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Thomas Piketty: Capital in the 21st Century

Just finished reading Thomas Piketty's now-famous book Capital in the Twenty-First Century. It's a big book, takes a while, but it's thoroughly worth it. It's admirably data-driven, yet clear and readable.

One thing it gives you is a lot of tips about whether the future will be the same as the past. Will inflation, growth, inequality be similar in the next 50 years as in the past 50 years? There are some perennial factors, and some things that are actually blips (caused e.g. by the World Wars) when considered on a timescale of centuries - and many of these are not quite as I had expected. Plenty of interesting titbits about, for example, how the amount of wealth we inherit is or isn't changing as our average lifespan gets longer, and how much "gift-giving" has grown in recent years as an "alternative" to inheritance.

And the readability is enhanced with details from history and literature, such as the way authors such as Jane Austen reflect the financial certainties of their time in their prose.

(It's worth mentioning that the Financial Times briefly smudged the book's reputation by alleging some of the data was wrong. (See here for example.) However, as The Economist noted, "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." The FT later awarded Piketty's book their business book of the year, perhaps sensing which way the wind was blowing.)

I agree with the LRB's review of the book that "nothing about the book is more impressive than the range and richness of its statistical information. [The book] both insists on the importance of data and, at least where modern societies are concerned, highlights the uncertainties involved in its collection." (Note: the LRB also takes issue with some of Piketty's interpretations - interesting review.)

The LRB review also points out that Piketty's proposed mechanism for fixing some of the problems of modern markets and global captialism - namely, a global progressive tax on capital - may be a nice theory to consider but it's so unrealistic as to be unhelpful. Piketty claims (p515) that even though it's utopian, it's worth considering, maybe even working towards. But to me it seems obviously to neglect so many extremely powerful problems. Of course the richest people have the most political power, and will fight to prevent such taxes being adopted (or if they are adopted, to build a new tax haven state on an oil-rig somewhere). Maybe this is just a practical problem, to be solved by politics. But the tax would require all forms of wealth, owned by every person on and off the planet, to be enumerated. If not, the rich and their financial engineers would transfer their assets into un-enumerated assets. This reminds me of the "information asymmetry" critique of neo-classical economics: many market theories assume that all market participants have perfect information, and this unrealistic assumption is required to prove those markets' effectiveness. Similarly, the effectiveness of the global capital tax in balancing out inequality rests really quite heavily on the idea of some tax agencies somewhere having essentially perfect knowledge. Unfortunately (and as Piketty notes) modern financial engineering means that many taxes, even progressive taxes, become a bit regressive when everyone is subject to them except for the super-rich.

Piketty also says (p519) that the main benefit of the wealth tax (charged at low annual rates, nothing too scary) is "more in the nature of a compulsory reporting law than a true tax" - in a sense, he's less interested in taxing wealth than encouraging transparency in wealth ownership. This again is a bit utopian, since of course people will be motivated to avoid some things being reported, but not so problematic, since the benefits of transparency don't require 100% transparency. And it chimes well with Piketty's insistence that it's not financial rules that can fix the world, but publicly-available information and democratic debate combined with the rule of law. Piketty points out (p570) that most businesses don't publish enough financial details for us to work out how the wealth is divided between profits and wages. If they were required to, that would empower workers. As well as economists ;)

Wednesday 28th January 2015 | economics | Permalink / Comment

Merge operation: in Chomsky, and in recursive neural networks for NLP

This is either a spooky coincidence, or a really neat connection I hadn't known:

For decades, Noam Chomsky and colleagues have famously been developing and advocating a "minimalist" idea about the machinery our brain uses to process language. There's a nice statement of it here in this 2014 paper. They propose that not much machinery is needed, and one of the key components is a "merge" operation that the brain uses in composing and decomposing grammatical structures. (Figure 1 shows it in action.)

Then yesterday I was reading this introduction to embeddings in deep neural networks and NLP, and I read the following:

"Models like [...] are powerful, but they have an unfortunate limitation: they can only have a fixed number of inputs. We can overcome this by adding an association module, A, which will take two word or phrase representations and merge them.

(From Bottou (2011))

"By merging sequences of words, A takes us from representing words to representing phrases or even representing whole sentences! And because we can merge together different numbers of words, we don’t have to have a fixed number of inputs."

