Sunday, March 23, 2014

Time

Economics in one lesson

Time to read a proper book about economics!

Posted by stillthinking @ 03:40 AM (7525 views)
Please complete the required fields.



92 thoughts on “Time

  • stillthinking says:

    Commenting on my own post what bad manners!

    Does anybody remember New Labour’s cash for clunkers! Dear oh dear.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    That book looks like a load of Faux Lib drivel

    “Tax discourages production” it trumpets. Well yes of course, taxes on production do that, but not taxes on land values.

    Then it says the losses to the economy from dead weight cost of taxes outweigh the benefits from extra government spending.

    Nonsense – up to a certain level, govt spending is so beneficial (law and order, defence, immigration control, public health, roads, refuse collection, fire brigade) that it does’t really matter what kind of taxes you have, the benefit of those things will always be ten times as much as the taxes collected/deadweight costs.

    Clearly, beyond a certain level (and the UK is way beyond that level) the government is just spending money on rubbish and/or stealing it, and taxes on production in the UK are far too high anyway.

    Reply
    Please complete the required fields.



  • What are your favourite books on economics, Mark W.? On different level of technical details. Is there anything like evidence based economics, similar to evidence based medicine for example? I heard that computer simulations in macroeconomics are notoriously inaccurate.

    Reply
    Please complete the required fields.



  • Austrian economics is like a fundamentalist religion. Great for dogmatic people who want a simple solution to a complex problem – the same can be said about Georgists, who are at least provably correct from historical examples, logic and mathematics – which cannot be said for the Austrains.

    The Von Misis brigade take some basic truths about the problems of taxation, price discovery and government monopoly and basically say that the sate is evil, without any nuance to the benefits of the state or the problems with the alternatives they propose.

    If you want a proper book on economics I would suggest you read Henry George, ‘Protection or Free Trade’ or his classic work: ‘Progress & Poverty’.

    The Austrians seam to take it as an act of faith that non government systems will end up without mass concentration of wealth and the pseudo state institutions that arise from such power concentrations, or claim that such power concentrations will evaporate with a ‘true free market’. They ignore the issues of monopoly, especially in land and natural resources and the malicious intent of private actors seeking monopolistic privilege.

    My favorite essay on the subject is by America’s own version of Mark Wadsworth, called Dan Sullivan: http://geolib.com/essays/sullivan.dan/royallib.html

    My other favorite commentary on the Austrians is By George Orwell when comparing and contrasting Socialism & Heyek:

    Review by Orwell: The Road to Serfdom by F.A. Hayek / The Mirror of the Past by K. Zilliacus Observer, 9 April 1944

    “Taken together, these two books give grounds for dismay. The first of them is an eloquent defence of laissez-faire capitalism, the other is an even more vehement denunciation of it. They cover to some extent the same ground, they frequently quote the same authorities, and they even start out with the same premise, since each of them assumes that Western civilization depends on the sanctity of the individual. Yet each writer is convinced that the other’s policy leads directly to slavery, and the alarming thing is that they may both be right.

    Of the two, Professor Hayek’s book is perhaps the more valuable, because the views it puts forward are less fashionable at the moment than those of Mr Zilliacus. Shortly, Professor Hayek’s thesis is that Socialism inevitably leads to despotism, and that in Germany the Nazis were able to succeed because the Socialists had already done most of their work for them, especially the intellectual work of weakening the desire for liberty. By bringing the whole of life under the control of the State, Socialism necessarily gives power to an inner ring of bureaucrats, who in almost every case will be men who want power for its own sake and will stick at nothing in order to retain it. Britain, he says, is now going the same road as Germany, with the left-wing intelligentsia in the van and the Tory Party a good second. The only salvation lies in returning to an unplanned economy, free competition, and emphasis on liberty rather than on security.In the negative part of Professor Hayek’s thesis there is a great deal of truth. It cannot be said too often – at any rate, it is not being said nearly often enough – that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamed of.

    Professor Hayek is also probably right in saying that in this country the intellectuals are more totalitarian-minded than the common people. But he does not see, or will not admit, that a return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State. The trouble with competitions is that somebody wins them. Professor Hayek denies that free capitalism necessarily leads to monopoly, but in practice that is where it has led, and since the vast majority of people would far rather have State regimentation than slumps and unemployment, the drift towards collectivism is bound to continue if popular opinion has any say in the matter.

    Mr Zilliacus’s able and well-documented attack on imperialism and power politics consists largely of an exposure of the events leading up to the two world wars. Unfortunately the enthusiasm with which he debunks the war of 1914 makes one wonder on what grounds he is supporting this one. After retelling the sordid story of the secret treaties and commercial rivalries which led up to 1914, he concludes that our declared war aims were lies and that ‘we declared war on Germany because if she won her war against France and Russia she would become master of all Europe, and strong enough to help herself to British colonies’. Why else did we go to war this time? It seems that it was equally wicked to oppose Germany in the decade before 1914 and to appease her in the nineteen-thirties, and that we ought to have made a compromise peace in 1917, whereas it would be treachery to make one now. It was even wicked, in 1915, to agree to Germany being partitioned and Poland being regarded as ‘an internal affair of Russia’: so do the same actions change their moral colour with the passage of time.

    The thing Mr Zilliacus leaves out of account is that wars have results, irrespective of the motives of those who precipitate them. No one can question the dirtiness of international politics from 1870 onwards: it does not follow that it would have been a good thing to allow the German army to rule Europe. It is just possible that some rather sordid transactions are going on behind the scenes now, and that current propaganda ‘against Nazism’ (cf. ‘against Prussian militarism’) will look pretty thin in 1970, but Europe will certainly be a better place if Hitler and his followers are removed from it.Between them these two books sum up our present predicament. Capitalism leads to dole queues, the scramble for markets, and war. Collectivism leads to concentration camps, leader worship, and war. There is no way out of this unless a planned economy can somehow be combined with the freedom of the intellect, which can only happen if the concept of right and wrong is restored to politics.

    Both of these writers are aware of this, more or less; but since they can show no practicable way of bringing it about the combined effect of their books is a depressing one.”

    Reply
    Please complete the required fields.



  • Thanks Pete,

    Fair comment, however the book was a useful starter.

    An up to date version might include the whole theme of crony capitalism. For that topic I tend to watch Max Keiser. He’s funny at the same time as being informative.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    PG, the annoying thing about “Austrians” is that they are half-right, they set off in the right direction (taxes on earnings = bad, credit boom-busts = bad, big government and crony capitalism = bad) and so on, with which you or I would agree as observed facts, but then they veer off in the completely wrong direction. To cut a long story, in an LVT-only world with the surplus dished out as CI, they’d have nothing to complain about.

    Reply
    Please complete the required fields.



  • @3 Smashed it. I think I’ve read that before so you must have already posted it.

    Fantastic quote. From what I’ve read of Orwell, he seems to have really got all this stuff (and conceived of a fair few impending technological advances) way ahead of his time. IIRC he was into socialism in his youth, but fathomed its shortcomings before it had really even taken off in the UK.

    Reply
    Please complete the required fields.



  • stillthinking says:

    @3 That is very interesting.

    At the moment though I think the case can be made that the UK is a failing socialist country, and that the state has become excessive. So it seems very reasonable to advocate a monetarist view. I made the point about the cash for clunkers because it demonstrates poor economic guidance. I live in Japan at the moment and I have been in the Japanese health system, the unemployment system and so on and I have to say that the UK is a complete disaster zone in comparison and dangerously so in provision of health care. Perhaps societies will always veer from one extreme to the other, but at the moment we follow failed socialist policies so to some extent people -have- allowed their liberties to be captured by the state.
    The point that both systems at the extreme are unjust is very well made but looking at the UK, there is surely a strong case that to pursue some monetarist policies would be ultimately for the benefit for the population at large. This argument seems to me to be a proxy for what is the state of the UK economy right now, recovering going up going down, and for me, I see the UK economy as an aeroplane heading straight into a mountain and the reasons why can be explained well by Hazlitt. Orwell is discussing the nature of societies, but the UK is a specific state of society. Namely failed socialism.

    Reply
    Please complete the required fields.



  • A little bit of perspective is needed here. All this Austrian vs Georgist type stuff is strictly blog gibber-jabber. Economic adults don’t talk or think like that.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    It’s not gibber-jabber, it is a question of which school of thought has the best explanatory and predictive powers. The ‘Austrians’ head off in the right direction (let’s agree that taxes on earnings and ouput and kleptocratic government, such as PFI funding for all this windmill nonsense, about which you know far more than I do, harm the economy) but don’t really help in forecasting the future or suggesting how the rules of the game can be tweaked to lead to better outcomes.

    The land-price-boom-bust cycle and its aftermath is easily documented going back centuries, as is the beneficial effect of collecting tax from land rents or reducing marginal withdrawal rates on benefits. All the evidence is there and this can be understood in layman’s terms.

    @ stillthinking, but is there really a difference between “failed socialist” and “corporatist”?

