Re: Piketty Reading Group: Chapter 4

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I would have liked some more explanation of why the German model of stakeholder ownership inevitably means a lower market value for I believe he calls the same 'social value' (productive capacity, number of employees, and so on). Piketty kind of treats that lower valuation as a given, and while I can certainly see reasons for it -- if I'm a capitalist and I can own a car factory where I can do anything I want, or a similar factory where I have to negotiate with unions before decisionmaking, I'd probably pay more for the first -- there may be something less obvious I'm missing.


Posted by: LizardBreath | Link to this comment | 06- 9-14 5:22 AM
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Is it a threadjack to ask why the ratio of r to g is a better measure of inequality than Gini coefficients? Is it that Gini coefficients are:
1. require too much data or too many computations
2. ultimately depend on computing the same underlying things as r and g anyway
or
3. r and g are actually a better indicator?

I'm embarrassed because maybe he has addressed this and I didn't notice because Heinlein.


Posted by: heebie-geebie | Link to this comment | 06- 9-14 6:06 AM
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I'd think that at the very least you would have learned from Heinlein how to be too lazy to fail.


Posted by: Walt Someguy | Link to this comment | 06- 9-14 6:20 AM
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JW Mason has a careful analysis of what makes Germany different here.


Posted by: Walt Someguy | Link to this comment | 06- 9-14 6:22 AM
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I'll step up for chapter 8 if it's still open.

GINI is a descriptive snapshot, precisely quantifies income inequality given perfect information. Wealth is much harder to quantify.

GINI makes no prediction about the future, neither does it say anything about the past. Piketty wants to consider the dynamic processes which cause the distribution. It's the difference between having a stochastic PDE and just knowing the equilibrium solution in one case.


Posted by: lw | Link to this comment | 06- 9-14 6:26 AM
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So it would have been infeasible to track Gini coefficients over time because it requires better data than is available? And r and g are more in tune with what the available data actually tells us?


Posted by: heebie-geebie | Link to this comment | 06- 9-14 6:30 AM
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R and g aren't measures of inequality - as Piketty tells it, they contribute strongly to a high capital-income ratio, and once he starts talking about inequality my impression is he'll link the high capital-income ratio closely with inequality.


Posted by: Minivet | Link to this comment | 06- 9-14 6:36 AM
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1. A U.S. company has a fiduciary obligation to shareholders to protect their interests solely, including when those interests conflict with other interests, such as employees. A German company does not have that obligation. Suppose two companies are the same in cash flow, dividends, balance sheet, etc., and differ only in which national law governs. An investor is aware that when a conflict arises between the employees and the shareholders, such as an opportunity to fire the factory workers and outsource production to China, the U.S. company will favor the shareholders' interest and the German company might not. In the stock market, investors will be willing to pay a little bit more for the U.S. company for that reason, so its stock price will be a little bit higher even if current dividends are the same.

Why can Olympic sprinters run faster than Olympic soccer players? Both groups are naturally good runners, and both are in top athletic condition, but the sprinters are training towards a single goal and the soccer players are putting some energy into a different goal (kicking and such), so they're not as good at the sprinting.


Posted by: unimaginative | Link to this comment | 06- 9-14 6:39 AM
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2. Intensive analysis of the index reveals that GINI is coming up in Chapter 7. Hang in there!


Posted by: unimaginative | Link to this comment | 06- 9-14 6:41 AM
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Alrighty-dokie!


Posted by: heebie-geebie | Link to this comment | 06- 9-14 6:41 AM
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Don't US companies not have a fiduciary obligation to shareholders? Isn't that a right-wing talking point more than an actual legal fact? The Unfogged lawyers discussed this once before, and I thought that was the conclusion.


Posted by: Walt Someguy | Link to this comment | 06- 9-14 6:42 AM
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I think that the different market values across borders are pretty complicated. Not sure how to identify which factors matter most for valuation, I honestly doubt that anyone can do that.

Basically, many german citizens are very suspicious of the stock market. Stockbrokers there are pretty closely regulated-- they can't call a potential client without having to fill out regulatory paperwork. Most stocks worldwide are domestically held, so this matters.

A counterexample: Japan's P/E or cyclical PE are on the other hand much higher than the US's. I doubt this tells us about superior growth/exploitation prospects there, rather it's a symptom of companies owning each others' stock and exerting influence otherwise than in the open market.


Posted by: lw | Link to this comment | 06- 9-14 6:53 AM
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Yeah, we actually haven't gotten to the inequality chapters yet - still on capital & the level of capital in a society. Distribution of income/capital comes up soon, I think. (uh, spoilers, sorry). During which he also talks about the GINI index and various other measures of inequality and why they all suck compared to his work.


Posted by: Tom Scudder | Link to this comment | 06- 9-14 6:53 AM
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11: Yves Smith certainly thinks so.


Posted by: Annelid Gustator | Link to this comment | 06- 9-14 6:55 AM
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Piketty attributes Germany's relatively low real estate values to rent control, which has the effect of redistributing wealth away from property owners. The German model is better from an inequality perspective, and apparently no worse from a "growth in the economy over time" perspective. Interesting.

This is true, but also there is a much lower rate of home-ownership in Germany (just over 50%), so much less of an owner-occupied housing market to drive up prices (either directly, or by creating political pressure for subsidies). On the other hand, the private rented sector is huge (and currently booming), even with the rent controls. It's viewed as a stable asset class by owners of capital, but offering much higher returns (6% to 9% rental yield) than, say, German government bonds. And in certain cities (especially Berlin), house prices have been growing very sharply in the last couple of years after being flat to negative for much of the last two decades.

Lots of data here


Posted by: Ginger Yellow | Link to this comment | 06- 9-14 7:12 AM
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You would think it would for sale stuff that's booming. Assuming that is that on average buyers are higher up the income scale than renters, then over the past fifteen years the top fifth has been doing quite well while the bottom two fifths not so much. Add the fact that as the rest of the Western countries were going through a property bubble Germany's prices actually declined in real terms there would seem to be plenty of room for growth. But no, Germany is weird. I remember that at the first years of this century Berlin had lower rents than Warsaw. Given relative incomes that's just insane.


Posted by: teraz kurwa my | Link to this comment | 06- 9-14 7:32 AM
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8, 11, 14 -- IMO the best discussion is here. (recommended by me before). Formally, directors of a US (really, Delaware, which is what matters for this discussion) corporation have a fiduciary duty to shareholders. However, this is not a duty to maximize value to the shareholders at the expense of all other objects of the corporation; the directors ALSO have duties to the corporation itself and in practice should usually have ample legal room to favor broader corporate interests over the narrowest interests of shareholders. The idea that officers or boards of US corporations have an unambiguous fiduciary duty to maximize "shareholder value" at the expense of all other considerations is more a product of an agreed-upon ideology taught in business and occasionally law schools than a mandate of US (Delaware) law.

But certainly the German stakeholder model isn't what we have either, and I understand where Unimaginative is coming from professionally.


Posted by: Robert Halford | Link to this comment | 06- 9-14 7:39 AM
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11: There are some very limited optional fiduciary duties to non-shareholders in some states of the U.S. Where those statutes exist, they permit the Board to consider interests of other "stakeholders," but they do not create a legal obligation to do that. This comes up sometimes in the "hostile takeover" area, where management may have a choice to fight off a hostile bid. Usually management pretends to be protecting the jobs or the community, but they're actually protecting their own high status positions. Corporate directors have fairly wide discretion in interpreting their fiduciary duty, and they usually can justify things they want to justify, even keeping unprofitable factories open as in the shareholder's best interests in the long run. But generally speaking, they don't represent anyone but the shareholders. I understand the duties to others are much stronger in Germany.


Posted by: unimaginative | Link to this comment | 06- 9-14 7:40 AM
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pwned


Posted by: unimaginative | Link to this comment | 06- 9-14 7:42 AM
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Whatever the legal details, isn't it the case that corporations in Germany have a lot less freedom (legal, normative, or some combination of both) to downsize, sell off assets, etc.?


Posted by: Minivet | Link to this comment | 06- 9-14 7:44 AM
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Patrimony!


Posted by: Minivet | Link to this comment | 06- 9-14 7:45 AM
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A previous thread from here discussing a dsquared post on a comment by Posner.


Posted by: JP Stormcrow | Link to this comment | 06- 9-14 7:47 AM
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And for God's sake can someone please make cuts work on the mobile site? The Piketty project is making it painful to navigate.


Posted by: Minivet | Link to this comment | 06- 9-14 7:48 AM
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I don't use the mobile site even on a mobile. It's not like the main page is very mobile-unfriendly.


Posted by: Moby Hick | Link to this comment | 06- 9-14 7:49 AM
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The German model as I understand it (which isn't well) is to actually put stakeholders on boards of corporations so that they have some degree of actual control. Such that, for example, the board of VW (I'm making this up, but maybe someone not on a phone can check) would have 5 union reps on it, 5 reps from the major creditors of Daimler, 5 shareholder reps, a community rep, etc. I'm not sure about the proportions on the board, but there's broad representation. Very different than the US system where the board is formally controlled by shareholders and generally in practice controlled either by the very biggest shareholders or senior management.


