July 2009

Ritchie discovers the British tax system

And he\’s shocked I tell, shocked.

He finds that the direct tax system is progressive, the indirect system highly regressive and the allocation of benefits is progressive. Gini on market incomes is somewhere over 0.5 and at the end of the money shuffling is 0.34 or so (don\’t take those as being too accurate, I\’m just eyeballing).

The system as a whole is progressive: as anyone who bothered to read Chris Dillow could tell him.

And what should we do about it?

The reality is that now is the time for progressive taxation reform – to make sure that the richest in the UK pay a fair share for the society we live in, because they do not right now. And that has to change.

OK, let\’s take that and see where we can go with it. This is the original report that everything comes from.

Hmm, average income in the top decile is around £90,000 (no point in being more accurate than that throughout). Cut out everything they get from the State and everything they pay to the State and you get £65,000 a year. There are some 2.5 million households in that top decile.

So, total income of \”the rich\” is £225 billion a year, of which they pay £63 billion or so a year to the State (nett of course, taxes out and benefits in) leaving them with about £163 billion a year to wave in the faces of the downtrodden poor.

How much does the whole system cost a year? Around £660 billion isn\’t it?

So, we could take all the money off the rich, every penny (and of course we could only do this once as the next year they\’d all bugger off) and we\’d be, umm, lessee….£660 minus about 60 they already pay minus another 160 ish that we let them keep so far….what, £440 billion short of what government costs us?

And that\’s why we tax the poor, because the rich simply don\’t have enough money to pay for the State we already have.

If you want to have a State that the poor don\’t have to pay for, but the rich carry all the burden, then you need a smaller State than the one we have.

The Church and Teh Gays

No, you don\’t have to believe this. Yes, you can mock this all you like.

Until it sorts out in its own minds what exactly it is about homosexuality that offends it and is able to explain its reasons in intellectually rational, credible and convincing terms to outsiders, the church (all churches, actually) will continue to be assailed with justified accusations of homophobia. Saying \”because the Bible says so\” is not quite good enough, especially when the church has changed its mind about so many other things in the Bible over the years.

No, not that, I\’ll mock that in a moment.

The Church\’s view (now this is the RC view but there\’s very much a strand of Anglicanism that follows this, it\’s also pretty much true of Islam and Judaism) is that only sex which has the possibility of conception, within marriage, is moral. Everything else is out.

So homosexual sex is out, as is lesbian. Blow jobs are fine but no orgasms that way, same with anal and other varieties. Condoms are fine to prevent HIV transmission but there must be a hole to leave open the possibility of conception (that was actually a real argument put forward by part of the Curia at one time).

As I say, you don\’t have to agree with this, don\’t have to believe it or live this way, mock it all you wish. I certainly neither believe it nor agree with it.

But that is the basics of the position.

And it\’s a pretty clear position, there\’s logic to it if you accept the original premises.

One of the most hilarious press conferences I attended in my lengthy stint as the Guardian\’s religious affairs correspondent…

But my real point here is that I would expect a religious correspondent, yes, even one for The Guardian, to actually know all of the above. Which is why Stepehn Bates rather deserves our mockery.

Now Naomi Klein rejects her own thesis

Progressives need to get clear on our answer now because we haven\’t had the potent combination of a serious crisis and a clear progressive democratic mandate for change since the 1930s. We use this opportunity, or we lose it.

Precisely and exactly the opposite of her thesis in The Shock Doctrine.

Consistency, only for righties, eh?

And she\’s still talking bollocks too:

This is the most comforting and dangerous lie that there is: the lie that perpetual, unending growth is possible on our finite planet.

As economic growth is defined as adding value then growth can continue while we continue to find new ways to add value. The limit is human ingenuity, not physical resources.

Modern capitalism was born with the so-called discovery of the Americas. It was the pillage of the incredible natural resources of the Americas that generated the excess capital that made the Industrial Revolution possible.

Bollocks dear, entirely bollocks. Try reading some Greg Clark.

Science paper bleg

Anyone with access to Science or the AAAS out there?

Would you like to send me the .pdf of this article?

My knee jerk reaction is that those fisheries that are seeing stocks rebound are those that have sorted out property rights. I\’d like to see how well the old knee is jerking at the moment.

Update. OK, got it now, thank you !

The Guardian\’s Katine Project

I\’m very impressed with their basic idea. Can a group sponsor a small region onto a better development path?

