Interesting business practice

In a letter to suppliers, Debenhams said it was seeking a one-off fee from suppliers worth 2.5pc of its outstanding payments as of Tuesday. It will also apply a 2.5pc discount to orders it has agreed with suppliers.

Simon Herrick, the chief financial officer at Debenhams, said the discounts are a “contribution” to the retailer’s investment in new store openings and the £25m revamp of its flagship Oxford Street store.

Demanding a discount on goods already delivered…..

Ritchie on corporation tax incidence

And whilst still on corporation tax let’s put to bed that age old (well, rather more recent, actually) myth that the cost of corporation tax is largely paid by labour. This myth is almost entirely the work of Prof Mike Devereux at Oxford who studied corporate tax increases (themselves a rare phenomenon) and suggested when they occur wages paid fall. He forgot two things. First he didn’t notice countries did in the past only increase tax rates when they were in economic distress, of which falling wages are a sure sign. Second, Devereux forgot to check if the relationship he supposedly found worked in reverse i.e. did wages increase when corporation tax rates fell? Real wages have fallen steadily since 2008 and so have corporation tax rates. If Devereux had been right then falling tax rates should have boosted wages, but they very clearly have not. The evidence of any significant link between tax rates and corporate tax dates has been shattered for good. Devereux should have realised that correlation does not necessarily indicate causation.

Ritchie is rather ignoring something here. That Deveraux has provided an estimate of how the corporate tax burden is split between labour and capital in the UK is true.

But that is all that is true. Ritchie is so ignorant of economics that he assumes that the basic theory started with Deveraux: not so, it is only one paper providing one estimate.

The first four results from a Google search for “incidence of corporate income tax” (I stop there because the fifth is me).

Uwe Reinhardt in the NYT:

The earliest formal general equilibrium model, published in 1962 by a University of Chicago economist, Arnold C. Harberger, in the Journal of Political Economy, assumed a closed economy. In that model, the burden of the corporate income tax ultimately fell entirely on the owners of capital.

When the model was modified as an open economy in which capital in the taxed country can escape by flowing abroad to untaxed or lower-taxed countries, some or all of the burden of the corporate income tax shifted to labor. Under the assumption of perfect international capital mobility and perfect substitutability of imported goods and services for all domestically produced goods and services, labor would then bear the entire corporate income tax, because labor is the only immobile factor than cannot escape the tax.

The point is made before Deveraux was out of short trousers.

The Wikipedia entry:

Similarly, taxes on a business that can easily be relocated are likely be borne almost entirely by the residents of the taxing jurisdiction and not the owners of the business.

A 2005 paper from Alan Auerbach:

Finally, while exploring many extensions of the Harberger model, I have devoted little
attention to one of that model’s important omissions, the impact of corporate income taxes on
capital accumulation. But the implications are clear. For taxes on capital income, in general, we
would expect an increase in the effective tax rate on new saving and investment to reduce capital
accumulation. The resulting decline in the capital-labor ratio would increase before-tax returns
to capital and lead to a fall in wages, thus partially shifting the tax burden from capital to labor.
This analysis would apply to the corporate tax as well, but only to the extent that the corporate
income tax represents a tax on new saving and investment. The shift in the corporate tax burden
from capital to labor can proceed only if it is first shifted from shareholders.

The Concise Encyclopedia of Economics:

Modern economic opinion is divided on the incidence of the corporate income tax, but few economists today believe its burden falls entirely on the owners of capital. The latest thinking is that, since capital is mobile, it will flow to investments that produce the highest after-tax returns. The corporate income tax raises the cost of capital and reduces after-tax returns in the corporate sector, and thus leads to a migration of capital into noncorporate or taxexempt sectors of the economy. This migration has two effects: it lowers the supply of capital available to corporations, and it causes a reduction in rates of return in the noncorporate sector as capital becomes more plentiful there. The ultimate effect, therefore, is to lower returns for all owners of capital across the economy. One important result of this capital migration is that the burden of the corporate income tax, over time, shifts to workers: with a smaller capital stock to employ, workers are less productive and earn lower real wages. In a 1996 survey, public finance economists were asked to estimate what percentage of the corporate income tax in the United States was ultimately borne by owners of capital. While their answers varied, the average response was 41 percent, meaning that the professional consensus is that more than half the burden is eventually shifted from owners of capital to workers or other groups.

