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First notes on Thomas Piketty's Capital in the 21st Century

by Cyrille Sat Apr 12th, 2014 at 06:58:17 AM EST

Since being published in English (its original publication, in French, came a year sooner), Thomas Piketty's Capital in the XXIst Century has been heavily discussed - and reviewed.

I would like to comment and start discussions on some of its contents and assumptions. Since there have been questions about it, I will start writing even though I am yet to finish the book. Well, if I were to do it all in one go, it would be far too long a diary in any case. Please note that I am reading it in French, and thus cannot exactly quote the English version. At the point where I am in the book, little has been said of inequalities, which are the subject of part 3.

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An unfair test

by Cyrille Tue Apr 8th, 2014 at 04:29:41 AM EST

Via Paul Krugman, I read Ezra Klein's opening tribune on his new, independent website venture.

And it purports to show that politics makes us brain dead because, when presented with a political problem that fits our prejudice (or goes against them), we tend to reply according to the prejudice rather than according to our abilities, in this case a simple maths proportions problem (yes, I am surprised that most people failed the problem in the first place, and that it be called "difficult", go take a look).

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Unfit models

by Cyrille Sat Mar 8th, 2014 at 11:36:36 AM EST

In a recent conference about data analysis, I highlighted the importance of being well aware of one's model's assumptions. That all models are wrong should not be a reason never to use them, but you must be acutely aware of what their use implies.

I trust that you would agree with such an observation (OK, some will not want to use imperfect model at all, but that is going too far, and would have prevented any progress in human knowledge). But if you do, you should be pretty worried. Because most developed countries (and probably even more so less-developed ones) are now run on the basis of models whose assumptions are wildly violated -to the point where the rules of such models have made their way into their constitutions.

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Propaganda works

by Cyrille Sun Feb 9th, 2014 at 04:59:31 AM EST

As I recently wrote about, we are once again hearing calls for selling, well,everything public. And a French nominally (yes, already only nominally) socialist president is announcing a major turn rightwards -economically, that is- despite being at the helm of a country that has been performing markedly better than tenants of Aust(e)rian orthodoxy, such as the Netherlands or Finland.

And, you know what: he's getting praise for it.

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When a refutation is anything but

by Cyrille Mon Jan 20th, 2014 at 12:19:58 PM EST

For decades, many academics and pundits have pronounced that the 70s conclusively proved that Keynes had been completely wrong, and that it proved that Friedman had been completely right.

You see, there was a recession, and it should have created deflation, except if inflation was actually determined by expectations based on previous experience, in which case it would not be brought down by depression. Friedman went on to state that "inflation is always and everywhere a monetary phenomenon" which, if you think twice about it, is the most laughable statement.
And to this day, I keep reading articles, even by professors of economics in the UK, saying that the episode of inflation over 2% in the UK in the early years of the current Government is a clear indication that any stimulus would have had little to no effect, being swallowed by inflation.

That's what happens when you start believing that your model matters more than reality.

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Some thoughts about secular stagnation

by Cyrille Mon Nov 18th, 2013 at 05:35:10 AM EST

Via Paul Krugman, I saw that Larry Summers had given a presentation on the topic of secular stagnation at the IMF conference (admittedly, I wasn't invited this year, well, the letter must have been lost in the post ;-) ). If you'd rather read than watch, Krugman's summary is a nicely written one, and adds a few comments which can be interesting in themselves.

Well, I have not usually been inclined of late to say nice things about Larry Summers, although that was probably more about Summers the political persona. His academic research deserves more credit. So, much of it is interesting, although some of the conclusions he derives (and here Summers the neoliberal may be showing, for instance when he suggests that proper financial regulation may be a bad thing in the context of stagnation, which is bonkers) appear to either be there purely for provocation sake, or to be pre-conclusions looking for a justification. Still, I would have a few things to add, and I believe that the conclusions fall short in a couple of ways.

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Today in Newspeak

by Cyrille Wed Aug 7th, 2013 at 11:19:30 AM EST

This is cross-posted on my blog.

Reading the New Statesman correspondence section (yes, I know...), I came across a letter referring to a leader that had apparently stated that the UK needed an extra one million houses over the next five years is the level to meet present needs. The letter proceeds to explain via a small calculation that the figure is actually four millions over ten years. So far, so good (or not - I really have no idea about the actual figures, the calculation is worded in a way that might suggest that there is some confusion between yearly need and backlog, and I don't know the source of the numbers used), I don't mean to dispute the need for extra housing in the UK.

But the reader, after apparently making a call for a strong building program (this is about meeting present "needs", not fanciful wishes), then adds:
"A damaged economy cannot afford to allocate such a large share of limited resources to housebuilding."

This left me nonplussed on several levels.

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Greg Mankiw at it again...

by Cyrille Fri Jun 28th, 2013 at 01:31:10 AM EST

Greg Mankiw came up with a defense of the top 1% (note: I provide the link because that's the done thing. I don't actually recommend that you follow it...). Many people, such as Dean Baker, Harold Pollack, Paul Krugman and even The Economist (and this time I do recommend you follow the links), take this apart.

