Ritchie just doesn\’t know his economics, does he?

By reducing the profits UK owned businesses can make tax avoidance undermines investment and employment in the UK;

Actually, it\’s the taxation of returns to investment which reduces investment.

No, not some neoliberal invention, that\’s just the standard economics of taxation.

Tax fags and fewer people smoke. Tax petrol and fewer people drive shorter distances. Tax investment and fewer people invest less money.

You would have more investment and more employment if you did not tax investment therefore.

79 thoughts on “Ritchie just doesn\’t know his economics, does he?”

  1. Murphy’s point is that if you tax businesses based overseas less onerously than domestic businesses, you will end up with a lot of businesses based overseas. Which will indeed undermine employment in the UK. It’s standard economics.

  2. PaulB

    no, I don’t think that makes sense.

    Isn’t his argument that the substance of these tax avoiding multinational businesses is in the UK, the profits are generated by the UK, and only the chimera of tax accounting reduces reported UK profits by shifting profit to overseas territories where it is taxed more lightly. If that’s what’s happening then these businesses will be perfectly happy to invest and employ in the UK.

    meanwhile, UK-only firms that cannot exploit such dodges will suffer, their employment and investment will suffer, but only because they are losing ground to the tax-avoiding multinationals. That isn’t an argument to overall UK employment and investment will fall, just that some firms will lose out to others.

  3. Do we actually care where businesses are headquartered? There aren’t that many jobs in HQs any more and most of those are at a high enough level of pay that they play personal tax games too.

    If the economic substance of the company is in this country then either British workers are getting paid or British consumers are getting goods that they want at acceptable (to them) value.

    Of course, if your only measure of economic success is the amount of the HMG tax take (and therefore the number of unionised, under your paymasters, peons who must be employed to shuffle irrelevant paperwork about and bankrupt companies for kicks) then anything that benefits non-your-union workers or the consumer is an irrelevance.

  4. SE’s of course completely correct.
    Which means the correct counter to Murphy’s claims is to wave banners & cheer the off shore based to the rafters because they’re investing more, creating more jobs & doing more for the real economy by their patriotic act. (That’ll give Arnald an aneurism)

  5. wave banners & cheer the off shore based to the rafters because they’re investing more, creating more jobs & doing more for the real economy by their patriotic act.

    Indeed, which is why I’m doing all my christmas shopping via amazon, and explaining to anyone who queries this that it’s because I support their moral position…

  6. Most people contributing to this blog (with the obvious exception of Arnald) have a good grasp of the issues and are generally right. The only slight problem is we are losing the argument (badly).

  7. Does anyone really believe Richard doesn’t understand how these things work? I’m not so sure, perhaps he understands perfectly well but he has paymasters to cater to .. TUC, Greens, Guardian, PCS, Class, TJN etc.. so he daresn’t go off message or they’d pull the plug, no?..

  8. @KJ – Good faith principle. Assume it’s due to ignorance not evilness.

    That principle, important as it is, doesn’t half get tested these days.

  9. SE @ 5,
    “Do we actually care where businesses are headquartered? There aren’t that many jobs in HQs any more and most of those are at a high enough level of pay that they play personal tax games too.”

    That must be true of any individual business. But say every single multinational was “run” by a brass plate HQ in Ireland? And with no profits being made anywhere in the world apart from Netherlands where all intellectual rights were based and charged at starbucks type rates; all freeholders owners of property were based in NL, so that no bricks and mortar retailer made a profit etc etc.

    Would we still say “that’s fine”? We’d still be working and paying tax, while the Irish and Dutch would be living comfortably on their cut of the low rates of tax on the corporate profits of the entire world?

    It seems to me that smaller countries can game the system because for them having lots of head offices makes a significant difference, and they can raise (for them) huge amounts of tax with very low rates of tax on profits that are really being earned elsewhere. Not that I have a solution…

  10. There aren’t that many jobs in HQs any more …

    Unless the building in question belongs to a major oil company, in which case you’ll find thousands upon thousands of people roaming the corridors, seemingly doing fuck all.

