The Rise and Rise of the One Percent: Considering Legal Causes of Wealth Inequality
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THE RISE AND RISE OF THE ONE PERCENT: CONSIDERING
LEGAL CAUSES OF WEALTH INEQUALITY
Shi-Ling Hsu*
ABSTRACT
Thomas Piketty 's Capital in the Twenty-First Century, which is surely one
of the very few economics treatises ever to be a best-seller, has parachuted
into an intensely emotional and deeply divisive American debate: the problem
of inequality in the United States. Piketty's core argument is that throughout
history, the rate of return on private capital has usually exceeded the rate of
economic growth, expressed by Piketty as the relation r > g. If true, this
relation means that the wealthy class-who are the predominant owners of
capital-will grow their wealth faster than economies grow, which means that
relatively speaking, the nonwealthy willfall behind.
But even if we accept Piketty's assertion that this has been a historical
fact, why is r > g most of the time? Piketty offers afew economic factors and
a few legal rules, but mostly demurs as to why the 'forces of [wealth]
divergence generally overwhelm the 'forces of [wealth] convergence. This
Essay argues that legal rules and institutions exhibit an inherent bias toward
some forms of private capital and serve to inflate returns to private capital-
Piketty's r. Meanwhile, not only is it more difficult to make economic growth-
Piketty's g keep pace, but it is more contentious. The result is that returns to
private capital have indeed commonly exceeded the rate of economic growth.
This historical truism can be traceable to a capital-friendly bias that inheres in
legal rules and institutions. The bias is particularly pronounced in several
areas of law in which law and policy have inflated returns to private capital
and driven it well above the rate of economic growth, exacerbating economic
inequality. This Essay closes by arguing for a greater attention paid to
. Larson Professor, Florida State University College of Law. The author thanks and acknowledges the
help and comments of Thomas Piketty, Richard McAdams, Barak Orbach, Jay Kesten, Emily Hammond,
Jonathan Nash, Nicholas Georgakopoulos, Daniel Cole, Sidney Shapiro, Michael Hoover, Steve Johnson, and
Bruce Markell, and also workshop participants at the Emory University School of Law and participants at the
2014 Midwestern Law and Economics Association Annual Meeting. The author would also like to thank Mary
McCormick, Kat Klepfer, and the outstanding library staff at the Florida State University College of Law for
their assistance. Of course, the remaining shortcomings are the sole responsibility of the author.](ViewImageLocal?handle=hein.journals/emyon64&div=4&collection=&method=preview&ext=.png&size=3)
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The Rise and Rise of the One Percent: Considering Legal Causes of Wealth Inequality
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