Discussion Paper

A Discussion of Thomas Piketty's Capital in the Twenty-First Century: By How Much Is r Greater than g?

Abstract: Thomas Piketty’s 2014 book Capital in the Twenty-First Century may have been a greater sensation upon publication than Karl Marx’s nineteenth-century Das Kapital. It made the New York Times bestseller list, generated myriad reviews and responses from economists at top institutions, and was the subject of a standing-room-only session at the recent American Economic Association annual meeting. In Capital, Piketty argues that wealth inequality is set to rise from its relatively low levels in the 1950s through the 1970s to the very high levels it once occupied at the dawn of the Industrial Revolution—the time of the heroes of Jane Austen and Honoré de Balzac. He supports this argument with voluminous evidence on the history of the capital stock and of inequality in developed countries, which he argues have been moving in ways consistent with his theory. Piketty proposes that governments worldwide intervene to prevent this rise in inequality, most importantly by levying a global tax on capital. In this series, I will describe the arguments that Piketty makes to conclude that wealth inequality will rise and that global capital taxation is needed to stop it, and present a critical discussion of these arguments. My analysis starts with Piketty’s most famous formula, r > g.

Keywords: capital; technological frontier; inequality; Piketty; growth;

JEL Classification: N2; E2;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2015-07-13

Number: 20150713b