8 ms·

Apple - and much of the hugely profitable tech sector - is probably a bad example to pick on. It’s worth noting, though, that the corporate leverage the author

Apple - and much of the hugely profitable tech sector - is probably a bad example to pick on. It’s worth noting, though, that the corporate leverage the author is concerned about is widespread among all business sectors. Personally I worry a bit that we’ve run into a sort of soft ceiling on the economy where the biggest moneymakers are causing creative destruction via software (Intuit to Accountants, Uber to Cab Drivers, etc) but that we aren’t seeing the kind of widespread real economic growth (ie productivity gains) with these shifts that historically accompanied waves of industrialization. The pie isn’t growing as much as certain players are finding ways to expand their slices of it at the expense of others. Perhaps the above is true, perhaps not, I don’t know. But it seems to me that the entire system we have is predicated on steady macroeconomic “growth” to function. In one way or another we all depend on the stock market to climb about 10% a year so we can retire some day and have savings to live off of, etc. And when that growth isn’t happening via the old mechanism of expanding industry with solid jobs and wage growth, then Wall Street and the White House resort to tricks (new financing mechanisms, tax cuts, spending, etc) to keep the machine running. The sense I get is that since about 2000 we’ve just been playing different games to try and get the old mojo back, and that the nature of such games is to work for a bit and then collapse due to unsustainability. Maybe that’s just my tinfoil hat coming out, I hope I’m wrong.

