Dean Baker: Economic Policy in a Post-Piketty World

Thomas Piketty’s new book, Capital in the 21st Century, has done a remarkable job of focusing public attention on the growth of inequality in the last three decades and the risk that it will grow further in the decades ahead. Piketty’s basic point on this issue is almost too simple for economists to understand: if the rate of return on wealth (r) is greater than the rate of growth (g), then wealth is likely to become ever more concentrated.

This raises the obvious question of what can be done to offset this tendency towards rising inequality? Piketty’s answer is that we need a global wealth tax (GWT) to redistribute from the rich to everyone else. That is a reasonable solution if we’re just working out the arithmetic in this story, but don’t expect many politicians to be running on the GWT platform any time soon.