Piketty’s (r – g) Law is Pareto’s Law: Consistent Analyses of Income Distribution Predicated on Inconsistent Definitions of Inequality

Jill Trinh and Michael McLure
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Jill Trinh: Business School, The University of Western Australia, https://www.web.uwa.edu.au/person/jill.trinh
Michael McLure: Business School, The University of Western Australia, https://www.web.uwa.edu.au/person/michael.mclure

No 18-06, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: On the face of it, Pareto’s law and Piketty’s (r – g) law are inconsistent, with Pareto arguing that real per capita economic growth is the solution to the problem of income inequality and Piketty arguing for redistribution to be funded from a wealth tax. This study, however, establishes that when the same definition of inequality is adopted by the two scholars, Piketty’s and Pareto’s laws are the same economic law. It also establishes that Piketty’s assertion that Pareto treats income distribution as “rock stable” overlooks the critical aspects of Pareto’s law that emphasise change.

Keywords: distribution; inequality; growth; Pareto; Piketty (search for similar items in EconPapers)
JEL-codes: B16 B31 D30 D31 (search for similar items in EconPapers)
Pages: 28
Date: 2018
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