    I don’t think there ever has been a country which you could describe as “successfully socialist”, it just doesn’t seem to work, so that term “failed socialist” is fairly meaningless. “Socialism” is “failed socialism”, more or less by definition.

    “Corporatism” however appears to be self-sustaining, and whether “corporatism” works depends on whether you are an insider (like people who cream off the PFI subsidies for windmills, chronically overpaid and under-incentivised upper echelons in the NHS) or an outsider.

    It’s just a question of making sure that enough of the electorate (the Home-Owner-Ists) think that they are insiders (when the majority of them are cutting of their noses to spite their faces).

    Reply
    Please complete the required fields.



  • It is gibber-jabber. The world has moved on and so has economic theory, understanding and modelling. Working professionals use a far more nuanced and complete set of tools than was available to to the early economists who once spouted this stuff. These arguments only really take place in blog world. Modern working professionals would be utterly bemused by such talk. I imagine the people who write this stuff on blogs have advertising and subscriptions to sell and the people who get excited by it tend to be new to the subject and have a tendency to gullibility and over-enthusiasm.

    Reply
    Please complete the required fields.



  • My point is that this is a gibber-jabber argument, so I’m hardly likely to dignify it with ‘something of substance’. Produce a house price related argument that amounts to more than a disjointed series of blog world cut and pastes and I’ll happily debate it.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    “The world has moved on and so has economic theory, understanding and modelling.”

    So a fancy new theory which has no predictive power whatsoever (or is obfuscation at best) trumps good old fashioned theories like supply and demand curves, optimum pricing strategies, the effect of taxes on output, the effect of interest rates on the discounted net present value of future monopoly income? Or even the general observation that “rents and land prices only go up in the long run”? When did these go out of fashion?

    Maybe I’ll come up with a new theory of gravity that shows up Newton and Einstein for the charlatans that they are, my theory is newer so it must be better.

    Reply
    Please complete the required fields.



  • paranoia blue says:

    Beware the “Gnostics.”

    Reply
    Please complete the required fields.



  • Your notion that I must be talking about ‘a fancy new theory’ is instructive. Modern working professionals do not line up tribally behind any particular school or theory. Early economists (and now enthusiatic bloggers with a new found interest) did that decades ago but professionals now use a far more highly developed and more diverse palet of tools and modelling techniques. All this Austrian/Georgist stuff comes from a long gone era when ‘economics’ was relatively primitive and often driven by heavy political bias.

    The proof is in the pudding. Many of you won’t like it but it’s the skill and understanding of modern economists that has confounded the collective hpc forecast opinion at every turn. For example, 1970s economists (and certainly not even earlier) quite evidently did not have the tools that are now available.

    Reply
    Please complete the required fields.



  • There’s a good mix here today. “Failed socialist country” – now that really is a perverse fantasy. And as for the “skill and understanding of modern economists” – well, I wonder what might befall us if their understanding should ever falter.

    Reply
    Please complete the required fields.



  • Hi Flash, good to see you generating lively debate as usual! You say “All this Austrian/Georgist stuff comes from a long gone era when ‘economics’ was relatively primitive and often driven by heavy political bias.” Are you suggesting that economics is no longer driven by politics?

    Reply
    Please complete the required fields.



  • letthemfall, it was my access to economists with ‘modern levels of skill and understanding’ that allowed me to loudly and often predict (right here) that the economy would start to pick up in late 2012 and that house prices would rise due to population increases and an unemployment rate that stayed stubbornly lower than in past recessions. The joke is not on modern economists.

    Reply
    Please complete the required fields.



  • @7

    My limited understanding from Economist articles on the subject is that Japan has huge problems relating to crony capitalism, and their medical industry epitomises them. They invented zombie banks. They have an ageing population and a dreadful worker-to-pensioner ratio. The pharmaceutical companies are a cartel that holds the taxpayer to ransom to keep the retirees alive well into their 90s.

    I may have got that all jumbled up, but it’s certainly not thought of as the free market utopia you’re depicting it as. Socialism is a wide spectrum and whether or not we’re still upon it is debatable. There’s a good deal of redistribution in this country and we have tons of govt. debt, but I think a “failed socialist state” might be pushing it. They could overhaul the tax and benefits system (whether or not that entails LVT), balance the books whilst keeping govt. at 35-40% of GDP and the whole system would be a lot fairer, without falling under the banner of socialism, as I see it.

    Reply
    Please complete the required fields.



  • Hi TT, most modern working economists are driven by not much more than models and mathematics. The trouble is that politicians cherry pick what suits them and then spin it out of context and all recognition.

    Reply
    Please complete the required fields.



  • I think the thing that is most detested by ‘establishment’ groups is when theories are prove useless or have been hijacked by vested interests, such issues are rife in any academic discipline of any type. With economics there of course far more vested interests willing to employ people who can bend and economic theory to suite the status quo. I agree with you on the flawed debates between vying ‘schools’ of thought which makes infantile augments, but is often valid in describing how these schools affect the workings of the real world.

    Flashman as you refuse to give any substance to your assertions I cannot take you seriously. The idea that you can say I know more than you, but I am not telling you is a bit silly is it not. You have not redressed the logic or historical examples of the georgist school. In fact you have shown no understanding of Georgism except in focusing your prodigious talent for fallacious argument techniques. While I am the first to admit that Georgism needs serious improvements to its theories when concerned to international flows of money and the tourtouse legal framework of patents etc it in no way detracts from its fundamental tenents. There have been great strides in economics, some of us have the mathematical training to understand parts of it, and if you want to challenge me to a test of logic, statistics or actuarial practice I am well up for it, so I can counter your assertions, If the fundamental assumptions of modern economics, as used in public policy are unsound, such as ignoring the law of rent, monopoly or the endogenous nature of money supply etc then you can have any level of hyper complex theories based on advanced statistical understanding, but they are still rubbish and hence why we are in a pickle with high house prices and low productivity in the UK.

    Reply
    Please complete the required fields.



  • Flash, so presumably these models account for decision making driven by political motivation? It seems to be generally recognised that the whole debacle we’ve been through, and some would say are still going through, is the result of interest rates being kept too low for too long. The decision to do that came primarily as a result of political will, not because it was shrewd economic policy. Would you agree?

    Reply
    Please complete the required fields.



  • Rising house prices are a joke – a complete product of 42 billions of QE in the FLS pumped into housing.

    How come house prices are rising when no-one is any the richer…..certainly not UK government, the debt and deficit and bigger than ever.

    FLS was election bribery……

    Reply
    Please complete the required fields.



  • tt, we had an almightly boom that went on for an almost unprecedented length of time. Regulation and any sort of sensible ‘brake’ were almost entirely removed by politicians hungry for glory and revenue. The duration, extent and wildness of the boom eventually caused what would once have sent us into a ‘great depression’. However this time unemployment in the UK stayed well below the levels of past mere recessions and the aggregate world economy never stopped growing. There was no deflation and inflation stayed moderate. The lack of regulation and fiscal brake during the previous boom was almost entirely down to the politicians and poodle experts paid to tell them what they wanted to hear. The blog idea that only a few people saw it coming is silly. I never met an economist or analyst who didn’t. My milkman used to warn me. When the trouble hit, the politicans panicked and more humbly went to economists and newly empowered central bankers to steer us clear of the rocks. Interest rates were just one of several tools they quickly came up with. I say credit where credit is due. Their counterparts from decades ago would have sent us into great depression. They haven’t got a magic wand but they’ve done a good job considering the extent of the problem.

    Reply
    Please complete the required fields.



  • Stilldrinking says:

    I think our excellent thinking comrade, StillThinking’, needs to be more precise as to exactly what he considers socialism to be. Perhaps he means ‘bourgeois socialism’ but should clearly nominate that rather than paint every government policy he disagrees with as being ‘socialist’.

    Secondly, I wouldn’t argue with him as to weather the liberties of working people are being curtailed by the present ruling regime but while comparing the ruling parties is like comparing Coke to Pepsi, I think one can say that Coke is slightly sweeter than Pepsi (I know it’s debatable) while Pepsi is slightly more gaseous. In the same way I think we can safely say the present regime is certainly less bourgeois socialistic than the previous one. So this begs the question of our excellent thinking comrade; if liberties of the people are being curtailed due to failed (of course we could also debate on what actually constitutes ‘a failed economy’.) bourgeois socialist economic policies, why are peoples liberties pretty much constantly being curtailed by every new regime, Coke or Pepsi, despite the fact each new regime pushes more right-wing or ‘free market’ policies?

    Finally, the elephant in the room, if the reason for economic funk is due to bourgeois socialistic economic policies (and I’m certainly not seeking to defend bourgeois socialists), which our comrade doesn’t say outright but certainly suggests; Why are the most successful economies in Europe and probably the world, the more bourgeois socialistic countries? Germany, Sweden, Denmark, Netherlands and add Canada and Australia to the wider world. Of course the same phenomena is under way in those places. Every new regime, Coke or Pepsi, pushes for more ‘free market’ policies and those countries are only successful compared with other developed countries. Compared to the economic situation in those countries 30 years ago, one can make a strong case to call them ‘failed economies’ also.

