Coronavirus QE

We should not underestimate the scale of the crisis. Just imagine for a moment that UK schools were required to close for two months and as a result parents had to stay at home to look after children. The economic implications are staggering, from the deep micro to macro levels. Significant parts of the economy will grind to a halt. Businesses will fail. Households will go bankrupt. The knock on effects are at present incalculable.

Unless, that is, government intervenes with emergency funding. That is, payments to those who have to quarantine.

And how will those be funded? The answer appears to be glaringly obvious. I strongly suspect that sometime soon you will hear of something I have not yet heard mentioned. That is coronavirus QE. Call it CQE for short.

Rather more likely to be that schools and businesses don’t close for 2 months over a new ‘flu variant.

Erm, why?

If 50% of the world’s investments are going to ethically invested within five years there’s going to be a massive demand for accounting reform


I think there will be a market for sustainable cost accounting.

No one uses sustainable cost accounting to define what is an ethical investment. Therefore, why would more ethical investment mean more sustainable cost accounting?

Oooooh, Goodoh!

No wonder many remain concerned that we are heading for being Singapore-on-Thames. The rhetoric used suggests that the fear is justified.

Someone’s going to have to remind me what’s so terrible about Singapore on Thames though.

A distinctly richer place, with a better health care system, a government that can actually produce the housing the population needs, with a bit more inequality.

The problem being?

The Gini coefficient – which measures income inequality from 0 to 1, with 0 being most equal – fell to 0.452 last year, lower than 0.458 in 2018 and the lowest since 2001, according to the Department of Statistics’ Key Household Income Trends report released on Thursday (Feb 20).

Government transfers and taxes reduced the Gini coefficient further to 0.398.

About the same level of market inequality of incomes as here, the outcome being a little more post- tax and benefit inequality.

Shrug. That a deal you’d accept for a 50% pay rise?

Isn’t this an amusing contention

The reasons should be obvious. Coronavirus would not be the issue it is in economic terms if we did not have such an interconnected world, where supply lines are stretched to their limits so that many companies are at risk from the slightest disruption to their systems, which coronavirus is already creating, and which could get much worse.

Far better to have entirely local economies. So that when the local farmer drops dead then all starve in that area.

Hmm, what’s that? Security comes from having multiple suppliers? Gosh, that’s right! So, having all the world as a potential supplier is safer then, right?

I don’t need to steenkin’ evidence!

I have blogged throughout the austerity years and made the NHS such an issue at one point that I think I was noted as the fourth most active social media campaigner against the 2012 NHS reforms that increased the impact of market forces upon it.

Those reforms have failed. A healthcare system that was intended to, and did, deliver worse health outcomes in a political environment of hostility towards large parts of the UK population is indicative of a chronic political malaise within government during this period.

NHS England has had more market based reforms than NHS Scotland or NHS Wales. NHYS England has improved outputs better than NHS Wales or NHS Scotland.

One useful proof of this being the absence of reports from the usual suspects crowing about the outperformance of NHS Wales and NHS Scotland. They’d be there if it were true…..

Err, yes

Our new Chancellor should not try to find a new fiscal rule. He should have an economic rule instead. He should target full employment at low inflation. Only government spending can deliver that. Turn it on.

That’s actually what the Bank of England’s target is. One they’re currently hitting.

Spud is upset

Whilst its respect for the rule of tax law is not great. Just read Richard Teather’s book on tax havens for them published in about 2005 as evidence of that: it got as close to endorsing the merits of tax evasion as a mechanism for undermining the democratic choices of government as I suspect it dared go.

Both Richard and I would go further than that. One of the merits of tax evasion is that it limits the amount that government may tax – those democratic choices.

So online advertising is another thing Snippa doesn’t understand then

So, our polymath notes this:

And comments that:

I presume KPMG did not ask to be associated with this feature from Mark Littlewood of the Institute of Economic Affairs, but as the biggest tax havens operator amongst the Big 4 accountants I doubt they object.

Except online advertising isn’t determined by the publication. It’s determined by you the reader.

The ad companies check up on what you read, see what it is that you might like, then advertise that to you. Different people looking at that same page will see different ads therefore.

Presumably Snippa saw it because he logs in to KPMG in order to fulminate over how much those who were asked to remain with the company after training now make.

