Widening Wealth and Inequality Gaps Have Limits
A new staff report from the New York Fed makes an old argument for centrally managed capital, but its predictions will rarely hold up in the real world.
Photographer: Scott Eells/Bloomberg via Getty Images
A staff report from the Federal Reserve Bank of New York titled “Capital Management and Wealth Inequality” comes to some remarkable Marxist conclusions. In James Best and Keshav Dogra’s model, an ever-smaller group of capitalists accumulate all wealth, while the ever-bigger proletariat survives on less and less. The optimal solution, reflecting the authors’ personal views and not necessarily the position of the Fed, is for central planners to control all capital with the profits distributed among workers.
The authors don’t claim these events will take place; they only posit a simple mathematical model that implies them. The assumptions are not realistic — all individuals are identical except for wealth; there is no uncertainty — but you judge models by predictions, not assumptions.