Anyone who has been reading here for any length of time will know that there are huge gaps in my knowledge of economics. Some tiny parts of the subject I know reasonably well. Others I\’m as much use as a fart in a windstorm.
Which brings me to one of those areas where I\’m simply parping.
It\’s something of a commonplace in left circles at the moment to show that the labour share of income has been falling in recent decades. From something in the mid 60%s to something in the mid 50%s from the 1970s to now I think they usually try to say.
First observation is that the labour share went up quite a lot from the 1950s to the 1970s and we\’re seeing a return to perhaps the long term trend.
The inverse of labour\’s share of income is of course capital\’s share of income.
So, if labour\’s share has been falling then capital\’s share must have been rising.
Now for the parp bit.
Where, if anywhere, can one find the info on how much capital investment there has been?
Hmm, no, OK, let\’s explain the conjecture.
We used to have a labour/capital share of x. That changed to y. It\’s now moving back to x again (or has even passed it maybe).
Now, if capital was getting less of the dosh/is now getting more of the dosh, everything else being equal we would expect to have seen there being in the first part of the change less capital investment (for the incentive to invest is what you can get from it). And then we would expect, from the point where the labour share peaked, there to be more capital investment.
So, is that actually true? And how would or could we find out if it were?
And I think that, finally, what we would want at the end is one of those nice graphy things. Labour share of income since, say, 1950 (thus avoiding the immediate post war years) showing the rise and then fall of it. Then, on the right hand axis, (this being one of those graphy things with both a left and right axis, enabling us to show two different things on one graph) showing capital investment….presumably as a share of the economy or something.
My supposition is that the two should track each other as inverses: but I\’ve no idea whether that\’s actually true.
I can think of a number of reasons why it wouldn\’t be true too: one being the increased efficiency of the use of capital perhaps…..but I\’d love to know whether it is or not.