Milanovic on Stiglitz and the "Piketty puzzle"

Stiglitz: Theories of just deserts and of exploitation by Branko Milanovic

2) Stiglitz proposed an interesting view of drivers of inequality in today’s US. The principal role belongs to finance (where he agrees with Galbraith) which made credits more easily available which in turn led to over-investment in housing, and to the increase in the wealth/GDP ratio, discussed by Piketty. But that increase while real was not conducive to greater productivity because what increased was value of land, not the physical quantity of productive capital. Banks, instead of lending to companies to invest in new capital, lent to the public which spent the money on housing and unproductive assets. Stiglitz here rejoins, with some twists, Kumhoff and Rancière, and Rajan, and even (if I may say so) myself who wrote about that in March 2009. But Stiglitz presents it as a solution to the “Piketty puzzle”: how come that the wealth/income ratio went up but the marginal product of capital did not godown and, most importantly, wages did not increase.