Ritchie does management consultancy

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.

Spot the difference

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.

Nope, it wasn’t just a typo then

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.

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

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

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.

Lord God the man’s an idiot

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.

Well done Snippa, well done

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.

Spudda on politics

I am aware that the image is not the best: the point is that the red line shows that concern about the EU was entirely manufactured since the beginning of 2016: it was simply not an issue for the vast majority before then,

Umm, odd, that.

How was there the pressure to have a referendum (the bill was in 2015) if no one gave a toss. How come, when people voted actually about Europe then Ukip, the peeps shouting about the EU, did so well every time?

Snippa’s knowledge of economics to the fore once again

Peter Bofinger is professor of economics at Würzburg University and a former member of the German Council of Economic Experts. He has written an excellent, and accessible, article on Social Europe in which he explains why Keynesian thinking explains the world as it is, and neoclassical economics explains a world that does not exist.

Hmm, neoclassical economics manages to explain an awful lot of the world but still, let’s see what is being said:

[T]he laws of motion of the classical and the Keynesian world view differ…. In the classical model saving generates investment. In the Keynesian model investment generates saving. In the classical model saving and investment determine the interest rate. In the Keynesian model saving and investment determine aggregate output.

Ah. The classical model is different from the neoclassical model. Markedly so.

Something that Snippa seems not to know. And Snippa used to be a professor of economics at a British university.

Ho Hum.

And it is why neoclassical economics continues to help destroy us, our economies and our planet. And it has to go.

Just to remind everyone what the three major tenets of neoclassical economics are:

People have rational preferences between outcomes that can be identified and associated with values.
Individuals maximize utility and firms maximize profits.
People act independently on the basis of full and relevant information.

Which of these does Ritchie want to junk? No, not which should people not do but which don’t they?

Interesting economics here

I also think that the editorial missed a killer punch. That was, first of all, because they kept referring to Keynes, and not his motives, and yet it is his motives, and their contrast with those of monetarism that is critical. Keynes was motivated by social concern: monetarism was motivated by the desire for private profit. Keynes was about creating fairer societies, and monetarism was about creating inequality.

Really? And here’s every economist in the world thinking that they’re just two proposed methods of dealing with the business cycle.

And not all that different either, Keynes himself runs with the idea that fiscal policy is what you do in that special case when monetary no longer works. Oh, and QE is derived from Keynes’ insistence that the velocity of circulation of money does indeed vary….

This is correct, and yet it needs contextualisation. We have just seen an election where policies in the shadow of Keynes did not prevail. Whilst nationalisation, social housebuilding, the welfare state and much else that might be associated with Keynesian policy all poll well with focus groups they did not deliver election success for Labour.

Keynes of course being a pre-war Liberal. Not notably in favour of all of those things.

Nor, come to that, did the Green New Deal in the way that Labour presented it. And that is because Keynes did not just want these things, as if they in themselves mattered. What he was particularly interested in, I suggest, was what they could deliver for people. In other words, what he wanted to address was not just an economic crisis, but the oppression of people’s hopes and aspirations and their replacement by fear. He knew he was fighting fascism, and he played a key role in achieving that goal.

Rilly? Il Musso saw Keynes’ economics as being at worst “not incompatible with fascism” and the Nazis were probably the first to put them into action. Building infrastructure to stimulate the economy? Heard about the autobahns?

Keynesian spending is about transforming relationships in society.

And that’s not something you’ll find in Keynes.

Ah, Tax Justice are being economical with the actualite again, aren’t they?

The report released on Monday suggested any action by the government to close loopholes at the budget would be positively received. That includes remedying the situation where someone who lives purely off dividends from shares pays a lower rate of income tax than someone who is working.

The tax rate on dividends is the income tax rate plus the corporation tax already charged at the level of the company.

But then Tax Justice is run by Alex Cobham who has been known to get complicated matters like adding up wildly wrong.

Amazingly, the report doesn’t actually mention the idea nor question.

And now here’s what’s vile:

In our next report, we will explore what ways
of communicating on tax and wealth resonate
the most with the public and how to shift
people’s views.

This is a propaganda project. How do we get people to agree to higher taxes?

