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This is the conclusion of Thomas Picketty's 2013 book, "Capital in the 21st Century." Due to the historical averages of the rate of return on capital, he conclu

This is the conclusion of Thomas Picketty's 2013 book, "Capital in the 21st Century." Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors. The book was very provocative in economist circles, but even the critics mostly lauded the empirical work at collecting historical data. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...

suoduandao3 3y ago
It's an interesting model and in my opinion, provides a much better model for the 'fourth turning' pattern than the mechanism put forward by the authors. The predictable return on capital Picketty points to after all only happens during times of stability, during times of instability wealth disparities actually decrease. If too much concentration of wealth leads to crisis and crisis is a 'distributing' mechanism this is basically a self-correcting dynamic.
- thesuperbigfrog 3y ago
  >> If too much concentration of wealth leads to crisis and crisis is a 'distributing' mechanism this is basically a self-correcting dynamic. Doesn't this imply that economic hardships lead to unrest and wars? It certainly seems so and seems like a logical conclusion. It may be primarily anecdotal, but the last 100 years or so seem to confirm it.
  - lainga 3y ago
    For the opposite (not quite converse logically!) argument that unrest and wars lead to economic equality, I recommend Walter Scheidel's "The Great Leveler". https://press.princeton.edu/books/paperback/9780691183251/the-great-leveler https://press.princeton.edu/books/paperback/9780691183251/th...
- Fauntleroy 3y ago
  Perhaps there is a better alternative to this. Rather than simply waiting for "times of instability," society at large could take a more proactive approach.
thriftwy 3y ago
I believe this was true throughout almost all history, and 20th century was a fluke where a lot of people lost what they could inherit, and other lots of people made their capital from hard work.
Qem 3y ago
We are devolving to the status quo from the nineteen century and before. A couple owners of inherited wealth and huge dispossessed masses.
- gretch 3y ago
  This is true if you view the world from a zero-sum perspective. If the rich are winning, then the poor must be losing. But I would argue the world is not zero-sum. Modern life for middle class or poor class people is a lot better than the vast majority of history (the 2 notable exceptions are post WWII USA and post Cold War USA, when America was punched through as an undisputed global superpower). We are a looooonnng way away from 19th century standards. Like seriously, would you desire to go back in time to 1890? Okay, have fun if you're not white. Good luck with polio and leprosy. Hope you're not bored with reading (if you can read) because video barely exists.
  - akprasad 3y ago
    There are two separate concerns here: - increases in material standards of living - decreases in class mobility and increased concentration of social power It is perfectly coherent to appreciate one and condemn the other. The parent comment seems to focus on the latter.
    - gretch 3y ago
      > decreases in class mobility and increased concentration of social power > The parent comment seems to focus on the latter Okay but it's still not a very good argument. Like really? That's when you literally had to be _born_ noble, like your blood ancestry. That's why a bunch of people died in the French revolution, Russian revolution, etc
      - danaris 3y ago
        The Gilded Age, the stereotypical example of a time with high inequality (which we have, in fact, now surpassed by any reasonable measure) was in the 19th century in the USA. We had no hereditary nobility (not in name, anyway). The robber barons were all (to the best of my knowledge) "new money"—their families made their fortunes right here in America by getting in on the ground floor of brand-new industries (very much in the same way that startup founders are trying to do today) as the Industrial Revolution was ramping up...and then becoming monopolists and extracting all the money they could (very much in the same way that startup founders are trying to do today). You may need to review your history.
abeppu 3y ago
I also think it's worth calling out that his follow-up, "Capital and Ideology" in its latter sections includes several suggestions for counteracting the trend to increasing inequality. One of these is basically that _every_ person should have a windfall inheritance when they're in their early adulthood, which would give them opportunities to pursue education, try starting a business, or whatever else. And naturally, this needs to be funded by taxes on the very wealthy.
- Fauntleroy 3y ago
  People whine about "wealth distribution" day and night, but at the end of the day what alternative is there to combat the (continually increasing) concentration of wealth at the top? At some point there will have to be redistribution, in some form, and the sooner society comes around to that the better off we'll all be.
  - theGnuMe 3y ago
    Death and taxes.
  - satellite2 3y ago
    Apparently he improved the conclusion in his second book. In the first one it was bittersweet as he only stuck to historical evidences and what he found was that the only periods of decreasing economic inequalities were wars.
  - Buttons840 3y ago
    Wealth redistribution and making it easier for new businesses to enter markets and compete. These often go hand-in-hand; safety nets allow people to take risks, and new competition prevents markets from colluding and ceasing competition.
