Capitalism’s Winter — Chapter One summary and open thread

(Sorry this is coming late in the day! You know life… stuff.)

This chapter opens with a scene of violent conflict between mine workers and state police, acting on behalf of mine owners. He uses this as an example of the fact that much of the conflict over capital arises out of ways society has divided up the fruits of capital between the capitalists, and labor, what he calls the capital/labor split.

He goes on to stake a political flag in the ground, one of the first so far in the book: “(Unrest) is due… to the extreme concentration to the ownership of capital.”

Piketty also spends some more time defining his terms — he wants us to be well aware of what he means by terms like national income, and why he chose it over the popular GDP (the short version of this is the National Income accounts for entropy, the wear and tear of infrastructure, whereas GDP doesn’t.)

This is the chapter where he carefully defines capital, and thereby the scope of the book — he doesn’t make a value judgement of capital at all, but just defines what he’s talking about and therefore how he believes it will behave. This is a clever trick, sidestepping many of the religious wars of economics. His definition is interchangeable with his definition of wealth. As a writer, I suspect this is more a literary convenience than a technical or economic one; having a synonym makes the text less cumbersome and repetitive. And, that’s pretty useful when you’re dragging a general audience along for over 600 pages.

When considering wealth, Piketty gives us the definition of one of his most important numbers: the capital-income ratio. It is defined as the capital stock/annual flow of income, denoted as β. It’s a multiplier, so if capital stock = 6 x national income, β=6, or 600% of national income.

Put another way, If you had $60 saved in the bank, and you made $20 in income, the ratio would be β=3, and so on.

Capital income ratio (β) is usually between five and six on the national level.

The accounting practices of 19th century novels makes its debut in Chapter One as well, with discussions of rate of return in the backgrounds of the drama of Balzac and Austin.

Piketty continues what he started in the introduction by laying out the lineage of his economic data. This is, I think, the most difficult sections for readers who are not economists or statisticians. The history of data isn’t uninteresting, but this is a surface view of how data collection has evolved, waving at the changing nature of the data he and his cohort of economists had to work with when trying to understand income and output. It is of limited value to the general reader, beyond being a declaration that homework got done.

The chapter closes with a discussion of national inequalities and their historical context and possible mechanics. He contrasts much of the “catch up” world of emerging economies with Sub-Saharan Africa, which he describes as largely owned by foreign capital, going so far as to describe this state, and the colonialism that came before it as “when one country owns another.” It’s once again a political statement, but couched in and supported by a specific definition of ownership. That ownership is expressed in terms of a country that performs labor for and also pays another country where capital resides. The political part isn’t mere to describe that as ownership, but also as the cause of a failure to thrive post-colonially. I think this is a compelling argument, especially given countries that largely own themselves seem to grow faster and stronger than those who rely on FDI, which even in the best of cases transfers wealth out of poor countries, even when it has good effects within a country.

Capitalism’s Winter — Introduction summary and open thread

We’ve begun! If you haven’t, don’t worry, come along at your own pace. It’s a big book.

In this introduction, Piketty starts out by taking us back to school to look at the history of Economics, and its apocalyptic tendencies. While most of us remember Ricardo for Comparative Advantage, he reminds us that, like Malthus and Marx, his was an apocalyptic vision about the path of capital and distribution of resources after it. Malthus saw the world as we knew it ending from the scarcity of food, Ricardo from the accumulation of land resources in land-owning capitalist’s hands, and Marx from industrial capital concentration, culminating in massive global communist revolutions. Of course, spoilers, none of these things actually happened. Why were economists so wrong so much of the time?

Piketty wants us to understand something: that early Economics, including not only these pretty smart guys but a bunch of other smart guys, was working without real world data. It was essentially ethnography and math, complete with economic theories born out of visits to inns, industrial workplaces, and so on. Without any data, even brilliant observations about economic culture were doomed to make bad predictions.

