Of course he is being serious: taxation of imaginary profits to impoverish the middle class is a key policy of Marxists “grind the middle classses between the upper and nether millstones of taxation and inflation”.
Nessimmersion
I notice another person who seems to be a bit in the Ritchie vein is getting more traction & plaudits from the left.
One Michael Hudson.
Wonder if Tim can do a short piece on the collated fruitcakery as in this example:
“Economics is not really a science as it’s taught. It’s a lobbying effort by the finance, insurance, and the real estate sector: the FIRE sector. It’s a lobbying effort by the parts of the economy that don’t produce goods and services, that only collect income without playing any productive role at all. Empty prices – that is price without any underlying value. And that is being promoted as economic growth.
And basically, it’s as if economics is like a criminal case in court where you have two opposing attorneys.The 19th century attorneys were prosecutors for the landlord class. They said, “Why should we have to pay the heirs of the warlords who conquered England and France to collect ground rents without producing anything? What possible function do they play? Why should we have to pay banks money for creating interest for creating credit that actually the governments can simply create their own money, or at least create credit for a productive purpose? And why do we permit monopolies, most of which were created by the government to sell off to creditors because it couldn’t afford to pay them their debt, why do we have to do anything of that? We don’t need it. Let’s get rid of the rentier sector.”The rentier sector being landlords, and bankers and monopolists.
Well, by the end of the 19th century, the rentiers fought back. And they developed what a defense attorney would do in a trial. They said, “There’s a whole different reality. There is no such thing as unearned income. There is no such thing as economic rent. Everybody deserves what they have. The landlord produces a valuable service in renting out the land and the housing and deciding who to rent to. And the bankers make a wonderful service when they charge interest. And especially when they charge a penalty fee because that helps make people pay their debts on time and that’s essential for productivity. So of course, we charge penalty fees as part of the gross domestic product. And monopolies are also part of the GDP, because after all, the monopolist is simply creating an orderly market.”
So, the problem is that instead of economic students getting both sides of the prosecution and the defense of the rentier economy, they’re only getting one side of the picture. They’re getting the defense of the rentiers, not the classical economics. And that’s why in graduate economic courses they no longer teach the history of economic thought. They no longer teach economic history. Because if you had the history of economic thought, you’d know that contrary to what Margaret Thatcher said, there is an alternative, that things don’t have to be this way.
There is a reason why China is growing so rapidly, and the American economy is being squeezed tighter and tighter. And that’s because its basically using its revenue to create new means of production and create a broader environment.
It’s true that it provides education freely, instead of charging $50,000 a year, which is what people have to pay in New York. But if you would say what if we credit China with every person with a degree of having paid $50,000 a year, obviously, that would be much bigger.”
Van_Patten
I am reminded of a quote from the Tony Scott Film ‘The fan’
‘I’m as serious as a heart attack Bobby’
He doesn’t do humour. In his eyes if you have assets that are subject to Capital Gains Tax then you are by definition wealthy and your income can quite easily survive reallocation to someone ‘more deserving’
You do learn something every day – I’d never encountered ‘Vertical Tax Equity’ but here it is :
Vertical tax equity requires that as a person’s income increases, the amount of tax paid on it will always increase irrespective of its source, with a progressive tax system resulting as a consequence.
If income from different sources e.g. work, rents, investments and capital gains, are not taxed in the same way (as they are not in the UK) then the creation of vertical tax equity is very hard and, as a result, a genuinely progressive tax system is hard to deliver. This is apparent in the effective tax rates of those with higher levels of wealth in the UK, which are lower than most would expect.
The creation of vertical tax equity is heavily dependent upon the creation of horizontal tax equity as a consequence.
and here’s ‘horizontal Tax Equity’
Horizontal tax equity
Horizontal tax equity requires that all incomes of similar amount be taxed the same sum irrespective of where that income comes from.
As example, this would mean that three people with an income of £30,000, one generating that from work, another from rents, and the third from capital gains, should all pay the same amount of tax in the year despite those differing sources of their wellbeing.
The UK is a very long way from having horizontal tax equity at present.
Would anyone, anywhere in the world outside of Spud’s near demented imagination consider either of these worthwhile goals? How stupid would you have to be?
Bongo
I don’t think horizontal tax equity is going to help Spud personally.
£30k income generated from PAYE employment for a PLC results in a different after tax return than the same amount generated from grant income to an LLP which is yourself for practical purposes.
Therefore I’m in favour.
Essentially he’s rejecting neoclassical economics. Insisting that things do not happen at the margin. Is returning to classial economics.
Which is, of course, toss. Like trying to reintoduce phlogiston to chemistry.
Jim
“Essentially he’s rejecting neoclassical economics. Insisting that things do not happen at the margin. Is returning to classial economics.