    - bobthepanda 3y ago
      Also letting legacy businesses die. It is more often than not that family firms in particular collapse after one or two generations, if not propped up.
mmanfrin 3y ago
It feels like we're slowly slipping back to palace economies but instead of violence it's through capital (which some might still call violence).
verisimi 3y ago
He must surely be an embedded character with such a prestigious background, promoted in the media, talks at the WEF, etc. Whatever he is proposing will be milk toast to the billionaires - a lighting rod to direct peoples' frustration to somewhere that won't cause any harm to those billionaires. Institutions: Paris School of Economics School for Advanced Studies in the Social Sciences London School of Economics Massachusetts Institute of Technology
- 7thaccount 3y ago
  Are you referring to Piketty's work and folks like Krugman going on interviews to talk about it?
  - verisimi 3y ago
    I'm making the point that the way legislation etc is drafted, the clauses that are allowed - the whole captured system really, that allows the very rich to be able to increase their wealth through inheritance, is problematic if it is seen to be unfair. People will get angry, as inflation, carbon taxes, etc start to bite. The billionaires will feel some heat. In order to manage that tension, you need certain people who appear to be against you, but are actually in your pocket. Picketty is surely one of those. He will say contentious things, that appear to be critical of billionaires, but his real job is to help manage popular discontent, by sucking up the air from others whose response that would be more problematic to those billionaires.
steveBK123 3y ago
Low interest rates decade made this pattern seemingly no longer hold, but I think we are getting right back to the old pattern for sure. The next question is what to do about it. Wealth tax is controversial and hard to implement. It seems to me that simplifying the tax code such that capital gains and various forms of non-salary income didn't have preferential treatment would be an important first step. Further, an actual meaningful inheritance tax that isn't easily avoided by various trust schemes.
rabuse 3y ago
What happens when the masses get fed up with the inequality and 400+ million guns in the U.S.?
- alfredol 3y ago
  Fascism, apparently.
- jay_kyburz 3y ago
  I see people joking about this all up and down this thread, but rich peoples wealth is not sting around in gold bars waiting to be stolen by poor people. All that will happen in a violent uprising is a lot of people will die, and peoples houses will burn down, but nothing will happen to those numbers in a spreadsheet.
  - giardini 3y ago
    well, there will be a lot of inheritance and spreading of wealth (thru theft et al) as a result of that uprising!
    - jay_kyburz 3y ago
      You missed my point, a looter might get a new car or tv, but that's not wealth. A looter is can't take ownership of television network, or a social media website, or a coal mine, or a rail way, or like anything actually worth anything. Now instead of a violent uprising we talk about electing a democratic government that's prepared nationalize our nations infrastructure we'd be talking real wealth redistribution.
onlyrealcuzzo 3y ago
> Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors. You're obviously incredibly unlikely to become a billionaire. If someone inherits billions - you're not going to out-labor them to become richer. Only luck will help there. So where is the cutoff? You can easily out-labor someone who inherits $2M at 50. >10% of people in the US amass >$1M (without counting their home equity) by around 50... How many people are inheriting more than $2M? 0.5% of people? You're never going to out-labor luck. It's always going to be better to be lucky than work hard. But luck doesn't scale, and hope isn't a great strategy. I'm in favor of inheritance taxes. But this doesn't seem like the main driver of inequality....
- wing-_-nuts 3y ago
  >I'm in favor of inheritance taxes. But this doesn't seem like the main driver of inequality.... I mean, Piketty's work shows that it is... I'd like to see a scandi style tax system and social safety net. Inheritance taxes at the point where 90% of small business and farms won't be affected. Progressive carbon taxes. Massively increased social safety net that includes paid education, healthcare, and unemployment generous enough that one won't be destitute if they try to start their own business and fail (look at the rate of small business formation in the scandi countries!) There's a common refrain in conservative circles that they're more in favor of 'equality of opportunity over outcome'. Right now we clearly have neither.
  - onlyrealcuzzo 3y ago
    > I mean, Piketty's work shows that it is... He shows that - currently - R > G. I'm not convinced this "proves" inheritance is the main problem. It shows that you can't work your way to the top - only invest and get lucky (of which inheritance is one of many ways to get lucky). And by the way - it shows that this was true for all of human history except a brief window after WW2.
seydor 3y ago
Piketty's claim seems empirically obvious, but also virtually obvious to anyone who has created a gaming economy. The rich get richer faster than anyone can catch up, so you have to introduce artificial constraints like increasing prices for rich people.
- iNic 3y ago
