I note that some readers might be interested in some of my journalistic economic writing. So, I’m going to start posting it on here. Here is a piece that I wrote for Al Jazeera that was published today.
Also, while on the subject of stock markets and inequality and so forth, I started reading the Piketty book and I must say that Galbraith’s criticisms — especially regarding the measurement of capital — strike me as rather damning. I really don’t think that this is a silly gripe on Galbraith’s part at all.
Piketty’s work does indeed seem to suffer from considering capital from the standpoint of its (highly volatile) valuation while at the same time trying to write a theory around this with a conception of capital-as-machinery lying in the backdrop.
Finally, I should also note that Piketty strikes me as having a marked tendency to confuse accounting identities with laws. Indeed, he refers to the following as the ‘First Fundamental Law of Capitalism’:
α = r × β
Where β is the capital-to-income ratio, r is the rate of return on capital and α is the share of capital in income. Well, that’s not a law. That’s an accounting identity. This leads him to some other rather dubious ‘laws’. For example his ‘Second Fundamental Law of Capitalism’ is as follows,
the higher the savings rate and the lower the growth rate, the higher the capital/income ratio (β).
Again, that doesn’t strike me as a law at all. That, again, strikes me as an accounting identity. All of Piketty’s so-called laws strike me as heavily watered down versions of the Cambridge Equation.