Blue Monday Morning Reads

BMTapestryGood Morning!

I have to admit that it’s getting tough to face the news these days.  I am having one of the years where everything I own has decided to break down.  It started last Labor Day with the AC unit outside and has moved on to my computer, me, two of my pets, the vacuum cleaner, my car’s brakes, and the refrigerator.

I’m having a really difficult time paying for all of these as well as dealing with the usual grief of running around trying to get it all fixed.  Most of this stuff is not the sort of thing that can wait which is the most depressing news.  Is it just me or is everything designed to completely break down within a fairly short time?

I’ve ranted quite a few times here about the consolidation of all kinds of industries in this country from banking to media to anything having to do with natural resources.  There’s a new book out from Barry Lynn called “Cornered: The New Monopoly Capitalism and the Economics of Destruction” that provides some fairly good information on the consequences of market consolidation.

Lynn Parramore: What are some of the telltale signs of monopolies?

Barry Lynn: Well, monopoly doesn’t mean that a company controls 100 percent of the marketplace. What monopoly means is that a company has sufficient control of the market to shape the outcomes of that market to its own advantage — to shape pricing, to determine who is making deals of with whom.

So what we have in America is that there are actually very few marketplaces in which you have a single company that has complete, 100 percent control. But what you do have is many marketplaces, thousands of markets, in which you have a dominant player that really controls commerce in that activity.

A really good sign, the thing you’ll actually tend to see in a newspaper or on TV is the merger, a big deal, two companies coming together. And most of the time, the press will cover it as, well, here’s an opportunity to invest. Or here’s a company that you should be looking at in the future. But what you’re actually seeing in many cases is the creation of power or the increasing power of a particular corporation over a particular marketplace.

LP: For the average person, how do monopolies affect our lives, prevent us from getting and doing the things we need?

BL: Monopolies affect us in innumerable ways. The most obvious way, the way that people always talked about, is that monopolies usually have the power to raise the price in some activity, for some good, for some service. We see that, say, with Comcast and cable services. But monopolists also have the capacity to reduce our liberties.

As workers, one of the things you prize is an open market where you can sell your work to many potential buyers, many potential employers. If there’s a lot of consolidation nationally in your industry, or even your town, you may find yourself with really only one or two buyers for your work. That means that you have less ability to negotiate higher wages. It also means that you have less real freedom: you can’t just pick up and leave if you get a bad boss.

I watched a program about a new movie starring Meryl Streep and Jeff Bridges based on the book “The Giver” this weekend. It’s yet another take on a2004011700140201 dystopian future but it sounds quite interesting and the casting is super.  Here’s a piece in The Atlantic over the movie and the idea of equality/inequality which is central to the theme of the book and movie.

The world is an increasingly unequal and unfair place, economists tell us. Every year, it becomes a little harder to picture what equal opportunity and egalitarianism even look like. As the rich attract capital like Jupiter attracts space debris and the poor fail to make any substantial gains, the gap between them comes to seem to us less surmountable, more of a force of nature than something for which we can even imagine a reasonable counterfactual.

Fortunately, we have literature to help us out with that.

Specifically, we have young adult literature, and its fascination with the way that the world is made, unmade, and remade.

If you grew up in the 1980s or 1990s and were of a bookish turn, you either readThe Giver or had it read to you, despite the numerous times that moral hawks tried to keep it out of your hands. (Naturally, this only made it more attractive.) The book, and numerous others that followed it, imagined worlds where economic conditions dictate the facts of human life, as of course they have a tendency to do.

* * *

In The Giver, society has “solved” inequality by dramatically reducing personal property and having the state distribute what’s left. (This is not the sort of solution that might be recommended by a moderate market skeptic, like Capital in the Twenty-First Century’s author Thomas Piketty. His proposal—raising the income tax or making it more progressive—wouldn’t make for the most exciting subject, especially for young-adult page turners.) Such a solution like The Giver‘s has a stellar literary pedigree: It harkens back to thinkers like Thomas More, who in 1516 invented the egalitarian no-place (“utopia”), and to the socialist philosophers of the 19th century, especially Friedrich Engels.