Absolutely fascinating to find out if it is indeed possible.

However, in detail I\’m not sure.

A considerable number of pupils in the majority of primary schools in Katine still study in poor conditions, making it harder for them to perform well, it has emerged.

Amref\’s six-month report, published earlier this month, states that, as a result of the Katine project, the number of pupils sharing a desk had been considerably reduced, from a ratio of one desk to 10 pupils (1:10) to the required national ratio of 1:3.

However, a field survey conducted by the Guardian found that the desk:pupil ratio in some schools still stands at 1:8, and in others pupils still had to sit on a dirty floor.

Desks? These are hardly a high tech good. Amazon, as we\’ve been endlessly told, was founded on a door across two trestles.

Surely it\’s hardly beyond the wit of man to hire some labour with a chain saw and a few machetes and bodge up a few desks? Even if the chain saw has to be supplied by the project?

Fancy that!

The National Centre for Social Research study, which surveyed just under 7,100 parents found that two thirds say they have to work because they need the money.

Simply astonishing, eh?

To turn the old phrase around, work is like exports, simply the boring shite we have to do so that we can consume.

This story in short

The UK should and will breach EU law on organ transplants.

Now, whether you or I believe they should is another matter….but the EU is certain to have something to say about it in time.

What I think about it all of course is that the two organs which can be done from live donation, kidneys and livers (yes, you can cut out part of one and give it to another, both then regenerating: I saw it on House so it must be true) should have paid markets in them.

Last year, 3,504 organ transplants were carried out in the UK from 1,844 deceased and living donors.

However, there are currently 8,054 people on the active waiting list for a transplant and a further 2,400 who are currently too ill to join the list.

About 1,000 people a year, or three every day, die while waiting.

That would solve a lot of that problem.

Magna Carta

Right, well, that\’s that then, liberty is dead.

All four copies of the 1215 Magna Carta – the celebrated civil liberties document – have been granted World Heritage status by the United Nations.

When they start putting things in museums you know that the next stage is to say that it\’s not relevant to the modern world.

Credited with establishing many of the freedoms on which English and international law is founded, the charter was forced on King John by his subjects, and guaranteed certain civil liberties.

One of its most durable legacies is the right of Habeas Corpus – still used in law today – and which grants the individual the right to be freed from judicial detention or harm.

See, they don\’t even understand the bleedin\’ concept. Which is that you should be free from arbitrary detention or harm, and only subject to that imposed by the judiciary.

And of course, Habeas Corpus has bugger all to do with international law. If it did, we wouldn\’t have the appalling extradition treaty that we do with the US, nor the European Arrest Warrant.

Slightly strange

The country’s first “workplace parking levy” will come into force in Nottingham in 2012 and is likely to be adopted by other councils.

Under the scheme, any firm with 11 or more staff parking spaces will be charged £250 a year for each. That cost could rise to £350 within two years.

I admit that my detailed interactions with the UK tax system have been sparse in recent years, not having been in business in the country for some time (personal taxation is another thing of course).

However, I dimly recall that a parking space provided by an employer is a taxable benefit, isn\’t it?

So this is rather double taxation, isn\’t it?

From the annals of Ritchiedom

A fall in the monetary volume of purchases on Visa cards and a rise in the number of transactions shows that, umm, the apocalypse is just around the corner. From the FT:

Visa said consumers spent less during the quarter as the global recession inspired greater thriftiness, resulting in a 7 per cent decline in year-on-year cash volumes to $969bn.

However, the number of processed transactions grew as consumers increasingly used their cards in preference to cash or cheques. The total number of processed transactions was 10.3bn in the quarter, an 8 per cent increase year-on-year.

Ritchie\’s analysis:

Let’s translate this: a) people know they’re in trouble so are spending less on big ticket items but b) they’re paying for more and more smaller, everyday, and even essential items on credit. Which means they’re putting off the day of reckoning when they just can’t pay the debt.

Let\’s try an alternative explanation. From Visa\’s (Europe) previous quarter\’s results:

Ecommerce continued to grow strongly with a 26% increase in transactions proving online retailers are winning market share from other retailers. The number of transactions on debit cards also grew very strongly by 14%.

Ah: we\’ve a structural change in where people buy things meaning that we\’ve a structural change in the method people use to pay when buying things. Note also that debit cards do not imply credit being used.

