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Tim Worstall

Inflation\’s a tricky thing you know

Michael White:

For the record, MPs were unpaid until the radical Liberal chancellor David Lloyd George found them £400 a year in 1910, the annus mirabilis of progressive taxation when LG faced down the Lords. According to the National Archives ready-reckoner, that £400 is worth £22,824 today – so MPs on £65,738 have achieved a steady real-terms pay rise.

Ministers have done less well. Pitt the Younger got £5,000 a year as PM in 1800, a sum worth £160,000 today, but £292,000 in 1850, more stable times. The pay was increased to £10,000 in the 1930s when, according to the reckoner, it would be worth £396,000 in today\’s funny money.

Thanks to Brown\’s unilateral cut and his own 5% further cut, Cameron gets £142,000, including his MP\’s salary.

Comparing money across time is not all that easy a thing. Should we just calculate, as above, by the straight old inflation rate?

Well, we can, but that doesn\’t really give us the right idea. For, at least since the invention of this capitalism thing, we\’ve also had rising living standards in general, economic growth in general. This leads, quite naturally, to the thought that we\’ve had rising real wages over time.

So there are a number of alternatives: note that none of these are perfect. We\’re making ranging shots at judging which is the best number to use, not plumping for one or other method which is precise.

The above simply inflation one is the worst of our alternatives. For many reasons but perhaps the most important is that we\’re simply ignoring the fact that everyone\’s standard of living has risen since 1800, or 1910, or 1930. And as a good lefty like Michael White would be happy to agree, a goodly chunk of the point about wages is not the absolute value, but the value relative to everyone else.

We can also use in relation to GDP (ie, what\’s the wage as compared to the total economic output of the country, adjusted for population) and so on, but probably the best, when we\’re looking at incomes, is to upgrade by the rise in average incomes. So, for example, if average incomes have risen by 1-2% above inflation, as they pretty much have done, over the couple of centuries, then we should be upgrading those income figures by that 1-2% above inflation.

One reason why even this isn\’t perfect is that this would take no account at all of a change in the distribution of incomes. Recall in Jane Austen that £3,000 a year made one very wealthy indeed landed gentry so £10,000 as PM was way, way out in the very tippy top of the income distribution. Not equivalent at all to that £160,000 which is about the top 1% today isn\’t it?

To use these various different measures, there this great little site.

The results are that £400 in 1910 is more like £145,000 now. £5,000 in 1800 is around £3,500,000 now and £10,000 in 1930 is £1.7 million now.

Which means that, in relative terms, MPs are about right now (pay plus expenses isn\’t far off £145,000) while the Prime Minister is grossly underpaid.

Another way of looking at it: That £5,000 in 1800 if considered as a capital sum was enough, when invested, to produce a solidly upper middle class income forever. £200 a year or so*….as compared to a Naval Post Captain\’s wages (without prize money of course) of some £140 a year**. That £10,000 in 1930 similarly treated would give £400 a year in perpetuity, again a solid upper middle class income. You would need a capital sum of that £2 million and above to be providing top quintile income from investments today (top quintile household income starts at £80k today ish).

So another way of thinking about this is that back then the PM was paid the capital sum, each year, necessary to have that upper middle class lifestyle for life. Today he\’s paid that upper middle class lifestyle amount as income each year that he\’s PM. A very different amount indeed.

*Assuming 4% interest which isn\’t far off gilts in those days

** Guestimated from Bligh being reported as getting £70 a year as a Post Captain on half pay.

No surprise really

A small number of suspects will still face legal curbs on their freedom without being put on trial, he signalled.

The new security regime will mean that a small number of suspects will still be subjected to far-reaching restrictions on their freedom, electronically tagged and prevented from travelling freely.

An announcement on anti-terrorism laws is expected next week. Whitehall sources said the most dangerous terrorist suspects will still be subject to far-reaching restrictions on their freedom even after the phrase “control order” is abandoned.

Yet disappointing.

If you have the proof that these people have committed offences then try them. If you think they\’re plotting to committ offences then monitor them: that is what we\’ve got various spy services for, after all.

