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Tory MP ignorant. We\’re surprised, right?

This really is cretinous stupidity.

The costs to our economy of productivity lost at work, together with the criminal justice and health bill, put the financial drain as high as £55bn. There is no such thing as a cheap drink; we are all paying a very heavy price.

Sigh. Leave aside that this is simply an invented number (only two years ago it was around £20 billion).

What is the benefit of booze? The pleasure that people get from boozing of course. How can we measure the value, in cold hard cash, of that benefit, that pleasure?

The amount that people spend on booze of course. No one who thinks that 50p in their pocket is more valuable than a pint of cheap cider will exchange the 50p for the pint of cheap cider. Thus the pint of cheap cider which people do exchange 50p for must be worth more to that person than 50p.

The value to, the pleasure gained from, the boozer of booze must be greater than the amount spent by the boozer on booze.

How much do we spend on booze? From memory it\’s around £55 billion a year actually.

So, actually, even by our idiot Tory MP\’s reasoning, we\’re not paying any price at all: we\’re getting at least as much benefit from boozing as it costs us. Excellent, fuck off then.

But it gets worse:

An alcohol strategy that would work should include the following: minimum pricing of 50p a unit,

The problem with this is that it just increases the profits of the booze industry. It\’s also, as far as I know, illegal under EU rules. But even if not, we\’re still just increasing profits. To which our idiot Tory MP says yes but:

To those who feel that minimum pricing would just hand greater profits to the drinks industry, there are many suggestions: varying VAT between on- and off-licensed premises to offset a rise in duty without penalising pubs or clubs, or a levy on unopened bottles of between 5p and 10p per unit.

Which is exactly the point that we\’re all trying to make. Vary the taxes you idiot, if you want to change the price. Don\’t just boost the industry profits, get more money for the Treasury!

Just if any politician should happen to pass by just let me explain the logic again here. Minimum prices are a bad idea because it just increases industry profits. If you want to raise the price of alcohol you should raise the taxes on alcohol, so that the Treasury gains the money, not the industry. The response \”well, we\’ll change taxes to deal with the problems of minimum prices\” doesn\’t work. Just change the taxes and forget the minimum prices.

Ha-Joon Chang: It\’s the way he tells \’em

The victory of the Republican anti-government ideology over a weakened Barack Obama has locked the US into the prison of fiscal rectitude.
…..
The budget deficit of the zone is only about 6% of its GDP, as against the 10-11% of the US and Britain.

A budget deficit of 10-11% of GDP is being locked into the prison of fiscal rectitude now, is it?

World Development Movement: tosspots again

Now they\’ve a letter from 450 \”economists\” insisting that there must be position limits, a set percentage of commodity markets, above which no more financial speculators can be let in.

Because, you see, financial sepculation both increases volatility and increases prices:

\”Excessive financial speculation is contributing to increasing volatility and record high food prices, exacerbating global hunger and poverty.\”

Which is pretty cute really, making prices both go up and down and only making them go up. It\’s difficult to think of any economic action which would have both effects. Not that the WDM does think of course.

As to the volatility argument we have, of course, their own evidence from their own report. Wheat and maize have deep and liquid futures and options markets, allowing lotsn\’lots of speculation. Rice doesn\’t so much. So, in the 2006/8 balloon in prices, which was more volatile? Yup, rice. Showing that deep and liquid futures and options markets reduce price volatility.

And as Paul Krugman has pointed out, to increase spot prices you need to see evidence of hoarding in physical markets, something we didn\’t see, so it wasn\’t financial speculation driving up prices either.

Deborah Doane, director of the World Development Movement, said that \”excessive\” lobbying from the finance sector seemed to be delaying political action, both in the UK and elsewhere.

\”This is despite the obvious suffering caused by speculation on this most basic human need, and despite the growing number of voices calling for action,\” she said.

\”Instead of propping up cynical financial gambling by speculators, the G20 finance ministers must act to ensure that strict rules are put in place to limit the hold of bankers over the world\’s food markets.\”

Strangely, I\’ve not seen any lobbying at all against the proposals. Sure, we\’ve seen reports from various people, OCED, IMF and so on, all pointing out that the case for speculation increasing price volatility is, at best, unproven. It\’s a set of assumptions about herd behaviour which no one has offered conclusive evidence for: and the behanviour of markets seems to offer pretty good evidence against.

In fact, the only people I can see lobbying on this issue are the WDM.

But our list of \”economists\”.

Dr Funda Rana Adacay, Associate Professor in Economics, Anadolu Univeristy, Eskisehir, TURKEY

Hmm, Anadolu is the equivalent of the Open University. High and mighty economists there then, an associate prof (what we would call a lecturer) at the OU.

