And really just not getting economic rent either

Paul Hunt says:
October 20 2017 at 4:48 pm
In round numbers there are 13,000 yellow cabs in New York City and at their peak medallions changed hands for an eye-watering Dr Evil price of 1 million dollars. So just the combined value of those medallions was around 13billion USD until recently, and that’s just for one city, admittedly a big one.
It’s a big market, ride-sharing apps do seem to expand it – and the cut that the market thinks Lyft is likely to get could mean they are undervalued. There’s also the potential for the technology ( if it works ) to be incorporated into e-bikes and punting. Exciting times ahead imv.

Richard Murphy says:
October 20 2017 at 5:57 pm
No one can make enough money out of a taxi to pay a million for a licence

So I a right, they’re not worth a million

What someone pays and what something’s worth are not always the same thing

You really should do some economics

And please remember – because I know your source – Tim Worstall gets his economics wrong, most of the time

But people were making money out of that price. Exactly because there was a restriction upon the number of licences the owners of the medallion were able to charge $40,000 a year for each of the 2 x 12 hour shifts available each day.

Richard Murphy says:
October 21 2017 at 8:48 am
But that’s not the return, is it? That’s because much of that sum is the price of labour – the taxi driver has to do long and anti-social hours to achieve this (if indeed they can). So this, plus the cost of their can (the return to capital) has to be deducted before the return to rent (the price for the medallion) is estimated. And that then looks paltry. Which is why the price has collapsed.

No, the price has collapsed because competition from Uber and Lyft has lifted that medallion restriction thus destroying the ability to collect that economic rent.

Cassandra Trojan says:
October 20 2017 at 5:28 pm
“no taxi rank has ever been worth $10 billion.”

“In 2013, some {NYC taxi] medallions sold for more than $1.3 million. …There are currently 13,587 yellow-taxi medallions in the Big Apple ” NY Times 5 Apr 2017

13,587 * $1.3 million = ?

Richard Murphy says:
October 20 2017 at 5:54 pm
But that’s rent, as I said

Yes, it’s an economic rent, One being destroyed by that competition. Which is where economists usually say Hurrah! In fact, even Spudda has been saying that we want to get rid of economic rents where we can.

Richard Murphy says:
October 21 2017 at 8:44 am
That’s what happens whene there is a new, disruptive element that for a one not (and it will only be a moment) creates something that looks like a market: the rental return of super normal profits disappears

But in this case the new entrant clearly wants to re-establish the barriers – that’s they only at the price can be justified

So that aim, as I said, is not to run taxis but to extract a rent from the taxi rank

No, collapsing the rent in one city by $13 billion and then making just normal profits on activity in 300 cities to gain a valuation of $10 billion. Note that the rent being destroyed is an annual value, the worth of Lyft is a capital value, reflecting all future income. In normal economics this is regarded as a very good thing indeed actually. And if Ritchie ever thought through his own opinions on rents then he would agree too.

Jeebus, someone, please, get him an economics textbook!

Abolish NI over time and replace it with a progressive consumption tax charged on the flows through a person’s bank account (having allowed for transfers between related accounts). This is green taxation and it does not penalise jobs, which is the last thing we need to do as we head for automation. Tinkering with NIC is pointless. We need a financial transactions tax for a new era.

Consumption taxes and transactions taxes are conceptually different things.

Sheesh. Don’t forget he is employed by the British State to teach economics and I am not.

The Sage of Ely tackles venture capitalism

Google sticks money into Lyft at a $10 billion valuation:

First, this is not a transportation company. Lyft, like Uber, does not run cabs. It runs a taxi rank.

Second, no taxi rank has ever been worth $10 billion.

And if someone thinks it is then they have four things at the forefront of their minds.

The first is driving the competition out of the market.

The second is then screwing the consumer.

The third is screwing their staff.

And the fourth is then presenting the regulator with a fait accompli as they’re hoping all other games will have been driven out of town and that way they’ll earn hyper rents from their rank activities.

That’s how you can make a fortune from a cab booking service.

And it stinks.

As to no cab rank ever being worth $10 billion, well, someone’s just paid at that valuation so it is worth that.

But rather more, should it be worth that much? Lyft operates in 300 US cities. No, dunno what the cab ranks in 300 US cities are worth. A lot though I would think. And Uber seems to be 30% more efficient than traditional taxis. Yes, that’s the Alan Krueger. What’s the value of a 30% efficiency gain in the taxi markets of 300 US cities?

