Timmy elsewhere

At the ASI.

Why do people find things as simple as markets so difficult to understand?

31 thoughts on “Timmy elsewhere”

  1. Who says they don’t understand markets? I think they do understand markets, hence they’re complaining about market conditions.

    It does act as another reminder that open borders disproportionately affects the bottom end of the market, which is why business types tend to like it (cheap labour), the elite tend to like it (cheap nannies and gardeners) and manual workers tend to dislike it (they come over here, taking our jobs).

  2. I’ve long thought that faith is really a matter of choice. So, maybe people don’t believe in the market, in the face of the evidence of their own experience, because they don’t want to believe. If you want to build the New Jerusalem, want it badly enough that you have convinced yourself that it can indeed be built here, today, then the market must be disbelieved.

  3. With ref to the ASI article, always thought the per hour price of whores is one of the finest economic indicators money can buy. You are, after all, dealing with the discretionary spending of adult working males totally unaffected by government market interference by either subsidy or taxation. Supply side’s a reflection of real economic hardship. No need to adjust for measures to alleviate poverty etc. All done for you.
    For reference, the p/h rate here is down to mid ’90s levels, no adjustment for inflation included.

  4. For reference, the p/h rate here is down to mid 90s levels

    This is just a case of the state sector crowding out the private.

    After spending all their money on a good screwing by the state, they have no money left for the independent providers

  5. Those open borders affect the bottom end disproportionately because at the top end the borders have almost always been, in effect, open. Your average businessman, middle-class professional (some nationally protected markets aside) has always found his labour subject to the full force of global competition. Those he/she employs have had protection.

    So opening the borders is just putting us businessmen/middle-class professionals back on a level playing-field with the lower orders.

  6. JamesV-

    There are various differences though. Those at the top end can use all kinds of barriers to entry, ranging from qualifications, to cartels and licensing, to networking, to reduce competition.

    The particular problem though is who one is competing with. The third world currently represents a huge, expanding resource of dirt cheap manual labour who will move to first world countries and work for peanuts. Not many of them are getting off the banana boat for a job on the board of Goldman Sachs.

    Of course, a large part of this would be solved if the third world reached first world economic standards. Curiously, the upper eschelons of Western society are pouring vast quantities of effort into keeping it in agrarian primitivity, via NGOs.

    I wonder why.

  7. You also have to remember my usual schtick that much of the white collar world is on massive quantities of permanent welfare via the financial system. It’s pretty easy to keep your pay level up when it’s quantitatively eased, as the saying goes.

  8. The sad truth is people like fascism. They want a strong, autocratic central government to smooth out the world on their behalf. Markets behave independent of such “help.”

    “A government big enough to give you everything you want, is a government big enough to take away everything that you have.” – Gerald Ford

    The problem is, government empowered to do what it wants to to help you will quickly realize it can do whatever it wants to. Here in the U.S., they have banned 100 watt light bulbs, and they wanted to ban top load washers. They did succeed in screwing them up.

    http://online.wsj.com/article/SB10001424052748704662604576202212717670514.html

  9. For reference, the p/h rate here is down to mid ’90s levels, no adjustment for inflation included.

    I noticed that after I took a look at punternet reviews.

    It’s struck me that if you have a massive benefit withdrawl rate that for young women with kids and without qualifications, it’s about the only way out of benefits, where you immediately see a return on your labour (escorts still have to pay taxes). Plus, the work is flexible – get the kids in bed, get mum round to babysit, and you go and do a few hours work.

  10. IanB, I know there are plenty of non-protectionist protectionist barriers in certain professions. The better-organised, and the longer a profession has been around the higher those barriers tend to be (I guess the profession at hand is a notable exception). But for the bulk of us doing professional-y stuff that didn’t exist 30 years ago the barriers are effectively zero.

  11. Couple of comments above about the oldest profession not being taxable. Is that right? Not talking about the practicalities here – plenty of small time self employed types aren’t noted for their tax paying. Just what is the theoretical position?

  12. Here in Western Australia I’d be astonished if any of the independents paid taxes. Brothels pay GST but as far as I know leave it up to the girls to decide whether they declare their income.

  13. People understand markets well enough. They’ve seen property markets inflate at rate far above the general rate of inflation and housing bubbles in many countries (US, UK, Spain, Portugal, Lithuania ,Latvia, Poland ,Ireland etc consult bubblebubble.com.) High rents and property costs have reduced the demand for other things: shops and pubs on high streets, open for years are closing in droves. In 1910 rents or property expenses were 8% of income; in 2010 they were 25%. Half of people’s income now goes in a roof over one’s head and taxes.

  14. That’s not caused by markets though, at least not by free ones. It’s deliberate government policy to inflate property. It couldn’t have happned without (a) intense building restrictions via planning regs and (b) government stoking monopoly money into the system.

