Today\’s @richardjmurphy strawman alert

The argument being rebutted is that of Tim Worstall – that we should not tackle tax evasion because to do so would reduce GDP. He says the existing rate of evasion is optimal and we should not address it as we are at an equilibrium state where we can afford this level of crime.

No, I don\’t say that.

What I say is that there is some level of attempting to crack down on tax evasion that will reduce GDP, making us worse off as a result of trying to crack down on tax evasion. The optimal level of tax evasion to leave alone is the one where cracking down on it starts to make us poorer not richer. A level which I\’ve actually stated I do not know but which I know exists.

So entirely a strawman from Ritchie there.

As he makes clear, neoliberal economics is based upon the belief that everything about the world is measurably probabilistic. What this means is that neoliberal economists believe that, first, we know everything that might happen in the future. Second, they believe that we can attach to each event that might happen in the future a probability that it will occur. So, for example, such economists might say that in 2024 I might move house and the probability of this occurring is 15%. The result is that these economists think that the future is entirely predictable.

However, real life experience shows such a belief is obviously wrong, and Keynes pointed out why. As he argued, the number of circumstances where we can make the predictions neoliberal economists think possible are remarkably limited. He said the future is not probabilistic as they suggest in most cases: it is actually uncertain. That means we simply do not know what might happen, let alone with what probability

And that is sadly entirely bollocks. Neither neo-liberals or, what I suspect he really means, neo-classicals, deny the existence of uncertainty. In fact, risk and uncertainty are just subsets of uncertainty: those uncertain things which we can in fact attatch a probability to thus making them risks. To insist that because some uncertainties are transferred into risks because we have quantified them by assigning a probability means that we don\’t recognise true uncertainty is not just to deny parts of economics, it\’s to deny the very basis of statistics itself.

You know, those bits about sample sizes, significance etc?

What\’s the liklihood of an asteroid of sufficient size to do serious damage hitting the Earth in the next 10 minutes?

Somewhere around zero as we\’d already know about it if it was. What\’s the liklihood in the next 4 billion years before the Sun burns out? The risk is pretty much up there close to 1 actually. And it is a risk, we can see how many asteroids there are (or at least a subset), can see how many have hit other planets, heck, we\’ve even seen one part of shoemaker I think?) hit Jupiter.

What\’s the liklihood of one hitting in the next 100 years? Uncertain. We simply don\’t have enough data to decide either way.

As to this:

But worse the claim that we can decide what that is assumes we know all there is to be known and can correctly allocate risk to each component. I say we can’t do that, so we use ethical judgement instead.

Allow me to translate for you. We don\’t know so therefore everyone should do what I think they ought to do.

Which is rather the problem with ethical judgement really, isn\’t it? Ethics do rather vary…..

Now of course, I accept that a decision will be taken to allocate resources to crime that accepts that not all crime will be solved.But quite explicitly it’s not taken for the reason Worstall notes. It recognises there are conflicting goals subject to ethical judgement – plus a certain pragmatism that some crime will effectively remain unknown and unknowable – and therefore insoluble and therefore with present resources be an irreducible problem. This is not a statement of optimality: it is reluctant acceptance of a problem as yet insoluble.

So, err, there is an optimal amount of crime, of tax evasion then.

But that’s the real significance: this point is reached using a very different decision making process as a result that is explicitly ethical when neoliberalism is not.

Just that the definition of optimal is whatever Richard J Murphy thinks it is inside the recesses of his head rather than any objective facts that the rest of us can use to judge his opinions by.

This is the justification of a guru not an economist.

14 comments on “Today\’s @richardjmurphy strawman alert

  1. But surely you remember Hayek’s argument: State Planning doesn’t work because everything is predictable.

    Selma Hayek perhaps!

  2. You have to laugh at someone bringing ethics into it.

    Right now, “rich” people such as senior nurses and police sergeants are taxed at high rate, even an 18yo on minimum wage is taxed. And Murphy wants more taxation ? And he’s quoting “ethical”.

