Brad DeLong — The Four Big Valid Issues People Have with Thomas Piketty’s Grand Argument

I think there are four big valid issues with Thomas Piketty’s grand argument:

1. As the W/Ynet ratio rises the net rate of profit is likely to fall, and so it is highly unreasonable to imagine that the net savings rate out of income snet will not fall rapidly and substantially and so greatly attenuate any rise in W/Ynet. Thus substantially rising W/Y is not a problem that we should expect to see.
2. Should the W/Ynet ratio rise substantially, the net rate of profit is likely to fall, and so the share of income earned from wealth will rise only slightly–and may not rise at all. This is not a problem: this is wealthholders providing workers with lots of capital services at a cut-rate price. Thus rising W/Y is likely to rather than lowers working-class incomes and is unlikely to worsen the income distribution, and so the prospect is not a problem.
3. Even should the W/Ynet ratio rise substantially and even should the net rate of profit not fall, wealth is unlikely to become or remain highly concentrated. A high W/Y and a high r x W/Y is a big problem only if wealth becomes and remains highly concentrated, and that we are unlikely to see.
4. Even should the W/Ynet ratio rise substantially and even should the net rate of profit not fall and even should wealth become and remain highly concentrated, plutocrats are highly likely to get into status games of spend-my-money-to-change-the-world, and so we are unlikely not have a world in which heirs and heiresses exercise undo influence over our priorities. Even should the distribution of wealth and of income become markedly more unequal, it is unlikely to distort society’s choices and lead to a grossly unequal distribution of utility.

I figure each of these has about a 20% chance of coming true, and thus that Piketty’s scenario is a (slightly) less than 50-50 shot, even with policy and politics on autopilot….

WCEG — The Equitablog
The Four Big Valid Issues People Have with Thomas Piketty’s Grand Argument

Brad DeLong