Economics has long had a problem with time. Its preferred solution has been to eliminate time altogether. The mechanism for doing so is discounting. This technical term conceals an extraordinary act of erasure.
That’s the wrong end of that shitty stick firmly grasped then.
This from the man who keeps telling us that uncertainty exists. Which is one of the reasons to discount of course – maybe what we think might happen won’t….
“This from the man who keeps telling us that uncertainty exists. Which is one of the reasons to discount of course – maybe what we think might happen won’t….”
I think you are being too careful here. We know that what we think might happen won’t happen and that the delta between reality and plan expands the further out we go in time. Anyone who thinks differently has never followed an investment decision over time
What is he on? Surely discounting is economics dealing with time, not erasing it.
Noo, you’re all wrong on discounting. You deal with time by declaring that there’s 100 months so save the world (2008), and net zero by 2050, and the electric grid will be carbon free by 2030. Mission-oriented targets.
On the positive side Reform are getting a boost from him:
Nigel Farage wants children to suffer.
He wants millions of people to suffer.
He wants to punish people for being poor.
He wants them to lose their homes because they won’t be able to pay the rent.
He wants to make the disabled and the vulnerable the most hard-up people in the UK, and those least able to take part in our society.
The fact is, poverty will explode under Reform. And even if you think you won’t be impacted by what Nigel Farage is talking about – although many millions of people who might vote for Reform will be – I can almost guarantee you that somebody you know would be really badly hit by what Farage is proposing.
Ask your family.
Ask your friends.
Ask your neighbours.
Ask about who needs benefits? Who’s got benefits? Who couldn’t survive without benefits? And then realise that Farage’s cuts would destroy lives.
Why would you want to vote for that to happen? I’m completely bemused by the action of anybody who did.
Please care about your neighbours.
And care about the fact that Farage wants to destroy their well-being, and think again about Reform.
Considering the source?
Please stop. I can only cheer so loudly; I will lose my voice if you keep going.
God, you’d need a heart of stone not to laugh. I wasn’t sure about Reform but after reading this I’m definitely going to vote for Nigel.
“He wants them to lose their homes because they won’t be able to pay the rent.”
Surely if you deport hundreds of thousands, maybe millions of people then rents might just fall a bit?
Thank you V_P. This drivel of his is risible. Reform is consolidating a coalition of (i) working class social conservatives that believe in the welfare state and the NHS but loathe ‘gimmegrants’ and spongers and (ii) anti-immigration right-of-centre types disillusioned with the Tories. So cuts to the welfare state are simply not on Reform’s agenda, as it would fracture the coalition; and neither is Spud’s bogeyman – “neoliberalism”. His dogmatic ignorance of Reform’s strategy reveals his Dunning-Kruger level of stupidity.
Tim
You missed the most important part of his blog, farther down:
“The truth is that time cannot be eliminated. It is the medium in which all human activity occurs. That is why ignoring it in economics is such a profound mistake. And that is where the concept of sustainable cost accounting matters.”
The grift never ends, does it?
A very wise person explained this not so long ago “So, when you think about it, there is great significance to the passage of time”.
Nonsense.
Farage has said nothing about reform of welfare. If anything, he wants to extend it. (e.g. lifting the two child cap.)
Reform really must take a chainsaw to the welfare state (in particular, the triple lock) but they are keeping very quiet about it.
They’ve said they want to keep welfare and State services for British citizens only. Which given the millions of foreigners over here would be a massive cut in welfare spending. Its a 100% cut in welfare payments for one section of people, business as usual for the rest, maybe even some more.
Its not ideal but its far better than what we have today, which is free money and services for anyone who manages to rock up at these shores.
No politician is going to win by saying ‘we’ll cut your welfare’ to everyone on welfare, because they are almost certainly the majority now. The only way to make it work will be to draw a dividing line between ‘them and us’ and make savings that way. It also has the added advantage that it will deter immigrants from coming here in the first place, another Reform aim.
Yes we’d like to have cuts to welfare across the board, but thats just not electorally possible, not from where we are anyway. I think Nige realises this.
This is for fans of the man’s various boondoogles that are meant to generate an income in the absence of any pension provision – this one is ‘SCA’ – Sustainable Cost Accounting
What sustainable cost accounting does is reverse the logic of discounting. Instead of writing down the value of future costs and benefits to nothing, it insists that we must recognise the compounded costs of inaction at the moment decisions are made.
This seems to be the greatest straw man (or one of them he has ever come up with) – I know its verboten to suggest his accountancy qualifications aren’t real but anyone with even the vaguest familarity with GAAP will realize he’s talking utter crap.
Think of climate change. If a government decides not to invest today in decarbonisation, the cost of that inaction does not drift away into a discounted future. It grows. Every year of delay makes the problem bigger and more expensive to resolve. The compounding effect is relentless.
So that’s what it’s all about. The ‘science is settled’ according to a halfwit from Ely so we have to dercarbonize RIGHT NOW!!!!
Sustainable cost accounting says we must account for those costs now. When the decision not to act is made, the liability is created. It should be recognised immediately. That liability is not some theoretical future loss. It is the real consequence of inaction. The economy will bear it, and society will suffer it, whether we acknowledge it or not.
