From the 0.2 of a professor

Richard Murphy says:
February 18 2016 at 4:58 am
I suppose we need some reason too, not driven by crazy notions like ‘crowding out’

Provide your evidence please

Crowding out is a crazy notion now is it? That’s, umm, interesting for a professor of economics, even one of political economics. it might be interesting to discuss whether it’s happening in a specific case or not but the idea that government doing something might reduce the amount of that thing that other people might do looks pretty reasonable to most. We would, for example, rather expect there to be more private schools if we went and closed down the state education system. that those private schools don’t currently exist is of course that very crowding out from the state provision.

Note that this is nothing at all to do with whether the crowding out is a good idea or not, only the existence of it.

24 thoughts on “From the 0.2 of a professor”

  1. his logic is based on the assumption that government is good. Therefore more government is better. And conversely nothing the Kurajus Stait does can ever have any deleterious effects, as everything is for the common good.

  2. Would it be too much to ask that a professor is familiar with the empirical evidence on subjects they opine on?

    For some body who craps on about the real world, careful discussions of evidence are conspicuously absent from his oeuvre

  3. Luis
    But Murphy “lives in the real world” * and is therefore unfettered by the tedious pronouncements and evidential requirements of those in academia and business who do not.

    * This real world is a room in his house not solely used for business purposes which contains all his IT kit and books, and, crucially, the model train set which proves it fulfils a private as well as business purpose.

  4. It’s not that he doesn’t agree that crowding out is happening, he has no idea that it is a standard term in economics. I remember years ago on a dingbat lefty forum one of the more sensible contributors used the term “rent-seeking”. One of the lefties went off on a wonderful rant about how the contributor was “making up terms”. Lefties are generally unaware of the terms even being used, and I suspect that this is the case with Ritchie. Although you would expect a professor of economics to know them, even 0.2 of a professor.

  5. ‘Crowding out’ occurs, I believe. When living up north, I noticed how the brightest and best moved into the expanding public sector in times of recession and then stayed there when the local economy should have been improving. But does anyone have a link to evidence that would convince a sceptic? -Luis? Tim?

  6. “One of the lefties went off on a wonderful rant about how the contributor was “making up terms””

    You would think the first thing you would do on seeing a term you are unfamiliar with is to Google it, not denounce the speaker as a liar.

  7. Murphy’s opinions on how the real world works are based on his beliefs which are untroubled by the real world.

    He’s claims he stopped using Apple products because of their tax policies so he switched to Android but admitted Android are just as bad on tax. He obviously doesn’t realise that ‘Android’ doesn’t have any tax policies. It’s a free source operating system created by Google in tandem with mobile phone manufacturers. Android is given away. It’s updates are free, Anyone can use it’s source material. He hasn’t got an Android phone. He might have a Samsung that uses Android software.

    His endless ability to show he doesn’t understand what he is talking about is remarkable

  8. The fact that my taxes contribute lots of money to national charities is crowding out my own contributions, which now go solely to local charities. (Not that that’s the only reason, mind.)

  9. You would think the first thing you would do on seeing a term you are unfamiliar with is to Google it, not denounce the speaker as a liar.

    You’d have thought so, but this place was so much of an echo chamber that contradictory views were rare, and this clown was a moderator.

  10. Surely Murphy’s class would be far better if he switched spots with his poorest performing student* or an inanimate carbon rod.

    *I assume this poor student has gotten terrible grades so far because he bothered to try to learn about economics. Pity the poor truly liberal mind. We spend far to long actually trying to understand issues allowing narrow-minded idiots, whether left or right, to shout at everyone.

  11. Theophrastus

    “This paper considers the impact of public sector employment on local labour markets. Using English data at the Local Authority level for 2003–2007 we find that public sector employment has no identifiable effect on total private sector employment. However, public sector employment does affect the sectoral composition of the private sector. Specifically, each additional public sector job creates 0.5 jobs in the non-tradable sector (construction and services) while crowding out 0.4 jobs in the tradable sector (manufacturing). When using data for a longer time period (1999–2007) we find no multiplier effect for non-tradables, stronger crowding out for tradables and, consistent with this, crowding out for total private sector employment.”

    http://www.ieb.ub.edu/aplicacio/fitxers/WS12Overman.pdf

  12. ken thank you for that link. The abstract promises useful information. Hopefully the paper provides what it promises.

