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Economics

Twats

People living in remote Indigenous communities are as happy as those in wealthy developed countries despite having “very little money”, according to new scientific research that could challenge the widely held perception that “money buys happiness”.

Researchers who interviewed 2,966 people in 19 Indigenous and local communities across the world found that on average they were as happy – if not happier – as the average person in high-income western countries.

“Surprisingly, many populations with very low monetary incomes report very high average levels of life satisfaction, with scores similar to those in wealthy countries,” said Eric Galbraith, the lead author of the study which was published in the scientific journal Proceedings of the National Academy of Sciences (PNAS). “I would hope that, by learning more about what makes life satisfying in these diverse communities, it might help many others to lead more satisfying lives while addressing the sustainability crisis.”

That is, you’ll still be just as happy when we’ve made you as poor as we’re going to make you.

And yes, we know this.

The hedonic treadmill, also known as hedonic adaptation, is the observed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes

Chop off someone’s leg and like as not a year later they’re about sa hppy as they were before you chopped their leg off.

Doesn’t mean you should go round chopping legs off, obviously.

Nor deliberately making people poorer either.

Those costs of the minimum wage

Of course, as we know, the true minimum wage is $0 an hour.

But another cost:

Some of Britain’s biggest food outlets risk excluding elderly customers as they turn to self-service kiosks to cut costs, campaigners have warned.

Fast food chains including McDonald’s, Leon and Subway are using self-service as a way for customers to order as wage costs rise and the hospitality industry grapples with a shortage of staff.

Almost all of McDonald’s 1,450 restaurants now have self-service kiosks.

But campaigners have said they risk alienating elderly diners who may not be able to use the technology.

Now, it’s possible to think that that’s a bit of a whinge and you’re probably right. But it will be true, at the margin, for some. And thus a cost of a rising minimum wage will be some oldsters unable to have a Big Mac.

Might even be a fair cost, a reasonable cost, but it will be a cost all the same.

Ain’t this true…..

Amid growing speculation the Scottish government will introduce an additional 44p rate on incomes between £75,000 and £125,000, the Fraser of Allander report has lowered its estimate of how much that would raise from £56m to about £41m – well below the £92m suggested by the Scottish Trades Union Congress.

According to the Times Scotland, the proposal caused disputes within the cabinet, with some ministers warning it could alienate middle-income and aspirational voters, but ultimately it was accepted, with the Scottish Fiscal Commission told of the decision last week.

Those earning more than £28,000 already pay more tax in Scotland.

In a sign of the pressures facing the cabinet, a coalition of business networks warned the move would hamper recruitment from elsewhere in the UK, while the former finance secretary and Scottish National party leadership candidate Kate Forbes told ITV Border on Thursday it was “very difficult to protect against behavioural change”.

Change the rules, you change peoples’ behaviour. The Lucas Critique that is. With tax changes, you must therefore have dynamic scoring of revenue changes. Which means considering the income effect and the substitution effect.

A helpful hint here. Do not get Richard J Murphy to do that dynamic scoring. The last time he tried this, for the TUC, he got the sign wrong. Actually insisted that among married women in high income families the income effect would predominate, leading to a rise in their labour supply. It is, of course, the oppsite.

An interesting thought

Argentina’s problems were common among emerging market economies in the 1980s and early 1990s. However, most of these countries have since made dramatic improvements in their policy-making.

Fiscal policy was tightened, central banks were made independent with bans on financing government deficits, exchange rates were floated and domestic financial markets were deepened.

OK, it’s possible to argue about improve or not there. But essentially that statement is that developing countries stopped using MMT and so their economies improved. Which is interesting, no?

Ken Rogoff says

Aside from a few notable exceptions, those who championed the notion that debt is a free lunch have not acknowledged the likelihood of a new reality. At a recent conference, I listened to a well-known financial commentator who had been a staunch advocate of the “lower for ever” narrative and seemed unaware that it had been thoroughly debunked. When pressed, they conceded that if interest rates do not quickly revert to the ultra-low levels of the 2010s, budget deficits might matter after all. But they were reluctant to admit that the existing debt overhang could pose a problem, as this would impugn their previous endorsements of spendthrift fiscal policies.

