A little test for the historian Cormac Shine

Today, as we grapple with the challenges posed by AI, automation, climate change, and a changing geopolitical landscape, we look as much to philosophers and technologists for guidance as to economists. But historians have a role too. They are uniquely placed to help debate and define the contours of society as these challenges reshape our world, providing much-needed perspective and nuance.

Historians are skilled in building and interpreting varied narratives dealing with change over time. Yet still too many are reluctant to attempt comparison of any kind between past phenomena and contemporary concerns. Far from being irreconcilable opposites, the past and future should be viewed as two sides of the same coin.

OK, great, historians should be included. Super, who would disagree?

Certainly not any economists. At which point a little challenge for Cormac Shine. Or any historian at all. What’s the one great economic fact we’ve got to explain? What, where, is the one piece of historical experience that we’ve got to work out the causes – and if you like the effects – of? Once we’re sure that we’ve got a historian or two who grasps that most essential then sure, why not bring them into the conversation of what to do next about matters economic?

This is a Ritchie level of economics

With the second loan, the IMF exerted sustained pressure on Tunisia, and more specifically on the Tunisian Central Bank, to stop intervening in the currency markets to defend the value of the Tunisian dinar. The result of the dinar’s (imposed) depreciation has been to increase imports at a time when the main exports (phosphates and tourism) are in crisis and cannot offset these new costs.

Why would imports increase with depreciation? Get more expensive, yes, which will reduce them…..

Drivel, drivel

The most viable pathway would be for Africa’s elite to look within the vast political and ideological resources on which successful civilisations (the Zulu, the Igbo, the Malian dynasties of Timbuktu, the Oyo empire, etc) were built. In most Igbo states, for instance, there was an egalitarian system where an older member of a clan represented his people in the elders’ council. There were no kings or presidents. Perhaps there could be a way to adapt this unique political structure to replace the western one which has so far failed.

We need to look into these systems and extract coherent policies that can help form workable and uniquely African social and political systems. This is the only viable path to preventing the continent from fully becoming western Africa – and the only way to ending the continent’s long-term political decay.

Political, social organisation? Hey, run with whatever you want. That is rather the point of democracy, no?

Celebrations of Africa on the international scene mostly involve dancing, music, traditional fashion and other cultural artefacts – hardly ever showcasing African-originated economic ideas, social ideologies or intellectual theories.

And part of that is drivel. Economics is, just as are physics or chemistry. Things like comparative advantage, division and specialisation of labour, rising productivity etc, they just are. There’s no new to be had.

Sure, much of macroeconomics is bunkum but micro ……

Falling life expectancy

People in post-industrial towns and isolated rural areas are dying younger while longevity is rising in London and parts of the southeast, according to the first detailed analysis of national data.

Economic stagnation and cuts to services such as social care are among theories suggested for consistent falls in life expectancy over half a decade in dozens of local authority areas.

Other factors that may play a role include rising rates of obesity, a greater effect of smoking and drinking in poor areas, and loneliness or lack of care when children move away from their parents. An increase in flu deaths in recent winters has also been suggested as a contributor.

Migration. No, internal migration, the fit and young leaving depressed areas.

Is it the right or total answer? Possibly, probably not the total one. But until that is studied and the effect detailed we’re not going to get anywhere close to working out why it’s happening.

Here’s how it works George

Two hospitals, both urgently needed, that Carillion was supposed to be constructing, the Midland Metropolitan and the Royal Liverpool, are left in half-built limbo, awaiting state intervention. Another 450 contracts between Carillion and the state must be untangled, resolved and perhaps rescued by the government.

When you examine the claims made for the efficiency of the private sector, you soon discover that they boil down to the transfer of risk. Value for money hangs on the idea that companies shoulder risks the state would otherwise carry. But in cases like this, even when the company takes the first hit, the risk ultimately returns to the government. In these situations, the very notion of risk transfer is questionable.

Project goes wrong, there’s a set of losses. Direct government work means that first set fall on taxpayers. Outsourcing means the private sector loses first. Government might then pick up the remaining tab, true, but there has been risk transfer, no?

