October 2011

Timmy on Twitter

Have to say that these two consecutive (well, consecutive on my timeline or whatever) amused me:


@spanneredbooks Bert Random
@wood5y Pretty much – Worstall is a libertarian zealot, with a really unpleasant (and often hypocritical) view of the world…

@alikichapple alikichapple
@RegularGrrrl Don\’t worry too much about Worstall, he is a hard-right authoritarian conservative who likes to provoke. #asshole
I\’m both a libertarian zealot and a hard-right authoritarian conservative?
Good grief, I thought I was far too old to be such a contortionist.


The Murphmeister on heterodox ideas

Others d not share that view. The criticism that has arisen is that of the 100 who signed the letter to the Observer not all were ‘economists’. Some were social scientists, others accountants or in business schools and others, like me have professional and not academic post graduate qualifications.

Those who make such comment utterly miss the point. For a profession that supposedly promotes competition as the cure to all problems economics has been curiously ruthless in eliminating it. It is now almost possible to study anything but mainstream neoliberal economics. It is this economics that has failed us, but if you do not subscribe to it then it is very hard to now get a PhD in economics, let alone a job as an economist at a university. neoliberalism ha squeezed all alternative economic thought out of economics, which is all the poorer for it.

But that, of course is why alternative thinking has had to come from elsewhere.

Here\’s a list of economics departments in the UK.

I defy anyone to uncover a department (and just to keep it simple, we\’ll limit ourselves to people who actually offer an \”economics\” degree) which only teaches \”neo-liberal\” economics.

Warwick, for example, teaches Keynes in macro 101.

Term 1: Economic Growth and Business Cycles. The module begins by introducing the concepts and variables of interest for macroeconomic issues, focusing particularly on the recent experience of economic growth, unemployment, and inflation in the UK and continental Europe. It then moves into the theories and models to which economists have turned to advocate or criticize different policies. We analyze models in both, closed and open economies. We start with the classical long-run theory of determination of economic growth and inflation. The Keynesian approach to aggregate demand with fixed or sticky prices is then introduced with a discussion of the determinants of short-run economic fluctuations.

Term 2: Macroeconomic Policy. Expectations and forward-looking behaviour have important influences on the markets for aggregate output, money, and labour. The module considers how they may stabilise aggregate demand or make it more volatile, along with implications for macroeconomic stabilisation policy. Short-run trade-offs between inflation and unemployment and their implications for monetary policymaking are analyzed. Open economy issues such as fixed versus flexible exchange rates are examined in the context of the Mundell-Fleming model. Macroeconomic stabilisation policy is reviewed in the light of long-run constraints arising from the government\’s need to finance deficits by borrowing. The module closes with a discussion of the European Monetary Union.

Mundell-Fleming for example is the Keynesian model with fluctuating exchange rates.

UCL second year macro:

Balance of payments accounts.  Exchange rates, competitiveness and the Marshall–Lerner condition.  IS/LM analysis in the open economy: the Mundell–Fleming model.  Exchange rate expectations, including overshooting.  Inflation and unemployment in the open economy.  Supply shocks.  Policy analysis in the open economy: exchange rate as policy instrument, fiscal policy, supply-side policies.  Applications to macroeconomic performance and policy in Europe and to European Monetary Union.

IS/LM….Hick\’s interpretation of Keynes.

Southampton, Ricthie\’s Alma Mater. Second term macro:

This unit provides an introduction to the major theories explaining the aggregate behaviour of the economy. The salient macroeconomic trends reflected in long term growth and cyclical fluctuations are emphasised. Competing explanations for the empirical patterns of growth, unemployment, and inflation are assessed.

This is a near random choice, starting at the bottom of the list. I\’ve included the first three that actually gave some detail of the syllabus.

The only economics taught in the UK is neo-liberal stuff? The man\’s spouting complete bollocks, isn\’t he?

Absolutely delighted to offer a challenge. Find me a UK university that does not teach Keynes in the undergraduate economics programme.

Man\’s mad or ignorant…..or possibly just dissembling.

Err, Yes?

Fukushima nuclear plant could take 30 years to clean up

Removal of fuel rods and decommissioning of reactors could take decades, warns Japan\’s atomic commission

So, err, how long does it normally take to decommission a reactor?

I have this vague sort of idea that you wait a decade or two anyway to get rid of the short lived isotopes before you start.

