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Ragging on Ritchie

The bit that Spud misses

In contrast to economists from Adam Smith and Karl Marx through John Maynard Keynes, Friedrich Hayek, and even Milton Friedman, [current economists] have largely stopped thinking about ethics and about what constitutes human well-being.

Well, OK. So let’s go back to Smith, Hayek and Friedman, those economists who thought abuot ethics and what constitutes human well-being then.

Smurf in a nutshell

We really do need to put an end to the economic narratives that are proving to be so destructive and to replace them with narratives intended to reinforce the meeting of need.

If we just change the stories then we can change reality.

Honesty at last

Let me, however, step back from personalities on this and instead suggest what the real conflict between those proposing MMT and other schools of thought is all about.

The real issue is one of political economy, and not economics.

“That means I get to ignore economics and talk about politics instead.”

Ahaha, aha, ahahahahaha

Then he claimed MMT says a government can default on its debts, print some more money and carry on as before. This suggests Mark has never easy anything written about MMT. Anyone who is serious about it has never said such a thing, although no doubt some uninformed enthusiast on the web has. Mark should really be able to tell the difference, and not make such an absurd claim. It’s is unbecoming of a person with some stature to make claims that are very obviously untrue about an opponent’s arguments. Why is it that he and others think it acceptable to do so about MMT?

Like, umm, folk who claim that everyone tries to maximise their cash income? Then gets all pissy when it’s pointed out that it’s utility which is maximised? To the extent of calling the correction an ad hominem?

And, umm, this is even better:

Like many, I was confused by Will Hutton’s arguments in The Observer today, in which he argued that Rachael Reeves has given Britain “the plan for economic lift off”. Unsurprisingly, I disagree with him.

Let me summarise my argument at the outset. I think Will Hutton is looking for a job.

Disappointed?

There is only one problem. There is no such book. I cancelled the contract to write it in 2022 when I had long Covid and had no energy to work on it over very many months. Once I got better I decided not to revive the project because there was by then too much else to do in catching up with time lost. So, this book does not exist. I have told Amazon and Wiley. Meanwhile, please do not try to buy it. You will be very disappointed if you do.

Dunno really, a book not written by Spud sounds quite enticing.

Man’s an abject buffoon

The Guardian reports this morning that:

Overall, during the year [2022-23] 12 million people were in absolute poverty [in the UK] – equivalent to 18% of the population, including 3.6 million children – levels of hardship last seen in 2011-12 after the financial crash.

Growth will not solve this. We know that wealth never has and never will trickle down.

Sigh.

Ignorant, ignorant, twat.

Ho Yus

Now, once wages have caught up this inflationary episode will be over, having passed quite quickly, as almost all such periods in the UK have always done without requiring intervention from anyone to make that happen.

Inflation arrives, goes away again and it’s all entirely out of our hands.

No one has ever reformed the supply side. No one has ever applied fiscal policy to either juice or reduce demand. And absolutely no one at all has ever changed interest rates.

Because The Spud has spoken, inflation just naturally goes away.

Bold claim

But there is a point to be made nonetheless. Japan could not induce inflation through decades of loose monetary policy. It did not work. The Bank of England did not beat inflation with a tight monetary policy. It did not work.

Monetary policy is not a mechanism to control inflation is the obvious conclusion.

I hate to point out the obvious, but someone has to do it.

Idiot claim, but bold one.

The price of money has no influence upon the price of money?

Ignorance, all is ignorance

We need an economics that prioritises the needs of people

Sigh. Economics is a toolkit. It doesn’t say what you should do – it is not normative, it is positive.

You can bring any set of desires you wish to economics. All it will then say is yes, that’s possible, no that’s not. Here are the trade offs, you can have this and this, but that combination isn’t one of the things you can gain in this universe. You can even say “Here’s the end goal I wish to reach” and economics will help you think through how to get there.

