Strangely, actually, we do

We don’t need to sell handbags if we want decent healthcare

It’s undoubtedly true that consuming health care is of value to us. But as also must be true, we need to create that value so that it can be consumed. And the people who produce health care for us will, with some fraction of their earnings from the taxes paid to produce health care, desire to consume handbags. Thus, in order for them to be willing to produce the health care we desire to consume, someone, somewhere out there, must be producing the handbags that the doctors and nurses desire to consume.

That is, producing handbags for doctors to consume is the price we pay for doctors to produce the health care we desire to consume.

24 thoughts on “Strangely, actually, we do”

  1. So far as I can tell, the argument is that healthcare can be paid for by printing money. That takes care of things in the short term.

    We then need to recover that money from the economy in tax, unless we want rampant inflation and loss of value in sterling; to do so we need a tax base, and that may or may not require the production of handbags.

    But (following Murphy’s apparent position) in the short term (ie until people cotton on that the money issued is worthless), we don’t need a tax base.

  2. Incidentally, not being an economist I am very confused about the practical difference between these two analyses:

    1) If spending exceeds taxation there will be inflation. So we should work out our tax receipts first then work out what we want to spend (and whether we should then adjust the tax receipts to fit), bearing in mind our desires about inflation.

    2) Spending does not require taxation, but inflation control does. So we should work out our spending first and then work out how much tax we want (and whether we should then adjust the spending to fit), bearing in mind our desires about inflation.

    The former seems to be an outmoded paradigm with no relevance to the real world, which merely constrains thought and leads to austerity; whereas the latter is a marvellous new perspective which will allow far better economic and social growth.

    But to me (not being an economist) it seems to be a question of whether you look at the left hand first and then the right before comparing them, or vice versa.

  3. RM:

    What is more, when that debt can be issued at such low cost, with almost no prospect that effective repayment will ever be demanded.

    I’m obviously missing something fundamental but why would anyone lend money to someone if they weren’t expecting that debt to be honoured / repaid in the future?

  4. PF: I think he means that you can just roll over the debt. So you can borrow at 0.5% now; presumably people will be happy to keep that 0.5% rate indefinitely regardless of how interest rates move… oh, wait.

    Murphy does seem to focus on the present, with less regard for the future. I can borrow cash now, at low rates, so I don’t need to tax people *now* if I spend it. The fact that I need to tax people *soon* to avoid inflation, or that I will need to refinance the debt at future interest rates, are simply not relevant. Any analogies to credit card debt are equally irrelevant: the UK is not a family, and so anything that is a bad idea for a family is not a bad idea for the UK.

  5. I need to get Murphy’s thinking on PQE straight sometime. Is the following more or less what he says?

    1) The BoE can create say £50bn of debt through buying bonds issued by a National Infrastructure bank. This is not inflationary, as the money has not been spent; there is no interest cost as both the BoE and the NIB are arms of government, so it’s all just internal accounting.

    2) The NIB can spend that £50bn. This creates no new interest obligation, as that was created at step 1, but it is inflationary.

    3) The inflation is not a problem, as:
    a) tax of £50bn at some stage would eliminate it; and
    b) a bit of inflation is a good thing anyway

    So we can conclude that the following are all true:
    – Creating money through PQE has no interest cost
    – Spending PQE money does not require tax rises
    – Spending PQE money need not be inflationary

    Of course the first is a fairly sterile thing to do, and you can’t have both of the last two at the same time – but you can have either of them. And all three statements are true.

  6. Bloke in Costa Rica

    Asking what Murphy means by something is begging the question. He’s too thick and ignorant to have thought through even the first order effects, let alone any higher order outcomes. To the extent he has a worldview, it would appear to be a sterile, totalitarian autarky where, inter alia healthcare is an end in itself rather than a cost which we shoulder in order to be able to do the things that make life worth living (i.e. we want to be well enough to go out and buy handbags).

  7. The Corajus State seems to have become a state where everybody is either a consumer or a provider of health care and everyone is happy because they get the chance to pay tax.

  8. Tim is right. My wife used to work with a nurse who came to work in a Mercedes (rich hubby) – she worked in order to finance her taste for designer handbags. Money was simply a facilitative means of exchange.

