Economics

Danny Dorling really is an ass

The general slowdown we are living through is advantageous. Recognising this requires us to shift our fundamental view of change, innovation and discovery as unalloyed benefits. We need to stop expecting ceaseless technological revolutions.

We’re in the middle of the digital revolution – which really is changing everything – and this ass wants us to believe that technological change is slowing?

Not quite and exactly the same thing

World Bank: Coronavirus financial shock in Asia-Pacific will condemn millions to poverty
New report warns that 11 million in the Asia Pacific region could be pushed under the poverty line

That’s actively going into poverty:

The financial shockwaves of the coronavirus crisis will prevent millions of people in the Asia-Pacific region from escaping poverty this year, a new report from the World Bank has warned.

That’s not escaping it.

Still, this concern for the garment workers is good. For when we get lefties decrying this – as indeed all should for who doesn’t want to see the poor of the world rise up – we can at least retort that in normal times we already do our bit. We buy the fruits of their labour, that fast fashion, which is what aids them in becoming richer.

It’s always the same answer, isn’t it?

…and another $1 trillion in an emergency federal work and infrastructure program to repair and build roads, bridges, airports, wastewater treatment plants, and mass transit systems. That money can also go toward redoing the electric grid and providing rural broadband.

The American liberal has yet to realise that the American liberal regulation of the economy through permits, investigations and studies of and for proposed infrastructure means that there is no possible emergency infrastructure plan.

This economy stuff is hard says Barbie

This economic interdependence necessitates all parts working in harmony. Unfortunately, the pandemic is asynchronous – it hits countries at different times with different rates of growth and severity. While China is reopening, India and the US are shuttering. If portions of Chinese production require unavailable intermediate goods from India or the US, such production won’t be possible. Even if China can produce items for export, if their normal buyers in the US are closed, who will they sell to? And what happens when China – still lacking herd immunity – needs to close its economy again right when India or the US are looking to reopen and use Chinese inputs?

The staggered nature of the virus outbreak coupled with worldwide production presents a remarkable – and quite possibly insurmountable – global coordination problem.

If only we had a science that discussed coordination problems. Ones that weren’t solvable by planning, the human mind directed? Perhaps one where this specific nugget of difficulty had been discussed, solved even?

Wouldn’t that be useful?

Dr Nick Obradovich is a PhD political and data scientist who trained at UCSD, the Harvard Kennedy School, and the MIT Media Lab. He is currently senior research scientist at the Max Planck Institute of Human Development in the center for humans & machines. Dr Renee C Wurth is a PhD population health scientist who trained at Northeastern and the H Chan school of public health at Harvard University

Even might we not hope that people who would tell us how to run the world were aware that the problem had been solved?

I don’t actually know

Got me. Not a scooby what the correct response is here.

I think that governments are screwing the pooch in their response but then I always think that. Being more specific though, paying wages? Business support? VAT holidays? Dunno.

My general thoughts are, yes, horrible recession. And also a short one. Current financial market economists are talking about 15% off GDP for a quarter. And 1.5% off for the year. So, that’s a horrible, very deep and also very short recession. From what we can see in statistics from China they’re already climbing back. Orders are coming in to replace commodity stocks for example. Firms are reopening, people are back at work.

Yes, deep, deep, cut in output and therefore also in incomes. But something to think about. This happens often. The economy comes to a shuddering halt every Sunday for example. Yes, I know, different, but still a point to consider. It’s not how deep a production closedown is, it’s how long it lasts.

One more thing. Recessions that happen because of something we know about lead to much faster recovery growth than when we’re all standing around without that scooby. Because we know what the cause is, once it’s stopped happening then we resume not quite but almost where we were. There’s not the discovery period twatting about trying to work out what went wrong. There’s also not the reorganisation period trying to solve it.

Thus, short, sharp recession with steep recovery.

At which point you can argue either way. Let it happen and carry on. Or given that it’s going to be short why not pay everyone’s wages etc? I don’t really have a view on this.

The Guardian’s really going for it today

A nice building in Durham. Built by miners and their unions etc. About which they say:

Redhill, opened in 1915, is ‘a shining example of what people can achieve collectively’.

Gibbering idiots. Everything above the level of the self-knapped flint is collective action. The Bank of England is collective action, Standard Oil was built collectively. Auschwitz was.

Come on, we even had Obama saying “You didn’t build that”.

“Collectively” is just “as a group”. There being many ways for people to form a group. What The G means is “no in pursuit of that nasty capitalist profit” which may well be but that is a very different thing.

