Thread: Socialism in the City Board: Oblivion / Ship of Fools.
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Posted by Russ (# 120) on
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This thread is prompted by seeing the mapped results of the UK election, in which (to a good approximation) the socialist Labour Party won a large majority of the constituencies in the major cities of England and hardly any of the constituencies composed of rural areas and small towns.
Maybe nothing new in that.
But it suggests a "what if" - what would happen if the national government devolved substantial powers to the councils of one or more non-capital major cities to enable them to give these city-dwellers the experience of living in a socialist state that they seem to want ?
What powers would this involve ?
Would such an experiment be a good idea ?
Or is it not socialism if people and businesses can opt out by moving out of the city to somewhere nearby ?
Speculation welcome...
Russ
Posted by Ad Orientem (# 17574) on
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I wasn't aware that the Labour party was socialist anymore?
Posted by Jay-Emm (# 11411) on
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Practically there's a problem if you (can) skip and chose between the two (or more systems) depending on what's convenient now.
And of the two governments (as supposed to societies), that (short term) hits the socialist one worse.
But to some extent that genie is already out the bottle. It's just only available to the extent you control the government (and private sector equivelents) through time.
[ 10. May 2015, 11:08: Message edited by: Jay-Emm ]
Posted by balaam (# 4543) on
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The political map shows that of the North East, North West, Yorkshire and the Humber and London regions still support the Labour party. London and Ynys Mon (Anglesey) are exceptions, but otherwise the Labour areas coincide with where the coalfields are (and the mines were).
It is not the cities, it is towns in the col areas and pit villages that are the Labour areas. This could be another of Thatcher's legacies.
Posted by Doc Tor (# 9748) on
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I used to live in the People's Republic of South Yorkshire in the mid-80s, before Thatcher's wildly anti-democratic rate-capping law came into force.
The high rates were supported by the local population - it wasn't paradise, but everything seemed to work very well. No one bothered to bring their cars into Sheffield, because the maximum bus fare was (iirc) 5p.
So your 'experiment' has already been carried out, more or less successfully, in at least one region.
Posted by Dafyd (# 5549) on
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While Miliband's Labour Party was slightly to the left of Blair's Labour Party - a difference just perceptible to the naked eye - Miliband's tablet of stone said nothing about returning the means of production to the workers. So it would no more have been a socialist state had Miliband won than it was when Blair was PM.
The OP appears to have some odd notions of socialism. If it didn't say otherwise on the profile, I'd suspect the OP of being American.
Posted by Lucia (# 15201) on
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quote:
Originally posted by balaam:
The political map shows that of the North East, North West, Yorkshire and the Humber and London regions still support the Labour party. London and Ynys Mon (Anglesey) are exceptions, but otherwise the Labour areas coincide with where the coalfields are (and the mines were).
It is not the cities, it is towns in the col areas and pit villages that are the Labour areas. This could be another of Thatcher's legacies.
And Oxford East, a patch of red in a sea of blue. No coal field there though!
Posted by Heavenly Anarchist (# 13313) on
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quote:
Originally posted by Lucia:
quote:
Originally posted by balaam:
The political map shows that of the North East, North West, Yorkshire and the Humber and London regions still support the Labour party. London and Ynys Mon (Anglesey) are exceptions, but otherwise the Labour areas coincide with where the coalfields are (and the mines were).
It is not the cities, it is towns in the col areas and pit villages that are the Labour areas. This could be another of Thatcher's legacies.
And Oxford East, a patch of red in a sea of blue. No coal field there though!
Cambridge turned from yellow to red, though we are also in a sea of blue. The only thing you could mine round here is peat.
Posted by OddJob (# 17591) on
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Surely 'socialism' is as hard to define as 'Evangelical Christianity', and nobody holds the exclusive right to do so in either case.
Posted by Honest Ron Bacardi (# 38) on
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quote:
Originally posted by OddJob:
Surely 'socialism' is as hard to define as 'Evangelical Christianity', and nobody holds the exclusive right to do so in either case.
What constitutes a practical evidence of socialism? Probably. But any dictionary or encyclopaedia will give you a concise and pretty constant definition. Though I see that American ones for some reason tend to stress the involvement of the state, whereas nobody else does.
Dafyd's understanding is mainstream.
Posted by Russ (# 120) on
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quote:
Originally posted by Ad Orientem:
I wasn't aware that the Labour party was socialist anymore?
Clearly not socialist enough for some. And presumably too socialist for many of those who didn't vote for them ?
But feel free to use whatever definition of "socialism" you want in addressing the question.
If you'd like city-level government to have more powers in order to implement locally some of what all those city-dwelling Labour voters wanted to see implemented nationally, what powers ?
And if it's a bad idea, what's wrong with it ?
Best wishes,
Russ
Posted by chris stiles (# 12641) on
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quote:
Originally posted by Russ:
Clearly not socialist enough for some. And presumably too socialist for many of those who didn't vote for them ?
For those who weren't thinking clearly and took their cue from the Murdoch empire presumably (who clearly thought that the younger brother of Castro was about to march into number 10).
Anyway, since the difference between support for the various arms of the state differs in degree rather than kind between the Tories and current Labour party, I think you should define what you feel to be socialist in the context of your OP.
Posted by Alan Cresswell (# 31) on
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quote:
Originally posted by Russ:
If you'd like city-level government to have more powers in order to implement locally some of what all those city-dwelling Labour voters wanted to see implemented nationally, what powers ?
And if it's a bad idea, what's wrong with it ?
I think that an excellent argument can be made that different parts of government work most effectively at different spatial scales. A national government would be extremely inefficient at prioritising renovation of primary schools, local government would not be the appropriate level to decide international policy. It's called subsidiarity.
The question then isn't "is it a good idea to have some powers devolved to local level?", the question is "which powers?"
Posted by Leorning Cniht (# 17564) on
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quote:
Originally posted by Alan Cresswell:
The question then isn't "is it a good idea to have some powers devolved to local level?", the question is "which powers?"
It's also not obvious that the power to decide broad policy and the power to implement details should reside at the same level. It is sensible for some local-level body to decide which primary school to renovate next. It is not obvious that that body should have the power to levy its own taxes in order to pay for those schools. It can simply be handed a budget according to some standard formula and be told to get to work.
Posted by Alan Cresswell (# 31) on
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Yes, that's part of the "which powers?" question.
The decision about which school to renovate is a power.
The raising of taxes to pay for that is a different power.
Posted by Jane R (# 331) on
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...and the decision about which school to renovate is meaningless without the power to pay for it.
Posted by Doc Tor (# 9748) on
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And bearing in mind that some of the wealthiest councils are amongst the ones who've had their central grant cut the least, we could end up with a ludicrous balkanisation across the country: the poorest areas which have little opportunity to raise revenue being sunk further into deprivation, while the richest areas being able to provide all the shiniest things for its already-wealthy residents.
Redistributing wealth away from prosperous parts of the country is a prerequisite for local democracy to function effectively. Otherwise all councillors will be able to decide on is which services to cut.
Posted by lowlands_boy (# 12497) on
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Well, ignoring the question of what socialism is, Manchester is having some devolution....
Manchester Evening News coverage
Posted by Sioni Sais (# 5713) on
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Central government is very keen to devolve decision making to local authorities when the outcome is always going to be at best controversial if not a death wish for the local authority (Moving responsibility for providing Accommodation for Travellers from central to local government was a first-rate example).
The main reason for this is that central government retains control of funding, by limiting block grants to what it considers "fair" and capping council tax if a local authority should take it upon itself to defy central government, irrespective of the local elections about the very issues that have been devolved to it!
In short, because local authorities do not have fiscal sovereignty, they cannot currently do what they want to do or even what the voters want them to do. If they had the fiscal sovereignty then I expect that would be insufficient, so they would have to back it up with additional intervention funding from the European Union and that would, in all probability, increase the contribution required from the "BLue zone" of what is currently the United Kingdom.
Posted by Russ (# 120) on
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quote:
Originally posted by Sioni Sais:
In short, because local authorities do not have fiscal sovereignty, they cannot currently do what they want to do or even what the voters want them to do. If they had the fiscal sovereignty then I expect that would be insufficient, so they would have to back it up with additional intervention funding from the European Union and that would, in all probability, increase the contribution required from the "BLue zone" of what is currently the United Kingdom.
You're right that some tax-raising power would need to be devolved. Perhaps some form of local income tax ? Supplemented by the power to borrow money, to issue bonds against future tax revenue ?
Presumably there would still be a block grant from general taxation, calculated on the basis of some benchmark level of provision of services. So that the devolved cities could have a positive rate of local taxation and spend more than the benchmark, or a negative rate and spend less.
You may be right that the EU would try to force the national government to contribute more if and when the devolved cities cocked up the local economy.
But although the UK election result was the original starting point, I was trying to frame the discussion in a way that was equally applicable to Shipmates from elsewhere. Or is the politics of the urban-rural divide a peculiarly British issue ?
Some people talk as if cutting their own throats was preferable to voting Conservative. In a country which has just signed up for another 5 years of Conservative government. I don't want to see any minority oppressed. In response it seems only natural to ask the more general question - can you, with a little generosity of spirit on both sides, have a left-leaning city within a right-leaning country ? And if so, what does it take and what are the problems and the risks ?
Best wishes,
Russ
Posted by Leorning Cniht (# 17564) on
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quote:
Originally posted by Russ:
In response it seems only natural to ask the more general question - can you, with a little generosity of spirit on both sides, have a left-leaning city within a right-leaning country ?
Let's take the issue of fiscal sovereignty. Is your left-leaning city able to pay its own bills? It might be - if it's a left-leaning city with a reasonable share of both poor and wealthy inhabitants, and if the wealthy inhabitants share (or at least are content with) the left-leaning policies and aren't about to scarper to Torytown next door at the first glimpse of a redistributionist policy, then there's no reason why a left-leaning city can't raise higher local taxes and provide more services.
If, on the other hand, your left-leaning city requires significant subsidies from richer, right-leaning areas in order to operate, the position is more difficult. Can such a city successfully levy more taxes from its poorer populace in order to be able to spend more, or is it hoping to decide to spend more money and have someone else pay the bills?
The degree of subsidy which poorer areas receive from richer areas is fundamentally a national question. It can't be determined on a local basis.
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by Leorning Cniht:
if it's a left-leaning city with a reasonable share of both poor and wealthy inhabitants, and if the wealthy inhabitants share (or at least are content with) the left-leaning policies and aren't about to scarper to Torytown next door at the first glimpse of a redistributionist policy.
That's the issue. It's one thing to idly wonder how many rich people would leave the country if redistributionist policies were enacted by Westminster, but when we're talking about city-level policies then the likelihood that the richer residents would move to the next town over in order to avoid such taxes is massive. Hell, they wouldn't even have to switch jobs!
What the city would be left with is a massive hole in the finances that has to be filled by a poorer population. So either cuts would have to be made or taxes would have to go up again, leading to a vicious cycle which would only end when the only ones left in the city - barring relatively well-paid left-wing people, of course - would be the ones that can't afford to either move or pay taxes.
Or to put it another way, I don't think that any major kind of socialist movement would be possible on such a small scale. To properly work, those policies need to apply on a large enough scale that the rich can't easily up sticks and leave.
Posted by quetzalcoatl (# 16740) on
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Socialism in the city sounds like Stalin's socialism in one country, and is similarly absurd. Well, it depends on what you mean by socialism, but surely classically it has the meaning of transnational, or overcoming boundaries of any kind. But, as we see with Stalin, it has been perverted.
Posted by Crœsos (# 238) on
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Isn't the United States, with significant governing authority vested in the hands of the various states, kind of a living example of what such a devolved system would look like?
Posted by Pomona (# 17175) on
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Also surely the powers of the mayor of London is a prime example of this already existing....?
Posted by quetzalcoatl (# 16740) on
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But a left-wing mayor doesn't produce a socialist London, unless socialism is being given some arbitrary meaning. The City carried on with its leveraged buy-outs, beggars continued to beg, whores to whore, and so on.
Posted by Russ (# 120) on
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quote:
Originally posted by Marvin the Martian:
when we're talking about city-level policies then the likelihood that the richer residents would move to the next town over in order to avoid such taxes is massive. Hell, they wouldn't even have to switch jobs!
Seems to me there are two answers to this.
There's a hard-left answer which brands such behaviour as a Crime against the People and demands the devolved power to declare a state of emergency, seal the border, and not let people through without an exit visa...
And a soft-left answer which says that whilst the aim is ever-increasing government spending and an ever-increasing tax take to pay for it, we're content to progress slowly. To let people get used to paying an extra 1% tax before we raise it to 2%. To monitor the trends in migration and house prices, and if the less-left-leaning residents are moving out faster than the ideologically-sound are moving in, then we need to slow the pace of change and reduce the sense of threat. To prioritise the win-win policies over the win-lose ones, whilst still believing in the latter.
Not sure if there's any middle ground between the two...
Best wishes,
Russ
Posted by Doc Tor (# 9748) on
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quote:
Originally posted by Russ:
Seems to me there are two answers to this.
Seems to me there are three answers to this. Make the city a genuinely brilliant, vibrant, happy place to live. Lots of public transport, parks, leisure facilities and high-end shopping, excellent schools, a top-grade university... you know. Stuff like that.
Posted by Russ (# 120) on
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quote:
Originally posted by Doc Tor:
Make the city a genuinely brilliant, vibrant, happy place to live. Lots of public transport, parks, leisure facilities and high-end shopping, excellent schools, a top-grade university... you know. Stuff like that.
If you can do that while still easing the burdens of the poor, that's great - that's a win-win policy that everyone, left or right, can vote for.
But what you're talking about means things like leaving people enough disposable income that they can afford to eat out. It means a system that encourages small business - ethnic restaurants, boutique shops, etc. it's saying get the generation of wealth right and there will be money for the poor. Doesn't sound like socialism to me...
But a good answer. Up to this point the question of how to run a city well seems to have been rather less interesting than the question of how to make sure that "the rich" don't escape punitive taxation...
Best wishes,
Russ
Posted by Dafyd (# 5549) on
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quote:
Originally posted by Russ:
quote:
Originally posted by Doc Tor:
Make the city a genuinely brilliant, vibrant, happy place to live. Lots of public transport, parks, leisure facilities and high-end shopping, excellent schools, a top-grade university... you know. Stuff like that.
If you can do that while still easing the burdens of the poor, that's great - that's a win-win policy that everyone, left or right, can vote for.
The ideologues on the right hate public spending on principle.
quote:
But what you're talking about means things like leaving people enough disposable income that they can afford to eat out. It means a system that encourages small business - ethnic restaurants, boutique shops, etc. it's saying get the generation of wealth right and there will be money for the poor. Doesn't sound like socialism to me...
It's not capitalism. Capitalism means that businesses with lots of capital buy out small businesses, destroy town centres etc etc.
(The reason it is called capitalism is because it favours entities with lots of capital - that is chiefly banks, which get to hoover up vast quantities of subsidy, bailout, tax breaks - then big businesses.)
quote:
Up to this point the question of how to run a city well seems to have been rather less interesting than the question of how to make sure that "the rich" don't escape punitive taxation...
I haven't seen anyone show any interest in punitive taxation other than you.
Posted by Doc Tor (# 9748) on
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quote:
Originally posted by Russ:
But what you're talking about means things like leaving people enough disposable income that they can afford to eat out. It means a system that encourages small business - ethnic restaurants, boutique shops, etc. it's saying get the generation of wealth right and there will be money for the poor. Doesn't sound like socialism to me...
![[Killing me]](graemlins/killingme.gif)
You have absolutely no idea what socialism is, do you?
Posted by quetzalcoatl (# 16740) on
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The whole thread is vitiated by that - WTF is meant by socialism? Stalinism? Increased tractor production? We have always been at war with Eastasia!
Posted by deano (# 12063) on
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Okay Doc and quetz, instead of pointing out that we don't know what socialism is, please explain it to us.
Explain why - under socialism - Russ' comment about small businesses and expendable income is incorrect.
Give us the truth about Socialism and how it will really work in the bright sunny uplands that will follow a True Socialist victory in an election.
We are all eager to know what Socialism really is.
Posted by quetzalcoatl (# 16740) on
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I've already given you a taster, increased tractor production, the nationalization of women, 4 legs good, 2 legs bad, compulsory dungarees, and free beer. Any problems with that?
Posted by Sioni Sais (# 5713) on
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quote:
Originally posted by deano:
Okay Doc and quetz, instead of pointing out that we don't know what socialism is, please explain it to us.
Explain why - under socialism - Russ' comment about small businesses and expendable income is incorrect.
Give us the truth about Socialism and how it will really work in the bright sunny uplands that will follow a True Socialist victory in an election.
We are all eager to know what Socialism really is.
How about (and I'll admit this is idealistic and other explanations exist and are probably far better) the economy being run for the benefit of mankind as a whle, as opposed to the current situation in which it is run by and for those who own the assets employed?
Whatever the alternatives may be, widening the proportion of the population that benefits from economic activity has to be at the top of the list.
Posted by Doc Tor (# 9748) on
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Okay. Let's try this for starters.
Currently, about the only way that local authorities can benefit from commercial activity in their district is via the business rates. While (afaiui) business rates are collected locally, they are set nationally, and up until only recently (2013) kept nationally. Now councils get to keep half the business rates, in return for a reduced block grant.