It’s not bupkiss, is it?

The Senior Lecturer still doesn’t understand tax incidence

The FT issued an email last night saying:

Steven Mnuchin warns of market fall without tax cuts.

The US Treasury secretary warned Congress that US stock markets will shed a “significant amount” of their recent gains if lawmakers do not pass tax reform.

On the eve of a critical Senate vote aimed at pushing tax-cutting plans forward, Mr Mnuchin told Politico in a podcast that there was “no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform”. US equities would “go up higher” if the reform plans, which include a reduction in the corporate tax rate, were passed.

This is interesting for three reasons. First, it says quite explicitly that the proposed tax reforms are meant to cut the tax rates of big business. Second, it quite clearly states that the corporate tax rate changes share prices, in this case by driving them sharply upward. And third, as a result it states quite clearly that the US Treasury thinks the incidence of corporation tax is on shareholders, who are already capitalising the value of the gains they are to be given.

But let’s stop debate on who benefits: Mnuchin has stated what we all already knew, which is that this is for the undisputed benefit of the owners of capital on whom almost all the incidence of corporation tax indisputably falls. That debate is, I think, now closed.

At which point we’ve got to conclude that idiot is still idiot. Because everyone does agrees that in the first stage the incidence of the corporate ta is upon the holders of capital. But that’s the point, that’s the start of our analysis.

What happens when you tax something? You get less of it. So what happens when we tax investment, or saving? We get less of it. And as even Spudda will agree it is indeed investment over time which makes us all richer over time. So, the more we tax investment, the less there will be, the less rich we all are over time.

That shareholders bear the incidence of the corporate income tax in the first iteration is well known and is so well known that it’s the start of our analysis, not the end as the Senior Lecturer at Islington Technical College seems to think.

Not the most convincing of responses

ElySageProductions takes me on over MMT. By, apparently, entirely agreeing with me.

If money is not the constraint, why are we not using it to increase our productivity? This takes us full circle to Tim Worstall’s point about the relationship between money and who controls the resources. The people that are stopping us are the vested interests whose wealth (or power) will be compromised by progress. Money—democratically owned by us in the form of fiscal policy—directs resource at the microscopic level, and we have the democratic power to chose the direction. We could choose to use our most precious resource—time—to learn, to innovate, to care and to build a better life for everyone.

Money’s not the constraint, resources are. MMT doesn’t therefore solve our problems.

He’s just lovely when he gets angry

I pretty much make it a matter of policy to ignore whatever Tom Worstall has to say.

Tom? It’s not even good publicity, is it?

So far, so good. It is indeed true that there need never be a shortage of money. But Worstall continues, saying:

The underlying error is that economics isn’t the study of money. Sure, monetary economics is interesting enough, but that’s not the core of the subject. Instead, we note that there are unlimited human desires but only scarce resources with which to sate them. Changing the amount of money in circulation doesn’t change the number of those wants, however, nor the resources we have with which to satisfy them. It only changes the counting we’re doing as we do so.

Before you throw your hands up in horror I should note that Worstall does reveal here his deep knowledge of, and unfaltering belief in, neoclassical economics. What he is saying is wholly orthodox economic teaching, taught day in and day out in universities across the world. It is quite literally the case that in general equilibrium based macro economic thinking, which dominates the thinking and teaching on this subject the world over, that money is effectively ignored. As too, incidentally, is taxation.

The study of an individual market is partial equilibrium, not general. Further, general equilibrium is microeconomics, not macro. Even, money is not ignored, it was there in Walras’ first model and has continued, in general, to be there since.

Failure to appreciate this permits Worstall to make some pretty wild, and glaringly false claims. For example he says this

Because it’s the resources which are scarce. Take health care, for example. There’s the labour needed to do it, the buildings to do it in, the implements with which we do it and so on. But at any point in time there’s only a given amount of each of those things. Increasing the money supply doesn’t increase the amount of any of them.

Of course, the economy is not a zero-sum game, it is always possible to train up or import more labour; we can build more hospitals, make more medical equipment. But more money doesn’t increase the resources from which we can do all of those things.

Three thoughts follow. First, there is the most extraordinary suggestion implicit in this that the availability of money demand within the economy does not change behaviour. Or to put it another way, that if more money is dedicated (whether by tax or not does not matter) to healthcare demand then there will be no reaction to this monetary stimulus in the real economy and nothing will happen as a result: no new health care will follow. What Worstall is saying here is that demand cannot apparently alter supply in the real world.