Posted by: Robert Halford | Link to this comment | 06- 9-14 7:53 AM
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I kind of switched representative fake boards from real German corporations there, but you get the idea.


Posted by: Robert Halford | Link to this comment | 06- 9-14 7:56 AM
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24: I use it largely because of the scale of the main site, where I need to zoom in for it to be legible.


Posted by: Minivet | Link to this comment | 06- 9-14 8:05 AM
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Here's the VW board. Largely union members and politicians, which would be unthinkable in the US. Also, the new GTI and Golf R look pretty sweet.


Posted by: RH | Link to this comment | 06- 9-14 8:11 AM
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The politicians represent the second most important shareholder after the Porsche family.


Posted by: teraz kurwa my | Link to this comment | 06- 9-14 8:21 AM
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I was generally interested that the capital/income ratio is lower in the US than in Europe. I'm sort of ignorantly groping ahead trying to draw some normative conclusions out of this, and I'm thinking (mostly because it's pretty clearly telegraphed in the text) that a high capital/income ratio is going to be related to persistent high inequality -- I'm not sure how this relates to the relationship between inequality levels in the US and Europe.


Posted by: LizardBreath | Link to this comment | 06- 9-14 8:24 AM
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Very different than the US system where the board is formally controlled by shareholders and generally in practice controlled either by the very biggest shareholders or senior management.

I'm amazed to the extent to which shares have become little more than articles of faith in a company. Regular shareholders, particularly in modern tech companies, don't actually control much of anything, because things are structured in a manner such that only the shares owned by the founders get an appreciable number of votes on the board. So shares are basically all about deriving income based on dividends, except a lot of companies don't even provide dividends anymore. So its about capital appreciation, except if you have no control over the capital, and the capital isn't paying dividends, I don't understand how that's any sort of value to a shareholder.

But it seems to be taken on faith that it is. Apparently, shares of capital you don't control and which don't pay you are valuable because everyone says they are valuable.


Posted by: Spike | Link to this comment | 06- 9-14 8:27 AM
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Apparently, shares of capital you don't control and which don't pay you are valuable because everyone says they are valuable.

Bubble gum.


Posted by: Annelid Gustator | Link to this comment | 06- 9-14 8:31 AM
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31: Yeah, it's sort of like a multigenerational Ponzi scheme in that sense, although the theory does sort of become actual during buyouts.


Posted by: Minivet | Link to this comment | 06- 9-14 8:31 AM
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I have had exactly that same thought -- I really have an ignorant-peasant fear of stocks, because I don't understand what makes them worth anything at all other than the whim of the company management.


Posted by: LizardBreath | Link to this comment | 06- 9-14 8:37 AM
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And, of course, that someone will buy them from you. Which I don't understand why that is the case either, but it seems to be.


Posted by: LizardBreath | Link to this comment | 06- 9-14 8:38 AM
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So shares are basically all about deriving income based on dividends, except a lot of companies don't even provide dividends anymore. So its about capital appreciation, except if you have no control over the capital, and the capital isn't paying dividends, I don't understand how that's any sort of value to a shareholder.

When I said something like this in an old thread, I got a very condescending round of "Ummm, that is...not very smart, Heebie" and people explaining that it's just gambling on other people's gambling habits. Maybe I phrased it a bit more one-dimensionally but I call shenanigans.


Posted by: heebie-geebie | Link to this comment | 06- 9-14 8:42 AM
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I was generally interested that the capital/income ratio is lower in the US than in Europe.

I've been trying to think about something smart to say about that, because, obviously, that was one of the things that I was most interested in the introduction.

The obviously point is to go back to DeLong's description

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.

The charts in this chapter give us some sense of how large a change that would entail. It appears that the US is moving towards greater accumulation of capital, but to reach the same ratios that he's talked about in France/Britain would mean accumulating an additional 50% of capital.

On the other hand, it's just hard for me to imagine adding 50% to the value of capital in the US. Perhaps that's just a failure of imagination on my part, and that reading Piketty should give me the motivation and tools to work harder to envision it (and to figure out how to avoid that future).


Posted by: NickS | Link to this comment | 06- 9-14 8:42 AM
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Apparently, shares of capital you don't control and which don't pay you are valuable because everyone says they are valuable.

And they might turn into Apple which, IIRC, didn't pay any dividends for ages, but ended up accumulating a ridiculous amount of cash and is now paying significant dividends.


Posted by: NickS | Link to this comment | 06- 9-14 8:44 AM
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I've put all my money in tulip bulbs. They are due for a rebound.


Posted by: Spike | Link to this comment | 06- 9-14 8:45 AM
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Here's the VW board. Largely union members and politicians, which would be unthinkable in the US.

Bear in mind that it's the supervisory board that has the worker representation, not the management board. It's still meaningful, but they're much more hands off than a unified Anglosphere board.

Regular shareholders, particularly in modern tech companies, don't actually control much of anything, because things are structured in a manner such that only the shares owned by the founders get an appreciable number of votes on the board. So shares are basically all about deriving income based on dividends, except a lot of companies don't even provide dividends anymore. So its about capital appreciation, except if you have no control over the capital, and the capital isn't paying dividends, I don't understand how that's any sort of value to a shareholder.

This is very much a tech company thing. Most (profitable) companies pay dividends, and most (Anglosphere) blue-chip companies have reasonably widely dispersed stock. There are obvious exceptions, and the situation is very different somewhere like Italy where powerful families tend to have controlling stakes in firms, but the "founder-managment owns most of the voting stock and pays no dividends" model represents a pretty small proportion of the market cap of say the S&P 500 and the FTSE 100.


Posted by: Ginger Yellow | Link to this comment | 06- 9-14 8:46 AM
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Isn't that a right-wing talking point more than an actual legal fact?

Isn't this just as much a left-wing talking point as a right-wing one? Chomsky uses it as one of the many examples he sees of the ruling class explicitly saying they are relentlessly pursuing their class interest at the expense of everyone else.

Of course, for Chomsky to make is point, all he has to show is that the boards of corporations say they are obligated to think of shareholders and no one else, even if that isn't actually their obligation. It is still a moment like Alan Greenspan bragging that he is creating more worker insecurity.


Posted by: rob helpy-chalk | Link to this comment | 06- 9-14 8:48 AM
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What GY said in 40; that's a weird situation, not a common one. That said, as someone who ends up with chunks of that sort of weird stock.... it is very weird.


Posted by: Nathan Williams | Link to this comment | 06- 9-14 8:50 AM
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And they might turn into Apple which

They might, but Apple is rather old-school among tech companies in that investors have quite a bit more leverage than founders. But, with a lot of newer companies, like Google, almost all of the voting stock belongs to the dudes who started it. Everyone else gets shitter, low-class, non-voting shares. Same with Facebook; its entirely under the control of Mark Zuckerberg. Its putting a lot of faith in Zuckerberg to assume that he's one day going to decide to start handing out money to people that aren't him, when there is actually no mechanism to force him to do so.


Posted by: Spike | Link to this comment | 06- 9-14 8:52 AM
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Just to nitpick, until (very) recently the issue wasn't that (reltative) plebs got non-voting Google stock, just that the founders controlled well over 50%, so their voting power was pointless. I believe the same is true of Facebook, that public shares are formally voting shares. There are some interesting implications for inheritance/succession issues.


Posted by: Nathan Williams | Link to this comment | 06- 9-14 8:56 AM
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What GY said in 40; that's a weird situation, not a common one

It is weird, but its becoming more and more common. Now that its been done, I think its likely to become the norm for all new companies in the future. Once founders have figured out they can do this, why would they go back?


Posted by: Spike | Link to this comment | 06- 9-14 8:56 AM
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You have to understand, at the end of the day I have to put my shareholders first.


Posted by: Opinionated Obstetric Practice Corporation | Link to this comment | 06- 9-14 8:58 AM
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A new "C" class of Google shares will begin trading on Thursday under the familiar GOOG ticker. This stock gives its owners zero votes at the annual shareholder meeting. That sounds bad. In practice, however, the nonvoting shares won't be so different from holders of Google's "A" class shares, which get one vote apiece. Both groups are dominated by holders of the only shares that matter: class "B" shares with 10 votes each. Most of those are owned by Google's founders, Sergey Brin and Larry Page.


http://www.businessweek.com/articles/2014-04-03/why-google-is-issuing-c-shares-a-new-kind-of-powerless-stock


Posted by: Spike | Link to this comment | 06- 9-14 8:58 AM
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Right, that's the "very recently". Until two months ago, all the GOOG stock people were buying (and that I was being issued occasionally) was voting stock, but semi-pointlessly so. The 10:1 thing is kind of weird arithmetic from the founding and IPO, and I don't think it changes anything; the net result is still founders in control.