This is only half the story for businesses, however. Rents are often controlled by FacelessPropertyCo, who own a bazillion properties and see voids as part of their business plan. They can own whole town centres and run them as they wish - they're more concerned about the price of the land than the economic activity on it.
One of the reasons why every shopping street looks the same is that only big chain stores have the financial clout to rent frontage there, and when a unit goes vacant, it's either a charity shop (rent free, commercial rate free, tax break for the owner) or simply left empty. For FacelessPropertyCo, it's an entry on the balance sheet, for the shopping centre, it's an eyesore and often a catastrophe. Not, note a lack of enterprise from the local population. And any rent charged by FPC leaves the local economy (and ends up in a tax haven somewhere).
So one proposal would be simply this. A tax on based on land value, paid by the owners to the local authority. Regardless of the economic activity taking place on it. The LA could use that to defray business rates as it saw fit.
Posted by deano (# 12063) on
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quote:
Originally posted by Doc Tor:
So one proposal would be simply this. A tax on based on land value, paid by the owners to the local authority. Regardless of the economic activity taking place on it. The LA could use that to defray business rates as it saw fit.
And as the owner of the land I would increase the rents on those businesses which are on my land in order to defray the extra tax you have proposed. Those businesses will pass on their rent increases to their customers.
Also, you say you want to raise a tax in spite of someone not having the ability to pay... that is what you mean by collecting tax on the land value regardless of any economic activity on the land, isn't it?
Isn't that merely a hidden way of punishing people for owning property? Isn't that simply a way of implementing a policy of "property is theft" without actually having the courage to state it outright?
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by Doc Tor:
So one proposal would be simply this. A tax on based on land value, paid by the owners to the local authority. Regardless of the economic activity taking place on it. The LA could use that to defray business rates as it saw fit.
Here's another proposal: the government empowers local authorities to purchase city/town centre land from the FPCs. It would require a large initial outlay, especially if the land was bought at market price, but thereafter the local authorities would be able to use commercial income from that land in order to reduce the block grant they receive from government. And as a nice bonus, the local authorities would be motivated to ensure that all frontages were occupied as vacant lots wouldn't generate any income.
Taxpayers would benefit because they wouldn't have to pay more in order to keep local services running, and they'd get more vibrant high streets into the bargain. Small businesses would benefit because the landowner would be motivated to rent vacant properties to them. Local authorities would benefit because they'd have a guaranteed (and potentially lucrative) revenue stream. Government would benefit because it wouldn't have to pay as much block grant to the local authorities. And the people running FPCs would benefit because they'd get a nice big wodge of cash in their back pockets.
The only stumbling block would be the initial outlay required. But even that would pay for itself over the long term, so could be funded through borrowing or bonds.
Posted by Doc Tor (# 9748) on
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quote:
Originally posted by deano:
quote:
Originally posted by Doc Tor:
So one proposal would be simply this. A tax on based on land value, paid by the owners to the local authority. Regardless of the economic activity taking place on it. The LA could use that to defray business rates as it saw fit.
And as the owner of the land I would increase the rents on those businesses which are on my land in order to defray the extra tax you have proposed. Those businesses will pass on their rent increases to their customers.
Also, you say you want to raise a tax in spite of someone not having the ability to pay... that is what you mean by collecting tax on the land value regardless of any economic activity on the land, isn't it?
Isn't that merely a hidden way of punishing people for owning property? Isn't that simply a way of implementing a policy of "property is theft" without actually having the courage to state it outright?
A land tax is a way of taking the price of land and levying a fair and proportionate rate on it (if you want to go into more detail, try starting here).
Once levied, it becomes in the owner's best interest to increase the economic activity on that land - which may or may not include decreasing rent charged to occupiers in order to insure full occupancy, renovating properties and ensuring good infrastructure. What it doesn't do is reward economic inactivity - such as land banks, derelict sites, empty shops and treating the occupiers as cash cows.
quote:
Also, you say you want to raise a tax in spite of someone not having the ability to pay
Highlight the part of my post where I said that. Or retract. Whichever.
Posted by Doc Tor (# 9748) on
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quote:
Originally posted by Marvin the Martian:
Here's another proposal: the government empowers local authorities to purchase city/town centre land from the FPCs. It would require a large initial outlay, especially if the land was bought at market price, but thereafter the local authorities would be able to use commercial income from that land in order to reduce the block grant they receive from government. And as a nice bonus, the local authorities would be motivated to ensure that all frontages were occupied as vacant lots wouldn't generate any income.
Yes. Absolutely. I thought compulsory purchase a step too far for deano, so wasn't going to mention it right now, but since you have, it's on the table.
Posted by deano (# 12063) on
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quote:
Originally posted by Doc Tor:
Highlight the part of my post where I said that. Or retract. Whichever.
I already did. Read my post after the elipses. If someone has a piece of land and there is no economic activity taking place on that land, by definition they will have no income from the land. But you want to take taxes from them anyway, disregarding any (or no) economic activity on the land.
quote:
Originally posted by Doc Tor:
Yes. Absolutely. I thought compulsory purchase a step too far for deano, so wasn't going to mention it right now, but since you have, it's on the table.
Oh no, feel free to be honest. I welcome honesty and truthfulness when discussing socialism. Especially from socialists themselves. I find they are wary of stating their intentions baldly; perhaps they fear that ordinary people will misunderstand their intentions. But surely if the intentions are good then there is nothing to fear from a truthful stating of those intentions from the beginning.
Besides, it is - and will forever remain - merely an academic debate.
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by Doc Tor:
I thought compulsory purchase a step too far for deano, so wasn't going to mention it right now, but since you have, it's on the table.
I wasn't thinking of compulsory purchase so much as simply buying the land off them at a price they'll accept.
Come to think of it, simply buying the company would have the same effect. And with only one negotiation rather than lots.
Posted by Doc Tor (# 9748) on
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quote:
Originally posted by deano:
quote:
Originally posted by Doc Tor:
Highlight the part of my post where I said that. Or retract. Whichever.
I already did. Read my post after the elipses. If someone has a piece of land and there is no economic activity taking place on that land, by definition they will have no income from the land. But you want to take taxes from them anyway, disregarding any (or no) economic activity on the land.
So your definition of "unable to pay" encompasses "owns land worth millions". Ooookay.
You realise you're making my ideas look more sane and reasonable by the moment, don't you? ![[Yipee]](graemlins/spin.gif)
Posted by deano (# 12063) on
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quote:
Originally posted by Doc Tor:
quote:
Originally posted by deano:
quote:
Originally posted by Doc Tor:
Highlight the part of my post where I said that. Or retract. Whichever.
I already did. Read my post after the elipses. If someone has a piece of land and there is no economic activity taking place on that land, by definition they will have no income from the land. But you want to take taxes from them anyway, disregarding any (or no) economic activity on the land.
So your definition of "unable to pay" encompasses "owns land worth millions". Ooookay.
You realise you're making my ideas look more sane and reasonable by the moment, don't you?
No, I'm just trying to clarify the point. If I won a piece of land, that is all it is... a piece of land.
Now if there is no economic activity taking place on it but you still want to tax me based upon the value of that land, how would you expect me to pay?
You were the one who included the phrase "Regardless of the economic activity taking place on it." All I'm trying to do is clarify whether you will still want the tax paying even if there is zero economic activity taking place on it.
It is a straightforward question isn't it?
As a follow up, would you expect farmers to pay the tax on their land?
If so would it be fair to expect a farmer to pay the same tax per square mile when their economic activity is growing wheat, as opposed to a square mile in London where the economic activity is rent to retail, homes, factories etc?
[ 14. May 2015, 10:54: Message edited by: deano ]
Posted by Doc Tor (# 9748) on
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Okay. A land tax is proportionate to the value of the land.
If the land is in the middle of nowhere and is a swamp, its value is very low and the tax next to nothing.
If the land is in the middle of a city, it is very valuable and will attract a greater level of tax.
Yes, even if there is nothing on it. If you can't afford the tax, then you'll have to sell the land. For millions. The next owner will then have to decide whether or not to redevelop the site and realise the economic worth of the land.
Note that this discussion is taking place in the context of how municiple socialism might work. The idea of a land tax is not to tax what is on the land, but the land itself. You can build what you like - offices, shops, flats, whatever - on it. Those won't attract any more tax on top. This is simply a way of making sure that there is economic activity within a city, and ensuring that derelict spaces are quickly brought back into use.
Posted by Doc Tor (# 9748) on
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Adding that, no. An owner-farmer will pay a land tax proportional to the value of the agricultural land. A tennant farmer, nothing - the estate they rent the land from pays the tax.
If the estate then raises the rent to the point the tennant farmer can no longer afford it, the estate still has to pay the tax, and also get no income from the land.
Posted by deano (# 12063) on
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But all that will happen is the costs will be pushed further down the food chain until at the very end those people who shop in Aldi and Pound shops will be paying the tax in increased prices.
So as the landowner I won't pay anything extra. I'll pass the costs on ultimately to the very people you think you are trying to protect.
Posted by Doc Tor (# 9748) on
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quote:
Originally posted by deano:
So as the landowner I won't pay anything extra. I'll pass the costs on ultimately to the very people you think you are trying to protect.
You don't seem to know anything about the free market either.
Scenario 1: you don't develop the land. You pay tax on it.
Scenario 2: you do develop the land. You pay tax on it.
Scenario 3: you do develop the land. You attempt to shift the burden of tax onto the tennants. The tennants go elsewhere. See scenario 2.
So it's in your best interests, given that, as the landlord, you are liable for all of the tax, to firstly, bring the land into economic use, and secondly, set a rent at which you can profit from that economic use without gouging the tennants.
Posted by lilBuddha (# 14333) on
:
quote:
Originally posted by Leorning Cniht:
quote:
Originally posted by Russ:
In response it seems only natural to ask the more general question - can you, with a little generosity of spirit on both sides, have a left-leaning city within a right-leaning country ?
Let's take the issue of fiscal sovereignty. Is your left-leaning city able to pay its own bills? It might be - if it's a left-leaning city with a reasonable share of both poor and wealthy inhabitants, and if the wealthy inhabitants share (or at least are content with) the left-leaning policies and aren't about to scarper to Torytown next door at the first glimpse of a redistributionist policy, then there's no reason why a left-leaning city can't raise higher local taxes and provide more services.
If, on the other hand, your left-leaning city requires significant subsidies from richer, right-leaning areas in order to operate, the position is more difficult. Can such a city successfully levy more taxes from its poorer populace in order to be able to spend more, or is it hoping to decide to spend more money and have someone else pay the bills?
The degree of subsidy which poorer areas receive from richer areas is fundamentally a national question. It can't be determined on a local basis.
The system in the U.S. demonstrates how dysfunctional that can be, though.
Posted by deano (# 12063) on
:
quote:
Originally posted by Doc Tor:
quote:
Originally posted by deano:
So as the landowner I won't pay anything extra. I'll pass the costs on ultimately to the very people you think you are trying to protect.
You don't seem to know anything about the free market either.
Scenario 1: you don't develop the land. You pay tax on it.
Scenario 2: you do develop the land. You pay tax on it.
Scenario 3: you do develop the land. You attempt to shift the burden of tax onto the tennants. The tennants go elsewhere. See scenario 2.
So it's in your best interests, given that, as the landlord, you are liable for all of the tax, to firstly, bring the land into economic use, and secondly, set a rent at which you can profit from that economic use without gouging the tennants.
But the costs don't stop at the tenant! The tenant passes the costs on to the consumer by raising their prices? Thus the consumer pays your tax.
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by deano:
But the costs don't stop at the tenant! The tenant passes the costs on to the consumer by raising their prices? Thus the consumer pays your tax.
Then the consumer goes elsewhere and buys their goods from somewhere else where the tenants are prepared to swallow the cost of the tax themselves. Isn't the free market grand?
Meanwhile, the local authority plows the tax take into schemes to alleviate poverty or to improve economic efficiency (like road maintenance) so the consumers have more money in their pockets and can afford to pay whatever tax is left over when the prices have settled to an equilibrium.
In the worst case scenario, under this arrangement the consumer has the choice between going shopping and paying higher prices because of the tax, and not going shopping and not paying tax. In the other arrangement, the consumer only has the choice not to go shopping.
Posted by deano (# 12063) on
:
Provided they are able to travel to alternative places to shop. Can people who have low incomes afford to do that? Or will they remain tied to having to shop at those places that pass the land tax on to the consumer!
Also what happens when the consumers, tired of having to pay high prices, use their votes to elect a government who will reduce or remove the tax?
Posted by Alan Cresswell (# 31) on
:
quote:
Originally posted by Marvin the Martian:
Here's another proposal: the government empowers local authorities to purchase city/town centre land from the FPCs.
I can't use the word 'nationalise' because it's being bought by a local authority rather than national government. How about 'municipalise'?
So, you municipalise town centres. But now you have a really crappy bus service which means people can't get to the town centre easily. I advocate we municipalise the bus services as well, so that the council can make sure the buses run convenient routes for the people who want to get into the town centre. But, other people come to town by train. So, we municipalise the trains as well. By now the water, gas and electricity companies are gouging the council to provide power to the town centre, so municipalise them as well.
Hey, look we've reversed all those privatisations that Thatcher seemed to think were such a good idea, just with everything devolved to local authorities. I like it. ![[Big Grin]](biggrin.gif)
Posted by deano (# 12063) on
:
quote:
Originally posted by Alan Cresswell:
quote:
Originally posted by Marvin the Martian:
Here's another proposal: the government empowers local authorities to purchase city/town centre land from the FPCs.
I can't use the word 'nationalise' because it's being bought by a local authority rather than national government. How about 'municipalise'?
So, you municipalise town centres. But now you have a really crappy bus service which means people can't get to the town centre easily. I advocate we municipalise the bus services as well, so that the council can make sure the buses run convenient routes for the people who want to get into the town centre. But, other people come to town by train. So, we municipalise the trains as well. By now the water, gas and electricity companies are gouging the council to provide power to the town centre, so municipalise them as well.
Hey, look we've reversed all those privatisations that Thatcher seemed to think were such a good idea, just with everything devolved to local authorities. I like it.
No, you have just written about it on a web forum. Last Thursday means that's the nearest you will get!
Posted by Alan Cresswell (# 31) on
:
deano, you seem to have missed part of the proposal. Here it is again, with the bit you've missed highlighted
quote:
Originally posted by Doc Tor:
So one proposal would be simply this. A tax on based on land value, paid by the owners to the local authority. Regardless of the economic activity taking place on it. The LA could use that to defray business rates as it saw fit.
Your argument is that the land tax will be passed onto the businesses using that land, pushing up prices. But, if the LA has significantly reduced business rates then the overall increase in taxation the business pays need not increase much at all. And, if because vacant land still incurs the tax the land owner is incentivised to develop that land so it generates an income to at least cover the tax on the land then the overall economic activity of the town will go up - and it may even be that the overall tax burden the tenant faces goes down, because the LA is now raising the same amount of tax from more businesses the share paid by each business goes down.
Posted by Doc Tor (# 9748) on
:
quote:
Originally posted by deano:
But the costs don't stop at the tenant! The tenant passes the costs on to the consumer by raising their prices? Thus the consumer pays your tax.
You really don't know how the free market works, do you?
We already assume that whatever we buy consists of the raw cost of the product, the labour involved in the product, the cost of bringing it to market and merchandising it to the consumer. Overheads, such as rent and rates, are factored into the cost. The margin for the retailer is on top of that.
Your cry of "the consumer pays your tax" is as meaningless, or meaningful, as "the consumer pays my rent". What's your point? Especially where the land tax may be less than the existing taxes.
Posted by Alan Cresswell (# 31) on
:
quote:
Originally posted by deano:
No, you have just written about it on a web forum. Last Thursday means that's the nearest you will get!
I can dream, can't I? If you don't have a dream, how you going to have your dreams come true.
Besides, come the glorious revolution last Thursday will be the first against the wall ![[Biased]](wink.gif)
Posted by Ricardus (# 8757) on
:
ISTM for businesses taxes on assets make more sense than taxes on revenue. A tax on revenue discourages productivity because any new grand enterprise won't generate as much money for you as it should. A tax on assets incentivises productivity because your margin of taxation decreases in proportion to the efficiency with which you exploit your assets.
I believe that's why that well-known socialist Adam Smith was in favour of land taxes.
Posted by Marvin the Martian (# 4360) on
:
quote:
Originally posted by Alan Cresswell:
So, you municipalise town centres. But now you have a really crappy bus service which means people can't get to the town centre easily. I advocate we municipalise the bus services as well, so that the council can make sure the buses run convenient routes for the people who want to get into the town centre.
No need, the local authority can just offer subsidies for bus and train companies to run convenient routes into their centres. As many do today.
Posted by Marvin the Martian (# 4360) on
:
Of course, if the town centres were so much more popular it would become profitable for those companies to run services anyway. And the advantage of a subsidy-based system is it doesn't preclude competition between companies should another one want to run services as well, which was ultimately the main problem with nationalised transport.
Posted by Alan Cresswell (# 31) on
:
quote:
Originally posted by Marvin the Martian:
Of course, if the town centres were so much more popular it would become profitable for those companies to run services anyway.
The problem isn't the popularity of the town centre, it's the profitability of running from some places to the town centre. It's the other end of the route that's often not sufficiently popular.
