Quotulatiousness

June 25, 2015

Refuting Piketty on the inevitable “rich get richer” meme

Filed under: Economics — Tags: , , — Nicholas @ 05:00

At Reason, Ronald Bailey links to a study that appears to undermine most of Thomas Picketty’s claims:

From the study:

    We believe Piketty’s core message is provably flawed on several levels, as a result of fundamental and avoidable errors in his basic assumptions. He begins with the sensible presumption that the return on invested capital, r, exceeds macroeconomic growth, g, as must be true in any healthy economy. But from this near-tautology, he moves on to presume that wealthy families will grow ever richer over future generations, leading to a society dominated by unearned, hereditary wealth. Alas, this logic holds true only if the wealthy never dissipate their wealth through spending, charitable giving, taxation, and splitting bequests among multiple heirs.

    As individuals, and as families, the rich generally do not get richer; after a fortune is first built, the rich get relentlessly and inevitably poorer.

    The “evidence” Piketty uses in support of his thesis is largely anecdotal, drawn from the novels of Austen and Balzac, and from the current fortunes of Bill Gates and Liliane Bettencourt. If Piketty is right, where are the current hyper-wealthy descendants of past entrepreneurial dynasties — the Astors, Vanderbilts, Carnegies, Rockefellers, Mellons, and Gettys? Almost to a man (or woman) they are absent from the realms of the super-affluent. Our evidence — used to refute Piketty’s argument — is empirical, drawn from the rapid rotation of the hyper-wealthy through the ranks of the Forbes 400, and suggests that, at any given time, roughly half of the collective worth of the hyper-wealthy is first-generation earned wealth, not inherited wealth.

    The originators of great wealth are one-in-a-million geniuses; their innovation, invention, and single-minded entrepreneurial focus create myriad jobs and productivity enhancements for society at large. They create wealth for society, from which they draw wealth for themselves. In contrast, the descendants of the hyper-wealthy rarely have that same one-in-a-million genius. Bettencourt, cited by Piketty, is a clear exception. Typically, we find that descendants halve their inherited wealth — relative to the growth of per capita GDP — every 20 years or less, without any additional assistance from Piketty’s redistribution prescription.

    Dynastic wealth accumulation is simply a myth. The reality is that each generation spawns its own entrepreneurs who create vast pools of entirely new wealth, and enjoy their share of it, displacing many of the preceding generations’ entrepreneurial wealth creators. Today, the massive fortunes of the 19th century are largely depleted and almost all of the fortunes generated just a half-century ago are also gone. Do we really want to stifle entrepreneurialism, invention, and innovation in an effort to accelerate the already-rapid process of wealth redistribution?

A different kind of crowd-funding

Filed under: Economics, Media — Tags: , , — Nicholas @ 04:00

Christopher Taylor starts off by praising to the skies a movie I’ve never seen … but he goes on to discuss a variant of crowdfunding that might be a significant change to how movies are made:

… the big studios are corporations that answer to a board of stockholders. And the stockholders aren’t interested in great film making, they are interested in making money off their stocks.

So the Broken Lizards guys went to crowdfunding to raise money for their film, and have done quite well. They did so well that they don’t need a big bunch of studio dollars and interference to make the movie.

But here’s where it gets really interesting. See, crowdfunding sites raise money by offering goodies and the joy of helping a product succeed. They are not investment sites so much as a chance to be a patron of something you want to see on the market as well as a chance to get something from the company. Free copies, a mention in the book, a token in the game named after you, and so on.
Well that’s all about to change in a big way.

Jay Chandrasekhar writes:

    At our meeting, I vented to Slava about my perception of crowdfunding. I told him I wished people could invest in the movie and then own an equity piece of the backend. He said, “I totally agree.” That’s when we hit it off. He said that there is legislation in Washington, as we speak, that if signed, will make equity-based crowdfunding a reality. Think about that.

I’m with Jay here. Think about that. Its very likely that soon you will be able to donate to a crowdfunded project and get money back from its sales. In other words, it will actually be an investment, not just patronizing.

This is a huge key in changing the way that media gets made. All those projects the studios and TV channels pass on because it isn’t hot or doesn’t make sense to them? If this happens, they can have a chance.

Delivering a new streetcar to the TTC

Filed under: Cancon, Railways — Tags: , — Nicholas @ 03:00

On Facebook, James Bow linked to this photoset from Toronto Life, showing the stages a new streetcar goes through when the railway delivers it to the TTC:

Click to see full-sized image at Toronto Life

Click to see full-sized image at Toronto Life

Building A WW2 Tank: A Defense Report On Film – 1941 Educational Documentary

Filed under: History, Military, USA, WW2 — Tags: , , — Nicholas @ 02:00

Published on 20 Jun 2015

Activities at the Chrysler Tank Arsenal in Detroit. Wheel suspension units are milled, wheels ground, gun mount gears cut, armor plate put through a punch press and drill, sprocket gears cut by an arc torch, gears heat treated and immersed in oil baths, armor plate hydraulically riveted, the tanks assembled, armament installed, and the tanks lifted from the assembly line by cranes. The tanks are tested at Fort Knox, Kentucky.

QotD: Religion as a user interface for reality

Filed under: Humour, Quotations, Religion — Tags: , , — Nicholas @ 01:00

I was raised as a Methodist and I was a believer until the age of eleven. Then I lost faith and became an annoying atheist for decades. In recent years I’ve come to see religion as a valid user interface to reality. The so-called “truth” of the universe is irrelevant because our tiny brains aren’t equipped to understand it anyway.

Our human understanding of reality is like describing an elephant to a space alien by saying an elephant is grey. That is not nearly enough detail. And you have no way to know if the alien perceives color the same way you do. After enduring your inadequate explanation of the elephant, the alien would understand as much about elephants as humans understand about reality.

In the software world, user interfaces keep human perceptions comfortably away from the underlying reality of zeroes and ones that would be incomprehensible to most of us. And the zeroes and ones keep us away from the underlying reality of the chip architecture. And that begs a further question: What the heck is an electron and why does it do what it does? And so on. We use software, but we don’t truly understand it at any deep level. We only know what the software is doing for us at the moment.

Religion is similar to software, and it doesn’t matter which religion you pick. What matters is that the user interface of religious practice “works” in some sense. The same is true if you are a non-believer and your filter on life is science alone. What matters to you is that your worldview works in some consistent fashion.

Scott Adams, “The User Interface to Reality”, The Scott Adams Blog, 2014-07-15.

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