8 ms·

Thomas Piketty Goes Global

62 points by mitchbob 7y ago

thedudeabides5 7y ago
Over the past century, the rate of return on capital (r) and existing wealth, owned disproportionately by the rich, had exceeded the rate of growth in the economy (g) as a whole. Piketty's calling out some good things, but by linking r to interest rates, Piketty's telling us we need to lower interest rates to deal with inequality, when in reality lower interest rates just benefit those already wealthy...
- averros 7y ago
  Agreed. Piketty is a total economic ignoramus and has absolutely zero clue about basics of macroeconomics. Not sure why anyone takes that clown seriously.
- throw0101a 7y ago
  >> rate of return on capital (r) > but by linking r to interest rates Where does he do this? I was under the impression that this is, to a first approximation, the return on equities—of which the top 10%/1%/0.1% own the vast majority of.
  - onlyrealcuzzo 7y ago
    R is the return on capital, 50% of which is owned by the top 1%. 83.3% of capital is owned by to top 8.4%. This is pretty off base from the 80-20 rule, and way out of line with what people think is fair. Since $100k net worth puts you in the top 8.4% globally -- a lot of us probably fall into that category. I think the biggest problem is that 70% of the world has a net worth less than $10k. We're not properly investing in our human capital. Taking from the rich to give to the poor sounds great, and the rich probably have way too much. But a lot of people think it's just a distribution problem. It isn't. The pie isn't big enough yet. It really is the biggest problem. If all the wealth was shared equally, the average person would have $32k. That won't even buy you a shack in Nigeria.
    - xapata 7y ago
      The key is that the pie would get bigger faster, in the long run, if wealth were more evenly distributed. As inequality grows, the behavior of the market approaches a command economy, with all the fragility and inefficiency that brings. As wealth distribution approaches uniform, market decision-making approaches maximally distributed. There's some optima of wealth distribution which maximizes risk-adjusted growth. We've probably gone a little too centralized, at least for some industries.
      - kortilla 7y ago
        We’re nowhere near a command economy. For that to happen the holders of 99% of the wealth would have to be coordinating (or be the same person/org). The wealthy compete and disagree all of the time. The most valuable companies in the world still got there by catering to the middle class and poor.
        xapata 7y ago
        No, intentional coordination is unnecessary for ill effects. Stratechery had a relevant article about the razor blade market recently. Oligopolies are quite common.
        kortilla 7y ago
        That’s not related to command economies. The razor blade market is anything but catering to the wealthy.
    - flak48 7y ago
      If the pie were to become bigger, wouldn't the shack in Nigeria also cost more?
      - onlyrealcuzzo 7y ago
        A shack in Nigeria would cost more if there was more demand and the same supply for shacks in Nigeria. Or it would cost more if the value of money decreased. My idea of a bigger pie, is not debasing the value of our currency. I think you're assuming that if we "made more money" Venezuela-style that the value of money would be less / things would be more expensive. I'm not saying we should "make more money". I'm saying we should "make progress". Progress is REAL growth. We measure GDP growth in REAL terms. An inflated pie would not be a bigger pie. A pie that's bigger in REAL terms would be a bigger pie.
  - thedudeabides5 7y ago
    I think it's in the book. Like if you look at how he constructs his r I could be wrong, the thing is like 500 pages and it's been a while. Does anyone know how he gets his r? https://en.wikipedia.org/wiki/File:TaxRateAndGrowthPiketty10_10.png https://en.wikipedia.org/wiki/File:TaxRateAndGrowthPiketty10...
- tryptophan 7y ago
