Ragging on Ritchie

Well Done Ritchie!

So Reform proposes that:

Research for this paper indicates that the public sector workforce needs to reduce by at least one million people (15 per cent of the total) if the structural deficit is to be eliminated, over a period of years.

Hmm, we\’ve a large structural deficit, one which we need to deal with in some manner.


Ritchie then tells us that:

This is how ludicrous this proposal is.

But what is more ludicrous is the economics. 1 million unemployed means, when there is a lack of demand in the economy, which will spiral out of control with all these extra out of work, that all these people will remain unemployed – at cost to the benefit system.

Oh dear.

That\’s not a defence of a structural deficit nor an attack on closing it over time.

That\’s a defence of a cyclical deficit.

If only Ritchie knew enough economics to recognise the difference…….

How to finance the Green New Deal

In their new report.

Green Quantitative Easing of course!

In this way, quantitative easing could be used to increase long-term, sustainable economic activity and with it a huge growth in jobs. The Chancellor, Alistair Darling should announce in his pre-budget report that the extensions in quantitative easing would be used to fund a Green New Deal, as called for by Gordon Brown in the run-up to the G20 meeting.
There are historical precedents in crises for governments to generate debt-free money to fund massive projects, Abraham Lincoln paid for the American Civil War by printing $432 million in new greenback bills, with Congressional authorisation. The French revolutionary government was financed by the creation of assignats.

Those might not be the very best of examples you know…..

To his admirers, Abraham Lincoln (1861-1865) is remembered as “the Father of the Union.” But the first Republican president was an inflationist in monetary affairs, and his policies led to consequences that are still visible today. To pay for the Civil War, Lincoln abandoned specie and launched a paper dollar (the “greenback”) that resulted in rampant price inflation.

The Civil War led to an enormous growth of federal spending, from $66 million in 1861 to $1.3 billion four years later.[7] Lincoln tried to finance the war initially with government bonds, but public demand for specie payments led to their suspension at year’s end. Lincoln took advantage of the fact that the United States was on an inconvertible paper standard by signing the Legal Tender Act of 1862, which authorized greenbacks to pay for the war. Initially limited to $150 million, a second $150 million issue was approved in July and a third $150 million issue passed in early 1863.[8] By mid-1864, greenbacks were worth 35 cents in gold. But at war’s end, they had risen to 69 cents on the prospects of future gold redemption.[9] Prices rose 110.9 percent from 1860 to war’s end.

(A biased source I agree but the facts are as they are).

Assignats were worse:

Assignats were paper money issued by the National Constituent Assembly in France during the French Revolution. The assignats were issued after the confiscation of church properties in 1790 because the government was bankrupt. The government thought that the financial problems could be solved by printing certificates representing the value of church properties. These church lands became known as biens nationaux. Assignats were used to successfully retire a significant portion of the national debt as they were accepted as legitimate payment by domestic and international creditors. Certain precautions not taken concerning their excessive reissue and comingling with general currency in circulation caused hyperinflation.

Originally meant as bonds, they evolved into a currency used as legal tender. As there was no control over the amount to be printed, the value of the assignats exceeded that of the confiscated properties. This caused massive hyperinflation. In the beginning of 1792, they had lost most of their nominal value. In 1796, the Directoire issued Mandats, a currency in the form of land warrants to replace the assignats, although these too quickly failed.

Don\’t forget, these are the examples that the Green New Deal themselves put forward as evidence of the likely success of their plans.

One doubling of the price level in 5 years and one hyperinflation followed by a second hyperinflation…..these they think are recommendations?

Yes, by the way, Richard Murphy is involved here.

We also get the £25 billion from tax avoidance in tax losses. Even Murphy\’s own report this figure comes from says that £25 billion is the summation of Parliament\’s intentions, tax planning, tax avoidance and tax evasion.

They seem to think a Tobin Tax would raise £400 billion a year: that\’s so cute of them. They\’ve obviously not understood the implications of that Austrian think tank (no, not government) report.


We believe it essential that part of this wall of money, much of it saved in funds that create no new investment in the economy, has to be used more constructively to create a Green New Deal.

Y\’see, pensions savings are often invested in extant shares and bonds. Thus they don\’t mean \”new investment\”, just that ghastly secondary market. But, we, we will be different! Green Bonds!

It must be liquid so that people can buy in, knowing with confidence that they can get their money back when they want.

