Se os economistas são tão espertos, por que não são ricos? - Peter Coy (NYT)

‘If Economists Are So Smart, Why Ain’t They Rich?’

Peter Coy

 The New York Times, 10/5/2022

 

After I wrote a newsletter last month on how economists’ views differ from those of ordinary people, I got emails to the effect of, “If economists are so smart, why ain’t they rich?” I’m not an economist, so the question doesn’t ruffle my feathers. The possible explanations, though, are interesting — sometimes funny, sometimes kind of deep. Here are five theories.

 

1. Economists aren’t trying to be rich. A lot of economists go to work for institutions of government and higher education. You don’t go to work for such employers because you aspire to vast riches. According to the Bureau of Labor Statistics, the median annual wages of economists in May 2021 were $105,630. That’s lower than the median pay of astronomers, nuclear engineers, medical dosimetrists and theatrical and performance makeup artists.

 

Nobody asks Trappist monks why they aren’t rich, because it’s understood that getting rich is not their aspiration. Economics likewise offers rewards beyond money. There’s a joke on Quora about a bunch of investment bankers who ask an economics professor why he isn’t rich if he’s so smart. He asks them why they aren’t smart if they’re so rich.

 

2. Economists are too good at economics. Learning a little economics is useful for a lot of lucrative careers, from management to banking. Warren Buffett, Steven Cohen, Kenneth Griffin, Henry Kravis and Elon Musk are among the billionaires who have bachelor or master degrees in economics. The mistake is loving it so much that you get your doctorate and become an impoverished postdoc or assistant professor. It’s the same with the hard sciences. In “My Life as a Quant,” the theoretical physicist Emanuel Derman writes that he didn’t start making real money until he realized he would never be a world-famous physicist and went to work on Wall Street, where his math skills were in great demand.

 

3. Economists aren’t actually smart. I don’t buy this one. I think that economists are smart. But some — not the good ones — can be blindered. They know their subspecialties well but are weak on others, such as economic history. These economists have technical expertise but not wisdom.

 

4. Economists are hamstrung by the “efficient market hypothesis.” There’s a joke about a young economist who stoops to pick up a $20 bill he sees on the sidewalk. An older colleague tells him not to bother because if there were really a $20 bill there, someone would have picked it up already. Devotion to the efficient markets hypothesis — which assumes that prices reflect all available information — discourages economists from trying to beat the market, and that’s why they never get rich.

 

5. Economists do think they can beat the market, but they’re wrong. A great example of this is Long-Term Capital Management, a heralded hedge fund that included a pair of Nobel economics laureates, Robert Merton and Myron Scholes. It went bust in spectacular fashion in 1998.

Deirdre McCloskey, an economist who wrote a 1990 book titled “If You’re So Smart: The Narrative of Economic Expertise,” wrote to me in an email that when she was at the University of Chicago in the 1970s, senior faculty members were speculating in the bond market. Milton Friedman told her that interest rates were bound to fall. “This was when interest rates were at 6 percent,” she wrote. “They in fact rose to 10 percent” soon after, “and the wise economists lost their shirts.”

Warren Buffett, despite earning a master of science degree in economics from Columbia University in 1951, told a CNBC interviewer in 2016, “I don’t pay any attention to what economists say, frankly.” He added: “You have all these economists with these 160 IQs who spent their life studying it. Can you name me one super-wealthy economist who’s ever made money out of securities?”

Buffett said that the great British economist John Maynard Keynes failed repeatedly as an investor when he tried to use the credit cycle to predict what businesses would do and succeeded when he gave up on that and “settled on buying good businesses cheap,” Buffett’s own approach.

Buffett is right that economics isn’t an ideal way to make money as an investor. On the other hand, that’s not what it’s for. It’s a science of means and ends. Let economists be economists!

Contra a Corrente: pobreza e riqueza no contexto mundial e brasileiro - Gustavo Maia Gomes

 CONTRA A CORRENTE

Gustavo Maia Gomes

Postagem no Facebook, 28/12/2020

Link: 4 h

O Brasil tinha, em 2019, quase 52 milhões de pobres, definidos como as pessoas com renda mensal de até R$ 436. (Esse é um parâmetro usado pelo Banco Mundial.) Muita gente, sem dúvida. Temos esse problema.

