Still reading Piketty

Just finished Chapter 12, though I have to reread earlier chapters, particularly Chapter 11. There have been several excellent reviews and alternative suggestions to his for the problems raised. The closest my reading is one by Doug Henwood http://www.bookforum.com/inprint/021_01/12987
See also Inequality and sabotage: Piketty, Veblen and Kalecki and the discussion
Was Marx right? in NY Times
P.S. I find that I have misunderstood some crucial parts and so have to go back and forth.

Chart book of economic inequality

for 25 countries via Timothy Taylor: "The 25 countries are partly determined by the availability of long-run (meaning a good chunk of the 20th century) data. Along with the United States, the other countries are  Argentina, Brazil, Australia, Canada, Finland, France, Germany, Iceland, India, Indonesia, Italy, Japan, Malaysia, Mauritius, Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, and the United Kingdom. The figure for each country is also followed by a few bulletpoints that highlight some main trends. Detailed sources for the data are also provided."

Faculty vs administration numbers

I remember a Dutch professor telling me in 1980 that there was time when the number of admninistrators in his university was a fraction of the faculty number but by then it has crossed. This paper discusses the trends since the eighties in the US. Harvard is apparently bucking the trend. It is apparently leading to protests in some places. A quick search did not lead me to the exact data. From this article  from 2011
"In 2005, colleges and universities employed more than 675,000 fulltime faculty members or full-time equivalents. In the same year, America’s colleges and universities employed more than 190,000 individuals classified by the federal government as “executive, administrative and managerial employees.” Another 566,405 college and university employees were classified as “other professional.” This category includes IT specialists, counselors, auditors, accountants, admissions officers, development officers, alumni relations officials, human resources staffers, editors and writers for school publications, attorneys, and a slew of others. These “other professionals” are not administrators, but they work for the administration and serve as its arms, legs, eyes, ears, and mouthpieces."
This from 2014 has numbers for public schools:
"To get an idea of how drastically the situation has changed over time, consider that in the 1949-50 school year, teachers outnumbered non-teaching staff by 2.37 to 1. In other words, sixty years ago there were 237 public school teachers for every 100 non-teaching staff. Now in states like Virginia, that ratio has almost been completely reversed, and there are now 1.83 non-teachers for every public school teacher in Virginia, or 183 administrators and non-teaching staff for every 100 teachers!"

The debate starts

'Save capitalism from the capitalists by taxing wealth' from The Economist's View

Some economists are talking of sustainable growth

from VoxEu Sustainable growth requires long term focus. A related post on agriculture from Triple Crisis
To end hunger, global policy cannot be 'business as usual'

“The transition to agri-food policies that support the realization of the right to food requires major political efforts to restructure support around agro-ecological, labor-intensive, poverty-reducing forms of agriculture,” De Schutter writes in the report. “The food systems we have inherited from the twentieth century have failed.” 

Full court press

Earlier US opposition to ambitious Indian food program a direct attack on the right to food'
Now US tries to stop India's solar policy while pushing fight against climate change

Why is everybody talking about Piketty?

by Ryan Cooper in The Week "The English translation of French economist Thomas Piketty's magnum opus Capital in the Twenty-First Century is finally out, and it's made an enormous splash (see reviews here, here, and here). It's a brilliant, surprisingly readable work that synthesizes a staggering amount of careful research to make the case that income inequality is no accident. Indeed, Piketty argues that it is a feature of capitalism itself — unless governments take action to rein in capitalism's excesses." 
It also links to some things that can be done and which are being done partly in many countries.

More reviews of Capital 21

This one from Doug Henwood is close to my views
"Starting with the title, the eternally recurrent specter of Marx hangs over this book. Early into the first page of the introduction, Piketty asks, “Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands, as Karl Marx believed in the nineteenth century?” Phrasing the question as something grounded in the past is a nice distancing technique, as the psychoanalysts say, but the answer is clearly yes. Several times, Piketty disavows Marx—just a few lines later he credits “economic growth and the diffusion of knowledge” for allowing us to avoid “the Marxist apocalypse”—but he also concedes that those prophylactics have not changed capitalism’s deep structures and the tendency for wealth to concentrate. It seems, in other words, that Piketty’s own research shows that the old nineteenth-century gloomster had a point."
The review by James Galbraith is more negative and has some suggestions of what can be done:
"In sum, Capital in the Twenty-First Century is a weighty book, replete with good information on the flows of income, transfers of wealth, and the distribution of financial resources in some of the world’s wealthiest countries. Piketty rightly argues, from the beginning, that good economics must begin—or at least include—a meticulous examination of the facts. Yet he does not provide a very sound guide to policy. And despite its great ambitions, his book is not the accomplished work of high theory that its title, length, and reception (so far) suggest."
Dean Baker's review is somewhat similar. And one from Angry Bear "So Marx was wrong both ways — economically and politically — even while he was right." The spectre of Marx does not seem to go away.
All in all, the book seems to have started important discussions and is worth a look.

