Well of course companies dictate corporate tax rates

How else does anyone think this happens? The point being not that the head of the CBI phones George up and dictates what the corporate tax rate would be (not that George would give much mind to the CBI anyway), but that the rate of tax that can be charged depends upon the reaction to it of those the tax is being levied upon. All of which makes the vapours that people are having over this comment somewhat mysterious:

The UK’s tax policy is effectively dictated by companies and not ministers, according to a leading barrister and adviser to the treasury on its recent “Google tax”.

Philip Baker QC said policymakers and tax experts had learned over recent decades that the mobility of companies and jobs meant there was “no question [countries] have to be competitive to survive”. As a consequence, governments had to provide the tax policies that international corporations wanted.

So, why do we not have 100% income tax rates on pay over £7.00 an hour? Because we know that just about everyone would bugger off out of the country making being the politicians running it really no fun at all. why don’t we have VAT at 100% on everything? Because that storm for the ferries would be just the same as most fled such an extortionate tax regime. If, of course, we didn’t all just ignore it and deal in cash.

so, why do we have a reasonably reasonable corporate tax system and rate? Because it’s easy enough for a company to leave the country and go and try to make a profit elsewhere. Therefore their mobility really does tax our ability, dictate to the government, to tax them.

There’s really nothing mysterious about this at all. We all realise that a restaurant where they ceremonially spat on the soup at each and every table would get very little customs (not none as there’s nowt so strange as folk) for we would be dictating our rejection of the practice by staying away.

Why would anyone think that taxation would be different?

From the Annals Of Really Bad Science Journal

This is simply terrible:

Imposing a minimum unit price for alcohol leads to a dramatic fall in drink-related crime, including murders, sexual assaults and drink-driving, a new study shows.

Crimes perpetrated against people, including violent assaults, fell by 9.17% when the price of alcohol was increased by 10% over nine years in the Canadian province of British Columbia. Motoring offences linked to alcohol, such as killing or injuring someone with a vehicle and refusing to take a breath test, fell even more – by 18.8% – the study found.

An interesting finding but how good is the science?

Method:
A time-series cross-sectional panel study was conducted using mixed model regression analysis to explore associations between minimum alcohol prices, densities of liquor outlets, and crime outcomes across 89 local health areas of British Columbia between 2002 and 2010. Archival data on minimum alcohol prices, per capita alcohol outlet densities, and ecological demographic characteristics were related to measures of crimes against persons, alcohol-related traffic violations, and non–alcohol-related traffic violations. Analyses were adjusted for temporal and regional autocorrelation.

Results:
A 10% increase in provincial minimum alcohol prices was associated with an 18.81% (95% CI: ±17.99%, p < .05) reduction in alcohol-related traffic violations, a 9.17% (95% CI: ±5.95%, p < .01) reduction in crimes against persons, and a 9.39% (95% CI: ±3.80%, p .05). Densities of private liquor stores were not significantly associated with alcohol-involved traffic violations or crimes against persons, though they were with non–alcohol-related traffic violations.

So, they examined minimum alcohol prices and traffic violations in British Columbia. What did they not measure? Changes in traffic violations in Canadian society in general. In, perhaps, areas that did not have the rise in minimum pricing.

For all the ordure that it thrown at economists and their models these days at least this would never be published in an economics journal. Because the first reviewer, heck, even the editor pondering whether to send it out for review, would first ask, well, what was that general change so that we can measure the effects of this specific change against it?

Not that we’re about to do that detailed analysis, we’ll leave that to the excellent Chris Snowdon over at the IEA. But an indication from Canada’s 2010 crime statistics:

In 2010, police reported about 84,400 incidents of impaired driving (Table 4). The number of impaired driving offences reported by police can be influenced by many factors including legislative changes, enforcement practices (e.g. increased use of roadside checks) and changing attitudes on drinking and driving.

The 2010 rate of impaired driving was down 6% from the previous year, representing the first decrease in this offence since 2006 (Chart 14). The rate of impaired driving has been generally declining since peaking in 1981.

No, we don’t know but we’ve got at least a definite impression. Booze related driving incidents have been declining in general for 30 years. To the point that in the final year alone of this paper’s measurements they actually declined nationwide by 6%. And they’re trying to pin an 18% decline over a decade on a minimum price change that only happened in one province?

And they don’t compare the declines in that one province with other provinces?

This might be all sorts of things but it ain’t science, is it?

But this is impossible under modern monetary theory!

Or perhaps we should revise that to a “this is impossible under a deeply deluded understanding of modern monetary theory”. For there’s a certain segment of the populace who insist that banks just make up money out of thin air. So, therefore, this can never happen:

Ordinary Greeks rushed to withdraw cash from ATMs in the early hours of Saturday morning. Greece’s Alpha Bank stopped all online transactions according to its website on Friday night.

If banks do just create money ab nihilo then this cannot possibly happen. There is no possibility of a bank ever running out of money, is there? But this is happening. Therefore it cannot be true that banks do indeed just create money out of nothing.

The confusion comes from the way in which credit is created: this is indeed done by the banking system in a fractional reserve banking system. You or I go to borrow money and the money we borrow is indeed simply created, as a ledger transaction, by that bank at that time. So, to some that seems the end of the matter. But at 4 or 4.30 that afternoon, that bank has to balance its books. It must have sufficient deposits to fund all of its loans, and if it does not through its branches it must go out into the more general market and solicit some more deposits. So, that effortless creation of money only lasts until that daily point at which it must balance the books.

