Abstract
:The Cambridge (UK) versus U.S. capital theory debates of the 1960s showed that the workhorse mainstream growth model relies on unsustainable assumptions. Its standard interpretation is not consistent with the past four decades of data. Part of an estimated increase in the ratio of personal wealth to income in recent years is due to higher asset prices. The other side of the accounts reveals that financialization and growing business debt partially offset the greater net worth of households. Attempts to interpret growth in wealth principally as a consequence of capitalization of rents are misleading, but capitalization of a rising profit share helps explain an upward trend in Tobin’s q. Growth models based on Cambridge ideas can help correct these misinterpretations.
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