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So g represents growth of the entire economy, not worker income or some such thing. Note that if Piketty’s hypothesis is true then the conclusion (return on cap
by zxcmx 7y ago
So g represents growth of the entire economy, not worker income or some such thing. Note that if Piketty’s hypothesis is true then the conclusion (return on capital will capture more and more of the economy) is more or less tautological.
- notahacker 7y agoThis. A corollary of the argument is that if r > g, worker income on average grows slower than g.
- Symmetry 7y agoWorker incomes kept pace with investment income through the 19th century where r was consistently higher than g and also in the early 20th where it didn't. If your investments are in machines that need people to work them then better machines mean that people's labor is more valuable. It's only recently that we've seen we've seen wages as a share of total income slip from roughly 50% to roughly 40% of total income. But the delta can be almost entirely explained by large amounts of capital returns in owner occupied housing which is a far higher share of the US capital stock than it had been historically. And this form of capital doesn't require (much) labor to maintain its value.