The Sage of Ely is wondrous, isn’t he?

D’ye recall when he wrote over at Soapy Joe’s? And assumed that business people with their tax returns – they were going to maximise income and or profit?

My telling him in the comments that this is not so, that people maximise utility, became an example of my neoliberal ad hominem‘s which do so much to justify his banning of disagreeable comments?

Today:

David Howdle says:
October 12 2017 at 5:07 am
I certainly agree with you Professor Murphy. Admittedly my experience is limited, but I know small business owners who started businesses because they are passionate about teaching music, painting landscapes, arranging flowers, drinking coffee etc. They hope to make a living doing whatever it is, but that isn’t their primary motivation. If it was they’d quickly get bored!

Reply
Richard Murphy says:
October 12 2017 at 1:01 pm
Absolutely

And that, not profit, is the general rule

Economics is wrong again

Reply

Economics insists that people maximise utility still. But Snippa has managed to reverse himself to getting to the right answer while still insisting that economics is wrong.

Quite, quite, remarkable. Thus I remark.

24 comments on “The Sage of Ely is wondrous, isn’t he?

  1. But seriously… He used to insist that people maximised profit when it would mean that people would work harder if taxed higher, when the economics understands that people maximise utility. So the economics was wrong then.

    Now he accepts that people maximise utility, but thinks that the economics states that people maximise profit, when it doesn’t. So the economics is wrong for not saying what he needs it to say today, when in fact it’s always said what he needs it to say today.

    And on that note, I’m going to maximise my utility by making myself a coffee to let my brain calm down after that…

  2. D’ye recall when he wrote over at Soapy Joe’s?

    Yes, and he soon scurried back to his own blog once he realised he couldn’t delete comments that pointed out his stupidity.

  3. ‘Economics’ is one of his straw men, the bogeyman which is everything he disagrees with or doesn’t like at that particular instance in time. I doubt it has any more substance to him than ‘neo-liberalism’ does.

  4. Well, yes, economics says that people maximize utility. That is true by definition. Economics says that only because people don’t always maximize profit.

    So economics looks at what people are doing, and defines utility as whatever it is they’re maximizing. Utility is not something we can measure except by looking at what people are actually doing.

  5. The examples give are basically of hobbiests. They may make a living or may not – in the long term mostly probably not because their primary interest is the pursuit of the hobby, not the monetary return on it and they are certainly not the driven, myopic, psychopathic bastard types which typify the great entrepreneurs

  6. He contradicts himself so much it’s like he has Multiple-Personality Disorder; each more stupid than the last.

  7. I have often thought of starting a photographic business – not to earn money – but to offset cameras (for my hobby) against tax. I wonder if some of those businesses mentioned are like that.

  8. @anon

    HMRC are wise to that. If you haven’t made a profit inside at the most 3 years then they’ll have a closer look and can disallow losses from being carried across to other income.

    But if the ‘side-line’ only lasted a couple of years before folding…..you might be OK. Do make it look like a business though. Put a few ads out. Actually do a few jobs.

  9. Oh poor Richard, he’s had to fly a long way and come back after a few days. Like real people trying to pay his taxes have to do to earn a living I guess.

    At least it seems you can really rip the piss out of him with the right commentator name and he’s that think he just can’t see it.

  10. ‘I know small business owners who started businesses because they are passionate about . . . . They hope to make a living doing whatever it is, but that isn’t their primary motivation.’

    People say all sorts of things. Doesn’t make them true. You open a business to make money. That’s why it’s called a business.

  11. Doesn’t the theory of the firm assume that companies exist to maximise profit? I know that Baumol and behavioural theories go well beyond this but the basic assumption is profit maximisation

  12. “You open a business to make money. That’s why it’s called a business.”

    Meeeeeehhhh kinda but not necessarily. If you’ve got a source of income from say producing youtube videos, it may be tax efficient and hence overall cheaper to attribute that income to a business and be able to deduct costs rather than take it as personal income and not be able to deduct costs.

    It’s something I’ve got to look into myself, but I’m not convinced at my current revenue level that it’s worth it (the admin costs in CH will likely outweigh the benefits, plus the hassle, keeping detailed records, an extra tax return etc).

  13. Hahahaha

    Murphy is now claiming he ‘turned down the chance’ of becoming a Big 4 partner.

    Hugh and I are close friends.

  14. ‘I know small business owners who started businesses because they are passionate about . . . . They hope to make a living doing whatever it is, but that isn’t their primary motivation.’

    But that’s a definition of Murphy!

    His hobby is spittle flecked ranting about other people’s success. He’s turned it into a small business.

  15. Andrew C – limited company, doesn’t have to make a profit but does have to try.
    Can offset quite a bit of hobby / experiment / research into a business.

  16. “it may be tax efficient and hence overall cheaper to attribute that income to a business and be able to deduct costs rather than take it as personal income and not be able to deduct costs”

    A penny saved is a penny earned.

  17. Lots of small businesses are definitely not run for maximum profit. Many tradesmen will turn down jobs if it eats too much into their free time. Many won’t hire more staff because the hassles of staff aren’t worth the added income. Many will only do jobs they fancy — I recently had a plumber decline to do a job because it required scaffolding and he couldn’t be arsed.

  18. “A penny saved is a penny earned.”

    An expression not heard often nowadays, along with: look after the pennies and the pounds look after themselves.

  19. I’m not quite sure what some people are saying here.

    A ‘business’ does not have to mean setting up a company. A business can be run as a sole trade, in partnership or through a company.

    It would most-likely be pointless to set up a side-line hobby-type business as a company. It costs money to set up and run a company and most importantly in the scenario of losses, there is nothing you can do with company losses except carry them forward to set against future company profits – which we are not anticipating.

    As a sole trader, if your side-line made a loss you could set the loss against other income, such as your salary from your main job.

    Were I to try and take out an appendix based on bits and pieces of info I had heard in the pub or read on-line most people would think me mad and yet people seem determined to organize their tax affairs in that manner, in order to ‘save on fees’.

  20. @ Andrew C
    As far as I can tell from my dealings with HMRC they will not allow me to offset losses from one activity against profits from another.

  21. @ Chester Draws
    Hiring staff is horrendous hassle for a sole trader, made worse by the regulations on Employers’ Liability Insurance, evidence of which you have to keep for N years; since I shall be cremated very shortly after I voluntarily* retire that would be an insurmountable problem – so I gave up employing anyone when Blair brought that in.
    * Maybe a bit longer in the case of involuntary retirement, but I can’t plan for that.

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