Friday, 19 January 2018

Killer Arguments Against LVT, not (433)

From the comments at The Guardian:

KLN 1. "What happens when all land owners sell sell their property to the lowest bidder, run for the hills and the economy become non-existent?"

KLN 2. "LVT will allow rich people to live in the best areas and push poorer people out as the town develops. The well to do will live within walking distance of the local amenities - including the best schools..."

Are those two not complete opposites? Both are wrong (KLN 1 being wronger than KLN 2), but they cancel each other out.

So what's it to be, you Homey twats? The rich will sell up and move abroad, or the rich will happily pay to be in nice areas? The poor will live in slums, or poor will snap up the nicer homes which the rich abandoned?

Every now and then, the Daily Mail manufactured outrage is perfectly justified

From The Daily Mail:

A Pakistani paedophile who claimed he didn't realise it was illegal to have sex with 14-year-olds intends to use his conviction for grooming to help him claim asylum in the UK...

He now claims his conviction means he cannot return to his homeland, as anger over a recent child rape case means it is now unsafe for him.

If he gets away with this..? FFS.
What is not quite clear, is how and why it is a crime to ask online vigilantes posing as 14-year olds for sex.

You ask a 14-year old you know to be 14 for sex, you're in trouble. You ask a 14-year old you genuinely believe to be 17 for sex (because she told you and she looks it), surely that's a defence or a plea in mitigation.

Let's assume having sex with a 17-year old you know is 17 is OK. What if you have sex with a 17-year old you genuinely believe to be 14 (because she told you and she looks it)? Would it make a difference if you knew she was lying?

They tried to explain inchoate offences on the criminal law unit, stuff like "attempt".
One of the questions was, is it a crime to (attempt to) do something you believe is a crime, but actually isn't?

Or would be impossible, like sinking a ferry by firing an airgun at the hull? IIRC, they can do you for criminal damage to the paintwork, but not for attempted murder.

IMHO, it would be impossible to have under-age sex with online vigilantes posing as a 14-year old, so attempting to do so can't be a crime either. Or perhaps it is. I never understood that bit.

But hey, in the instant case, deportation would seem like a reasonable punishment.

Thursday, 18 January 2018

Indian Bicycle Marketing: Big businesses v small businesses

Bayard left a throwaway comment on a thread about Carillion a couple of days ago:

"But the govt (and the EU) ignores small businesses because we don't so as we're told, can't lobby for bungs, oops contracts, and push back against their regulationism."

Not only do they ignore small businesses, they pretend that they don't exist. "Businesses" to the government, are only large ones run by the likes of Richard Branson or Philip Green. The left wing happily go along with this myth, as the image of silk-hatted millionaire boss profiting from his low-paid cloth-capped workers suits their rhetoric so much better than the owner-operator working long hours on slender margins and even thinner profits.

Then I noticed similar comments by people I follow on Twitter:


It's interesting that right leaning libertarians I follow are saying little about Carillion. I've noticed that most of them are much more interested in topics like multiculturalism and the EU than they are about corporatism.

Capitalism needs as level a playing field as possible. The Carillion mess shows so many ways in which markets are horrendously distorted. Market Libertarians have to call out this stuff as vigorously as lefty folks do.

In fact, pro market libertarians need to be more vigorous than lefties in exposing corporatism. This is because if lefties are the only ones doing it, then people will assume that the only alternative to corporatism is socialism.

@Land_Liberty, regarding an article in the fairly hard-left Jacobin mag, headed Small Businesses Are Overrated*:

Left and right on the same hymn sheet here. “Current state of small biz poor, ergo anti-monopoly movement bad.” Nope.
This is actually another fine example of nominally left and right, for example the UK Labour and Conservative parties, both subscribing to the same basic lie, each to serve their own nefarious ends.

The Conservatives promote the Protestant Work Ethic myth, if only you work hard enough, you too could be Richard Branson, a billionaire merchant banker or the next Duke of Westminster. Labour, under Corbyn in particular, seem to throw all employers in one pot; the little bosses are as guilty as the big ones - so let's regulate them all to death.

As ever, the key is to distinguish between:
a) rent-seeking, corporatism or outright corruption and
b) proper wealth-generating businesses.

The actual size of a business is irrelevant. There is some correlation - large businesses can hold out for bail-outs and subsidies; similarly businesses which collect rent find it easier to grow - but that is not correct way of looking at it, there are plenty of gigantic corporations who do a decent job, and plenty of small businesses who live off bungs.
* The article includes a chart showing that average wages are higher in larger businesses. Which is why "small businesses are overrated".

Well duh.

It's clear that entry-level, bottom rung wages must be pretty much the same in small and large businesses. So you earn much the same in the local corner shop as at the checkout in Tesco. A car mechanic in the local garage earns the same as somebody on the production line at Ford.

Small, local businesses only have one or two levels in the heirarchy, there are the workers and the boss, the boss earns a bit more than the workers, but not much more. The larger the business, the more levels there are, and people in each level earn a bit more than in the level below, so in massive corporations, the top dogs earn (or pay themselves) a hundred or a thousand times as much as the bottom level.

Therefore, average wages in large corporations are higher than in small businesses. That's neither a good thing nor a bad thing in itself, it is just is the way it is.

Large corporations can only exist to exploit economies of scale, and those economies go into higher wages at higher levels of the hierarchy. The higher paid workers are exploiting the business' owners, rather than the other way round.

Wednesday, 17 January 2018

Schrödinger's missing beats

I haven't spotted any wonky timing in ages, but there is something wonderfully weird in a song from Keith Richard's last solo album.

Listen to the chorus at about 25 seconds in, the first "Trouble..." is on the last two beats of the bar (third and fourth), but the next "Trouble..." appears to be slightly too soon, on the first two beats (until the next bit makes it clear that they weren't, they were on the last two beats).

