Capital 2 Flashcards
What do you call the Equal distribution of hereditary wealth among brothers and sisters?
Equipartition
Why did wealth decline during the interwar years?
Large fortunes served to finance a certain “lifestyle” and thus by not being able to reduce expenses sufficiently to compensate for the shocks of their capital investments the rich had to eat directly into their capital to finance their expenditures
What is the failure of corporate governance
Highest ranking executives setting their own salaries without any rational productivity justification for it. “Meritocratic extremism”
What do you call it when inherited wealth falls on the hands of too many heirs and what cultural mechanism was invented to combat this problem?
It is called fragmentation and we invented primogeniture where a very large portion of the property.
Theory of Marginal Productivity
The marginal revenue product (MRP) of a worker is equal to the product of the marginal product of labour (MP) (the increment to output from an increment to labor used) and the marginal revenue (MR) (the increment to sales revenue from an increment to output): MRP = MP × MR. The theory states that workers will be hired up to the point when the marginal revenue product is equal to the wage rate. If the marginal revenue brought by the worker is less than the wage rate, then there is no need to employ.
Rhenish Model
A system of capitalism characterized by non‐market patterns of coordination by economic actors and extensive state‐regulation of market outcomes. The term Rhenish Capitalism was popularized by Michel Albert in his book Capitalism vs. Capitalism (1993) and is central to recent research on ‘varieties of capitalism’. Rhenish capitalism is associated with Northern European economies—most centrally Germany but also the Netherlands, Denmark, and Sweden—and has also been used to characterize Japan. Non‐market coordination refers to the engagement by firms, unions, and other social actors of a variety of associational bodies used to develop and renew economic institutions. Examples include collective wage bargaining, vocational training systems, technology transfer initiatives, and credit‐based financial systems with ‘stakeholder’ patterns of corporate governance. State regulation supports non‐market coordination through accepting many associational agreements as legally binding and through granting Show More
Progressive tax
The tax rate increases with the level of income or wealth
What are two ways (described by Piketty) for a society to achieve very unequal distribution of total income?
“Hyperpatrimonialism” : a society in which inherited wealth is very important and where the concentration of wealth attains extreme levels (with the upper decile owning typically 90% of all wealth)I.E. ancien regime
“Hypermeritocratic society”: (society of superstars) normatively describing the system of labor that favors the top producers. It’s debatable whether or not this is an accurate description. I.E. United States Capitalism
If we look at the period between 1977-2007 what was one of the problems which lead to the economic crisis?
Richest 10 percent took 3/4 of that economic growth. 1% absorbed nearly 60% of the total national income whereas the bottom 90% only .5% growth per year.
Pg.212
What is one of the forces against inheritance and why?
Mortality. m. As the mortality rate drops and life expectancy rises and increases the time for inheritance.
Why did France see a decrease in Capitals share of national income and compression of income inequality?
Because Charles Degalle signed “Grenkeleasing Accords” which boosted the minimum wage increasing the purchasing power by more than 130 percent.
Meritocratic extremism
The apparent need of modern societies to designate certain individuals as winners to reward them all the more generously if thy seem to have selected on the basis of their intrinsic merits rather than birth or background.
Pareto’ law aka
“Power laws”
The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. … Pareto developed both concepts in the context of the distribution of income and wealth among the population.
Determines how rapid the number of taxpayers decrease as one climbs higher in the income hierarchy
What lead to the economic instability in the early 2000’s?
The stagnation of the purchasing power of the lower and middle class who make up the majority of the population were more modest to take on debt especially from unscrupulous banks who were free from intermediation or regulation and eater to earn good yields by offering credit to well to dos on generous terms.
What is the fundamental dynamic of economic inequality?
r>g
Meaning the return on Capital (r)
Is greater than growth (g)
How is the the theory of time preference (θ) tautological?
One can always explain any observed behavior by assuming that the actors involved have preferences or utility functions in the jargon of the profession that leads them to act in some way.
According to time “time preference” theory (psychological attitudes toward future) what would cause property owners to decrease their capital stock?
If return on capita investment remains consistently low and there are heavy government regulations then a significant proportion of property owning individuals will be forced to sell their assets.
Generational Duration
Average age of birth
Modiglianis life cycle theory
The primary reason for amassing wealth, especially imaging societies, is to pay for retirement.