Which means that people must buy Green Bonds on the secondary market because for each seller there must be a buyer. Which means that, after the initial burst, the vast majority of the Green Bonds will be trading in the secondary market and not providing any new investment (the stock is of course, after a few years, going to be hugely greater than the flow, by definition almost).

Meaning that we\’ve just replicated the financial markets at great cost and to no effect. Aren\’t we wonderful!

This is also excellent, about Green savings vehicles:

It must be capable of paying real rates of return.

Well, yes, but that\’s the problem, d\’ye see?

Without carbon taxes or cap and trade, green investments can\’t pay a real rate of return because they\’re more expensive than not green projects. This is the classic externalities problem of course.

But once we\’ve imposed either carbon taxes or cap and trade, thus priced the exteralities into market prices, we don\’t need to have green bonds or green investment schemes. Because our traditional savings and investment methods will do just fine, for such green projects will now be capable of paying real rates of return.

In short, the plans either won\’t work or they\’re not needed.

Anyway, I\’m bored with these fools and knaves now. It becomes tedious continually pointing out that these idiots simply don\’t understand what it is that they\’re pontificating about.

A couple of Ritchie\’s nuggets

The reality is that tax is paid by consent in the United Kingdom. This may not appear to be
the case for those in employment with limited investment income, but for those who are self
employed or who run companies the relatively high rate of compliance with tax law is the
consequence of voluntary disclosure to HMRC since the resources it has available to pursue
those not willing to pay are very limited. This rate of voluntary compliance is dependent
upon widespread acceptance of the tax system being, despite all complaints made, broadly
When additional revenue is being demanded the obligation upon political parties of all
hues to close loopholes exploited by those avoiding tax will be high since the existence of
persistent tax avoidance, especially when undertaken by major corporations and those with
significant earnings, will undermine the widespread perception of tax justice that exists at

There\’s some logic missing there really. To put his suggestion simply.

The poor and low earners don\’t have much opportunity to dodge tax. The rich do and we don\’t have enough taxmen to stop them. Thus we should crack down more heavily upon the rich because we rely on them voluntarily cooperating with the tax system……


The UK’s domicile rule should be abolished as a first step towards simplifying the UK’s
overly complex rules on personal tax residence.

Shrug, whatever. But it\’s going to make this more difficult:

Any such rule must also include
significant anti-avoidance rules so that those leaving the UK to live in a location with low
or no taxes and no history of tax cooperation with the UK should face considerably higher
obstacles before being considered non-resident than do those leaving for locations such as
other EU countries.

Because of course tax domicile also applies to those who leave as well as to those who come. To skip inheritance tax for example you\’ve got to be non-dom, not just not-resident. I\’ve seen no sign anywhere that Ritchie has even considered this point.

There should be reform of the rules on company residence so that the artificial relocation
of a company’s place of management and control in an effort to escape the UK tax net
becomes considerably harder to achieve.

Sorry mate, simply not in the powers of the UK Government. That\’s EU law that is, free movement of people, goods and capital. And yes, companies count as people here (they being \”legal persons\” you see?). Brussels defines this, not Westminster.

Radically reform the way in which small companies are taxed to both simplify current
arrangements and prevent abuse – this would require the income of such companies to
be treated as belonging to their shareholders unless those shareholders are not resident
in the UK, so preventing tax deferral by use of corporate structures.

Fascinating. He regularly rants that Jersey is a nest of vipers for doing exactly this.

Introduce an additional tax charge on investment income above a set limit so that
it is taxed at rates similar to those applied to earned income when national insurance
is taken into account to reduce the incentive to shift income between partners in a
relationship and to create fairness between those living on earned and unearned income,
which does not exist at present.

Oh dear. Seems to have forgotten that national insurance is, well, national insurance. You pay in to get stuff out. Like unemployment pay, pensions, just to give two examples. If you\’re self employed then you pay lower NI…..and you also get a lot less help when the work dries up. If you live on investment income you don\’t pay NI at all. But then nor do you get unemployment pay nor a State pension.

Y\’see, he\’s forgotten that if people pay their insurance premiums then they\’re supposed to get the insurance that premiums buy.

His final lines:

It is not possible at this juncture to quantify precisely the benefit that would result from
this programme of tax reform. It is reasonable to expect the benefit to considerably exceed
£10bn per annum.