Why we’ll keep flying

That will certainly be difficult for staff who lose their jobs, and the owners whose companies have gone up in smoke. Still, with spare planes, crews and runways plus that still existing desire to go see the world, new companies are sure to spring up to fill the gaps left by the companies that have gone under. Say’s Law, that supply creates demand, isn’t really wholly true. But the inverse, that demand calls forth supply of something technically possible, is. Especially when the landscape is littered with the supplies necessary to make it possible.

However many airlines go bust in this difficult time it’s simply not going to change, in any medium or long term sense, the general ability to fly off somewhere. Simply because it’s observably true that people like doing it, it’s known how to do it, therefore it will be done by those eager to profit.

The worse it becomes for extant – and soon not to be extant – airlines the easier it will be in the near future for a new one to be set up by any would-be entrepreneur with a bit of get up and go. After all, whatever the fallout of this dreadful period, Covid-19 is surely not going to kill off the greed of capitalists?

A small argument elsewhere

What looks like a bunch of Georgists wants to say that that past wasn’t as poor as all that:

What about the point made by Worstall, that average incomes were only $450 until recent centuries? There are two answers. First, that $1.23 per day implies either that they live on land of little value and rent, or else that this figure does not account for the rental value of they land in which they live and work. Secondly, these were not free societies. Typically there were serfs or slaves working for a landlord or master, and much of their output went to the landlord or master. Therefore this history is not relevant to the question of whether poverty is natural.

They’re right in a way, the rules of the system do determine how rich it becomes. But they’re wrong in which rules they’re talking about here. Because, as I’ve pointed out:

No, I’m afraid not:

“What about the point made by Worstall, that average incomes were only $450 until recent centuries? There are two answers. First, that $1.23 per day implies either that they live on land of little value and rent, or else that this figure does not account for the rental value of they land in which they live and work. Secondly, these were not free societies. Typically there were serfs or slaves working for a landlord or master, and much of their output went to the landlord or master. Therefore this history is not relevant to the question of whether poverty is natural.”

The estimates of historical poverty – usually derived from Angus Maddison but Brad Delong is another useful source – are comparable to the current World Bank estimates of absolute poverty. You know, the $1.90 a day stuff that 700 million people are still mired in.

These are estimates of the value of consumption. That is, real incomes – a real income being what you are able to consume. They include the market value of any home produced and home consumed items – so, say, a peasant growing and eating their own crops.

Maddison’s figures are actually GDP per capita. Adjusted, as far as is possible, across time and geography for prices. And including the value of those things – home production – which are not included in more formal GDP estimates. And they are the average across the society. We have, therefore, the estimate that the value of all production, per capita, across England in 1600 AD is $1,000 a year. The same number for China in 1978. Thus, England in 1600, or China in 1978, were at about the same level of living standards. Because, obviously, given that GDP is all incomes, all consumption and or all production, each of the three being equal to either of the other two. Further, that’s about the same living standard as $1,000 would buy today (actually, in 1992 dollars but still). Or, very little above that $1.90 a day we say is absolute poverty today.

The reason we say that the past was poor is because very little was produced. Therefore very little could be consumed. It is *not* about how people were oppressed, or the Lords ate everything. Sure, of course, there was horrendous inequality, but that’s not the cause of these startlingly low numbers. The average production across the whole society for England in 1600 was $1,000 a year. Therefore the average consumption across the same society must have been the same.

As to why this was all true this is where Malthus was right.

Economic twattery

The 2008 crisis caused a recession that rivalled the Great Depression of the 1930s, drove US unemployment up to 10% and burst a housing bubble that was both tragic and almost beyond parody: people with no income, no job and no assets were being given mortgages to buy homes they couldn’t afford.

The Observer of course.

The error? The housing crash came first. It was the realisation of it that caused the financial crash and the recession. And even without the financial crash on Wall Street there would still have been a recession.

Quite so

The economy could “easily” contract in the coming weeks by as much as it did in more than a year during the financial crisis, a senior forecaster has warned.

As ministers were being urged to do more to help businesses survive the coronavirus, Julian Jessop, an independent economist, said a 6pc drop in GDP or “even worse” in just one quarter can be expected.

Yep, sure, entirely possible.

And what matters is not that at all. What matters is what happens in the 3 months afterwards.

Recessions where we know what happened are less of a problem than those where we don’t. For, obviously enough, when the thing stops happening we can go back to doing stuff.

