Inequality and the Rate of Return on Capital: An Institutional Approach to “The Piketty Problem”

Luke A Petach

Journal of Economic Issues, 2018, vol. 52, issue 4, 925-946

Abstract: In Capital in the Twenty-First Century, Thomas Piketty (2014) explains growing income inequality via the difference between the rate of return on capital and the growth rate of the economy: the “r > g” inequality. Even if it is true that r > g leads to increasing inequality, nearly every school of economic thought predicts that r will fall as the economy grows. Thus, for Capital (2014) to be a comprehensive theory of inequality, a more adequate theory of r is required. I term this the “Piketty Problem.” I offer a solution to this problem from an institutionalist perspective.

Date: 2018
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DOI: 10.1080/00213624.2018.1518558

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