July 2014

The Murphmonster on choice

First of all, time and again evidence has been provided that people neither want choice when offered it, and nor does it necessarily improve lives when they have it.

Hmm. Personally I’m rather a fan of choice. I’m sure Richard is too. He did choose to move from London to Norfolk for example. And given that he still lives in Norfolk I think we can argue that that choice improved his life.

One does worry slightly for the future of civilisation

Fans of former England footballer Paul Gascoigne, popularly known as ‘Gazza’, were left confused and fearing for his future as a Free Gaza campaign took off online.

Tweets with the hashtag #freegaza have been trending on Twitter in response to the violence in the Middle East, with users using their posts to urge Israeli forces to stop their assault on the Gaza Strip. The conflict, which started on July 8, has led to the deaths of more than 1,200 people.

But followers of the troubled player, who has become known for his battles with alcohol and drugs, mistakenly thought that he had been arrested and that the campaign was in support of his freedom.

These people
have the vote you know.

So that’s what happened at Banco Espirito Santo

That the top holding company of the Espirito Santo family was in trouble was known. But why should this be a problem for a bank that was two layers down and only minority owned anyway?

Portugal’s Banco Espirito Santo lost €3.6bn (£2.85bn) in the first half of the year – mostly on loans to its founding family’s crumbling business empire – and now has less capital than it is required to hold.

The loss at the country’s largest listed bank wiped out its €2.1bn capital buffer, and is likely to force the bank to resort to a new capital increase to preserve solvency ratios demanded by regulators.

The loss includes €4.25bn euros in impairments and contingency measures, BES said. The biggest item was a provision of €1.2bn on loans to the Espirito Santo Group – the bank said €856m-worth of those provisions were taken because the bank’s directors learned that BES had granted two letters in favour of creditors of the family group, which were not approved in accordance with internal procedures.

Ah, they were, perhaps unknowingly, guaranteeing the debts of that holding company two levels up. I suspect there’s going to be a very interesting story about how they managed to cock up. And of course this also shows that Piketty isn’t quite right in his wealth always increases prediction. One of Portugal’s richest families has just gone bust after a century. What you invest in is rather important: perhaps more so than merely having capital to invest.

Ritchie and economics

No one has ever been able to define a structural deficit

But if we have ever had one it’s only been since 2010

And I am not sure I would agree with that


Structural Deficit

The portion of a country’s budget deficit that is not the result of changes in the economic cycle. The structural deficit will exist even when the economy is at the peak of the cycle.

We were pretty clearly at the peak of the cycle in 2005-7. We were running a budget deficit at that time. It may well have been to “invest” in the future but it was still a deficit at the peak of the cycle. A structural deficit therefore.

Is there no beginning to this man’s understanding of economics?

Some truths just aren’t meant to be said out loud

Professor Richard Dawkins has drawn an angry response from women’s campaigners after he referred to “mild date rape” and stated that date rape is not as bad as being raped by a stranger.

The academic and author also differentiated between “mild pedophilia” [sic] and “violent pedophilia” in a Twitter row about language and logic.

But it was his comments about rape that proved the most controversial.

The End Violence Against Women Coalition said his words were “not merely ignorant but extremely offensive”. Shami Chakrabarti of the human rights group Liberty said there was “no such thing as mild rape”.

Don’t go around telling the truth now, eh? Some shouty bird might get upset with you.

Ritchie and progressive taxation

The man is simply incapable of logical thought, isn’t he?

The Conservatives remain wedded to the belief that the richest need tax cuts to encourage them to work whilst the poorest need economic sanctions to achieve the same goal. The evidence is already clear from their actions in the parliament. They have cut the top rate of income tax. They have cut the rate of corporation tax, which benefits those with wealth most. They have increased VAT significantly, which impacts those on lowest earnings most. And they have introduced penal changes to many aspects of the social security system.

This is, of course, economically illiterate. The marginal analysis on which so much conventional economic thinking relies says that the more a person has of something the less they respond to more of it. So, quite logically, the more income someone has the less each additional pound of income is worth to them. Conversely, when someone has very little any change in their income is very significant.

And they’ve also significantly raised the personal allowance thereby reducing marginal tax rates for millions of poorly paid people. On precisely and exactly the grounds that high marginal tax rates on the poor deter them from raising their incomes. And hasn’t this been a policy that Ritchie has fought against tooth and nail?

