Economics Brown Bag Seminar Series - Ross Garnaut (The University of Melbourne)

Economics Brown Bag Seminar Series

Room 605, Level 6 FBE Building 111 Barry street, Carlton

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Renaud Coulomb and Leslie Martin

renaud.coulomb@unimelb.edu.au; leslie.martin@unimelb.edu.au

Title: The return of rent: Keynes answering Piketty on the puzzles of 21st century capitalism

Abstract: Thomas Picketty has famously argued that capitalist development in normal conditions leads to widening inequality of incomes and wealth. He draws this conclusion analytically from a presumption that the rate of return on investment remains high as capital accumulates (r>g). Extensive empirical work seems to support his contention. The Picketty view contrasts with Keynes’ view, expressed in Chapter 24 of the General Theory and in his Essay, “Economic Possibilities for Our Grandchildren”,  that the long-term tendency of capitalism is egalitarian—the accumulation of capital and total productivity growth will lead to labour becoming scarce and valuable and capital abundant and cheap. Keynes’ view seems to draw support from the twenty-first century tendency towards historically exceptionally low long-term interest rates. This presentation discusses the competing views of Picketty and Keynes. It suggests that they can each be reconciled with contemporary reality by reference to an increasing role for rents.