r>g ad infinitum

 If you haven’t at least heard of the book capital in the 21st century, then you haven’t been keeping up with your economics Nobel prize winners!

The focus of the book is on the premise, backed up extensively throughout that the rate of return on capital has always been and without intentional redistribution by a state like entity will always be larger than the rate of growth in the economy. If you are happy to take that statement on reading it then perhaps you no longer have any need to read the book, if you are sceptical or at least intrigued in the development and evidence for the concept then you can get the book on audible.

One question that isn’t addressed at least in Tomas’ first book (I feel he addresses it better in “capital and ideology”) is what stops this from being the case in the limit.

Surely you can’t go on earning a larger and larger share of the pie. There is after all only so much pie to go around.

It is a relatively simple calculation to work out for a given long term growth rate and return, when a given sum would be predicted to be equivalent to the value of all there is to own.

Starting with $1m and earning 5% with the total wealth ($450 trillion) growing 2% leads to you owning everything in about 680 years. 10% brings it down to just over 230 years.

Not to mention that starting with a single million is far smaller than the wealthiest have, who are almost millionaires of millionaires (They are closing in on having a million million).

I would make the argument that there are two points that stop wealth from taking over in this manner. One is that any large amount of wealth concentration could lead to revolt. That said the case of ownership is one that is put to question in his second book.

All property is theft

What does it mean to own something?

I’m writing this post on a laptop. I bought this laptop and I have exclusive possession of this laptop. Furthermore, I have no agreement with anyone that I have transferred the ownership of this laptop to them and (at least to my knowledge) no one else is even making a claim of ownership over this laptop.

What elements of this laptop constitute my ownership of it. Do I even own it? I would argue I do, British law would concur that I do. A burglar might contend that they do, and that they have the right to sell it (although would be unlikely to pose their position in such a way).

One thing that this new book has really helped me to grasp is the way in which property, and in the same way capital and ownership (all intrinsically linked) are human constructs in a way that income isn’t.

People need things to survive; food, shelter and clothing. These can be valued on an annual basis and considered as “income”. In that respect an income, although not necessarily a monetary income, is required for a human to live. Ownership on the other hand is something contrived. It is completely based on agreements. You could in a sense value the income of animals by considering the value of what they yield from the world.

The idea of ownership has to come from an agreement between at least two parties that one of the parties has rights to an object (or indeed something less tangible) that remove the rights of others with respect to that object.

“Possession is 9/10 of the law”

Clearly being in possession of something gives you the ability to do things with that object that others who are physically not in possession of that object cannot do.

That makes sense for the possession of objects, but what about a spear you left somewhere. To what extent should you expect to be able to come back to it and use it again?

It’s an important question because what you chose to do today has a lot to do with what you expect to happen in the future.

One of the innovations that has allowed humanity, as a species, to take control of the world is our ability to make plans regarding the future. Capital has a lot to do with this. Capital and to a certain extent property, in general, is forgoing some consumption now for the promise of greater consumption in the future.

If you know that you can spend (invest) 10 hours making a spear and that you will get exclusive use of that spear, then the calculator (computed mathematically or intuitively) for if you should spend today making a spear or just gathering berries is very different.

It wouldn’t be worth making something if someone was just going to take it away as soon as you made it.

I’m assuming here, as is so often the case when talking about economics, a very individualistic society in which the person who is taking your newly made spear is not going to use it hunt in such a way that you would benefit from the yield of that hunt. In such a scenario although you do not keep possession of the spear you are in a sort of way deriving interest from it in the sense that your collective has a better yield when hunting. This may or may not make it worth your while.

So societies that have more rigid property rights allow for more predictable outcomes. That doesn’t mean that the outcomes are fairer and Tomas goes into great detail in capital in the 21st century in outlining why the concentration of capital is not a good thing. It does, however, help to explain why slave owners were compensated and not the slaves. The validity and sanctity of property rights must be upheld beyond human rights. If the power doesn’t uphold property rights, if the power uses its monopoly on force to take unpredictably then the calculation of making has to take that into account. If property is not sacrament people will air on the side of not forgoing consumption for a promise of more in the future. For that future consumption could just as easily be taken away.


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