Acontece que a nossa população, no mesmo ano, era de 210 milhões. Se quem não é pobre é rico, existiam, naquele ano, 158 milhões de ricos no Brasil. Três vezes mais. Apesar disso, legiões de economistas estudam a pobreza no país. Identificam os seus problemas, fazem medições sofisticadas, propõem soluções, das mais burras às mais inteligentes. Muito justo que o façam. Mas, não conheço ninguém que estude a riqueza.

Fiz um teste. Fui ao Ipeadata, site de estatísticas do Instituto de Pesquisa Econômica Aplicada (Ipea). Escrevi “pobreza” no lugar destinado às buscas. Apareceram 28 tabelas, cada uma com suas ramificações. Escrevi “riqueza”. Zero resposta. Zerinho da Silva. Será que os brasileiros não-pobres não têm nenhum problema? Que sua existência e felicidade eternas estão garantidas por decreto divino?

Vivemos a repetir que um objetivo nacional é reduzir a pobreza. Temos conseguido. Portanto, a quantidade de ricos tem aumentado. Ninguém parece notar. Até quando as questões teóricas e empíricas, macro e microeconômicas, associadas à riqueza irão permanecer indiscutidas?

Não é só no Brasil que o número de pobres tem diminuído. É no mundo todo, com uma ou outra exceção irrelevantes e excluídos das estatísticas anos loucos como foi 2020 e, tudo indica, também o será 2021. Na verdade, nas últimas quinze décadas, como mostra a figura abaixo, o produto interno bruto por habitante no mundo e em todas as suas regiões (umas mais, outras menos) tem crescido muito.

É líquido e certo que esse processo continuará a existir indefinidamente, ou ele será interrompido pela própria riqueza que tem criado? Não sei. Para contingentes cada vez maiores da população mundial o “problema econômico” já não é como conseguir comida, mas em que gastar a parte de seus rendimentos que sobra após a feira. Essas pessoas podem escolher se preferem trabalhar menos e ter mais lazer ou trabalhar mais e consumir bens e serviços com que seus pais jamais teriam sonhado. E ninguém quer saber disso? (No Brasil, pelo menos.)

Pois decidi quebrar o tabu. Pretendo apenas levantar algumas questões. "Bater o centro" (iniciar a partida), como se dizia no jargão futebolístico. Alguma coisa resultará da empreitada. Outros economistas que continuem o jogo, se o desejarem. Eu virei historiador, desde algum tempo.

Ricos sempre ficam mais ricos? Tem esse risco? SIM! Cabe expropriá-los? Não! - FMI e Paulo Roberto de Almeida

 Ricos tendem a ficar mais ricos? SIM, SIM. Riqueza, especialmente financeira, traz retornos mais altos, inclusive por economias de escala, por melhores oportunidades de grandes investimentos e por melhor aconselhamento por especialistas refinados.

O Piketty está certo, portanto, com suas digressões sobre a concentração de capital? NÃO, NÃO. Que existe concentração de renda é um fato, pelos fatores apontados acima.

Mas está certo em querer PUNIR os que ficam absurdamente mais ricos, investindo a sua fortuna? NÃO e NÃO. Se esses super-ricos se tornaram hiper-ricos pela simples multiplicação da sua fortuna, sem tornar os pobres mais pobres, não existe NENHUMA RAZÃO para o governo pretender over-taxar essa riqueza para distribuir entre os pobres, pois o mais provável de ocorrer é que o governo vai gastar esse dinheiro com o próprio governo e com os Mandarins do Estado, em lugar de reduzir a pobreza (a não ser que investissem tudo na capacitação educacional de famílias desfavorecidas).

Se os mega-bilionários ficam trilionários investindo a sua fortuna – ou seja, correndo riscos – e não roubando nada dos pobres, não existe NENHUM MOTIVO para que o governo queira mudar as regras apenas para arrancar mais dinheiro dos extra-ricos. O mais provável é que estes façam melhores investimentos, criando empregos e distribuindo renda, do que os governos. Todo o resto é apenas inveja e raiva do CAPITAL, como esses socialistas franceses.

