No, not quite Mr. Newman, not quite

Oh dear. Expert Market don’t appear to have much expertise if this is what they’ve gone and done, and nor do journalists from The Independent. Revenue divided by number of employees doesn’t tell you much: the company might be making catastrophic losses for all we know, meaning all those employees aren’t adding much value at all.

It is profit, not revenue, that is the measure of a company’s added value and therefore to work out what each employee is worth on average you’d need to divide profits by the employee headcount. Here’s what they’ve done with Shell…..

Profit is indeed the company’s added value. But the employees’ value is what they must be paid to add value plus the profit made from employing them.

If it costs £100k a year to employ Mr. Newman, and Total makes £50k a year profit per employee, then Mr. Newman must be adding £150k a year of value through his labour.

This also balances our GDP accounting. GDP is the measure of all value added in the economy. GDP is also all incomes – all incomes to both labour and capital. Thus all value added must be equal to all payments to people, whether labour or capital holders.

Hunh, tsk, these youngsters trying to invade on the turf of us old timers.

68 thoughts on “No, not quite Mr. Newman, not quite”

  1. If it costs £100k a year to employ Mr. Newman, and Total makes £50k a year profit per employee, then Mr. Newman must be adding £150k a year of value through his labour.

    Harrumph. I meant “additional value after all costs” and calling it “added value”. You’re quite correct, my terminology was all mixed up.

  2. Pingback: Economics at The Independent | White Sun of the Desert

  3. I agree with Watcher’s comment: ‘Often, it’s all about the bigger picture in these things.’

    Concentrating on labor smells of communism.

  4. “must be”: I love that. “must be”: heh!

    “GDP is the measure of all value added in the economy.” Ho, ho, ho, Worstall thinks that government expenditure always adds value? Shock, horror!

  5. What DM said.

    Private sector – consuemers choose to purchase. Hence, there is clearly a value add.

    Public sector – tax is confiscated to pay people to dig holes and then re-fill them (oh yes, and diversity too). Not necessarily any value added (outside of a definition).

  6. In context — this blog, and the fact that Tim has written a lot about GDP being measured wrongly — I think it’s clear that he’s talking about the existing definition of GDP rather than suggesting that that definition is AOK.

  7. I know this isn’t a thread to ask this, and particularly this site churns and feedbacks many of the same attitudes as many “alt-right” shit-storms, but surely: Isn’t it possible to have a positive thread, basically the comments would be the same, but the subject may be one that you support, rather than bleat on like snowflakes that the world is against you and every fucker is a cunt?

    It would be interesting to see positive endorsement rather than a litany of repetitive smug and faux anger.

    After all, I bet most of you are doing alright under the current system we’ve had for ages?

  8. “Isn’t it possible to have a positive thread, basically the comments would be the same, but the subject may be one that you support, rather than bleat on like snowflakes that the world is against you and every fucker is a cunt?”

    Given the UK State has extremely little or no libertarian/free market tendencies, and a good proportion of the media and public life consists of people who wish for it to become even more authoritarian and control even larger proportion of our economic output, point us to something we can be positive about.

    Everywhere one looks there’s cunts trying to tell everyone else what to do, and take the fruits of their efforts away from them, with the force of the State behind them. Its a constant battle against one very beguiling argument – ‘We’ll give you free stuff paid for by someone else’. Whereas the Right’s argument ‘If you want stuff, earn it yourself’ is less appealing, for the obvious reason many if not most people are greedy, selfish and lazy.

    Its why we like Brexit and Trump so much, not because we think they’re necessarily the bees knees (Brexit is, Trump – who knows?), its because they are opposed by all the people who are wrongest about everything, so that very fact must mean something positive is going on.

  9. @ Don’t Hug Me
    You should read Tim’s Rugby comments (especially Japan v SA and Ireland v NZ) – very positive.

  10. @Dont Hug Me,

    Both the lockstep rightists of Eckistan and the lockstep leftists of Snowflakeville are tiny minorities. Tiny tiny minorities that believe that the other is the overwhelming majority. Because anyone who ever once expresses the slightest agreement with the least controversial of a snowflake view is instantly considered to be a snowflake in all matters.