Clubber 8y ago
That's one of the primary reasons we haven't really cut back on military spending since the end of WWII. WWII military spending got us out of the depression, no one knows what will happen if we suddenly or gradually stopped. Considering that, we've been playing some sort of game since at least WWII and probably since FDR got elected.
- allcentury 8y ago
  I think that's mysnomer https://www.forbes.com/sites/peterferrara/2013/11/30/the-great-depression-was-ended-by-the-end-of-world-war-ii-not-the-start-of-it/ https://www.forbes.com/sites/peterferrara/2013/11/30/the-gre...
  - Clubber 8y ago
    >exactly contrary to the analysis of Keynesian so-called economists. It seems like that article is taking a political position, so I'm not so sure how much credence to give it. I mean that's the closing sentence of his first paragraph. To base the article on the complete dismissal of the Keynesian school of thought isn't very inspiring. Ya, looking at his portfolio, he's certainly a political shill. He's written some sketchy articles such as "Why Deregulation Is Essential To Restoring Booming Economic Growth, And The American Dream," "President Obama's Plan To "De-develop" America Shifts Into High Gear," "President Obama's Global Warming Calculated Deception Means Democrats Have Abandoned Working People," as well as promotes the return to the gold standard. I wouldn't use him as a primary source. https://www.forbes.com/sites/peterferrara/#283999473eb5 https://www.forbes.com/sites/peterferrara/#283999473eb5 He's also a director at the Heartland Institute which is a conservative "think tank." https://www.sourcewatch.org/index.php/Heartland_Institute https://www.sourcewatch.org/index.php/Heartland_Institute
    - bb88 8y ago
      Yes, you're correct, it is an opinion piece. But I think you need to be careful between labeling people as political shills, since even political shills can make good points from time to time. It's also worth noting that there's a real deep division in economics between the "Freshwater" and the "Saltwater" types, and it's important to know which kind of economist your reading. He's of the "Freshwater" type so he's going to be Anti-Keynesian, but that's okay. Lastly, it was written before 2014 so everything changed after Thomas Piketty wrote "Capital in the 21st Century".
      - Clubber 8y ago
        >But I think you need to be careful between labeling people as political shills, since even political shills can make good points from time to time. Yes, I don't dismiss political points of view outright, but the language he uses and the phrases he uses, it's fairly obvious he's trying to convince the reader of his position by discrediting the education of the counterpoint rather than using points of his own. It's intellectual dishonesty wrapped in a false shroud of academia for people who can't tell the difference. I'll wager free air that if you read is articles over time, he starts to contradict himself depending on which political party is in power. This article seems to be written when the whole austerity thing was going on when the Dems were in office. I suspect now that the GOP is in office, he's ok with government spending, or he ignores it altogether. (actually it appears he's no longer writing for Forbes).
JoshTriplett 8y ago
> In one way or another we all depend on the stock market to climb about 10% a year so we can retire some day and have savings to live off of, etc. One critical detail here: 10% is definitely not sustainable. Long-term, the market reliably provides about 4% after accounting for inflation. You shouldn't assume you can get any more return on investment than that.
- droidist2 8y ago
  True, I always heard 7% and I think that's before inflation, so 4% sounds reasonable.
  - WalterBright 8y ago
    It's 7% after inflation. https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
    - JoshTriplett 8y ago
      You can't count on the average, however; by definition it'll often be below that. There are studies that show you can reliably count on about 4% for long-term investment, even if you have to ride out a crash.
      - nicky0 8y ago
        But of course all these are based on looking at historical data and show nothing about the future.
- quickthrower2 8y ago
  Why is 10% not sustainable, but 4% is?
  - wutbrodo 8y ago
    I don't think he meant that as a law of nature. I think he meant that, empirically, sustained 10% stock market growth hasn't happened on the timescales that are being discussed (ie for a person's retirement savings), while avg 4% growth has.
ArekDymalski 8y ago
>we all depend on the stock market to climb about 10% a year Can anyone point me to any scientific reasoning behind this? As I'm not an economist, I was always baffled by an expectation that the market will always grow. That instantly brings to my mind the comparison to cancer.
- xapata 8y ago
  Purely based on empirical observation. The rate of growth is actually quite bad for capitalism in the long run, as it's unsustainable. See Piketty's inequality. As capital agglomerates, it creates instabilities. When a large capital cluster collapses, if it's too big the collapse has systemic impact. If everyone is small, an individual may experience greater risk, but the system is robust. In reply to the other comments: Economic growth is different from stock market asset appreciation.
- jonknee 8y ago
  It's a byproduct of having more people and more productivity every year, you don't need large amounts of either for it to compound. (And you don't need 10%, a lot more money is in bonds than equities and at much lower rates.)
  - thrav 8y ago
    Surely there has to be a ceiling to “more people” though, right?
    - jonknee 8y ago
      Yes and that will bring all sorts of troubles, look at Japan for a modern example. One of many reasons we should be welcoming immigrants instead of shutting them out.
      - losteric 8y ago
        Why can't progress in technology replace population growth through higher productivity? We tend to cut costs and reward the capital managers... but why not maintain costs while rewarding employees?
maxerickson 8y ago
The reason productivity doesn't go up is that it is decoupled from jobs. Some things are wildly productive and produce a few jobs and some other things aren't very productive but employ lots of people. So sustainability of growth isn't particularly an issue (the economy quickly grows to meet new demand, essentially instantaneously), the problem is that it is becoming more difficult to participate meaningfully in the economy (when lots of people do that you get demand growth).
- eli_gottlieb 8y ago
  > The reason productivity doesn't go up is that it is decoupled from jobs. Some things are wildly productive and produce a few jobs and some other things aren't very productive but employ lots of people. Well, that sounds like we have two large problems to solve: 1) Effective demand/participation, the "jobs thing" everyone talks about. 2) The underlying cost diseases that force huge amounts of labor to be employed at low (sometimes even negative) marginal productivity.
bb88 8y ago
