Ritchie’s new project

Anyone who did so refer outside the in-group would quickly find out that the acronym is less than fortunate. Our colonial friends use the can as a synonym for prison. And many varieties of English use the can as a synonym for the toilet.

Hmm, perhaps not so inappropriate. The Corporate Accountability Network, where one goes to defecate.

Amazingly, the Senior Lecturer doesn’t understand Coase on the Firm

We’d all rather hope that someone trying to teach economics in he UK is up to date with one of the foundational pieces of the subject. Ronald Coase on why the firm exists.

The essential answer being that there are costs – and benefits – to doing everything within one organisation, costs and benefits to contracting out functions. The line we draw around the firm depends upon the specific costs and benefits of the specific activity at that specific time.

Ford uses steel. For uses headlights. Ford uses seat covers. Ford uses engines. Which of the four should Ford be making inside the firm of Ford and which should is subcontract out? Where should the line be between Ford and not-Ford?

Depends really. As far as I know the first is definitely subbed out, the second is too. The third didn’t used to be at least – there was a strike by the lady seat cover makers which is a milestone in equal pay gubbins. And engines are made by Ford.

This is the background. So, the Senior Lecturer:

The fact is that outsourced models only save by doing one of three things. Those are providing a worse service; cutting staff costs; or reducing commitment to service renewal (R&D, training, etc). All are fatal to the quality of outcomes over anything but the very short  term. And that’s precisely why this model has to come to an end.

Sigh.

Presumably the NHS is now going to start making its own mops – hey, hospital floors must be cleaned and contracting out doesn’t work. The sausages in the canteens will be made by the NHS. Because contracting out doesn’t work.

Yes, you’re right, Ritchie’s an idiot.

The question about outsourcing is only when is it better and when isn’t it? And it really was Coase who pointed out the basics here.

Well, yes, obviously

The FT has noted this morning just how out of line US banks are on fossil fuel investment when compared with other banks and the fact that fossil fuels are now known to be threatening the future of life on earth (and I stress: that’s a fact, not an opinion).

The US is the only place that allows fracking – for oil as well as gas – on a large scale. It’s also one of the few places that has been reducing emissions in recent years.

Funny that, isn’t it? That the banks in a country finance the activity in that country?

Rilly?

we should not be using shares as a savings medium, for which task they are wholly unsuited precisely because capitalism has a short term view,

Anyone care to offer an organisation or section of society with a longer term view than a capitalist company?

No, not one that should, not one that might, but one that does?

An Oxbridge college maybe? A Livery Company?

And?

Jeez, this is Spud level

Scotland would be forced to dump the pound for its own free-floating currency immediately after independence, the country’s most eminent macroeconomist has warned as he denounced the “poor” plans produced by both sides of an SNP battle over the issue.

Professor Ronald MacDonald, research professor of macroeconomics and international finance at Glasgow University’s Adam Smith Business School, said a separate currency not linked to sterling would be needed to pay off the country’s £16 billion balance of payments deficit.

It’s the reporting not the economist though. You don’t pay off balance of payments deficits. In fact, you can’t have balance of payments deficits because the balance of payments always balances.

I assume what is meant is that there will be a trade deficit and if in sterling then a certain difficulty in gaining the incoming investment to finance it. The solution to which is a decline in the currency so that investing looks better and imports are more expensive/exports cheaper. Which is why you need your own currency.

But you know, newspaper reports of economics….

Tee Hee

Here’s another idea: we need a higher rate of VAT on products that are bought to indicate social status, and which contribute to global warming.

What am I talking about? Let’s start with cars with an engine capacity above 1.6 litres (and maybe I am being generous when suggesting that). Or which cost, say, more than £20,000 at present. I cannot see why any such vehicle is necessary. They are, I suggest, just conspicuous consumption, and as a result are not designed to last, which is precisely why they need to be taxed more to save the environment.

A Rolls Royce lasts less time than an Austin Allegro then, eh?

After which there are phones costing more than £300, which are nothing more than jewellery, but which are deeply wasteful by encouraging massive environmental waste as they are simply fashion items, designed to be replaced at a rapid rate.

And entirely missing the point of Veblen Goods. Sure, they indicate social status. Make them more expensive and they become even more of a Veblen Good. Twat.

Umm, you what?

