Disparity between the Rich and the Poor, Distribution According to Work and Innovation Development: Based on the Criticism of Thomas Piketty's Capital in the 21st Century

Xu Dajian, Guo Raofeng

Journal of Shanghai University of Finance and Economics Vol. 18, Issue 03, pp. 4 - 15 (2016)  DOI:10.16538/j.cnki.jsufe.2016.03.001

Abstract

The disparity between the rich and the poor is a big social problem nowadays. Thomas Piketty's Capital in the 21st Century discusses the wealth distribution and the disparity between the rich and the poor in Europe and the United States since the 18th century, cuts into the present-day evils and causes huge reaction in academic circles. Taking Piketty's Capital in the 21st Century as a platform for discussing the wealth distribution, this paper puts forward some opinions of the principle and standards of justice in wealth distribution as well as their relation to innovation and economic development based on the analysis and criticism of Piketty's thoughts in wealth distribution. The key point lies in that, although the global capital progressive tax put forward by Piketty as a government intervention based on his interpretation of the mechanism of disparity between the rich and the poor arising inevitably from market economic system itself with a large amount of data, may effectively relieve the disparity between the rich and the poor caused by market economy, but it may also hinder innovation and economic development because he does not distinguish between pure capital gains that does not contain labor & risk, financial asset gains containing labor & risk, and intellectual property income & stock option income containing innovative labor and risk. Therefore, we should pay attention to the adverse effects of the varieties and progressive tax rates of capital tax on innovative labor when formulating capital tax policy to relieve the disparity between the rich and the poor.

Keywords

Capital in the 21st Century; wealth distribution; distribution according to work; innovation