Paulo Roberto de Almeida

How the Rich Get Richer

IMF Blog, November 30, 2020

By Davide Malacrino

Wealth begets wealth. This simple concept of privilege has added to growing discontent with inequality that has escalated under the shadow of the COVID-19 pandemic.

A paper co-authored this year by economists from the IMF and other institutions confirms that wealthier people are more likely to earn higher returns on their investments. It also shows that the children of wealthy people, while likely to inherit that wealth, aren’t necessarily going to make the same high returns on investments.

Detailed data on wealth are extremely rare, but 12-years of tax records (2004-2015) from Norway have opened a new window into wealth accumulation for individuals and their offspring. The Nordic country has a wealth tax that requires assets to be reported by employers, banks and other third parties in order to reduce errors from self-reporting. The data, which are made public under certain conditions, also make it possible to match parents with their children.

The data show that an individual in the 75^th percentile of wealth distribution who invested $1 in 2004 would have yielded $1.50 by the end of 2015—a return of 50 percent. A person in the top 0.1 percent would have yielded $2.40 on the same invested dollar—a return of 140 percent.

Another significant finding: High returns both bring individuals to the top of the wealth scale and prevent them from leaving it. Controlling for age, parental background and earnings, moving from the 10^th percentile to 90^th percentile of wealth distribution increases the probability of making it to the top 1 percent by 1.2 percentage points compared to an average probability of 0.89 percent.

Why do rich people earn high returns? Conventional wisdom suggests that richer individuals put more of their assets toward high risk investments, which can result in higher returns. But our research finds that wealthy people often earn a higher return even on more conservative investments. Richer individuals enjoy pure “returns to scale” to their wealth. Specifically, for given portfolio allocation, individuals who are wealthier are more likely to get higher risk-adjusted returns, possibly because they have access to exclusive investment opportunities or better wealth managers. Financial sophistication, financial information, and entrepreneurial talent are also important. These characteristics make the returns to wealth persistent over time. This research is the first to quantify this mechanism and show that it is likely to matter empirically.

Do high returns persist across generations? The answer is a qualified yes. Wealth has a high degree of intergenerational correlation, but there are important differences in how returns to wealth accrue across generations. The children of the richest are likely to be very rich, but unlikely to get as high returns from this wealth as their parents did. This suggests that while money is perfectly inheritable, exceptional talent is not.

As 20 companhias que mandam no Brasil (sera?) - Anderson Antunes (Forbes)

O jornalista esqueceu de uma companhia muito importante, que movimenta também, direta ou indiretamente, bilhões de dólares, e que atende pela sigla PT.
Paulo Roberto de Almeida

Anderson Antunes, Contributor

All things wealth-related. And a bit more.

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1/23/2014 @ 12:11PM |9,016 views

The 20 Companies That Own Brazil

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Brazil is known worldwide for its soccer players and supermodels, its lively parties and an appreciation for living life passionately. Another well-known characteristic of the country is its high inequality spurred on by ineffective income distribution practices and clientelistic political systems. For many people, the vast slums that shape the landscape of Brazil’s cities have become an emblematic, almost mythic image of Brazil’s poorest which contradicts the country’s ambition for growth and modernity.

It is true that Brazil’s economic boom of the past decade led to a significant decrease in the country’s poverty rates, but inequality is still a serious problem and one of the major challenges faced by its governors. A report from the World Bank indicates poverty in Brazil has fallen markedly, from 21% of the population in 2003 to 11% in 2009 with numbers continuing to fall. The Instituto Brasileiro de Geografia e Estatística (IBGE) also reported that the richest 20% of Brazilians saw a decrease in their share of wealth over the past decade, whilst the poorest 20%, on the other hand, increased their share of wealth from 2.6% to 3.5% during the same period.

The first four on the list outweigh the economic power of Brazil’s union. (PHOTO: WIkipedia)

But inequality is not a problem exclusive to Brazil. As political and business leaders gather the World Economic Forum in Davos, Switzerland, to discuss the improving global economy, a new study indicates that the rich have become richer, ever more increasing their grip on economic dominance throughout the world — according to British humanitarian group Oxfam International, the 85 richest people on the planet now control a wealth of about $1.7 trillion, which equals that of the bottom half of the global population, or about 3.5 billion people.