  As I said in a different comment in this thread, Piketty's claim does not hold for all capital, it only holds for land. This is perfectly in line with theoretical predictions by David Ricardo[1]. The solution to this is a Land Value Tax as proposed by Henry George[2]. [1]: https://en.wikipedia.org/wiki/Law_of_rent https://en.wikipedia.org/wiki/Law_of_rent [2]: https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
chrischattin 3y ago
Hardly empirical. The data shows the opposite. ~80% of current billionaires in the U.S. are self-made first generation.
- tmalsburg2 3y ago
  Source?
- danielmarkbruce 3y ago
  And another large chunk are first generation inherited. Like self made mom or dad just kicked the bucket. This myth of multi-generational, dynastic absurd wealth is.... nonsense with few exceptions.
- futureamish 3y ago
  Are we calling them "self-made" now for strapping some http requests to old, purposefully gate-kept banking systems? Or is it the ones that we allowed to horizontally expand with zero regulatory system to stop them? Or is it the ones who ruined housing the world over? So many useful people.
- wing-_-nuts 3y ago
  You don't have to inherit billions from your parents to have a huge leg up on everyone else. There are examples all over the place from something as extravagant 'a small loan of a million dollars' to 'an introduction to a vp at ibm', to paying their kids tuition to the best private schools. I am extremely suspicious of any wealthy person who claims to be 'self made' when in reality they had a paved path to success.
- spiralx 3y ago
  The article is saying that the inherited wealth of the remaining 20% of today's billionaires is greater than the wealth of those new-made billionaires, there's no contradiction there at all. And obviously you'd expect most new billionaires to have a net wealth close to the $1bn mark, so all it would take is each of the 20% to inherit four times as much on average. This page lists nine people who inherited over $50bn each, and another 23 who inherited between $4bn and $50bn, totalling just over $1.1tn of inherited wealth. Easy to see how that would outweigh the wealth of a larger number of new billionaires. https://www.madisontrust.com/information-center/visualizations/which-of-the-worlds-richest-people-inherited-their-wealth/ https://www.madisontrust.com/information-center/visualizatio... And that list doesn't include any of the inherited wealth of the various royal, noble and other old money families around the world...
danielmarkbruce 3y ago
It's such a bad assumption that historical returns on capital will persist. Capital is subject to supply/demand just like other things. The more of it there is, the lower the returns are. Anyone who works in finance/investing will tell you (including old Warren Buffett), it's a lot harder to generate returns these days than 50 years ago. There is just so much capital sloshing around.
iNic 3y ago
It turns out the thing that Picketty missed was that he grouped land with Capital. Land should be treated differently as it can not be created or destroyed. If you seperate out the data into land and capital (w/o the land) then all of the outsized returns come from rich people hoarding land[1]. This is in line with the observations of Riccardo[2]. [1]: 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... [2]: https://en.wikipedia.org/wiki/Law_of_rent https://en.wikipedia.org/wiki/Law_of_rent
- burkaman 3y ago
  Sorry if this is nitpicking, but valuable land absolutely can be created (Boston) and destroyed (climate change) on human timescales. I'm sure the amount of land that can realistically be created and destroyed within a few lifetimes is negligible compared to the amount of land in existence, but compared to valuable inhabited land it might actually be significant. Coastal land tends to be pretty valuable, and that's where (almost) all the creation and destruction occurs. Edit: Actually, the interview you reference is not even really talking about land. > When you say “land,” you’re not talking about land in the Jane Austen sense, that is, agricultural land under the ownership of the lord of the manor, right? > It’s not agricultural land, it’s the value of urban land. Obviously urban land can be created and destroyed as cities expand and contract.
  - tomwheeler 3y ago
    The Netherlands has also created quite a bit of land. Chernobyl is an example of land that was effectively destroyed by becoming uninhabitable.
  - dr-detroit 3y ago
    [dead]
  - yterdy 3y ago
    It's not nitpicking, it's central to the issue. One could consider that, as far as Western civilization is concerned, colonialism was an exercise in "land creation" - and the various wars of the 20th century, temporarily in the case of bombings and permanently in the case of mine-setting, a type of "land destruction". Picketty doesn't miss.
godelski 3y ago
> "Capital in the 21st Century." It's weird because prior to the 21st Century this used to be almost entirely how wealth was generated. But I think the argument of inheritance being a major wealth driver should be simple to understand from a few base principles. This is invariant of money and is related to capital in the broader sense (i.e. resources) which is also going to be invariant to many economic systems. One of the most important ones is momentum. Momentum seems to often not be considered in these discussions but makes discussions of trickle down economics rather insane. Let's look at a more realistic discussions. Your stock portfolio should not be bounds, full of bonds, and nothing but bonds. You have to diversify and actually even include some risky investments. We usually talk about this in percentages of investments but this doesn't actually make any sense because it's actually percentage of risk vulnerability. E.g. Elon can lose 244B of his 245B and still gave essentially the same quality of life (similarly doubling his wealth won't change anything in a meaningful way). But let's also look deeper at percentages. Let's say I make an investment of $10k (a nice size for someone early on in their career) and I'm about to do really well and get 500% return on that (killer value!), I now have $60k to play with. Now let's say another person puts a $10M investment and only gets a measly 1% return. They gained $100k so have $10.1M to play with.