Posted by Marvin the Martian (# 4360) on
:
That's where the subsidy comes in. But you'd only need it for the less profitable routes, not all of them.
Posted by Baptist Trainfan (# 15128) on
:
quote:
Originally posted by Marvin the Martian:
The local authority can just offer subsidies for bus and train companies to run convenient routes into their centres. As many do today.
Not that easy (as I've discovered lately here). Apparently a service has to be proved to be running at a loss before the subsidy can come in.
Here we have a problem. The local town bus company is owned by the Borough Council, which can't offer it a subsidy as that would be seen as giving their company an advantage over others. Subsidies can be offered by the County Council which also covers the area, however they are more interested in the rural routes; also they are of a different political hue to the Borough Council and are constantly at loggerheads.
Anyway, both Councils are trying hard to not spend money on such boring things as bus services.
[ 14. May 2015, 15:23: Message edited by: Baptist Trainfan ]
Posted by deano (# 12063) on
:
quote:
Originally posted by Doc Tor:
quote:
Originally posted by deano:
But the costs don't stop at the tenant! The tenant passes the costs on to the consumer by raising their prices? Thus the consumer pays your tax.
You really don't know how the free market works, do you?
We already assume that whatever we buy consists of the raw cost of the product, the labour involved in the product, the cost of bringing it to market and merchandising it to the consumer. Overheads, such as rent and rates, are factored into the cost. The margin for the retailer is on top of that.
Your cry of "the consumer pays your tax" is as meaningless, or meaningful, as "the consumer pays my rent". What's your point? Especially where the land tax may be less than the existing taxes.
My point is that ultimately your land tax will be a cost that has to be borne all the way through the retail chain and will end up being passed on to the consumer as higher prices for their products.
For example...
Lord Landowner receives a demand from HMRC to pay £X,000 in land tax. His Lordship send HMRC a cheque for the required amount.
Lord Landowner decides he doesn't want to be out of pocket, so he sends a letter out to the shopkeepers who rent shops on the piece of land telling them that he will be putting their rents up by £Y00.
Mrs Shopkeep who runs a shop on the land owned by Lord Landowner receives his Lordships letter and decides that she also does not wish to be out of pocket by £Y00. Therefore she increases the cost of some of her products by £Z.
Mr Poorpensioner comes into the shop to buy some bread and milk. He gets to the till and finds he has to pay £W more than he did the day before. He is on a fixed income and cannot get more money from anyone else to pay the £W amount. He has to find the money if he wants the bread and milk.
Your land tax has proved inflationary and that in turn is a burden on the low paid and those with a fixed income. The low paid suffer because £W is proportionaly a significantly larger fraction of their income than it would be of someone earning more. The fixed-income pensioners and those on benefits suffer because they have no way of increasing their income to cover the extra amounts they now have to pay out for their bread and milk.
Posted by deano (# 12063) on
:
Oh, and I notice that you haven't explained what Socialism is yet Doc.
You have almost managed to dodge it, but not quite.
Will you be answering that question Doc?
Posted by Crœsos (# 238) on
:
quote:
Originally posted by deano:
Your land tax has proved inflationary and that in turn is a burden on the low paid and those with a fixed income.
Except that's not restricted only to land taxes. The same chain of events follows if Lord Landowner wants £X,000 for taxes or if he wants it to buy another ivory-handled back scratcher or if he just figures he can squeeze an extra £X,000 out of his tenants. I'm not sure why it's only taxation that sets off the inflation alarm.
Posted by deano (# 12063) on
:
quote:
Originally posted by Crœsos:
quote:
Originally posted by deano:
Your land tax has proved inflationary and that in turn is a burden on the low paid and those with a fixed income.
Except that's not restricted only to land taxes. The same chain of events follows if Lord Landowner wants £X,000 for taxes or if he wants it to buy another ivory-handled back scratcher or if he just figures he can squeeze an extra £X,000 out of his tenants. I'm not sure why it's only taxation that sets off the inflation alarm.
But we are discussing Doc Tor's land tax policy and it's implications. I'm sure he wouldn't want you to divert attention away from that would he?
Nor from his soon-to-be-posted explanation of what Socialism actually is, for those of us who don't understand it. Again let's respect Doc and ensure the focus is well and truly still on him and the questions he has not yet answered.
Posted by Sioni Sais (# 5713) on
:
deano,
You also ignored my explanation of "What socialism is". I agree it wasn't detailed, but it was merely the objective and policies would need to follow that guideline.
I'm not sure Site Value Rating does, but it's better than what we have now, whatever system one is working with.
Posted by Doc Tor (# 9748) on
:
Firstly: a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.
So nothing about tractors or demanding everything is painted grey. Sorry to disappoint you.
So, to the other question. Is a land tax inflationary? No. It's actually deflationary, but we'll look at that in a moment. The question you're asking is this: what's to stop greedy capitalist bastards simply defraying the cost of a land tax on their poor benighted tenants?
The answer is surprisingly straight forward. The answer is the market. Which is already operating. Lord Landowner isn't running a charity, he's running a business. He's already squeezing the pips out of his tenants, because he's charging in rent what the market will bear.
So now he's being asked to pay £X000 in land taxes. He has nowhere really to go. If he tries to gouge his tenants, they'll either shut up shop or decamp to Lady Moneybags' shopping arcade down the road. He's still liable for all that tax, and now he's left with no means to pay any of it. Either he has to fund all those empty shops himself, or new tenants. And good luck with that, because, you know, free market. Or he can sell some land. And next year, he'll have to do the same.
Meanwhile, Lady Moneybags' new shopping arcade is doing really well. She's got full occupancy and can easily cover the land tax. It's in her interests that all her tenants stay, so she invests some of her new income into tidying the place up and making it look attractive to shoppers. If Lord Landowner sells some of his land to cover his land tax, she's interesting in buying it, because she knows she can make more money by expanding her existing business onto it.
In the next town, the Duke of Wealthington's estate manager is in a meeting with His Grace. "Your Grace," he says, "don't be an utter cockwomble like Lord Landowner. We have to make this new tax work whether we like it or not. Lady Moneybags is coining it in. We have to make sure we're not losing business to her by developing that tired-out high street we have. If we sell some of the less attractive properties, we'll have the capital to tart them up."
"Sell them? Good lord, who to?"
"Anyone who'll buy them at a mutually agreeable price."
"But won't the land tax drive down the price we'll get, because the new owners will be liable for this tax next year, and every year after."
"You Grace is very perspicacious."
And that's why a land tax is deflationary.
Posted by deano (# 12063) on
:
Doc, what is stopping the tenants passing on the costs to their customers?
Posted by Arethosemyfeet (# 17047) on
:
quote:
Originally posted by deano:
Doc, what is stopping the tenants passing on the costs to their customers?
The more they try to pass on, the less competitive they become. If they are able to pass on these costs then clearly your beloved market forces aren't working effectively. Besides, you're neglecting that this tax is instead of business rates, so for most of the tenants there is likely to be a net gain. Relative to the current system this would be a tax on unproductive property.
Posted by Russ (# 120) on
:
quote:
Originally posted by Doc Tor:
So one proposal would be simply this. A tax on based on land value, paid by the owners to the local authority. Regardless of the economic activity taking place on it. The LA could use that to defray business rates as it saw fit.
What would happen to a little old lady on a fixed pension whose only interest in life is her half acre of garden ? Would you tax her too ?
I'm wondering if it wouldn't be better to "municipalise" the development industry. The granting of planning permission can cause a huge increase in the value of land. Why not capture that for the public purse ? Establish a municipal monopoly on change of land use. Compulsory purchase land
at its market value under its current use (plus a modest mark-up as compensation where the existing owner is a person rather than a corporation). Grant the planning permission, and sell the land to the highest bidder. If they don't develop it within a fixed period of time, the permission lapses and the city can buy it back at the low price.
Just an idea...
Russ
Posted by Doc Tor (# 9748) on
:
quote:
Originally posted by Russ:
What would happen to a little old lady on a fixed pension whose only interest in life is her half acre of garden ? Would you tax her too ?
Everyone who owns land pays. Everyone. And in the UK the little old lady on a fixed pension pays council tax anyway. If her garden has half an acre, I'm going to reasonably assume (because by UK standards that's massive - you could fit a whole housing estate on it) her council tax isn't that small.
However, since she's not living in Knightsbridge, but probably (if she has half an acre - that really is a lot of land) in a village somewhere out in the sticks. Low land tax. Boom. Sorted.
Posted by Doc Tor (# 9748) on
:
quote:
Originally posted by deano:
Doc, what is stopping the tenants passing on the costs to their customers?
They do already. Seriously, the list of subjects you seem to know nothing about gets longer by the post... I'm just adding 'running a business' to it.
Posted by Leorning Cniht (# 17564) on
:
quote:
Originally posted by Doc Tor:
However, since she's not living in Knightsbridge, but probably (if she has half an acre - that really is a lot of land) in a village somewhere out in the sticks. Low land tax. Boom. Sorted.
And if she does own a huge house in Knightsbridge, but has a small income, I'm sure we can manage to make the tax into a lien against her house instead, so she can keep on living in the home that she brought her children up in, and we get the goods when she dies.
Posted by Alan Cresswell (# 31) on
:
In that case, it wouldn't be unreasonable to also adjust residential council taxes as well as business taxes to account for the effect of land-tax. The merry widow of Knightsbridge is clearly someone with income or savings to pay what would be a hefty council tax bill on such a property, if that was cut because she now has a land-tax to pay it wouldn't make much difference.
But, it's a point that's widely recognised that no single form of taxation (land, income, poll tax etc) is perfect and fair. The best that can be managed is combination of different taxations, though that often has the detriment of complexity.
Posted by Leorning Cniht (# 17564) on
:
quote:
Originally posted by Alan Cresswell:
The merry widow of Knightsbridge is clearly someone with income or savings to pay what would be a hefty council tax bill on such a property, if that was cut because she now has a land-tax to pay it wouldn't make much difference.
I am in favour of shifting the tax burden towards LVT and away from income / sales taxes. Which does increase the tax burden on our widow.
If all you're doing is replacing council tax with a small LVT, it will make little difference for most people, but also won't have any of the effects of an LVT that Doc Tor mentioned, because it's so small.
Posted by Alan Cresswell (# 31) on
:
Doc Tor was talking about the impact of a land tax on commercial activity. In that case a land owner is incentivised to get commercial returns from his property, and so vacant properties become a liability. That impacts shops, office buildings, rented housing etc.
Owner-occupier residential use of land is a different category. In this case there is no commercial return from the property, it's value to the owner is as a place to live (potentially an investment for future sale) rather than generate income.
Posted by Ricardus (# 8757) on
:
AIUI the philosophical basis of Land Value Tax is that land, unlike other goods, does not obviously belong to anyone. So I can claim to own a widget either because I made it myself or because I recompensed the widget-maker, but I quite famously cannot recompense God (or plate tectonics, if you prefer) for creating land.
This being so, land, if it belongs to anyone, belongs to the community as a whole, and LVT is a means of recompensing the community for the exclusive use of a common asset. This is still true if the exclusive user is a dear white-haired old lady whose only interests are cats and flower-arranging.
Posted by Doc Tor (# 9748) on
:
Which is why (despite Adam Smith's obvious enthusiasm for it) a Land Tax is something a socialist can happily advocate.
(Actually, Adam Smith had a great deal of sensible things to say. Amongst which is: in a free market, profit tends to zero.)
Posted by quetzalcoatl (# 16740) on
:
Marx developed that idea, profits zeroing, but he described it as a decline in the rate of profit, as the ratio of 'fixed capital', i.e. machinery and factories, to labour, increases. But of course, there are ways of reversing this - my dad's factory moved to Korea, I wonder why, maybe the climate.
Posted by Leorning Cniht (# 17564) on
:
quote:
Originally posted by Alan Cresswell:
Owner-occupier residential use of land is a different category.
Land is land. Some land is desirable, other land is less desirable. If you own a few acres of land on the outskirts of town X, I don't really care whether you build a factory or a mansion on it - I'll tax you the same.
(Of course, if your land is surrounded by factories, you probably don't want to build a house there. If there are zoning laws that prevent you from doing something with your land, maybe it's worth less (and so pays less tax) than similar land that you are allowed to make better use of.)
Posted by Alan Cresswell (# 31) on
:
quote:
Originally posted by Leorning Cniht:
quote:
Originally posted by Alan Cresswell:
Owner-occupier residential use of land is a different category.
Land is land. Some land is desirable, other land is less desirable. If you own a few acres of land on the outskirts of town X, I don't really care whether you build a factory or a mansion on it - I'll tax you the same.
Yes, that's what's proposed.
But, to assess the impact of changing to a land tax you also need to consider the system you're changing from. Which at the moment is business taxes for commercial activity and council tax for residential.
That is where the differences comes in, the current state not a potential situation where the tax is based on land value.
Posted by Penny S (# 14768) on
:
Could there be a tax for long term unoccupied residential properties owned by people living overseas? Partly raised from the property companies selling to them in preference to people living here?
Posted by Jengie jon (# 273) on
:
Actually there is the added problem and that is not everyone in the UK owns the land their building is on. There is freehold which means that they do and there is leasehold which means that they do not. Leaseholds are normally on long term rental agreements where the annual income is very small indeed.
So when the land is lease through leasehold who pays? Please note the property built on the land is owned by different people to the land itself.
Jengie
Posted by Doc Tor (# 9748) on
:
quote:
Originally posted by Penny S:
Could there be a tax for long term unoccupied residential properties owned by people living overseas? Partly raised from the property companies selling to them in preference to people living here?
The Land Tax will cover that. (And also to answer Jengie's point) - the owner of the land on which the property sits is liable for the tax. A leaseholder might have it written into their contract that they are to pay (certainly part of it, as per Australian law), but in the first instance, the charge is on the landowner.
Posted by Alan Cresswell (# 31) on
:
I suppose the problem is if someone has a long term lease, to what extent can the contract they have entered into be amended to increase the income for the landowner to recompense him for a tax demand?
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by deano:
Provided they are able to travel to alternative places to shop. Can people who have low incomes afford to do that? Or will they remain tied to having to shop at those places that pass the land tax on to the consumer!
I'm impressed to see someone arguing against socialism admit that markets aren't automatically perfectly efficient.
Of course, if the customers can't shop elsewhere, why hasn't the owner raised rents anyway? The owner's sitting on an effective monopoly; they're not going to think I'd better leave myself somewhere to raise prices in case the council passes an extra tax. If competition isn't a constraint, they will raise their rents to the point where the limit is customers deciding not to buy anything.
In short: the rents will already be at the point where if they're any higher customers will stop buying. The landlord can't pass the tax onto the customers by raising the rents; they'll already have raised the rents as high as they can go.
The other point of course is that the tax doesn't just disappear. The council uses it to pay for e.g. waste services and road repairs. These cut the business costs. (It's odd how nobody who complains that the businesses will pass costs on to their customers thinks that the businesses will pass savings on.) Or they spend the taxes on school dinners, which means the customers don't need to spend money on packed lunches and have more money to spend on services.
Posted by Russ (# 120) on
:
quote:
Originally posted by Doc Tor:
a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.
Hi Doc - thanks for posting this.
I suppose my first question is what you mean by "vesting in".
If a government take a nationalised industry, and privatises it by giving one share to each member of the population, is that vesting in the community as a whole ? And therefore socialism ?
If the government instead gives it to the church - an organisation which (like the State) in principle exists for the benefit of the whole community - is that socialism ?
Best wishes,
Russ
Posted by Doc Tor (# 9748) on
:
That's an interesting question: to me, being more libertarian left than authoritarian left, I think that running every enterprise at the state level would be a mistake (certainly a mistake made by Soviet-era communism) that doesn't bear repeating.
I'm much more in favour of a communitarian approach. A farmer should own the land they work, but any employees they might have should have a 'vesting' in the running, the risks and rewards of that enterprise. Workers would own the business they worked in, and would jointly determine, through consultation and committees, strategy, pay and other matters traditionally dealt with solely at the board-level.
It does keep the state's (often dead) hand out of communitarian private enterprises, and allows for a great deal of competition that wouldn't, under a centrally-planned economies, weed out the ineffective, unwieldy or corrupt.
For larger 'public service' utilities, the vesting of citizens is done via local, regional or state government: public transport, roads, energy, water can all be publicly owned and controlled for the public's benefit.
Posted by Leorning Cniht (# 17564) on
:
quote:
Originally posted by Jengie jon:
Please note the property built on the land is owned by different people to the land itself.
An important feature of LVT is that the tax is on the value of the land, not the house. Two houses on identical plots of land pay the same tax, even if one is a shack and one is a mansion. It doesn't matter who lives there - the tax is paid by the owner of the land.
Obviously the owner of the land will have to consider his tax bill when he decides how much rent to seek...
Posted by Leorning Cniht (# 17564) on
:
quote:
Originally posted by Alan Cresswell:
I suppose the problem is if someone has a long term lease, to what extent can the contract they have entered into be amended to increase the income for the landowner to recompense him for a tax demand?
One can legislate for anything, of course, and this is a fine example of a case where transitional arrangements are warranted.
Posted by Russ (# 120) on
:
quote:
Originally posted by Doc Tor:
I'm much more in favour of a communitarian approach. A farmer should own the land they work, but any employees they might have should have a 'vesting' in the running, the risks and rewards of that enterprise. Workers would own the business they worked in, and would jointly determine, through consultation and committees, strategy, pay and other matters
Sounds like you'd allow the barber to own his scissors, and the singer his voice.