  11. Luke (#11), the answer is that we all stop having corporation tax, stop hiding the true level oftax by splitting it between companies and individuals, and have an honest level of income tax.

    Democratic & transparent.

  12. Luke @ 11
    That’s the EU. It is part of the Plan. We get out (extremely difficult and they know it) or we integrate (what they want)

    Tim @ 12 seemingly?

  13. I think the slight problem with Tim’s statement at #11 is it should be tweaked to “fuck all substantive”.

    Most of them will actually be busy but, generally, when they do anything that impacts on the front line, it will be either nugatory or actually harmful. But it keeps the exemplars of the Peter Principle away from places where they could actually put lives at risk.

  14. Luke @ 5
    But all the actual things would be happening right where they’d been before. People making things & supplying services. People buying things & enjoying services.That’s the point of doing them all. Even the taxes, at that level, would pay for most of what’s needed
    The other stuff just feeds the government.

  15. @ JohnK

    I listened to a fair bit of discussion about this on BBC radio (4 and 5) both last night and this morning.

    Relating tax paid to turnover, instead of profits? Check.
    Referring to things as *technically* legal (snearing tone)? Check.
    Banging on about ‘morality’ as if that’s actually a useful thing in this discussion? Check.
    Mention of Murphy as a ‘tax expert’ without any reference to his established political leanings? Check.
    Talk of tax paid being ‘uncovered’ (as oppose to, say, being read directly from publicly available documents) as if it’s all some big hush-hush conspiracy? Check.
    Not one solitary mention of the single market that makes much of the avoidance possible? Check.

    Damn right we’re losing.

  16. Question: If Corporation Tax in the UK is 24% and in the Netherlands it is 25.5%, why would a company want to “shelter” profits there?

    There may be certain exemptions, eg dividends from subsidiaries, and “income attributable to a foreign business enterprise”, but surely royalty payments for use of logo, etc., wouldn’t apply.

    How then, are Starbucks making extra money by avoiding tax…?

  17. @ TTG:
    Referring to tax evasion as tax avoidance: check
    Failing to acknowledge that the UK has any transfer pricing rules: check
    Refusing to accept that IP has any value: check
    Refusing to accept companies can make genuine losses for long periods of time: check
    Stating that the CT tax take has gone down £6bn because of tax avoidance rather than economic activity: check

    I could go on.

    The narrative – independent of facts – seems unstoppable.

  18. Richard @ 13
    “Luke (#11), the answer is that we all stop having corporation tax, stop hiding the true level oftax by splitting it between companies and individuals, and have an honest level of income.”

    That’s my first reaction. But…just about every advanced country (with the possible exception of small islands) has corporation tax. Are all the politicians and all the voters in every one of these countries stupid?

  19. The Thought Gang – you’ve got it. Try explaining single market, corporation tax being payable where based, how corporation tax and sales are not related and you get blank looks at best. Couple of cases I was accused of catering to the multinationals – I swear some people have a different reality than the one I’m living in.
    Saying what is rather than what people may want things to be like…..

  20. Luke,

    It’s not stupidity. It is ignorance (of non-trivial concepts of economics) on the voters’ part and a egregious cunning on the politicians’ part in the sure and certain knowledge that companies don’t vote and everybody-meaningful-to-political-campaining has too short a horizon to take longer term effects in to account.

  21. @ John K & TTG

    I wouldn’t worry too much, though. People will still shop at amazon, use google and buy their coffee at starbucks. It’s a bit like Tesco; if eveyone who bangs on about how evil they are refused to shop there they wouldn’t be in the position they are. The fact is that people go on and on about shopping sustainably and not propping up ‘tescopoly’ but go there anyway because it’s a) cheap, b) relatively good quality and c) nearby and open.