The Awful Truth About Brazil's Protests: The 'Country Of The Future' Is Still Hostage To Its PastAnderson AntunesContributor

The Richest People In Brazil 2013: The Full ListAnderson AntunesContributor

How Brazil's Poorest State Minted One Of The Country's Richest -- And Most Controversial -- Political ClansAnderson AntunesContributor

“It is staggering that in the 21st century, half of the world’s population owns no more than a tiny elite whose numbers could all sit comfortably in a single train carriage,” said Winnie Byanyima, Oxfam’s executive director. “Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table,” Byanyima said.

That sort of gap is also evidenced when looking at Brazil’s largest corporations and the power they wield. Thinking about that, the Brazilian NGOsInstituto Mais Democracia and Cooperativa EITAcreated a ranking to show who controls Brazil’s capital, most of the time through an almost invisible power structure.

The result is astonishing, with a biopsy of over 2,000 companies in order to find the ultimate owner in each one of its byzantine ownership structure. By taking into account the ownership in these companies and their net revenues, the study mapped the people and corporations with greater economic power in Brazil’s trillion-dollar economy, which is concentrated within a group of about 12 corporations that together represent more than 50% of the total wealth generated by all listed companies. The first four on the list even outweigh the economic power of Brazil’s union, which is about $192.35 billion, not to mention that the top 20 companies listed are directly connected to 10 FORBES billionaires, whose combined net worth is $47.1 billion (as of March 2013).

Check the list with the 20 companies that control Brazil:

1. Telefonica S.A. (telecommunications)

Country of Origin: Spain

Total economic power: R$ 187.46 billion ($79.99 billion)

Controlled by Banco Bilbao Vizcaya Argentaria, Caja de Ahorros y Pensiones de Barcelona and Blackrock.

2. Previ (pension fund)

Country of Origin: Brazil

Total economic power: R$ 145.8 billion ($62.21 billion)

Controlled by Caixa de Previdencia dos Funcionarios do Banco do Brasil

3. Telemar Participacoes (telecommunications)

Country of Origin: Brazil

Total economic power: R$ 112.1 billion ($47.83 billion)

Controlled by AG Telecom, LF Tel S.A., BNDES, Bratel Brasil, Fundacao Atlantico de Seguridade Social, Previ, Funcef and Petros

4. BBD Participacoes (finance)

Country of Origin: Brazil

Total economic power: R$ 102.4 billion ($43.7 billion)

Controlled by Lazaro de Mello Brandao

5. Stichting Gerdau Johannpeter (steel)

Country of Origin: Brazil

Total economic power: R$ 70.8 billion ($30.21 billion)

Controlled by Klaus Gerdau Johannpeter, Germano Hugo Gerday Johannpeter, Frederico Carlos Gerday Johannpeter and Jorge Gerdau Johannpeter

6. Wilkes Participacoes (retail)

Country of Origin: Brazil/France

Total economic power: R$ 67.6 billion ($28.84 billion)

Controlled by Peninsula Participacoes and Sudaco Participacoes

Billionaire connection: Abilio dos Santos Diniz

7. Blessed Holdings (food processing)

Country of Origin: Brazil/United States

Total economic power: R$ 61.7 billion ($26.33 billion)

Controlled by FB Participacoes (the Bertin and Batista families)

8. Banco Santander S.A. (finance)

Country of Origin: Spain

Total economic power: R$ 61.2 billion ($26.11 billion)

Controlled by Santander

9. Jereissati Participacoes (telecommunications, shopping centers)

Country of Origin: Brazil

Total economic power: R$ 50.1 billion ($21.38 billion)

Controlled by the Jereissati family

10. Ultra S.A. Participacoes (fuel distribution)

Country of Origin: Brazil

Total economic power: R$ 48.6 billion ($20.74 billion)