  3. You mean he wrote an entire blogpost complaining about, er, nothing at all? Both of you are saying the same – that it isn’t possible to eliminate all tax evasion. Tim is arguing that it’s not worth trying to because the law of diminishing returns applies: Murphy, that it’s not worth trying to because we can’t know the full extent of evasion anyway.

  4. Another way of looking at it is the ‘law of diminishing returns’. HMRC can divert all its resources and considerable budget to catching the people Ritchie doesn’t like and they still wouldn’t catch everyone.

    On the point about risk and uncertainty, there is a big difference between active and passive systems. In my world of engineering, we carry out inspections not of one hundred per cent of batches produced but just a few. That’s because the odds are that if three out of one hundred are right so will be the others. The stuff is passive.

    But in markets and the melee of people earning and paying tax, it’s almost a case of for every action there is an equal and opposite reaction. The ‘system’ is active or even reactive.

    It has always seemed to me that if Ritchie wants to cut down tax avoiders he should suggest pressing the rest button and starting again with our tax system. It’s now so complicated it’s bound to have loopholes. But that would be too simple, wouldn’t it!

  5. Runcie

    He has some ethical views which can be charitably described as ‘minority view’.

    He has described the personalisation agenda in adult care (where elderly and other vulnerable people get to decide for themselves where they live and what should happen to them and the state just commissions it for them) as (you guessed it) neoliberal claptrap.

    He has described private education as ‘an abuse’. Blimey,

    He had a rant at Jeremy Clarkson last week, but when it was pointed out his old mate John McDonnell had said something similar about Mrs Thatcher, he muttered something along the lines of ‘he shouldn’t have done it’ and called a halt to the conversation.

    He is coy about whether he gets paid for his TUC work. Of course, it is unconstitutional for the TUC’s management to commission such work. He wouldnt take ultra vires money would he?

    His ethical stance blows with the wind. Sauce for the goose is not sauce for the gander.

    But rules are for the peasants, you see.

    I think the only completely consistent ‘ethical ‘position he has on anything is that we need more tax inspectors.

  6. Oh, actually he’s right that most stochastic economic models feature known probability distributions and no uncertainty as such. What that has to do with taxation etc is anybody’s guess.

    It’s not obvious what a model, or any other way of thinking about taxation, verbal, whatever, does with uncertainty. What are the implications of adding some “we simply have no idea” to a model that differs from just taking a guess of the probabilities? How does Richie’s thinking incorporate uncertainty?

  7. It’s the breathtaking muddle-ness of his thinking that gets me. You read him, thinking, “That’s it! He just wrote it. He’s about to get it! Oh.”

    It’s like watching a footballer missing penalty after penalty in front of empty goals.

    So, just to recap, in the extract above, Ritchie establishes that uncertainty DOES exist, and that we can’t know everything. But still thinks central planning the economy (by him) is a good idea.

    He shoots! He misses.

  8. Amusing that the TJN sees fit to criticize Google’s tax arrangements – then decides that streaming video is too expensive so hosts their “tackle tax havens” videos on YouTube.

  9. He is not merely foolish, he is becoming more and more deranged, intolerant and dangerous.

    At this rate of deterioration he will soon need help from public servants in white coats and a uniform that buckles his arms behind his back.

  10. Tim, how honoured you are that, Murphy having mis-duplicated and misrepresented just about every other economic source that ever lived, he has finally got round to trashing you by mis-statement rather than mere counter-argument.

    When I read the exchanges above, there is only one side I can manage to get through without going totally blank, and it ain’t our Ritchie’s.

    Alan Douglas

  11. I think you’re all being rather hard on Murphy. His underlying point seems to be that the appropriate level of tax evasion to tolerate should be determined not with the aim of maximising net revenue but rather in accordance with the resources we are willing to put into reducing crime in general. Proponents of the “broken window” theory of law enforcement will agree with him, if they think the theory applies to white collar crime. And why should it not?

    Unfortunately for him, he rather obfuscates his position by his determination to bring Keynes into everything he writes, howsoever irrelevantly: I suppose he sees this as a form of proof by authority. Economic uncertainty really has nothing to do with his argument, but if it had Frank Knight’s would have been a more appropriate name to drop.

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