Political Vids/Images

[Superfreakie]

[Superfreakie]

This french author has just released a good book on Capitalism (its failure(s)). Although it is a hefty academic work, it has reached #1 on Amazon.

http://www.huffingtonpost.com/2014/04/22/thomas-piketty-amazon_n_5191566.html

[runawayjimbo]

r > get bent

[Superfreakie]

r > get bent

Because he doesn't incorporate risk into the rate of return model, being that capital gains are no longer guaranteed from large amassed pools of wealth, due in part to traditional stable long term investments, such as treasury bills, yielding a pittance? But the equity and bond markets are hardly level playing fields. Then again, how do you factor in a variable for stock manipulation and insider trading? One thing I have learned from years of study in imperfect sciences, is that no model is perfect, particularly when one is trying to encapsulate humanity. But that is hardly a qualifier to the discarding of its ideas. Should it be held up as canon, absolutely not, there are a lot of problems with his book, ones which pose greater concern than the rate of return. Those revolving around inheritance and the absence of technological evolution within his model etc.... Should you wish to read a long rebuttal, I forward you a foreign affairs article (yes, I have a subscription). But it is still a good read nonetheless. We're in a fucking pickle and the more ideas tossed at the problem the better. From left and right.

http://www.foreignaffairs.com/articles/141218/tyler-cowen/capital-punishment?cid=emc-may14promoa-content-042214&sp_mid=45687449&sp_rid=ZGFyZW5pbmdyZXlAeWFob28uY29tS0

[runawayjimbo]

r > get bent

Because he doesn't incorporate risk into the rate of return model, being that capital gains are no longer guaranteed from large amassed pools of wealth, due in part to traditional stable long term investments, such as treasury bills, yielding a pittance?

If T-Bills are the measure of r, than g has been > than r for 5 years running.

But the equity and bond markets are hardly level playing fields. Then again, how do you factor in a variable for stock manipulation and insider trading?

Enabled by regulators and the Fed.

One thing I have learned from years of study in imperfect sciences, is that no model is perfect, particularly when one is trying to encapsulate humanity.

Bernanke says NO

But that is hardly a qualifier to the discarding of its ideas. Should it be held up as canon, absolutely not, there are a lot of problems with his book, ones which pose greater concern than the rate of return. Those revolving around inheritance and the absence of technological evolution within his model etc.... Should you wish to read a long rebuttal, I forward you a foreign affairs article (yes, I have a subscription). But it is still a good read nonetheless. We're in a fucking pickle and the more ideas tossed at the problem the better. From left and right.

Endorse. Also, Tyler Cowen is the shit.

I haven't read Piketty, but it seems like economists on all sides agree his work on the history of inequality is invaluable. But after all that great work studying the history I feel like he just backed his forecast into a conclusion he had already made. And I wholeheartedly believe his solution of punitive taxation is not only wildly misguided, but far more dangerous than he gives credence to. Plus, the Marxist title doesn't sit well with me, if we're being honest.

[Superfreakie]

I do enjoy Cowen, although his support for the Anglo-American invasion and occupation of Iraq (and Afghanistan) was a farcical argument. Admittedly, he shifted position in 2007 as costs were spiraling out of control....which we knew they were bound to back in 2003. While I find it impressive that he writes on endless subjects (as do many academics), his initial argument was grossly uneducated and myopic. That said, this particular area of study is my scholastic domain, so me commenting on economic articles with any sort of authority is somewhat hypocritically equivalent in ignorance. And Bernanke is wrong. And never forget, Parisians believe in utopic ideals....a holdover from their storied past I guess. LOL.       

[sls.stormyrider]

But the equity and bond markets are hardly level playing fields. Then again, how do you factor in a variable for stock manipulation and insider trading?

Enabled by regulators and the Fed.

I hope you don't think that stock manipulation and insider trading woudn't happen w/o regulation and the Fed.
imo the reason why it is enabled, or, better yet, allowed to happen, by regulators is that business has bought them off

[runawayjimbo]

I do enjoy Cowen, although his support for the Anglo-American invasion and occupation of Iraq (and Afghanistan) was a farcical argument. Admittedly, he shifted position in 2007 as costs were spiraling out of control....which we knew they were bound to back in 2003.

Yeah, I think he supported TARP too, which is something no self-respecting free market economist would ever bring himself to do. Still, I give him credit for admitting his wrongs, something that very few "serious" scholars are willing to do.

And Bernanke is wrong.

But the equity and bond markets are hardly level playing fields. Then again, how do you factor in a variable for stock manipulation and insider trading?

Enabled by regulators and the Fed.

I hope you don't think that stock manipulation and insider trading woudn't happen w/o regulation and the Fed.
imo the reason why it is enabled, or, better yet, allowed to happen, by regulators is that business has bought them off

Of course not. I didn't say the Fed invented insider trading, I said they enabled it.

I don't think it's allowed as much as it is inevitable. Talent ends up at the banks, not the regulators. So they will always get around regulation. On top of that, the regulators all want to get a gig at a bank, so they're not gonna rock the boat too hard. You're right that business has bought them off, but it's only cause the incentives in place cause that behavior.

Of course, a more purist free marketer than I would argue insider trading should be legal. That for "efficient markets" to function effectively, ALL relevant information should be priced in. And while I am sympathetic to that eventual goal, it simply could not work in our current cronyist system. Someday, maybe.

