How strange of an accountant not to understand profit

The simple fact is that the Green New Deal and profit maximisation are incompatible with each other, and this is of massive importance and is an issue that cannot be ducked if the Green New Deal is to work.

Profit is the value added in an organisation. This statement is tantamount to insisting that we don’t want to add value in our economic activities. Which is rather the point of having economic activities in the first place really, to add value.

Quite explicitly, externalities such as environmental cost are ignored in this framework, which accepts the standard neoclassical line that natural capital is a ‘free gift of nature’. This is inappropriate in a world where we face the reality of climate crisis. The capital constraint that businesses now face does not come from finance – which is readily available to most of them at almost no real cost in the case of larger companies – but from natural capital, whose use we have to limit.

This all having been dealt with by Arthur Cecil Pigou in the 1910 to 1925 period. Which is why the Stern Review, William Nordhaus and all the rest advocate the carbon tax as they do. Include externalities in the price system and Robert’s your parent’s sibling of choice.

We already considered this, dealt with it, a century ago. But then those who know no economics are going to be constantly trying to puzzle through questions already answered, aren’t they?

Perhaps more reading and less staring out the window is required?

10 comments on “How strange of an accountant not to understand profit

  1. For some reason your post evokes the image of a sweaty old man masturbation over a train set. I’m not ready for that and neither is the world

  2. Use of fossil fuels is a net BENEFIT to mankind.

    Using ‘climate crisis’ to justify a ‘carbon’ tax is just cheap ass politics. Politicians cheating to get the people to accept higher taxes. It has double ought nothing to do with the environment.

  3. My guess is he has been talking with one of his ‘four horsemen’ – those who follow the ‘Ragging on Ritchie’ posts will know their identities. This particular individual felt all businesses should be converted to ‘not for profit’ operations so expect this to come out from the Great Tuber at some point. Albeit as I have mentioned before because of his refusing to work as one of a team under Mcdonnell he’s ‘persona non grata’ – those Corbinites have long memories and his ‘betrayal’ has seen him put into the ‘Black Book’. This is no doubt linked to the lack of job offers in academia (which is virtually 100% Corbinite)

  4. I get the ‘address externalities’ thing, but why, for god’s sake, should it be a tax? Taxes go to the government which spends them on stuff they shouldn’t be doing. If you want to charge for externalities, then find a better method that keeps the revenue out of the exchequer.

  5. How about tax the externalities but put all the money into a pool that a single tax payer wins each year. So every year one person becomes a billionaire because of shit that allegedly fucks the planet. Imagine the lefty horror, it would be awesome.

  6. Exactly, TG. The proposed ‘carbon’ taxes, as with most Pigou taxes, don’t actually address the externalities, they just exploit them for government to get more money.

    It’s okay to trash the environment if government gets some money out of it.

    When it comes to fossil fuels, there is so much inelasticity that a ‘carbon’ tax would have to be huge to effect usage.

    Meanwhile, the ‘climate crisis’ is global. IT MAKES NO DAMN DIFFERENCE WHAT ENGLAND DOES.

    UK produces 0.04% of GHG emissions. Kill your economy, send your factories to South Carolina, for WHAT? So Lefties can feel better about themselves?

  7. Actually this is something I can’t remember seeing addressed in my undergrad economics – we got the rationale of why Pigovian taxes can “correct” incentives otherwise distorted by externalities. But if the Treasury gets the money, does that incentivise them to set the rate so as to increase tax take beyond the point where incentive-correction dictates, and hence distort things in the other direction?

    Am sure there’s some academic work on this, would love to see the details.

  8. Probably – although I’m unaware – that means I don’t know, nothing else- of any academic work

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