Oh aye? Yet another figure plucked entirely from the air then. No doubt by the next report from Mr. Murphy this will have morphed into a fixed and exact figure, for, you see, he\’s a habit of making unsubstantiated assumptions in report n+1 into solid facts in report n+2. By referring back to report n+1 of course. See, there \’s a reference!

Typical Murphy nonsense and sadly the peeps at the TUC are stupid enough not to realise it.

Ritchie\’s report cont.

He\’s not even capable of quoting himself accurately. The new report:

The TUC published its report on tax avoidance in the UK entitled The Missing Billions1 in
February 2008. That report suggested that the UK was losing at least £25bn a year as a result
of tax avoidance activity, £13bn of this resulting from the actions of individuals and £12bn
arising from tax avoidance activity by companies.

No, that\’s not what Ritchie\’s own report said. This is:

If the estimated loss is extrapolated
across all of these 700 companies then the total corporation tax expectation gap
might be some £11.8 billion. This is an increase from £9.2 billion, which was the
estimate made the last time a similar exercise to that undertaken here was completed,
relating to the period to 2004 30.
As a proportion this may be the highest gap of all. Much may be due to legitimate tax
planning, but by no means all is. Some, undoubtedly, is due to tax avoidance.

See what he\’s done there? In the first report he\’s got tax planning (otherwise known as exactly what Parliament intended and wanted companies to do: the R&D tax allowance as an example, the training relief etc.) and tax avoidance mixed in with each other.

In the second report he\’s dropped the \”legitimate tax planning\” and simply stated that all of it is due to tax avoidance.

Come on now, how are we supposed to take seriously someone who cannot even quote his own conclusions accurately?

Ritchie\’s new report

Yes, another one for the TUC.

It\’s a cracker as well. In the opening lines:

This paper does four things.
• It assesses the reforms the UK Government has proposed in that period to tackle
tax avoidance. It estimates that measures undertaken by the Government since Budget
2008 have saved the taxpayer £1bn.

Ooooh, goodie! We like it when the taxpayer saves money. So, what have they done? Reduced spending? Well, no not that. Have they become more productive? Well, no, not that either.

Actually, they\’ve raised more tax money.

Yes, seriously, in Ritchie world, collecting £1 billion more tax is the same as \”saved the taxpayer £1 billion\”. As opposed to the real world meaning of \”cost the taxpayer £1 billion\”.

Higher taxes are, you know, a cost to taxpayers?

Speaking with forked tongue

Today\’s Ritchie installment:

Alistair Darling is under pressure to slap a punitive new income tax rate of up to 70 per cent on top earners in a “tax-the-rich” mini-Budget next week, it emerged last night.

Gosh! But put your mind at rest:

This is nonsense: I am certain there is no such plan at all


But what\’s this?

Well, I rather hope that is what the Treasury is thinking in due course – because much of it comes from the Compass tax report

Ah, yes, that\’s right, the Compass report that insists that we should raise marginal tax rates on the top decile of households to 75%.

So, what we\’ve got is the man who wrote the report calling for 75% marginal tax rates insisting there are no plans or pressures to create marginal tax rates of as high as 70%.

Consistency is so undervalued in today\’s world, don\’t you think?

This is fascinating

Leave aside that it\’s about trucks and look at the general principle:

Simon Nicholls, Mr Denby’s lawyer, said: “There appears to be a lacuna in the regulation. There is a general principle that if there is an ambiguity in the law it should be read in favour of the defendant.”

That\’s the bit that Ritchie wants to overturn with his insistence that any ambiguity in the tax law should be read in favour of the prosecution, HMRC.

He\’s nothing if not ambitious, is he, desiring to overturn one of the basics of Common Law.

Today\’s Ritchie

Certainly a bee in his bonnet.

And all those who support the secrecy these places provide to facilitate this abuse should be ashamed of themselves. By offering your excuses you will, undoubtedly, be causing hardship beyond imagination and death as well.

Which is why I campaign for the abolition of secrecy jurisdictions – the BVI and Cayman included.

Strong words about an organisation using the courts to enforce their legal claim to an unpaid debt really.

In fact, there\’s nothing about secrecy jurisdictions facilitating this at all. Richard Murphy himself, as an individual UK citizen, could use exactly the same prcedure to insist upon payment of a lawful debt in exactly the same way.

Indeed, I think it odds on that in his business career he did so.

The hard right and a secrecy jurisdiction acting in concert: no surprise there.