An excellent description of the policy suggestions of Professor Murphy. Now of course Mr. Rogoff has never heard or Professor Murphy – well, OK, maybe, but if so only to giggle – but it is a damn good description of the delusions, no?

A useful little tell

Of course, this is The Guardian:

Citing calculations made in a report by the Brattle Group, which factors in the wealth and GDP amassed by countries that enslaved African people, she set out that the UK owes $24tn in reparations to 14 countries affected by transatlantic slavery, Spain owes $17.1tn, France owes $9.2tn and the Netherlands owes $4.86tn.

How do you amass GDP? It’s a flow, it’s what is created this year. It’s not a stock at all, it’s the value added by activity this year. If everyone stopped doing stuff then GDP would be zero – you cannot amass it.

So here’s an interesting little thought experiment

Of the 137 people who became billionaires in the 12 months to this April, 53 inherited a combined $150.8bn (£119bn) from their family, the report by UBS found. This exceeds the combined $140.7bn created by “84 new self-made” billionaires over the same period.

How much of that $140 billion depends upon the $150 billion being allowed to happen for its creation?

As we all know, incentives matter.

An incentive for humans is the ability to make our childrens’ lives between better and pluperfect. One motivation for becoming rich is that desire to found a dynasty.

So, how much of the entreprenurial activity – the main beneficiaries of which are us out here as consumers – is dependent upon being able to pass on vast wodges to the kids?

Clearly, it’s some and equally clearly it’s not all. But how much? For that’s the level at which you could nick that wealth off rich folk without harming consumers.

On Milei

The genuinely interesting question is this: could he trigger a global return to liberal free market reforms? Argentina is hardly the country you would choose for a bold experiment.

Well, no, it’s exactly the place you would choose to try it.

But as is also said:

Of course, he will face plenty of opposition. Civil servants, and state semi-monopolies will block him when they can. The IMF which endlessly indulged the lavish spending of the Peronists will oppose him, and so too will the World Bank, along with the rest of the Davos establishment.

Or as I’ve said:

Milei, in Argentina, diagnosed that the entire Argentinian state, its economics, its management – in both senses, what is done and who is doing it – is rotten and needs to be swept away. He got elected. Of course, for all those others who are part of the management of other states this poses something of a risk. What if it works and then their own restive managees decide to do the same? We’d thus expect the establishments of everywhere else to not just denigrate but actively block anything Milei tries to do. As, of course, the domestic managerial class will also be trying to do the same.

Not gonna be easy. But here’s hoping.

Funny how the demands change

Britain can’t borrow at these high interest rates, so we must tax the rich
Phillip Inman
The days of cheap credit that could have fuelled long-term investment have gone. Now chancellors must find a different source of revenue

So we used to have some amount of the economy that government and politics got to spend. OK.

Then came sheap credit and righteous money printing – at least at the start QE was righteous. So, poluitics got used to spending more. But the claim was that we should have a bolus, a burst, of spending because cheap credit.

But now the insistence is that that rise in spending must be permanent. And if we can’t have it by cheap credit then we must by some other means.

As the man said, nothing so permanent as a temporary government program, right?

An, err, “economic” analysis

It found consumers spend £81.5bn a year on unhealthy products, from which the Treasury makes £28.8bn through VAT receipts.

The research was undertaken by the Obesity Health Alliance (OHA), Alcohol Health Alliance (AHA) and Action on Smoking and Health (Ash) in conjunction with Landman Economics. For example, they calculated that 28.8% of all food bought by UK households is unhealthy because it breaches government dietary guidelines for fat, salt or sugar (HFSS). Those sales together earn the food industry £34.2bn.

Landman Economics has carved out quite a little niche here in producing entirely absurd, insane, no good, terrible, paid for pieces of “economic research”.

Landman Economics is Howard Reed. Did you know that Reed is a mate of Richard J Murphy?

Within actual economics we call this technological diffusion. Once a grift has been discovered then more people will start to do it….

But Spud has already pronounced here

An independent Scotland would need its own currency before joining the European Union (EU), a think tank has said after the SNP published its latest blueprint for breaking up Britain.

