Not going to work, is it? But he’s attempting it:
Rishi Sunak has claimed that to pay a 10% pay rise to all public sector employees will cost each household in the UK £1,000. This is what I call CRAp – which stands for a ‘completely rubbish approximation’ to the truth. Let me explain…
There are so many things wrong with what Sunak has said that it is hard to know where to start, but first of all it ignores the fact that about 5 million people work for the public sector. This payment would not cost them £1,000 a year.
Then it assumes that all 28 million UK households make the same contribution in tax towards this cost, but that is also not true. Some households do not pay income tax, for example. And the amount of tax paid varies widely, thankfully, because the best off do pay more.
And Sunak assumes that this payment will come out of tax. It might not. It could be paid for with borrowing or money creation, which is commonly called quantitative easing. It looks like he does not even know how government spending is actually funded.
If £28 billion is spent upon this thing here – wherever the money comes from, however, whoever – then that’s £28 billion that cannot be spent upon anything else. Therefore the cost of spending £28 billion is not spending £28 billion elsewhere. Or, as we can and should also put it, the cost of spending £28 billion is £28 billion.
If you try to do economics without opportunity cost then you’re not, in fact, doing economics. But then this man has only had three economic professorships in modern British academia so how was he supposed to know that?
But worst of all, this claim assumes that if £28 billion in extra wages is paid out this money just disappears, never to be seen again, and this assumption is so stupid it is laughable – except very few politicians seem to understand this.
Let me explain. Let’s start with the fact that if £28 billion is paid out then this will top up existing pay. It will all be taxable and subject to national insurance. Assume tax is 20%, employee NI 12% and employer NI is 13.8% and the full NI cost is included in the £28bn.
This is true of spending £28 billion elsewhere or otherwise. It’s even true of not doing the spending thorough government, private spending of £28 billion would lead to the same result. This does not, therefore, offset that opportunity cost.
Why then can’t politicians talk economic, management and straightforward human sense about these issues in that case? I really wish I knew. But I can offer a suggestion. Maybe they don’t know what they’re talking about. That’s why they talk CRAp.
It’s also possible that some of them know some economics.
If £28 billion is spent upon this thing here – wherever the money comes from, however, whomever – then that’s £28 billion that cannot be spent upon anything else.
Not under the rules of Elynomics, it isn’t! This is what Capt. Potato calls “Billions of Lovely Loot? Of course, kind sir.”
I think £1000 is a disgrace. It’s not nearly enough for all the wonderful service that those in the Public Sector provide.
Personally I would renounce all my worldly goods and sell my family into slavery in order to fund nurses so that they don’t have to root throrugh the bins to scavenger for theirs and their childrens’ dinners.
wibble
“It’s also possible that some of them know some economics.”
I really don’t think that assertion can be justified by their performance.
As I said in a previous post, if you create money without creating the goods & services to purchase with it, you create higher prices as people compete for what’s available. The net result will be a transfer of wealth from the poor to those receiving the money, since they lose out in the competition for the G&S.
So we can rename Spud Robbin
HoodBastard. He who steals from the poor to give to the rich.He really does not understand that money is an abstract. A token of exchange not a tangible. Does he?
It’s obvious that Sunak was illustrating a point, not making an actuarial calculation.
“Never ascribe to malice that which…” Bollocks. Even Murphy isn’t that stupid – he’s just a nasty little troublemaker.
Well it makes a change from the tuber claiming that additional public spending pays for itself through increased taxation etc etc. It’s a start I suppose,
If you want to spend £28bn elsewhere Soud’s got another QE/Green New Deal just for you. As it happens he has unlimited supply of them.
But worst of all, this claim assumes that if £28 billion in extra wages is paid out this money just disappears, never to be seen again, and this assumption is so stupid it is laughable – except very few politicians seem to understand this.
And yet they think the government NOT TAKING OUR BLOODY MONEY in the first place means it just disappears.
Apparently the ICAEW considers him ‘top UK Social Media Influencer’ – clearly they don’t actually read any of his comments – as for his absurd contention. Why stop at £28 billion? Why not £280 billion? Just fairytale stuff. The fact he has even a scintilla of influence let alone holds a position as a UK academic is indicative of the nation’s sorry state.
《 if you create money without creating the goods & services to purchase with it》
Why shouldn’t price makers raise prices just because they can, while throttling supply (see OPEC), and why isn’t the best solution simply indexing incomes to nominal price rises?
Cuz even I bit?
Well trillions, OPEC have raised prices before, and people built nukes, synfuel plants, and finally developed fracking.
Of course torrents of Arab oil money have supported the initial Commie attack on nukes, demonised coal, oil and gas, and generally made it appear that only wogs are so debased that they can be allowed to drill for fossil fuels.
But there is still the dire danger that if they push the bullshit too hard, and raise prices too much, the nukists’ll build nukes, the coalists’ll dig up coal, and Holy Mother Gaia will be totally fracked. After all, never forget that dreadful fiend Trump who actually encouraged the vile practice.
If OPEC can drive prices down to $20/barrel again to drive out competitors, and still profit, how arbitrary are energy prices?
Is Fischer Black in “Noise” looking more and more right?
《we might define an efficient market as one in which price is within a factor of 2 of value, i.e., the price is more than half of value and less than twice value. The factor of 2 is arbitrary, of course. Intuitively, though, it seems reasonable to me, in the light of sources of uncertainty about value and the strength of the forces tending to cause price to return to value. By this definition, I think almost all markets are efficient almost all of the time. “Almost all” means at least 90%.》
I suppose the lead time on developing nukes, coal mines etc means OPEC can easily drop prices to kill off alternatives then ramp them back up later, then rinse and repeat as needed
BniC,
Its much cheaper to
buylobby politicians. Clegg successfully canned that Nuke that would have come on line this year and Putin has done a good job in demonising fracking.I think Murphy subscribes to the theory that more money given by government is a public good. You don’t need to pay (in useful hours worked) to get some more and giving more to one group doesn’t exclude any other group getting some.
As we like public goods, 28bn isn’t enough.
Trillion: Price-fixing cartels are inherently unstable, the first member to cheat and drop prices wins by grabbing the market.