Re: Piketty Reading Group: Introduction and Chapter 1

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(Admittedly, I was lying about the steak knives.)


Posted by: LizardBreath | Link to this comment | 05-19-14 7:02 PM
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Wow.


Posted by: Moby Hick | Link to this comment | 05-19-14 7:02 PM
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This isn't even remotely how I understood Piketty's argument. But of course I read it in French.


Posted by: Von Wafer | Link to this comment | 05-19-14 7:03 PM
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future posters should not feel pressured to match his length

Gentlemenz.


Posted by: essear | Link to this comment | 05-19-14 7:04 PM
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3,100 words.


Posted by: Moby Hick | Link to this comment | 05-19-14 7:06 PM
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If Halford keeps this up, you could probably monetize unfogged by selling access to undergraduates writing papers in Econ 101.


Posted by: Von Wafer | Link to this comment | 05-19-14 7:08 PM
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Something that Piketty didn't say, but seemed like a natural and disturbing conclusion to draw from his discussion of Kuznets: Kuznets drew the mistaken conclusion that inequality was decreasing for structural reasons, when in fact inequality over the period he was looking at had decreased as a result of the huge shocks to the world economy in the 1914-1945 period -- two World Wars and a depression.

So, if we want lower inequality, does that mean we want more shocks of that kind? This seems worrisome, and also like something bob would advocate.


Posted by: LizardBreath | Link to this comment | 05-19-14 7:10 PM
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In fairness, I was drunk while writing the first half, and then got up early to write the second half after eating brain and body destroying Samosas at a forced trip (birthday party)to a vegetarian restaurant the night before.


Posted by: Robert Halford | Link to this comment | 05-19-14 7:10 PM
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(This post is really spectactular, Halford. It's going to be very useful to link back to for the definitions later on.)


Posted by: LizardBreath | Link to this comment | 05-19-14 7:11 PM
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I think it's worth noting that chapter 1 spends a lot of time on the definitions, and relatively little on the implications - they're practically throwaway sentences in there.

I puzzled over the entire α = r * β equation and where he was going with that until the end of that section, where he clarified that the point was just that there were two degrees of freedom rather than three, but the overall importance of that hasn't yet become clear.


Posted by: Nathan Williams | Link to this comment | 05-19-14 7:15 PM
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7 is a great point. I thought about putting in a passage about whether or not we should destroy and massively re-organize the economy along Halfordismo lines for the sole purpose of creating equality, but that seems too flip. But the analysis does lead to the conclusion that depression and war created inequality, and the assumption that the future of r>g capitailsm will favor inherited wealth assumes a world not destroyed by depression and war -- these are predictions of what is likely to happen if you have predictable growth in relatively stable situations.

[(this is from reading ahead a little bit) In fact, much of the change was driven not just by war, but by the fact that inflation melted away the value of holding big chunks of debt, particularly government debt, but we'll get to that later I guess.]


Posted by: Robert Halford | Link to this comment | 05-19-14 7:23 PM
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10: That equation particularly could have used one more line of algebra to make it clear -- I got stuck on exactly what he was saying until I actually scribbled it out with a paper and pen:

α=(income from capital/total income)

β=(capital/total income) so

(income from capital/total income)=r(capital/total income), or

income from capital = r(capital).

Clear as glass once you've got the definitions straight, but it took me a bit of staring.


Posted by: LizardBreath | Link to this comment | 05-19-14 7:26 PM
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My reaction to the book was very different than Halford's, and I think it's clear that we start with very different perspectives and expectations. Here's what I wrote in response to the introduction.

When the discussion started about doing a reading group on Capital In The 21st Century, I was interested but I also felt somewhat sketptical of the book -- not whether his factual claims where accurate, but about the significance of the book. My initial response was that it might provide some additional ways for people who were already suspicious of the power of money in society to frame their arguments (which I am broadly sympathetic to) but that it didn't promise any intellectual or conceptual revelations.*

Reading the introduction, I was surprised by the ways in which it helped me think through the reasons for my initial skepticism and made me much more interested in an sympathetic to the book. So I wanted to pick out a couple of things from the introduction and talk abouit how they related to my interest in the book.

I: The contrast he draws between France and the US (page 29 of 35 or ~80%)

Although [France's] population has increased over the past two centuries, the rate of increase has been relatively low. The population of the country was roughly 30 million at the time of the Revolution, and is slightly more than 60 million today. It is the same country, with a population whose order of magnitude has not changed. By contrast the population of the United States at the time of the Declaration of Independence was barely 3 million. By 1900 it was 100 million, and today it is above 300 million. When a country goes from a population of 3 million to a population of 300 million (to say nothing of the radical increase in territory owing to Westward expansion in the nineteenth century), it is clearly no longer the same country.

I've said before that I chosen to live in a place and in a way in which I don't spend much time interacting with wealth -- both in the sort of work that I do and the town in which I live I'm pretty distant from serious wealth and, in particular inherited or generational wealth. Reading that description of France I thought about how, living in NW Washington State, I live in a part of the county which isn't that far removed from being the frontier for geographic expansion. Locally, it's more visible to see new wealth growing/created - -from the dot-com millionaires of Microsoft or Amazon, or real estate, which is newly valuable. It's somewhat common to know people who own valuable property because their grandparents built a cabin on some desolate forested patch of land, that's now a million-dollar ocean-view property.

Contrasting that with his example of France makes me conscious of how unusual a situation that is, and that there are many parts of the country, and the world, in which the power of inherited wealth is much more obvious.

II: His description of what is at stake (page 15 of 35, or ~20%)

Will the world in 2050 or 2100 be owned by traders, top managers, and the super-rich, or will it belong to the oil-producing countries or the Bank of China? Or perhaps it will be owned by the tax havens in which many of these actors will have sought refuge. It would be absurd to not raise the question of who will own what . . .

Personally I spend almost no time wonder who will own what in 2100, but clearly it's an interesting question to ask. If the book can answer that, it would be an impressive accomplishment.

That's slightly sarcastic because the book doesn't pretend to answer the question of who, exactly, will own the capital in 2050 or 2100, and yet, raising that question makes me think about the way in which I, personally, use the fact that it's difficult to predict the future winners of the economy to avoid thinking about the relationship between capital and labor, in the way that the book does. Not only don't I spend much time wondering "who will control global wealth in 2100?" I also don't think, "what will global wealth look like in 2100?" That's an interesting question and one for which I don't trust my intuitions, so it will be interesting to see if the book offers a convincing portrait.

Thinking about my intuitions, I remembered a line from a philosophy professor in college who said, half-joking, that whatever person designed the Microsoft clip art and icons did more to shape our collective cognitive structures than any academic. That seemed like a reasonable idea to just toss out in a way that, "we are headed for a new age of inequality" doesn't. It feels easier (it probably isn't) to have an opinion about maco-cultural phenomena than macro-economic ones. Perhaps it's as simple as the fact that intuitions in both cases are likely to be incomplete or incorrect but it's much visible when one's economic predictions are false.

My point is just that I come to the book with no idea what I would be looking for as a way to cultivate my intuitions and understanding of something as big as capital. I'm still not sure what I expect, but the introduction does convince me to keep reading and see what he's going to do with it.

* I felt closest to Kevin Drum's initial response.

Don't get me wrong: Piketty may be right. Hell, he probably is right. But while the details are of keen interest to specialists and practitioners, the gist of his argument is simply that the future will probably look like the past. That's certainly plausible, but I'm frankly having a hard time plowing through a ton of background material in support of such a simple thesis.

Posted by: NickS | Link to this comment | 05-19-14 7:28 PM
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Jesus Christ, Halford.


Posted by: Flippanter | Link to this comment | 05-19-14 7:28 PM
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So, if we want lower inequality, does that mean we want more shocks of that kind?

Blowing up capital is remarkably effective. Might flooding capital have the same effect?


Posted by: Spike | Link to this comment | 05-19-14 7:28 PM
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15: Good point. It's a shame the only capital I own personally is on a coastline.


Posted by: LizardBreath | Link to this comment | 05-19-14 7:31 PM
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That was a really useful summary, so far as I can tell having never read the book.


Posted by: Moby Hick | Link to this comment | 05-19-14 7:35 PM
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4) National income=capital income (net of depreciation)+labor income. So national income includes income generated by capital.

This was the part of Chapter 1 that I was most interested in picking at, because he doesn't spend much time talking about depreciation but it seems like potentially a major element.

First, let's give some numbers, using his round number approximations you could break it down this way:

National Income (pre-depreciation) = 111.
Depreciation = 11
Gross Capital Income: 41 (37% of gross)
Net Capital Income: 30
Labor Income: 70 (63% of gross).

First thing to note, he mentions that for years labor consistently received 2/3 of gross national income, but that has been falling lately. You can see there that labor is getting more than 2/3 of net income, so one possibly dynamic is that if accumulation of capital leads to increased depreciation costs (because you have more capital to depreciate) that could push down labor's share of gross without affecting the share of net income.

Secondly, if the calculation of depreciation is wrong -- let's say depreciation is 15% of gross income, instead of 10, then the net capital income would be 24 instead of 30, or only 25.5% of net income (and r would be ~4%).

Thirdly, the obvious way in which depreciation could be wrong is if you think that ecological degradation isn't accounted for correctly. If you think of the environment as public capital you could end up with something like

Net capital income: 30
Net labor income: 70
Net public return on capital: -10

Since the net public change in capital stock is mostly going to be born by the people receiving labor income, inequality would be even worse in that case than in Piketty's description. However, it would also be a reason to be cautious about projecting the trends into the future. It won't be possible to freely deplete the public (environmental) capital forever.


Posted by: NickS | Link to this comment | 05-19-14 7:42 PM
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Second, two commonly offered mechanisms by which capitalism's defenders have claimed that it will reduce inequality do not, in reality, do so.

So wait, Halford: in a different thread you were pretty dismissive of that Salon review that criticized Piketty for ignoring the role of strengthening/weakening unions (and also getting US history super wrong, although not particularly in the intro or chapter 1.) Why is that reviewer off-base?


Posted by: heebie-geebie | Link to this comment | 05-19-14 7:45 PM
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Also, I don't (yet) get why the early 20th century low inequality is attributed to massive shocks, rather than heavy taxation, lots of government spending on social programs, strong unions, government regulation, etc. (Not that those things happened perfectly, but they're things that are re-creatable in the absence of a massive world war, in theory.)


Posted by: heebie-geebie | Link to this comment | 05-19-14 7:49 PM
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Unions don't show up much in the book, but I think Piketty would agree that unions are good and important, but would also agree that unions alone are very unlikely to solve all or most problems (note that the beginning of Chapter 1 specifically begins with a story about unions). That Frank review annoyed me because the guy clearly hadn't really read the book. And, also because he has a romantic and largely wrong view of US history, which would benefit from being out into context. (Actually, I think that one plausible conclusion of the book is that terrible US corporate governance is a bigger problem for the US, at least purely on the issue of inequality, than the lack of unions. But that really is an issue for later chapters.)


Posted by: Robert Halford | Link to this comment | 05-19-14 7:54 PM
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The thing that struck me most about the definitions in chapter 1 is Piketty's explicit focus on nonhuman capital. That felt like a decision that has enormous implications for his arguments, yet was presented to the reader fairly quickly. Focusing on nonhuman capital means, for example, that the entire process of global knowledge and skill diffusion (which he identifies as a major driver in reducing inequality) becomes a separate phenomenon completely unrelated to the global distribution of capital. Does it make sense to look at the world that way? Maybe, but I don't feel as though I see enough of the big picture to know yet.


Posted by: widget | Link to this comment | 05-19-14 7:55 PM
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rather than heavy taxation, lots of government spending on social programs, strong unions, government regulation

But weren't these also the result of massive shocks? Massive taxation to pay for the war, strong unions, government spending and regulation in response to the Great Depression.


Posted by: Spike | Link to this comment | 05-19-14 7:56 PM
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Human capital is inalienable, in a Marxist sense. I don't know if you can teach space aliens. Anyway, it seems a fundamental difference between it and non-human capital in a book about inequality.


Posted by: Moby Hick | Link to this comment | 05-19-14 7:57 PM
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23: sure, but a different reaction to the massive shocks (austerity, Hoover) wouldn't have worked so well. It was clearly the response to the shocks, not the shocks themselves.


Posted by: heebie-geebie | Link to this comment | 05-19-14 8:00 PM
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See also Nazism.


Posted by: Moby Hick | Link to this comment | 05-19-14 8:01 PM
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And the response then implies policy going forward, whereas if he says it's the massive shocks, then it doesn't imply policy reactions so clearly.


Posted by: heebie-geebie | Link to this comment | 05-19-14 8:02 PM
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And plenty of countries have plenty of massive shocks without making the world more egalitarian.


Posted by: heebie-geebie | Link to this comment | 05-19-14 8:03 PM
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I guess I'm nitpicking, but I found it confusing.


Posted by: heebie-geebie | Link to this comment | 05-19-14 8:03 PM
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but a different reaction to the massive shocks (austerity, Hoover) wouldn't have worked so well

In the short term maybe not, but I suspect the argument goes that one way or the existing order of wealth was going to get shaken up, whether by policy or hyperinflation or revolution or large-scale war.


Posted by: JP Stormcrow | Link to this comment | 05-19-14 8:05 PM
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I didn't understand what Piketty was saying about the capital-labor split in the first section of chapter 1. He seems to totally abandon the concept after page 42 and focus entirely on capital/income ratio instead. Is he suggesting that those quantities somehow measure the same thing?


