The claim that economists have lost control is based on the absence of a cost-benefit analysis in the Green New Deal and the fact that carbon pricing is rejected.
Of course, the Economist is wrong. There is a cost-benefit analysis in the Green New Deal: we cannot afford not to do it, whatever it costs.
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, a carbon tax raises the price of emitting technologies, reducing the relative price of non-emitting.
Our task with climate change is to replace emitting with non-emitting technologies.
Renewables are now so cheap that we don’t need a carbon tax to change those relative prices.
So, we’re done then, right? Everyone will, from now on, install non-emittive technologies as they’re cheaper and we’ve solved climate change.
So why is Ritchie insisting we still need the Green Leap Forward?
It could be that the UK is heading the world into a downturn: it’s happened before.
It could be Brexit, which is what most commentators outside the UK think.
What it is not is good for the conventional view of the economy.
The conventional view of the economy is that there is a business cycle, Gordon Brown did not abolish it. It’s largely diven by animal spirits, something that uncertainty undermines.
Thus Brexit, uncertainty, lack of animal spirits, well, why not a recession?
That’s actually the conventional view.
And who it is also not good for is those Brexiteers who said that those who suggested Brexit would cause a downturn were wrong. We’ve now got to the point where that prediction can be tested. And those who made it, me included, are being proved right.
No surprise there then. It was glaringly obvious.
Mrs – Ex might be able to correct him on this. A doctor can confidently predict that someone will die. It’s the timescale over which the prediction is made that matters. A century is piss easy and useless. The moment people vote to leave the EU is useful but wrong.
I confess theory excites me only so far as it is useful. Anyone’s theory ceases to be of interest to me when it becomes dogmatic, exclusive and a simple excuse for point scoring in isolation.
There’s more on him here too.
So obviously, it won’t work:
Whatever Alexandria’s Aims Ocasio Cortez’s Green New Deal Won’t Work
Alexandria Ocasio Cortez is to reveal the details of her Green New Deal in the next few days – the one thing we absolutely know about this being that it won’t work. This isn’t a commentary upon climate change nor the desirability of doing something about it. This is just a simple statement of fact about the universe we inhabit. As with the climate the economy is a complex, even chaotic, thing. Plans to substantially reform it therefore don’t work, no matter how egghead the planners nor pure in motive the instigators.
And low interest rates also stop the trickle (or flood) up of wealth: they are rents, after all.
Low interest rates raise the price of higher yielding assets. QE shows that, share prices rose because of QE as Spudder oft complains.
So, low interest rates stop the flood up of wealth, do they? Even though Spudda complains about how low interest rates have raised asset prices?
Third, MMT accepts physical constraints, unlike most other economics.
The science of the allocation of scarce resources does not accept that resources are scarce?
In an argument with two real economists we get Spuddo saying:
But what that means is three things. First, in Simon and Jonathan’s view economic policy is being run for the sake of economic policy. Its aim is to restore monetary policy. Second, that means the aim is to put bankers back at the heart of economic policy, and not people. And third, the aim is to restore finance as the constraint on activity instead of that limit being the available resources within the economy i.e. the goal of establishing full employment.
If we get to full employment then interest rates will be able to rise to the time value of money. Instead of being artificially suppressed below that as at present.
This is putting bankers at the heart of the economy?
Among the things Ritchie does know about:
English politics might wait a long time for something like the SNP to come along. Until long after they have gone, maybe.
Single issue party succeeding in English politics?
What’s scary about it is that this suggests that no deal is Labour’s best hope. And I regret to say it, but in party political terms it probably is. As I was told by an influential member of Corbyn’s team in March 2016, Brexit was a Tory fight and Labour just needed to watch it out to win from it.
That was a position grossly negligent in political terms. But nothing has changed as far as I can see. That’s what Labour are doing. It’s a plan predicated on a no deal. And it’s predicated on chaos. And that Labour can win from this. Which is thought to be a price worth paying.
He’s talking about we do it, we don’t, what’s the deal or no deal because Ukip won or lost?
In the first instance MMT says all money is created by either government central banks or other banks acting under state licence.
Second it says that money only has value because the government promises to back it.
Third, it suggests that this backing is evidenced: the requirement that tax be paid in government created money guarantees state created currency a value in exchange, most especially if there is no other currency in circulation in an economy.
And fourth, this necessarily means government spending must come before tax is raised in our macroeconomy or there would be no money created to settle the tax bill. This cannot be issued as semantics: it is fundamental to understanding the role and nature of deficits.
Central banks and or commercial banks create money.
Therefore government spending must come before taxation otherwise there would be no money to collect the taxes in.
Which fifthly means government deficits are a necessary and good thing because without them the means to make settlement would not exist in our economy.
But if it’s the banks, central and commercial, which create the money then it would be the absence of banks which would lead to the absence of money.
And sixth, and most important of all, knowing this liberates us to think entirely afresh about fiscal policy, which Portes rightly says is prioritised by MMT over monetary policy, which I would happen to argue is now largely redundant anyway because in a world of low interest rates monetary policy is wholly ineffective, and I believe low interest rates are here to stay.