    The snowflakes feel the same about the Eckistanis.

    Which is why each group believes them to be a correct minority in a world controlled by the majority enemy group. One moans about the pervasive right-wing media the other about the pervasive left-wing media. And don’t realise the irony that they are both correct.

  11. Dont hug me,

    Ooh a post-fact style diverse blog where we pretend that every fucker isn’t a cunt, the only fly in that idea is that in the current-fact environment we actually inhabit, every fucker is a cunt (and they are becoming more rabidly cuntish every day). Other than that, great idea.

  12. > I see ‘alt-right’ is going to be the new ‘neoliberal’.

    Not quite: when used as epithets, “neoliberal” basically means “Jewishish” and you can hurl it at non-Jews, whilst “alt-right” means “antisemitic” and you can hurl it at Jews.

  13. BobRocket

    I didn’t say that. I was wondering whether anything actually happens in this world that is positive, rather than open to mockery, as fun as that may be. There must be something going on that people here like. It must be hard to be surrounded by fucking cunts all of the time, but yeah that would fit in the boxes you don’t want described.

    Squander Two

    I disagree. Why does everything have to be reduced to Jewishishness? Do people wake up in the morning and grade their attitudes on a scale of 1 to Zionist “oh I feel a bit Golan Heights today”?

    It does seem to be an obsession with the alt-right (as the term is defined by the alt-rightists).

    Neoliberal, of course, means fuck all, but it’s easy to infer that it encapsulates unempathic, individual-oriented, Randian goals under the ‘don’t upset the horses’ categories that the self-defined alt-righties are wanting desperately to align with.

    Which is basically what Tim Worstall is.

    I really don’t get the Jew thing. I reckon it’s you lot being lazy.

  14. “Neoliberal, of course, means fuck all, but it’s easy to infer that it encapsulates unempathic, individual-oriented, Randian goals under the ‘don’t upset the horses’ categories that the self-defined alt-righties are wanting desperately to align with.

    Which is basically what Tim Worstall is.”

    That’s a harsh judgement of someone who supports a universal basic income, a much higher personal allowance for tax (and actually aided in getting that policy adopted), shared parental leave (ditto) and a carbon tax, isn’t it?

  15. Looking positively, I quite like the way that the Autumn Statement didn’t say much about tax.

    It would be nice if it had said that, in the name of certainty and stability, some of the previously-announced changes were going to be slowed down; but although he’s not steadying the boat much, at least this chancellor isn’t jumping up and down much either 🙂

    Yet.

  16. Pellinor

    I’m not disagreeing “re jumping up and down”, but are there plans for it to be a crime, retrospectively, to have given someone advice, which “later” a court decides was evasion rather than compliance, and hence may not have been considered to be evasion at the point the advice was given?

  17. Don’t Hug Me,
    Calling people “twats” is at least a lot less offensive than calling them fascists and litrullyhitler the whole time,

    Murphy, and others such as the Guardian, do this all the time and usually for frivolous reasons, and under a veneer of reasonableness and “caring”.

    Brexit and Trump are both examples of those much-maligned “ordinary” people telling their “betters” where to get off. Positive, and hilarious.

  18. “I was wondering whether anything actually happens in this world that is positive”

    Lots. The sort of people on this blog are the sort of people who are out there making all sorts of stuff actually happen. Not producing reams of paperwork bullshit about it, and having endless meetings about it, and never achieving anything, like everyone in the State sector does, but actual ‘Here’s something I made/designed/created/managed to fruition/sold to a million people’ type activity. Its people like you that spend most of their time trying to prevent people like us doing stuff, saying stuff and thinking stuff. If anyone is negative its the Left, they are constantly trying to get people to stop doing things they don’t like. Making money, smoking, eating too much (or too little), thinking thoughts you disagree with etc etc ad infinitum. The Right just want to get on with stuff.

    Why don’t you just fuck off and leave us alone? If the Left’s ideas are so fucking wonderful why do they have to be compulsory, rather than voluntary?

  19. Don’t Hug Me

    ‘There must be something going on that people here like.’

    I like opera and ballet, which is nice.
    Let’s hope that no one suddenly wants to tax or ban those.