Posted by: L. | Link to this comment | 05-19-14 8:06 PM
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But that can't possibly be an accurate generalization about large-scale war, famine, depressions, etc - that it shakes up wealth and evens out inequality? I mean, look at the past seven years.


Posted by: heebie-geebie | Link to this comment | 05-19-14 8:08 PM
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Those weren't large scale wars.


Posted by: Moby Hick | Link to this comment | 05-19-14 8:08 PM
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No, I just meant austerity exacerbating things in, say, Greece.


Posted by: heebie-geebie | Link to this comment | 05-19-14 8:10 PM
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Look, if we wanted less inequality, we should have let Bush invade Iran.


Posted by: Moby Hick | Link to this comment | 05-19-14 8:11 PM
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What struck me the most about the material in the introduction chapter is the degree to which Kuznet's data and model were really just quantitative sugar-coating for the way folks in the developed west wanted the world to seem to be at the time. Per footnote Intro16 (to material on pg. 14): As Kuznets himself put it: "This is perhaps 5 percent empirical information and 95 percent speculation, some of it possibly tainted by wishful thinking."


Posted by: JP Stormcrow | Link to this comment | 05-19-14 8:12 PM
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Nicely done, RH.

15 is kind of grim, but might be right.


Posted by: lw | Link to this comment | 05-19-14 8:13 PM
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The Iraq war certainly shook up wealth in Iraq. The Hussein family doesn't hold the same strong position in society that they once did. Obviously in our country no sort of upheaval occurred.


Posted by: Cryptic ned | Link to this comment | 05-19-14 8:14 PM
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And it will probably usher in a peaceful period of highly progressive, redistributive Iraqi social programs solidifying the middle class, so.


Posted by: heebie-geebie | Link to this comment | 05-19-14 8:21 PM
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24: Alienability is certainly a pretty big difference. Though (at least some) forms of human capital can be passed along from generation to generation, even if they can't be sold on the market. But maybe analyzing that requires too much granular detail to work into a really large-scale, long-term analysis of the type Piketty is interested in doing.


Posted by: widget | Link to this comment | 05-19-14 8:24 PM
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So one thing that I'm curious about---and that I don't think Piketty said much about, but maybe I should skim again---is to what extent there's an explanation for the broad similarity of trends in different parts of the developed world. For one thing, I don't entirely understand the history behind what Kuznets found. It's clear that in Europe, a lot of the existing wealth was literally blown up during the World Wars, which obviously is going to have some kind of leveling effect on the amount of inequality in wealth. The US economy also obviously got some kind of "shock" from the wars but here the word shock is a little vaguer for me. To what extent did wealth inequality decrease for the same reasons in the US and in Europe in that time period? Superficially it seems like the reason for a decrease in wealth inequality must have been very different in the US, where we didn't have lots of old valuable property destroyed by bombs. But the US and Europe are pretty tightly coupled economically. It's just not clear to me if it's mysterious that they behaved in the same way or not, and to what extent the devastation in Europe would necessarily affect inequality in the US.

Similarly, the trends toward inequality increasing again now seem broadly similar in the US and Europe, but he highlights the massive inequality in executive pay as more of a US-localized thing. So is it a coincidence that we see the same general trend?


Posted by: essear | Link to this comment | 05-19-14 8:29 PM
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In the U.S., the destruction in the rest of the world did a great deal to increase the wealth of what had been relatively poor farmers. My grandparents when from barely surviving to middle class in ten years without doing anything very much different than what they did before.


Posted by: Moby Hick | Link to this comment | 05-19-14 8:34 PM
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I think the same happened in other industries as well. Global demand for U.S. goods shot up and government action saw to it that the bombed-out places had sufficient borrowing ability to buy the goods.


Posted by: Moby Hick | Link to this comment | 05-19-14 8:35 PM
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But doesn't it seem like that could have happened in a way that would still funnel most of the profit into the hands of our corporate overlords? It doesn't seem obvious to me that the outcome was guaranteed to be a reduction in inequality in the US.


Posted by: essear | Link to this comment | 05-19-14 8:47 PM
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(Lurkers can participate, right?)

Regarding the depreciation question in 18 (as well as in the Larry Summers article referenced in one of the other threads), isn't Piketty measuring the results rather than the process? In other words, does he even care what the rate of depreciation is? It's whatever it needs to be relative to the gross growth rate to produce the measured share of national income. If he's measuring the change in Capital's share of income year over year, then he's measuring net income accrued to Capital, after considering depreciation.

It sounded to me like that was what he was arguing, and would fit with the general principal that Summers is wrong about everything.


Posted by: puggle | Link to this comment | 05-19-14 8:48 PM
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44: If Alf Landon had won.


Posted by: Moby Hick | Link to this comment | 05-19-14 8:56 PM
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45.1: Technically, you aren't a lurker now.


Posted by: Moby Hick | Link to this comment | 05-19-14 8:58 PM
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For those interested in data, National Income data is here and GDP data is here.

I had wanted to see if the GDP/GNI ratio for Trinidad and Tobago was unduly skewed (post-colonial, oil based economy largely funded by foreign direct investment), and it is! The ratio is 1.16.

By comparison, the ratio for Grenada and Nigeria are both 1.05, and the ratio for Jamaica is 1.03. Gabon, which is about the same size population as T&T, and also oil-and-gas dominated, is at 1.12.


Posted by: Spike | Link to this comment | 05-19-14 8:59 PM
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I am interested in getting clear on what I see as a tension in two of the larger theoretical claims in Piketty:

(1) the claim that "one should be wary of any economic determinism in regard to inequalities of wealth and income. The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms" (see Major Results of this Study, Intro)

(2) the claim that r > g is something like a "law of capital", capturing the natural historical tendency of capitalism towards increasing inequality in the absence of (a) the kind of disasters that destroyed existing capital stock and wealth from 1914-1945 or (b) the kind of confiscatory upper bracket income taxes and wealth taxes Piketty will propose.

Should have more to say about this tomorrow.


Posted by: Criminally Bulgur | Link to this comment | 05-19-14 9:03 PM
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24, 40: Agreed. It's a means of increasing the returns to labor. Calling it "capital" is primarily designed to make people who don't have a stock of actual capital feel like things aren't moving against them quite so much and to generate embarrassing Tom Friedman columns.


Posted by: Mr. Blandings | Link to this comment | 05-19-14 9:04 PM
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"It's just not clear to me if it's mysterious that they behaved in the same way or not, and to what extent the devastation in Europe would necessarily affect inequality in the US."

While in Europe it was probably largely a case of outright physical destruction, I'd assume in the U.S. the forces reducing inequality were war spending + Great Depression. The massive war spending brought economic growth, so in those years g is way greater than r, in Piketty's terms. And the wars bookend a period of profound wealth destruction in the Depression. That was my reading of it, anyway.


Posted by: calico | Link to this comment | 05-19-14 9:05 PM
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49 is kind of what's nagging me too. I like data. But it seems like after observing empirical regularities that hold in very different countries and time periods, there should be some kind of dynamical explanation. I can't tell if he's going to try to provide one.

I was going to dig back into the text but I got distracted by dog photos on Facebook and now it's time to sleep.


Posted by: essear | Link to this comment | 05-19-14 9:10 PM
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The GDP/GNI ratio of Puerto Rico is at 1.52. Why would that number be so skewed? Does half of the value Puerto Rico's production really leaves it shores? Or is it an artifact in the data related to where people pay taxes?


Posted by: Spike | Link to this comment | 05-19-14 9:11 PM
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On the "rising tide lifts all boats thing". People don't really use this phrase very precisely, but I had usually understood it not in the Robert Solow sense of

(a) gains from growth get distributed uniformly (on a percentage basis) across the income scale

but rather

(b) stuff sets get produced more efficiently/cheaply, so even people on the lower end of the income scale have a higher standard living, independently of their gains or losses in real income.


Posted by: Criminally Bulgur | Link to this comment | 05-19-14 9:13 PM
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To respond to a few things above:

1) As the book discusses in a few chapters, the importance of the 1914-45 period is that it destroyed the relative value of capital, not that it represented a massive state-driven transfer to labor through tax-driven transfers of wealth. Basically, inflation killed entirely the value of debt held by a lot of rich capital owners; other values, including land, suffered, and the holders of capital had to sell it off to make ends meet. I'm sure we'll all talk about that in a bit.

2) I think 50 gets it totes right w/r/t human capital, and I think Piketty agrees. There's a lot more on that, interspersed throughout the book.

3) 49 is a really interesting question and something we'll have to return to a lot in talking about the book. In some ways, I think the idea that r>g is a "law" is misleading. Really, it's an observed empirical regularity that is present when capital is arranged in particular ways and when particular conditions about growth apply. Piketty thinks those conditions are likely, but this is a claim about how the world has worked historically and is likely to work in the future, not some quasi-natural law. Again, lots and lots to talk about on this issue for weeks.


Posted by: Robert Halford | Link to this comment | 05-19-14 9:27 PM
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Doing what I do (listening to corporate conference calls all day, basically, though I used to be cagier than that about discussing it online) I hear the "rising tide lifts all boats" thing a lot and I've been torn for a while about whether it's more just economicese for "knock wood!" as if there's some sympathetic magic in it or if it's more of a neg, where the implication is that, well, come on, we still know which boats are better regardless of tides. This isn't necessarily pertinent, but I also haven't gotten out of the introduction yet and am about to go to bed.

But welcome, puggle!


Posted by: Thorn | Link to this comment | 05-19-14 9:30 PM
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Iceland was at a 1.27 ratio in 2008, in which year GDP peaked while National Income was taking a dive. Maybe National Income is the leading indicator? Why would that be so?


Posted by: Spike | Link to this comment | 05-19-14 9:32 PM
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54: I think the general understanding of the phrase is that an improvement in the aggregate measure results in improvements across the entire scale of the individuals comprising it that need not be uniform but are expected to include income gains. It wouldn't sell without the last part.


Posted by: Mr. Blandings | Link to this comment | 05-19-14 9:37 PM
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Thanks a fucking heap, Halford.


Posted by: Minivet | Link to this comment | 05-19-14 9:41 PM
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53: I would find that entirely plausible, PR is truly screwed economically.


Posted by: dairy queen | Link to this comment | 05-19-14 9:46 PM
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I vote that Halford does the rest of the summaries.


Posted by: Eggplant | Link to this comment | 05-19-14 9:49 PM
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36: Economists seem to have a long history of ommitting any careful qualifications they've put in their research when making public pronouncements. And, of course, forgiving each other for doing this.


Posted by: Eggplant | Link to this comment | 05-19-14 9:54 PM
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That quote was from the public pronouncement.

Not that it notably affected the rest of the pronouncement, or had any meaningful impact on its subsequent use.


Posted by: Mr. Blandings | Link to this comment | 05-19-14 10:02 PM
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So, uh, what's with the bourbon, Halford? That can't be paleo-approved.


Posted by: teofilo | Link to this comment | 05-19-14 10:07 PM
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That pressing issue aside, this is indeed a fantastic writeup, and it gives me hope that following the reading group will give me a good sense of what Piketty is saying without reading the book.


Posted by: teofilo | Link to this comment | 05-19-14 10:35 PM
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If capital as defined here is what Piketty is concerned with, and inequality of possession of capital, then I'm not sure I would be much persuaded by the rest of the book, for two reasons:

1) Gains unequally distributed, even increasingly, doesn't necessarily mean the poor are worse off, especially in the long run. It depends on exactly what the tradeoff is, if any, between inequality and growth. Specifically, a tradeoff that's bad if you just consider the next decade might possibly be good if you consider the next 1000 years. Growth seems to compound, and a future that's fantastically rich in aggregate by our standards seems more likely to be a future in which what we'd consider poverty basically doesn't exist.

2) Paper capital/wealth as defined here is at best a very loose proxy for control of resources or share of consumption. Government may have negative capital but it controls a lot of resources. Because of regulatory capture and market forces, even a firm in a highly regulated space, like a bank or power utility, may not be entirely under the government's power - but its ownership of its capital - its ability to do with the capital as it sees fit - is far from complete.

On the other hand, government doesn't really consume at all.

3) Because of 1 and 2, what seems to matter the most is, what policy changes will actually affect growth in what ways, how different actions and outcomes will affect the "natural" distribution of wealth, and how they will affect the political system's willingness and ability to control real resources for the good of all.

It's nice to have something like "capital/wealth" to count, but the bottom line is what happens to the real resources, and who actually decides this, and that's a different question and much harder to answer.

Does Piketty address these things?


Posted by: Benquo | Link to this comment | 05-19-14 11:03 PM
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It depends on exactly what the tradeoff is, if any, between inequality and growth

The thing is, there doesn't really seem to be much of one. Some causal mechanisms for reducing inequality increase growth (universal education, health care), some don't.


Posted by: x.trapnel | Link to this comment | 05-20-14 12:24 AM
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Not only is there no evidence of an overall tradeoff between growth and equality (in continental Europe, for example, the highest growth periods from 1945-75 were the most equal), but it goes beyond that -- growth, under the theory Piketty develops, actually tends to reduce long-term inequality, so long (in long run, or in general) as the growth is sufficient to exceed the rate of return. (Also, a somewhat related point, as I tried to explain in the summary, there's essentially no evidence that capital flows from rich countries to poor countries has has much of any impact whatsoever on the growth of those countries -- diffusion of knowledge matters more.) "Inequality doesn't matter as long as there's growth" posits both a false tradeoff and totally misses what's actually interesting about the book.

The second point in 60 is kind of a giant who cares; what we're trying to figure out here is what the trends are in who controls actual real capital. Whether or not the government is also powerful doesn't really matter at this stage (and, in fact, Piketty is going to argue that the private capital/income ratio stays remarkably stable over the past 250 years, despite the huge growth of the state in that period.