Not so much that all the means of production should be owned iby everyone in common; more that no-one should be without some (sole or joint) ownership of some means of production.
Would you add some qualifier about "if they wish" ? Some people might prefer a guaranteed weekly wage to a share of the weekly profits (not guaranteed to be a positive number)...
Best wishes,
Russ
Posted by Alan Cresswell (# 31) on
:
I think part of the communitarian approach is one of motive, who does the business benefit?
In modern capitalism, the answer is simple: Businesses benefit their owners, which for large businesses means the share holders. Businesses make money, the owners get a share of that, and a business that fails to make money fails.
In socialism the answer is society. But the actual implementation is more complex. There are several models. The Cooperative movement demonstrated one model, the benefit is to the workers and shoppers at the Cooperative stores. Mutual financial institutions operated on a similar model. However, all this is is a variation on the capitalist model - replacing shareholders with consumers, if the Cooperative fails to make money it still goes out of business. That's especially true in modern western society where the Coop isn't the only shop in town, so the profits from the Coop do not benefit society, just a small portion of society, and society won't break down if it closes. When the Coop ran the only store then the situation was a bit different.
Other forms of cooperatives, like the small farmers cooperatives that form the backbone of the fair trade system, operate in a different manner. These operate as collective bargaining organisations, allowing the workers who are almost powerless on their own to exert power on their own benefit. This is more like the trade union movements than the cooperative shops. But again, these cooperatives exist to make money for their members, so in a real sense are still capitalist in nature.
Socialism really comes into it's own when the function of a business is not to make money, but to provide an essential service. When the business of a rail network is to get workers in and out of work, to get children to school, people to the shops and their holidays, and hence to directly benefit society. Of course, questions of effeciency and cost effectiveness are important - if for the same money it's possible to provide a better service then that's clearly good. But, if the service fails to recover all it's costs then that's not a problem, providing it provides the service to society that is intended.
The same would go for something like a health service. Provided by the State for the citizens of the state without thought of profit. We never really had that in the UK, because parts of the service (the drugs companies in particular) were capitalist ventures. Of course, a health service which is run by capitalist insurance companies is never going to be socialist, and the government paying the insurance premiums of those who can't afford them doesn't make it a socialist health care system.
Posted by Russ (# 120) on
:
quote:
Originally posted by Alan Cresswell:
I think part of the communitarian approach is one of motive, who does the business benefit?
In modern capitalism, the answer is simple: Businesses benefit their owners, which for large businesses means the share holders. Businesses make money, the owners get a share of that, and a business that fails to make money fails.
Everyone benefits from business.
I'm not an expert on economics, but suppose for example I set up a widget-making business. I buy from the bank the use of capital, I buy from the landowner the use of the premises, I buy from the workforce their labour, I buy from other businesses the raw materials. And every one of those transactions is voluntary, meaning that the other party benefits thereby (or else they wouldn't do it). I sell widgets, and every purchase is voluntary, and so everyone who buys a widget from me benefits (or else they wouldn't do it). And I make a profit on the business (or else I wouldn't do it).
In classical economics, I as the business owner set the price/quantity trade-off (the cheaper they are, the more I sell) at the point which maximizes my profit. (In real life I might at any moment be more concerned with growing market share, but let's not complicate the model). A benevolent government would want me to set that price/quantity trade-off at the point which maximizes total benefit to society. Which probably means lower prices, more widgets and lower profit to me. Which may be what you'e getting at.
There are various things that the government can do to try to bring this about. I as the economically-rational business owner respond to changes in the prices of the inputs I buy by changing the price/quantity of widgets. E.g. If the cost of labour goes up, I buy less of it, and take a reduced profit by producing fewer widgets and selling them at a higher price - net reduction in the social benefit of the industry. Unintended consequences abound...
I think the conclusion from the classical model is that society does best where governments:
- regulate to prevent/mitigate market failure - working with the grain of the market rather than against
- tax profits from economic activity rather than taxing economic activity, with the aim of encouraging an economy where production is high and prices are low
- generally has low taxes with citizens choosing what they want to buy rather than have government making choices for them
Isn't that what you would do if your understanding of economics matched that of Adam Smith ? Feel free to disagree if I've got it wrong.
If you're saying that there are problems in applying this economic model to a sector such as healthcare, I'd tend to agree, but would be interested in hearing the argument in more detail.
Best wishes,
Russ
Posted by Alan Cresswell (# 31) on
:
quote:
Originally posted by Russ:
Feel free to disagree if I've got it wrong.
Broadly I'd agree with two provisos.
First is I don't think your three points ever hold true.
1) Governments regulate for a variety of reasons that are not directly related to market success or failure. They will certainly regulate on health, safety, environmental protection grounds. They may regulate to support other policy decisions (eg: in the UK to move employment out of London to the north and west, to ease pressure on public services in the much more densely populated south east). I think that many of those other factors are entirely legitimate, but will screw the simple model presented.
Even if government regulation was only to prevent/mitigate market failure, they wouldn't do so perfectly.
2) Taxation of profits isn't as easy with multinational corporations where the profits of economic activity in one country may be registered in another. Small and medium companies then face a larger tax burden because they don't have easy access to the option to displace profits to other nations. Tackling issues of taxation in an international trading system would be very challenging, and require international cooperation.
3) Taxation can often be used to further other government policies. Taxation on tobacco or alcohol products to reduce use, for example. There are usually good reasons for these other policies, but again they would screw with your simple model.
And, my second reason relates to your additional comment.
quote:
If you're saying that there are problems in applying this economic model to a sector such as healthcare, I'd tend to agree, but would be interested in hearing the argument in more detail.
There are sectors of the economy where such economic theory can't be followed. Healthcare is one of them. Education would be another. In general, public services. A train company can operate routes and generate a profit, but as a public service they would need to run services on routes and at times when profitability would be harder to achieve at prices that would make it useful to the general public. The same for postal services, utilities, and probably retail (would you running a business on your model build a new supermarket within easy access of neighbourhoods of people who have no cars and are not going to be buying the high ticket items very often?).
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
I'm not an expert on economics, but suppose for example I set up a widget-making business. I buy from the bank the use of capital, I buy from the landowner the use of the premises, I buy from the workforce their labour, I buy from other businesses the raw materials. And every one of those transactions is voluntary, meaning that the other party benefits thereby (or else they wouldn't do it). I sell widgets, and every purchase is voluntary, and so everyone who buys a widget from me benefits (or else they wouldn't do it). And I make a profit on the business (or else I wouldn't do it).
Er... how, given classical economics, do you make a profit?
You own Wonderful Widgets and you've set your prices so you make a profit. Now Widgets Worldwide across the way decides that if they cut their prices they'll make less on each widget, but they'll sell a lot more so they'll make it up. So in order not to be driven out of business you have to cut your prices. And then they cut their prices again, and pretty soon, neither of you is making any kind of profit - you're just covering running costs. This benefits the consumers, who get their widgets at the most efficient possible price. Hooray for the free market.
The point is that anywhere someone is making a profit it can only be because the market is running at less than optimal efficiency according to classical economics.(*) Where there is profit there is inefficiency. So government action to redistribute profit, by e.g. raising the cost of labour, isn't intervening in an efficient market; it's intervening where the market is already inefficient.
In any case, it's open to question whether the workers are entering into a voluntary transaction. In a labour market with no government intervention in the form of social security, labour has to get a job or starve. Unlike the bank or business owner, who can live off their capital for a while and who is under no immediate need to enter the market, labour has to enter the market now. You can call transactions made under duress voluntary if you choose. (Hayek said that if a robber takes my wallet at knifepoint, I have given him my wallet voluntarily, since I could have chosen to be stabbed...) But most of us would choose not to.
(*) There is one classical economist who had an explanation for how profit arises in an efficient market. His name was Karl Marx.
Posted by Russ (# 120) on
:
quote:
Originally posted by Dafyd:
Er... how, given classical economics, do you make a profit?
You own Wonderful Widgets and you've set your prices so you make a profit. Now Widgets Worldwide across the way decides that if they cut their prices they'll make less on each widget, but they'll sell a lot more so they'll make it up. So in order not to be driven out of business you have to cut your prices. And then they cut their prices again, and pretty soon, neither of you is making any kind of profit - you're just covering running costs. This benefits the consumers, who get their widgets at the most efficient possible price. Hooray for the free market.
The point is that anywhere someone is making a profit it can only be because the market is running at less than optimal efficiency according to classical economics.
Relative advantage.
If I can design a better widget, I have an advantage. If I'm so enthusiastic about widgets that I'll spend more hours designing widgets and selling widgets and motivating my widget-makers, for the same level of monetary return, then I have an advantage. If I know a few tricks of advertising and branding and product placement, I have an advantage.
And the theory says I only need a relative advantage. If you can make widgets a little cheaper/better than I can, and you can make gadgets a lot better/cheaper than I can, then it pays you to concentrate on gadgets and leave me to concentrate on widgets. Or so I'm led to believe...
Best widgets,
Russ
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
quote:
Originally posted by Dafyd:
The point is that anywhere someone is making a profit it can only be because the market is running at less than optimal efficiency according to classical economics.
Relative advantage.
That is to say, the market is not running at perfect efficiency. If have an idea to design a better widget, or a few tricks of advertising, then effectively have a micro-monopoly on that knowledge or idea. And that micro-monopoly is an inefficiency.
Posted by Dave W. (# 8765) on
:
quote:
Originally posted by Dafyd:
The point is that anywhere someone is making a profit it can only be because the market is running at less than optimal efficiency according to classical economics.(*)
Do you happen to have a link that supports this reading of "classical economics"?
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Dave W.:
quote:
Originally posted by Dafyd:
The point is that anywhere someone is making a profit it can only be because the market is running at less than optimal efficiency according to classical economics.
Do you happen to have a link that supports this reading of "classical economics"?
Not to anything online.
Galbraith contains a discussion of the problems classical economists had in establishing how profits come about. The explanation that's been settled on is that profit rewards risk, but how that doesn't explain why competition doesn't eliminate it altogether.
[ 27. May 2015, 13:28: Message edited by: Dafyd ]
Posted by Doc Tor (# 9748) on
:
Well, Adam Smith argues that, given oversupply and competitors, that profit will fall (chapter 10 of Wealth of Nations).
Given a perfect market, that profit will inevitably fall to zero. Therefore, any profit is due to a monopolistic (ie market failure) position, however temporary.
Posted by Doc Tor (# 9748) on
:
Actually, this is probably a better, more comprehensive explanation.
Posted by Russ (# 120) on
:
Thanks Doc Tor, that explains it.
The profit that will be eaten up by competition in a perfectly-functioning market is the profit over and above the "going rate" of return for enterprise in the society.
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
The profit that will be eaten up by competition in a perfectly-functioning market is the profit over and above the "going rate" of return for enterprise in the society.
In a perfectly functioning market the going rate of return for enterprise will be the salary for a job requiring the same qualifications, with a bit of a bonus to reflect any additional risks assumed. Note that being fired, or working for a business that goes bust are also risks, so the bonus won't be that large.
That is, the going-rate of return for enterprise will settle at the point where it is equally economically attractive for someone to run a business or to be employed - if it is higher than salary more people will leave salaried work, meaning competition becomes more intense.
Note that profit on business is separate from interest on investment.
Posted by Russ (# 120) on
:
quote:
Originally posted by Alan Cresswell:
1) Governments regulate for a variety of reasons that are not directly related to market success or failure. They will certainly regulate on health, safety, environmental protection grounds. They may regulate to support other policy decisions (eg: in the UK to move employment out of London to the north and west, to ease pressure on public services in the much more densely populated south east). I think that many of those other factors are entirely legitimate.
Safety & environment & regional disparity are I suspect all examples of externalities - impacts that firms don't have to pay for - which is a different form of market failure. And yes, regulation that mimics the impact of the missing market responses is legitimate.
quote:
Even if government regulation was only to prevent/mitigate market failure, they wouldn't do so perfectly.
Government doesn't do anything perfectly, but that's an argument against the sort public ownership and "big government" that you seem to be in favour of.
quote:
2) Taxation of profits isn't as easy with multinational corporations where the profits of economic activity in one country may be registered in another. Small and medium companies then face a larger tax burden because they don't have easy access to the option to displace profits to other nations. Tackling issues of taxation in an international trading system would be very challenging, and require international cooperation.
Good point. Differential tax rates in cities with devolved powers would lead to similar issues. If a firm operates in multiple jurisdictions, the place where the profit is generated seems to be largely a matter of accounting convention.
quote:
There are sectors of the economy where such economic theory can't be followed. Healthcare is one of them. Education would be another. In general, public services. A train company can operate routes and generate a profit, but as a public service they would need to run services on routes and at times when profitability would be harder to achieve at prices that would make it useful to the general public.
The point about healthcare is that the paradigmatic case has a seriously ill person who needs the skills and expertise of health professionals in order to get better. And no-one could reasonably not want to get better. And any person of goodwill wants sick people to get better. So the Invisible Hand doesn't apply, there's minimal scope for patients to exercise meaningful choice. A man can't decide that he can't afford to be treated for cancer so he'll be treated for flu instead...
You could say it's a case of needs rather than wants. except that may not hold true around the edges - cosmetic surgery is one example - and it can be hard to see a clear dividing line.
Not convinced that the same necessarily applies to transport. If you have the choice of walking or cycling to work, the bus isn't a need. And in a functioning market, house prices in an area ought to reflect costs of transport....
I suppose the question is what functions should be public services - what's the argument by which we should rationally decide ? Approving of the concept in principle isn't enough...
Best wishes,
Russ
[code]
[ 29. May 2015, 08:11: Message edited by: Eutychus ]
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
Government doesn't do anything perfectly, but that's an argument against the sort public ownership and "big government" that you seem to be in favour of.
I am not convinced it is fair to compare government as actually existing with perfect markets; the relevant comparison would be government as actually existing with markets as actually existing.
quote:
Not convinced that the same necessarily applies to transport. If you have the choice of walking or cycling to work, the bus isn't a need. And in a functioning market, house prices in an area ought to reflect costs of transport....
Housing prices, even mitigated by mortgages, are an upfront cost. If you have a lot of money to start with, you can invest it in a more expensive house closer to your workplace and make up the savings on transport. If, on the other hand, you have minimal liquidity, you don't have the option: you have to go for the lower immediate cost. This is one of many poverty charges.
The major argument for public transport is that it is socially useful to service areas that might not make a sufficient rate of return to attract private investors. In addition, the externalities on car use in terms of pollution are heavier than on most forms of publically owned transportation.
quote:
I suppose the question is what functions should be public services - what's the argument by which we should rationally decide ? Approving of the concept in principle isn't enough...
I'd have thought that a case-by-case basis argument would be more appropriate than a general principle. But, generally, where a market-based solution results in burdens falling unequally upon people who have fewer resources in any case, or where free-rider costs or administrative inconvenience make a payment at point of use or subscription model inappropriate.
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
Safety & environment & regional disparity are I suspect all examples of externalities - impacts that firms don't have to pay for - which is a different form of market failure. And yes, regulation that mimics the impact of the missing market responses is legitimate.
Economist Paul Krugman, writing about a different though related topic, made this relevant observation*:
quote:
First, when it comes to things that make urban life better or worse, there is absolutely no reason to have faith in the invisible hand of the market. External economies are everywhere in an urban environment. After all, external economies — the perceived payoff to being near other people engaged in activities that generate positive spillovers — is the reason cities exist in the first place. And this in turn means that market values can very easily produce destructive incentives.
--------------------
*The New York Times has a paywall that limits non-subscribers to viewing ten articles per calendar month. Only click through if you're a NYT subscriber or feel like using one of your ten monthly NYT passes on a blog entry by Krugman.
Posted by Russ (# 120) on
:
quote:
Originally posted by Dafyd:
In a perfectly functioning market the going rate of return for enterprise will be the salary for a job requiring the same qualifications, with a bit of a bonus to reflect any additional risks assumed. Note that being fired, or working for a business that goes bust are also risks, so the bonus won't be that large.
That is, the going-rate of return for enterprise will settle at the point where it is equally economically attractive for someone to run a business or to be employed - if it is higher than salary more people will leave salaried work, meaning competition becomes more intense.
So what's your conclusion from that, Dafyd ?
That returns to enterprise are actually pretty low ?
That there are specific market failures that are causing the returns to entrepreneurs to be too high, and that government should address these ?
Or that economic theory is missing something ?
Not quite sure where you're coming from...
Best wishes,
Russ
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
So what's your conclusion from that, Dafyd ?
Largely that when guiding practical policy, comparing government action as imperfect as in actuality with markets as perfect as in theory is going to be misguiding. Deciding policy on the basis that the markets work efficiently, or at least that they invariably work more efficiently than government intervention, is like trying to design a bridge on the principle that all masses are point masses and all beams are perfectly rigid.
Posted by Russ (# 120) on
:
Seems to me that the use of economic theory is to describe the "state of nature" - how various sectors of the economy work in the absence of government intervention - and what the impact of different interventions is likely to be. As a guide to appropriate government action.
Does economic theory tell us that the economy works best if government leaves it alone ?