Which is, of course, toss. Like trying to reintoduce phlogiston to chemistry.”
There you go again, trying to pretend economics is a hard science. Its not, its a social science, and about as useful.
Tim Worstall
No, the microeconomics part is very useful. Even correct at times. Which is why they hate it – it tells us their grand plans are wrong.
Jim
Economics (whether micro or macro) is not a science because of the weasel phrase ‘all other things being equal’. In real sciences we can make all other things be equal, thats what experiments are for. In economics that is literally impossible. So all economic theory is based on a state of being that cannot exist. It is therefore worthless. You might as well argue about how many angels can dance on a pinhead, that’s about as realistic as economics is.
To be fair, even the ‘real’ sciences are struggling to do proper science these days, just look at medicine and covid…….
Murphy is a c*nt
@Jim,
You seem to be confused! Just because economics is not perfect, does not mean that it can’t tell us an awful lot and inform us about how the world (and people) work.
Jim
“You seem to be confused! ”
Nope, I’ve just spent the last 40 years watching economists be wrong about everything. You can’t forecast a system that comprises the aggregate of billions of individual people’s decisions. Its fundamentally unpredictable. And pretending otherwise is intellectually dishonest.
Matt
@Jim
Agree it’s not a science, but that doesn’t make it useless. Just because economists* are wrong all the time doesn’t invalidate economics. The problem is that the tenets of economics are pretty simple and there’s no grant money in “Smith and Ricardo were right.” So all the funding goes to the fruit-loops who are trying to _disprove_ what is patently obvious, and prestige and elite-acceptance follows shortly after.
It’s like weather forecasts. The inaccuracy of weather forecasts doesn’t render physics useless, it just proves that predicting the future state of a chaotic system is difficult, and utterly pointless beyond a certain horizon. Similarly, entire economies are chaotic systems, so anyone attempting to make macro predictions is an astrologer in a suit.
*at least the ones who get gubmint jobs or are permitted on air by the TV gatekeepers
Jim
” Just because economists* are wrong all the time doesn’t invalidate economics.”
I would rather contend it does. If engineering created bridges that collapsed as much as they stood up, then I think engineering would be not be considered a science. The mere fact that economists can’t agree about anything tells me its basically politics by another name.
Tim Worstall
As I’ve noted before. There’s no macroeconomic theory that all living Nobel Laureates in economics would agree upon (that’s a bit of rhetorical excess perhaps, but then most things original to me usually are). There are plenty of bits of microeconomics they would. Which leads to the idea that we shouldn’t try to guide the economy by macroeconomics, instead get those microeconomic rules right (the basics of property, law, transactions and so on) and stand back.
Which is, roughly enough, my standard approach to economics.
Lots of economics is wrong, yes. So, let’s not use those bits.
Andrew again
On the topic of inflation indexing, but off this topic. A thought occurred to me.
The thing is, Tim, that the utilities with inflation linked contracted income often sell the actual inflation result and get a fixed payment in return. So their income isn’t even variable based on prices. It’s fixed based purely on the volume of electricity they can produce.
And yet they still can’t make enough revenue to cover their costs + their cost of capital at a time when ‘wind is cheaper than ever and 9x cheaper [!] than FF electricity’ and their capital costs have been lower than ever as people have flooded into net zero and sustainability funds.
That flood of people is now a flood of people looking for the exits incidentally.
Addolff
Economics isn’t perfect, I think we all accept that, but i’ve a soft spot for the belief that “Perfect is the enemy of good”.
Ducky McDuckface
Andrew Again – price controls, no storage.
Jim
“Lots of economics is wrong, yes. So, let’s not use those bits.”
The fact that the bad bits haven’t been thrown out as useless, as they would in a discipline like maths or chemistry, still just proves its politics, nothing more.
jgh
Economics observes that if the price of something goes up, people buy less of it. Is that wrong? Maths says it’s right.
Economics observes that if the prices of a basket of things goes up, people buy less of different parts of the basket to prioritise not buying less of other parts of the basket. Is that wrong? Maths says it’s right.
Jim
“Economics observes that if the price of something goes up, people buy less of it. Is that wrong? Maths says it’s right.”
Well, yes, with the crucial caveat ‘All other things being equal’. But they never are equal in real life though are they? If the price of food goes up people don’t just have a fixed budget for food and thus are forced to buy less. They economise elsewhere and possibly end up buying more food, because they aren’t going out to the pub for example. Or buy the cheaper brands and eat more of them. Its been noted that heavy drinkers in Scotland have increased their consumption of alcohol after the price rises from the introduction of minimum pricing rules, because they stopped buying food, and bought more cheaper brands. So its really isn’t as simple as ‘price up, consumption down’ is it?
The world people actually live in is not the fantasy world that economics pretends everyone lives in, and thus its conclusions are not relevant to real people, only the ‘all other things being equal’ world they have created out of thin air.