Bio fuel for small farmers

From Using bio fuel to run an irrigation pump for five acres:
"While the farmer says that he was able to turn the land fertile only through organic practices, he is well known in the region for propagating the usefulness of punnai seeds.

“If a farmer has two punnai trees on his land, he can reduce the diesel cost considerably. I run the motor for about five months using the oil during summer,” he says.

The tree grows well in coastal regions. Cattle or goats do not eat the leaves thus making it easier for a farmer to grow it.

Capable of growing in any type of soil it can withstand heavy winds and produce seeds within five years after planting.

“A farmer can get four to 20 kg of seeds a year from a five year old tree. After 10 years, a tree will yield 10 - 60 kg in a year and the seed yield will be on the increase as the trees grow older. From my experience, a 25 year-old tree yields a minimum of 300 kg and a maximum of 500 kg of seeds,” says Mr. Rajasekaran.

The trees attract lot of honey bees and bats. While the bees help to pollinate the bats eat the fruits and the seeds scatter all over the area through their droppings.

Drying

“My daily job in the morning is to collect the seeds and dry them for a week, after which they are broken open to expose the kernel. The kernel is further dried for 10 days before oil extraction,” he adds.

From one kg of seed kernel about 750 to 800 ml of oil can be extracted and the cost of producing a litre of oil works out to Rs.10.

“I operate the pump only during summer, for about five months in a year to be precise and for that my requirement is 600 ml of oil for an hour every day. Previously while using diesel my requirement was 900 ml for the same duration of time.

In a year I am able to get 75 litres. The surplus oil is sold to other farmers at Rs. 42 a litre. After extracting the oil, the cake is used as manure for crops,” he explains."

More about the tree  Calophyllum inophyllum and its regional names in the wikipedia 

Another negative review of Piketty

Capital in partial equilibrium by Ryan Decker, a Ph.D. candidate in macroeconomics:
"Many reviews have been very positive; there are a lot of positive things I could say about it, but I will leave that to others. The book suffers from some fundamental flaws; in short, while it is heavy on data it is light on serious economics. Readers will find themselves wading through hundreds of pages of opinion and ideological quips, not economic analysis, with interesting charts scattered throughout. The firehose of data can be overwhelming, which may explain why some reviewers internalized his arguments uncritically. " 
This and some other criticisms by Ryan Decker seem valid. But I think that it is also  the attractive part of the book. It is clear, allows one to understand some of the problems and think for oneself. Even parts which are somewhat technical about how inheritance still matters are explained very simply. I think that one should be taken in by all the hype but the book does make some economic questions accessible to outsiders.

Is it r-g or f r-g?

One measure of inequality for Piketty is the capital to income ratio β =C/I. If the rate of return on capital is r, not all the return rC is invested next year but only a fraction of it frC. which is the increase in capital that is used to calculate the  β for next year. This leads to the formula β_(t+1)/β_t=(1+f_t r_t)/(1+g_t) which helps to determine the growth of β in the long run. So it seems that what matters is fr-g rather than r-g. To see what f is like, if s is the national savings rate frC =sI or frβ=s or β=s/fr. So if β does not explode, we should have fr and g nearly equal and this leads the formula β=s/g in the long run, the so called Harrod-Domar-Solow formula. In any case, the emphasis on fr-g instead of that on r-g would have made Piketty's arguments clearer.
P.S. Calculations of this type are in a paper of Thomas Piketty and Gabriel Zucman  http://behl.berkeley.edu/files/2013/02/Piketty-Zucman_WP2013-10.pdf

Finally a critical review of Capital 21

by Charles Andrews: Thomas Piketty's Capital in the Twenty-First Century: Its Uses and Limits. From the conclusion
 "A section of progressives are excited about Capital 21 because it might help revive social democracy.