I'm not an expert. My perception is that the answer is "yes under certain conditions". Suggesting that government action can improve the workings of the economy by addressing market failure and externalities. But can also disimprove the economy by actions which disrupt those parts of the economy which theory suggests are well-functioning.
I don't see such an approach as making unfair comparisons.
I'm interested in the extent to which left-leaning Shipmates hold alternative economic theories. That could in principle be tested in a city with devolved powers. Or conversely whether the left-leaning agenda (avoiding the s-word) is about deliberately rejecting economic prosperity in pursuit of other goals. Implying that such a city would eventually become an economic basket case...
Best wishes,
Russ
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
Seems to me that the use of economic theory is to describe the "state of nature" - how various sectors of the economy work in the absence of government intervention - and what the impact of different interventions is likely to be.
This is deceptive since the assumed "state of nature" usually has a massive amount of government intervention assumed as its baseline (e.g. laws against theft and fraud will be enforced, legally binding agreements can be made and redress sought when breached, some type of currency is in circulation, etc.). A true "absence of government intervention" is failed state anarchy, like Somalia or warlord-era Afghanistan. Economic theory would seem to valid outside of that very limited set of circumstances.
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
Seems to me that the use of economic theory is to describe the "state of nature" - how various sectors of the economy work in the absence of government intervention - and what the impact of different interventions is likely to be. As a guide to appropriate government action.
As Croesos notes, the use of 'absence of government intervention' here is heavily question-begging, since the government performs a lot of functions that are necessary to keep even the most laissez-faire capitalist economy going.
quote:
My perception is that the answer is "yes under certain conditions". Suggesting that government action can improve the workings of the economy by addressing market failure and externalities. But can also disimprove the economy by actions which disrupt those parts of the economy which theory suggests are well-functioning.
Government action should surely be based not on what the theory suggests but on what actually happens in practice. If the theory suggests that parts of the economy are well-functioning it should equally assume that government intervention will have the desired effects. If the theory doesn't allow that then it's engaged in special pleading against government intervention.
quote:
I'm interested in the extent to which left-leaning Shipmates hold alternative economic theories. That could in principle be tested in a city with devolved powers.
Whatever theories left-leaning shipmates hold can hardly fail testing more comprehensively than the dominant right-wing orthodoxy has done. The only reason the UK economy hasn't become a complete basket-case under the Tories is that Osborne surreptitiously introduced a government spending splurge a couple of years ago, which he and the dominant right-wing orthodoxy are now ignoring.
quote:
Or conversely whether the left-leaning agenda (avoiding the s-word) is about deliberately rejecting economic prosperity in pursuit of other goals. Implying that such a city would eventually become an economic basket case...
Despite regular predictions from the right, Sweden is not yet a basket-case even though it pursues economic policies considerably to the left of anything that's likely to happen in Britain.
The idea that anyone's economic policy is solely based around economic prosperity is misleading until you define economic prosperity. Maximise the total wealth in society regardless of distribution? Minimise the number of people suffering financial hardship? Or should abstract wealth or financial matters be treated as mere means to the ends of production of food and goods and health services?
Posted by Russ (# 120) on
:
quote:
Originally posted by Dafyd:
the government performs a lot of functions that are necessary to keep even the most laissez-faire capitalist economy going.
Agreed. As I understand it, Adam Smith and his contemporaries were fully aware of the need for government to enforce the law of contract, maintain a sound currency, provide for the common defence etc.
quote:
Government action should surely be based not on what the theory suggests but on what actually happens in practice.
Government action should be based on a best-available understanding of the likely consequences (and a commitment to the common good, governing on behalf of all the people rather than profiting one constituency - in the wider sense - at the expense of another).
How does understanding of consequences not constitute a theory ?
quote:
If the theory suggests that parts of the economy are well-functioning it should equally assume that government intervention will have the desired effects. If the theory doesn't allow that then it's engaged in special pleading against government intervention.
This is just nonsense. Of course there is the possibility of unintended consequences, and theories cannot plead. This comes over as a desperate attempt to discredit any understanding of how the economy works because you find the conclusions unpalatable.
quote:
Whatever theories left-leaning shipmates hold can hardly fail testing more comprehensively than the dominant right-wing orthodoxy has done. The only reason the UK economy hasn't become a complete basket-case under the Tories is that Osborne surreptitiously introduced a government spending splurge a couple of years ago, which he and the dominant right-wing orthodoxy are now ignoring.
I take it you refer to Keynesian economics. If it works, great. Problem seems to be that politicians of all parties are happy to borrow in recession but reluctant to pay back in the boom times...
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
quote:
Originally posted by Dafyd:
the government performs a lot of functions that are necessary to keep even the most laissez-faire capitalist economy going.
Agreed. As I understand it, Adam Smith and his contemporaries were fully aware of the need for government to enforce the law of contract, maintain a sound currency, provide for the common defence etc.
So, because Adam Smith knew that the market does not function in the absence of government intervention, the 'function of economic theory is to describe the "state of nature" - how various sectors of the economy work in the absence of government intervention'.
You may want to spell out the logic of that for me.
quote:
How does understanding of consequences not constitute a theory ?
A theory may understand consequences accurately or inaccurately. Current mainstream centre-right economics does not seem to describe real-world consequences accurately.
quote:
quote:
If the theory suggests that parts of the economy are well-functioning it should equally assume that government intervention will have the desired effects. If the theory doesn't allow that then it's engaged in special pleading against government intervention.
This is just nonsense. Of course there is the possibility of unintended consequences, and theories cannot plead. This comes over as a desperate attempt to discredit any understanding of how the economy works because you find the conclusions unpalatable.
You think that because I find the conclusions unpalatable I should ignore the fact that the conclusions are quite demonstrably inapplicable to the real economy?
Companies make large profits.
According to the theory you've been putting forward, companies do not make large profits.
Apparently, thinking that this shows up a problem with the theory is a desperate attempt to discredit any understanding of how the economy works.
What you seem to be arguing is that as long as we have an understanding, no matter how wrong-headed, we mustn't subject it to criticism in case we discredit it.
quote:
quote:
Whatever theories left-leaning shipmates hold can hardly fail testing more comprehensively than the dominant right-wing orthodoxy has done. The only reason the UK economy hasn't become a complete basket-case under the Tories is that Osborne surreptitiously introduced a government spending splurge a couple of years ago, which he and the dominant right-wing orthodoxy are now ignoring.
I take it you refer to Keynesian economics. If it works, great. Problem seems to be that politicians of all parties are happy to borrow in recession but reluctant to pay back in the boom times...
I feel that as flaws in theories go, a flaw that governments won't act in accordance with its recommendations and the predicted consequences follow is generally preferable to a flaw that governments will act in accordance with its recommendations and the predicted consequences don't follow.
One might as well argue that since governments won't take action against climate change on the basis of current climate science, we should reject the climate science and adopt climate change denialism instead. Now that I say that, some people do.
[ 04. June 2015, 09:30: Message edited by: Dafyd ]
Posted by Russ (# 120) on
:
quote:
Originally posted by Dafyd:
So, because Adam Smith knew that the market does not function in the absence of government intervention, the 'function of economic theory is to describe the "state of nature" - how various sectors of the economy work in the absence of government intervention'.
You may want to spell out the logic of that for me.
Do you not know the difference between facilitating the market and intervening in the market ?
Almost everyone agrees that some things governments do are supportive of economic activity. The substantive point you seem to be making here is a very weak one. Are you saying that not everything government does is automatically bad ? Or that because governments do some things right they shouldn't be criticised for doing other things ?
I'll admit that the choice of the phrase "state of nature" perhaps did not convey accurately what I meant to say. It kinda sounded vaguely AdamSmithian...
quote:
Current mainstream centre-right economics does not seem to describe real-world consequences accurately.
Why do you think that is ? What mechanisms are missing from the theory ?
quote:
Companies make large profits. According to the theory you've been putting forward, companies do not make large profits.
If I have it right (and I've admitted to being a mere amateur in this area), the theory says that under conditions of perfect competition, companies would not make large profits. So that where large profits exist, this is due to what you might call "partial monopoly" - things like barriers to entry, trade secrets, copyright.
You went further, to suggest that any not-immediately-transferrable skill I might have in widget-making constitutes a micro-monopoly.
That sounds like when we're talking in the abstract you know and understand and make use of the theory. It's only when it comes to the role of government that you feel the need to discredit it.
quote:
What you seem to be arguing is that as long as we have an understanding, no matter how wrong-headed, we mustn't subject it to criticism in case we discredit it.
I'm interested to hear any constructive criticism (i.e. steps towards a better theory). What I've no time for is the attitude that uses the fact that modern medicine sometimes doesn't work perfectly as an excuse for ignoring the doctor's advice and doing exactly what we feel like doing...
Best wishes,
Russ
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
Do you not know the difference between facilitating the market and intervening in the market ?
"[F]acilitating the market" is when government action helps you, while "intervening in the market" is when government action hinders you or helps your competitors, right?
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
Almost everyone agrees that some things governments do are supportive of economic activity.
Seriously though, there's no government action that doesn't have negative (or as you might say "unsupportive") consequences for someone. Take, for example, government enforcement of laws against theft. While this may be beneficial to most citizens, it still negatively impacts a variety of economic activities: theft, re-sellers of stolen goods, various "legitimate businessmen" selling "protection" against theft, etc. There are plenty of very good arguments why governments should disfavor and try to impede these types of economic activities, but it's still government suppression ("intervention", to use your term) of one type of economic activity in favor of others.
quote:
Originally posted by Russ:
I'll admit that the choice of the phrase "state of nature" perhaps did not convey accurately what I meant to say. It kinda sounded vaguely AdamSmithian...
I think it was more your insistence that economies could work "in the absence of government intervention" that got you in to trouble, given that every action taken by government is intervening with someone.
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
quote:
Originally posted by Dafyd:
So, because Adam Smith knew that the market does not function in the absence of government intervention, the 'function of economic theory is to describe the "state of nature" - how various sectors of the economy work in the absence of government intervention'.
You may want to spell out the logic of that for me.
Do you not know the difference between facilitating the market and intervening in the market ?
I'm highly sceptical of the coherence of the distinction. It seems to me to be arbitrarily motivated.
In order to make the distinction you have to theoretically delimit the market as a self-contained system into which external entities such as the government intervene. But I don't think the market does exist as a self-contained system in such a way that anything can be considered external to it.
quote:
quote:
Current mainstream centre-right economics does not seem to describe real-world consequences accurately.
Why do you think that is ? What mechanisms are missing from the theory ?
Mainstream centre-right economics (and for that matter centre-left economics in the hands of people like Krugman) believes that you can model people's behaviour on the basis that they act rationally to maximise their utility with an accurate assessment of risks.
Keynesian economics believes that people neither accurately assess risks, nor do they believe themselves to accurately assess risks. Instead, it argues that people's behaviour shows that they value the ability to hedge against unpredictable risks. So Keynesian economics thinks that people will value fluid investments (investments they can cash at short notice) over non-fluid investments. Mainstream economics doesn't have a theoretical basis for that.
(Incidentally, for similar reasons mainstream economics cannot allow that 'having enough money to feed and shelter myself and my family this week' is a more urgent motivation than 'increasing the value of my spare capital'. For that reason, it's going to assume that the workers can get a better price for their labour than they actually can. It doesn't allow for the power imbalances that result from this fact.)
The other thing Keynesian economics adds is that it doesn't think the markets are uniformly rational. It thinks they tend towards herd mentality. In mainsteam economics, you can't make a fortune by guessing what the market will do and doing something else. Keynes himself made a fortune three times by doing just that - something that according to mainstream economics should be either impossible or at least require implausible luck.
Mainstream economics is almost entirely uninterested in how things get produced or how much stuff gets produced.
quote:
You went further, to suggest that any not-immediately-transferrable skill I might have in widget-making constitutes a micro-monopoly.
That sounds like when we're talking in the abstract you know and understand and make use of the theory. It's only when it comes to the role of government that you feel the need to discredit it.
That sounds like when we're talking in the abstract you know and understand the theory that bridge beams are perfectly rigid and never break. It's only when it comes to the role of health and safety inspectors in bridge building that you feel the need to discredit it.
That I feel I have a basic grasp of the theory in the abstract is why I think it's faulty when it comes to practice.
quote:
What I've no time for is the attitude that uses the fact that modern medicine sometimes doesn't work perfectly as an excuse for ignoring the doctor's advice and doing exactly what we feel like doing...
Or else, you have no time for the attitude that uses the fact that homeopathy sometimes doesn't work perfectly as an excuse for ignoring the homeopath's advice...
Posted by Russ (# 120) on
:
quote:
Originally posted by Crœsos:
"[F]acilitating the market" is when government action helps you, while "intervening in the market" is when government action hinders you or helps your competitors, right?
Intervention is a coming-between (from the Latin veni). In this case, coming between the buyer and the seller. Enforcing the same individual rights (to property, to security of the person, etc) on buyers and sellers in the market as on non-participants isn't something I'd class as an intervention in the market.
If you've ever had the experience of being offered a discount for payment in cash, this may have been a suggestion that the transaction be confined to you and the tradesman concerned, rather than a three-party transaction including the government...
Best wishes,
Russ
Posted by Jolly Jape (# 3296) on
:
quote:
Originally posted by Russ:
quote:
Originally posted by Crœsos:
"[F]acilitating the market" is when government action helps you, while "intervening in the market" is when government action hinders you or helps your competitors, right?
Intervention is a coming-between (from the Latin veni). In this case, coming between the buyer and the seller. Enforcing the same individual rights (to property, to security of the person, etc) on buyers and sellers in the market as on non-participants isn't something I'd class as an intervention in the market.
If you've ever had the experience of being offered a discount for payment in cash, this may have been a suggestion that the transaction be confined to you and the tradesman concerned, rather than a three-party transaction including the government...
Best wishes,
Russ
Or maybe a desire on the part of the tradesperson concerned to cheat the government by not paying their fair share towards maintaining conditions whereby they can ply their trade in safety and security, a desire to use roads they haven't funded, use of a financial infrastructure that will prevent them being at the mercy of the fraudsters and speculators without regard to the fact that such systems do not come free, and to be beneficiaries of public health system that protects both them and their clients, without their contributing to the cost of its maintenance.
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
quote:
Originally posted by Crœsos:
"[F]acilitating the market" is when government action helps you, while "intervening in the market" is when government action hinders you or helps your competitors, right?
Intervention is a coming-between (from the Latin veni). In this case, coming between the buyer and the seller. Enforcing the same individual rights (to property, to security of the person, etc) on buyers and sellers in the market as on non-participants isn't something I'd class as an intervention in the market.
Wait, taking sides in property disputes (a.k.a. "enforcing . . . individual rights to property") doesn't count as "intervention"? I disagree. I'm also pretty sure that your definition of "intervention" would apply to every non-barter transaction. After all, if you're trading in a government-issued currency the state is very clearly coming between a buyer and seller. On the other hand given that all laws are written to be generally applicable, to buyers, sellers, and non-participants, this would seem to mean that nothing counts as intervention. Could you be a little clearer on the distinction?
Posted by Russ (# 120) on
:
It's about freedom and consent. If you buy a widget from me, then (however much you'd prefer a lower price) you consent to pay the price that we agree between us. And however much I'd prefer to get a higher price for this widget, I've consented to sell it to you.
If the government steps in to say that widgets can't be sold on this day, or at this price, or without certain paperwork that I don't have, then they have come between us, intervened, acted against our mutual consent to transact.
If the government makes laws that compel us to transact honestly, that enhances our freedom to transact, by making possible a more informed consent. I can have confidence that the money you give me will buy tomorrow more or less what it will buy today. You can have confidence that the widget will be fit for purpose, will be the type of widget that I have advertised it as.
Posted by Doc Tor (# 9748) on
:
quote:
Originally posted by Russ:
If the government steps in to say that widgets can't be sold on this day, or at this price, or without certain paperwork that I don't have, then they have come between us, intervened, acted against our mutual consent to transact.
The first thing that sprang to mind when I read this was "drugs". So I'll ask. Where do you stand on that, given the above.
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
If the government makes laws that compel us to transact honestly, that enhances our freedom to transact, by making possible a more informed consent.
Actually that's an example of the government intervening by prohibiting certain types of transactions. Specifically "dishonest" ones. While there are numerous explanations as to why it's a good thing to restrict such transactions, it is nonetheless an "intervention" under any rasonable understanding of the term.
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
It's about freedom and consent. If you buy a widget from me, then (however much you'd prefer a lower price) you consent to pay the price that we agree between us.
(Right-wing economics is, when you scratch the surface, just as much about values as left-wing economics is. We thought we were arguing about the best way to achieve a mutually desired degree of wealth, but in fact it's about freedom and consent.)
Freedom and consent are problematic term. Do you consent if you consent under duress?
If someone is faced with a choice of taking an underpaid job now or going without food and shelter, do they consent? Or does the fact that they need food mean that they're under duress, and therefore they didn't really consent?
Hayek, of inspiration to Margaret Thatcher fame, bit the bullet and argued that if a mugger points a knife at someone and tells them to hand over their wallet, the person mugged has consented to hand over their wallet (however much they'd prefer not to).
Most of us I think would agree that perhaps that is taking consent a bit far. Indeed, most of us would think that it's not really a value worth supporting at that price. It's not really a value worth supporting if it means the majority of the workforce exist on subsistence wages.
