Specifically, what they do is, they go on Facebook, see, and they post links to articles on Vox with bland statements of interest or endorsement like "This is so cool. Crayons are amazing." or "These guys are selling quarters for 37 cents a piece. And it's not totally crazy either." or "This answers exactly the question that's been bugging me — why is ISIS so much better at fighting than the Iraqi government?" (all these being recent efforts of Matt's; I'm not "Facebook friends" with Ezra).

This is, to me, super annoying. We know where you work, guys; we know this is disingenuous. What's with the pretense? Can't you just post your links without shame?

Further on the Yggles tip. This is also priceless, from an interview with Christensen:

You keep referring to Lepore by her first name. Do you know her?

I've never met her in my life.

Christ, what an asshole.

Note that the reference to Christensen above only appears to come out of the blue, with no context whatsoever. There is context in the first link. For the effort it's taken me to write this paragraph I could have provided said context myself, above, but I guess we're just stuck with things this way!

Snarkout sends in: A new service that will let you spend $24 a month two have two $10 rolls of quarters mailed to you, because innovation!

Heebie's take:

Want to know the best part about that? The shipping's on us.

Noted. Is this more or less egregious than YO?

--Luis Suarez was goddamn electric in the game yesterday, but is there a bigger on-field jerk in all of sport? Biting? Really? And it's strategic biting. At least Tyson was acting in full brutality, and bit the ear off. You can respect that.

--Thanks to my kids, I've listened to more Michael Jackson then ever before. The man could write a catchy song, but he is not, it's fair to say, our greatest lyricist. So who is our greatest lyricist?

This may perfectly well be no big deal, and not turn into more active military involvement. In itself, it's no more worrisome than anything else in the news.

But really, advisers? The US military just spent a full decade setting up and training the Iraqi army. If they had any useful advice to give, don't you think they could have gotten around to mentioning it sometime before they left?

Ok, I have a bit of a naive bleg. We invited another family out to eat with us, whom we don't know very well. They are Chinese, and suggested a Chinese restaurant in town. Sounds great!

Now, Heebietown is small enough that all we have is crappy strip mall Chinese restaurants, so I assume this is a situation where if you are actually Chinese, you just chat with the server and order something authentic, while everyone else gets a standard menu of food cooked completely differently.

So: Are the Geebies going to receive menus, and should we order off them? Or will our friends order on our behalf? Or what are the expectations in this kind of situation? I think it would be fun if they ordered for us and we had whatever culinary adventure came our way, but my first choice is not to make anyone feel awkward.

Yeah, the state should really not be in the business of sterilizing people, even (presumably) super unsympathetic people. It's just got too loaded of a history.

This thread will only work if some pariah takes up the case that certain people are such semen-spreaders that they really ought to be castrated.

Chronic depression sounds so super awful.

What a downer of a thread. To balance it out, read about how Trudy goes to church. I love Trudy.

Sifu writes: Bitcoin, having matured beyond its "trust no one" phase, has entered a new phase, trust an incredibly shady Russian bitcoin mining enterprise. I'm sure that will all go perfectly smoothly. I mean, come on, would the NCAA get involved with something shady?

Bitcoin was different because it did not require full faith and trust in any single entity. The moment there is a 51% miner, the users need to fully trust that miners' intentions. That miner will, of course, claim that they would never launch an attack or engage in any nefarious activity. Whether they do or do not does not matter: the main pillar of the Bitcoin narrative is lost. It will be difficult or impossible to expand the Bitcoin user base. If users were okay with trusting the good intentions of a single entity, we'd do away with the entire protocol, save all the electricity that goes into mining, and keep all the account balances on a database administered by GHash. We'd make sure to use something like HyperDex so it can handle the high transaction rate and is consistent and fault-tolerant. The resulting system would be cheaper, faster and more convenient for everyone, but all of Bitcoin's unique features would have been lost. We can call this centralized entity the "Verifying International Secure Authority," or, in short, VISA.

Heebie's take: ....I'll let you know.

Patent cancelled.

Swistle's post on why marriage depends on luck is very true, yet not particularly depressing. More just straightforward on how marriages can end for reasons that are beyond the grit of the vows.

Nick S writes: I haven't watched any of the show, but it's still funny, entertaining reading. There are many good lines, but I thought this exchange was particularly strong

Alex convinces Piper to lie on the witness stand. Alex then tells the truth when it's her turn to testify. She is then apparently freed.

I'll totally believe that.

Why?

Oh, people turn on each other constantly. All the time. And not even for getting released, you know? They do it for getting their sentence reduced by a few months. Anyone who tells you there's this honor code, or thinks that their homeboys won't rat them out is in for a rude awakening. But I'll tell you the most believable thing about this whole series is the idea that Piper only got 15 months for running dope money.

Why is that believable?

Because she's white, rich, and blonde.

Does that make a difference?

