Resumen de Missing equation in Piketty’s r-g theory
Although Thomas Piketty has revolutionized our understanding of inequality, logic behind his r-g theory is not developed formally in his researches. The present paper, by finding out the missing part of Piketty’s r-g theory, attempts to construct a model to show the condition where β (capital/income ratio) increases over time when r (rate of return on capital) is greater than g (growth rate of output). It is revealed that necessary and sufficient condition for the r-g theory is SY(t)=CF(t). That is, savings (left hand side) are equal to the consumption using financial capital (right hand side). We also reveal that the problem is not in the Second Fundamental Law of Capitalism, but in the formulation of capital accumulation dynamics. Furthermore, it is demonstrated that the two Fundamental Laws of Capitalism are not necessary for deriving the r-g theory.
