Monday, 24 July 2017

Economic myths: "Does supply create its own demand?"

Interesting article at The Daily Signal covers the main points.

It appears - as always - that people's political viewpoint colours their interpretation of economics. Instead of answering the actual question, it drifts off into "How should a government respond to a recession?"

The right-wingers are supply siders, they say that the best way to stimulate the economy is tax cuts; the left-wingers are Keynesians and say that the best way to stimulate the economy is deficit spending (quite on what is not clear). Really, those are two ends of a spectrum - tax cuts (if you're not already in the wrong side of the Laffer Curve) implies deficit spending just as much as, er, deficit spending. Unless core government spending is reduced during a recession, which most would agree is a bad idea. The Tories talk a good game on austerity, but they are actually running massive deficits in supposedly better times, which even Keynes said was a bad idea.

In normal times, of course supply creates demand. Not necessarily for the product itself but for other things. With electricity, there is a nice feed back loop. Electricity was just something scientists stumbled across in the lab; having discovered it, people worked out what it could be used for (electric lighting and radios). So we have demand for light bulbs and radios. The more light bulbs and radios people use, the more electricity is produced and the more the National Grid is extended etc. Meaning that more people can buy light bulbs and radios, etc.

As to the proposed government responses to recessions, both are wrong, as they don't address why we have recessions in the first place. The reason is that when the land-price/credit bubble pops after eighteen or so years, banks try and claw back as much of their loans as possible. They can't speed up the rate at which people can pay off mortgages on land, so they call in loans from - and reduce lending to - the productive economy instead (be that loans to businesses or consumer credit loans). That has knock-on effects which no amount of tax cuts or deficit spending can prevent.

Saturday, 22 July 2017

"Michael Gove: newly green or still mean?"

Labour Land Campaign press release:

The Labour Land Campaign (LLC) has long called for a fundamental shift in what is taxed by replacing taxes on wages and productivity that depress the economy with an economically neutral Land Value Tax (LVT) on the unearned income that big landowners collect. Chair of LLC, Anthony Molloy is sceptical that when Michael Gove [1] calls for “a Green Brexit”, saying that “farmers must prove they deserve future subsidies after the UK leaves the European Union”, it means he understands how the £3 billion handed out every year in Common Agricultural Policy (CAP) subsidies benefits rich landowners to the detriment of small farmers, especially those on rented land. More likely, this is merely greenwash to disguise the fact that these much-resented, highly counter-productive hand-outs to the very wealthy are to be maintained in a post-CAP Britain.

The top 100 recipients of Single Payments [2] (the subsidy you get for simply owning the land which accounts for nearly three quarters of all CAP payments) receive more than the bottom 55,000 put together and include four offshore companies, 16 individuals on the Sunday Times Rich List, at least 20 aristocratic estates, Conservative MP Richard Drax [3], numerous donors to the Conservative Party and a Saudi prince.

LLC research has shown how such subsidies actually increase the value and therefore the price of land. Even the EU has long recognised that CAP subsidies soon capitalise into land value, raising rents for tenant farmers and making farmland more expensive to buy for young would-be farmers. Thus, some of the richest people in the country get the triple benefit of a hand-out on top of increased rents and rising asset value at the expense, not only of the taxpayer but also of those trying to make a living from farming.

Anthony Molloy went on to say “I hope the Secretary of State for Environment, Food and Rural Affairs has realised that not only should farming subsidies be earned but also that they should be designed to benefit farming and not be a hand-out to the wealthiest owners of farm land. LVT is a tool for ensuring all land is used efficiently and sparingly and if Michael Gove is serious about protecting the environment and enhancing rural life, then LVT will do just that. With LVT, farmers will only farm the land they need and will release the rest for new entrant farmers; and if land is unproductive, then it can be recovered for wildlife.”

Both rural and urban land should be used for homes, businesses, food production and recreation rather than as an investment by individuals and corporations. Real investment in public services and productive businesses—paid for by all of us as taxpayers, consumers and entrepreneurs—is what should generate land value. Not hand-outs.

[1] Is this Michael Gove the same one who, talking about greenfield sites in 2013, was “delighted by the release of more land for housing”. And is this Michael Gove promising to maintain welfare payments for the very rich the same one who, in the same speech, welcomed his government’s slashing of welfare payments for the poor: “Instead of incentives for idleness and a culture of dependency, there are powerful incentives to work.”

[2] Greenpeace Energydesk

[3] Another harsh critic of some types of welfare hand-out (talking about capping overall payments): “Many argue that the cap is far too high and, judging from the above figures, they have a good point”.

Friday, 21 July 2017

My niggles with the film "Wonder Woman"

I tagged along with my family to see Wonder Woman recently. I don't mind the premise of a film being complete nonsense as long as the film itself is internally consistent. This one wasn't, not by a long chalk.

The film is based on Greek myths:
1. They explain that Zeus created mankind in his own image. My daughter reliably informs me that in Greek myth, a Titan called Prometheus created mankind.
2. Wonder Woman is the daughter of an Amazon. She is called Diana. Diana was the Roman goddess of hunting, the Greek equivalent was Artemis. Even I knew that.
3. The mythological Amazons removed their own right breasts so they could aim their arrows better. The ones in the film all have both breasts intact.