Posted by: Robert Halford | Link to this comment | 05-20-14 1:18 AM
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That last reference s/b to 66, not 60.


Posted by: RH | Link to this comment | 05-20-14 1:20 AM
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r>g being a observation rather than a law is a good point.


Posted by: Asteele | Link to this comment | 05-20-14 1:25 AM
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Halford is already doing a sterling job, but a shorter version of 66 is basically:

1) Assume all of things Piketty intends to demonstrate to be true, are in fact false.
2) Given 1, Piketty is unconvincing.


Posted by: nattarGcM ttaM | Link to this comment | 05-20-14 2:08 AM
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I'm not actually reading the book, but a thought about WW2 and capital: one of the ways capital can lose its value, besides physical destruction, depreciation, and confiscation, is obsolescence.

If you look at the UK, we had a lot of previously valuable slum property with holes in it in 1945 but we also suddenly had an electronics industry that made computers. We hadn't done any substantial maintenance on anything in six years, so there had been a massive destruction of capital just through depreciation, but we had created a huge aircraft industry that was transitioning to jets. R-R decided to go jet because their management was painfully aware of just how many tens of thousands of Merlins would be surplus as soon as the guns stopped firing.

To think of this in a Pikettyesque way, imagine that the arrival of widget-smurgling technology creates returns that are split between investors in Widget Smurglers Ltd and wider society, while also forcing the widget industry to depreciate out its existing machines fast. So the incumbent widget makers are hit with a negative return on their capital, while WSL makes out like a bastard. If these two factors are roughly equal, g has gone up (because some of the benefits of smurgling grow the economy) and r remained constant, so smurgling has caused the r/g ratio to move our way.

so if we live in a time of innovation, why does everything suck? well, if the WSL investors manage to capture more of their return rather than it spilling out into g, that might do it. or perhaps not enough stuff is going obsolete?


Posted by: Alex | Link to this comment | 05-20-14 2:20 AM
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Now Joseph Schumpeter would say that innovators are motivated by the prospect of having a monopoly...until the next one destroys it. (I kind of wonder how Clayton Christensen has a career given that his life work is basically cribbing this point.) So there's a tension between technology as a force that increases returns and as one that blows up monopolies, and I suspect this is closely related with r/g.


Posted by: Alex | Link to this comment | 05-20-14 2:29 AM
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I kind of wonder how Clayton Christensen has a career given that his life work is basically cribbing this point.

Well, it's not like anyone reads Schumpeter these days.


Posted by: teofilo | Link to this comment | 05-20-14 2:43 AM
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Except libertarians, I guess, but who cares about them?


Posted by: teofilo | Link to this comment | 05-20-14 2:45 AM
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Not me, sir! (and they don't bother reading the bit where he came out for social democracy in the end....)


Posted by: Alex | Link to this comment | 05-20-14 2:59 AM
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First off, immense thanks to RH for a great job here.

There's a lot of good stuff in both the summary and the comments, so I might come back as I work through them, but firstly, to 7 and 11 on the shock and destruction thing.

Classical Marxism argues that the way capitalist society deals with the "declining rate of profit", that is falling rate of return in Piketty's terminology, is to destroy capital. Marxists therefore viewed the shocks of the 20th century as tending to confirm their expectations, although the outcomes weren't optimal from their point of view (contrary to popular belief, there's nothing in classical Marxism which says that successful revolution is inevitable; the alternative, that the whole planet can go to shit in the biggest way, is always available.)

Why does this matter? For two reasons. Firstly, Piketty demonstrates rightly that Marxist expectations of general crisis have been obviated chiefly by technical innovation, but he also demonstrates that the kind of rapid growth driven by such innovation (which has been itself up until very recently largely driven by the shocks of the 20th century and their aftermath) is historically anomalous, and he is clear that we should not assume such growth into the future. So why should we assume that technical innovation will continue at recent rates? And if not, then can we avoid a return to conditions where the rate of return tends to fall?

Secondly, if high growth rates (and Piketty seems to regard 2% as high) are not assumed under normal conditions, and we face an immediate future of concomitantly low rates of return (tending to depend increasingly on rents as production will be less profitable), what is to prevent a return to early 20th century conditions at best?

It seems to me that a social democratic manifesto such as Piketty's needs to address these points. Maybe it does later on, but he is usually scrupulous in identifying issues he means to return to, and he hasn't with these.


Posted by: chris y | Link to this comment | 05-20-14 3:28 AM
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re: 77

re: your second question. I thought Piketty's point [and I'm early in my reading] was precisely that there is nothing to prevent a return to early 20th century conditions, at best, and that, based on the data he and his collaborators have gathered, we are pretty much already tehre.


Posted by: nattarGcM ttaM | Link to this comment | 05-20-14 3:36 AM
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I really like that this is a mostly empirical book.

On Puerto Rico, there are tax structures in place to encourage US- owned pharma manufacture, which would increase the ratio.

P points out that high growth, the kind NickS mentions, is historically unusual, and the rich world should not expect high growth in the future. The empirical observation r>g about the past becomes a prediction for that reason.


Posted by: lw | Link to this comment | 05-20-14 3:38 AM
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78. I was thinking of conditions in the sense of the prevalence of global war rather than economic inequality.


Posted by: chris y | Link to this comment | 05-20-14 3:41 AM
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re: 80

Ah, OK. Yes, I take your point.


Posted by: nattarGcM ttaM | Link to this comment | 05-20-14 3:44 AM
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Vague notes on the Introduction:

1. Democracy will never be supplanted by a republic of experts - and that iis a very good thing

But isn't that more or less the Blairite project and similar?

2. Why were the dates of the population explosion and subsequent transition in France so far out of sync with the est of Europe? We were formerly told that rapid population growth was made possible by industrialisation, but that can't apply to early c. 18 France.

3. Smith... was influenced by the Malthusian model but pressed the argument further.

Were Smith's prejudices the same as Malthus'? In WoN he seems to be arguing principally against mercantilism.

4. It [capital share of NI] would decrease slightly in the final decades of the nineteenth century, as wages partly caught up with growth.

This coincides with the growth of general unions in Britain at least, so might not be an entirely accidental thing.

5. ... Russia, where the industrial revolution had scarcely begun...

A slight overstatement, I think. Anyway, this apparent anomaly had been theorised fifteen years previously by Trotsky and Helphand, in the "law" of combined and uneven development.

6. Fig 1.1. Income inequality in the US 1910-2010.

Inequality seems to have remained high during WWI but plummeted on the outbreak of WWII. Just politics? Any ideas?

7. ... principles of social justice fundamental to modern democratic societies.

But explicitly denied by US Republicans and may British Tories, who still get 50% of the vote.

8. ... without even knowing what facts needed to be explained.

Kaldor facts? These are an extraordinary group of assertions. What made Kaldor, who was no fool, suggest in 1957 that "The share of capital and labor in net income are nearly constant."? Had he not been paying attention for the last half century?

9. β = s/g

How is the saving rate defined? What am I missing?


Posted by: chris y | Link to this comment | 05-20-14 4:17 AM
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I thought part of reason for the social democratic foundation of the golden age was that to get the working class to march off to be killed in war, especially after the misery of the Great Depression, you need to promise them something. Maybe this story works especially well for the UK.

Sylos-Labini suggests somewhere that to foster innovation and growth in society, you need to occasionally shake up the social order. Losing a war does that.

Lance Taylor has a review somewhere that suggests economists should pay more attention to Kaldor's colleague Pasinetti. Both had long run growth models that can be used to analyze the relationship of r to g.


Posted by: Robert | Link to this comment | 05-20-14 4:39 AM
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Even vaguer notes on chapter 1:

1. [class relations deteriorated] perhaps because production became more capital intensive...

Perhaps? No General but Ludd did the poor any good!

2. I will temporarily set aside the issue of income inequality between workers...

I look forward to seeing how he does address this, because it's been cited as a weakness in the book by people as different as Paul Krugman and David Harvey.

3. Bear in mind too, that a portion of what is called "the income of capital" may be remuneration for "entrepreneurial" labour...

But the price of entrepreneurial labour is set by the entrepreneur, insofar as it is set within the income of the firm. Quis custodet ipsos custodes? This is related to the "CEO package problem", as above.

4. For one thing, the capital/labour split varied widely over the course of the twentieth century.

Again, Kaldor, what was he thinking? A "no true Scotsman" take would be that the 20th century wasn't long term enough, but in that case we're into that long term in which we are all dead.

5. In other words, the rich countries are doubly wealthy...

This is a simple restatement of the theory of imperialism popularised by Lenin, who plagiarised it from Bukharin who plagiarised it from Hilferding. If it's worth restating at all, it's because it makes it clear that imperialism doesn't require formal colonialism: export of capital is the key to it. With or without formal colonies, the vicious circle of comprador regimes dependent on the imperialist powers and revolutionary populist insurgencies that Piketty describes is identical.

6. The consequence of this is that a country that privatised its health and education services would see its GDP rise artificially..."

Somebody tell David Cameron and Michael Gove, please.


Posted by: chris y | Link to this comment | 05-20-14 4:49 AM
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82.9: That threw me too a bit, but note that he qualifies it with "In the long run". I figure that means that β=s/g isn't a definition or an accounting identity, it's an empirical claim that presumably will be backed up with data in some later chapter.


Posted by: LizardBreath | Link to this comment | 05-20-14 4:50 AM
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It would be of great value to have national income estimates that would remove from the total the elements which, from the standpoint of a more enlightened social philosophy represent dis-service rather than service. Such estimates would subtract from the present national income totals all expenses on armament.


Posted by: opinionated Simon Kuznets | Link to this comment | 05-20-14 5:14 AM
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86. I'd like to see a convincing argument against the thesis that the military industrial complex is all that stands between the "west" and total and abject economic collapse. We pretend to built stealth aircraft and they pretend to pay us.

Odd fact: in the eighteenth century the largest industrial enterprise in Britain by a country mile was the Royal Navy.


Posted by: chris y | Link to this comment | 05-20-14 5:24 AM
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That doesn't seem very odd.


Posted by: Moby Hick | Link to this comment | 05-20-14 5:26 AM
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By all accounts, it was a very impressive navy.


Posted by: Moby Hick | Link to this comment | 05-20-14 5:29 AM
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Krugman suggests that inequality has more to do with income than wealth.

http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-gilded-age/

"the fact is that the most conspicuous example of soaring inequality in today's world--the rise of the very rich one percent in the Anglo-Saxon world, especially the United States--doesn't have all that much to do with capital accumulation, at least so far. It has more to do with remarkably high compensation and incomes."

What Picketty talks about seems to be a bigger deal in Europe for now.


Posted by: lemmy caution | Link to this comment | 05-20-14 5:44 AM
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I'd like to see a convincing argument against the thesis that the military industrial complex is all that stands between the "west" and total and abject economic collapse.

I can think of a few points, like:
There is a natural experiment here in recent history. Halving the size of the UK military-industrial complex (as happened elsewhere too) between 1980 and 1995 did not in fact produce much in the way of economic collapse; average economic growth in the 90s was actually a bit better than it was in the 80s. And, for that matter, taking mil-ind spending back up to Cold War peak levels in the 2000s didn't do anything much for the US economy.

You are positing here a simply tremendous stimulus multiplier effect for military spending. Turn it around, and what you're saying is that a western country with no military and in a state of economic collapse could rapidly jumpstart its entire economy simply by building a relatively small military, in a way that it couldn't by spending the same budget on, say, social security or road building. Or that we could become economic tigers by doubling our military budget and taking the armed forces back up to 1980 size.


Posted by: ajay | Link to this comment | 05-20-14 5:49 AM
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90: Piketty is aware that income inequality is a major thing in the US in the moment, and he discussed that in the introduction:

This phenomenon [inequality due to very large incomes from labor for top managers] is seen mainly in the United States and to a lesser degree in Britain.... The tendency is less marked in other wealthy countries (such as Japan, Germany, France, and other continental European states), but the trend is in the same direction. To expect that the phenomenon will attain the same proportions elsewhere as it has done in the United States would be risky until we have subjected it to a full analysis--which unfortunately is not that simple, given the limits of the available data.

He goes on to say that the accumulation of private wealth is "in some ways simpler and more transparent and no doubt exerts greater influence on the long-run evolution of the wealth distribution". I assume he'll discuss this more later in the book; he definitely doesn't seem to view his focusing on wealth rather than income as some sort of limiting choice, he thinks it's the most important thing. And even in the US a lot of wealth is in the hands of heirs (the Waltons, the Koch brothers), so I think he's at least plausibly right.


Posted by: essear | Link to this comment | 05-20-14 5:58 AM
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β = s/g is discussed a lot more in chapter 5. (I'm peeking ahead; I haven't read that far yet.) I think LB is right, the "long-run" part basically assumes some kind of equilibrium.


Posted by: essear | Link to this comment | 05-20-14 6:08 AM
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in today's world--the rise of the very rich one percent in the Anglo-Saxon world, especially the United States--doesn't have all that much to do with capital accumulation, at least so far. It has more to do with remarkably high compensation and incomes.

I supposed this has a lot to do with weather you define the 1% (or .001% or whatever) as being the very top tier of income, or the very top tier of wealth. Typically, the 1% gets defined by income, but maybe that's a mistake.

I would baselessly speculate that, in any given year, there are a number of hedge fund managers with larger incomes than the Koch brothers or some of the Waltons - but in terms of wealth, the Koch brothers and Waltons would still have the upper hand.