For the rest of us, Capital 21 provides solid data about the very rich.  Piketty's work is a demonstration of the adage: follow the money.  Good advice.  But when you need deep understanding of society, follow the labor."

Trying again to understand Piketty

Earlier mistake (repeated here) was to add the whole gain from capital to deduce the next year's capital. We use a fraction of it in the next calculations.
β is C/I where C is capital and I is income. To consider the long term changes, I will denote these quantities at a given time by subscripts β_t etc and after an year by β_(t+1) and growth rate for that year by g_t etc. f_t is the fraction of the return from capital that is saved and added to the capital for the next year.

So C_(t+1)=C_t+f_t*r_t*C_t and I_(t+1)=I_t+g_t*I_t (here * denotes multiplication which I will omit it later and just use juxtaposition); If the population is not stagnant, growth rate in the population is added in g_t. Dividing both sides by I_(t+1) and simplifying, we have
 β_(t+1)/β_t=(1+f_t r_t)/(1+g_t) (call this Equation A) 
(Notice that if the national savings rate is s_t, we should have s_t =f_t r_t β_t (Equation A'))
from which we can estimate β_(t+k)/β_0 for k years as  a product of successive ratios:
β_(t+k)/β_0=((1+f(t+k-1)r(t+k-1)/(1+g_(t+k-1)).....((1+f_0 r_0)/(1+g_0)) (Equation  B)

By rearranging we also get another identity comparing f_t, r_t , g_t:

f_t r_t-g_t=((β_(t+1)/β_t)-1)(1+g_t) (call this Equation C)

Piketty's observation is that this difference r-g has been generally positive except for a  period 1913-1970 in the twentieth century and often f_t r_t is greater than g_t. Generally β has been less than 8 or so. Assuming that growth rate is bigger than -1 during  the period under consideration, we see from Equation C that for f_t r_t-g_t to be positive we also should have 
(β_(t+1)/β_(t)-1)greater than 0 or β_(t+1) greater than β_t. That is, β_t increases during that period. If it does not go to infinity, we should have β_t converging to some β in the long run during the period when f_t r_t-g_t greater than 0. This convergence implies from Equation A that 1+f_t r_t gets close to 1+g_t or that f_t r_t and g_t are nearly equal after a while. If we assume that g_t converges to some g, then f_t r_t also converges to the same number g.

So the conclusion is that if β_t does not explode, whatever the growth rate is (as long as it is bigger than -1) f_t r_t modifies to mimic the behaviour of g_t.

From equation A', we see that β_t converges to the limit of s_t/f_t r_t =s/g which corresponds to the asymptotic formula β=s/g.

Of course, I am not sure whether this is correct either. But these are my models for understanding parts of Piketty's Capital.

P.S. Calculations of this type are in a paper of Thomas Piketty and Gabriel Zucman  http://behl.berkeley.edu/files/2013/02/Piketty-Zucman_WP2013-10.pdf

Links to Piketty reviews

from Brad DeLong. Of these one from Heather Boushey and Brad DeLong has a link to a lecture by Piketty himself with a number of the graphs seems useful to me.

Actress Nanda RIP

We used to know her as Baby Nanda. More about her in the wikipedia . One of her dance-songs I listen to frequently

Ed Yong on drug resistance to Malaria

"In the war against malaria, one small corner of the globe has repeatedly turned the tide, rendering our best weapons moot and medicine on the brink of defeat. I travelled to Thailand and Burma to meet the scientists who are trying to eliminate resistant malaria before it defeats our best remaining drug. " from
Can we beat drug-resistant malaria at its birthplace?

