‘The return on labor is falling while the return on capital remains relatively high.
Parker O'Brien
1

Parker, thank you for the questions.

  1. Economist Thomas Pikketty published a book in 2015 called Capital in the 21st Century that is full of data that compares economic growth rates to the return on capital for the past 2,000 years. Before his book came out, I had formulated my own idea on this dynamic from observation and reflection, not data — I call it impressionist economics! The concepts and conclusions are similar. Instead of growth, I focus on what I describe as the return on labor. You can see the thought process I went through by going to chapter nine (Income Inequality) of the draft of the book I’m writing about an idea for a performance-based capital structure for IPOs, the Fairshare Model. Go to the resources tab at www.fairsharemodel.com and download the pdf.
  2. Take note that my return on labor is more abstract than wage levels — I am more interested in understanding changes in the big picture than in specific data points. I appreciate that some people will not like that. Also, that some may have other ways assess what is going on with people who earn a living based on their labor (vs their capital).
  3. I said capital markets can be a basis for competition between economies — I certainly didn’t call for reduced capital formation. In fact, the Fairshare Model is an idea to make capital markets more powerful, competitive and inclusive.
  4. It is not necessary to spend capital to be more productive. Think about China, India, Vietnam, and other low wage countries. They became more productive by virtue of creating more goods with their labor — much of it for export. Capital helped that, of course, but it isn’t an essential requirement. If you did your job for less money, you would be more productive in an economic sense.
  5. Trade can include technology, but need not. Trade occurs when a country can produce something another wants at an attractive price. Technology plays a minor role in the trade of food, textiles, furniture, tourism, commodities, etc..
  6. Finally, data points aside, what is your explanation for the trade related concerns recently expressed by voters in the UK, US and France?
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