Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

Eduardo Luigi Paolozzi_Newton_Istvan_Flickr Paolozzi/Newton/Istvan/Flickr

Piketty’s Missing Knowhow

Thomas Piketty argues that, because the world’s rich countries are growing at less than 4-5% per year, they are becoming more unequal. But, because Piketty splits the world into two fundamental substances – capital and labor – his calculations miss the crucial role of knowhow as a source of capital accumulation.

CAMBRIDGE – Theoretical frameworks are great because they allow us to understand fundamental aspects of a complex world in much simpler terms, just as maps do. But, like maps, they are useful only up to a point. Road maps, for example, do not tell you current traffic conditions or provide updates on highway repairs.

A useful way to understand the world’s economy is the elegant framework presented by Thomas Piketty in his celebrated book Capital in the Twenty-First Century. Piketty splits the world into two fundamental substances – capital and labor. Both are used in production and share in the proceeds.

The main distinction between the two is that capital is something you can buy, own, sell, and, in principle, accumulate without limit, as the super-rich have done. Labor is the use of an individual capacity that can be remunerated but not owned by others, because slavery has ended.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/kJ0eJ6i;
  1. bildt70_SAUL LOEBAFP via Getty Images_trumpukrainezelensky Saul Loeb/AFP via Getty Images

    Impeachment and the Wider World

    Carl Bildt

    As with the proceedings against former US Presidents Richard Nixon and Bill Clinton, the impeachment inquiry into Donald Trump is ultimately a domestic political issue that will be decided in the US Congress. But, unlike those earlier cases, the Ukraine scandal threatens to jam up the entire machinery of US foreign policy.

    0
  2. krueger21_trumpamericamediocre

    Making America Mediocre

    Anne O. Krueger

    America owes its economic strength to its private sector, which has long benefited from an absence of undue influence by politicians and the state. But under US President Donald Trump's administration, discretionary decisions by policymakers are increasingly giving some companies advantages over others.

    0