Surviving capitalism

One old idea seems to be some sort of co-operatives. Shaila Dewan writes in NY Times (via Ramarao Kanneganti) Who needs a boss? "The oft-proposed remedy for this state of affairs is redistribution — namely, taxing the rich to benefit the poor. Piketty, in fact, proposes a global tax, one that can’t be avoided by private jet. Others want to raise the minimum wage. In contrast to those Band-Aids, worker co-ops require no politically unpalatable dictates. And by placing workers’ needs ahead of profits, they address the root cause of economic disparity. “If you don’t want inequality,” says Richard Wolff, the author of “Democracy at Work: A Cure for Capitalism,” “don’t distribute income unequally in the first place.”"
See also The rise of anti-capitalism by Jeremy Rifkin

Interview with the two particle physicists in the US Congress

in Politico (Via a comment in http://economistsview.typepad.com/economistsview/2014/03/paul-krugman-wealth-over-work.html)
"Representative Bill Foster (D-IL) and Representative Rush Holt (D-NJ) share an atypical background: they are both particle physicists. Serving respectively since 2008 and 1999, they are currently the only two physicists in Congress, a body made up mostly of lawyers and career politicians, where members with technical backgrounds – such as engineers, economists, and scientists – are rare.

The Politic had a chance to hear from both Foster and Holt, who shared some of their thoughts, based on their congressional experience, about the connection of science and technical training with policy making, an overlap which includes much more than science policy."

From Holt "By thinking like a scientist, I mean asking questions in ways that they can be answered based on evidence, and then subjecting your answers to scrutiny by others so you don’t become trapped in a self-delusion. That’s what science is, and that’s what is so rare in politics"

From Foster "n the United States Congress, it’s a roughly fifty/fifty mix of lawyers and career politicians, and about 4 percent people with – a very generous definition of – a technical background, including large animal veterinarians and economists. Then you have about 4 percent that could be called scientists or technical people. So you see [the differences] very strongly in the behavior."

Relatively rich talking about the poor

The top decile In US break up: the top 1 percent, the next 4 percent and the next 5 percent. In 2010, the 'bottom' 5 percent income ranged from 108,000 to 150,000 dollars for year, and for 4 percent above between 150,000 and 352,000. Among the members of this upper income groups are US academic economists... (from Piketty's Caiptal, Chapter 8. From the kindle page, it is difficult to give the page number). It seems that many of the Indians I know in US (as well as Australia) are in this upper income group. May be me too; my only asset is my house and superannuation which is around 2500 Australian dollars a month. The house which I bought for 150,000 dollars in 1995 seems to be around a million dollars worth now. So, I am probably a millionaire too. Is it mostly the relatively rich people, who never felt the pangs hunger (I did mildly but that was around 1960 when I was student), talking about the poor?

Another nice review of Piketty's 'Capital'

Taking on Heiristicracy. As Krugman says, it is all about r-g. Cutting down r is a political decision. May be ban anybody above certain income from elected positions or appointments by elected officials. I think g works differently for developing and developed economies. Only the book 52 in this list seems to question growth obsession for developed economies 1oo Best Economics Books of All Time.

Another dance from Vyjayantimala (1963)

Via http://cinemanrityagharana.blogspot.com.au/2014/03/found-vyjayanthimalas-other.html#more

Krugman on Piketty

Whether what I wrote was correct or not, it seems that I have been spending my time on a good book. Krugman says "It’s an amazing book; among other things, it does an awesome job of integrating economic growth, the factor distribution of income (between capital and labor), and the individual distribution of income into a common framework. (It’s all about r-g)."
P.S. Here is what I wrote yesterday in better format (thanks to Jack Morava. Since reitirement I do not have access to the software most of the time) https://www.dropbox.com/s/m0yycewv9vlx18j/SwaruponPiketty.pdf

P.P.S (25th March) Assuming what I wrote above is correct, one conclusion is that during periods when r_t-g_t >0 and g_t>-1, the capital to income ratio β_t  will explode unless r_t- g_t tends to zero. But this is only a necessary condition. If it tends to zero at the rate of 1/t, β_t will still explode but some thing like  1 /t^2 is fine. But these are all simple identities and do not discuss any thing of the processes involved.
P.P.S.2 What I wrote is wrong. Corrections here http://gaddeswarup.blogspot.com.au/2014/03/trying-again-to-understand-piketty.html
P.P.S.3 Calculations of this type that I was attempting are in a paper of Thomas Piketty and Gabriel Zucman  http://behl.berkeley.edu/files/2013/02/Piketty-Zucman_WP2013-10.pdf

Reading Piketty: some doubts

This is probably a foolish attempt, trying to discuss Piketty without knowing any traditional economics and I have read only the first seven chapters so far out of a total of sixteen. I will depend on Branko Milanovic review for overall view of the book. But it seems better to spell out doubts so that somebody may clarify them so that eventually I can understand it better. So far, Piketty uses traditional economics at only one place in Chaper 5, to get an asymptotic (long run) estimate for the rate of return r. I will ignore this and just discuss some of the stuff I read so far in terms of identities and their relation to data.