This is a description of something called a "recursive neural network" (NOT a "recurrent neural network"). But look: the module "A" seems to do what the minimalists' "merge" operation does. The blogger quoted above even called it a "merge" operation...

As far as I can tell, the inventors of recursive neural networks were motivated by technical considerations - e.g. how to handle sentences of varying lengths - and not by the minimalist linguists. But it looks a little bit like they've created an artificial neural network embodiment of the minimalist programme! I'm not an NLP person, nor a linguist, however: surely I'm not the first to notice this connection? It would be a really neat convergence if it was indeed unconscious. Does this mean we can now test some Chomskian ideas (such as their explanation of word displacement) by implementing them in software?

Wednesday 21st January 2015 | science | Permalink / Comment

Beetroot and tomato soup

It's always good to have recipes for those packs of cooked beetroot. So let's have a nice simple soup. Serves 4 to 5 people, takes about half an hour:

  • 1 pack cooked beetroot (4 beetroots), drained
  • 3 big tomatoes (or 5 small ones)
  • 1 small onion
  • 1 clove garlic
  • 1 tsp cumin seed (or less if you prefer)
  • Marge / butter / oil for frying
  • 1/2 cup of milk

On a medium heat, heat up a blob of marge in a deep saucepan with a lid. Roughly slice the onion and add it. Then add the cumin seed and stir. Slice the garlic and add that. Add salt and pepper. Let that all fry gently to soften, for about 5 minutes.

Roughly chop the tomatoes and pile them on top. Boil the kettle and add enough hot water so that it only-just-about covers the things in the pan (maybe 1/2 a cup). Stir, then put the pan lid on, turn the heat down to low, and let it bubble gently for 15 minutes.

Cut the beetroot roughly into chunks, add it to the pan and stir. Take the pan off the heat. Let everything cool for a minute, then carefully ladle it all into a big blender. (I say carefully because you still want to be careful about beetroot stains!) Whizz it all up, briefly so that there are no pieces left but it's still kinda thick. Return it to the pan.

Warm it up again, adding the milk at the end - not too much, just enough to slacken it and give it a touch of creaminess.

Serve with bread and butter.

Wednesday 7th January 2015 | recipes | Permalink / Comment

Tea-smoked turkish delight

At our local International Supermarket they do some great turkish delight. However, the batch I bought recently tasted funny - I think they must have stored the turkish delight alongside a big mound of parsley, because it had obviously absorbed some flavours which didn't really suit it!

So what can you do if your turkish delight has absorbed some flavours? Make it absorb some more!

So I experimented with tea-smoking the turkish delight. I was nervous that something weird would happen in the wok (I've never tried warming up turkish delight before...) but it turned out fine and the smoky flavour works well.

Actually I'd like them a bit more smoky than they are, so you might want to increase some of the proportions here:

  • One pack of turkish delight (mine had pistachios in)
  • Three teabags
  • Dark sugar
  • Rice

Get a wok (or similar) and put a layer of tinfoil in.

Rip open the teabags and pour their contents onto the foil. Then add roughly equal quantities of rice and sugar. Mix it up a bit with your fingers. Put the wok on a medium heat. It'll take a few minutes until it starts smoking.

Meanwhile, you'll need something into the wok which will hold the turkish delight well away from the heat, but will allow the smoke to circulate. Maybe some sort of steaming pan. I used a thing for stopping oil from spitting at you.

Don't put the "thing" into the wok yet, keep it to one side. On top of the thing, put some tinfoil and put the pieces of turkish delight onto that. Space them out, and make sure the foil won't stop smoke from circulating.

Turkish delight, ready to get smoked

When the tea has started smoking, put the thing-and-foil-and-delight into it, and put a tight lid on top. (You could use foil, if you don't have a good lid.)

Turn the heat down a bit and let the thing smoke gently for about 15 minutes. Don't peek inside! You don't want the smoke to escape! After 15 minutes, turn off the heat and just leave the pan there for a couple of hours to let the process continue.

When it's all finally done, open the pan - in a well-ventilated area. Take the delight out, and sprinkle with a bit more icing sugar to serve.

