Ragging on Ritchie

Ritchie\’s looking for more handouts

And I candidly think that the proposals to increase consultation are anti-democratic and will result in significant bias in UK tax legislation. There are three reasons. First, to be consulted you need to be have the time available to take part without being paid. Only the rich and their agents can do that.

It would appear that £35k a year from the Joseph Rowntree peeps just isn\’t enough to keep a retired accountant in the style to which he wishes to become accustomed:

First, if there is to be consultation then it must be broadly representative and positively seek to be so. If necessary that means that payment must be made to those taking part. Second, parliament must have resources to commission its own reviews of legislation.

So Ritchie should be paid your and my money so as to inflict upon us his ideas of how he can take more of your and my money?

And note that second little bit, resources to commission……what this means is that Caroline Lucas and Chuka Umunna should be able to shovel even more of our tax money Ritchie\’s way.

Me, I suggest we reinvigorate that age old difference between \”making a living\” and \”public service\”. Otherwise known as \”if you want to try and inflict your prejudices upon us, do it on your own dime matey\”.

There is an alternative: Ritchie could become a parliamentary aide to one of those who like the cut of his jib. There are allowances for such things.

Although, it does have to be said, the screw is a great deal worse than what a retired accountant from Wandsworth might feel is fitting for one of his eminence.

Ritchie as libertarian: he means he\’s illiberal

This is quite mind garglingly good actually.

The post war consensus was built on the basis of positive liberties. I am a positive libertarian on that basis, and proud to be so. Neo-liberalism and its vision of libertarianism is negative by this definition.

And what we’re seeing is the state – the agency that should enforce positive libertarian rights – being used to reinforce the negative libertarian rights of few.

That’s the core of this issue.

That’s the core of Blue Labour too by the way – as I see it. The collective is positive.

The imposition of the individual over the collective – and the denial that the collective exists – as Thatcher suggested – is what is threatening our society, destroying trust, undermining democracy, increasing fear and seeking to destroy the well being of the majority in the interests of a minority.

That’s what Polly is saying we need to rebel against. And she’s right.

And let’s not forget – it’s a libertarian act to rebel for our collective rights. Positively libertarian. In itself a word the left need to reclaim – with precisely the connotation I put on it.

If I\’m able to take words and strip them of their usual meaning then I too can prove anything.

For the word \”libertarian\” is usually taken to mean those concerned with negative liberties, not positive ones. To argue that one is a positive libertarian is an oxymoron, you know, like military intelligence, capitalist socialist or intelligent retired accountant from Wandsworth.

To add a little from the philosophy page that Ritchie quotes from, you know, the bit he skimmed over:

As Berlin showed, negative and positive liberty are not merely two distinct kinds of liberty; they can be seen as rival, incompatible interpretations of a single political ideal. Since few people claim to be against liberty, the way this term is interpreted and defined can have important political implications. Political liberalism tends to presuppose a negative definition of liberty: liberals generally claim that if one favors individual liberty one should place strong limitations on the activities of the state. Critics of liberalism often contest this implication by contesting the negative definition of liberty: they argue that the pursuit of liberty understood as self-realization or as self-determination (whether of the individual or of the collectivity) can require state intervention of a kind not normally allowed by liberals.

Ritchie is arguing that those rights and freedoms of the individual must be subsumed into those rights and freedoms of the collective to impose itself upon the individual.

Which means that I\’ll allow him his little conceit of describing himself as a positive libertarian. As long as I\’m allowed my own, which is to point out that in doing so he is being profoundly, gargantually, illiberal.

By definition.

@RichardJMurphy on healthcare: ignoring the evidence

So, Ritchie tells us that:

First we need to eliminate those wasteful market mechanisms.

Yers, you see that competition thing is just so terrible isn\’t it? Damn near trade!

Then we can see what people who actually know what they\’re talking about say about competition in health care. You know, people who bother to go and look at the actual evidence?

In recent research along with Rodrigo Moreno-Serra (Gaynor et al. 2010), we look at all admissions to hospitals in the National Health Service – around 13 million admissions – pre- and post-policy. We find that hospitals located in areas where patients have more choice are of a higher clinical quality – as measured by lower death rates following admissions – and their patients stay in hospital for shorter periods compared with hospitals located in less competitive areas. What’s more, the hospitals in competitive markets have achieved this without increasing total operating costs or shedding staff. These findings suggest that the policy of choice and competition in healthcare can have benefits – quality in English hospitals in areas in which more competition is possible has risen without a commensurate increase in costs.