Damnit: the entire debate about universal benefit is to try to lower the marginal tax and benefit withdrawal rates as people move from no work through some work to full time and supporting themselves. Precisely because everyone does recognise that high marginal rates deter work for both the rich and the poor.

The nation rejoices

Tax workers have started a series of fresh strikes in a long-running dispute over job losses and office closures.

Members of the Public and Commercial Services union (PCS) will take part in walkouts over the next three days, threatening disruption to the work of HM Revenue and Customs (HMRC).

The leeches
are leaving us alone for a few days.

Fancy making it a few months lads? A few years?

Is Ritchie a fuckwit, really, or just a fuckwit?

So, here’s his “audioboo” telling us that the recent IMF report says that pure monetary policy just ain’t good enough.

Here’s the actual IMF report that he himself links to…OK, the report on the report that he links to:

The IMF completed its “Article IV” mission to the UK in June when it ended its feud with the coalition government over austerity. In its more considered report on Monday, the fund produced optimistic forecasts, similar to the government’s, and said the latter’s austerity strategy was “appropriate”.


It recommended continued cuts in public spending and efforts to boost productivity to make the UK more competitive.

Please note, I don’t say that the IMF is correct, nor that the FT is correct in what they say the IMF has said. But you do have to be mad to draw Ritchie’s conculion from his source.

Quite barking.

Ritchie’s quite startling logic

She also notes my support for extending national insurance to investment income. Here, unfortunately an extra zero has crept into the Guardian copy. This will not raise £40 billion. Cautiously it may raise only £4 billion after exempting small receipts and those of some pensioners, but the impact will be bigger. A great deal of tax avoidance is still focussed on national insurance. This would stop much of that in its tracks.

Then we might get business focussing on more important things, like productivity, making things people want, and investing for the future. Right now far too much business advice is simply about how to reduce tax payments. When that whole scenario changes to a situation where people seek advice on how to boost their incomes by doing things better we might see a real gain to the UK economy. Without reform on tax that is not going to happen. That’s a very good reason why tackling tax abuse should be so high on the agenda now.

That’s really…..fascinating. If we tax the returns to investment more highly then people will do more investing, work harder to make their investments work. This is akin to his earlier argument that if we raise income tax rates then more married women will go out to work in order to maintain the family income.

That is, in both cases he’s arguing that the income effect is more important than the substitution effect. That latter being where people look at higher tax rates, decide “Ah, fuck it, not worth it” and go fishing instead. The former being the idea that we all have a target income in mind and that we’ll do whatever work necessary to achieve it.

And it should be said that both effects are true: all people some of the time, some people all of the time and the net effect is of course the balance of who does what in any one situation. Thus our Laffer curve.

There’s one problem with Ritchie’s thoughts here though. With those higher income taxes he thought that the income effect would be strong among those married women. Yet we know very well (from careful empirical work) that it’s actually the substitution effect that’s very strong for married women. Stronger than it is for unmarried women, stronger than it is for men. For the obvious reason that they’ve already got something to do if they’re not working which is to stay home and run a home (along with whatever children etc). They can, just as a partial example, not go to work to earn the money for childcare but stay home and do it themselves.

So, Ritchie’s first stab at this failed simply because he doesn’t know enough economics to know how the income and substitution effects play out.

And his second attempt also fails for he doesn’t understand that the substitution effect is higher for capital income than it is for labour income. Thus why there are higher deadweight costs to capital taxation than there are to labour: deadweight costs being the loss of economic activity we get from levying a particular and specific tax.

And thus, of course, why Sir John Mirrlees got his Nobel in part: for pointing out that the tax rates on capital income should be lower than those on labour income. Because doing it that way makes the entire society richer.

But obviously all of that is empirical economics worked out painfully over the past couple of hundred years by lots of very bright people. All of which is wrong according to Ritchie. Because, well, because it’s wrong, d’ye see?

Chakrabortty rides again!

And its the most godawful mess, too:

Take banking, since this week the big high street names report their results. With each disclosure of rebounding profits will come an admission that the banks are putting aside millions more to compensate businesses and households they’ve ripped off through mis-selling. And each time, Chuka Umunna or Chris Leslie will swear that Labour would bring in “challenger banks”, while the coalition will retort that “there is already greater choice on the high street” than there was under Tony Blair.

But what is the point of having more competitors if they’re all doing the same thing? Go online and look for a savings account: there are tons around – most with time-limited offers, or with fiddly rules about how much you must pay in each month. Lots of versions of the same, basic product: the providers simply competing to bamboozle customers. All hail the market!

