The Real News Network has the interview Piketty: The Market and Private Property Should Be The Slaves of Democracy.
So the human capital illusion is saying that now with the modern economy all that matters is human capital. And education, personal skills, personal talent, as opposed to traditional forms of non-human capital financial, real estate, etc. Now this is an illusion because in fact in the long run you have a rise of both human and non-human capital in comparable proportions. So of course you have a rise of human capital. You have more education and higher level of human skills today. But you also have a higher level of real estate, equipment, patents, robots and other non-human assets. So that in the long run, you know I’m not saying that robots will dominate humans but I’m just saying that the balance between human capital and non-human capital has no reason to move in the direction of human labor. And indeed, if we look at the recent trends, you know the capital share in GDP has actually been going up and the labor share, for the share of income going to labor earners in the form of wages or other forms of compensations for labor, has actually been reduced. And I’m not saying it’s going to reduce forever but it can very well stabilize at a level that is not so different from the 19th century. So in other words, the capital labor split today is not that different from the 19th century. And it would be wrong to assume, and this has been an illusion to assume, that technological change alone and modernity alone in the form of technical change would make the triumph of labor over capital, and the triumph of human capital. So this is the first illusion.
I am so glad to finally hear Piketty in his own words. Up till now I have just been reading and hearing what reviewers have to say about his book.
It is good to hear his own take on the applicability and limitations of what is in the book. He also puts his projections for the future into a proper perspective.
The excerpt that I chose to highlight above goes to the concern that I have expressed by my suggested thought experiment. Imagine a world where only a very few people are needed to run the automated systems that can produce all the goods that the world population needs to sustain a decent standard of living. How will the potential output of such a system be allocated in such a way that everybody shares in the benefits to some degree or other?
My thought, like Piketty’s above is that this allocation can not be depended on to happen automatically because of capitalism. We actually need to think about how humans and democracies can make decisions to shape that allocation.