This is not just the wailing of some free marketeer either. Behold Simon Wren Lewis on the point.

This ‘direct’ impact of the pandemic will reduce GDP in that quarter by a few percentage points. The precise number will depend on what proportion of the population that get sick, on what the fatality rate in the UK turns out to be, and how many people miss work in an attempt not to get the disease. The impact on GDP for the whole year following the pandemic is much less at around 1% or 2%, partly because output after the pandemic quarter is higher as firms replenish diminished stocks and meet postponed demand.

BTW, there is no way to stop the slump happening. No combination of monetary and fiscal policy will do so. We’re at Canute and the tide here. It’s the recovery that matters.

That price system again

Prices are as they are because this is what, through voluntary interaction, human values and desires have defined as the relative prices of things. They are what emerges from an aggregate of a society’s views – that is not going to change simply through moral appeals or wishful thinking.

Economics 101 test

Just to see if you’re been paying attention:

American scientists have said that the body, probably once the core of a planet, contains iron worth £8,000 quadrillion. A quadrillion is one followed by 15 zeros. Shared among the world’s nearly eight billion people, this would amount to about £1 billion each.

What happens to the price if we increase supply that much?

Well, yes, but

Perhaps it’s Piketty’s mild manner that disconcerts; or perhaps it’s the matter-of-fact way that he points out that the most prosperous period in US history – 1950-70 – coincided with a top marginal rate of inheritance tax of 80% and of income tax that was even higher.

No one actually paid it. Which does sorta argue the other way, doesn’t it?

As societies distribute income, wealth and education more widely, so they become more prosperous.

OK, fun theory. So, we’ll have to measure the distribution of the output of that education then, won’t we? The human capital that results? And what is it that is not included in any of the calculations of the wealth distribution? Human capital…..

Evidence on these postwar regimes confirms that very high marginal tax rates are both reasonable and effective. But they had a lurking weakness, which Piketty views as fatal: they accommodated highly unequal access to education. Not only is educational equality the biggest factor in economic development (more so than property rights, he argues), the sharp division between graduates and non-graduates produced political schisms that, by the 1990s, had left the working class electorally homeless.

So, yes, human capital is important then. Better start measuring the distribution then, yes?

In The Guardian

At least one or two of them might understand this:

Imogen West-Knights (Journal, 6 February) informs us that it is, by definition, impossible to level up the needy without redistribution of wealth or opportunity from the wealthiest. Back when Adam Smith became a professor in 1751, GDP per capita in the UK was some $1,800 a year (by Angus Maddison’s inflation-adjusted numbers). Today it is around $39,000. Reality is telling us that the economy is not a zero-sum game.
Tim Worstall
Senior fellow, Adam Smith Institute

Peeps should know this shit

At least, peeps who are trying to be economic commentators should know these basics of economics:

You’re Right – Jason Hickel Is An Ignorant Know Nothing Twat

Hickel wants to tell us that capitalism hasn’t made the poor richer because before capitalism the peeps had commons that they lived off.

Hickel’s problem is that our estimations of poverty and income already include the stuff that people got, before and during capitalism, off those commons.

Oh, right

The only thing that would limit the spending is inflation if it causes too much demand for an economy to cope with when it is at full capacity. Economist Richard Murphy, a MMT supporter and the co-author of a report proposing the “green new deal” in the UK, says “economics is out of ideas” and that Kelton has become the leading theorist by some way.

Murphy says that Kelton is highly influential with Sanders and Democratic congresswoman Alexandria Ocasio-Cortez.

Well that is a ringing endorsement from a valued source. Fortunately the Telegraph has MMT’s number:

The main appeal of Kelton and her ideas for Sanders is that they help the senator’s dubious spending calculations add up.

A revealing little paragraph

The UN’s extreme poverty expert is embarking on a 12-day visit to Spain to see what the government of Europe’s fifth largest economy is doing to address inequality, unemployment and social exclusion.

Inequality, unemployment and social exclusion not being extreme poverty of course.

But then that being what Alston does, looks at inequality and declares it to be extreme poverty.

Just a tiny little thing

Needed an image from a photo library just moments ago. Wanted something for “work” so put “work” into the sites search engine.

Which gave me rows and rows of images of people in meetings or sitting in nice dry and warm offices. Absolutely no one at all standing out in the rain shovelling shit at all.

No, not complaining at all. It’s just an interesting little sign that this is what work is these days. The imagery is perhaps a little in advance of reality in that there are some still out there in the environment among the ordure but not that far.