It says a lot that Piketty is Amazon's best seller. And that he overtook Flash Boys, another fairly technical (albeit popularly written) story of inequality (in the financial markets), says even more. People are definitely starting to wake up. That makes me happy.

[runawayjimbo]

The Economist is not a Piketty fan

http://www.economist.com/news/leaders/21601512-thomas-pikettys-blockbuster-book-great-piece-scholarship-poor-guide-policy

A modern Marx

Thomas Piketty's blockbuster book is a great piece of scholarship, but a poor guide to policy

WHEN the first volume of Karl Marx's "Das Kapital" was published in 1867, it took five years to sell 1,000 copies in its original German. It was not translated into English for two decades, and this newspaper did not see fit to mention it until 1907. By comparison, Thomas Piketty's "Capital in the Twenty-First Century" is an overnight sensation. Originally published in French (when we first reviewed it), Mr Piketty's vast tome on income-and-wealth distribution has become a bestseller since the English translation appeared in March. In America it is the top-selling book on Amazon, fiction included.

The book's success has a lot to do with being about the right subject at the right time. Inequality has suddenly become a fevered topic, especially in America. Having for years dismissed the gaps between the haves and have-nots as a European obsession, Americans, stung by the excesses of Wall Street, are suddenly talking about the rich and redistribution. Hence the attraction of a book which argues that growing wealth concentration is inherent to capitalism and recommends a global tax on wealth as the progressive solution.

"Capital" has duly enraptured the left, infuriated the right and spiced up the dismal science in the popular mind (see article). But if Mr Piketty does set the tone of debate on inequality, the world will be the poorer for it. For like its 19th-century namesake, "Capital" contains some marvellous scholarship, but as a guide to action, is deeply flawed.

"Capital" makes three big contributions in its 577 pages. First, Mr Piketty, a pioneer in using tax statistics to measure inequality, painstakingly documents the evolution of income and wealth over the past 300 years, particularly in Europe and America. In doing so, he shows that the period from about 1914 to the 1970s was an historical outlier in which both income inequality and the stock of wealth (relative to annual national income) fell dramatically. Since the 1970s both wealth and income gaps have been rising back towards their pre-20th-century norms. There are surely a few snafus in these statistics, but this work has transformed understanding of the history of wealth, with eye-popping results. Who knew, for instance, that the annual value of inheritances in France has tripled from less than 5% of GDP in the 1950s to about 15%, not all that far from the 19th-century peak of 25%? As a piece of empirical sleuthing, the book is indisputably brilliant.

Mr Piketty's second contribution is to come up with a theory of capitalism that explains these facts and offers a prediction of where wealth distribution is heading. His central claim is that the free-market system has a natural tendency towards increasing the concentration of wealth, because the rate of return on property and investments has consistently been higher than the rate of economic growth. Two world wars, the Depression and high taxes pushed down the return on wealth in the 20th century, while rapid productivity and population rises pushed up growth. But without such countervailing factors, Mr Piketty argues, higher returns on capital will concentrate wealth—especially when, as now, an ageing population means that growth should slow.

Mr Piketty's expectation of rising wealth concentration is not outlandish. However, it is a prediction based on extrapolating from the past, not an inherent model of capitalism. He assumes that the returns to capital will not fall substantially even as the stock of wealth rises. That may prove to be true, but the Piketty prediction is a hypothesis, not an iron law.

Nit-Piketty

That is where the problems start, because Mr Piketty's third contribution is to offer policy proposals that assume this growing concentration of wealth is not only inevitable, but the thing that matters most. He prescribes a progressive global tax on capital (an annual levy that could start at 0.1% and hits a maximum of perhaps 10% on the greatest fortunes). He also suggests a punitive 80% tax rate on incomes above $500,000 or so.

Here "Capital" drifts to the left and loses credibility. Mr Piketty asserts rather than explains why tempering wealth concentration should be the priority (as opposed to, say, boosting growth). He barely acknowledges any trade-offs or costs to his redistributionist agenda. Most economists, common sense and a lot of French businesspeople would argue that higher taxes on income and wealth put off entrepreneurs and risk taking; he blithely dismisses that. And his to-do list is oddly blinkered in its focus on taxing the rich. He ignores ways to broaden the ownership of capital, from "baby bonds" to government top-ups of private saving accounts. Some capital taxes could sit nicely in a sensible 21st-century policy toolkit (inheritance taxes, in particular), but they are not the only, or even the main, way to ensure broad-based prosperity.

Mr Piketty's focus on soaking the rich smacks of socialist ideology, not scholarship. That may explain why "Capital" is a bestseller. But it is a poor blueprint for action.

[Superfreakie]

Read that too (digital subscriber) and do concur, great work of scholarship, poor policy guide. However, and as you have stated prior, what is slightly comforting is that people are no longer simply angry, that widespread readership of this and many other recent economic titles suggest an active engagement of an auto-educational process that we must hope leads to eventual action.   

[VDB]

Obama yukkin it up at the WH Correspondents' Dinner:

[VDB]

I came across this old classic from 2008. Still hilarious. This is a local TV news anchor, mind you, not an opinion-show host.

[rowjimmy]

I love Joe Biden.
I wish he was my uncle because he'd be my favorite uncle.

[PIE-GUY]

I love Joe Biden.
I wish he was my uncle because he'd be my favorite uncle.

troof.

[PIE-GUY]

oh snap!!