Angus Robertson, the SNP’s constitution secretary, published the seventh paper in the Scottish Government’s prospectus series on Friday, suggesting that Scotland could join the EU within two to five years of negotiations starting.

All fairly obvious really. But something that amuses. Spud insists this would be good because then they can do MMT. And he wavers between don;t worry about the FX rate and you can control it anyway.

But the EU will insist upon euro membership. And there will also have to be a period of linked FX rates before the switch. This means that Scottish £ monetary policy will have to be devoted to maintaining the FX price. Not to doing the MMT fantasies. Because you cannot fix all three at the same time – your own money supply, your own interest rate and your own FX rate. If the FX rate is fixed then the other two have to be set so as to support that – just like the gold standard.

Which will be fun. Watching a Scottish Chancellor trying to maintain a fixed FX rate against the euro while also enjoying Spud’s freedom with money printing.

As I was saying

Diageo’s shares have plunged after the Johnnie Walker and Guinness owner warned of a major slowdown in sales and warned over profits.

Shares in the spirits and drinks maker dropped around 14pc as markets opened – the steepest fall since 1997 – after the company said it expected sales in Latin America and the Caribbean to drop by as much as 20pc in the first half of its current financial year. Latin America accounts for roughly 11pc of the company’s sales.

Chief executive Debra Crew blamed the slowing global economy, which has dented consumer confidence around the world and prompted shoppers to cut back or buy cheaper drinks.

She said: “That caused lower consumption and really more consumer down trading than what the team was expecting.”

Corporate determinations of likely future sales are where we’d first expect to see signs of a recession.

It’s possible that the American recession is already here

Yes, yes, I know:

When it comes to the economy, in fact, Biden is in trouble. The 46th president pledged more than $1 trillion on the Inflation Reduction Act (which at the time was estimated to boost inflation slightly) at a time when it was clear far too much money had already been pumped into the economy – all in a crude attempt to secure some political leverage.

Instead, he is forced to grapple with abysmal polling, which illustrates just how disappointed Americans are with the economy’s performance.

Polling from Gallup this autumn finds that only 20pc of Americans consider the country’s economic conditions to be “good”, compared to 60pc who consider those conditions to be either “only fair” or “poor”.

Meanwhile, the vast majority of respondents fear the outlook for the economy is moving in the wrong direction, with 73pc reporting that they believe these conditions are getting worse, while only 24pc think they are improving.

This kind of doom and gloom perspective of American voters compares, Gallup says, to attitudes more than a decade ago, during the time of the financial crash.

It’s a fairly standard observation that we never really do know we’re in recession until it’s almost over. That’s slightly a joke, but only slightly.

Looking at the profit reports of American companies there’s an awful lot of “consumer demand is weak” and “sales difficult to complete” and stuff. The renewables supply chain is destocking like billy-oh. Fortunately I’m not a macroeconomist and so don;t have to actually argue this in detail. But I’ve a suspicion that the US economy actually is in recession right now.

Which makes Biden toast this time next year of course. But, obvs, we’ll see.

Marxist against libertarian getting elected

Economists warn electing far-right Milei would spell ‘devastation’ for Argentina
More than 100 economists including Thomas Piketty and Jayati Ghosh publish open letter ahead of country’s 19 November election

This is a surprise, isn’t it?

They’d rather go with the socialist who hsa ceased income tax for the election period and is paying for everything by printing more money in a 150% inflation environment.

So we can be sure they’re doing economics, Ho Yus, not politics, right?

The letter said Milei’s proposals – while presented as “a radical departure from traditional economic thinking” – were actually “rooted in laissez-faire economics”

Quite right. If anyone were allowed to prove that laissez fire works then that would be the end for socialism, no?

Milei has also attacked Piketty in the past, calling him a “turd” and “a criminal disguised as an intellectual”.

Warming to him, warming I am…..

“Generally” is doing a lot of work here

There are complaints in the rightwing press that the British “tax burden” has reached the highest level as a proportion of GDP since the second world war. Yet it is well below that of most European countries, which are generally acknowledged to enjoy higher standards of living and public infrastructure than we do. (“You get what you pay for.”)