So the recent surprise of the last few years was Thomas Piketty's "Capital in the 21st Century"[0]. He argues that return on capital investment will generally outpace growth, and that these patterns we see now, we have seen around a century ago. The rate of investments has been historically 5% where as a good growth rate for the US recently has been 3%. The difference between those numbers is why inequality grows. [0] https://www.economist.com/the-economist-explains/2014/05/04/thomas-pikettys-capital-summarised-in-four-paragraphs https://www.economist.com/the-economist-explains/2014/05/04/...
- pesmhey 8y ago
  Could you point me towards any discussion that’s been had about using those numbers to shape economic/monetary policy?
  - bb88 8y ago
    I guess I would start here, and then use that as a jomping off point. https://equitablegrowth.org/hourly-piketty-paul-krugman-gattopardo-economics-economic-modelling/ https://equitablegrowth.org/hourly-piketty-paul-krugman-gatt... Part of what makes this problem hard, is if Piketty is really right, we don't necessarily know what policies we should be following. It's unclear how we change the equation at this point. Piketty seems to think that tax hikes on the rich might work. But that is really just a theory.
    - gaius 8y ago
      Piketty seems to think that tax hikes on the rich might work. But that is really just a theor Intuition suggests that about half the time raising taxes (or interest rates, or whatever policy lever) might help whatever economic problem you have, and half the time cutting them is better. It’s like tuning a radio, the knob goes both ways. I am wary of these so-called economists who only have one solution to every conceivable problem. Krugman is the same, whatever the scenario, he always recommends printing more money.
      - 8y ago
gaius 8y ago
The sense I get is that since about 2000 we’ve just been playing different games to try and get the old mojo back I would concur. The global economy never actually recovered from the dotcom crash. Since then it has just been papering over the cracks, inflating property, artificially low interest rates, “quantitative easing” i.e. just printing money that’s not backed by anything in the real economy. The correction when it comes will make the dotcom crash and even the 2008 crisis seem mild.
- candiodari 8y ago
  If you're going down this path then perhaps it's worth pointing out that the only long-term improvement of the economy possible is productivity improvements. Everything else is financial engineering which is artificial and cannot last. Productivity is roughly a measure of how much an individual can accomplish for a company. (Real, meaning subtracting inflation) productivity improvements stopped in 1980, and have been going downhill ever so slightly since. Productivity today is actually a bit lower than, say, 5 years ago. People do less. Now this needs to be measured in real growth to see this effect (although, in the last 6 years or so, even productivity growth without inflation is negative). Attempting an analogy to make it maximally real: essentially, if I have you work for me (as 1 more employee), how many big macs can I sell extra ? The answer, say, was 800, 10 years ago and now it's 700. Meanwhile, all costs that productivity needs to carry have been steadily increasing, which can be roughly expressed as "per worker, how much needs to be supported ?". For Europe, especially this is very bad (frankly, it is very, very bad for everywhere except the US where it is merely dismal). Essentially, whereas in 1980 every individual working needed to support the life of 1.8 persons, most of them children (who will support others when they grow up), now it's 2.3, most of them elderly (who's main contribution in the future to the economy, as dismal as it sounds, is dying). This is generally referred to as "secular stagnation". It's a huge problem, because, put simply, the total amount of economic activity we can dedicate to any person is essentially productivity. So you can only get a nicer house if productivity goes up. In my opinion, it is in fact a much bigger process than the generally agreed upon view above. In 1985 or so the world went from (on very large average) demand-driven to supply-driven. Simply said, in 1975, if a baker produced 5 more pieces of bread, people would buy them, eat them, pay for them, and work a bit harder themselves (maybe making some more windows ... or whatever) to make up for it. In 1995, if a baker produced 5 more pieces of bread, they would rot on this shelves. This is what then causes the productivity stagnation. Another way to put this is that we are demand-limited. People are producing everything they want (which in economic terms means that they are not willing to work harder for more). This means that while before 1980 we were arguing "how can we produce more cars ?", "how can we get more people flying/traveling ?", all good questions. Now we're arguing "okay, next year, we'll sell less cars, less people will go on holiday. How do we divide up the profits from that ?". Whatever the outcome, I guarantee not many people will be happy with it. In other words, the problem is (as stupid as it sounds) that we ... as in humanity as a whole, don't have enough to do. We are embarking on a few grand projects, like urbanizing China, but as a whole they don't seem to make a big difference. We should decide on something ridiculously intensive to do, requiring massive infrastructure build, and go out and do it. Maybe colonize the bottom of the oceans (or the top). Fly to the moon and build a base this time. Capture an asteroid. Or how about automated metros everywhere (or just in many places) ? Whatever. But the alternative is that we're going to have a lot of people sitting on their hands (and being very poor and hopeless and maybe even homeless because of it). That seems like a good thing to avoid. I must confess that while I wasn't rooting for him, I was hoping that Trump's infrastructure plans would accomplish exactly that, at least for America (and they still might, I suppose), but so far not much has happened.
dalbasal 8y ago
I think that at least in the fields you mention, the structure of the markets is problematic. Ubers' value to customers is proportional to the number of rides they take, and the usefulness of the service. Ubers'value to investors is not proportional/linear. It's more a function of what Peter Thiel (being intentionally provocative) call "monopoly." He means market share, network effects, moats, lock-in, other aggregation benefits... We can see this in a lot of the new economy. Google's search business is worth X. A search business with 1/10th of the volume is not worth 10% of Google search's worth nor does it generate revenue on that scale. This is because Google derives its value from aggregating a large portion of the total. More than the sum of parts is an o understatement. This exists in a manufacturing environment too, the size factor. But, for manufacturing this is "economies of scale" related. Ie, they use price to lower unit costs. In the new economy, it's unrelated to unit costs. The actual revenue (not profit) and market cap effect on the 1+nth unit is higher. ROI is what actually drives the economy. But, if market caps grow while the "real" economic outputs (searches, rides) do not.... This is why Thomas Pickettys work is so popular today. This mechanic can effectively drive increases in the value of capital, without changes in the real economy. I think we can see this quite clearly in the capital markets. Market value grows faster than revenue. Capital grows faster than the economy.