Controlled by Daisy Igel, Paulo Guilherme Aguiar Cunha, Ana Maria Levy Villela Igel, Fabio Igel, Christy Participacoes, Marcia Igel Joppert, Joyce Igel de Castro Andrade, Rogerio Igel and Lucio de Castro Andrade Filho

Billionaire connection: Daisy Igel

11. Andrade Gutierrez S.A.(construction services, telecommunications)

Country of Origin: Brazil

Total economic power: R$ 42.4 billion ($18.09 billion)

Controlled by the Andrade and Gutierrez families

12. Rio Purus Participacoes (textile, steel)

Country of Origin: Brazil

Total economic power: R$ 37.4 billion ($15.96 billion)

Controlled by Dorothea Steinbruch

Billionaire connection: Dorothea Steinbruch

13. Belga Empreendimentos e Participacoes S.A. (sugar and ethanol)

Country of Origin: Brazil

Total economic power: R$ 36.6 billion ($15.62 billion)

Controlled by Rubens Ometto Silveira Mello

Billionaire connection: Rubens Ometto Silveira Mello

14. Iupar – Itau Unibanco Participacoes S.A. (finance)

Country of Origin: Brazil

Total economic power: R$ 34.7 billion ($14.81 billion)

Controlled by Itausa (the Setubal and Villela families), Companhia E. Johnston de Participacoes (the Moreira Salles family)

Billionaire connection: Alfredo Egydio de Arruda Villela Filho and Ana Lucia de Mattos Barretto Villela

15. Casino Guichard Perrachon (retail)

Country of Origin: France

Total economic power: R$ 33.8 billion ($14.42 billion)

Controlled by Bengal LLC, Pincher LLC, Oregon LLC, King LLC, Segisor and Lobo I LLC

Billionaire connection: Abilio dos Santos Diniz

16. Peninsula Participacoes Ltda. (retail, food processing)

Country of Origin: Brazil

Total economic power: R$ 33.8 billion ($14.42 billion)

Controlled by the Diniz family

Billionaire connection: Abilio dos Santos Diniz

17. Kieppe Patrimonial Ltda. (construction services, oil & gás)

Country of Origin: Brazil

Total economic power: R$ 33.7 billion ($14.38 billion)

Controlled by the Odebrecht and Gradin families

Billionaire connection: Victor Gradin

18. Cia Brasileira de Energia (energy)

Country of Origin: Brazil

Total economic power: R$ 31.2 billion ($13.31 billion)

Controlled by AES Holdings and BNDES

19. Itausa Investimentos Itau S.A. (finance, diversified)

Country of Origin: Brazil

Total economic power: R$ 27.7 billion ($11.82 billion)

Controlled by the Setubal and Villela families

Billionaire connection: Alfredo Egydio de Arruda Villela Filho and Ana Lucia de Mattos Barretto Villela

20. Stichting InBev (beer)

Country of Origin: Belgium/United States

Total economic power: R$ 27.1 billion ($11.56 billion)

Controlled by Eugenie Patri Sebastian and BRC Sart

Billionaire connection: Jorge Paulo Lemann, Carlos Alberto da Veiga Sicupiraand Marcel Herrmann Telles

A economia do Egito nos tempos de Cleopatra - Stacey Schiff

In today's excerpt - from Cleopatra: A Life by Stacey Schiff. The economy of Egypt during Cleopatra's reign was robust and efficient. This made Cleopatra fabulously wealthy -- even by today's standards -- and one of the wealthiest monarchs in the world. She was wealthier than Caesar, but had no standing army, and was thus both coveted by and vulnerable to Rome:


Cleopatra: A Life
by Stacy Schiff
by Back Bay BooksDelanceyplace, 13/12/2013

"The Ptolemaic system [the Ptolemys were Cleopatra's dynastic family and the Greek rulers of Egypt, after its conquest by one of Alexander the Great's generals] has been compared to that of Soviet Russia; it stands among the most closely controlled economies in history. No matter who farmed it -- Egyptian peasant, Greek settler, temple priest -- most land was royal land. As such, Cleopatra's functionaries determined and monitored its use. Only with government permission could you fell a tree, breed pigs, turn your barley field into an olive garden. All was scrupulously designed for the sake of the record-keeping, profit-surveying bureaucrat rather than for the convenience of the cultivator or the benefit of the crop. You faced prosecution (as did one overly enterprising woman) if you planted palms without permission. The beekeeper could not move his hives from one administrative district to another, as doing so confused the authorities. No one left his village during the agricultural season. Neither did his farm animals.

