August 2015

An economist apologises

There is absolutely no reason to think that Richard understands why PQE wouldn’t work as he thinks it would – that never crossed my mind – he is obviously sincere, not knowingly selling false goods

Translation: he’s ignorant, not deceptive.

Cat meet pigeons

It is a commonly held belief, certainly among the fairer sex, that women are better at multitasking than men.
And scientists have now discovered that women undergoing a sex change start to think more like men after treatment as their brains are rewired.
Researchers studied the brains of 18 female-to-male transsexuals before and after four weeks of testosterone treatment.
They found that qualities more traditionally attributed to women, such as verbal and multitasking skills, diminished, while others increased.
Exposure to the male hormone almost immediately reduced the volume of grey matter in the two regions of the brain linked to language processing.
At the same time, connections between the two regions became stronger, increasing spatial ability.
Researcher Professor Rupert Lanzenberger, from the University of Vienna, said: “What we see is a real quantitative difference in brain structure after prolonged exposure to testosterone. This would have been impossible to understand without looking at a transsexual population.
“In more general terms, these findings may suggest that the genuine difference between the brains of women and men is substantially attributable to the effects of circulating sex hormones. Moreover, the hormonal influence on human brain structure goes beyond early developmental phases and is still present in adulthood.”

All rather what Simon Baron Cohen has been talking about, EQ, SQ, male and female brains and all that.

All rather unremarkable in fact: no one with any connection to reality thinks any differently.

And yet there are those who insist that everything is culture, imprinting, that men and women are exactly the same underneath it all. They thus push for outcome equality…..

But if there are real and actual differences in the brain (and as Baron Cohen is the first to point out, this is about averages, we tend to find women at one end of the spectrum, men another, but any individual can be anywhere) then things like female equal representation in coding or engineering might just not be what our species was cut out for.

No to Lords reform!

Peers could be forced to leave the House of Lords when they get too old in a bid to ensure the second chamber does not “keep growing indefinitely”, a Cabinet minister has said.


What provides Lords with their independence is that we can’t chuck ’em out. And nor can the government of the day, nor any form of the establishment, do so.

Introducing rules whereby someone must leave, whether for criminal offences, age, infirmity etc, destroys this.

There are all sorts of arguments against the Lords. But opening the door to removal by some committee (who would, for example, make the decision of what is too old, too infirm?) isn’t going to make the place better.

How incredibly quaint of Ritchie

Seventh, the inflation argument got silly. The Telegraph turned up with the Zimbabwe argument, on cue. The fact that PQE is either clearly intended to stop if there is a risk of inflation because full employment is achieved, or would be countered (in that case only) by tax was not noticed by them.

He seems to believe you can only have inflation if there is full employment. Wouldn’t Mugabe be surprised by that statement?

And Oliver Sacks passes on

Oliver Sacks Dies at 82; Neurologist and Author Explored the Brain’s Quirks

And there’s a tiny little story in there.

Growing up in England, a small boy in the years just before World War II, Dr. Sacks was surrounded by cousins, aunts and uncles — his mother was the 16th of 18 children. The family overflowed with physicists and mathematicians, teachers and chemists, including Uncle Tungsten, as his Uncle Dave, a manufacturer of light bulbs with tungsten filaments, was known.

I like scandium, I don’t know why. I sometimes have this absurd dream of a hamburger made of scandium. It is rare but it’s also common in the sun. A sunny element, of which we are only permitted a little bit on this earth. And, of course, it’s particularly exciting because it was one of the elements that was predicted by Mendeleev. It had to be there. No. 21, and it has 21-ness written all over it.

And then one day he was off visiting Theodore Gray who took him around to see a local factory where:

After the delightful lunch, it was time to visit the local company I had arranged a tour of. Some friends there have donated about a dozen very nice samples for my periodic table. I was pretty sure Sacks would have fun there, and he did. He particularly delighted in the beautiful multi-colored inorganic salts I can’t show you pictures of for confidentiality reasons. But the highlight of the visit was when they served him a scandium hamburger complete with tungsten leaf lettuce and titanium onions (with sodium iodide and cobalt iodide for salt and pepper respectively).

