DT 08/22 - On Capital: an essay on inequality, capital and value theory

Capital is back at the center of the empirical distributional research agenda. New estimates of wealth accumulation, distribution and inheritance, fully consistent with national accounts' definitions and deeply rooted in standard neoclassical growth models, are now available. This provides the new inequality literature with clear-cut insights and empirical firepower. But while the empirical flank is increasingly well protected, the theoretical one is exposed. I revisit the debates on the underlying theory of capital and document its drawbacks, highlighting that it is particularly ill-equipped for inequality analysis and that its central problem is the theory of value. Does this mean that we should to start anew? I argue on the contrary, showing that under a one-good model assumption, there is accounting correspondence with the labor theory of value, which gives room for reinterpretation of most available estimates. Moreover, it is possible to establish clear accounting links between famous drivers of the economic system such as r>g and Marx's falling rate of profits. However, even under this accounting correspondence, taking distance from the scarcity theory of value has relevant implications for the inequality narrative, insofar it forces us to abandon the merit-inheritance discussion to include the role of exploitation.