In Mankiw, Goldin and Katz’s case inequality is considered harmful only to the extent to which it destabilises growth, investments, and suitable conditions for the reproduction of capital. But this is a morally shallow treatment of harms of inequality, and prematurely brackets off the extent to which capitalism is itself to blame for the inequality with which they are concerned. Building upon research on tax return he previously did with Emmanuel Saez, Thomas Piketty provides a long view of the changing shape of income distribution and exploitation. One element traces the already well-known relative rise and fall of incomes over time, and their political influences thereof, ranging from unionization to re-regulatory exercises. The highlight is that since 1980 the 1% share of income has doubled, the 0.1% share has tripled, and the 0.01% share has quadrupled; Piketty statistically shows how money begets money and the rich get richer.
In his review of Piketty’s research,
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Firstly, that the return on capital is higher than the growth of income; the notable r>g phenomenon, a “process by which wealth is accumulated and distributed.” Put another way, the determinants of inequality and the concentration of wealth are that returns on assets exceed the growth rate. This is not some “market imperfection,” Piketty argues, conversely “the more perfect the capital market (in the economist’s sense), the more likely r is to be greater than g.” So the share of global wealth held by a tiny fraction of the population rises much more rapidly than average global incomes. Similarly, retirees’ pension plans accumulate at the rate of assets. All of this factors into the flow of inheritances, a kind of distribution of asserts through time, that further exacerbates the concentration of wealth. There are demographic changes that Piketty does not address, such as declining birth rates amongst the wealthy that compound the concentration of