Secrecy jurisdictions are captured states that are used to promote the hard right.

There will be howls of protest – but let’s be clear.

Err, perhaps howls of laughter at that absurd conjunction. For this is about the Swiss voting to ban the building of new minarets. And I\’m having an extremely hard time thinking up any manner at all in which Swiss bank secrecy makes the population a group of religiously intolerant xenophobes.

I can think of something interesting that could be said about this story:

The 57 per cent approval of the minaret ban

That there\’s a difference between human rights, perhaps liberty, and what we can get the masses to vote for on any particular day or subject. But then, you see, if we admit to that, that the expressed will of the hoi polloi is not to be listened to in some circumstances then we then need a system of deciding when it will and when it won\’t be listened to.

As in, for example:

But she’s wrong about the electorate. Compass did some polling with YouGov on a sample of more than 1,000 people to support this report, which I co-wrote. The polling was pretty emphatic……..The finding to this one was 78% strongly in favour or agreeing;…….Here the finding to this one was 59% strongly in favour or agreeing…….And the finding to this one was 62% favoured the first statement…….

As we\’ve already noted, just because the people will vote for it does not mean that it\’s something we should do. Which is a teensie little problem for Ritchie there who is arguing that we should do it because the public seem to like it.

Richard Murphy bans me from his blog

For a comment to be published I must be satisfied that:

1. It is legal;

2. It is polite;

3. It includes an argument that adds value to readers;

4. It appears factually accurate;

5. That the commentator is genuine;

6. It is not promoting an opinion usually associated with the far right political fringes (for these purposes the UK Independence Party and beyond within the UK domestic environment);

7. It is not posted by a person I consider to be usually associated with the far right of the political spectrum.

That\’s his revised blog comment policy.

It is of course his blog, his property, and he can do as he wishes with it.

But it is indicative of a certain mindset, isn\’t it?

Adding up Ritchie\’s numbers.

Finally, we actually get a reply to the question.

How does Richard Murphy make his sums work about how much revenue will be raised by increasing the tax rate on the top decile of families by 60%?


Good to note you agree the tax could be raised

Your only query seems to be how much tax is raised

Your way of expressing this is to question our assumption on elasticity

For reasons we have given – and which iI have explained here – we think there will be behavioural changes – which may result in more, not less effort

I think there may be a greater demand for work – for example from the second partner in a high earning household that will – in accordance with all observed social behaviour – including the wish to ‘keep up with the Jones’ or to simply pay the mortgage – which is widely ignored in the blackboard economics you favour developed, rather oddly, by economists who have never worked in a market in their lives

That pressure to earn more to cover fixed obligations will, I (we) think counterbalance any tendency to reduce work

Leaving the outcome we predict

And of course we may be wrong

But that’s our prediction

And I stand by it


The effect of any tax change upon revenue is (amongst other thing but these are the two relevant ones) determined by the following.

1) How much people target their post tax earnings as the determinant of how much they work. If people have a number, \”x\”, that they desire, if you tax them more will they go out and work more to get to that post tax \”x\”?

2) How important marginal tax rates are in setting incentives. Do you offer to do more work if the Government is getting 30% of your marginal income or 75% or your marginal income? At what point do you trade more leisure for that decreasing percentage of extra income that you get to keep?

There is really no firm answer to either of these questions. Different people will react differently, the same people will react differently at different times. It is also true that the short term and long term effects are likely to be different. Someone locked into a current spending pattern (say, a particular mortgage, or some number of kids at private school just as examples) may well find that 1) is the appropriate response. However, the same person over time might reorganise life leading to the second effect becoming more important. Trade down the house and take more leisure for example.

(I\’m not sure if I\’ve got this quite right but I refer to those two as the income and substitution effects. Might be me garbling the jargon though….update….and I have, a bit, but not badly enough to affect the argument.)

The nett effect of any tax change is going to be the sum of these two effects.

Richard is assuming in his calculations that the income effect will predominate. That (vastly) higher tax rates will lead to an increase in work and thus an increase in revenue over and above a straight line calculation of that tax change.

That, it has to be said, is an extraordinarily brave assumption to be making. I certainly wouldn\’t want to have to try and defend it. And, sad to say, nor really does Ritchie. He\’s muttered something about the Treasury being allowed to see the sums but not anyone else.

What I do love though is the arrogance of the suggestion that \”blackboard econmoics\” of the type I favour doesn\’t consider such matters.