And that scandium hamburger was made from scandium that I had bought in Kazakhstan, refined in Moscow and shipped over to the mid-West. For use, just to complete the circle, in light bulbs which do not use his uncle’s tungsten.

Tee hee

Ben Squirrell says:
August 29 2015 at 3:22 pm
You are right Richard. I think there is clearly jealously from mainstream economists when it comes to considering your Corbynomics work. Unlike you they cannot see beyound their neoliberal noses. Some of them have spent their entire working lives studying economics and some do it as a full-time job. Unfortunately, they see you as a provincial high street chartered accountant. They should know better. Accountancy deals with money and you’ve been an accountant for years. Therefore, you understand economics because that involves money.

Richard Murphy says:
August 29 2015 at 3:46 pm
We have a Chancellor who has not worked in the real economy

We have an economics profession who has never been near it

And I have been

And apparently I don’t know about it

All very odd, isn’t it?


And more than that, look at what he’s actually claiming. I’ve done the books for a few luvvie artistes therefore I know more about monetary economics than the Governor of the Bank of England.

Dunning Kruger isn’t enough to explain this, is it?

Surrender is an interesting euphemism for negotiations, isn’t it?

Mr Corbyn said in an interview with the BBC in 2013 that a “degree of joint administration” might resolve the conflict over the Falkland Islands. He has not stepped back from the suggestion since making it.
He said: “Other situations like this, for example the dispute between Finland and Sweden over the Aman Islands, was sorted out by some degree of joint administration while maintaining nationality.
“It was done with Hong Kong, it has been done to some extent with Gibraltar. There is a way forward.
“It was in Margaret Thatcher’s interests in 82 to divert attention form her catastrophic economic issues.
“There is a letter been produced by five nobel peace prize winners all of whom suggest without changing the question of nationality there is room for some kind of discussion and debate.
“Why can’t we respond to that letter and work on that basis rather than upping the ante and spending more and more money on arms.”

Someone really needs to point out the UN’s insistence on the right to self-determination….

SuperMurph really just doesn’t get monetary policy, does he?

Four things are important about this. First, there is a clear signal here that if rates rise in the UK it is not going to be my much: assuming inflation remains low (and I think that will be the case) he thinks to 1% in real terms the long term, which may be little more than that in actual terms.

Second, that implies that in effect monetary policy – which requires scope for changes in bank rate – is dead as a tool for delivering economic policy.

Err, no. A change in monetary policy could be done through a change in the bank rate, that’s true. But monetary policy is still there even if there is no change: for whatever the rate is is a monetary policy.

And it’s not necessary to conduct monetary policy through the bank rate of course. There’s this thing called quantitative easing for example. There’s even that monetisation of fiscal policy which is PQE which is also a monetary policy.

It’s the SuperMurph’s standard problem. Because he doesn’t understand the basics he falls into all sorts of error.

Something that we must all remember

What this does imply to me is that, as one person who wrote to me about your post said, you are “not arguing in good faith”.

I have, of course, held this view before: for a long time you happily joined in trolling abuse with the likes of Tim Worstall and I broke off any engagement with you precisely because it appeared you wished to play in that gutter. Your pulled yourself out of it, I thought, and so I tried again. I now see that was a waste of time.

I extended the courtesy of a fully developed argument in response to your abuse: you have just replied with more offence. I long ago realised that argument on this basis is a complete distraction. As I said: I have no desire to do personal, and since it seems you won’t debate I draw matters to a halt here, happy that you have had your chance to comment and have had nothing to say.

In disappointment


That thing that we must all remember being that SuperMurph wears his underpants outside his tights. He’s saving the world here, not getting bogged down in anything so trivial as logic or consistency.

Roger Morbeck says:
August 29 2015 at 7:52 pm
Are you saying, Richard, (a) that PQE is a tool for dealing with the next economic crisis (if it arrives before interest rates rise) OR (b) that PQE is a means of maximising funds for public expenditure in any economic conditions OR (c) both (a) and(b)? I am genuinely puzzled.

