The argument being rebutted is that of Tim Worstall – that we should not tackle tax evasion because to do so would reduce GDP. He says the existing rate of evasion is optimal and we should not address it as we are at an equilibrium state where we can afford this level of crime.
No, I don\’t say that.
What I say is that there is some level of attempting to crack down on tax evasion that will reduce GDP, making us worse off as a result of trying to crack down on tax evasion. The optimal level of tax evasion to leave alone is the one where cracking down on it starts to make us poorer not richer. A level which I\’ve actually stated I do not know but which I know exists.
So entirely a strawman from Ritchie there.
As he makes clear, neoliberal economics is based upon the belief that everything about the world is measurably probabilistic. What this means is that neoliberal economists believe that, first, we know everything that might happen in the future. Second, they believe that we can attach to each event that might happen in the future a probability that it will occur. So, for example, such economists might say that in 2024 I might move house and the probability of this occurring is 15%. The result is that these economists think that the future is entirely predictable.
However, real life experience shows such a belief is obviously wrong, and Keynes pointed out why. As he argued, the number of circumstances where we can make the predictions neoliberal economists think possible are remarkably limited. He said the future is not probabilistic as they suggest in most cases: it is actually uncertain. That means we simply do not know what might happen, let alone with what probability
And that is sadly entirely bollocks. Neither neo-liberals or, what I suspect he really means, neo-classicals, deny the existence of uncertainty. In fact, risk and uncertainty are just subsets of uncertainty: those uncertain things which we can in fact attatch a probability to thus making them risks. To insist that because some uncertainties are transferred into risks because we have quantified them by assigning a probability means that we don\’t recognise true uncertainty is not just to deny parts of economics, it\’s to deny the very basis of statistics itself.
You know, those bits about sample sizes, significance etc?
What\’s the liklihood of an asteroid of sufficient size to do serious damage hitting the Earth in the next 10 minutes?
Somewhere around zero as we\’d already know about it if it was. What\’s the liklihood in the next 4 billion years before the Sun burns out? The risk is pretty much up there close to 1 actually. And it is a risk, we can see how many asteroids there are (or at least a subset), can see how many have hit other planets, heck, we\’ve even seen one part of shoemaker I think?) hit Jupiter.
What\’s the liklihood of one hitting in the next 100 years? Uncertain. We simply don\’t have enough data to decide either way.
As to this:
But worse the claim that we can decide what that is assumes we know all there is to be known and can correctly allocate risk to each component. I say we can’t do that, so we use ethical judgement instead.
Allow me to translate for you. We don\’t know so therefore everyone should do what I think they ought to do.
Which is rather the problem with ethical judgement really, isn\’t it? Ethics do rather vary…..
Now of course, I accept that a decision will be taken to allocate resources to crime that accepts that not all crime will be solved.But quite explicitly it’s not taken for the reason Worstall notes. It recognises there are conflicting goals subject to ethical judgement – plus a certain pragmatism that some crime will effectively remain unknown and unknowable – and therefore insoluble and therefore with present resources be an irreducible problem. This is not a statement of optimality: it is reluctant acceptance of a problem as yet insoluble.
So, err, there is an optimal amount of crime, of tax evasion then.
But that’s the real significance: this point is reached using a very different decision making process as a result that is explicitly ethical when neoliberalism is not.
Just that the definition of optimal is whatever Richard J Murphy thinks it is inside the recesses of his head rather than any objective facts that the rest of us can use to judge his opinions by.
This is the justification of a guru not an economist.