Archive for Capital & Interest
Larry Summers Unwittingly Blows Up Piketty’s Whole Book
…but he still thinks Piketty should get a Nobel Prize. The gory details are at Mises Canada. An excerpt: Piketty wants to scare his readers into believing that the percentage of income each period going to the capitalists will increase over time, meaning that “the workers” will earn a lower portion of total output in, […]
Read moreHow Economists Treat Interest
I got an email from a colleague (reprinted with permission): Dear Bob: Please settle a bet between me and [another colleague]. One of us maintains that without borrowing and lending, no interest rate could arise. The other of us takes the view that there is always time preference, and this guarantees an interest rate, even […]
Read moreA Note on the “Real” Rate of Interest
In my Mises Canada post walking through problems with the typical neoclassical approach to capital & interest, I came up with a simple thought experiment in which there are capital goods (nets) that have a positive marginal product–the workers can catch more birds with nets than without. This explains why the nets can earn a […]
Read morePiketty Can’t Even Get His Basic Tax History Right
The more I read of Thomas Piketty’s Capital in the Twenty-First Century, the worse it gets. Try this excerpt: [T]he Great Depression of the 1930s struck the United States with extreme force, and many people blamed the economic and financial elites for having enriched themselves while leading the country to ruin. (Bear in mind that […]
Read moreThe Final Nail in the Coffin: MPK Is Not *Sufficient* For Interest, Either
For those who really want to understand what all the fuss is about capital & interest, you need to get a cup of coffee, perhaps even a piece of paper and pencil, and spend 20 minutes reading my latest Mises Canada post. You know I don’t often ask these things of you, but this is […]
Read moreHeterodox Economists School Krugman on His Flim-Flam Econ
Wow, I thought I was hard on the guy… In the debate over Thomas Piketty’s book on Capital, many of the heterodox leftist economists are coming out of the woodwork to complain. Specifically, the problem is that Piketty relies on the mainstream notion that interest in a market economy is determined by the “marginal product […]
Read moreShowing Problem With Piketty Using Neoclassical Models
I am an Austrian economist. My understanding of capital & interest comes (originally) from Mises, but then it was refined in grad school when I studied Bohm-Bawerk, Fetter, and Fisher. In case I haven’t been clear: One doesn’t need to be an Austrian to understand what’s wrong with Piketty’s conceptual remarks about capital & interest […]
Read moreA Question for the Piketty Defenders on National Income Accounting and Interest
OK Kevin Donoghue manages to escape the trap I had set for Piketty, much as Luke Skywalker–nursing his mangled arm–fled Vader at the end of The Empire Strikes Back. To refresh your memories: Piketty clearly had argued that if the “marginal productivity of capital” (and from his discussion it was clear that this was a […]
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