Category Archives: Income disparity

Piketty’s “Second Law of Capitalism” — Is it Fundamental?

Thomas Piketty’s new book has been widely praised for its empirical contribution, but his prediction of rising inequality rests on economic theory. This column argues that Piketty’s pessimistic forecast is based on an extreme – and unrealistic – assumption about households’ saving behaviour. According to standard theory, the wealth–income ratio would increase only modestly as growth falls, so declining growth would not be a powerful force for generating high inequality.

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Randy Wray: Forget Taxes for Redistribution – What to do About Inequality

Yves here. A lot of people argue for redistributive taxes, contending that they were very successful in the golden age of the American middle class, from the end of World War II through the Reagan era, in constraining the concentration of income and wealth at the top. However, that tax structure reflected a broad social consensus in favor of fostering prosperity for ordinary Americans, in no small measure to keep Communist impulses at bay.

In Yankee terms, Wray’s argument against using taxes to create a more egalitarian distribution of income is “You can’t get there from here”.

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