H. Benisty and Timiota — Medical Breakthrough: Low Dosage “Piketty” Prevents “FT” Fits (I/II)

I’ve come up with a model, which suggests that even a rather slight Piketty-esque reduction of inequality is enough to bring about enormous gains in stability. The fundamental reason is that, in this model — which is intentionally simplistic and intended only as inspiration — there’s “coupling” between the fluctuations among the fortune of the hyper-rich and the irreversible downfall of the more modest into survival-level misery. Moderating hyper-wealth is thus a need, not just a societal choice among others. 

In this model, you’ll only find very simple things: the “wealth” of individuals, who will be lucky or unlucky in their daily exchanges, and end up after a while with more or less “fortune”.

There’s also a poverty level, because one can only risk what lies above that threshold: the poor won’t risk any more than a few euros, the rich only a few millions.

Global wealth evolves with those exchanges, but I’ve chosen to put that aside, to “normalise” it as the mathematically-inclined say. This circumvents much more complex debates on demography, technology, sociology, “value creation”, etc. This only affirms that each society defines financial well-being locally, that one is only rich or poor in comparison with his neighbours.

Every day, one risks a part of his surplus (in every form, including time and effort) with varying success. This will be described as an independent random process. In principle, he exchanged with other people, and some form of compensation should exist, but that can only be true on average — and sometimes not even so, as an especially bad bet involving a huge sum of money can make everyone poorer. In contrast, one who invents something especially useful but only extracts a fraction of the societal gain (this being springtime, I’m hoping for a silent lawnmower) can make everybody substantially richer.

Blog de Paul Jorion
Medical Breakthrough: Low Dosage “Piketty” Prevents “FT” Fits (I/II), by H. Benisty (co-author with Timiota)

Medical Breakthrough: Low Dosage “Piketty” Prevents “FT” Fits (II/II), by H. Benisty (co-author with Timiota)
(h/t Yves Smith at Naked Capitalism)