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Comment by rufus_foreman | Hacker News Reader

The problems with Piketty's arguments are addressed in the article:

"if America’s rich families in 1900 had invested passively in the stockmarket, spent 2% of their wealth each year and had the usual number of children, there would be about 16,000 old-money billionaires in America today. In fact, there are fewer than 1,000 billionaires and the vast majority of them are self-made"

Yes, if rich people invested their money wisely, gave nothing to charity, spent small amounts, and left their wealth to one of their children, wealth inequality would grow unchecked.

But rich people don't do that.

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But wealth inequality has still grown quite a bit. Your point is not a refutation, it’s just an observation that the infection has progressed more slowly than it could have if it was completely optimal.

>> Your point is not a refutation

"there are fewer than 1,000 billionaires and the vast majority of them are self-made"

That's a refutation, Piketty made assertions not just about the outcome, but about the process by which that outcome would happen.

So long as rich-get-richer mechanics play out inside of a single generation they are unquestionably OK? What even is this argument?

he didn't say it's ok. He said piketty is wrong. Anyone who studied even econ 101 and combined it with a teaspoon of common sense knows piketty is an idiot and that book is garbage. He's a politician.

No, inheritance isn't the only dubious method of accumulation that Piketty described. Try again.

Maybe actually take econ 101 so you can get the thrust of the book rather than getting lost in the details. His thesis, in that book, is that r > g and that over many years that difference results in very large accumulations of wealth. No one disputes that there are various means that r is achieved.

It doesn't change the thesis, which is wrong. r is not greater than g for any reasonable amount of time for individuals/families because humans have an amazing ability to behave stupidly and reduce r below g.

Explain your argument because it's not at all clear to me. I do not see how that statement refutes the arguments the above poster gave.

They're saying that self-made billionaires didn't inherit their wealth. Which means they created it. Which means that it created useful economic activity. And since rich people dont optimally pass on their wealth, those 1000 billionaires' spawn are likely to piss away that wealth while 1000 more economically active individuals create more healthy economic activity in pursuit of becoming billionaires so that they can pass on their wealth to their children to piss away, ad. Inf.

If that's the argument, then it sounds pretty flawed TBH. I mean how does not inheriting their wealth, automatically mean they created it? Is theft not also a possibility?

The billionaires' spawn pissing their wealth away would likely generate a lot of economic activity.

Piketty’s argument was not just that income inequality would increase, but that it would increase because the return on capital is greater than the growth rate of the economy, so, in his words, "It is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime's labor by a wide margin".

But inherited wealth does not dominate wealth amassed from a lifetime's labor. The largest fortunes today are dominated by people who built businesses, not by people who inherited their wealth. So if "there are fewer than 1,000 billionaires and the vast majority of them are self-made", that is a direct refutation of Pikkety's thesis.

It is hard to overstate just how bad Pikkety's arguments are. His argument assumes single inheritance of fortunes, it assumes that wealthy people don't donate significant sums to charity, it assumes that inheritors of wealth will invest that wealth as wisely as the person who created it, along with many, many other false assumptions. The most egregious one in my opinion is that it assumes the wealthy don't spend their money.

If a billionaire makes a 5% return on his billion dollars and spends $50 million dollars a year, does wealth inequality increase? No, it does not.

It's a ridiculous theory, it is directly contradicted by the facts, and I have no idea why it is taken seriously by people here other than just as an opportunity to participate in a 2 minutes hate against rich people.

"wealth inequality" is one of the dumbest ways of measuring the health of an economy, or to specifically aim to reduce. Unfortunately, there will always be a baseline group of people at, or near, zero wealth. The goal should simply be to reduce this number and the overall number of people living in or near poverty. Whether Warren Buffett has $50, 100, or 200 billion - which does affect wealth inequality calculations - is of zero consequence to the lives of the lowest-wealth individuals (nor did someone like SBF losing 10s of billions, help them)

It matters if one person can buy Twitter on a whim and use it to pursue his ideological goals, or if one person can buy The Washington Post and dictate it's editorial positions, or if a small handful of people can fund an effort to identify and groom a wide bench of lawyers to one day become judges who will bend the law in their favor. Not to mention plain old lobbying and campaign contributions. When wealth is power, wealth inequality is toxic to democracy.