So there you have it. Richard Murphy, never knowingly studying the facts.

@RichardJMurphy a complete wazzock over Facebook

From our favourite retired accountant we get this hysteria:

Whilst lots got excited by the royal weeding more than 50 Facebook pages were shut down against their owners will.

The full list is here.

So much for freedom of speech in this country. Do you note any right wing ones in there?

Well, actually, to be honest, no, I don\’t note any right wing ones in there.

That would probably be because only not right wingers are stupid enough to break the Facebook terms of service.

In short there are three main ways to be on Facebook:

  1. With a profile – intended for real people, with a name
  2. With a group – a small to medium size group of people discussing something
  3. With a page – ‘Like’ something to get news updates from it

As far as I can determine no groups or pages have been deleted, only profiles, and all the profiles were not individual people, they were being used by organisations. Not only is this stupid (as I’ve previously explained here) but it violates the Facebook terms of service. So no leg to stand on if one is deleted.

So there you have it. Only lefties are stupid enough not to read and obey the terms of service.

Which stupidity, come to think of it, might aid us in working out why they might be lefties. They\’ve failed to read the operating instructions for the universe.

Ritchie announces: tax kills people

Nice to see him admit it:

Unlike most businesses hospitals pay VAT, and quite a lot of it, because what they supply is VAT exempt but what they buy still has in many cases (including on agency staff) VAT charged on it.

So what has happened is that the VAT paid by hospitals has increased and as a result frontline healthcare in the UK is going to be cut, significantly, to the point of reducing hospitals to a state that experts predict will be chaotic .

Blame the Tories when people die as a result, as they will. There’s no one else at fault.

See? Tax kills.

Ritchie misunderstands Glencore\’s tax affairs

Not all that surprising, Ritchie manages to misunderstand most things.

As a private Swiss-based company, the tax charges in the trading business are borne by its employees. The partners – about 485 employees – accumulate tax liabilities during their work career and pay them when they cash their shares at retirement as income tax.

So, the reason that Glencore doesn\’t pay much corporation tax is because it\’s not taxed as a corporation. It\’s taxed as a partnership, an LLP if you like, with a deferral available to the partners who are liable for the tax.

Absent that deferral part, it\’s taxed in exactly the same was that Murphy Deeks Nolan was when Ritchie was running it. Profits are assigned to the partners, the partners pay tax on those profits as if they are the partners\’ incomes.

All very simple and nothing to get upset about.

It was due to to the fact that Switzerland let them trade virtually tax free, providing a wholly artificial competitive advantage.

Oh, really? Did Murphy, Deeks, Nolan trade virtually tax free? Wouldn\’t be the first time Ritchie has ranted about tax rules that he himself has used of course but I rather think that wasn\’t the case. It\’s just that partnerships are not taxed as corporations, they\’re taxed as partnerships.

Who has suffered from this? Well, you have. Prices are too high as a result of the actions of this monopolist.

Gosh, that\’s innovative. The absence of taxation leads to higher prices to consumers? Can\’t quite see it myself I have to admit.

Who else has suffered? Undoubtedly the poorest countries in the world have, who have not enjoyed prices they should have been paid if a freeer market had existed.

My word, another innovative theory. That the absence of taxation leads to lower prices to producers.

And let’s note: this is not the result of free market action. This is the result of state subsidy. The Swiss state chose to subsidise Glencore by way of not charging it to tax that it would have been charged elsewhere.

No, Glencore itself is paying tax as if it were a small accounting partnership in Wandsworth. You know, it\’s the partners who pay the tax, not Glencore? Like Mr Murphy did at Murphy Deeks Nolan?

Agreed that the partners themselves are getting a deferral, but Glencore ain\’t.

The rest of Ritchie\’s rant is just that, a rant based on Our Favourite Retired Accountant not understanding the tax system he\’s complaining about.

BTW, I\’ve said this before: I hold no candle for Glencore, wouldn\’t trade with them if you paid me to do so. But that Ritchie can be wronger than Glencore is a surprising fact of life.