But to punish them without trial is such a breach of the principle that no one should be punished without trial that we cannot do that. For of course if some can be essentially jugged without trial then so can any. Which ain\’t the point of a free and liberal society nor of the rule of law.

I wonder….

The 2011 research workshop co-organised by the Association for Accountancy & Business Affairs and the Tax Justice Network will explore connections between debt, tax justice and human rights. The themes that might be explored within this remit are wide, potentially including issues such as how debt impacts on public finances; how tax avoidance infringes human rights; why tax revenues are more sustainable as a source of public finance than debt; and how tax system design can contribute to delivery of tangible human rights.

Other related themes are likely to emerge as the workshop programme develops.

The aim of this workshop is to bring together researchers, academics, journalists, policy staff of civil society organisations, consultants and professionals, elected politicians and/or their researchers, and government or international organisation officials to explore issues on these and related themes. The purpose of the workshop is to facilitate research through open-minded debate and discussion, and to generate ideas and proposals to inform and shape the political initiatives and campaigns already under way.

They\’ve a call for papers.

D\’ye think my as yet unwritten paper \”The other name for tax avoidance is \”obeying the law\”\” has a chance of being accepted?

Offers of papers are especially welcome and early submission is encouraged since applicants have exceeded available spaces in recent years. Any submissions will be actively considered by the organising committee which comprises:

• John Christensen (Tax Justice Network)

• Jo Marie Griesgraber (New Rules for Global Finance)

• Prem Sikka (Essex University)

• Richard Murphy (Tax Research LLP)

• Ronen Palan (Birmingham University)

• Sol Picciotto (Lancaster University)

No, I didn\’t think so either. They don\’t intend for discussion to be that open…..

Predictions are very difficult

PLAYBOY: Isn\’t cocaine the currently fashionable drug in Hollywood?
NICHOLSON: I see it around.

PLAYBOY: Have you tried it?
NICHOLSON: Yeah, it\’s basically an upper, but it doesn\’t seem to do too much to me. I don\’t think it\’ll be fashionable for long, because it\’s expensive and we\’re in a depression; whether the world chooses to call it a depression or not, there\’s no money around. Cocaine is \”in\” now because chicks dig it sexually.

H/T

This is most impolite

Via Bishop Hill, we get this.

The first part seems to be that Irish macroeconomics forecasters warned of the property bubble in 2005, not much notice was taken of their warning and other later predictions concentrated on other matters.

Ho hum, macro forecasters right is hardly a basis for criticism. Rather a cause for celebration, given how rare it is.

Then we get this:

Lomborg operates the Copenhagen Consensus Center (CCC) which, in spite of its title, has served solely as a vehicle for the political views of its leader. The Copenhagen Consensus projects involve Lomborg hand-picking researchers, with Tol a favourite, to engage in rigged research projects which Lomborg further distorts beyond the point of fraud to oppose any reduction in fossil fuel use.

Eh? \”Beyond the point of fraud\”? And where does Lomborg say we shouldn\’t reduce fossil fuel consumption? The whole point of his work has been that yes, of course we do want to reduce such: the argument is only over how we do so (do we pour money into renewables research? Should the carbon tax be Nordhaus or Stern? etc, etc) and how much we do so (will tight restrictions now cost us more than the benefits later?).

Long-term Lomborg critic Kåre Fog took Tol, whose FUND computer-model was the basis for the simulation, to task about the study. Tol admitted that the study used a discount rate that fell gradually from 5% whereas all the competing proposals used a 3% rate.

Don\’t see what\’s wrong with that. Treasury Green Book approach. We should use market interest rates out to a decade or couple, because that is the interest rate that we use to decide upon other plans out to a decade or three. But for long term decisions we do need to reduce the interest rate applied: this is the flip side of noting that humans are liable to hyperbolic discounting. We place too much weight on things in the near future and not enough on the long term future (not all that surprising in a species evolved to live some handful of decades really).

The outlier in all this is Stern but then that\’s opening another can of worms.