Clubber 8y ago

That's one of the primary reasons we haven't really cut back on military spending since the end of WWII. WWII military spending got us out of the depression, no one knows what will happen if we suddenly or gradually stopped. Considering that, we've been playing some sort of game since at least WWII and probably since FDR got elected.

allcentury 8y ago
I think that's mysnomer https://www.forbes.com/sites/peterferrara/2013/11/30/the-great-depression-was-ended-by-the-end-of-world-war-ii-not-the-start-of-it/ https://www.forbes.com/sites/peterferrara/2013/11/30/the-gre...
- Clubber 8y ago
  >exactly contrary to the analysis of Keynesian so-called economists. It seems like that article is taking a political position, so I'm not so sure how much credence to give it. I mean that's the closing sentence of his first paragraph. To base the article on the complete dismissal of the Keynesian school of thought isn't very inspiring. Ya, looking at his portfolio, he's certainly a political shill. He's written some sketchy articles such as "Why Deregulation Is Essential To Restoring Booming Economic Growth, And The American Dream," "President Obama's Plan To "De-develop" America Shifts Into High Gear," "President Obama's Global Warming Calculated Deception Means Democrats Have Abandoned Working People," as well as promotes the return to the gold standard. I wouldn't use him as a primary source. https://www.forbes.com/sites/peterferrara/#283999473eb5 https://www.forbes.com/sites/peterferrara/#283999473eb5 He's also a director at the Heartland Institute which is a conservative "think tank." https://www.sourcewatch.org/index.php/Heartland_Institute https://www.sourcewatch.org/index.php/Heartland_Institute
  - bb88 8y ago
    Yes, you're correct, it is an opinion piece. But I think you need to be careful between labeling people as political shills, since even political shills can make good points from time to time. It's also worth noting that there's a real deep division in economics between the "Freshwater" and the "Saltwater" types, and it's important to know which kind of economist your reading. He's of the "Freshwater" type so he's going to be Anti-Keynesian, but that's okay. Lastly, it was written before 2014 so everything changed after Thomas Piketty wrote "Capital in the 21st Century".
    - Clubber 8y ago
      >But I think you need to be careful between labeling people as political shills, since even political shills can make good points from time to time. Yes, I don't dismiss political points of view outright, but the language he uses and the phrases he uses, it's fairly obvious he's trying to convince the reader of his position by discrediting the education of the counterpoint rather than using points of his own. It's intellectual dishonesty wrapped in a false shroud of academia for people who can't tell the difference. I'll wager free air that if you read is articles over time, he starts to contradict himself depending on which political party is in power. This article seems to be written when the whole austerity thing was going on when the Dems were in office. I suspect now that the GOP is in office, he's ok with government spending, or he ignores it altogether. (actually it appears he's no longer writing for Forbes).

JoshTriplett 8y ago

> In one way or another we all depend on the stock market to climb about 10% a year so we can retire some day and have savings to live off of, etc. One critical detail here: 10% is definitely not sustainable. Long-term, the market reliably provides about 4% after accounting for inflation. You shouldn't assume you can get any more return on investment than that.

droidist2 8y ago
True, I always heard 7% and I think that's before inflation, so 4% sounds reasonable.
- WalterBright 8y ago
  It's 7% after inflation. https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
  - JoshTriplett 8y ago
    You can't count on the average, however; by definition it'll often be below that. There are studies that show you can reliably count on about 4% for long-term investment, even if you have to ride out a crash.
    - nicky0 8y ago
      But of course all these are based on looking at historical data and show nothing about the future.
quickthrower2 8y ago
Why is 10% not sustainable, but 4% is?
- wutbrodo 8y ago
  I don't think he meant that as a law of nature. I think he meant that, empirically, sustained 10% stock market growth hasn't happened on the timescales that are being discussed (ie for a person's retirement savings), while avg 4% growth has.

