Capital in the Twenty-First Century

by Thomas Piketty

Let me examine the three forces one by one. The first is the capital / income ratio β. This force expresses a truism: if the flow of inherited wealth is to be high in a given society, the total stock of private wealth capable of being inherited must also be large. The second force, the mortality rate m, describes an equally transparent mechanism. All other things being equal, the higher the mortality rate, the higher the inheritance flow. In a society where everyone lives forever, so that the mortality rate is exactly zero, inheritance must vanish. The inheritance flow by must also be zero, no matter how large the capital / income ratio β is. The third force, the ratio μ of average wealth at time of death to average wealth of living individuals, is equally transparent.4 Suppose that the average wealth at time of death is the same as the average wealth of the population as a whole. Then μ = 1, and the inheritance flow by is simply the product of the mortality rate m and the capital / income ratio β.