  The whole R vs G doesnt make to much sense to me. Its like comparing speed vs acceleration, and deciding that since speed > acceleration, the bike will move in a sine pattern. Say we have 2 people who spend all their money every year. $A makes 100K a year. $B has 1M capital. Say the rate of growth is 2%, and that the return on capital is 10%. Year 0, $A makes 100k, $B makes 100k. Year 1, $A makes 102k and $B makes...100K, again. Even if they both save 50% of income, the worker still "wins", although his performance asymptotically trends towards the other's performance as a greater share of income comes from capital. Even though the return is 5x greater than growth ( and growth is part of the return), the person who relies on salary (ie not capital return) benefits and the other does not. Now if $B has 10M, and r=g at 2%, lets recalculate. Year 0 $B makes 200k, $A 100k, then at year 1 $A 102k, $B 200k. But consider, to have the same consumption, $B can save 50% and invest the other 100K. If he did that he would have 102k to spend like $A. Obviously this is a convoluted scenario, but for me, it seems this example punches a huge logical hole in the r vs g thing. Inequality seems to have more to do with personal savings rate than r>g. And note - its WEALTH inequality that rises, not consumption inequality (in that case, does it even matter?). I don't really know what to think about this subject anymore.
  - xapata 7y ago
    You've misunderstood the growth term. It's the growth of the entire economy, not just of wages. If average growth is X and capital grows faster than X (on average), then we can deduce that non-capital growth is slower than X (on average).
  - H8crilA 7y ago
    The point of R is that it also compounds, much like G. Imagine that B has $2M instead of $1M but needs to spend only $100k/year. For B: first year: $100k spending, $100k extra capital gains, $2.1M total capital second year: $102k spending, $108k extra capital gains, $2.208M total capital third year: $104k spending, $117k extra capital gains, $2.325M total capital. And so on. The real argument against Piketty is that people don't stay rich for long, i.e. they don't really get R, but a crazy volatile version of R. There's a large rotation in the top %. Nassim Taleb is quite vocal on the fact that, in the end, pretty much nobody gets market returns. Most people get below average returns, while very very few outperform a lot. This is the same reason why stocks should outperform bonds - they're more risky, and you need more capital to take more risk. Therefore not everyone can afford stocks, therefore stocks are cheaper (from a return point of view).
- deleted 7y ago
  [deleted]
keithnz 7y ago
I like that Piketty is super aggressive with some of the ideas and I generally support the idea that a baseline is set for everyone that is some kind of equalizer (even though it will never be perfect) that covers income/health/education. However, creating a practical wealth tax seems a bit tricky especially in terms of assessing wealth.
- toomuchtodo 7y ago
  > However, creating a practical wealth tax seems a bit tricky especially in terms of assessing wealth. It seems straightforward to employ those versed in valuing various stores of wealth for the implementation of a wealth tax. Certainly, some assets might be more difficult to value than others (art, antiques, exotic vehicles, certain business ventures), but a value can be determined nonetheless. Real estate? Financial instruments? Effortless and automatable.
  - averros 7y ago
    The "luxury goods" have all been taxed already via sales/VAT and corporate income taxes. Real estate is taxed via real estate taxes. Additionally taxing financial instruments is simply stupid: the capital gains taxes already tax them. I strongly suspect that Piketty is as ignorant of basics of tax law as he's totally ignorant of basic economics.
  - throw0101a 7y ago
    > art, antiques, exotic vehicles, That's what insurance company are (perhaps) for: what are they covered for? That's what you tax them at.
    - deleted 7y ago
      [deleted]
    - ardy42 7y ago
      > That's what insurance company are (perhaps) for: what are they covered for? That's what you tax them at. There's also this idea, which could be useful for discouraging undervaluing assets for a wealth tax: the owner puts a value on the asset, and the tax authority has the option of purchasing it for that price. If someone tries to cheat the system by severely undervaluing their assets, their bluff can be quickly called.
leftyted 7y ago
