A bit more about Capital21

A friend asked me for a summary. Here is my understanding of two themes which may be wrong; I made a few mistakes earlier.
I guess the basic idea is simple. That is looking at wealth to income ratio for a country, equivalently the ratio of average wealth to average in come and how it changes over time. Total income is GDP minus depreciation plus foreign income if any. Wealth or capital includes the sum total all non human assets that can be owned or exchanged in a market. it includes real estate, financial and professional capital including plants, patents etc. This ratio is denoted β is C/I where C is capital and I is income. The first grows by savings and the second by growth rate (includes the population growth too and can be measured from time to time, for example each year. Another quantity, he considers is alpha α, share of income from capital in the national income. the first accounting identity is α=rβ, where r is the rate of return on the capital. The growth rate, income, savings rate etc can be measured each year and so also α. This allows us to estimate r which is around 4-5 percent in the west for much of the time except for a period between the wars and then upto 1970 or so. The growth rates have declined, but since this includes population growth, there is some difference between stagnant countries and countries like USA. Savings rate vary, high for Japan (14% or so) and low for USA (around 7). β was around 7 in Europe before the first world war, declined to less than 3 around 1950 and went up to nearly 6 recently. In USA change is less pronounced but has similar U shape. 4.5., 3.5., 4.5. For some reason, Piketty uses percentage signs, I think that these are just numbers. Capital income α also follows a U pattern currently around 30% in most western countries.
Clearly, we do not want α, β to go up, they reinforce each other depending on r. So we need to see with possible numbers. Here is an example from Piketty Chapter 10.
"For example, if g=1%, and r=5%, saving one-fifth of the capital from income (while consuming the other four-fifth) is enough to ensure that capital inherited from the previous generation grows at the same rate as the economy. If one saves more, because one's fortune is large enough to live well while consuming less than one's annual rent, then one's fortune will increase more rapidly than the economy, and inequality of wealth will tend to increase even if one contributes no income from labor."
So either g has to increase but by diminishing returns etc, it is expected to stabilize around 1.5 or so for advanced countries. So if we do not want a Marxian apocalypse where α, β do not explode, we have to reduce. Piketty recommends progressive taxes on wealth etc. Some are suggesting minimum wages and other means.
What is impressive is that he and collaborators were able to tease out so much data which even if there are further corrections, gives the broad contours for further discussions.
That was the main message. There is one more formula which Piketty frequently uses asymptotic formula β=s/g, called Harrod-Domar-Solow formula. If we denote the corresponding quantities using subscript _t, what this means is that β_t tends to s_t/g-t,as t gets large which may be 50-60 years or even more. This formula depends on models which imply some sort of stability or convergence for β_t. If we assume convergence, it is easy to see the formula (but this is not really necessary for his main message). To see the formula, there is an easy formula β_(t+1)/β_t=(1+s_wt)/(1+g_t) where s_wt=s_t/ β_t. In general the right hand side has to be multiplied by a capital gains factor. Now if β_t stabilizes β_t tends to β. so the left hand side tends to one. So from the right hand side _t tends to s_t/ β or β in the long run is the limit of s_t/g_t. But in short term it fluctuates. This formula is not really necessary to understand his main message, Which Milanovic also emphasized. The subtle part for me is how wealth is passed onto the next generation. This is in Chapter 12 and I will have to read it again. I think that is also discussed by Gregory Clark from a different perspective in "The Son Also Rises". Criticisms and other supplementary material, I will write later on. This is all the mathematics that there is in the book and are in the paper by Piketty and Zucman "Capital is Back".