Of course he is being serious: taxation of imaginary profits to impoverish the middle class is a key policy of Marxists “grind the middle classses between the upper and nether millstones of taxation and inflation”.
I notice another person who seems to be a bit in the Ritchie vein is getting more traction & plaudits from the left.
One Michael Hudson.
Wonder if Tim can do a short piece on the collated fruitcakery as in this example:
“Economics is not really a science as it’s taught. It’s a lobbying effort by the finance, insurance, and the real estate sector: the FIRE sector. It’s a lobbying effort by the parts of the economy that don’t produce goods and services, that only collect income without playing any productive role at all. Empty prices – that is price without any underlying value. And that is being promoted as economic growth.
And basically, it’s as if economics is like a criminal case in court where you have two opposing attorneys.The 19th century attorneys were prosecutors for the landlord class. They said, “Why should we have to pay the heirs of the warlords who conquered England and France to collect ground rents without producing anything? What possible function do they play? Why should we have to pay banks money for creating interest for creating credit that actually the governments can simply create their own money, or at least create credit for a productive purpose? And why do we permit monopolies, most of which were created by the government to sell off to creditors because it couldn’t afford to pay them their debt, why do we have to do anything of that? We don’t need it. Let’s get rid of the rentier sector.”The rentier sector being landlords, and bankers and monopolists.
Well, by the end of the 19th century, the rentiers fought back. And they developed what a defense attorney would do in a trial. They said, “There’s a whole different reality. There is no such thing as unearned income. There is no such thing as economic rent. Everybody deserves what they have. The landlord produces a valuable service in renting out the land and the housing and deciding who to rent to. And the bankers make a wonderful service when they charge interest. And especially when they charge a penalty fee because that helps make people pay their debts on time and that’s essential for productivity. So of course, we charge penalty fees as part of the gross domestic product. And monopolies are also part of the GDP, because after all, the monopolist is simply creating an orderly market.”
So, the problem is that instead of economic students getting both sides of the prosecution and the defense of the rentier economy, they’re only getting one side of the picture. They’re getting the defense of the rentiers, not the classical economics. And that’s why in graduate economic courses they no longer teach the history of economic thought. They no longer teach economic history. Because if you had the history of economic thought, you’d know that contrary to what Margaret Thatcher said, there is an alternative, that things don’t have to be this way.
There is a reason why China is growing so rapidly, and the American economy is being squeezed tighter and tighter. And that’s because its basically using its revenue to create new means of production and create a broader environment.
It’s true that it provides education freely, instead of charging $50,000 a year, which is what people have to pay in New York. But if you would say what if we credit China with every person with a degree of having paid $50,000 a year, obviously, that would be much bigger.”
I am reminded of a quote from the Tony Scott Film ‘The fan’
‘I’m as serious as a heart attack Bobby’
He doesn’t do humour. In his eyes if you have assets that are subject to Capital Gains Tax then you are by definition wealthy and your income can quite easily survive reallocation to someone ‘more deserving’
You do learn something every day – I’d never encountered ‘Vertical Tax Equity’ but here it is :
Vertical tax equity requires that as a person’s income increases, the amount of tax paid on it will always increase irrespective of its source, with a progressive tax system resulting as a consequence.
If income from different sources e.g. work, rents, investments and capital gains, are not taxed in the same way (as they are not in the UK) then the creation of vertical tax equity is very hard and, as a result, a genuinely progressive tax system is hard to deliver. This is apparent in the effective tax rates of those with higher levels of wealth in the UK, which are lower than most would expect.
The creation of vertical tax equity is heavily dependent upon the creation of horizontal tax equity as a consequence.
and here’s ‘horizontal Tax Equity’
Horizontal tax equity
Horizontal tax equity requires that all incomes of similar amount be taxed the same sum irrespective of where that income comes from.
As example, this would mean that three people with an income of £30,000, one generating that from work, another from rents, and the third from capital gains, should all pay the same amount of tax in the year despite those differing sources of their wellbeing.
The UK is a very long way from having horizontal tax equity at present.
Would anyone, anywhere in the world outside of Spud’s near demented imagination consider either of these worthwhile goals? How stupid would you have to be?
I don’t think horizontal tax equity is going to help Spud personally.
£30k income generated from PAYE employment for a PLC results in a different after tax return than the same amount generated from grant income to an LLP which is yourself for practical purposes.
Therefore I’m in favour.
The starting point is:
https://www.investopedia.com/ask/answers/032515/what-marginalism-microeconomics-and-why-it-important.asp
Essentially he’s rejecting neoclassical economics. Insisting that things do not happen at the margin. Is returning to classial economics.
Which is, of course, toss. Like trying to reintoduce phlogiston to chemistry.