    Reply
    Please complete the required fields.



  • I stick by my original stance that Austrian vs Georgist type arguments are pointless anachronisms and I will not therefore waste time arguing them. I see a few attempts to shoehorn my comments into anti Georgist (reminds me of that Arsenal FA cup goal for some reason) arguments. They are not and should not be taken as such. Modern economists use the most proven bits and pieces from all over the place. They are far better than they ever were in the past because the science has exponentially developed. Anyone who zealously supports some long outdated school is misguided in the extreme because all the old schools have been at least partially discredited. If any ‘old school’ advocate wants me to take what they say seriously then stop portraying yourself as an anything ‘ist’. One eyed fanaticism rots the brain or is it the other way around?

    In my world success is judged on performance and results. I laid my cards on the table here many times and was (despite howling resistance) generally proven to be correct. Only in blog world could the frequently right be lectured about credibility by the frequently wrong.

    Reply
    Please complete the required fields.



  • mw, you always descend to stuff like troughman when you get flustered. As for this uncle tom nonsense, no one sensible believes you just like they didn’t believe you when you claimed I owned this site. You are becoming more eratic by the day.

    You claim that you knew this and that and that what I’ve predicted in the past was obvious/not rocket science etc. The probem with that is you’ve got everything that matters wrong for years. You gambled on house prices and lost your bet. You argued against a recovery and got it wrong again. Did your Georgist derived economics desert you? There is actually no shame in that because you are an accountant with no economic training or experience. However, where you lost all credibility was in your claim that we needed no new house building. Madness

    No one has ever discredited any Georgie thinking? I rest my case. You never get much sense from an extremist.

    Reply
    Please complete the required fields.



  • Flash, I don’t know what developments there have been in economic tools so will bow to your superior knowledge on that subject. However, it is plainly obvious that what has developed is politicians willingness to do whatever will get them re-elected, regardless of the economic consequences. You seem sure that we avoided depression because of better economic tools, but I think that the economic policies that were adopted, were adopted for political gain rather than economic benefit. Nobody knows what would have happened if different policies were used, like nobody knows if all the computers would have crashed if we didn’t do all those Y2K projects. And it is also plainly obvious to a huge number of people that it is far too early to say the policies that were adopted have been a success. There are enough documentaries about parents who don’t eat so their kids can, to demonstrate that fact.

    Reply
    Please complete the required fields.



  • People who lose in life often claim that winners were just lucky. In a way its that attitude that keeps them down. There is always luck in life but people who frequently lose should perhaps look a little more closely at what makes a winner and try to emulate rather than disparage. As for the houses to people ratio having increased? You’d have to be seriously xxxxxx to believe that. I’ll post the figures going back 60 years on the next appropriate thread. We started going backwards a few years ago. You drive yourself further into the weeds every time you claim that. The population has recently sharply increased. This has coincided with well below average house building. Surely an accountant can understand how averages work?

    Reply
    Please complete the required fields.



  • Maybe they’re not building houses because there’s insufficient demand… Like Aston Martins – they’re lovely and most people want one, but there aren’t many around because people can’t (or won’t) afford them. Surely an economist can understand that?

    Reply
    Please complete the required fields.



  • tt, as far as I can make out politicians have always been as bad as they are now… maybe worse. I recently watched Horrible Histories with the kids and things were definitely worse in the old days because it once was even easier to hack something off your opponents.

    Regarding the skill of modern economists, it really is nothing mysterious and you don’t need to be deep in the loop to understand it. The improvements are down to experience and technology. In the height of the crisis, a few years ago, the response was well telegraphed and openly discussed. Maybe I understood the language and ramifications a bit more than average but it really was all out there in the public domain. No luck required. Experience speaks for itself in that lessons have been learned from many past episodes but it is technology that allowed the old data to be better understood and the solutions to be better monitored and modified in real time. Modern economists have fantastic modelling systems and immense computing power at their disposal. They can see how something is working in real time and their models and algorithms will even suggest a series of lightening quick improvements as things progress. I spent a good few years working on ‘black boxes’ so I knew what was possible and it gave me more certainty in the authorities ability to handle the crisis. They didn’t have what they have now even 15 years ago. In a way its the success they’ve had that has enraged so many here. In effect people are saying ‘yeah but no but they cheated’. They actually did what they had to do after the craziness of politicians had landed us in it.

    Reply
    Please complete the required fields.



  • TT, house building has now finally picked up, precisely because of the demand. Transaction volumes are also up

    Reply
    Please complete the required fields.



  • Flash, house building has picked up (a) because the government has made taxpayers money available to buy them and (b) because the public are increasingly thinking that, despite it being a ridiculous price to have to pay, the fact that politicians are willing to do whatever is required to keep prices up means that it’s a fairly safe bet. Economically this situation is mental but politically it makes sense. You have confidence that all will work out OK, most folk on here don’t, and some simply hope that it won’t, for their own benefit. Time will tell who was right, but I maintain that saying “it’s worked” is premature.

    Reply
    Please complete the required fields.



  • TT, the majority of people don’t think in the terms you laid out. The opinions expressed on this blog and blogs like it are very left field. Nearly everyone wants to buy a house and nearly everyone knows that its best done as young as possible. ‘Normal’ people don’t concern themselves with dark political motivations or fiscal manipulation because they consider it to be boring or just plain weird talk. When people reach house buying age in this country they do whatever it takes regardless of the politics/economy of their time. I sympathise with anyone who cant afford to buy a house but I’ve got absolutely no sympathy for the ‘sold to rent’ or ‘wait for a crash’ speculators. As a result of their lost (and foolhardy) speculation we have to put up with years of temper tantrums and nerdy mutterings about redistribution.

    As for it being premature to say it worked…too late, it did work and now we are in a different time. Life moves on and on. There is a tendency here to dwell and fester on long gone situations. 5 years ago I came on to this site and gave my opinions on how that situation would pan out. I now have a whole new set of opinions but this site is no longer a good place to express them because it doesn’t tend to focus on the now. I get the impression that if anything goes wrong in 20 years time, there’ll be some bald old hpc geezers nodding sagely.

    Reply
    Please complete the required fields.



  • It’s clear that none of the issues that created the 2008 crash were really sorted out. In my view, the real crash is yet to come…the country has become addicted to low interest rates and cheap money in a huge way.

    Remember January last year? It looked like the year was going to be very flat – then UK government announced they were going to ”turbo-charge” FLS….and what happened? A fairly hefty rise in house prices, which led to a superficial recovery, based not on wealth creation, not on wages rising….but 42 billions of cash thrown at it, by UK government. The next thing will be a rather large amount of inflation, as this money hits the high street.

    There is simply no way that this thing is over, the cheap cash just means the party can go on for a little longer, but believe me, one day someone is going to have to pick up the tab for the massive UK debt and massive deficit…….and that day is coming closer.

    Reply
    Please complete the required fields.



  • hpw, employment surging, unemployment down, real wages up (2014), manufacturing up (feb PMI 56.9). These are the realities.

    Reply
    Please complete the required fields.



  • Flash, we’ve created god knows how many billions through QE and we still have IR’s the lowest they’ve ever been. The economy is on life-support. All of the things you mention have been bought on the credit card. Buying things on credit is easy, paying off the bill is a tad more tricky. Try telling me it did work when we’ve done that and I might take you seriously.
    And are you a psychologist as well as a finance bod? I don’t think you give people enough credit – for most people, buying a house is the biggest financial commitment they’ll ever make – few do it lightly. I suspect they “think” prices will go up because that’s what they want to happen, in the same way that people here think prices will go down because that’s what they want to happen.

    Reply
    Please complete the required fields.



  • The fact is that the current recovery is a complete mirage – all done with government borrowing. UK GDP almost directly related to government debt….the tories are absolutely obsessed with winning the next general election.

    Employment is a farce too; part time work, zero hours contracts and internships (unpaid work) keep the figures artificially low.

    But we shall see…..I think the real state of the bankrupt UK economy will start showing itself again quite soon.

    Reply
    Please complete the required fields.



  • Sorry TT but from what you’ve written above, I dont think you understand QE. ‘Created’? I dont think so. In any case, did you realise that it ended almost 2 years ago?

    As I’ve explained before you shouldn’t confuse national debt (quite small by historical standards) with the fiscal health of our companies and economic engines. There is very little corporate debt in this country and our companies are doing pretty well globally and domestically. QE (and htb for that matter) has FA to do with the activity of most of our companies.

    One of the main reasons that long term interest rates are so low is because the best analysts in the world think of us as one of the safest bets in the world. You should think on that. It is of course your prerogative to disagree with them but my money is on the worlds best analysts

    Reply
    Please complete the required fields.



  • Hpw, I’m not sure if you’re interested in the facts but your assertions on employment are entirely wrong. 459,000 more people are in work than a year ago.

    459,000!!!!

    Do you think it remotely possible or reasonable to claim that employers took on nearly half a million extra people just to put them on zero hour contracts? Do you think they’d take on such an enormous number of new employees when they already had an army of existing employees on zero hour or part time contracts. Of course not.

