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Piketty's argument that capital will grow at a rate significantly faster than GDP should seem weak to pretty much anyone who has ever tried to invest reasonable
by vasilipupkin 12y ago
Piketty's argument that capital will grow at a rate significantly faster than GDP should seem weak to pretty much anyone who has ever tried to invest reasonable size capital at a decent return. Think about it. How can returns outpace gdp growth for a very long time ( obviously it can happen over a short time horizon ) ? It would require some kind of magic bean that as an investor, I would love to get a hold of
- vasilipupkin 12y agothe person downvoting, be interested to hear an explanation of your reasoning :)
- deleted 12y ago[deleted]
- vasilipupkin 12y agoWhy downvote instead of engage the argument? The S&P 500 return over the last 15 years has been pretty poor. VC returns have been poor. So, empirically, we don't seem to have this divergence in recent data.
- the_gastropod 12y ago(I did not downvote). But have you read Pikkety's book? It pretty thoroughly explains how capital grows more rapidly than GDP.
- vasilipupkin 12y agosure. My statement is that his mechanism for generating this growth appears to me to be unrealistic. New research appears to generate some confirmation for my view.
- the_gastropod 12y agoWhat research? Even over this anecdotally chosen timespan, the S&P 500 returned 3.98% / year on average. That completely squashes GDP growth over the same period.
- vasilipupkin 12y agono it doesn't. we've had 2 percent inflation over the same period.
- mrow84 12y ago> over this anecdotally chosen timespan, the S&P 500 returned 3.98% / year on average > we've had 2 percent inflation over the same period So, still, return on capital "completely squashes GDP growth over the same period" by twice as much, given your figure. No?
- vasilipupkin 12y agono, US real gdp growth and real S&P 500 returns have been basically in line in the 2000s. And real S&P 500 returns are way lower than world GDP growth over the same period. Piketty assumes that technological innovations will raise returns on capital while not really raising GDP by the same amount. This is a very zero sum game view of the world, which I find strange. Do we really believe that rise of the robots will not increase our GDP ? self driving cars will not increase GDP ? better medical care will not increase GDP ? Maybe, but it doesn't seem realistic
- mrow84 12y agoAh yes, sorry, I had a brain fart and confused growth and inflation... As for Piketty's point on technological innovation, isn't it that it is one possible mechanism to escape the capital trap, but only if the rents on the resulting developments are low enough, and that historically they haven't been because of investor's desire for returns?
- vasilipupkin 12y agoI think his point is that technological innovation will result in transfer of income from labor to investors that finance the innovation. It most certainly will, but he skirts the issue that the innovation itself could very well dramatically increase GDP !
- skilesare 12y agoThe magic bean is called 'congress'.