Two questions (actual, not rhetorical) for anyone who’s read the book: 1. by “national wealth or capital” does Piketty mean physical capital alone or financial capital as well? 2. to slice “national wealth or capital” another way, does he mean private capital only or does he include govt capital?If anyone's read the book and has an answer.
I’m trying to plug his numbers into Gunnar Berglund’s grand ratios model and his (Piketty’s) definition of capital has me confused. I think he means private wealth– physical and financial– and that his capital to income ratio is the inverse of Berglund’s private wealth to spending turnover rate (so Piketty’s predicted higher ratio would mean a lower turnover rate). If I have this wrong, let me know. If I do have that right, a consequence of Piketty’s thesis is the need for greater and greater deficit spending to fill the demand gap left by inadequate effective demand. Anyway to quote the linked Berglund paper, “Equality and Enterprise: Can Functional Finance Offer a New Historical Compromise?” (pdf p. 18):
Monetary Realism
Piketty’s monetary mysticism
beowulf
5 comments:
"If I do have that right, a consequence of Piketty’s thesis is the need for greater and greater deficit spending to fill the demand gap left by inadequate effective demand."
Well he may also just be advocating for a policy of higher taxes of some sort on excess incomes/wealth which is savings and hence a 'leakage'.... (which he probably assumes will result in LOWER deficits) and then correspondingly HIGHER levels of transfer payments/public investment to facilitate adequate levels of demand to result in more equality/higher output/employment...
ie the "tax and spend" model (MMT is "spend and tax" model) where govt targets 'excess savings' in order to "get more money to spend", etc...
(beo, I assume Piketty is not "in MMT paradigm" so to speak... he has made some statements that lead me to believe he thinks govt has to tax in order to spend iaw the current dominant paradigm..)
rsp,
He means both physical and financial capital, and he does include government-owned wealth. He defines national capital as "the total market value of everything owned by the residents and government of a given country at a given point in time, provided that it can be traded on some market."
Either way, "inadequate effective demand" is always just a lack of aggregate goals, Desired Outcomes or challenges - whether set by an aggregate itself, or outside interventions.
Instead of waiting for natural disasters to give us an excuse to rebuild, just build even more capabilities beforehand .... of some sort or another?
Recombination first, selection later? Isn't that how evolution has been working for ~3.5 Billion years on planet earth? An we think ~13.7 Trillion years universe wide?
Notional demand is assumed to be unlimited which is a reason that economic scarcity is assumed. MMT shows that there's no reason for lack of effective demand based on affordability. As long as real resources are available, the means needed to distribute (allocate) them can be arranged institutionally. The only issue is availability (scarcity) of real resources.
So the actual issue is allocating scarce real resources most efficiently and effectively wrt to some criteria. Choosing those criterial is a political choice and under a democratic republic is made by the people's representative chosen through elections.
Where the failures lie is first it thinking that affordability is an issue. Secondly, the issue of selection of criteria requires an educated and engaged electorate and informed debate, which are generally lacking. So special interests and power elites, compete with each other over the boot to be looted.
beowulf "a consequence of Piketty’s thesis is the need for greater and greater deficit spending to fill the demand gap left by inadequate effective demand."
I think Lynn Sturgeon's recommendation in the Equality Versus Entreprise paper you reference that negative tax credits enable better demand balance which will require government "deficit" spending proportional to the health of the economy.
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