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It's not only reasonable, but is becoming increasingly accepted. I finished this book a little while ago: https://www.amazon.com/Rise-Fall-American-Growth-Prin

by AlanSE 8y ago

It's not only reasonable, but is becoming increasingly accepted. I finished this book a little while ago: https://www.amazon.com/Rise-Fall-American-Growth-Princeton/dp/153661825X https://www.amazon.com/Rise-Fall-American-Growth-Princeton/d... But it really said the same thing that many other economics books said. If you read Thomas Piketty, you know that inequality basically comes down to the end of growth. He starts with the mostly-factual premises that growth will remain stalled while capital returns will continue at their historical rates. I'm still unsure about the latter premise myself, but the former is undeniable. But we also need to distinguish economic growth from quality of life improvements. Quality of life, necessarily, has to come from productivity improvements (not in the dictionary sense of those words, but in the macro economic sense). The US GDP could be partially buoyant due to immigration, and partially due to demographics. To some of the points of the article - companies would invest more if there was an expectation that new technologies were fundamentally transformative. I don't get that sense.

zone411 8y ago
Have you also read the criticisms of Pikkety's book? I would find it hard to recommend this book. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century#Criticism https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
- xyzzy123 8y ago
  Without speaking for the validity of it, there’s a lot of material in the book, which provides lots to “shoot at”. I’d expect anything which presents an ideological challenge like this book to draw a high volume of criticism from multiple angles. The only way to sort it out (if you happen to care) is to actually wade through the various arguments.
- AlanSE 8y ago
  I didn't really recommend it, and the reason I borrowed from it in my comment was for an economic point which was not its main focus. To borrow from your own link: > Lawrence Summers criticizes Piketty for underestimating the diminishing returns on capital, which he believes will offset the return on capital and hence set an upper limit to inequality. We are moving further away from the original point, but this is very close to what I said. Sometimes a complex topic doesn't need to be complex. What Pikkety argued was simple math - almost high school level math. He still spent decades doing the research groundwork (very very complex), but the take-away for the rest of us is very simple. If we return to a low-growth world, then it's very very hard for me to accept that returns on capital will remain high. From where will these returns come from? Pikkety only has 1 real reference point for the high-inequality world, and that was the 1800s. One very very major unanswered question for Pikkety is this - if capital returns hold strong indefinitely, where will the negative feedback come from? I could never tell if the book was literally apocalyptic. If you mathematically describe something which multiplies infinitely, then either you're making the point that some negative feedback is missing, or you're predicting collapse for any real world system where that model applies (also a negative feedback, just a very jerky one). I think he thought that in the 1800s, the rich found a way to balance their expenses with their income. This is silly. Perhaps there was no means of re-investment due to the illiquidity of land. This is also silly. Anyway, I can still accept that some negative feedback from people's behavior existed in the 1800s, but even if I do, I don't accept that such a feedback would exist today. Rich people today have no natural limit to how rich they want to be, and no neo-feudalistic system that prevents further expansion. This all argues for the apocalyptic interpretation. My take - I don't think we can be at low growth for long. If we are, things will start to change Perhaps climate change, perhaps war. We're not going to just hang out in that state. Maybe we can then stay at low-growth, but low-growth with capital destruction. However, the more disruptive historical events tend to bring back growth. I think potential for technological productivity growth is still very very possible, but with a restructured way of life. Right now, the incentives just don't work. That's all.

by AlanSE 8y ago

zone411 8y ago

Have you also read the criticisms of Pikkety's book? I would find it hard to recommend this book. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century#Criticism https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...

xyzzy123 8y ago
Without speaking for the validity of it, there’s a lot of material in the book, which provides lots to “shoot at”. I’d expect anything which presents an ideological challenge like this book to draw a high volume of criticism from multiple angles. The only way to sort it out (if you happen to care) is to actually wade through the various arguments.
AlanSE 8y ago
I didn't really recommend it, and the reason I borrowed from it in my comment was for an economic point which was not its main focus. To borrow from your own link: > Lawrence Summers criticizes Piketty for underestimating the diminishing returns on capital, which he believes will offset the return on capital and hence set an upper limit to inequality. We are moving further away from the original point, but this is very close to what I said. Sometimes a complex topic doesn't need to be complex. What Pikkety argued was simple math - almost high school level math. He still spent decades doing the research groundwork (very very complex), but the take-away for the rest of us is very simple. If we return to a low-growth world, then it's very very hard for me to accept that returns on capital will remain high. From where will these returns come from? Pikkety only has 1 real reference point for the high-inequality world, and that was the 1800s. One very very major unanswered question for Pikkety is this - if capital returns hold strong indefinitely, where will the negative feedback come from? I could never tell if the book was literally apocalyptic. If you mathematically describe something which multiplies infinitely, then either you're making the point that some negative feedback is missing, or you're predicting collapse for any real world system where that model applies (also a negative feedback, just a very jerky one). I think he thought that in the 1800s, the rich found a way to balance their expenses with their income. This is silly. Perhaps there was no means of re-investment due to the illiquidity of land. This is also silly. Anyway, I can still accept that some negative feedback from people's behavior existed in the 1800s, but even if I do, I don't accept that such a feedback would exist today. Rich people today have no natural limit to how rich they want to be, and no neo-feudalistic system that prevents further expansion. This all argues for the apocalyptic interpretation. My take - I don't think we can be at low growth for long. If we are, things will start to change Perhaps climate change, perhaps war. We're not going to just hang out in that state. Maybe we can then stay at low-growth, but low-growth with capital destruction. However, the more disruptive historical events tend to bring back growth. I think potential for technological productivity growth is still very very possible, but with a restructured way of life. Right now, the incentives just don't work. That's all.