Well, no, I don’t. Instead I talk about total resources being, at any point in time, fixed, meaning that if we wish to divert more resources to health care hen w will, inevitably, have less of something else. We can indeed increase total resources over time. That’s not what he says I say at all.

Second, what he’s also saying is that if there is underemployment in an economy working at less than full capacity (both of which are true in the UK at present because we suffer massive disguised unemployment in the form of under-employment) then adding to the money supply cannot stimulate a greater supply of goods and services to the economy. This is glaringly obviously untrue. He also ignores the positive multiplier effects of such spending in that situation, although they are now widely documented.

I also don’t say that. What in fact I do say is:

It is possible to get all Kenyesian about this and say when in recession we can boost output of all things – and maybe there’s some truth to that. But that’s not what our simplistic money tree peeps are saying. Instead, they are insisting that because we can print more money then there’s no shortage of the resources we need to do whatever we want. Which is, of course, complete tosh.

When we’re at full employment, about where we are, when GDP is about at potential, roughly where we are, then the only method by which we can have more of something is by having less of something else. Or, of course, by increasing the efficiency through which we produce things from our scarce resources over time. Neither of these options is waved away, aided nor hindered by printing more money.

I don’t even claim this:

Which is a pretty big claim, because what he is actually suggesting is that using money as a mechanism to direct resources towards investment has no impact on outcomes in the real world, when that is very obviously untrue.

Instead, all I’m saying is that increasing the amount of money does not increase the amount of scarce resources.

In which case he needs to explain why he is so obsessed with preserving the right of money to hide in tax havens, and why he is so obsessed with preserving existing monetary wealth distributions, and why he is so opposed to progressive taxation that might redistribute this money that he says has no impact on the well being of those who own it.

I’m not, I’m not and I’m not.

Except that he hints at the answer to all these three questions in one telling paragraph where he says:

Money’s just the way we count who controls those resources, it’s not a measure of what we can put to work at all. Thus printing more money doesn’t alter the fact that we must still choose which activities we’re to devote what resources to, there is no get-out clause here.

But this is not true. Because if in the process of printing money we change who controls resources we really do change outcomes.

But that’s not my point Senior Lecturer, is it? Rather, that the scarce resources are still scarce whoever directs their use. Thus, use of more resources to do one thing means fewer to do some other.

So in fact what Worstall has written indicates three things. The first is the bankruptcy of conventional macroeconomic thinking to which he, and the greater part of the academic community, subscribe.

General equilibrium still isn’t macroeconomics.

Actually what’s true is we can’t do everything, but that changing the way we control money by letting government print more of it to achieve social goals can very fundamentally change our constrained reality.

Shrug. Sure. Who gets to spend the money will indeed change what it gets spent upon. And? That still doesn’t mean that doubling the number of pound coins increases the scarce resources we can devote to the health service.

As an example of failed reasoning Worstall takes some beating. Buy don;’t expect me to engage with him again: once a decade is enough when faced with folly of this level.

Wonder if he’d listen to someone he trusts as they explain his errors?

Ah, yes, well, senior lecturer

A dream of a world where economics is the liberating and not the dismal science

The source of the name being Carlyle, who was most upset when it was proved to him that paid labour was more productive than slave found that his ideas about who how and why there should be slavery were proven invalid.

All of which makes that an entirely valid dream for the Senior Lecturer, doesn’t it? I dream of an economics which can ignore reality.

Err, you whut?

Richard Murphy says:
October 18 2017 at 2:06 pm
No we have not used up all our fiscal tools

Nor have we used up all our monetary tools, by a long way

We have just delivered low interest rates that reduce rentierism in the economy

When looking out of the other stump holes The Sage tells us that low interest rates have just increased asset values increasing the value of the rentiers’ capital stock.

And we have all noted how buy to let has fallen alongside those low rates, haven’t we?

Oooooh! Well done from the Sage of Ely!

As the FT reports this morning:

Rio Tinto and two former senior executives were hit with US fraud charges, and the miner with a UK penalty, on Tuesday for allegedly trying to hide a multibillion-dollar business failure by inflating the value of coal assets in Mozambique.

In a civil complaint filed in federal court in New York, the Securities and Exchange Commission said that Rio, Tom Albanese, its former chief executive, and Guy Elliott, a former chief financial officer, had ignored proper accounting standards and misled investors in their valuation of coal deposits that the company had purchased for $3.7bn and later sold for just $50m.
As they also note:

In the UK, the company was fined £27.4m over the affair, the largest fine the Financial Conduct Authority has levied on a company for a listing-rules breach.
So, let’ ask the obvious question: where were the auditors?