Hey, your brain cells, your choice.

Bloody marvellous!

Finally, someone\’s getting the point:

Householders will earn up to £150 a year from recycling their rubbish under a scheme designed to reward those who put waste in the correct bins.

Sorting to recycle takes time. Your time is worth money. Thus those insisting you recycle should pay you for your time in sorting to recycle.

The best (in fact, only, as neither the UK nor EU governments have bothered to study the question) estimates of time required are 15 minutes per household per week for simple recycling, 45 minutes for complex with food and garden waste.

At minimum wage this 13-39 hours per year is worth £75 to £225 a year.

That £150 a year offer is in the right ball park.

One proviso though: if, when the cost of this offer is included, recycling loses money (yes, including the externalities upon the environment) then we shouldn\’t in fact be doing such recycling. For it would then be clear that whatever benefits there are to it are not outweighed by the cost of peoples\’ time to do it.

I look forward to the results of the scheme.

The end of Moore\’s Law

Interesting piece about how silicon fabs ar getting more and more expensive and so we might see Moore\’s Law slow down.

I\’m not sure he\’s entirely right in detail, I think there might be some confusion between cramming the transistors on closer together and using bigger disks to make the chips from. From what I understand it\’s that latter that dramatically raises the costs.

Still, I think there\’s one huge thing missing from his piece:

Moore\’s law has seen computing power grow exponentially for 40 years – but soon economics, not physics, may stop it.

He\’s using the word \”economics\” there to mean huge costs. But buried in there is the real argument, that the huge costs are indeed there but no one is sure that they can sell enough of the new chips to make those costs worthwhile. That is, the proper economic point being that the costs will be greater than the benefits (or the benefits the consumers are willing to pay for perhaps) and thus this is an investment that we don\’t in fact want to make. That is, economisc is stopping us from wasting scarce capital.

Well, no Edmund

Human nature, however, is such that we crave certainty. When we discover something that looks like a feasible theory, we stick to it doggedly, until something proves us wrong. This was our collective error a few decades ago, when economics was hijacked by something called the efficient markets hypothesis, a seductive theory that both tied in with Adam Smith (postulating that most asset prices would always be a fair reflection of supply and demand) and seemed able to predict the future with more than occasional accuracy.

No, that ain\’t the EMH. It says pretty much nothing about supply and demand. Actually, in the weaker version it says that markets process all the publicly available information. Sure, some of that info is about supply and demand but the point is in the processing of the information. There\’s a stronger version, which states that the results arrived at as a result of such processing are \”right\”.

The EMH is thus not about supply and demand, it\’s about the processing of the information we have about it. Sounds like a small difference but it isn\’t: for if the FMH was about s and d then, if they could just find out what they were then bureaucrats could do as well as markets. But if it\’s the market doing the processing of the information, then you can\’t effectively short circuit markets by the use of bureaucrats, for you need the markets to process the information.

Whether the EMH is actually correct is another matter (to me it seems simply axiomatic that the weak version is correct, the strong one, well, I dunno).

But in a strange way, the by-product of this financial collapse has been to free economics of this burden. In the corridors of the Bank of England and Treasury, there is a distinct whiff of excitement. For the first time in decades, economists have been able to throw away their textbooks and go back to first principles; to exhume once-sacrilegious figures such as John Maynard Keynes or Friedrich Hayek. It is unsettling, no doubt, but this is a fertile moment, an opportunity from which may be born a better model of how to run an economy.

We are already seeing the consequences. In the future, markets will be less free; there will be more regulation; the state will be more interventionist. Taxes may become more redistributive. But from the ashes of the crisis may come a new understanding of how to run an economy that is both more successful, and more stable, than the failed models of the past.

That outcome really rather depends upon whether people read more Hayek than Keynes or vice versa, doesn\’t it?

It also rather depends on which bits of Keynes they read: it would certainly be an advance if they absorbed two of his points about fiscal stimulus: the first being that when you\’ve growth above trend you should in fact be doing fiscal contraction, saving money for the bad times which will inevitably come. As Brown so famously didn\’t. The other is that the best method of fiscal stimulus, the easiest to implement, the fastest and the one that best accords with microeconomic incentives as well as macro desires, is to cut national insurance payments.

If those are the two things that the Treasury takes away from a rereading of Keynes then I for one would be happy….