Rania Antonopoulos, Senior Scholar and Director of Gender Equality and the Economy Program, Levy Economics Institute, USA

Expert in gender equality at small upstate New York liberal arts college. Pulling out the big guns here.

Dr Ozlem Arpac Arconian, Department of Economics, School of Oriental and African Studies, University of London, UK

Don\’t think that anyone at SOAS has ever met a market they like, have they?

Dean Baker is a good economist, even if somewhat partisan. In fact, he\’s so good they\’ve counted him twice.

Prof Radhika Balakrishnan, Professor of Women\’s and Gender Studies Rutgers, The State University of New Jersey, former Professor of Economics and International Studies at Marymount Manhattan College, USA

Prof Drucilla K. Barker, Director Women’s & Gender Studies, Phd in Economics, University of South Carolina, Columbia, USA

Dr John Barnshaw, Department of Sociology, University of South Florida, USA

Gender studies and sociology (to the extent that they differ): so useful in determining the effects of financial markets.

Dr Stephanie Blankenburg, Department of Economics and CISD, School of Oriental and African Studies, UK

SOAS again: they have all kinds of economics there, both Trots and Marxists.

Dr Ha-Joon Chang, Reader, Faculty of Economics, University of Cambridge, UK

Surprise!

John Christensen, Economic Adviser and Director, Tax Justice Network, London, UK

Double Surprise! Really didn\’t expect to see him there, did we?

Kimberly Christensen, Visiting Faculty Member in Economics and Public Policy, Sarah Lawrence College in Bronxville, New York, USA

Sarah Lawrence College?

 Sarah Lawrence College was established by real-estate mogul William Van Duzer Lawrence on the grounds of his estate in Westchester County and was named in honor of his wife, Sarah. The College was originally intended to provide instruction in the arts and humanities for women. A major component of the College\’s early curriculum was \”productive leisure,\” wherein students were required to work for eight hours weekly in such fields as modeling, shorthand, typewriting, applying makeup, and gardening.

We\’re certainly hitting the high spots of the academic universe here, aren\’t we? BTW, \”visiting faculty member\” often means \”gives a couple of public lectures per semester\”.

Prof Christopher Cramer, Professor of the Political Economy of Development, SOAS, UK

Trot or Marxist wing of SOAS?

Couldn\’t face going through the entire list but yes:

Richard Murphy, Director, Tax Research UK

A retired accountant from Wandsworth is included in their list of 449 (Double Dean, recall?) economists who know about financial markets.

Not a list we need to pay all that much attention to.

 

Occupy Oxfam!

Oxfam is seeking court action to ban a pensioner from one of its shops, and is asking him to pay a £10,000 legal bill.

But Barry Nowlan, 63, of Taunton, says he has a legitimate complaint about Oxfam’s “political campaigning.”

The charity banned the retired bank clerk and Lloyds shareholder from its shop at The Bridge in Taunton after he complained about a poster which highlighted Oxfam’s call for a “Robin Hood” tax of banks and financial institutions.

The charity accuses Mr Nowlan of causing: “great distress” and “harassing volunteers”.

He denies the claims but admits entering the building since Oxfam banned him by letter.

Oxfam says seeking an injunction at county court is a “last resort.”

Mr Nowlan said on Friday: “Oxfam claims its Robin Hood Tax will come from bank profits and bankers’ bonuses, not from the ordinary people”. But banks are owned by shareholders.

“They are pension funds and ordinary people like me.

“I retired at 49 through ill-health. My pensions are small but I had the benefit of dividends (mainly from my Lloyds Bank shares) until the last few years.

“As you know, Lloyds\’ share value fell from a peak of £11 to barely 30p. now. The dividends represented about one-third of my income. So I was not best pleased to see Oxfam\’s window display deceiving people.

So, should Mr. Nolan be prosecuted as UKUncut peeps in TopShop were or not?

Or does this sort of thing depend upon what you\’re protesting about, not the protesting itself?

No, it wasn\’t bank regulation that failed

One of the great things about Diamond-Dybvig is that it immediately punctures any superficial notion that a bank can be defined by some traditional appearance — that it basically has to be a marble building with rows of tellers, i.e. a depository institution. Any arrangement that borrows short and lends long, that offers investors claims that are liquid while using their funds to make illiquid investments is a bank in an economic sense — and is potentially subject to bank runs. Indeed, what we had in 2008 was mainly a run on shadow banks, on non-depository institutions.

It is much more accurate to say that non-bank, or shadow bank, regulation that failed.

Or even, that shadow banks didn\’t have deposit insurance and so were prone to liqudity problems…..