I'm happy to pay more taxes so people poorer than me can have healthcare. But stuff like this strikes me as monumentally silly: > They include a schedule of taxation on income and wealth that reaches ninety per cent and the elimination of nation-states in favor of “a vast transnational democracy,” which will secure “a universal right to education and a capital endowment, free circulation of people, and de facto virtual abolition of borders.” I think arguments like these can serve a useful function. Based on their appeal, maybe we'll move in the right direction. But the arguments themselves? A "transnational socialistic union" is a bizarre dream. And dreams can be dangerous when people take them too seriously.
- deleted 7y ago
  [deleted]
- refurb 7y ago
  That idea is beyond ridiculous. Even small countries can't get agreement on what the gov't should be doing, so how could possible do that across the globe? I'm going to guess like most "revolutions" it involves taking care of those "reactionaries" to make sure they don't upset the plan.
- voldacar 7y ago
  Any kind of one-world government would be pathological to the extreme. With no competitors or alternatives where people it treated poorly (or even just people who preferred a different style of governance) could go, it would rapidly become unimaginably tyrannical
  - rolltiide 7y ago
    In my experience people take a dim view that market based competition controls governments more so than any kind of representation or ideology can. They take a dimmer view that people on this planet take advantage of this reality, but they arent really perceiving that this is what those people and corporations are doing. Its definitely a privilege though!
- foogazi 7y ago
frisco 7y ago
Piketty’s main point is that if the return on capital is greater than the return on labor then over time you will get inequality. But like... what would a world in which that is not true look like? What would it even mean for labor to scale? I’ve thought about this a bunch and cannot imagine what such a system would look like or how it would work, except for maybe utopian socialism, which basically isn’t physical. What kind of system is he proposing in which capital doesn’t create leverage?
- adventured 7y ago
  Every path along that road goes back to the same thing, including Piketty's: extreme control by a very small group of people over everyone else. Piketty is merely suggesting control by a different group. The non-wealthy often respond very positively to that, thinking their sandwich will be bigger and they'll have some enhanced influence - which never actually happens in practice. The types of people that pursue power in very concentrated systems of any sort, almost never like to share their accumulated power. You have to either nationalize wealth and production formally (Socialism), so that bureaucrats or authoritarian citizen boards/panels (or the military as often happens) govern the use & distribution of all wealth and production; or you have to aggressively regulate all possible uses of private wealth, which also requires similar authoritarian control groups for oversight & dictate, that will de facto rule as fascist entities (a veneer of private ownership scenario). This is Socialism vs Fascism, in which one formally nationalizes and doesn't usually bother to pretend about who owns & controls what; and the other de facto nationalizes but leaves you with fake property ownership & control (which they can and will revoke at any time). If you want to pursue any Piketty style premise, all roads go to the same place. There will be no exceptions, there has never been an exception. You can vary the details, it doesn't matter, you get inherently violent, humanity crushing authoritarianism in every scenario if you actually pursue it very far. Piketty requires authoritarian-heavy structures, you can't redistribute and equalize enough in any other manner. We've already figured out the furthest you can go before you tip over: various European nations have experimented out in the open with very hefty welfare state concepts for generations now. They've taken it as far as it can go, before tipping into authoritarianism. Several have had to roll back their burdensome welfare states at times, including eg Sweden, as they rolled into stagnation. It's a challenging balancing act that requires careful management to continue operating well. Piketty has proposed nothing new, these are very old ideas and they've all been trialed in the real world repeatedly, all have failed repeatedly. Piketty is a rehash for modern times, Marx lite. The only response you will ever get when you point out that it has all been tried already, is: well, they didn't crush enough skulls (insert alternative fantasy story here: they didn't invent a technocratic utopia smart AI solution that was good enough to achieve harmony), or it would have worked.