I'm a white blonde girl who went out and willfully fucked up and committed armed robbery, and I got five years. There were tons of black girls in my prison who were holding onto a bag of dope for a couple of days, and they always seemed to get, like, 10 years. If you ever find yourself in prison and wonder why there's tension between white and black, shit like that is probably one of the reasons.

That's incredibly unfair.

It absolutely is. But that didn't prevent me from moonwalking the fuck out of that place when the time came.

Heebie's take: It is a good read. I haven't started the second season, which they're commenting on, but I didn't feel like anything crucial was being spoiled. (How would I know, though?)

A friend told me this story, about a college friend of hers (ie I have not met the main character): In his early 20s, he was super-drunk one night and looking for his car in a parking garage. (Yes, obviously bad idea number one.) He was on the top floor, and realized he was in the wrong garage, and that his car was in the adjacent parking garage, on its top floor. So he decided to jump. And he didn't make it. He lived, but suffered permanent paralysis and some brain damage.

This story has been haunting me, especially when I get insomnia in the middle of the night and picture my kids growing up and learning about how to pace themselves, drinking. Balconies and roofs and bridges and ledges that seem like you could probably make it to that swimming pool with a running start.

I almost didn't want to post this, because the comment thread will be full of injury stories and I am faint of heart and stomach. But it's also early afternoon and I haven't got anything else to post.

I guess he's just been embarrassed to tell us.

Drum and TPM have been making this point lately, that Fox News is more influential and more toxic than we non-viewers realize. This is a difficult thing to decide anecdotally. If you've been on the web for a long time, you've had long and constant exposure to right-wing nutcases, and Fox was too new to account for much of the Clinton insanity. On the other hand, there was famously a disconnect between the opinions of the "elite," who wanted to hang him, and the public, who didn't really care, about Clinton. One certainly gets the sense that you wouldn't find some reasonable conservatives saying "Oh, it's just private conduct" these days. The new Pew survey certainly seems to support the thesis that things have changed, although they don't try to determine whether Fox is responsible.

You know the line

The best minds of my generation are thinking about how to make people click ads. That sucks.

I thought of it when I read about the cup, seven years in development, that tells you what you just poured into it.

Especially when almost exactly the same skills and technology can be used to make something really wonderful (which will probably also make the builders rich).

A big day for the Copa Mundial, as we call it in my country.

The polarization of a Wisconsin that can produce Scott Walker. I found this a really interesting read. Also I'm rooting for Walker to win the Republican nomination now so that I can see that smirk get wiped off his face on the national stage.

h/t Brad DeLong

[Updated schedule: Conflated has Chapter 6 next Monday, I have Chapter 7, and lw is on Chapter 8.

Xtrapnel's summary of Chapter 5, proving that the accumulation of capital can only be reversed by appointing government officials by lot, under the fold. LB]

Prior reading group posts:

Piketty Reading Group Setup
Initial Scheduling Post
Introduction and Chapter One -- Robert Halford
Chapter Two -- Minivet
Chapter Three -- Essear
Chapter Four -- Unimaginative

Piketty Chapter 5

The previous two chapters have sketched out the history of the capital-to-income ratio, Piketty’s β, in various countries for which data exists. Now Piketty wants to explain the dynamics of that ratio. Isn’t it weird that it stayed relatively stable, at around 6-7x national income in Europe or 3-5x in the US, over centuries, even as its composition changed dramatically? Why was it so much higher in Europe than in the US? And isn’t it weird that it’s now shooting up again? What’s up with that?

What’s up with that is, in Piketty’s rather grandiose terminology, the Second Fundamental Law of Capitalism, β = s / g, which says that a society’s equilibrium capital/income ratio is equal to its savings rate (net of depreciation) divided by its growth rate (total, not per capita). To use his example, because I’m lazy and typing this on a tiny coach-class dining tray on an international flight, "if s = 12% and g = 2%, then β = s / g = 600%".

The key thing about this law is that, unlike the First Law (α = r × β: capital’s share of income equals its rate of return times the capital/income ratio), it describes a tendency towards equilibrium rather than an accounting identity that must always hold. If that s = 12%, g = 2% society has a β of only 5 rather than 6 in year 1, it will have a β of 5.12 / 1.02 = 5.02 in year two (over the course of the year, an extra 12% of a year’s income has been added to the capital stock, but national income has also grown by 2%), which is to say, it has crept closer to the equilibrium rate of 6. By contrast, if it starts with β of 7 in year 1, its β will be 7.12 / 1.02 = 6.98 in year 2—again, creeping closer to the equilibrum value. Only at β = 6 does saving 12% a year while growing 2% keep β constant. But arriving at this equilibrium value may take quite some time!

There are two further qualifications to the law. First, it only counts capital that can be accumulated, and not, for example, “pure” natural resources. Second, it ignores asset price effects—if a small country’s capital consists of owning houses in a foreign country, and those houses suddenly double in price, β will also double without any concomitant change in savings. I do wonder about the significance of asset price effects, of which more later.

