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?

Facepalm

Technology and cloud giant Accenture has confirmed it inadvertently left a massive store of private data across four unsecured cloud servers, exposing highly sensitive passwords and secret decryption keys that could have inflicted considerable damage on the company and its customers.

The servers, hosted on Amazon’s S3 storage service, contained hundreds of gigabytes of data for the company’s enterprise cloud offering, which the company claims provides support to the majority of the Fortune 100.

The data could be downloaded without a password by anyone who knew the servers’ web addresses.

Just put it in the hands of the experts they said…..

Some Private Eye stories come true at least

Statement from Dow Jones

OCTOBER 10, 2017
October 10, 2017

Please disregard the headlines that ran on Dow Jones Newswires between 9:34 a.m. ET and 9:36 a.m. ET. Due to a technical error, the headlines were published. All of those headlines are being removed from the wires. We apologize for the error.

###

Steve Severinghaus
Senior Director, Communications
steve.severinghaus@dowjones.com

Jessica Mara
Publicist
jessica.mara@dowjones.com

Err, yes, ever so slightly embarrassing:

There you have it. Steve Jobs’ will + Dow Jones + Apple Park = Google’s buying Apple. I think we finally have algorithmic transparency.

This morning Dow Jones shot some fake news out over the wires announcing that Google was acquiring Apple for $9 billion. For a brief second, the news sent Apple’s stock up about $2 to $158 per share. To the benefit of everyone’s morning, both stock prices quickly returned to normal.

As I say, there are times when even Private Eye stories come true. New technology baffles pissed old hack….

I wonder why we don’t do this

The entire world could be powered by one deep-sea wind farm stretching across the North Atlantic.

Building a renewable energy project the size of India across the ocean would allow the entire world to get access to sustainable energy and fulfil its needs, according to a major new study.

There are likely to be very significant hurdles to building such a major project, especially one that would require international cooperation and incredible levels of investment. But it would also allow people to get access to vast amounts of energy: at least more efficiently than onshore wind power.

The two researchers found that if a wind farm were built across three million square kilometres of the ocean it would account for roughly the equivalent of all energy used today.

I mean, there must be some reason why we don’t, mustn’t there?

What excellent news!

The profitability of the average UK farm could fall by as much as half after Brexit, new research suggests.
The report, by the Agriculture & Horticulture Development Board (AHDB), says the “worst-case scenario” would cut average farm profits from £38,000 a year to just £15,000.

That’s assuming:

Reduced subsidies and tariff-free access to the UK for foreign producers. Average annual incomes fall to £15,000

Those current higher incomes being, of course, how much we consumers are screwed by the current EU based structures.

This is how it works Grant

Grant Shapps has told Conservative colleagues that he has been subjected to an unprecedented level of “abuse and bile” since being outed as the ringleader of an attempted coup against Theresa May.

If you win then you’re a hero, bright new dawn and party united behind you. If you lose you’re abused.

That’s just how it works, has done since the first king looked nervously at the plans of his brother.

Elsewhere

TECH GIANTS AND SOCIETY
Sir, Liam Byrne says that tech giants should be adopting policies from Britain’s glory days through such things as profit-sharing and worker ownership (Thunderer, Oct 10). In this manner they can take the high road and thus benefit the wider structure of society. I would hope that the shadow minister for the digital economy would have a working knowledge of the industry of which he speaks, but there is little evidence of it. The industry already works on share options and stock grants — the very method by which the profits and ownership are shared with the workers.
Tim Worstall
Senior fellow, Adam Smith Institute

Still not managed the last letter yet though, an ambition still to be achieved.

As ever, there’s a clash of rights here

The police express inability to do anything under public order legislation and the situation has intensified with “both sides” sometimes locked in a stand-off. Back in January I raised this in parliament, and got no meaningful reply from the minister. Since then, ideas have been percolating on how to deal with this threat to women’s wellbeing. This week, a motion comes before Ealing council that would extend asbo powers – usually reserved to move on street drinkers and drug dealers – to stop these protests.

If successful, this approach could be replicated nationwide. This is, of course, far from being exclusively an Ealing problem; there have been similar protests in Camden, Twickenham, Southwark, Cardiff and Edgbaston in Birmingham, all aimed at frightening and intimidating women visiting abortion clinics.