And the Tax Policy Centre:

In the past several years, researchers have attempted to estimate the incidence of
the corporate income tax empirically. The primary approach used in empirical papers has
been to examine cross-country variation in the corporate tax rate over time and measure
subsequent changes in wage rates. All of the recent empirical papers have found that corporate taxes lead to depressed wages, but critics have questioned the validity of the
empirical methodology. To date, there remains little, if any, consensus about who bears
the burden of the corporate tax.

That last is particularly interesting, don’t you think? Empricial papers find the very effect that Ritchie is looking for?

Or, in other words, Ritchie is spouting nonsense on this subject.

I guess we can say that Thomas Piketty isn’t a Marxist then

One of the book’s main arguments is that wealth inequality is a function of the difference between the rate of return to capital (after taxes) and the economic growth rate. Inequality will increase the more that the capital return rate exceeds the economic growth rate, and it will decline when the relationship is flipped (the growth rate exceeds the capital return rate).

OK, take that as being true. He also then goes on to state that the return to capital is rising above the growth rate. Thus inequality is rising.

Which cannot be a Marxist interpretation for that does rather rely upon the idea that returns to capital will inevitably fall.

It’s also something of a crushing blow to the watermelons. For it means that as long as the return to capital is positive therefore we must have economic growth or the level of inequality will rise.

And finally it tells us something very interesting about the great reduction in inequality in the past century. It was nothing at all to do with unions, taxes, deliberate government intervention into distribution and so on. It was simply that economic growth was high.

Something for everyone there. Assuming that it is true of course.

George is quite right here

Coal kills vastly more people each year than nuclear ever has or ever will.

Three hundred micrograms of fine particulates per cubic metre of air is classed as severe pollution, the point at which children and elderly people should not leave their homes. As Greenpeace points out, in Shanghai a fortnight ago and in Harbin in October concentrations of particulates exceeded 500 micrograms. By far the greatest source of these particles is coal burning.

I don’t doubt it. But one question does interest me. Are the Chinese using electrostatic filters on the chimneys, as western plants must do, or not?

You’re picturing filthy plants in Poland and Romania, aren’t you? But among the most polluting power stations in Europe, Longannet in Scotland is ranked 11th; and Drax, in England, is ranked seventh.

Are we actually talking about the same levels of pollution there? Are both post filtering of the fly ash, or one before and one after?

We should probably try pre-war actually

Sir Michael Lyons, the former chairman of the BBC who is overseeing in Salford one of the largest urban developments in Europe, is by temperament a practical man. He promises he is not interested in “building castles in the air”, but constructing a realistic blueprint for more than 200,000 houses a year being built in England by 2020.

Appointed by Ed Miliband to prepare a plan for Labour to implement in power, he starts by stressing the need for the country collectively to grasp the scale of the problem.

He told the Guardian: “We do need some of the enthusiasm we had in the years immediately after the second world war where we saw it as a duty of government to encourage housebuilding on a much bigger scale.

For the years immediately after WWII were when we had rationing of building materials. Plus the planning acts that restricted the availability of plots. Immediately post war in fact we had piss all house building.

What we’d really like of course is the pre-war attitudes. Where people could build what they wanted, what they thought the market wanted perhaps, pretty much where they wanted to. And, amazingly, lots and lots of houses did in fact get built.

Funny that really, markets working better than bureaucrats.

On the lesson from Peter O’Toole

But the O’Toole character that lodged in cinemagoers’ minds was O’Toole himself: the hellraiser, the champagne and whisky-sinker, the garrulous, charm-drizzled sot. Like Oliver Reed, Richard Burton and Richard Harris, he was one of Hollywood’s great drinkers, and his passing brings that notorious era to a close. (“Booze is the most outrageous of all drugs, which is why I chose it,” he once told an interviewer.)

Made it to 81 on it too.

So, that story about how we’re all killing ourselves by having more than a small sherry every other Sunday…..

Our rulers are idiots

Dozens of Conservative MPs are urging David Cameron to give Parliament a veto over all EU laws, in an attempt to take back control of Britain’s borders.

Up to 80 backbenchers are expected to sign a letter to the Prime Minister calling for Parliament to be given the right to throw out existing laws from Brussels and block new ones.

