Bringing empiricism back to economics
Are We Destined to Wealth Inequality?
Posted by Ross Pomeroy May 23, 2014
RealClearScience
According to French economist Thomas Piketty, there's a simple equation to explain the rise in wealth inequality in the United States: r > g.
The rate of return for owned capital (r) exceeds the overall rate of economic growth (g). Thus, families and individuals who control wealth will accumulate it at a faster rate than the economy can produce it and so will control a much larger portion of the economic pie. The rich get proportionally richer, and the poor get proportionally poorer. And unless something happens to alter the status quo, this trend will continue.
Piketty's provocative message, shared in his new book, Capital in the Twenty-First Century, as well as in a review article published Thursday to Science, comes amidst growing concern over wealth and income inequality. Two-thirds of Americans, comprised of majorities of Democrats, Republicans, and Independents, are dissatisfied with wealth and income distribution in the U.S. Currently, the richest 10% control 71% of wealth and take home 48% of income. While the former value isn't unprecedented, the latter is, and when it's accompanied with the expected widening in the gap of r > g over the coming decades, we can expect to see the top 10% control more wealth than ever before.
(More here, with charts.)
Posted by Ross Pomeroy May 23, 2014
RealClearScience
According to French economist Thomas Piketty, there's a simple equation to explain the rise in wealth inequality in the United States: r > g.
The rate of return for owned capital (r) exceeds the overall rate of economic growth (g). Thus, families and individuals who control wealth will accumulate it at a faster rate than the economy can produce it and so will control a much larger portion of the economic pie. The rich get proportionally richer, and the poor get proportionally poorer. And unless something happens to alter the status quo, this trend will continue.
Piketty's provocative message, shared in his new book, Capital in the Twenty-First Century, as well as in a review article published Thursday to Science, comes amidst growing concern over wealth and income inequality. Two-thirds of Americans, comprised of majorities of Democrats, Republicans, and Independents, are dissatisfied with wealth and income distribution in the U.S. Currently, the richest 10% control 71% of wealth and take home 48% of income. While the former value isn't unprecedented, the latter is, and when it's accompanied with the expected widening in the gap of r > g over the coming decades, we can expect to see the top 10% control more wealth than ever before.
(More here, with charts.)
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