I believe that taxes can assist the transformation to the economy and society that we need if we are to avoid catastrophic environmental change. That is why I have been writing about what I am calling Tax to Save the Environment (TASTE). I stress, I do not think tax is the only way to achieve this: regulation will usually be required as well, but tax has powerful signalling capacity both economically and socially, and I think that is vital at present. I do therefore offer another suggested tax now.

In 2015 I suggest a Carbon Usage Tax (or CUT) in my book The Joy of Tax. I explained this in my White Paper on Scottish Taxation for Common Weal in 2017 as follows:

OK, tax something you get less of it. With you so far.

And the tax proposed is a bank account transactions one. Idiot idea of course.

But we are here talking about a tax to discourage carbon emissions through consumption. Again, fair enough. Then as a justification we get:

It would capture non-consumption expenditure, which is very largely not liable to VAT and other indirect taxes at present;

But we’re trying to tax the consumption which leads to carbon emissions. The very power of the tax is that it only taxes consumption which leads to carbon emissions. Thus incentivising people away from such, that is in fact the power of such taxation.

So, which idiot decides to extend such a tax to non-consumption?

Ah, yes, it’s one of Spudda’s ideas, isn’t it? Expecting logic through 5 paragraphs is hoping for too much.

Interestingly, what is it that we call non-consumption expenditure? Largely, savings. So, he wants to tax savings in order to reduce consumption.

Jeez, and to think that he’s employed to teach economics.

Even By Ritchie’s standards this is impressive

I am impressed by the courage of those who have taken direct action in the cause of the Extinction Rebellion. They have gone beyond talk, as the crisis facing our world requires.

But, that said, I have never been inclined to take direct action: it’s just not the way I want to change the world. I am not saying it’s wrong: far from it in fact. I think it works. But I have always felt that there have been other things for me to do. And what that has meant in the current situation is that I have had to ask myself what I might do. My answer is to suggest that we need to talk about Tax to Save The Environment (TASTE).

I have long argued that the primary purpose of tax is not to raise revenue. I wrote a whole book – The Joy of Tax – on that theme. I unashamedly recommend reading it. In it I suggested that there were six reasons for tax:

Reclaiming the money the government has spent into the economy.
Ratifying the value of money.
Reorganising the economy.
Redistributing income and wealth within the economy.
Repricing goods and services.
Raising representation in a democracy.
These are explained in more detail here.

My argument when suggesting Tax to Save The Environment falls into categories 3, 4 and 5, although with a focus on the last, and definite implications for the other groups. I stress: the aim is not to raise money. It is to use tax to change the way out society works.

And that is what is required now: a whole change to the way our society works. Since in my opinion tax is one of the most powerful tools that we have to change the way that society works, for better or worse, my contribution will be to suggest ways that tax can deliver change for the better to help save our plant. That’s what TASTE will be all about.

An example of which is:

It’s sometimes thought that tax is complex. And sometimes it is. And that’s why many people misunderstand a lot about taxation. But it does not always need to be so.

It’s my suggestion that we need to use Tax to Save the Environment (TASTE). Let me start with a simple example of something we could do now.

We now know that there is a massive problem with methane created by cattle, sheep and (to a somewhat lesser degree) goats. There is a way to address this issue in the UK. We could put VAT on all food the products that are created from them. We can do this now. VAT on food is allowed under EU law. And it would work: it would shift pricing and so reorientate people towards other products, of which there are many that are available.

I know this would be controversial: I am aware that the big problem would be around milk. The rate of tax on milk might then be open to discussion. On everything else standard rate VAT should be applied now, in my opinion.

And to ensure hardship does not result revenue raised must be matched by the allocation of additional funds to benefits.

This is simple, possible, and achievable now.

It’s the first Tax to Save The Environment. There will be more.

Actual economists have thought through this very problem. Last year’s Nobel Laureate, William Nordhaus, for example. Nick Stern in his review. In fact, damn near every economist who has considered the matter. And the vast majority of other economists agree with them. Assume that the science is right the answer is a carbon tax. What is Ritchie suggesting? Effectively, a carbon tax.

What has Ritchie said in the past?

And carbon pricing does not work. Marco Fante explains why here. The essence is simple though: renewables are cheap enough to ensure that carbon pricing is itself priced out of the market.

