Ragging on Ritchie

In this case, Bush fails to explain what economists call Baumol’s cost disease. This explains why services such as healthcare, education, social care and the arts tend to become more expensive over time, even when their productivity does not improve. The reason should be obvious, but like many things that should be, it is hiding in plain sight.

The reality the so-called disease highlights is that, over time, the manufacturing sector in an economy can become more productive because technology lets each worker produce more. Wages can therefore rise without prices rising by the same amount. So far, so good.

The problem is that many services cannot increase productivity so easily. A teacher still needs time to teach a class, a carer needs time to care, and a string quartet still needs four musicians and almost exactly the same time to perform, or the result might be truly terrible. But, and this is the crucial point, if we still want those services, the workers engaged in them must nevertheless receive wages comparable with those available elsewhere, or they will leave. The cost of providing their services does, therefore, inevitably rise even though their output per hour has changed little.

The crucial point is that in this case rising costs do not necessarily indicate inefficiency. They may instead reflect the inherently labour-intensive nature of valuable services.

Yes, very good. But it works through wages rising. And as Spud tells us all the time wages have not been rising. Therefore Baumol doesn’t apply.

There is also only one known solution, as it is clear that the private sector will not create the number of jobs required to engage younger people in the UK in work, and that is for the government to take on that job instead.

Hire more Lanyards. That’ll do it.

The mising ingredient

Cheap I know, and also very cheap, given my spelling.

But a little known fact. Spell checkers do not work in the headline space of near all content management systems. Just one of those things.

Infographic: Why do we need economic growth

No, really, we have. We’ve promised ourselves £250k each of end of life healthcare. £250k each as a pension for our old age. That half a million is predicated uipon the idea that the economy will continue to grow at previous rates – 2 and 3% real pa.

If we don;t have growth we cannot have what we’ve already promised ourselves.

Shrug.

One response to that came from someone called Lucy Johnstone, who, with John Cromby, has contributed to the debate on this issue through the site ⁠Mad in the UK. They have questioned the way in which autism and ADHD are understood, diagnosed and discussed, and have explicitly located the rise of the neurodiversity movement within the context of neoliberal capitalism. They suggest that the rapid growth in autism and ADHD diagnoses can, at least in part, be understood as a consequence of neoliberalism, while neurodivergence itself has, in their opinion, subsequently been commodified and marketed, making it in part a neoliberal construct.

We’ll find out the neoliberals are responsible for dicksoftening in men rich in maturity next.

No, Spud hasn’t grasped banking after all:

The answer is – as you imply, – depositors are a cheap form of capital – in fact, cheaper than anyone else – and deposits are capital to a bank – money they can lose if they go bust.

I know some resist that claim, so I did not put it in the infographic, but deposits are credits on the balance sheet, and so is capital. They have different regulatory roles, but look at the big picture, and they are now much the same; except deposits are cheaper.

Sigh.

I know what the regulation says.

But as an accountant, I am interested in economic substance. Viewed in that way, if the purpose of deposits is to supply liquidity, they are just another source of capital.

No, really.

Finally Spud grasps the role of deposits in banking. They finance the loan book.

This has taken how many years to beat into him?

Of course, he still wants to deny it – because he wants to be able to say that cash savings have no value therefore he can spend them all instead – but it is in there all the same. Deposits finance the loan book.

Spud explains bank interest without delving into why banks pay interest on deposits.

Seems a bit of a gap there.

In this episode of Understanding Economics, I explain why microeconomics needs to look beyond markets. It should ask how society allocates resources, who has power, who bears the costs, who receives the benefits, and how we can organise the economy so that everyone has the opportunity to live well and thrive.

No one says markets do these things perfectly. All of the discussion is when do they work better than alternatives, when do they not?

The answer being more often than most think.

What’s going on? It’s too early to tell. But evidence is mounting that artificial intelligence is playing a role.

New research by economists at Morgan Stanley shows that the rate of unemployment is half a percentage point higher than it would otherwise be in occupations significantly exposed to AI, which they put at about 30% of all employment. The effect is even more dramatic among younger people.

Workers in these exposed occupations are also finding it more difficult to transition from unemployment back into employment than workers in less exposed occupations, leading to longer spells of joblessness.

And according to research by the economists Sania Edlich and Apollo Global Management’s Torsten Slok, wage growth in jobs exposed to AI has contracted by 6.7% since 2023. This slowdown in wage growth has already resulted in at least $28bn in losses for 5.8 million affected workers.
….
Even if AI begins to generate the productivity bonanza its advocates predict – but that it hasn’t yet – there’s no reason to assume US workers will see any of the benefits in their paychecks.

Sigh. That hiring is slowing – that employers can produce while bringing in less labour – is, definitionally, proof that productivity is rising. Further, and again by definition, average wages in an economy are determined by average productivity in that economy.

Sigh.

So, let’s be clear: almost everything said about the wealthy and their willingness to flee from tax is total nonsense. Might we, therefore, politely ignore them in the future?

If that’s true then why does absolutely every proposal for a wealth tax come with an inbuilt exit tax?

Housing

Housing costs are one of the biggest pressures on household budgets.