Posted by: Spike | Link to this comment | 05-20-14 6:13 AM
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I figure that means that β=s/g isn't a definition or an accounting identity, it's an empirical claim that presumably will be backed up with data in some later chapter.

Well, I don't know if there's data, but he explicitly calls it a tendency that can be counteracted by other factors rather than an accounting identity in a later chapter.


Posted by: Minivet | Link to this comment | 05-20-14 6:39 AM
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beta is defined as Capitol C over Income I.

next year beta will be (C + delta C)/(I+ delta I)

by definition the changes in capitol and income in a year are:

delta C = sI
delta I = gI

so beta next year is (C +sI)/(I +gI)

in equilibrium beta next year equals beta this year and:

C/I = (C +sI)/(I +gI)= sI/gI = s/g

If s/g is above beta then beta will rise , if s/g is below beta then beta will fall.


Posted by: lemmy caution | Link to this comment | 05-20-14 7:05 AM
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90: Krugman is just asserting this, though. The only evidence he cites for the claim that it's wage inequality driving the increase rather than returns on capital is this:

"Real wages for most US workers have increased little if at all since the early 1970s, but wages for the top one percent of earners have risen 165 percent, and wages for the top 0.1 percent have risen 362 percent."

He doesn't make any claim for why that's more significant than returns to capital. When we're talking about the top 0.1%, I would expect it to be hard to differentiate - they tend to receive equity as well as income.


Posted by: puggle | Link to this comment | 05-20-14 7:08 AM
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96. Yes, but what is the definition of s?


Posted by: chris y | Link to this comment | 05-20-14 7:15 AM
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s is the savings rate.

I am assuming Income includes the wage income and the return on capitol (rC).


Posted by: lemmy caution | Link to this comment | 05-20-14 7:48 AM
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97: at the margin, the distinction collapses because so many top-earners are paid in stock.


Posted by: Alex | Link to this comment | 05-20-14 7:50 AM
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98, 99: I do wonder how you determine s. Total capitalyear n+1 - Total capitalyear n gives you the total amount saved from income in year n, and then (total amount savedyear n/incomeyear n) would be s?


Posted by: LizardBreath | Link to this comment | 05-20-14 8:02 AM
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Thank you LB. I was beginning to wonder if I was being stupid. I know s is the saving rate. Piketty says so clearly. But I don't know how to determine it. Frex, with or without interest?


Posted by: chris y | Link to this comment | 05-20-14 8:14 AM
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I though savings was just income - consumption.


Posted by: Moby Hick | Link to this comment | 05-20-14 8:18 AM
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96, 99: Oh, huh, now I follow you.


Posted by: LizardBreath | Link to this comment | 05-20-14 8:18 AM
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I typed "Piketty savings defintion" to get here.

Pretty sure it's income less expenditure, where income is the sum of income from labor and income from returns to capital held. He states in the link that it's an accounting identity-- he's been thorough with definitions so far, I figure he'll get to this one.


Posted by: lw | Link to this comment | 05-20-14 8:19 AM
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103: But how do you directly measure consumption?

I mean, Piketty does note that pretty much all of the numbers we have access to are estimates of varying degrees of accuracy, so worrying about too much precision is just fooling ourselves.


Posted by: LizardBreath | Link to this comment | 05-20-14 8:20 AM
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106.1: I don't know. I haven't read the book and it's been close to twenty years since I took an economics class.


Posted by: Moby Hick | Link to this comment | 05-20-14 8:21 AM
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So I'm behind because somebody (not naming any names) said we weren't starting before Wednesday. A couple of quick comments.

From 54:


On the "rising tide lifts all boats thing". .. I had usually understood it ...but rather

(b) stuff sets get produced more efficiently/cheaply, so even people on the lower end of the income scale have a higher standard living, independently of their gains or losses in real income.

If you have a higher standard of living for the same income, then by definition you have a higher real income.

82.2: I think France fell behind population-growth-wise because of the French Revolution and the Napoleonic Wars.


Posted by: Walt Someguy | Link to this comment | 05-20-14 8:25 AM
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From some dude:

"What are national saving and the national saving rate?

National saving is the total amount of saving by individuals, businesses, and the government. The national saving rate is national saving measured as a percentage of national income. "


so sI= national savings = change in capitol


Posted by: lemmy caution | Link to this comment | 05-20-14 8:25 AM
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"the fact is that the most conspicuous example of soaring inequality in today's world--the rise of the very rich one percent in the Anglo-Saxon world, especially the United States--doesn't have all that much to do with capital accumulation, at least so far. It has more to do with remarkably high compensation and incomes."

Other reviews—and one of the interviews with Piketty linked here recently—have suggested that insane compensation, especially on the part of managers, should really be considered covert income from capital rather than (merely) the salary it appears to be. If I could remember who it was who was saying this and why this comment would be better!


Posted by: nosflow | Link to this comment | 05-20-14 8:27 AM
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or 101


Posted by: lemmy caution | Link to this comment | 05-20-14 8:29 AM
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109: Just because it's nagging at me, you mean capital with an 'a', not the domed white buildings you find with state legislatures in them.


Posted by: LizardBreath | Link to this comment | 05-20-14 8:30 AM
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110: I don't know that an economist could model this, but I see high salaries as reflecting executives being treated culturally like capital-holders - either themselves in the ranks of the capital-holders or friends of theirs, so they get a generous cut of the spoils just from being on the same side.


Posted by: Minivet | Link to this comment | 05-20-14 8:32 AM
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I think France fell behind population-growth-wise because of the French Revolution and the Napoleonic Wars.

I remember reading a serious suggestion (in a history of the period) that it was due to French soldiers "bringing knowledge of local contraception techniques home from the Middle East". I have no idea what this could be referring to.


Posted by: ajay | Link to this comment | 05-20-14 8:33 AM
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110: I was having that same thought. Talking about the return on capital is generally going to mean the return received by the owners of the capital. But here, the exaggerated compensation received by top managers seems to be much more related to the amount of capital they control than to anything about the value of their labor; is there some coherent way to think of the control such managers exert as a type of shared ownership of the capital rather than a type of labor?


Posted by: LizardBreath | Link to this comment | 05-20-14 8:34 AM
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114: Something to do with sand?


Posted by: LizardBreath | Link to this comment | 05-20-14 8:38 AM
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108.2/114. My question wasn't why French population growth stalled when it did, so much as why it started a hundred years before the rest of Europe.


Posted by: chris y | Link to this comment | 05-20-14 8:41 AM
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Actually, I assumed that the story of French population stability was about having become densely populated earlier than other European countries, to a point where the population was stable for Malthusian reasons (poverty leading to later marriage, lower birth rate, higher death rates from poor nutrition). Is that not right?


Posted by: LizardBreath | Link to this comment | 05-20-14 8:44 AM
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so sI= national savings = change in capitol

What about depreciation?


Posted by: Moby Hick | Link to this comment | 05-20-14 8:44 AM
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My last was crossed with Chris, but yeah, I got exactly the same impression.

Literal agricultural fertility? France could just support a denser population at a fairly low technological level than the rest of Europe? (I have no idea if this is true, but maybe?)


Posted by: LizardBreath | Link to this comment | 05-20-14 8:46 AM
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114: "...and a pessary made from crocodile dung."


Posted by: Moby Hick | Link to this comment | 05-20-14 8:47 AM
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113/115: I guess you could distinguish "rentier income" as a type of return on capital, but given they don't own the capital that seems a bit perverse.

As 113 gets at I think it's more useful to think of the very highly compensated as elite renewal. They are being given a step on the ladder of capital by the owners of capital through inflated compensation. This inflated compensation comes at the cost of lower returns on capital, which capital owning elites are willing to absorb for various social reasons, eg they think they are young go-getters who will keep their inherited wealth scions on their toes and teach them a thing or two. Or they are inherited wealth scions themselves forced to compete for control of the inherited capital, like the Murdoch children.

Its kind of an extreme capitalist version of marrying up with all the social climbing dynamics implied by that.

You could use this to argue this is the best of all possible meritocracies or to sneer at rich brats I think.


Posted by: conflated | Link to this comment | 05-20-14 8:55 AM
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France has much much more arable land than most other European countries. I don't know how true that was in the middle ages, but I'd imagine it wasn't vastly different. France has 3 or 4 times the amount of arable land that the UK does, for example.


Posted by: nattarGcM ttaM | Link to this comment | 05-20-14 8:55 AM
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Am I the only one who found the concise graphs of historical distribution of world production by region astoundingly clear expressions of colonialism, then? Including the African question mark.


Posted by: conflated | Link to this comment | 05-20-14 8:59 AM
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55: I think the idea that r>g is a "law" is misleading. Really, it's an observed empirical regularity that is present when capital is arranged in particular ways and when particular conditions about growth apply

70: r>g being a observation rather than a law is a good point.

Piketty says (also in Major Conclusions, Intro):

The more perfect the capital market (in the economist's sense), the more likley r is to be greater than g.

He hasn't elaborated this claim at this stage in the book, but taking it at face value seems to suggest that frictionless market exchange + capital-intensive productive industries will lead to spiraling inequality in the absence of drastic exogeneous shock or political intervention (i.e., political interventions more drastic than any of those tried by the historical or contemporary welfare states of the developed world).


Posted by: Criminally Bulgur | Link to this comment | 05-20-14 8:59 AM
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I'd think, but am not sure, that Germany had more arable land but a much later slow down in population growth. I think relatively early political centralization might have helped France.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:00 AM
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Piketty ascribes it to early "de-Christianization" in the next chapter.


Posted by: puggle | Link to this comment | 05-20-14 9:02 AM
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Longer growing season? I'm pulling my sense of Germany v. France out of nowhere in particular, but Germany's further north and with much less of a coastline to moderate temperatures.


Posted by: LizardBreath | Link to this comment | 05-20-14 9:02 AM
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127: Prior to the revolution, when the bishops spoke against dung pessaries, people listened.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:04 AM
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I think high executive compensation is more institutionally driven than, e.g., 122 would suggest. For whatever reason (you can argue about why) there is a whole lot of capital locked up right now in publicly traded companies. The owners of that capital don't have direct control over the managers of those companies or their compensation, and so the managers are able to set their own compensation; effectively they divert a small percentage of the capital to themselves as it flows from one place to another. I don't think that thinking of this as purely a social or cultural preference on the part of the ultimate capital owners tells the whole story.


Posted by: widget | Link to this comment | 05-20-14 9:06 AM
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First, there is one, and only one, force driving a reduction of inequality under capitalism. While it's very important, and really has reduced inequality by an enormous amount, it isn't really "capitalist" at all. It's the diffusion of knowledge .... But Piketty makes clear that this is driven by a knowledge-
diffusion effect, and not, in any very important way, by "free trade," international movements of capital, or other purely economic arrangements.

I think this is a bit strong based on p70 (loc 1298 in the kindle whatever the fuck that means)? Diffusion of knowledge isn't quite enough unless there is have a very specific definition I am missing.

"The Asian countries that have lately been catching up with the rest of the world have clearly benefited from openness to foreign influences. But they have benefited far more from open markets for goods and services and advantageous terms of trade than from free capital flows."

ie, free trade has helped the poor world a treat, but by dropping protectionist trade barriers on goods and services, eg slashing clothing tariffs, car tariffs, food tariffs etc. But letting Mrs Western Capitalist fund the capital your mine doesn't appear to help much. He goes on to note that China still has capital controls, these include both foreign exchange controls and limitations on investment in Chinese property and stock exchanges.

(Great summary Halford lurker appreciation vibes your way)


Posted by: conflated | Link to this comment | 05-20-14 9:08 AM
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Yes, the line quoted in 125 is the thing that makes me think we're eventually going to get an argument that r > g is not just an empirical regularity but that it follows from some dynamics. (Um, I'm sure I'm abusing language here, since I don't know if economists use the word "dynamics" or what they mean by it. I mean it would follow from some causal mechanism with basic assumptions about the way the economy functions.)


Posted by: essear | Link to this comment | 05-20-14 9:12 AM
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126. Yes, but Germany also had a much later start in population growth, as did Britain. In respect of Britain, the traditional story is that that start was enabled by the agricultural and industrial revolutions, which makes sense given that Britain has limited agrarian land. But France was not a leader in agrarian reform - it remained semi-feudal until 1789, yet Piketty dates its population take-off to a hundred years before anywhere else. Why?


Posted by: chris y | Link to this comment | 05-20-14 9:12 AM
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130: yes, it is institutional, but isn't it weird that it is tolerated by not only workers (save a few occupy protests here and there) but also owners of capital? Why should big capitalists tolerate their managers high compensation in a way they would not tolerate in non-management? Absolute numbers, yes, but also social and cultural reasons (I propose with little scholarly backing), not least that they actually talk to their managers.

It seems like the same dynamic as tipping the waiter but not the dishpig.


Posted by: conflated | Link to this comment | 05-20-14 9:13 AM
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Germany also didn't exist in 1789-- http://www.zonu.com/detail-en/2009-12-21-11431/Holy-Roman-Empire-1789.html

So no census, in contrast to France and Britain. Looking at Austria-Hungary, slowly growing population from 1789 onwards. http://www.tacitus.nu/historical-atlas/population/centraleurope.htm

For the 18th century, here's a claim of 1.5% growth per annum for Bohemia, no industrial revolution necessary, just the absence of war and plague.