Engels saw the institutions of family and private property as deeply entwined. Part of Engels’ objection to the institution of the family was that it involved a “progressive narrowing of the circle, originally embracing the whole tribe, within which the two sexes have a common conjugal relation.” Marxism’s benevolent tendencies are swallowed up by concern and preference for one’s immediate family, which becomes the unit of basic inequality.

Like Engels and Marx, Piketty and his contemporaries worry about “patrimonial capitalism,” or the tendency for certain families to only become richer, because the rate of return on capital exceeds the ordinary rate of growth. Have more capital, get more growth, have more capital, get more growth, and so on.

But there’s another kind of patrimony, as everyone who has ever ended up doing the same thing as her parents knows. There is a real danger that inequality is not just related to literal capital accumulation, but to equality of opportunity and the accumulation of cultural capital. This might include things like what kind of education your family can afford to give you, but also could be as simple as what you see in front of you every day and the way that it either expands or limits your opportunities, your very knowledge of to what you can reasonably aspire.

Anyway, it seems worth viewing if only for the cast.  Streep plays the villain btw.

bskyb_image_187918_v1_child_with_dove_1901_1_400x240If there’s ever been an example of a post capitalist dream turned dystopia on earth, it has to be the city of Detroit.  It was once the center of our premier industry.  We haven’t mentioned the most recent development there.   The city is shutting off water service to many people.  That’s basically turning lives over to a less than third world living situation and it sets up a potential Health Crisis.  Thousands of families–including infants and the elderly– no longer have running water.

A new mass rally in Detroit is planned for Friday, August 29, the day the state-enforced city bankruptcy trial begins. Democracy activists throughout the Midwest are again urged to come demonstrate against the water shut-offs and the hostile takeover of Detroit’s assets.

In this period of mass despair over rampant political corruption and economic injustice in America, many people ask, “Does protest really make a difference?” The answer is yes, and it is being proven right now in Detroit, the frontline battleground in the growing resistance movement against the hostile corporate takeover and looting of American cities nationwide.

Detroit is the model for a nascent democracy mass movement. On July 18, thousands of demonstrators from around the country linked arms and marched in downtown Detroit, past the City Emergency Manager’s office and the JP Morgan Chase Bank, in a show of solidarity against the ongoing corporate-led assault on city worker’s pensions and most recently, the indiscriminate shut-off of water, without notice, to more than 15,000 families, mostly African American.

While businesses, large corporations and banks – 55 percent of which were in arrears on water bills – were exempted from the shut-offs, service to 40,000 homes was reportedly on the chopping block. Thousands had already been left without clean water, with no concern shown for infants and children, pregnant women, the sick, elderly or handicapped. Many Detroit activists and civic leaders, including Congressman John Conyers, attended the rally at Hart Plaza and decried the water shut-offs as a human rights violation and a public health crisis.

As one prominent sign at the front of the rally stated, “WHERE DO YOU EXPECT US TO SH*T?”

On the same morning that the protest rally exploded, civil disobedience was used to block private company trucks performing the shut-offs from leaving their garage. Nine activists were arrested, including three clergy members and Baxter Jones, an activist with a disability who uses a wheelchair for mobility. Pastor Bill Wylie-Kellermann stated after his arrest: “Detroit is under assault by lawless and illegitimate authority. It’s a moral issue. As religious leaders and allies, we are upping the ante, spiritually and politically, by putting our bodies in the way. We pray to intensify the struggle with civil disobedience, even as it is broadened with mass action and legal challenge. As one of our fallen mentors Charity Hicks urged, we are seeking to ‘wage love’ in the face of death. Such deeds can sometimes break the dreadful silence of our occupied corporate media.”

The protest actions, following an admonition from the United Nations that Detroit’s water shut-off was indeed a human rights violation, embarrassed both Governor Rick Snyder and his appointed “Emergency Manager,” Kevin Orr. Within three days, Orr announced a 15-day moratorium of the shut-offs; a respite later extended to August 24. Soon after, Orr relinquished administration of the Water Department to the city.

The demonstrations may ultimately serve to deter a planned privatization of the city’s water system: a Detroit asset estimated to be worth many billions of dollars that sits adjacent to 21 percent of the world’s freshwater supply in the Great Lakes.