[0] The other problem with percentages is that you can "increase your luck" by taking on far more risk. If we both take our 10{k,M} and diversity into 1k pots and each pot has a x% chance of returning 500%, which person do you think ends up with more winners? Or if we do a fixed number of pots but divide by percent of money, you're going to find a very different expected return value. Consider this factor when you're also considering cost of living arguments. I'll take that SV software job at $300k/yr where I can only invest 10% of my income (30k) per year over a $100k/yr job in middle America where I can invest 20% of my income (20k). COL calculators are always based on percentages and so not taking this into account (as well as a lot more abstract things) and it doesn't matter of in SV I'm spending 70% of my income on housing but 30% elsewhere if this is the end result (only focusing on building wealth for a clearer argument. Other factors matter and wealth isn't everything. But employers, you can't just use COL adjustments, it's a bad deal for the employees and they know it) Now I said it is invariant of money, because capital is capital. Land, factories, gold, potatoes, whatever, that's all capital. It can't ever be evenly distributed, even with all good faith actors, because the value of those changes wildly and fast (value != money, its more abstract). Throw in how non-homogeneous everything is (e.g. land, housing, location are not fungible resources) and you got a crazy fucking mess. It's no wonder you can't make a successful 5 year plan, the world is chaos and the models need to be exceptionally complex. You have to embrace the chaos in some way. TLDR: math isn't always intuitive because neither percentages nor raw values exclusively tell the whole story (don't get me started on mean, median, and variance). People love to (often unintentionally) lie by using whichever fits a better narrative. A holistic approach is needed (i.e. context) with clear definitions of objective functions and more importantly clear understandings of the metrics (a whole other can of worms that people think is far simpler than they actually are). [0] To put it another way, if you're retiring with $10M in investments you're retiring with a passive income north of an L3 at Google. This is why John Bogle is happy with only $50m (which grew) because he understood that there's very little more money can do for him and that a simple 2% a year on that gets him a million every year and so the value is not a high score but being human. This isn't really a philosophical argument because literally capital generally follows an S curve in its utility, not linear and usually not exponential (though S looks exponential at some points).
rufus_foreman 3y ago
>> wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors Adjusted for inflation, John D. Rockefeller had 340 billion dollars of wealth in 1918. What has that fortune grown to? It hasn't. It is gone. He gave it away. Adjusted for inflation, Andrew Carnegie had 370 billion dollars of wealth in 1901. What has that fortune grown to? It hasn't. It is gone. He gave it away. John Jacob Astor's fortune? Gone. Vanderbilt's? Gone. Looking at a few different lists, those are the 4 wealthiest people in US history. They either gave the money away or their heirs spent it all. If wealth was going to automatically concentrate, it would have. It didn't. Rockefeller's 340 billion invested in the stock market from 1918 to today would roughly equal the entire net wealth of the US. That didn't happen for the Rockefellers and it didn't happen for any of the other many fortunes in the past. What Picketty "concludes empirically" does not in fact happen. If it did in fact happen, all the wealth of the US would be in the hands of one person. To figure out if wealth will concentrate in the hands of inheritors, you need to know many different things. Will people give their wealth to their children or will they give it away? Zuckerberg, Gates, Buffet, Ellison, all giving their money away. Will people give their wealth to a single child? Elon Musk has 10 kids. If he gave away money to each child, his wealth would not be concentrated. (Oops, 11 children. Even less concentrated.) If those children went on to have multiple children, the inheritance gets diluted even more. Some rich people, believe it or not, actually spend money. People who inherit wealth rather than earning it seem to be particularly good at spending wealth faster than it grows.
opportune 3y ago
There is at least one exception to this, which is that as technology improves, it necessitates the creation of new capital to utilize that technology commercially, and the people involved in creating it (whether as founders or wage workers) stand to capture a lot of the value in delivering it. Case in point, see how valuable it is these days to be an AI scientist or software engineer. Both are involved in the creation of capital in the form of AI models and software, both are paid a lot and able to adequately catch up in wealth to old money.

