Excellent, let us have that debate.
The answer is no.
Excellent, let us have that debate.
The answer is no.
We all know there’s a North-South divide, but from a policymakers perspective it’s not clear what – if anything – we should be doing about it.
To a significant degree, the relative economic success of London and the South East is due to factors beyond the powers of politicians to rebalance (without simply dragging the country’s capital down). The decline of manufacturing, the rise of London and Cambridge as tech hubs, and the cultural pull of the metropolis cannot be overturned – no matter how much money the government throws at it.
But even though we can’t turn the country upside-down, given that most of us would prefer wealth and opportunity to be a little more evenly distributed, we should try to identify instances where we are prejudicing the South at the expense of the North. Here, one thing stands out above all others: the decision to postpone the revaluation of business rates.
As Simon Danczuk MP wrote a few years ago in the Guardian: “The problem is in my constituency – and no doubt many others – some commercial property values have fallen by up to 40 per cent since 2008.” For Danczuk’s Rochdale constituency, the FT reported that “a study by Liverpool university showed that if business rates were set using up-to-date property values, shops in Rochdale would experience a 65 per cent fall in rates bills.” In contrast, London shops would see a 52 per cent increase.
These costs weigh heavily on the North. Of the top 10 town centres with the greatest percentage of empty shops, seven are in the North East or North West. The Daily Mail reported last year that the North West is suffering from 16.9 per cent empty shop space, versus London’s 7.9 per cent. In Hartlepool, County Durham, 27.3 per cent of stores in the town are up for rent.
Demanding regular revaluations shouldn’t be confused with a call to cut business rates. As has been argued forcefully on this blog, business rates are about the least worst form of taxation: “Repeated taxes on property, that is business rates, have the lowest deadweight costs of any form of tax. The only one that could be better is a proper land value tax.” Nevertheless, landlords and the entrepreneurs that want to use the abandoned spaces deserve rates that reflect the value of the land – the first step of a Northern regeneration should be a revaluation.
Philip Salter is director of The Entrepreneurs Network.
We’ve one of those lovely Guardian discussions over the morality of commercial practices. You can guess the tone just from the headline:
Blood money: is it wrong to pay donors?
And we of course observe the comments section filling up with outraged screams that of course it’s morally wrong.
Which isn’t actually the point that should be under discussion. What we’d really like to know is whether paid blood donation is efficient. And the answer there is that no, it’s not really. When offered a choice those who purchase blood place a higher price on blood that has been donated rather than that which has come from paid donors. Such pricing is because donations do tend to be og higher quality. So, if we could fulfill our requirements for blood and blood products purely from donations we would, by preference, do so.
But we can’t so fill our preferences. So, for blood products specifically in the UK, we purchase from paid donors in other countries. Shrug. It’s either that or simply don’t offer the treatment and it’s hardly moral to deny treatment because of some squeamishness that cash was involved in the process.
The important of this observation isn’t confined just to blood of course. We tend to think that kidney transplants are better than he slow death which is dialysis. But many do die simply because there aren’t enough kidneys available for transplant. And this would be true even if ever potentially usable organ was stripped from corpses, the wishes of their now deceased former owner be damned. To fill this gap we must therefore ask for live donations (much the same being true of liver and lung transplants, heart such cannot of course be carried out from a live donor). But there’s a rather limited supply of people willing to live donate a kidney.
When, as we do from time to time, we suggest that the obvious answer is simply to pay donors, as they do in Iran, we’re told that paying for kidneys would simply be immoral. As with those shouting about blood. Shrug: this means that people will die because of some squeamishness over cash having been involved.
Oh yes, most moral that outcome is.
One thing I go on about on this blog is how nominal GDP targeting—a market monetarist policy proposal that has even won over a small group of New Keynesians—is also the kind of policy an Austrian should want in the medium term. Of course, in the long term we’d like to abolish the Bank of England altogether, but even then we’d get, with free banking, something like a stable level of nominal GDP, so it’s a pretty good target to work towards.
The economist Nicholas Cachanosky wrote a paper in the Journal of Stock & Forex Trading about a year ago, which I missed, called “Hayek’s Rule, NGDP Targeting, and the Productivity Norm: Theory and Application” which lays a lot of the Austrian arguments for targeting the level of nominal income in a very clear and cogent fashion. I include some key extracts below:
The term productivity norm is associated with the idea that the price level should be allowed to adjust inversely to changes in productivity. If total factor productivity increases, the price level (P) should be allowed to fall, and if total factor productivity falls, the price level should be allowed to increase. A general increase in productivity affecting the economy at large changes the relative supply of goods and services with respect to money supply. Therefore, the relative price of money (1/P) should be allowed to adjust accordingly. In other words, money supply should react to changes in money demand, not to changes in production efficiency.