ArekDymalski 8y ago

>we all depend on the stock market to climb about 10% a year Can anyone point me to any scientific reasoning behind this? As I'm not an economist, I was always baffled by an expectation that the market will always grow. That instantly brings to my mind the comparison to cancer.

xapata 8y ago
Purely based on empirical observation. The rate of growth is actually quite bad for capitalism in the long run, as it's unsustainable. See Piketty's inequality. As capital agglomerates, it creates instabilities. When a large capital cluster collapses, if it's too big the collapse has systemic impact. If everyone is small, an individual may experience greater risk, but the system is robust. In reply to the other comments: Economic growth is different from stock market asset appreciation.
jonknee 8y ago
It's a byproduct of having more people and more productivity every year, you don't need large amounts of either for it to compound. (And you don't need 10%, a lot more money is in bonds than equities and at much lower rates.)
- thrav 8y ago
  Surely there has to be a ceiling to “more people” though, right?
  - jonknee 8y ago
    Yes and that will bring all sorts of troubles, look at Japan for a modern example. One of many reasons we should be welcoming immigrants instead of shutting them out.
    - losteric 8y ago
      Why can't progress in technology replace population growth through higher productivity? We tend to cut costs and reward the capital managers... but why not maintain costs while rewarding employees?

maxerickson 8y ago

The reason productivity doesn't go up is that it is decoupled from jobs. Some things are wildly productive and produce a few jobs and some other things aren't very productive but employ lots of people. So sustainability of growth isn't particularly an issue (the economy quickly grows to meet new demand, essentially instantaneously), the problem is that it is becoming more difficult to participate meaningfully in the economy (when lots of people do that you get demand growth).

eli_gottlieb 8y ago
> The reason productivity doesn't go up is that it is decoupled from jobs. Some things are wildly productive and produce a few jobs and some other things aren't very productive but employ lots of people. Well, that sounds like we have two large problems to solve: 1) Effective demand/participation, the "jobs thing" everyone talks about. 2) The underlying cost diseases that force huge amounts of labor to be employed at low (sometimes even negative) marginal productivity.

bb88 8y ago

So the recent surprise of the last few years was Thomas Piketty's "Capital in the 21st Century"[0]. He argues that return on capital investment will generally outpace growth, and that these patterns we see now, we have seen around a century ago. The rate of investments has been historically 5% where as a good growth rate for the US recently has been 3%. The difference between those numbers is why inequality grows. [0] https://www.economist.com/the-economist-explains/2014/05/04/thomas-pikettys-capital-summarised-in-four-paragraphs https://www.economist.com/the-economist-explains/2014/05/04/...

pesmhey 8y ago
Could you point me towards any discussion that’s been had about using those numbers to shape economic/monetary policy?
- bb88 8y ago
  I guess I would start here, and then use that as a jomping off point. https://equitablegrowth.org/hourly-piketty-paul-krugman-gattopardo-economics-economic-modelling/ https://equitablegrowth.org/hourly-piketty-paul-krugman-gatt... Part of what makes this problem hard, is if Piketty is really right, we don't necessarily know what policies we should be following. It's unclear how we change the equation at this point. Piketty seems to think that tax hikes on the rich might work. But that is really just a theory.
  - gaius 8y ago
    Piketty seems to think that tax hikes on the rich might work. But that is really just a theor Intuition suggests that about half the time raising taxes (or interest rates, or whatever policy lever) might help whatever economic problem you have, and half the time cutting them is better. It’s like tuning a radio, the knob goes both ways. I am wary of these so-called economists who only have one solution to every conceivable problem. Krugman is the same, whatever the scenario, he always recommends printing more money.
    - 8y ago

gaius 8y ago

The sense I get is that since about 2000 we’ve just been playing different games to try and get the old mojo back I would concur. The global economy never actually recovered from the dotcom crash. Since then it has just been papering over the cracks, inflating property, artificially low interest rates, “quantitative easing” i.e. just printing money that’s not backed by anything in the real economy. The correction when it comes will make the dotcom crash and even the 2008 crisis seem mild.