This is about women’s security: every woman deserves to be able to go about her life in safety. I recently met some of those who work in the clinic and it was illuminating to hear stories from staff who frequently have their path obstructed by zealots simply while going to work. They keep an incident book; tellingly the chants and tactics differ for women entering and leaving. On the way in, it’s emotional blackmail: teddy bears are thrust at women who get called “mum”. On leaving they are met with anger and commonly told they’re headed for hell. Creepy footage of them shot without their consent gets transmitted via Facebook Live.

Abortion is indeed legal and it is and would be illegal to physically prevent someone from getting one.

Standing on the street expressing your views is also legal.

The intention here is that the free speech must be curtailed in order that the others don’t feel bad.

Hmm, let’s consider that. Ah, OK, considered : Fuck Off Matey.

There’s a lot resting on the “should” here

The opposite, abolitionist position – favoured by feminists including myself, and every sex trade survivor I have interviewed – is: prostitution is inherently abusive, and a cause and a consequence of women’s inequality. There is no way to make it safe, and it should be possible to eradicate it.

Julie Bindel (who else?).

I don’t actually know of any human society that has managed that should. Anyone else?

Well, yes

Even many Brexiters paint a bleak picture of what crashing out without a deal might entail for the British economy. “We are looking at a 10-year recession. Nothing ever experienced by those under 50,” said Pete North, of the Leave Alliance, in a chilling blogpost on Tuesday. “This is not the Brexit I was gunning for,” he added. “I wanted a negotiated settlement to maintain the single market so that we did not have to be substantially poorer.”

Except laddie is rather too influenced by Pater over what would be the effects of a reversion to WTO.

Well, yes, I think we could support this

The former Labour education minister Andrew Adonis has reignited one of the oldest controversies in British education by calling for the clock to be turned back on polytechnics granted university status.

Lord Adonis told a House of Lords committee that the government’s decision 25 years ago to allow more than 30 polytechnics to take the title of university was a mistake, and argued for the removal of the status from what he termed “the lower-performing former polytechnics”.

“I do think it was a very serious mistake – and I would never have done it as minister – to have rebadged all of the polytechnics as universities in 1992, which was a reform done without any proper consideration or advice,” Adonis told the committee, during a hearing on education funding.

And of course the third grade, like Islington Technical School, should be on a level lower once again.

Elsewhere

This is for a foreign language publication and it’s aimed at people not all that up on economics. Thus the detail is a bit sketchy:

Richard Thaler has won the 2017 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel – also known as the Economics Nobel. There is no controversy over the award to him – he’s widely thought of as being a thoroughly deserving recipient. There is a little pondering over the when of the prize though, some think he should have been noted in 2002, with Daniel Kahnemann, or perhaps 4 years ago with Robert Shiller. For all three have been working at the same basic problem we have within economics, when is it that we do actually work as the textbooks assume and when don’t we? This is more generally known as behavioural economics, the teasing out of what really are, instead of what are assumed to be, human reactions to stimuli.
This being, of course, what we’re trying to do in the whole field – what is it that humans do? Once we know that, and the way that they respond to changes in the incentives they face, then we can at least to begin to design methods to aid in a better world.
One outcome of Thaler’s work, something discussed in his best selling book with Cass Sunstein, “Nudge,” is that we can get people to save more for their retirement simply by assuming that they will. In more detail, Thaler’s work shows that we value what we’ve got rather more than we do what we might get. That is, $1 we have is worth more to us than $1, or perhaps even $2, that is on offer – this is known as the “endowment effect.” This feeds through into a possible overvaluation of the status quo in many situations.
At which point, we know that we want people to save for their retirements – excellent, so, how do we encourage this? We could imagine tax breaks for saving, a law stating that you must save (the UK does the first, Singapore the second) and so on. Thaler has pointed out the implications of that status quo bias. As and when people are signed up by their employer for pensions savings schemes, the default option could be the maximum permissible savings amount. People are more likely to take the choice their offered rather than change it. Just this, this little insight alone, is said to have led to some $30 billion more of pensions savings among Americans.
At the heart of the work though there is a great point being made. Market economics makes an assumption of rationality, something which itself comes in two flavours. The first being that people are just consistent. If they prefer A to B and B to C then they will also prefer A to C. The second is that people are rational calculating machines who zero in on the optimal strategy to gain their desires given their constraints. The first is held to be generally true, the second only at times. Thaler, along with other behavioural economists, has shown that neither are always true. However, as is so often true the interesting part is in trying to work out why the irrationality.
Some early parts of Thaler’s work concentrate upon the ultimatum game. In this there are two participants in the experiment, one is given $100 and told to split it, however they wish, with the second. The second can accept or reject the offer. Rejection means that neither keeps any cash, acceptance that the split happens. Logic would indicate that a 99/1 split should be accepted, a free dollar is after all a free dollar. That isn’t what happens though, splits of less than 70/30 are routinely rejected.
At which point we want to explain this and the usual idea is that humans have some innate sense of fairness. One that’s so strong that they will reject “unfair” offers at costs to themselves in order to punish that perceived unfairness. This does indeed seem to be true among American undergraduates who were the experimental subjects.
This result did not survive testing in other societies though. We now have a pretty good evidence base that resolutely non-market economies will accept just about any split, market economies will reject ones perceived as unfair. Which leaves our mystification just that one level deeper – do markets create that punishment against unfairness or are they a precondition for them?
In this instance we’re seeing something that doesn’t appear rational yet, upon deeper examination, it becomes entirely rational at that deeper level. Other parts of Thaler’s work talk about “limited rationality” which is where people do things that really aren’t rational in either of our two meanings. One of his examples here is a fund called “Cuba.” That’s the trading name for it, it doesn’t have any assets in Cuba itself, nothing to do with the place, that’s just the 4 letter acronym it’s known by. For years it bumbled along at the usual 10 to 15% discount to net assets that a closed end fund normally trades at – then it leapt to a 70% premium to that asset value. What? The trigger event was the US stating that it would open up a little more to trade with Cuba. The island that is, the place the fund has nothing to do with.
This change in price is clearly irrational and if it was something that persisted for a day or two we could just mark it down as a mistake brought on perhaps by bad information. But it persisted for months. Even financial markets – which Thaler and most others would agree are the most rational of our markets – aren’t really all that rational therefore.
The implication of this, one that Thaler pushes himself, is that we should therefore nudge people into making better, more rational, decisions. Sometimes this is obvious enough, greater savings for retirement probably are a good thing as above. However, the idea does run into a logical problem, which is that if people are irrational who is going to be the rational nudger? Of course, as with Kip’s Law (“the central planner always, but always, envisions himself as being the one doing the planning”) there’s no shortage of people who claim to be more rational than the rest of us. But given the way politics works it’s not in fact a given that those who are will be the people giving the nudges. A casual glance around the world shows that.
One of the joys of Thaler’s work is that it isn’t heavily mathematical and in fact, it’s all rather obvious. Except it’s obvious in a non-obvious manner. Once he’s explained a matter – two examples being why people like it when you take away the cashew nuts they’re enjoying eating, or how men will improve their aim when you stencil a fly on a urinal – then yes, it’s obvious! But before it was pointed out it wasn’t obvious at all.
What we really want to know of course is what is the deeper significance of all of this? Preventing bathroom messes, getting people to save, these are good and useful things but hardly about to set the world alight. That importance being that the standard microeconomics does indeed assume “Homo Economicus,” that we’re rationally reacting to stimuli and opportunities all the time. Thaler, along with colleagues, is pointing out that human beings simply don’t work that way all the time. But the important part of this observation is the “not all the time” part.
We are not in a binary situation here. It is not true that humans are irrational, thus must be told what to do. We’ve tried those planned economies and societies and we know they don’t work. It is also not true that humans are rational, always and all the time, so the unregulated world of varied fantasists also will not work. What we actually want to know is when is it that people are doing that irrationality and perhaps should be nudged or regulated out of it, when are they doing just fine and can be left alone?
The correct answer here is unknown as yet but in my opinion will come from something closely related to Thaler’s behavioural economics. Which is the result of the Prisoner’s Dilemma, an experiment in game theory. Two prisoners, if they both keep silent then they will both get a short prison sentence. If they both tell on the other then both will get a medium one. If one keeps silent and the other tells then silence earns a long sentence, informing freedom. What’s the best strategy for the prisoners?
This is still argued about when it’s a one time event. But when it happens over multiple iterations then the optimal strategy is clear, cooperation, or tit for tat. I’ll do this time whatever you did last time – inform or stay silent. At which point we’ve the beginnings of a useful structure.
Thaler tells us, proves to us, that we’re sometimes to often irrational. Regulation, nudges, can improve matters when we are – but what we want to know is, when are we? As the results of the two games, Ultimatum and Prisoner show, the answer is different in situations with multiple iterations, many interactions. Punishing people into fairness is part of – perhaps cause, possibly result – the market economy that so enriches, it’s worth it. Cooperation, tit for tat works over time. At which point a useful rule of thumb can be constructed.
Where we do things regularly then we’re probably acting rationally. We buy bread often enough that an unfair seller will quickly lose custom and be driven out of the market. We buy pensions usually only once in a lifetime, we’re far more likely to be irrational at that point. Thus we can leave the regular activities to humans to solve, regulation is needed more with the irregular.
Note that the conclusion is mine, not Thaler’s. His great contribution though is to get us to the point where we can even consider the point. People are not as rational as the standard theory assumes, we must therefore consider where, when and why people are irrational and what we plan to do about it.