And yet, they are being much too kind.

Greg Mankiw has written an Economics textbook that is very well regarded, and is still the leader in the undergraduate universities market in the US (although Paul Krugman's seemed to be catching up fast). Because of that, a lot of people will like him or, at any rate, not want to appear to have too bad a word for him. Yet there is a point where this becomes enforced blindness.

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What happened to the scientific process?

by Cyrille Tue Mar 12th, 2013 at 05:14:44 AM EST

David Greenlaw, James Hamilton, Peter Hooper, and Rick Mishkin (no, those names did not mean much to me either) have published an op-ed in the Wall Street Journal based on their recent paper on debts, deficits and borrowing interest rates.

Thus far, the sentence reveals nothing extraordinary. What they end up concluding (the most policy-absorbed might have surmised it from where their op-ed was published) was that there was a strong relationship between debt level and interest rates. There is a detailed takedown of the conclusions by Matt O'Brien, so I'll focus on something else. The data they based their conclusion on can be plotted on a graph easily enough, like that:

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A heterodox proposal

by Cyrille Thu Mar 7th, 2013 at 03:53:58 AM EST

I've been thinking about regulatory environments lately -finance, insurance, but also medical or IT.

Actually the last two will be relevant to the idea only as illustration. The proposal is about the financial world.

So, as you may or may not know, norms like Basel (2 or 3 at any rate) or Solvency 2 will require a lesser quantity of capital set aside if you have an internal process to evaluate counterparty risk. This process must be pretty thoroughly documented internally (internally is an operating word here) and will be subjected to audits.

As you also know, audit firms are paid by the company that they are auditing. Thus creating the mother of all conflicts of interest.

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The disaster of axiomatic macroeconomic thinking

by Cyrille Tue Feb 26th, 2013 at 06:17:41 AM EST

On Friday (22nd February), Moody's downgraded the UK's credit rating by a notch. That is actually a non-event. Rating agencies clearly play to an ideological agenda (for instance, they consistently give a higher rating to a private company than to a state for a similar level of risk), and it's hard to see in what circumstances the UK, a country with its own central bank emitting fiat money, could default.

What makes it somewhat more interesting is that UK's chancellor, George Osborne, reacted that way :

"Tonight we have a stark reminder of the debt problems facing our country - and the clearest possible warning to anyone who thinks we can run away from dealing with those problems," he said.

"Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it.
"We will go on delivering the plan that has cut the deficit by a quarter, and given us record low interest rates and record numbers of jobs."
[...]
"As the rating agency says, Britain faces huge challenges at home from the debts built up over many, many years, and it is made no easier by the very weak economic situation in Europe.
"Crucially for families and businesses, they say that 'the UK's creditworthiness remains extremely high' thanks in part to a 'strong track record of fiscal consolidation' and our 'political will'.
[...]
"They also make it absolutely clear that they could downgrade the UK's credit rating further in the event of 'reduced political commitment to fiscal consolidation'.
"We are not going to run away from our problems, we are going to overcome them."

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Alternatives aplenty

by Cyrille Wed Nov 2nd, 2011 at 06:52:26 AM EST

It's now out in the open: Paul Krugman is flirting with Tara.

However, Robin Wells (Paul Krugman's partner) need not worry. Tara is actually the impersonation of our rallying cry, There Are Real Alternatives, and of course the arch-nemesis of Margaret Thatcher's frightening offspring, TINA (There Is No Alternative).

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What we stand for: Quasi-Rawlsian ethics

by Cyrille Sat Oct 2nd, 2010 at 09:17:02 AM EST

Recently, in a diary called Paris by Sven Triloqvist, poemless made the point that some people come to ET and struggle to understand what It is about. Why I find that this patchwork tendency also has an endearing feel to it, I must admit that I have struggled to get people to read ET regularly. And we may sometimes not even explicitly mention some points that we take for granted within our community -but which may be lost on a new reader.

So, I thought I would try to find and word some major tendencies that shape ET. I realize that the "we" in the title can seem presumptuous -after all, it is only I who write. But there are two reasons for it. First, I endeavour to identify common lines of thought -ones that, while we can find an individual frequent contributor who disagrees about any one of them, would probably be each be shared by the great majority of us, and a majority of them should be shared by any one of us. Second, I hope that ensuing discussions will make it that eventually it will be "we" writing.
I was initially going to have all topics into one diary, but quickly saw that it would be way too long -besides, I probably am not settled on the list yet.

So here goes with a first instalment: Quasi-Rawlsian ethics

for your weekend reading - Nomad

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What we stand for: Qualitativism

by Cyrille Fri Oct 1st, 2010 at 05:27:29 PM EST

As I explained in my earlier diary What we stand for: Quasi-Rawlsian ethics, I am trying to clarify our identity by highlighting common positions that we, as a group, overwhelmingly share.

I was going to touch about today's subject in a diary about the quest for sustainability, but comments by JakeS convinced me that it needed to stand on its own, as its roots were not merely -nay, not mostly, in the need for sustainability.