candiodari 8y ago
If you're going down this path then perhaps it's worth pointing out that the only long-term improvement of the economy possible is productivity improvements. Everything else is financial engineering which is artificial and cannot last. Productivity is roughly a measure of how much an individual can accomplish for a company. (Real, meaning subtracting inflation) productivity improvements stopped in 1980, and have been going downhill ever so slightly since. Productivity today is actually a bit lower than, say, 5 years ago. People do less. Now this needs to be measured in real growth to see this effect (although, in the last 6 years or so, even productivity growth without inflation is negative). Attempting an analogy to make it maximally real: essentially, if I have you work for me (as 1 more employee), how many big macs can I sell extra ? The answer, say, was 800, 10 years ago and now it's 700. Meanwhile, all costs that productivity needs to carry have been steadily increasing, which can be roughly expressed as "per worker, how much needs to be supported ?". For Europe, especially this is very bad (frankly, it is very, very bad for everywhere except the US where it is merely dismal). Essentially, whereas in 1980 every individual working needed to support the life of 1.8 persons, most of them children (who will support others when they grow up), now it's 2.3, most of them elderly (who's main contribution in the future to the economy, as dismal as it sounds, is dying). This is generally referred to as "secular stagnation". It's a huge problem, because, put simply, the total amount of economic activity we can dedicate to any person is essentially productivity. So you can only get a nicer house if productivity goes up. In my opinion, it is in fact a much bigger process than the generally agreed upon view above. In 1985 or so the world went from (on very large average) demand-driven to supply-driven. Simply said, in 1975, if a baker produced 5 more pieces of bread, people would buy them, eat them, pay for them, and work a bit harder themselves (maybe making some more windows ... or whatever) to make up for it. In 1995, if a baker produced 5 more pieces of bread, they would rot on this shelves. This is what then causes the productivity stagnation. Another way to put this is that we are demand-limited. People are producing everything they want (which in economic terms means that they are not willing to work harder for more). This means that while before 1980 we were arguing "how can we produce more cars ?", "how can we get more people flying/traveling ?", all good questions. Now we're arguing "okay, next year, we'll sell less cars, less people will go on holiday. How do we divide up the profits from that ?". Whatever the outcome, I guarantee not many people will be happy with it. In other words, the problem is (as stupid as it sounds) that we ... as in humanity as a whole, don't have enough to do. We are embarking on a few grand projects, like urbanizing China, but as a whole they don't seem to make a big difference. We should decide on something ridiculously intensive to do, requiring massive infrastructure build, and go out and do it. Maybe colonize the bottom of the oceans (or the top). Fly to the moon and build a base this time. Capture an asteroid. Or how about automated metros everywhere (or just in many places) ? Whatever. But the alternative is that we're going to have a lot of people sitting on their hands (and being very poor and hopeless and maybe even homeless because of it). That seems like a good thing to avoid. I must confess that while I wasn't rooting for him, I was hoping that Trump's infrastructure plans would accomplish exactly that, at least for America (and they still might, I suppose), but so far not much has happened.

dalbasal 8y ago

I think that at least in the fields you mention, the structure of the markets is problematic. Ubers' value to customers is proportional to the number of rides they take, and the usefulness of the service. Ubers'value to investors is not proportional/linear. It's more a function of what Peter Thiel (being intentionally provocative) call "monopoly." He means market share, network effects, moats, lock-in, other aggregation benefits... We can see this in a lot of the new economy. Google's search business is worth X. A search business with 1/10th of the volume is not worth 10% of Google search's worth nor does it generate revenue on that scale. This is because Google derives its value from aggregating a large portion of the total. More than the sum of parts is an o understatement. This exists in a manufacturing environment too, the size factor. But, for manufacturing this is "economies of scale" related. Ie, they use price to lower unit costs. In the new economy, it's unrelated to unit costs. The actual revenue (not profit) and market cap effect on the 1+nth unit is higher. ROI is what actually drives the economy. But, if market caps grow while the "real" economic outputs (searches, rides) do not.... This is why Thomas Pickettys work is so popular today. This mechanic can effectively drive increases in the value of capital, without changes in the real economy. I think we can see this quite clearly in the capital markets. Market value grows faster than revenue. Capital grows faster than the economy.