Interesting Guardian defintion

Austerity The belief that by cutting spending and raising taxes you can eliminate government borrowing

Crowding out The belief that the public sector sucks up finances and workers that could otherwise go to businesses

Debt The total sum of all the borrowing taken by the state over the years

Deficit The overspend racked up by the government when it spends more than it receives in taxes

All of those being true of course.

Amazon’s workers getting food stamps

Re a previous post talking about 10% of Amazon’s workers in Ohio getting SNAP – the same as the incidence of SNAP among the general workforce in Ohio.

This isn’t a subsidy to Amazon. Benefits which are paid whether you are working or not are not subsidies to employers. Quite the opposite in fact, they raise the reservation wage.

Think it through. I work not at all, I get some money/food/shelter. Therefore going to work must pay me more than the value of the things I already get. In the entire absence of any welfare state some would work for $1 an hour (hmm, mebbe). Employers must pay me more than what I get without working therefore.

Welfare that I get *only* because I am working might be such a subsidy to the employer. So, working tax credits (EITC to Americans) could be an employer subsidy. As it happens we think they’re about 30% a subsidy to employers, 70% to the workers. Which is fine actually, as working tax credits are meant to be a subsidy to the employment of low skill workers.

But food stamps, Section 8 and so on are not. Because you can indeed get them without working at all. In fact, you get more of them without work (the rules for single able bodied no dependents adults are stricter). Thus they raise wages that must be paid, not lower them.

Or, as the thoroughly left wing Arindrajit Dube (himself a researcher into the minimum wage) puts it:

A final line of argument is that these public assistance programs have become de-facto subsidies for low-wage employers. For a program to be a subsidy for an employer, it needs to lower wages. Is this plausible for the public assistance programs considered? I think it is for the EITC, but not for other programs. Depending on where one is on the EITC schedule, that policy can increase work incentives. And there is a lot of empirical evidence showing EITC encourages labor force participation. An unintended consequence of that labor supply response, however, is that employers capture some of the tax subsidies. This can happen in a simple supply and demand framework, where an increased labor supply to the market drive wages down. This can also happen in a bargaining context where the size of the bilateral surplus expands from lower taxes, and employers capture some of this increased surplus. Work by UC Berkeley’s Jesse Rothstein suggests that for every $1 of transfer to workers using the EITC, post-tax income rises only by $0.73 because of employer capture.

But what about other programs like food stamps or housing assistance? These means tested public assistance programs are not tied to work, and we should not expect them to lower wages. Let’s take food stamps, which are available to eligible families whether or not a family member works or not. Indeed, when people are not working, they are more likely to be eligible for food stamps since their family incomes will be lower. Therefore, SNAP is likely to raise, and not lower a worker’s reservation wages—the fallback position if she loses her job. This will tend to contract labor supply (or improve a worker’s bargaining position), putting an upward pressure on the wage.

Peter Leeson is often fun

I’m not entirely convinced that he’s always right though:

Their appearance was all the more strange because between 900 and 1400 the Christian authorities had refused to acknowledge that witches existed, let alone try someone for the crime of being one. This was despite the fact that belief in witches was common in medieval Europe, and in 1258 Pope Alexander IV had to issue a canon to prevent prosecutions.

But by 1550 Christian authorities had reversed their position, leading to a witch-hunt across Christendom. Many explanations have been advanced for what drove the phenomenon. Now new research suggests there is an economic explanation, one that has relevance to the modern day.

Economists Peter Leeson and Jacob Russ of George Mason University in Virginia argue that the trials reflected “non-price competition between the Catholic and Protestant churches for religious market share”.

As competing Catholic and Protestant churches vied to win over or retain their followers, they needed to make an impact – and witch trials were the battleground they chose. Or, as the two academics put it in their paper, to be published in the new edition of the Economic Journal: “Leveraging popular belief in witchcraft, witch-prosecutors advertised their confessional brands’ commitment and power to protect citizens from worldly manifestations of Satan’s evil.”