Low interest rates are a monetary policy.
Tax reliefs, terrible things, they deprive the government of necessary funds, restrict the good it can do, cause austerity.
And we really shouldn’t be subsidising the consumption of energy now, should we? Not in this world of climate change. In fact, that reduced rate of VAT on energy is part of that $5 trillion we’re said to, globally, use to subsidise fossil fuel consumption. Really, we should stop doing that.
Or maybe we shouldn’t? This being a useful litmus test for those who will try to use these figures. There will indeed be, as there is, shouting about that £4 billion. But that’s as near nothing compared to that £53 billion. So, people who are serious about reducing tax relief so as to reduce austerity – which should they be saying we should do away with? And which will they say we should do away with?
Where have 70% tax rates worked? In the USA, for a start….
The Spud doesn’t seem to know his history. Nor does the historian:
And here’s the problem. Hauser’s Law. Pretty much whatever anyone does the Federal tax take doesn’t rise above about 20% of GDP. And it’s not true that those high marginal tax rates of the 1950s did much, even anything, to get that tax take up.
There’s a reason why this is true as well. Taxation of incomes isn’t going to get you much more than that.
With the 31 January self assessment deadline looming, a campaign group has highlighted statistics showing the ongoing unfair tax advantage available to self-employed business owners.
Figures from the Institute for Fiscal Studies (IFS) show that an employee earning £40,000 a year will pay £12,262 in tax. This is £4,556 more than a self-employed person who earns the same but has opted to incorporate as a self-employed company manager/owner. The overall rate of tax paid by self-employed manager/owners can be as low as 19%, far less than the 32% rate likely to be paid by an employee earning the same salary.
Ritchie’s gone from promoting such ideas in The Observer to condemning them now.
He used the system for far longer than he publicly approved of it, of course. In fact, he used until after he’d been paid to condemn it. Funny that.
But Murphy said it would be hard for the UK to replicate the Singapore model. “More than 80% of people live in government-owned housing so it does not need to tax people, it just charges rent. And many of its largest companies are also state-owned so, again, local taxes on profits do not matter as much as they do in the UK, because the government gets a large chuck of local profits anyway. It can offer low taxes and not have its revenues threatened. This is fundamentally different to the UK, where the government is dependent on tax.”
Amazingly, rent on public housing does not appear as a source of revenue in this estimation of Singapore’s income. The expenditure side of the budget shows significant appropriations to build the flats too. Oh, and Singapore doesn’t charge for the value of the underlying land in its state housing prices.
How much can you charge – or perhaps how much profit can be made – from rental housing if you’re not charging that land value? Not a lot I think is the answer, no? So public housing in Singapore is contributing how much to the general budget? If it’s not in fact a drain on it?
Matthew d’Ancona has an article worth reading in the Guardian. As a former Spectator editor he is naturally a right winger.
They publish right wingers in The Guardian these days, do they?
I have resigned from those organisations I have been linked with that promote modern monetary theory.
I have done so without regret.
I remain convinced by the core argument of MMT as I see it, as explained here.
I have no time for being told this leads to one inevitable course of action that is the only available option if one wants to be theoretically compliant with the prescriptions of MMT.
I will say in future in response to that claim what I often think when faced with academic nonsense, which is that I live my life in practice and not in theory.
How long before there are no organisations left that he has even a modicum of agreement with?
Britain’s wealthiest business people are fleeing abroad amid mounting complications over tax, the country’s richest man has warned.
Amid a growing political crisis over the UK’s future relationship with the EU, Gopichand Hinduja, whose family controls a £20.6bn industrial fortune, told The Sunday Telegraph many of the country’s wealthiest people have already quietly left Britain for Dubai, Singapore and other financial centres.
But what are those tax campaigners going to say about it?
Good riddance? We didn’t want their money anyway? Huzzah London house prices will fall?
Or just do a Spud and insist people don’t move for tax reasons?
Recall what the pitch for the Fair Tax Mark is. That the company will be higher valued as a result of making it clear that it operates to the highest moral standards:
FTSE 100-member SSE’s share price is in freefall!
With Hinckley Point also in doubt, the UK’s future energy policy is in tatters: the nuclear option is dead because it is technically and financially not feasible.
If ever there was a moment for us to be focussing on what is important in politics to announce a Green New Deal to solve this problem this would be it.
Now show that the Green New Deal is cheaper than nuclear.
A difficult task given that the GND will be funded by the issuance of new money – and how much would nuclear cost us if we did that?
This is simply wrong. It is not true that we are outright losers from exports, and it is unambiguously not true that we are the only winners from imports, at entire cost of those who export to us.
At which point he bumbles off to talk about money being used in settlement.
But imports are the point of trade, they’re the work of others that we get to consume. Exports are a cost to us, they’re our work that others gain by consuming. Tracking pieces of government issued paper doesn’t change that.