This report was prepared with funding from the
Friends Provident Foundation and the ESRC Impact
Acceleration Awards via The University of Sheffield’s
Internal Knowledge Exchange Scheme.

Yep, via the ESRC we’re paying tax to be persuaded to pay higher tax.

Fuck ’em, eh?

Perhaps the NHS is the solution

Snippa tells us:

The simple facts stand out. After five years most people who have cancer in the USA are alive. In fact, overall it looks like there might be a near nine in ten chance of that.

And the associated cost is a 40% chance of bankruptcy.

That is no way to run a health service.

And yet this is the model those in office in the UK aspire to.

So, 90% 5 year survival rate.

In the NHS?

The UK government said other data showed that one-year survival rates in England, for all types of cancer, were at a record high.

One-year survival has increased from 62% in 2001 to 72.8% in 2016.

The one year NHS survival rate is nearly 20 percentage points lower than the American 5 year one?

Might we not say that the NHS isn’t the health care model to aspire to?

Guess who?

I have to admit I do not think this attack happened either by chance or without co-ordination in some way.

In addition, I very much doubt that all the names used to post comment are unrelated: apart from making the obvious point that all are likely to be false I rather suspect there may be multiple identities for a single person involved.

Apparently my writing about his mistakes here is “coordination” now.

So, just for the avoidance of doubt Snippa. I have not told anyone to go comment on your blog. I never do in fact. I have also not coordinated anything. All I have done is indulge in a little free speech by reading, then considering and commenting upon, your proposal.

As I’m now about to do again:

Then SCA suggests that a business must have a plan for becoming net carbon neutral, including on Scope 3.

Scope 3 emissions belong to those using the product, not those making it. This is a fundamental error here.

After then it is claimed that there is double counting by including Scope 3. And yes, there could be if a product does, after sale pass through multiple further business hands before reaching an end consumer. But this entirely misses the point of SCA.

No, we’re talking about your assumption within SCA. The end consumer is the one travelling, cooking, consuming and thus emitting. And it’s consumer behaviour we desire to change too. This is all made entirely plain in the Stern Review and other such basic documents.

That double counting would matter if SCA was a macroeconomic measure. But it is not. It is a microeconomic measure. What it is seeking to appraise is what an entity’s contribution to global heating might be.

It’s still double counting and it still matters.

And if it is in a supply chain that delivers global heating it is playing a part in that process.

Jeebus, you’re not even understanding your own point. The supply chain is Scopes 1 and 2. Scope 3 is not the supply chain, it’s consumption.

Then it is claimed by critics that SCA prices this carbon that has been measured. Quite specifically sustainable cost accounting does not do that. It prices the cost of eliminating the carbon.

Which is another mistake being made. The cost of eliminating the emissions isn’t the important thing. The damage the emissions – their cost – do is.

It does not require the creation of an artificial market in carbon, thankfully. That’s not least because that market is not going to exist at any price that might be required at any foreseeable time in the future.

Trying to do economics without considering prices is, well, it’s rampantly stupid actually. And to claim that carbon is going to have no price at all is insane. It might even be a high price but there is going to be one.

Simply glorious:

As a consequence I propose that a precautionary principle must apply: only proven technology can be included in a plan to be net carbon neutral.

The world must become carbon neutral, today, with extant and proven technologies only. Entirely missing the point of Stern, Nordhaus et al, that the task is to develop the technologies which allow industrial society without climate change.

I am well aware that those who do not like sustainable cost accounting will wish to continue to take issue with it, and I m entirely happy about that: if I did not believe in constructive debate I would not have facilitated comments on this blog for as long as I have. But, those who raise repetitive, and continually inappropriate questions on the subject, not least because they make false claims as to what SCA is about, will simply be referred to this blog post. And those who are here to troll can expect to be banned.

And anyone who continues to point out Snippa’s errors will be banned. Got that?

This is fun

I am not sure that there is much more to add t that, except to note that the tax spend total is actually £400 billion once allowances are taken into account. And what is clear is that these sums are being remarkably poorly managed.

OK. So, total taxation is what, £600 billion? £800?

So, abolish all allowances – absolutely all – and cut tax rates on everything by 33 to 50%.

Amazingly, I don;t see Ritchie proposing that. Even though it’s a logical deduction from his observation.