The allegations largely relate to 2012. The auditors then were PWC, as they are now.

The sums now subject to investigation must be material. So where is the investigation into the audit? I can find no evidence that there is one.

Why not?

In the very same FT article it says:

“Rio Tinto’s top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multibillion-dollar transaction was a failure,” said Stephanie Avakian, co-director of the SEC’s enforcement division.

To avoid a similar black mark on the coal business, the executives hid the problems from the board, audit committee, independent directors and investors, the SEC claimed. In late 2012, they allowed the audit committee to review an estimate of the coal project’s value that had “no basis in reality”, according to the SEC charge.

The basic allegation is that they lied to the auditors. Why should the auditors have picked this up?

From the actual SEC complaint:

Instead, as the project began to suffer one setback after another resulting in the rapid decline of the value of the coal assets, they sought to hide or delay disclosure of the nature and extent of the adverse developments from Rio Tinto’s Board of Directors, Audit Committee, independent auditors, and investors.

International political economy is difficult, isn’t it?

So, with real wage increases running at a negative rate of 0.9% based on this data and annual wage increases being 2.1% per annum the Bank of England is going to compound the misfortune of most people by increasing interest rates.

I don’t think this is by itself the tipping point which will make most people realise just how irrelevant they are to those who make decisions on economic policy in the UK, but it will certainly add to the sense of dis-ease that many will have on that issue.

As acts of economic folly go this one will take some beating. It is, after all, contemptuous of most people in the country.

Hmm. We’ve inflation. What’s the usual response to inflation? Raise interest rates. Get that inflation lower and nominal wage increases will translate into real wage increases.

Ah, but wait! This is not inflation in the sense of a general price rise in the UK due to capacity constraints. It is, instead, import led driven by the fall in the value of the pound. So, what does raising interest rates do? Raises the value of the pound. Thus removing, possibly even reversing, that import led inflation. And thus neatly returning us to our nominal wage rises leading to real wage rises.

Gosh, this international political economy is tough stuff, isn’t it? Quite beyond the ken of the Senior Lecturer in the subject at Islington Technical College.

The Senior Lecturer tells us!

To which the obvious response is the one O’Toole has to offer:

The cure for poverty is an adequate income.

And yet this is precisely what society does not want to offer. Just listen to the argument on universal back income – that it will permit the idle to do nothing – and all the prejudices O’Toole refers to are apparent.

There is no reason why people cannot have enough to live on in a country of plenty. That they don’t is a decision. And it’s not a decision the poorest made. In which case it’s the responsibility of those with money. And it’s they who have to face up to their responsibility to change that.

And yes, when I talk of peaceful revolution that is one of the things that has to change.


The median equivalised household disposable income in the UK was £26,300 in the financial year ending 2016 (2015/16). After taking account of inflation and changes in household structures over time, the median disposable income has increased by £600 (or 2.2%) since 2014/15 and is £1,000 higher than the pre-economic downturn level observed in 2007/08.

While median income for the majority of households has recovered to pre-economic downturn levels, income for the richest fifth of households has fallen by £1,900 (or 3.4%) in real terms. This has been largely driven by a fall in average income from employment (including self-employment) for this group following the economic downturn.

By contrast, the average income of the poorest fifth has risen by £1,600 (or 13.2%) since 2007/08. This is mainly due to an increase in the average income from employment for this group, reflecting increases in both the wages and employment levels of people living in these households.

We’ve had median household income growth (after tax, benefits and inflation), we’ve had a fall in top end household incomes and a decent enough rise in bottom 20% household incomes.

As it well know, inequality has fallen this past decade therefore the above must in fact be true. Low incomes must have risen relative to higher ones.

He’s spouting cock, isn’t he?

But whadda about the Rotten Boroughs Ritchie?

Despite having no parliamentary majority, and do having no mandate for fundamental constitutional change, the government is permitting work to continue on the reduction in the number of MPs from 650 to 600.

This is a fundamentally undemocratic move. I know all the arguments about supposedly delivering proportionality. If that’s the desire then my answer is simple: deliver what we really need to create that, which is proportional representation.