What actually happens is that the next bar (after the first "Trouble...") containing the line "... is your middle name" is actually six beats long, so the "Trouble..." still comes on the last two beats (in 6/4 time) but appears to come on the first two beats, if you have been tricked into splitting it into 4/4 and assume that the left over 2/4 bit is the first two beats of the next 4/4).

So are there two extra beats, or two missing beats? I'll leave greater minds than mine to debate that one.

"... because they didn't teach us about it at school." is the short answer to that.

From The Daily Telegraph, April 2015:

Why has everyone forgotten about male suffrage?

... Before 1918, the vote was restricted not simply by sex but also by property qualifications. Roughly 60pc of adult men were then entitled to vote. At the 1910 general election, 7,709,981 men were registered to vote. By the time of the 1918 general election there were 12,913,166 registered male electors in the United Kingdom.

The 1918 Act is, rightly, most famous for having brought more than eight million women into the electorate; but, for the first time, it also enfranchised more than five million men over the age of 21 without regard to property or class.

I knew that the number of men allowed to vote crept up gradually over the centuries, as the "property owning" condition became less and less onerous, but I didn't realise that universal (male) suffrage was as recent as that.

Which makes the outcomes of the 1906 election and the second 1910 election, when the Liberal Party won on a platform of Land Value Tax, all the more surprising.

Economic Myths: Local taxes

Let's refer back to the handy cut-out-and-keep guide on what makes a good tax:

I've been prompted to think about this a bit more from the various KLNs that were advanced in response to a tweet by @tomcopley.

There is this brainwashing that taxes on land and buildings are only appropriate for paying for "local" services (this is actually embedded in the German constitution, at the suggestion of the Americans).

The Homeys always start flailing about and saying that LVT is the worst way to pay for "local" services, and either a Poll Tax or Local Income Tax is better (despite those two being diametric bloody opposites, with LVT being the Goldilocks middle. Sales taxes go round the clock and start behaving more like a Poll Tax, "on closer inspection, everything becomes something else", as Steve S and I like to say).

That's actually a minor issue.

I compiled that handy cut-out-and-keep-guide on the assumption that we are looking at national taxes. National taxes which serve to reduce regional discrepancies, so the wealthier regions subsidise the poorer ones (in return for leeching off them in the first place), are surely inherently better than "local" taxes?

Think about it, Council Tax operates like both LVT and Poll Tax at a hyper-local level. Me, the wife and two kids live in a detached house in Band G, so we pay about twice as much as a two-person household in a one-bed flat across the road in Band B. So we could express this as a modest LVT (our house is worth about twice as much as a one-bed flat across the road) or a Poll Tax of £700 per person.

Whichever way I look at it, that seems fine to me if I am just comparing what we pay with what the people across the road pay.

What is not OK, is when an arbitrarily defined amount of arbitrarily defined "local" spending is to be funded out of a "local" tax.

They could replace Council Tax (which pays for a tiny fraction of "local" spending) with a "local" income tax. To get £700 per person where I live, the appropriate income tax rate would be something like 3% of local incomes (assuming no personal allowance), no biggie and I'd be happy to pay it instead of Council Tax, it's a few hundred quid either way.

To raise £700 per person from the most depressed areas of the UK, the income tax rate would have to be more like 15%.

Does that outcome not seem like madness? That higher earners in high income areas pay 23% basic rate income tax and people in depressed areas pay 35% basic rate income tax?

Try this again with Poll Tax, local LVT or local Sales Tax and you get the same answer. They are all inherently regressive.

Which is why, if you really want LVT to come into its own, it has to be a national tax.

Here endeth.

Tuesday, 16 January 2018

Some people are a bit confused

From The Daily Mail:

Last April, federal prosecutors filed charges against two men suspected of spying on the opposition People's Mujahedin of Iran (MEK) on behalf of Iranian intelligence, Deutsche Welle reported.

The Paris-based MEK is an Islamist-Marxist-feminist militant group seeking to overthrow Iran's theocratic government. Iran has blamed the group for stirring up protests earlier this month in Iran.

I know what each of those four adjectives means, and I am sure there are plenty of groups which tick two of those boxes; if you drop "Islamist" then a group which ticks the other three is plausible; going for all four is a comedy sketch.

Killer Arguments Against LVT, Not (432)

From Farmers' Weekly:

The Scottish Land Commission has been instructed by the government to investigate the tax as part of a wider piece of research on land reform issues.

The taxation would raise public revenue through an annual charge based on the rental value of land, typically levied against the unimproved value of that land, not taking into account any buildings, services or infrastructure.

So far so good, here's the classic one-liner:

Shadow rural economy secretary Peter Chapman said the prospect of such a level could be “catastrophic” for farm incomes.

Woah! His argument is totally devoid of facts - without knowing the proposed tax rate (anything between 1% and 100%) it is impossible to say what the impact will be. It could be anything between "very modest claw back of agricultural subsidies" (which average out at £40 per acre per year in Scotland, as far as I can make out) all the way up to "quite a lot".

Then we get into logic free arguments:

Andrew Wood, partner with property consultant Bidwells, said this plan would increase food production costs and put Scotland at a further disadvantage for doing business and securing investment.

Whether it increases total food production costs or not depends on whether the Scottish government reduces other devolved taxes (income tax, business rates, LBTT and Council Tax). Because of the tendency of LVT to stimulate output per unit of land, per-unit production costs will probably fall, or worst case, stay the same.

LVT has little impact on "doing business", in fact it probably helps people wanting to "do business" because it strengthens their hand against land owners who want to hold them to ransom charge them rent, and after all, it's "business" which invests, land is just there to be used.

Money for nothing...

From the BBC:

Rudi Klein, head of Specialist Engineering Contractor, an umbrella group representing suppliers to the construction industry, said Carillion outsourced virtually all its work.

