SESSION 3

…IN WHICH WE EXAMINE TRENDS IN INEQUALITY OVER TIME

READINGS

• 1. Introduction, Chapter 6 and 9 of Thomas Piketty’s Capital in the Twenty-First Century.

• Suggested Reading:
• Maitresh Ghatak et al: “Trends in Economic Inequality in India.”
• Chapters 2 and 3 of Thomas Piketty’s The Economics of Inequality.
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VIEWS ON CAPITALISM

• The orthodox Marxist view: Capitalism’s natural tendency is to exploit workers and generate
inequality. Even if wages raised, capitalist system will ensure through its institutions that
labour loses out.
• Reformist views from the left: Capitalism’s natural tendency is towards inequality. Inequality
can be reduced by raising wages (what is the inherent assumption about production here?)
• Piketty: Capitalism’s natural tendency is towards rising inequality. Implies elasticity of
substitution high. Can be solved through fiscal redistribution, not direct.
• Summers: Piketty assumes elas of subst>1, when empirical papers show elas of subst<1.
Capitalism through perfect competition etc can reduce inequality. Fault lies in tech change,
monopolies, globalization, outsourcing etc.
INCOME SHARE OF TOP 0.01%, US, 1913-2014

in 2012, the 90th percentile of the total

income distribution was $112,000, the 99th
percentile was $372,000, the 99.9th percentile
was $1.55 million, and the 99.99th percentile
was $7.2 million.