If I were you, I would hesitate to assume a respected economist has no credibility, at least until I had read the paper. What is more likely: that he is trivially wrong, or that you have failed to understand some facet of his argument?

You've setup a helluva strawman. You're comparing returns of the entire capital stock for a chunk of the western world over the course of last century to the inflation adjusted yield curve of a specific government-bond calculated from last weeks prices.

That's not the point GP is making.

The conclusion that you have drawn is based on a misinterpretation of what constitutes as "capital". If "capital" meant "government debt", then the rate of return on capital would indeed equal the interest rate on government debt. However, when economists refer to capital, they are referring to the market value of the cumulative stock of a nation's capital.

What is "capital"? Piketty defines capital as:

"the sum total of nonfinancial assets (land, dwellings, commercial inventory, other buildings, machinery, infrastructure, patents and other directly-owned professional assets) and financial assets (bank accounts, mutual funds, bonds, stocks, financial investments of all kinds, insurance policies, pension funds, etc.) less the total amount of financial liabilities (debt)."

Furthermore, national capital can be broken down into public capital and private capital:

"[National capital is] the sum of public capital and private capital. Public capital is the difference between assets and liabilities of the state (including all public agencies), and private capital is of course the difference between the assets and liabilities of private individuals."

...and can be broken down into domestic capital and net foreign capital:

"Domestic capital is the value of the domestic capital stock (buildings, firms, etc.) located within the borders of the country in question. Net foreign capital...is the difference between assets owned by the country's citizens in the rest of the world and assets of the country owned by citizens of other countries."

The rate of return on capital:

"...measures the yield on capital over the course of the year regardless of it's legal forms (profits, rents, dividends, interest, royalties, capital gains, etc.), expressed as a percentage of the value of capital invested. It is therefore a broader notion than the 'rate of profit', and much broader than the 'rate of interest', while incorporating both."

If I understand it correctly (I'm not an economist) your argument is like the common global warming counter argument: It's so cold outside, global warming is a lie.

I wouldn't dismiss this critique too quickly...

It does indeed appear (I have not read the book, and I plan to) that the crux of his thesis is that capital can grow at 4-5% over the long run, whereas economic growth only grows at ~3%, and thus concentration of capital always runs away from normal economic growth.

... and this idea ... that you can regularly achieve even 4% annual return over the very long term ... has gotten a lot of people in trouble. Not just in the recent unpleasantness, but historically over many different economic cycles. Regardless of how receptive I may be to this book, or these ides, I am deeply skeptical of this assumption.

aggregate return on capital (i.e. the sum of profits of all firms i.e. all the money that rich people make) is completely different than the return of any one firm or market/investment strategy. you seem to be conflating the two deliberately to set up a straw man.

I agree with your response to your parent post, but I have one clarification to add:

aggregate return on capital (i.e. the sum of profits of all firms i.e. all the money that rich people make)

Actually, as I understand it, the term "capital" as standardly used by economists is broader than this. To see the difference, consider: if you are doing work that requires skills (as I'm sure most HN readers are, since computer programming is such work), those skills are capital that you possess, and your pay, according to standard economic usage, is partly return on that capital, not compensation for labor. (Basically, the difference between your pay and the pay of an unskilled person, like the burger flipper at McDonald's, is return on capital--it's actually not quite that simple because variations in productivity at similar skill levels, due to automation, also come into play, but that's the gist of it.)

I have not read Piketty's book, so I can't say for sure how he is using the term "return on capital", but it seems to me that in order to properly interpret the data he appears to be using, one has to pay very careful attention to the distinction I made above. Otherwise one might be incorrectly estimating return on capital.

> Piketty claims that the average return on capital

So you've discovered that one data point in a set is not precisely equal to the average of the set.

And you think that means...."loses all credibility".

Oh boy.

Please don't post comments like this to HN. WildUtah's comment may (or may not) have been overstated, but yours is mean.

Seeking to cast another person in the stupidest possible light is a form of incivility. The precedent it sets for others gets worse the more right you are.