"All land was surveyed, all livestock inventoried, the latter at the height of the flood season, when it could not be hidden. Looms were checked to make sure that none was idle and thread counts correct. It was illegal for a private individual to own an oil press or anything resembling one. Officials spent a great deal of time shutting down clandestine operations. (Temples alone were exempt from this rule for two months of every year, at the end of which they, too, were shut down.) The brewer operated only with a license and received his barley -- from which he pledged to make beer -- from the state. Once he had sold his goods he submitted his profits to the crown, which deducted the costs of raw materials and rents from his income. Cleopatra was thereby assured both of a market for her barley and of profits on the brewer's sales. Her officials audited all revenues carefully, to verify that the mulberries and willows and acacia were planted at the proper time, to survey the maintenance of every canal. In the process, they were especially and frequently exhorted to disseminate throughout Egypt the reassuring message that 'nobody is allowed to do what he wishes, but that everything is arranged for the best.'

"Unparalleled in its sophistication, the system was hugely effective and, for Cleopatra, hugely lucrative. The greatest of Egypt's industries -- wheat, glass, papyrus, linen, oils, and unguents -- essentially constituted royal monopolies. On those commodities Cleopatra profited doubly. The sale of oil to the crown was taxed at nearly 50 percent. Cleopatra then resold the oil at a profit, in some cases as great as 300 percent. Cleopatra's subjects paid a salt tax, a dike tax, a pasture tax; generally if an item could be named, it was taxed. Owners of baths, which were private concerns, owed the state a third of their revenue. Professional fishermen surrendered 25 percent of their catch, vintners 16 percent of their tonnage. Cleopatra operated several wool and textile factories of her own, with a staff of slave girls. She must have seemed divine in her omniscience. A Ptolemy 'knew each day what each of his subjects was worth and what most of them were doing.'


"How wealthy was she? Into her coffers went approximately half of what Egypt produced. Her annual cash revenue was probably between 12,000 and 15,000 silver talents. That was an astronomical sum of money for any sovereign, in the words of one modern historian 'the equivalent of all of the hedge fund managers of yesteryear rolled into one.' (Inflation was an issue throughout the century, but it affected Cleopatra's silver less than her bronze currency.) The most lavish of lavish burials cost 1 talent, the prize a king tossed out at a palace drinking contest. A half-talent was a crushing fine to an Egyptian villager. A priest in Cleopatra's day -- his post was a coveted one -- made 15 talents yearly. That was a princely sum ... Pirates set a staggering 20-talent ransom on the head of the young Julius Caesar, who, being Caesar, protested that he was worth at least 50. Given a choice between a 50-talent fine and prison, you opted for jail. You could build two impressive monuments for a much-loved mistress for 200 talents. Cleopatra's costs were high ... But by the most stringent of definitions -- that of Rome's wealthiest citizen -- she was fabulously well-off. Crassus claimed that no one was truly rich if he could not afford to maintain an army.*

"*On one contemporary list Cleopatra appears as the twenty-second richest person in history, well behind John D. Rockefeller and Tsar Nicholas II, but ahead of Napoleon and J. P. Morgan. She is assigned a net worth of $95.8 billion, or more than three Queen Elizabeth IIs. It is of course impossible accurately to convert currencies across eras."

Capital is back: a riqueza aumentou em todos os paises, relativa 'a renda nacional - Tyler Cowen (NYT)

ECONOMIC VIEW - The New York Times, Business Section, July 20, 2013

Wealth Taxes: A Future Battleground

By TYLER COWEN

IF you’d like to know where American political debates are headed, the data suggest a simple answer. The next major struggle — in economic terms at least — will be over whether taxes on personal wealth should rise — and by how much.

