A note on Piketty's "Capital in the Twenty-First Century"

Thomas Piketty's Capital documents long-term trends in income and wealth in advanced economies. It also provides a theoretical framework for analysing the past and projecting the future. Piketty argues that the ratio of wealth to national income is on an upward trend and that this is responsible for the rising income share of wealth-owners. This note accepts Piketty's main empirical findings but questions his interpretation. The rising income share of wealth-owners is not due to the over-accumulation of capital, as he claims, but just the opposite. There has been too little real investment. The note also considers the long-term dynamics of Piketty's model and explores the effect of modifying his assumptions about savings behaviour. Finally, it considers the implications of rising asset prices, which are documented by Piketty but are not adequately taken into account in his theoretical analysis or projection of future trends.