β is C/I where C is capital and I is income. To consider the long term changes, I will denote these quantities at a given time by subscripts β_t etc and after an year by β_(t+1) and growth rate for that year by g_t etc.

So C_(t+1)=C_t+r_t*C_t and I_(t+1)=I_t+g_t*I_t (here * denotes multiplication which I will omit it later and just use juxtaposition); If the population is not stagnant, growth rate in the population is added in g_t. Dividing both sides by I_(t+1) and simplifying, we have
 β_(t+1)/β_t=(1+r_t)/(1+g_t) (call this Equation A) 
from which we can estimate β_(t+k)/β_0 for k years as  a product of successive ratios:
β_(t+k)/β_t=((1+r(t+k-1)/(1+g_(t+k-1)).....((1+r_0/(1+g_0)) (Equation  B)

By rearranging we also get another identity comparing r_t ,g_t:

r_t-g_t=((β_(t+1)/β_t)-1)(1+g_t) (call this Equation C)

Piketty's observation is that this difference r-g has been generally positive except for a  period 1913-1970 in the twentieth century. Generally β has been less than 8 or so. Assuming that growth rate is bigger than -1 during  the period under consideration, we see from Equation C that for r_t-g_t to be positive we also should have (β_(t+1)/β_t)-1)>0 or β_(t+1)>β_t. That is, β_t increases during that period. If it does not go to infinity, we should have β_t converging to some β in the long run during the period when r_t>g_t. This convergence implies from Equation A that 1+r_t gets close to 1+g_t or that r_t and g_t are nearly equal. If we assume that g_t converges to some g, then r_t also converges to the same number g.

So the conclusion is that if β_t does not explode, whatever the growth rate is (as long as it is bigger than -1) r_t modifies to mimic the behaviour of g_t.

But what are the numbers involved? Milanovic says on page 8 of his review "... g cannot exceed 2.5% per year. If r remains, as Piketty thinks, at its historical rate of 4-5% p.a., all the negative developments from the 19th century will be repeated."

If the above 'identities' are correct. some of the current data can be checked using, for example, Identity B. It seems from this, r cannot be that high compared to g without β getting much larger. So, I am not sure what is happening.

Milanovic asks "But, the reader will ask, if the capital/output ratio increases so much, 

would not the marginal return to capital diminish? Would not r go down? This is obviously a soft point of Piketty’s machinery." The above analysis says that if β is bounded above, then r has to go to the level of g. What is this bound?

Last word from Milanovic and Piketty "A remarkable graph, reproduced below, shows a huge positive gap between r and g from Antiquity to the early 20th century, its disappearance (or rather, the inversion, g>r) for the most of the 20th century, and then recent reemergence. Moreover, Piketty sees, interestingly, today’s processes of expanding financial sophistication and international competition for capital as helping keep r high. While many people question financial intermediation and blame it for the onset of the Great Recession, Piketty sees it as helping uncover new and more productive uses for financial capital and maintaining the rate of return high. But far from making this high r a good thing for the economy, he regards it, unless checked by higher taxation, as a portender of disaster..............The validity of Piketty’s “model” thus depends on the key proposition of relative stability of the rate of return on capital. But in a methodological approach that he both pioneered and clearly prefers, the answer to that question cannot be given in the abstract but only by the empirical evidence that is still in the future. In other words, we shall have to wait for the judgement of history. "
P.S. Jack Morava has kindly texed it and sent me the pdf file https://www.dropbox.com/s/m0yycewv9vlx18j/SwaruponPiketty.pdf
P.P.S. The above is wrong. Corrections here http://gaddeswarup.blogspot.com.au/2014/03/trying-again-to-understand-piketty.html
P.P.S.2 Calculations of this type I was attempting are in a paper of Thomas Piketty and Gabriel Zucman  http://behl.berkeley.edu/files/2013/02/Piketty-Zucman_WP2013-10.pdf

Last taboo

From Tackling the last taboo by Christopher Williams:
"The lack of access to safe, hygienic and private menstruation also has major societal consequences. In India, up to a quarter of girls drop out of school when they reach puberty; in part because schools lack private or gender-segregated toilets. Women frequently miss work because they have no place to change the cloths they use. In Bangladesh, most employed women miss about six days of work each month, stifling productivity and advancement.

