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Notes and Reflections on Books and Media

by Hannah Leitheiser

The Exponential

Capital in the Twenty-First Century

Thomas Piketty

2013

Link

2018-09-09

- Thomas Piketty, Capital in the Twenty-First Century (2013)

Picketty's argument basically:

Two factors of economy: the return on capital investment (r) and economic growth (g). Where r > g, the result is an "endless inegalitarian spiral."

I'm no economist, but by my math, if you take gross domestic product as being shared between the workers and investors, the formula for the proportion will be an exponential that will either peg to zero or 100% depending on whether r > g.

And to a degree, this aligns with common sense. An economy that outgrows past wealth will keep past wealth from being the dominant factor, and over time whether your great-great-great grandparents would have belonged in a Jane Austin novel will make little difference. An economy that does not is...well, a Jane Austin novel.

This book did not make other economists happy. The prevailing idea is even with slow economic growth, the free market results in meritocracy. I haven't read their rebuttals thoroughly, but they seem to focus on the unaccounted for ways wealth might be fragmented, consumed, and taxed.