As usual, the guy brings up a lot of very good points- arguing that Dwarkesh and others are unreasonably assuming that our current systems of property law, democracy, and economic modelling will remain relevant in a post-ASI world that challenges the foundations of those systems.
As many noted at the time, this is probably an incorrect account of the past. Labor and capital complement each other. Wealthy people can keep accumulating capital, but hammers grow less valuable when there aren’t enough hands to use all of them, and hands grow more valuable when hammers are plentiful. Capital accumulation thus lowers interest rates (aka income per unit of capital) and raises wages (income per unit of labor). This effect has tended to be strong enough that, though inequality may have grown for other reasons, inequality from capital accumulation alone has been self-correcting.
Does anyone have a link to a more fleshed out version of this argument? After reading Capital in the 21st, and all of the historical evidence Piketty cites, saying "in theory this correction mechanism might work" doesn't seem super convincing. Maybe this means that theoretically gini coefficients should stabilize at .99 instead of at 1, but I'm not sure that is enough to say Piketty was wrong.
Or are there places where inequality went down just because capital became so abundant that the return on labor started outpacing the return on capital, absent any redistributive effects?
"This first law is not as compelling as one might at first think, however. After all, one must consider whether a change in the growth rate g might also alter the saving rate s or the rate of return r, because these are all endogenous variables that are linked in standard models of economic growth. Piketty argues that r should not change much in response to a decline in g because the elasticity of substitution between capital and labor is high, resulting in an increase in the capital share of national income.
However, the vast majority of existing estimates indicate a short-run elasticity of substitution significantly less than one (for example, Hamermesh 1993; Mairesse, Hall, and Mulkay 1999; Chirinko, Fazzari, and Meyer 1999; Krusell, Ohanian, Rios-Rull, and Violante 2000; Chirinko 1993; Antràs 2004; Klump, McAdam, and Willman 2007; Oberfield and Raval 2014)."
Zvi's response: https://thezvi.substack.com/p/dos-capital
As usual, the guy brings up a lot of very good points- arguing that Dwarkesh and others are unreasonably assuming that our current systems of property law, democracy, and economic modelling will remain relevant in a post-ASI world that challenges the foundations of those systems.
I feel like when a submission statement is that brief, you might as well just put it in the title
Well submission statements are mandatory on the subreddit so he couldn't just put it in the title.
Does anyone have a link to a more fleshed out version of this argument? After reading Capital in the 21st, and all of the historical evidence Piketty cites, saying "in theory this correction mechanism might work" doesn't seem super convincing. Maybe this means that theoretically gini coefficients should stabilize at .99 instead of at 1, but I'm not sure that is enough to say Piketty was wrong.
Or are there places where inequality went down just because capital became so abundant that the return on labor started outpacing the return on capital, absent any redistributive effects?
Acemoglu and Robinson wrote their own debunking of Piketty, available here: The Rise and Decline of General Laws of Capitalism. This part is relevant:
"This first law is not as compelling as one might at first think, however. After all, one must consider whether a change in the growth rate g might also alter the saving rate s or the rate of return r, because these are all endogenous variables that are linked in standard models of economic growth. Piketty argues that r should not change much in response to a decline in g because the elasticity of substitution between capital and labor is high, resulting in an increase in the capital share of national income.
However, the vast majority of existing estimates indicate a short-run elasticity of substitution significantly less than one (for example, Hamermesh 1993; Mairesse, Hall, and Mulkay 1999; Chirinko, Fazzari, and Meyer 1999; Krusell, Ohanian, Rios-Rull, and Violante 2000; Chirinko 1993; Antràs 2004; Klump, McAdam, and Willman 2007; Oberfield and Raval 2014)."