  20. > Why does everything have to be reduced to Jewishishness?

    No idea. It pisses me off royally. Don’t shoot the messenger.

    > I really don’t get the Jew thing. I reckon it’s you lot being lazy.

    Who’s “you lot”? One thing that I think it is fair to say charactises the comments on this blog is incessant bickering. And yet every now and then someone turns up and accuses us of all agreeing with each other.

    Most insightful thing anyone ever said about antisemitism is that it’s like a virus: it mutates and adapts to whatever host brains are currently receptive to. This is why so many people who genuinely are not antisemitic hold antisemitic views. If you think “neoliberal” isn’t an example of that — just as “neocon” was — you’re not paying attention. Look at the things that are said about “neoliberals”; look at the things traditionally said about Jews. I was going to say that the difference is that no-one accuses “neoliberals” of poisoning the water supply, but then I remembered Flint, Michigan, so we’ll go with making pastry out of children’s blood. No-one’s accusing “neoliberals” of that, yet — though they do of course routinely accuse “neoliberals” of causing the death of innocent children.

    To be fair, SMFS is always accusing Jews of running the Great International Communist Conspiracy, and no-one thinks “neoliberals” are doing that. But he’s a nutter.

  21. And, if you want something positive, this blog is one of the few places you can find people regularly celebrating the massive decrease in poverty over the last forty years. Whereas the Left are the ones who deny that it’s happened and insist that everything is still miserable.

  22. -Jim

    I’m not sure why you’re being so sensitive. All I’ve done is to see ‘alt-right’ as I infer from ‘alt-right’ websites, since it’s the media mot du jour. There’s no doubt at all that there is more attention on various groups that would not generally get any oxygen.

    “Its people like you that spend most of their time trying to prevent people like us doing stuff, saying stuff and thinking stuff”

    “Why don’t you just fuck off and leave us alone? If the Left’s ideas are so fucking wonderful why do they have to be compulsory, rather than voluntary”

    I don’t think I’ve expressed a preference, other than not perceiving anything positive from what I’ve gleaned from this sort of blog.

    Why should I fuck off? Have I scared your horses? Of course not. So you have to tolerate me, don’t you? Even if you somehow you’ve manage to deduce that I support totalitarianism. You’re allowed, I guess, post-truth and all that.

    -Tim Worstall

    I can’t apologise for loosely categorising you, as the blog’s author, as I’m basing it on latest content.

    Raising allowance? Would that mean you would lower the higher band? Will universal income cost the state less? It does sound like a good idea. I don’t know enough about it. Carbon Tax? The so-called alt-right seem very anti anything scientific, so a carbon tax hedges your position. I’m guessing your contributors don’t agree much.

    What do your commentators think? A new name not copying and pasting the opinion previous is needing a kicking.

    Presumably the opposing ideology of neoliberal is neoconservative. Neon is the new N.

  23. – Squander Two

    My last post was done before I read yours.

    “Look at the things that are said about “neoliberals”; look at the things traditionally said about Jews.”

    Interesting that reading back a couple of pages here and I find “Mr Ecks” advocating purges. I understand that you could find antisemitic tract and replace “Jew” with a word of your choice and then describe the writer of being antisemitic.

    Are people, nowadays, who have a pop at people who may or may not eat babies, all antisemitic? But your comment rings true.

    As for lifting folk out of poverty, jury’s out, conglomerated national stats don’t account for outliers. I think.

  24. Don’t Hug seems remarkably slap-dash in his attitude to facts – “The so-called alt-right seem very anti anything scientific”.

    The only anti-science people I can think of are Muslims – and not many contribute to this blog.

  25. The question is, rather, what is this value added to? Tim N. is looking at this from the owner’s perspective. How much value, the owner asks, is Mr. Newman adding to my firm, meaning to say, how much is he adding to my bottom line? If I have to pay him so much that I’m left with zero profits, he’s not adding anything at all.

    If one looks at the economy as a whole, GDP is the total value added in that economy. It can be measured in three different ways, one being the income method, which adds up wages, corporate profits, other return on capital such as interest, and a few other items. “Thus all value added must be equal to all payments to people, whether labour or capital holders.”