Posted by Karl: Liberal Backslider (# 76) on
:
Dafyd - there you uncover the central nonsense of Libertarianism. It's significant that in my experience of them, they will sooner or later defend any action by an employer with "did they put a gun to your head and force you to take the job?" - a ridiculously extreme model of "consent" is central to the philosophy.
Posted by Alan Cresswell (# 31) on
:
quote:
Originally posted by Russ:
If the government steps in to say that widgets can't be sold on this day, or at this price, or without certain paperwork that I don't have, then they have come between us, intervened, acted against our mutual consent to transact.
So, would you be advocating removing the powers of government in relation to consumer protection? No trading standards ensuring that products sold match their description? Nothing to control the sale of goods not fit for purpose, even unsafe? You want to leave it upto the buyer to do their own research to confirm that they are buying what they think it is?
Is your widget perhaps a device that performs a full range of tests on food so that people can walk into a supermarket and determine whether the produce they're buying carries an excessive quantity of pesticide residue, is free of GM ingredients or hasn't been treated with ionising radiation (just to pick three things that would be impossible to determine without sophisticated laboratory equipment)? Or maybe your widget will enable people to check the full supply train of the pair of trainers they want to buy, and confirm that no sweat-shop labour was involved (to pick something that usually relies on paperwork)?
Posted by Alan Cresswell (# 31) on
:
quote:
Originally posted by Karl: Liberal Backslider:
a ridiculously extreme model of "consent" is central to the philosophy.
It's certainly not a model of consent employed anywhere else. Following that logic a defence against a rape charge along the lines of "she had a bit to drink and was not capable of clearly saying 'no'" would be perfectly valid.
Posted by Russ (# 120) on
:
quote:
Originally posted by Doc Tor:
quote:
Originally posted by Russ:
If the government steps in to say that widgets can't be sold on this day, or at this price, or without certain paperwork that I don't have, then they have come between us, intervened, acted against our mutual consent to transact.
The first thing that sprang to mind when I read this was "drugs". So I'll ask. Where do you stand on that, given the above.
We're maybe drifting a bit from the original topic, but I'm happy to go with the flow. Sometimes the detour throws light on the original topic. Sometimes the thread just wanders off into the wilderness and dies...
Seems to me that selling drugs is potentially problematic on three grounds:
One is deceit - it's not an honest transaction if I offer you a pill to take without telling you how bad the side effects can reasonably be expected to be. In both long-term and short-term. Informed consent requires a reasonable level of information.
The second is whether the normal use of this product is going to give rise to an economic externality. In other words whether the drug is likely to cause you to damage other people without them getting the chance to offer or withhold their consent. Such that there is a benefit to the economy in taxing the transaction to pay for the costs of cleaning up the mess.
And the third is whether you are a sufficiently fully-functioning human being to know what you're doing. If you're a child, or in some way mentally handicapped (whether on a permanent or temporary basis), then you're not in a position to fully consent.
Guess I grew up in the old-fashioned liberalism that lets consenting adults do what they like behind closed doors... Including smoking weed and popping pills.
Best wishes,
Russ
Posted by chris stiles (# 12641) on
:
quote:
Originally posted by Russ:
One is deceit - it's not an honest transaction if I offer you a pill to take without telling you how bad the side effects can reasonably be expected to be. In both long-term and short-term. Informed consent requires a reasonable level of information.
The second is whether the normal use of this product is going to give rise to an economic externality. In other words whether the drug is likely to cause you to damage other people without them getting the chance to offer or withhold their consent. Such that there is a benefit to the economy in taxing the transaction to pay for the costs of cleaning up the mess.
There are analogues to both of these that also apply to other products.
Posted by Russ (# 120) on
:
quote:
Originally posted by Jolly Jape:
maybe a desire on the part of the tradesperson concerned to cheat the government by not paying their fair share...
Your moral indignation here depends on identifying the amount of tax that the government wants to take with the individual's "fair share" of the cost of collectively-provided services.
In one sense you're right. There is something objectionable about trying to get something for nothing. There's possibly not a tax dodger in the land who doesn't justify their action with the proposition that the amount of tax being sought is excessive.
But in practice there is no "fair share" at which government stops taking. There is no conceivable amount of tax you could pay that would be enough, that would make the taxman lose interest in what you did thereafter. Government is insatiable.
Do you feel the same indignation at those who try to get something for nothing through the democratic process ? by voting for a politician.who promises handouts for them financed by taxing other people ?
Best wishes,
Russ
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
But in practice there is no "fair share" at which government stops taking. There is no conceivable amount of tax you could pay that would be enough, that would make the taxman lose interest in what you did thereafter. Government is insatiable.
Insatiable? I think even the dangerously socialist Labour government were threatening to raise the highest tax rate to no more than 50%.
quote:
Do you feel the same indignation at those who try to get something for nothing through the democratic process ? by voting for a politician.who promises handouts for them financed by taxing other people ?
Ah the bogeyman emerges into the light of day. Are we not besieged by hordes of handout zombies, shuffling and lurching, groaning something for nothing, something for nothing, endlessly pandered to politicians promising to tax other people, unless the handout zombies are destroyed by brave common people uncritically chanting Daily Mail headlines at them?
Posted by Karl: Liberal Backslider (# 76) on
:
I do rather see a difference between someone who votes informed by the belief that one party would better look after them in the event of misfortune such as illness or unemployment, and someone fiddling the tax system so that either the burden has to fall more on honest people, or the tax take is reduced and essential services are cut.
But hey, let's demonise the sick and the unemployed and paint them as scroungers because it's so much easier to cut their welfare benefits and watch them suffer that way.
Posted by Russ (# 120) on
:
quote:
Originally posted by Karl: Liberal Backslider:
I do rather see a difference between someone who votes informed by the belief that one party would better look after them in the event of misfortune such as illness or unemployment, and someone fiddling the tax system so that either the burden has to fall more on honest people, or the tax take is reduced and essential services are cut.
But hey, let's demonise the sick and the unemployed and paint them as scroungers because it's so much easier to cut their welfare benefits and watch them suffer that way.
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
But in practice there is no "fair share" at which government stops taking. There is no conceivable amount of tax you could pay that would be enough, that would make the taxman lose interest in what you did thereafter. Government is insatiable.
Do you feel the same indignation at those who try to get something for nothing through the democratic process ? by voting for a politician.who promises handouts for them financed by taxing other people ?
quote:
Originally posted by Dafyd:
Ah the bogeyman emerges into the light of day. Are we not besieged by hordes of handout zombies, shuffling and lurching, groaning something for nothing, something for nothing, endlessly pandered to politicians promising to tax other people, unless the handout zombies are destroyed by brave common people uncritically chanting Daily Mail headlines at them?
There's that, but there's a lot more than that here as well.
One of the main reasons we typically tolerate public takings (i.e. taxes) by the state is that they are generally a lot less than the private takings that would occur in its absence. In that sense a stable government is a lot more "satiable" than the collection of bandits and warlords that would emerge in its absence.
But another reason for tolerating public takings for those of us living under democratic governments is that such systems provide a way for us to have some control over the way such public takings are used. Most would see governments acting with the consent of the governed as a method by which collective action problems can be solved in a reasonably fair manner. Russ apparently sees this as a bunch of moochers skimming from their rightful wealthy overlords. In other words, democracy is a bug, not a feature and a government less answerable to the governed is better.
Posted by Russ (# 120) on
:
Sorry - having problems with my phone...
quote:
Originally posted by Karl: Liberal Backslider:
...the belief that one party would better look after them in the event of misfortune such as illness or unemployment...
Nothing wrong with the principle behind National Insurance - the idea that people club together to operate a system whereby people pay a portion of their wages into a fund and draw out a portion of that wage if they're sick or unemployed. That's a pooling of risk.
I was talking about something different - the sort of politics which seeks votes from these people over here by promising to tax those people over there - offering to use the power of the state to get voters something at other people's expense. Which is a sort of free-riding.
Not demonising anyone.
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
Nothing wrong with the principle behind National Insurance - the idea that people club together to operate a system whereby people pay a portion of their wages into a fund and draw out a portion of that wage if they're sick or unemployed. That's a pooling of risk.
I was talking about something different - the sort of politics which seeks votes from these people over here by promising to tax those people over there - offering to use the power of the state to get voters something at other people's expense. Which is a sort of free-riding.
This seems to be an artificial distinction. Risk pooling involves giving one group (the sick and unemployed) something the expense of other people (the well and working). Is the only distinction that it's illegitimate if it involves the coercive power of the state? That would seem to argue that states themselves are illegitimate, rather that this one particular exercise of power.
Posted by Doc Tor (# 9748) on
:
Or is it only good insurance if there are huge overheads swallowed up by private administrators who try and deny the insured their benefits, and shareholders who want to maximise their profits?
Posted by Ricardus (# 8757) on
:
To be fair, I think Russ has in mind the kind of pork-belly politics you get (over here) in marginal constituencies.
(A few days before the last election, Mr Osborne turned up in Wirral West to promise that a Conservative government would somehow fix things so that Wirral residents would be exempted from tolls on the Mersey Tunnels. Nothing about whether that would apply on the opposite bank of the Mersey, of course, which is all safe Labour seats. Thankfully the Conservatives lost Wirral West, which I suppose proves that voters aren't so easily bought.)
ETA: it's worth noting that offering bribes to marginals is only really worthwhile under FPTP, which conservatives like and progressives aren't generally keen on.
[ 12. June 2015, 20:10: Message edited by: Ricardus ]
Posted by Ricardus (# 8757) on
:
(Pork barrel even.)
Posted by chris stiles (# 12641) on
:
quote:
Originally posted by Ricardus:
To be fair, I think Russ has in mind the kind of pork-belly politics you get (over here) in marginal constituencies.
But the assumption that this only proceeds in one direction seems rather naive, and apart from anything else, if the issue is pork - surely one tackles the largest pigs first.
At the moment, having tub-thumped on the issue of bank regulation, the current UK government is set to do nothing at all that's actually substantive (they haven't yet gone back to their position pre-financial crisis that even less regulation was required - though give them time). Meanwhile, the justification for running surpluses is to cope with the next financial crisis.
Similarly the government vote is strong amongst pensioners - who have been promised that pensions won't be cut, and that pensioners bonds will continue (the bill here is way in excess of original government 'estimates').
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Ricardus:
To be fair, I think Russ has in mind the kind of pork-belly politics you get (over here) in marginal constituencies.
(A few days before the last election, Mr Osborne turned up in Wirral West to promise that a Conservative government would somehow fix things so that Wirral residents would be exempted from tolls on the Mersey Tunnels. Nothing about whether that would apply on the opposite bank of the Mersey, of course, which is all safe Labour seats.
That's not particularly clear, since the principles he's espousing are general enough to cover just about anything. For example, his arguments would seem to be against not just selective toll-collecting in the Mersey Tunnels but against the tunnels' existing at all in the first place. They're a public works project funded with taxes collected from both future users and future non-users. In other words, those who use the tunnels got "something at other people's [those who don't use the tunnels] expense", which would seem to be a big no-no for Russ.
[ 12. June 2015, 20:53: Message edited by: Crœsos ]
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
I was talking about something different - the sort of politics which seeks votes from these people over here by promising to tax those people over there - offering to use the power of the state to get voters something at other people's expense. Which is a sort of free-riding.
It would be if the people over there were no more able to pay tax or were no more deserving to pay tax than the people over here.
For example, creating a fund at tax-payers' expense to bail out banks, allowing bankers to take risks at public expense but private benefit, would count as an example of the thing you're talking about if the tax burden is spread evenly among the population.
On the other hand, I don't think spending on health for everyone by a redistributive tax policy would count as free-riding since the benefits are distributed evenly and the cost falls proportionally upon people who need the money less.
Posted by Russ (# 120) on
:
quote:
Originally posted by Dafyd:
quote:
Originally posted by Russ:
offering to use the power of the state to get voters something at other people's expense. Which is a sort of free-riding.
It would be if the people over there were no more able to pay tax or were no more deserving to pay tax than the people over here.
It's trying to get something for nothing - the same thing that tax-evaders are criticised for - regardless of what your feelings are about what others deserve.
The difference is that the tax evader is acting individually, and is in some sense cheating or reneging on his neighbours who pay the tax bill reluctantly. That lack-of-solidarity applies whether the tax demands are just or unjust. Those who vote for Them to pay for things for Us are acting in solidarity with their immediate neighbours - the rest of Us - against a group with whom they lack sympathy - Them. The preference for one over the other seems to me to be to do with whether you see that sort of group-solidarity as a virtue.
My problem is not with central government spending the roads budget in a way that doesn't give every area exactly the same benefit (or exactly a benefit in proportion to taxes paid, or whatever formula you think would constitute perfect justice). What's wrong is Merseyside thinking that life owes them a Mersey tunnel paid for by people who live elsewhere.
Pork-barrel politics is a con game where the politicians con the public in each district that they can get more out of the public purse than they put in.
Posted by chris stiles (# 12641) on
:
quote:
Originally posted by Russ:
Those who vote for Them to pay for things for Us are acting in solidarity with their immediate neighbours - the rest of Us - against a group with whom they lack sympathy - Them. The preference for one over the other seems to me to be to do with whether you see that sort of group-solidarity as a virtue.
So essentially it is 'wrong' to vote for progressive taxation that touch anyone in a socio-economic group above yours?
With a ridiculous proposition.
Presumably we should apply this to other things also.
Posted by Karl: Liberal Backslider (# 76) on
:
quote:
Originally posted by chris stiles:
quote:
Originally posted by Russ:
Those who vote for Them to pay for things for Us are acting in solidarity with their immediate neighbours - the rest of Us - against a group with whom they lack sympathy - Them. The preference for one over the other seems to me to be to do with whether you see that sort of group-solidarity as a virtue.
So essentially it is 'wrong' to vote for progressive taxation that touch anyone in a socio-economic group above yours?
With a ridiculous proposition.
Presumably we should apply this to other things also.
It gets dafter. I will vote for higher taxation on myself in order to benefit other people who I can clearly see need the help. In this case presumably I'm allowed to do this because I won't personally benefit from it (rather the opposite) but people poorer than me who would, shouldn't vote that way, at least without provoking Russ' opprobrium.
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
My problem is not with central government spending the roads budget in a way that doesn't give every area exactly the same benefit (or exactly a benefit in proportion to taxes paid, or whatever formula you think would constitute perfect justice). What's wrong is Merseyside thinking that life owes them a Mersey tunnel paid for by people who live elsewhere.
I'm pretty sure those two things are mutually contradictory. If it's okay for the government to spend on roads in a way that doesn't give every area exactly the same benefit, then you're going to have "a Mersey tunnel [or similar project] paid for by people who live elsewhere". On the other hand, if it's wrong to build "a Mersey tunnel paid for by people who live elsewhere", that pretty clearly implies that government spending on roads must be exactly proportionate to taxes paid in each region.
Posted by Russ (# 120) on
:
Croesus,
"Something for nothing" is objectionable as a motivation. The objection is not that some get more out of the public purse than they put in. (That seems inevitable, unless everyone gets out less than they put in...) The objection is when getting stuff at others' expense becomes what the game is all about.
Just as love of money is the root of all evil, whilst money is jolly useful stuff to have when one lives among other people...
Best wishes,
Russ
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
"Something for nothing" is objectionable as a motivation.
Did you mean to put a 'not' in that sentence? I think the logic of your paragraph means you did mean a 'not'. (If you didn't mean to put 'not' in I couldn't disagree more.)
quote:
The objection is when getting stuff at others' expense becomes what the game is all about.
I'm pretty sure that the claim of classical and neoclassical economics is that because the concepts of a fair wage or a fair price do not apply, therefore the best way to achieve the common good is when everyone tries their best to get stuff at others' expense.
[ 13. June 2015, 19:13: Message edited by: Dafyd ]
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
quote:
Originally posted by Dafyd:
quote:
Originally posted by Russ:
offering to use the power of the state to get voters something at other people's expense. Which is a sort of free-riding.
It would be if the people over there were no more able to pay tax or were no more deserving to pay tax than the people over here.
It's trying to get something for nothing - the same thing that tax-evaders are criticised for - regardless of what your feelings are about what others deserve.
The difference is that the tax evader is acting individually, and is in some sense cheating or reneging on his neighbours who pay the tax bill reluctantly. That lack-of-solidarity applies whether the tax demands are just or unjust. Those who vote for Them to pay for things for Us are acting in solidarity with their immediate neighbours - the rest of Us - against a group with whom they lack sympathy - Them. The preference for one over the other seems to me to be to do with whether you see that sort of group-solidarity as a virtue.
This is only the case if the only relevant distinction between the Us and the Them is the membership of the Us and Them. But it isn't.
It seems to be a pillar of right-wing neoliberal orthodoxy that a person taxed at 10% on £10,000 is less harshly treated by the tax regime than a person taxed at 50% on £1000,000. This is open to doubt. Common sense I think is that the really important bit is how much money the person is left with.
In short, if the Us are people who are having trouble making ends meet, and the Them are filthy rich it is not merely Us vs Them thinking to suggest that the people who are filthy rich might pay more of the burden of any social costs.
quote:
What's wrong is Merseyside thinking that life owes them a Mersey tunnel paid for by people who live elsewhere.