Also clearly irritated by the attention on the shut-offs was Federal Bankruptcy Judge Steven Rhodes, who demanded an explanation from the city, stating that the water issue was hurting Detroit’s reputation in the world community. The mass actions turned a powerful national spotlight on Detroit’s controversial bankruptcy, including full coverage of the resulting water war on major TV and cable networks, and in printed press ranging from the Detroit Free Press to the Wall Street Journal and The New York Times.

Detroit activists “felt the love” as the media and internet were lit up and news of the protests went viral; thousands of blogs and social media communications spread the word, and within days, perhaps millions became aware of Detroit’s crisis. The coverage illuminated the role of criminal banks and real estate moguls, as well as the attacks on pension funds and attempted privatization of the water system.

Overnight, this local crisis emerged as an example of the national “shock doctrine” strategy being spread like a plague by the Tea Party and ALEC; exposing their “emergency management” laws as facilitating a strategy to undermine democracy and pave the path for surreptitious privatization of public assets.

The rally shed light on the complicity of the major Wall Street banks in Detroit’s economic spiral, banks whose investors continue to thrive while Main Street takes the brunt of the financial losses they caused. “Detroit is just the canary in the mine” was a refrain often repeated by the rally speakers.

van_gogh-iris-1890So, this is turning into quite the serious post.  But, like I said, this just seems to be one of those moon or solar phases, I guess.  Amnesty International is on the ground in Ferguson.  It’s the first time they’ve ever deployed in the USA.

Amnesty International has taken “unprecedented” action to deal with the situation in Ferguson, Missouri, by sending resources the human rights group has never deployed inside the United States.

The organization has been on the ground in Ferguson since Thursday, sending a 13-person human rights delegation to the city in the wake of the Aug. 9 police shooting death of Michael Brown.

Jasmine Heiss, a senior campaigner with Amnesty who is a part of the team in Ferguson, said the use of the “cross-functional team” — which she said included community trainers, researchers, and human rights observers — was “unprecedented” within the United States for the group.

On Saturday, after Missouri Gov. Jay Nixon declared a state of emergency and put a curfew in place in Ferguson, Amnesty International USA’s executive director, Steven W. Hawkins, issued a scathing statement.

“We criticize dictators for quelling dissent and silencing protestors with tactics like curfews, we’ll certainly speak out when it’s happening in our own backyard,” he said. “The people of Ferguson have the right to protest peacefully the lack of accountability for Michael Brown’s shooting.”

I’m ending with the results of Michael Brown’s private autopsy which was released last evening. Brown was shot at least 6 times and twice in the head Blue_Lovers_Marc_Chagallwhich is  interesting given that he was 6’4″.  Eric Holder has ordered an autopsy as part of the Federal investigation.  Governor Nixon held court in the Sunday Shows.  I have to admit that I left the TV off all day.  There’s only so much one old lady can take. 

Nixon called St. Louis County Prosecuting Attorney Robert McCulloch, an “experienced prosecutor.” Nixon said he had no timetable for the investigation.

Nixon also told ABC’s “This Week With George Stephanopoulos” that his office was unaware that Ferguson Police Chief Thomas Jackson was going to release on Friday a videotape showing what is alleged to be Brown, 18, in what police have called a “strong-armed” robbery of cigars in a convenience store shortly before he was killed.

“Rest assured we have had very serious discussions about that action” and its effect on Brown’s family, Nixon told NBC’s “Meet the Press.” — Chuck Raasch, 10:30 a.m. Sunday

So, the Governor has no problem with the prosecutor.  That’s interesting too.

So, I’m going to end it here. What’s on your reading and blogging list today? 


Monday Reads: In Search of the American Dream

the-american-dream-by-salvadore-dali

Good Morning!!

Whatever happened to the American dream? Did it ever exist in reality?

We baby boomers can look back to the post-WWII years, when the economy was humming along and the GI Bill made it easier for our dads to get college degrees, find good jobs, buy houses for their families.

In those days, one salary was enough to support a couple and several kids. My dad did it on a college professor’s salary. It was a struggle early on, but those government programs for veterans gave us a push into the professional class.

Eisenhower was President then–a Republican who wouldn’t even recognize his fellow Republican today. Later on, after John Kennedy was murdered and Lyndon Johnson was brought down by the Vietnam War, Richard Nixon presided over the end of the good times. After about 1973, it was over; and since then, wages have essentially remained stagnant.