He said the government knew of Carillion's reliance on sub-contractors, but continued to award the company lucrative work despite growing concerns about its finances.

"It's that supply chain who is going to bear the massive loss," he said. "There could be a large number of firms that will experience substantial financial distress."

... and presumably their chicks for free, although that is not expressly stated.

Monday, 15 January 2018

Carillion: Winners and Losers

City AM have listed the winners to save me the bother:

... Amid the chaos, however, lurk some cunning opportunists – most of whom can be found in Mayfair.

In many ways, Carillion has been the story of the short sellers. The most bet-against stock in Europe will see hedge funds share profits of around £300m between them. Marshall Wace took the biggest piece of this as shares plunged in the autumn. After it exited stage left, the fund was quickly replaced by rivals, steadfast in the belief worse was to come. Blackrock, the world’s biggest asset manager, has stuck around and still holds a chunky bet against the contractor.

Then there is a raft of advisers picking up hefty fees. The jewel in the crown would be the administrator mandate. EY is reportedly in the box seat, but pension scheme adviser PwC may cry foul, arguing its rival has a conflict given EY’s six-month role helping the company right-size operations.

But never mind the winners, back to the many losers from Carillion's decline – including, of course, the government. A decade on from the financial crisis it is incredible the state yet again finds itself under pressure to consider a taxpayer bailout of a private company, this time during a period of economic growth. Such situations imperil public faith in business and the very principles of a market-led economy, and remind us that regulators – in the financial sector and beyond – have some way to go before we can be confident that the spectre of bailouts has been consigned to the past.

As to paying hundreds of millions for "administration", sod that. All the government needs to do is send somebody round to each site where Carillion operates and tell everybody "You're working for us now, here's your new employment contract". Those people will then get onto their own suppliers and tell them to send future invoices to the Department of [whatever] and everything continues as was. It'll save the government taxpayer a fortune.

This is also another argument for deposit funded corporations - like building societies, co-operatives or partnerships, they don't have a share price, so speculators will have to find something better to do.

Sunday, 14 January 2018

Daily Mail on top form

Black cab rapist John Worboys set to live in £300,000 seaside flat near FOUR of his alleged victims after his release from jail

Friday, 12 January 2018

Killer Arguments Against LVT, Not (431)

Arch-Tory/NIMBY Nicholas Clarke on Twitter @drmagwai

And what you fail to mention is that lvt only works properly when all land is already developed. Do we want the UK to become a mega city?

This is the sort of baseless crap that we have to deal with.

I remember that Sobers (I think it was him) once advanced the argument that LVT would only work for an agricultural economy, also without justification or explanation.

As per usual, we are presented with two baseless arguments which cancel each other out.

Let's take a breath and do facts and logic:

1. Most of the UK by surface area is 'developed'. Up to one-tenth is actually built on (incl. roads, reservoirs, back gardens etc) and most of the rest has been 'developed' or adapted for farming and some bits have been kept close to pristine for tourism, leisure, wildlife etc.

2. Even if both arguments, taken in isolation had some validity (which they don't), then it would be quite easy to split up the UK (or any similar country) into two regions - the urban bits (where LVT would work properly, even by Nimby Clarke's own admission) and the remaining rural area (where LVT would work fine by Sobers' admission).

3. The UK is not going to become a mega city any time soon - with or without LVT - it would require a twenty-fold increase in population to about one billion to make it worthwhile. So that is the stupidest rhetorical question of the day.

What is the tax base under a LVT + Citizens Income?

One objection against LVT I recently stumbled over was that as a single tax it violated the principle that everyone should contribute to state spending.

Saint of Bacon who recorded a video on Youtube critiquing the LVT said "My argument is the idea of a single tax isn't going to fly in the US because we've adopted the view that everyone should pay into the government. Meaning having some segment of the population be tax exempt by choice isn't how America likes to function. Efficiency only gets so far and that is my point, quoting philosophy that I don't subscribe to isn't going to convince me. You're literally in the position of a Christian quoting Bible courses to an atheist."

Let's assume for arguments sake the LVT could indeed cover all of state spending is Bacon correct?

Say a country spends £250bn on services and £250bn on benefits.  As the rental value of land is £500bn pa, for reasons of efficiency and justice it decides to shift to a LVT and Citizens Income , negating the need to tax incomes, capital or transactions.

The principle behind the LVT is that it is a compensatory payment to those excluded from valuable natural resources. That it is collected and redistributed/spent by the state is a separate issue.  As we are all equally excluded we are therefore all entitled to an equal share of the rents, so this hypothetical country does this by paying out the £500bn pa as a Citizens Income.

This country still has to finance £250bn of spending on defence, schools, hospitals etc, which it does by imposing a Poll Tax on each citizen.

For accounting purposes this makes no sense. So instead of collecting the Poll Tax, it's less bureaucratic just to deduct £250bn of the LVT at source, and pay the other £250bn out as a Citizens Income.

This is viewed by Bacon that only those that pay the LVT pay into state coffers, but that's not correct because that's not what is happening in principle.

The correct view is that the LVT  doesn't belong to the state as tax. The state is merely its collector and redistributor. Therefore any citizen that does not receive their full amount of compensation with no deduction is paying a defacto Poll Tax.

And as all taxes on income, capital and transactions are to some degree incident upon land, that's also true of all current tax systems around the world.  That is, we pay into state coffers simply by not receiving our full share of  land rent.

Thursday, 11 January 2018

Oh shit, here we go again...

From the BBC:

Former UKIP leader Nigel Farage says he is close to backing a second EU referendum to end the "whinging and whining" of anti-Brexit campaigners.

Mr Farage told Channel 5's The Wright Stuff a fresh vote could "kill off" the Remain campaign for a generation. He said "the percentage that would vote to leave next time would be very much bigger than it was last time round".

Pro-EU campaigners welcomed his comment, claiming "support is growing" for another referendum.