So, if safe, hygienic and private menstruation is so critical to women’s lives and livelihoods, why don’t we hear about it more often? Why isn’t it higher on the international development or women’s rights agenda? The answer involves the difficulty of tackling deep-rooted customs, women’s position in society and the inherent discomfort in talking about normal but messy bodily functions.....

 Today, for example, only 12 per cent of India’s menstruating women have access to commercial sanitary products, while many of the rest use dirty rags, newspaper or cotton. Innovative companies and organisations developing inexpensive, reusable sanitary products like the AFRIpad can help close this gap and must be supported."

Another  ,about reusable pads from ecofemme.

Chris Blattman initiates a discussion on Crimea

which seems more polite than usual and he summarizes in this post ( I have not been really following the issues,. Some discussions et too heated and too long)

Responses to “Someone please explain to me why I should accept that the annexation of Crimea is a terrible thing”

Puppet inspired dances fro Hindi films

from Chori Chori and another from Kathputli

BoE document making waves

Money creation in modern economy and Money creation in modern economy: an introduction
A commentary by Raul Ilargi Meijer with links to commentaries by Steve Keen and David Graeber:
The Bank of England lights a fuse under the field of economicshttp://www.theautomaticearth.com/the-bank-of-england-lights-a-fuse-under-the-field-of-economics/
I am still reading the documents which are not too long, but the interest seems to from the opening statementfrom the first document :

"• This article explains how the majority of money in the modern economy is created by commercial banks making loans.

• Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

• The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’."

whereas as Keen quotes from Krugman 

“Banks are just another kind of financial intermediary, and the size of the banking sector — and hence the quantity of outside money — is determined by the same kinds of considerations that determine the size of, say, the mutual fund industry.”

I hope to read these documents more closely and see how they relate to 

China's "Minsky Moment" is here, Morgan Stanley finds.

P.S. I have not read the documents yet (busy with Piketty) but this point has been botherin me "Thus, in the theortetical framework described by the authors, QE cannot possibly have any effect on any macroeconomic variable. Now that’s a problem." from http://uneasymoney.com/2014/03/21/the-irrelevance-of-qe-as-explained-by-three-bank-of-england-economists/

Piketty's Capital, Chapter 6

This chapter is somewhat diffuse, discussing the previous data, introducing more standard economic concepts, probably setting up the basics for the rest of the book. He notes that capital to income ratio β, or capital's share of the national income α have not shown stability , only short or medium term trends so far. Detailed table of contents is available here. A concrete part is discussion of Marx, already described by Matt Bruenig http://mattbruenig.com/2014/03/14/piketty-on-marx/ . It is taking longer to read as I go on. With ten more chapters to go, it may take a month or so to read the rest and understand some bits of it.

One from Baiju Bawra with subtitles

(via Richard Singer)

Another interesting article on itch

The itch nobody can scratch by Will Storr on Morgellons disease (via Ed Yong). It does not quite reach the depths of Atul Gawande's The Itch.

The perpetual conflicts

"The present crisis is the latest iteration of what has become a permanent feature of life in the United States. Just last summer the American people were subjected to a manufactured war fever that nearly led to a bombing campaign against Syria. Before that it was Libya, with the people being told that immediate military action was required to prevent a “human rights” catastrophe. Threats against Iran and China are permanent, with the possibility of military action always “on the table.”" from http://www.wsws.org/en/articles/2014/03/19/pers-m19.html (via Richard Singer). But there are conflicts on other fronts too US opposition to ambitious Indian program is a direct attack on the right to food (an alternative view) and trade agreements New study shows dangers of trade areements that help corporations sue governments.

Evolution of corn rootworms resistant to BT corn

From Voracious worm evolves eat Biotech corn engineered to kill it by Brandon Keim:
"There’s a lesson to be learned for future crop traits, Shields said. Rootworm resistance was expected from the outset, but the Bt seed industry, seeking to maximize short-term profits, ignored outside scientists. The next pest-fighting trait “will fall under the same pressure,” said Shields, “and the insect will win. Always bet on the insect if there is not a smart deployment of the trait.”"