I don't know why it works at all. My model says that the stock is worthless, and I act on that belief, but clearly lots of other people feel differently.


Posted by: Nathan Williams | Link to this comment | 06- 9-14 9:03 AM
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US Tech companies are pretty unusual.

Larger companies are often pretty deeply leveraged, so management needs to keep the good opinion of at least banks or bond rating companies. Usually, keeping suppliers and large customers happy is also important, this constrains management optimism/delusion/megalomania. Management shenanigans and business consequences are pretty easy to find-- Parmalat in Italy, Countrywide finance in the US.


Posted by: lw | Link to this comment | 06- 9-14 9:03 AM
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It is weird, but its becoming more and more common. Now that its been done, I think its likely to become the norm for all new companies in the future. Once founders have figured out they can do this, why would they go back

Because it only really works for companies where a) the IPO is in massively high demand from rubes, and/or b) employees can be fobbed off with B shares rather than higher wages or ordinary shares, ie highly prestigious tech companies which haven't IPOed yet. Most new companies are not in that situation, even pre-IPO.


Posted by: Ginger Yellow | Link to this comment | 06- 9-14 9:05 AM
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Here's where the ignorant peasant prejudices come in -- do voting rights have any perceptible value to a small investor? If I buy a couple of thousand dollars worth of anything, even if those shares have the same voting rights as all other shares in the company, I can't see any way that can effectively be used to protect my investment. For anyone investing at a scale smaller than a significant percentage of the companies they're investing in, I don't see the value.


Posted by: LizardBreath | Link to this comment | 06- 9-14 9:10 AM
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51 was my impression also.


Posted by: Moby Hick | Link to this comment | 06- 9-14 9:11 AM
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It is weird, but its becoming more and more common.

I remember Felix Salmon having interesting things to say about the question of whether the Stock Market was becoming less important as a source of capital. Searching quickly I find a couple of things. But I have no idea whether it actually describes a trend or just a "trend."

this

So why go public at all? The main reason for an IPO is to raise money, but Facebook has just demonstrated, in its deal with Goldman Sachs, that it's more than capable of raising as much money as it needs privately. Any time Zuckerberg needs new equity capital, Goldman can find it for him at a very attractive valuation, no IPO required. And if Facebook is now profitable, it probably doesn't need any more equity capital anyway.

this

Put another way, as the number of initial public offerings steadily declines, the stock market is becoming little more than a place for speculators and algorithms to compete over who can trade his way to the most money.

What the market is not doing so well is its core public function: allocating capital efficiently. Apple, for instance, is hugely profitable and sits on an enormous pile of cash; it is thus very unlikely to use its highly rated stock to pay for any acquisitions. It hasn't used the stock market to raise money since 1981, and there's a good bet it never will again.

Meanwhile, the companies in which people most want to invest, technology stars like Facebook and Twitter, are managing to avoid the public markets entirely by raising hundreds of millions or even billions of dollars privately. You and I can't buy into these companies; only very select institutions and well-connected individuals can. And companies prefer it that way.

this

There are a few different reasons [why it is bad, from a public policy perspective if fewer companies are going public], but they basically boil down to the idea that it's a good idea for stock ownership to be as broad as possible. What we don't want is a world where most companies are owned by a small group of global plutocrats, living off the labor of the rest of us. Much better that as many Americans as possible share in the prosperity of the country as a whole by being able to invest in the stock market.

Posted by: NickS | Link to this comment | 06- 9-14 9:12 AM
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do voting rights have any perceptible value to a small investor?

I would assume that part of the value comes from the threat of selling your shares to Carl Icahn (or, to put it another way, your votes may be worthless but the fact that you belong to class of people that has power means that your interests are likely to be protected along with the rest of that class).


Posted by: NickS | Link to this comment | 06- 9-14 9:14 AM
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Here's where the ignorant peasant prejudices come in -- do voting rights have any perceptible value to a small investor?

I mean, in practice, probably no because most small investors don't know anything at all. In theory, yes, but it's mostly from second order effects. Your voting share is worth more because it (potentially) has value to someone else who can acquire a material stake, and also because it is part of a class of shares which is better protected against dilution than non-voting shares.


Posted by: Ginger Yellow | Link to this comment | 06- 9-14 9:17 AM
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Pwned.


Posted by: Ginger Yellow | Link to this comment | 06- 9-14 9:17 AM
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51 They have value in the aggregate to the big investors. Not just in cases of takeovers, but also if pension fund X or hedge fund Y has decided it wants to buy, say $100M of the company, they have to get those shares from somewhere and that means you can sell it to them.


Posted by: teraz kurwa my | Link to this comment | 06- 9-14 9:17 AM
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Double pwned.


Posted by: teraz kurwa my | Link to this comment | 06- 9-14 9:18 AM
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As I've learned from reading this blog, the stock market has almost nothing to do with raising capital or financing corporate investment, which is done almost entirely via debt financing or retained earnings. And voting rights are for anything like an ordinary investor in a large company (and indeed many tiers above ordinary) basically worthless. You're betting on the value a company will provide to the shares over whatever time period you want to invest, which ultimately should take the form of dividends, but can also be cashed out via a merger or an IPO. Note that this also means that different shareholders can have very different interests.


Posted by: Robert Halford | Link to this comment | 06- 9-14 9:20 AM
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I'm not sure I agree at all with 53 last. I mean, there's certainly a case for wide ownership of companies, but I don't see that it needs to be through the stock market rather than nationalisation (in the case of natural monopolies and critical infrastructure in particular), or mutual societies/employee ownership. There are all sorts of downsides to conventional public stock companies, the most obvious being short-termism in management and fraud based on maintaining quarterly numbers.


Posted by: Ginger Yellow | Link to this comment | 06- 9-14 9:23 AM
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I'm not sure I agree at all with 53 last. I mean, there's certainly a case for wide ownership of companies, but . . .

Part of why I wanted to look that up is that I think there's an interesting contrast between Piketty's big-picture, thousand-foot view and Felix Salmon's small-picture view. I think he's looking at the question of, "is a change in direction X an improvement or dis-improvement compared to the status quo" not "are there significant improvements (or dis-improvements ) that could be made relative to the status quo in some direction other than X."


Posted by: NickS | Link to this comment | 06- 9-14 9:28 AM
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Definitely agree with 60. If the last 30 years have taught us anything it's that managers and financiers are massively capable of teaming up to use shareholding as a vehicle for outsized personal enrichment for their own benefit and at the expense of the broader middle class.


Posted by: Robert Halford | Link to this comment | 06- 9-14 9:29 AM
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60: yes, that really reads to me like an argument against wealth inequality rather than against narrow ownership per se. It would be bad if 150 people owned most of the stock market, but it would be just as bad if 150 people owned most of the bond market, or most of the property market.


Posted by: ajay | Link to this comment | 06- 9-14 9:31 AM
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In as much as small investor voting rights get aggregated via mutual funds, I think they are worth something. Mutual funds can at least add some pressure in favor of dividends. Which should be enough; I don't particularly care about the specific value of my own voting rights, whats important is that there is some functional mechanism to get companies to provide a return to their investors. And it looks to me like that mechanism is starting to break down.


Posted by: Spike | Link to this comment | 06- 9-14 9:31 AM
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Mutual funds aren't particularly interested in dividends, either, or rather they are in different ways at different times. In my view the whole "shareholder democracy" movement is a sad counterproductive joke.


Posted by: Robert Halford | Link to this comment | 06- 9-14 9:33 AM
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60. If Felix Salmon said any of that in public, he would have a hard time schmoozing big shots subsequently.

I agree that an intelligent public discussion of relative merits of public rather than private ownership would be great. But, outside of maybe Scandinavia (and Brazil for the last decade) , the politicians who control public goods have not been much better than private owners.


Posted by: lw | Link to this comment | 06- 9-14 9:34 AM
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Anyone want to talk about

slaves as capital in the United States?

The exclusion of native Americans and probably other subgroups from Piketty's statistics?

Why agricultural land has been a declining asset in the past two centuries all over the world?

Why Britain and France seems to have higher capital/income ratios than the U.S., for two centuries so far?

Whether evidence supports my theory that Piketty wrote this chapter with the TV on?


Posted by: unimaginative | Link to this comment | 06- 9-14 9:39 AM
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Why Britain and France seems to have higher capital/income ratios than the U.S., for two centuries so far?

I'd love to. Do you have a theory? (other than the reasons that Piketty gives -- more abundant land, and less time to accumulate physical capital).


Posted by: NickS | Link to this comment | 06- 9-14 9:42 AM
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Whether evidence supports my theory that Piketty wrote this chapter with the TV on?

I thought that was a pretty good catch. He certainly did make a leap from contemporary portrayals in literature to products of modern Hollywood.


Posted by: Spike | Link to this comment | 06- 9-14 9:43 AM
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I think he says that the higher capital/income ratio in Britain and France is entirely explained by (a) US population growth and (b) the US being a younger country with less capital to start out with (except slaves, and when slaves were capital the southern US looked like Britain and France). (B) is obviously less important now but (a) is still super important.