  9. I am assuming the mysoginist in question is Murphy.

    We don’t need to sell organic vegetables if we want decent healthcare.
    We don’t need HS2 if we want decent healthcare.
    We don’t need “Green QE” if we want decent healthcare.
    We don’t need Quaker meeting houses if we want decent healthcare.

    Feel free to add your own.

  10. It’s that difficult bit of rhetoric about doctors “not doing it for the money”, isn’t it? At one level, for most of the doctors I have known, it has some degree of truth: they certainly feel more satisfaction in their work than merely its pecuniary compensation. But of course, at another level it is quite false: if we paid doctors nothing, then we would have very few doctors indeed.

    A proper concept of utility helps, of course, but how many doctors, famously so plugged in to the private sector, have a sound understanding of economics?

  11. @Rob – I’m glad you weren’t in Pink Floyd; those lyrics don’t scan anywhere near as well.

    Hey Murphy! Leave them quids alone.
    All in all, you’re just…. etc

  12. We don’t need to pay nurses a living wage to have decent healthcare, do we? Or have I somehow misread the NHS policy wrong again?

  13. Pellinor

    An excellent explanation of “The Murphy Paradox”, otherwise stated: “we don’t need the tax base that we desparately need”.

    Where I struggle is with the idea of from where the tax base we need to control inflation will.come. I keep arriving at “handbags” and “fripperies”; that can’t be right can it?

  14. The list of people that Murph worries about is seemingly endless:

    health care workers
    tax inspectors
    himself….is there anyone else?

  15. “We don’t need to sell handbags..”
    Lump of useless lard’s never made a handbag in his life. Wouldn’t even know how to. Shouldn’t think he could even hack standing in a shop & selling them.
    When he’s capable of doing something vaguely useful, maybe he could get back to us on what WE should be making.

  16. @ Runcie Balspune
    “We don’t need to pay nurses a living wage to have decent healthcare, do we? ”
    We didn’t 50 years ago – girls took up nursing as a vocation (the best friend of each of my sisters did so), but now they have a union that demands that we pay them more than the market wage so with a monopoly supplier of healthcare they have the government over a barrel.
    “Living Wage” means enough for each individual to support a family of four (ignoring the income of the other adult) at a standard of living that I did NOT expect as a upper-middle-class kid.

  17. Ironman – it’s not so much a paradox as a complete argument that just gets quoted selectively. More generally:

    – X has 2 outcomes, A and B
    – There is a trade-off between A and B such that one can be eliminated if the other is maximised

    We can therefore truthfully say that X is possible without A (and not mention that this requires high B), and that X is possible without B (with high A).

    This reminds me of a child claiming that as their pocket-money is enough to buy a toy, and it is also enough to buy sweets, it is enough to buy both the toy and the sweets. It’s a convincing argument, if you’re not paying attention 🙂

  18. john77, it’s a kind of mission-creep. Nurses used to wash patients, change dressings, take temperatures etc. Nowadays, nurses are junior doctors. In a GP surgery, the doctor is actually the guy who is out of touch. If you need real diagnosis, go to the practise nurse. She will do the blood tests that old man doctor has said should happen, because of governmental plans.

    And the nold nurses now need to prove that they are doctors.

    Grade inflation at its worst. I now trust the nurses more than the doctors.

    The NHS is fucked.

  19. Dear Mr Worstall

    That nice Prof* Murphy writes ” …the demand for education, healthcare and other essential public services…”

    I wasn’t aware that education or healthcare were ‘essential public services’. They seem very private to me: I am educated (or not); my health is cared for (or not), neither of which impinge on any other person, unless one takes the view that all of society benefits somehow, which tends to the view that people are livestock of the state, not individuals. Compare and contrast with defence, which is indivisible, insofar as if I am defended (or not), then so is my neighbour and everyone else (or not).

    @ Rob November 16, 2015 at 5:16 pm

    We don’t need the NHS if we want decent healthcare.

    DP

    * If Prof* Murphy is 2/5th (or whatever) of a professor, does that mean he is Prof Murphy only 2/5th of the time? And if so, which 2/5ths?

  20. DP, as I understood it there is a small public goods element to healthcare and education:
    – it benefits me if there are fewer people running round with infectious diseases that I might catch;
    – it is probably useful these days if we can assume that the population can read.

    Unfortunately those tend to be the bits that our “public services” aren’t very good at, because they conflict with their “social justice” objectives so get sidelined.

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