And now the Murphmeister misunderstands economics on Twatter

Glory be:

RichardJMurphy: RT @nils_gilman: Does the Modigliani-Miller theorem apply to black markets? ANSWER: No, it\’s never applied anywhere . http://t.co/Ei4taFZ
And that link is to here.
Where they discuss the way in which Somali pirate attacks are financed by syndicates. Stump up some of the cash necessary to get a raiding operation going, get a chunk of the rewards…..if there is indeed a ransom in the end.
Not unlike pirate style raiding was financed in our own dear land when we called them Letters of Marque and the like.
What that\’s got to do with Modigliani Miller I\’m not quite sure.
The basic theorem states that, under a certain market price process (the classical random walk), in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed.
Anyone actually able to work out what Ritchie meant there? Maybe?
Quite apart from anything else, how does he get from a capital structure that we\’re not valuing (as there is as yet no transfer market in such pirate syndicates) to a disproof of a theory which talks about how capital structures change valuations….or don\’t?

Beg pardon Ritchie?

The Murphmeister pronounces again:

As he argues, strength is in diversity, as  real sciences recognise but economics does not.

You what? No, seriously, where on earth does any even the tiniest teensiest piece of economics argue that diversity is a bad thing?

It\’s certainly not this neo-liberal part of is, that\’s for sure. You know, the one that relies upon markets, everyone doing their own thing, that very diversity, for it to function, is it?

The only monocultures that I can think of, in an economic sense, are the planned economies: you know, that sort of planning that Ritchie wishes to be the planner of but which the rest of us acknowledge has failed?

No, I don\’t think so Richard

We will of course continue to publish online at AccountancyAge.com and AccountancyAgeJobs.com, offering the full range of articles and jobs currently found in print, as well as new, specialist digital material. Currently over 120,000 individuals visit AccountancyAge.com each month.

To which he adds:

Second, they only just beat me in terms of number of visits.

No, I don\’t think so.

In online metrics, \”visitors\” is different from \”visits\”. A \”visitor\” is sometimes known as an absolute unique visitor. So one IP address is counted only once in each month, however many visits they might make. So, for example, a regular daily reader of the new output is one visitor.

A \”visit\” is one IP address turning up, however many page views they have in that visit. So, for example, a regular daily reader is 30 visits (in a 30 day month).

A page view is of course the number of pages served up. So if your daily visitor reads (ie, visits, separately, 5 pages) 5 pages, this will count as 150 page view in that month.

Now I\’m vaguely willing to believe that Ritchie is getting near 120,000 page views a month. Which is almost certainly not the measurement that Accountancy Age is using. But I\’m about willing to believe that he\’s getting that sort of traffic.

I\’m not, I\’m afraid, willing to believe that he gets 120,000 visits a month, and most certainly not 120,000 unique visitors a month.

A quick skip through Alexa (which itself is a flawed metric, as it measures only those with the Alexa toolbar installed…..I think) shows that his traffic ranking is higher than this site\’s, his UK traffic ranking lower than. So I\’d expect his numbers to be not dissimilar to this one\’s (note that Wikio uses an entirely different set of metrics).

Fortunately all of this is pretty easy to resolve. I\’ve got sitemeter available there for anyone to look at. He seems to have statcounter but it\’s not public. All he has to do is make public those statistics and we can see what his traffic levels are.

Those tax dodging bastards at Glencore!

Ritchie tells us that they\’re dodging tax in Zambia.

Now I\’m actually willing to believe pretty much anything at all about Glencore. Personal experience in the metals game plus the delightful long term record of Marc Rich, the founder (although he sold out of it yonks ago).

However, I\’m not entirely sure about this report.

Take two points they make in their Mopani audit.

The first is about copper pricing. In the last two or three years the price received by Mopani, after the copper has been marketed by Glencore, has been progressively deteriorating below the LME price. The assumption the report makes is that this is deliberate, through the use of hedging (ie, sell futures).

How they get to that \”deliberate\” is interesting. They assume that if you were trying to hedge, to lock in high prices, then you would do so at the peak of the price cycle. However, if you were trying to shift cash out of a tax jurisdiction, you would do so at low prices. As the hedging seems to have been done at lowish prices, thus they might be hedging to tax dodge.

They might be.