suoduandao3 3y ago

It's an interesting model and in my opinion, provides a much better model for the 'fourth turning' pattern than the mechanism put forward by the authors. The predictable return on capital Picketty points to after all only happens during times of stability, during times of instability wealth disparities actually decrease. If too much concentration of wealth leads to crisis and crisis is a 'distributing' mechanism this is basically a self-correcting dynamic.

thesuperbigfrog 3y ago
>> If too much concentration of wealth leads to crisis and crisis is a 'distributing' mechanism this is basically a self-correcting dynamic. Doesn't this imply that economic hardships lead to unrest and wars? It certainly seems so and seems like a logical conclusion. It may be primarily anecdotal, but the last 100 years or so seem to confirm it.
- lainga 3y ago
  For the opposite (not quite converse logically!) argument that unrest and wars lead to economic equality, I recommend Walter Scheidel's "The Great Leveler". https://press.princeton.edu/books/paperback/9780691183251/the-great-leveler https://press.princeton.edu/books/paperback/9780691183251/th...
Fauntleroy 3y ago
Perhaps there is a better alternative to this. Rather than simply waiting for "times of instability," society at large could take a more proactive approach.

thriftwy 3y ago

I believe this was true throughout almost all history, and 20th century was a fluke where a lot of people lost what they could inherit, and other lots of people made their capital from hard work.

Qem 3y ago

We are devolving to the status quo from the nineteen century and before. A couple owners of inherited wealth and huge dispossessed masses.

gretch 3y ago
This is true if you view the world from a zero-sum perspective. If the rich are winning, then the poor must be losing. But I would argue the world is not zero-sum. Modern life for middle class or poor class people is a lot better than the vast majority of history (the 2 notable exceptions are post WWII USA and post Cold War USA, when America was punched through as an undisputed global superpower). We are a looooonnng way away from 19th century standards. Like seriously, would you desire to go back in time to 1890? Okay, have fun if you're not white. Good luck with polio and leprosy. Hope you're not bored with reading (if you can read) because video barely exists.
- akprasad 3y ago
  There are two separate concerns here: - increases in material standards of living - decreases in class mobility and increased concentration of social power It is perfectly coherent to appreciate one and condemn the other. The parent comment seems to focus on the latter.
  - gretch 3y ago
    > decreases in class mobility and increased concentration of social power > The parent comment seems to focus on the latter Okay but it's still not a very good argument. Like really? That's when you literally had to be _born_ noble, like your blood ancestry. That's why a bunch of people died in the French revolution, Russian revolution, etc
    - danaris 3y ago
      The Gilded Age, the stereotypical example of a time with high inequality (which we have, in fact, now surpassed by any reasonable measure) was in the 19th century in the USA. We had no hereditary nobility (not in name, anyway). The robber barons were all (to the best of my knowledge) "new money"—their families made their fortunes right here in America by getting in on the ground floor of brand-new industries (very much in the same way that startup founders are trying to do today) as the Industrial Revolution was ramping up...and then becoming monopolists and extracting all the money they could (very much in the same way that startup founders are trying to do today). You may need to review your history.

abeppu 3y ago

I also think it's worth calling out that his follow-up, "Capital and Ideology" in its latter sections includes several suggestions for counteracting the trend to increasing inequality. One of these is basically that _every_ person should have a windfall inheritance when they're in their early adulthood, which would give them opportunities to pursue education, try starting a business, or whatever else. And naturally, this needs to be funded by taxes on the very wealthy.

Fauntleroy 3y ago
People whine about "wealth distribution" day and night, but at the end of the day what alternative is there to combat the (continually increasing) concentration of wealth at the top? At some point there will have to be redistribution, in some form, and the sooner society comes around to that the better off we'll all be.
- theGnuMe 3y ago
  Death and taxes.
- satellite2 3y ago
  Apparently he improved the conclusion in his second book. In the first one it was bittersweet as he only stuck to historical evidences and what he found was that the only periods of decreasing economic inequalities were wars.
- Buttons840 3y ago
  Wealth redistribution and making it easier for new businesses to enter markets and compete. These often go hand-in-hand; safety nets allow people to take risks, and new competition prevents markets from colluding and ceasing competition.
  - bobthepanda 3y ago
    Also letting legacy businesses die. It is more often than not that family firms in particular collapse after one or two generations, if not propped up.

