Debraj Ray — Nit-Piketty — A Comment on Thomas Piketty’s Capital in the Twenty First Century

Debraj Ray notices somethings about Piketty that other reviews haven't and proposes his own "Fourth Law."

And finally, if I may be so bold as to supplement Piketty’s Three Laws by yet another, here it is:

The Fourth Fundamental Law of Capitalism. Uneven growth or not, there is invariably a long run tendency for technical progress to displace labor.

There is a simple argument why this law must hold. It is this: capital can be indefinitely accumulated, while the growth of labor is fundamentally limited by the growth of population. Therefore there is always a tendency for capital to become progressively cheaper relative to labor, and so all technical progress must be fundamentally redirected away from labor. But there is a subtlety here: that redirection must of necessity be slow. If it is too fast, then the demand for labor must fall dramatically, resulting in labor being too cheap. But if labor is too cheap, the impetus for labor-displacing technical progress vanishes. So, this change must be slow. But it will be implacable. To avoid the ever widening capital-labor inequality as we lurch towards an automated world, all its inhabitants must ultimately own shares of physical capital. Whether this can successfully happen or not is an open question. I am pessimistic, but the deepest of all long-run policy implications lies in pondering this question.

Chhota Pegs
Nit-Piketty — A Comment on Thomas Piketty’s Capital in the Twenty First Century
Debraj Ray | Professor of Economics at New York University,  a Research Affiliate of the Instituto de Análisis Económico in Barcelona. and Co-Editor of the American Economic Review
(h/ t Mark Thoma at Economist's View)