Ritchie’s interesting economics

Convergence requires

Assessment of economic capacity based on GDP inclusive of the shadow economy
Assessment of deficits on the basis of tax spending including uncollected tax as if it is a budgeted tax spend
A requirement that this spend be controlled like all others
The pre-condition of accepting this goal

There has been a reluctance to tackle this issue
This is based on the widespread belief that if the tax gap is tackled the economic activity brought within the scope to tax will be lost altogether
This is not true. Microeconomic theory says that markets work best to maximise social well-being when there is a level playing field on which all market participants compete
The tax gap destroys that level playing field. The result must be that markets deliver sub-optimal results because of misinformation, distorted rates of return, misapplication of capital and reduced productivity
Closing the tax gap will overcome these market defects. Accepting this market based argument is the pre-condition for change in the convergence criteria

Government deficits under the Maastricht criteria should be measured as if government is collecting the tax it cannot collect.

Sheesh. So Greece is just fine then, eh?

The distortions of the tax gap are also fun. For that’s the wrong way around. It’s the taxation itself which is the distortion in the first place. Maybe a necessary one, of course, but still a distortion which creates misapplications and reductions.

25 comments on “Ritchie’s interesting economics

  1. When Ritchie finally loses his job at City when the Coffers cash runs out (a rather excellent benefit of Brexit one hopes), does his “Professor” title die with it (unlike proper learned Professors who have real academic status)? Please let it be so, to refer to the “former-Professor-now-unemployed Murphy” will drive him bat shit crazy.

  2. This made me chortle:

    D B Fletcher says:
    May 22 2017 at 11:43 pm

    I assume your paper cross-references yourself frequently. It’s good to have consistency.

    Reply
    Richard Murphy says:
    May 23 2017 at 5:59 am
    Mr Fletcher

    This is a place that encourages debate, but narcissistic cynicism

    It seems you are dedicated to wasting time here

    I regret there is a simple solution to that: you will need to play somewhere else.

    Richard

  3. From Murphy’s Blog this morning………

    “There are mornings when my usual routine of waking up, surveying the news and deciding what to write is broken. This morning is one such occasion. The reports from Manchester are shocking. ……….”

    Yes they are shocking….I wonder how long before he somehow turns this into being about himself……

    “I do not apologise though for not dwelling on the detail….”

    Ah, OK then, Manchester is shocking but not really worth talking about. I wonder what is…..

    “….. I reflected then on why society felt it worthwhile paying a bunch of fairly bright people to come to events like the one I am at in Brussels ……”

    Oh, there’s a surprise. Murphy talks about Murphy. It’s all about “bright people” being paid to listen to Murphy.

    Candidly, three things occur to me.

    Firstly, Murphy is a cunt.
    Secondly, Murphy is a cunt
    Thirdly, Murphy is a cunt.

  4. @Theo.

    Alas, it seems that D B Fletcher (whoever he is) must retire. I am confident he will find a successor.

  5. “….. I reflected then on why society felt it worthwhile paying a bunch of fairly bright people to come to events like the one I am at in Brussels ……”

    Which society wasted my money?

  6. I’m sorry, but why in a single currency area where tax is just government reclaiming the money it itself has created and spent do we need an assessment of defects?

  7. Jesus, after reading these comments I went across to read what the Sage of Ely had to say about the Manchester Arena bomb. It really was all about him wasn’t it!

  8. ““former-Professor-now-unemployed Murphy”

    Reader Emeritus in Unemployment?

  9. Tim summarising Dickie, said: “Government deficits under the Maastricht criteria should be measured as if government is collecting the tax it cannot collect.”

    My gut feeling is that Brown came to a vaguely similar conclusion – that once he was finished with Tory spending plans after 2000, it was fine to borrow and spend the ‘tax gap’ because *hand waving*. And that worked out well didn’t it.

  10. If he is right that taxing things leads to increased economic activity then this would be a revolutionary finding. Let’s look at his evidence. Oh there isn’t any.

    Just shut up, Snippa. Get back to the nursery

  11. @Ironman

    Yep.

    Edit > Find on this page…

    ” I ” = 18 found
    ” my ” = 8
    ” me ” = 3

    29 in total.

    (note that spaces were used to avoid parts of words)

  12. One passage in particular struck me

    Microeconomic theory says that markets work best to maximise social well-being when there is a level playing field on which all market participants compete

    Does this come from any proper economics text book or Snippa’s arse?

  13. It must be his arse, mustn’t it? Even at the height of open outcry trading at the SE or the metal exchanges, in what sense was social well-being being maximised? In fact now that I have typed it I realise that I have no idea how to measure social well-being nor, in fact, what it is. He gets paid to teach such nonsense?

  14. I might be being a bit thick here, but;

    “Assessment of economic capacity based on GDP inclusive of the shadow economy”

    Is the ESA2010 changes, right? Introduced autumn 2014?

    So GDP is now Actual Output + Estimated Output(including transactions arising from activity that is otherwise illegal)

    Apart from the fact that I’m not sure how GDP is a measure of capacity, as opposed to actual output/consumption.

    “Assessment of deficits on the basis of tax spending including uncollected tax as if it is a budgeted tax spend”

    So the deficit is now calculated as (Actual Money Spent + Estimated Tax Not Collected) / Tax Actually Collected?

    So ESA2010 directly caused a rise both (1) in GDP, and in (2) government deficits?

    (1) is definitely handy when it comes to calculating the membership fee.
    (2) is rather handy when comes to exerting fiscal control under a monetary union, particularly when Convergence, previously a requirement for Euro adopters and wannabes, is extended to all members via the Stability And Growth pact.

    I ignored the rest of it.

  15. AndrewC

    “I am confident he will find a successor.”

    With his blocking of commenters, Spud is sowing dragon’s teeth – or chopping heads off the Hydra.

  16. Oh, there’s a surprise. Murphy talks about Murphy. It’s all about “bright people” being paid to listen to Murphy.

    Most distasteful of all is the fact that he uses a terrorist act with 20+ fatalities as a segue to his wonderfulness in that particular blog post.

  17. One passage in particular struck me:

    Microeconomic theory says that markets work best to maximise social well-being when there is a level playing field on which all market participants compete

    Same here. Last time I checked, basic microeconomic theory was silent on the subject of markets and “social well-being”. I’m not from Ely, and I do have trouble distinguishing stupid from sarcasm, but I seem to remember my Microeconomics classes having more to do with market handling resource allocation and utility maximization than anything to do with “social well-being”.

    Actually, I googled “Richard Murphy definition of social well-being” to see if the Great Man had actually defined his term, and came up with nothing. Appropriate enough, I guess.

  18. After the Dachau thing I’ve lost the ability to be shocked by that, Dennis. Murphy making a tragedy about himself is like a feral cat peeing on the rug. Everyone knows it’s going to happen and it’s going to stink, the only uncertainty is how fast it happens.

  19. In his latest spat with Steve Smith over on TRUK is he really suggesting that the Manchester bombing of innocent teenagers is a conspiracy between the Conservatives and ISIS???

    I’m pissed and would be happily corrected….

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