  15. @Luke

    In the UK it is relatively difficult to live for more than a couple of years with high cash spending and no taxed sources of income. You have to keep mobile. Many sex-workers regard it as better to pay a certain mount of tax in return for lack of official hassle and the need to change address every 6 months.

  16. @ Luke

    just to elucidate, you can live in a travel lodge, but if you want a place of your own you have to declare earnings or income…..so you have to be at least semi-official in terms of income. unless you are preapred to live in a caravan or canal boat or squats…..

  17. Luke (#12) asked if prostitution is taxable.

    Income tax, yes; see the Miss Whiplash case (Inland Revenue Commissioners v. Aken 1990).

    VAT, probably, if turnover is over the threshold; see the Polok case (R&J Polok, t/a Supreme Escorts 2002).

    Both High Court cases.

  18. @IB
    How do you explain that Land Value Taxer Henry George was moved (so he said) to write Progress and Poverty (1879)by coming across land in Oakland Calif going for $1000 an acre ?California then had a population of 380,ooo: it is now 38 million. The place was so uninhabited there was practically no government, certainly not one deliberately choosing to inflate land values and major work (like on the railroads) was parcelled out to huge armies of Chinese labourers whom George had taken it upon himself to attack in print on racist terms (1869), checking out his economic background in Philadelphia Library by reading JS Mill’s Political Economy .(This, not incidentally, contained a more reasoned account of how to levy a Land Value Tax which George appears to have pinched and distorted.) There is no such thing as a Free Market absent LVT or action on land price inflation .And if they’re in place it would n’t be free, would it?
    As well as the supply of land, the supply and creation of money is also a form of private- sector monopoly which requires State intervention.

  19. I don’t know, DBC. I am not familiar with the economy of California in the 19th century. The first guess would be that the land was worth $1000 an acre. Land has a value, like everything else.

    I don’t know what you mean by “there is no such thing as a free market absent LVT”. I suspect your definition of “free market” isn’t actually “free” or a “market”.

  20. This LVT thing is completely beyond me. All land is basically worthless because you can’t cart it away. You soon find that when you’ve got a piece that nobody wants. It’d sell for a fortune in Kensington & Chelsea if only it’d go on the back of a truck & you could find somewhere off of Holland Avenue to squeeze it in.
    So the value in land is what you do with it. But we’ve already got perfectly adequate ways of taxing what people do on land, from raising crops, to mining minerals, to running factories, to building & living in houses. Even profits on land speculation can be taxed as capital gain. And if the value of the land is what you do with it, it doesn’t change from when you bought it. Not in any real sense. That’s what it cost. That’s what’s on the books. It changes when it’s sold because that’s when the use changes. If it’s increased in value it’s because the new owner has a higher utility for it. If there’s a profit it can be taxed. Borrowing against it is no different from borrowing against future earnings.
    As far as I can work out, LVT is trying to extract some of that profit before it exists. So the only way an LVT can work is if land continues to rise in value, irrespective of its utility value. What if it falls? Do you get a rebate towards mitigating the loss? Thought not. Whole thing seems to be an excuse for manipulating a continually rising utility cost. Otherwise it’s just a crafty way of extracting or increasing other taxes taxes.

    The answer to DBCR’s 1000 bucks an acre California question was how much did they sell? If somebody paid a grand it had a grand’s worth of utility value. If they didn’t, it didn’t. Just because someone valued it at 1k means squat.

  21. bloke in spain,

    All land is basically worthless because you can’t cart it away

    If land is worthless, why does it cost more to rent a 2 bed house in Kensington than a 2 bed house in Scunthorpe? Seems to me there’s something more valuable about the land in Kensington than Scunthorpe.

    If it’s increased in value it’s because the new owner has a higher utility for it.

    No, land increases in value because (generally) the state improves the value of it. The state spends out on increasing the speed of the railway near you, the value of your land increases.

    As far as I can work out, LVT is trying to extract some of that profit before it exists.

    LVT is a tax on the value of the land. Not profit, value. Someone owns a flat in Kensington and doesn’t make any money renting it out, they still pay the tax.

    What if it falls? Do you get a rebate towards mitigating the loss? Thought not.

    Well, if it falls relative to other land (e.g. someone builds a new runway nearby), the land tax probably would fall (you have to consider inflation). Certainly compared to other land, the value would fall.

    Whole thing seems to be an excuse for manipulating a continually rising utility cost.

    Nope. It’s about taxing rent-seeking rather than wealth-creation.

    Otherwise it’s just a crafty way of extracting or increasing other taxes taxes.

    Again… nope. LVT isn’t designed to collect any more or less tax.

    Go and actually read the literature.

  22. bloke in spain said “So the value in land is what you do with it”

    Isn’t the point of LVT that the value of land can depend on what other people do to surrounding land?