Glen Cononish

It takes one tonne of rock to produce enough gold particles to fashion a wedding ring.

Blimey, that\’s a rich mine, no wonder they\’re so keen to get digging in a national park.

A more normal gold mine would be 1 gramme per tonne rock.

And unless you\’re at the very cheap end of the market a wedding ring is 5-10 grammes.

The absurdity of the definition of \”trafficking\”

So Silvio\’s involved, eh?

Mr Berlusconi, 75, is accused of having sexual relations with belly dancer Karima El Mahroug at one of the evenings he hosted at his lavish villa and at the time she was just 17 years old.

Miss El Mahroug was one of 33 women who attended the parties and at which it is claimed – among other things – that they dressed as nuns and police officers to perform seductive pole dances and stripteases.

It has now emerged Mr Berlusconi was named in this year\’s State Department\’s Trafficking in Persons 2011 report which details the parties and describes how one of the guests was a minor.

\”In February 2011, judges set a trial date for Prime Minister Silvio Berlusconi for the alleged commercial sexual exploitation of a Moroccan child, media reports include indicate evidence of third party involvement in the case, indicating the girl was a victim of trafficking,\” the report said.

Now, there may have been all sorts of things going on here. While we might not regard a 17 year old as a child, in terms of the (legal) sex trade in Italy she is and thus this is \”child prostitution\” (if true, of course).

As background:

Karima El Mahroug reportedly arrived in Italy with her family from Morocco in 2003, settling in the eastern Sicilian coastal town of Letojanni.

So, immigration, with family. She then goes on to become, umm, a dancer.

Now this just isn\’t what we all think of as \”trafficking\” is it? We all have a mental image of some girl/boy/child kidnapped, spirited across a border and then forced into sexual slavery. To call Ms. Mahroug \”trafficked\” is an insult to those (very few) who really do suffer from being forced into sexual slavery.

But the term does get used in this expanded manner. By those who seem to want to show that trafficking is a much larger problem than it really is. By those who would ban consensual for money sex for example.

As with the modern equation of relative poverty with absolute poverty, we need to fight against this conflation, this demeaning of the language.

Richard Tyler: Nope, you\’re wrong

What hope is there when even the newspaper writers, the specialists, don\’t understand what is going on?

Richard Tyler is the Telegraph\’s (both daily and Sunday) \”Enterprise Editor\”.

European leaders remain under immense pressure to provide more detail about the terms of last week\’s refinancing proposals, which are set to cut Greek debts by 50pc, and see a €100bn recapitalisation of eurozone banks.

No, Greek debts are not set to be cut by 50%.

Foreign private sector holders of Greek debt are to be asked to take a 50% cut, yes. But said foreign, private sector, holders of Greek debt do not hold even a majority of Greek debt.

The others, the public sector holders, the Greek banks (I think, the reason being that if they took the haircut they would immediately be bust, requiring Greece to recapitalise them thus raising the debt again) are not taking a haircut.

Thus Greek debt is to be cut by perhaps 20%: which isn\’t enough. If Greek debt was to be cut by 50% then the Greek problem, the one of the country\’s solvency, would be over, done and dusted.

But the debt ain\’t being cut by that much and the problem ain\’t over.

This isn\’t a trivial detail folks, for because the solvency problem ain\’t over we\’re going to have to revisit this in a few months or years.

And if those who write the newspapers don\’t know all of this then what good are those who write the newspapers?

It\’s certainly *A* plan to pay the pensions

Mr Truell, founder of the Pensions Corporation, a pensions buy-out firm, said research by the London School of Economics estimated the public sector pension liability at £1.3 trillion.

If the Treasury issued gilts to plug the gap, the resulting fund could bankroll infrastructure projects that would generate returns used to meet the pension liabilities as they fall due, he said.

Well, yes,

He said issuing the gilts would create a \”virtuous circle\” of income meeting future pension liabilities. \”A decent power project yields around 7pc. The Treasury have to pay 2.5pc at the moment to issue gilts so you have 4pc to pay off the liability,\” Mr Truell said.

There\’s certainly some truth to this.

We all know, the markets all know, that this money is owed. So making it explicit by issuing the gilts shouldn\’t change very much.

It\’s also trivially easy to point to some projects that could be invested in. We could even, if we were good little Keynesians, point out that borrowing to spend will give the economy a boost.

However, there is just that one little fly in the ointment.