bretpiatt 7y ago
This is the same reason we have the following problem in the United States: (1) Owning a home in the US is a good investment. (2) Housing in the US is affordable. Both 1 and 2 cannot be true over the long term, if the price of housing appreciates faster than inflation and wages it is a good investment and if it does that it is no longer affordable because wages have not kept up with the cost of housing.
- majormajor 7y ago
  Doesn't housing primarily only need to be a better "investment" than renting, not vs other assets? Housing-as-investment seems to come in two forms, but I don't think either needs unsustainable growth? 1) you'll have at least one asset going into retirement, or 2) you're going to borrow against the first one to buy another, rent it out, etc, which doesn't need a ton of appreciation in value as you start getting the cumulative income streams Consider that in many parts of the country housing is still a "good investment" but you don't have coastal-California-level unaffordability. Housing prices in the most desirable cities are a result of extremely heightened inequality. However, ownership is a path to security and insulation from the whims of the super-wealthy, so undercutting that doesn't seem like a great anti-inequality strategy.
  - bretpiatt 7y ago
    Home ownership has created wealth for two independent reasons: 1. In many markets in the US housing has been a good investment (for a bunch of reasons too long to discuss here). 2. Owning a home with a mortgage on it forces the owner to "put money in savings" each month as they pay down principal on the loan. The rent v. own discussion is a complex financial decision. If you buy a house with 20% down you're using 5:1 leverage. Even in historically strong housing markets if you put the same amount of principal into a 5:1 levered SP500 you'd have made much more money buying stocks than you would that home. So if your rent = interest + maintenance and you could afford to invest the same in principal in equities you'd do much better. Now I don't know any investment advisor who would tell a client (and I'm not one at all so take my advice for what it is -- the thoughts of a business person) to go all in on a 5x leveraged equity portfolio.
mychael 7y ago
Here is an e-book debunking Piketty's ideas https://www.cato.org/sites/cato.org/files/pubs/pdf/anti-piketty.pdf https://www.cato.org/sites/cato.org/files/pubs/pdf/anti-pike...
- jacobolus 7y ago
  Pretty unsurprising that the Koch brothers’ pet “think tank” would want to fight back against anything questioning extreme inequality and concentration of power. Before you examine something published by Cato, you can predict its position, and will rarely if ever be surprised by what you read there. The data will be cherry picked or massaged and the argument will be contorted to support the pre-chosen position favorable to the donors funding it. Cato generally opposes all kinds of taxes and regulations, supports privatization of public institutions and services, opposes a public safety net, opposes campaign finance reform, disputes or downplays global climate change, etc.
  - kortilla 7y ago
    Ad hom. If you think this particular paper is invalid and/or cherry-picks points, then refute it specifically. It’s not novel to point out that the Cato institute leans free market.
    - ardy42 7y ago
      > Ad hom. If you think this particular paper is invalid and/or cherry-picks points, then refute it specifically No, it doesn't work like that. Reputation matters, and taking it into account is a way to deal with the sad fact of the Bullshit asymmetry principle. Jacobolus is basically saying Cato has cried wolf too many times to be given the benefit of the doubt anymore. [1] https://en.wikipedia.org/wiki/Bullshit#Bullshit_asymmetry_principle https://en.wikipedia.org/wiki/Bullshit#Bullshit_asymmetry_pr...: "The amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it."
      - kortilla 7y ago
bjourne 7y ago
Sal Khan has a good lecture series about Piketty's theory of capital: https://www.khanacademy.org/economics-finance-domain/macroeconomics/macroeconomics-income-inequality/piketty-capital/v/piketty-capital https://www.khanacademy.org/economics-finance-domain/macroec...