So the economists – or rather, the neoliberal economists that the Economist thinks to be the holders of that tile – have lost.

Apparently a carbon tax invented by Ritchie works and a carbon tax considered by every other economist does not. That’s impressive, even by the standards of the Senior Lecturer.

Who knows, maybe it’s just that he’s so damn ignorant he doesn’t know that implicit in all carbon tax proposals is that it’s levied on CO2-e, not actually upon carbon?

No, not bitter about vermine

Roger Stokes says:
April 18 2019 at 8:22 am
… John McDonnell has created the same rod for his own back with Labour’s “Fiscal Credibility” rules… they appear to believe Thatcher’s dictum that…
“It is your tax which pays for government spending. The government have no money of their own. There is only tax payers money”… yet they surely aren’t stupid enough to not understand that every time the government spends it creates money and every time it taxes it destroys it…

Reply
Richard Murphy says:
April 18 2019 at 8:23 am
Don’t you believe they’re not that stupid…..

Reply

That incorrect decision still stings, doesn’t it?

My word, really?

Spudda tells us it’s all done!

A short introduction to a historic report, published 12th April 2019 by LUT University and Energy Watch, that models the global energy system on an hourly basis using the real economics of existing renewable energy technologies. A unique first, and essential ammunition for all worried about climate change.

We’re saved? We can power the world on 100% renewables!

Except, well, page 18 of the main report.

Energy Storage
Storage technologies play a vital role in enabling
the transition towards a fully renewable energy
system across all sectors. As shown in Figure 3.1-4,
a significant share of electricity demand is covered
by storage that increases through the transition
period up to nearly 5000 TWhel by 2030 and further
significantly increases to over 30,000 TWhel by
2050. As the shares of solar PV and wind energy
increase significantly beyond 2030, the role of
storage is crucial in providing uninterrupted energy
supply. The ratio of electricity demand covered by
energy storage to electricity generation increases
significantly to around 18% by 2035 and further on
to about 23% by 2050, as shown in Figure 3.1-4.
Electricity storage technologies cover most of the
storage requirements from the electricity sector,
complemented with some shares of electricity
derived from stored heat. This cross-sectoral
storage is enabled through an integrated power
and heat sector

OK, super. So energy storage will become effective and economic.

So, which technologies? Umm, what’s that? They will? You are assuming that are you? Ah, you are.

So, OK, sure we can power the world on renewables if we only had an economic method of electricity storage. But assuming that we do doesn’t prove that we can now, does it?

This also amuses:

A global transition to 100% renewable energy across all sectors – power, heat, transport and
desalination before 2050 is feasible1. Existing renewable energy potential and technologies, including
storage, is capable of generating a secure energy supply at every hour throughout the year. The
sustainable energy system is more efficient and cost effective than the existing system,

Great, so we don’t need to do anything about it, do we? Private lust for profit will get us to this more efficient and economic system on its own.

Good, glad we’ve got that settled.

That Curajus State

As we know the Senior Lecturer is insistent that the State should have more power. Be Curajus.

Erdogan has certainly been that.

The Turkish lira has shed almost 30 per cent of its value since Mr Erdogan switched the parliamentary system to an executive presidency last year, partly prompted by his poor meetings with investors in London last May, when he announced that he was planning to rein in inflation by suppressing interest rates — a move that flies in the face of all economic orthodoxy.

Hmm.

Berat Albayrak, 41, flew to Washington late last week to try to breathe life into the Turkish economy and currency, which have been failing since Mr Erdogan, 65, centralised almost all powers in his hands.

Turkey’s muzzled media has largely hailed the trip as a success, focusing on Mr Albayrak’s discussions yesterday with President Trump and Jared Kushner, the US president’s son-in-law, in which they touted having tripled trade to $75 billion.

However, one investor told the Financial Times that it was “one of the worst performances from a finance minister I have seen”. Another told Axios, a news website, they had “never seen someone from an administration that unprepared”. A fund manager described it as “a shit-show”.

That Curajus State is an interesting idea obviously. Except that our more usual problem is curbing the actions of the idiots who manage to gain office.