    In an economy with only one factor of production, labor, one could say that Mr. Newman is adding £50k per year to his employer’s bottom line and £150k per year to GDP. In most sectors, however, it’s not labor alone but labor plus the capital provided by the firm’s shareholders and creditors that are adding to the firm’s profits and GDP.

  26. I was wondering whether anything actually happens in this world that is positive,…

    Well, as I understand it, setting up a blog is dead easy – so you can start writing one that reflects on the wonderful things happening in the world. Let us know how it goes.
    On the other hand, you can come here and complain that someone else (actually, several others) who are offering free content that reflects their interests and preoccupations aren’t writing the stuff you would like to see. Because, after all, they have an obligation to provide material to your liking, right?

  27. > A new name not copying and pasting the opinion previous is needing a kicking.

    I’ve read that a few times now, and seriously have no idea what it’s supposed to mean.

  28. > As for lifting folk out of poverty, jury’s out, conglomerated national stats don’t account for outliers. I think.

    Aside from the fact that the jury really isn’t out on this one — the stats are unambiguous and phenomenal — you were complaining that we’re all complaining about everything, I point out something most people here are rather positive about, and you react with gloomy pessimism. Honestly, some people.

  29. Jury’s out on folks being lifted out of poverty?

    Simply not true. Even the UN recognises what has happened over the last 30 years.

  30. Not complaining, dcardno.

    – Squander Two

    Gloomy? No. Expressing that a jury may be still out, as far as I’m concerned, is not negative. That would mean anything said by anybody is negative.

    And it’s not gloomy to think that for everyone now earning a dollar (or whatever the poverty unit is now) when they had none, it signifies that those that had the dollar before will now have three. Loose, I know, but that’s the essence of the system. So that dollar won’t get you yesterday’s dollar’s worth of improvement.

    What people claim is raising standards is not because of your phenomenal stats, it’s a natural social evolution. A guy with ten dollars in an African village when every other person has one dollar does not make that village more ‘western’.

    If there’s going to be point-scoring about lifting folk out of poverty, and there’s no leftism here, the Romans did ok. On a big scale.

    The textbook positives of a free market can only happen if there actually is a free market. Similarly with the softer socialist ideals. Neither can be proved, unless ‘post-truth’ is invoked.

    Can our version of democracy deliver real improvement?

    It would be interesting to go all Proudhon or anarchocapitalist about it all, which I believe are logical extensions to your beliefs that people are in less poverty than they were, especially in those areas where poverty is endemic; that the generation of material wealth of any individual, anywhere, will improve the lot for the entire species.

    Making a dollar into two dollars is far harder, and riskier, than making a hundred dollars into two hundred dollars. Not statistically, but for actual humans in an actual world.

  31. What do you get when you put two libertarians in the same room?

    Three opinions.

    Bickering is the natural state of affairs as there is evidence that can support most positions. The key is being able to change your opinion in light of valid facts. Remove the bickering and we are left with an echo chamber. If that is what you want stick to Facebook and the mainstream median.

    Don’t Hug Me,

    Since you mentioned you don’t know anything about basic income have some links.

    http://basicincome.org/

    http://www.policyinnovations.org/ideas/briefings/data/000163

    http://www.basicincome.org/bien/pdf/munich2012/haarmann.pdf

    http://unicef.in/Uploads/Publications/Resources/pub_doc83.pdf

    http://www.livableincome.org/rMM-EForget08.pdf

    There is more but this is probably enough to fry the brains of most people in one sitting.

    For a sin tax carbon taxes aren’t that bad if set up correctly. The key is to make the plan revenue neutral with the revenue used to help those who are hurt by the ‘sin’. The last thing we want is sin tax revenue to go into the general fund, like has happened with tobacco taxes in Pennsylvania. Under no circumstances do I see a reason to tax the poor so that the Toomeys and McGintys of the world can get tax breaks or cushy jobs.

  32. So Much For Subtlety

    Squander Two – “To be fair, SMFS is always accusing Jews of running the Great International Communist Conspiracy, and no-one thinks “neoliberals” are doing that. But he’s a nutter.”