That was when we entered a new America, in which it took two salaries to support a family. Women went to work, not just because they wanted to, but to keep their families afloat. Children went to day care. So many thing changed. What happened to the American dream? Were those post-war years just an outlier, a brief period of prosperity that meant nothing in the greater scheme of things?

Yesterday, I read a piece by Joseph Stiglitz–in Politico of all places–that addressed some of these questions: The Myth of America’s Golden Age: What growing up in Gary, Indiana taught me about inequality. Stiglitz was born in 1943. Growing up in the industrial “company town” of Gary, he was able to observe the underside of the “golden age” of capitalism–“discrimination, poverty, and bouts of high unemployment.” The big steel companies deliberate brought in desperately poor African Americans from the south in order to keep wages low–to divide and control the work force. Stiglitz writes that he never bought into the notion of the free market as the answer to all ills.

Nearly half a century later, the problem of inequality has reached crisis proportions. John F. Kennedy, in the spirit of optimism that prevailed at the time I was a college student, once declared that a rising tide lifts all boats. It turns out today that almost all of us now are in the same boat—the one that holds the bottom 99 percent. It is a far different boat, one marked by more poverty at the bottom and a hollowing out of the middle class, than the one occupied by the top 1 percent.

Most disturbing is the realization that the American dream–the notion that we are living in the land of opportunity–is a myth. The life chance of a young American today are more dependent on the income and education of his parents than in many other advanced countries, including “old Europe.”

American Dream, by Skip Hunt

American Dream, by Skip Hunt

Stiglitz points to Thomas Picketty’s research as evidence. Picketty’s work shows that capitalism leads inevitably to inequality. The post-war era of my childhood and early adulthood was an “aberration.”

Today, inequality is growing dramatically again, and the past three decades or so have proved conclusively that one of the major culprits is trickle-down economics—the idea that the government can just step back and if the rich get richer and use their talents and resources to create jobs, everyone will benefit. It just doesn’t work; the historical data now prove that. [….]

Ironically enough, the final proof debunking this very Republican idea of trickle-down economics has come from a Democratic administration. President Barack Obama’s banks-first approach to saving the nation from another Great Depression held that by giving money to the banks (rather than to homeowners who had been preyed upon by the banks), the economy would be saved. The administration poured billions into the banks that had brought the country to the brink of ruin, without setting conditions in return. When the International Monetary Fund and the World Bank engage in a rescue, they virtually always impose requirements to ensure the money is used in the way intended. But here, the government merely expressed the hope that the banks would keep credit, the lifeblood of the economy, flowing. And so the banks shrank lending, and paid their executives megabonuses, even though they had almost destroyed their businesses. Even then, we knew that much of the banks’ profits had been earned not by increasing the efficiency of the economy but by exploitation—through predatory lending, abusive credit-card practices and monopolistic pricing. The full extent of their misdeeds—for instance, the illegal manipulation of key interest rates and foreign exchange, affecting derivatives and mortgages in the amount of hundreds of trillions of dollars—was only just beginning to be fathomed.

American Dream, by Gordon Wendling

American Dream, by Gordon Wendling

I can’t quote any more, but I hope I’ve whetted your appetite enough that you’ll go read the whole thing. While you’re at that link, you might also take a look at this article by “zillionaire” Nick Hanauer, The Pitchforks are Coming for Us Plutocrats. Here’s just a small taste–it’s a long read.

The most ironic thing about rising inequality is how completely unnecessary and self-defeating it is. If we do something about it, if we adjust our policies in the way that, say, Franklin D. Roosevelt did during the Great Depression—so that we help the 99 percent and preempt the revolutionaries and crazies, the ones with the pitchforks—that will be the best thing possible for us rich folks, too. It’s not just that we’ll escape with our lives; it’s that we’ll most certainly get even richer.

The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren’t only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they’d be able to afford his Model Ts.

What a great idea. My suggestion to you is: Let’s do it all over again. We’ve got to try something. These idiotic trickle-down policies are destroying my customer base. And yours too.