The paper itself is here.

Idiot is idiot

The leader of Canada’s most populous province has lashed out at prominent business owners who clawed back employee benefits and paid breaks in order to offset the costs of a minimum wage increase, describing the move as the “act of a bully”.

Kathleen Wynne, the premier of Ontario, announced last year that the province would raise its minimum wage to C$15 ($12) an hour by 2019. The first phase went into effect this week, hiking the minimum wage for workers from C$11.40 an hour to C$14.00.

Days into the wage hike, it emerged that employees at two locations of Tim Hortons – Canada’s emblematic coffee chain that claims to pour eight of every 10 cups of coffee sold in the country – would no longer be paid for breaks and would have to cover at least half the costs of their health and dental benefits.

The owners of the two stores, Ron Joyce Jr and his wife, Jeri Horton-Joyce – who are the son and daughter of the chain’s co-founders – said in a letter to employees that the changes were due to the increased minimum wage.

Labour compensation is labour compensation, labour wages are labour wages. When a politician, by fiat, changes labour wages we might well expect to see a change in non-wage labour costs in order to keep labour compensation around and about static.

You know? Canute and the tide, prices in a market economy?

Well, yes, obviously

Labour’s plan to hike the minimum wage to £10 per hour could put increasing numbers of workers at risk of losing their jobs to robots, an economic think tank has suggested.

Well, yes. But that’s going to happen anyway. All that will change is the speed at which it will happen.

Much more important is that a high minimum wage will stop some to much of the experimentation needed to produce jobs once the robots are taking some of them.

This is the most pernicious effect I’m afraid. It increases the costs of trying to do new things with that newly abundant – but still expensive – labour.

Err, how? What?

What laws that is:

The government, he writes, must enact laws that require manufacturing’s share of the GDP to rise from its current 12.5 percent to something closer to the norm for OECD nations—somewhere between 17 percent and 19 percent.

How in buggery do you do that? Let alone why would you want to.

Such a changeover, Uchitelle acknowledges, would require the enactment of steep tariffs, of domestic content standards far stricter than any now on the books, and perhaps a trade war with China and other nations. It would require treating manufacturing as we’ve treated agriculture since the 1930s. “The political maneuvering involved in authorizing the annual farm subsidy once drew headlines and controversy, but now rarely does.” (Of course, that’s partly because the handful of agribusiness giants can lobby behind closed doors.) “We accept that farming is a federally subsidized market activity,” he continues. “Manufacturing must proceed along a similar path.”

Umm, right. Agriculture’s share of GDP has continued to decline though, hasn’t it?

It’s fun how people get rich, isn’t it?

The brothers’ intense personal rivalry has loomed large over India’s business scene since 2002, when the death of their father Dhirubhai Ambani, founder of the Reliance Industries group, led to a rift over strategy.

The dispute eventually led to the break-up of Reliance Industries when, in a 2005 peace deal brokered by their mother, Mukesh retained the highly profitable oil and gas business and Anil walked away with telecoms and power.

Both men continued to operate under the Reliance brand, although it was Mukesh whose fortunes prospered. The elder brother is now India’s richest man, with an estimated net worth of $41 billion,

Sure, he started out rich which helps. But the surge in fortune has come from launching free and heavily discounted mobile telecoms services. The same thing which has severely diminished his brother’s fortune.

Who are the people who really benefit from this? Well, sure, he’s a nice stash now, hasn’t he. But what about those hundreds of millions of Indians who have received free and heavily discounted mobile telecoms services? The cumulative gain there is rather larger than his increase in the stash. Very much larger in fact.

Which is why the system works. As William Nordhaus pointed out.

Causes of depopulation

Well, there could be many reasons why a small island off Scotland doesn’t have a viable population. Weather, jobs, just the sheer misery of tiny, tiny, communities.

But this would also be a problem:

critics say Canna’s difficulties are exacerbated by strict property ownership rules on the island.

