What’s behind rising wealth inequality?

19 Oct, 2014 at 14:00 | Posted in Economics | 1 Comment

The Initiative on Global Markets at the University of Chicago yesterday released a survey of a panel of highly regarded economists asking about rising wealth inequality. Specifically, IGM asked if the difference between the after-tax rate of return on capital and the growth rate of the overall economy was the “most powerful force pushing towards greater wealth inequality in the United States since the 1970s.”

The vast majority of the economists disagreed with the statement. As would economist Thomas Piketty, the originator of the now famous r > g inequality. He explicitly states that rising inequality in the United States is about rising labor income at the very top of the income distribution. As Emmanuel Saez, an economist at the University of California, Berkeley and a frequent Piketty collaborator, points out r > g is a prediction about the future.

But if wealth inequality has risen in the United States over the past four decades, what has been behind the rise? A new paper by Saez and the London School of Economics’ Gabriel Zucman provides an answer: the calcification of income inequality into wealth inequality …



Nick Bunker

1 Comment

  1. Out of the box
    Comment on Nick Bunker’s ‘What’s behind rising wealth inequality?’
    With the growing mass of new facts about distribution coming in, what has been already clear becomes even clearer: distribution theory is hanging in the air. It is not that hard to see why conventional models fail. What is preferable, though, is an outline of the true model of distribution. As you have read and heard enough explanations why there is no satisfactory explanation you might appreciate to learn how the economy really works. What has to be done is to change the formal foundations of economic theory. For the new paradigm see:
    “The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?”
    The working paper has been posted recently on SSRN:
    Egmont Kakarot-Handtke

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