Comments on Debraj Raj's comments on "Capital in the 

21st century". 

Debraj Raj: "Saying that r > g implies that capital income will grow faster than labor income is a bit like comparing apples and oranges.
To make the point clear, I’m going to expand upon this argument in two ways. First, let us look at a situation in which the argument apparently holds.
Suppose that capital holders save all their income. Then r not only tracks the level of capital income, it truly tracks the rate of growth of that income as well, and then it is indeed the case that capital income will come to dominate overall income, whenever r > g.
But the source of that domination isn’t r > g. It is the assumption that capital income owners save a higher fraction of their income!". 

--- It is not just an assumption, it is a statistical fact.  

But if the statistical properties of the interaction between apples and oranges are so that we get an asymmetric tendency that makes the apple&orange entity dysfunctional, then we should compare apples and oranges, and analyze the interaction and the properties that it causes.
To which extent wealth inequality has varied, is observable by looking at statistical data in industrialized countries, especially from post WW2. And when capital income owners have a higher income than labor income earners, which obviously is (one of the central tenets of) the 1% vs the 99% issue,  then capital owners only need to save so much that their accumulation is bigger than labor income. What conditions must be met if two different agents/entities are in an economy, and agent B accumulates more than agent A?

Debraj Raj: "Here is what Piketty concludes from this Law, as do several approving reviewers of his book:
that because the rate of return on capital is higher than the rate of growth overall, the income of capital owners must come to dominate as a share of overall income. Once again, we are left with a slightly empty feeling, that we are explaining one endogenous variable by other endogenous variables, but I don’t want to flog this moribund horse again. Rather, I want to make two related points: (a) the above assertion is simply not true, or to be more precise, it may well be true but has little or nothing to do with whether or not r > g, and (b) the law itself is a simple consequence of a mild efficiency criterion that has been known for many decades in economics.
Indeed, most economists know (a) and (b), or will see these on a little reflection." 

--- Is it true or is it not true?

Or is it some doublethink aspect in this, a doublethink that most economists will see on with little reflection??
The law that r>g is not a simple consequence of a mild efficiency criterion, it is the political economy! It is the distribution economy, and the redistribution economy, and the re-redistribution economy.. and the re-re-redistribution economy as we reach infinite re-re-regress...!

On the diminishing return aspect in this; I predict that capital owners will not be happy with falling profit rates, their capital assets and production factors will rather move, and extract profits where they can find them. There will be increased tax competition, income competition, profit rate competition and payoff structure competition in the future as the tendency of the falling rates of profit will be observed more and more on larger areas.

Debraj Raj: "Piketty’s Third Law has been known to economic theorists for at least 50 years, and no economic theorist has ever suggested that it “explains” rising inequality.
Because it doesn’t. It can’t, because the models that generate this finding are fully compatible with stable inequalities of income and wealth. (More on this in the Appendix.)
You need something else to get at rising inequality."

--- As a proximate cause it is the political economy, too few voters vote for equality in general. It is not an ultimate explanation as such, but it is a statistical descriptive. A cause for this is the density of the solidarity sphere. In the Scandinavian countries people vote more pro equality both in absolute distribution-numbers and for relative distribution amounts, and even more so in Norway than Sweden and Denmark. But what causes the political economy/distribution economy to have the percentage properties that it has?? We can speculate or guesstimate on the cultural variables, but we can not build a scientific valid bridge with empirical evidence, yet. We don't have scientific theory of cultural evolution yet, even if I may be so bold to inform you that I am working on it as I write this.

Debraj Raj: "to avoid the ever widening capital-labor inequality as we lurch towards an automated world, all its inhabitants must ultimately own shares of physical capital.
Whether this can successfully happen or not is an open question. I am pessimistic, but the deepest of all long-run policy implications lies in pondering this question. "

--- No, all inhabitants will not own shares of physical capital, and not even in the social democratic consensus democracy of Norway, with the highest income pr.capita in the world for all countries bigger than 5mio citizens, and the most equal by equality of outcome, not all inhabitants own shares of physical capital. But the state does this on the behalf of the citizens!!! A grandeur national public majority utility...economy...!  How 'bout that Mr. professor in economics Debraj Raj...? :-}

And it is rather so that as we lurch towards an automated world, the creative destruction of Schumpeter will be more and more economic necessary, including the political economy that
Schumpeter predicted would prevail more and more.

 Debraj Raj: "But the fact that r exceeds g explains nothing about the rise in inequality."

--- A bad straw man argument Mr. PhD. economist Debra Raj. Piketty did not try to explain the anthropogenic economy by writing "Capital in 21st..", but he did describe it with amounts of
empirical data.
How to explain the effects of political economy by using "my" conceptualization of the density of the solidarity sphere inside an economy is not easy... :-]
Mostly because the density of the solidarity sphere is a sociocultural&socioeconomic descriptive, not explanatory, even if it is on a lower abstraction level than some factors that are of interest for the Nordic model aka Rhine Capitalism:cultural homogeneity including the uniformity school, explains some of it. Relatively equal set of skills&ability explains some of it. Intensity of reflexive feedback mechanism explains a lot.
City state coordinated model of capitalism explains a lot.
Small-medium scale economy with own currency etc explains a lot. Labor movement syndicalism explains a lot. The time factor explains a lot, these mechanisms have been working in the Nordic countries for several generations, and are still going strong. That these factors are self-reinforcing explains a lot.