Oh my, individual ownership of newspapers? Bezos bought it from Katharine Graham, while the Sulzberger clan has owned the NYT for over a century. Scripps, Hearst, Pulitzer... how did these names get famous? Newspapers.

Twitter is much more effective at brainwashing stupid people into believing any old crap than newspapers ever were, there were journalistic standards in the coverage for one thing.

So you've managed to blend elitist ideas of some people being less or more "qualified" to disseminate certain opinions than others who don't share your ideological preferences with supposedly egalitarian ideas of reducing concentration of power.

Also, journalistic standards, historically, were little or not at all better than anything you see online today. Yellow journalism was a major part of media since long before the internet and newspapers pandering to very specific, dishonest biases was also pervasive, but with few genuinely unfiltered alternative viewpoints being available. The difference today is that a real plurality of opinions is finally possible and can be globally made visible. The media gatekeepers hate this and thus create contrived arguments about an imaginary golden standard of media integrity and mass misinformation.

>It matters if one person can buy Twitter on a whim and use it to pursue his ideological goals, or if one person can buy The Washington Post and dictate it's editorial positions,

Oh no, now it's important to stop this because some people are able to do these things while having political viewpoints that you don't like. Were you previously making the same argument against say, the New York Times, due to it's being owned by one family and following that family's specific ideological viewpoints?

Wealth inequality is an innate part of human society, and by itself has little bearing on democracy or even overall standards of living. There are also many countries with low wealth inequality in which democracy doesn't exist in any sense.

I’m not the person you’re responding to, but I’ll answer that yes, it has always been a problem that so much influence is concentrated in so few hands. It’s been said that a dictatorship would be the best form of governance if you could ensure the dictator would always be the best one possible. But you can’t. When you allow such concentrations of power, at some point someone who is willing to abuse that power, or someone who is simply incompetent, will come along and it’s a disaster for everybody.

Wealth inequality is not innate; there have been plenty of civilizations with far less of it. It’s only an inherent part of free-market capitalism.

>Wealth inequality is not innate; there have been plenty of civilizations with far less of it. It’s only an inherent part of free-market capitalism.

Please by all means, name these superior civilizations with minimal wealth inequality. The fact that some people are immensely rich and many others aren't is much less important than how a given society regulates individual rights to live one's life and be protected by the law. Wealth inequality is also less important than the specific question of how these rich people became what they are and how much power they have over those less wealthy than them. Ie: You can't honestly compare a modern market economy with a feudal barony.

In much of the modern "terribly" unequal market economies, a Bill Gates or Musk can be freely told to go fuck themselves by anyone less wealthy than them and their wealth has little to do with some random average person's capacity to better their own life. The same often doesn't apply to societies with low wealth inequality, which coincidentally are often poorly developed and authoritarian.

I don't really care if Warren Buffet, Zuckerberg or Ellison can buy a dozen private jets any time they like if I live in the same society with most of my legal and economic rights protected, and with the ability to create a comfortable life also respected. I would however worry about a more supposedly egalitarian state in which central authority figures have given themselves the legal right to confiscate property and earned capital for reasons of ideology.

Also, while many on this site live in a bubble in which the importance and influence of Musk's X (previously Twitter) is grossly fetishized, in the real world, it's just not that important. Musk can throw all the tantrums he likes on the site and ban whoever he pleases, and for 99% of the world, it doesn't matter enough to be worth a single shit.

It's when he obtains literal political power that I worry, and the mechanism behind the kind of authority that could confiscate earned wealth beyond a certain ideologically or politically defined point can at any time fall victim to someone with the kind of grossly egotistical personality that someone like X's owner has.

having the legal authority to prevent a rich person from owning a social media platform is much more dangerous than that rich person simply owning a social media platform (in a landscape of others that it has to increasingly compete with).

> Please by all means, name these superior civilizations with minimal wealth inequality.

You have to go quite far back to find those civilizations, so you can't really compare them to modern ones. Also depends on what the goals of society are. It's possible that people are happier on average in a poorer but more equal society, so would it be inferior just because it has less material wealth?