Posted by: Robert Halford | Link to this comment | 06- 9-14 9:44 AM
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Why agricultural land has been a declining asset in the past two centuries all over the world?

I assume because the productivity of the land is now heavily dependent on the investment of non-labor factors than ever before.


Posted by: Moby Hick | Link to this comment | 06- 9-14 9:44 AM
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There was a reference to Titanic where I really wondered if there was a translation problem and it made more sense in the original French -- he went straight from "Capital was less dominant in the US than Europe" to "But Titanic portrayed it as exactly the same" without anything clarifying what his point was -- the movie was wrong? Or it wasn't wrong somehow?

Generally, something seems really weird about using historical fiction as examples. Austen and Balzac may not be guaranteed accurate sociological data, but they're at least reporting assumptions about the world that weren't jarringly insane to their readers, immersed in the same world. Titanic was made by people who didn't know or care all that much about 1912 for an audience that knew and cared less -- it doesn't seem like useful information at all.


Posted by: LizardBreath | Link to this comment | 06- 9-14 9:47 AM
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Why agricultural land has been a declining asset in the past two centuries all over the world?

What percentage of the world's spending does the basic at the farm grain value represent today, what was it two centuries ago?


Posted by: teraz kurwa my | Link to this comment | 06- 9-14 9:50 AM
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Even on the Balzac and Austen side, I have to wonder about the sample size.

Is there an obscure community of sociologists somewhere that have been collecting as much economic data as they can from obscure old fiction, and are annoyed that this pompous economist strolls in and thinks he can get all the answers in his spare time?


Posted by: Cryptic ned | Link to this comment | 06- 9-14 9:51 AM
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obscure obscure


Posted by: Cryptic ned | Link to this comment | 06- 9-14 9:54 AM
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72 He argues that the oldest, most heavily capitalized parts of the US, e.g. NYC had something that was similar to the European elites, but that as a whole the US was very different. Though even in the Northeast or other old heavily settled parts of the country, rural land prices should have been lower because of the widespread availability of cheap and nearby. And in addition to Titanic he also cites Henry James for a contemporary depiction of that society.


Posted by: teraz kurwa my | Link to this comment | 06- 9-14 9:55 AM
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The exclusion of native Americans and probably other subgroups from Piketty's statistics?

Curious about it, but I haven't read 1493. It's a good question, thanks for raising it. Plagues and Peoples goes into some detail about death from communicable disease and population estimates. Mound builders clearly had surplus wealth around 1000 AD. I don't know whether they stopped building long before Europeans came, or if disease is a plausible explanation.


Posted by: lw | Link to this comment | 06- 9-14 10:02 AM
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I thought it was pretty clear that the mound building stopped only because of depopulation due to European diseases.


Posted by: Moby Hick | Link to this comment | 06- 9-14 10:05 AM
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when slaves were capital the southern US looked like Britain and France

Well I should certainly hope so.


Posted by: Opinionated Not-Yet-Malarial Distressed Cavalier | Link to this comment | 06- 9-14 10:11 AM
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The exclusion of native Americans and probably other subgroups from Piketty's statistics?

Also, he explicitly says that he's using market value as his estimate for the value of capital -- so anything that isn't traded on a market is likely to be excluded.


Posted by: NickS | Link to this comment | 06- 9-14 10:16 AM
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This chapter lost me on Piketty with the Titanic reference alone, not to mention Django Unchained. Seriously? SERIOUSLY?

I would mark a student's paper severely down if they used it as evidence (and it wasn't, say, a paper on slavery in film or what have you). A lot of the early American stuff rubbed me the wrong way, but I don't think he's wrong, exactly. I think this chapter just confirmed for me that I went into the right field, even if I didn't stick with it. "It's a lot more complicated than that" is basically the historian's call to battle.


Posted by: Parenthetical | Link to this comment | 06- 9-14 10:17 AM
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Someone here once commented that for historians, facts are unique and precious, and to put two of them together to form a generalization is an act of horrific violence.


Posted by: rob helpy-chalk | Link to this comment | 06- 9-14 10:20 AM
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Not just historians


Posted by: Ginger Yellow | Link to this comment | 06- 9-14 10:21 AM
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There's a suggestion that part of the difference in returns on capital between Britain and France on one side, and Germany and the U.S. on the other, is that Britain and France had substantial overseas colonies and the U.S. and Germany didn't. Colonial investments may have been exceptionally profitable, or perhaps the statistics don't include the labor earnings in the colonies as part of national income, affecting the capital/wages ratio. Either explanation is plausible ot me, although one is a real difference and the other is a statistical shortcoming. One of many places where I get frustrated with this book.


Posted by: unimaginative | Link to this comment | 06- 9-14 10:34 AM
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I'm generally on team historians, but in this particular case it seems like historians' attention to granular detail has fairly severely obscured some extraordinarily important economic history results (I'm not blaming the historians for this, but it seems to be true). By this I mostly mean missing the fundamental continuity of the high level of concentration of capital through the 19th century, but there are lots of other examples.

The portion in Chapter 4 on the structure of the capital/income ratio in the US South vs. US North and the reasons given for the difference are worth more than about 1/2 of the semester of the standard US antebellum history course, just as history alone. Not that historians are unaware of the general issue but being able to starkly describe the difference and put it into economic context is just incredibly important, as history. I mean, so important that IMO it's basically malpractice for any historian of the 19th century US or Europe to not read this book.


Posted by: Robert Halford | Link to this comment | 06- 9-14 10:37 AM
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Huh, really? Maybe I wasn't paying close enough attention but nothing in Chapter Four really surprised me. I was in no way an economic historian, but it seemed like fairly well trodden ground?

I do agree that it's important to be able to summarise so clearly and efficiently, and he does it well. Like I said, it's not a real criticism, I just felt my urge to add detail rising and rising.


Posted by: Parenthetical | Link to this comment | 06- 9-14 10:43 AM
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72: Both the Titanic and the Mad Men examples illustrate exceptions to the historical trends he's interested in.

I'm especially annoyed about Mad Men. The concept of a U.S. advertising agency being bought out by a British one around 1960 is not completely impossible, but definitely contrary to the economic trends of the era. Foreign investment in the service sector in the U.S. barely existed before the 1980's.


Posted by: unimaginative | Link to this comment | 06- 9-14 10:46 AM
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78. Cahokia was abandoned before the Europeans came. Hopewell culture produced nice ceramics, possibly also mounds, they stopped producing long before Europeans landed, maybe the successor cultures kept building mounds.

85.2 seconded-- the point that most of the wealth in the southern US was in the form of slaves, and that slaves were worth more than all the machines combined on the continent, these are pretty important and not made clear in standard accounts.


Posted by: lw | Link to this comment | 06- 9-14 10:47 AM
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I think 88.2 must be a failing of academic history getting through to the popular level. I've certainly heard that sitting in a classroom, read it, and taught it.


Posted by: Parenthetical | Link to this comment | 06- 9-14 10:48 AM
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Why agricultural land has been a declining asset in the past two centuries all over the world?

Horses?

Hear tell that around 1890, 1/3 of all agricultural output in the developed west was used to feed horses.

Not to mention their capital value, which Piketty doesn't.

More a question than a criticism.

There is also a massive increase in most developed nations in agricultural productivity, much faster than any Malthusian increase in population, fast enough to be the prime factor in almost every successful industrialization story. First ag to free labor to the factories.


Posted by: bob mcmanus | Link to this comment | 06- 9-14 10:49 AM
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85: A good lesson in the economics of economics , and the history of history. Economists and historians have long been aware that slavery was a very large sector of the U.S. economy back in the day, but they downplay that in textbooks because it's bad for sales, especially but not exclusively in the South.


Posted by: unimaginative | Link to this comment | 06- 9-14 10:50 AM
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85, 86, 88: Yeah, reading this gave me a sense that I really didn't have before of the scale of slavery in economic terms -- I had thought of the South as smaller and poorer than the North (at least by the decades immediately before the Civil War) and therefore of the economic value of slaves as, while important to the individual rich people who owned them, not all that great society-wide.

I think I'd also overweighted the idea that most free white people in the South didn't own slaves -- that they were mostly owned only by the quite wealthy -- and it led me to underestimate the total economic effect of slavery.


Posted by: LizardBreath | Link to this comment | 06- 9-14 10:53 AM
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31: This is generalizing too much from the example of Google. Most companies accomodate the interests of shareholders (or of some shareholders). Look at how Carl Icahn has bullied Apple into increasing its dividend.

Anyway, companies return just as much money to shareholders as ever, just that lots of it comes through stock buybacks rather than dividends.

Also, shareholders are assholes. The less say they have the better. In the bad old days where everybody ignored shareholders we had unions and companies would spend their excess cash on inventing the transistor and the graphical user interface, instead of making sure Carl Icahn can buy a bigger yacht.