Wonder Woman is superhuman, obviously, but not completely invincible. The Germans shoot at her torso/head, and she protect herself with her magic wristbands and a magic shield. At this stage, the Germans don’t do the obvious thing and shoot at her (bare) legs. In the fight scenes in the last half hour of the film, Wonder Woman is prancing about in high heeled boots. They make her legs look longer, but are not really practical battle wear for the mud of the trenches.

At the start of the film, an American spy steals a German aeroplane in occupied Belgium, flies off over the North Sea, through some thick clouds/fog and crash lands in the sea near the hidden island of Themyscira (where the Amazons live). The island is not hidden by a physical barrier, just by the thick fog/cloud. The German ship chasing him appears through the fog/cloud a few second later.
1. Why would you chase an aeroplane in a ship? You’d lose him from sight after a couple of minutes, he is flying at least ten times as fast as you and once he’s disappeared over the horizon, he could turn off in any direction.
2. As he and the ship had set off from Belgium, the island must be in the North Sea/English Channel, one of the busiest sea-lanes/coasts in the world, it seems unlikely that the island would have remained undiscovered for so long.
3. The American spy explains that the Germans who were chasing him are the bad buys and he is with the good guys. One of the Amazons accuses him of lying and points out that he is “wearing the same colours” as the Germans. Not really true – the Germans chasing him were wearing Navy uniforms and the spy is wearing a pilot’s uniform.
4. The German sailors attack the spy and the Amazons. The Amazons line up with bows and arrows ready and they shoot after their general gives the command “Fire!” This is meaningless in the context of an archery battle. The Amazons would have been waiting for the command “Shoot!” or something.
5. Later in the film, they refer to a notebook which the spy stole from the evil chemist. Although the book was underwater with the spy for a minute or two, the ink writing is still perfectly legible.

Lüdendorff is portrayed as the senior German general. He is determined to win the war by any means. He poisons Hindenburg who wants to capitulate. Wonder Woman kills Lüdendorff towards the end of the film. As a matter of fact(s), Lüdendorff was the junior partner of the two, he was very unsure of himself and was the first to wonder whether Germany hadn’t make a huge mistake starting the war and both survived the war.

When the spy assembles his crack team of oddballs to steal the poison gas, he signs up the chap from Trainspotting because he is a crack sniper. Although he carries a rifle with him during the fight scenes and uses the telescopic sight a few times, he never fires a single shot, despite their being times when it would have been the obvious thing to do.

Wonder Woman demolishes the steeple of a Belgian church in order to kill a German sniper hiding in it. The Belgian villagers all cheer, which seems a bit unlikely. Isn’t this sacrilege or something?

During the fight scenes, the band of misfits wander more or less unhindered through enemy lines and then blunder about on a German airbase causing havoc. They’d have been shot within minutes. Wonder Woman has an epic fight scene with Aries on top of a control tower without anybody trying to shoot her.

The poison gas is very poisonous indeed and one shell will kill everyone within a ten mile radius. Apparently the gas is highly flammable. The spy steals an aeroplane loaded with the shells/canisters and flies off. Once he has flow a mile or two, he fires one single bullet from his pistol which manages to trigger an explosion which sets off all the shells/canisters and burns off all the gas a few hundred metres above ground level, we assume harmlessly.

It is unlikely that one bullet would have been able to do that, even with luck on his side, he’d have to assume that some shells would fall to the ground and kill everybody along the Belgian coast, or at least that not all the gas would be burned off with mass fatalities. That sort of defeats the whole object, seeing as that is what the Germans were planning to do this anyway. The correct course of action would be to fly out to sea north-east as far as his fuel would allow, then land the plane in the North Sea (he has already had practice at this) and hope that it sinks (worry about the environmental catastrophe in a few decades time). This would have had the added bonus that he could have survived and got married to Wonder Woman (they fell in love somewhere along the way).

I had lots of other minor niggles, I’ll probably come back and add to this list later on.

Glorious politician waffle.

From the BBC:

Transport Secretary Chris Grayling said:

"Our new aviation strategy will look beyond the new runway at Heathrow and sets [sic] out a comprehensive long-term plan for UK aviation. It will support jobs and economic growth across the whole of the UK. Our vision puts the passenger at the heart of what we do, but also recognises the need to address the impacts of aviation on communities and the environment."

None of that has any tangible meaning whatsoever, it's the usual kitchen sink random list bollocks.

An actual expert gets to down to brass tacks:

Martin Rolfe, chief executive of NATS, said the consultation process could take between two and three years, "so millions and millions of people will have a say in aircraft flying over their house".

He told the BBC's Today programme: "Local communities are very obviously concerned about what more traffic might look like, but actually modernising [airspace] means we can keep aircraft higher for longer. "We can have them descend more steeply than they currently do because modern aircraft are more capable than the types of aircraft that were in service when this airspace was originally designed."