George meets Steve Keen: not a pretty sight

The official view, as articulated by Ben Bernanke, chairman of the Federal Reserve, is that both the first Great Depression and the current crisis were caused by a lack of base money. Base money, or M0, is money that the central bank creates. It forms the reserves held by private banks, on the strength of which they issue loans to their clients. This practice is called fractional reserve banking: by issuing amounts of debt several times greater than their reserves, the private banks create money that didn\’t exist before. Conventional economic theory predicts that when the central bank raises M0, this triggers a \”money multiplier\”: private banks generate more credit money (M1, M2 and M3), boosting economic growth and employment.

Bernanke, echoing claims by Milton Friedman, believed that the first Great Depression in the US was propelled by a fall in the supply of M0, which, he said, \”reinforced … declines in the money multiplier\”. But, Keen shows, there is a weak association between M0 supply and depression. There were six occasions after the second world war when M0 supply fell faster than it did in 1928 and 1929. On five of these occasions there was a recession, but nothing resembling the scale of what happened at the end of the 1920s. In some cases unemployment rose when the rate of M0 growth was high and fell when it was low: results that defy Bernanke\’s explanation. Professor Keen argues that it\’s not changes in M0 that drive unemployment, but unemployment that triggers changes in M0: governments issue more cash when the economy runs into trouble.

Facepalm.

President Obama justified the bank bailout on the grounds that \”a dollar of capital in a bank can actually result in eight or 10 dollars of loans to families and businesses. So that\’s a multiplier effect.\” But the money multiplier didn\’t happen. The $1.3 trillion that Bernanke injected scarcely raised the amount of money in circulation: the 110% increase in M0 money led not to the 800% or 1,000% increase in M1 money that Obama predicted, but a rise of just 20%. The bail-outs failed because M0 was not the cause of the crisis.

Jeez. It\’s as if MV = PQ never existed, isn\’t it?

Sure there\’s a multiplier, sure there\’s a V, the velocity of circulation.

But V changes in recession. So, in a recession we need a greater increase in M to stop declines in either P or Q.

Keen hasn\’t discovered anything new, he\’s simply ignoring (or ignorant of) the conventional wisdom.

If V were constant and we pumped $1.3 trillion of new Mo into the economy then we\’d have hyperinflation! Because we would have created $8 trillion or whatever of new wider money supply.

As to the rest of Keen\’s thesis, excess debt leveraging, sure, this is pretty much the Austrian view, you know, Hayek, Mises etc. Hardly new.

Instead, Keen says, the key to averting or curtailing a second Great Depression is to reduce the levels of private debt, through a unilateral write-off, or jubilee.

And no, that ain\’t the solution. We want to liquidate the unproductive debts, the stupid stuff, but not the good stuff. So we want bankruptcy of those who cannot pay, not simply the wiping away of all debts.

Yes, Death Row probably is torture

Among the approximately 3,250 prisoners on death row in the US, the vast majority will serve years in solitary and crippling conditions, awaiting execution. Of the 34 states that still kill people, at least 25 hold death row inmates in solitary confinement for 23 hours or more a day. Sensory deprivation is prevalent. On death row in Texas, hundreds of condemned men are isolated in 60-square-foot, single-person, solid-front cells for 23 hours a day. The prisoners exercise alone for one hour each day in a metal cage. Meals are served through a locking metal flap in the cell door. There are no work or group recreation programs; nor can the prisoners speak to each other through the solid cell walls and door.

The problem is, the Supreme Court doesn\’t agree.

Even though it should.

Note that this is nothing to do with the death penalty itself (although regular readers will know I\’m vehemently opposed to it). But the treatment of those actually on Death Row is, objectively, torture.

Hell, in the UK we would prosecute someone for treating a dog in this manner, let alone a human being.

Air Passenger Duty should be abolished

APD is a tax, a Pigou Tax, to pay for the emissions damage caused by flying.

All, right, all right, leave aside whether you believe any of that or not. Assume you do.

So, ew only want to have one Pigou Tax on an activity, we want to tax things at the optimal level, not the maximum level possible. We\’re trying to put into the price system the things which the price system doesn\’t consider: the costs of those emissions.

The emissions trading scheme means airlines will have to surrender a permit for every tonne of carbon dioxide they emit, which is expected to raise the cost of flying for millions of passengers.

Bigger airlines, such as easyJet and British Airways, have long been preparing for huge bills from the emissions trading scheme.

They will get a large number of free allowances in the first few years of the scheme to protect their businesses from becoming uneconomic.

Airlines now have to have carbon permits. This is the alternative method of getting emissions prices into market prices.

But we only want one of the two: thus, if we\’re to have carbon permits for flights then APD should be abolished.

Won\’t happen, I know, but it ought to.

Vickers speaks out!

The chairman of the Independent Banking Commission (ICB) insisted that rather than being seen as a warning against his proposals, the downgrades should be seen as \”a natural reflection of the taxpayer getting one step further off the hook\”.