Although a few crofts are owned by its original inhabitants, incomers are not allowed to own land or build houses on Canna, and tenancy agreements are capped at 20 years.

The National Trust is the absentee landlord, you see?

Don’t think so somehow

The home of the father of modern economics will reopen to visitors in the autumn. Heriot-Watt University is spending £4 million restoring Panmure House in Edinburgh’s Old Town, where Adam Smith spent his final years.

The 17th-century mansion has lain empty for several years, but soon visitors will be greeted by an original copy of An Inquiry into the Nature and Causes of the Wealth of Nations.

Smith’s 1776 work influenced Karl Marx and was reputed to have a permanent place in Margaret Thatcher’s handbag.

It’s a hell of a weight for a book.

Also, as I understand it, it was a volume of Hayek she slammed down and said “That’s what we believe.”

Dear God I’d love this job

Internal Job Opening

Vacancy Notice –
Contractual agent, FG III

This is to inform you that the Greens/EFA group in the European Parliament is looking for a full-time replacement for the position of ECON adviser (fixed-term contractual agent contract, function group III – Contract until 31/12/2019).

Indicative starting date: 1st of February 2018

Agreed, we’d have to be informing the Greens about economics starting with Peter has two apples, John wants one and has some money but still.

So, a question for economic types

It’s well known (umm, OK, not well known but in detail some people know it) that at some point of revenue raising you’ve got to go off and tax the poor. You just can’t squeeze enough out of the richer to pay for a large State.

For example, an American economist (whose name I can never damn recall, which is annoying because he made a significant pledge to my unsuccessful kickstarter to do a book on the subject) keeps pointing out that if the US wants to move to a welfare state of European size it will have to have a VAT – a regressive tax. He also points out that the Swedish et al systems pay for themselves by taxing the poor more, not the rich that much more.

Which leads to a bleg. The information is definitely out there, but has anyone collated it?

We have the distributional impacts of taxation. The top 10% pay y % of all tax (usually we just see income tax, but the calculation for the total tax burden exists for UK and US at least). Top 20% z% and so on.

OK, has that all been collated?

My question being, well, do larger States ever manage to finance themselves by higher tax burdens on the richer? Or is it always done by taxing further down the income levels?

That is, do we have collated somewhere the percentage of GDP raised on the top 1%, top 10%, top 50%, bottom 10% and so on. Which can then be cross referenced against government as %ge of GDP? Or has this even been done?


Yep, poverty is shit, isn’t it?

Fanja Randriamihavo, 15, is one of 3,000 people who live and work in Ralalitra, one of Africa’s largest rubbish dumps. The site, in Madagascar’s capital, Antananarivo, spans about 50 acres. Each day, it receives more than 600 tonnes of waste from the capital and from the three million residents of its sprawling suburbs.

People who work on the dump site collect metals, coal and plastic from among the chaotic mess of needles, rats, faeces and aborted babies. They are paid just 3,000 Malagasy ariary ( 70p) a day.

As a side issue, it’s amazing how they become aborted babies when there’s shock horror to inculcate, mere blobs of tissue when we discuss abortion or not.

Still, yes, poverty is shite:

But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.

After all, global poverty is not something recently invented for the benefit of multinational corporations. Let’s turn the clock back to the Third World as it was only two decades ago (and still is, in many countries). In those days, although the rapid economic growth of a handful of small Asian nations had started to attract attention, developing countries like Indonesia or Bangladesh were still mainly what they had always been: exporters of raw materials, importers of manufactures. Inefficient manufacturing sectors served their domestic markets, sheltered behind import quotas, but generated few jobs. Meanwhile, population pressure pushed desperate peasants into cultivating ever more marginal land or seeking a livelihood in any way possible–such as homesteading on a mountain of garbage.

That is, we’ve a cure for this sort of absolute poverty. Neoliberal globalisation.

Please note that my proof comes from a left wing New York Times columnist (but I repeat myself) and Economics Nobel Laureate. This ain’t just ideological burblings, this is the real world cure for the ailment.