Piketty, T. (2014) “Kapital for the Twenty-First Century?“, Belknap Press, 2014, 671 pp.
What is “capital”? To Karl Marx, it was a social, political, and legal category—the means of control of the means of production by the dominant class. Capital could be money, it could be machines; it could be fixed and it could be variable. But the essence of capital was neither physical nor financial. It was the power that capital gave to capitalists, namely the authority to make decisions and to extract surplus from the worker.
Early in the last century, neoclassical economics dumped this social and political analysis for a mechanical one. Capital was reframed as a physical item, which paired with labor to produce output. This notion of capital permitted mathematical expression of the “production function,” so that wages and profits could be linked to the respective “marginal products” of each factor. The new vision thus raised the uses of machinery over the social role of its owners and legitimated profit as the just return to an indispensable contribution.
Symbolic mathematics begets quantification. For instance, if one is going to claim that one economy uses more capital (in relation to labor) than another, there must be some common unit for each factor. For labor it could be an hour of work time. But for capital? Once one leaves behind the “corn model” in which capital (seed) and output (flour) are the same thing, one must somehow make commensurate all the diverse bits of equipment and inventory that make up the actual “capital stock.” But how?
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- Bastian, J. (2014) “Greece’s return to capital markets: Why not try a diaspora bond first?”, macropolis.gr, 4 Μαρτίου.
- Onado, M. (2014) “European banks: Between a rock (need of more capital) and a hard place (low profitability)”, VoxEU, 23 Φεβρουαρίου.
- Posner, R. (2013) “Has Capitalism Revived/Survived?”, The Becker-Posner Blog, 16 Σεπτεμβρίου.