No, it\’s not the idea that the government would end up owning a largish chunk of the economy: there\’s plenty of ways in which such investments could be structured so that we\’ve not got the social workers pension fund actually trying to manage things.

No, rather, well, hands up everyone who trusts politicians to invest in profitable deals? No, not \”profitable\” on a social basis, that\’s not what we\’re talking about here. We need to have projects that are profitable on a cash basis, a pure business basis. No, not even on a creating jobs basis, a raising aggregate demand basis, a taxes coming in basis.

We need to make a straight accounting profit off this £1.3 trillion, that\’s the whole point of it.

Given that we\’ve got private sector companies sitting on hundreds of billions of cash (dunno, maybe it\’s a trillion or more?) and they can\’t seem to see profitable projects to put that into, where are all these projects that are going to make the money to pay the pensions?

We cannot, for example, put it into solar panels. They don\’t in fact make a profit on this basis (not unless we rook the people even more on their electricity bills at least). We can\’t insulate every building in the country with it because this again doesn\’t make an accounting profit. Sure, it might reduce our dependance on foreign energy, might lower fuel poverty, might reduce climate change but however desirable you might think these things are they\’re notactually accounting profits that can be taken to the bank to pay the pensions. We can\’t spend it all on education, not unless we charge the students for their education in some manner and so on.

That\’s what the problem is. Absolutely anyone can draw up a list of things to invest £1.3 trillion in that would make the country a better place by their particular lights. But that just isn\’t what we need from this proposal, we need to be generating £60 billion or more a year in straight cash profit, after financing costs, for this to work.

And what the fuck do we invest in to gain that?

If we\’re allowed to use the \”ah but think how much richer the country will be as a whole\” argument then I\’ve an idea. We know very well that there would be large transitional costs from abolishing the welfare state and replacing it with a citizens\’ basic income, with scrapping our absurd tax system and replacing it with a simple flat consumption tax. £1.3 trillion would cover that and more: but we still cannot do that because that\’s not what we need from this plan.

Compass\’ Plan B

Oh dearie me. 100 economists sign up for this?

This is not to argue that the deficit can be
ignored indefinitely. But if demand could be
restored and the employment rate increased, a
significant portion of the structural deficit would
disappear, leaving the rest to be financed through
a combination of controls on spending at the
right moment when the economy is growing
again and tax revenue increases.

Err, no. The structural deficit is, by definition, that part of the deficit that does not disappear when demand is restored and the employment rate increased. They are there talking about the cyclical deficit but calling it the structural one.

Pure ignorance of economics of course, as if the people writing it didn\’t pay attention to their economics classes after the first few weeks. You know, that \”of course neo-classical economics is all bullshit\” thing?

Looks like our favourite retired accountant from Wandsworth did more than just advise on this document.

And given that error in the first few paragrpahs, how many of our \”100 economists\” actually read the plan before signing it?

This is fun:

It is now widely agreed that the £200 billion
programme of quantitative easing (QE1) launched
in March 2009 mostly benefitted the bankers.25

Hmm, footnote 25:

25 See for example R Murphy and C Hines, Green Quantitative Easing: Paying
for the Economy we Need, Finance for the Future, 2010.

So \”widely agreed\” now means one of the autohrs of this report referring to his own previous report, does it?

This is also fun:

the moment, the Jobseeker’s Allowance payment
for a single working age person under 25 is £53.45
and for a person over 25 it is £67.50. Research
by the Centre for Research in Social Policy at
Loughborough University shows that a single
working age person with no children requires
a weekly income of around £185 ‘to reach a
minimum acceptable standard of living, covering
essential requirements and allowing people to
participate in society’.28 It is clear that benefit
levels for working age single people fall far short
of what is required to alleviate poverty. Raising
the levels of Jobseeker’s Allowance and other
working-age benefits such as Employment and
Support Allowance so that they are at, or at least
much nearer to, the minimum income standard is
an essential prerequisite for the benefit system to
be effective at preventing poverty among people
searching for work.

We\’re going to cut unemployment by subsidising unemployment more. Ignorance of the basic causality here seems to be an essential doesn\’t it? If you subsidise something you get more of it.

Research by Landman Economics

Another writer of the report self-referencing his own  work there.

Another economic boost could come from a
financial transactions tax.

Well, no. The EU actually says that an FTT would shrink the European economy by 1.7% or so. Not really an economy boosting measure that.