But there is no “economics that prioritises the needs of the people” there’s just economics. In this sense it’s like physics, or mathematics. The pr4ioritisation comes before the economics, in the setting of the task or expression of the desire, not in the economics itself.

Of course, what Smurf really means is that he desires an economics that doesn’t reveal the contradictions and impossibilities in his own thinking. But that’s another matter of course.

Not historically accurate, no

What is the point of power if it is not to help the most vulnerable and least well off, which there is no sign that Labour will do?

Power has been, historically, sought after and acquired for one of two reasons.

1) To live high on the hog.

2) To have power over others.

It has always been vastly, vastly, better to be ruled by the first set of greedy bastards than by those who enjoy the actual process of power itself.

Snigger

I gather that the article is here, but I would not bother reading it because the above summary reveals just how wrong Policy Exchange is and these authors are.

First, savings do not fund investment. The UK has £8,100 billion of financial wealth according to the Office for National Statistics: vastly more cash is available from savings than might ever be needed to fund investment and that investment is not happening because that is not the use now made of savings. They are almost all used for speculative purposes, those saved with the government excepted.

Second, investment is actually almost invariably funded by credit, and that is created out of thin air by banks. Policy Exchange reveals that it does not know how the economy works.

Odd that an accountant seems not to have heard of equity as a component in investing.

Nor, obviously, that net new investment is going to be net new saving, not the current stock of saving? For it that were not true, then where would all the results of the investing of the past be if not in the stock of saving/investment?

I might have said this you know

Professor Joseph Stiglitz: Debt does matter, both economically, and, perhaps even more, politically. Let me first try toexplain MMT, the modern monetary theory, which has argued that it does not matter at all. I also want to make it clearthat the view held by many people, that it is the most important thing, is wrong. I am not at all worried about the level ofdebt in the United States. So the view that we face an existential crisis because of the debt is wrong, but the other view, that we do not have to think about it, is also wrong.

The origin of the view that it does not matter at all goes back to the 2008 financial crisis, where we expanded the basemoney supply enormously—by fivefold in the US and Europe—and there was no inflation. That led people to believe that you could increase the money supply enormously without any inflationary consequences. There was no inflation, because the money went from the Government into the banks’ coffers and they did not lend it, so it did not have any inflationaryeffect, but it did not have any benefit either.

If that money had gone into the banks, the banks had lent it, and the people to whom it had been lent had spent it, wewould have had enormous inflation, but we would not have needed to increase the money supply that much. We kept doing it, because we hoped that increasing the money supply would stimulate the economy, but it had a very weak effect.That is the fallacy in MMT: if you increase the money supply and nobody spends the money, it does not cause a problem, but it does not solve a problem, either.

That’s Joe Stiglitz, Nobel Laureate.

No, he is not saying it because I did, not did I because he, both because that’s actually correct. As everyone was in fact saying back then.

Here in a retired acciountant from Wandsworth on the subject:

So we have to conclude that Stiglitz did this deliberately. I stress, that I really would not mind if Joe Stiglitz had offered an honest critique of MMT to this committee. He is, of course, entitled to do so. Economics is full of disagreements. But he did nothing of the sort. He did three things.

First he revealed his ignorance, not just of MMT, but also of banking, the role of the national debt, and the fact that there is such a thing as double entry so that when discussing that issue we also have to consider the preferences of those who own wealth and their desire for safe places to save.

Second, he misrepresented the truth, and I am really not sure that this is what anyone should do before a parliamentary committee.

Third, as a consequence, he might have served his purpose but he made himself look stupid in the process. He might, like many economists, think that a worthwhile thing to do, but I would have thought that he had by now reached a sufficient stage of maturity to get over playing such silly games.

Who to believe, eh, who to believe?

Eh?

So, for example, the price that we pay for much of the software that we use represents a rent. Now that annual charging is commonplace the pretence that it is otherwise has been abandoned. Nothing about the pricing of these products accords with standard microeconomic theory on pricing: it is simply maximised in the interests of the greed of both the senior management of the enterprises involved, and their owners.

