It’s astonishing that this bloke is employed to write about economics

For he seems not to grasp the very basics of the subject, looking for the unseen:

Nonetheless, the message was clear. No one should despair about quitting the EU; an investment boom that consigns the standstill of the last 10 years to history is still possible.

However, the evidence for this assertion is alarmingly thin. Most companies with spare cash have preferred to milk their customers, sweat their assets and pass on the proceeds to investors through share buybacks and dividends.

That’s not just a UK trend. It can be seen in the US, where large corporations are trumpeting how much of Donald Trump’s tax cuts are being spent on wage rises and investment, although these sums are likely to be dwarfed by the amounts passed back to shareholders.

And what happens next? Shareholders can either spend or invest, it is not possible to do anything else.

This idea that investment must, can only, happen inside extant companies is just nonsense.

Fascinating finding

A new report by EPI economist Ben Zipperer and economic analyst Janelle Jones finds that Amazon fulfillment centers do not boost overall employment in the counties where they open—undermining the case for providing large tax breaks and incentives to lure Amazon facilities to a particular place.

Analyzing data for counties in 25 states containing Amazon fulfillment centers, the authors find that within two years, the opening of an Amazon fulfillment center leads to a 30 percent increase in warehouse and storage employment in the surrounding county. However, this does not lead to an increase in overall employment in the county—and in some cases, the data even suggest reductions in overall employment.

“Amazon has received over $1 billion in state and local subsidies to open its fulfillment centers at taxpayers’ expense—but does not increase overall employment in the county,” said Zipperer. “If policymakers instead invested in public services—particularly in early-childhood education and infrastructure—that would be a much stronger recipe for long-term economic development, rather than giving tax breaks to national employers like Amazon.”

The authors speculate that jobs created in warehousing and the storage sectors are offset by job losses in other industries, or that the employment growth generated by Amazon is simply too small to be meaningfully detected in the data.

This does therefore mean that closing a factory – due to, say, increased trade – doesn’t lower the number of jobs in a county either.

Which is a bit of a killer for just about every complaint the EPI ha about trade really.

Oh dear

Writing in the recent McKinsey quarterly, W Brian Arthur put it this way: “Offshoring in the last few decades has eaten up physical jobs and whole industries, jobs that were not replaced. The current transfer of jobs from the physical to the virtual economy is a different sort of offshoring, not to a foreign country but to a virtual one. If we follow recent history we can’t assume these jobs will be replaced either.”

An economy at full employment has lost jobs which weren’t replaced, has it?

Is it actually necessary to be an ignorant twat to get a job at McKinsey?

Larry Elliot’s also rather failing:

The experience of past industrial revolutions suggests that resisting technological change is futile.

Indeed so. Then:

But there are going to be middle-class casualties too: machines can replace radiologists, lawyers and journalists just as they have already replaced bank cashiers and will soon be replacing lorry drivers. Clearly, it is important to avoid repeating the mistakes of the past. Any response to the challenge posed by smart machines must be to invest more in education, training and skills. One suggestion made in Davos was that governments should consider tax incentives for investment in human, as well as physical, capital.

Still this won’t be sufficient. As the Institute for Public Policy Research has noted, new models of ownership are needed to ensure that the dividends of automation are broadly shared. One of its suggestions is a citizens’ wealth fund that would own a broad portfolio of assets on behalf of the public and would pay out a universal capital dividend. This could be financed either from the proceeds of asset sales or by companies paying corporation tax in the form of shares that would become more valuable due to the higher profits generated by automation.

Those past technological revolutions didn’t require such things and we’re all vastly richer as a result of those past technological revolutions. Thus we need a different reaction this time because?

Not exactly a ringing endorsement of Corbynism

The city of Preston in Lancashire dates back to Roman times. It is listed in the Domesday book as Prestune. It’s where inventor Richard Arkwright kickstarted the cotton trade. Yet ask local people to tell you its history and they jump straight to 2011. That was Preston’s year zero, when the grand schemes for the city fell apart. For more than a decade the council had bet everything on a massive shopping mall. The Tithebarn would sprawl over the city centre, cost £700m and be built by two of the biggest developers on the planet. It was going to have a Marks & Sparks, a multiplex and a huge John Lewis store. It was the lottery ticket, said the council leader. The lifeline, the turnaround, the magic bullet.

Then came the banking crash, and cranes across the country stopped dead. Businesses grew cooler on the Tithebarn until, in November 2011, John Lewis pulled out. The council found its sums no longer added up, and killed the entire scheme. Where once there was a masterplan, Preston now had a vacuum.

The answer, it appears, is to have small scale experiments in this and that according to local circumstances.