    We now have a record 30.2 million people in work. 24.7 million of these people are in the private sector, so we can’t even claim that we’re public sector dependant.

    Early projection unemployment is now thought to be running at circa 6.8% and falling fast. The fast growth in employment and the rapid fall in unemployment have exceeded the most optimistic expectations, so it is quite ludicrous to frequently cite a poor employment situation as proof of negative conditions.

    Reply
    Please complete the required fields.



  • @21
    House prices are claimed by many people to be a function of credit availability. Rising prices may equally be the consequence of low interest rates and govt FFL than population increases. Low unemployment is also not necessarily due to a healthy economy (which is still not the case) but changes to company practices outlined by other economists. None of this is surprising given the old joke that there are as many analyses as there are economists.

    Reply
    Please complete the required fields.



  • Flash, I’m sure you could teach me a lot about QE. As I’ve said many times on here before, I am more than willing to bow to your technical knowledge of finance and economics. What I’m not willing to accept from you though is your constant assertion that everything is rosy. It’s not. The companies in this country may be awash with cash, but millions of people cannot survive. I know you don’t know them, I don’t know them either, but that doesn’t mean they don’t exist. What worries me most in this country is not economic collapse but social collapse. I’m sure your pretty Surrey village is very sheltered from all this, so is mine in Berkshire. What frustrates me talking to you is that whilst you clearly understand numbers really well, you evidently know f*** all about people.

    On your last note, from what I know about a relatively small number of employers, it is absolutely reasonable to think that 459K people were given zero hours contracts. I would say the actual number given a zero hours contract is probably much higher than that, but they weren’t counted because they already had other zero hours contracts.

    Reply
    Please complete the required fields.



  • tt, it is utterly ridiculous and lazy to say that 459,000 were given zero hour contracts. It’s not remotely logical and it can be disproven with even a 30 second google search… so why say it? It is equally ridiculous to say that millions of people ( in this country) can’t survive. We live in one of the worlds wealthiest countries with one of the worlds highest pay and employment rates. There is no mass death through starvation…so why say it? I do not say everything is rosy but I do deal in facts (that are inconvenient to your assertions). I suspect that is what frustrates you.

    letthemfall, house prices started to rise again during a period of very low credit availability. Try to remember that. Employment grows and unemployment falls when more people get work. When more people get work it means that things are improving. When we add 459,000 jobs in a year, it means things are improving fast. It really is as simple as that.

    Reply
    Please complete the required fields.



  • What is true to say is that British productivity is not looking good which reflects the poor quality of the growth in jobs & wages. A fair proportion are of very poor quality, but not ‘all’. Of course our current rosy picture can be explained by Government induced credit expansion, and thus have nothing to do with fundamental strengths in our economy.

    High land prices means low competitiveness & this is central to the problem of the UK and this site. We need a system that will keep land prices low and investment in business high, productivity high, wages high & employment high and improve the efficiency of land use for housing, I am sure we can all wrack our brains for a policy that will achieve that – but the only policy I can think of that will achieve all of that is a shift of taxes off of production and earnings and on to Land Values.

    Reply
    Please complete the required fields.



  • There is tremendous growth in jobs (459,000 in the last year is the envy Europe and one of our best ever performances) and this year wage awards are running comfortably ahead of inflation ( just announced at a low 1.7%). This site loses credibility when people persist in presenting out of date statistics and scenarios. We are now in 2014 and things are markedly better than they were a few years ago.

    In the next suitable thread I will comprehensively show people why pure form LVT couldn’t possibly work in a sophisticated globalised economy like ours. It is so painfully obvious that I didn’t want to dignify the subject but it’s time to put a lid on this fantasy.

    Reply
    Please complete the required fields.



  • Average pay figures disguise the fact that wages (rising 1.4% according to ONS – March release) are falling or stagnating for the lower paid, but rising steeply for the highly paid. What loses credibility is presenting single numbers as an absolute measure.

    Reply
    Please complete the required fields.



  • “house prices started to rise again during a period of very low credit availability.”

    Low credit availability to business, not quite so low to house buying. And then there is the price of credit – pretty low these last few years. And BTL enthusiasm – fired by cheap credit – adds to price rises. Try to remember that.

    Reply
    Please complete the required fields.



  • Hpw, I’m not sure if you’re interested in the facts but your assertions on employment are entirely wrong. 459,000 more people are in work than a year ago.

    459,000!!!!

    So what? Are wages rising a significant amount? – (the answer is no).

    Reply
    Please complete the required fields.



  • Flash, when you talk about complex economic models, I assumed you meant teams of really bright people developing complex algorithms – sounds more like you just watch the news so you can pop the headline numbers into a spreadsheet… 🙂
    OK some facts for you. Last year I did a couple of bits of work with 2 employers with a combined FTE of about 25,000 – so not massive employers but a fair size. Between them they issue over 10,000 zero hours contracts every year, and from the benchmarking we did I have no reason to believe that they are unusual in their sectors. I could do 30 seconds on Google as you suggest and estimate what the total number of zero hours contracts issued in those 2 sectors would be but I can’t be bothered. Trust me though, it would be a lot more than 459,000. It maybe that you misread my post @50, or it maybe that you’re just wrong – not sure which.
    Next fact. Neither of those companies could tell you how many of those 10,000 people actually go on to do a single hour – they are simply hired in case they are needed. If the employers themselves can’t tell you how many are “actually” employed, then Google, clever though it is, certainly can’t.
    Next fact. One of those employers is a retailer. There is plenty of evidence that the current “boom” is retail driven so it makes sense that gross earnings are up, because those zero hours contracts result in several hours work. There is also plenty of evidence that the boom is unsustainable, so zero might become zero quite quickly.
    Next Fact. Both of those businesses are VC backed and the individuals involved are collectively worth billions. If you therefore look at the net worth per capita across the whole of both businesses, I am sure it would be a healthy number, and back up your statement that we are one of the wealthiest countries in the world. I think this is where we fundamentally disagree and will never come close – you look at the total worth, see a big number and say we’re fine, I see thousands struggling and say we’re not. We have a different definition of success.
    Lastly, you saying there is no mass death through starvation so people aren’t struggling is like me saying there aren’t millions living on the streets so there isn’t a housing shortage.

    Reply
    Please complete the required fields.



  • Flash, I’ve been studying economics in my spare time for years now and I’ve yet to encounter anything in orthodoxy that challenges Georgism. Now that I’m finally doing a proper qualification, I find a lot of the other students I speak to have heard of it and are interested in it. I admit that it’s on the fringes, but it’s not as outlandish as MMT or other ideas popular on the internet. Its from a time when economics was less mathematical, but it’s never been contradicted. I don’t think LVT could raise enough money to replace VAT, NI, IT as well as all the other property taxes, and I don’t think it’s a likely prospect any time soon, but it’s lack of prominence in the mainstream doesn’t mean it’s not a valid doctrine anymore.

    To my mind, popular economic discourse mainly consists of contorting the orthodoxy to pursue an Austrian/neo-lib/free-market agenda, so the elite can exploit natural monopolies. As for the models, yes they’re very sophisticated, but General Equilibrium has been around for almost 50 years and has been discredited heavily by the crisis, as it didn’t take account of leverage. It’s not just renegades like Steve Keen who have pointed that out, but hedge fund managers and respected academics. My macro knowledge is still limited, so I don’t know how sophisticated the models are in that field, but it’s considered more of a soft science than micro. Most economics students and graduates I have met were disgusted by last year’s budget (HTB etc.), and concluded that Osborne had effectively resigned himself to brushing the nation’s problems under the carpet, only to have them blow up later.

    I’ve tried to sit on the fence regarding whether or not we need house-building. But last week, I went to a talk by Danny Dorling at the LSE. He’s a Professor of Geography at Oxford. It was a book launch regarding housing in the UK, that was very well researched, and whilst I didn’t agree with all his proposed reforms, his analysis of the need to build was probably one that would satisfy all of us (but perhaps not you):

    i) There are more bedrooms per capita in this country than at any point in census history (he put this down to a speight of recent extensions)
    ii) We have enough houses for the current population, but will need more if immigration carries on at the current rate.
    iii) As the current crisis is principally an allocation problem, building more houses will achieve very little if nothing else is done as houses will continue to be concentrated into the hands of the few who have too many as it is (i.e. BTL, holiday homes, foreign investors etc.).

    Finally, I would just like to say that the two of you (Flashman and MW) make some of the most interesting contributions to this site. It’s a pity neither of you can engage in discussion without being confrontational from the off and resorting to name-calling, especially considering you’re probably some of the oldest contributors to the site.

    Reply
    Please complete the required fields.



  • I for one cannot wait for this logical critique of Land Value Tax – I await with great interest.

    The semi valid point on against LVT is money supply, but that can be fixed by other means and gets us into the whole theory of money – which is a fascinating subject in its self.