From 19th century doom and gloom Piketty switches to the “fairytale” of Kuznets — but it’s the first tale with data behind it, and that’s important. By the mid 20th century Simon Kuznets was telling the tale of capitalism giving rise to greater income equality as almost a natural consequence of the system. In fact, much of post-war economics was starting to rely on data which had never been accessible before: national accounts, tax data, estate data, etc., often tabulated by hand. But with two world wars and a worldwide depression that limited window on the first data-rich analysis of capitalism was necessarily flawed. While Kuznets himself cautioned generalizing from this window he knew was narrow in his papers, he was more exuberant in his speech, and it was what the post-war world wanted to hear.

To build on this history, Piketty tells us about the data he is working with for this next century analysis, and again, he cautions us about its limitations and gaps. He also tells us about how other datasets were gathered, listing them off, and emphasizing how much modern research tools, like computers have made his job far easier than his predecessors.

The first conclusion of his data is refreshing: that you can’t divide economics from politics and pretend to predict things. The second conclusion is more ominous, it is that things can really go terribly wrong in capitalism, that the system doesn’t correct itself naturally.

Together, we can take these as capitalism doesn’t exist beyond politics, and nothing in economics is going to take care of us, we have to take care of ourselves. But take care of ourselves from what? Piketty goes on to describe some of the problems of progressing inequality, with hints that he will expand on these later.

And lastly, he briefly excoriates his field for its obsession with math and disdain for the other “soft” social sciences. As someone who has for many years referred to Economics as “a science desperately searching for a coefficient,” this was edifying for me. If you come up with an idea and do math on it, that math can be pretty and a wonderful thing. But to connect it to the real world, to enter into the realm of science, you must be measuring something — a step woefully absent in much of the history of Economics. Piketty calls for his field to grow up; to play nice with the other social sciences, and don’t do more math than the data lets you do.

What do you think? What did Piketty miss? He takes Ricardo, Marx, and Malthus to task, but largely leaves Smith alone. Does Smith present problems for his ideas? And are you hooked yet?

Capitalism’s Winter Schedule for Week One

Monday, February 8th – Begin reading. This week is
— Introduction
— Chapter 1 – Income and Output (which is shorter than the introduction!)

Open thread for Introduction will be posted
Wednesday Feb 10th.
(You don’t have to be done by then, that’s just when it’s open!)

Open thread for Chapter 1 will be posted
Friday Feb 12th.
(You don’t have to be done by then, that’s just when it’s open!)

Between the two, the Introduction is longer, but super helpful for understanding what’s coming up. I strongly recommend reading it.

A quick note: the majority of the registrations that have come in have looked… er… kind of shady. Until I know whether we’re being targeted by spammers or worse, I’m going to keep moderation on the comments. I’m sorry about this, but right now it’s the only way to make sure the space stays safe, spam and malware free. Bear with me on comment approval, I will try to get to everything as fast as possible.

Capitalism’s Winter Reading Schedule

Monday, February 8th – Begin reading. This week is:

— Introduction
— Chapter 1 – Income and Output (which is shorter than the introduction!)

Monday February 15th — Week Two

— Chapter 2 – Growth: Illusions and Realities
— Chapter 3 – The Metamorphoses of Capital
— Chapter 4 – From Old Europe to the New World

Monday February 22nd — Week Three

— Chapter 5 – The Capital/Income Ratio over the Long Run
— Chapter 6 – The Capital-Labor Split in the Twenty-First Century

Monday February 29th — Week Four

— Chapter 7 – Inequality and Concentration: Preliminary Bearings
— Chapter 8 – Two Worlds

Monday March 7th — Week Five

— Chapter 9 – Inequality of Labor Income
— Chapter 10 – Inequality of Capital Ownership

Monday March 14th — Week Six

— Chapter 11 – Merit and Inheritance in the Long Run
— Chapter 12 – Global Inequality of Wealth in the Twenty-First Century

Monday March 21st — Week Seven

— Chapter 13 – A Social State for the Twenty-First Century
— Chapter 14 – Rethinking the Progressive Income Tax

Monday March 28th — Week Eight

— Chapter 15 – A Global Tax on Capital
— Chapter 16 – The Question of the Public Debt
— Conclusion

I’m shooting for between three and four hours a week reading. Of course, ymmv, which is totes cool. Throughout the weeks I will post a week-specific schedule, then open threads with a little information about the chapter. This isn’t homework! You don’t have to have the reading done by the time the thread is open, or even to participate. You do you, it’s all good.