> It's when he obtains literal political power that I worry,

Money is literal political power. If it wasn't, you would not be seeing a bunch of billionaires running the government. I agree that current forms of government also concentrate power too much, but there will always be some kind of entity that makes the rules, and always those with the most resources will naturally be the most able to take control over that entity and make rules that benefit them.

> having the legal authority to prevent a rich person from owning a social media platform is much more dangerous than that rich person simply owning a social media platform (in a landscape of others that it has to increasingly compete with).

I agree, but letting people amass unlimited amounts of wealth will lead to that authority anyway. Once someone or some group of people is wealthy enough that they're able to buy the government, they'll obviously use it to give themselves that and any other authority they wish. It doesn't matter if that government is small or large, weak or powerful. There will always be a rule creating and enforcing entity, and that entity becomes whatever those who control it wish it to be. It will be controlled by those with the most resources. The solution is therefore not to try to limit the functionality of the tool that is government, but to maximize the number of people that have control over it. That requires having a more equal distribution of wealth.

I don't think it's practical to eliminate wealth inequality. But we can certainly limit it. I would also be less concerned about wealth inequality if we had more robust legal frameworks to prevent wealthy people and institutions from having an outsized influence--for example, campaign finance limits and public campaign financing, elimination of super-pacs and dark money, lobbying regulations, and bans on government officials becoming lobbyists, etc. Instead, these guardrails are steadily eroding. Citizens United devestated campaign finance regulations. Last year in Snyder v. United States, the Supreme Court ruled that federal bribery law does not prohibit gifts or gratuities given to state and local officials after an official act. Of course these are just the kinds of rulings the Federalist Society has hoped to see, financed by the Mercers, Kochs, and other wealthy families. Six of the nine current justices have ties to the Federalist Society.

Yep. A wealth tax on billionaires brings in some tax revenue, but that's not the key thing it achieves. It achieves no more billionaires. It is bad for society when one single unaccountable person can accrue this much power.

> is of zero consequence to the lives of the lowest-wealth individuals

That wouldn't be the case if those at the top were taxed and more of their wealth transferred to those at the bottom.

We just went through a crisis which the federal government - both Trump and Biden administrations - attempted to alleviate by handing people free money. Are poor people better off because of it?

Yes. Child poverty dropped to historical lows. And then rose again afterwards. https://www.childtrends.org/publications/more-children-in-po...

Wealth inequality hasn't grown since 1900.

https://wid.world/news-article/inequality-across-700-years/

Why do people post stuff like this. If your ideology depends on misleading people about bad things that are obviously happening, just get a better ideology!

No. It decreased massively and then went up again so now we're back at where it was back in 1900.

This significantly challenges the "if America’s rich families in 1900 had invested passively in the stockmarket"

e.g. the equivalent of S&P 500 if adjusted by inflation was in 1982 was well below it's 1929 peak. Almost all growth happened after that.

>But wealth inequality has still grown quite a bit.

This is called stability. The more stable the system - the more value have investments.

Rich peoples descendants dont do that...

Thanks for that correction.

Yeah brilliant “businessmen” are born into rich families and destroy their wealth pretending to be real estate developers and managing to be so incompetent you bankrupt a casino where the house should always win!

> 1900 had invested passively in the stockmarket, spent 2% of their wealth

How is that possible, though?

e.g. according to

https://ofdollarsanddata.com/sp500-calculator/

adjusted by inflation the stock market only grew by 34.10% between 1900 and 1982 when adjusted and even if dividends were reinvested. And that's total growth, annualized was barely 0.36%

Their wealth wouldn't have increase at all during that period, especially if they wanted to spend 2% each year.

Of course it accelerated massively in the 80s (1900-2024 was 2.48% annualized) but using the average would make no sense.

If you were still very rich in 1982 you would have made a massive amount of money since then. e.g. somebody like Trump invested all of his inherited wealth (and everything his dad gave him before) into the stock market instead of pretending that he was a very "successful" businessman he would have been much, much richer than he was in 2016 and wouldn't have had to be so ashamed about realising his tax returns.

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