
A note on Piketty and diminishing returns to capital (2014) [pdf] - troyastorino
http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf
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jgalt212
Aside from the regressive tax policies of the last 30+ years, and all those
loopholes (carried interest, I am looking at you), the major issue is that
we've been in a bond market boom for 30+ years.

Asset prices inversely correlate the with interest rates. Rich folks own
assets. Those have increased faster than the growth rate of the economy
because interest rates have been trending down for 30+ years.

That being said, we've reached the end of that trade--mostly because interest
rates don't have anywhere else to go but up. Overnight rates in most of G-7
are close to 0%.

So if interest rates reverse their course (even if only slightly), the asset
owning rich will suffer, and earners will gain.

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ahomescu1
> So if interest rates reverse their course (even if only slightly), the asset
> owning rich will suffer, and earners will gain.

Plenty of middle class people own their own homes, so it sounds like your
proposal would also hit them significantly. On the other hand, many rich
people own companies (or parts of), which aren't exactly assets (not like a
private jet or a mansion is).

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mark_l_watson
I read Piketty's book, and largely agreed with his data and models. I don't
understand this paper well enough to criticize it but I did find it off
putting.

I think that Piketty's book is valuable as a warning of the diminishing power
of labor vs. people with large amounts of capital. You can nitpick about some
of the data and models, but the overall message is right on.

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ryanmonroe
How is arguing an empirical or theoretical point "off putting"? You say you
don't know the paper well enough to criticize it, but I suggest you read the
introduction. It is not technical at all and I'm not sure how you could come
away from reading that fairly straightforward explanation of the paper's
intention still thinking that it is "off putting".

The overall message of Piketty's book is that capital's share of income will
rise due to the difference between capital returns and growth. It may be true
that capital accumulation is and will continue to be driving inequality, and
is certainly valuable to know if so, but you can't accept the assumptions on
which that argument is based blindly.

This paper is not nitpicking a small point, but arguing against the main
message of the book.

~~~
mark_l_watson
Fair points. I only read the introduction to this paper and then spent less
than 5 minutes skimming random parts of the paper.

I do think that many mainstream economists don't like what Piketty says
because of his criticisms of economists who have economic incentives that
color their views and my first reaction was that this paper reflected this
status quo loving point of view.

