Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

In the interest of giving the fuller discussion:

Picketty's book has been out for a while now. It is good economics. It deserves rightful praise, and scrutiny.

Acemoglu and Robinson's answer[1] is also good economics. Digestible podcast form here [2]. It purports that Picketty's "r>g" model is flawed. It also deserves a reading.

All of this is part of a larger discussion, which C21 started. r > g doesn't seem to explain nearly as much as Picketty presents in the book, but that doesn't mean his larger idea is fundamentally invalid, or that he didn't introduce something valuable.

[1] http://economics.mit.edu/files/10422 [2] http://www.econtalk.org/archives/2014/11/daron_acemoglu.html

Suppose r > g as Picketty claims. What would be the implications? One I could think of is that rather than investing in human labor (e.g. education), it would make more sense to invest in capital (e.g. stock market) since that would yield you higher returns. Also, all the talk about wealth inequality uses percentages like the top 10%. However, the top 10% is not stable. In fact, the turnover is very high, much higher than it has been in the past. For instance:

> Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scores developed for the Forbes 400, shows that increasingly we find self-made billionaires among the ranks of the richest people in the country. This has accompanied the incredible increase in wealth of the members of the Forbes 400, which has jumped 1,832% times since 1984, when the total net worth of our list was $125 billion, compared with $2.29 trillion today [0]

And just a casual look through the richest lists, you don't see a lot of old money. Most are first generation wealth.

So my question is, how is it possible that there is high turnover in the wealthiest while wealth inequality is always much higher than income inequality as Picketty claims? When Bill Gates generated great wealth by founding Microsoft, was that considered income or capital appreciation? I think it would be capital appreciation since he sold stock and the stock appreciated. But is this really "capital" in the sense that its passive investment like a money printing machine that was passed down generation to generation? Or if his wealth would be considered income, then how is wealth inequality always so much higher than income inequality considering the richest Americans created their wealth in a similar means to Gates?

[0] http://www.forbes.com/sites/afontevecchia/2014/10/03/there-a...

I'm a third of the way through C21. Skimming the beginning of Acemoglu and Robinson, feels like they are criticizing points that Picketty raises - specifically that politics plays a substantial role in inequality, and r vs g. Maybe it's just a question of degree. Probably worth more than a cursory glance.

Anyways, since you linked to such a relevant C21 response, do you know if there's a team-piketty response to Acemoglu? No longer have access to JSTOR etc, and am not necessarily well equipped to analyze the quantitative claims.

For most of the books I read on Kindle it was the case. This statistic will make sense only compared to other books, and not by itself.