Posted by: Walt Someguy | Link to this comment | 06- 9-14 10:54 AM
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It's not just saying that slaves were worth a lot -- that's definitely in the standard US history narrative these days (I mean, to my knowledge).

It's that the value of slaves was sufficient to recreate levels of capital ownership in land similar to old Europe, whereas the Northern US had both extremely unusually low inequality and an extremely and unusually low capital-income ratio.

"Slaves were valuable" is part of the standard narrative and used to explain the South; "treating slaves as capital created a society that held wealth in the manner of old Europe, with corresponding inequality of wealth, whereas the antebellum Northern US had a low capital-income ratio and extraordinarily low inequality of both wealth and income, is not, or not put in that way. It's not just treating the value in the abstract but tying it into a broader narrative about social structure and inequality.


Posted by: Robert Halford | Link to this comment | 06- 9-14 10:54 AM
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Google Answers Horse populations. Scroll down. Forinstance

HISTORICAL DOMESTIC POPULATION - US

1867 - 8,000,000
1915 - 21,500,000
1949 - 6,000,000
1950's (early) - 2,000,000
1957 - 750,000 (*unreliable source? See sources below)
1960 - 3 million


HISTORICAL WILD/FERAL POPULATIONS - US

1971 - 17,000 (first census)

Late 1800's - Over 1,000,000 in Texas alone
End of 1800's - 2 million

Lots of fucking fodder


Posted by: bob mcmanus | Link to this comment | 06- 9-14 10:55 AM
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89: As unimaginative says in 91, too much attention to slavery as the cause of the Civil War is surprisingly disfavored at the high school level (which is the last American history I ever took). There's a fairly recent post where I bitch about Sally's history class, teaching the standard NYS mandated curriculum, where they were explicitly taught as a matter of test prep that if a question asks about the causes of the Civil War, 'slavery' is a trap answer and the test wants something more nuanced.


Posted by: LizardBreath | Link to this comment | 06- 9-14 10:57 AM
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On the other topic, I agree 100% with 93.


Posted by: Robert Halford | Link to this comment | 06- 9-14 10:57 AM
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94: Yeah, exactly. Rich Southerners weren't just putting on a goofy show of being European aristocrats, there was a sense in which they economically were European aristocrats.


Posted by: LizardBreath | Link to this comment | 06- 9-14 10:58 AM
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94: I do think that history is seriously hampered by our geographical focus, and Piketty's ability to compare to Europe is truly something new and important.

However, historians definitely are busy making your last point, but they're doing it in lots of little works that don't get read by the broader public. My brain is completely fried from lack of sleep, but for instance I'm fairly sure James Oakes has been arguing this for years.


Posted by: Parenthetical | Link to this comment | 06- 9-14 11:00 AM
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96: It's a real problem, and it often means that university teachers end up spending lots of time teaching a corrective to this, which is part of the reason I'm probably surprised by the seeming newness of this. Also, I just like arguing with Halford, apparently.


Posted by: Parenthetical | Link to this comment | 06- 9-14 11:02 AM
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Following up from 98, another way of putting it (and this is me saying it, not Piketty, and I'm not totally sure that I'm right) is that the institution of slavery, by turning labor directly into capital, was able to recreate wealth and income inequality similar to that of agricultural society in old Europe, even in a society with almost no pre-existing capital and wildly available land. While at the same time, in the North, you had a society in the same country at the same time that had the opposite result -- low inequality, widely dispersed wealth.

Which ties in to what e.g. David Hackett Fisher says about the culture of the tidewater South (e.g., it was designed to recreate an aristocratic lifestyle) but it's really interesting and important that this was in a profound economic sense true.


Posted by: Robert Halford | Link to this comment | 06- 9-14 11:04 AM
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The fact that really brought home to me the scope of slavery is that several southern states had slave majorities. (Here's the 1860 census with Mississippi and SC with slave majorites and Louisiana and Florida not far off.)


Posted by: Unfoggetarian: "Pause endlessly, then go in" (9) | Link to this comment | 06- 9-14 11:06 AM
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103 -- sort of related but not really, I was interested to learn that the state of Mississippi had a black majority through the 1930s. If more of the black population had stayed put through the second great migration, and the voting rights act had come through at the same time, Mississippi would be a majority-minority and presumably solidly Democratic state.


Posted by: Robert Halford | Link to this comment | 06- 9-14 11:10 AM
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88.1: According to reliable sources, while some centers were in turmoil, others persisted right up until contact with Europeans. But it does look like some people blame the Little Ice Age for some of the damage.


Posted by: Moby Hick | Link to this comment | 06- 9-14 11:13 AM
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Given the experience of the reconstruction, count me skeptical that the voting rights act would have succeeded if there had still been a black majority state. (That said, it is still quite an interesting counterfactual.)


Posted by: Unfoggetarian: "Pause endlessly, then go in" (9) | Link to this comment | 06- 9-14 11:14 AM
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Hey, not to digress from a basically focused discussion-- (), who is good on Reconstruction? I couldn't deal with Foner's brick of a book.

To 89, I just went back and looked-- McPherson does say that the south was richer than the north, but seems like not much emphasis. I guess that I remembered his phrase "Land and slaves" as "mostly land," my mistake. The other civil war thing I've read recently is David's bio of Lincoln, and this really simple explanation of the US economy that clarifies a lot did not appear there.


Posted by: lw | Link to this comment | 06- 9-14 11:14 AM
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"The exclusion of native Americans and probably other subgroups from Piketty's statistics?"

Unless I missed something, Piketty has not yet touched on South American history. It would be interesting to see the contrast and whether native populations would play more of a role in South America. The civilizations the Spanish encountered were much more similar to those in Europe than the ones the English found in North America. They were more organized top-down societies, with inhabitants living in more elaborate housing in quite large cities and so on. The Spanish experience was therefore quite different, in that (at least at first) they were essentially taking over empires built by others, just knocking out the existing leaders and taking control at the top while leaving the wider structures in tact further down. I'd be curious how that affected the economic picture, in Piketty's terms.


Posted by: calico | Link to this comment | 06- 9-14 11:18 AM
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In other news, it would appear that abolitionists and others were quite apt in describing the South as a slaveocracy. (I may have misspelled that.)

Lw, I am useless on reconstruction. I'm actually a pre-1820 sort of historian and I've basically only read Foner and a few other specialised books that weren't really general intros. Let me have a quick look and I'll see if I can help more but others here are probably better equipped to answer.


Posted by: Parenthetical | Link to this comment | 06- 9-14 11:21 AM
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Both times I was a TA for an intro college-level 19th century US survey course, there were a number of students who had "how come no one ever told us this before?" responses to the material. How many students? I don't know; I didn't do quantitative history.


Posted by: fake accent | Link to this comment | 06- 9-14 11:29 AM
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I am useless on reconstruction.

"We can rebuild Paren. We have the technology, but $6 million isn't going to go very far."


Posted by: Six Million Dollar Parenthetical Voice-Over | Link to this comment | 06- 9-14 11:30 AM
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There's a short version of Foner's Reconstruction book. I will make no comment regarding whether I ever read the longer one.


Posted by: fake accent | Link to this comment | 06- 9-14 11:31 AM
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Anyway, companies return just as much money to shareholders as ever, just that lots of it comes through stock buybacks rather than dividends.

Ok, but part of the motivation there is to concentrate the voting power into the hands of the people who don't participate in the buyback. Why would they even bother to buy back shares that don't come with voting power at all?


Posted by: Spike | Link to this comment | 06- 9-14 11:31 AM
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112. To boost profits per share, which is often a metric for deciding how well managers are compensated. Again, US internet companies are exceedingly screwy.


Posted by: lw | Link to this comment | 06- 9-14 11:35 AM
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110: it feels like it will certainly take at least that much after today.

And yes, the short Foner was still the standard text nigh on 12 years ago when I took a class on the Civil War.


Posted by: Parenthetical | Link to this comment | 06- 9-14 11:42 AM
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112: My impression is that the main motivation of stock buybacks rather than dividends is taxes. Also, investors expect dividends to basically never change, while they will tolerate changes in stock buyback patterns.


Posted by: Walt Someguy | Link to this comment | 06- 9-14 12:02 PM
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I would generally not recommend it to nonacademics, but Richard Bensel's Yankee Leviathan may be a good book to read with Piketty. It covers the Reconstruction period from a political economy perspective.

For economics of slavery, I really don't know the economic history literature, maybe something by Gavin Wright?


Posted by: fake accent | Link to this comment | 06- 9-14 12:03 PM
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That Django reference was crazy bad considering how much acclaim piketty got for incorporating a discussion of literature in the book.


Posted by: lemmy caution | Link to this comment | 06- 9-14 1:39 PM
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My understanding is the value of slaves spiked due to the invention of the cotton gin increasing the demand and constraints on supply caused by the 1807 act abolishing the slave trade.


Posted by: lemmy caution | Link to this comment | 06- 9-14 1:44 PM
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That Django reference was crazy bad considering how much acclaim piketty got for incorporating a discussion of literature in the book.

