Working Paper: NBER ID: w20919
Authors: David N. Weil
Abstract: In Capital in the 21st Century, Thomas Piketty uses the market value of tradeable assets to measure both productive capital and wealth. As a measure of wealth this is problematic because it ignores the value of human capital and transfer wealth, which have grown enormously over the last 300 years. Thus the constancy of the wealth/income ratio as portrayed in his data is an illusion. Further, the types of wealth that he does not measure are more equally distributed than tradeable assets. The approach also incorrectly identifies capital gains due to reduced discount rates as increases in the capital stock.
Keywords: capital; wealth; inequality; human capital; transfer wealth
JEL Codes: D31; Y3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital deepening (E22) | output growth (O40) |
| housing (R31) | capital accumulation (E22) |
| human capital growth (J24) | wealth distribution (D31) |
| transfer wealth (G51) | wealth inequality (D31) |
| wealth-income ratio constancy (D31) | misleading wealth distribution (D31) |
| retirement (J26) | demand for asset holding (E41) |