- Title: CAPITAL in the Twenty-First Century
- Author: Thomas Piketty
- Published: 2013
- Publisher: The Belknap Press of Harvard University Press, Cambridge, Massachusetts
- Translated: Arthur Goldhammer (2014)
- ISDN-13: 978-0-674-43000-6
Piketty’s “CAPITAL in the Twenty-First Century” aims that there is a scientific approach to determine what (economic) factors cause inequality of wealth. Piketty relies on statistical and historical data to back up his hypothesis.
His main ideas are:
If the income comes more from capital than labor, the inequality of wealth increases.
α = r × β
- α: the share of capital income in national income
- r: the average rate of return on capital
- β: the capital/income ratio
If the ratio of capital/income (β) increases, the inequality of wealth increases.
β = s/g
- s: savings rate
- g: growth rate
The higher the growth rate, the less ratio of capital/income – long term effect.
The solution is the Progressive Tax nationally and globally, especially for income from capital.
Quantizing the social issue is not only a difficult task but also a dangerous one. You might recall what had happened in McNamara’s analysis system during the Vietnam war. But Piketty’s approach has its merit; it has the power of persuasion; it gives an authority. No wonder the book became a best seller. Many scholars pointed out errors in his approach, but it is hard to refute the main argument: emphasis on the equality of wealth over the inequality and how capital is linked to this process.