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Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

The Rise and Decline of General Laws of Capitalism

  • Daron Acemoglu
  • James A. Robinson
Journal of Economic Perspectives
vol. 29, no. 1, Winter 2015
(pp. 3–28)
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Abstract

Thomas Piketty's (2013) book, Capital in the 21st Century, follows in the tradition of the great classical economists, like Marx and Ricardo, in formulating general laws of capitalism to diagnose and predict the dynamics of inequality. We argue that general economic laws are unhelpful as a guide to understanding the past or predicting the future because they ignore the central role of political and economic institutions, as well as the endogenous evolution of technology, in shaping the distribution of resources in society. We use regression evidence to show that the main economic force emphasized in Piketty's book, the gap between the interest rate and the growth rate, does not appear to explain historical patterns of inequality (especially, the share of income accruing to the upper tail of the distribution). We then use the histories of inequality of South Africa and Sweden to illustrate that inequality dynamics cannot be understood without embedding economic factors in the context of economic and political institutions, and also that the focus on the share of top incomes can give a misleading characterization of the true nature of inequality.

Citation

Acemoglu, Daron, and James A. Robinson. 2015. "The Rise and Decline of General Laws of Capitalism." Journal of Economic Perspectives, 29 (1): 3–28. DOI: 10.1257/jep.29.1.3

Additional Materials

JEL Classification

  • B51 Current Heterodox Approaches: Socialist; Marxian; Sraffian
  • D31 Personal Income, Wealth, and Their Distributions
  • D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
  • D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
  • O25 Industrial Policy
  • O43 Institutions and Growth
  • P16 Capitalist Systems: Political Economy
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