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obstinate | 8 years ago

On some level, this is basically "capitalism 101." If I don't need my resources now, I can put them to work so that I can later benefit from them. This leads to me having productive assets, which pay me some return.

If I could not acquire productive assets, there would be much less reason to save. And it's unclear how one would save, as banks would likely not exist either. You can solve this problem somewhat by having a centrally planned economy. But then you have the problems that hit those.

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andkon|8 years ago

The problem here isn't that capitalism lets you have productive assets that give you a return. It's that when r > g (when the rate of return of capital is greater than the growth rate of output), inequality increases dramatically. The greater the difference between r and g, the greater the rate of increase in inequality.

This is laid out super bare in his example: he bought a house. That house is in an area that surely is past its prime in terms of growing rate of GDP growth. Which means r > g. And that means his assets give him relatively good returns, which in turn compound, which has the net effect of him getting far, far ahead of everyone else who lives in that area.

maerF0x0|8 years ago

The benefit of productive assets is that people who otherwise would not be able to produce high value outputs are stuck making lower value ones. By working with another's assets an individual can create more value than alone, and somehow split the difference with the asset owner. Workers maybe need to start to fight for a better split, but that is beyond the scope of this article.

obstinate|8 years ago

Yes, yes. Or governments can enforce a more equitable split through taxes. But you still have to give some benefit to those who save, else there will be no reason to do aught but consume all one produces.