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.
> 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).
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.
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.
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.
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[ 2.9 ms ] story [ 28.7 ms ] threadAsset 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.
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).
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.
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.
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.