It’s when I realized this that I decided I had to leave my insulated world of the super-rich and get involved in politics. Not directly, by running for office or becoming one of the big-money billionaires who back candidates in an election. Instead, I wanted to try to change the conversation with ideas—by advancing what my co-author, Eric Liu, and I call “middle-out” economics. It’s the long-overdue rebuttal to the trickle-down economics worldview that has become economic orthodoxy across party lines—and has so screwed the American middle class and our economy generally. Middle-out economics rejects the old misconception that an economy is a perfectly efficient, mechanistic system and embraces the much more accurate idea of an economy as a complex ecosystem made up of real people who are dependent on one another.

Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators.

Is it possible that because these articles appear in conservative Politico, even a few powerful people  in Washington might read them and stop for a moment to think about what what is really happening to America?

American Dream by Matt Sesow

American Dream by Matt Sesow

Also in the news today:

NBC NEWS: Yes, Perceptions of Washington Are Even Worse Than Last Year.

This is a six-month report card time, and it’s failing grades for all of Washington. President Obama’s approval rating stands at 41% in our recent NBC/WSJ poll, his fav/unfav is upside down (at 41%-45%), and a majority of Americans (54%) no longer think he’s able to lead the country and get the job done. Republicans and Congress are in even worse shape. The GOP’s fav/unfav in the NBC/WSJ poll is 29%-45% (versus the Democratic Party’s 38%-40% score). Just 7% of the country has confidence in Congress (compared with 29% for the presidency and 30% for the Supreme Court, per Gallup. And when it comes to congressional productivity, the 113th Congress (2013-2014) has passed just 121 bills into law — fewer than at this same point in the historically unproductive 112th Congress (140 bills into law). Maybe it doesn’t FEEL worse, because there hasn’t been an epic showdown or confrontation like the government shutdown. But the numbers tell a different story — it has gotten worse.

From James Risen at the NYT, scary revelations about the murder of 17 civilians by Blackwater thugs in Iraq in 2007: Before Shooting in Iraq, a Warning on Blackwater.

Just weeks before Blackwater guards fatally shot 17 civilians at Baghdad’s Nisour Square in 2007, the State Department began investigating the security contractor’s operations in Iraq. But the inquiry was abandoned after Blackwater’s top manager there issued a threat: “that he could kill” the government’s chief investigator and “no one could or would do anything about it as we were in Iraq,” according to department reports.

American Embassy officials in Baghdad sided with Blackwater rather than the State Department investigators as a dispute over the probe escalated in August 2007, the previously undisclosed documents show. The officials told the investigators that they had disrupted the embassy’s relationship with the security contractor and ordered them to leave the country, according to the reports.

After returning to Washington, the chief investigator wrote a scathing report to State Department officials documenting misconduct by Blackwater employees and warning that lax oversight of the company, which had a contract worth more than $1 billion to protect American diplomats, had created “an environment full of liability and negligence.”

“The management structures in place to manage and monitor our contracts in Iraq have become subservient to the contractors themselves,” the investigator, Jean C. Richter, wrote in an Aug. 31, 2007, memo to State Department officials. “Blackwater contractors saw themselves as above the law,” he said, adding that the “hands off” management resulted in a situation in which “the contractors, instead of Department officials, are in command and in control.”

I have a few more links, but I’m going to put them in comments; because I’m having terrible issues with WordPress today. I hope you’ll also post your thoughts and links in the thread below.


Lazy Saturday Reads: Economics Food Fight, Drive-By Mass Murder, and Other News

Thomas Picketty

Thomas Picketty

Have a Stupendous Saturday!

It’s too bad Dakinikat is so busy today, because there’s an economics food fight brewing. Perhaps she’ll still find time to comment on the controversy later the evening after she returns home with her newly adopted canine family member, Temple. Meanwhile, I’ll do my best to describe the dispute over Thomas Picketty’s conclusions about wealth inequality, published in his book Capital in the Twenty-first Century.

The Accusations:

At the Financial Times, Economics Editor Chris Giles has claims to have found problems with Picketty’s work: Piketty findings undercut by errors.

Thomas Piketty’s book, ‘Capital in the Twenty-First Century’, has been the publishing sensation of the year. Its thesis of rising inequality tapped into the zeitgeist and electrified the post-financial crisis public policy debate.

But, according to a Financial Times investigation, the rock-star French economist appears to have got his sums wrong.

The data underpinning Professor Piketty’s 577-page tome, which has dominated best-seller lists in recent weeks, contain a series of errors that skew his findings. The FT found mistakes and unexplained entries in his spreadsheets, similar to those which last year undermined the work on public debt and growth of Carmen Reinhart and Kenneth Rogoff.