    And if amazon – or starbucks come to that – raised their prices (just in time for christmas – yay!) because they had to pay some spurious tax as a sop to manufactured ire (and told their customers this) then the politicians would find themselves dragged from their offices, Mussolini-style, by outraged punters.

  22. I’ve skipped the tread so sorry if somebody else has said this and I missed it, but it appears Ritchie is using a Keynesian model, in which case the “investment” (Y) which creates employment is government investment, i.e. state spending. (Consumption== kY, otherwise known as the anal jelly theory).

    So by not paying taxes, the State invests less, and thus creates less employment. Otherwise known as batshit economics. Hence-

    tax avoidance undermines investment and employment

  23. (
    In batshit economics, employment==consumption==production


    ∴ C=kY

    ∴ δC=k.δY

    …until you run out of unemployed labour


  24. It is ignorance (of non-trivial concepts of economics) on the voters’ part…

    Incidentally, economics is not a statutory part of the National Curriculum. I don’t recall being taught any at school (“it shows!”) and it seems odd that such an important thing is missing while things that seem less important are mandatory.

  25. it seems odd that such an important thing is missing while things that seem less important are mandatory.

    And if it were part of the NC, what would be taught? The statist/Keynesian hogwash. They would be none the wiser and, worse, imprinted with a considerable quantity of beliefs about economics which are no more true than astrology.

  26. economics is not a statutory part of the National Curriculum.

    let’s not run before we can walk. more than one in five Brits aged 16-65 is functionally illiterate. For children leaving school at 16 the figures are even worse – the last time they were measured 47% were functionally innumerate and 42% functionally illiterate.

    I’m therefore not that hopeful on them grasping economics.

    (counter-argument; many of those who leave school functionally illiterate probably go on to find employment in the recreational narcotics trade. At which point I’m guessing they acquire functional numeracy – albeit at a very micro-level – extremely quickly. Or, you know, die.)

  27. BIS @ 17 I agree, but, in my v. simplistic model, a cut of the profits made on those activities in the UK (or wherever) go to Ireland/NL – maybe not a significant amount for us, but quite a lot for them if they have all the HQs of every multinational in the world, and charge corp tax of 5% or whatever.

    So they’re freeloading off us – do we/should we mind? That’s my sole point really. Saying it goes to the govt doesn’t help – I’d rather it went to my govt than someone else’s.

    (I’m leaving out here what happens if there’s no corp tax – there just doesn’t seem any near term prospect of that happening.)

  28. Well, I dunno. Keynes appears to have been functionally innumerate (though he covered for it by babbling a kind of algebraic salad, full of sound and fury signifying nothing) and he did alright for himself.

  29. Ian B @35. According to Wikipedia, he got a first in maths from Cambridge, having got a scholarship to read maths there. Please tell me you’re being ironic, and not in some parallel universe where you and you alone understand maths.

    (A friend with no physics or maths beyond O’level became convinced not just that the theory of relativity was wrong, but that all physicists who did not agree with him were not so much wrong as deluded or liars, so I’ve seen it happen. )

  30. Well Paul, I’ve got The General Theory as an audiobook. It’s the only economics textbook that comes with a laugh track.

    Seriously; there seems to be a split of opinion as to whether Keynes actually believed what he wrote, or whether he knew it was a “good lie” to provide an alternative to Marxism, or whether it was simply a manifestation of his infamous puckish wit. I am inclined towards the first explanation myself; but, if as you seem to be insisting, he was too well educated to write such a nonsense by accident, then it must be deliberate nonsense.

    That remains less important than the fact that it is nonsense.

  31. Luke:

    In thread after thread, all across ye internets (and here, too), I await the Keynesian fanboys to actually justify or meaningfully defend the garbage in The General Theory. They never do.

    If I made the mistake of attacking Relativity, I would be mobbed by physics experts demonstrating why I am wrong. Not so with Keynesians. It seems to be because they cannot do so.

    It is worth adding that Relativity remains unassailed as a theory. Keynesianism, on the other hand, was even abanonded by socialists in the 70s when western economies demonstrably broke the light barrier.

