Grasping Reality on TypePad, by Brad DeLong

From One Year Ago:

• Afternoon Must-Read: Alan Blinder: ‘What’s the Matter with Economics?’

From Two Years Ago:

• Liveblogging Your Personal Final Exam Nightmares: Hoisted from the Archives from Four Years Ago
• Tomas Piketty: Capital in the Twenty-First Century/Inequality and Capitalism in the Long Run: The Honest Broker
• "The Feds Don't Want You to Know This": The View from the Roasterie La Farine LVII: December 18, 2013

From Five Years Ago:

• James Kwak on the "Obama Renaissance"

From my first Piketty review: Thomas Piketty: Capital in the Twenty-First Century/Inequality and Capitalism in the Long Run: The Honest Broker: The lessons that I drew from Piketty's... Helsinki Lecture... are four: First, that inequality is driven by the dynamics of capital (and more broadly, wealth--wealth includes land and also rent-extraction position as well) accumulation--the capital-to-output ratio and the capital share of income--and by the dynamics of wealth distribution.... Second, from roughly 1930 to 1980, the North Atlantic... [had] social democracy and social insurance [that] inhibited [the] multiplicative dynamics by which more was given to those who had. Third, meritocracy? Make me laugh.... True equality of opportunity produces relatively small income differentials because there is always somebody almost as good eager to bid for your high-paid job. Inequality emerges either (i) when this generation's human capital is last generation's wealth, or (ii) when other non-meritocratic factors are creating jobs that are the equivalent of covering yourself with glue, standing outside at a corner in Canary Wharf, and watching the money stick to you as it blows by. Fourth... multiplicative dynamics are back with a vengeance....

But what does Piketty say? [What lessons does he draw?]...

1. As growth rates decline in the Old World (Europe and Japan), we will once again see the dominance of capital: a greater proportion of the wealth of society will be held in the form of physical and other non-human-skill assets, and inheritance and position will matter more and individual effort and luck less.

2. In fact, given relatively high average rates of return on capital and thus a large gap vis-a-vis the growth rate, wealth concentration is likely to reach and then surpass peak levels seen in previous history as the superrich become those who started wealthy and benefitted from compound interest and luck.

3. America remains an exceptional puzzle: it looks, however, like it is headed for an even more extreme distribution of wealth than is the Old World.

4. Remember, however: the evolution of income and wealth distributions is always political, chaotic, unpredictable--and nation-specific: not global market conditions but national identities rule wealth distributions.

5. High wealth inequality is not due to any 'market failure': this is a market success: the more frictionless and distortion-free are capital markets, the higher will wealth inequality become.

6. The ideal solution? Progressive global-scale wealth taxes...