However, there\’s another possible explanation: they got their hedging wrong. The divergence starts as copper prices start to roar up back in 2004 ish. So if Glencore (or Mopani) were hedging 3-6 months ahead, something not unusual as you might try to fix the price you\’re going to get for the copper cathode before you send the boys in with shovels to get the copper concentrate, then you\’re always going to be getting less than the current price. You\’ve sold it forward, recall? At today\’s price plus whatever futures premium there is (and this could get worse if there\’s no such premium, umm, I think that\’s called a cotango) but by the time you actually deliver the cash price has risen above your future price.

I\’d note that I\’m just going on what\’s in the report: I\’ve no extra information here. I\’d, as I say, believe pretty much anything about Glencore but it\’s not open and shut that they are tax dodging on this.

The second is about cobalt pricing. The report notes that the price Mopani receives is always below the LME price. Consistently below the LME price.

Well, yes, it might well be. For the purity of the Mopani Co is lower than some other suppliers (and higher than some others as well). The \”LME price\” is actually an average of the prices of the different suppliers\’ grades. I don\’t know whether Mopani normally trades at a discount or premium to LME, but it will do one or the other consistently. It\’s entirely usual for there to be a persistent premium or discount on all LME metals from specific suppliers as a result of those different suppliers having different purity levels. Russian A7 E for example (LME registered aluminium brand) a decade back went for LME minus $20 -$30 a tonne for example. Phoning up an LME broker in cobalt and asking what the premium/discount on Mopani is would sort this out pretty quickly….but we leave that as an exercise for the reader.

Just to repeat, I\’ve no idea what Glencore/Mopani is actually doing. But these two points don\’t seem to me to be open and shut cases that they\’re doing something naughty.

Yes Virginia, 1,000 cretins can be wrong

Hands up everyone who thinks we should raise interest rates?

Right now, today?

OK, how much should they rise by? 0.25% maybe, like the ECB has just done? 0.5%? Shake that inflation out of the system?

How about let\’s raise them from the current 0.2/0.25% level straight up to 12.5%. That\’ll be good won\’t it?

No chance of inflation rearing its ugly head at that rate. Won\’t do much for the bascent economic recovery, that\’s true, but as we\’re going to do it in a good cause we should all sign up immediately.

We write to you as the call for a Financial Transaction Tax is now gathering global momentum, and the French government has made it a key priority for their G20 presidency.

This tax is an idea that has come of age. The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society.

Even at very low rates of 0.05% or less, this tax could raise hundreds of billions of dollars annually and calm excessive speculation.

So, there\’s this thing called LIBOR. It\’s the rate that banks lend to each other at. Lloyds takes in a little more over the counters than it pays out one day, HSBC the reverse. So Lloyds lends the cash to HSBC so their books balance overnight.

This is quiet a big thing actually. In normal times (ie, not now perhaps) the volume, in sterling and in London alone, is around £20 trillion a year.

Current rates on this are around 0.2, 0.25% on an annual basis. With 250 banking days (is this correct? Or it it 360?) that means that an overnight loan will earn you 0.0008%. So, let\’s add a 0.05% tax to this trade shall we?

I think we\’ve rather changed this market, haven\’t we?

Yes, we have. In fact, what we\’ve done is to make short term interest rates 12.5% (0.05 x 250). Just what we need in a recession eh? Mindbogglingly high real interest rates.

Yes Virginia, there really are 1,000 cretins who are wrong.

Ritchie on HICL

So he\’s gone to the Beeb with another story about how evil Teh Banksters are and their tax dodging ways.

The BBC has reported that HSBC set up a Guernsey-based company to reduce tax on profits from funding National Health Service hospitals provided under the notoriously opaque private finance initiative.

What can one say? This happened on the watch of HSBC’s former chairman Stephen Green, a Church of England minister and also trade minister in the British coalition government.

Now of course HSBC’s defence is that the private equity operations in the Uk that are owned by the Channel Islands’ subsidiary of HSBC will be taxed in the UK and so all will be fine. But that’s 10% iof the story.

Indeed, perhaps the other 90% of the story could be that HICL is not in fact an HSBC subsidiary, it\’s an independent company with it\’s own London listing? The major shareholders appearing to be pension and insurance funds?

As, actually, the Beeb itself reported:

HSBC said it did not set up the scheme to divert funds from the NHS but to give people a chance to invest in PFI projects.