Research on the possible revenues from a
financial transactions tax published by Tax
Research LLP in 2010 suggested that total global
yields from a tax of one half of a basis point (one
200th of 1% or 0.005%) on spot and derivative
foreign exchange dealing would raise approximately
$33 billion annually, while a tax at a
similar rate on exchange-traded and over-thecounter
bond, gilt, derivative, swap and other
trades could yield approximately $118 billion
per year.30 Obviously these are global figures,
but the large volume of trades taking place in the
UK suggests that the UK’s share of this revenue
would be substantial.

Tax on spot FX is illegal in the EU which is why the EU version doesn\’t include it. We\’ve also another self-reference and even better, no one seems to have noticed that the FTT being proposed by the EU is for the money from the FTT to go to the EU. It would actually be a net loss to the UK Treasury as what we currently get from Stamp Duty would be redirected to the EU under this new FTT.

HM Revenue & Customs
say it is £42 billion – made up of £35 billion of
illegal tax evasion and £7 billion of unacceptable

tax avoidance. But the true figures are possibly
as much as £70 billion and £25 billion a year,
respectively, to which can be added £25 billion of
tax paid late.34

Self-referential Murphybollocks again.

The report as a whole just seems to be a collection of every bad idea that\’s been floated by Compass, Murphy and the nef over the past few years. And they\’re taking the fact that they had a bad idea a couple of years ago as proof that this is a widely accepted and wonderful idea now.

Ho hum.



Plan B

Letter to the Observer here.

All the usual tosh from all the usual suspects.

Just about the entire economics department from SOAS. Prem Sikka (yes, they are counting an accountant as an economist), R. Murphy (ditto), the bird who writes Gaian Economics, various nef-ites, Gregor Gall (professor of industrial relations I think, not an economist?).

Essentially, a list of those who have or do write for The Guardian plus those who would like to.

Increase benefits and pay for it through an FTT (even the EU has said that an FTT will shrink the economy).

Green Quantitative Easing. Print money to spend on windmills in effect. They\’re incapable of understanding the difference between quantitative easing (printing money to bring down long term interest rates) and printing money to spend.

Oh, and the Government should direct investment through a national investment bank. As if it\’s not been tried before and doesn\’t work?

Willy doesn\’t even get the math of the Greek bailout

Greece\’s debts are still unsupportable, even though the country is relieved of half of them.

This is nonsense, tripe. Why is this man paid to write columns?

Greece has not been relieved of half of its debts.

Leave aside his opinions in this column (erm, current travails in the eurozone show that Britain should join it) and concentrate just for a moment on facts.

The Greek bailout gives a 50% haircut to private sector holders of Greek debt. It gives a 0% haircut to public sector holders of Greek debt.

Given that public sector holdings of Greek debt are around and about 50% of the total outstanding, the bailout relieves Greece of 25% of the debt burden.

Which isn\’t enough.

These numbers are well known, anyone who reads the FT for example will be aware of them.

So why are we getting columns about the bailout which don\’t even understand the basic maths of the bailout?

Now here\’s a question

When the #Occupywherever crew express some inchoate rage about how the system just isn\’t working and we need to rethink the whole thing from the ground up they\’re regarded in some quarters as expressing the obvious wisdom of the people.

When the eurosceptic crew express some inchoate rage about how the system just isn\’t working and we need to rethink the whole thing from the ground up they\’re regarded in the same quarters as expressing the obvious stupidity of the people.


Cake and eating it

The new Chinese divorce law:

Since August 13th, when China\’s Supreme People\’s Court reinterpreted the country\’s marriage law, many of the women leaving marriage registry offices like the one in Chaoyang have more than just the end of their marriages to bemoan. According to the new law, residential property is no longer to be regarded as jointly owned and divided equally in the event of a divorce.

Instead, whoever paid for the apartment or house is the legal owner and gets to keep it in its entirety.

Gosh,that\’s terrible, isn\’t it? Almost like Scottish law, pre-marital possessions are not part of marital possessions.

A major reason why the new law is regarded as unjust by most women is that in China men, or their parents, traditionally buy the family home. Indeed, many women will refuse to marry until that happens.

That makes it even worse, doesn\’t it?

The women hold out for a home to be bought before marriage and then if they divorce they don\’t get half the home.

What bastards the slant eyes are, eh?