Corrections are welcome.
I guess the basic idea is simple. That is looking at wealth to income ratio for a country, equivalently the ratio of average wealth to average in come and how it changes over time. Total income is GDP minus depreciation plus foreign income if any. Wealth or capital includes the sum total all nonhuman assets that can be owned or exchanged in a market. it includes real estate, financial and professional capital including plants, patents etc. This ratio is denoted β is C/I where C is capital and I is income. The first grows by savings and the second by growth rate (includes the population growth too and can be measured from time to time, for example each year. Another quantity, he considers is alpha α, share of income from capital in the national income. the first accounting identity is α=rβ, where r is the rate of return on the capital. The growth rate, income, savings rate etc can be measured each year and so also α. This allows us to estimate r which is around 4-5 percent in the west for much of the time except for a period between the wars and then upto 1970 or so. The growth rates have declined, but since this includes population growth, there is some difference between stagnant countries and countries like USA. Savings rate vary, high for Japan (14% or so) and low for USA (around 7). β was around 7 in Europe before the first world war, declined to less than 3 around 1950 and went up to nearly 6 recently. In USA change is less pronounced but has similar U shape. 4.5., 3.5., 4.5. For some reason, Piketty uses percentage signs, I think that these are just numbers. Capital income α also follows a U pattern currently around 30% in most western countries.
Clearly, we do not want α, β to go up, they reinforce each other depending on r. So we need to see with possible numbers. Here is an example from Piketty Chapter 10.
"For example, if g=1%, and r=5%, saving one-fifth of the capital from income (while consuming the other four-fifth) is enough to ensure that capital inherited from the previous generation grows at the same rate as the economy. If one saves more, because one's fortune is large enough to live well while consuming less than one's annual rent, then one's fortune will increase more rapidly than the economy, and inequality of wealth will tend to increase even if one contributes no income from labor."
So either g has to increase but by diminishing returns etc, it is expected to stabilize around 1.5 or so for advanced countries. So if we do not want a Marxian apocalypse where α, β do not explode, we have to reduce. Piketty recommends progressive taxes on wealth etc. Some are suggesting minimum wages and other means.
What is impressive is that he and collaborators were able to tease out so much data which even if there are further corrections, gives the broad contours for further discussions.
That was the main message. There is one more formula which Piketty frequently uses asymptotic formula β=s/g, called Harrod-Domar-Solow formula. If we denote the corresponding quantities using subscript _t, what this means is that β_t tends to s_t/g-t,as t gets large which may be 50-60 years or even more. This formula depends on models which imply some sort of stability or convergence for β_t. If we assume convergence, it is easy to see the formula (but this is not really necessary for his main message). To see the formula, there is an easy formula β_(t+1)/β_t=(1+s_wt)/(1+g_t) where s_wt=s_t/ β_t. In general the right hand side has to be multiplied by a capital gains factor. Now if β_t stabilizes β_t tends to β. so the left hand side tends to one. So from the right hand side _t tends to s_t/ β or β in the long run is the limit of s_t/g_t. But in short term it fluctuates. This formula is not really necessary to understand his main message, Which Milanovic also emphasized. The subtle part for me is how wealth is passed onto the next generation. This is in Chapter 12 and I will have to read it again. I think that is also discussed by Gregory Clark from a different perspective in "The Son Also Rises". Criticisms and other supplementary material, I will write later on. This is all the mathematics that there is in the book and are in the paper by Piketty and Zucman "Capital is Back".
Corrections are welcome.