    The only other valid argument I have seen against LVT is the the ‘dash our babies against rocks’ augment in that rent seekers will gladly stimulate war and revolution in the pursuit of their unearned income. But that is akin to saying lets accept the rule of kings otherwise it will all go hell in a handcart. But there is some validity to the idea that throughout human history there has been a struggle for the unearned income associated with land and natural resource rents and the sons of landowners attending Sandhurst will be eager for a coup d’état if their ‘free lunch’ is taken away by the great unwashed.

    Reply
    Please complete the required fields.



  • Good to see you all getting so animated.

    TT, I suspect that most people here don’t fully understand what a zero hour contract is but it sounds gloomy so it must be bad. The fact is that more than 50% of zero hours workers reported in a recent comprehensive survey that they are happy with their work life balance and that they wouldn’t want more hours. In other words most zero work contracts are of benefit to people who need flexibility and couldn’t otherwise work. The recently revised total of these contracts ( new methodology) is about half a million. It is therefore impossible to claim that all (or more than) the extra 459,000 new jobs are zero hours contracts. That would suppose that there were hardly any zero hour contracts 12 months ago.

    letthemfall, I made it as clear as possible that I was quoting 2014 wage awards. I gave you the source and numbers last week.

    Reply
    Please complete the required fields.



  • Flash, what are we arguing about – the number of workers, the number of contracts or whether they’re any good? I just googled it and the ONS figure is 582,935. But like I said, if the employers don’t know how many employees they have, how do the ONS, Google, you or anyone else know? I’m sure the ONS have some theoretical methodology, but I am giving you facts from employers that use these contracts, only one of which ever sends data to the ONS. I’m starting to get really worried about your economic models if this is the standard of the data you use – all the time I was blaming politicians for getting us into this mess but maybe it was actually the economists who got it wrong.

    Reply
    Please complete the required fields.



  • reticent, thanks for your comments. I’ve got a meeting shortly but I’d like to discuss your post in detail later.

    For now, a quick few comments:

    The point about census history is where he goes wrong (probably deliberately). He knows that the last census coincides exactly with the point in history where the dwellings to people ratios reversed (peaked at 2.3 in 2010). Up until then the ratios had steadily improved for decades. We have good data on building and population since the last census but for whatever reason he has chosen to ignore them (the years that actually matter). Even at the ratio peak in 2010 our housing standard was a joke ( comedians from Python to Enfield have done sketches on it). Our houses are notoriously too small but the response was to build them even smaller and then of course to steadily decrease the building just as the population started to shoot up ( mostly post census – a well documented fact). His point about extensions is OK but it is still a fact that our houses are the smallest in Western Europe despite the extensions, so its not much of a point. We used to live like dogs decades ago. Things steadily improved until we just lived in slightly crammed acomadation that was the but of comedians jokes. Then in 2010 things started to reverse again.

    Regarding LVT, that’ll have to wait. Don’t mean to be patronising but I had a very different attitude to economics when I studied it. It all changes after a few decades of making a living from it. Take your point on name calling.

    Reply
    Please complete the required fields.



  • I have about 40 staff on zero hour contracts(varies with the season), about half are happy with that – mostly students, the other half are most certainly not! It gives employers incredible power for abuse and is generally a bad thing. In the cleaning and caring sectors there is rampant abuse which should be stopped immediately. As with all things there are two sides to every coin and Zero Hour contracts, while being a functional solution to many people also have a very dark side which needs a proper investigation.

    Reply
    Please complete the required fields.



  • TT, the ONS is pretty good. Small sample sets from personal experience should always be avoided when it comes to grand conclusions. Like I (the ONS) said, there are about half a million zero hours contracts in total (and more than half of them are good as far as the people who have them are concerned). The economy added 459000 jobs in the last year so your claim that they are all zero contract is not very credible or mathematically possible when we consider than only about 1 in 60 contracts in this country is zero hour.

    Reply
    Please complete the required fields.



  • Thats all well and good but it does not mean that all is as rosy as you make out and our growth in jobs is not lacking in their quality of how they are remunerated which is demonstrated by our poor productivity. This lack of productivity could be from a fundamental problem we are discussing here in that we are overburdened by very high private debt and high land prices, both acting as a drag on ‘real’ investments that will make us uncompetitive as a global economy and create jobs that will survive global competition. We are throwing newly minted loans at unproductive assets, not a recipe for sustainable global enterprise and that could be the fundamental factor in our so called recovery.

    Reply
    Please complete the required fields.



  • Lorne Street Lenny says:

    flash – 459,000 more people are in work than a year ago.

    Any update on the numbers of previously full time/part time workers going self-employed and what %age of the 459k is accounted for by this? Also, how about some idea on the average pay of self-employed vs. employed? Perhaps some analysis on women & men self-employment pay rates.

    Just in case people are wondering: large numbers have transferred from employed to self-employed and, on average, earnings are substantially reduced. This is even more marked in the case of women. Also, can we quote RPI as well as CPI when assessing cost of living and wage rises. People can decide which reflects more accurately on their experience.

    Reply
    Please complete the required fields.



  • Life’s too short.

    Reply
    Please complete the required fields.



  • flashman, I am quoting 2014 figures too from ONS (released this month). I don’t recall another source now.

    Reply
    Please complete the required fields.



  • Haven’t you lot got jobs to do?……… where do you find the time?

    Reply
    Please complete the required fields.



  • Reticent, I was curious about this Dorling fellow and in particular about why he would deliberately ignore the most relevant data. I’ve come accross the same light weight trick several times and was fairly sure what I’d find. His full title is actually …of Geography and the ENVIRONMENT. It didn’t take long to find out that he’s on record as stating that building is bad for the environment. His obfuscation about post census data is standard issue stuff from the anti-building environmentalist lobby/green belt wallahs. He’s also on record as saying that building is only good for bankers and other assorted capitalist bogymen blah blah. His other spiel includes all the usual stuff about empty bedrooms and holiday homes. It’s all a big irrelevant yawn because British people don’t tend to go a bundle on radical redistribution and confiscation. Sorry but the guy has the luxury of being a ‘child’. The rest of us have to work with real world solutions that have a chance of being accepted and that might actually work.

    Fortunately these people have lost the argument spectacularly and all the main parties are all about building way more homes. Saying we don’t need more homes is very much a derided minority view these days. It is weird that some people on this site are against more building. It strikes me as being some sort of blog self-harm mechanism. Don’t people want more choice and bigger, cheaper houses?

    Reply
    Please complete the required fields.



  • letthemfall, don’t you remember the 2014 pay award survey I pointed you at? Or wasn’t that you? Been travelling a lot recently and one week blurs into the next

    Reply
    Please complete the required fields.



  • Only got my phone to hand but if you’re referring to the ONS wages data released about this time it’ll be a year to year comparison. 1.4 sounds about right. I was talking about 2014 pay award survey data compared to current inflation. Incidently a couple of years ago the number was also 1.4% when inflation was running at something like 3.5%. They were far darker days. Things are improving.

    Reply
    Please complete the required fields.



  • Flash, we don’t need more homes, and that is an absolute fact. There’s only about 65 million of us – we can all move to Surrey and live inside your ego.

    Reply
    Please complete the required fields.



  • tt, I don’t think you know what fact means.

    Reply
    Please complete the required fields.



  • Right, I’ve got twenty minutes for this LVT thing. Before I start I’d like to make something clear. I am not vehemently against the notion of LVT because it’s just a tax and the government has to get tax from somewhere. A pound is a pound no matter what the tax is called. However the scorn I have for the subject as presented on these pages is derived from the way it is distorted, misunderstood and misrepresented by the HPC disciples of LVT (all two or three of them) and used to constantly spam and hijack the site. Any rational person would instinctively wince at the way in which it is constantly portrayed as an unequivocal wonder cure for all economic and social woes. “LVT would sort all that out” “LVT would (in of itself) automatically get us manufacturing more, investing more and building more infrastructure” ” LVT would cure poverty and inequality at a stroke” blah blah blah. It’s obvious flim-flam and I suspected (now confirmed) that one of them knew this and the other one or two just needed a hobby to get all blindly OCD about.

    I was going to talk about capital flows and investment cycles to “put a lid on this fantasy” but there is now no need because the main man fell before the first hurdle. I pointedly used the expression “pure form LVT” which caused an immediate cave in and retreat “there is no such thing as pure form…it’s always a bit rough and ready”. Really? That not AT ALL how it’s been presented here. How many thousands of times have we heard that “LVT is all we need” ? Remember this immediate cave-in and retreat from the usual presentation, the next thousand times we’re told it’s an unequivocal cure-all.

