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TERRA ECONOMICUS

The effect of Piketty: a comment to new concept

TERRA ECONOMICUS, , Vol. 15 (no. 2),

The article deals with the effect of inequality of Piketty, which is treated by the author of the effect as the third fundamental law of capitalism. In the paper, a brief review of the critical works of Western authors on the law of Piketty is given; the author shows that in Russian scientific discourse the new concept has not been adequately highlighted and developed. The author emphasizes the thesis that the law of Piketty should be more accurate to demonstrate the effect of Piketty, rule of Piketty, or principle of inequality of Piketty, which more precisely reflects the essence of the analytical construction and not diminishes the merits of the author of the concept. Attention is drawn to the fact that unlike the first two laws of capitalism, written by Piketty in the «strong» form (i.e. in form of strict equality), his third law expressed in the «weak» form (i.e., in the form of inequality), which demonstrates a «gap» in a common methodological agenda of research. The article provides the generalization of the inequality of Piketty by constructing a simple model of economic growth, which implies equality, including the effect of Piketty. The resulting equality allows to determine the condition under which the effect of Piketty is performed automatically. The paper demonstrates that the effect of Piketty is an investment one by its nature, and the return of capital and the rate of economic growth change always synchronously. This means that cuts in the profitability of the capital will automatically entail a decrease in the rate of economic growth. Thus, the internal contradictions of the observed effect and the ambiguity of its implications for the regulation of the process of capital accumulation are obvious. Experimental calculations allowed to demonstrate that the large gap between return on capital and rate of economic growth by itself does not lead to increased social inequality. The author discusses the issue of over-accumulation of capital in the context of new phenomena of our time – the attempts to introduce the «robot tax» and the unconditional basic income.


Keywords: effect of Piketty; economic growth; social inequality; capital; income; welfare

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606