Fog’s criticisms did not end there. Tol claims his research showed a net benefit from global warming until mid-century, after which the effects turn sharply negative. For this purpose, welfare effects were calculated in local economy terms, with deaths for example being costed at a certain multiple of local per-capita GDP. Thus a single European saved from winter influenza, probable – in actuarial terms – to be elderly and infirm, outweighed not one but many Africans dying – likely in the prime of life – due to global warming.

Yes, this is normal. For when we assign a value in a cost benefit analysis we are not assigning some true, eternal value. Such things do not exist (Aquinas was wrong, sorry). We assign the often arbitrary but always subjective values that human beings apply to the things being valued. And yes, us human beings do indeed value lives of those in rich countries more highly than residents of poor countries value the lives of residents of poor countries.

In some parts of the world people really do get slaughtered over a pile of yams: here the gain to be made from murdering someone is usually thought of as needing to be rather greater than that in order to trigger the action. You know, like the wife\’s life insurance policy or something.

Don\’t forget, economics is very little to do with the way things ought to be: it\’s much more concerned with the way things are.

While empirically-based criticism is central to science, Tol has shown no zeal in his dealings with Lomborg or with Ian Plimer, another scientific fraud alongside whom Tol acts as scientific advisor for the Global Warming Policy Foundation, a secretive pressure group opposed to fossil-fuel restrictions.

You mean Benny Peiser? Secretive? Lord Lawson on the board and it being almost impossible not to be getting the daily email? The GWPF which publishes books, gives speeches and so on? Secretive? And again, I\’ve seen no evidence whatsoever that they\’re opposed to fossil-fuel restrictions: I\’ve seen a great deal of discussion about what those restrictions ought to be though.

Plimer I\’ll be a great deal less defensive of of course.

Tol’s ready facilitation of Lomborg’s systematic falsification of science cannot but draw the ESRI into disrepute.

\”Systematic falsification of science\”? Lomborg? Blimey mate, take more water with it, you\’re frothing.

The neo-liberal consensus that dominates policy-making globally and of which the ESRI is part,

Ah, finally, the meat of the complaint. Those bastard people who think markets are often a pretty good idea, eh?

As to who Adrian Kelleher is I can\’t really find out. Other than that he\’s a regular commenter at Richard Tol\’s blog. As far as I can tell this is all a bit like Richard Murphy taking to The Guardian to denounce me as a neo-liberal. All very amusing but of not great import.

Although I have a feeling that Ritchie would take more note of the libel laws to be honest…..as would The Guardian\’s lawyers.

Many of these economic points are of course made in my book:

Murder is murder and mercy killing is mercy killing

The children of a retired chartered surveyor who committed suicide after being charged with his arthritic wife\’s murder have criticised the legal system for punishing their father\’s \”act of love\”.

I know this sounds rather callous but the man did admit to police to killing his wife: in a pre-meditated manner.

Thus he should be tried for murder.

For we do in fact have a system to decide between what is murder and what is mercy killing. Might not be quite written down there in the law books but we do have one.

Called \”a jury\”.

It\’s those twelve good and true who get to decide. And that\’s why those who kill should go to trial. So that they system we already have can decide whether it was murder or not.

Entirely true that \”mercy killing\” is not a verdict that the jury can bring in. But \”not guilty of murder\” is.

Maybe Google ain\’t all that hot

So I\’m doing a google search on some horrible technical stuff which I need to understand more about.

One of the first page  results was an article I\’d written essentially giving the broad brush picture and noting that I really need to bone up more on the details of this horrible technical stuff.

I won\’t put in here what I\’m actually searching for for I don\’t want this to turn up in the search results again…..

Blimey: the truth about globalisation in The Guardian

Its cheerleaders may deny it (even as they argue passionately against such horrors as a living wage), but global- isation tends to close the poverty gap between countries, and promote such a gap among the populations within countries.

Yup, quite right.

\’N\’ ain\’t it grand?

Hundreds of millions, billions, rising up out of the destitution that has been mankind\’s lot for millenia at the cost to us of a little more jealousy about shits riding around in Bentleys.

Pretty good deal, hunh?