    I don’t really need to go on now but we were also told above that all we’d need to replace all income tax is a 2.5 percent tax on “your house price”. Not that it matters but what house price would that be? The house price right now or the house price once LVT had distorted it (the more rational LVT folks elsewhere frequently admit that LVT would have anything from a big to a drastic effect on house prices). So we see that the 2.5 percent number is deliberately obscure but let’s take it at face value at look at a couple of examples to see if it amounts to more than the usual film-flam. Let’s take a home counties doctor with earnings of £250,000 per annum and a 1 million pound house. At the moment he pays very roughly half his income in income tax and NI (maybe a little bit less). That comes to very roughly £125,000 per annum in income tax. However if a 2.5 percent LVT on his house price was used to replace his income tax he’d pay £25,000 pounds per annum. I’m sure he’d be over the moon and hold a party on his new yacht to celebrate but does that sound viable to you? Of course it doesn’t. Let’s now look at another end of the scale and take a worker living in a northern town. He earns say £25000 per annum and has a house worth £100000. He’d now pay only £2500 in tax per annum, so how on earth is this 2.5 percent going to replace the receipts from all income tax? That’s right, it couldn’t (let’s not forget that we also have to detract from the tax pot the millions of non-homeowners who would now pay no tax to make the claim even more ridiculous). I often wonder if numbers like this are put out because of a total disrespect for the analytical ability of the other contributors here? Either way this example is as instructive as the immediate cave-in from the usual “cure all” presentation.

    As per above, I was going to talk about capital flows and investment cycles but there is no need now. I wasn’t particularly looking forward to it because I’d have to wade through the usual unquantified cut and paste diatribe and shouts of neo homey something or other. Reticent quite sensibly realises above that LVT couldn’t replace all other taxes but wonders how I could be so dismissive of a (fringe) concept discussed in economics classes. I hope the above better explains my stance to it, as presented here. They usually stay well clear of actual numbers for obvious reasons. It is a convenient exercise in futility, after all, to argue with airy, undefined concepts that are not accompanied by realistic projections or models. It is even harder to argue against disjointed cut and paste diatribes complete with anti homey, anti neo hoo ha slogans. That’s why I think a dismissive attitude is the most appropriate response. If anyone sensible wants to discuss how investment cycles and capital flows make pure form LVT unworkable in a sophisticated globalised economy, I will be happy to oblige on a later thread. I will not however discuss it with anyone who has frequently chanted slogans at anyone who’s ever doubted the notion of LVT as a cure-all.

    Reply
    Please complete the required fields.



  • That is in no way a refutation of LVT flashman – and I await with eager anticipation on your capital flow/investment cycle refutation – I will of course pass it on for comment to all the Georgist economists I know.

    The issue of LVT is more than ‘land value’ as it really means all natural monopolies which are a lot more.

    You also have to think of the ramifications of removing taxes wages and trade equal to the LVT charged and the economic growth that will stimulate

    You also have to think about something called the ATCOR theory (first identified by the Physiocrats) in that All taxes come out of rents. So as you remove taxes on wages & trade then that surplus bolster economic rents & thus you can collect that extra through LVT

    I am glad you feel LVT will reduce house prices – as that is what I want. Permanently low house prices for everyone in the UK, with higher wages and more investment in productive activities.

    Reply
    Please complete the required fields.



  • Oh flashman the idea that you can say LVT is a cure all, then say this is absurd, is another one of your wonderful straw man arguments. LVT will do what LVT does, and nothing more – life is complicated and it will have many beneficial effects and no doubt unintended consequences just like any other economic policy

    Reply
    Please complete the required fields.



  • QED

    Reply
    Please complete the required fields.



  • Blimey Flash – bit early for a drink….

    Reply
    Please complete the required fields.



  • TT 🙂

    Reply
    Please complete the required fields.



  • Total value of UK property = £6,000 billion, assuming all owners pay LVT @ 2.5% = £159billion, not even enough to cover benefits spending…

    It would need to be 13% to match UK public spending, this assumes prices are fixed which as we know are not.

    Reply
    Please complete the required fields.



  • @76

    That’s not the way I do the sums, but the result is roughly the same. I can’t be bothered to look up the exact figures but:

    IT 155bn approx
    NI 105bn approx
    VAT 85 bn approx
    Total: 345bn approx

    (not forgetting that LVT should replace Council tax, stamp duty and business rates first, which are around £50-60bn, even once you discount SD on shares).

    Then you have UK property estimated to be worth £4trn (not all of it land). I thought MW preferred a 1% charge, but even 2.5% is only £100bn max.

    Then of course, you have to expect the land values to drop at least 50% and the tax to go up to compensate. It’s hard to say where the equilibrium would lie, but MW’s idea that the tax should end up equalling the entire location premium (aka land rent) such that an acre is worth pretty much the same anywhere in the country but carries a higher tax bill (I think that’s how I understand it). If pursued to equilibrium, an acre in London would actually be worth less than most, since there would be a risk premium attached to taking on such a hefty tax bill.

    It’s not inconceivable that you’d end up with the UK land supply worth £1trn and you’d be charging over 10% tax on it to achieve just over half the aims it’s charged with. You can rent a flat in London for £20k/year that costs £450k. Let’s say the land value dropped from £400k to £100k and we collect £10k in tax from it. The rent falls to £5k for a £15k total (tenants benefit from LVT, homeowners don’t). Anyone who buys the flat for £150k pays £10k/year on it, on top of their mortgage.

    I take Pete’s point that those who’d struck oil (or other natural monopolies) probably don’t have their land values in the £4trn figure, and that all natural monopolies feed through to land values, so the amount raised is likely to be higher (maybe even double but not so much higher that taxes upon income could be abolished).

    I whole-heartedly agree that there would be less distortion and it would be good for the economy as a whole.

    There are a whole host of issues to do with the transition that I can’t be bothered to enumerate, but an obvious one is that London would be paying a much greater share of tax than it does now for much of the transition.

    The reality is that it’s really hard to think through all the implications because everything would be so radically different.

    To be fair to MW, I don’t think he believes it can replace all other taxes. I think he just selectively suggests it could replace whichever one is at issue in the given debate.

    British people are averse to user charges (road tolls etc.) but they’re how most model governments charge for public services (Singapore etc.). That is partly because we’re so taxed upon things that we can’t restrain ourselves from doing (e.g. earning, living within a council etc.).

    Just because something’s not a panacea, doesn’t mean it’s not a good idea.

    Reply
    Please complete the required fields.



  • reticent, you are quite right that the taxable land base is not remotely sufficient to allow a sensible LVT tax rate but I think that your dire seeming estimates of falls in land values are actually not nearly dire enough. As I will explain below it’s not just the value that would shrink drastically. The volume would also shrink.

    Who in their right mind would want to own property just so that they could take on the entire nations tax burden (that is disproportionately large compared to the new taxable base). People are fond of quoting dramatic falls in the value of Japanese property but they dont all perhaps realise that much of this is due to the taxes accruing to these properties. You can’t give some property away because nobody wants the tax bill that goes with it. What manufacturing company would want to buy the large amounts of UK land necessary for large scale manufacturing when they could buy it in a competing country who deducts their massive investment in land from their taxable income instead of taxing them heavily regardless of the huge losses they incur as a consequence of their set up costs? What manufacturing company would invest in essential new plant when they’d be taxed heavily regardless of the losses they make for several years while they recouped their essential investment in plant and modernisation? What builder would want to build when the finished product is worth naff all because no one wanted to own it? The bricks and materials would still have to cost plenty because the manufactuers would be shouldering a huge tax bill because he needs a large amount of land to make stuff. The taxable base would shrink even further when companies played a desperate game of pass the parcel with taxable land and property. Large service industry companies would offshore as many functions as possible or push off completely leaving a few agents and satellites to handle the business thus drastically reducing their UK tax bill. They could do this because competing countries would gleefully welcome the companies and manufacturers we fought so hard to attract in the first place. We do not live in the semi-isolationist nineteenth century and Britain has to compete hard. It is thus easy to see that it (full LVT) couldn’t come close to working unless all our competitors did it and that is never going to happen when anyone who didn’t impose it would be in for an almighty windfall.

    You say it’s hard to think through all the implications (although I’ve hopefully done a bit of spade work for you above) and you admit that the taxable base it not nearly large enough ( I think it’d end up far smaller than you first thought) and yet you conclude that just because it’s not a panacea doesn’t mean it’s not a good idea? In light of what you say above, I find that a puzzling and please forgive me, a willfully stubborn conclusion. Pure LVT is clearly a very bad, totally unworkable idea. However what would be a good idea is higher taxes on property income and profit where people are paying less tax than they would if it were wages. That would be an eminently sensible and fair idea and it should have been done years ago.

    Reply
    Please complete the required fields.



  • @84 Companies already pay business rates. Properties for commercial use cost less per square foot and changing designation is very difficult. LVT doesn’t have to entail tax rises for them at all, and if you’re using LVT to curb/eliminate VAT (you can do some of the things MW advocates, just not all), you could engineer LVT such that the tax burden for these companies doesn’t rise at all (either in aggregate or individually, depending on what you were trying to achieve).

    I don’t think the £4trn figure even includes commercial property.

    The reality is that the same 20 families have owned the vast majority of the land in the country for 100s of years. They don’t pay much tax on it and they’re some of the richest people in the nation. “Higher taxes on property income and profit” sounds a lot easier to avoid and expensive to collect than LVT. How much of Grosvenor’s income comes from land? How hard would it be for the estate accountants to make it look like all profit came from other investments?

