- 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.
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.
from the book
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, both nationally and globally, especially for income derived from capital.
Quantizing social issues is not only a difficult task but also a dangerous one. You might recall what happened in McNamara’s analysis system during the Vietnam war. But Piketty’s approach has its merit; it has the power of persuasion and gives an authority. No wonder the book became a bestseller. Many scholars pointed out errors in his approach, but it is hard to refute his main argument: the emphasis on the equality of wealth over the inequality and how capital is linked to this process.
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