Neal Lawson: same old cretinous error

For the vast majority of people life has become relentlessly anxious, stressful and exhausting as we desperately try to keep up on the treadmill of a learn-to-earn-to-spend culture in which there is no time for the things and the people we really value; no time even for ourselves. Life just feels like a relentless slog to keep our head above water.

Leisure time has been increasing for the past friggin\’ century, you twat.

We have ever more time for ourselves.

What hope is there for compassion in a world of endless competition? When the rewards of those at the top crush every hope beneath them, and the ruthless logic of the market tramples all over our planet, how can we hope to find any meaningful sense of control and therefore freedom in our lives?……And our planet can better sustain itself as we decide that there is more to life than searching for meaning through materialism. So the good society demands proper restrictions on the time we spend working so we can think, rest, play and have the space to be citizens.

How did someone so ignorant ever get to be taken seriously in the world of politics? It\’s that very market system which has made us all so pig rich that leisure has increased and we have the time to think, rest, play and have the space to be citizens.

But what brings the good society to life is democracy: the only tool we have to take control of our lives.

Fatuous wittery. Freedom, liberty, are the tools we can use to take control of our lives. Democracy is all very well of course, but it\’s actually the tool by which we take control of other peoples\’ lives: that tyranny of the majority.

No, not a schooner

I have mixed feelings about the government\’s proposed new two-thirds pint measure – just don\’t call it a schooner

Of course not. We already have a word for a third of a pint: stoup.

Thus the new glass size is a \”double stoup\”. Or possibly a \”large stoup\”.

Which will add greately to the gaiety of the nation, as a \”double\” or \”large\” becomes smaller than a pint.

Won\’t that drive the tourists usefully to distraction?

What does anyone expect a bureaucracy to do?

Officials at UK Trade and Investment, the Whitehall body that flies the flag for British business abroad with a little help from the Duke of York, have been instructed to burn through a spare £1m.

Sir Andrew Cahn, the quango\’s chief executive, sent an email to staff saying that the Foreign Office had failed to spend all of its budget this financial year and was keen to go on a splurge.

In the email, leaked to the Daily Mail, Cahn said: \”The FCO is heading for an underspend and wants to get money out of the door. If we spend money in this financial year on a one-off basis then we can have at least £1m.\”

Never, never, underspend a budget because if you do next year\’s will be cut and that means a diminution in the importance of those running the organisation.

It happens in all organisations of course: big corporates are no better. But at least there there is a countervailing force, the aim of the organisation being to turn a profit and thus control such urges. No such force exists in pure, government, bureaucracies. So this happens every damn year.

This is all well laid out here and if you haven\’t read it yet, you probably should.

That\’ll do Dick, that\’ll do

Dick King-Smith has died.

However many times I see it I still roar with applause at the end of Babe: and there has been known for there to be a manly glisten in the corner of an eye or two.

Even if that\’s the only thing one manages in life (which most certainly was not true for King-Smith), one perfect moment of story telling: yes, that\’ll do Dick, that\’ll do.

Vale.

Well, yes and no

Striking out the word nigger every time it appears in Huckleberry Finn is a kind of ethnic cleansing, a pretence that in the land of the free no one referred to black people by a demeaning term once the Civil War had been won.

For while the novel was written well after the Civil War (1884 first publication) it is set well before it, some indeterminate period between 1835 and 1845.

The setting  must be pre Civil War….otherwise, how can you have a runaway slave?

The biggest CDO of all time

You remember what CDOs were?

Collaterialised Debt Obligations?

Take some dodgy debt, stick a nice guarantee on top of it, bit of financial alchemy and then call it an AAA bond?

The Commission’s €60bn bail-out fund (EFSM) raised its first €5bn to cover the Irish loan package, paying 2.59pc on five-year bonds. The cost is notably higher than equivalent French debt at 2.12pc, suggesting that investors are sceptical about the fund’s AAA rating.

Ireland will be charged 5.1pc for loans from the EFSM.

Oh look, if Governments do it it must OK, right?

For this is essentially what they are doing here. Raising money on the combined debt rating of the eurozone countries in order to lend it to the fiscal basket case which is Ireland.