I'm all in favour of democracy, but this was TPTB's Plan B all along.

As soon as they realised that a slim minority had voted Leave, they decided to mess up Brexit as badly as possible, really drag it out, sign up to some unacceptable terms and conditions (like massive future payments) and agree to impose massive import tariffs that would really hurt the consumer.

Then, acting all innocent, they would announce a second referendum asking people whether they would like to jump out of the frying pan and into the fire, the outcome of which would likely be "Sod it, if it's going to be that bad, let's stay in."

Suitably heartened, the EU would then swiftly impose loads of federalist measures, like what they are trying to do to Poland, Hungary and the Czech Republic.

We also have to assume that Farage's vanity trumps his political intelligence.

Wednesday, 10 January 2018

The world has gone completely mad.

A lot of diesel cars are clearly labelled 'diesel' somewhere near the filler cap so that you don't put in petrol by mistake, that's a good idea.  I can never remember which fuel my wife's car uses, so it's good that there's a visual reminder that it's a diesel. If an organisation runs a large fleet of cars with lots of occasional users, I suppose it makes sense to label the petrol ones 'petrol' as well. That's all fine.

But I walked past a parked police car today and noticed that next to the filler cap, in one inch high letters was the word "UNLEADED".

FFS, can you even buy leaded petrol any more and if so, where? I thought you had to buy unleaded and chuck additives in.

(I didn't dare take a photo to prove it because some coppers don't take kindly to that sort of thing, and I was going to take the piss out of them anyway).

Nearly as stupid are all the vehicles with a sticker on the back saying "Limited to 70 mph". That's the maximum speed limit anyway, so nobody would reasonably expect them to drive any faster.

Fun with numbers

From City AM:

Last month Persimmon chairman Nicholas Wrigley and Jonathan Davie, the chair of its remuneration committee quit, after it was revealed Fairburn along with 140 senior management were in line for payouts totalling an estimated £800m in aggregate...

Persimmon said it has made a "significant contribution to increasing UK housing supply" since 2012 by building more 80,000 new hones. Annual production has jumped by 70 per cent and cash coffers swelled in 2017 jumping, from £913m to £1.3bn.

Let's be generous and assume that the bonuses relate to the whole five year period.

£800 million ÷ 80,000 homes = £10,000 per home.

Based on an average selling price of a Persimmon home of £225,430, the SDLT for a first time buyer would be £nil and for a second home buyer it would be £8,771.

Funny how the likes of City AM/The Taxpayers' Alliance wail about Stamp Duty Land Tax but not the extra £10,000 which these companies can charge for a home (largely because of Help To Buy). City AM's editorial even praises such bonuses (Bonuses are the best motivators we have)!

Environmental Kuznets curve - alive and well.

I first heard of this basic correlation decades ago, when I read that this was a likely explanation for e.g. rules on cars emissions being strictest in the wealthiest countries - California and Germany - and it therefore seems obvious to me.

Tim Worstall put a name to this phenomenon four years ago* (I didn't realise that all these basic observations need to be named after somebody, but hey, useful shorthand), explained by the ever helpful Economics Help as follows:

The environmental Kuznets curve suggests that economic development initially leads to a deterioration in the environment, but after a certain level of economic growth, a society begins to improve its relationship with the environment and levels of environmental degradation reduces.

Various possible explanations are offered, the most salient one is this:

9. Diminishing marginal utility of income

Rising income has a diminishing marginal utility. The benefit from your first £10,000 annual income is very high. But, if income rises from £90,000- £100,000 the gain is very limited in comparison. Having a very high salary is of little consolation if you live with environmental degradation (e.g. congestion, pollution and ill health). Therefore a rational person who is seeing rising incomes will begin to place greater stress on improving other aspects of living standards.

There then follow some counter-arguments and limitations, the least plausible of which is probably this:

5. Countries with the highest GDP have highest levels of CO2 emission. For example, US has CO2 emissions of 17.564 tonnes per capita. Ethiopia has by comparison 0.075 tonnes per capita. China’s CO2 emissions have increased from 1,500 million tonnes in 1981 to 8,000 million tonnes in 2009.

Well no, that's just choosing three countries at different stages on the curve, it is not comparing like with like. Taking GDP per capita figures for PR China from here and population figure from here...

1981 - 1.5 kg CO2 and $1,000 GDP per capita
2009 - 6 kg CO2 and $8,000 per capita

The 'CO2 intensity' per $1 of output has therefore fallen by half.

Question: which effect will win out - higher GDP or lower CO2 per $ GDP (taking CO2 as a proxy for pollution - it is not harmful to humans, animals or plants, but is a good way of measuring how fast we are using up natural resources)? And if it's lower CO2 per $ GDP, when?

Answer: it is happening already.

6 March 2017, China pledges to cut pollution and boost food safety

24 October 2017, China Has Shut Down Up to 40% of Its Factories in an Unprecedented Stand Against Pollution

2 January 2018, China, Moving to Cut Emissions, Halts Production of 500 Car Models

And the one that really caught the headlines here because it affects us directly:

1 January 2018, Toxic plastic to be 'burned in Britain' due to China import ban:

Hundreds of thousands of tonnes of toxic plastic could be burnt in Britain rather than recycled due to a Chinese import ban, officials have warned... But the new ban, imposed as part of a drive towards self-sufficiency and in order to prevent environmental contamination, means councils will be forced to send the majority of the waste for incineration or landfill unless alternative markets are found.

So PR China has had enough and wants to move to cleaner, more upmarket/value added activities. It is highly unlikely that there will be mass incineration or landfilling of plastic over here, there will be too much of an outcry, so either we will use less plastic (like the 5p plastic bag tax, which appears to have worked, see also Landfill Tax) or we will incinerate it in such a way as to minimise pollution/use it for generating electricity and/or there will be more people employed sorting the stuff. All of which are wins, from a purely environmental point of view.

