COMMENT 1 (at http://nyti.ms/1lv1FH5):
Contrary to Mr. Piketty,
the fact that the rate of return on capital is higher than the rate of economic
progress does not at all imply that the fortunes of the rich will increase more
rapidly than the overall size of the economic system.
The fortunes of the rich can grow only to the extent that they save and invest out of their relatively high rate of return. But to the extent that they do so, economic progress tends to increase and the rate of return tends to decrease.
Economic progress tends to increase insofar as the savings result in a larger supply of capital goods, which serves to increase production, including the further production of capital goods. The rate of return on capital tends to fall because the larger expenditure for capital goods (and labor) shows up both as larger accumulations of capital and as an increase in the aggregate amount of costs of production in the economic system, which serves to reduce the aggregate amount of profit.
Our problems today result largely from government policies that serve to hold down saving and the demand for capital goods. Among these policies are the corporate and progressive personal income taxes, the estate tax, chronic budget deficits, the social security system, and inflation of the money supply. To the extent that these policies can be reduced, the demand for and production and supply of capital goods will increase, thereby restoring economic progress, and the aggregate amount and average rate of profit will fall.