The Italian tax burden is higher than the UK. So is the Spanish, the Portuguese. There are very, very, few who would suggest that living in those countries, on local wages, provides a higher standard of living than being in Britain on local to Britain wages.

If I might suggest something?

Russia has hiked interest rates to 15pc as policymakers step up their fight against inflation amid labour shortages and a weaker rouble.

The central bank lifted rates by two percentage points from 13pc in September.

OK.

In a statement, Russia’s central bank said: “Current inflationary pressures have significantly increased to a level above the Bank of Russia’s expectations. Steadily rising domestic demand is increasingly exceeding the capabilities to expand the production of goods and the provision of services.”

Yes, OK.

Inflation stood at 6.6pc in the year to October, according to the central bank, up from 6pc in September. The central bank said on Friday that inflation could hit 7.5pc by the end of the year.

That doesn’t look right at all. Real interest rates were already 7% and they still had 6% inflation?

My bet – based upon nothing but a feeling in my waters (OK, rather, economics does add up, if you see this then you should also see that as a result of the same cause etc) is that that inflation rate is grossly under-reported. Just because 6% inflation and 7% real (13% nominal) interest rates aren’t really consistent with each other.

Bollocks

A million children now living in poverty, reveals Joseph Rowntree Foundation
Charity says almost four million people experienced destitution in 2022 due to low incomes, rising cost of living and high levels of debt

There’s no one in the UK in destitution.

Relative poverty, sure, but destitution? Nope.

The organisation defines destitution as when someone cannot afford what they need to meet their most basic physical needs to stay warm, dry, clean and fed.

How warm, how fed?

Well, Sorta

Italy must roll over old debt and finance new debt equal to 24pc of GDP over the next year (ECB data), and do so at rocketing borrowing costs. No other eurozone state is remotely close.

It’s true, and yet. Traditionally – and I’ve no idea how true this is now – Italian households have not carried much mortgage debt. Housing tends to be inherited (an effect of a stable population over the generations). Therefore much of household savings has been into Italian Treasuries. Owing interest to the country’s own households is different from owing it to foreigners.

That might well not be enough but it is rather different from the position of many other countries.

Which leads to a surmise – and it’s no more than that, a surmise. Which is that countries always do test the outer limits of macroeonomic possibilities. But that what those limits are depends upon the microeconomics of the underlying structure. What might be a disaster in one place can be shrugged off in another.

Maybe.

Doesn’t stop places then going over those local limits, just means that the limits are locally determined.

This is why we don’t allow governments to invest

But here in Michael Gove’s back yard of Surrey Heath, it also holds the key to the financial struggles facing the local council.

The House of Fraser building and the shopping centre were bought by the council for a combined total of £113m in 2016. Funding was tight and the purchase, paid for by borrowing, seemed a way of regenerating the town centre and producing an income stream.

Seven years on, with high streets across the UK struggling, compounded by the Covid pandemic, the two sites are thought to be worth £33m – 70% less than the purchase price – while rising interest rates mean the cost of servicing the council’s debts has increased.

Because governments are shit at investing. QED.

Of course. Mazzonomics says that these same people should be decinding upon all investment in all new technologies. Mazzo, that is.

You what?

Love and hope can help people to grow taller, a new study suggests.

Prof Barry Bogin, a biological anthropologist from Loughborough University, delved into historical records to see how height changes as living conditions wax and wane.

He found that during straitened times, such as the Long Depression of 1873–1896, heights dropped in the United States by around 1.1 inches and 0.4 inches in the UK, before recovering as people’s situations improved.

Prof Bogin also looked at 300 years of records from children’s homes and found that mistreated or orphaned children often experienced stunting, but when their situation improved, their height increased.

Likewise, migrants moving away from unstable or dangerous regimes tend to experience increases in height after relocating to more prosperous and secure nations.

‘Insecurity and emotional stress can kill’
“Love and hope play essential roles in helping people grow in a healthy way,” said Prof Bogin.

“When we don’t have love or hope, we experience toxic emotional stress, which has harmful biological effects, including blocking hormones needed for growth and height.

“Insecurity and emotional stress can kill, with the most notorious example being the very high death rates in orphanages throughout European history.”

Food, Matey, food.