mmanfrin 3y ago

It feels like we're slowly slipping back to palace economies but instead of violence it's through capital (which some might still call violence).

verisimi 3y ago

He must surely be an embedded character with such a prestigious background, promoted in the media, talks at the WEF, etc. Whatever he is proposing will be milk toast to the billionaires - a lighting rod to direct peoples' frustration to somewhere that won't cause any harm to those billionaires. Institutions: Paris School of Economics School for Advanced Studies in the Social Sciences London School of Economics Massachusetts Institute of Technology

7thaccount 3y ago
Are you referring to Piketty's work and folks like Krugman going on interviews to talk about it?
- verisimi 3y ago
  I'm making the point that the way legislation etc is drafted, the clauses that are allowed - the whole captured system really, that allows the very rich to be able to increase their wealth through inheritance, is problematic if it is seen to be unfair. People will get angry, as inflation, carbon taxes, etc start to bite. The billionaires will feel some heat. In order to manage that tension, you need certain people who appear to be against you, but are actually in your pocket. Picketty is surely one of those. He will say contentious things, that appear to be critical of billionaires, but his real job is to help manage popular discontent, by sucking up the air from others whose response that would be more problematic to those billionaires.

steveBK123 3y ago

Low interest rates decade made this pattern seemingly no longer hold, but I think we are getting right back to the old pattern for sure. The next question is what to do about it. Wealth tax is controversial and hard to implement. It seems to me that simplifying the tax code such that capital gains and various forms of non-salary income didn't have preferential treatment would be an important first step. Further, an actual meaningful inheritance tax that isn't easily avoided by various trust schemes.

rabuse 3y ago

What happens when the masses get fed up with the inequality and 400+ million guns in the U.S.?

alfredol 3y ago
Fascism, apparently.
jay_kyburz 3y ago
I see people joking about this all up and down this thread, but rich peoples wealth is not sting around in gold bars waiting to be stolen by poor people. All that will happen in a violent uprising is a lot of people will die, and peoples houses will burn down, but nothing will happen to those numbers in a spreadsheet.
- giardini 3y ago
  well, there will be a lot of inheritance and spreading of wealth (thru theft et al) as a result of that uprising!
  - jay_kyburz 3y ago
    You missed my point, a looter might get a new car or tv, but that's not wealth. A looter is can't take ownership of television network, or a social media website, or a coal mine, or a rail way, or like anything actually worth anything. Now instead of a violent uprising we talk about electing a democratic government that's prepared nationalize our nations infrastructure we'd be talking real wealth redistribution.

onlyrealcuzzo 3y ago

> Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors. You're obviously incredibly unlikely to become a billionaire. If someone inherits billions - you're not going to out-labor them to become richer. Only luck will help there. So where is the cutoff? You can easily out-labor someone who inherits $2M at 50. >10% of people in the US amass >$1M (without counting their home equity) by around 50... How many people are inheriting more than $2M? 0.5% of people? You're never going to out-labor luck. It's always going to be better to be lucky than work hard. But luck doesn't scale, and hope isn't a great strategy. I'm in favor of inheritance taxes. But this doesn't seem like the main driver of inequality....

wing-_-nuts 3y ago
>I'm in favor of inheritance taxes. But this doesn't seem like the main driver of inequality.... I mean, Piketty's work shows that it is... I'd like to see a scandi style tax system and social safety net. Inheritance taxes at the point where 90% of small business and farms won't be affected. Progressive carbon taxes. Massively increased social safety net that includes paid education, healthcare, and unemployment generous enough that one won't be destitute if they try to start their own business and fail (look at the rate of small business formation in the scandi countries!) There's a common refrain in conservative circles that they're more in favor of 'equality of opportunity over outcome'. Right now we clearly have neither.
- onlyrealcuzzo 3y ago
  > I mean, Piketty's work shows that it is... He shows that - currently - R > G. I'm not convinced this "proves" inheritance is the main problem. It shows that you can't work your way to the top - only invest and get lucky (of which inheritance is one of many ways to get lucky). And by the way - it shows that this was true for all of human history except a brief window after WW2.

seydor 3y ago

Piketty's claim seems empirically obvious, but also virtually obvious to anyone who has created a gaming economy. The rich get richer faster than anyone can catch up, so you have to introduce artificial constraints like increasing prices for rich people.