I'll mark him down for using the meaningless phrase "local communities" instead of just "people", but hey.

Thursday, 20 July 2017

YPP (London) meet-up, tomorrow Friday 21 July

We'll be at The Brewmaster nr Leicester Square tube station from 5.20 or so onwards - if you think you'll turn up later than 6.30, please get in touch or 07954 59 07 44.

Leicester Square Tube Exit 1, turn left and left again into the alleyway (St Martin's Court). We put a yellow YPP leaflet on the table so that you can find us.

I once went to Germany "for six months" and the same thing happened to me.

From The Onion:

CHARLOTTE, NC—Suddenly stopping in his tracks as he boarded the Lynx blue line to go apply for a library card on Tuesday, local man Mark Collier came to the horrifying realization that he was putting down roots in the city of Charlotte, NC...

I ended up staying for nine years. Qualifications, job, friends, wife, kids, bank account, telephone, the lot.

Yet another good argument for Land Value Tax.

From The Daily Mail:

Blairs’ £5million office: After buying 38 homes since leaving Downing Street, Tony and Cherie move into commercial property

Baffling Reader's Letter Of The Day

From The Metro's Good Deed Feed:

A BIG thank you to my dad, who took a week off work to take me to London for my work experience.

Amy, Essex.


Wednesday, 19 July 2017

Readers' Letters Of The Day

From The Metro:

Tuesday, 18 July 2017

Student fee and loan wibble.


"[The Labour] party’s education spokesman has admitted that the tuition fees policy has a £100 billion…She has admitted that there is a £100 billion black hole in Labour's student fees policy.”

Damian Green MP, 12 July 2017

Fullfact then explains that the net cost will be a lot lower than that, bearing in mind write offs and so on.

The point is surely that student loans are the worst of both worlds, they have the characteristics of loans and of a super-tax on income (9% of income over £21,000 p.a.). So writing them off or down is not an upfront 'cost' the government but a reduction in tax revenues.

The best way of looking at govt tax revenues is the annual amount. The best summary I have found is by the Institute for Fiscal Studies. Page 22 suggests that expected the extra revenues from the 9% surcharge will be about £6 billion a year, covering two-thirds of the £9.7 billion upfront cash cost of higher education. That's not nothing, but only about one per cent of UK govt revenues/spending.

Here comes the real wibble, and article by somebody from the (right wing/supposedly free market) Institute for Economic Affairs in City AM:

Moreover, deeply regressive policies are finding their way back to popular status, with very little push back. That Labour has been able to get away with linking the abolition of tuition fees to “fairness” is shameful; expecting workers on the minimum wage to subsidise students attending Oxbridge – whose career prospects are likely to earn them a much higher salary in the future – is anything but fair.

As our Lord and Saviour said on Twitter recently:

Education is A Good Thing (up to a point, I'm not talking about Mickey Mouse degrees) for the nation as a whole, so I've no objection to the taxpayer chipping in as that's the best way of ensuring that everybody has an equal-ish chance in life. It's like a non-cash citizen's dividend. We'd expect those that go to uni to end up earning more than they otherwise, that's sort of the whole point isn't it?

For sure, the 7% of kids who went to private school have a better chance of going to uni, but is that really so unfair? Their parents have waived a state education place (cost to the taxpayer approx. £70,000 per child) and they have pissed well over £100,000 up the private school wall, most of that goes to teachers or suppliers, so that generates a minimum of £40,000 in tax revenues per child (PAYE, irrecoverable VAT, corporation tax on suppiers etc), more than enough to cover the cost of a normal three year degree of £35,000-ish.

The only reason for tuition fees is that government spending on higher education has remained constant but student numbers have doubled. If we halved them again and kept net spending constant, we wouldn't need tuition fees. If student numbers were slimmed down to a sensible level, say 25% of school leavers, and all private school kids went to uni, that still means that one-in-five state schools kids would get to go to uni "for free" on top of the "free" state education they have already enjoyed [sic].

If their is any "unfairness", it is that a lot of the 'professions' are really just leeching off the fact that the government lays down stupid and complicated rules which the layman can't fathom. So we have lawyers (if judges weren't so useless, we wouldn't need barristers on £5,000 a day to explain things to them), auditors etc. What they earn is just rent, it is an appropriation of other people's earnings or wealth without adding to it.

And as it happens, most people in these 'professions' went to uni and have a very middle class background. I'd be all in favour of stemming this flow of rent by radically simplifying the rules, having judges who apply common sense and abolishing the audit requirement. Or imposing price caps on them. Or failing that, subjecting their income to a higher tax rate. In an ideal world there's be a flat income tax of no more than 20%, but a higher rate of 50% for the 'professions' seems fair and reasonable to me.

That levels out the only real unfairness that I can see - that some high earners didn't go to uni, or did but do something useful and made their way in the productive economy. So a tax on the 'professions' would be a much more sophisticated version of the graduate tax.

And with a Citizen's Income system, student maintenance grants/loans would not be an issue, of course students would get it.