To ask the counterfactual

Patrick Jahnke is right: this is a fundamental flaw at the heart of modern accounting. I have said this morning that nothing lasts forever, and I stand by that. It’s wise to realise that’s true. But to assume nothing has value in a generation’s time is as flawed as thinking anything lasts in perpetuity. And what the practice of discounting in accountancy means is that no company plans for a generation hence. And yet it is believed that investing in the shares of these companies is a rational basis for making pensions provision.

That this is not true – because these companies have no plan for the time when pensioners will want to realise their investments – should be apparent. But it is not.

Which human organisation has a longer time horizon than the major corporation?

No, not in theory, in practice?

Bonus question. If we have an inevitable too short a time horizon among the things we can invest in then aren’t we going to have to have a secondary market in investments?

That’s a challenge then

It’s really quite masterly in its way, this piece of projection. Still, we’re asked one particular thing, or rather told something which we can refute:

And we all know that almost no Brexiteer can name an EU regulation that they would actually want to repeal.

I think I count as a Brexiteer. Worked for Ukip, stood for them as an MEP candidate.

Just off the top of my head I’d get rid of the entirety of Reach. Plus all the bendy banana laws. And the European jam, jellies and marmalades laws. That’s just things I’ve actually written columns about over the years. Give me 15 minutes and I’l find a library full for you.

A weekend of reflection leaves me still bemused by Brexit. Or at least by Brexiteers. Let’s leave aside all the nastiness of some who claim to represent those interests. Let’s instead consider what Brexit is supposedly about. Except I cannot. Because I do not know.

It’s based upon entirely the wrong ideal – ideal – of governance for a free and liberal society. It’s using the Roman Law derived idea of a regulation for everything and nothing without a regulation. Whereas a liberal society says these limited things must be regulated because of third party damage and everyone’s free to get on with the rest as they wish.

The European Union’s simply on the wrong side of liberal.

This is most fun

It looks like the EU will deliver their verdict on the UK today. It is that we are unable to decide. And because we can’t they’ll give us the time we need to go away and make up our minds.

It’s damning. What they can see is what we know: that we have a political class bereft of ability that is unable to think logically about an issue. Worse, tribalism matters so much that it’s not just compromise that is impossible for them; they are also beyond considering the national interest.

OK. So, the solution?

But most of all I wish for the essential reform that will permit real change in our society, which is electoral reform. We cannot suffer the incapacity that these parties have created for much longer. And that requires fundamental change.

So, we move to a system where the will of the people really is both expressed and enacted? A referendory (referendatory?) democracy perhaps, like Switzerland? Meaning that we’d already be out of the EU?

Not quite as amusing as thought

Nowhere was this truer than in the comment of Viscount Ridley. He is supposedly a scientist. He has made much economic comment from a far right perspective. He writes columns for right wing newspapers on that issue., He is, of course, anti-green. And he saw the attempt to pass the Cooper / Letwin Bill in a day as ‘tyranny’.

Faisal Islam called him out. As I well recall, he was also chair of Northern Rock when it crashed (you could not make this up)

Never was there better evidence that some think there should be one rule for them and another for everyone else.

Except Matt Ridley was rather against that nationalisation. However the bill was passed. He’d been arguing that N Rock just needed liquidity support from the BoE. Which, given that the loan book has made a profit since then seems reasonable enough.

He made the case for abolishing the Lords most effectively.

No , that case would have been best made by Labour putting a retired accountant from Wandsworth into the House so that his expenses would be reasonable payment for his advising Labour.

What fun can be had with the Murphmeister

Ritchie spends a decade on corporate tax.

Trying to entirely dodge the UK tax system no longer works. There’s also all that political pressure to be paying more. The thing is, that deductibility of foreign taxes paid is still there. As far as Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is concerned now, it’s going to have to pay taxes somewhere. Might as well pay more to the UK for that bill is then a deductible against the American one.

Sure, this is all a bit long-winded, but it’s necessary to get to the point. Only when that background is understood can we consider the effects on investing in Big Tech of that movement toward higher taxation of those varied companies. Which is, that movement to gain more tax isn’t going to have much effect. We don’t really have to worry about what the rest of the world does, it’s all already taken care of in the revisions to the US tax code.

Trump’s changes mean that the foreign profits of US corporations are already taxed whatever. So, a rise in European taxation of such profits leaves the companies just the same – the deductibility of foreign taxes means little or no change in the total taxation bill.

Electing Donald Trump solves his problem.