  13. The other side of this is that national wage scales kill people. (Crowding out of a different sort)

    http://www.jstor.org/stable/10.1086/653137?seq=1#page_scan_tab_contents

    accessible version –

    http://www.bristol.ac.uk/media-library/sites/cmpo/migrated/documents/wp184.pdf

    Labor market regulation can have harmful unintended consequences. In many markets, especially for public sector workers, pay is regulated to be the same for individuals across heterogeneous geographical labor markets. We would predict that this will mean labor supply problems and potential falls in the quality of service provision in areas with stronger labor markets. In this paper we exploit panel data from the population of English acute hospitals where pay for medical staff is almost flat across the country. We predict that areas with higher outside wages should suffer from problems of recruiting, retaining and motivating high quality workers and this should harm hospital performance. We construct hospital-level panel data on both quality – as measured by death rates (within hospital deaths within thirty days of emergency admission for acute myocardial infarction, AMI) – and productivity. We present evidence that stronger local labor markets significantly worsen hospital outcomes in terms of quality and productivity. A 10% increase in the outside wage is associated with a 4% to 8% increase in AMI death rates.

  14. I’ve finished my first read of the Faggio Overman paper. Unfortunately it was not nearly as useful as I’d originally hoped. I have issues with certain assumption that are made. Additionally it appears that all public sector activities are lumped together. It appears this paper was written with a bias towards supply side economic and demand is not considered.

    “2.2 Impact on the Tradable Sector
    Assume that local demand is a negligible component of total demand for the tradable sector.
    Under that assumption neither the increase in local income nor the increase in intermediate
    demand from the public sector will have a significant impact on demand for the tradable
    sector. In the absence of any demand effects, the general equilibrium effects (the citywide
    increases in wages, house prices and the price of nontradables) all work to decrease
    employment in the tradable sector. As with nontradables, the more elastic is labour supply,
    the smaller are these general equilibrium effects and the lower is crowding out from the
    tradable sector. ”

    The effects of demand are clearly left out here. If a police department adds two additional officers they will need the equipment for their job including uniforms, guns(in the US), radios, patrol cars… This will create orders for companies that provide tradable goods. Additionally the new officers will demand personal goods further boosting the market for tradable goods. Finally, assuming the .5 service sector multiplier is correct, an additional person is employed giving an even larger tradable good boost.

    This paper is only valid in a world of full employment. Additionally free trade agreement which externalize business costs, such as environmental regulations. While the assumption that high paying public sector jobs will increase the costs to a business for attracting the most capable workers has merit this model is flawed.

  15. Well who in their right mind thought that paying a nurse in Llandysul, to pick a random small Welsh town, the same amount as the nurse in London was a good idea?

    It should be obvious that cost of living needs to be factored into whatever the nurse is paid. There is a reason postal workers in California make more than those in Arkansas.

  16. LY

    The assumption is that the tradables will come from the country as a whole. The orders for radios will go to a national supplier, who probably employs some people on average in the local area. This is the point of tradables.

  17. Rob

    as for the notion that someone with so many demands for their services has time to ‘read something on Google’ – well, only a pedant could think that.

    Candidly, you are wasting my time

    That will be your last contribution here

  18. and why would a nurse work in llandysul if she can make more elsewhere? The Canadians give tax breaks etc to staff in the NWT not because of the cost of living but because very few people want to live there.
    Medical staff, especially ICU aren’t going to be a great example from a labour demand perspective as they are specialist and tend to be concentrated in certain areas, it’s also one of those jobs where not everyone is doing it for the money and raising the pay won’t make people any more capable of doing the job, similar to acute care babies wards not everyone is physiologically capable of the job.

  19. BniC

    The paper shows that where ICU nurses are priced out of the local market (eg their wages are low relative to the local private sector), the likelihood of death increases. Your effect should go the other way (crappy places to live reduce the incentives for skilled people to live there) – if you can think of a way to measure that, a paper in a prestigious journal awaits.

  20. Bnic, household income might be one thing to bear in mind, but then a partner nursing for pin money rather than income might not be A grade. Stress on the “might”. I am sure there are exceptions.

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