    Normally I would be annoyed by this and would point out how wrong it is. Today I can’t seem to be bothered. Partly because it is obviously untrue. But mainly because you are saying this in such obvious bad faith. You know it is not true. You know what I did say. It likely follows that you know that what I said was true but that upsets you. Hence the need to pretend you are dealing with some sort of closet Nazi which makes you the hero of your own story.

    Fine. I still can’t be bothered. You need to work on your own issues.

    Also, while neo-Con is clearly used to mean people who are Jewish (and in fairness an awful lot of them, but not all of them, are former Trots who come from Jewish families) I am not sure neo-liberal is. I think it still has a substantial meaning. Most neo-liberals are not, after all, Jewish. I don’t think I can think of anyone who has used it in that special “Zionist” sense. It is mainly used to criticise people like Thatcher.

  33. SMFS,

    I jump in but I also can’t be bothered. I will note I didn’t remember that Trotsky was Jewish until you used Trots.

  34. “Making a dollar into two dollars is far harder, and riskier, than making a hundred dollars into two hundred dollars. Not statistically, but for actual humans in an actual world.”

    Jeez. For profound leftie statements that neither mean anything nor stand up to the slightest of analysis or testing that’s a good one.

    Do you drop that into the conversation at dinner parties to illicit knowing nods from fellow worthies?

    I do know that spending a dollar you’ve made yourself is infinitely harder for a lefty than spending 1,000 dollars you’ve taxed off someone else is.

  35. I doubt anyone would want to.

    How about literacy rates then? The UN rate literacy as the single most important tool in helping people get out of poverty.

    OECD and UNESCO figures show adult literacy rates improving as follows:

    1950 – 36%
    1970 – 56%
    1999 – 82%
    2014 – 85%

    It’s estimated that the great majority of those adults illiterate today are the elderly who were illiterate when young and still are.

    I realise that such facts aren’t half as important as a glib, meaningless worthyism about how holier than the rest of us the left is and isn’t it terrible how the thicko working classes keep voting for the wrong parties but I doubt those whose lives have been and are being constantly improved by this awful neoliberal conspiracy couldn’t give a toss about that.

  36. @Liberal Yank – I trust that wasn’t directed at me bilbaoboy. My comment was perfectly cromulent in my own mind at least.

    Eh, what comment was perfectly cromulent? Are you “Don’t Hug Me” as well?

  37. So Much For Subtlety

    Don’t Hug Me – “It would be interesting to see positive endorsement rather than a litany of repetitive smug and faux anger.”

    Says the guy who is denying the largest reduction in poverty and misery in human history.

    Consistency is such a bugbear of little minds innit?

  38. JerryC,

    I am so used to people not even bothering to read the UBI links I provide that I was unsure if bilbaoboy’s was directed at me. Spending time on sites like NPR(before they removed the comments section), the Atlantic, and Mother Jones has shown me just how narrow minded American liberals typically are.

  39. DHM,

    > that dollar won’t get you yesterday’s dollar’s worth of improvement.

    Amazingly, economists have actually thought of the incredibly obvious point you just made, and so measure income in purchasing-power adjusted dollars. Look, if you want to argue the point, go look up the actual stats (search for “Branko Milanovic elephant”). Then you might be able to pick holes in them in an informed way and look less like a rambling fuckwit.

  40. DHM,

    If you want positive, ask our host to reflect on the bounty that abandoning communism and embracing markets and economic freedom has spread amongst the poorest of our brethren – he does that from time to time. There is nothing dog-eat-dog about that – just (what could appear to be) a miraculous lifting of the very poorest out of the most abject poverty. Markets did that. Whee!

  41. I also don’t agree that people associate ‘neoliberal’ ideas with any concept of Jewishness. For one thing I think the use of neoliberal is too widespread and haphazard; it’s just what the left say when they mean ‘the baddies’.

    I was being slightly facetious in claiming that alt-right is the new neoliberal but the left is already fudging the definition by claiming that Milo and Breitbart (and here) are alt-right, which they really are not. So it becomes a new word for ‘the baddies’ and helpfully slanders reasonable opposition by lumping it in with the nutters.