This is an endorsement of Corbyn’s insistence that the economy should be centrally planned in what manner?

How excellent

Rwanda has become the first low-income country to provide universal eye care for its 12 million population.

No, not a joke nor a sneer. All the people of a poor country now get eye care. Excellent.

However, this is to manage poverty. What we really want is to abolish poverty. For there are 98,000 (internet statistic) such problems in each and every poor country and getting rid o the poverty solves all of them at once.

No, not even don’t take glasses to the myopic, it’s not even that. Just don’t allow minor successes to lead to losing sight of the goal.

Technological change

The peak of the textile trade was in 1801 and after 1811, the exports declined sharply. By 1830
British goods began to displace Indian goods in the Indian market. One of the most dramatic
technological change was in spinning. It took 10,000 operative hours to spin 100 lbs of cotton
in India. Crompton’s mule, one of the first machines of the industrial revolution in 1780, did
this in 2000 operative hours. By 1825, the number was down to 125 with Robert’s automatic
mule. (Broadberry and Gupta 20094)

Yes, yes, yes, we all know, spinning, textiles, industrial revolution.

But think about the truly important part of this, how this really made us all richer.

That’s 9,875 hours, for every 100 lbs of cotton, of human labour which can be used to go do something else. And people did.

The point about the mechanisation isn’t so much that we got the machines to do the spinning but that humans didn’t have to do the spinning.

Quelle surprise

Nutella riots show that even the French can go nuts over a bargain

Well, yes. It’s one of the core observations of economics. Human beings like to get more for less.

From which we can derive two fairly important results.

1) Economic systems which do not have this observation as a core part of the structure aren’t going to work very well. Trying to insist that people will get less for more won’t work. We should pay farmers more for food because farmers doesn’t, for example. Quadruple (an actual demand being made) the wages in those garment sheds in Bangladesh and everyone will be happy to pay the resultant price increase in Zara doesn’t.

2) Economic systems which do cater to this human desire seem to work rather well. One thing we can absolutely say about this capitalism/free market mix is that it makes things cheap. It caters to this handing over less to gain more.

Well done.

Yes, this applies even to the French, concerns about their relationship with homo sapiens sapiens notwithstanding.

Anne Pettifor calls herself an economist, does she?

Everyone – from the government, to housing charities, to housebuilders – has bought into the conventional wisdom that the dysfunction that racks our housing market is a matter of demand and supply. We’re not building enough houses, so house prices have been sent rocketing, taking home-ownership out of reach for growing numbers of young people. But in reality, our housing problems are not a simple feature of supply and demand. Rather, our housing market has a bitcoin problem.

What has bitcoin mania got in common with house prices, especially in the capital? For starters, both are speculative bubbles. Vast sums of money have been poured into finite supplies of bitcoins and London property. Both have consequently exploded in value, albeit over different time periods. And so both have become financialised assets that deliver capital gains far in excess of people’s ability to earn income from work, or from investment in the real economy. And as with bitcoin, so with London property: speculators are convinced that prices will continue to rise for ever.

Yes. So, if we expand the supply what happens to the price?

What’s more amusing is that, as the property industry itself is pointing out, prices are falling in London. You know, exactly that thing which Ms. Pettifor tells us cannot happen?

This will lower house prices

More than half of the 1,900 ultra-luxury apartments built in London last year failed to sell, raising fears that the capital will be left with dozens of “posh ghost towers”.

The swanky flats, complete with private gyms, swimming pools and cinema rooms, are lying empty as hundreds of thousands of would-be first-time buyers struggle to find an affordable home.

The total number of unsold luxury new-build homes, which are rarely advertised at less than £1m, has now hit a record high of 3,000 units, as the rich overseas investors they were built for turn their backs on the UK due to Brexit uncertainty and the hike in stamp duty on second homes.

It doesn’t matter that these are “luxury” not “affordable.” There are still 3,000 more units and that will lower the price, fractionally of course, of every other property on the market. Because this supply and demand stuff really does work.

Wouldn’t surprise me at all if one or more of the developers, or perhaps developments, goes bust which would be an interesting time for a housing association to pick up some cheap stock, no?

Sorry, the IMF has fallen for the delusion

Lagarde cautioned against people becoming too complacent about the pick-up in global growth reported by the IMF at the start of the WEF’s annual meeting. The IMF raised its forecasts for global expansion to 3.9% this year and in 2019, reporting that all major economies – the US, the eurozone and Japan – are doing better.

“I don’t think that we’ve completed the job,” said Lagarde, who fears that the growing economic inequality in many countries is creating “fractures”.