For Labour to say that more competition will fix predatory industries is to mouth economic theory while ignoring business practice. For Ed Miliband to claim market forces alloyed with some cliches about living wages and an industrial policy will get Britain out of its deep hole is to see the country through Westminster abstraction over real-world specifics.

Britain’s model of capitalism was clearly not working long before 2008. Once you strip out inflation, the typical worker saw no wage rise for most of the past decade. So who prospered during the boomiest boom in economic history? Those at the top, often running or owning businesses well-sheltered from competition (think: water, rail, energy) and shaking them down for bonuses and dividends.

Such rampant market inequality won’t be solved by competition.

I’ve not cut nor edited anything there. He really is stating that the worst abuses came in those markets with little competition and also that competition doesn’t solve or cure market abuses.

Blimey, with this sort of logic you can describe an historian as a valid and useful commentator on the economy.

Polly on tax


Tax campaigner Richard Murphy has just published his latest assessment of the Treasury’s missing taxes – a gap he sets at £100bn. The difference between this and the Treasury’s £35bn estimate comes partly from Murphy’s recent uncovering of some 360,000 companies not declaring income, never checked by the staff-starved HMRC, with a sample of 40% of declarations found to be fraudulent. But most of all, he would change the law to assert a general avoidance principle, to stop rules being wriggled around, but let HMRC strike down any activity whose purpose is plainly to avoid tax.

The major difference between the two estimates is that Murphy classes as tax avoidance things that the Treasury does not class as tax avoidance. And on this matter the Treasury is correct for they are following the law and the Murph his own delusions.

Ask Murphy where money is to be had and he has large sums to offer. Start by bringing back the level playing field, abolished in the Thatcher era, between tax on earnings and investments. If the same 13% national insurance was charged on earned and unearned income, that would stop people setting up artificial companies just to avoid it – and it would bring in £40bn.

And that’s just sodding stupid. It’s a well known result of optimal taxation theory (you know, that economics that MonsterMurph insists is all wrong because he disagrees with it) that capital income should be taxed at lower rates than labour income. On the grounds that the deadweight costs of capital taxation are higher than of labour taxation.

Hodge would confront Amazon and the rest right away. “Don’t wait for international negotiations. It will take forever; just close the loopholes now.”

But Amazon isn’t exploiting any fucking loopholes you terminally dim cow. Haven’t you noticed? The entire company as a whole makes losses! There ain’t no profits to tax!

So Was Dear Bryony A Slut Then?

David Cameron has become embroiled in the row over claims a Conservative cabinet minister called a female writer a “slut”.

The Prime Minister’s spokesman said that he had not spoken to his newly appointed Defence Secretary Michael Fallon about the alleged incident.

But she added that Mr Cameron would never consider the use of such language appropriate.

Asked about the claims, she said: “Does the Prime Minister think the use of the word ‘slut’ is appropriate in any sense?


But she added that there was a “clearly a debate [about] … exactly what was said” during the disputed conversation.

Mr Fallon has been accused of calling Bryony Gordon, a writer for The Daily Telegraph newspaper, a slut when he met her at a party in a London bar back in 2010.

Quite agreed that it’s not quite the language one might use when meeting someone (and even Bryony doesn’t think that Fallon knew who she was when he was talking to her). But, well, hasn’t she just released a book telling us all how she went out boozing and shagging on one night stands for a few years as a result of the stress and trauma of the divorce of her own parents?

Slut might not be polite but it really wasn’t all that long ago that it would have been accepted as being perfectly descriptive.

Dear God Paul Mason’s an ignorant cunt isn’t he?

If you wanted to radically alter the economy, making a country such as Britain as dynamic as China or Brazil, what would the state have to do? Intervene, obviously, but how?

Well, you’d have to stop everyone from using modern technology and modern methods wouldn’t you? Because we are at the technological boundary where economic development is quite difficult. Brazil and China are doing catch up growth, where we expect there to be that greater vibrancy because catch up growth is easier. Thus regress out technological level to theirs and we’ll have more vibrancy.

Damn, the idea that anyone needs to explain this to an economics editor is simply ridiculous, isn’t it?

Err, why?

If you believe politicians are useless, you’ll end up with useless politicians
In an age where it’s fashionable to be utterly cynical about all politicians, Alex Proud says it’s time we stopped belittling and denigrating our elected leaders

Given that I do believe that they’re useless cunts why should I stop believing they’re useless cunts just because they turn out to be useless cunts?