Last week Moody\’s cut the ratings of 12 British lenders, including Royal Bank of Scotland and Lloyds Banking Group, saying that the ICB\’s report was \”credit-negative for bond holders\”.

Quite. The downgrade was entirely as a result of changes in the government guarantee on offer to the banks.

Yes, this does make things more dangerous for bondholders: it also reduces moral hazard and the implicit subsidy provided by taxpayers to bank shareholders.

This is of course exactly what several people have been arguing for. Strange that those arguing for these things immediately stated that the downgrade was Armageddon really.

What excellent news!

A third of all shoppers say that they are cooking with leftover food and scraps more than they were at the start of the year, according to a survey into shopping habits by the IGD, the food and grocery industry body.

Won\’t WRAP and all the environmentalists be pleased? You know, the people who have been whining that we throw away far too much of the food that we buy?

Or maybe it doesn\’t work like that. It\’s good if you waste less food because you are pure of heart but not good if you waste less food because you\’re skint?

You know, intentions matter more than the environment?

What?

Ritchie Tweet:

Richard Murphy
@RichardJMurphy Richard Murphy
If Nobel prize macroeconomist\’s work has no \’direct implications for the current situation\’ what\’s the point of it? http://ht.ly/6SLW1

Erm, celebration of advancement of knowledge maybe?

Honouring of those who have advanced human knowledge?

Or are we to assume the different argument? That he\’s not referring to the Nobel, but the the research?

What? All research must be immediately applicable? Umm, doesn\’t that rather destroy universities?

No, please, Richard, do come and tell us what you mean here.

What is this backing track?

What is the backing track to this?

Every time I hear it I think that I really ought to know what it is but I don\’t: and I\’d rather like to find it without the chatting over the top of it.

Ah, never mind, found it.

It\’s Count Basie version of Hang on Sloopy

Why we should cut workers rights

You know, make it easier to fire them?

Today\’s Nobel Laureate:

Before the 1970’s, similarly short durations but lower flows into unemployment
meant that Europe had lower unemployment rates than the United States. But since
1980, higher durations have kept unemployment rates in Europe persistently higher
than in the U.S. A general equilibrium search model with human capital explains
how these outcomes arise from the way Europe’s higher firing costs and more generous
unemployment compensation make its unemployment rate depend on a parameter that
determines a worker’s loss of valuable skills after an involuntary job loss.

Yup, higher firing costs mean higher unemployment.

Oh Dearie me, what a disaster for Ritchie and others

So, George Irvin:

This is what economists call the \”Ricardian equivalence\” hypothesis, first proposed by David Ricardo in the early 19th century and popularised by Robert Barro and other members of the \”rational expectations\” school of economics which enjoyed brief credibility in the 1970s. Bluntly, there is little empirical support for this hypothesis.

Ritchie:

This is one of the extraordinary achievements of the neoliberal era. It created the idea of “rational expectations” and so distorted true rationality in the process that they have persuaded people that voting against their best interest is the right thing to do.

Ritchie:

We must realise that this pension arrangement was designed by people who believed in the  Efficient Market Hypothesis and in rational expectations.   Both are fundamentally wrong.

Oh dearie me. They\’ve just given the Nobel for rational expectations.

 

The cost of country by country reporting

Remember, Ritchie expects the companies to just eat these costs. While there may be some indirect benefits for investors, the main purpose of these proposals is to help NGOs badger governments. Governments, in the main, don\’t need country-by-country reporting because they have the ultimate sanction – \”give us the information we want or we won\’t let you trade here\”. There are even doubts as to whether country-by-country reporting would provide sufficient information for Ritchie and the NGOs to derive meaningful and accurate conclusions about the tax compliance of multinational firms.

So unless the NGOs feel like cutting a cheque (and they may have some difficulty explaining this in terms of their charitable objects), on what basis do they feel they have any right to demand that the pensions of ordinary working people be punished annually to the tune of hundreds of millions of pounds for their ridiculous vanity project?

That\’s a very good question.

If, as Ritchie agrees, country by country reporting is going to cost hundreds of millions of pounds a year, why isn\’t Ritchie offering to pay for it? He is the one demanding it, after all.

Surely we don\’t all have to suck up the costs for his obsessions?

I am shocked, shocked, by Maddy Bunting

She has written a column about the Millenium Villages which gets absolutely, entirely accurately, to the actual problem.

It\’s something of a shock I can tell you.

Nothing wrong with the aim, the amount of money being spent, the desire to enrich the poor.

The problem is that the way the experiment has been set up we\’re not actually able to measure whether it works or not.

And, let\’s be honest about this, if Maddy can work it out then why hasn\’t someone as clever as Jeff Sachs?