POLSCI 391 Lecture Notes - Lecture 4: Thomas Piketty, Diminishing Returns, Creative Destruction
Document Summary
Diminishing returns: start out fast and slow down. 1 scoop of ice cream is better, 2 is better, but 5 and 6 etc. start to get sick. Workers not enough, better with more people, but too many bump into each other and not productive. Gross domestic product (gdp): total market value of all goods and services crude measure of how an economy is doing. Gdp per capita once making ,000, don"t get happier. Rule of 72: 72 divided by the growth rate give (approximately) the (cid:1) years required for gdp to double. 3% growth: double every 24 years (72 divided by 3=24) 2% growth: double every 36 years (72 divided by 2=36) Piketty says look at top 10% of richest people"s share of economy. Wealth(r-t-c) = new wealth: r = return on capital, t = tax rate, c = consumption rate. Wealth = 4 x gdp: rich get 5% rate of return (cid:1) (cid:1, capital gets 20% of gdp.
