r > g: Paralleling Piketty

If we learned nothing else from Thomas Piketty’s masterpiece, it’s that r > g. So, I couldn’t resist this comparison:

Thomas Piketty, May 2014 (Salon):

So right now, what we see is that the top of the wealth distribution is rising at 6, 7 percent a year — more than three times faster than the size of the economy. How far is this going to go? Is this going to stop somewhere? Yes, of course it will stop somewhere. But where exactly will it stop? I think nobody knows…

We should not just be waiting for natural forces to get us to the right place… There is no natural force that makes the rate of return and the growth rate of the economy coincide in the long run. And there is no natural force that prevents the concentration of wealth from rising to a high level. So I am not saying this will rise forever. This will stop somewhere. I am just saying that this somewhere can be very high, and there is no natural force that prevents this from happening.

Bob Lord, March 2013 (Inequality.org):

The unavoidable result: Wealth at the top is growing at a faster rate than aggregate wealth. That’s where the arithmetic comes in to play. If the wealth of one group within a nation grows at a faster rate than the nation’s aggregate wealth, that group’s share of the aggregate wealth must increase over time. That’s a mathematical certainty. And the level of subsequent wealth concentration has no limit.

So until inheritance taxes and taxes on income from capital rise high enough to keep wealth at the top growing no faster than aggregate national wealth, America’s wealth will continue to concentrate in the pockets of America’s most affluent.