Solving the Piketty Problem

Solving the Piketty Problem May 9, 2014

Alex Tabarrok has as solution to the problem of capital accumulation that Thomas Piketty identifies as the driver of inequality (Capital in the Twenty-First Century): Change the birthrate of the rich:

Increasing fertility rates would do the trick: “If every wealthy family has 4 children, wealth per person doesn’t increase and so inequality does not increase. . . . If the wealthy consume about 20% of their capital income (still a very high savings rate) and have just 3 children then again we have approximate balance and no increase in inequality over the generations. . . . Piketty’s ‘patrimonial capital’ contains its own internal contradiction. The more patrimony the less capital.”

So would reducing fertility below a certain rate: “If the rich as a class have fewer than 2 children then it follows inexorably that their time is numbered, albeit without first creating a small number of very rich people.”


Browse Our Archives