  32. Just to add-

    “He attended Columbia University, where he was awarded a Bachelor of Arts degree in mathematics and economics in 1945 and a Master of Arts degree in 1946. He earned a Doctor of Philosophy degree in economics in 1956 at Columbia under Joseph Dorfman.”

    -that’s Murray Rothbard, who said Keynes was spouting bollocks.

    So, it’s not really lone internet crank Ian B you’re arguing with, but with many people (including Rothbard) who are considerably better qualified than John Maynard “one term of economics” Keynes.

    That’s also John Maynard “daddy bought him a job at Cambridge” Keynes, by the way.

  33. It is worth adding that Relativity remains unassailed as a theory.

    Well, except that we know it (General Relativity) is wrong. Not very wrong, admittedly, and at a macroscopic level, the best thing we have at the moment but it is more right than Newtonian mechanics in degree, not in absolute.

    Because there are a whole bunch of unexplained mathematical infinities that crop up (gravitational singularities being the best known) that mean that although the maths is luvverly, we know it must be wrong. And there’s this whole quantum mechanics nonsense that seems to work just as well (at the micro level) but is not compatible with GR. Sighs …

  34. IanB>

    I’ve always assumed that the General Theory was just a piss-take of Das Kapital, designed to highlight the absurdity of Marxist ‘economics’.

    That aside, I’m yet to hear a criticism of Keynes based on what he actually said or wrote, rather than what people imagine or have been told he said or wrote. For example, one commonly sees the following quote taken out of context and ridiculed:

    “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.”

    The ridicule ignores the fact that Keynes was himself using a deliberately ridiculous argument to demonstrate the fallacy of the common conception he was attacking.

  35. Ian: in reaches of the internet wilder yet than this one you’ll find relativity cranks complaining that no real physicist has defended the Theory of Relativity to their satisfaction.

    Your objections to Keynes are:

    1) He’s done no new work since 1946
    2) He’s been criticised by members of the Austrian School
    3) You don’t like his mathematics

    All these things seem to be true. But you do need to explain why you think (3) in particular so much worth repeating.

  36. Ian B, you’ve missed the point (and not answered Paul B’s question). The issue is not whether Keynes was “right”. (I don’t know, btw, but I suspect nothing could ever persuade you). It’s “did he have anything interesting to say?” and ” if he was wrong, why?” My criticism of my friend is not that Einstein must be right, but that my friend just started making ad hominem attacks without knowing what he was talking about.

    Mr W, for example, says Keynes was wrong because, even if he’s right in theory, his recommendations depend on govts tightening in good times, which Mr W thinks is unrealistic. That’s a rational argument (maybe based on his prejudices, maybe not, but one that’s worth looking at).

    You just say ” he couldn’t do sums” when he obviously could. That’s just silly. Now, answer Paul B’s question.

  37. Luke (and Paul) I have previously engaged in very long threads discussing the specifics of Keynes’s mathematics. These have generally been rather depressing experiences. Paul’s method of argumentation, as Bloke In Spain recently noted, is to split hairs with an electron microscope, rather than engage with the general argument.

    I did, in fact, above demonstrate one of Keynes’s first errors, which is egregious; he divides income into consumption and investment (which is cautiously valid) then declares that there is a ration between the portion and the whole, and thus that a constant k exists between them, and thus that income is a multiple of I. Hence the famous multiplier, which is simply the ratio of the two, and thus his absurd conclusion (predicted and stated by himself) that if I were zero, k would be infinite and thus first employment, and then prices once employment were exhausted, would rise without limit. This is absurd, and a thinking man would have realised that it indicated an error. But not Keynes.

    The basic problem is that there is simply no such relationship between the two portions. It is trivially true that what is not consumed is saved (and vice versa) so the two portions must sum to the whole. But it does not follow that the whole is a multiple of the part; and yet upon that assumption rests all of Keynes’s prescription for ending a recession by government spending (which in a sleight of hand, he suddenly in the text declares to be “I”, when just paragraphs before “I” was savings).