But if instead we are to have first past the post and the continuing pretence that one person can represent all the interests of the people in their community, even if many would never have voted for them, then at the very least there has to be a very profound dedication to the principle that constituencies must represent real communities, and not gerrymandered blocks of the population who happen to fit a geographically based, statistically consistent, model that has no bearing to the places where people live.

Amazingly we’ve been doing this for a couple of centuries now. One of the great Parliamentary irruptions of the Enlightenment being those reallocations away from the Rotten Boroughs. And today’s allocations work upon, roughly enough, the following rules:

The boundary commissions are required to apply a set series of rules when devising constituencies.

Firstly, each proposed constituency has to comply with two numerical limits:

the electorate (number of registered voters) of each constituency must be within 5% of the United Kingdom electoral quota. The electoral quota is the average number of electors per constituency, defined as the total mainland electorate divided by the number of mainland constituencies, where “mainland” excludes four island constituencies: Orkney and Shetland, Na h-Eileanan an Iar (Western Isles), and two on the Isle of Wight.
the area of a constituency must be no more than 13,000 square kilometres.
There are a small number of exceptions to the numerical limit on electorate which are specified in the legislation:

the four island constituencies are permitted to have a smaller electorate than the usual limit;
a constituency with an area of more than 12,000 square kilometres may have a smaller electorate than the usual limit; and
constituencies in Northern Ireland may be subject to slightly different limits under certain circumstances.
Having satisfied the electorate and area requirements, each commission can also take into account a number of other factors:

“special geographical considerations” including the size, shape and accessibility of a constituency;
local government boundaries;
boundaries of existing constituencies;
local ties which would be broken by changes to constituencies;
inconveniences resulting from changes to constituencies.
It is evident that the other factors can to an extent be mutually contradictory, and therefore each commission has discretion on how it applies them. In so doing, each commission aims for a consistent approach within a review.

We should take this whinge for what it really is, nakedly political. Labour, as has been true for many a year, has a preponderance of seats in those areas losing population. Meeting exactly Ritchie’s criteria means they lose a few safe seats.

Well, yes Ritchie

That explanation is, he suggests, to be found in the work of the Nobel prizewinning Swedish economist Gunnar Myrdal. Lakey’s argument is that Myrdal encouraged all these states to invest in the individual person as the primary resource for delivering economic growth. This idea, and the actions that result from it, is, he believes, the pillar of the Nordic economic model. At its core this idea, he observes, rejects the classical view of work – that it is a struggle to win the means of existence – and puts in its place a positive framework of incentives for economic participation.

The book explores this hypothesis in numerous ways, but at its heart a number of things stand out that, at a time when the economies of so many countries are so badly failing those who live in them, must be worthy of serious study.

The first is conceptual. As a result of these states having largely rejected the core assumptions of classical economics, profit is seen as a consequence of work and not as its goal. Banking is seen as a service and not as the focus of economic growth. Education is viewed as vital to personal growth, which just also happens to be the perfect countercyclical investment that secures long-term prosperity. And underpinning all this is an expectation that each person will work to contribute to the overall well-being of the society of which they are part: this is a perception of work as a participatory activity.

The result appears to be a Keynesian, social democratic nirvana where education, healthcare and pensions are free, the social safety net is still strong and cooperatives supply 40 per cent of housing in Norway.

Could actually be something a little different.

They’re all in the top 25 for the Index of Economic Freedom. They’re all in the top 30 of the Fraser economic freedom measurement. They’re all in the top 15 of the World Bank’s ease of doing business list. In fact, there’s a serious argument that leaving aside the tax and spend part they’re all significantly more free market than either the UK or US.

Another way to put this is that they’ve not rejected anything about classical economics at all. Quite the opposite. Let the market rip, tax it to provide some buffers against the effects. This is somewhere between neoliberalism and the Third Way that is.

Of course, you’re never going to get things right if you cannot analyse why certain places work, are you?

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?


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!

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

And that, not profit, is the general rule

Economics is wrong again


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.

Well, yes, it would be interesting if UK taxes rose by £100 billion, wouldn’t it?

And third you make clear you’ll collect what is owed but not paid. This is getting this debate back to the tax gap, but with a twist. To be fully understood tax not paid is not just that illicitly unpaid, however important that is. It is also potential tax bases not charged, like wealth, financial transactions and land value.

And tax unpaid is also tax given away in allowances and reliefs, like the £50 billion spent subsidising the savings of UK pensioners annually. Or the £2.8 billion spent subsidising ISA savings. And the £28 billion annual cost of wholly exempting the capital gains in homes from tax.

