Ritchie and understanding economics

This is a good one.

Econometric analysis of advanced OECD countries for the period 1965-2010 finds that a higher tax to GDP ratio has a statistically significant, negative effect on growth. For example, an increase in the tax to GDP ratio of 10 percentage points is found to lower annual per capita GDP growth by 1.2 percentage points.

He disagrees with this naturally. His refutation contains this quote:

Whether one looks at levels or rates of change, one cannot show any clear negative relationship between social spending and GDP per capita.’

Spot the problem?

Quite. The size of government is not the same as the size of social spending.

One of the points that is often made about the Nordics for example, often by myself it has to be said, is that they are very much neoliberal economies overlaid with large amounts of redistributive taxation. The interference of government in the economy is actually quite a lot lower than that in many other countries which have less of such \”social spending\”.

He\’s refuted a point not being made.

3 thoughts on “Ritchie and understanding economics”

  1. It also looks like he’s speaking about GDP per capita, rather than growth thereof; the original text quite clearly deals with the latter.

  2. Tim, I’m really not sure how much longer your incessant twattery on real life can keep a cohesive momentum. You may know about some shite about about how markets affect your precious little life, but you know nothing, really nothing, about real life.

    Face it, you don’t. Exactly like the twats, like me, that comment here.

    I have never read anything that you have produced, especially in the last few days, that marks you out as someone that wants anything more than what your fisty grey hands is clutching right now.

    You are an insult.

    And I am a masochist.

  3. Well, except we are often told that high taxes (penalising work) and generous benefits (rewarding layabouts) is bad for the economy, so I’d say the finding that high social spending does not retard growth or reduce the level of GDP would be a striking finding that undermines a fair bit of right wing economic dogma,

    Tim adds: And as often pointed out, the Scandies fund this through a more regressive tax system than our own, by high taxes on consumption, not returns to capital or corporations.

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