Friday, October 3, 2014

Branko Milanovic — The world of the weird: r is greater than g and inequality is not increasing? Can it happen?

I was recently discussing Piketty’s book (yet again) with my friend Mario Nuti. I mentioned to him that I think it is possible to have the rate of return on capital (r) be greater than the rate of growth of income (g) and still have a non-increasing inequality—under the simplest possible conditions and within the very narrow confines of Piketty’s model. After I explained it, Mario encouraged me to publish it in a blog. So this is what I am doing now, essentially transcribing the notes I took while reading Capital in the 21st century.
global inequality
The world of the weird: r is greater than g and inequality is not increasing? Can it happen?
Branko Milanovic

1 comment:

Anonymous said...

I have not read Piketty, so maybe I am missing something. But I don't get the scenario Milanovic presents.

OK, so you have decreasing real income with zero return on capital, but the capital base remains constant (ceteris paribus?). How is that not a picture of growing inequality? Because people are starving to death? (Ceteris non paribus?)