“Having growth is good, improving productive is good, but [policymakers should] make sure that the results of that growth are properly allocated,” said the IMF chief, adding that inequality is growing in many advanced economies, and very high in emerging markets.

Still thinking, or perhaps newly thinking, that there is some lever to be pulled to “allocate” growth.

It’s as much of a delusion as thinking that there’s some lever to pull to create growth. That’s one we’ve tested to destruction and shown to be untrue. But then those whose job is to mull over how to run the world economy aren’t going to be happy with the likely correct answer. We can’t. Growth is emergent from economic freedom, just as the allocation of that growth is.

Sure, we can vary the tax system a bit, fiddle with benefits, but that’s about it. We’ve no lever long enough, nor a fulcrum for it, to be able to create nor allocate the growth itself. Something as chaotic as an economy isn’t malleable enough to be managed. We’ve irrefutable proof that an economy can be mismanaged, there’re enough examples of fuck ups for that, but management to good ends appears to mean doing only what must be done (that peace, easy taxes and tolerable justice) and then leaving the fuck alone.

But then if you were an international bureaucrat tasked with economic management you wouldn’t like that answer, would you?

Oh my, how amusing

Paul Sagar used to be a commentator around here at this blog. He then blogged a bit, now he’s teaching:

Paul Sagar is a lecturer in political theory in the Department of Political Economy, King’s College London.

OK.

Not sure he took quite the right message from reading here though:

Neoliberals often invoke Smith’s name, believing him to be an early champion of private capitalist endeavour, and a founder of the movement that seeks (as Thatcher hoped) to ‘roll back the frontiers of the state’ so as to allow the market to flourish. The fact that there is a prominent Right-wing British think tank called the Adam Smith Institute – which since the 1970s has aggressively pushed for market-led reforms, and in 2016 officially rebranded itself a ‘neoliberal’ organisation – is just one example of this tendency.

It is certainly true that there are similarities between what Smith called ‘the system of natural liberty’, and more recent calls for the state to make way for the free market. But if we dig below the surface, what emerges most strikingly are the differences between Smith’s subtle, skeptical view of the role of markets in a free society, and more recent caricatures of him as a free-market fundamentalist avant-la-lettre. For while Smith might be publicly lauded by those who put their faith in private capitalist enterprise, and who decry the state as the chief threat to liberty and prosperity, the real Adam Smith painted a rather different picture. According to Smith, the most pressing dangers came not from the state acting alone, but the state when captured by merchant elites.

The ASI being one of the prominent groups and places which make exactly this point, no?

And I’m sure he must have misunderstood this:

Indeed, Smith’s single most famous idea – that of ‘the invisible hand’ as a metaphor for uncoordinated market allocation – was invoked in precisely the context of his blistering attack on the merchant elites.

The only WoN mention of invisible hand is about domestic versus foreign investment. Really, nothing at all to do with the later use of the metaphor.

Tax incidence, tax incidence

Ministers will be urged to reform stamp duty to make it a seller’s tax rather than a buyer’s tax to kick-start the housing market and give a boost to first time buyers.

John Stevenson, a Tory MP, will make the case for reform in a Westminster Hall debate, to which the Government will have to respond.

It would help hundreds of thousands of first time buyers who pay an average of £3,500 stamp duty on their first property or around £10,000 in London where properties are more expensive.

Entirely possible that there are cash flow issues here but who bears the burden, rather than who writes the cheque, won’t change at all.

Oxfam on Venezuela

Hugo Chavez, Venezuela’s President, has plenty of critics, who often focus on his style (not least his interminable unscripted chat show, Alo Presidente), and in many ways he does fit into the tradition of the Latin American caudillo (the ‘strong man on horseback’). But Venezuela certainly seems to be getting something right on inequality. According to the highly reputable UN Economic Commission for Latin America and the Caribbean, it now has the most equal distribution of income in the region, and has improved rapidly since 1990.

Equality of income is just so important, isn’t it?

Hedonic adjustments

Britain’s productivity could be better than thought because officials may have underestimated the size of the telecoms industry. Advances in broadband and digital technology may not have been shown in GDP numbers by the Office for National Statistics, analysis suggests.

The work, instigated by the ONS after a review of economic data in 2016, found that inflation in telecommunications services may have been overstated by 90 per cent from 2010 to 2015.

The problem is that we want to adjust for quality/performance as well as just price. For that’s the true measure of inflation. It’s also a difficult thing to do.

The general US agreement is that they overstate inflation by 1 to 2.5% a year. Doesn’t sound like much but over the decades it sure as hell mounts up. I’d expect the UK overstatement to be less than that (amazingly, I think ONS better than Census etc over there) but still to exist. It’s also the explanation for “real wages static for 50 years” and the obvious evidence of reality that real incomes have risen.