Completed the first reading of Capital 21

with the help of Capital is Back by Piketty and Zucman. Because the book is long, I lost some threads, misunderstood some and miscalculated. The paper is briefer about 35 pages long and has some of the main points. It helped but the book is clear enough. The more technical parts are being discussed by many economists which I will link off and on. A recent one by Steve Roth looks interesting. On the whole I like the book, though a shorter book might have been better. It helps us to understand some of the problems and think about them. I will start rereading parts of it again.
P.S. Here is another readable one The Short Guide to Capital in the Twenty-First Century
Paul Krugman's review is also out.

Dependence on US weakening?

Planned European communications network " The United States on Friday criticized proposals to build a European communication network to avoid emails and other data passing through the United States, warning that such rules could breach international trade laws." 
Apparently so did Indian Food Security Bill.
US threatens Russia over Petro-dollar busting deal and one of the links What about the dollar: Russia, Iran announce $20 billion oil-for good deal "The White House has said such a deal would raise "serious concerns" and would be inconsistent with the nuclear talks between world powers and Iran"

But the dollar's role as international currency may be part of the reason for US trade deficits:
"Greider hit on a number of themes in this book, but at least part of the story was one of the U.S. trade deficit creating a deficiency in aggregate demand. In properly behaved macro models, trade deficits are supposed to be self-correcting as the value of the deficit nation's currency falls and the values of the surplus nations' currencies rise. This makes imports more expensive to the deficit nation and their exports cheaper to people living in other countries. This leads to fewer imports and more exports and therefore more balanced trade.

But this adjustment has not happened, or certainly has not happened quickly. We can blame evil doers at central banks in other countries who are manipulating their currencies or frightened foreigner investors who think dollar denominated assets are the only safe place to store their wealth. The actual cause does not matter, the point is that the dollar has not fallen to correct the imbalance." says Dean Baker
Two older articles on the dollar Debtor Nation from Harvard Business Review from mid 2007
The dollar and the Deficits from FP, December 2009.

Links

Reading is different on line (via Naked Capitalism)I find that I still print papers even short ones if I have to back and forth.
This is probably a minor example Andrew Gelman on Simpson's paradox.
The drugging of the American boy (via Rahul Siddarthan). Blame it on classifications? Here a philosopher looks at DSM-5
Peter Martin in The Age looks at trade agreements but is vary of TPP.
Maine against tax dodging multinationals
Sidharth Mongia on T20 and Yuvaraj
Dysfunctional police: baby charged for attempted murder
Mhaske, son of a laborer returns from US to contest elections in India
Upperstall chooses this video in its tribute to cinematographer V.K. Murthy:

Marx, Piketty and Krugman

What little I know of Marx is from this essay by Robert Heilbroner (a lapsed Marxist, I think) in his book "The Worldly philosophers" and a more recent book "Business as Usual: The Economic Crisis and the Failure of Capitalism" by Paul Mattick Jr.
Piketty in his Capital21 is somewhat dismissive of Marx, but as Doug Henwood says in his review:
"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."

Paul Krugman has been enthusiastic about Piketty's book in his posts and is writing a detailed review of the book. Now Rober Waldman (about whom I know very little but his name name appears frequently in Economist's View linked posts) says in Krugman and Kapital "He has been flirting with Marx for a while (Thomas Piketty seems to be a mutual friend who helped them break the ice)." May be the detailed data presented by Piketty convinced him of some of Marx's points. It seems that Marx won't go away.

Paul Krugman on gravity

I always thought that this kind of anti-gravity force works at every level. "You see my point: the sheer wealth of the 0.1 percent has a kind of gravitational attraction, pulling people into their orbit and their worldview." says Paul Krugman in Channels of oligarchic influence: an example.

P.S. Related discussion at Economist's view.
With all the focus on top 1% or .001%, I cannot help feeling that many others have a role too, particularly the middle classes. Palma said a couple of years ago ‘In Latin America the middle classes seek to defend their share of income with different forms of alliances with the élite (some more successfully than others). This is different to India, for example, where the administrative classes defend their position mostly via alliances with the poor (which gives them the political power to mediate in the different conflicts between the capitalist élite and the state)’. from
http://oxfamblogs.org/fp2p/its-the-share-of-the-rich-stupid-brilliant-inequality-stats-politics-from-gabriel-palma/

A dance from 'White Nights' 1985

More Piketty discussions

Steve Roth at Angry Bear :
"Where are the lines between “real” capital, “human” capital, and “financial” capital? What are their economic relationships? (If you’re under the impression that they’re obvious or clearly understood and agreed-upon, you’re not thinking very hard. At all.)