That’s precisely what brought us the response to COVID – which was arguably the greatest single disaster ever to befall the country
This changes everything. Instead of discounting the future to zero, we bring the future into the present. We insist that inaction today carries a price that must be reported today. The balance sheet of government, business, and society is altered. Decisions that look cheap under the discounting model are revealed as ruinously expensive when their compounded costs are made explicit.
I thought it was a binding rule of governments that no administration could bind its successor? Forget that – we have to be tied into this cretin’s vision forever. Why do have a vision of Murphy as the character ‘Frank Booth’ in ‘Blue Velvet’: – ‘You don’t sustainably cost account, you’re F%^&ed FOREVER!!’
Take public health. Spending on preventive care is often cut because the benefits lie far in the future, while the costs are immediate. Discounting reinforces this choice. But sustainable cost accounting shows that every pound not spent now creates a liability – in the form of increased illness, lost productivity, and greater treatment costs – that compounds over time. The failure to act generates costs that are far larger than the initial saving.
There is a kernel of truth in this observation – the problem is that the demand for Free medical services is almost unlimited and the costs are highly unpredictable. Despite MMT theory which is simply flat out wrong (as circumstances are proving almost daily) there isn’t a bottomless pit of money to keep paying ‘ad nauseam’
The same is true of education. Investment today equips generations with skills, resilience, and capacity. Failure to invest stores up deficits in knowledge, productivity, and social cohesion. Under discounting, these benefits are written down and ignored. Under sustainable cost accounting, the liability of inaction is carried forward and recognised.
I’d argue much expenditure on education is highly wasteful. The entirety of the DEI and LGBT Alphabet Soup canon have a severely negative impact on the balance sheet , incurring wholly unnecessary costs across the piece in all sectors of the economy. I bet that’s not what he had in mind, of course.
Infrastructure provides another example. Victorians who built sewers were not thinking in terms of discounted future benefits. They acted out of necessity. But their decision delivered continuing returns across centuries. Had they not acted, the compounded cost of inaction – in disease, lost labour, and social breakdown – would have been catastrophic. That liability should always have been recognised the moment the decision was taken not to build.
Channelling honest Johnny Major and a return to ‘Victorian values’ – who’d have thought it?
This is not just an accounting technicality. It is about the way we see the world. Discounting tells us the future does not matter. Sustainable cost accounting tells us that the future is the measure of all we do. One erases time; the other insists that time is always present.
And this is where the idea links back to quantum economics. In quantum theory, outcomes are uncertain, but time remains the essential backdrop against which probabilities evolve.
The lesson for economics is that time must be treated in the same way. It cannot be ignored. It must be recognised as the dimension in which all value is created, and all costs accumulate.
And they would just happen to provide a certain ‘Quantum specialist’ with a revenue stream that since his defenestration in the annals of higher education has been sadly lacking – what a coincidence.
The irony is that, when seen in this light, investment today is cheap. Education, health, renewable energy, infrastructure: all deliver benefits so large and so long-lasting that their cost now is trivial by comparison. The real expense lies in not acting. That is the liability that compounds beyond measure.
So the challenge is clear. We need an economics that bends time back into our view, that refuses to discount the future, and that recognises the cost of inaction as a liability at the moment the choice is made. We need accounting frameworks that reveal, rather than conceal, the truth.
If I look at Renewables the costs are enormous, the benefits highly uncertain and the immediate costs in terms of people dying cold and hungry almost incalculable. To be honest this is basics of cost Benefit analysis and contingency planning. It’s done by businesses as a matter of course. Quantum packaging aside you are saying nothing new.
Because in the end, this is not about abstractions. It is about survival. If we continue to discount the future, we discount our own existence. If we continue to ignore the costs of inaction, we compound them until they overwhelm us.
‘Murphy answered – I am the way and the truth and the life. No one comes to the Father except through me’
The task is therefore urgent. We must move beyond discounting and embrace sustainable cost accounting. We must see time as essential, not incidental. And we must fund the future in ways that recognise that the value of investment today is not only real – it is infinite.
That, surely, is what Funding the Future must mean.
And Tim, you still maintain this guy’s accountancy qualifications are bona fide? The value of investment is ‘infinite’??
This is all based on a straight-out LIE – discounting does not reduce any future cost to zero – it equates, for the purpose of the decision tree, to the amount of money which one should need to invest, at a risk-free interest rate, in order to meet that cost when it arises. Benefits are discounted at a risk-included discount rate (which is obviously higher to alow for the risk that they might not be actually realised).
Discounting *cannot* push one away from concern about long-term disbenefits.
It is possible that Murphy has tried discounting liabilities at a risk-included interest rate to reduce them to *near* zero but I thought that even an accountant would know better than to do so.
“Time is the measurement of change.”
— Aristotle
Time is just Nature’s way of stopping everything from happening at once.
Space is Her way of stopping it all happening to me.
John Wheeler (attrib)
Time is a great teacher, but unfortunately it kills all its pupils.
Hector Berlioz
But… but… Richard Murphy takes the Stern Report as an article of faith (as does Timothy Worstall), and that report employs artful selection of discount rates to inflate the present value by a factor of roughly 20. Is Spuddo telling us that the Stern Report is nonsense?