Pointing out these issues is what will, in my opinion, inspire interest in the tax revenue cycle because once they are understood then the answer to the ‘How are you going to pay for it?’ Question has to be more than a shrug of the shoulders and a ‘We can’t afford it’ because with the right data people will know that’s a choice and not a reality.

I am going to work on this.

That really is insisting that everything, but everything, should be taxed, isn’t it?

Ain’t Spudda wondrous?

Note the implication: health and education spending as well as progressive taxation deliver reduced inequality. And these are the themes the IMF then builds on, suggesting that there are now three ways in which inequality might be tackled.

The first is by more progressive taxation:

Personal income tax progressivity has declined steeply in the 1980s and 1990s, and has remained broadly stable since then. The average top income tax rate for OECD member countries fell from 62 percent in 1981 to 35 percent in 2015. In addition, tax systems are less progressive than indicated by the statutory rates, because wealthy individuals have more access to tax relief. Importantly, we find that some advanced economies can increase progressivity without hampering growth, as long as progressivity is not excessive.

Let’s not beat about the bush: this is the IMF (of all organisations) making clear that we now have insufficiently progressive taxation; that we could have more of it; that this would be beneficial in most cases; and that this will not have negative growth consequences (as is almost glaringly obvious to anyone who has thought in any way appropriately about this issue, but which is welcome, nonetheless).

What they actually say is:

Empirical evidence suggests that it may be possible to
increase progressivity without adversely affecting economic
growth, for instance, by raising marginal tax
rates at the top in countries with relatively low rates
and progressivity.

Which then leaves open the question of just how progressive are we?

Page 7 of the report tells us, we’re around and about average, both in the Gini points that the total tax and spend system reduces inequality by and also in the portion of that which is due to taxation rather than spending. We’ve not got low rates nor progressivity, the potential to raise doesn’t apply to us.

Which is what they all said a couple of years back too, that you can lower the Gini by 12-14 points or so without killing the goose but not much more than that. Which is a little less than what we currently do.

This is also fun, isn’t it?

Economic theory suggests that taxing capital income
can lower efficiency. Specifically, a comprehensive
income tax that includes capital income effectively
taxes future consumption at a higher rate than current
consumption, thereby discouraging saving and
thus investment and economic growth. Moreover,
it means that an individual who earns most of his
or her income early in life pays more in tax than
another who earns the same lifetime income, but
spread out over time. Based on these arguments,
some economists contend that only consumption
or—equivalently—labor income should be taxed.27
Although this is a powerful argument, there are
negative equity consequences of taxing only consumption,
given that the richest individuals may
consume only a fraction of their wealth during
their lifetime. A compromise between solely taxing
consumption and taxing income comprehensively
can be achieved by creating tax-favored vehicles,
such as pension funds, that can allow individuals to
save efficiently for their life cycle needs, while still
taxing capital incomes of individuals with much
higher wealth

Those pension reliefs should stay then, eh?

He manages to contradict himself in his introduction!

Interest in analyses of spillover effects, (the direct impact of one country’s tax policy on
another country’s tax base, tax policy and economic activity), has been growing since the
IMF sought to define the term, and proposed econometric methods for evaluation (IMF,
2014.) The basic proposition justifying spillover analysis, is that countries’ tax regimes can
produce profit shifting and tax base erosion, as well as other forms of tax competition that
erode the revenue raising capacity of governments, while detrimentally effecting levels of
real economic activity in other jurisdictions through various forms of capital flight

Remember how money never moves around because of tax? Now we’ve got capital flight because of tax.


And the know nothing speaks out!

As the FT notes this morning:

Wolfgang Schäuble has warned that spiralling levels of global debt and liquidity present a major risk to the world economy, in his parting shot as Germany’s finance minister. In an interview with the FT … said there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets.

It took him a long time to form that conclusion. And if as a result there are bubbles now then the blame can be firmly laid at his door.

If that could be seen in 2010 – and I did see it – the question for Schäuble is why has it taken him quite so long to state what is seemingly obvious when all the conditions for another bust have been laid on his watch?

The lack of knowledge is really quite startling. Schauble and the Bundesbank have always been tyhe loudest voices in the eurozone against QE. Precisely because they didn’t think it would work, it would only create a bubble.

The Sage of Ely is at least nominally a professor in international political economy. Shouldn’t we expect at least a passing knowledge of the scene of international political economy?