Piketty's Capital, Chapter 5

I spent a few days mulling about Chapter 5 on capital to income ratio β. Thus β is C/I where C is capital and I is income. Note that his definitions may be slightly different from the usual ones.I tried to do an exercise to help understand it better. He says that in the long run, it is s/g where s is the savings rate and g the growth rate. He also has an identity on the return from capital 
α = r*β where * denotes multiplication and r is the rate of return on capital. To consider the long term changes, I will denote these quantities at a given time by subscripts β_t etc and after an year by β_(t+1) and growth rate for that year by g_t etc.
So C_(t+1)=C_t+r_t*C_t . Now divide both sides by I_(t+1). the right hand side is (C_t/I_t)*(I_t/I_(t+1)) +r_t*(C_t/I(t+1)). Now divide the numerator and denominator of the second factors on the right hand side by I_t. I assume that the population growth rate is zero when writing I_(t+1) in terms of I_t and g_t. Simplifying, we get the equation β_(t+1)= (β_t/(1+g_t))* (1+r_t).
Now assume that the growth rate also stabilizes. Since we know that β_t stabilizes, we must also have r_t stabilizing. Denoting the limits by β, r, t etc and taking limits on both sides and assuming that none goes to infinity, we have β=β(1+r)/(1+g) or we should have r=g in the long run, if we assume stability.

All this may be nonsense. If anybody who knows some economics (I do not) has corrections and suggestions, it will help me to understand the book a little better.

Two on development

The rise of Anti-Capitalism by Jeremy Rifkin:
"Despite this impressive growth, many economists argue that the nonprofit sector is not a self-sufficient economic force but rather a parasite, dependent on government entitlements and private philanthropy. Quite the contrary. A recent study revealed that approximately 50 percent of the aggregate revenue of the nonprofit sectors of 34 countries comes from fees, while government support accounts for 36 percent of the revenues and private philanthropy for 14 percent.
As for the capitalist system, it is likely to remain with us far into the future, albeit in a more streamlined role, primarily as an aggregator of network services and solutions, allowing it to thrive as a powerful niche player in the coming era. We are, however, entering a world partly beyond markets, where we are learning how to live together in an increasingly interdependent, collaborative, global commons.'
Piketty on Marx by Matt Bruenig 
Matt Bruenig explains Piketty and Marx. Note that the second fundamental law (below the first) is an asymptotic law (in the long run) and Piketty says that it is only valid if one assumes that asset prices behave the same way as consumer prices. Secondly, it does not take into account the changes which may be coming pointed out in the NY Times article above. 
"Piketty plugs Marx’s somewhat vague prosaic presentation of this theory into the two formulas Piketty relies upon to describe the dynamics of capital.

• β = s/g
• α = r*β
• ...............

The case where r decreases to compensate is the “tendency of the rate or profit to fall” scenario. The rate of return on capital trends towards zero and that causes all sorts of political instability because of capitalists tearing each other apart to try to scratch out a return. The case where α increases to compensate is a world where capital slowly gobbles up more and more of the national income until it gobbles up all of it, a scenario which will surely generate worker revolution.

So, if we assume growth or near-zero growth will eventually result after capital deepening has essentially run its course (Piketty’s account of what Marx may have had in mind), capitalism does appear to self-destruct from internal contradictions. It is only the existence of TFP-driven growth elements that allows us to stave off this particular conclusion, something Marx would not have been aware of."

Fernando Ibarra

"In rural, northern Argentina, profound economic isolation and severe environmental conditions are the order of the day. It is a region of the country called 'The Impenetrable' where there are few resources and fewer opportunities to change the day-to-day grind of rugged circumstances and disenfranchisement.

For Fernando Ibarra, an engineer and starry-eyed inventor, the region is his own personal laboratory, and this hardscrabble reality presents a fresh challenge - a place to develop and test drive solutions for almost every situation.

This film is a journey that takes us into this world. The story unfolds as Fernando travels through the region, in his funky 1947 truck named "Gasogene", identifying both the projects he hopes to take on and the people he can work with to develop long-term solutions to local problems.

Fernando's goal is not to be a "visiting angel" but to develop a core group of locally based leaders that can contribute to solving their own issues using sustainable and available resources.

