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Piketty showed in Capital that most modern work about the trends in economic inequality was flawed. We usually think of the industrial revolution and modern era

Piketty showed in Capital that most modern work about the trends in economic inequality was flawed. We usually think of the industrial revolution and modern era as periods where power and wealth became much more fairly distributed. However, if you go far back enough into the records, as he did, you can see a clear trend of concentration of wealth even now in the current system. The trend was briefly disrupted by the two world wars which were so destructive to our economies. The necessary reconstruction led to massive wealth redistribution and evened the playing field somewhat. It seems that the graphs in this tweet are another confirmation of Piketty's observation.

gbacon 9y ago
How then is it possible that some four in five American millionaires inherited no more than ten thousand dollars, according to The Millionaire Next Door by Thomas Stanley?
- kiliantics 9y ago
  A millionaire is hardly wealthy these days. Upper middle class rich, sure. But not "an estate to leave to my heirs" rich. Someone who got a good middle class start, went into the right career, and had everything work out pretty well (no major financial misfortune or an injury or sick family member) while saving responsibly, can become a millionaire in a few decades today. They can probably afford a nice house, which their kids can carve up to have their own nice middle class start. This group of people is still insanely privileged but it is nothing on the obnoxious levels of real inherited wealth in the upper crust.
  - ataturk 9y ago
    Speaking as one, I can tell you that having a couple million takes the edge off of everything in life. You don't sweat buying a house or pretty much any new car anytime you want it. The monthly bills are in the noise as far as concerns in life. I still go to work every day but I won't be working until age 65, that's for certain; not full time, anyways. My kids will be able to be entrepreneurs if they wish, they have a comfortable fallback that I never had. Less stress in life is a good thing. What's different today is that inflation and high taxes have wrecked the middle class. The truly rich are the $100M and billionaire types whose wealth has run away from the rest of the people. Almost none of the truly wealthy are that way because they were smart (merit) only a few are. The rest . got rich either because they were lucky or because of some angle they could exploit such as favorable connections or regulatory capture. Above them, Old Money rules the world by at least one order of magnitude.
- personjerry 9y ago
  Isn’t this article about Europe though?
  - empthought 9y ago
    It's called "Thatcherism" for a reason.
- closeparen 9y ago
  A median-income household owning a median-priced house and making the standard 15% 401k contribution will clear "millionaire" by retirement age, easily.
  - aaronblohowiak 9y ago
    And yet “Fifty-seven percent of Americans don't have enough cash to cover a $500 unexpected expense”. We suck at saving as a country.
    - closeparen 9y ago
      Most of the value contributing to millionaire net worth is going to be in 401ks and home equity, neither of which you could reasonably access to pay a $500 expense. It would be pretty weird to have <$500 in checking at the same time as 5-6 figures in retirement + home equity, but possible. It helps that 401k is a payroll deduction and there's really no bargaining with yourself on whether to pay the mortgage this month (whereas it's easy to splurge instead of saving extra cash).
      - fgjjgutjvnu 9y ago
        But if you have that net worth, wouldn't it be easy to get a loan over 500$ from a bank?
      - smsm42 9y ago
        You can access 401k under "financial hardship", after paying taxes and 10% penalty. Of course, it's rarely worth it for $500 - it'd be better to find a credit card with 0% APR or other credit option, if you have access to those. I imagine most people with 401k's do have access to credit. Am I wrong? You can also loan against 401k (though there are limits, but if you have it for a while loaning $500 would not be a problem, though again fees could make it a bad deal). Advantage is that while you lose the growth for the time of the loan, you are paying interest to yourself, not somebody else.
        9y ago
- tikhonj 9y ago
  I haven't looked at the data, but my guess would be that it's the difference between weighing based on individuals (number of individual millionaires) vs total wealth. The latter is going to be dominated by the richest part of the distribution.
- tomlock 9y ago
  This sounds like a big number, but consider this - if less than 10% of Americans are millionaires then this means that millionaire parents are more than twice as likely to have millionaire children as non-millionaires. This shouldn't gel well with someone who values meritocracy/social mobility.
  - njarboe 9y ago
    Parents have influence on how well their children do. Nature and nurture. Is this not the whole point of parenting? If millionaire parents are only twice as likely to have millionaire children I would be surprised.
  - xorfish 9y ago