    All the central arguments for LVT still hold. If you eliminate all property taxes, replace them with LVT such that the tax take is still 35% of GDP, then gradually reduce taxes on profits/earned income. You would expect this to bring about MORE business investment and less speculative behaviour. The people who wanted to make use of the land would get on with it. Those who were only interested in capital appreciation would sell up. Those who were interested in collecting rents would see their net income drastically reduced.

    The parts of the economy that are productive would find little had changed.

    Reply
    Please complete the required fields.



  • Reticent, you can use my given name. I’m not Voldemort. You appear to have mostly side stepped the serious implications I outlined but in fairness you appear to be advocating a watered down version with exemptions. If we watered it down and dole out exemptions, then what’s the point? It just becomes one of several taxes and is hardly therefore worthy of evangelical support. I suppose if it was one of say six taxes and the country had a good spell we could claim vindication just like the LVT crew do for US states that have property taxes instead of income taxes. The problem is that they ignore places like Florida which has the same system but was the first into a property/economic crash and the last out. All the similar claims of success can be and have been diminished like this. Incidently I’ve lived in the States and just like everyone else there I’ve jumped through hoops to buy things like cars in no sales tax states when it wasn’t strictly allowed. This is an example of the distortions I talked about in my last post, that happen when all countries/states don’t harmonise taxes.

    You are overcomplicating my comment about equalising taxes derived from property with taxes derived from wages. I was thinking about simple things like the American system of taxing the profits (at the same rate as income tax) made from the sale of a family home. I’ve paid it myself. I filled out a 15 minute form and it’s entirely unavoidable. I was also thinking about the current situation where someone can massively extend/develop their main residence, make a few hundred thousand pounds and pay no tax. This profit is taxed in the States under the same simple system described above. I was not however taking about vague notions of taxing land away from billionaires called Patel who clearly got their land in the Norman conquest. I’ve got no problem with people who want radical redistribution but let’s not dress it up in a fancy wrapper or pretend that the country would wear it.

    Business rates are the most hated tax by businesses because they grind on regardless of investment induced losses or thin years. The inflexibility of the tax has caused millions of bankruptcies over the years to otherwise viable businesses. There are serious moves afoot to reform or even abolish them partly in acknowledgment of their current role in helping to destroy the high street (because its a hopelessly outdated concept that didn’t envision internet shopping or businesses with overseas distribution hubs). Using a hated, competition distorting, outdated tax that is about to be reformed is not a good cornerstone or sales pitch for LVT.

    You also appear to be suggesting that we could eventually afford to do without the huge amount of tax we currently harvest from corporations and businesses. As you have acknowledged the tax base available to LVT is already hopelessly inadequate, so if we did that we’d have to cull pensioners, sick people and schools and perhaps give away free food and baloons to induce crazy people with a few billion in the bank to buy a house. Politicians always accuse other politicians of making unaffordable spending promises. I ‘d love to see someone on the hustings shouting “support no corporate tax for hedge funds and insurance companies. Pay their share yourselves”. There wouldn’t be enough rotten veg in the whole of England. One of the most common delusions on the web is that reading a few blog articles somehow imbues more knowlege and insight that is held by highly trained paid experts (I’m not accusing you of this). Trust me if an advantage could be gained from it, we’d have done it long ago. Everyone’s known about it for decades and it never makes it out of the starting gate (there really is no dark room full of jews, bankers and toffs keeping these things down). It’s a fringe topic for a reason.

    It’s a pleasure debating with you and please understand that my acerbic comments (cant help it) are in no way aimed at you. I think it’s great that people examine radical solutions. My only real problem with LVT here is the way in which it is erroneously presented and evangelicised. It quite obviously couldn’t work (a conclusion I share with decades of government economists in hundreds of countries). Evangelicals (like enviromentalists for example) often have a tendency to turn into liars because they believe so deeply in their cause that they think dishonesty is justified if it gets the job done. It’s that same syndrome that we’re dealing with here but ultimately all it does is harm a cause.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    Reticent 83, basing the tax on selling prices leads to lots of silly circular calculations, because a higher rate pushes down selling prices etc.

    So it is easiest to base the tax on rental values, which are much more stable (which is how Business Rates works).

    The total rental value of UK land and buildings is in the order of £300 bn a year for residential and £90 billion for commercial (including business rates and council tax) if you knock of depreciation and maintenance costs, the site-only rental value is £240 billion or thereabouts.

    That’s your tax base, the government could collect 100% of that, which means you can cut VAT to 15% (the EU doesn’t like it if you go below 15% cost about £25 billion), get rid of council tax, business rates, stamp duty, inheritance tax, ATED and all that rubbish (cost about £45 billion), get rid of National Insurance completely (net cost about £80 billion) and there’s £50 billion left over to a) get rid of higher rate and additional rate tax and all manner of stupid tax breaks (cost £25 billion?) and with what’s left you can bump up the tax-free personal allowance a bit to £14,000 a year or something (thus easing the benefit trap).

    Fag packet says, the LVT would average out at 3% – 3.5% of what housing is currently worth and would be a bit higher than Business Rates.

    Fag packet also says, if your earned income is at least one-eighth of what your house is currently worth, you’d end up paying less in tax, a bit less or a lot less, does it matter?

    So actually, there’s no overriding reason to assume that house prices would fall (putting bubble mentality to one side).

    And no, this would not be pure form LVT, so what, it would be at least half way there. Something is better than nothing. From there on in, you just nudge up the LVT a bit eery year and reduce the income tax/corporation tax rate a bit.

    And this would not be “massive redistribution” in the sense of robbing the rich to give to the poor, or the current system of the One Per Cent milking everybody else, but it would be “massive redistribution” of the tax burden away from workers and businesses (aka ‘wealth creators’) and on to people who own lots of valuable land.

    It’s not top-down redistribution, it’s sideways redistribution. High earners would benefit as would low earners, those who would lose are the people who are looking forward to inheriting overpriced housing (be that Kirsty Allsop or the Duke of Westminster’s oldest son).

    Reply
    Please complete the required fields.



  • The sums keep changing and it’s all based on the complete fantasy that house prices and land values wouldn’t fall. You wont find many LVT’ers who would agree with that (the other two have also disagreed above ) and you certainly wouldn’t find any non LVTers who would agree with it. It really is obviously not true.

    We are also expected to believe that there would be enough in the pot despite high earners, low earners (and by implication middle earners) and businesses benefitting. I think they must have been donated a pot of gold by a friendly leprocorn.

    At least we all now agree that other taxes would still be needed and that we couldn’t have pure form LVT. I bet stillthinking didn’t expect almost a hundred comments.

    Reply
    Please complete the required fields.



  • I’ll never persuade my mum that the Shroud of Turin isn’t genuine and I won’t persuade this tiny fringe group either. However that was never the point of my earlier posts. I knew if I prodded all sorts of nonsense would be revealed. There is a comment above that I’ve just noticed @82 from a bloke with a calculator who realises what nonsense is pumped out about LVT without opposition on this site. Fortunately there are millions of people with calculators and common sense in this country. That’s why this will always be a fringe topic with negligible support

    Reply
    Please complete the required fields.



  • As you can all see, the numbers don’t add up and its been reduced to just another tax tacked on to the list. Hopefully now that this has been established, the topic will be posted in a context more appropriate to its actual scope.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    Reticent:

    “You can’t tell me that anyone would bother to spend £2000/month on a decent 2-bed in zone 2 for the rest of their lives. They wouldn’t”

    Quite possibly not, but there will always be somebody else queuing up to rent it.

    So you move to London to make your fortune in a fancy job, pay the tax/rent while you are living there, and then you retire somewhere cheaper (or nicer) and somebody from the cheaper or nicer area moves to London.

    But let’s make it even simpler and assume that LVT replaced council tax etc and income tax in full.

    So by definition, nearly all working households will pay a few thousand quid less in tax overall, and poor widows in mansions will pay quite a bit more, but they can roll up and defer this, so not a huge issue.

    So the couple currently paying £24,000 a year for a 2-bed in Zone 2 is also currently paying roughly the same figure in income tax (as it happens, I pay slightly more income tax than rent+council tax, others will no doubt pay less, but ballpark it’s the same.

    We know that rents are quite simply local average wages minus tax minus (say) £10,000 per person for other living costs. And that is what attracts people to London (apparently half of uni graduates move to London and one-quarter of people are private renters). I could easily save £10,000 a year in rent if I moved to Leeds or Birmingham, but I’d have to take a pay cut of £20,000 a year, which is why I wouldn’t do it.

    So if London wages for such a couple are now income tax free, more people want to move there to get the really well paid jobs and so rents probably go up, i.e. the tax base goes up, not down. I’d still choose to live and work in London because the extra I earn more than compensates me for the higher rents.

    It’s easy to think up counter examples where rental values would go down in expensive areas, and rental values can’t possibly go down in cheap low-wage areas because they are rock bottom and LVT in those areas would be minimal.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    “How on earth is anyone going to afford to make mortgage payments and pay the equivalent rent to the government at the same time?”