Gosh, lookee here!

Supply of labour in the short-run: choice for the individual between income and leisure,
including the backward-sloping supply curve.

It\’s part of the A Level economics syllabus. Well, fancy that, I guess \”blackboard economics\” really does ignore such things!

Update: One more thing here. Ritchie is specifically expecting the second part of a household to take up extra work (ie, married women for the most part). But we know that married women are \”more\” sensitive to tax rates than either the single or men. Thus whatever the effects of raising tax rates are generally on either of the two effects, we know that for married women the subsititution effect is stronger than it is for others.

Which really leads us to the conclusion that the specific effect, more married women going out to work as a result of higher tax rates, that Ritchie needs to make his sums balance just ain\’t gonna be there.

Most, most amusing

We\’ve just had Ritchie telling us all that raising the marginal tax rate on top decile of households to 75% will bring in untold billions. That an average tax rate of 55% on such households won\’t either change behaviour (ie, trade income for leisure) nor prompt any to bugger off and leave Darling grasping at thin air rather than the expected wallets full of dosh.

One point he makes in his report is:

Of course the right will argue that higher taxes
will just lead to higher rates of avoidance or the
flight of talent. Research by theWork Foundation
busts the latter myth.60

And that research looks at how international the market for high earners is. Not, you might note, at how many Brits (like myself for example) work outside the UK and are thus not subject to the tax regime (except for certain taxes from income arising in the UK). Rather, at how many foreigners there are working in the FTSE 350 companies. Or at the top of them.

And they find that 86% are Brits. Thus, they conclude, there isn\’t an international market and thus lots of rich bastards will not run away with their money.

Now that\’s a pretty weak basis upon which to \”bust a myth\” especially as we get this information from Jeff Randall today:

More than 40 per cent of London\’s FTSE 100 companies are led by executives from beyond our borders. Just as Arsenal, Liverpool and Chelsea have foreign managers, so too do Lloyds Banking Group (an American), Rexam (a Frenchman) and Vodafone (an Italian). Burberry, which promotes itself as an icon of British fashion, is run by a woman from New Palestine, Indiana.

Now of course, just as the original study relies on looking at who is here rather than how many of us are elsewhere, so does this. But if evidence of few foreigners here is evidence of there not being an international market for talent then we do have to insist upon the reverse: lots of foreigners here is evidence of there being an international market for talent.

And thus is the myth busting busted.

We may well be able to find other evidence elsewhere that there is no great market for British talent overseas (and Randall himself hints at it). But we cannot rely upon that Work Foundation report, can we?

Today\’s Ritchie

Ritchie responds to the criticism of his assumption that a 60% rise in average tax rates will have no impact upon behaviour.


Here\’s the comment I left there:

So, what you\’re saying, in formal terms, is that moving the average tax rate up by 60% (from 34% to 55% as you describe it at one point) will have no effect upon the following equation:

C = w (T – l)

Which is an extremely brave assumption to make and one that would require, before it being accepted as true, a certain amount of empirical research. You are, in effect, stating that no one would subsitute leisure for market income with such a tax change and that everyone has a fixed desired income which they will work to fulfil.

Yet you do seem to miss the logical implication of that latter part. If it is true that we all have some fixed income that we work to fulfil (or that this top decile do) then your tax changes will increase tax revenue over and above static changes. For as post tax incomes will be lower people will work more to get to their desired post tax income.

And as you\’ve not included such a tax rise as a result of your impression of the income effect we have to conclude that you don\’t actually believe this point either.

But as to the major point. Don\’t you think it might be a good idea to base our estimates of the revenue to be had from tax changes on the empirical research of the past couple of centuries rather than the societal impressions of a retired accountant?

OK, Compass roundup

So, Compass insist (it\’s really Richard Murphy, again) that we can raise taxes on the rich and everything will be just hunky dory. There are a few leetle problems with their assumptions though, it should be said.

There are strong grounds for
supporting reasonable proposals to limit the
capacity of corporations to avoid tax by moving
their tax base to national regimes with lower
corporate taxation rates. This would require
international co-operation, probably initially at
an EU level.

Well, there\’s ambition for you. They want to tear up one of the defining characteristics of the European Union. The free movement of labour, goods and capital across the 27 countries. Good luck renegotiating the Treaty of Rome guys.

On a financial transactions tax.