iNic 3y ago
As I said in a different comment in this thread, Piketty's claim does not hold for all capital, it only holds for land. This is perfectly in line with theoretical predictions by David Ricardo[1]. The solution to this is a Land Value Tax as proposed by Henry George[2]. [1]: https://en.wikipedia.org/wiki/Law_of_rent https://en.wikipedia.org/wiki/Law_of_rent [2]: https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax

chrischattin 3y ago

Hardly empirical. The data shows the opposite. ~80% of current billionaires in the U.S. are self-made first generation.

tmalsburg2 3y ago
Source?
danielmarkbruce 3y ago
And another large chunk are first generation inherited. Like self made mom or dad just kicked the bucket. This myth of multi-generational, dynastic absurd wealth is.... nonsense with few exceptions.
futureamish 3y ago
Are we calling them "self-made" now for strapping some http requests to old, purposefully gate-kept banking systems? Or is it the ones that we allowed to horizontally expand with zero regulatory system to stop them? Or is it the ones who ruined housing the world over? So many useful people.
wing-_-nuts 3y ago
You don't have to inherit billions from your parents to have a huge leg up on everyone else. There are examples all over the place from something as extravagant 'a small loan of a million dollars' to 'an introduction to a vp at ibm', to paying their kids tuition to the best private schools. I am extremely suspicious of any wealthy person who claims to be 'self made' when in reality they had a paved path to success.
spiralx 3y ago
The article is saying that the inherited wealth of the remaining 20% of today's billionaires is greater than the wealth of those new-made billionaires, there's no contradiction there at all. And obviously you'd expect most new billionaires to have a net wealth close to the $1bn mark, so all it would take is each of the 20% to inherit four times as much on average. This page lists nine people who inherited over $50bn each, and another 23 who inherited between $4bn and $50bn, totalling just over $1.1tn of inherited wealth. Easy to see how that would outweigh the wealth of a larger number of new billionaires. https://www.madisontrust.com/information-center/visualizations/which-of-the-worlds-richest-people-inherited-their-wealth/ https://www.madisontrust.com/information-center/visualizatio... And that list doesn't include any of the inherited wealth of the various royal, noble and other old money families around the world...

danielmarkbruce 3y ago

It's such a bad assumption that historical returns on capital will persist. Capital is subject to supply/demand just like other things. The more of it there is, the lower the returns are. Anyone who works in finance/investing will tell you (including old Warren Buffett), it's a lot harder to generate returns these days than 50 years ago. There is just so much capital sloshing around.

iNic 3y ago

It turns out the thing that Picketty missed was that he grouped land with Capital. Land should be treated differently as it can not be created or destroyed. If you seperate out the data into land and capital (w/o the land) then all of the outsized returns come from rich people hoarding land[1]. This is in line with the observations of Riccardo[2]. [1]: 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... [2]: https://en.wikipedia.org/wiki/Law_of_rent https://en.wikipedia.org/wiki/Law_of_rent

burkaman 3y ago
Sorry if this is nitpicking, but valuable land absolutely can be created (Boston) and destroyed (climate change) on human timescales. I'm sure the amount of land that can realistically be created and destroyed within a few lifetimes is negligible compared to the amount of land in existence, but compared to valuable inhabited land it might actually be significant. Coastal land tends to be pretty valuable, and that's where (almost) all the creation and destruction occurs. Edit: Actually, the interview you reference is not even really talking about land. > When you say “land,” you’re not talking about land in the Jane Austen sense, that is, agricultural land under the ownership of the lord of the manor, right? > It’s not agricultural land, it’s the value of urban land. Obviously urban land can be created and destroyed as cities expand and contract.
- tomwheeler 3y ago
  The Netherlands has also created quite a bit of land. Chernobyl is an example of land that was effectively destroyed by becoming uninhabitable.
- dr-detroit 3y ago
  [dead]
- yterdy 3y ago
  It's not nitpicking, it's central to the issue. One could consider that, as far as Western civilization is concerned, colonialism was an exercise in "land creation" - and the various wars of the 20th century, temporarily in the case of bombings and permanently in the case of mine-setting, a type of "land destruction". Picketty doesn't miss.