* Damn and blast! I finished this article, did a Google search on that link and it turns out that he has written an earlier article with pretty much exactly the same title and content as this. So see it as an update.

BBC stoops to Daily Mail standards.

From the BBC:

Heavy rain run-off caused a mudflow in the community of Montecito, where some homes were knocked off their foundations, said Santa Barbara County Fire Department spokesman Mike Eliason.

Boulders the size of small cars were rolling down hillsides and blocking roads, reports BBC News Los Angeles correspondent James Cook... County Fire Captain Dave Zaniboni said that five people were found dead on Tuesday in Montecito and may have been killed as result of the storm.

The upmarket neighbourhood includes homes owned by celebrities such as actor Rob Lowe and chat show host Ellen DeGeneres. Oprah Winfrey also has a property in Montecito that is reportedly worth nearly $90m (£66m).

Tuesday, 9 January 2018

Economic Myths: Unaffordable Housing

Hardly a day goes by without some journalist or politician mention that housing has become "unaffordable". However, a few moments' thought is all it needs to realise that if a house is unaffordable then it must mean that no-one who would consider buying that house can afford to buy it. Such houses would then be sitting on an estate agent's books, probably empty.

That doesn't match up with what the RICS are saying,:
The Royal Institution of Chartered Surveyors (RICS) said the number of properties sitting on estate agents’ books fell to just 43 per branch in March, the lowest figure since the body started collecting the data in 1978.

Of course, what "unaffordable" really means is "I, a middle class, middle income person can no longer afford to live where I would like to live and where I could afford to live twenty years ago", but that's somewhat more long-winded than a single snappy word.

Economic Myths - NHS spending and the Baumol Effect

This theory (also known as Baumol's cost-disease) is given a lot of credence by e.g. The Economist, the LSE and Tim Worstall/Forbes.

The Economist explains it thusly:

HEALTH-CARE expenditure in America is growing at a disturbing rate: in 1960 it was just over 5% of GDP, in 2011 almost 18%. By 2105 the number could reach 60%, according to William Baumol of New York University’s Stern School of Business. Incredible? It is simply the result of extrapolating the impact of a phenomenon Mr Baumol has become famous for identifying: “cost disease”...

In 1913 Ford introduced assembly lines to move cars between workstations. This allowed workers, and their tools, to stay in one place, which cut the time to build a Model T car from 12 hours to less than two. As output per worker grows in such “progressive” sectors, firms can afford to increase wages.

In some sectors of the economy, however, such productivity gains are much harder to come by—if not impossible. Performing a Mozart quartet takes just as long in 2012 as it did in the late 18th century. Mr Baumol calls industries in which productivity growth is low or even non-existent “stagnant”.

Employers in such sectors face a problem: they also need to increase their wages so workers don’t defect. The result is that, although output per worker rises only slowly or not at all, wages go up as fast as they do in the rest of the economy. As the costs of production in stagnant sectors rise, firms are forced to raise prices. 

These increases are faster than those in sectors where productivity is improving, and faster than inflation (which blends together all the prices in the economy). So prices of goods from stagnant sectors must rise in real terms. Hence “cost disease”.

The theory is that therefore health spending will inexorably rise as a percentage of GDP.

It seems like nonsense to me. For sure, in relative terms the cost of labour-intensive services increases, but only in relative and not in absolute terms. In truth, the cost of labour-intensive services stays constant and the price of automated, mass manufactured products decreases.

Think about the two extremes.

a) Wages rise exactly in line with GDP, in which case, the cost of labour-intensive services, wages generally and GDP go up in step. Health spending stays constant as a percentage of GDP.

b) All the benefits of automation go to the people who invent and own the machines that make stuff and wages stay constant. In this case, wages fall as a percentage of new enlarged GDP and the cost of labour-intensive services also falls as a percentage of GDP.

In neither scenario does the cost of labour-intensive services like healthcare increase! That only happens when there is a sharp contraction in GDP, wages in protected sectors like health being inflexible downwards - the sharpest increase in NHS spending as a percentage of GDP was between 2007 and 2009.
I think that the tried and tested explanations for the increase in healthcare spending are the correct ones, these apply to both extreme types of funding (USA and UK), in no particular order and these all overlap and tie in with each other:

1. Most treatment is paid for by insurance, whether that is private premiums or compulsory mass-insurance via the tax system, meaning that treatment is free or cheap at point of use, it is "other people's money".

2. Healthcare is a victim of its own success. They invent new treatments for non-curable/non-fatal diseases/conditions, which means that such diseases are passed down to more children and people live much longer. So there are more people with those conditions, and healthcare gets more and more expensive the older people are, because there is more that can and will go wrong.

3. Healthcare feels like a necessity from the point of view of an individual (choice between living or dying), but is actually a luxury good i.e. the amount that people are willing/able to spend on it rises disproportionately as a share of income; so healthcare takes up a disproportionate share of GDP growth.

4. They keep inventing new and more expensive treatments. Heart transplants were a novelty fifty years ago, now they are almost routine. Thirty years ago, getting HIV was more or less a death sentence, so people just died. Luckily, the virus itself is nowhere near as virulent as it was, and they have developed medicines that enable people with HIV to live fairly normal lives for decades.

5. Politicians in Europe can always earn a few brownie points with the voters by promising to spend more on healthcare, even though the law of diminishing returns applies and a lot of the increase in health spending just goes into higher profit, salaries and white elephant spending and not actual additional treatments. This is particularly crass in the UK as there is a disconnect between 'spending on the NHS' and 'spending on healthcare'. Compare and contrast - all nurses and doctors get a 3% pay rise vs. the NHS employs 3% more nurses and doctors on the same salaries.