And considering how much actual information there must be out there for how much different kinds of slaves were sold for.


Posted by: Minivet | Link to this comment | 06- 9-14 2:30 PM
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OK, I'll defend the Django reference. He's choosing books/shows for their familiarity to his readers over optimally accurate reference.

What would have been better that was familiar to readers? Maybe mentioning the amounts in the Dred Scott case, or that slave auctions were held on the courthouse steps in Saint Louis and in DC.

Also, US writing familiar to Europeans is going to be movies and TV, maybe detective stories.


Posted by: lw | Link to this comment | 06- 9-14 3:19 PM
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The movie 12 years a slave may have been too recent to include in Capital, but the book had been out for 160 years. As had many other first hand accounts of slavery.


Posted by: rob helpy-chalk | Link to this comment | 06- 9-14 3:32 PM
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For something that'd be a familiar cultural touchstone, like Austen or Balzac, 12 Years a Slave might be a bit obscure (I don't think I'd ever have gotten around to it barring feeling guilty about not wanting to go to the movie), but Uncle Tom's Cabin? The Narrative of Frederick Douglass?


Posted by: LizardBreath | Link to this comment | 06- 9-14 3:34 PM
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I dunno that you can really defend the Django reference, but getting worked up about it seems like carping over trivia. It's not in any way central to his point, it's just a throwaway line designed to increase accessibility to the book by making it slightly less dry. Who cares.


Posted by: Robert Halford | Link to this comment | 06- 9-14 3:35 PM
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For a good discussion of the slave economy, white slaves possessed by Indians that is, there's always the high school AP History staple "The Narrative of the Captivity and Restoration of Mrs. Mary Rowlandson".


Posted by: Cryptic ned | Link to this comment | 06- 9-14 3:37 PM
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Wait, this thread is for people reading the book. Sorry.


Posted by: Cryptic ned | Link to this comment | 06- 9-14 3:38 PM
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No, comments relevant to the discussion are fine even if you didn't read the book (I say, as Book Discussion Group Autocrat). I had explicit rules to that effect, but I think I failed to put them in this post.


Posted by: LizardBreath | Link to this comment | 06- 9-14 3:41 PM
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On the "what about conquest and colonialism" front, I am surprised that there seemed to be no real effect from the revolution in Haiti on France's capital / income ratio. The loss of the slaves as well as the plantation lands seems to have had no effect, unless they were not included in his statistics to begin with. The amount of coffee and sugar being produced in Haiti until they burned shit down was huge.


Posted by: Criminally Bulgur | Link to this comment | 06- 9-14 3:42 PM
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Oh, you know what really, really threw me? WW II didn't affect the capital/income ratio in Germany all that much. This appears to be an extraordinarily stable ratio.


Posted by: LizardBreath | Link to this comment | 06- 9-14 3:46 PM
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The amount of coffee and sugar being produced in Haiti until they burned shit down was huge.

But France had several other cash-crop-centric colonies, right?

128: I wonder if their postwar desolation and especially high percentage of population dead meant that unlike in the Allied countries, income declined as fast as capital.


Posted by: Minivet | Link to this comment | 06- 9-14 3:51 PM
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128 -- Some of that may be his decennial averaging (don't have the book in front of me and don't know exactly which table you're looking at, so I could be wrong) which is often by decade -- one might expect a fairly dramatic shift in the capital/income ratio between 1944 and 1948, but it gets smoothed out over a decade.

In any case, I'm pretty sure that he includes WWII as a shock (though one among others) to capital, though, that creates the U-shaped graph he's so fond of, and later on (sorry, but I can't help it) he says that WWII was important for a dramatic reduction in the proportion of inherited wealth in total wealth.


Posted by: Robert Halford | Link to this comment | 06- 9-14 4:02 PM
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Just do your best at comprehending the writing in the last comment. Excelsior!


Posted by: Robert Halford | Link to this comment | 06- 9-14 4:03 PM
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his decennial averaging (don't have the book in front of me and don't know exactly which table you're looking at, so I could be wrong) which is often by decade

I was surprisingly offended by a chart showing a non-zero value for slaves in the US after 1865 -- it took me some staring for it to click as a straight line connecting a positive value in 1860 to a zero value in 1880. My initial reaction was all "Wrong! Bad! We'd gotten clean by then, you can't call us slaveholders as of the 1870s!" And then I got over myself.


Posted by: LizardBreath | Link to this comment | 06- 9-14 4:06 PM
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WWII also killed off a lot of the labor, which perhaps balanced out the ratio a bit.


Posted by: Spike | Link to this comment | 06- 9-14 5:24 PM
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I dunno that you can really defend the Django reference, but getting worked up about it seems like carping over trivia.

Apple Computers is a famous example: it was founded by (mostly Republi­can) computer engineers who broke from IBM in Silicon Valley in the 198os, forming little democratic circles of twenty to forty people with their laptops in each other's garages.


Posted by: heebie-geebie | Link to this comment | 06- 9-14 5:34 PM
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Why agricultural land has been a declining asset in the past two centuries all over the world?

Halford's 101 is pretty close to what I am thinking, but I would try to generalize a little more. The law of conservation of privilege. In a society structiured like ours the value of whatever capital there is tends to be a relatively constant multiple of the value of total production. Either because that value best represents elite's overall control of society, or the measure of difficulty of admission to the elite, or ideally both.


Posted by: roger the cabin boy | Link to this comment | 06- 9-14 5:45 PM
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Is his Germany West Germany or both and how does he count changing borders? The maps of 1930, 1940, and 1950 Germany are not the same.


Posted by: teraz kurwa my | Link to this comment | 06- 9-14 6:15 PM
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From his first data table (national income and private wealth):

Boundaries: 1870-1944: German Empire (including Alsace-Lorraine from 1871 on, excluding territories lost in the wake of World War 1 from 1919-1923 on, including Saarland from 1935 on, and including annexed territories in 1938-1944); 1945-1949: territory occupied by the Allied powers and USSR; 1950-1990: West Germany (including Saarland & West Berlin); 1991-onwards: reunified Germany.

Posted by: Minivet | Link to this comment | 06- 9-14 6:48 PM
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123 I dunno that you can really defend the Django reference

Of course you can, as you go on to do in that very comment. For fuck's sake, he's not putting these novel, TV, and movie references in as a central part of his argument, he's putting them in as a way to engage readers and point out how some of the things he's presenting in rigorous quantitative form might be somewhat familiar already from our general cultural knowledge. It may not be to your taste, but it doesn't undermine his scholarship. Anyway, the book is largely a popularization; for the most part, the actual scholarly work is in a bunch of articles he and others have already published elsewhere.


Posted by: essear | Link to this comment | 06- 9-14 7:19 PM
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According to reliable sources, while some centers were in turmoil, others persisted right up until contact with Europeans

There certainly were recognizably Mississippian societies that persisted until European contact and collapsed as a result of it, but they didn't necessarily build mounds and in general were smaller and apparently less stable than the major chiefdoms of earlier centuries.


Posted by: teofilo | Link to this comment | 06- 9-14 8:46 PM
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Also, () is totally right that this stuff is well-known within academic US history and has been for quite a while now. If there's a failure of historians here, it's a failure of communication rather than research.


Posted by: teofilo | Link to this comment | 06- 9-14 8:54 PM
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Did they maybe build mounds?


Posted by: Moby Hick | Link to this comment | 06- 9-14 8:55 PM
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And bob is totally right about the economic importance of horses, although I find it very hard to imagine that they aren't included as capital in Piketty's data.


Posted by: teofilo | Link to this comment | 06- 9-14 8:55 PM
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141: Some did, I think, but I can't think of any specific examples offhand.


Posted by: teofilo | Link to this comment | 06- 9-14 8:56 PM
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Ah, I remembered one example: the Parkin site in Arkansas, which is thought to have actually been visited by De Soto. The mounds there may have been built earlier, but they were still in use at that point.


Posted by: teofilo | Link to this comment | 06- 9-14 9:01 PM
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The Etowah site in Georgia was also occupied at that time and visited by De Soto, and some of the smaller mounds there were apparently built during that occupation.


Posted by: teofilo | Link to this comment | 06- 9-14 9:10 PM
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I strongly doubt that 149 is true, or at least that it was true until very recently, since both the broad outline of the argument and the specific international comparative data sets were prepared basically by Piketty. Of course US historians have known that slaves were valuable and that the South and North had different social structures since approximately forever, but that's not the point or force of the argument in the book (which I don't think you're reading?).


Posted by: Robert Halford | Link to this comment | 06- 9-14 9:18 PM
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146 to 140, not 149.


Posted by: Robert Halford | Link to this comment | 06- 9-14 9:19 PM
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144, 145: Thanks.


Posted by: Moby Hick | Link to this comment | 06- 9-14 9:21 PM
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Avoiding cereals for pseudo-scientific reasons is the best way to eat a healthy diet.