It said it owned no shares in HICL and did not take a profit from it.

We\’ll put that one down as a fail shall we?

Ritchie tells me off again

Tim

I reiterate my point – all you prove is your inability to comprehend the human condition, blinded as you are by cost-benefit analysis, flawed as it is

You expose the weakness of your argument – rational as you think it may be – as a consequence, and it is precisely that rational indifference to the human condition that means the right cannot be trusted

We cannot agree on this issue.

This debate is therefore closed.

Which is a bit odd really.

He sez nuclear\’s bad because the Fukushima thing is going to kill lots of people.

I say that it\’s not going to kill lots of people and therefore shouldn\’t be considered bad for the reason that it\’ll kill lots of people.

And then the condemnation is that I\’m allowing facts to cloud my judgement?

Sadly, he\’s closed comments on the piece just as I was going to respond to this:

Not all the waste is iodine – or the radiation would have gone already

No Richard, no.

Iodine 135 has a half life of 8 days. No new iodine 135 has been created since the reactors were scrammed at the moment of the earthquake. We have been seeing releases of it since then.

What the half life thing means is that after 8 days half of it has become xenon (harmless) and the other half is still iodine 135 (not harmless but not very dangerous either). After 16 days, 75% xenon, 25% iodine 135. After 56 days under 1% iodine 135, after 80 days under 0.1% iodine 135.

In theory there will always, right until the end of the universe, be some amount of radiation left from these reactors. That\’s the way that radiation works, it\’s quantum, see? However, the thing we\’re interested in is how long will there be radiation that we can be bothered to care about? How long will there be radiation above background level for example? Or above a level that could possibly, even just maybe, do some harm?

As a reasonably informed guess, from the iodine 135, a few months at most.

These facts, ye see, these cost benefit analyses, they\’re important.

A prediction for you. The environmental damage from the whole thing…..after the dead have been buried (tens of thousands, let us not forget), the shattered houses rebuilt…the largest long term environmental damage won\’t be the radiation. It won\’t even be the millions of gallons of oils and weird chemicals that have been washed around by the tsunami. It\’ll be the inundation by salt water, the tsunami itself, of the farmland.

Could be decades before that gets sorted out.

Ritchie takes me to the woodshed

Worth repeating this in full:

The Guardian has reported:

Japan has raised the severity level of its nuclear crisis to the maximum seven, putting the emergency at the Fukushima Daiichi power plant on a par with Chernobyl.

Officials from the nuclear and industrial safety agency (Nisa) confirmed that the crisis level had been raised from five to seven on the international nuclear and radiological event scale.

At the same time there are reports of serious shortages affecting economic production, 200,000 people without homes or having restricted access to them, there will be serious health issues for many, the sea has been contaminated affecting the food chain, maybe for some time to come, and the plant still has no cooling system meaning the crisis is far from over yet.

I think in retrospect that justifies my comment on March 11 that:

Don’t think nuclear melt down in Japan is some minor issue.

It’s massive. For the world.

I am very, very worried.

This issue still has the capacity to have such an impact – and may well do so, given that the awareness of the severity of the issue is growing, not declining.

I’d compare that with Tim  Worstall on his blog, who said:

Absolutely the worst that could happen, absolutely the worst possible outcome, is that the reactors end up as a puddle of cold metal at the bottom of their containment vessels.

That’s it. The chain reaction is already shut down. All that is left is the residual heat which the water is cooling. If the water doesn’t cool it then yes, the rods and fuel might melt. At which point they might stay liquid until they hit that 2-3 metres of reinforced concrete underneath them where they will solidify.

So the worst possible outcome is a 40 year old reactor which cannot be used again.

If evidence were needed that, as ever, the man has not a clue what he’s talking about, this is it.

As ever, the judgement of the right wing is proven to be utterly unsound.

And let me give you the rest of what I said at the time:

There cannot be a nuclear explosion, there is no possibility of a fire as at Chernobyl (because there is no graphite to catch fire). We can have, as we have had, a hydrogen explosion, but that’s outside the reactor and outside the containment vessel. No radioactivity released as a result.

Just to give you an idea of the “raised levels of radioactivity” that have been reported. Between 500 and 1,000 microsieverts per hour. The top end of that range is about half what you would get if you had a CT scan.