London’s $2–3 trillion a day in transactions is
speculative, the effective tax rate increases
substantially for repetitive transactions, thus
reducing the incentive for speculators to trade
and so reducing price volatility. At times of significant
price change in the market, the effective tax
rate rises, thus dampening speculation and acting
as a disincentive to the herd instinct.68

Yes, they believe that speculation increases price volatility: when every fule kno that it dampens it.

There are, however, other forms of FTT. A tax
could be imposed on all debits – that is payments
– in bank accounts. The rate might be very low –
say, 0.1%. The GDP in the UK is at present
approximately £1.4 trillion per annum. To
achieve this level of national income, several
times this volume of debits is required in bank
accounts (for example, wages paid are a debit, and
when those who receive them spend that cash
they are a further debit). Speculative activity also
creates substantial cash movement for little
income generated. If it is supposed that debits run
at three times the level of GDP, a tax at 0.1%
would raise £4.2 billion, costing the average
household less than £20 a year, far less than most
households pay in bank charges.

You recall how the financial crisis was brought on by people taking their money out of ATMs, tenner by tenner do you? No, me neither, but that\’s what they\’ve decided they\’d like to tax.

The simplest reform would be the
most effective: all UK passport holders should
pay UK tax on all their worldwide income
whether or not they are in the UK.

Congratulations, you\’ve now become a slave of the State. Whatever you do, wherever you go, you\’ve got to pay Alistair Darling. This is to move to the US basis of personal taxation and it does seem perverse to pick up on the very worst part of their system (so bad that they\’re the only country that does it) as the one thing you\’d like to copy.

I also have a feeling that this would fall foul of EU rules: you\’re not allowed to discriminate between different national origins. But if a Latvian (or Frenchman) working in Latvia pays 20% flat tax (or whatever their rate is) and an Englishman working in Latvia has to pay 40%, that looks like discrimination to me.

But finally, here\’s the great guffaw.

They intend to raise the average tax rate (that is, the percentage of total income paid in taxes….this is not the marginal rate) for the top 10% of households from around 34% to 55%. That\’s an over 60% rise in taxation on this group of 2.3 or so million households.

We also see marginal tax rates rise substantially (as of course they would have to). I can see something over 70% easily: top rate of 50%, two sets of NI adding something like 23/25 % (for they will lift the NI cap).

In fact, with their \”minimum tax rates\” of 40% at £100,000 and 50% at £150,000 (ie, withdrawal of personal allowances and of perhaps even the lower rate allowance) we might well have bands where marginal tax rates are above 100%.

Now, we might think that there could be some changes in behaviour over such changes in rates. You know, this Laffer Curve thing: yes children, it really is true, the Laffer Curve exists. The argument is not over whether but at what rate we move from maximising tax income to diminishing it by raising the rate further. That\’s an empirical matter of course but recent rough estimates would put it in the 40-50% rate area (note, for marginal tax rates, not average). So what do our brave boys and girls think of this, the possibility that their tax rises would lower revenue rather than increase it?

Our view on avoidance is
that if the top rate is increased while at the same
time reforms are made to the tax system,
minimising avoidance and evasion, the taxable
income elasticity is likely to be small, if not zero.

Correct, they simply claim that it won\’t happen. That no one will trade leisure for lower income. That hoicking tax rates by 60% will not change work patterns at all.


Today\’s Ritchie

The requirement is clear: that we dedicate our work as Christians to Christ – not the making of money. Thsi puts all Christian teaching at odds with neo-liberalism, per se

And those who have skills must use them in pursuit of the creation of Chsritian ideals – including relief of poverty


Let\’s agree, for the moment, with Ritchie\’s oft stated contention that the last 30 years have seen the rise of this \”neo-liberalism\” stuff.

OK, so what else has been happening in the past 30 years? The largest reduction in poverty that our species has ever seen. Hundreds of millions, if not billions, rising up out of the destitution of peasant agriculture into a middle class lifestyle.

To thus claim that neo-liberalism is incompatible with the Christian injunction to reduce poverty is thus, umm, well, odd….or should we perhaps go a little stronger and say barking lunacy?

Today\’s Ritchie

I\’d forgotten he was a Godbotherer.

And it also quite contrary to the message of Luke’s gospel. In Luke 4, starting at verse 18 Jesus says:

The Spirit of the Lord is upon me, because he has anointed me to bring good news to the poor. He has sent me to proclaim release to the captives and recovery of sight to the blind, to let the oppressed go free, to proclaim the year of the Lord’s favour.