The central theme of Prof Piketty’s work is that wealth inequalities are heading back up to levels last seen before the first world war. The investigation undercuts this claim, indicating there is little evidence in Prof Piketty’s original sources to bear out the thesis that an increasing share of total wealth is held by the richest few.

Prof Piketty, 43, provides detailed sourcing for his estimates of wealth inequality in Europe and the US over the past 200 years. In his spreadsheets, however, there are transcription errors from the original sources and incorrect formulas. It also appears that some of the data are cherry-picked or constructed without an original source.

John Maynard Keynes

John Maynard Keynes

In one specific example, Giles says the corrected data do not show significant growth in Europe since 1970. In a second article, Giles goes into more detail. In addition, he argues that the U.S. data doesn’t support the conclusion that a greater proportion of the wealth is controlled by top 1% than in recent decades. He does admit to the top 10% controlling a greater share of wealth than previously.

An investigation by the Financial Times, however, has revealed many unexplained data entries and errors in the figures underlying some of the book’s key charts.

These are sufficiently serious to undermine Prof Piketty’s claim that the share of wealth owned by the richest in society has been rising and “the reason why wealth today is not as unequally distributed as in the past is simply that not enough time has passed since 1945”.

After referring back to the original data sources, the investigation found numerous mistakes in Prof Piketty’s work: simple fat-finger errors of transcription; suboptimal averaging techniques; multiple unexplained adjustments to the numbers; data entries with no sourcing, unexplained use of different time periods and inconsistent uses of source data….

A second class of problems relates to unexplained alterations of the original source data. Prof Piketty adjusts his own French data on wealth inequality at death to obtain inequality among the living. However, he used a larger adjustment scale for 1910 than for all the other years, without explaining why.

In the UK data, instead of using his source for the wealth of the top 10 per cent population during the 19th century, Prof Piketty inexplicably adds 26 percentage points to the wealth share of the top 1 per cent for 1870 and 28 percentage points for 1810.

A third problem is that when averaging different countries to estimate wealth in Europe, Prof Piketty gives the same weight to Sweden as to France and the UK – even though it only has one-seventh of the population.

Get even more detail and charts here: Data problems with Capital in the 21st Century.

Karl Marx

Karl Marx

The Pushback So Far:

Paul Krugman: Is Piketty All Wrong?

Great buzz in the blogosphere over Chris Giles’s attack on Thomas Piketty’s Capital in the 21st Century. Giles finds a few clear errors, although they don’t seem to matter much; more important, he questions some of the assumptions and imputations Piketty uses to deal with gaps in the data and the way he switches sources. Neil Irwin and Justin Wolfers have good discussions of the complaints; Piketty will have to answer these questions in detail, and we’ll see how well he does it.

Krugman suggests that Giles may be doing something wrong.

I don’t know the European evidence too well, but the notion of stable wealth concentration in the United States is at odds with many sources of evidence. Take, for example, the landmark CBO study on the distribution of income; it shows the distribution of income by type, and capital income has become much more concentrated over time:

It’s just not plausible that this increase in the concentration of income from capital doesn’t reflect a more or less comparable increase in the concentration of capital itself….

And there’s also the economic story. In the United States, income inequality has soared since 1980 by any measure you use. Unless the affluent starting saving less than the working class, this rise in income disparity must have led to a rise in wealth disparity over time.

At Mother Jones, Kevin Drum notes that

Giles’ objections are mostly to the data regarding increases in wealth inequality over the past few decades, and the funny thing is that even Piketty never claims that this has changed dramatically. The end result of Giles’ re-analysis of Piketty’s data is [below] with Piketty in blue and Giles in red. As you can see, Piketty estimates a very small increase since 1970.

blog_ft_piketty_wealth_inequality_europe

 

R.A. at The Economist: A Piketty problem?

Milton Friedman

Milton Friedman

Mr Giles’s analysis is impressive, and one certainly hopes that further work by Mr Giles, Mr Piketty or others will clarify whether mistakes have been made, how they came to be introduced and what their effects are. Based on the information Mr Giles has provided so far, however, the analysis does not seem to support many of the allegations made by the FT, or the conclusion that the book’s argument is wrong.