My purpose here is not to solve that capital conundrum — far be it from me. I come not to bury Piketty, but to praise him. His usages and definitions provide a very useful framework in which to discuss issues that have been hard to discuss coherently absent such framing. The evidence he’s assembled within that framework, and his remarkably cogent discussion of that evidence, gives ample evidence of that.

But even more: By tackling these definitional issues head-on (if not always successfully), he has brought an inconclusively theorized crux of economic thinking — the nature of capital (plus wealth, value, and even money) — back to the forefront of discussion. We can all hope that much good will come from that."

And Kevin Quinn at Econospeak.

James Galbraith on Capital

James Galbraith in his review of Piketty's Capital 21 says
"Although Thomas Piketty, a professor at the Paris School of Economics, has written a massive book entitled Capital in the Twenty-First Century, he explicitly (and rather caustically) rejects the Marxist view. He is in some respects a skeptic of modern mainstream economics, but he sees capital (in principle) as an agglomeration of physical objects, in line with the neoclassical theory. And so he must face the question of how to count up capital-as-a-quantity.

His approach is in two parts. First, he conflates physical capital equipment with all forms of money-valued wealth, including land and housing, whether that wealth is in productive use or not. He excludes only what neoclassical economists call “human capital,” presumably because it can’t be bought and sold. Then he estimates the market value of that wealth. His measure of capital is not physical but financial.

This, I fear, is a source of terrible confusion. Much of Piketty’s analysis turns on the ratio of capital—as he defines it—to national income: the capital/income ratio. It should be obvious that this ratio depends heavily on the flux of market value. And Piketty says as much."
But Piketty also says that he is looking for long term trends. It is not clear to me that housing or land cannot be considered as capital. For one thing, money can be made in investing in real estate. Money can be borrowed using land and housing and can be invested. Lot of middle class people, apart from the rich, have been doing this. Once you accept physical capital (James Galbraith has objections to this too), I do not see why housing and land cannot be accepted as capital.
Just trying to understand Piketty bit by bit taking criticisms into account.
P.S. Brad DeLong pitches in "Two pieces on Thomas Piketty that I do not like so much.

The first is the almost always reliable and very sharp James K. Galbraith, who--for some reason I don't understand--thinks that Piketty intends his Capital to be a book about production rather than about distribution. And as a result I think his review goes awry: James K. Galbraith"

Links

I might have linked this before but I noticed a video to go with it Your ancestors, your fate

I find that I have misunderstood and miscalculated while reading Capital by Piketty. I am now trying to supplement it by a paper of Piketty and Zucman. Here is a piece from The Economist on some crucial parts of the book (possibly google search of the title may be needed to access it) Reading "Capital": Chapters 5 and 6. Some from the left do not seem to like it , here is a review of a review by Philip Pilkington.

Another Geeta Dutt-Lata Mangeshkar duet

via Dustedoff.

An old favourite from Waadah 1957

Another review of Piketty

I have almost completed reading Piketty's Capital. But there are various things I have to reread and also try to follow his calculations, perhaps using Piketty-Zucman. But his presentation is clear and readable. In this review The Age of the obvious:Piketty's Capital:
"This is an important book: it marshals a lot of data, and puts it together in a coherent model.

But the model is not as new as it might seem. Piketty spends a lot of time distancing himself from Marx, and well he should, because this argument, even with a different model of what Capital is than Marx used, isn’t that much different from Marx’s view on the concentration of Capital, nor is his view of post – WWII history particularly different from a fairly orthodox reading of it: the financial collapse, depression, and two World Wars destroyed the wealth and thus power of the rich, and made it possible to put in place policies which were hostile to their interests and which made it so that more of national income was distributed to ordinary people......

There is no fundamental analysis of the mode of production or the mode of violence, either, and without those you cannot determine how much power various groups have to take a share of the national income.  How many people are needed for production?  How many people are needed for violence?

