Thanks to everybody who took part in the last Fun Online Poll:
"Legal immigrants should be entitled to the same welfare benefits as a UK born citizen after having supported themselves for..."
Six months - 1%
One year - 7%
Two years - 12%
Five years - 32%
Ten years - 33%
Never - 16%
I was wavering between five and ten myself; in the end UKIP went with ten years, so fair enough, I don't think they'll lose too many votes with that.
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I've had a bit of a spat over The Multiplier Effect at Houseprice Crash (see comments 21 onwards), and I'd be interested to know what people think of it.
Cast your vote here or use the widget in the sidebar.
Dismayed
39 minutes ago
14 comments:
On that other thread you said, "Let's say they build Crossrail at a cost of £16 billion, that's an annual amortised cost (depreciation plus interest) of £1.6 billion, if output of private sector in and around London goes up by more than £1.6 billion (and it appears that it almost certainly would) then yippee hurrray, let's do it!"
I don't think this is really the classic multiplier effect, which talks about the supposed economic stimulus of the spending itself. (In this example, the builders of crossrail get some money, which they then spend, creating more output etc) The classic multiplier effect is discredited Keynesian nonsense. But obviously infrastructure is important and building it can improve the output of the economy.
Mark: having had a quick read thru the first ten or so exchanges of views on the multiplier, there is an essential ingredient that you and the others taking part have missed.
As it points out in the basic economics text books, the multiplier only applies to what are called “injections”. These are NET increases in demand unmatched by a decrease anywhere else. E.g. an increase in exports or increase in government spending funded by printed money are injections. In contrast, an increase in government spending of £X financed by increased tax of £X clearly has no effect on aggregate demand.
Indeed, I did a word search for "injection" and the word wasn't there.
Adamcollyer more or less gets it right when he says that the multiplier refers to the effects of SPENDING with no regard for the source of the spending. As to his claim that the multiplier is "discredited Keynsian nonsense" I don't agree with that. Where are the reputable economists who have argued with or tried to contradict the multiplier idea?
AC, I'd tend to agree with you.
Ralph, fair point, but such 'injections' involve taking money away somewhere else. Printing money, in a literal sense, rewards debtors and punishes those with savings. Even exports are pointless unless you spend the money on imports.
Mark: I’ve just had a look at what my economics text books say about multipliers – something I might have done before pontificating on the subject above.
They actually use the word multiplier several different scenarios. I.e. they use the word in a quite similar fashion to the Wikipidia definition, that is as a broad mathematical type phenomenon.
Also when using the word multiplier in reference to spending increases, they tend to use the word “autonomous” by which they seem to mean “we’re considering the effect of the spending increase in isolation, i.e. we are deliberately ignoring where the relevant money came from”.
This “ignoring where the relevant money comes from” is a reasonable ploy, seems to me, in the case of extra income from additional exports. To illustrate, extra UK exports to Italy sucks money out of Italy which reduces Italy’s spending on stuff in the US, and elsewhere in the World. I.e. precious little of Italy’s reduced spending is felt in the UK.
On the other hand in the case of Keynsian “borrow and spend”, I agree that it is unrealistic to ignore “where the money comes from”. And in fact there is a lot debate on how far Keynsian borrow and spend is stymied by “crowding out”. Personally I think “borrow and spend” is so uncertain in its effect that we shouldn’t bother with it.
I don’t agree with your claim that “Printing money, in a literal sense, rewards debtors and punishes those with savings.” Obviously if TOO MUCH is printed, that’s the effect. But in the present recessionary environment the private sector is saving money as never before. If government doesn’t print extra money to satisfy this increased desire to save, we’ll just get “paradox of thrift” unemployment. Indeed the recession has been caused precisely by deleveraging hasn’t it? It has been caused by the desire to pay off debt and save more.
The UK government printed an extra £200bn in 2009. The markets are not predicting serious inflation: in my view quite rightly.
R, thanks. That's what I call proper two-sided economics, so I probably agree with it.
Interesting, but you didn't really explain how the NIMBY/Homeownerist Alliance has prevented us having a proper broadband system.
B,
1. There's plenty of broadband in areas with a certain minimum population density. This gives a profit to the broadband provider, and an unspecified 'consumer surplus', which manifests itself as an increase in rental value (or capital gain) to the landowner.
2. There are some areas that are so sparsely populated that it will never make economic sense.
3. There are also a lot of areas (covering maybe ten per cent of the population) which are marginal. There is no profit to be made by broadband provider if he has to fund entire capital cost himself, but if the landowners were to make a contribution proportional to the increase in rental values, then overall it would make sense.
4. Ergo, if these marginal areas want broadband, the landowner is going to have to pay for it via a tax on the uplift in rental values, i.e. a very modest Land Value Tax, i.e. something which is anathema to the NIMBY/Home-Owner-Ist Alliance and will never happen. They'd rather slap those grubby little people who live in towns with a 50p a month landline tax.
Ralph, "If government doesn’t print extra money to satisfy this increased desire to save, we’ll just get “paradox of thrift” unemployment."
The paradox of thrift is also wrong in my view. Thrift provides resources for investment; lack of thrift produces consumption instead. In the long run, we need more investment and less consumption. See here for more details. (Sorry to advertise on here but the argument is too long for a comment!)
AC, while I share your misgivings about the paradox of thrift, it is also true that in the medium term production = consumption.
That's the whole point of producing - to enable yourself to be able to consume more. The whole point of exporting is to be able to afford more imports. The whole point of investing is to be able to produce more, and hence consume more, in future.
The only real point in 'saving' is to spread consumption more evenly over your own lifetime - because the amenity lost through bit of foregone consumption when you are earning a lot is far less than the amenity gained from that extra consumption when you are not earning so much.
Mark, Production = Consumption + Investment in actual fact.
For example, you can spend money on producing a washing machine or spend the same money producing a machine tool to make more washing machines.
If you reduce the proportion of your production that is devoted to consumption, i.e. use more of your production to increase future production, then economic growth will be faster.
How many legal immigrants are on welfare in proportion to earning a living ?
Of those on welfare, how many are willing to work compared to unwilling ?
Of those willing ask why they cannot find work ?
That is the real question. And it is the biggest question It will be the same reason as non immigrants.
Lets deal with the big problems, not the small ones... perhpas?
Mark, re broadband, if find it very odd that NuLab, which is a party of the cities and large towns (see electoral map for last general election) should penalise their supporters in favour of the other lot's voters.
Mind you, I reckon this government is quite capable of coming up with an idea as daft as this levy without the HO/NIMBY Alliance having to say a word. The only justification for it seems to be that the Continentals have better broadband than us, not that we actually need anything more than we have at present.
AC, nope. Production = consumption.
"Investment" is on closer inspection a meaningless phrase. If I run a laundrette and buy a washing machine, that's "investment" because it helps generate income; if I buy a washing machine for my private home that's "consumer expenditure". Where's the big difference?
People who run businesses know perfectly well that there are longer-run capital costs which will improve their production (i.e. the consumption opportunities offered to others) in future, in exchange for which they make higher profits which in turn increases the consumption opportunities accruing to the business owners.
RS, no idea, this was a tidying up exercise.
B, indeed, this is a mystery to me as well. I suppose it's all about the "white heat of technology" orsomething.
MW: On tidying up, me neither. I'm pro-immigrant and of course wish to see them treated like humans rather than commodities. Particularly when they produce more wealth per capita than locals. Apologies if that was not clear or is irrelevant
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