There are four important questions raised by the FT‘s work. First, which data are wrong? Second, how did errors in the work, if they are errors, come to be introduced? Third, how do the errors affect the specific points made in the relevant chapters? And fourth, how do the errors affect the fundamental conclusions of the book?

Mr Giles focuses on wealth inequality, to which Mr Piketty turns in Chapter 10 of his book. Mr Piketty has not published nearly as much research on the question of wealth inequality, and it seems that much of the analysis in Chapter 10 was done specifically for the book, based on others’ research. Mr Piketty’s wealth-inequality analysis certainly matters as a component of the book’s argument, but it is not accurate to say, as Mr Giles does, that the results in Chapter 10 constitute the “central theme” of the book.

Are the data wrong? Mr Giles identifies discrepancies between source material cited by Mr Piketty and the figures that appear in the book. He identifies cases in which Mr Piketty appears to have chosen to use data from one source when another would have made more sense. Further, the calculations in Mr Piketty’s spreadsheets (which have been available online since the book’s publication) seem to include adjustments in the data that are not adequately explained, and some figures for which Mr Giles cannot find a documented source. Finally, Mr Piketty has made choices concerning weighting of data used in averages, and assigning of data from one year (1935, for example) to another (1930) when such assignments seem unnecessary or inadvisable.

Alan Greenspan

Alan Greenspan

The author concludes that, unfortunately, ideology will determine how many people respond to the Giles critique. Much more extensive analysis at the link.

Here is Picketty’s–presumably preliminary–response to Giles in a letter to the Financial Times:

Let me also say that I certainly agree that available data sources on wealth are much less systematic than for income. In fact, one of the main reasons why I am in favor of wealth taxation and automatic exchange of bank information is that this would be a way to develop more financial transparency and more reliable sources of information on wealth dynamics (even if the tax was charged at very low rates, which you might agree with).

For the time being, we have to do with what we have, that is, a very diverse and heterogeneous set of data sources on wealth: historical inheritance declarations and estate tax statistics, scarce property and wealth tax data, and household surveys with self-reported data on wealth (with typically a lot of under-reporting at the top). As I make clear in the book, in the on-line appendix, and in the many technical papers I have published on this topic, one needs to make a number of adjustments to the raw data sources so as to make them more homogenous over time and across countries. I have tried in the context of this book to make the most justified choices and arbitrages about data sources and adjustments. I have no doubt that my historical data series can be improved and will be improved in the future (this is why I put everything on line). In fact, the “World Top Incomes Database” (WTID) is set to become a “World Wealth and Income Database” in the coming years, and we will put on-line updated estimates covering more countries. But I would be very surprised if any of the substantive conclusion about the long run evolution of wealth distributions was much affected by these improvements.

I thought this was important:

my estimates on wealth concentration do not fully take into account offshore wealth, and are likely to err on the low side. I am certainly not trying to make the picture look darker than it it. As I make clear in chapter 12 of my book (see in particular table 12.1-12.2), top wealth holders have apparently been rising a lot faster average wealth in recent decades, at least according to the wealth rankings published in magazines such as Forbes. This is true not only in the US, but also in Britain and at the global level (see attached table). This is not well taken into account by wealth surveys and official statistics, including the recent statistics that were published for Britain. Of course, as I make clear in my book, wealth rankings published by magazines are far from being a perfectly reliable data source. But for the time being, this is what we have, and what we have suggests that the concentration of wealth at the top is rising pretty much everywhere.

Luckovich shooting

In Other News:

There has been a mass shooting in Southern California–this time perpetrated from behind the wheel of a car. From the LA Times, 7 dead in drive-by shooting near UC Santa Barbara.

The shootings began about 9:30 p.m., a sheriff’s spokeswoman told KEYT-TV. It wasn’t clear what the attacker’s motivation might have been.

An 18-year-old Newport Beach man who was visiting Santa Barbara described a confusing scene as the shots rang out.

Nikolaus Becker was eating outside The Habit, 888 Embarcadero Del Norte,  near the scene when the first set of shots was fired about 9:30 p.m. At first he thought it was firecrackers. A group of three to five police officers who were nearby started to casually walk toward the sounds, said Becker, but ran when a second round of shots broke out.