    Land in Kensington is only worth what it is because London is nearby, there are roads and underground railway lines connecting the two, and fewer of your neighbours are the sort who might try to stab you than would be the case in Brixton?

    All of that is to do with surrounding land, nothing to do with what has been done on the land in question.

  23. But the Stigler is wrong to say that it is generally the State that improves the value of that land.

    A lot of it is other private landowners doing things to their land (and a lot more would be private if the State left things alone a bit more).

  24. So Much For Subtlety

    Luke – “Couple of comments above about the oldest profession not being taxable. Is that right? … Just what is the theoretical position?”

    One of the least liberal things I ever heard was a lawyer once explain to me that the British Inland Revenue did indeed tax prostitutes – who at that time were not just doing something illegal, but something that they could go to jail for doing.

    Which was bad enough in itself, but in order to do this, the Inland Revenue had the right to deem someone a prostitute. And the right to assume their level of income. And hence the right to assess their income tax at that level. That the British government took it upon themselves to decide if someone was or was not a prostitute and then guess how much they earnt and then demand a slice of it by menaces always appalled me.

    I hope they do not do it any more.

  25. So Much For Subtlety

    Matthew L – “Only DBC Reed could turn a discussion on tarts for hire into one about land value tax.”

    Godwin once pointed out, over time every thread ends up talking about the Nazis. Perhaps Reed is trying to prove that he can guarantee every thread will end up talking about land value taxes.

    So there is a simple solution – What was Hitler’s view on the land value tax? Anyone know?

  26. As a general point, this thread was n’t about prostitutes until some of this site’s old dependables made it so. If only computers could be added to the mix, this thread would take off to 100+ mailings, the conjunction of sex and computers being an irresistible source of fascination round here.
    @BIS The Stigler was a bit brusque in his critique of your comments. The first form of LVT (proposed in England by JS Mill ) was meant to apply only to land value increases, so if your land went down in value ,or stayed the same , you would n’t pay any land tax: the later Henry George form just taxed the value to within an inch of its life, no matter if you were still paying for it at an old, pre-slump price . It is perfectly possible to envisage an economy with massive demand stimulus spending which is blocked from entering a new bubble by JS Mill LVT (sometimes called the Sentinel Tax). In this scenario LVT would n’t kick in if land and property values held steady, as would probably be the case when people realised that any property speculation would cost them: this tax would mostly serve as an anti-inflationary measure.
    @SMFS
    Although the titled people you so much admire for running banks etc and generally showing such sound judgement that capitalism is teetering on the edge, generally do not figure very large in land tax discussions except as landowners looking for something- for-nothing land price increases , even they realise that housing and land bubbles have just about ruined the “free market” economy in the US Ireland, Spain, UK ,Poland Latvia,…you name it . LVT provides an anti bubble remedy. If you know of any better, don’t keep it to yourself.

  27. DBCReed =As a general point, this thread was n t about prostitutes until some of this site

  28. DBCReed =As a general point, this thread wasn t about prostitutes until some of this site s old dependables made it so

    First line of article, thread refers to= The Daily Mail has a report looking at the plight of the hardworking prostitutes of the country.

    Not really hard to see why DBCReed is in favour of LVT. Reality disconnect.

  29. So Much For Subtlety

    DBC Reed – “Although the titled people you so much admire for running banks etc and generally showing such sound judgement that capitalism is teetering on the edge”

    Since we took control of this country away from the titled, the country has been going down hill. They did not cause the present mess. The smart arse Grammar school children did. Even that is not true – their heirs did.

    “generally do not figure very large in land tax discussions except as landowners looking for something[]for[]nothing land price increases”

    That is simply a stupid claim. The one thing you can say about British titled landowners, they have shaped the countryside and the towns to our enormous benefit. You only have to look at those parts of London controlled by Titled families to see that they have been able to plan in a way that the State only wishes it could. You can look at the countryside and see what they have preserved. Unlike democracy which has brought us the ruin of the Spanish and Italian coastline for instance. Or state planning which brought us the housing estates of Glasgow.

    They do not do nothing. They do a great deal by controlling building and especially the building of really ugly buildings. Nothing improves property prices like control by an old and titled family. Look at the one good housing estate built this past 100 years. The only place built by a quasi-government instrument (sort of) where people actually want to live – The Poundbury Estate built by Prince Charles.

    “LVT provides an anti bubble remedy.”

    No it does not. It may or may not provide a remedy against bubbles in property, but as that is not a big issue it is irrelevant. We have had bubbles in tulips, computer stocks, bank shares, railway shares and the Japanese sharemarket. Bubbles are essentially caused by over-saving. If you squeeze that investment out of property, it will just find somewhere else to inflate. You have not prevented the bubble. You are just playing Whack a Mole with the bubble popping up in another place.

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