Thomas Piketty: Capitalism

“Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy, it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present). … The inequality r > g in one sense implies that the past tends to devour the future: wealth originating in the past automatically grows more rapidly, even without labor, than wealth stemming from work, which can be saved. Almost inevitably, this tends to give lasting disproportionate importance to inequalities created in the past, and therefore to inheritance.”

Thomas Piketty book Capital in the Twenty-First Century

Source: Capital in the Twenty-First Century (2013), p. 377.

Sense , Past , Future , Wealth

“When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.”

Thomas Piketty book Capital in the Twenty-First Century

Source: Capital in the Twenty-First Century (2013), p. 1.

“Capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market.”

Thomas Piketty book Capital in the Twenty-First Century

Source: Capital in the Twenty-First Century (2013), p. 46.

“How do wealth-income and capital-output ratios evolve in the long run, and why? Until recently it was difficult to properly address this question, for one simple reason: national accounts were mostly about ﬂows, not stocks. Economists had at their disposal a large body of historical series on ﬂows of output, income and consumption – but limited data on stocks of assets and liabilities. When needed, for example for growth accounting exercises, estimates of capital stocks were typically obtained by cumulating past ﬂows of saving and investment. This is ﬁne for some purposes, but severely limits the set of questions one can ask.”

Thomas Piketty

Piketty, Thomas, and Gabriel Zucman. Capital is back: Wealth-income ratios in rich countries, 1700-2010 http://piketty.pse.ens.fr/files/PikettyZucman2013WP.pdf. Centre for Economic Policy Research, 2013.

Exercises , Question , Past , Wealth

“I can now present the first fundamental law of capitalism, which links the capital stock to the flow of income from capital. The capital/income ratio β is related in a simple way to the share of income from capital in national income, denoted α. The formula is
α = r × β
Where r is the rate of return on capital.
For example, if β=600% and r = 5%, then α = r × β = 30%.
In other words, if national wealth represents the equivalent of six years of national income, and the rate of return on capital is 5 percent per year, then capital’s share in national income is 30 percent.”

Thomas Piketty book Capital in the Twenty-First Century

Source: Capital in the Twenty-First Century (2013), p. 52.

Law , Way , Wealth

“The overall importance of capital today, as noted, is not very different from what it was in the eighteenth century. Only its form has changed: capital was once mainly land but is now industrial, financial, and real estate. We also know that the concentration of wealth remains high, although it is noticeably less extreme than it was a century ago. The poorest half of the population still owns nothing, but there is now a patrimonial middle class that owns between a middle and a third of total wealth, and the wealthiest ten percent now own only-two thirds of what there is to own rather than nine-tenths.”

Thomas Piketty book Capital in the Twenty-First Century

Source: Capital in the Twenty-First Century (2013), p. 377; As cited in: " Thomas Piketty Capital in the twenty first century‎ Part III http://robertpaulwolff.blogspot.nl/2014/03/thomas-piketty-capital-in-twenty-first_30.html" on robertpaulwolff.blogspot.nl, 2014/03.

Change , Wealth

“The distribution of wealth is one of today’s most widely discussed and controversial issues. But what do we really know about its evolution over the long term? Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands, as Karl Marx believed in the nineteenth century? Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes, as Simon Kuznets thought in the twentieth century? What do we really know about how wealth and income have evolved since the eighteenth century, and what lessons can we derive from that knowledge for the century now under way?”

Thomas Piketty book Capital in the Twenty-First Century

Source: Capital in the Twenty-First Century (2013), p. 1 Introduction: Lead paragraph; Quoted in From the Introduction to Capital in the Twenty-First Century, by Thomas Piketty http://www.hup.harvard.edu/features/capital-in-the-twenty-first-century-introduction.html, at hup.harvard.edu, 2014.

Way , Knowledge , Wealth

“Modern economic growth and the diffusion of knowledge have made it possible to avoid the Marxist apocalypse but have not modified the deep structures of capital and inequality—or in any case not as much as one might have imagined in the optimistic decades following World War II.”

Thomas Piketty book Capital in the Twenty-First Century

Source: Capital in the Twenty-First Century (2013), p. 1.

War , World , Imagination , Knowledge