    Compare like with like!

    For younger, working couples, the LVT they’d pay would be a lot less than the income tax they are currently paying (assuming for simplicity, LVT replaced income tax, it’s not the worst tax but at least we don’t need to argue about tax incidence).

    We always hear about Poor Widows In Mansions, whose tax bills would go up, fine, I don’t dispute that, but younger, working couples in smaller homes are diametrically opposite, they’d be saving the equal and opposite amount.

    Reply
    Please complete the required fields.



  • Reticent, nice one. I think this thread has gone on long enough so I’ll keep it short and I hope not to unfair on your post. It’s refreshing to see someone cop to a few errors and then correct them.

    In a similar vein to something I said before to you, I am puzzled by your conclusion that it would work well in light of your admission that the sums presented don’t add up, that the implementation would be flawed and that a rush to the exits would be a nightmare to mitigate against. It’s a bit like saying that you’d be very wealthy despite being declared a bankrupt. Regarding the rush to the exits, that’s an inevitability so what’s the point in carrying on describing how things would be if the inevitable (or close to inevitable) didn’t happen? The rush to the exits (when it was inevitably not implemented by some or all of our overseas competition) is a fantastically decisive eventuality but it is almost always ignored by LVT’ers. Maybe its been too many years since I was a student but I can’t be bothered with concepts that are placed in blissfully ignorant vacuums. I also think you’re being far too forgiving of mw’s ‘miscalculations’. It doesn’t matter if they are deliberate or accidental but these calculations are one of two cornerstones of a viability claim and they have been shown up here as being wildly out. Thats quite important. I am glad however that you have now acknowledged the other cornerstone of a viability analysis by acknowledging the ‘rush to the exits’. I have to say that once the rush to the exits has been acknowledged, the topic should end in the same way as described above by my wealthy despite being a bunkrupt analogy.

    Likewise with my/your comments on Dorling. He is clearly not so thick that he forgot to look at the data that mattered (post census), so why give him a pass?

    I’m glad you got stuck into mw’s rent and value bits because it saves me the effort. I would have added a few more points but you captured it pretty well

    The irony in any disagreements we might on this topic is that you have actually summed up my argument pretty well. All I wanted to achieve here was the acknowledgement that pure form LVT couldn’t exist, that it was no panacea for all ills and that the numbers being presented here were incorrect. Job done.

    Regarding your other comment about people who read things on a forum and take it as gospel being computer illiterate or dim: sure but
    that’s not particularly fair because I think its more appropriate to aim your venom at the people doing the manipulating (unless of course they are dim themselves). People with a causes have always found gullible ‘dim’ sorts to do their dirty work. They never get to fully join the top table (because ultimately they are an embarrasement) but they are patted on the head just enough to keep them baring their teeth and salivating at the enemy. I’ve been to several planning consultations where swivel eyed sorts are used to shout and bark at the opposition while their (anti building) handlers sit passively pretending to be above it but clearly surpressing a smirk.

    Have a good weekend

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    There would be “no rush for the exits”, that’s gibberish.

    We know for a fact that there are some really wealthy non-doms who are happy to pay £50,000 a year in non-dom charge for the pleasure of living here but not having to declare their income to tax. So if they have income of more than £200,000 a year, then that £50,000 is less than the tax they’d have to pay living in any other country.

    What if the LVT on the nice sort of house they like to live in were £100,000 a year and there were no income tax (and hence no non-dom charge)?

    The same applies, they would continue living here quite happily.

    Of course, there are lots of people who can’t or won’t pay that much, but they can live in a home where the LVT is £10,000 a year or £20,000 or whatever – as long as this is less than the income tax they’d have to pay in any other country, they are happy to pay it.

    “it was no panacea for all ills and that the numbers being presented here were incorrect”

    My numbers are always correct and at least I go to the bother, you just make up fact- and evidence-free scare stories.

    So what if LVT would never be pure form? It’s still better than taxes on earnings and output.

    And no it is not a panacea, no LVTer has ever said that, but such a tax shift would make everything “a bit better”, so unemployment down a bit, profits up a bit, house prices down a bit, fewere vacant buildings, economy growing a bit more steadily, boom-bust cycle dampened, trade deficit and govt deficit down a bit, slightly higher income inequality but much lower “wealth” inequality, and so on.

    There are loads of real llife examples to prove every single one of these claims.

    So even if unemployment only went down 500,000 that is still not a perfect world but it would be “a bit better” and “a bit better” is always the option worth choosing.

    Reply
    Please complete the required fields.



  • Actually I forgot to ask why you called me Joe?

    Also I didn’t mean to ignore your comments re think tanks. I think saying ‘almost all think tanks …” is bit of a wild chest beat. It would be more accurate to say a hand full of think tanks often staffed by low paid bods who couldn’t get employed anywhere lucrative. Seriously I think you know that it’s a very niche topic with minimal support and prospects. Let’s be serious, even here it gets almost no traction. There are only what, 3 or 4 of you despite years of grinding away at the website. The abstainers from lvt posts are almost deafening and I think the disproportionate spamming of the site has almost certainly driven away many posters who are bored silly by it. There are a few very clever lefties here who never comment on it which should tell you something. If I’m honest its this disproportionate spamming that gets up my nose more than LVT itself.

    Reply
    Please complete the required fields.



  • mw, I hope your bilge pumps are working. Your numbers are always correct!!! People can read you know.

    Anyway none of that really matters. You’ve considerably softened your stance, so hats off to you

    To sum up we all now agree that:

    It’s no panacea, there could be no such thing as pure form LVT and some other taxes would still have to exist.

    Hopefully future posts will reflect these new accords. If they do I’ll join the hundreds of other posters who ignore the subject.

    Reply
    Please complete the required fields.



  • Flashman its your spamming of spurious & fallacious arguments that gets up my nose on this site, but we can all have opinions. But debating should make us all wiser, and your hectoring does help focus the augments.

    But an olive branch of understanding, however tentatively offered will be greatfully recieved & I will try to respond in kind.

    My own vision of LVT is one where all monopolies are taxed, natural or man-made where appropriate and practical. This to be bolstered with externality & pigovian taxes. Such a system would mean we could almost get rid of the bad taxes and reduce them considerably. Also you need to think that in an LVT world with more jobs and productivity and much cheaper land and access to monopolies you would reduce the need for public spending or increase the efficiency of public spending on things that improve productivity such as infrastructure, scientific research, health and education. Better efficiency of natural resource use will reduce our need to ‘police the world’ securing natural resource access.

    This is why ‘LVT’ supporters, like myself, support it and think it will solve so many of the issues we face today, not just our housing crisis. Its a logical extension of its effects, that why so many LVT supporters are mathematicians, scientists and theoreticians as it takes a working understanding of logic extrapolation to understand its positive effects. Practical people recoil and mistrust such logical extrapolation and often experience major cognitive dissonance.

    Just think of all the monopolies apart from Land that make up ‘Economic Rent’ and things that are bad for us all:

    Road congestion pricing
    The seigniorage of money supply
    the many monopolies created by government regulation, specifically in the financial services industry
    Taxes on patents & intellectual property
    Taxes on pollution
    A carbon tax at source
    mineral taxes
    Booze and fags, sugar & salt – legalise wacky baccy & tax it
    packaging & waste
    Taxes on deep sea fishing instead of fishing quotas
    electromagnetic spectrum lisences.

    My own favourite is what I call a ‘brain worm’ tax – for taxing advertising. Advertising is so good these days because our minds cannot resist it, it becomes a competition to monopolise our mindsets, so a tax on advertising would help limit this monopoly.

    The billions would mount up quickly and all the time could be lowered on the bad taxes. Not being an economist I would hate to work it out but some economists have. There is a couple of economists in america who theorise that economic rent is far higher than public spending.

    Reply
    Please complete the required fields.



  • Like I say people can read. You were caught out above quoting numbers that made no sense. Even one of ‘your own’ pointed this out. I invite anyone new to the thread to scan through it.

    People can also read above where you specifically cop to it not being a panacea and that there could be in no such thing as pure form LVT. The panacea context was also fleshed out by one of your own and you referenced it so I think you understand the context. In any case the definition of panacea should be sufficient

    Be comforted that the three or four LVTers will remain zealous but on this showing there are unlikely to be any more.

    Is the ‘Joe’ thing a killer LVT argument thatwe should know about?

    Reply
    Please complete the required fields.



  • In any event, whatever the economics, a recovery build on wholly debt is no recovery.

    Reply
    Please complete the required fields.



  • You had me worried there hpw. But then I relaxed when I looked at some sector by sector EBITDA and book debt:capital ratios. Presumably a debt expert such as yourself also keeps a close eye on stuff like that.

    Reply
    Please complete the required fields.



  • using big words like sector by sector EBITDA and book debt:capital ratios does not refute hpwatchers assertion in any way shape or form, simplistic as it may be. Debt is much more complex in its forms and the expanding debt creates the money supply that feeds into these these business performance measures of earnings & corporate debt.

    Now lets have a grown up discussion on debt, money supply and house prices.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>