Branko Milanovic — Mr. Piketty and the classics

For a seminar in Oslo on September 4, I was asked (although I did not expect it) to speak of the significance for economics, and especially economics of inequality, of Piketty’s recent work. So I decided in this brief note to put some thoughts together.

globalinequality
Mr. Piketty and the classics
Branko Milanovic

Summary: Capitalism is designed to favor capital formation and in most nations running capitalist economies, capital is predominantly owned by the ownership class rather than being distributed. So wealth begets wealth and without redistribution, the rich get richer. It's institutional, rather than a function of merit and deserts.

However, a recent and important (yet unpublished) work by Christoph Lakner shows that in the US, the probability of a person having a high labor income also having a high capital income is greater than the reverse probability, of a person with high capital income having also a high labor income. So we may be moving toward the emergence of a peculiar capitalism with high concentrations of both labor and capital incomes.

Lots of other stuff worth reading too.