    Handling money responsibly is the easiest way to become a millionaire, not inheritance. Upbringing is important and I think children of millionaires are more likely to develop healthy spending habits.
- contravariant 9y ago
  Clearly those four in five millionaires aren't responsible for much of the total wealth.
deleted 9y ago
[deleted]
nugget 9y ago
Didn't Rognlie @ MIT show that almost all of the out-performance of wealth was due to real estate prices? Couldn't the solution to wealth inequality therefore be a radically different approach to building codes and land value taxes? And doesn't it follow that wealthy landlords in California massively benefiting from proposition 13 and decrying wealth inequality at the same time sit at the pinnacle of political and economic hypocrisy?
- acover 9y ago
  > In the postwar era, developed economies have experienced two substantial trends in the net capital share of aggregate income: a rise during the last several decades, which is well-known, and a fall of comparable magnitude that continued until the 1970s, which is less well-known. Overall, the net capital share has increased since 1948, but when disaggregated this increase comes entirely from the housing sector: the contribution to net capital income from all other sectors has been zero or slightly negative, as the fall and rise have offset each other. [0] That doesn't mean that the gains for capital since the 70s are from housing. Only that the gains from the 40s are. It also doesn't address the industrial revolution's affect. [0] - http://mattrognlie.com/brookings_capitalshare.pdf http://mattrognlie.com/brookings_capitalshare.pdf
  - rajnathani 9y ago
    It’s clearly the case for since the 70s as well. In an interview, Nobel prize-winning economist Joseph Stiglitz (who served under Bill Clinton) criticized Piketty [0] of overemphasizing the increase in concentration of wealth, and this was on the basis that the current increase in wealth stems from an increase in land value. [0] https://www.salon.com/2015/01/02/joseph_stiglitz_thomas_piketty_gets_income_inequality_wrong_partner/ https://www.salon.com/2015/01/02/joseph_stiglitz_thomas_pike...
arkh 9y ago
There are two extreme ways to remove the inheritance problem. One would be to forfeit personal property: you can't give what you don't own. The other would be to remove the concept of family: when born you are placed in a communal system to be raised by professionals. People start with the same chances, the same level of social knowledge, network and vocabulary, you almost get to a pure meritocratic society (there are still those pesky genes). Let's not imagine the unwanted effects and just bask in the idea of those kind of perfect societies.
- ataturk 9y ago
  I think you're kidding, but just in case not: Communism never did any little guy any favors. I can't even imagine the amount of suffering that would go on for children "raised by professionals" given the amount of documented abuse that takes places in institutions like boarding schools, foster homes, and so forth. Nobody loves a kid like his/her own parents do. Not to say that many families don't abuse their kids, but the idea that society would care better for a child is a concept that has been thoroughly and completely debunked time and time again. As far as removal of private property, I don't think I like the living conditions in Venezuela, Cuba, or China very much, thanks. Again, nobody cares about property better than its owner, someone with a vested interest in maintaining it.
- chillydawg 9y ago
  We already have inheritance tax laws, they are just not very good. They need to target trusts and other ways that rich families get around it.
- letsgetphysITal 9y ago
  > you almost get to a pure meritocratic society (there are still those pesky genes). That's OK, we can use CRISPR tech to solve that problem. Brave New World in 3.. 2.. 1..
- ramblerman 9y ago
  There is a third (equally extreme) but much simpler way. Keep everything as is, but don't allow inheritance, or cap it at some number.
zokier 9y ago
> It seems that the graphs in this tweet are another confirmation of Piketty's observation. As far as I can tell, the graph is based on an earlier graph from Pikettys paper: http://piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2015.pdf http://piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2015.... Compare to Figure 5
golergka 9y ago
> wealth became much more fairly distributed > clear trend of concentration of wealth These two facts only contradict one another if you have an implicit belief that "fair" is "equal".
- vidarh 9y ago
  Yes, that was the point the comment was making - that going back further shows that the common assumption of a more fair distribution is wrong.
  - golergka 9y ago
    It seems that you're mixing up fair and equal again - which was the point of my comment that you may have missed.
    - vidarh 9y ago
      Then you might want to make that comment instead of trying to be glib. And no, I was not mixing up anything, I was pointing out that you were merely confirming what the comment said. That you disagree with the definitions used does not change that, given that it was clear which definitions were used, as you clearly understood yourself what was meant.
rajnathani 9y ago
From what I remember Piketty was simply against using the Gini Coefficient as a measure of wealth and income inequality, which happened/happens to be primarily used by such contemporary measurements.

