Capital in the Twenty-First Century by
Thomas Piketty, 2014, Excerpts
Capital
“Capital” and ‘Wealth” are
used interchangeably. Capital is defined as the sum total of nonhuman assets
that can be owned and exchanged on some market. The total wealth owned at a
given time. “National capital”, or “national wealth”, is the total market value
of everything owned by the residents and governments of a given country.
National wealth = private wealth + public wealth
Income
Income is a flow. The quantity
of goods produced and distributed in a given time period, assume annual. Wages
and output.
Capital/Income
Ratio
B Ratio
= Capital/Income
The principal destabilizing
force is when the rate of return on capital, r, is significantly higher for long periods of time than the rate
of growth of income, g. The
inequality r>g implies that accumulated
wealth grows more rapidly than income, capital reproduces itself faster than income
increases. The conditions are ideal for an “inheritance society” characterized
by both a very high concentration of wealth and a significant persistence of
large fortunes from generation to generation.
The rate of return on capital
– generally 4-5 percent – has throughout history always been distinctly greater
than the income growth rate and is a powerful force for an unequal distribution
of wealth.
In the developed countries
today, the capital/income ratio varies between 5 and 6.
