For much of big picture economics, what we do is define a few fundamnetal concepts with which to narrate the economic story. The 20s - 80s "theory" that you r

For much of big picture economics, what we do is define a few fundamnetal concepts with which to narrate the economic story. The 20s - 80s "theory" that you refered to narrates its story with productivity and bargaining power. It makes sense and is based on microeconomic fundamentals. It makes sense for union-esque bargaining and politics. It also implies a constant relationship between production and wages. Like any narrative choice, the productivity-bargaining power story works better in some cases than others. For example, productivity (and output generally) is just more abstract in 2017 than 1967^. It's hard to adjust for inflation and its hard to measure productivity of office/info workers. An alternative set of fundamentals to narrate our stories is now gaining popularity because of the Picketty "family" of economists. It's early to tell if that school of thought will have influence on economics and policy, but for now we have some new terms, new characters for our story. In this corner of economics, labour & capital are the main protaginists (or antagonists :) All net income in an economy goes to either labour or capital, our two forms of income. For example, my back-of-the-envelope^^ suggests that about $60bn has been paid by Google to employees in the 10 years since IPO. About 600bn in capital has been created in that time. Should we define this as high labour productivity or capital productivity? Either way, I think the point illustrated is that economic productivity/growth can go to one or both of these. There's no economic rule ensuring proportions remain constant. So, what is capital? To dip a toe into Marxist grand history, capital was mostly land. Then it was mostly factories. Today, it is more ethereal. The only way to define it is financial terms: discounted future income. $600bn in capital is a $40bn annuity.^^^ Anyway... I don't have any big profound conclusions to share. I just think labour-capital aggregates will continue to be adopted in these discussions. For example, if the post work automated future happens, I think these terms will be more useful. If Elon Musk automates the machine that makes the machine, making driverless cars,then what is he creating? It will be a bundle of capital requiring very little labour inputs to generate value. You could try to describe it in labour productivity terms, but it starts to get ridiculous and totally unlreated to wages. ^ I ws starting to write in examples, but stopped. This needs its own thread. ^^Just assumed 150k global average salary, I could be way off.