gbacon 9y ago

How then is it possible that some four in five American millionaires inherited no more than ten thousand dollars, according to The Millionaire Next Door by Thomas Stanley?

kiliantics 9y ago
A millionaire is hardly wealthy these days. Upper middle class rich, sure. But not "an estate to leave to my heirs" rich. Someone who got a good middle class start, went into the right career, and had everything work out pretty well (no major financial misfortune or an injury or sick family member) while saving responsibly, can become a millionaire in a few decades today. They can probably afford a nice house, which their kids can carve up to have their own nice middle class start. This group of people is still insanely privileged but it is nothing on the obnoxious levels of real inherited wealth in the upper crust.
- ataturk 9y ago
  Speaking as one, I can tell you that having a couple million takes the edge off of everything in life. You don't sweat buying a house or pretty much any new car anytime you want it. The monthly bills are in the noise as far as concerns in life. I still go to work every day but I won't be working until age 65, that's for certain; not full time, anyways. My kids will be able to be entrepreneurs if they wish, they have a comfortable fallback that I never had. Less stress in life is a good thing. What's different today is that inflation and high taxes have wrecked the middle class. The truly rich are the $100M and billionaire types whose wealth has run away from the rest of the people. Almost none of the truly wealthy are that way because they were smart (merit) only a few are. The rest . got rich either because they were lucky or because of some angle they could exploit such as favorable connections or regulatory capture. Above them, Old Money rules the world by at least one order of magnitude.
personjerry 9y ago
Isn’t this article about Europe though?
- empthought 9y ago
  It's called "Thatcherism" for a reason.
closeparen 9y ago
A median-income household owning a median-priced house and making the standard 15% 401k contribution will clear "millionaire" by retirement age, easily.
- aaronblohowiak 9y ago
  And yet “Fifty-seven percent of Americans don't have enough cash to cover a $500 unexpected expense”. We suck at saving as a country.
  - closeparen 9y ago
    Most of the value contributing to millionaire net worth is going to be in 401ks and home equity, neither of which you could reasonably access to pay a $500 expense. It would be pretty weird to have <$500 in checking at the same time as 5-6 figures in retirement + home equity, but possible. It helps that 401k is a payroll deduction and there's really no bargaining with yourself on whether to pay the mortgage this month (whereas it's easy to splurge instead of saving extra cash).
    - fgjjgutjvnu 9y ago
      But if you have that net worth, wouldn't it be easy to get a loan over 500$ from a bank?
    - smsm42 9y ago
      You can access 401k under "financial hardship", after paying taxes and 10% penalty. Of course, it's rarely worth it for $500 - it'd be better to find a credit card with 0% APR or other credit option, if you have access to those. I imagine most people with 401k's do have access to credit. Am I wrong? You can also loan against 401k (though there are limits, but if you have it for a while loaning $500 would not be a problem, though again fees could make it a bad deal). Advantage is that while you lose the growth for the time of the loan, you are paying interest to yourself, not somebody else.
      - 9y ago
tikhonj 9y ago
I haven't looked at the data, but my guess would be that it's the difference between weighing based on individuals (number of individual millionaires) vs total wealth. The latter is going to be dominated by the richest part of the distribution.
tomlock 9y ago
This sounds like a big number, but consider this - if less than 10% of Americans are millionaires then this means that millionaire parents are more than twice as likely to have millionaire children as non-millionaires. This shouldn't gel well with someone who values meritocracy/social mobility.
- njarboe 9y ago
  Parents have influence on how well their children do. Nature and nurture. Is this not the whole point of parenting? If millionaire parents are only twice as likely to have millionaire children I would be surprised.
- xorfish 9y ago
  Handling money responsibly is the easiest way to become a millionaire, not inheritance. Upbringing is important and I think children of millionaires are more likely to develop healthy spending habits.
contravariant 9y ago
Clearly those four in five millionaires aren't responsible for much of the total wealth.