6. There is massive rent seeking in health care. Back in pre-NHS days, GPs would practice discriminatory pricing and charge wealthy people more than poor people for the same treatment. Faced with a choice of life or death, somebody with only a few hundred quid savings can't pay more than a few hundred quid. The GP can hold millionaires to ransom and charge them tens of thousands. Pharma companies love inventing medicines that will alleviate symptoms of long-term incurable diseases/conditions. The bigger the NHS gets, the higher the salaries that all the top dogs can pay themselves and get away with it. And I am sure that the US insurance companies really take the piss.

7. For the benefit of Ralph Musgrave, let's chuck in this phenomenon, this one and this one for good measure.

Here endeth.

Dear Daily Mail readers ...

... "My wife and I are soon to have a 'clean break' divorce. Her lawyer is wanting me to sign over the house in its entirety that I have paid for all my working life in exchange for not touching my pension."

There's no figures mentioned whatsoever to inform the advice.  But below the line, 'Just Retired' is winning the comments with 166 green arrows to 7 red.  Given that the correspondent mentions "the house in its entirety" and "all my working life" you'd have thought "his descendants" and "her descendants" would more than likely be the same people.  

And the voting in these comments says it all.  The fact the global equities have outperformed UK houses by about three to one seems to have completely passed them by.

But presumably at the crux of the problem is that the man would find it impossible to buy anywhere to live if he had to start again.  And so would his ex-wife, which is why she wants the house and not the pension.  As for what his job is and where he lives we're in the dark.

Monday, 8 January 2018

ATCOR and tax incidence

ATCOR is an acronym for "all taxes come out of rent". This means that apart from a poll tax, all other taxes are incident to some degree or another on land rental incomes and thus selling prices. It doesn't mean that every penny of every tax is incident upon land.

To illustrate, consider the simplified example of a hypothetical country called SmallLand.

SmallLand has a population of 1 million. They all rent their immovable property from a landlord called Mr Monopoly. Total incomes are £15bn per year. Due to agglomeration effects there is a linear relation between the size of a locations population and its average income.   Average incomes are lowest in the smallest town (A) Poorville at £10,000 pa rising to £20,000pa in the biggest town (B) StreetsofgoldCity.

Ricardos Law of Rent tell us that Mr Monopoly can extract the difference between the averages. Leaving the average discretionary incomes in SmallLand before taxes are applied at £10,000 pa(C), while Mr Monopoly gets a yearly income of £5bn(D) from land (leaving out income from bricks and mortar)

SmallLand's government needs to raise £5bn a year in taxes. It can do so by either a poll tax, a flat income tax, or a land value tax. The graphs below show how each of the taxes effect the incomes of the population.

To raise £5bn from a poll tax(F), everyone would pay £5000 pounds each, leaving total discretionary incomes at £5bn(E) for all those paying rent. Mr Monopoly's income becomes £5bn -£5000(G)

To raise £5bn from a flat income tax, it would be set a 33.3...%. For that part of incomes at £10,000 pa and under it would raise £ As incomes rise over £10,000pa the amount raised goes up in proportion to incomes, totaling £ This leaves total discretionary incomes £, leaving £6,666.66 for each renter. Mr Monopoly's income falls from £5bn-£, totaling £ pa(K).

To raise £5bn from a LVT it would be set at 100%, so that the total income of Mr Monopoly (D) is converted into tax revenue (M). Therefore, in essence, those living in SmallLand who all rent become tax free so their discretionary incomes (L) is the same as (C).  The rent they pay is in effect rebated aback to them as State spending.

In conclusion, the incidence of a LVT and Poll Tax on land are at the opposite ends of the spectrum. Because incomes are dependent upon location, taxes upon output share their incidence between land, labour and capital in proportion to their "progressiveness".

In my example above, a flat 33% income tax is shared 1/3 land to 2/3 incomes. As the UK tax system is only mildly progressive in total, this this probably a good guesstimate of how much revenue a tax shift to LVT would raise.

Fun Online Polls: Donald Trump and Severn Tolls

The results to last week's Fun Online Poll were as follows:

Did Trump collude with Russia in the 2016 Presidential election?

No - 70%

We'll never find out - 11%
Trump is clearly trying to cover up something - 12%
Yes - 5%
Other, please specify - 3%

Well that's conclusive enough. I still think there was something fishy going on, but I'm in the minority.

Thanks to everybody who took part.
I allowed this poll to run for far too long, partly out of laziness and secondly because I haven't been t inspired to start a new one. If anybody has any bright ideas on which burning issue of the day can be resolved by asking the internet, please advise.
I just stumbled across this article of a year ago, from the BBC:

Estate agents in south Monmouthshire claim about 80% of home buyers are now coming from the Bristol area ready for the halving of the Severn bridge tolls. As a result, property prices have been rising quicker than the Wales average as Bristol commuters seek new homes, figures have suggested...

"House prices in Bristol are off the scale," said agent Charles Heaven, "People know the tolls are coming down next year and hoping to get a bargain... With the railway electrification of the south Wales mainline, the planned south Wales Metro, the proposed M4 Relief Road around Newport, coupled with the beautiful countryside of south Monmouthshire and the Wye Valley, this is desirable place to live."

Two big housing developments are planned at Chepstow's old dockyard and near its hospital while a new estate is heading for Undy, bordering the M4 motorway near Magor. Severn Tunnel Junction railway station in Rogiet, between Caldicot and Magor, has recently undergone an £8m refurbishment while a new train station at Magor has the backing of Monmouthshire council and is part of the new South Wales Metro proposal.

Nathan Reeks, owner of Nathan James Estate Agents in Caldicot and Magor, explained why south Monmouthshire is becoming attractive for commuters from Bristol.

"We recently had a couple from Bristol who bought a property in Rogiet near Severn Tunnel Junction station, they bought a four-bedroom detached house with detached garage for about £295,000, after selling their three-bedroom mid-terrace in Bristol for £390,000. So they made almost £100,000 on a bigger house and the new owner can get to his work in Patchway on the outskirts of Bristol quicker from Severn Tunnel Junction than from when he lived in Bristol.