Posted by: Moby Hick | Link to this comment | 06- 9-14 9:21 PM
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146: That's fair enough, and you're right that I'm not reading the book so it's certainly plausible that Piketty's data and international comparisons are new and more substantial than anything historians have come up with before. Parenthetical is certainly the expert in this area rather than me, so I'll defer to her for details, but her 99.last, to your 94.last, certainly rings true to what little I've read about this.


Posted by: teofilo | Link to this comment | 06- 9-14 9:24 PM
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But really, I've read very little about nineteenth-century US economic history, so I'm not going to press any points about it. (I've read quite a bit of Mississippian archaeology, though.)


Posted by: teofilo | Link to this comment | 06- 9-14 9:27 PM
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Without having read the book or looking up the Django reference, I'm going to venture that the fact that Piketty went with that reference, but appears otherwise to have stuck to references contemporaneous to the period about which he's writing, is a sign of just how thoroughly American slavery has been kept out of the mainstream of American culture, including the aspects of American culture exported abroad. I'm guessing that Huckleberry Finn has about as much about slavery that most people in the US read in literature. I doubt that many people have read Frederick Douglass's narrative (and until recently, even fewer would have read other ex-slave's narratives), and the same probably goes for Uncle Tom's Cabin*, though of course many people would know who Douglass and Stowe were.

*Both were assigned in my pre-Civil War US survey when I was an undergrad, so maybe I'm wrong. I remember the class complained that Uncle Tom's Cabin was too much reading and the prof gave in and cut a few chapters, but so little that I just read the whole thing.


Posted by: fake accent | Link to this comment | 06- 9-14 10:58 PM
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Oh, you know what really, really threw me? WW II didn't affect the capital/income ratio in Germany all that much. This appears to be an extraordinarily stable ratio.

Actually I just checked that - from 1940 to 1950 the c/i ratio in Germany dropped by a good third. That seem pretty significant to me, especially given that that meant it had dropped by close to three quarters from 1910. Looking up per capita GDP figures I see that it went up by about five percent from 1930-1950 even as the ratio went from about 3 to 1.75. That's some pretty serious capital destruction and I'm pretty sure market values weren't doing so hot in Germany in 1930.


Posted by: teraz kurwa my | Link to this comment | 06- 9-14 11:36 PM
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The Narrative of Frederick Douglass?

I will confidently bet LB 150% of the national income of any country she chooses to name that if she walks into any UK (or French) university (except for American Studies departments) and starts talking about Douglass, she will be greeted with blank stares at best from students and faculty alike.


Posted by: chris y | Link to this comment | 06-10-14 3:13 AM
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To sorta bring this together with the other thread, I think the Django and Mad Men references are just the way public intellectualism works these days: the role is largely defined by drawing on quantitative social science and references to pop/mass culture, rather than humanistic scholarship and "big thinkers" .


Posted by: Criminally Bulgur | Link to this comment | 06-10-14 8:25 AM
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My brain is completely fried from lack of sleep, but for instance I'm fairly sure James Oakes has been arguing this for years.

My brain was completely fried, because I just looked back at my notes (from 9! years ago, I'm lucky I remember anything) and realised I had his argument skewed. The book I was thinking of, at any rate, The Ruling Race, spends most of its time looking at the strivers of the slave-holding world, those who owned one or two slaves and desperately wanted to move up into the next class, but often couldn't because of the structural constraints that Piketty idenitfies. Thus the urge for constant movement & expansion, and the aggravation that precipitated war. A distinct portion of the book spends a lot of time comparing it to the North without picking up on the key difference that Piketty writes about, but nonetheless ensuring that we see the slave-holders as just as much of capitalists as their northern brethren.


Posted by: Parenthetical | Link to this comment | 06-10-14 8:34 AM
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Further to that, said book was published in 1982 and there have been loads of responses to it in the last thirty years, which I think is part of why I remembered it incorrectly. I actually HATED it when I first read it and threw it across the room at one point, dislodging a number of pages.

But anyway!


Posted by: Parenthetical | Link to this comment | 06-10-14 8:39 AM
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It would be interesting to read a 19th century economic/social historian reviewing the book and treating its implications for that area specifically. I haven't seen any review like that but it would be neat to read.


Posted by: RH | Link to this comment | 06-10-14 9:33 AM
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93, 112: Putting it in finance 101 terms, a company's management can choose to reinvest profit in the firm, or return it to the owners through a dividend or more rarely a buy back. Choosing to reinvest might be quite reasonable if the firm is small and growing. The firm will be building more factories, publication rights, datacentres or whichever. If investors believe this will work, they are willing to pay more in anticipation of future dividends or capital growth. In this simple form it's no more a Ponzi scheme than buying a house and choosing to live in it rather than draw an income through rent.

So you'd expect new growing firms to award dividends less and established ones more, and indeed this is what has happened with eg Apple and Microsoft.


Posted by: conflated | Link to this comment | 06-11-14 10:01 PM
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152: Having not read Frederick Douglass, 12 Years, Uncle Tom or even, embarrassingly, Huck Finn, do any of them mention relative slave prices?

I think Piketty put Django in as part of a drunken bet.


Posted by: conflated | Link to this comment | 06-11-14 10:11 PM
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160: That's a good question, and something I was wondering about when I wrote that comment, since it sounds like Piketty's reference was to a specific scene.* Of the four, I've read all but 12 Years, but it's been nearly 10 years since I read them. There's definitely an auction scene in Huck Finn, or so various notes websites for gradschoolers lead me to believe.

*I still haven't looked at the reference or watched the movie.


Posted by: fake accent | Link to this comment | 06-11-14 11:06 PM
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It would be interesting to read a 19th century economic/social historian reviewing the book

Well, I happen to have Defrosted Thomas Carlyle RIGHT HERE...


Posted by: ajay | Link to this comment | 06-12-14 3:02 AM
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Turns out that Cantor-slayer Brat's doctoral thesis was focused on 19th century economic history:

In the three-part thesis, Mr. Brat analyzed the determinants of economic growth, with a focus on the 19th century where some countries became vastly wealthy and others languished. In the first chapter, Mr. Brat studied the role of research and development, finding that countries with more research grew more quickly, but that other countries catch up as those research advances spill across their borders.
The second chapter found that the international distribution of income "has become more unequal over time," while the third delves into the relationship "between the growth of science in the 19th Century and a nation's dominant religious establishment."
Mr. Brat concluded that Protestantism expanded education, broadened patterns of thought and improved governments in ways that led to a swifter advancement of science. The dissertation primarily compares Catholic France with Protestant Britain and Germany.


Posted by: JP Stormcrow | Link to this comment | 06-12-14 5:25 AM
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163: He also wrote a paper looking at whether the Kuznets curve obtained internationally.


Posted by: Sifu Tweety | Link to this comment | 06-12-14 5:47 AM
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I actually had a couple things to say on this chapter but was otherwise occupied while the thread was active. But now I have an important work deadline so I can do it now.

I'm still torn on the proper representation of slaves as capital (and how it relates to the exclusion of "human capital"in general). Details of that aside, I certainly agree with LB in 92 and Halford in 94 on the value he brings in illuminating the contribution of slavery to these national economic facts.

However, I'm not sure I'm comfortable with the notion that the primary capital-destroying part of the Civil War involved the freeing of the slaves. My poorly thought out instincts bring me back to questioning "human capital" not being accounted for; am more comfortable with viewing emancipation as the transfer of "capital" from one owner to another--i.e the person themselves, the rightful owner. We tend to speak of "owning one's labor", but I think there is an associated asset as well, as difficult as it may be to put a value on.

Locke:

Though the Earth, and all inferior Creatures be common to all Men, yet every Man has a Property in his own Person. This no Body has any Right to but himself. The Labour of his Body, and the Work of his Hands, we may say are properly his.

And related, I think, is Piketty's footnote 15:

If each person is treated as an individual subject, then slavery (which can be seen as an extreme form of debt between individuals) does not increase national wealth, like any other private or public debt (debts are liabilities for some individuals and assets in others, hence they cancel out at the global level).

Posted by: JP Stormcrow | Link to this comment | 06-12-14 5:55 AM
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This Brat fellow contains multitudes


Posted by: Annelid Gustator | Link to this comment | 06-12-14 6:02 AM
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"Master of Divinity" is a pretty great title to have.


Posted by: essear | Link to this comment | 06-12-14 6:10 AM
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Secondly, I do like (but have not had time to really think through) that the data helps set an appropriate context for items which are thoroughly demagogued in today's political dialogue: public debt and assets, and the magnitude and direction of of foreign ownership.

On the first I do wonder if his method still underestimates public capital since things like "brand loyalty*" which are baked into private capital valuations seem to be lacking in the public space. (What is the capital value of social and governmental institutions, Constiutions, laws etc.? But this is probably similar to considerations of how to properly account for 'human capital"and economically manifest themselves in other ways such as ability to not need to pay a premium on Treasury bonds etc.)