Richard Murphy says:
August 29 2015 at 8:07 pm
I have answered those questions many times

Please read what I have written


To accuse someone of libel is in itself libel

So I’ll be letting the libel pass by.

The libel itself?

By extension, a snake oil salesman is someone who knowingly sells fraudulent goods or who is themselves a fraud, quack, charlatan, or the like.

Hmm, Ritchie? Economics? Well, umm….???? And to still any doubts:

So let’s now look at the economics on offer from Paddy. In doing so I can’t help but start with a quote from a Danny Blanchflower paper from 2012 in which he in turn quoted Oliver Blanchard’s 2008 description of the standard macroeconomist’ approach to an issue (Blanchard is now chief economist at the IMF):

A macroeconomic article today often follows strict, haiku-like, rules: It starts from a general equilibrium structure, in which individuals maximize the expected present value of utility, firms maximize their value, and markets clear. Then, it introduces a twist, be it an imperfection or the closing of a particular set of markets, and works out the general equilibrium implications. It then performs a numerical simulation, based on calibration, showing that the model performs well. It ends with a welfare assessment.

And that is, almost exactly, what Paddy Carter does. I will come back to all his other assumptions in a minute. What is most telling to me about Carter’s whole approach is that is his whole criticism of PQE is based on the logic of this paragraph:

And here’s why People’s QE (PQE) is snake oil. So long as the BoE is still targeting inflation, it will still be pushing and pulling money in and out of the system, as required to meet demand for money at the interest rate it has set. If the BoE is still targeting inflation, then whatever money PQE puts into the economy on one hand, the BoE is going to be taking out with the other. Or, if the BoE happens not to take the money out, that implies it would have been putting it in, anyway. And that means that over the long run the rate of seignorage, or the extent to which the government is able to spend without borrowing, is not affected by PQE.

For the sake of doubt, let me deconstruct that. What Paddy Carter is assuming is that at the moment PQE is introduced the economy is in equilibrium (the first Blanchard condition). In other words, Carter assumes PQE would be introduced into what he thinks is an already perfect world – because that’s what he has apparently taught piles of students is what exists in the macroeconomic world. The consequence is that he assumes that the only need the Bank of England would have if PQE was introduced would be to immediately cancel the consequence of it because the world was perfect before PQE happened. This is the fulfilment of the second Blanchard condition: introducing PQE is to create an imperfection in an already perfect world. And the third Blanchard condition requires that the imperfection must be addressed, which is why the impact of the PQE funding must be cancelled by pulling it out of the economy as fast as possible in Carter’s opinion by selling bonds. And then in the final sentence we get the fourth and fifth Blanchard conditions combined: there is no impact on ability to spend without borrowing as a consequence and so no net welfare change, it is claimed.

Err, no, Paddy doesn’t assume equilibrium and he also doesn’t assume that PQE is an imperfection.

It’s not looking good for the retired accountant versus the PhD in economics really…..

And now let’s explore why that is total nonsense.

First, we are not in a state of general equilibrium. We are very far from it. We have (to list just a few of the reasons why this assumption is not true):

Low productivity
Limited investment by business
A chromic shortage of necessary social infrastructure like affordable housing
A market unable to price minor issues like climate change and the funding needed as a consequence
An impending exogenous shock in the form of China

Depending upon who you want to talk to 1) might or might not be a condition of GE. But items 2-6 have absolutely nothing to do with it at all.

Third, monetary policy has not worked for more than six years because we are at the lower bound of interest rates and there is little sign that is going to change.

His last post but two or three was all about how QE, which is monetary policy, has worked.

So, let’s summarise this. First, Carter’s macroeconomics is a proof existing solely in its own fantasy world that in turn exists solely in his imagination and that of his fellow so-inclined macroeconomists.

Err, yeah……

Ritchie’s non sequitur

This is just lovely, isn’t it?