“Essentially he’s rejecting neoclassical economics. Insisting that things do not happen at the margin. Is returning to classial economics.
Which is, of course, toss. Like trying to reintoduce phlogiston to chemistry.”
There you go again, trying to pretend economics is a hard science. Its not, its a social science, and about as useful.
No, the microeconomics part is very useful. Even correct at times. Which is why they hate it – it tells us their grand plans are wrong.
Economics (whether micro or macro) is not a science because of the weasel phrase ‘all other things being equal’. In real sciences we can make all other things be equal, thats what experiments are for. In economics that is literally impossible. So all economic theory is based on a state of being that cannot exist. It is therefore worthless. You might as well argue about how many angels can dance on a pinhead, that’s about as realistic as economics is.
To be fair, even the ‘real’ sciences are struggling to do proper science these days, just look at medicine and covid…….
@Jim,
You seem to be confused! Just because economics is not perfect, does not mean that it can’t tell us an awful lot and inform us about how the world (and people) work.
“You seem to be confused! ”
Nope, I’ve just spent the last 40 years watching economists be wrong about everything. You can’t forecast a system that comprises the aggregate of billions of individual people’s decisions. Its fundamentally unpredictable. And pretending otherwise is intellectually dishonest.
@Jim
Agree it’s not a science, but that doesn’t make it useless. Just because economists* are wrong all the time doesn’t invalidate economics. The problem is that the tenets of economics are pretty simple and there’s no grant money in “Smith and Ricardo were right.” So all the funding goes to the fruit-loops who are trying to _disprove_ what is patently obvious, and prestige and elite-acceptance follows shortly after.
It’s like weather forecasts. The inaccuracy of weather forecasts doesn’t render physics useless, it just proves that predicting the future state of a chaotic system is difficult, and utterly pointless beyond a certain horizon. Similarly, entire economies are chaotic systems, so anyone attempting to make macro predictions is an astrologer in a suit.
*at least the ones who get gubmint jobs or are permitted on air by the TV gatekeepers
” Just because economists* are wrong all the time doesn’t invalidate economics.”
I would rather contend it does. If engineering created bridges that collapsed as much as they stood up, then I think engineering would be not be considered a science. The mere fact that economists can’t agree about anything tells me its basically politics by another name.
As I’ve noted before. There’s no macroeconomic theory that all living Nobel Laureates in economics would agree upon (that’s a bit of rhetorical excess perhaps, but then most things original to me usually are). There are plenty of bits of microeconomics they would. Which leads to the idea that we shouldn’t try to guide the economy by macroeconomics, instead get those microeconomic rules right (the basics of property, law, transactions and so on) and stand back.
Which is, roughly enough, my standard approach to economics.
Lots of economics is wrong, yes. So, let’s not use those bits.
On the topic of inflation indexing, but off this topic. A thought occurred to me.
The thing is, Tim, that the utilities with inflation linked contracted income often sell the actual inflation result and get a fixed payment in return. So their income isn’t even variable based on prices. It’s fixed based purely on the volume of electricity they can produce.
And yet they still can’t make enough revenue to cover their costs + their cost of capital at a time when ‘wind is cheaper than ever and 9x cheaper [!] than FF electricity’ and their capital costs have been lower than ever as people have flooded into net zero and sustainability funds.
That flood of people is now a flood of people looking for the exits incidentally.
Economics isn’t perfect, I think we all accept that, but i’ve a soft spot for the belief that “Perfect is the enemy of good”.
Andrew Again – price controls, no storage.
“Lots of economics is wrong, yes. So, let’s not use those bits.”
The fact that the bad bits haven’t been thrown out as useless, as they would in a discipline like maths or chemistry, still just proves its politics, nothing more.
Economics observes that if the price of something goes up, people buy less of it. Is that wrong? Maths says it’s right.
Economics observes that if the prices of a basket of things goes up, people buy less of different parts of the basket to prioritise not buying less of other parts of the basket. Is that wrong? Maths says it’s right.
“Economics observes that if the price of something goes up, people buy less of it. Is that wrong? Maths says it’s right.”
Well, yes, with the crucial caveat ‘All other things being equal’. But they never are equal in real life though are they? If the price of food goes up people don’t just have a fixed budget for food and thus are forced to buy less. They economise elsewhere and possibly end up buying more food, because they aren’t going out to the pub for example. Or buy the cheaper brands and eat more of them. Its been noted that heavy drinkers in Scotland have increased their consumption of alcohol after the price rises from the introduction of minimum pricing rules, because they stopped buying food, and bought more cheaper brands. So its really isn’t as simple as ‘price up, consumption down’ is it?
The world people actually live in is not the fantasy world that economics pretends everyone lives in, and thus its conclusions are not relevant to real people, only the ‘all other things being equal’ world they have created out of thin air.