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Comment by fallingfrog | Hacker News Reader

So the argument is: if we lower taxes on ownership of capital that can produce "rents" (i.e. stocks, real estate, etc), the value of that capital flies upwards so high that people are discouraged from buying in due to inflated asset prices. So then we can have a relatively smaller more entrenched group of people who controls all the productive assets.

Sounds wonderful. Long live the king.

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Can you give an example of capital value flying upwards so high that people are discouraged from buying in due to inflated asset prices?

Southern California homes?

Are they really disconnected from rents in that area, as well as reasonable expectations of future growth in demand - given low interest rates, which mean you have to consider the performance of the asset far into the future?

In other words, if these assets were any cheaper, would they not be underpriced vs their intrinsic value, making it a great investment with someone with enough capital - thus bidding the prices back up?

This is typical of soft science papers in economics. Authors haven’t explored major aspects and clearly they had some prior beliefs and went after it. For example, when capital stays in the hand of few, it also means wealth accumulation happens much more rapidly at the top. In capitalistic society, not having capital means significant portion of your earnings is returned to someone else who is targeting passive income. When you go in the mall and pay $100 for a dress, $10 goes to someone who simply is owner of the mall and rarely visits it if at all, another $10 goes to owner of factory who never works there but has legal titles, another $10 goes to owner of farm that produced cotton but never put sweat in that farm -and so on. A vast majority of your purchase price ends up to rent seekers one way or another. This is why rich becomes richer.

Sounds like what's happening in many interesting areas these years, to be honest.

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