Piketty’s book is important primarily because it proves the obvious, and this is the age of the obvious.  You must prove, beyond a reasonable doubt, what any educated individual already should know because there is a lot of money in obfuscating the obvious. It pays very well to be a conservative ideologue spouting off about economic freedom, because very rich people want the government to make them rich, bail them out, and not tax them."

George Kennan on democracy

I came across this quote.
 “There is, let me assure you, nothing in nature more egocentric than embattled democracy. It soon becomes the victim of its own propaganda. It then tends to attach to its own cause an absolute value which distorts its own vision … Its enemy becomes the embodiment of all evil. Its own side is the centre of all virtue.” 
Google search showed that it is due to George Kennan one of the architects of cold war from a book of his Russia and the West Under Lenin and Stalin. Apparently, he belonged to the realist school of diplomacy and was deeply suspicious of democracy.

Strange electoral reforms proposed in Canada

one of them "Section 44 of Bill C-23 requires Elections Canada to appoint central poll supervisors from lists of names provided by the candidate or party that came first in the last election, favouring incumbents and their parties."  from Don't undermine elections in Canada.
Comment from The Age "In Canada, the process of the changes has been as worrying as the content. The government is bypassing the usual forms of consultation and full parliamentary and public debate that normally occur with any major changes to electoral administration.

If all of this can happen in Canada, it can potentially happen anywhere, and there are hints that aspects of these reforms might be on the agenda here."

One from Baaji (1963)

Two from Mousiqar 1962

Varieties of Marxism?

I find from a link that Richard Singer posted and some related discussions  that there may be several varieties of Marxism. I have been following only one thread that I read in Robert Heilbroners's "The Worldly Philosophers". Even there I could not understand the thesis, antithesis stuff. It is about capital's emphasis on profits rather than useful production, the corresponding need for low wages, unemployment and the problems that might arise due to too much accumulation of capital. The period with which we are familiar with from the first world war to 1970 ort so seems to be an exceptional period and perhaps should not be taken as a model. The link which Richard posted Marx blogged to death.
P.S. Link to Heilbroner chapter on Marx 

Two about the middle classes

One by Thomas Frank at Salon Plutocracy without end: Why the 1 percent always defeats the middle class "What hit me that day was the possibility that my happy, postwar middle-class world was the exception, and that the plutocracy we were gradually becoming was the norm. .... As the triumphant wingers stand athwart the unconscious bodies of their opponents, beating their chests and bellowing for some new and awesomely destructive tax cut, a liberal’s heart turns longingly to such chimera as pendulum theory, or thirty-year-cycle theory, or the theory of the inevitable triumph of the center. Some great force will fix those guys, we mumble. One of these days, they’ll get their comeuppance...........You can build a plutocratic model that will stumble along just fine, like it did in the nineteenth century. It requires different things: instead of refrigerators for all, it needs bought legislatures and armies of strikebreakers—plus bailouts for the big banks when they collapse under the weight of their stupid loans, an innovation of our own time. All this may be hurtful, inefficient, and undemocratic, but it won’t dismantle itself all on its own."
From The desperation of the vanishin middle class by James Kwak:
"The underlying problem with financial advice—besides the fact that most of it is wrong, conflicted (in the conflict of interest sense), or covert marketing—is that, even in the best case, it rarely works. The underlying financial problem that most Americans have isn’t that they buy too many lattes or pick the wrong stocks. It’s that they don’t make enough money to begin with, at a time when many necessities like health care and education are getting more expensive. "
Some of the Indian middle class that I have seen in coastal Andhra (from contractors to small landowners to bus drivers, seems a bit different. They tend to save in gold or buy little plots of real estate in towns or keep the land and real estate they inherit. The prices have invariably gone up and many of them are quite comfortable now except those who did not move from farming. Those in cities and some of the richer ones seem to be investin in stocks.

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