    To put it another way, it is the same as observing that my foot is 1/6 the length of my body, and thus my height is 6 times the length of my foot, and thus if my foot is stretched, my entire body will stretch by the same proportion. And then to bemoan that if only the length of my foot were zero, the multiplier k would be infinite, and my body would grow without limit.

    It really is that daft.

    Now I could go on like this, taking the thing apart paragraph by paragraph. Henry Hazlitt did precisely that, in The Failure Of The New Economics. But Keynesians, and Paul in particular, aren’t interested in economic truth. They want their justification for magic government money that multiplies itself, so arguing about it is largely a waste of time.

    He couldn’t do sums. He obviously couldn’t do sums. Believing he could is the “silly” thing.

    Now, I’ve answered your question, and, as many times previously, answered Paul B’s question. Paul will now go for some form of hair-splitting, nitpicking or ad hom. Anything to avoid engaging the arithmetic.

  38. Philip Scott Thomas

    The ridicule of Keynes doesn’t usually include his involvement in the Bloomsbury Se(c)t. The Bloomsburys were a mostly a closed set of relatives and their university BFFs. There were also a handful of auslanders such as E. M. Forster and, surprise, surprise, Keynes.

    Sometimes the auslander was taken up by the inner circle as a pet, as when Keynes became, for a brief while, Grant Bell’s lover.

    Demonstrate why Keynes’s economics were seriously intended and weren’t meant simply to flatter the inner circle at the margins of which he was a just another Charles Ryder.

    Show your workings out.

  39. Also, Dave @42 is being more generous than Keynes deserves. Here’s the “holes in the ground” quote in context-


    Dave missed out the immediately following-

    “It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”

    What he’s actually saying is that gold mining (or digging up buried money) is good, in providing employment, but it is even better if the makework also produces something useful. He is quite clearly asserting that digging up buried money would be an economically beneficial policy, not lampooning it.

  40. Worth mentioning, Keynes was very big on eugenics. Still very big on eugenics when the implications of practical eugenics were looking him right in the face. Economics is the study of how people interact with each other. Something he seems to have had trouble grasping.

  41. PST, as I understand your argument, it is that Keynes shagged more people than you, therefore his economics is wrong. Try again.

    Ps I have no training in economics, and no maths beyond A level, so I’ll have to back off when anyone comes up with something better than “he’s not our type.”

  42. Ian seems to be talking about the Marginal Propensity to Consume, which we discussed at unproductive length some time ago. He agrees that if you increase income, some proportion of the increase will be spent. But for some reason I have been quite unable to grasp, he says that Keynes cannot be allowed to assume as much.

    Keynes’ multiplier applies in equilibrium. He was of course aware that equilibrium cannot be reached instantly, and that at the singularity Ian is proud to have discovered, it cannot be reached at all. Unlike Ian, Keynes understood the maths quite well enough to know exactly how relevant that is.

    The passage Dave quotes was mocking the gold bugs – the gold standard was a hot topic at the time Keynes wrote those words. He’s saying that burying money is a stupid idea, but, in the economic conditions of the early 30s, it would be better than doing nothing.

  43. Also Luke, it is rather disheartening for someone to demand a substantive (mathematical) argument and then, when one has wasted time typing it out, have the person who did the demanding declare that they don’t understand the math so can’t comment. Bait and switch? Chain yanking?

    Besides all else, this is not high level math anyway. Anyone with a reasonable grasp of math can understand it. It’s O Level really. When Keynes brings in calculus terms like derivatives (for marginal variables), well calculus was A Level when I did it, but you don’t actually have to do any differentiation or integration or any proper math like that. Keynes doesn’t.

  44. Paul, how many more comments will it take before you equate pointing out Keynes’s arithmetical fallacies with Holocaust Denial? That appears to be where you’re heading.