Or, if we use the Banana Equivalent Dose (you do indeed absorb radiation from eating a banana, a pile of bananas will indeed set off a radiation detector) the mid range there is like eating 20 bananas a day for a year. One banana a day for a year is around 35 microsieverts.

So, we’ve just had the fifth worst earthquake in the past century, the 7 th worst we have on record, a 30 foot wall of water sweeping in at 500 miles an hour and the worst part of the nuclear power system is that if you were standing right there, right at the plant, you might get the same radiation dose as a fruitarian?

And you want to use this to tell us that nuclear power is dangerous?

I’ve got bells on the other one which will jingle if you pull it.

So, what has actually happened? The reactor cores have indeed melted (a bit at least). Have they melted through the containment? Not as far as we know. They certainly haven\’t melted through the concrete underneath them. And let us look at what Ritchie said:

A nuclear power plant in Japan is failing – part has already exploded. The melt down of the core is being discussed.

It’s been my nightmare since realising the folly of Sizewell and nuclear power as a teenager living in Suffolk.

If that melt down happens – and I sincerely hope it does not – ¬†then we’re not just heading for one of the biggest ecological disasters in human history. We’re also heading for a massive humanitarian disaster. And if Tokyo is as disrupted as I fear – it being only 200 miles or so a way, we face potential global financial melt down.

If there is no one to deal wih the counter party to debts in a global financial system it stops. Banks can’t work through that.

Don’t think nuclear melt down in Japan is some minor issue.

It’s massive. For the world.

I am very, very worried.

So, who do you think called this right then?

Yes, we\’ve got several nuclear power plants entirely screwed. Yup, we\’ve got radiation leaks.

Is this a massive ecological disaster? A massive humanitarian one? Is Tokyo disrupted? No one dead as yet (thank goodness of course) and no one as yet exposed to a level of radiation that might cause their death.

As The Guardian points out (and of course I\’ve no idea whether these figures are true or whether they\’ve got garbled as some have done earlier):

Japan\’s nuclear safety commission estimated that the Fukushima plant\’s reactors had released up to 10,000 terabecquerels of radioactive iodine-131 per hour into the air for several hours after they were damaged in the 11 March earthquake and tsunami.

The emission of radioactive substances from Fukushima Daiichi was about 10% of that detected at Chernobyl, Nishiyama said.

The nuclear safety commission said emissions have since dropped to below one terabecquerel per hour, adding that it was examining the total amount of radioactive materials released.

10% of Chernobyl? Which at top will cause 4,000 deaths over 50 years? So we\’re talking about 400 over 50 years are we? And that\’s without considering the half live of iodine 131 (8 days) as opposed to the caesium which Chernobyl sprayed over the countryside (30 years).

That is, fewer deaths than we would expect from a coal fired plant of the same size operating normally over the same period?

Hey, make up your own minds on this judgement thing.

The glories of Ritchie\’s economics

The Murphmeister has done it again. Entirely glorious.

A huge great long post in which, well, in which…..

It is my belief that the goal of human life is to achieve one’s potential: to seek to explore the possibilities available to you to the full within the constraints placed upon you. So, logically, you would want your area of achievement to approach the outer circle of your limit of possibility.

The clear implication of the model being proposed here is that the green area in the diagram is better for the person who enjoys it than the red area: it is not just that they appear to have more, they have come closer to fulfilling their potential for achievement, and that is their aim.

That though begs the question, is there a limit to possibility? And does that mean achievement is constrained? It is this question that fundamentally changes the approach used here from that offered by conventional economics at this time. Conventional thinking is that the individual should think their consumption unconstrained, even though the reality is otherwise. In the economics proposed here is the individual is recognised to be constrained they then recognise a different goal – which is to work to achieve within the constraint. And, of course, the answer is that the individual is constrained, and there is a limit to possibility that they must accept.

To some degree this is internally imposed by our finite nature.

It is also externally imposed. The simple reality is that we cannot consume without limit. The world is finite. Like us it has a beginning and an end. Of course, like us it also has a capacity to regenerate itself. But ultimately the laws of entropy apply: there is a limit to what is possible.

Yup, working from first principles he\’s just discovered that we do in fact face a world of scarce resources. And that within those constraints we should struggle as best we might to gain the goals that we ourselves desire. You know, material comfort certainly, but also social contact, possibly a meaning to life, whatever floats your boat really. Possibly even greater social and economic equality if that\’s the sort of thing that turns you on.