Please let me know if I’ve made any mistakes, or if this schedule will not work for the French edition which I know some of you people, especially the French ones, will be reading.

Announcing the Capitalism’s Winter Reading Group

Did you mean to read that Piketty book but OMG it looks long and hard? Did you want to read it again? Or just want to show off that you’re reading a really long economics book? Whatever your reason, let’s read it together!

We’ll be reading Thomas Piketty’s Capital in the Twenty-First Century over February and March, as the Capitalism’s Winter Reading Group. If you think that sounds a little like 2009’s Infinite Summer, I’ll just remind you that great artist steal. (If you don’t know about Capital in the Twenty-First Century, follow a few of the links above. It’s pretty interesting.)

Here’s how it’ll work: Next week, the second week of February, is going to be just the introduction and Chapter one, to give people time to get the book, audiobook, library copy, pirated edition, or whatever, and join in.

I’ll post an open thread for each chapter during the week for us to discuss the book as we go along. I’m estimating 3-4 hours a week of reading time — not impossible, but a commitment. At that rate, we should have this 700 page behemoth done in eight weeks. That will get us finished just in time for spring, and to have new ideas after assimilating Piketty’s voluminous research. If that seems a little fast, just go slower! If you’re late, join in! The discussion spaces will stay open for a while.

This will be fun! OK, kind of geeky, but fun!

You cannot read the stars and live

You cannot read the stars and live.
You cannot comprehend their mysteries, you are consumed in the process
You are burnt up.
And below them,
Eyes transfixed skyward, regarding,
is a stranger,
A thief of your memories
Standing in your place and on your ashes.

Next Time, Pay Attention.

When the extra-judicial harassment of drug addicts began, in the 80s, or even back in the 60s, no one cared. “Ew, they’re drug addicts.”

We filled our prisons with young blacks and latinos destroyed by the drug trade, sent our Vietnam vets there, our crack addicts and tweekers. We got used to not caring about them. We hired police and taught them it didn’t matter what they did to those people and their communities.

When the extra-judicial harassment of Arabs began, in the 90s and then many times worse after 9/11, it was, we said, to be expected. “Well, they’re Arabs.”

On a few occasions, I stood outside in a protest of Arab registration in America where a still unknown number of men went into DHS offices, and never came home. We all watched the surveillance and intimidation of Muslim and Arab communities in America, the UK and Europe and said to those governments, it’s ok, because those communities have extremists.

Now the extra-judicial harassment of journalists has begun. And a bunch of folks are saying “How could this happen?”

You’ve been letting it happen and grow for 50 years. Congratulations on noticing. Now do something about it, because you’re next.


An Open Reply to Zooko and Jon

Dear LeastAuthority and Silent Circle (aka Zooko and Jon),

I too know and like you both! I too admire your work, have tremendous confidence in your abilities, and it’s been amazing to watch your efforts, both sophisticated and useful, grow over time. I want to be customers of you both when I am less broke. Personally, I enjoy talking and hanging and hiking and all manner of things with you! (Zooko I really must go back to the mountains with you one day) That was a very sweet and erudite discussion of the problems of verifiability and technical trust and Open Source and Descartes and Godel. Seriously, I could totally have that talk with both of you while sipping nice port out of little crystal glasses.

But no one is going to attack the customers of either Silent Circle or Tahoe-LAFS by compelling you to deliver a malicious update. If they want to do it the hard way, they’re going to use an iTunes update or a Skype update or just attach a filed called interesting-shit.jpg.exe to a forged email to your customers. If they want to or can attack your customers the easy way, your customers will end up under fluorescent lighting in an airless room surround by buzzcuts with toothy rictus smiles. Your customers will have the distinct sense that while they’d like to see your customer’s computer/phone or else, they’re cool with or else for a while if your customers want to play that way.