62 points by mitchbob 7y ago

Over the past century, the rate of return on capital (r) and existing wealth, owned disproportionately by the rich, had exceeded the rate of growth in the economy (g) as a whole. Piketty's calling out some good things, but by linking r to interest rates, Piketty's telling us we need to lower interest rates to deal with inequality, when in reality lower interest rates just benefit those already wealthy...

averros 7y ago
Agreed. Piketty is a total economic ignoramus and has absolutely zero clue about basics of macroeconomics. Not sure why anyone takes that clown seriously.
throw0101a 7y ago
>> rate of return on capital (r) > but by linking r to interest rates Where does he do this? I was under the impression that this is, to a first approximation, the return on equities—of which the top 10%/1%/0.1% own the vast majority of.
- onlyrealcuzzo 7y ago
  R is the return on capital, 50% of which is owned by the top 1%. 83.3% of capital is owned by to top 8.4%. This is pretty off base from the 80-20 rule, and way out of line with what people think is fair. Since $100k net worth puts you in the top 8.4% globally -- a lot of us probably fall into that category. I think the biggest problem is that 70% of the world has a net worth less than $10k. We're not properly investing in our human capital. Taking from the rich to give to the poor sounds great, and the rich probably have way too much. But a lot of people think it's just a distribution problem. It isn't. The pie isn't big enough yet. It really is the biggest problem. If all the wealth was shared equally, the average person would have $32k. That won't even buy you a shack in Nigeria.
  - xapata 7y ago
    The key is that the pie would get bigger faster, in the long run, if wealth were more evenly distributed. As inequality grows, the behavior of the market approaches a command economy, with all the fragility and inefficiency that brings. As wealth distribution approaches uniform, market decision-making approaches maximally distributed. There's some optima of wealth distribution which maximizes risk-adjusted growth. We've probably gone a little too centralized, at least for some industries.
    - kortilla 7y ago
      We’re nowhere near a command economy. For that to happen the holders of 99% of the wealth would have to be coordinating (or be the same person/org). The wealthy compete and disagree all of the time. The most valuable companies in the world still got there by catering to the middle class and poor.
      - xapata 7y ago
        No, intentional coordination is unnecessary for ill effects. Stratechery had a relevant article about the razor blade market recently. Oligopolies are quite common.
        kortilla 7y ago
        That’s not related to command economies. The razor blade market is anything but catering to the wealthy.
  - flak48 7y ago
    If the pie were to become bigger, wouldn't the shack in Nigeria also cost more?
    - onlyrealcuzzo 7y ago
      A shack in Nigeria would cost more if there was more demand and the same supply for shacks in Nigeria. Or it would cost more if the value of money decreased. My idea of a bigger pie, is not debasing the value of our currency. I think you're assuming that if we "made more money" Venezuela-style that the value of money would be less / things would be more expensive. I'm not saying we should "make more money". I'm saying we should "make progress". Progress is REAL growth. We measure GDP growth in REAL terms. An inflated pie would not be a bigger pie. A pie that's bigger in REAL terms would be a bigger pie.
- thedudeabides5 7y ago
  I think it's in the book. Like if you look at how he constructs his r I could be wrong, the thing is like 500 pages and it's been a while. Does anyone know how he gets his r? https://en.wikipedia.org/wiki/File:TaxRateAndGrowthPiketty10_10.png https://en.wikipedia.org/wiki/File:TaxRateAndGrowthPiketty10...
tryptophan 7y ago
The whole R vs G doesnt make to much sense to me. Its like comparing speed vs acceleration, and deciding that since speed > acceleration, the bike will move in a sine pattern. Say we have 2 people who spend all their money every year. $A makes 100K a year. $B has 1M capital. Say the rate of growth is 2%, and that the return on capital is 10%. Year 0, $A makes 100k, $B makes 100k. Year 1, $A makes 102k and $B makes...100K, again. Even if they both save 50% of income, the worker still "wins", although his performance asymptotically trends towards the other's performance as a greater share of income comes from capital. Even though the return is 5x greater than growth ( and growth is part of the return), the person who relies on salary (ie not capital return) benefits and the other does not. Now if $B has 10M, and r=g at 2%, lets recalculate. Year 0 $B makes 200k, $A 100k, then at year 1 $A 102k, $B 200k. But consider, to have the same consumption, $B can save 50% and invest the other 100K. If he did that he would have 102k to spend like $A. Obviously this is a convoluted scenario, but for me, it seems this example punches a huge logical hole in the r vs g thing. Inequality seems to have more to do with personal savings rate than r>g. And note - its WEALTH inequality that rises, not consumption inequality (in that case, does it even matter?). I don't really know what to think about this subject anymore.
- xapata 7y ago
  You've misunderstood the growth term. It's the growth of the entire economy, not just of wages. If average growth is X and capital grows faster than X (on average), then we can deduce that non-capital growth is slower than X (on average).
- H8crilA 7y ago
  The point of R is that it also compounds, much like G. Imagine that B has $2M instead of $1M but needs to spend only $100k/year. For B: first year: $100k spending, $100k extra capital gains, $2.1M total capital second year: $102k spending, $108k extra capital gains, $2.208M total capital third year: $104k spending, $117k extra capital gains, $2.325M total capital. And so on. The real argument against Piketty is that people don't stay rich for long, i.e. they don't really get R, but a crazy volatile version of R. There's a large rotation in the top %. Nassim Taleb is quite vocal on the fact that, in the end, pretty much nobody gets market returns. Most people get below average returns, while very very few outperform a lot. This is the same reason why stocks should outperform bonds - they're more risky, and you need more capital to take more risk. Therefore not everyone can afford stocks, therefore stocks are cheaper (from a return point of view).
deleted 7y ago
[deleted]

keithnz 7y ago

I like that Piketty is super aggressive with some of the ideas and I generally support the idea that a baseline is set for everyone that is some kind of equalizer (even though it will never be perfect) that covers income/health/education. However, creating a practical wealth tax seems a bit tricky especially in terms of assessing wealth.