That aside, just showing that there is in fact a positive side of the public ledger that is of the same order of magnitude as public debt is leaps and bounds ahead of current political discourse. A couple of times in the past year I have cautiously (or I thought it was cautious) hazarded to introduce that fact to co-workers (I usually abstain from any political discussions) in a" Gee, here's an interesting thing we never think about" kind of way. Both attempts were met with aggressive, visceral scorn and rejection by conservatives and liberals alike. Beyond anything I expected. There seemed to be a massive emotional investment in a narrative of pure squanderment.

*And they may be so relatively small as to not matter at the level he is addressing things.


Posted by: JP Stormcrow | Link to this comment | 06-12-14 6:14 AM
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166: Yes, he's far more "interesting" than just some kneejerk reactionary goober. But in the bad Ted Cruz kind of way, rather than in the good buttsex way.

He seems to have been engaged in a direct "academic" assault in line with Galbraith's pithy quote: "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 | 06-12-14 6:23 AM
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163. Not enough detail to work out whether he was actually plagiarising Weber or not. Protestant Germany? Bavaria? Baden Wurtemburg?


Posted by: chris y | Link to this comment | 06-12-14 6:24 AM
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Finally, in the prior Piketty thread, the role of wastrels of the great families came up. Two of my favorite wastrels were Peggy and Billy Mellon Hitchcock who channeled some of their waste in at least an interesting direction--they funded Leary's Millbrook estate* and Billy ended up in the mix with Tim Scully and the Brotherhood of Eternal Love.

Their parents were fairly credibly assumed to be a role model for Tom and Daisy Buchanan. The father Tommy Hitchcock was best known as a polo player and pilot for the Lafayette Escadrille and died in WWII test-flying a P-51 Mustang with a Rolls-Royce engine.

Peggy Hitchcock later emerged as a vocal supporter of stockholder rights in T. Boone Pickens' attempt to takeover Gulf Oil (The Mellon family still had a large stock interest in Gulf).

*Their local overly-ambitious prosecutorial nemesis was G. Gordon Libby.


Posted by: JP Stormcrow | Link to this comment | 06-12-14 6:45 AM
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168.3 I think that people do not think clearly about public assets because of a bogus exceptionalism. Government is one more organization that can succeed or fail, that can be more or less corrupt. It's IMO very rarely useful to think of government as an instantiation of ideals.

Most people in the US and in Western Europe IME reverse these-- they consider ideals first, and operational considerations never or a distant second. Obviously, I believe in the rights of man, I think the constitution is a wonderful piece of thinking and writing. But for discussing headlines or budgets, ideals are IMO rarely useful.


Posted by: lw | Link to this comment | 06-12-14 6:55 AM
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I actually have some free time this weekend for a change, so I might finally be able to go and sit under a tree with a glass of something and start reading the book. It sounds dead interesting.


Posted by: ajay | Link to this comment | 06-12-14 7:09 AM
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Ted Cruz is interesting, even in a bad way?

Also, Brat's campaign manager seems to be some kind of goldbug.


Posted by: rob helpy-chalk | Link to this comment | 06-12-14 7:10 AM
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G. Gordon "Libby" Dole


Posted by: Sifu Tweety | Link to this comment | 06-12-14 7:12 AM
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I live partially in a mirror universe. (That is actually an interesting typo--have no idea what specific brain malfunction was involved.)


Posted by: JP Stormcrow | Link to this comment | 06-12-14 7:23 AM
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93: Google is indeed weird in their stock structure. It was designed specifically to avoid the institutional finance usual suspects from stopping Larry and Sergey building cool stuff that might potentially piss a billion dollars up the wall or invent robot cars. They did a dutch auction instead of the usual IPO pricing too, which worked rather well, but Wall St got rather narky about. It's strictly elite competition between capitalists in the Piketty context though.

I once had cashflow-generating instruments explained to me as being on a spectrum between stocks or bonds. If it's not cashflow generating, it's a commodity. If it has a trigger date, it's a future or option on some underlying which is commodity, stock or bod.

Anyway you can think of stocks and bonds as forming endpoints of a spectrum. With common stock you own part of the firm. With a vanilla bond you loan the firm money and they pay you interest. In between you have hybrids like preferred stock where you don't get voting rights but you get paid dividends first or are earlier in the queue in the case of liquidation. "Ordinary" Google shares behave kind of like preferred shares because of the dilution of voting rights.

That is all pretty much consensus reality, though as others have said it makes an interesting point about how surprisingly possible to separate ownership from management in large complicated organisations.


Posted by: conflated | Link to this comment | 06-12-14 7:28 AM
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Ted Cruz is interesting, even in a bad way?

He's the most prominent obvious fraud in American politics at the moment, since the decline of Ralph Reed.


Posted by: Cryptic ned | Link to this comment | 06-12-14 7:43 AM
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That aside, just showing that there is in fact a positive side of the public ledger that is of the same order of magnitude as public debt is leaps and bounds ahead of current political discourse. . . . .There seemed to be a massive emotional investment in a narrative of pure squanderment.

I wonder if part of the reason is that there's a significant emotional investment in not having the government start selling off assets to pay down the debt. . . . Can we carve out 100 acres of Yellowstone for vacation cabins. How much would a company pay to put an advertising banner as a sash around the statue of liberty. Is there extra marble that could be removed from the Washington monument and sold to collectors (with a certificate of authenticity, of course) . . . I wouldn't want to encourage anybody to start thinking along those line.


Posted by: NickS | Link to this comment | 06-12-14 7:44 AM
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170 Catholic Belgium was about as industrialized as it gets in nineteenth century continental Europe. The most industrialized part of Prussia was the Rhineland, also Catholic, then Berlin, Protestant, and then Upper Silesia, Catholic. On the other hand if we're talking nineteenth century I don't think Bavaria is a particularly good example of industrial development.


Posted by: teraz kurwa my | Link to this comment | 06-12-14 7:49 AM
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I've certainly heard lots of ideas about selling off parts of the Park Service. "Gosh, we don't really need all those National Monuments."

Maybe we should sell off some aircraft carriers.


Posted by: Spike | Link to this comment | 06-12-14 8:03 AM
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Maybe we should sell off some aircraft carriers.

No one would take them as a gift. The US offered the Royal Navy an aircraft carrier (or rather the long-term loan of one) as a gift in 1982 and the Royal Navy said no.


Posted by: ajay | Link to this comment | 06-12-14 8:11 AM
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Maybe we should sell off some aircraft carriers.

Indeed

The United-States of America remains the largest exporter of conventional weapons in the world, according to the latest study by the Stockholm International Peace Research Institute (SIPRI). The U.S account for 30% of global arms sales, or about $7 billion per year, for the period 2005-2009, SIPRI statement says. From 2005 to 2009, the U.S. sold one-third of its arm exports to South Korea (15%), Israel (13%) and the United Arab Emirates (11%).

Posted by: NickS | Link to this comment | 06-12-14 8:11 AM
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Just sell a few carriers to plutocrats, like in Snow Crash.


Posted by: conflated | Link to this comment | 06-12-14 8:12 AM
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Wikipedia says that, since 2009 Russia has passed the US.


Posted by: NickS | Link to this comment | 06-12-14 8:13 AM
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178: Right.


Posted by: JP Stormcrow | Link to this comment | 06-12-14 8:14 AM
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The US offered the Royal Navy an aircraft carrier (or rather the long-term loan of one) as a gift in 1982 and the Royal Navy said no.

What if they gave it directly to the Queen, like Jim Frecklington?


Posted by: Cryptic ned | Link to this comment | 06-12-14 8:15 AM
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Shorter me in 165: Consistent to have slaves as capital if you somehow also account for human capital of free people, if you don't then it cancels in the overall accounting per his footnote.


Posted by: JP Stormcrow | Link to this comment | 06-12-14 8:17 AM
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But it is a very minor quibbling point.


Posted by: JP Stormcrow | Link to this comment | 06-12-14 8:18 AM
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181.2 The US government received tens of millions from Kuwait and Saudi Arabia in 1992 for gulf war I. US companies definitely profit from weapons sales to foreign countries, and the sales must be approved by the government. These aren't direct payments to gov't, but it's a gray zone very close to government.

Both 181 and 179 demonstrate the point in 168. The US government routinely earns money from logging, grazing, mineral and water rights from public land. Selling or controlling terms of use of public property is primarily boring ordinary government business, not pimping out the Lincoln bedroom. The purchase and subsequent resale at a profit of GM stock is another example.


Posted by: lw | Link to this comment | 06-12-14 8:18 AM
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Another multitude that Brat seems to contain is that he was a Presbyterian seminarian but now seems to go to a Catholic church.


Posted by: JP Stormcrow | Link to this comment | 06-12-14 9:00 AM
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And is someone who once wrote: Give me a country in 1600 that had a Protestant led contest for religious and political power and I will show you a country that is rich today.


Posted by: JP Stormcrow | Link to this comment | 06-12-14 9:19 AM
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