My real reading of this would be something which I think comes from Feynman. When a number of clearly wrong no one does come out and prove that it should be radically different. Rather, we get a shuffle away from the wrong closer to the right, it taking a number of shuffles to get to reality.

Dreadful foolishness

And yet work is not working, for ever more people, in ever more ways. We resist acknowledging these as more than isolated problems – such is work’s centrality to our belief systems – but the evidence of its failures is all around us.

As a source of subsistence, let alone prosperity, work is now insufficient for whole social classes. In the UK, almost two-thirds of those in poverty – around 8 million people – are in working households.

That definition of poverty is relative – less than 60% of median household income. That’s not something that has any relationship with subsistence, is it?

As a source of social mobility and self-worth, work increasingly fails even the most educated people – supposedly the system’s winners. In 2017, half of recent UK graduates were officially classified as “working in a non-graduate role”.

Maybe sending 50% of the age group to university isn’t a good idea then?

Whether you look at a screen all day, or sell other underpaid people goods they can’t afford, more and more work feels pointless or even socially damaging – what the American anthropologist David Graeber called “bullshit jobs” in a famous 2013 article. Among others, Graeber condemned “private equity CEOs, lobbyists, PR researchers … telemarketers, bailiffs”, and the “ancillary industries (dog-washers, all-night pizza delivery) that only exist because everyone is spending so much of their time working”.

Yeah, the division and specialisation of labour is such a silly concept, isn’t it?

The argument seemed subjective and crude, but economic data increasingly supports it. The growth of productivity, or the value of what is produced per hour worked, is slowing across the rich world – despite the constant measurement of employee performance and intensification of work routines that makes more and more jobs barely tolerable.

Productivity is value of output divided by hours worked. Much output these days is valuable in human utility but has no market value – all that free stuff from the digital economy. As Hal Varian points out, GDP doesn’t deal well with free. And GDP is where we get out output number from….

And away from our unpredictable, all-consuming workplaces, vital human activities are increasingly neglected. Workers lack the time or energy to raise children attentively, or to look after elderly relations. “The crisis of work is also a crisis of home,” declared the social theorists Helen Hester and Nick Srnicek in a paper last year. This neglect will only get worse as the population grows and ages.

Looking after children or relatives is work. Unpaid, household, work to be sure, but it’s still work. And anyone analysing work without knowing that is being an idiot.

But not quite all. The idea of a world freed from work, wholly or in part, has been intermittently expressed – and mocked and suppressed – for as long as modern capitalism has existed. Repeatedly, the promise of less work has been prominent in visions of the future. In 1845, Karl Marx wrote that in a communist society workers would be freed from the monotony of a single draining job to “hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner”. In 1884, the socialist William Morris proposed that in “beautiful” factories of the future, surrounded by gardens for relaxation, employees should work only “four hours a day”.

In 1930, the economist John Maynard Keynes predicted that, by the early 21st century, advances in technology would lead to an “age of leisure and abundance”, in which people might work 15 hours a week.

Quite so, you twat. And it has happened, too. For it is those household, unpaid, hours which have shrunk. See what I mean about not ,being able to get it right if you don’t note those household hours?

The emergence of the modern work ethic from this chain of phenomena was “an accident of history,” Hunnicutt says. Before then, “All cultures thought of work as a means to an end, not an end in itself.” From urban ancient Greece to agrarian societies, work was either something to be outsourced to others – often slaves – or something to be done as quickly as possible so that the rest of life could happen.

Even once the new work ethic was established, working patterns continued to shift and be challenged. Between 1800 and 1900, the average working week in the west shrank from about 80 hours to about 60 hours. From 1900 to the 1970s, it shrank steadily further: to roughly 40 hours in the US and the UK. Trade union pressure, technological change, enlightened employers, and government legislation all progressively eroded the dominance of work.

If you don’t include household hours you’re never going to get it right.

Creating a more benign post-work world will be more difficult now than it would have been in the 70s. In today’s lower-wage economy, suggesting people do less work for less pay is a hard sell.

Seriously? Claiming that wages are lower today than they were in the 1970s?

Sigh.

Now isn’t this a surprise?

York’s decision to refuse Uber a licence to operate in December was based mostly on complaints by local taxi companies, the Telegraph can disclose.

York, who in December became the third UK city to refuse the ride-hailing company a licence, had cited concerns about customer complaints as well as the 2016 data breach which affected 2.7m British users and drivers.

However, a freedom of information request has revealed that of the 155 complaints the Council received about the company since January, 83.2% were made by “York taxi businesses”.

Incumbents protect their position…..

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…..