He is committed to infusing the next generation with a passion for respecting resources and encouraging them to build home "grown" projects that they can develop, manage and operate themselves. " from Al Jazeera Viewfinder. The video can also be viewd on YouTube

Holi song from Navrang 1059

(via Richard Singer)

From Do Behnen 1959

Corruption related

A bad boom from The Economist (via Akshay Regulaedda)
Interview with Pranab Bardan (via Chris Blattman)
FDI: India and  Mauritius

Reading Piketty

Reading "Capital" by Piketty without knowing standard economics, I stumbled into the first hurdle in chapters 5 and 6. So far it is very readable like a good novel. In chapter 5 he starts discussing the long run behaviour of 'beta' β, the capital to income ratio. In this some model seems to be needed and hence some assumptions in his Harrod-Domar-Solow formula. Expositions of Solow model and the formula are available on YouTube and the other sources, Piketty's technical appendix is in French. While reading other sources, one has to be careful about the definitions, for example, Piketty also includes depreciation in his definition of income. In any case, Branko Milasovic says that the limiting behaviour only plays a subsidiary role in the book. May be it is better to see a few examples and go ahead. And use Milasovic review as a guide: http://mpra.ub.uni-muenchen.de/52384/1/MPRA_paper_52384.pdf

grandkids

More Piketty reviews

linked in In Praise of Utopian Political Imagination by Kathleen Geier

Contrasting news

Stanford bioengineer develops a 50-cent paper microscope:

 "Prakash’s dream is that this ultra-low-cost microscope will someday be distributed widely to detect dangerous blood-borne diseases like malaria, African sleeping sickness, schistosomiasis and Chagas."

NASA funded study: Industrial civilization headed for 'irreversible collapse;?:

"The study challenges those who argue that technology will resolve these challenges by increasing efficiency:

"Technological change can raise the efficiency of resource use, but it also tends to raise both per capita resource consumption and the scale of resource extraction, so that, absent policy effects, the increases in consumption often compensate for the increased efficiency of resource use."

.......

Applying this lesson to our contemporary predicament, the study warns that:

"While some members of society might raise the alarm that the system is moving towards an impending collapse and therefore advocate structural changes to society in order to avoid it, Elites and their supporters, who opposed making these changes, could point to the long sustainable trajectory 'so far' in support of doing nothing."

However, the scientists point out that the worst-case scenarios are by no means inevitable, and suggest that appropriate policy and structural changes could avoid collapse, if not pave the way toward a more stable civilisation. "

Monsanto going organic?

seems to be high tech organic Monsanto going organic in a quest for the perfect veggie (via Steven Hsu at Information Processing): "Furthermore, genetically modifying consumer crops proved to be inefficient and expensive. Stark estimates that adding a new gene takes roughly 10 years and $100 million to go from a product concept to regulatory approval. And inserting genes one at a time doesn’t necessarily produce the kinds of traits that rely on the inter­actions of several genes. Well before their veggie business went kaput, Monsanto knew it couldn’t just genetically modify its way to better produce; it had to breed great vegetables to begin with. As Stark phrases a company mantra: “The best gene in the world doesn’t fix dogshit germplasm.”

What does? Crossbreeding. Stark had an advantage here: In the process of learning how to engineer chemical and pest resistance into corn, researchers at Monsanto had learned to read and understand plant genomes—to tell the difference between the dogshit germplasm and the gold. And they had some nifty technology that allowed them to predict whether a given cross would yield the traits they wanted.

The key was a technique called genetic marking. It maps the parts of a genome that might be associated with a given trait, even if that trait arises from multiple genes working in concert. Researchers identify and cross plants with traits they like and then run millions of samples from the hybrid—just bits of leaf, really—through a machine that can read more than 200,000 samples per week and map all the genes in a particular region of the plant’s chromosomes."

"Make fruit taste better and people will eat more of it. “That’s good for society and, let’s face it, good for business,” Stark says.

Monsanto is still Monsanto. The company enforces stringent contracts for farmers who buy its produce seeds. Just as with Roundup Ready soybeans, Monsanto prohibits regrowing seeds from the new crops. The company maintains exclusion clauses with growers if harvests don’t meet the standards of firmness, sweetness, or scent—pending strict quality-assurance checks."