godelski 3y ago

> "Capital in the 21st Century." It's weird because prior to the 21st Century this used to be almost entirely how wealth was generated. But I think the argument of inheritance being a major wealth driver should be simple to understand from a few base principles. This is invariant of money and is related to capital in the broader sense (i.e. resources) which is also going to be invariant to many economic systems. One of the most important ones is momentum. Momentum seems to often not be considered in these discussions but makes discussions of trickle down economics rather insane. Let's look at a more realistic discussions. Your stock portfolio should not be bounds, full of bonds, and nothing but bonds. You have to diversify and actually even include some risky investments. We usually talk about this in percentages of investments but this doesn't actually make any sense because it's actually percentage of risk vulnerability. E.g. Elon can lose 244B of his 245B and still gave essentially the same quality of life (similarly doubling his wealth won't change anything in a meaningful way). But let's also look deeper at percentages. Let's say I make an investment of $10k (a nice size for someone early on in their career) and I'm about to do really well and get 500% return on that (killer value!), I now have $60k to play with. Now let's say another person puts a $10M investment and only gets a measly 1% return. They gained $100k so have $10.1M to play with.[0] The other problem with percentages is that you can "increase your luck" by taking on far more risk. If we both take our 10{k,M} and diversity into 1k pots and each pot has a x% chance of returning 500%, which person do you think ends up with more winners? Or if we do a fixed number of pots but divide by percent of money, you're going to find a very different expected return value. Consider this factor when you're also considering cost of living arguments. I'll take that SV software job at $300k/yr where I can only invest 10% of my income (30k) per year over a $100k/yr job in middle America where I can invest 20% of my income (20k). COL calculators are always based on percentages and so not taking this into account (as well as a lot more abstract things) and it doesn't matter of in SV I'm spending 70% of my income on housing but 30% elsewhere if this is the end result (only focusing on building wealth for a clearer argument. Other factors matter and wealth isn't everything. But employers, you can't just use COL adjustments, it's a bad deal for the employees and they know it) Now I said it is invariant of money, because capital is capital. Land, factories, gold, potatoes, whatever, that's all capital. It can't ever be evenly distributed, even with all good faith actors, because the value of those changes wildly and fast (value != money, its more abstract). Throw in how non-homogeneous everything is (e.g. land, housing, location are not fungible resources) and you got a crazy fucking mess. It's no wonder you can't make a successful 5 year plan, the world is chaos and the models need to be exceptionally complex. You have to embrace the chaos in some way. TLDR: math isn't always intuitive because neither percentages nor raw values exclusively tell the whole story (don't get me started on mean, median, and variance). People love to (often unintentionally) lie by using whichever fits a better narrative. A holistic approach is needed (i.e. context) with clear definitions of objective functions and more importantly clear understandings of the metrics (a whole other can of worms that people think is far simpler than they actually are). [0] To put it another way, if you're retiring with $10M in investments you're retiring with a passive income north of an L3 at Google. This is why John Bogle is happy with only $50m (which grew) because he understood that there's very little more money can do for him and that a simple 2% a year on that gets him a million every year and so the value is not a high score but being human. This isn't really a philosophical argument because literally capital generally follows an S curve in its utility, not linear and usually not exponential (though S looks exponential at some points).

rufus_foreman 3y ago

>> wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors Adjusted for inflation, John D. Rockefeller had 340 billion dollars of wealth in 1918. What has that fortune grown to? It hasn't. It is gone. He gave it away. Adjusted for inflation, Andrew Carnegie had 370 billion dollars of wealth in 1901. What has that fortune grown to? It hasn't. It is gone. He gave it away. John Jacob Astor's fortune? Gone. Vanderbilt's? Gone. Looking at a few different lists, those are the 4 wealthiest people in US history. They either gave the money away or their heirs spent it all. If wealth was going to automatically concentrate, it would have. It didn't. Rockefeller's 340 billion invested in the stock market from 1918 to today would roughly equal the entire net wealth of the US. That didn't happen for the Rockefellers and it didn't happen for any of the other many fortunes in the past. What Picketty "concludes empirically" does not in fact happen. If it did in fact happen, all the wealth of the US would be in the hands of one person. To figure out if wealth will concentrate in the hands of inheritors, you need to know many different things. Will people give their wealth to their children or will they give it away? Zuckerberg, Gates, Buffet, Ellison, all giving their money away. Will people give their wealth to a single child? Elon Musk has 10 kids. If he gave away money to each child, his wealth would not be concentrated. (Oops, 11 children. Even less concentrated.) If those children went on to have multiple children, the inheritance gets diluted even more. Some rich people, believe it or not, actually spend money. People who inherit wealth rather than earning it seem to be particularly good at spending wealth faster than it grows.

opportune 3y ago

There is at least one exception to this, which is that as technology improves, it necessitates the creation of new capital to utilize that technology commercially, and the people involved in creating it (whether as founders or wage workers) stand to capture a lot of the value in delivering it. Case in point, see how valuable it is these days to be an AI scientist or software engineer. Both are involved in the creation of capital in the form of AI models and software, both are paid a lot and able to adequately catch up in wealth to old money.