"That's typical of our business in the last six months as since the government was announced they are reducing the bridge tolls, 80% of my buyers have come from over the Severn Bridge. The accessibility for Bristol, the Midlands, the south west, south Wales, London and Heathrow Airport is all the more desirable as south Monmouthshire offers a semi-rural location with a stunning backdrop. It's a great place to bring up children and with a new comprehensive school opening soon in Caldicot, the Monmouthshire market is very strong."

They say "location, location, location", the Georgists say "community-generated value of land", it's two ways of describing the same thing.

This all reminds me of a Winston Churchill speech when he was (fairly briefly) a land value taxer:

Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.

He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived...

Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public conscience, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed.

All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted.

Sunday, 7 January 2018

"... well balanced, like any other fine piece of sporting equipment... a pair of matched shotguns for instance."

Here's how they reviewed cars forty years ago, 55 second into this:

More VAT-Brexit-related fuckwittery

From The Guardian:

More than 130,000 UK firms will be forced to pay VAT upfront for the first time on all goods imported from the European Union after Brexit, under controversial legislation to be considered by MPs on Monday.

The VAT changes spelled out in the taxation (cross-border trade) bill – one of a string of Brexit laws passing through parliament – are causing uproar among UK business groups, which say that they will create acute cashflow problems and huge additional bureaucracy.

Labour and Tory MPs and peers said that the only way to avoid the VAT Brexit penalty would be to stay in the customs union or negotiate to remain in the EU-VAT area...

This is a typical spat between incompetent government and hard-core Bremoaners, with long-suffering UK businesses caught in the crossfire.

VAT is the most damaging tax, but all the same, it can be made administratively as painless as possible. Before wading in, it is important to know how it currently works on a day-to-day level. When a UK VAT-able business imports from the EU, VAT is nominally due, but it is not paid up-front - what happens is that the notional import VAT is added to the total VAT payable on the next VAT-return, but the importer can also reclaim the notional import VAT is input tax, so the overall payment is nothing.

This defers the business' cash outflow by a few weeks or months - the apparent proposed new system is to collect VAT at point/time of import (a massive administrative burden) and not to credit it as input VAT until the next return (usually quarterly).

There is nothing to stop the UK government from continuing current practice post-Brexit (in fact, we could do this for most import duties). And despite what 'Labour and Tory MPs' have said, there is absolutely no need for the UK to remain in the Customs Union or the Eu-VAT area to be able to do this - remember that post-Brexit, it is entirely up to the UK government whether or not it imposes import duties, import VAT or even VAT at all.

Saturday, 6 January 2018

The recently discovered largest prime numbers continues the pattern nicely...

With thanks to James Higham whose post alerted me to this.

I explained that there appears to be a surprisingly consistent pattern if you plot the number of digits against date discovered back in 2016.

Here's the updated chart:

UPDATE: It turns out I needn't have bothered doing my own spreadsheet, the relevant Wiki article includes a much longer term chart showing exactly the same phenomenon: "The red line is the exponential curve of best fit: y = exp(0.187394 t - 360.527), where t is in years."

Friday, 5 January 2018

Just Because...

I was here today.

This is the ex Rob Walker / Sterling Moss 250 GT SWB

This is the ex David Piper 250 GTO now in the JCB collection

Checklist for UKIP leaders

The current UKIP leader is taking this really seriously, see today's Metro:

Checked flat cap? CHECK

Green Barbour wax jacket? CHECK

Carry large golfing umbrella while giving the distinct impression you'd rather be carrying a shot gun? CHECK

Leave wife for woman half your age? CHECK

You wonder whether the cap and jacket get passed down from UKIP leader to UKIP leader, like a badge of office...

Thursday, 4 January 2018

They own land! Give them money!

From the BBC:

UK farmers are to receive the same level of subsidies they get from the EU for five years after Brexit, the environment secretary is to say. Michael Gove was due to tell farmers a new system prioritising the environment will start in 2024, instead of 2022.

The current subsidies - £3bn a year - are based on the land farmers own. Farmers will have an two extra years to prepare for the new payments, which would reward initiatives such as planting wildflower meadows and woods.

Mad, they get paid for doing nothing? I'm with Monbiot on this - scrap the subsidies and impose a flat £20* (or whatever low-ish figure gets the optimum balance) per acre LVT on them instead. Farmers will happily abandon the most marginal sites with the lowest yields and thus escape the LVT. As it happens, the nicest places to enjoy nature - near settlements, along river banks, on cliff edges and hill tops - are the worst places for farming, and vice versa - flat fields in the middle of East Anglia are the best for farming, but it's not much fun tramping across them.

In case anybody thinks I am anti-farming (which I am not, it's tough work and I love food), we could and should just exempt farming from tax altogether as a quid pro quo - no VAT refunds, no income tax or corporation tax on profits (so no capital allowances either), which we already have with forestry, no Business Rates on farm buildings/greenhouses, no PAYE on farm wages (farm workers can pay voluntary NICs to keep up their pension entitlement if they wish). You can nail this down by continuing to tax farm rental income, meaning a net tax saving for owner-occupier farmers, so we could and should exempt purchases of farm land from SDLT as well.

That'd would be more or less a break even from the government's point of view. If there's a net saving, then by all means spend it on rural broadband or rural public transport etc.

As we know from the allotments vs commercial farms example, this would increase the amount of food grown per acre and rural employment.

Everybody wins!

... Meanwhile, a report warns Brexit trade deals could threaten UK food security.

Well, they would say that wouldn't they?

MPs and peers in the All-Party Parliamentary Group on Agroecology (AAPG) say ministers must ensure famers [sic] are not undermined by future trade deals which permit imports of food produced with lower welfare or environmental standards.

