Author Archives: Tim Worstall

The two issues were related though. Many of the new ‘toys’ were expensive exercises in centralising control. As the business had grown, the core management team had lost confidence in its ability to control a growing team. Incentives had changed and discretion had been removed from line managers.

Some issues that had devolved to them had become subject to central control and standardisation, in ways that were not working. Quite simply, the line managers had stopped managing because they were not given enough discretion to do so: from arranging shift patterns to making short term decisions on scheduling and many other matters where previously their on the spot knowledge had kept productivity high in ways that no standardised system could deliver.

The cost of that loss of flexibility, when added to management’s new toys, had eliminated the bottom line almost in its entirety.

This from the man who would plan the entire economy from the centre – see Green New Deal.

Restricting immigration will mean:

This policy has a range of potential outcomes. Presuming the lost jobs are not filled as the policy begins to impact, as surely it will, then there will be significant short staffing in agriculture, food processing, catering, tourist industries, the NHS, care facilities, building and other sectors. These sectors will not be able to deliver their services. The knock on effect will not being significant increases in wages when there isn’t capacity to either reduce margins or increase prices significantly; the consequence will be corporate failures. Businesses facing inevitable losses will close before that point is reached. And the job losses will then reach the sectors of the economy traditionally staffed by UK domiciled staff.

Raising the minimum wage will mean:

This policy has a range of potential outcomes. Presuming the lost jobs are not filled as the policy begins to impact, as surely it will, then there will be significant short staffing in agriculture, food processing, catering, tourist industries, the NHS, care facilities, building and other sectors. These sectors will not be able to deliver their services. The knock on effect will not being significant increases in wages when there isn’t capacity to either reduce margins or increase prices significantly; the consequence will be corporate failures. Businesses facing inevitable losses will close before that point is reached. And the job losses will then reach the sectors of the economy traditionally staffed by UK domiciled staff.

Tom Parker says:
February 19 2020 at 11:15 am
‘ I really cannot see the price of labour rising significantly though: in sectors such as care and hospitality margins are already very small and there is strong price inelasticity ‘

Strong price inelasticity means that demand doesn’t change much in response to a change in price. Surely therefore there is ample room for wages to rise without affecting demand.

Reply
Richard Murphy says:
February 19 2020 at 11:23 am
How does that work when businesses are on tight margins Tom?

Reply
Nick Carroll says:
February 19 2020 at 11:51 am
Richard

Tom Parker is right about the definition – if demand is price-inelastic, it doesn’t change much in response to a change in price.

The sectors that you mention are highly competitive, hence the low margins. Demand may well still be price-inelastic at the sector level, if the whole sector experiences higher wage costs – probably true for care, and perhaps for hospitality as well.

Do note that Richard Murphy was employed to teach economics at a British university just recently.

Why won’t the government disclose the cost of climate change

Well, because they don’t want to admit that the costs of stopping it will be higher than the benefits of doing so?

I wonder why?

What are they worried about?

In the meantime, I will go with £1 trillion….nothing suggests it is less to me, based on all the estimates I have seen.

That’s for the UK alone of course.

According to the Review, without action, the overall costs of climate change will be equivalent to losing at least 5% of global gross domestic product (GDP) each year, now and forever. Including a wider range of risks and impacts could increase this to 20% of GDP or more, also indefinitely. Stern believes that 5–6 degrees of temperature increase is “a real possibility.”[4]

The Review proposes that one percent of global GDP per annum is required to be invested to avoid the worst effects of climate change. In June 2008, Stern increased the estimate for the annual cost of achieving stabilisation between 500 and 550 ppm CO2e to 2% of GDP to account for faster than expected climate change.

UK GDP is around £2 trillion at present. So Ritchie thinks that we should spend 50% of GDP to avoid a future 5% loss of GDP. Which, starting a few decades out and then discounting to the present is more or less than 50% of GDP?

This being Stern’s argument about why we don’t use planning, instead we use market forces as pushed by a carbon tax. For the latter is a more efficient method therefore we’ll solve more climate change that way.

I really cannot see the price of labour rising significantly though: in sectors such as care and hospitality margins are already very small and there is strong price inelasticity – meaning that capacity to pass on wage increases will be very low.

Inelastic with respect to price means demand doesn’t change much with a change in price. Therefore it is easier to raise prices without a significant reduction in demand.

A recent professor of economics in the British university system manages to get matters 180 degrees, entirely and wholly, wrong.