JakeS explained our not being productivists in those words: "There is a level of economic activity that would satisfy us, and it is for most of us somewhat below the current level of economic activity in The WestTM - or at least not greatly beyond it."

This is certainly a fair description of us as a group. To risk new words, I'd venture that we are exponents of Qualitativism vs Productivism and Consumerism

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Elwan blogging

by Cyrille Sat Feb 6th, 2010 at 07:34:03 AM EST

Elwan Liam Oulom Karim Viossat was born on Saturday the 30th of January at 17h51, in St Thomas Hospital. He weighed 2.950kg and was 53cm tall.

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Moving to London (and how you could help me)

by Cyrille Sat Sep 27th, 2008 at 04:10:49 PM EST

Hello all.

As some of you know, my wife and I should move to London this January. I say should because the current environment seems to make companies a bit more cautious than they used to be. So Mouna's transfer details are not yet known, and mostly, my move has been made conditional to my finding a mission in the UK.

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Stop Blair! - the lamest of rebuttals from the WSJE

by Cyrille Fri Feb 8th, 2008 at 06:27:27 AM EST

Right, that just about does it. The Wall Street Journal Europe breaks even the lowest standards of journalism in its apology of Blair. Let's go through it, and bring your noseclip.

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Cynicism unconcealed

by Cyrille Tue Dec 18th, 2007 at 04:35:37 PM EST

AP: Kadhafi: Dassault invite Yade à "s'occuper de ses affaires" AP: Ghadafi: Dassault invites Yade to "mind her own business"
PARIS - Serge Dassault a estimé mardi qu'il "fallait savoir ce que l'on veut" après la polémique concernant la venue du colonel Moammar Kadhafi en visite officielle en France et conseillé à la secrétaire d'Etat aux Droits de l'Homme Rama Yade -qui s'était publiquement émue de la venue du chef d'Etat libyen- de "s'occuper de ses affaires". PARIS - Serge Dassault reckoned on tuesday that "we must decide what we want" after the polemic around the visit in France of colonel Muhammar Ghadafi and advised secretary of State for Human Rights Rama Yade, who expressed her reservations against the visit of the Lybian head of State, to "mind her own business".

Wow.

I am told Sarkozy launched some sort of media operation to neutralize this, so to the Front Page with it - Diary rescue by Migeru

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Sarkozy and EU preference

by Cyrille Tue Nov 13th, 2007 at 07:45:48 AM EST

Right, this is my first attempt at a post so bear with me, I fear it may not be optimal...

Nicolas Sarkozy réclame une "véritable préférence communautaire"

STRASBOURG (AP) - Nicolas Sarkozy a réclamé mardi devant le Parlement européen un débat sur "ce que doit être une véritable préférence communautaire". "L'Europe ne veut pas du protectionnisme mais l'Europe doit réclamer la réciprocité", a-t-il dit, dénonçant le "laisser-faire absolu". "L'Europe est attachée à la concurrence, mais l'Europe ne peut pas être seule au monde à en faire une religion". STRASBOURG (AP) - "Nicolas Sarkozy on tuesday, in front of the European parliement, requested a debate on "what must be a genuine EU preference". "Europe does not want protectionism but Europe should claim reciprocity," he said, denouncing "absolute laissez-faire." "Europe is keen on competition but cannot be alone in the world to make it a religion".

Well... Are we? I realise that some at the Commission may be seen as high priests of deregulation (which, by the way, is not the same as competition), but the Commission is not the whole of Europe. Europe having a religious competition stance? I have my doubts...Besides, there IS some EU preference going on. Now that does not mean that it would necessarily be useless to debate how much there should be, and how. But the bit about Europe alone in the world to make it a religion is a strawman -and a typical Sarkozyan one at that, in the campaign it was always about France being the "only country in the world/Europe to..."

"Nous devons être capables de faire autant pour nous protéger que ce que font les autres", a estimé le président français. "Si les autres régions du monde ont le droit de se défendre contre les dumpings, pourquoi l'Europe devrait les subir?", a-t-il lancé. "Si des nations défendent leurs agriculteurs, pourquoi l'Europe devrait-elle renoncer à défendre les siens?". "We must be able to do as much to protect ourselves as others do", reckoned the French president. "If other regions in the world are allowed to defend against dumpings, why should Europe face them?", he claimed. "If nations defend their farmers, why should Europe give up on defending its own?"

Now that really is disgraceful. I guess farmers in Africa are indeed unfairly defended by their governments. And of course, the one area where the EU has never done anything is agriculture. We all know that. Again, the same rethoric, implying something blatantly false to stimulate an outrage that has little reason to be.

Now if you ask me, I'm all for some kind of protection. But not based on nationality -on production standards, mostly environmental impact to be precise. Then, maybe African products will not be able to price out the French farmers in France, but the obscene event where European products can starve African farmers will at least be over. There is NO sense in burning fuel to export wheat produced with lots of chemicals to countries which have no competitive advantage in anything else to employ priced out local farmers.

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