It’s an interesting theory alright

It has also underrepresented individuals who subscribe to what economic historians Avner Offer and Gabriel Söderberg described to The Atlantic as the “social democracy” school of thought, which emphasizes making public policy decisions to help governments care for their citizens. This is in contrast to what Offer and Söderberg describe simply as economics, which is highly theoretical and pro-free market.
“The reason that social democracy persists despite the absence of a robust intellectual foundation is that it works, and it is more efficient than markets in this particular domain,” Offer told The Atlantic. “You could say that economics is deeply theorized but dubious in practical terms, and social democracy is exactly the opposite. It is very practical, and perhaps for that reason it is not very well-theorized.”

Indeed, as the authors noted in their interview, only one adherent to the social democratic school of thought has won a Nobel Prize in recent years — Gunnar Myrdal, who was Swedish.

Umm, yeah, maybe not so interesting a theory.

The Nobel Prize for Economics has become less about rewarding innovation and pioneering achievement and more about touting one school of economic thought, involving the promotion of free markets, over others.

We’re going to use a definition of social democracy which doesn’t include Joe Stiglitz, Paul Krugman, James Tobin, John Hicks, Amartya Sen, Arthur Lewis, Paul Samuelson as social democrats?

Hmmm.

Nancy MacLean seems a little overwrought

The Koch network and their allies claim they want “liberty.” They actually call themselves “the liberty movement” or sometimes “the freedom movement,” and speak in this very anodyne language about how they want to have limited government and freedom and lower taxes. For older white conservatives this language is very appealing. But what really bothered me in writing “Democracy in Chains” is that they’re not being honest. As libertarians they believe that there are only three functions for a legitimate government: To provide for the national defense, to ensure the rule of law and to maintain social order. Other than that, everything is illegitimate because other functions of government depend on taxing people — and particularly better-off people in a system with progressive taxation. For this type of libertarian thinking, taxing people to provide for programs, services and resources with which they may not agree is illegitimate coercion and therefore must stop.

In this Koch-donor dream, we are all responsible for ourselves from the cradle to the grave, unless there is a charity that happens to take an interest in us. We do not have federal laws to outlaw pollution or to prevent discrimination. Instead we trust everything to the free market and private property. This cause has pitted itself against the whole American model of 20th-century government. Regulation of food and drugs, the New Deal’s federal support for workers to organize and hold corporations accountable, the Civil Rights Movement, the women’s and the environmental movements, all of these things are illegitimate in the eyes of these people on the right.

Outside a few Ayn Rand devotees I can’t think of anyone who does actually believe that.

As the basic theory predicts

Economists tend to think that the corporate tax burden is shared between labour and capital, but even among researchers in the field there is substantial disagreement over how much of the burden is shifted to workers. This column exploits variations in local business tax rates in Germany to identify the corporate tax incidence on wages. On average, more than half of the corporate tax burden is passed onto workers, implying a reduced overall progressivity of the German tax system.

The smaller the economy relative to the world economy, the more mobile capital is, the more the burden of corporate taxation will fall upon labour.

Germany’s smaller than the US, capital is more mobile (think EU Single Market), the burden on labour is heavier than in the US.

One for Rocco

Doesn’t Ron Jeremy look a bit like Harvey Weinstein?

There will be a number of look alike actresses out there.

Hmm, thinking about it, they’ve probably already wrapped on the shooting of that one, haven’t they?