If I understand the example correctly, it was George Osborne (who nobody calls a socialist (*)) who was proposing that idea, and he was rejected by people voting for a socialist party. It may be an example of how right-wing politicians think voters think, but it's got nothing to do with any objections to socialism.
(*) Actually I'd guess there's some loony far-right-wingers somewhere in the world who do so.
Posted by Russ (# 120) on
:
quote:
Originally posted by Dafyd:
I'm pretty sure that the claim of classical and neoclassical economics is that because the concepts of a fair wage or a fair price do not apply, therefore the best way to achieve the common good is when everyone tries their best to get stuff at others' expense.
Not quite accurate.
One part of the classical prescription is that everyone should shop around for the best price. You could see getting something for next-to-nothing as the objective, the ideal, of this process of "shopping around".
You seem to want to downplay the difference between finding someone who consents to selling you something at a low price ("next-to-nothing") and taking that something off them by threat of force and paying them nothing for it ("something for nothing"). A real bargain may in common parlance be "a steal", but taking it for nothing without consent is stealing. Please don't confuse the two.
And if someone asks you at knifepoint to consent to hand over your goods or money for nothing ? That's not commerce, it's taxation.
Classical economics is a static equilibrium theory. In which no economically rational agent will produce something in order to give it away for nothing.
Free samples are a short-term temporary inducement. And the theory doesn't claim to describe the whole of life - charitable giving is (if I understand it right) considered to fall outside the realm of economics.
Best wishes,
Russ
Posted by Alan Cresswell (# 31) on
:
quote:
Originally posted by Russ:
charitable giving is (if I understand it right) considered to fall outside the realm of economics.
That doesn't seem to make any sense. Charitable giving reduces the money the donors have to spend on commodities of their choice, hence potentially suppressing the demand for goods and services. And, charitable giving provides money for charities and individuals in need to spend on the necessities they need, hence increasing demand for a different set of good and services. Both effects have to have an impact on economies, so an economic theory which doesn't consider this effect is flawed.
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
Croesus,
"Something for nothing" is objectionable as a motivation. The objection is not that some get more out of the public purse than they put in.
Okay, I think I understand your point. Something like public works is okay provided the beneficiaries pay in something, even if it's only a pittance and the vast majority of expense is covered by others, but cases where the beneficiaries pay nothing in to the system, like publicly-funded education, are wrong.
quote:
Originally posted by Russ:
And if someone asks you at knifepoint to consent to hand over your goods or money for nothing? That's not commerce, it's taxation.
Contrary to your assertions elsewhere, this does not sound like you support any kind of public funding of anything.
Posted by Ricardus (# 8757) on
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quote:
Originally posted by Dafyd:
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What's wrong is Merseyside thinking that life owes them a Mersey tunnel paid for by people who live elsewhere.
If I understand the example correctly, it was George Osborne (who nobody calls a socialist (*)) who was proposing that idea, and he was rejected by people voting for a socialist party. It may be an example of how right-wing politicians think voters think, but it's got nothing to do with any objections to socialism.
Pretty much. [Parochialism alert] The maintenance of the Tunnels, which connect Liverpool to the Wirral, is paid for out of the tolls charged, i.e. they are currently paid for by their users. Mr Osborne wanted to arrange things somehow so that Wirral residents would pay less, or even nothing, simply because there is a key marginal on the Wirral. This would mean that Tunnel users from the Wirral would pay less towards maintenance than users from Liverpool, even though Wirral residents are generally richer. Hurrah for Conservatism.
This is the same Mr Osborne who has managed to divert the route of HS2 to avoid his own Tatton constituency.
I think the ability of politicians to manipulate public funds for electoral advantage is a widely acknowledged downside to government spending. The question is whether you think this is a worse downside than the manifold ways in which enterprises are capable of distorting the market.
Posted by Dafyd (# 5549) on
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Originally posted by Russ:
quote:
Originally posted by Dafyd:
I'm pretty sure that the claim of classical and neoclassical economics is that because the concepts of a fair wage or a fair price do not apply, therefore the best way to achieve the common good is when everyone tries their best to get stuff at others' expense.
Not quite accurate.
One part of the classical prescription is that everyone should shop around for the best price. You could see getting something for next-to-nothing as the objective, the ideal, of this process of "shopping around".
You seem to want to downplay the difference between finding someone who consents to selling you something at a low price ("next-to-nothing") and taking that something off them by threat of force and paying them nothing for it ("something for nothing"). A real bargain may in common parlance be "a steal", but taking it for nothing without consent is stealing. Please don't confuse the two.
I didn't say people did get stuff at other's expense, but that they were trying to get stuff at other's expense. The claim is that the result of two people's attempts to get stuff at each other's expense is that they end up cancelling each other out and paying an equilibrium price.
But moralising about trying to get something for nothing is quite ruled out. If someone owns a piece of land in a rising property market right-wing capitalist economics doesn't raise any objection to them getting the rise in value on that despite them doing nothing to earn it.
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And if someone asks you at knifepoint to consent to hand over your goods or money for nothing ? That's not commerce, it's taxation.
Seems like entrepreneurial exploitation of a business opportunity to me. By making an upfront investment (the knife) you get a monopoly on employment and get other people to earn you money in exchange for a living.
Posted by Russ (# 120) on
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quote:
Originally posted by Karl: Liberal Backslider:
I will vote for higher taxation on myself in order to benefit other people who I can clearly see need the help. In this case presumably I'm allowed to do this because I won't personally benefit from it (rather the opposite).
No-one would accuse you of wanting something for nothing, agreed.
But I'm curious about how you currently spend the money that you would have to pay in extra taxes if your preferred policy were enacted. I guess some combination of charitable giving, spending on friends and family, and spending on things like music and good food that brighten people's lives. What I'm guessing you don't currently do is give it as a voluntary donation to the government.
An economist would conclude from this that you don't actually believe that the government will spend the money better than you do. Or in other words that you value the goods (in the broad sense) that you buy by private spending more than the goods that the same sum would buy as public spending. Your actions reveal something of your preference structure.
So why do you want to deny others the option that you are currently choosing to exercise yourself ?
I can see two possible ways of making sense of this.
One is that you feel you ought to give it to the government as a voluntary donation but just can't bring yourself to do it. So like a drunkard who in a strong-willed moment throws away the key to the drinks cabinet, you want a parent figure to come along and make you do what in your better moments you think is right but lack the willpower to achieve on your own.
The other is that you value the pleasures (both hedonistic and altruistic) that you get from your private spending, but don't value the corresponding satisfactions that others get from their private spending. So it is better in your eyes that other people give money to the government (and you're happy to vote for whatever level of coercion is needed to make them do it), and the benefits from this are such that you'll suffer the loss of your own money in order to make it happen. Your private spending is more valuable than public spending is more valuable than other people's private spending.
So which is it, neurotic or nasty ?
Not that you come across as either, of course. Just struggling to see the rationality of your philosophy...
Best wishes,
Russ
Posted by Crœsos (# 238) on
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quote:
Originally posted by Russ:
But I'm curious about how you currently spend the money that you would have to pay in extra taxes if your preferred policy were enacted. I guess some combination of charitable giving, spending on friends and family, and spending on things like music and good food that brighten people's lives. What I'm guessing you don't currently do is give it as a voluntary donation to the government.
An economist would conclude from this that you don't actually believe that the government will spend the money better than you do. Or in other words that you value the goods (in the broad sense) that you buy by private spending more than the goods that the same sum would buy as public spending. Your actions reveal something of your preference structure.
I'm pretty sure that anyone trained as an economist would have heard of collective action problems. This is about as sophisticated an argument as "if you really believe in public roads, how come you're not buying them on your own?" Your argument seems to be that no one really wants public roads or national health care or Trident missiles, because otherwise the state would operate on the basis of voluntary charitable donations. The free market tends to be terrible at providing goods that are both non-excludable and non-rivalrous.
Posted by Karl: Liberal Backslider (# 76) on
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quote:
Originally posted by Russ:
quote:
Originally posted by Karl: Liberal Backslider:
I will vote for higher taxation on myself in order to benefit other people who I can clearly see need the help. In this case presumably I'm allowed to do this because I won't personally benefit from it (rather the opposite).
No-one would accuse you of wanting something for nothing, agreed.
But I'm curious about how you currently spend the money that you would have to pay in extra taxes if your preferred policy were enacted. I guess some combination of charitable giving, spending on friends and family, and spending on things like music and good food that brighten people's lives. What I'm guessing you don't currently do is give it as a voluntary donation to the government.
An economist would conclude from this that you don't actually believe that the government will spend the money better than you do. Or in other words that you value the goods (in the broad sense) that you buy by private spending more than the goods that the same sum would buy as public spending. Your actions reveal something of your preference structure.
So why do you want to deny others the option that you are currently choosing to exercise yourself ?
I can see two possible ways of making sense of this.
One is that you feel you ought to give it to the government as a voluntary donation but just can't bring yourself to do it. So like a drunkard who in a strong-willed moment throws away the key to the drinks cabinet, you want a parent figure to come along and make you do what in your better moments you think is right but lack the willpower to achieve on your own.
The other is that you value the pleasures (both hedonistic and altruistic) that you get from your private spending, but don't value the corresponding satisfactions that others get from their private spending. So it is better in your eyes that other people give money to the government (and you're happy to vote for whatever level of coercion is needed to make them do it), and the benefits from this are such that you'll suffer the loss of your own money in order to make it happen. Your private spending is more valuable than public spending is more valuable than other people's private spending.
So which is it, neurotic or nasty ?
Not that you come across as either, of course. Just struggling to see the rationality of your philosophy...
Best wishes,
Russ
Until someone devises a scheme whereby one can choose to pay extra money to the government, the question is moot, isn't it?
Posted by Karl: Liberal Backslider (# 76) on
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Longer answer after thinking:
The problem is the way you're framing the options. It's not that I think that I pay too little tax and should pay more. It's rather that I see a lot of areas where cuts and underfunding are causing a lot of suffering, and I want and will vote for a government that will address that, which will probably mean rises in taxes. And I am willing to be one of those who sees their tax burden increase to achieve that end.
The difference between doing that, and sending money unasked for to the government (if that even be possible - I'm reminded of the idiot motorists who shout "pay road tax!" at cyclists as if we could go to the post office and demand to pay a tax that doesn't exist for a vehicle that doesn't even attract the one that does) is that me sending a few hundred extra quid wouldn't make a blind bit of difference to government policy and spending, whereas the election of a government that did intend to do so, would.
Incidentally, since neither the UK nor any other Western democracy collects taxes at knifepoint like a mugger - saying, effectively, "if you don't pay I may kill you with this knife", can we drop that utterly ridiculous analogy, popular as it is amongst Libertarians?
Posted by Dafyd (# 5549) on
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quote:
Originally posted by Russ:
An economist would conclude from this that you don't actually believe that the government will spend the money better than you do. Or in other words that you value the goods (in the broad sense) that you buy by private spending more than the goods that the same sum would buy as public spending. Your actions reveal something of your preference structure.
This is a strange question. It implies that thinking that particular government functions and economic policy is a good idea is equivalent to thinking any and all policy by any government is correct.
Just because I'd be happy to pay higher taxes to a government that planned to use that to invest in the health service, education, and prevention and mitigation of climate change, does not mean I'm happy to volunteer money so George Osborne can use it to pay for Trident and give tax cuts to his mates.
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by Karl: Liberal Backslider:
neither the UK nor any other Western democracy collects taxes at knifepoint like a mugger
No, they just throw you in jail if you refuse to pay. Massive difference.
Posted by Doc Tor (# 9748) on
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quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Karl: Liberal Backslider:
neither the UK nor any other Western democracy collects taxes at knifepoint like a mugger
No, they just throw you in jail if you refuse to pay. Massive difference.
So - how would you deny public benefits from freeloaders?
Posted by Sioni Sais (# 5713) on
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Originally posted by Marvin the Martian:
quote:
Originally posted by Karl: Liberal Backslider:
neither the UK nor any other Western democracy collects taxes at knifepoint like a mugger
No, they just throw you in jail if you refuse to pay. Massive difference.
Unless you owe an abolute shedload. Then HMRC come to some "gentlemen's agreement". ![[Mad]](angryfire.gif)
It's fraudulent benefits claimants, owing hundreds or thousands that go to jail. Tax fraudsters, especially those who have stolen (I think that's the word) millions, go on to become folk heroes.
Posted by Marvin the Martian (# 4360) on
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Originally posted by Doc Tor:
quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Karl: Liberal Backslider:
neither the UK nor any other Western democracy collects taxes at knifepoint like a mugger
No, they just throw you in jail if you refuse to pay. Massive difference.
So - how would you deny public benefits from freeloaders?
I fail to see the relevance of that question to my comment and the post to which it was replying.
Posted by Doc Tor (# 9748) on
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Well, it's not difficult. You resent paying taxes. you only pay taxes because of the threat of imprisonment. What other mechanisms do you think society should employ, apart from imprisonment, to recover the tax from you for the benefits that you have enjoyed?
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by Doc Tor:
Well, it's not difficult. You resent paying taxes. you only pay taxes because of the threat of imprisonment. What other mechanisms do you think society should employ, apart from imprisonment, to recover the tax from you for the benefits that you have enjoyed?
No, I understood the point you were making. It's just that it's not really relevant given that my only point was to debunk the suggestion that taxes are collected without the threat of violence.
Whether said threat of violence is necessary or not is a different matter.
Posted by Karl: Liberal Backslider (# 76) on
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If a mugger approached me with a knife my thoughts would be "Oh shit, if I don't give him what he wants he might knife me."
When I get a tax demand I am not thinking "Oh shit, I'd better pay or they'll send tax inspectors around to beat the shit out of me."
I could not pay, and I might be arrested, I might be sent to prison, but at no point would I be subjected to a violent attack in order to extract the money for me. I might meet with violence if I offer violence in an attempt to avoid prosecution and imprisonment, but not as a means to get the money.
The comparison drawn by those of a Libertarian bent is to my mind risible.
[ 17. June 2015, 11:00: Message edited by: Karl: Liberal Backslider ]
Posted by Karl: Liberal Backslider (# 76) on
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[edit - is it only me who finds it vaguely amusing that in this case it's the right who are shouting "Ah! Now we see the violence inherent in the system! Come and see the violence inherent in the system! Help! Help! I'm being repressed!"]
Posted by mr cheesy (# 3330) on
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I pay my taxes with a happy heart, knowing that I'm contributing to communal well-being. ![[Axe murder]](graemlins/lovedrops.gif)
Posted by Leorning Cniht (# 17564) on
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quote:
Originally posted by Karl: Liberal Backslider:
Until someone devises a scheme whereby one can choose to pay extra money to the government, the question is moot, isn't it?
Someone did. In 1823. HM Treasury will take your cheque...
Posted by Russ (# 120) on
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quote:
Originally posted by Dafyd:
Just because I'd be happy to pay higher taxes to a government that planned to use that to invest in the health service, education, and prevention and mitigation of climate change, does not mean I'm happy to volunteer money so George Osborne can use it to pay for Trident and give tax cuts to his mates.
So you're saying that one can't be in favour of paying more taxes in principle. Only in favour of paying more taxes to support specific government programs where you think that the benefits to society as a whole outweigh the disbenefit of the loss of private spending. The leftist ideal of big government - a high-tax high-public-spending society - isn't something that any rational person can want ?
Some types of program are scalable. If you spend twice as much money on rent subsidies you have broadly twice the impact. Some aren't - half a bypass or half an aircraft carrier isn't worth anything much at all.
Karl seemed to be talking about the sort of program that is scalable. Tax one Karl and get £100 extra budget for the health service. Tax a million of his neighbours and get £100m extra budget for the health service. There's no threshold at which this flips over from being non-worthwhile to being worthwhile, from the pain outweighing the gain to vice versa. They scale up in parallel. A million times the extra good that the health service can do with the money. A million times the loss to the individuals involved from the money they can no longer spend as they choose. One is as real as the other.
To say that one's own contribution is just a drop in the ocean is just as good an argument for tax-dodging as it is an argument for not voluntarily paying a tax that you attempt (via the political process) to impose on others.
Yes, strict linearity may not exactly apply - there may be economies of scale or diminishing returns - but it's a good approximation.
Best wishes,
Russ
Posted by Ricardus (# 8757) on
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quote:
Originally posted by Russ:
The leftist ideal of big government - a high-tax high-public-spending society - isn't something that any rational person can want?
The idea that the left want high tax-and-spend as an end in itself is a strawman.
[ 18. June 2015, 05:28: Message edited by: Ricardus ]
Posted by Doc Tor (# 9748) on
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I don't think it's a question of 'leftist governments tax and spend'. All governments tax and spend, and it just depends on what you spend it on. If you want to cut spending, I'd like to see fewer subsidies go on things that make the rich richer.
Moreover, cutting government-supplied services to everyone that then cost more to access through the private sector is not giving people more money to spend how they wish. The biggest cause of bankruptcy in the US is medical bills - and most of those made bankrupt do have private medical insurance.
[ 18. June 2015, 08:55: Message edited by: Doc Tor ]
Posted by Dafyd (# 5549) on
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quote:
Originally posted by Russ:
Only in favour of paying more taxes to support specific government programs where you think that the benefits to society as a whole outweigh the disbenefit of the loss of private spending. The leftist ideal of big government - a high-tax high-public-spending society - isn't something that any rational person can want ?
