Tuesday, August 2, 2016

Bill Mitchell — Don’t let neo-liberal (idiots) loose with a spreadsheet!

I was in the airport lounge yesterday and as one does I picked up the right-wing Australian Financial Review (which purports to present financial news and comment but is in reality a propaganda machine) and read an Opinion piece, which would serve as a classic demonstration for statistical students of how to confuse causation with correlation. It would also serve as a classic piece for macroeconomics students on how to completely misunderstand the role of fiscal policy and the dynamics that are associated with it. All round an excellent learning piece – in the right hands. But in the hands of the normal reader, not versed in these matters, the Opinion piece is a trashy piece of dangerous propaganda, which serves to indoctrinate the readership into believing that the correct policy path is, in fact, exactly the opposite of the responsible policy path for governments. It still amazes me how this sort of rubbish can parade as serious public offerings to the economic debate. It was an appallingly ignorant article. One of the worst you might read.…
The neoliberal position is that government is and ought to be just another economic unit in an economy. Hence, it should be treated in the same way as any other economic unit, although it has to be bridled with imposed restraints, otherwise it will dominate owing to its size.

Bill Mitchell – billy blog
Don’t let neo-liberal (idiots) loose with a spreadsheet!
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia


Matt Franko said...

"taxation revenue is never needed to raise funds for the government in order that it can spend."

But then:

"The other reasons why a government might tax are: (a) To redistribute purchasing power from the rich to the poor (high income to low income) – a point that is obvious."


How does a tax on the rich redistribute "purchasing power" (btw getting a little Andrew Anderson here with the "purchasing power" phrasing....) to the poor? i dont think this is obvious...

Tom Hickey said...

How does a tax on the rich redistribute "purchasing power"

Providing tax credits increases purchasing power. Withdrawing them reduces purchasing power. Tax credits are claims on resources for sale in markets in that currency zone, as well as meeting tax obligations to the issuer.

Taxes are not needed operationally but can be used for policy purposes, such as redistribution.

Offsetting transfer payments $4$ with specific tax policy increases purchasing power of one cohorts while reducing the purchasing power of another cohort correspondingly.

Michael Hudson recommends this as a way to reduce inequality and tax away economic rent simultaneously. This stimulates circular flow while also dis-incentivizing rent-seeking as a policy choice.

Matt Franko said...

"Offsetting transfer payments $4$ with specific tax policy"

agree but that is not what it says....

Neil Wilson said...

"How does a tax on the rich redistribute "purchasing power""

It has to be sufficient to stop them spending on stuff, or get them to save rather than spend on stuff.

Taxation is very imprecise. I prefer banning things - campaign contributions for example - or restricting bank lending, which definitely is for spending.