EVER since Thomas Piketty, a French economist, published his monumental best-seller “Capital in the 21st Century” last year, his work has come under attack on theoretical and statistical grounds. The latest assault* comes from an unsurprising source: the libertarian Cato Institute.
The argument centres on Mr Piketty’s use of the expression “r > g”, where r is the return on capital and g is the growth rate of the economy. Mr Piketty argues that the growth rate of developed economies has been slowing, but that the return on capital is relatively undiminished. Since capital is concentrated in the hands of the wealthy, a long period in which returns exceed the growth rate will lead to widening inequality. This can be countered only by higher taxes.
The authors, who work for Research Affiliates, a fund-management firm, accept that the growth rate of the developed world has slowed, largely for demographic reasons. Where they differ from Mr Piketty is over the impact on investment returns.
The wealthy have indeed enjoyed very good returns on financial assets over the past 30 years. Bond yields have plunged (and prices risen) from...
from The Economist: Finance and economics http://ift.tt/1d41bZu
No comments:
Post a Comment