This is the clearest statement of Christian duty there is. Support for progressive taxation fulfils that duty.

How easy it now is to be a Christian! As long as you support the taxation of the rich bastards you\’re done!

Tax and developing countries

Ritchie has a bleat about how taxes don\’t seem to be capturing much more money in developing countries.

The reason is that import duties have been lowered (much the easiest tax to collect but they do horribly hamper trade), corporate taxation levels are being competed away and so the tax load has to go onto personal and consumption taxes like VAT.

OK, so why has this move been made? Well, it appears that it is this sort of tax system which actually builds a functioning society:

In colonial Nigeria in the last years of the 19th century, a strange quirk of history led the British rulers to draw an arbitrary boundary line along the 7?10? N line of latitude, separating the population into two separate administrative districts.

Below the line, the colonial government raised money by levying taxes on imported alcohol and other goods that came through Southern Protectorate’s sea ports. Above the line, the administrators of the landlocked Northern Protectorate had no sea ports, and instead raised money through direct taxes. In the areas near the border, this took the form of a simple poll tax, where tax officials collected from each citizen the equivalent of between $4 and $20 in today’s dollars.

Could this seemingly minor difference—created over a century ago by a long-defunct colonial administration, and long ago erased by subsequent administrative divisions—possibly still matter today?

Yes, it could, according to Daniel Berger, a PhD student in politics at NYU. Berger’s paper, Taxes, Institutions and Local Governance: Evidence from a Natural Experiment in Colonial Nigeria, finds that the “simple act of having to collect taxes caused governments to be forced to build the capacity which can now provide basic government services.” As a result, governance today is “significantly better” in areas just above the line than in those just below it.

If people actually see and feel the taxes they have to pay then they\’ll demand that they be better spent perhaps?

As ever it appears that we all want the same thing: better governance in these nations and thus more economic growth in this instance. However, Ritchie is, as ever, arguing for the counter-productive policy, the one which will not improve governance and thus will not improve economic growth.

Plus ca change.

Today\’s Ritchie

This is simply gorgeous from Mr. Murphy.

Your comments on markets shows just how naive the whole basis of your thinking is

Get over first year undergraduate economics

There are no supply and demand curves

Firstly – they don;t slope consistently, if they exist

Second – advertising, monopoly power and externalities destroys them for most commodities

Third, you assume the existence of homo economicus – which is sweet but utterly ridiculous of you – maximisers aren’t out there – so the market you think exists is simply a fiction

I could go on, and on

I don’t need to – all you prove by your comments is that all you and your like say is based on a profound fallacy – and therefore irrelevant.

In one fell swoop, centuries of economics is overturned by our hero!

Markets don\’t exist nor do supply and or demand curves!

Is there nothing this man doesn\’t know?

I think in fact that he\’s heard some scraps of this or that and then leapt to these truly insane conclusions. For example, of course supply and demand curves don\’t slope consistently. No one has ever tried to say that they do: consider the demand curve for water. At the level of a litre or so a day we\’ll pay damn near anything for it. At the level of millions of litres pouring through the front door it inverts as we\’ll pay people to pump it out of the front room for us.

It would be a very strange economics indeed which didn\’t recognise this sort of thing: and of course economics does indeed recognise it. That the curves change shape at different points, even that they have inflection points, doesn\’t mean that they don\’t exist or that they can\’t be useful at times.

He might also be thinking of the fact that the curves are not continuous (rather than consistent) and that they are discrete. This does complicate matters it is true, but doesn\’t obviate them.

You can fill in the rest for yourselves really: advertising for example doesn\’t destroy demand curves, although it might change them (indeed, the point of it is to shift them….meaning that the existence of advertising rather proves the existence of demand curves which is something of a blow to Murphy\’s thesis).

The very description of monopoly power rests on the way in which the monopolist faces a different supply curve than firms in a competitive market which again is something of a blow to the idea that the existence of monopoly power disproves the existence of supply curves.

Etc, etc and so forth.

Ritchieism of the day

Sorry – but until we get rid of consumerism this just won’t happen

When Cameron calls for a serious tax on advertising, the end of tax relief on advertising and restrictions on the power of the media to limit such absurd publications as the FT’s How to Spend It you’re just living in cloud cuckoo land.

Now he wants to end free speech as well?