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Thomas Piketty’s Capitalism Revisited

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  • Milić Milovanović

    () (Faculty of Economics, University of Belgrade, Serbia)

Abstract

Thomas Piketty’s international best selling Capital in the TwentyFirst Century lays out his theory of a long-run rise in income inequality under capitalism. It is written as a manifesto urging reintegration of social sciences. A number of reviewers judged it on ideological grounds, labeling it either as a revolution in economic thinking, or dismissing it offhandedly. Piketty’s theory of rising inequality is based on the two Fundamental Laws of Capitalism, developed after the Solow growth model. However, this model is inconsistent with Piketty’s own characterization of modern capitalism. Moreover, his sole justification for the constant discrepancy between rate of return and rate of income growth (r > g) is based on the high elasticity of substitution between capital and labor. However, that is just one factor that can have an influence on factor income shares. By failing to offer a consistent theory of rising inequality, his piece can hardly be considered as a useful founding stone for a new social science.

Suggested Citation

  • Milić Milovanović, 2015. "Thomas Piketty’s Capitalism Revisited," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(5), pages 663-677, December.
  • Handle: RePEc:voj:journl:v:62:y:2015:i:5:p:663-677
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    References listed on IDEAS

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    1. Avi J. Cohen, 2003. "Retrospectives: Whatever Happened to the Cambridge Capital Theory Controversies?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 199-214, Winter.
    2. Thomas Piketty, 2015. "Putting Distribution Back at the Center of Economics: Reflections on Capital in the Twenty-First Century," Journal of Economic Perspectives, American Economic Association, vol. 29(1), pages 67-88, Winter.
    3. Nicholas Kaldor, 1955. "Alternative Theories of Distribution," Review of Economic Studies, Oxford University Press, vol. 23(2), pages 83-100.
    4. Robert S. Chirinko, 2008. "ó: The Long And Short Of It," CESifo Working Paper Series 2234, CESifo Group Munich.
    5. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-947, October.
    6. Thomas Piketty, 2015. "About Capital in the Twenty-First Century," American Economic Review, American Economic Association, vol. 105(5), pages 48-53, May.
    7. Chirinko, Robert S., 2008. "[sigma]: The long and short of it," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 671-686, June.
    8. Thomas Piketty, 2015. "Putting Distribution Back at the Center of Economics: Reflections on "Capital in the Twenty-First Century"," Post-Print halshs-01207273, HAL.
    9. Robert S. Chirinko & Debdulal Mallick, 2014. "The Substitution Elasticity, Factor Shares, Long-Run Growth, and the Low-Frequency Panel Model," CESifo Working Paper Series 4895, CESifo Group Munich.
    10. Thomas Piketty, 2015. "About Capital in the Twenty-First Century," Post-Print halshs-01157487, HAL.
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    More about this item

    Keywords

    Income distribution; Production function; Elasticity of substitution; Economic growth;

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects

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