toomuchtodo 7y ago
> However, creating a practical wealth tax seems a bit tricky especially in terms of assessing wealth. It seems straightforward to employ those versed in valuing various stores of wealth for the implementation of a wealth tax. Certainly, some assets might be more difficult to value than others (art, antiques, exotic vehicles, certain business ventures), but a value can be determined nonetheless. Real estate? Financial instruments? Effortless and automatable.
- averros 7y ago
  The "luxury goods" have all been taxed already via sales/VAT and corporate income taxes. Real estate is taxed via real estate taxes. Additionally taxing financial instruments is simply stupid: the capital gains taxes already tax them. I strongly suspect that Piketty is as ignorant of basics of tax law as he's totally ignorant of basic economics.
- throw0101a 7y ago
  > art, antiques, exotic vehicles, That's what insurance company are (perhaps) for: what are they covered for? That's what you tax them at.
  - deleted 7y ago
    [deleted]
  - ardy42 7y ago
    > That's what insurance company are (perhaps) for: what are they covered for? That's what you tax them at. There's also this idea, which could be useful for discouraging undervaluing assets for a wealth tax: the owner puts a value on the asset, and the tax authority has the option of purchasing it for that price. If someone tries to cheat the system by severely undervaluing their assets, their bluff can be quickly called.

leftyted 7y ago

I'm happy to pay more taxes so people poorer than me can have healthcare. But stuff like this strikes me as monumentally silly: > They include a schedule of taxation on income and wealth that reaches ninety per cent and the elimination of nation-states in favor of “a vast transnational democracy,” which will secure “a universal right to education and a capital endowment, free circulation of people, and de facto virtual abolition of borders.” I think arguments like these can serve a useful function. Based on their appeal, maybe we'll move in the right direction. But the arguments themselves? A "transnational socialistic union" is a bizarre dream. And dreams can be dangerous when people take them too seriously.

deleted 7y ago
[deleted]
refurb 7y ago
That idea is beyond ridiculous. Even small countries can't get agreement on what the gov't should be doing, so how could possible do that across the globe? I'm going to guess like most "revolutions" it involves taking care of those "reactionaries" to make sure they don't upset the plan.
voldacar 7y ago
Any kind of one-world government would be pathological to the extreme. With no competitors or alternatives where people it treated poorly (or even just people who preferred a different style of governance) could go, it would rapidly become unimaginably tyrannical
- rolltiide 7y ago
  In my experience people take a dim view that market based competition controls governments more so than any kind of representation or ideology can. They take a dimmer view that people on this planet take advantage of this reality, but they arent really perceiving that this is what those people and corporations are doing. Its definitely a privilege though!
foogazi 7y ago

frisco 7y ago

Piketty’s main point is that if the return on capital is greater than the return on labor then over time you will get inequality. But like... what would a world in which that is not true look like? What would it even mean for labor to scale? I’ve thought about this a bunch and cannot imagine what such a system would look like or how it would work, except for maybe utopian socialism, which basically isn’t physical. What kind of system is he proposing in which capital doesn’t create leverage?

adventured 7y ago
Every path along that road goes back to the same thing, including Piketty's: extreme control by a very small group of people over everyone else. Piketty is merely suggesting control by a different group. The non-wealthy often respond very positively to that, thinking their sandwich will be bigger and they'll have some enhanced influence - which never actually happens in practice. The types of people that pursue power in very concentrated systems of any sort, almost never like to share their accumulated power. You have to either nationalize wealth and production formally (Socialism), so that bureaucrats or authoritarian citizen boards/panels (or the military as often happens) govern the use & distribution of all wealth and production; or you have to aggressively regulate all possible uses of private wealth, which also requires similar authoritarian control groups for oversight & dictate, that will de facto rule as fascist entities (a veneer of private ownership scenario). This is Socialism vs Fascism, in which one formally nationalizes and doesn't usually bother to pretend about who owns & controls what; and the other de facto nationalizes but leaves you with fake property ownership & control (which they can and will revoke at any time). If you want to pursue any Piketty style premise, all roads go to the same place. There will be no exceptions, there has never been an exception. You can vary the details, it doesn't matter, you get inherently violent, humanity crushing authoritarianism in every scenario if you actually pursue it very far. Piketty requires authoritarian-heavy structures, you can't redistribute and equalize enough in any other manner. We've already figured out the furthest you can go before you tip over: various European nations have experimented out in the open with very hefty welfare state concepts for generations now. They've taken it as far as it can go, before tipping into authoritarianism. Several have had to roll back their burdensome welfare states at times, including eg Sweden, as they rolled into stagnation. It's a challenging balancing act that requires careful management to continue operating well. Piketty has proposed nothing new, these are very old ideas and they've all been trialed in the real world repeatedly, all have failed repeatedly. Piketty is a rehash for modern times, Marx lite. The only response you will ever get when you point out that it has all been tried already, is: well, they didn't crush enough skulls (insert alternative fantasy story here: they didn't invent a technocratic utopia smart AI solution that was good enough to achieve harmony), or it would have worked.