Posted by: lw | Link to this comment | 05-20-14 9:13 AM
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133: I was suggesting that Germany had a later start in population growth because of its lack of political unity and the resultant instability and your occasional Thirty Years War kind of thing.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:15 AM
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France's demographic stability is partly a result of the Revolution creating a nation of smallholders rather than serfs/tenant farmers, partly Napoleonic law changing inheritance laws, meaning that land would get split up if you had lots of kids. The smallholders nation thing limited the rate of urbanization and serious industrialization started much later than in the UK. Plus the withdrawal method works in the aggregate. Maupassant has a fun section in the generally crappy Une Vie where the wife wanting a kid is consulting with her priest on how to prevent her husband from pulling out (Try being on top is the answer, and I'll lean on your husband to make sure he remembers that a good Christian husband must provide his wife with sex even if he's getting his fun with the neighbour's wife.)

As to growth in the eighteenth - it's less impressive in percentage terms than in absolute terms. France started out with a very high base. As people have said above, France is remarkable blessed with good agricultural land suited to premodern labor intensive farming. And lots of navigable rivers going off in various directions allowing a decent amount of cross regional distribution making it possible to limit local famines. Add in political stability following the disruptions of the Wars of Religion and dynastic struggles plus what by the standards of the time was a reasonably effective central government and you have your answer.


Posted by: teraz kurwa my | Link to this comment | 05-20-14 9:18 AM
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135 etc: A number of historians now see the Industrial Revolution as less of an epochal event and more of an evolution of increases in productivity before large scale mechanisation. Eg, In CA Bayly's The Birth of the Modern World, which is itself a survey of sorts,

"Fifty years ago, if professional historians or students had been asked what was the major economic change taking place at world level in the second half of the eighteenth century, they would probably have pointed to the Industrial Revolution and the beginnings of mechanical production in Britain. No one can doubt the long-term importance of industrialization for how people lived across the world. But many historians are now skeptical that the Industrial Revolution had proceeded very far by 1800 and have downplayed its significance even for most of western Europe and America before the 1830s" .
...
He goes on to introduce the concept of the "industrious revolution", a kind of pre-mechanization conventionalization and economically productive reorganization of society in Europe and China accompanying early modern society, including changes in colonial and global trade.

"Families acquired new "packages" of consumer items which worked on each other to produce yet larger gains in productivity and social satisfaction. For instance the consumption of coffee, and, later, tea went along with the purchase of sugar, fine breads, and easily replaceable plates off which to eat these items. The resulting package - let us call it "breakfast" - gave people a higher calorific intake, a new time discipline, and a new pattern for sociability and emulation in the household".

After that wall of text I don't have anything to hand to relate it to France specifically, though I guess it might have come sooner there being as it was large and western European and rich.


Posted by: conflated | Link to this comment | 05-20-14 9:24 AM
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let us call it "breakfast"

They had a nice idea, but that's still a stupid name.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:26 AM
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135. A German state didn't exist until 1871 in its modern sense, but Germany did, and the name was in common use; if you're going to study European economic history, you're going to have to live with the fact that political entities changed all the time, and still do (see Ukraine, sovereignty over Crimea).

Am I right in interpreting your suggestion as that the default population growth in countries with lots of agrarian land would have been high in the eighteenth century absent random constraining factors, and that France was the only major country which happened not to be so constrained? That would be interesting, because it would raise the question of why then rather than earlier (I know France was at war for most of the 17th century, but it was at war for most of the 18th too.) It's also a very extreme example of the "shit happens" view of history.


Posted by: chris y | Link to this comment | 05-20-14 9:31 AM
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More directly related, where does he get the depreciation =10% figure from? And is it really reasonable to treat it as constant across countries and eras?


Posted by: teraz kurwa my | Link to this comment | 05-20-14 9:34 AM
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I think I prefer 137.2 on reflection.


Posted by: chris y | Link to this comment | 05-20-14 9:34 AM
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141: No idea and I highly doubt it.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:37 AM
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140.2 Yes, I do not think that France was unique. Spain and Portugal would be the other places to look at with uninterrupted recordkeeping.

I don't have a clear answer, but I do not see any reason to look at France as an exception. Here is Braudel on grain prices and wages.


Posted by: lw | Link to this comment | 05-20-14 9:38 AM
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140: I'm not ready to give up on the wars totally. It's true that France was at war, but the wars were mostly not on French soil in the pre-revolutionary 18th century. That's got to make a difference.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:40 AM
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138. Christopher Hill argued that one of the most important changes wrought by the Puritan revolution in England was the introduction of the regular working week, six days with Sundays off, instead of previously the huge number of high days and holy days that people might or might not decide to take off at their own whim, which essentially made management as we now understand it impossible.


Posted by: chris y | Link to this comment | 05-20-14 9:41 AM
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Stupid Puritans.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:43 AM
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I should have probably looked up where various wars were in the 18th Century, but I seem to recall most of them being in Not-France, but mostly I only know of the Thirty Years War and that was 17th Century.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:48 AM
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144: I'd think that Spain and (to a lesser extent) Portugal would be confounded relative to France by A. much less arable land, and B. an overwhelming colonial experience - that is, the economic life of Spain was dominated by its New World colonies from ca. 1500 to somewhere between 1750 and 1800 (IIRC). I don't know exactly what population effects you'd expect from that, but I have to think that it's different from France, whose colonial holdings were relatively de minimus during that era.


Posted by: JRoth | Link to this comment | 05-20-14 9:49 AM
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148: There's the War of the Spanish Succession, but I have to admit that I'm not terribly sure where that took place mostly.


Posted by: LizardBreath | Link to this comment | 05-20-14 9:52 AM
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There was also the Seven Years War, which took place in Braddock, PA and other places.


Posted by: Moby Hick | Link to this comment | 05-20-14 9:55 AM
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All the wars took place in Belgium, because it's nice and flat and you can lay out your armies properly.


Posted by: Tom Scudder | Link to this comment | 05-20-14 9:57 AM
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Ok unpacking a few thoughts rather than straight comment replies.

I love the empiricism of this book, and I think it makes it very hard to argue with in the traditional economics / politics forms. In some very real ways, because you have to move onto the ground of Piketty's data before you even start arguing with him, and he has been putting it together for years. Part of the reason the right wing response has been so pathetic is it hasn't engaged this data at all. Some of the Marxist response has been similar eg

http://thenextrecession.wordpress.com/2014/05/19/david-harvey-piketty-and-the-central-contradiction-of-capitalism/

Piketty may backhand MIT as a "university near Boston" in his early notes but he has collaborated with a bunch of US development economists and economic historians on this, two he mentions are Abhijeet Banarjee at MIT and Nancy Qian at Yale. The international scope of the data is also a really interesting aspect of this work, and I wonder if there is a broader school of "evidence-based economics" that I didn't realize existed but which Piketty represents one branch of. Another branch is in development economics and focused on small randomized trials, eg around Banarjee.

I seem to have delurked at scale here, I have commented before and lurked for a while. You guys are funny, you know? So anyway some intro seems fair: I'm not an economist. I'm not from the US. Politically I am to the right of most of you but I didn't come here for a fight and maybe you are right sometimes you know and what about r>g eh and stuff. This a genuinely interesting book and I'm enjoying getting my teeth into it.


Posted by: conflated | Link to this comment | 05-20-14 9:57 AM
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148. 18th century wars were in not-France entirely as far as I can remember, until the revolution, after which there were various brief invasions in the early 1790s, and then again of course in 1813.


Posted by: chris y | Link to this comment | 05-20-14 10:01 AM
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Haven't you been around for a while? I'm awful at keeping track of infrequent commenters, but I thought I'd been seeing you here occasionally for quite some time. (Not that the introduction isn't welcome. And having people around who aren't on precisely the same political wavelength is always a good thing.)


Posted by: LizardBreath | Link to this comment | 05-20-14 10:02 AM
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152 is largely true.


Posted by: chris y | Link to this comment | 05-20-14 10:02 AM
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Hence the lyrics of "Over the hills and far away."


Posted by: LizardBreath | Link to this comment | 05-20-14 10:04 AM
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157. Not the Led Zeppelin song, then.


Posted by: chris y | Link to this comment | 05-20-14 10:09 AM
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"so sI= national savings = change in capitol

What about depreciation? "

I was ignoring it. Pikitty takes it out of the National Income term:

"Note 7: Above we use net-of-capital-depreciation production function Y=F(K,L) (i.e. Y = net domestic product), and net-of-capital-depreciation savings S=sY. Sometime people use gross production function Y=F(K,L) (i.e. Y = gross domestic product). Typically capital depreciation (amortissement) KD = about 10%-15% of Y, or about 2% of K. If Y=F(K,L) = gross domestic product, S=sY = gross savings, and capital depreciation KD = δK, then the Harrod-Domar-Solow equation becomes: β* = s/(g+δ)

Example: If s=10%, g=0% and δ=2%, then β* = 500%. I.e. in spite of g=0 & s>0 we do not get infinite accumulation. This is because a 10% gross saving rate is just enough to compensate a depreciation rate of 2% with a 500% wealth-income ratio: i.e. in fact there's zero new saving in equilibrium.

It is probably more meaningful to always think in net-of-depreciation-terms, i.e. used national income instead of GDP, net profits instead of gross profits (in private accounting, depreciation is always deducted from profits), net savings instead of gross savings, etc.
"


Posted by: lemmy caution | Link to this comment | 05-20-14 10:11 AM
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157: Our 'prentice Tom may now refuse
To wipe his scoundrel Master's Shoes,
For now he's free to sing and play
Over the hills and far away.

Over the Hills and o'er the main,
To Flanders, Portugal and Spain,
The Queen commands and we'll obey
Over the hills and far away.

We all shall lead more happy lives
By getting rid of brats and wives
That scold and bawl both night and day -
Over the hills and far away.

Over the Hills and o'er the main,
To Flanders, Portugal and Spain,
The Queen commands and we'll obey
Over the hills and far away.

(1706: referring to the Succession of Wars, or Wars of Succession.)

"I sometimes wondered why there were so many volunteers. Mostly it was mere hysteria... unhappy men too. Unhappy in their jobs, unhappy with their wives, doubting themselves. Hapy men don't volunteer. They wait their turn and thank God if their age or work delays it."


Posted by: ajay | Link to this comment | 05-20-14 10:24 AM
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insane compensation, especially on the part of managers, should really be considered covert income from capital rather than (merely) the salary it appears to be
This has always seemed reasonable to me. Doing otherwise allowed economists to conclude that, on average, everything was fine with labor compensation. Financial managers are often compensated directly proportional to the assets they control, and CEOs are compensated proportional to the size of their company. They are payed as if they are owners.


Posted by: | Link to this comment | 05-20-14 10:34 AM
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That was me.


Posted by: Eggplant | Link to this comment | 05-20-14 10:34 AM
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I sometimes wondered why there were so many volunteers.

Shilling a day, bloomin' good pay. Lucky to touch it, a shilling a day.


Posted by: chris y | Link to this comment | 05-20-14 10:39 AM
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"Doing otherwise allowed economists to conclude that, on average, everything was fine with labor compensation. Financial managers are often compensated directly proportional to the assets they control, and CEOs are compensated proportional to the size of their company. They are payed as if they are owners."

It should be treated as income. Especially, it should be taxed as income rather than under capitol gains. In particular, hedge fund managers should not getaway with any carried interest shenanigans.

http://en.wikipedia.org/wiki/Carried_interest


Posted by: lemmy caution | Link to this comment | 05-20-14 11:02 AM
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Definitely it should be treated as income for tax purposes; but that's an interesting connection, that we're theorizing that executive compensation is culturally treated as if it were getting a share of the capital being accumulated, rather than being paid for labor, and that is exactly what hedge fund managers (wrongly) argue is happening to evade taxes.


Posted by: Minivet | Link to this comment | 05-20-14 11:10 AM
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Also speaking of which, we could go a fair distance in evening things out just by equalizing tax rates for capital gains versus income, right?


Posted by: Minivet | Link to this comment | 05-20-14 11:11 AM
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I wasn't thinking in terms of tax consequences, but if I'm making the rules capital gains will be taxed at higher rates than ordinary income.


Posted by: Eggplant | Link to this comment | 05-20-14 11:12 AM
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166 would certainly be a good idea over here. I would think capital gains should just be treated as income and taxed as such. And there should be a 50% marginal tax band for incomes above, say, $200, 000.

That's for starters.


Posted by: chris y | Link to this comment | 05-20-14 11:28 AM
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But France was not a leader in agrarian reform - it remained semi-feudal until 1789, yet Piketty dates its population take-off to a hundred years before anywhere else. Why?

Widespread cultivation of the potato?


Posted by: | Link to this comment | 05-20-14 11:30 AM
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169. Interesting idea.


Posted by: chris y | Link to this comment | 05-20-14 11:33 AM
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If you want to find the CEO, I know where he is,
I know where he is, I know where he is,
If you want to find the CEO, I know where he is,
He's flying in the company jet.

If you want to find the director, I know where he is,
I know where he is, I know where he is,
If you want to find the director, I know where he is,
He's cashing another option in.

If you want to find the VP, I know where he is,
I know where he is, I know where he is,
If you want to find the VP, I know where he is,
He's drinking on the corporate card.

If you want to find the manager, I know where she is,
I know where she is, I know where she is,
If you want to find the manager, I know where she is,
She's getting another bonus check.

If you want to find the supervisor, I know where he is,
I know where he is, I know where he is,
If you want to find the supervisor, I know where he is,
He's totaling up his 401K

If you want to find the associate, I know where she is,
I know where she is, I know where she is,
If you want to find the associate, I know where she is,
She's being escorted out by security.


Posted by: Natilo Paennim | Link to this comment | 05-20-14 11:36 AM
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And there should be a 50% marginal tax band for incomes above, say, $200, 000.

How about 3% higher above $450,000?