“That’s when they yelled at us to get inside and take cover,” Becker said.

The BMW took a sharp turn in front of The Habit, Becker said, and moments later a third round of shots was heard. Becker and his friends moved toward the restaurant’s kitchen but were told to wait in the seating area by employees.

He estimates there were at least 13 to 15 shots total at three locations. The locations were about 100 yards from one another.

The shooter, whose motivation is unknown, was found dead in his BMW. It’s not yet clear if he shot himself or was killed by sheriff’s deputies.

In another gun-related story, TPM reports that some gun nuts are reconsidering their campaign of carrying long guns into public places: Scaring The Crap Out of People Oddly Not Winning Fans.

Open Carry Texas and a group of other aggressive gun rights groups have issued a joint statement telling their members, Dudes, let’s stop taking our guns to restaurants. It’s freaking people out and making them hate us.

Read the full statement at TPM.

Shelly-and-Donald-Sterling1

Soon-to-be former LA Clippers owner Donald Sterling has signed over the team to his wife and wants her to negotiate the sale.

Shelly Sterling, who previously shared ownership of the beleaguered NBA franchise with her estranged husband, is now in talks with the NBA over selling the team, the source said.

The NBA banned Donald Sterling for life from all league events after an audio tape became public that caught him on tape uttering racist comments to his assistant V. Stiviano. He told her not to post photos of herself with black people on Instagram — such as Magic Johnson — or bring them to his basketball games.

But the NBA isn’t buying it. From ESPN: Why the NBA won’t allow Shelly Sterling to control the Clippers.

At first glance, Donald Sterling’s gesture may seem like serendipitous news for the NBA. Taking him at his word, Donald Sterling has agreed to leave the league without a fight and has signed off on the sale of his team. Digging deeper, however, reveals possible ulterior motives on Sterling’s part to delay and potentially block the sale of the team. Do not forget a crucial point: capital gain taxes. As first reported by SI.com, the Sterlings have significant incentives under capital gain tax law to avoid the sale of the team and keep it in the Sterling family. Doing so, would save them hundreds of millions of dollars. Also, contrary to some reports, the Sterlings are unlikely to benefit from the “involuntary conversion” tax avoidance provision of the Internal Revenue Code. The bottom line is if the Sterlings have to sell the Clippers, they will probably pay hundreds of millions in state and federal taxes.

Along those lines, Donald Sterling’s proposed maneuver does not accomplish the NBA’s goal of ousting the entire Sterling family on June 3. As explained in a previous SI.com article, the NBA interprets its constitution to mean that ousting Donald Sterling on June 3 would also automatically oust Shelly Sterling as co-owner, with the Clippers then falling under the control of commissioner Adam Silver. Donald Sterling’s proposed maneuver risks the prospect of Shelly Sterling undertaking a slow-moving effort to sell the team. A sale process that takes months or years would clearly aggravate the NBA, which wants to erase the Sterling family name from the league as quickly as possible. A protracted sale of the Clippers by Shelly Sterling might also constitute a potential rationale for players to boycott NBA games.

Even of greater risk to the NBA, what is to stop Shelly Sterling from deciding to keep the Clippers? She could plausibly reason, on various grounds, that now is not the right time to sell the team. Also, her instruction from her husband to sell the team would not be legally binding; it would be a mere suggestion the moment she takes over the team.

Read much more at the link.

Ta-Nehisi Coates

Ta-Nehisi Coates

I’ll end with a long article that I haven’t gotten to yet, but I’m hearing it’s a must read: The Case for Reparations, by Ta-Nehisi Coates at The Atlantic. Here’s the tagline:

Two hundred fifty years of slavery. Ninety years of Jim Crow. Sixty years of separate but equal. Thirty-five years of racist housing policy. Until we reckon with our compounding moral debts, America will never be whole.”

Some reactions:

The Guardian: The ‘Case for Reparations’ is solid, and it’s long past time to make them.

Slate: An Ingenious and Powerful Case for Reparations.

The Wire: You Should Read “The Case for Reparations.”

NPR: How To Tell Who Hasn’t Read The New ‘Atlantic’ Cover Story.

WaPo: Culture change and Ta-Nehisi Coates’s ‘The Case For Reparations’.

What else is happening? As always, please post your links in the comment thread.