Paul Krugman Blog- Piketty and Pareto [View all]

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Well, it’s Piketty day at the Times, with David Brooks and yours truly even having more or less matching headlines. And David’s take reminds me of something I’ve been meaning to do: explain one important point in Piketty that even economist readers have, it seems, tended to miss.

In his critique David says of Piketty,

He predicts that family fortunes will concentrate, though big ones in the past have tended to dissipate and families like the Gateses give a lot away.

So, two points. Piketty doesn’t just assert that fortunes will concentrate, he shows that they have in fact concentrated in the past. That’s the whole point of his extended analysis of Belle Epoque France, with its dominance by inherited wealth. And for every Bill Gates, there are many families that do all they can to perpetuate dynastic wealth. Remember, the 10 wealthiest Americans include 4 Waltons and two Kochs.

Second, Piketty predicts a high concentration of wealth, but not concentration without limit. He alludes to his modeling here rather than presenting it explicitly, but maybe he should have said more.

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http://krugman.blogs.nytimes.com/2014/04/25/piketty-and-pareto/?_php=true&_type=blogs&smid=re-share&_r=0