The productivity norm was a common stance between monetary economists before the Keynesian revolution. Selgin [14, Ch 7,8] recalls that Edgeworth, Giffen, Haberler, Hawtrey, Koopmans, Laughlin, Lindahl, Marshall, Mises, Myrdal, Newcome, Pierson, Pigou, Robertson, Tausig, Roepke and Wicksell are a few of the economists from different geographical locations and schools of thought who, at some point, viewed the productivity norm positively.
One of the attractive features of productivity norm-inspired monetary policy rules is the tendency of the results to mimic the potential outcome of a free banking system, one defined as a market in money and banking with no central bank and no regulations. Among the conclusions of the free banking literature is that monetary equilibrium yields a stable nominal income.
Throughout Cachanosky distinguishes carefully between an NGDP target and a productivity norm, though I think these are overstated; and between ‘emergent’ stability in NGDP and ‘designed’ stability, which he (like Alex Salter) thinks are importantly different (I am not convinced).
Cachanosky believes that the 2008 crisis implies that NGDP growth beforehand was too fast, and led to capital being misallocated, but I still doubt the Austrian theory of the business cycle makes any sense when you have approximately efficient capital markets.
Despite our differences, I think that Cachanosky’s papers are very valuable contributions to the debate, and hopefully they can go some of the way to convincing Austrian economists that the market monetarist approach is not Keynesian.
Both Russia and Iran are in a bind due to the oil crisis. The best thing for both countries to do is to enact some easy-to-implement, partially stabilising policy. Three measures can be taken:
1. Enhance taxpayers’ autonomy by allowing entities to pay taxes in a greater variety of currencies;
2. Let citizens and businesses trade in a greater variety of currencies; and
3. Deregulate derivatives markets in particular (and financial markets more generally).
An entirely destabilised Russia and/or Iran is in no-one’s interest. Although relations with NATO are sour, other prominent nations such as China and India have offered a helping hand (albeit a limited one). However, an alternative, mutually beneficial agreement can occur between these four nations.
First: enhancing taxpayers’ and trading autonomy. Russia should allow its taxpayers to pay taxes in the rouble, the Chinese renminbi, the Indian rupee and the Iranian rial whilst legally enabling trade in all these currencies. Similarly, Iran should allow taxes to be paid in Russian rubles, Chinese renminbi and Indian rupees as well as enabling trade in them. Since only being allowed to pay taxes in one currency artificially raises the cost of doing business in other monies, the enhanced autonomy of taxpayers will make it feasible for some exporters to sell in relatively cheaper money (thereby stimulating production and exports) and importers to buy with relatively stronger money (thereby combating inflation). It would also provide access to less volatile and less vulnerable monies. Another advantage is that tax revenues paid in different monies would allow diversified foreign exchange reserves and, therefore, the Russian and Iranian governments would be in a better position to defend their own national monies’ value in future (should they so wish to). This would enable Russians and Iranians to get on with their lives in a more normal way. Furthermore, since Russian and Iranian currencies would be accepted for trade and taxes in the other country, the mutual recognition may help bolster their value. The arrangement would also benefit China and India since the renminbi and rupee would make up a greater share of foreign exchange transactions.
For tax collection, a proportional system could be implemented; that is, if an entity earned (for example) 30% in rupees, 50% in roubles, 15% in rial and 5% in renminbi, a flat tax of 30% could be imposed such that the 30% rate is levied on each of the currencies according to proportions held (meaning 9% of the 30% comes in rupees, 15% comes in roubles, 4.5% in rial and 1.5% in renminbi).
Furthermore, extensive deregulation and liberalisation of the countries’ respective derivatives markets (especially with respect to interest rates, foreign exchange, commodities and equities) will enable domestic entities to better manage current and expected risks. Although inflows from NATO member-states may not be so forthcoming, both India and China have a vested interest in a stable Russia and a stable Iran; hence, it would not be surprising if (given the increased opportunity and ensuring a supportive climate for it) increased foreign direct investment in the Russian and Iranian derivatives markets for commodities, equities, interest rates and foreign exchange helped substantially manage expected risk of the oil crisis in these countries.