bretpiatt 7y ago

This is the same reason we have the following problem in the United States: (1) Owning a home in the US is a good investment. (2) Housing in the US is affordable. Both 1 and 2 cannot be true over the long term, if the price of housing appreciates faster than inflation and wages it is a good investment and if it does that it is no longer affordable because wages have not kept up with the cost of housing.

majormajor 7y ago
Doesn't housing primarily only need to be a better "investment" than renting, not vs other assets? Housing-as-investment seems to come in two forms, but I don't think either needs unsustainable growth? 1) you'll have at least one asset going into retirement, or 2) you're going to borrow against the first one to buy another, rent it out, etc, which doesn't need a ton of appreciation in value as you start getting the cumulative income streams Consider that in many parts of the country housing is still a "good investment" but you don't have coastal-California-level unaffordability. Housing prices in the most desirable cities are a result of extremely heightened inequality. However, ownership is a path to security and insulation from the whims of the super-wealthy, so undercutting that doesn't seem like a great anti-inequality strategy.
- bretpiatt 7y ago
  Home ownership has created wealth for two independent reasons: 1. In many markets in the US housing has been a good investment (for a bunch of reasons too long to discuss here). 2. Owning a home with a mortgage on it forces the owner to "put money in savings" each month as they pay down principal on the loan. The rent v. own discussion is a complex financial decision. If you buy a house with 20% down you're using 5:1 leverage. Even in historically strong housing markets if you put the same amount of principal into a 5:1 levered SP500 you'd have made much more money buying stocks than you would that home. So if your rent = interest + maintenance and you could afford to invest the same in principal in equities you'd do much better. Now I don't know any investment advisor who would tell a client (and I'm not one at all so take my advice for what it is -- the thoughts of a business person) to go all in on a 5x leveraged equity portfolio.

mychael 7y ago

Here is an e-book debunking Piketty's ideas https://www.cato.org/sites/cato.org/files/pubs/pdf/anti-piketty.pdf https://www.cato.org/sites/cato.org/files/pubs/pdf/anti-pike...

jacobolus 7y ago
Pretty unsurprising that the Koch brothers’ pet “think tank” would want to fight back against anything questioning extreme inequality and concentration of power. Before you examine something published by Cato, you can predict its position, and will rarely if ever be surprised by what you read there. The data will be cherry picked or massaged and the argument will be contorted to support the pre-chosen position favorable to the donors funding it. Cato generally opposes all kinds of taxes and regulations, supports privatization of public institutions and services, opposes a public safety net, opposes campaign finance reform, disputes or downplays global climate change, etc.
- kortilla 7y ago
  Ad hom. If you think this particular paper is invalid and/or cherry-picks points, then refute it specifically. It’s not novel to point out that the Cato institute leans free market.
  - ardy42 7y ago
    > Ad hom. If you think this particular paper is invalid and/or cherry-picks points, then refute it specifically No, it doesn't work like that. Reputation matters, and taking it into account is a way to deal with the sad fact of the Bullshit asymmetry principle. Jacobolus is basically saying Cato has cried wolf too many times to be given the benefit of the doubt anymore. [1] https://en.wikipedia.org/wiki/Bullshit#Bullshit_asymmetry_principle https://en.wikipedia.org/wiki/Bullshit#Bullshit_asymmetry_pr...: "The amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it."
    - kortilla 7y ago

bjourne 7y ago

Sal Khan has a good lecture series about Piketty's theory of capital: https://www.khanacademy.org/economics-finance-domain/macroeconomics/macroeconomics-income-inequality/piketty-capital/v/piketty-capital https://www.khanacademy.org/economics-finance-domain/macroec...