Posted by: Opinionated Barak Obama | Link to this comment | 05-20-14 11:38 AM
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169: Not to mention the onions.


Posted by: Natilo Paennim | Link to this comment | 05-20-14 11:40 AM
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Mr President, if you want a 53% tax band on incomes above $450,000 as well, far be it from me to stop you.


Posted by: chris y | Link to this comment | 05-20-14 11:40 AM
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Another infrequent commenter here, wanting to thank Halford for the excellent summary.

I may be misremembering where in the early chapters the various discussions occur, but it seems we're getting a little ahead of Piketty in struggling with the shifting boundaries between capital gains and wage income for highly compensated managers. He does write later about the data problems and uncertainties that enter his inequality measures, and certainly gets into this question of how the value of CEOs is (or isn't) reasonably determined. But in Chapter 1 he is concerned about overall income and savings flows, not in tracking which individuals benefit.


Posted by: astronomer | Link to this comment | 05-20-14 12:05 PM
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The freakout continues: https://twitter.com/rortybomb/status/468819792414392321


Posted by: Minivet | Link to this comment | 05-20-14 12:11 PM
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CEO pay is a heavily researched question in economics. Like most heavily researched questions in economics, they don't know the answer. Here's a survey paper that admits as much.

I found a copy of the Kaldor paper that's the source of the "Kaldor facts", here (warning, PDF).


Posted by: Walt Someguy | Link to this comment | 05-20-14 12:25 PM
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In contrast to the managerial power hypothesis, a growing literature argues that the growth in CEO pay is the efficient result of increasing demand for CEO effort or scarce managerial talent. One set of theories in this vein attributes the rise in CEO pay to increasing firm sizes and scale effects. If higher CEO talent is more valuable in larger firms, then larger firms should offer higher levels of pay and be matched with more able CEOs by an efficient labor market (Rosen 1981, 1982). Small increments in CEO talent can imply large increments in firm value and compensation because of the scale of operations under the CEO's control (Himmelberg & Hubbard 2000). Gabaix & Landier (2008) and Terviö (2008) develop this idea further by solving competitive and frictionless assignment models for CEOs under the assumption that managerial talent has a multiplicative effect on firm output. In this framework, and using specific assumptions about the distribution of CEO talent, Gabaix & Landier show that CEO pay should move one-for-one with changes in the size of the typical firm. Thus, they argue that the sixfold increase in average CEO pay between 1980 and 2003 can be fully explained by the sixfold increase in average market capitalization over that period.

Section 4.1, on various justifications for CEO pay, is quite the read.


Posted by: Eggplant | Link to this comment | 05-20-14 12:46 PM
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I asked the French historian currently in my living room Chris's question. It's before her period, but her impression was that even despite slow land reform, etc, agricultural innovations did spread during the 18th c and fuelled population growth (about 8 million in 80 years). I think, frex, that France adopted the potato earlier than England. I am planning on doing a little rooting around on the question when I'm not on a phone.


Posted by: Parenthetical | Link to this comment | 05-20-14 1:36 PM
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I am pwned!


Posted by: Parenthetical | Link to this comment | 05-20-14 1:37 PM
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Right, but you added a potato pun.


Posted by: Moby Hick | Link to this comment | 05-20-14 1:52 PM
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Completely unintentional. Those are the worst.


Posted by: Parenthetical | Link to this comment | 05-20-14 1:54 PM
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Tuber? I hardly even know her!


Posted by: JP Stormcrow | Link to this comment | 05-20-14 1:58 PM
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Oh shit, wait, reading group thread...

From the item in my comment 36, I'm thinking of economics as dueling narratives of wishful thinking. The winning one for the past few decades has been the one where many economists wishfully pretend that the people and entities with a lot of money who reward economists for saying that they are in the right are in fact in the right. Unsurprisingly, John Kenneth Galbraith was pithier: The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.


Posted by: JP Stormcrow | Link to this comment | 05-20-14 2:07 PM
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OK, a lot to respond to here.

On the 18th century demographics question, I think there may be a misunderstanding as to what Piketty was saying. This is a topic that I used to know something about, so I'm not going to dig up links here but just make assertions. Well, OK, one link. There was a general trend of population growth in the 18th century in most of Western Europe, certainly including Britain. There's no specific 18th century population boom in France to explain; that was a general European phenomenon; Prussia grew, if anything, by more than France did. France was the largest country in Western Europe by population in both 1700 and 1800, due to its unusually fertile area in the period (and also the disaster that was the 30 years war in Germany) but the population boom was Europe-wide.

France was the first country in the world show the "demographic transition" and had slower population growth starting in the early 19th century. Generally this is attributed to the spread of birth control, and also to some extent to land distribution in the revolution; smallholding peasants were inclined to smaller family size to avoid dividing up the inheritance.


Posted by: Robert Halford | Link to this comment | 05-20-14 2:21 PM
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184: That was my reaction to the theories presented in 4.1 of the CEO pay paper. I'm I'm deeply suspicious of any explanation that assumes pay is equal to marginal productivity, especially when that productivity is impossible to measure.


Posted by: Eggplant | Link to this comment | 05-20-14 2:25 PM
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On the CEO pay question, Piketty both says, very clearly and at length later in the book that in the United States in particular, the bulk of the current trend towards inequality has been driven by the pay for top managers, and thus pay for labor. Thus Piketty agrees with Krugman that CEO/manager pay is critically important for inequality right now in the United States, more so than r>g. He identifies r>g as a separate mechanism that can drive inequality even without the drive to pay CEOs a lot of money, but he still identifies it. He also is very clear that the growth of pay to bosses is the result of political/legal/institutional factors, not some natural law of the economy. This doesn't really get discussed in detail until Chapter 8 so we'll have to deal with it then, but he's very much aware of, and his numbers demonstrate that, the recent and specifically American increase in inequality is driven by high compensation for managers.

He's also emphasizes repeatedly that, to a significant extent, in the real world it is often impossible to disentangle "capital" from "labor" income, since "capital" and "labor" are abstractions. The classic example of the latter point is a small business, or a partnership like the law firm I'm in; does the pay to the owners of the law firm represent compensation for labor or their capital ownership of the firm? It's almost impossible to disentangle. That doesn't mean that in broad terms its impossible to talk about a difference between income from labor and income from capital and to attempt to quantify the difference.


Posted by: Robert Halford | Link to this comment | 05-20-14 2:28 PM
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185.2 corresponds with the consensus here, though I am wondering if the numbers for Britain include Ireland, as they are a lot higher than the ones I saw when looking up English stats.


Posted by: Parenthetical | Link to this comment | 05-20-14 2:29 PM
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175 is also right. The discussion of inequality itself between individuals doesn't start until Part III. Remember, one of the U-shaped curves he shows in the Introduction shows changes in the Capital/Income ratio; this is not at all the same thing as showing inequality between individuals, though it's an interesting measure of the growth and importance of private capital.


Posted by: Robert Halford | Link to this comment | 05-20-14 2:35 PM
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since "capital" and "labor" are abstractions

I've been thinking about the question of does it matter whether capital is persistent (possibly handed down over generations) or whether, for a given level of inequality, there is rapid change among who owns the capital.

This is a silly thought experiment, since in the real world people with capital are good at protecting it. But one of the claims made by libertarians, for example, is that if you followed their advice you might end up with a world with great inequality, but also more dynamic inequality (in the sense that there is more turn-over at the top of the heap) because government would do less to privilege or protect currently successful industries.

How much would it improve things, for example, if every year the government randomly picked 10 people who have assets worth over $100M and give 1/3 (or all) of their assets to a randomly selected person?

I don't know yet -- I haven't gotten far enough into the book to know what problems he things are caused by excess growth of capital.


Posted by: NickS | Link to this comment | 05-20-14 2:48 PM
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155: I guess it must have been a year or more, now I add it up. I don't comment very often, threads usually run away while I'm asleep.


Posted by: conflated | Link to this comment | 05-20-14 4:27 PM
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I want to see Piketty selfies for comparison.


Posted by: essear | Link to this comment | 05-20-14 7:23 PM
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Okay, who the hell agreed to let Halford go first? I think he has raised the bar too high. 'Here's my summary of the intro and first chapter, which is actually a brilliant and insightful synoptic analysis of the entire book'. No pressure!

Interesting to see how this thread has taken a historical turn. I was amused by Piketty's aside concerning the relative prestige of economics (as an academic discipline) in France versus the situation in the USA. In France, he suggests, economists cannot merely sneer at, or just plain ignore, the other disciplines: they (the economists) must pay attention, and must make some attempts at interdisciplinary. For Piketty, the most important not-economics discipline appears to be history.


Posted by: Just Plain Jane | Link to this comment | 05-20-14 9:08 PM
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I wonder if there is a broader school of "evidence-based economics" that I didn't realize existed but which Piketty represents one branch of.

Indeed there is, and it includes basically all economists outside of academia, and many within. When someone, whether a government agency or a private company, is paying you for economic analysis in support of its larger goals, they generally want that analysis to be based on some sort of evidence. If the Piketty book leads to greater general knowledge of the existence of this segment of the discipline, as opposed to the highly theoretical and often highly ideological segment that tends to get all the press, that will be a very good thing.


Posted by: teofilo | Link to this comment | 05-20-14 9:25 PM
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One thing I noticed in the first chapter that I would like to keep an eye on is Piketty's brief treatment of net income flows for countries and regions. (Page 68.) He says most continental blocs are in rough equilibrium, with the exception of Africa, where the income is 5% less than output, and 20% of the continent's capital owned by foreigners. Within continental blocs, there are flows to richer and out of poorer countries. Picketty's quick exposition brings to mind Wallerstein and Arrighi, but he doesn't draw any conclusions from these imbalances in Chapter 1. In the beginning of Chapter 2 (spoiler alert) he talks about how a small difference in growth rate can make a big difference over time. I will be interested to see if he takes on the question of whether small differences in income flows can make a cumulative difference.


Posted by: Bave | Link to this comment | 05-20-14 9:27 PM
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114: blowjobs and buggery? (No seriously I read something about the growth in non PIV sex in 19th century France as an explanation of falling growth.)


Posted by: Keir | Link to this comment | 05-20-14 10:00 PM
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In Frank Harris' My Life and Loves, he learns about cunnilingus from a French woman.


Posted by: Walt Someguy | Link to this comment | 05-20-14 10:16 PM
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I remember reading about a big sex panic about butt-fucking in late nineteenth century France. The book (article?) suggested there was little evidence that it was the standard form of contraception as opposed to pulling out. But that didn't stop the moral scolds worrying about kids-these-days.


Posted by: teraz kurwa my | Link to this comment | 05-20-14 10:31 PM
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Plus ça change, eh?


Posted by: teofilo | Link to this comment | 05-20-14 10:34 PM
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The library now apparently has 7 copies of Piketty, and more on order, but I'm still far down the hold list. If people give up and return it quickly, I might have it by the later weeks of the reading group.


Posted by: fake accent | Link to this comment | 05-20-14 11:26 PM
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As for the contraception subthread, obligatory archive reference.


Posted by: fake accent | Link to this comment | 05-20-14 11:34 PM
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Also, Londa Schiebinger's work looks interesting.


Posted by: fake accent | Link to this comment | 05-20-14 11:46 PM
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I've only read some of her stuff, but it is good.


Posted by: Parenthetical | Link to this comment | 05-21-14 12:49 AM
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The cock joke ratio is a lie!


Posted by: conflated | Link to this comment | 05-21-14 2:09 AM
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There's shrinkage when it's cold.


Posted by: Moby Hick | Link to this comment | 05-21-14 5:15 AM
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laydeez ...


Posted by: JP Stormcrow | Link to this comment | 05-21-14 5:16 AM
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195: Though Piketty explicitly downplays the role of FDI / foreign capital in development, there is seemingly a recognised phenomenon of countries being debtors during early industrialisation. I was hoping to find comparative historical FDI by country, maybe there is some of that later in the book, but I did run across this paper by Brezis on FDI for Britain in the late eighteenth - basically Dutch capital was a significant factor.

http://piketty.pse.ens.fr/files/Brezis95.pdf

(From Piketty's website - economists seem pretty good about free versions of key papers in general but that's not based on any hard data)


Posted by: conflated | Link to this comment | 05-21-14 9:32 AM
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With his projections of low growth as the likely state of developed economies over the next decades, there's actually a whiff of Fukuyama and the End of History about Piketty.


Posted by: conflated | Link to this comment | 05-21-14 9:49 AM
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I will be interested to see if he takes on the question of whether small differences in income flows can make a cumulative difference.

If he's talking about 5% of National Income leaving the county, and an average return on capital of 5% wouldn't that work out to .25% reduction in annual growth rates, compared to investing that money within the country?

there's actually a whiff of Fukuyama and the End of History about Piketty.

Interesting . . .


Posted by: NickS | Link to this comment | 05-21-14 10:03 AM
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there's actually a whiff of Fukuyama and the End of History about Piketty.

Except that rather than the end of history, he seems to be predicting Interesting Times, if nothing is done to prevent them.


Posted by: chris y | Link to this comment | 05-21-14 11:02 AM
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Interesting article this morning by DeLong about Piketty.

It picks up on (but doesn't necessarily answer) some of the questions raised in this thread.

To my comment about the description of France in the introduction.

1) Piketty's book is not a book about the U.S. today: this is a book that is, mostly, about primarily France and secondarily Britain in the Belle Époque back before World War I and the Ancien Régime back before the Napoleonic wars.

The book is also, perhaps, about the U.S. and the North Atlantic in 2070 or so, when the processes that Thomas Piketty points to that have placed the U.S. and the rest of the North Atlantic on the Bell Époque will have had some time to gather force and speed.