Questions:

Why are house prices and rents still rising faster than many people’s incomes?

House prices are falling as a multiple of median wages. This is a number ONS publishes, should be possible for even Spud to look this up.

Rents are going up because the insane have been reducing the amount of rental housing available by changing contractual terms for rental housing.

What will your government do to make housing genuinely affordable rather than simply increasing supply?

Like more houses won’t mean lower house prices?

Britain continues to have some of the highest electricity prices in Europe despite generating increasing amounts of renewable energy.

Questions:

Why are British consumers still paying such high electricity prices?

It’s not despite, it’s because.

How will you reform the electricity market so that cheaper renewable power permanently reduces household bills?

It’s not cheaper once you add in the subsidies and the grid costs, that’s why.

What are you going to do to reduce long-term energy costs rather than offering temporary subsidies?

Nuclear maybe?

Childcare

Many parents find childcare costs make working financially difficult.

Questions:

Why has childcare become so expensive?

We’re a rich country. Therefore wages are high. That’s definitional, high wages, rich country, they mean the same thing. Thus services which are primarily human labour cost a lot. Baumol had things to say about this. It’s the same reason the NHS *needs* that 4% real budget increase each year.

Etc, etc……

The total loss is now thought to amount to more than 500,000 people.

Many more have been wounded, some with lifetime disabilities, of course.

The situation is now so desperate that Russia is paying recruits the equivalent of around £40,000 to sign up to fight.

Despite that, as the FT notes, it is still struggling to secure the recruits it needs.

That is not surprising; actual war is a deadly business, and the one with Ukraine especially so, particularly on the Russian side.

With that many losses, there can be almost no one in Russia who does not know someone, or the family of someone, who has died.

And the net gains are negligible. The lesson from all this is that Putin’s war is an exercise in vain folly pursued at cost to the people of Russia.

And despite this, we in the so-called West are told that Russia is the great threat that requires us to increase our defence spending considerably, although on what we do not know, except that this must come at the cost of sacrificing support to many of the most vulnerable people in the UK.

That there’s a fascist bastard out there willing to take 500k casualties is good reason to reduce our own defence spending.

So why are we going to spend so much on armaments for no good reason? And who is going to talk about what we might really need to do, and why, including how we can help people in need, except by spending fortunes to get them up to go to war?

THERE is a question that is often asked in the USA but rarely mentioned in Scotland – “What are your priors?” A person’s “priors” are the belief system that supports all the judgements they make on any issue.

That makes this question particularly relevant in politics. It also matters when you write a column for a newspaper, but I will return to that later.
I regret the absence of this direct questioning in this country, because its purpose is to ask anyone presenting an apparently unsubstantiated claim just what assumptions they are making that support the beliefs that they are claiming to hold.

If you ask Spud that you get told that your time here is up.

The thing about all this, which I am sure that others know all too well, but which I am now experiencing on a personal basis for the first time, rather than as an observer, is that urgent does, in the case of the NHS, have a very different meaning to that which it has in any other context. It implies a need for speed and conveys a sense of stress, neither of which is reflected in the actions taken.

What I am also discovering is that the NHS is excellent at sending information without explanation, whilst providing no opportunity to ask the most basic questions to secure understanding.

But of course that is not what Spud will conclude now, is it?

It would be all too possible in this circumstance to blame the NHS and state care, but I am not persuaded that that is appropriate. I think the depersonalisation of what is described as care, but which should properly be described as process, is deliberate and is a consequence of the medical-industrial complex.

Nope, he ain’t, is he?

The reality is that, at present, UK pension funds enjoy overall tax relief worth more than £70 billion a year, making the cost of this subsidy one of the government’s largest expenditures in any year,

People saving for their pensions gain a tax deferral. The pension funds don’t gain that tax benefit. The savers do.

As tellingly, the framing around support for Israel is significant: this reveals the real issue in US politics, which is whether the US should be a sovereign state, or one run for rhe the benefit of Benjamin Netanyahu’s factions in Israel.

Spud’s never less than fashionable now, is he?

Restore Britain scarcely acknowledges that history. Instead, it assumes that Britain’s current problems arise because government has become too large. That is the central proposition on which everything else in the paper depends. Cut spending. Cut taxes. Reduce regulation. Withdraw the state. And, it claims, prosperity will follow. That is an extraordinarily simple view of how an economy works.

Works for me.

Our YouTube traffic in July was only around 1.1 million views, when at present something closer to 2 million is more commonplace,

A quick look at ad rates for creators says $1 to $5 per 000. It would surprise if Spud were at the top end of that.

£1500 a month income?
£3,000? Out of which he’s got to pay the staff?

The aim of the day is not to deliver a series of lectures, but to offer an opportunity for discussion, chaired by John Christensen, with me introducing each theme. Each session will then be open to Q&A, discussion, and a focus on finding solutions to the problems our economy and society face.

Discussion, eh?

This meeting is not about defining the issues, as the meeting we held in Cambridge earlier this year was.

How Trotskyist. Anyone who ever did student politics knows this one. No, sorry, we cannot discuss this issue, that was at the last meeting….