Guillaume Nicoulaud . A slice:
In other words, there are two ways to explain why the mean wealth of the x% has grown faster than the mean wealth of the whole population. According to Piketty, it means that the richer you are in the first place, the faster your capital grows over time (hence, the dynastic wealth world he foresees). But it might also be the opposite: this phenomenon is exactly what we should expect to see in a world of high wealth turnover, a world where fortune rewards skills, hard work and risk taking. Quite symptomatically, Piketty and its numerous followers have completely dismissed that possibility.
Andrew Biggs . A slice:
But what if people don’t spend down their savings? That seems to be Piketty’s assumption, at least for the very rich: they build more and more wealth which they don’t spend, and that wealth generates capital income, which they also don’t spend, and so on. If that happens, then the capital-output ratio does keep rising.
But this also means that Piketty’s rich-get-ever-richer projection can happen only if the rich don’t live like rich people, that is, that they don’t spend their wealth or the income generated by their wealth. All those savings just sit there making the economy more productive and, in the process, raising wages for the proletariat while the top 1% don’t actually consume any of the returns on those savings. Piketty’s scenario is close to Charles Murray’s desire that the rich live a little less ostentatiously.