That’s their description of Corbynomics (although, only after they praise its motives). To reach their conclusions they say:

The £120 billion in missing tax revenues—which is about four times the government’s own estimate—comes from a report by Tax Research, a pressure group. Even if the figure is to be believed—which requires a leap of faith, since the report does not explain its calculations fully—Mr Corbyn’s proposed remedies are wanting. Britain already has one of the smallest shadow economies in the rich world; stopping cash-in-hand payments entirely is impossible (and even if it were not, the extra tax burden would crush some of the economic activity that generates this untaxed income). The Corbyn manifesto vaguely pledges “a proper anti-avoidance rule”.

I think they should read my report on this issue, which explains where every figure comes from, and a wide range of solutions. To be blunt, The Economist made its claims up. And that’s the kindest thing I can say about their claims.

So the Economist echoes (not because I said it, but just because it’s so damn obvious) something I’ve been saying for years. There always will be both a grey and black economy. And all one can do is reduce the size of it, not eliminate it. And Britain has done more than just about anyone else to do so: there’s not much more that can be done.

And, as I’ve also said, Ritchie is entirely ignoring the most basic thing we know about tax: taxing something means that we get less of it. And that applies in spades to that grey market activity. In very large part people are only partaking in the grey market simply because the tax wedge, if applied, would mean that no one would undertake that activity. The moment you start applying the full VAT whack plus income tax and double NI to window cleaning people stop doing it (purely as an example).

There just ain’t that £80 billion there to be captured, even if he is right about the size of the grey and black economies.

And do note how he entirely ignores the point that they actually make. Such a surprise, eh?

So this PQE isn’t going to work then, is it?

Rudi Havenstein says:
August 28 2015 at 8:12 pm
I’ll ask the question again because clear answers are still coming on one of the most basic principles of how PQE is meant to function. If a local or regional government wants some money for an infrastructure project that is deemed desirable, it can presumably go to this National Infrastructure Body for some money. Will the money it gets be a loan or a grant?

Richard Murphy says:
August 29 2015 at 7:46 am

It will administer a project whose owner will be the NIB

Think of it like a lease

Or, dammit, PFI

So hard to imagine?

So who is taking the equity risk? The risk that the project will be badly done, late, over spec or any other of the myriad things that can go wrong with a project?

What we’ve got here is an LA gets to get free money from the NIB in order to build something. A bureaucracy building something without financial constraints just isn’t going to deliver value for money, is it?

This seems pretty sensible really

Tens of thousands of poor families have left inner London in the past five years, creating “social cleansing on a vast scale” and leaving large parts of the capital as the preserve of the rich, figures suggest.

Umm, why shouldn’t rich people live where property is expensive and poor people live where it is cheap?

We think it’s OK that the poor don’t gorge on filet mignon and foie gras. That holidays are spent at Clacton not Curacao. why would or even should we expect poor people to live where just the land for a house is worth £1 million?

Err, no Guardian, just no

Statistics released by the Department for Work and Pensions (DWP) on Thursday revealed that 2,380 people died between December 2011 and February 2014 within 14 days of being taken off employment and support allowance (ESA) because a work capability assessment (WCA) had concluded they were able to work.

That “because” is too strong there, don’t you think?

The numbers do not show that people died “because” the WCA showed they were fit for work now, do they?

Somewhat fascist overtones here


for a strategic approach in which business, the state and the population work co-operatively to create wealth

“The population” eh? That’s you and me, with our myriad separate desires and needs, working under the control of the state.

Lovely, eh?

Jezz has the nutter vote cornered then

Asked whether “the world is controlled by a secretive elite”, 28 per cent of Mr Corbyn’s supporters strongly agreed. Just 13 per cent of the overall population said the same.

Wonder what portion think it’s the neoliberals who control everything and those who flat oit say it’s the Joos?

So, what numbers would we expect?

Thousands of welfare claimants have died within weeks of being declared “fit for work” and taken off sickness benefits, Government statistics have disclosed.
Campaigners called for an urgent inquiry after statistics released by the Department for Work and Pensions disclosed that 2,380 people died between December 2011 and February 2014 shortly after a work capability assessment declared them able to work.

There’s obviously some number of people we would expect to die in any period, from any portion of the population. So what we want to know is, well, is this death rate higher or lower than we would expect from this portion of the population?

Not going to be me working it out but if anyone spots someone doing so, let us all know, eh?