What is economics for? It’s often characterised as being about the choice between ‘guns or butter’. This choice is one not only about which we want to consume, but also about which we want to produce. Strangely, the dominant neoclassical paradigm attempts to render this a choice that need not be made, since it proposes the possibility of an entirely voluntary and stable production and trading outcome (equilibrium) that cannot be bettered. Or at least it cannot be bettered in the sense that no change is possible without making somebody worse off.
This process was described by the ‘father’ of modern economics Adam Smith as being an ‘invisible hand’ that brought about the welfare of all through the self-interest of traders, and that this is possible with markets and a set of prices for goods has been proven mathematically. It forms the basis of an approach to economics that starts from the position that in the absence of identifiable forces shifting things in the other direction, the economy will tend toward the ‘equilibrium’ outcome. In the apparent absence of a way of establishing the relative merits of individuals’ claims against each other this outcome is the best we can or should aim for, and so provides a justification for doing everything we can to remove any forces that might prevent this equilibrium being reached and maintained. Continue reading What is economics for? Part 1→
He is absolutely right to take this approach, for two major reasons. Firstly, while it is absolutely right that individual groups of workers make the case that removing their jobs are false economies, it is too easy for the coalition to claim that without reducing the deficit and the interest payments that are attached to it ‘things would (or will) be worse’. And the reason it is so easy is because there is a lack of understanding of the economic paradigm that underpins the coalition’s rhetoric. Sadly this economic paradigm was shared by the 1997-2010 Labour governments. Continue reading Union Action Against the ‘Cuts’→
I had the chance to see the great economist and social philosopher Professor Amartya Sen at the Edinburgh Book Festival on the 29th of August. I use the word ‘see’ not to imply that I had a personal meeting with him, but because he actually said disappointingly little at the large public event in which he took part.
It was a pleasant surprise to find that the Financial Times chief economics commentator Martin Wolf has come out in favour of a Land Value Tax (an annual tax on the value of land owned), following a debate on the FT website.
I have previously written a proposal for a Community Land Value Tax for the Scottish Parliament. I reproduce it here as originally written. I would probably change some of it now, but it contains the main elements of the case.
Proposal for a Community Land Value Tax
Diarmid Weir 1 Introduction
It was Marx who saw that the unequal distribution of ‘private property’, in particular land, was incompatible with social justice. Yet we have also seen from the former communist states that centralised ownership of land and the resources it produces brings a different sort of tyranny.
Land as fundamental property
In these days of highly manufactured technology it is very easy to lose sight of the importance of land. Look at any product of this technology, however, and we will find that it is composed of materials extracted from the earth’s crust, from crops grown from it or animals husbanded upon it. So land is the fundamental ‘property’ and all other material goods are derived from it. Social justice therefore demands some way of making the control of its use communal and democratic. Continue reading Martin Wolf and Land Value Tax→
If the financial sector can be rescued only by cutting back social spending on Social Security, health care and education, bolstered by more privatization sell-offs, is it worth the price? To sacrifice the economy in this way would violate most peoples’ social values of equity and fairness rooted deep in Enlightenment philosophy.
David Cameron says he wants an apology from Labour for the state of the economy. But his approach to the budget deficit is either one of the most mendacious or one of the most ignorant ever made by a British Prime Minister. By using half-truths and gross over-simplifications Cameron has shifted the blame for the financial crisis and its aftermath from the reckless and probably fraudulent behaviour of traders of financial assets to the ‘irresponsible economic management’ of the previous government. By implication the hapless ordinary British voter is also guilty, and is going to feel the righteous pain of public service and job cuts. We are quite likely heading for one of the most unjust periods of governance Britain has ever known. Continue reading Cameron’s Deceitful Cuts Rhetoric→
A Church of England vicar has recently said it’s OK to steal from supermarkets if you’re hungry and desperate. This is against the law. Apart from the 8th commandment do we have any idea why? It’s annoying to be stolen from, certainly, but it’s also unpleasant and dangerous to be poor.
The social, as opposed to the moral, justification for the illegality of theft is that without inviolable property rights no modern transaction-based economy would be possible. Who would exchange anything (for money or otherwise) if they could just take it or fear that the other person might? Who would build a factory and employ workers if they thought the workers could, without penalty, take over its running and obtain all its revenue themselves? Continue reading The Economics of Theft→
There is at present an unprecedented wave of concern about pay disparities. We have the bankers’ bonuses, both main parties promising to limit high salaries in the UK public sector and a vigorous debate in Scotland about the high levels of pay of some Health Board managers.
Last week, the New Economics Foundation (NEF) published a report in which they calculated the benefit to society of various low and high paid workers per £1 of income. Whatever one might say about the rigour of their methods, the report makes a strong case for current income disparities having little basis in social contribution. My view is that as a nation we are at last waking up to two realities of ‘political economy’. Continue reading The Truth of Unequal Pay→