Aha, so they don't mean "food security" from the consumers' point of view (the important one), they mean "income security" from the landowners' point of view?

Here's the best bit - five minutes in a TV studio with a YPP candidate last year seems to have worked wonders:

Detailing how the European Union's Common Agricultural Policy (CAP) will be replaced after Brexit, Mr Gove will say taxpayers' money should be used to boost public access to the countryside, and be spent on infrastructure and supporting rural communities.

He will say the CAP is "unjust, inefficient and drives perverse outcomes".

* OTOH asks: "Why should the LVT be flat? Shouldn't land with a higher value pay more land value tax?"

1. As I have pointed out often enough, the total rental value of UK farmland is so low (1% or 2% of rental value of urban land - hardly surprising as farming is 1% or 2% of UK GDP and employs 1% - 2% of all workers) that it's not really worth collecting anyway, such a tax serves a different purpose: to act as a cliff edge to encourage farmers to leave marginal land to be rewilded/for ramblers to enjoy.

2. Scrapping the subsidies (negative land value tax) will be a big enough shock for the big fat rent-seekers.

3. We do not know what farm rents will be once the subsidies are replaced with a blanket tax exemption. Will probably be lower; might be higher, but still negligible compared to urban land.

4. Urban land is all about location and little to do with the physical qualities of the soil or land itself, so it's easy to value, you can get it 90% accurate in a weekend with spreadsheets and HM Land Registry data. Farmland is difficult enough to value anyway, you've got to go and physically inspect it. Identifying the pure location element is even harder.

5. With farmland, the physical qualities of the soil are - to a greater or lesser degree - dictated by how well farmers have looked after it in the past and are looking after it today, which we wouldn't want to discourage with higher taxes, again, it's difficult to split out what's the naturally occurring element (taxable) and what's down to centuries of careful husbandry/wifery.

Thank God?

This is an interesting poll except it draws the correct conclusion ('members' does not equal 'voters') to misdirect.

Tories are a 'breed apart'. Simple answer from a democrat: "Yes They Are - Thank God." Isn't that a good thing?

Now what are they up to in this guff? Well, if they were actually trying to do anything worthy for our democracy. First tell readers what the total 'membership' of each party is, that your 1,000 member survey is drawn from.

If your party membership falls below 100,000 members, then the views of the Praetorian are going to be pretty marked are they not?

None of that serious discussion of course. It seems to me that the data is being used to show that 'eveybody' holds a certain view of Brexit; in counter point to the Tories.

So add in the SNP figures and it is another: Corbyn 'look mate', Labour must either: ignore, rerun, just pretend Brexit VOTE didn't happen. So the researcher says: "even Labour, which under Jeremy Corbyn is occupying the middle ground over Brexit. Among Labour members, 87% want the UK to remain in the single market, 85% in the customs union, and 78% support a new referendum."

Is the 90,000 Tory, Praetorian membership more reflective of the Tory vote generally than the 500,000 Labour Praetorian Guards and 'members of the line' are of Labour's?

I hope politics, economics and sociology students at the professor's University start with that question and what the serious answers mean for our democracy. Not how we discredit it.

Tuesday, 2 January 2018

And the 2018 prize for the most economically stupid banner goes to...

From here.

Daily Mail starts the year as it means to go on...

UKIP councillor and British Legion poppy seller appears in court charged with murder of his wife of 30 years at their £400,000 home

They've even saved us the bother of skim-reading the article to find out what the house would sell for by including it in the headline.

Monday, 1 January 2018

Paul Krugman on "Economic Geography"

From The New York Times, the conclusion is this:

Take the (fairly celebrated) example of Rochester, New York. It started as a flour milling center, benefitting from the Erie Canal, then as a center for nurseries and seeds. So it was a resource-based center. Then, in 1853, John Jacob Bausch, a German immigrant, started a company making monocles, which became a major producer of glasses, microscopes, and all things lens related.

So Rochester became a place where people knew about optics, presumably creating the preconditions for the rise of Eastman Kodak, and much later Xerox. This was typical of small industrial cities: even if what a city was doing in, say, 1970 seemed very different from what it was doing in 1880, there was usually a sort of chain of external economies creating the conditions that allowed the city to take advantage of particular new technological and market opportunities when they arose.

Obviously, this was a chancy process. Some localized industries created fertile ground for new industries to replace them; others presumably became dead ends. And while a big, diversified city can afford a lot of dead ends, a smaller city can’t. Some small cities got lucky repeatedly, and grew big. Others didn’t; and when a city starts out fairly small and specialized, over a long period there will be a substantial chance that it will lose enough coin flips that it effectively loses any reason to exist.

That seems to be a fair description/explanation of how things are developing.

The article in turn links to lots of other articles, the one that triggered his article was one by Emily Badger, which describes/explains how agglomeration effects benefit the largest global cities but smaller regional cities are losing out; also the links between global cities appear to be stronger than the links between any global city and its own hinterland/host country.

UPDATE: Now I've thought about it, there's a similar phenomenon with car manufacturing nowadays, which I wrote about here, it's just that large car factories are not concentrated near global cities, they are wherever they are for historical reasons. Most of the hundreds of small factories there used to be have closed down and a few have swollen enormously.

While this is all good stuff, what puzzles me is why anybody thinks these are blinding new insights? They aren't. I'm a land value taxer because I look at the real world and draw real conclusions. I know which factors drive (or depress) land values, and those factors are pretty much the same as those which encourage the growth of global cities and cause the gradual decline of smaller regional cities, in a word, 'agglomeration'.

Replacing taxes on earnings and output with Land Value Tax would ameliorate the effects of all this; it would drive growth in the largest cities; reduce the drag of taxation on smaller cities and 'the regions' (where land values are lowest); and act to redistribute the benefits of economic growth more evenly across the country - an overall levelling upwards.