In what way does Microsoft 365 violate microeconomic principles of pricing?

It is the extraction of rents that is doing four things in our economy.

Third, it is destroying innovation of any sort, as the intention of the rentier is to protect what they have, not to create something new.

Whut? The last few decades have seen the internet, the web, mobile phones, smartphones, earch and email. We’re on hte cusp pof whatever it is that AI might bring us. And the fool says that innovation is being destroyed?

How does Spud remember how to breathe?

We are going to be so lucky

The new book from Smurf:

In that case, let me start with some suggestions as to the arguments that are wrong. There could be a long list of these. I am not convinced that will help anyone, so I am working on the idea of there being just three that I wish to tackle.

When it comes to microeconomics my bête noire is that markets deliver optimal outcomes for society and that, as a result, government interference must be minimised at all times.

On macroeconomics, the argument needing to be addressed might be the household analogy, which is the mechanism used to ensure that impoverished microeconomic thinking dominates macroeconomic analysis as well, wholly inappropriately.

Then there is the question of human motivation, the understanding of which is necessary if we are to suggest how the economy should work. The current assumption that pervades society is that greed ultimately motivates all human actions. I disagree.

One and three are wrong, not believed by any economist. That is, what Smurf believes economists believe is not what they do. On two the household analogy doesn;t lead to micro- impositions on macro-. So that’s wrong too.

Gonna be a joy this next one, no?

The last line is missing here

My suggestion is a simpler one. If you really think that being Chancellor is going to be so difficult that you have to talk about it all the time then you’re not up to the job .

No one pretends that such a role is ever going to be easy. In that case what it requires is that the person willing to undertake it have the confidence to take on the task.

I’m not asking for the self-confidence that tips into arrogant foolishness. We all know the risks in that.

Instead, what is required is that quiet self-confidence that competence delivers.

Rachel Reeves clearly thinks she lacks that because of her perpetual references to the difficulty of the task. It really does make me wonder whether she is fit to undertake it.

And therefore arise Lord Smurf, the peer to save us in our hour of need…..

Possibly…..

What I will note is that this is happening at the same time as the Tory establishment is very obviously collapsing. So too, though, is Labour which has abandoned everything it seems to stand for, leaving the much of England, at least, without any realistic left-of-centre option available in elections at present.

….England doesn’t desire a centre left option?

I mean, could be. Politicians follow what they think will get them elected and perhaps it really is true that the English – as opposed to the Celts – are further to the right than the current left of centre?

Whoo, Boy

There is a cost to this. If the government borrows less, someone else has to borrow more: that’s the way in which any economy works if new money (all of which is debt-based) is to be created, which is the actual rule that cannot be broken because, unlike so-called fiscal rules, it is based on facts.

This from the bloke who repeatedly claims that QT destroys money. Even, the bloke who opposes QT because it destroys money.

And if QT is happening – it is – and money is being destroyed – it is – gthen we don’t have a problem about how is going to borrow in order to create new money, do we?

Impressive

What Sunak and his far-right allies want to create with their pernicious rhetoric of unity, to which Labour subscribes, is a feeling of inclusion for some in a group from which others are most definitely excluded.

Unity’s Bad, M’Kay?

But perhaps most of all there is the realisation that the need for a new, unifying, narrative within politics is very high.

Unity’s Good, M’Kay?

After that there is my belief that any such narrative has to simultaneously accept the imperative of collective co-existence and the innate requirement that this be fair whilst at the same time recognising that the differences between us have to be accepted and even celebrated because they are what make us unique so that we can stand out in a world where our obvious need for company and mutuality is ever-present.

A wise person once summarised this as loving our neighbours as ourselves, but I am going further than that.

Aren’t we the lucky ones to be treated to the Fifth Gospel?