He really should have paid more attention to those economics lectures at the University of Southampton, shouldn\’t he? For we\’ve already got a name for that second concept: utility. And the entire subject is really, at bottom, devoted to exploring how people struggle to maximise utility within the constraints imposed by scarce resources and the technology available to use them.

One of the points of university, indeed of any education system, is to inform you as to what others have found out before you. So that you don\’t have to go around reinventing the wheel all the time.

In which Ritchie proves the Laffer Curve

This set of facts from the Murphmeister is just too good not to have another go at.

Key USTax Facts

  • 15,753: The number of households in 1961 with $1 million in taxable income (adjusted for inflation).
  • 361,000: The number of households in 2011 estimated to have $1 million in taxable income.
  • 43.1: Percent of total reported income that Americans earning $1 million paid in taxes in 1961 (adjusted for 2011 dollars)
  • 23.1: Percent of total reported income that Americans earning $1 million are likely to pay in taxes in 2011, estimated from latest IRS data.
  • 47.4: Percent of profits corporations paid in taxes in 1961.
  • 11.1: Percent of profits corporations paid in taxes in 2011.

OK, so let\’s have a little walk through some tax statistics.

Total tax revenues in 1961 were $159 billion. If we upgrade this for inflation (just as they have done for the $1 million earners, by the CPI) total tax revenues would be $1,160 billion in 2010.

However, total tax revenues in 2010 were in fact $4,201 billion. And if taxes had remained flat as a percentage of GDP the 1961 number would be $4,280 in 2010. That\’s close enough to being the same when we\’re talking about government money.

So what is the contention of the Laffer Curve? That at some levels of taxation, reducing the rate of tax will lead to sufficient economic growth to increase the amount of revenue collected.

And we expect this to have a greater long term effect than a short term one.

OK. So what do we have before us? We (err, they) are collecting the same percentage of overall economic activity as tax revenues. They have massively lowered rates, both average and marginal. There has been huge economic growth and the actual tax revenues are several times higher than they would have been without that growth.

Now no, I do not say that proves that the Laffer Curve is true at all tax rates for everyone all the time….in the sense that all tax cuts pay for themselves. However, the facts that Ritchie has presented to us are at least consistent with having moved from, in 1961, the wrong side of the Laffer Curve. Rates cut, economic growth up, revenues rise.

And I think we should thank Ritchie for bringing this to our attention. It\’s interesting, isn\’t it?

Which leads to an even more interesting question. Are we still on the wrong side of the Laffer Curve? My feeling in my water is that, in the long term, yes we are.

In which Richard proves supply side economics

Key USTax Facts

  • 15,753: The number of households in 1961 with $1 million in taxable income (adjusted for inflation).
  • 361,000: The number of households in 2011 estimated to have $1 million in taxable income.
  • 43.1: Percent of total reported income that Americans earning $1 million paid in taxes in 1961 (adjusted for 2011 dollars)
  • 23.1: Percent of total reported income that Americans earning $1 million are likely to pay in taxes in 2011, estimated from latest IRS data.
  • 47.4: Percent of profits corporations paid in taxes in 1961.
  • 11.1: Percent of profits corporations paid in taxes in 2011.

So, err,cut the tax rates, wages rise, the economy expands and loads n\’ loads get stinking rich.

And the problem with this scenario is?

Meanwhile on Twitter

Client to @XXX \”Do I have to pay this tax?\” \”Yes.\” \”Really?\” \”Yes.\” (Actual answer – No.) Result – malpractice.

….

No, because with your CA you\’re being a thug; bullying others on here to different standards than you hold yourself.

….

So, you lying hypocritical thug, where\’s your \’chapter & verse\’ directors have duty to overpay tax? Substantiate your claim

….

Your biased unreferenced lying nonsense makes me furious that some people may mistake you for a Chartered Accountant.

….

I asked you to present yours re you utter lies. You need to stop misleading people, or resign your professional membership.

….

If you carry on acting so unprofessionally I will have a duty to report you, as you\’re clearly being a nutjob now.

& For reference, these bilious lies & crap you spread, bringing profession into disrepute is what makes me furious.

My word, who could tweetyaca be referring to?