To Heebie's question about high taxes

We do not know the future of the wedge [profit from capital which is not retained by the owners of capital]. I think it is important, however, to underscore how malleable it is, and how many elements enter into it. It is not just war, revolution, and confiscation plus the polity's taste for social-democratic progressive redistribution via taxes and spending programs. Conspicuous consumption and conspicuous contributions to charitable causes as ways of playing intra-elite social-status games matter to. The second of these was, in fact, Andrew Carnegie's proposed solution to what he saw as the problem of the potential dominance of inherited wealth: make it socially-uncool among the 400 to not give nearly all of your wealth away. Then there is Schumpeterian creative destruction of the wealth of heir and heiress plutocrats who want to exercise power over institutions and who have thus failed to diversify into rising industries. And, last, there is destructive destruction: legal and illegal fraud to separate from their wealth inheritor and inheritrix fools who would never have had the meritocratic chops to acquire it.

Posted by: NickS | Link to this comment | 05-22-14 8:16 AM
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OK, finished Chapter 1.Let's discuss.


Posted by: JP Stormcrow | Link to this comment | 05-23-14 6:22 AM
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Has someone linked to this yet? Do you Pikettybots even care that you're being scammed? Sheeple!


Posted by: Von Wafer | Link to this comment | 05-23-14 11:46 AM
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Picketty failed to carry the 2 on page 467. The whole book is a fraud!


Posted by: Spike | Link to this comment | 05-23-14 11:52 AM
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Annoying registration required. Fuck that.


Posted by: Tom Scudder | Link to this comment | 05-23-14 11:59 AM
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I managed to get around it. When I clicked on the "fuck that" button, it redirected me to the front page, where it was the number one story. So I clicked on that link, and it worked.


Posted by: Spike | Link to this comment | 05-23-14 12:04 PM
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Keeps bouncing me back to the front page. I refuse to bother with registering just to be trolled.


Posted by: Tom Scudder | Link to this comment | 05-23-14 12:15 PM
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213: "after we edited the spreadsheets in a totally fair way that was not at all an effort to undermine his conclusions, they no longer supported his conclusions! We will obviously not link to our edited spreadsheets, but we demand answers!"


Posted by: Sifu Tweety | Link to this comment | 05-23-14 12:19 PM
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218. Giles does link to the details of his objection, here:
http://blogs.ft.com/money-supply/2014/05/23/data-problems-with-capital-in-the-21st-century/

G's claim (that Piketty's smoothing affects the conclusion) is incorrect for the US and France. This from G's own presentation re: France and Saez re: US. I can't tell whether G's claims about the UK data series make sense. Doubt it, what he's published here is ankle-biting. But he has published the details of his objection.


Posted by: lw | Link to this comment | 05-23-14 12:55 PM
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Yeah, links to FT are generally intolerable with the registration demands. Its up there with Quora.


Posted by: Spike | Link to this comment | 05-23-14 12:55 PM
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The piece in 211 is definitely interesting, and something we should definitely refer back to often. I think it gets a lot wrong (including the part "what is this book about"), at least for any reader who is not a professional economist. I'm tempted to write a really unfair, mean summary of the linked piece but DeLong is definitely a guy on the side of the angels, I don't really know economics, and I guess these red-captioned posts are supposed to have a higher level of discourse than Unfogged Regular.


Posted by: Robert Halford | Link to this comment | 05-23-14 1:02 PM
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Though we could talk about my idea that any problems actually come from another, much less well-known, French economist named Thomas R. Piketty. Prove me wrong.


Posted by: Robert Halford | Link to this comment | 05-23-14 1:04 PM
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Dude, write the mean summary. Someone's got to rescue from this argument about Silver, or I'm going to get myself disbarred somehow.


Posted by: LizardBreath | Link to this comment | 05-23-14 1:06 PM
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I can't read far into any DeLong piece before I hit something like this and get angry:

On top of that we have the growth of labor productivity. It is not just that the number of people and workers in the economy grows. As technology improves, labor productivity grows as well. Thus even a wealth concentration that spends only its income and does not dip into capital becomes less salient over time, economically and also politically, sociologically, and culturally.

In context, by "salient" he seems to mean poorer, and I have to conclude that he is assuming labor's compensation is equal to their marginal productivity, which has never been true and the ratio has been dramatically worsening for the last forty years.


Posted by: Eggplant | Link to this comment | 05-23-14 1:12 PM
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I second the motion for a mean summary, and as long as I'm requesting work, could lw, who seems to have access, flesh out G's claims?


Posted by: Eggplant | Link to this comment | 05-23-14 1:15 PM
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223: If you'd read the documents in the original French, you wouldn't be making the claims you're making.


Posted by: Josh | Link to this comment | 05-23-14 1:16 PM
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So did anyone else catch the weird endnote numbering error in chapter one? Or is that just something that my edition has?


Posted by: nosflow | Link to this comment | 05-23-14 1:23 PM
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In context, by "salient" he seems to mean poorer, and I have to conclude that he is assuming labor's compensation is equal to their marginal productivity, which has never been true and the ratio has been dramatically worsening for the last forty years.

I think he means "salient" as "size relative to the economy as a whole." So even if the money generated by economic growth is going to other capitalists it will still start to "drown" out the inherited wealth.

So somebody who had a bunch of stock in Texas Instruments in 1951 and cashed out in the 70s will have less money than somebody who had a similar stake in Cisco* and cashed out in the 90s -- because the economy as a whole was much larger in the 90s than in the 70s Cisco was able to grow bigger in the same time frame.

Dude, write the mean summary. . . .Dude, write the mean summary. . . .

Seconded.

* I tried to pick a reasonable pair of companies, but I'm sure there are many reasons why it makes no sense to compare them.


Posted by: NickS | Link to this comment | 05-23-14 1:26 PM
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Eh, the mean, unfair summary was something like:

"If I ignore the empirical evidence Piketty presents, narrowly and unfairly summarize the conclusions and purpose of the book, ignore the caveats Piketty provides, and translate one of the book's actual conclusions into a confusing, non-illuminating mathematical formula using variables that I've made up from whole cloth, I can come up with a theoretical sense in which Piketty's predictions might be wrong. This helps me pretend that I haven't basically wasted my extremely well-intentioned life and very smart, historically-minded brain peddling right wing ideological bullshit to undergrads. Also, other economists will appreciate what I've just done."


Posted by: Robert Halford | Link to this comment | 05-23-14 1:29 PM
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I think he means "salient" as "size relative to the economy as a whole." So even if the money generated by economic growth is going to other capitalists it will still start to "drown" out the inherited wealth.
...unless they capture that productivity. Which is what, empirically, is happening.
DeLong's model ( (W/Y)* = [ρ/(n + g + ω)]^(1/λ) ) makes this bad assumption explicit: the wealth to income ratio (W/Y) will drop if labor productivity (g) grows, unless λ (the extent to which greater wealth accumulation enhances worker bargaining power or (if you prefer) reduces capital's marginal product) is less than one, something he considers unlikely.


Posted by: Eggplant | Link to this comment | 05-23-14 1:33 PM
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Caveat: I am basing this on a partial, quick read, so it's possible I'm being unfair to DeLong.
DeLong assumes that as wealth accumulates labor should have more bargaining power, and so the return to wealth should fall. This ignores distributive effects (as DeLong habitually does), for if that accumulation is held by fewer and fewer people there is no loss in bargaining power.


Posted by: Eggplant | Link to this comment | 05-23-14 1:37 PM
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DeLong assumes that as wealth accumulates labor should have more bargaining power,

I thought he did a good job of presenting some of the various arguments. First, the argument that he attributes to Piketty about why the wealthy will not lose bargaining power:

Piketty thus assumes almost as a matter of course that the wealthier are the wealthy, the more they successfully manage the politics of the political system, even one that is in constitutional-legal terms radically egalitarian and democratic, in order to enhance the bargaining power of wealthholders. The way Piketty sees it, neoclassical economists claim that theory tells them that increasing capital-output ratios must exert strong downward pressure on the rate of profit, but experience tells us that it does not. The neoclassical assumption that λ = 1 was adopted to make sense of a world in which the wealthholder share of income did not move. But that is not the world we live in. And, the way Piketty sees it, it is profoundly silly to presume as a baseline case that the wealthholder share of income is constant-that nothing can move it-when things clearly do move it. And it is even sillier to argue from this false theory that nothing affects the wealthholder share of income that the channels Piketty points to could not affect the wealthholder share of income.

But I also appreciated the challenge he set for himself (or, rather, for the generic neo-classical economist).

The things that Piketty says raise inequality-low n, g, and ω-are also the very things that raise real wages. The coming of the plutocrats and a very high societal wealth-to-annual-income ratio is then an unmitigated boon to the working class.

Wait, what? That's an interesting comment. I want to come back to that. But I also want to point out that it seems odd to accuse DeLong of ignoring distributive effects when he has an entire section (VI) about why the future Piketty describes would be bad, and the reasons to want to avoid seeing his predictions come true.


Posted by: NickS | Link to this comment | 05-23-14 1:46 PM
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225. a) http://bugmenot.com/view/ft.com Not sure about ft in particular, but most shitty cookie-based security sees a private-mode browser (or an instance of IE) as a new user that has never come to the site before.

b) G points out where Piketty extends the shitty or inconsistent primary data on wealth-- P adds some constant number (based on a single time point) to the available 1% wealthiest time series to get the a 10% time series to plot. Other cases also, but that type of thing. Conclusions unchanged where data is strongest (income), so this is methodological ankle biting of the weakest data, but done hysterically. G is either dim or a shill, I don't much care which.

IMO This is a little like the criticism of historical surface temperature data which changes methodology in the middle of the 20th century-- "You added something before 1950!!!!!"


Posted by: lw | Link to this comment | 05-23-14 1:48 PM
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232.last: I meant he was ignoring it in his model. He does agree that inequality is bad.


Posted by: Eggplant | Link to this comment | 05-23-14 1:51 PM
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DeLong's most famous contribution to economics is pointing out that maybe some people who invest in the stock market are actually dumb. I don't think he has to worry about Piketty disproving that.


Posted by: Walt Someguy | Link to this comment | 05-23-14 1:53 PM
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but DeLong is definitely a guy on the side of the angels,

I've heard Larry Summers called a lot of things, but "angel" is new to me.


Posted by: politicalfootball | Link to this comment | 05-23-14 2:02 PM
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As an academic economist, Summers is generally on the right side of things. It's only when you give him any sort of political power that he goes evil.


Posted by: Walt Someguy | Link to this comment | 05-23-14 2:04 PM
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I think this captures a huge flaw in his model:

The next step, after adding n and g together to get the growth rate of the economy, we next need to add to that what I call ω, the "wedge" between the rate of accumulation and the rate of profit. Piketty doesn't call ω much of anything, which I think is a significant flaw in the way the book presents its argument, for the wedge ω is truly a key concept in the argument. Wealthholders earn, on average and in expectation, a rate of profit r on their wealth. But they don't accumulate all of what they earn: that is the wedge.

Why should we treat productivity and labor force growth as producing identical effects to DeLong's wedge?


Posted by: Eggplant | Link to this comment | 05-23-14 2:10 PM
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229 really is an unfair, mean summary, which is why I resisted writing it. There is a key issue, which Piketty expressly raises and discusses in the book and we can talk about going forward when we get to that Chapter (Chapter 6, I think, without looking) (and to be clear the only reason why I know about this is because Piketty expressly brings it up).

My understanding, which isn't expert at all: Piketty agrees that the r>g, more inequality line will predict the future only IF the elasticity of substitution between capital and labor is substantially greater than 1. "Elasticity of substitution" measures how easy it is to substitute capital for labor, e.g., to finance a robot that takes the place of a worker. The higher it is, the more easily substitutable, at low elasticity, you can't substitute capital for labor at all.

Everyone agrees that there's more capital out there. But more capital also has a negative effect on the rate of return on capital; as there's more capital, the rate of return on it has to go down. So the key question is: as capital increases relative to total national income, will r (the rate of return on capital) fall sufficiently to make up for the problems of accumulating more capital, or not? If it does, having more capital may not be much of a problem for inequality, because even with more capital out there capital's share of total income won't increase. Remember, the capital vs. labor share of income in the economy=the rate of return on capital*the ratio of total capital to total income. So if r goes down exactly proportionally as the capital/income ration increases, the two effects cancel each other out and the share of the economy given to capital and labor remain exactly the same even as the total amount of capital increases. If that happens, r>g shouldn't happen at all-- there's an automatic, built in mechanism in the economy to ensure that increasing capital provides proportional (or greater) benefits to labor, not just proportionally greater benefits to capitalists. On the other hand, if elasticity is greater than 1, then this built-in adjustment mechanism goes away, so that r (the return to capital) won't just fall automatically by an exactly proportionate amount as capital increases. Rather capitalists can continue to invest their money indefinitely, even with a falling rate of return, and increase their share of the total economy versus that attainable by labor, because capital is more easily substitutable for labor.

DeLong says, basically, hey if you assume that elasticity is 1, like we've always done in economics for no very good reason, then Piketty's conclusions won't come true, a point Piketty expressly acknowledges and discusses. The problem is that Piketty says that elasticity is substantially greater than 1, has been in the past, and is likely to be so in the future. For me, I of course have no way of resolving that empirical debate. But it seems intuitively super implausible that capital isn't already good right now, and will only get better at, replacing labor. That is to say that machines and the like can easily replace labor. And if that's the case the built-in adjustment mechanism won't work.