The first way is of course stealthier, which is the real reason they go after hosted services, because that’s a stealthy way of monitoring communications, and gets you a historical record. (Which is also why I’m all like “No encrypted email! Encrypted email baaaad!” all the time.)

But if they’re going to own the endpoint, there’s no point in interfering with your two companies who are loud and skittish and likely to pull a “Ladar”.

They could own the end point any number of ways with off-the-shelf shit, and go home early for the weekend. If they really want to do bulk collection they’ll just send a malicious update of Angry Birds.

Seriously, attacking a target through your apps would be stupid and likely to get out. So they’re not going to. They’re going to use the vast number of easy weaponized apps built on top of the thriving 0day market to scoop not only every bit your targeted customers send you, but everyone else too. And it’s great! They won’t ever get caught for this. I don’t even have to provide links and evidence for what I’m saying because we all, everyone who works vaguely in this field, already know this.* But this is not just your customer’s problem, it’s your problem, too.

This all brings me to my point in my normally circuitous way. And Jon, you made this point in part, but for me, not nearly hard enough. These debates on crypto and code verification are actively beginning to annoy me, because malware/phishing is fucking terrible and the real fucking problem and everyone is ignoring it. I don’t mean you in particular are annoying me, but in general this tendency is. I worry watching two people as respected as you do this continues to distract people from our terrible problem. It’s like watching a couple gentlemen have a lengthy and erudite discussion on the merits of the front door’s lock while the back of the building is actually on fire.

I really do appreciate discussions of verifiability on an intellectual level. If I wasn’t also that kind of dork I would never have made it through the majority of my life hanging out with you people. I can sit around with friends trying to figure out when the halting problem comes into play in game situations. I teach writing with Shannon’s information theory in mind. I understand the dopamine rush of a *solution*. But we don’t have that luxury anymore, because everything and everyone is getting owned like crazy.

The answers to the malware problem are probably not verification. They are probably many answers, messy answers, and not always provable or even always effective. I think that’s why we don’t like them, because they aren’t elegant. And because we like to imagine malware can’t happen to us. It happens to people who don’t know better and live far away, but are also much more likely than us to do the kind of work that gets targeted by hostile actors.

I don’t mean to over-focus on you, because you guys aren’t close to the worst on this. We need to fix the industry’s incredibly broken threat model, because malware is everyone’s problem. You’re trying to protect your users’ data, period. Not just when it’s in your little mathematical garden, but before it gets there an after it leaves, because otherwise your mathematical garden is irrelevant to the real world. This problem is, for our kind, much harder than proving Godel wrong, because it’s tractable but huge and it’s messy and it will never, ever, ever feel right.

If we don’t start focusing some of our attention on malware, crypto is going to be irrelevant in yet another way.



* People who are not the people this is addressed to who would never make this mistake anyway, don’t even talk to me about AV. I mean, don’t even.

The Bit I Liked Most

As Ada took me back through the Lord of the Rings.

“I wish it need not have happened in my time,” said Frodo.
“So do I,” said Gandalf, “and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.”

Such times as these. Transition times, when new things are trying to not be crushed by old. Times like those that Paine said try men’s souls. Times when you can finally understand how people can see the round ups coming, and choose to stand. Drought times of soul and spirit.

Me, Aaron, and What I Said to MIT

MIT came out with its report on Aaron’s case and his death. I was interviewed by Hal Abelson and the lawyer assisting him May 3rd of this year. It was a difficult interview. I talked about what it was like being investigated along with Aaron. I told them how Aaron saw MIT, why he did what he did there, and what his relationship with data was. I told them things I had come to understand over years of knowing, loving, and living with him. This, for reasons both valid and not, vanished from the final report.

I, like many of the people close to him, wasn’t satisfied with the report. I didn’t appear in the final report beyond confirming factual details. However, I recorded my side of the interview. I share that with you here, and I will expand on it as I find the time.

The blank bits are were I have omitted personal information.