The MPs say the move would allow Britain to ‘recover control over our borders, lift EU burdens on business, (and) regain control over energy policy…in popular and sensible ways.’

By agreeing to be in the EU you’ve signed away the right to do that. EU law is made in Brussels and then imposed in Westminster. It’s not something there’s any choice left over.

Dear God, Mazzucato can’t even get public goods right

For an economist that’s something of a failing too:

While economists usually talk about things that are not done at all (or done inadequately) by the private sector as “public goods”, investments in “big” public goods like the UK national health service,

This is the wrong damn way around. The private sector does not produce invisible pink unicorns. This does not mean that invisible pink unicorns are public goods. Public goods are, rather, things that the private sector will not produce well or not in large enough quantity as a result of their non-rivalry and non-excludability.

And the NHS is not a public good. It is clearly rivalrous, for a treatment given to one person means that that same treatment cannot be given, with the same resources, to another. It is also excludeable as NICE proves every time it denies a treatment that costs over £30k per qualy.

Vaccines are also not a public good: although the effect of a decent vaccination is. For herd immunity is non-rivalrous and non-excludeable.

It’s vital for economists to get this right. And Ms. Mazzucato isn’t.

Public goods are goods whose benefits are spread so widely that it is hard for business to profit from them (or stop others profiting from them). So they don’t attract private investment. Examples include transport infrastructure, healthcare, research and education.

Transport infrastructure cannot be privately built? Health care? Education? What bollocks is this?

The state’s provision of many of these goods – notably transport, education, housing and healthcare

Housing is a fucking public good now? Crippled JC on a pogo stick this is nonsense.

When public goods are privatised they lose their “public good” nature: it does become possible to profit from distributing mail, running trains, renting out homes and providing education.

You fucking what? If it’s possible to profit from them then they’re not public goods in the first place! For they cannot be profitable if they are non-rivalrous and non-excludeable. That’s the basic problem in the first place.

We’re continually promised that, due to efficiency gains and innovations prompted by the profit motive, public goods can be delivered more cheaply and effectively by the private sector.

Dear God, and this is a supposed economist talking here. What the hell has she been smoking?

Ms. Mazzucato should be locked into a room and forced to write lines. Perhaps 1,000 just so that the idea will sink in.

Public goods are not things that are good for the public, are not things the public desires nor even are they good things the public consumes. Public goods are those goods that are non-rivalrous and non-excludeable.

Free the Mormon Five!

And quite right too:

A reality TV star and his four wives won a key legal victory for polygamist families on Friday, as a US judge threw out parts of Utah’s bigamy laws used to crack down on the practice of plural marriage in the heavily Mormon state.

The federal judge ruled in favour of Kody Brown and the four women he lives with publicly on the television show Sister Wives, who had challenged a Utah law that prohibits adults from living with multiple partners in marriage-like relationships. He found the law violated religious rights and criminalised the intimate sexual relationships of consenting adults, giving a major boost to breakaway Mormon groups that still follow the doctrine of plural marriage.

The point being that sure, given that the State licences marriage the State can decide that only two people can be in a marriage. But Utah went one step further, insisting that people could not live “as if” they were married:

Anti-bigamy laws are stricter in the Mormon heartland of Utah than elsewhere in the US, as they not only outlaw the possession of multiple marriage licenses but cohabitation in marriage-like relationships with multiple partners, which is punishable with up to five years in prison.

Fuck off you prodnose tossers.

And before anyone starts shouting that Mormons are right wing so this is just fine think about it for a moment. This sort of law outlaws a menage a trois for example, and forms of live in polyamory.

Consenting adults get to do what adults consent to…..

Dangerous thing, not drinking

A gardener put in intensive care after crashing his bicycle died of alcohol withdrawal because he wasn’t drinking his daily pack of strong lager, an inquest heard.

Can indeed happen:

‘He was getting better and suddenly there appears to be a sudden deterioration. This was likely to be as a consequence of withdrawing from alcohol.’

Dr Heath said the lack of alcohol in Mr Pickston’s system caused potassium levels in his blood to rise, leading to the fatal cardiac arrest.

‘The biochemistry of the blood is so abnormal that it cannot be reverted,’ the pathologist said.