You say that as if the leftist ideal doesn't care what the money is spent on. (Or for that matter who pays the tax.)
Most leftists don't like big government. That's why leftists get irritable when populist politicians want to give extra powers to the police and security services. We just think a democratically controlled government gives people more control over the decisions that affect their lives than an effective oligarchy gives.
Posted by Russ (# 120) on
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quote:
Originally posted by Doc Tor:
All governments tax and spend, and it just depends on what you spend it on. If you want to cut spending, I'd like to see fewer subsidies go on things that make the rich richer.
Moreover, cutting government-supplied services to everyone that then cost more to access through the private sector is not giving people more money to spend how they wish. The biggest cause of bankruptcy in the US is medical bills - and most of those made bankrupt do have private medical insurance.
Yes, all governments tax and spend. I guess what we're discussing here is people's attitudes to that. Some think this is a necessary evil, with a tendency to grow uncontrollably unless there is constant vigilance on the part of citizens in a democracy. (And I've not heard anyone here argue for any form of government other than democracy). Some seem to think conversely that the level of government tax-and-spending is the very measure of progress, or of civilised society. And probably many people have nuanced in-between views.
This attitude to the level of tax-and-spend seems to correlate closely with the traditional left-right spectrum in politics. So that if you travel to a strange country, and find that one party there is more for lowering taxes and another is more for raising spending, you can easily apply the labels "left" and "right" the correct way round. The precise applicability of those labels may depend on the extent of cultural difference, but it gives you a start...
Best wishes,
Russ
Posted by Leorning Cniht (# 17564) on
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quote:
Originally posted by Doc Tor:
Moreover, cutting government-supplied services to everyone that then cost more to access through the private sector is not giving people more money to spend how they wish.
...assuming that the people actually want the services.
In the case of healthcare, people are notoriously bad at estimating the risk that they will require "serious" healthcare, and will also tend to avoid spending modest amounts of money on healthcare because it doesn't seem all that serious, and they have other things to spend their money on. So they don't get early treatment, and then there's a bigger problem later. This makes healthcare a really good candidate for public provision.
Everyone needs food, too, but nobody seriously suggests some kind of public commissary system: people's tastes vary, and individual people are best placed to know their own tastes. Hence publicly provided food is a bad idea.
When governments are providing "services" that are only of interest to a fraction of the population, there are more questions. Consider, for example, government support for the building of new stadia for professional sports teams. It is not obvious that, for example, helping an NFL team build some extravagant new facility is a thing that governments should be doing.
Governments should not be preferring a particular choice out of a number of reasonable choices that people can make. If I could reasonably choose one of three options, and there's a government subsidy for one of them, it's bad - unless there's a clear reason for the government to prefer choice A over choices B and C, it shouldn't be interfering.
Posted by Crœsos (# 238) on
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quote:
Originally posted by Russ:
This attitude to the level of tax-and-spend seems to correlate closely with the traditional left-right spectrum in politics. So that if you travel to a strange country, and find that one party there is more for lowering taxes and another is more for raising spending, you can easily apply the labels "left" and "right" the correct way round. The precise applicability of those labels may depend on the extent of cultural difference, but it gives you a start...
Interesting notion. Let's put it to the test using the United States. After all, you specified "a strange country" and the U.S. can be pretty strange. So what happened to spending by the federal government under the past several presidents?
Reagan: +$203.7 billion
Bush I: -$67.2 billion
Clinton: -$53.3 billion
Bush II: +$451.2 billion
Obama: -$125.1 billion
Those figures represent federal spending the year the president in question left office minus spending levels the year when he entered office. The figures are given in inflation-adjusted 2015 dollars, to avoid counting "spending growth" that is nothing more than an artifact of inflation. Figures on government spending were acquired from the U.S. Commerce Department's Bureau of Economic Analysis. Inflation to 2015 dollars was done via the Bureau of Labor Statistics' inflation calculator. Note that Bush I was a one term president and spending under President Obama, by necessity, only goes through the end of the 2014 fiscal year.
So what we can see, using Russ' suggested metric, is that of the five most recent U.S. presidents the biggest leftists were George W. Bush and Ronald W. Reagan. (Maybe it's the middle initial?) Those on the "right" are William J. Clinton, George H. W. Bush, and Barack H. Obama.
I'm not sure most people would consider this "the correct way round".
Posted by Honest Ron Bacardi (# 38) on
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quote:
Originally posted by Crœsos:
quote:
Originally posted by Russ:
This attitude to the level of tax-and-spend seems to correlate closely with the traditional left-right spectrum in politics. So that if you travel to a strange country, and find that one party there is more for lowering taxes and another is more for raising spending, you can easily apply the labels "left" and "right" the correct way round. The precise applicability of those labels may depend on the extent of cultural difference, but it gives you a start...
Interesting notion. Let's put it to the test using the United States. After all, you specified "a strange country" and the U.S. can be pretty strange. So what happened to spending by the federal government under the past several presidents?
Reagan: +$203.7 billion
Bush I: -$67.2 billion
Clinton: -$53.3 billion
Bush II: +$451.2 billion
Obama: -$125.1 billion
Those figures represent federal spending the year the president in question left office minus spending levels the year when he entered office. The figures are given in inflation-adjusted 2015 dollars, to avoid counting "spending growth" that is nothing more than an artifact of inflation. Figures on government spending were acquired from the U.S. Commerce Department's Bureau of Economic Analysis. Inflation to 2015 dollars was done via the Bureau of Labor Statistics' inflation calculator. Note that Bush I was a one term president and spending under President Obama, by necessity, only goes through the end of the 2014 fiscal year.
So what we can see, using Russ' suggested metric, is that of the five most recent U.S. presidents the biggest leftists were George W. Bush and Ronald W. Reagan. (Maybe it's the middle initial?) Those on the "right" are William J. Clinton, George H. W. Bush, and Barack H. Obama.
I'm not sure most people would consider this "the correct way round".
I imagine the metric only works for countries that actually have a left wing, Croesos.
Posted by Alan Cresswell (# 31) on
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Also, it matters what the budget is spent on. Is it spent on providing health care, welfare, schools ... or warships, new fighter aircraft and missiles?
Posted by Honest Ron Bacardi (# 38) on
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or indeed rescuing banks.
Posted by Crœsos (# 238) on
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quote:
Originally posted by Alan Cresswell:
Also, it matters what the budget is spent on. Is it spent on providing health care, welfare, schools ... or warships, new fighter aircraft and missiles?
Conveniently the BEA breaks down U.S. federal spending into "National Defense" and "Nondefense" categories. So how does U.S. spending on National Defense look under the aforementioned system? (Again, all figures are in inflation-adjusted 2015 dollars.)
Reagan: +$192.7 billion
Bush I: -$103.3 billion
Clinton: -$87.8 billion
Bush II: +$319.6 billion
Obama: -$108.9 billion
Pretty much what you'd expect (though Bush the Elder continues to surprise), and it gives the exact same breakdown as before. Reagan and Bush Jr. are leftists (according to Russ); Bush Sr., Clinton, and Obama are on the right.
So what about Nondefense spending?
Reagan: +$10.8 billion
Bush I: +$36.2 billion
Clinton: +$34.5 billion
Bush II: +$131.6 billion
Obama: -$16.3 billion
Judging by those numbers, everyone's a leftist except Obama! Once again the standout president furthest to the left is Bush the Younger.
Of course, Russ' suggested diagnostic doesn't really distinguish between categories of "National Defense" and "Everything Else". Under his metric, "raising spending" is an indication of leftism, regardless of what it's on.
Posted by Dafyd (# 5549) on
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quote:
Originally posted by Crœsos:
Under his metric, "raising spending" is an indication of leftism, regardless of what it's on.
That's not quite a fair characterisation of Russ' position. He said tax and spend. So if Bush financed his spending not through taxation but by running up a deficit then his right wing credentials are intact.
Posted by Crœsos (# 238) on
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quote:
Originally posted by Dafyd:
quote:
Originally posted by Crœsos:
Under his metric, "raising spending" is an indication of leftism, regardless of what it's on.
That's not quite a fair characterisation of Russ' position. He said tax and spend. So if Bush financed his spending not through taxation but by running up a deficit then his right wing credentials are intact.
That's a false dichotomy. All government spending increases require tax increases to support. Running up deficits just means the electorate paying the taxes is a future one, not the one you're going to need the support of in the present. This may be justifiable (the future electorate will likely be living in a country with a higher GDP than the one inhabited by the current electorate), but the necessity of taxation is still there.
[ 19. June 2015, 20:52: Message edited by: Crœsos ]
Posted by Russ (# 120) on
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quote:
Originally posted by Crœsos:
quote:
Originally posted by Dafyd:
quote:
Originally posted by Crœsos:
Under his metric, "raising spending" is an indication of leftism, regardless of what it's on.
That's not quite a fair characterisation of Russ' position. He said tax and spend. So if Bush financed his spending not through taxation but by running up a deficit then his right wing credentials are intact.
That's a false dichotomy. All government spending increases require tax increases to support. Running up deficits just means the electorate paying the taxes is a future one, not the one you're going to need the support of in the present. This may be justifiable (the future electorate will likely be living in a country with a higher GDP than the one inhabited by the current electorate), but the necessity of taxation is still there.
If one president does the taxing and another (earlier or later) president does the spending, then that undermines your basis for comparison.
And there are other ways of spending without taxing.
If a country controls its own currency, there's the option of printing money. "Quantitative easing". The people end up paying, not in the form of taxes, but in the form of devaluation of the money they hold (and their non-index-linked pension entitlements).
Also, money linked to consumption of a service is a charge, not a tax. I don't pay for a TV licence because I don't have a TV. When "car tax" was first introduced in the UK, the money went into a fund which paid for building and maintaining roads. That's not a tax. It became a tax when they abolished the fund and took the money into the general coffers of the state, to spend on whatever they like.
The state as the mechanism by which we the people club together to buy collectively services which it is difficult for us to buy individually does not of itself require taxation to finance those services. Roads and broadcasting being the examples that come to mind.
But there's a type of services - what you might call "framework services" - the provision of the framework within which the market can operate - which can't be financed as a charge on a particular activity that citizens can opt out of. For that you do need taxes.
Would it be more accurate to say that the party that favours higher taxes (now or postponed by borrowing) to finance ongoing "social" spending is the leftist party. Regardless of the economic or defence "emergencies" which may have occurred during the term of various presidents ?
Best wishes,
Russ
Posted by Crœsos (# 238) on
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quote:
Originally posted by Russ:
Also, money linked to consumption of a service is a charge, not a tax. I don't pay for a TV licence because I don't have a TV. When "car tax" was first introduced in the UK, the money went into a fund which paid for building and maintaining roads. That's not a tax. It became a tax when they abolished the fund and took the money into the general coffers of the state, to spend on whatever they like.
This seems like a largely semantic distinction. Paying for roads is a "charge" if money is levied on a service (using vehicles on the roads) but is a "tax" if money is raised from the sale of a related good consumed (e.g. a levy on vehicle fuel). The distinction also seems to be based on post-collection accounting whether the money passes through a general fund first or is accounted for separately.
quote:
Originally posted by Russ:
Would it be more accurate to say that the party that favours higher taxes (now or postponed by borrowing) to finance ongoing "social" spending is the leftist party. Regardless of the economic or defence "emergencies" which may have occurred during the term of various presidents?
I'd say that distinctions between "social spending" and "economic or defence emergencies" is pretty arbitrary. Does building a large network of highways count as social spending because they're mostly used by civilians, or is it defense spending because you can use them to move troops quickly? (In some Western parts of the U.S. there are stretches of the Interstate Highway System that were deliberately designed to serve as emergency landing strips for B-52s.) What about unemployment insurance? Is that "social spending", or is it a response to an "economic emergency" like a recession?
Posted by Russ (# 120) on
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quote:
Originally posted by Crœsos:
Paying for roads is a "charge" if money is levied on a service (using vehicles on the roads) but is a "tax" if money is raised from the sale of a related good consumed (e.g. a levy on vehicle fuel). The distinction also seems to be based on post-collection accounting whether the money passes through a general fund first or is accounted for separately.
If the mechanism by which roads are funded is a levy on fuel, seems to me that's a charge on road users. Just as the cost of a rail ticket is a charge on rail users, regardless of the fare structure and regardless of whether the railways are in public or private ownership.
Just like every other good or service in the economy has to be paid for.
Tax is money extorted by government for government to do what it likes with.
Nothing difficult or complicated in that, surely ?
Best wishes,
Russ
Posted by Doc Tor (# 9748) on
:
quote:
Originally posted by Russ:
Tax is money extorted by government for government to do what it likes with.
Using the word 'extorted' here makes your whole argument sound ridiculous, as in 'Freeman of the land' ridiculous.
Government officials may, I suppose, take money with menaces and keep it all for their own personal use, which fits with the traditional, criminal use of the word 'extort'. But we both know that's not what happens. The money we pay in taxes goes on public works, benefits, services and the machinery of government, paying public servants and so on and so forth. Extortioners don't tend to ensure clean air, drinkable water, safe food, roads, air traffic control, the rule of law, border defence and control, schools, food stamps, and, and, and.
So what ever they are and whatever they do, we put them there and they don't 'extort'.
Posted by Crœsos (# 238) on
:
quote:
Originally posted by Russ:
If the mechanism by which roads are funded is a levy on fuel, seems to me that's a charge on road users. Just as the cost of a rail ticket is a charge on rail users, regardless of the fare structure and regardless of whether the railways are in public or private ownership.
Just like every other good or service in the economy has to be paid for.
Tax is money extorted by government for government to do what it likes with.
Nothing difficult or complicated in that, surely ?
I get the distinction you're trying to make. It just seems arbitrary and pointless. For example, what if someone buys fuel but doesn't use it in a vehicle? Say she uses it to run an emergency generator. Or in an off-road vehicle or a lawnmower. Does this change what she's paying from a "charge" to a "tax"? On the one hand she's not a user of the services the charge/tax is dedicated to covering (or at least she's not using them through the activity that's being charged/taxed). On the other hand, she's paying the same rate under the same law as those who are paying as a "charge", and the money paid doesn't go in to general funds. It just seems like a lot of pedantic hairsplitting (and remember who it is that's saying this to you!) to cover what are functionally indistinguishable activities.
Posted by Russ (# 120) on
:
quote:
Originally posted by Crœsos:
quote:
Originally posted by Russ:
If the mechanism by which roads are funded is a levy on fuel, seems to me that's a charge on road users. Just as the cost of a rail ticket is a charge on rail users, regardless of the fare structure and regardless of whether the railways are in public or private ownership.
I get the distinction you're trying to make. It just seems arbitrary and pointless. For example, what if someone buys fuel but doesn't use it in a vehicle? Say she uses it to run an emergency generator. Or in an off-road vehicle or a lawnmower. Does this change what she's paying from a "charge" to a "tax"?
... It just seems like a lot of pedantic hairsplitting
I see a real distinction between
- individual consent (which in the context of government-provided services means services that are in some manner paid for by the users, like TV and like roads used to be)
- assumed consent through the democratic process (government-provided services financed from general taxation on users and non-users alike).
At the boundary it may look to you like just an accounting convention. But it has real implications. If the price of TV licences goes too high, people can choose to not have TV.
The democratic process really doesn't function very well as a mechanism for determining economically optimal levels of service provision. (Whatever its other merits)
You're saying that fuel duty is an imprecise way of identifying road users. But it's a hell of a lot more precise than taxing everyone.
I've agreed that individual consent is not practical for all types of government service provision. But where it is reasonably practical to do so, it's economically a better approach.
And distinguishing "charges" from "taxes" in talking about government services reminds people that this money is being spent on something they want and that they do have the option of not paying it. And identifies some particular bit of government as the people responsible for providing value for that money.
Unlike the taxes that vanish into the black hole of government accounts leaving no trace behind...
Best wishes,
Russ
Posted by Karl: Liberal Backslider (# 76) on
:
quote:
Originally posted by Russ:
quote:
Originally posted by Crœsos:
Paying for roads is a "charge" if money is levied on a service (using vehicles on the roads) but is a "tax" if money is raised from the sale of a related good consumed (e.g. a levy on vehicle fuel). The distinction also seems to be based on post-collection accounting whether the money passes through a general fund first or is accounted for separately.
If the mechanism by which roads are funded is a levy on fuel
It isn't. Not in the UK anyway. VED goes to central government but there's no hypothecation (despite the widespread belief that "road tax" (actually abolished in the 1930s) pays into a "road fund" (actually abolished in the 1950s) that pays for roads). Most roads are maintained by local authorities out of monies collected in council tax.
Roads aren't funded for motorists or any other user. They're funded as a public good for society at large. Even if I never cycled, drove or even walked along a road I am still dependent on a road network to support the economic infrastructure on which we all depend.
[ 06. July 2015, 11:23: Message edited by: Karl: Liberal Backslider ]
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
The democratic process really doesn't function very well as a mechanism for determining economically optimal levels of service provision. (Whatever its other merits)
Whatever the market's merits as a mechanism for providing economically optimal levels of consumer goods, the market really doesn't function at all well as a mechanism for practical levels of service provision.
Posted by Sioni Sais (# 5713) on
:
The market is an appalling mechanism for service provision because so many services are required, especially by the state, that cannot be provided by anything resembling a free market enterprise. Could the principles that have made Walmart successful be applied to the U.S. Marine Corps?
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