This article
argues against a recent book on income inequality. According to the author of
the book, in the long run the rate of return on wealth exceeds economic growth.
Over time, this increases inequality as the share of national income going to
those who own capital (the rich) rises, while the portion going to labor
(everyone else) falls.
On the other
hand, Rognlie argues against it. First, he says that the rate of return on
capital declines in the long run due to law of diminishing returns. Second, not
all investments have increasing rates of return. That is, rates of return on
assets other than housing has been stable since 1970.
So, what is
your take on the argument? And, if housing is the real source of inequality
then what policy do you think should be put in place.
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1 comment:
To what extent is the rise in house prices driven by the increase in two income middle-class families over recent decades? It should also have pretty much worked its way through the system by now so that house prices would not be expected to continue to rise above the general increase in wages over the coming decades.
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