7 ms·

Disclaimer: I have not read the book either. One thing I don't understand about the r and g thing is how it makes sense to compare these two values at all. Isn

Disclaimer: I have not read the book either. One thing I don't understand about the r and g thing is how it makes sense to compare these two values at all. Isn't capital a measure of accumulated wealth, while GDP is a measure of wealth produced in a certain unit of time? For example, what if we just maintained a perfectly steady GDP that exceeded our consumption needs; wouldn't that yield a positive r and explain r > g? Does someone who read the book have a better understanding of exactly what these two numbers mean? P.S. I find it implausible that Piketty would make such an elementary mistake as the arithmetic mean vs. geometric mean issue discussed in the article. But again someone who has actually read the book should weigh in.

mlamat 12y ago
He explains all the terms at the start of the book. He has his own definition for capital which also includes real-estate etc... OP's post is just an argument against a straw man. BTW. Piketty also says that the problem with modern economics is too much focus on fancy math.
yummyfajitas 12y ago
For the record, I (author here) also think it's unlikely Piketty simply ignored it. I think the reviewers of the book are either ignoring it or failing to understand it. See this comment I wrote on HN discussing the book review which inspired this post: https://news.ycombinator.com/item?id=7619412 https://news.ycombinator.com/item?id=7619412 ...most reviews of Piketty, have to be misrepresenting...r > g...I don't think it's actually what Piketty is pushing.
RivieraKid 12y ago
It's pretty simple if I understand it correctly. GDP = total income in the economy = income that goes to labour + income that goes to owners of capital. g is the absolute growth of GDP, r is the absolute growth of income that goes to capital. If r > g, then the share of income that goes to labour is shrinking as a ratio of GDP. Another problem is that the income that goes to labour is increasingly unevenly distributed.

mlamat 12y ago

He explains all the terms at the start of the book. He has his own definition for capital which also includes real-estate etc... OP's post is just an argument against a straw man. BTW. Piketty also says that the problem with modern economics is too much focus on fancy math.

yummyfajitas 12y ago

For the record, I (author here) also think it's unlikely Piketty simply ignored it. I think the reviewers of the book are either ignoring it or failing to understand it. See this comment I wrote on HN discussing the book review which inspired this post: https://news.ycombinator.com/item?id=7619412 https://news.ycombinator.com/item?id=7619412 ...most reviews of Piketty, have to be misrepresenting...r > g...I don't think it's actually what Piketty is pushing.

RivieraKid 12y ago

It's pretty simple if I understand it correctly. GDP = total income in the economy = income that goes to labour + income that goes to owners of capital. g is the absolute growth of GDP, r is the absolute growth of income that goes to capital. If r > g, then the share of income that goes to labour is shrinking as a ratio of GDP. Another problem is that the income that goes to labour is increasingly unevenly distributed.