deleted 9y ago

[deleted]

nugget 9y ago

Didn't Rognlie @ MIT show that almost all of the out-performance of wealth was due to real estate prices? Couldn't the solution to wealth inequality therefore be a radically different approach to building codes and land value taxes? And doesn't it follow that wealthy landlords in California massively benefiting from proposition 13 and decrying wealth inequality at the same time sit at the pinnacle of political and economic hypocrisy?

acover 9y ago
> In the postwar era, developed economies have experienced two substantial trends in the net capital share of aggregate income: a rise during the last several decades, which is well-known, and a fall of comparable magnitude that continued until the 1970s, which is less well-known. Overall, the net capital share has increased since 1948, but when disaggregated this increase comes entirely from the housing sector: the contribution to net capital income from all other sectors has been zero or slightly negative, as the fall and rise have offset each other. [0] That doesn't mean that the gains for capital since the 70s are from housing. Only that the gains from the 40s are. It also doesn't address the industrial revolution's affect. [0] - http://mattrognlie.com/brookings_capitalshare.pdf http://mattrognlie.com/brookings_capitalshare.pdf
- rajnathani 9y ago
  It’s clearly the case for since the 70s as well. In an interview, Nobel prize-winning economist Joseph Stiglitz (who served under Bill Clinton) criticized Piketty [0] of overemphasizing the increase in concentration of wealth, and this was on the basis that the current increase in wealth stems from an increase in land value. [0] https://www.salon.com/2015/01/02/joseph_stiglitz_thomas_piketty_gets_income_inequality_wrong_partner/ https://www.salon.com/2015/01/02/joseph_stiglitz_thomas_pike...

arkh 9y ago

There are two extreme ways to remove the inheritance problem. One would be to forfeit personal property: you can't give what you don't own. The other would be to remove the concept of family: when born you are placed in a communal system to be raised by professionals. People start with the same chances, the same level of social knowledge, network and vocabulary, you almost get to a pure meritocratic society (there are still those pesky genes). Let's not imagine the unwanted effects and just bask in the idea of those kind of perfect societies.

ataturk 9y ago
I think you're kidding, but just in case not: Communism never did any little guy any favors. I can't even imagine the amount of suffering that would go on for children "raised by professionals" given the amount of documented abuse that takes places in institutions like boarding schools, foster homes, and so forth. Nobody loves a kid like his/her own parents do. Not to say that many families don't abuse their kids, but the idea that society would care better for a child is a concept that has been thoroughly and completely debunked time and time again. As far as removal of private property, I don't think I like the living conditions in Venezuela, Cuba, or China very much, thanks. Again, nobody cares about property better than its owner, someone with a vested interest in maintaining it.
chillydawg 9y ago
We already have inheritance tax laws, they are just not very good. They need to target trusts and other ways that rich families get around it.
letsgetphysITal 9y ago
> you almost get to a pure meritocratic society (there are still those pesky genes). That's OK, we can use CRISPR tech to solve that problem. Brave New World in 3.. 2.. 1..
ramblerman 9y ago
There is a third (equally extreme) but much simpler way. Keep everything as is, but don't allow inheritance, or cap it at some number.

zokier 9y ago

> It seems that the graphs in this tweet are another confirmation of Piketty's observation. As far as I can tell, the graph is based on an earlier graph from Pikettys paper: http://piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2015.pdf http://piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2015.... Compare to Figure 5

golergka 9y ago

> wealth became much more fairly distributed > clear trend of concentration of wealth These two facts only contradict one another if you have an implicit belief that "fair" is "equal".

vidarh 9y ago
Yes, that was the point the comment was making - that going back further shows that the common assumption of a more fair distribution is wrong.
- golergka 9y ago
  It seems that you're mixing up fair and equal again - which was the point of my comment that you may have missed.
  - vidarh 9y ago
    Then you might want to make that comment instead of trying to be glib. And no, I was not mixing up anything, I was pointing out that you were merely confirming what the comment said. That you disagree with the definitions used does not change that, given that it was clear which definitions were used, as you clearly understood yourself what was meant.

rajnathani 9y ago

From what I remember Piketty was simply against using the Gini Coefficient as a measure of wealth and income inequality, which happened/happens to be primarily used by such contemporary measurements.