Posted by: Robert Halford | Link to this comment | 05-23-14 2:14 PM
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237: I believe the canonical response cites enjoyment of almost every aspect of Our American Cousin.

Or, perhaps more appropriately for an economist, we might say that Summers is on the right side of things "with notably rare exceptions."

I still think that's too generous. (It obviously elides the whole conversation about women in science, for instance.)

But sure, sure. There are worse people than Summers. But not too many with more responsibility for the current sorry state of economic affairs in this country.


Posted by: politicalfootball | Link to this comment | 05-23-14 2:16 PM
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Okay, clearly you just want to bitch about Summers. Fuck Summers. Find somebody else to argue with.


Posted by: Walt Someguy | Link to this comment | 05-23-14 2:21 PM
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241: Sorry. Just passing time until I can get back to reading Pikketty.


Posted by: politicalfootball | Link to this comment | 05-23-14 2:31 PM
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Yeah, how does everyone feel about speeding up the schedule to two chapters a week? This seems slow.


Posted by: LizardBreath | Link to this comment | 05-23-14 2:38 PM
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It's because Halford read ahead and he won't include spoiler warnings.


Posted by: Walt Someguy | Link to this comment | 05-23-14 2:40 PM
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Yeah, fuck that. I want to keep my first-mover advantage! Human capital!!!


Posted by: Robert Halford | Link to this comment | 05-23-14 2:41 PM
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Put into an easily comprehensible model, if reading rate of the group "g" is less than the reading rate of Halford "r," such that r>g, then Halford benefits disproportionately.


Posted by: Robert Halford | Link to this comment | 05-23-14 2:42 PM
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Or possibly that Halford should do a disproportionate number of the chapter summaries.


Posted by: widget | Link to this comment | 05-23-14 2:46 PM
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Fuck your distributive socialism, Widget.


Posted by: Robert Halford | Link to this comment | 05-23-14 2:46 PM
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It's h, the Halfordian writing rate, that worries me.


Posted by: JP Stormcrow | Link to this comment | 05-23-14 2:47 PM
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243: That sounds good to me. I already have completely unrealistic expectations for what I'm going to accomplish this weekend, so writing an interesting post on chapter 3 doesn't seem like too much more to add to the list.


Posted by: essear | Link to this comment | 05-23-14 2:48 PM
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I just follow the data where they lead me, really.


Posted by: widget | Link to this comment | 05-23-14 2:48 PM
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Have we assigned anyone to read the first portion of Halford's summary yet?


Posted by: politicalfootball | Link to this comment | 05-23-14 2:49 PM
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Robert Halford is Thomas Piketty! It's all so obvious now.


Posted by: JP Stormcrow | Link to this comment | 05-23-14 2:49 PM
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Now that the Financial Times has shown it to all be wrong, I'm going to stop reading.


Posted by: Walt Someguy | Link to this comment | 05-23-14 2:51 PM
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Now I'm all worried about what if it is all wrong. How much dust is in rich people's houses? Did Piketty take the negative effect of dust on wealth into account?


Posted by: essear | Link to this comment | 05-23-14 2:53 PM
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50: If that actually does work for you, get it to me Thursday night, to discuss Friday? I mean, I was thinking of speeding it up after the first four chapters, so no pressure if you'd rather not.


Posted by: LizardBreath | Link to this comment | 05-23-14 2:54 PM
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253 Halford's youth involved hippy parents and formative experiences with goats?


Posted by: teraz kurwa my | Link to this comment | 05-23-14 2:57 PM
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I'll see if I can get to it this weekend. I keep forgetting I'm going to the west coast for part of next week, which is going to interfere with my blog-reading.


Posted by: essear | Link to this comment | 05-23-14 2:58 PM
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Somebody should also read and report back on this book. I nominate Dairy Queen. Piketty likes us! Or maybe he likes Bob, the true voice of la gauche americaine.


Posted by: Robert Halford | Link to this comment | 05-23-14 3:12 PM
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|| Think I'll take the holiday weekend off. This is really a Columbus Day song, but it'll do for this one as well. Enjoy. https://archive.org/download/sci1999-04-27.shnf/sci99-04-27d2%2Fsci99-04-27d2t04_vbr.mp3 |>


Posted by: CharleyCarp | Link to this comment | 05-23-14 3:24 PM
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From the subtitle and the editorial review, it sounds like that book is a collection of essays or op-ed pieces or something, most of which have nothing to do with les EU, however gauche they may be.


Posted by: teraz kurwa my | Link to this comment | 05-23-14 3:25 PM
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Yeah, it looks like he's had a column in Liberation for a long time. He really is Paul Krugman's sexier French equivalent.


Posted by: Robert Halford | Link to this comment | 05-23-14 3:27 PM
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Speaking of gauche Americans, have y'all discussed how to pronounce his name?


Posted by: ogged | Link to this comment | 05-23-14 3:50 PM
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Speaking of gauche Americans, have y'all discussed how to pronounce his name?

Indeed


Posted by: NickS | Link to this comment | 05-23-14 3:54 PM
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Very well then.


Posted by: ogged | Link to this comment | 05-23-14 4:01 PM
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Whoa hey hello. What's this speedup talk. I only just finished chapter 1.


Posted by: nosflow | Link to this comment | 05-23-14 5:28 PM
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I think you all should double the pace so that my failure to keep up will be quick and decisive and I can read the new Veronica Mars novel.


Posted by: heebie-geebie | Link to this comment | 05-23-14 5:32 PM
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I'm not caught up and I'm definitely finishing the novel I got yesterday first, but I can make it. I did use the Piketty to hold the peas I was shelling this evening, though.


Posted by: Thorn | Link to this comment | 05-23-14 5:36 PM
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The Veronica Mars novel is a super quick read. We should have a thread about it! I think it was better than the movie.


Posted by: essear | Link to this comment | 05-23-14 5:37 PM
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268: They didn't have anything but flat ones at the store I went to.


Posted by: Moby Hick | Link to this comment | 05-23-14 5:45 PM
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270: The pods don't roll. The peas themselves went in a bowl. (And the empty pods went on the table. But this gave me a little holding area above the table, which was great. Highly recommended!)


Posted by: Thorn | Link to this comment | 05-23-14 6:03 PM
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A not-rolling pod gathered on Thomas.


Posted by: Moby Hick | Link to this comment | 05-23-14 6:06 PM
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I'm most of the way through Chapter 2 and am eagerly awaiting the next post. 'cause there's one assertion in particular that had me going "WTF is he smoking?".


Posted by: Josh | Link to this comment | 05-23-14 6:50 PM
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I only have 1% left in chapter 2, so I'll hang for one more installment.


Posted by: heebie-geebie | Link to this comment | 05-23-14 7:09 PM
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I think I want to be ruling class.


Posted by: Natilo Paennim | Link to this comment | 05-23-14 7:13 PM
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Does anyone actually want a speed-up?


Posted by: Walt Someguy | Link to this comment | 05-23-14 10:32 PM
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LB seems to.


Posted by: teofilo | Link to this comment | 05-23-14 10:44 PM
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Hey, Walt, am I being completely incoherent, idiotic, or insane in this thread. I ask because I honestly can't tell at the moment.


Posted by: Eggplant | Link to this comment | 05-23-14 11:09 PM
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No. your comments are fine. I'm curious if marginal productivity is important to Piketty's argument. I haven't read Delong's stuff yet, because I'm very, very lazy, so maybe you're completely incoherent, idiotic, and insane there.

I think you could make a straightforward argument that in the 50s capital got paid something resembling its marginal product, and that's why the economy grew faster. Before and after capital conspired to pay itself greater than its marginal product, which lead to economic inefficiency and lower growth. In the US, it's managers that are paying themselves greater than their marginal product, but the effect is the same.


Posted by: Walt Someguy | Link to this comment | 05-24-14 1:00 AM
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Speed up would be insane. LB should get a life or read a novel or something if she has so much time on her hands.


Posted by: chris y | Link to this comment | 05-24-14 4:19 AM
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239. That's my understanding as well, which is probably less expert than yours. So far one of the themes of the book seems to be that he will not assume a spherical cow for any reason whatsoever. This is what sets him apart from most mainstream economists. Also it's presumably why he depends so heavily on historical data and why he begins the book with a discursus on Malthus, Ricardo and Marx, who were all deeply historical theorists: he's saying, OK, these people's conclusions may have been inadequate for one reason or another, but yes, you can do it that way.


Posted by: chris y | Link to this comment | 05-24-14 5:43 AM
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If there isn't a groundswell of support for speeding up, we won't. I was just worrying that people would get bored and drift off.


Posted by: LizardBreath | Link to this comment | 05-24-14 5:49 AM
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You know, if we had a commenters union, the FPPs couldn't just force speed-ups on us whenever they wanted. Solidarity!


Posted by: Natilo Paennim | Link to this comment | 05-24-14 7:10 AM
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That's an insightful front page post you got there. It would be a shame if nobody commented on it....


Posted by: Opinionated Commentators Union Thug | Link to this comment | 05-24-14 1:22 PM
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273: I'm most of the way through Chapter 2 and am eagerly awaiting the next post. 'cause there's one assertion in particular that had me going "WTF is he smoking?".

Just finished 2 and I am guessing that I know which assertion this.


Posted by: JP Stormcrow | Link to this comment | 05-25-14 12:54 PM
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And it looks like Chapter 3 is where he is going to get into the items that I have the most questions about.


Posted by: JP Stormcrow | Link to this comment | 05-25-14 12:55 PM
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The public library is really struggling with this. I check once a day and now there's 70+ holds. More copies apparently arrived but they've been listed as "in process" - instead of "on order" - for a week now. Plus someone created a second catalog record for the book and since the hold system is run through the catalog records, there are holds on that record too. The library seems to have realized that it would be unfair for people to jump the long line by requesting from the new record, so that hold line keeps bouncing around between 1 and 4 while the older hold line keeps gradually growing. I assume people in the new line get moved onto the pre-existing line but as long as the second record is there it will keep attracting people. I don't know why it got created or why it hasn't been deleted but library technology can be pretty crappy. And pretty boring, like this comment.


Posted by: fake accent | Link to this comment | 05-25-14 1:22 PM
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Piketty being fairly aggressive in responding to the Giles criticism in the FT>


Posted by: JP Stormcrow | Link to this comment | 05-26-14 11:35 AM
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Our library was responding aggressively to demand with new copies on order. But their New Book Policy is one week, no renewal; so useless for this exercise.


Posted by: JP Stormcrow | Link to this comment | 05-26-14 11:40 AM
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How much are the fines?


Posted by: Moby Hick | Link to this comment | 05-26-14 11:42 AM
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Only 25¢ a day! (Says one of the two affiliated library employees in the household; who followed with a sharp, accusatory question, so you're on your own.)


Posted by: JP Stormcrow | Link to this comment | 05-26-14 12:06 PM
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The Ohio State library had a fine structure such that once you were overdue by so much, you were better off to wait until they declared the book lost. If you turned in a book after they had already declared it lost, the fine was only $10.


Posted by: Moby Hick | Link to this comment | 05-26-14 12:13 PM
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Actually it looks like the Carnegie itself is 30¢ per day (and I don't see what the new book policy is).


Posted by: JP Stormcrow | Link to this comment | 05-26-14 12:15 PM
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It would be nice if Piketty used error bars. And somehow marginalized over the things that make it hard to interpret some of the data. At least he doesn't have to worry about Keynote to GIF uncertainties.


Posted by: essear | Link to this comment | 05-26-14 12:24 PM
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288: It's interesting that one of the economists quoted supporting Piketty is from the Manhattan Institute, which is a right-wing think tank, and has been poring over the data on Piketty's website, presumably trying to find mistakes. The explanation of the UK discrepancies also sounds pretty convincing.


Posted by: teofilo | Link to this comment | 05-26-14 12:29 PM
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The report is doing its job. The controversy is getting play.


Posted by: Eggplant | Link to this comment | 05-26-14 12:42 PM
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At least he doesn't have to worry about Keynote to GIF uncertainties.

That is never going to get old.


Posted by: Sifu Tweety | Link to this comment | 05-26-14 12:55 PM
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The fact that there's no Piketty post on the front page seems like one reason to speed up. Also that I'm not sure that every chapter has enough material in it to facilitate much discussion.

Can I make a request? It would be nice if every Piketty post contained links to all the previous Piketty posts, including the initial scheduling one. Otherwise clicking back in the archives to find things is going to get really inconvenient.


Posted by: essear | Link to this comment | 05-26-14 5:11 PM
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Hey, I just caught up with the week 1 reading! Now time to read this post and thread!


Posted by: rob helpy-chalk | Link to this comment | 05-27-14 2:40 PM
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Liveblog.


Posted by: NickS | Link to this comment | 05-27-14 2:47 PM
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Can't do much of that now, except to say that LB's 12 was helpful.


Posted by: rob helpy-chalk | Link to this comment | 05-27-14 3:32 PM
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Perhaps it is silly to ask chapter 1 questions on this thread, rather than the current one--what am I afraid of reading spoilers? Still, I'm going to stick with this idea of separate threads for now.

On page 56, he mentions that one of his sources for information on income and wealth in the 18th century is one Antoine Lavoiseir. Is this the chemist Lavoisier? His wikipedia entry mentions that he did work in economics, and the chronology is right.

Well actually, it must be the chemist. Damn, what a dude. I was just out of questions about this chapter to ask, since LB helped me out with her 14 and Halford with 55.1.


Posted by: rob helpy-chalk | Link to this comment | 05-27-14 6:37 PM
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Did you get to the part where he was such a good investor, he got executed for it?


Posted by: Moby Hick | Link to this comment | 05-27-14 6:56 PM
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