With those preliminaries out of the way, Piketty’s answer to the dramatic differences in β between the US and Europe, and β’s resurgence since the 70s, is pretty simple: Europeans save (and have kids and/or let in foreigners) like this, but Americans save (and have kids and/or let in foreigners) like this.

Seriously, that’s more or less it. In his view, per capita growth has been basically the same across the rich countries he’s studying, but population growth (.2% in Germany vs. 1.4% in Australia and 1% in the US) and net savings (15% in Italy vs 7.3% in Britain and 7.7% in the US) have varied quite a bit, and that’s basically the whole story. If you save a lot, and don’t grow much, you’ll have a high β; if not, not.

Since I’m on a plane right now, I can’t check Supplemental Figure S5.1, which he says shows that you can predict 2010 private wealth pretty well just from 1970 wealth and savings flows (except for Britain). But he seems like an honest chap. And in the Japanese case, saving flows alone predict a value (616% of national income) only slightly off from the observed 601% value, according to footnote 10. (Although I imagine the prediction would be way off during the height of the Japanese real estate bubble.)

After making this big picture point, Piketty spends some time on technicalities. He clarifies some questions about why it makes sense to count retained earnings as savings in the relevant sense (the decision retain earnings rather than pay out as dividends is largely driven by tax considerations, so it should be counted as savings on the shareholders’ behalf), and dismisses household durable-goods & “valuables” (art, gold, etc.) as not very relevant to the big picture: durables accounting for ~50% national income, and steady over time, while “valuables” make up ~5-10%, which has declined long term.

He also notes that if you measure β using disposable income (minus taxes, plus transfers) instead of national income, it’s already reached historic heights (due to the growth of the welfare state, which reduces the latter in the denominator), but I’m not sure how interesting that is.

As I said, the big story here is that, in his words, "The very sharp increase in private wealth observed in the rich countries, and especially in Europe and Japan, between 1970 and 2010 thus can be explained largely by slower growth coupled with continued high savings, using the law β = s / g." But there are two other mechanisms that contributed to this, although he doesn’t think they’re nearly as important.

One is the privatization of public wealth: states took on increasingly large debts, which became private sector assets. This accounted for between 1/10th and 1/4th of the total increase the growth of the latter, and that may be an underestimate, especially in cases like Britain where public assets were shifted off the balance sheet for undervalued prices. Still, not the main driver of things.

Nor was the general rebound in asset prices, which he sees as reflecting a recovery to quasi-natural (or natural-under-capitalism) levels after a bottoming-out around 1950, when "the price of real estate and stocks fell to historically low levels in the aftermath of World War II for any number of reasons (rent control laws, financial regulation, a political climate unfavorable to private capitalism)". This—which we can see illustrated in the general tendency of Tobin’s Q, the ratio of companies’ market values to their book value, or net assets, to rise from 1970 onward—accounts for about 1/4th to 1/3rd of the increase in β during that period.

After this, Piketty spends some time covering foreign assets, which would seem at first glance not to be a big deal in the postwar period, at least compared to the colonial era. Japan and Germany, though, have accumulated reasonably large net positions (70%/50%), and even small net positions can conceal quite large gross holdings, which may be an issue he’ll deal with in Part 3. Also, differences in β between countries can exacerbate capital imbalances, as capital-rich countries look for places to invest, and large β’s may invite bubbles generally.

Piketty then extrapolates into the future, using some mid-range demographic and economic growth predictions to predict the global β rising to almost 700% by the end of the century, effectively globalizing 19th century European levels of wealth-holding.

The chapter ends with a brief discussion of natural assets, which cannot be accumulated by simply saving more and are hence not covered by β = s / g. He suspects that the value of these assets is not large, partly because his 2nd law seems to explain so much variation.

To sum up: savings flows and population growth account for most of the rebound in β (in addition to dictating β’s asymptotic destination), with the privatization of public wealth, and (more importantly) an increase in asset prices due to a relaxing of constraints on owners’ ability to profit from them accounting for much of the rest.

Some thoughts: I’d like to see more on the asset-price issue. It’d be nice, too, not to have his savings-flow models relegated to an online appendix, because I’m way too lazy to look it up, and I’m curious about how off the numbers for the UK were, and what he thinks was going on there.

Whew. Okay, discuss! While Iberian Fury and I vacation in topless, enlightened, capital-dominated Europe.

This quiz would disarm the staunchest anti-intellectual and allow them to look back through the circular telescope at their own true biases. Who among us is brave enough to take the quiz honestly? Also have you ever heard a violin?

Teofilo writes: Apparently there's good money in operating fake Cambodian orphanages.

Heebie's take: Lately corruption feels like the root of all evil. (I was reading about Nigeria a bit.) It seems like the most intractable of all social problems. Let's all go back to bed oh and happy fathers day.