The mathematical reality is that wealth is becoming more important, relative to income. In a new paper,“Capital Is Back: Wealth-Income Ratios in Rich Countries 1700-2010,”Professors Thomas Piketty and Gabriel Zucman of the Paris School of Economics have performed the heroic task of measuring wealth for eight leading economies: the United States, Canada, Britain, France, Italy, Germany, Japan and Australia.

Their estimates reveal some striking trends. For instance, wealth accumulation in these eight countries has risen relative to yearly production. Wealth-to-income ratios in these nations climbed from a range of 200 to 300 percent in 1970 to a range of 400 to 600 percent in 2010. Behind the changing ratios is some bad news, namely that slow productivity growth and slow population growth have depressed income growth, but also some good news — that relative peace and capital gains have preserved wealth.

Illustration: Evan Hughes

Focusing on the wealth of economies lets us reframe our recent debates about government debt in useful ways. A look at the ratio of debt to gross national product, for example, can be scary, but the ratio of debt to wealth is far less forbidding. If, say, a nation’s debt-to-G.D.P. ratio is 100 percent — often considered a dangerous level — and national wealth is 10 times yearly national income, the debt-to-wealth ratio is thus 10 percent, which is comparable to owing $100,000 on a $1 million home. Not so scary.

Using the wealth numbers provided by Professors Piketty and Zucman, we can understand how Japan, despite a debt-to-G.D.P. ratio of more than 200 percent, can maintain low interest rates; Japan has a wealth-to-income ratio of about 600 percent. In essence, creditors think the Japanese political system will be able to drum up enough support for the requisite taxes, pulled out of national wealth if necessary, when the time comes.
But don’t relax too quickly, because fiscal problems remain very real for many countries. While virtually every government could pay off its debts by taxing wealth, such taxes are often politically unacceptable. In other words, fiscal problems are best regarded as problems of dysfunctional governance. In the recent elections in Italy, the incumbent government lost voter support partly because it addressed the nation’s revenue problems by levying a wealth tax on real estate; the policy remains contentious and may yet be repealed or limited.
And here is a related issue: If there is enough national wealth to pay off debts, it may be harder to arrange bailouts from outside.
In the European Union, countries like Germany may regard the union’s more troubled nations as shirking their fiscal duties, and that makes cooperation harder to achieve. Italy, for instance, is in a fiscal crisis, but it also has an especially high wealth-to-income ratio, at 650 percent, indicating that it could pay off its debt if more of that wealth were taxed. Germany, by contrast, has a much lower wealth-to-income ratio: 400 percent. And though the professors caution that the German data, in particular, may be incomplete, the figures do lend support or at least plausibility to the recent argument that Germany shouldn’t be viewed as the rich uncle of Europe.

Some forms of wealth taxation take hidden forms, such as financial repression. This occurs when a nation’s citizens are required to hold deposits in banks under unfavorable terms — meaning at low interest rates. The banks, in turn, may be required to buy government debt to help finance a budget deficit. For better or worse, this is likely part of a longer-run resolution of fiscal problems in the periphery of the euro zone.

In the United States, wealth taxes are currently limited to a few levies, such as property taxes and inheritance taxes. Capital gains taxes that aren’t indexed to inflation also serve as an implicit wealth tax, because they dig into the body of a person’s capital. Most likely those rates will rise. Like the bank robber Willie Sutton, revenue-hungry governments go “where the money is.”
The coming battles over wealth taxation may prove especially bitter and polarizing. Most wealth has already been subjected to income and other taxes, perhaps multiple times. It doesn’t seem fair to the holders of that wealth to suddenly pay additional taxes on assets that they thought were in the clear, and such taxes would signal that previous policy has failed.
Higher wealth in a nation means that there is more to take, and growing inequality means there are more problems that its government might seek to remedy. At the same time, however, this new economic configuration will mean greater political influence for the holders of that wealth, and that will make higher wealth taxes harder to achieve.
Historically, economists — including me — have generally favored taxes on consumption, on the grounds that they would do the least damage to long-term savings, investment and economic growth. Yet in some eyes, rising wealth will become a tempting target for short-term political gain. And note that while most Republicans currently oppose consumption taxes, they may dislike the relevant alternative, namely wealth taxes, even more.
Get ready to choose a side.

Tyler Cowen is a professor of economics at George Mason University.