  42. The only anti-science people I can think of are Muslims – and not many contribute to this blog.

    Most Greens are pro-science, right up to the point that any actual scientist disagrees with them, which is most of the time. GMO, nuclear power, the possibility of 100% renewables etc. In a discussion between a scientist, who says fracking is perfectly safe, and a Green you know the Green isn’t going to be persuaded by the science.

  43. We’re all good then. It’s sometimes hard to tell who a response is to without threading. Once my winter doldrums are over and I set up my own site I will have threads.

    I’m not Don’t hug me. I welcome hugs as long in the appropriate moment. While I do often times write incoherent drivel, mostly when drinking, I hope that my writing style is different enough that should be obvious.

  44. The question is, rather, what is this value added to? Tim N. is looking at this from the owner’s perspective. How much value, the owner asks, is Mr. Newman adding to my firm, meaning to say, how much is he adding to my bottom line? If I have to pay him so much that I’m left with zero profits, he’s not adding anything at all.

    Yes, this. There’s not a whole lot of point in paying somebody £100 to do something worth £100, although that can sometimes be smart. What you want to do is pay somebody £100 to do something worth £150.

  45. “Neocon” didn’t mean “Jew” at first, and a lot of the people who used it derisively without knowing what it meant never used it to mean “Jew”, yet it still ended up broadly meaning “Jew”. I think we’re in the early days of “neoliberal” making the same transition. I’ll be happy to be proved wrong by history on this one, but the worst thing about being cynical is being right.

    Anyway, the fact that we’re all disagreeing about it just further confirms my point that DHM was being a fuckwit when he said:

    > I really don’t get the Jew thing. I reckon it’s you lot being lazy.

  46. So Much For Subtlety

    Squander Two – “Oh, Jesus, PLEASE get a sense of humour.”

    Yeah because nothing is so amusing as calling someone else a Nazi and antisemite. I don’t find cheapening the Holocaust funny. If you do, you need to think again.

    Squander Two – ““Neocon” didn’t mean “Jew” at first,”

    Yes, of course it did. It started out referring to a small number of former Trots, mainly from New York, almost entirely Jewish, who came over to the Republicans over the growing anti-semitism of the pro-Palestinian left.

  47. > Yeah because nothing is so amusing as calling someone else a Nazi and antisemite.

    And where did I do that, exactly?

    > I don’t find cheapening the Holocaust funny.

    And where did I do that, exactly?

  48. Who exactly was the pro-Palestinian left?

    Although I’ve heard about this recently I don’t remember it from the before times. Neocons, from everything I recall, have just been the portion of the Republicans that favor bombing brown people for their own good, having the CIA overthrow their leaders in coups, or more generally, just trying to control everyone through fear and intimidation. Then again Bush I would be the first neocon I would name and I’m pretty sure he actually wasn’t the first.

  49. LY the Wikipedia article on the
    Neocons is so full of contradictions that it becomes clear that there is no definition. Rather like neoliberalism – it is just a word of general condemnation.

    “Neoconservatism was initiated by the repudiation of the New Deal coalition by the American New Left: Black Power, which accused Northern Jews of hypocrisy on integration and supported Israel in the Six-Day War; “anti-anticommunism”, and which during the late 1960s included substantial endorsement of Marxist–Leninist politics; and the “new politics” of the New left, which Norman Podheretz said was too close to the counterculture and too alienated from the majority of the population. Many were particularly alarmed by what they claimed were anti-semitic sentiments from Black Power advocates.[24] Irving Kristol edited the journal The Public Interest (1965–2005), featuring economists and political scientists, which emphasized ways that government planning in the liberal state had produced unintended harmful consequences.[25] Many early Neoconservative political figures were disillusioned Democratic politicians and intellectuals, such as Daniel Patrick Moynihan, who served in the Nixon Administration, and Jeane Kirkpatrick, who served as President Ronald Reagan’s UN Ambassador.”

    That’s one rather strange list of intellectual bedfellows.

  50. Can we just go back to calling a spade a spade and saying what we mean instead of all of the virtual signalling?

    What is really concerning to me is that this is one of the few safe spaces where I can say that and not have dozens, if not hundreds, of people calling me a racist for wanting words to have clear meanings.

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