Or, we could just arrive at the most important qualitative conclusion, when r>g then taxes will have to do most of the job, or else the asymmetric tendencies will increase until the creative destruction of Schumpeter in the distribution economic dimension is let loose; people vote for social democratic parties. Taxation and money printing factors of the political economy explains why inequality is increasing or will be decreasing in the future.
How to get there, well, how did social democracies emerge in the first place??
If some biologists or empirical minded research-psychologist or even empirical minded research economists with their mind set on a-posterior aspects, could find out more about why the social democracies in Scandinavia is not in dire need of the medicine that Piketty would induce, that scientific finding would be of grand imperative importance to the whole planet. :-}

If we find out much more about the causes of equality (of outcome and opportunity) we would find out much more of what causes inequality, and maybe we will find the economic-"medical" recipe and antidote to the economic sickness that torments the world, (which is not an armed revolution that could remove up to 30% of the upper populace strata) and that Piketty describes so eloquently and empirically. 
But as a social-capitalist, I would sincerely welcome a combined wealth&income tax at 80% on all capital that exceeds $1.000.000,- even if that would be perceived as too radical, even in Norway...! ;-} lolz.

My comment on Debraj Raj's respond to Branco Milanovic.

Imagine that there's a *research* officer in NATO that has been in Afghanistan and reports that NATO soldiers has kevlar vests which is solid to the extent that the Taliban soldiers who have AK-47's, and the 7,62x39 caliber of the AK-47 bullets cannot penetrate the kevlar of the NATO soldiers unless they stand within 50 meters away... and the Taliban got no kevlar vests. 
Someone can give this situation a mathematical formula.

The research officer reports with a mathematical formula that NATO soldiers is superior to Taliban soldiers...! And you, Mr. Debraj Raj, says that the formula does not explain the asymmetric tendencies...! The bullets from the inferior weapons of the Taliban can hit the NATO soldiers in their legs and arms, where they are not covered by kevlar, so they can bleed to death. And Taliban soldiers can sometimes come closer than 50 meters if they hide behind mountainous terrain etc? And sometimes there are IED's which sometimes kills NATO soldiers. 
So what's this gibberish..talk about asymmetric warfare to the advantage of the NATO soldiers???
But there's more..., and in the cities/towns sometimes Taliban soldiers dress as civilians and blow themselves and some unlucky NATO soldier(s) to smithereens from time to time...! What's all this non-logic talk about the asymmetric *non-explaining* formula from the research officer??? 

Mr. PhD. economist Debraj Raj, you should know better than this, and this is nowhere close to infinite regress. Unless you think we can decouple economic growth from the laws of the thermodynamics? You might imply that the exponential growth pattern equation does not conclude that we cannot have a Dyson sphere in 1400 years? And a galactic scaled economy in 2500 years?

 http://physics.ucsd.edu/do-the-math/2011/07/galactic-scale-energy/



Would you like galactic scaled energy and economies? If so Mr. professor in economics Debraj Raj, the assistant professor Tom Murphy has done the most important math already :-] :-}

Aaand, there is a logistic shoe added for your reading pleasure Dr. Debraj Raj.

http://physics.ucsd.edu/do-the-math/2011/08/does-the-logistic-shoe-fit/




And don't flog this cute pony of assistant physics prof. Tom Murphy more than necessary... remember the diminishing return :~} 






And also this: http://physics.ucsd.edu/do-the-math/2011/10/sustainable-means-bunkty-to-me/


 Or, r>g means bunkty to Professor in economics Debraj Raj.

If two competing and interaction forces/properties/entities etc. are in the same sphere, and they grow exponentially but they don't grow at the same pace then what? Well that depends. If the two growth trajectories grows exponentially, and by more than 2% every year...!  :-}   Do you know what that means professor Raj?
It means that we can conclude that if this continues there will not just be contradictions, because we already have that. We will observe patterns in the future that can be described as incompatible with each other or as a majority incompatibility in general.
The end result is that something will happen that changes one or several courses that we call trajectories, but sometimes when the trajectories are exponential and they will collide/implode in the future, then this means that there will be another future than most people would believe.

We can induce policies ourselves within the limits of democracy etc. or we can just wait and see...!

Some examples of interaction and competing entities in the same economic sphere is foxes and rabbits, or lions and buffaloes. What happens to the other specie if the predatory specie outgrows the herbivore, in an exponential growth pattern?  

Remember the diminishing return, Mr. professor in economics Debraj Raj. And the r>g is not even close to being a red herring, but in your pdf the issue you make of r>g is much more similar to a red herring. If the world had the political economy/distribution economy of Norway, we would not be having the discussions on "Capital in the 21st century".
But unfortunately Norway is a red herring in political economy, at least globally speaking.

I will also use an analogy from the digital world of software. "x is not a valid integer!"
With the current properties in economies around the world, r>g will not be a valid  integer in the future!
At least not if the different numbers of r and g as percents/percentages will be substantially different. And with exponential growth patterns, there's not much leeway, not in the long run. And we can observe the structural problems already, excessive asymmetrical distribution properties is a drag on the economy, on the economic agents and to the future prospect of exceptionalism and greatness, which the US had in the 50's, and as a diminishing trend in the 60's. The longer the asymmetrical trends continue, the more radical means will be economic necessary to implement to induce the equality-medicine which will be necessary if growth shall continue as long as we can harvest more energy.