  45. It’s also worth noting the argumentative style used by Paul here, which is no doubt some fallacy with a proper name on Wikipedia. It is the justification of a remarkable claim with an unremarkable one, accusing the opponent of denying the unremarkable claim.

    He agrees that if you increase income, some proportion of the increase will be spent. But for some reason I have been quite unable to grasp, he says that Keynes cannot be allowed to assume as much.

    Nobody denies that trvial fact that some proportion of income will be spent and the rest saved.

    “If you plant these beans, a magic beanstalk will grow that reaches a realm in the clouds!”

    “That’s nonsense”.

    “Do you deny that beanstalks grow from beans?”.

  46. IanB>

    Leaving aside your spat with Paul, there are two things which have struck me as particularly bizarre about your argument.

    In the first place, I find it deeply odd that you object to Keynes as ‘absurd’ since I find that at least 99% of what he wrote is entirely unobjectionable common sense.

    Moreover, I find it even odder that after I’ve specifically mentioned how Keynes quotes are commonly taken out of context and unfairly criticised, you then do exactly the same thing with the example I gave. You appear to think that what he should have said is exactly what he did in fact say if you read the whole chapter rather than out-of-context quotes.

    As I said, I have no problem debating the merits of Keynes’s arguments – but let’s debate his actual arguments, not what you imagine his arguments to have been.

  47. “If you plant these beans, a magic beanstalk will grow that reaches a realm in the clouds!”

    “That’s nonsense”.

    “Do you deny that beanstalks grow from beans?”.

    That’s perfectly logical, so far. Beanstalks do indeed grow from beans, so you haven’t yet given an argument against magic beanstalks.

  48. Dave,

    1) I am now mystified as to what you think Keynes meant. Rather than me guessing what you think he meant, can you state clearly what you take the meaning of the quoted passage to be?

    2) The beanstalk example illustrates that what is at issue is not beanstalks, but magic. Everyone agrees that beanstalks exist; if a person is asserting that magic beanstalks exist, they cannot use the existence of mundane beanstalks as evidence.

    My prior argument regarded the “magic” part of Keynesiasm. Paul’s subsequent declaration of the existence mundane beanstalks was not thus a valid answer. It is a deliberate focus on the wrong part of the issue.

  49. Also Dave, the “spat” with Paul B is simply that, so far as I can tell, he’s a devout Keynesian who takes great exemption to criticism of Keynesianism. We have this ritual where he demands a substantive argument from me (or others) and then when he is given it, he then engages in Protean contortions to avoid actually addressing the issue raised. Which is very irritating, and I suspect that that is his actual intention- simply to cause irritation. The boiled down matter here- whether or not, if




    is simple enough to understand, and if he had an answer he would supply it. But he never does.

    Hence my somewhat reduced politeness at having him repeatedly yank my chain over this.

  50. Ian B>

    1) Can’t we just go with what Keynes himself states that he means? I can’t summarise it simply and easily for you, because it’s not a simple argument. Keynes is not verbose in taking a chapter to explain it. To an extent even treating the single chapter in isolation is to take it out of context, but your minimum unit needs to be the chapter, not a couple of paragraphs.

    You need to bear in mind that Keynes commonly goes off on a lengthy tangent where he pours scorn and ridicule on some common idea or other, but he does so by highlighting the absurdities, and doesn’t then finish up by explicitly crowing over how he’s demolished an argument – some people seem to think that those are his own arguments and he’s arguing for the absurdity rather than demolishing it.


    “if a person is asserting that magic beanstalks exist, they cannot use the existence of mundane beanstalks as evidence”

    Of course they can. If there was no such thing as a bean-stalk, the magic would be irrelevant.

  51. It’s true that if A = B.C and B is fixed then ?A=B.?C

    I’m not a devout Keynesian (but I do like his pragmatic approach). I take no exception to informed criticism of him.

