Piketty, inequality and volatility: How can r exceed g?
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Piketty, inequality and volatility: How can r exceed g?
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Re: Piketty, inequality and volatility: How can r exceed g?
#2Disclaimer: I have not read the book either.
One thing I don't understand about the r and g thing is how it makes sense to compare these two values at all. Isn't capital a measure of accumulated wealth, while GDP is a measure of wealth produced in a certain unit of time? For example, what if we just maintained a perfectly steady GDP that exceeded our consumption needs; wouldn't that yield a positive r and explain r > g? Does someone who read the book have a better understanding of exactly what these two numbers mean?
P.S. I find it implausible that Piketty would make such an elementary mistake as the arithmetic mean vs. geometric mean issue discussed in the article. But again someone who has actually read the book should weigh in.
Re: Piketty, inequality and volatility: How can r exceed g?
#3In a fast-paced, industrial society, like the one we live in, long dynasties tend to get wiped out by high volatility. I don't know exactly what happened to the aristocrats of Russia as of 1910, or the businessmen of Germany as of 1935, but it can't have been good. Likewise for China, France, Poland, India...
In a stagnant, agricultural society, like medieval Europe, dynasties tend to get weighed down by the problem of reproduction. If you've inherited a fortune, there's no reason not to have ten kids, especially before birth control. And those ten kids will then want to fight over or divide the family fortune, and so on with their kids, etc. Queen Elizabeth is a descendant of Charlemagne, but so are millions of others whose distant ancestors were slightly less lucky in the power game.
Re: Piketty, inequality and volatility: How can r exceed g?
#4Disclaimer: I have not read the book either. One thing I don't understand about the r and g thing is how it makes sense to compare these two values at all. Isn't capital a measure of accumulated wealth, while GDP is a measure of wealth produced in a certain unit of time? For example, what if we just maintained a perfectly steady GDP that exceeded our consumption needs; wouldn't that yield a positive r and explain r >…
He explains all the terms at the start of the book. He has his own definition for capital which also includes real-estate etc...
OP's post is just an argument against a straw man. BTW. Piketty also says that the problem with modern economics is too much focus on fancy math.
Re: Piketty, inequality and volatility: How can r exceed g?
#5If I understood correctly (me too judging only from secondary sources) Piketty is concerned about uneven distributions---the relative share of the total pie of all that is measurable economically (GDP+capital) is becoming more concentrated in very few hands.
He's an economist and I don't generally trust economists' calculations[1], but the concern he raises relates more to the fact that the long-tail wealth people are better at hiding their revenue offshore. As more of the pie goes to them, there is less tax revenue for the state.
He proposes more International laws be put in place to prevent off-shore stashing (Hollande's of the world unite!). Also, some of his research papers are about "optimal" inheritance taxation.
I find these to be interesting lines of thought---not so much as they will happen, but because it brings the 0.001 into the lime light, and I bet they don't like that at all...
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[1] my reasons being that you can pretty much use any model and it might come out true ;)
Re: Piketty, inequality and volatility: How can r exceed g?
#6Is it just me or does the economics-mathematics remind anyone else of doing three or four decimal place calculations at school after measuring things with your hand because the ruler got broken.
It is an old argument but really came home in that article.
Re: Piketty, inequality and volatility: How can r exceed g?
#7From the article, "Suppose that r and g are both fixed quantities which do not change over time."
This is a straw man that I didn't get in the book. The idea I understood from Piketty is that whenever g is greater than r, _no matter how different_, inequality grows. Since you can have g > r, with g approaching r with time (g = r at infinity), capital simply continually takes up a larger piece of the economic pie.
Re: Piketty, inequality and volatility: How can r exceed g?
#8[deleted]
Re: Piketty, inequality and volatility: How can r exceed g?
#9In a fast-paced, industrial society, like the one we live in, long dynasties tend to get wiped out by high volatility. I don't know exactly what happened to the aristocrats of Russia as of 1910, or the businessmen of Germany as of 1935, but it can't have been good. Likewise for China, France, Poland, India... In a stagnant, agricultural society, like medieval Europe, dynasties tend to get weighed down by the problem…
You really think that? There are a lot of families that got rich in the early 20th in the US who are still controlling huge stakes in production of the country. After a 100 years I'd start calling those dynasties.
Countries you cited have had the bad luck of having much of their means of production wiped out through war/political turmoil. But the places that haven't blown up... well the wealth doesn't seem to be moving as fast as you seem to imply .
Re: Piketty, inequality and volatility: How can r exceed g?
#10If I understood correctly (me too judging only from secondary sources) Piketty is concerned about uneven distributions---the relative share of the total pie of all that is measurable economically (GDP+capital) is becoming more concentrated in very few hands. He's an economist and I don't generally trust economists' calculations[1], but the concern he raises relates more to the fact that the long-tail wealth people ar…
It's not just inequality, he also fights the statement " everyone's getting richer, even if inequality's increased"