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Piketty’s Paradox, Capital
Spillage, and Inequality
Craig Medlen
13th International Post-Keynesian Conference
Sept 15-18, ...
First Law:
𝛼 ≑ r x Ξ²
πœ‹
π‘Œ
≑
πœ‹
𝐾
X
𝐾
π‘Œ
Second Law:
𝐾
π‘Œ
β‰ˆ
𝑠
𝑔
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Tobin's Q1
Non-Financial Corporations
0
0.5
1
1.5
2
2.5
3
3.5
4
Stock Value/Income
Fixed Capital/Income
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
0.25
196819701972197419761978198019821984198619881990199219941996199820002002200...
-4
-3
-2
-1
0
1
2
3
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
20...
(1) S – I = GovDef + Current Account
(2)[FREE CASH + (s- I) Non-Corp]= GovDef + Current
Account
(-)
FREE CASH = GovDef - (...
-2
-1.5
-1
-0.5
0
0.5
1
1.5
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984...
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Free Cash
Spillage
Free Cash and Spillage
0
0.2
0.4
0.6
0.8
1
1.2
1.4
68
9
70
1
2
3
4
5
6
7
8
9
80
1
2
3
4
5
6
7
8
9
90
1
2
3
4
5
6
7
8
9
2000
1
2
3
4
5
6
7
8
9
201...
First Law:
πœ‹
π‘Œ
≑
πœ‹
𝐾
*
𝐾
π‘Œ
πœ‹
π‘Œ
≑
πœ‹
𝑆𝑀𝑉
*
𝑆𝑀𝑉
π‘Œ
Or:
πΆπ‘Žπ‘ β„Ž
π‘Œ
≑
πΆπ‘Žπ‘ β„Ž
𝑆𝑀𝑉
*
𝑆𝑀𝑉
π‘Œ
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
200...
0.16
0.18
0.2
0.22
0.24
0.26
0.28
0.3
0
0.5
1
1.5
2
2.5
3
3.5
4
SMV/Y Cash/Y
SMV/Y Cash/Y
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Piketty's Paradox, Capital Spillage and Inequality

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Piketty's Paradox, Capital Spillage and Inequality

  1. 1. Piketty’s Paradox, Capital Spillage, and Inequality Craig Medlen 13th International Post-Keynesian Conference Sept 15-18, 2016
  2. 2. First Law: 𝛼 ≑ r x Ξ² πœ‹ π‘Œ ≑ πœ‹ 𝐾 X 𝐾 π‘Œ Second Law: 𝐾 π‘Œ β‰ˆ 𝑠 𝑔
  3. 3. 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 Tobin's Q1 Non-Financial Corporations
  4. 4. 0 0.5 1 1.5 2 2.5 3 3.5 4 Stock Value/Income Fixed Capital/Income
  5. 5. -0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2 0.25 196819701972197419761978198019821984198619881990199219941996199820002002200420062008201020122014 Corp Invest Rate Corp Y Rate
  6. 6. -4 -3 -2 -1 0 1 2 3 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Corp Invest Rate Capacity Utilization Normalized Data
  7. 7. (1) S – I = GovDef + Current Account (2)[FREE CASH + (s- I) Non-Corp]= GovDef + Current Account (-) FREE CASH = GovDef - (s-I)(Non-Corp) + Current Account [(πœ‹ + 𝐷𝑒𝑝) – Icorp ]
  8. 8. -2 -1.5 -1 -0.5 0 0.5 1 1.5 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 WideCash Narrow Cash Non-Corp s-I s-I +GovDef Gov Deficits plus Non-Corporate s-I FREE CASH/Corp Invest
  9. 9. 0 200 400 600 800 1000 1200 1400 1600 1800 2000 Free Cash Spillage Free Cash and Spillage
  10. 10. 0 0.2 0.4 0.6 0.8 1 1.2 1.4 68 9 70 1 2 3 4 5 6 7 8 9 80 1 2 3 4 5 6 7 8 9 90 1 2 3 4 5 6 7 8 9 2000 1 2 3 4 5 6 7 8 9 2010 11 12 13 14 Corporate Spillage into the Capital Markets Dividends Mergers plus Dividends ShareRepurchases plus Mergers plus Div (Fraction of Fixed Investment)
  11. 11. First Law: πœ‹ π‘Œ ≑ πœ‹ 𝐾 * 𝐾 π‘Œ πœ‹ π‘Œ ≑ πœ‹ 𝑆𝑀𝑉 * 𝑆𝑀𝑉 π‘Œ Or: πΆπ‘Žπ‘ β„Ž π‘Œ ≑ πΆπ‘Žπ‘ β„Ž 𝑆𝑀𝑉 * 𝑆𝑀𝑉 π‘Œ
  12. 12. 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Cash/SMV Moody's AAA Bond Rate
  13. 13. 0.16 0.18 0.2 0.22 0.24 0.26 0.28 0.3 0 0.5 1 1.5 2 2.5 3 3.5 4 SMV/Y Cash/Y SMV/Y Cash/Y

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