NEW YORK TIMES Column: …Like Kuznets’s analysis, [Professor Thomas] Piketty’s is based on data. He just has much more: centuries’ worth, from dozens of countries. He distills from them a simple historical regularity. The rate of return to capital — understood broadly to include machinery, land, financial instruments, housing and everything else — is usually higher than economic growth…
This means that the income from wealth usually grows faster than wages. As returns from capital are reinvested, inherited wealth will grow faster than the economy, concentrating more and more into the hands of few. This will go on until capital owners decide to consume most of their income and stop reinvesting as much…
If anything, this means future inequality in the United States will be driven by two forces. A growing share of national income will go to the owners of capital. Of the remaining labor income, a growing share will also go to the top executives and highly compensated stars at the pinnacle of the earnings scale… (more)