    My primary purpose on this thread was to challenge Ian’s assertion that “Keynes appears to have been functionally innumerate”. Ideally, I’d also persuade Ian that he’s not competent to judge Keynes’ mathematics, but alas the Dunning–Kruger effect is defeating me.

  52. PaulB>

    Whilst we’re nitpicking, I hate the way the D-K effect is so commonly confused with anosognosia (in the non-technical sense). Dunning and Kruger defined a small subset of anosognosis as the D-K effect, but it’s far more common to see non-D-K anosognosia in action.

    (To be clear, the difference is between not knowing that you don’t know something, and thinking that you’re above average as a result of that.)

    It’s of course highly ironic that people are commonly unaware of their lack of understanding of the D-K effect.

  53. Okay Dave, don’t answer the fucking question then. It was a simple enough request.


    It’s true that if A = B.C and B is fixed then ?A=B.?C

    I didn’t ask that. I asked whether, if C=A/B, δA=BδC. Which isn’t the same thing.

  54. Also Paul, do you debate people face to face a lot, and do those debates tend to end up with you getting punched a lot? I ask because, at least online, your pompous high-handedness is repulsive.

    Please, take your Dunning-Kruger put-downs and find somewhere lacking in sunlight to shove them.

  55. Also, I have no explanation for the inordinate number of “christian name followed by B’s” in comment sections. Mine is my surname initial (Bland), but it seems unlikely that everyone else has a surname beginning with B. So, no idea on that one.

  56. Ian>

    Well I answered that question – or rather the one you asked, which was actually whether it was possible for me to explain it to you. You don’t like the answer – no, it’s not possible – but it’s still an answer.

  57. Paul, to reiterate-

    “I didn’t ask that. I asked whether, if C=A/B, ?A=B?C. Which isn’t the same thing.”


    Fair enough, you’ve just surpassed Paul in evasiveness.

  58. Ian: I’m bored with this. I suppose we don’t disagree about elementary algebra. I suggest you assume that I’m going to agree with the trivial parts and make whatever demonstration it is that you’ve got in mind.

  59. Ian B>

    If you assume good faith on my part, I thing you’ll find that in fact the only remaining explanation other than evasiveness is that you asked a bad question. There isn’t a dumbed-down version I can give you, if that’s what you’re asking for.

  60. Margaret Arthur Sharpe

    Paul B: ‘I’m not a devout Keynesian (but I do like his pragmatic approach).’

    Hmmm. Just saying that when the facts change you change your mind doesn’t really cut it, if you have to invent ‘animal spirits’ to make your theory work.

  61. If you ask me to choose between a model in which ‘busts’ are always endogenous to government action and one in which they’re usually exogenous, I prefer the latter. Because, as a practical matter, that is usually the case for any given country.

    Keynes was of course quite capable of analysing the causes of economic failure when relevant. In his The Economic Consequences of the Peace, written in summer 1919, he predicted hyperinflation in the Weimar Republic. Predictions by the Austrian School of hyperinflation – by Ron Paul since forever, by various others in 2009 – have been rather less successful.

    However, it’s not the case that Keynes and Hayek are diametric opposites. At a technical level they agreed about a lot of things, and they seem to have had a genuine admiration for parts of each other’s work.

    The important difference between Hayek and Keynes was, in crude terms, that Hayek believed that governments were inevitably so bad at economic management that it was better to leave everything to whatever market mechanism could be devised – the result might be horrible, but it would at least be self-correcting eventually. Whereas Keynes believed that governments could manage the economy competently, at least if they took his advice, which in practice they seldom did. For what it’s worth, I’d say that the truth is between the two.

  62. Given we’ve had 60-70 years of governments trying to manage the economy (mostly using Keynes’s ideas, or bastardised versions of them) and they have proved fairly incompetent at it, could we not give the alternative 60-70 years to see if that works?

  63. When Tim finds lefties complaining about the shameless oppression of workers by capitalists over the last 60-70 years, he points out how much workers’ living standards have risen over that time…

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