Friday 21st November 2014 | recipes | Permalink / Comment

I nearly bought shared ownership - here's why I didn't

In the UK we have these "shared ownership" schemes. They're provided by Housing Associations and they're meant to make homebuying more affordable for people who can't get on the housing ladder. The thing is, I do have some savings so I could afford to get a flat the "normal" way, but I saw this shared-ownership flat and it was so ideal - very close to work, etc etc. No way I could have afforded that if I was buying it outright.

So I went for it. But after spending thousands of pounds, two months and many sleepless nights, I had to conclude it wasn't as affordable as it had looked - and after some gnashing of teeth I had to pull out, go back to square one, and start looking all over again. I don't want other people to have to do that. So here's my advice:

  • If you can afford to buy outright, you should definitely do that instead (even if the shared-ownership homes are more attractive). Only go for shared ownership if you can't get a "normal" place. (In that case, though, renting might still be better. Plus there are currently schemes like help-to-buy which might sort you out.)

Shared ownership is more complex than normal homebuying, in many ways. First because you have to work out your mortgage costs for the share that you'll be buying, AND your rent costs for the bit that you'll not be buying, plus the other costs (service charges etc) - and how all those things will change over time. I wish the people selling me their shared-ownership flat had put all the costs up-front, or they wouldn't have had the cost and hassle of a sale falling through.

Here are some of the reasons shared ownership was not for me:

  • The rent that you'll pay is cheap compared to market rates - so the monthly costs will probably be lower than if you were renting an equivalent place privately - BUT the rent is typically locked in to increase annually, faster than inflation (RPI+0.5%). This is very poor compared against a mortgage, whose monthly payments don't increase. And many people's wages haven't been keeping up with inflation recently, so you might find yourself locked in to paying rents (and service charges) you can't afford. Plus, unlike renting you can't just leave with a few weeks' notice, so if it's near the edge of your affordability you really need to be mega-careful.
  • Selling/buying shared-ownership is slow - first of all the vendor has to give 8 weeks' notice to the Housing Association, who gets to decide if they want to buy it first. Then once a sale is agreed the contractual stuff is more complicated (and there's one more set of solicitors involved than normal!), so the conveyancing process is slower. Plus there are extra little fees here and there: e.g. the Housing Association charged a hefty little fee to check my identity, i.e. for someone to photocopy my passport, which I thought was cheeky.
  • "Staircasing" is the right for shared owners to buy more portions, until they own the whole thing. But it's extremely unlikely staircasing will be worth it for you - you'd be better to sell up and buy a normal place, rather than staircasing. For a start, if your first share is 50%, then in practical terms it's "worth" more than 50% to you, because it brings benefits such as "access" to the below-market rent offer. This means than in practical terms the remaining chunk is worth less than 50% to you. You'd only want to buy it if you were sure you wanted to stay put, and if house prices had slumped. (Note: even after you buy outright, the Housing Association still has some first-dibs rights to buy it back off you when you want to sell.)
  • Quite a few things make shared-ownership the "worst of both worlds" versus buying or renting. I've already mentioned that the rent can fluctuate yet you're just as tied-down as if you'd bought (or more so). Another example: you're responsible for the upkeep of the flat just as if you'd bought leasehold, yet you have to apply for permission for any non-trivial modifications, just as if you were renting.

I've nothing against Housing Associations and I think they're providing a useful service. They provide some of the role that council house-building programmes used to, and especially now that the coalition government has revved up right-to-buy again, there's a shortage of social housing, so at least these "affordable" housing options are there for people who can't get a place on a mortgage. But shared ownership can easily look like a better deal than it really is.

Friday 21st November 2014 | money | Permalink / Comment

PhD opportunity! Study machine learning and bird sounds with me

I have a fully-funded PhD position available to study machine learning and bird sounds with me!

For full details please see the PhD advertisement on jobs.ac.uk. Application deadline Monday 12th January 2015.

Please do email me if you're interested or if you have any questions.

– and is there anyone you know who might be interested? Send them the link!

Thursday 6th November 2014 | science | Permalink / Comment
Carpenters Estate - Is it viable or not? (Wednesday 1st October 2014)
Carpenters Estate, Stratford - some background (Saturday 27th September 2014)
ArcTanGent 2014 festival (Sunday 31st August 2014)
Jabberwocky, ATP, and London (Thursday 14th August 2014)
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