When the AA guys do an intervention they’ll have some rum with them. It’s necessary to ease down rather than go cold turkey from booze. For death is a possible consequence of simply going from a skinful a day to nowt.

And the EHRC can bugger off ‘n’ all

Official guidelines which endorse sex segregation at British universities have been declared potentially unlawful by Britain’s equality watchdog, The Telegraph can disclose.

The Equality and Human Rights Commission (EHRC) announced it will help re-write guidance, published by Universities UK (UUK) last month, which said Muslim societies and other groups were entitled to practice gender segregation at public meetings on campus.

Mark Hammond, the EHRC’s chief executive, said gender segregation was “not permissible” under equalities laws, adding that UUK’s guidance required clarification.

By agreeing to go back to the drawing board with the EHRC’s help, the vice-chancellors’ organisation appeared to have headed off the prospect of a legal challenge from the official watchdog.

Its controversial guidance to universities across Britain said segregation could be acceptable as long as men and women were seated side by side rather than with women at the back.

It also said that any event where some segregation took place for religious reasons should also provide a separate, non-segregated area.

Mr Hammond said: “Equality law permits gender segregation in premises that are permanently or temporarily being used for the purposes of an organised religion where its doctrines require it.

“However, in an academic meeting or in a lecture open to the public it is not, in the commission’s view, permissible to segregate by gender.”

They really don’t seem to get this freedom and liberty thing, do they?

Which is that it’s none of your (or my to that matter) damn fucking business how people voluntarily decide to organise themselves in public.

It is the business of government not to enforce such organisation or segregation. And also not to either insist upon or allow it in things that they are providing such as classes or lectures. But a public meeting is just that, a public meeting. And those going to it are entirely at liberty to accept or not whatever constraints the organisers of the meeting wish to put upon them.

We do, for example, insist upon the freedom of speech in this country. But no one at all would insist that the organisers of a meeting cannot ask a persistent heckler to leave. Nor “aid him” in leaving if he refuses.

So there’s some nutter who insists that he will only give his speech if the women are separate from the men. It’s entirely up to those who wish or do not wish to attend under said circimstances to make their own decision about that.

And not to a bureaucracy.

Cameron is a bit dim at times

Migrants from poor countries that join the European Union should be banned from moving to Britain, David Cameron has suggested.

The Prime Minister said unrestricted immigration should only be allowed from countries that have a similar level of wealth to the UK.


Not something
the UK gets to decide that, is it?

And it’s entirely irrelevant anyway. It would only apply to new entrants and thus not to Romania and Bulgaria, which is what everyone is worrying about. And until the Ukraine comes in in 2040 or whatever there’s only going to be a couple of Balkan scrap joining anyway.

Timmy elsewhere

At the ASI.

Riffing off Andrew Orlowski’s excellent piece about Mazzucato’s “Entrepreneurial State”.

Far from the British government supporting the technology that became the iPhone’s screen they killed it off through the usual bumbling incompetence.

It;s the wonderful thing about Ritchie, he just doesn’t “get” economics

The argument runs that welfare spending has for many years been extravagant, it was and is unsupportable, and has been a (if not the) primary cause of the economic recession. Austerity is given as the self-evident remedy for this situation.

If this argument were sound, you’d expect to find that countries with higher welfare spending would generally have suffered worse recessions than those with smaller welfare spending. However, if you compare the welfare spending of countries in the year before the recession (2007) with the change in GDP those countries suffered as a consequence of the recession (2009 vs 2008), you find that there is no such association.

Well, no, you wouldn’t. In fact, you’d expect those countries with larger welfare states to have smaller drops in GDP.

This is straight Keynes, of course, not a drop of neoliberalism in sight here. The standard response to a recession is that there should be fiscal stimulus. We’d like the gap between what the government spends and what it collects in taxes to rise. With a larger welfare state this happens on its own. More people out of work leads to less tax being collected and more being spent on welfare. This is so obvious that we even have a name for it: automatic stabilisers. And given that the thinking about fiscal stimulus is that it reduces the severity and timespan of the recession, those places with more automatic stabilisers in the form of a larger welfare state will have shallower and shorter recessions.

And this is the thing about Ritchie. The above is a comment he’s received from someone else. And Ritchie simply doesn’t get economics well enough to understand that the original set up is garbled.