And, of course, the same occurs in reverse when people are reducing their deposits at said bank. It must either claw back the loans it has made (something that takes time) or it must collect more deposits from the wholesale system or it must deny people the right to extract their deposits. Because, once a day at least, those books must balance.

In a world where banks effortlessly print or make as much money as they wish banks runs cannot happen. We are seeing a bank run: therefore banks cannot effortlessly print or make all the money they wish. Monetary theory’s just great but even that has to be checked against reality occasionally.

Owen Jones and labour economics

It appears that the latest campaign from Owen Jones and all things left is about the shameful way in which the self-employed are treated. Given that this group includes both Jones and your humble writer this is of course something of great interest. Sadly however, Jones is, as usual, entirely at sea with any economic concept more complex that “it’s all so unfair, innit?”

If booming levels of self-employment are an indicator of a thriving economy, then Greece is the powerhouse of Europe. Just under a third of the population of this austerity-ravaged nation are self-employed, more than double the EU average. Spain is another go-getters’ paradise, it seems: with half an entire generation out of work, self-employment among the young has surged. And then there’s Britain, where around 40% of the rise in jobs since 2010 is down to self-employment. If our rulers are to be believed, here is entrepreneurial flair and British dynamism in action, a vindication of the government’s “long-term economic plan”. But the plight of the self-employed is being ignored. It is time that the left began championing their cause.

Well, strip this of the rhetoric and perhaps there is a point there. Spain and Greece do indeed have a paucity of jobs and a surplus of people who would like to do one. So, what’s the cause of this? The amount that people are willing to pay to get a job done is lower than the amount that people are willing to accept to do a job. As we know, prices adjust to balance the supply and demand for anything, this is the function of a market.

As we also know if, through government action, that market is not allowed to change prices so as to balance supply and demand then it will balance anyway.

But self-employment spells precariousness, insecurity and falling living standards for all too many. Last week George Osborne lauded figures indicating that wages were rising; but what is often neglected is that the 15% of British workers who are self-employed are stripped out of these figures. There is little up-to-date research on their income, but the Resolution Foundation suggests that between 2006-07 and 2011-12 their weekly earnings dipped by a staggering 20% – and there was a big rise in underemployment, or self-employed people doing far fewer hours than they would like.

Quite so. Given that formal employment costs more than employers are willing to pay (or, the same thing, that the government imposition of conditions and extra costs makes the residual wage lower than people will accept) then the price of employment is lowered by side stepping some of those costs of employment.

Self-employment is often a means for businesses to hire workers without offering the rights and responsibilities that normally come with employment: private pensions, paid holidays, sick pay or maternity leave, for example.

Again, quite so. We have imposed, through government, a series of costs that are part of compensation but not a part of wages. Thus, if a system exists where those compensation costs can be avoided, and the total compensation is more than the market clearing price, then some part of the labour force will end up with the wages only, and not that compensation part.

So, what is the solution here? Well, if it’s government action forcing the price of labour above the market clearing price then the answer would seem to be to stop that government action that does so. Jones, and all things left are of course arguing that such costs should be forced upon all so that even more people can be unemployed. Quite why this is a good idea we’re not sure.

But our larger point here is that we are once again seeing the entire blindness of a certain section of the commentariat to reality. If self-employment is rising, because it means that people can escape the costs of employment, which is indeed the analysis they are offering, then this is evidence that the costs of employment are too high. The solution is thus to lower those costs of employment.

The most obvious place to start doing that is to abolish employers’ national insurance. This is, after all, one of the major costs that this sort of employment arbitrage is designed to avoid.

We’re even, at this point, willing to agree that there might be something to the basic analysis on offer. As long as, of course, Jones and all things left are willing to agree with our solution: lower taxes on employment.

Equality of opportunity or equality of outcome?

We find this all rather sad really:

Britain has too many stay-at-home mothers and must do more to get them into work, the European Union has said.
British women are twice as likely as those in the rest of Europe to choose not to work in order to care for their children or elderly relations, EU figures show.
The large number of mothers who work part-time or not at all is a “social challenge” that the Government must address by providing more state-funded child care, according to a report issued by the European Council.

The sadness coming from the clear confusion here between equality of opportunity and equality of outcome.

“Despite the positive trends in relation to labour market outcomes, social challenges persist,” it says.
“The difference in the share of part-time work between women (42.6 % in 2013) and men (13.2 % in 2013) is one of the highest in the Union.
“The percentage of women who are inactive or work part-time due to personal and family responsibilities (12.5 %) was almost twice as high as the EU average (6.3 %) in 2013.”

The aim is not to insist that as many women work full time outside the home as do men. For we are not looking for equality of outcome in gender and work, as we are not in most other areas of life. We’re actually looking for equality of opportunity in how people desire to organise their lives. And these same figures that appear to be a problem show that in this respect the UK does very well.

We have an extremely flexible labour market. Some to many women actually desire to raise their own children: also to combine that with some part time work perhaps. It’s exactly this choice that the UK does offer. We’re the ones getting it right. Those who wish to work full time can indeed do so. Those who wish to work part time, whether male or female, mothers or not, also get to do so. We’ve a system which offers the maximum freedom for people to organise their lives as they wish. Which is the point and purpose of how we organise society: to maximise choice and opportunity, not to enforce equality of outcome.

What is being identified as a problem here is in fact evidence that the UK has solved this problem.

After all, it’s hardly controversial to suggest that there’s a certain gender division in desired child care arrangements in a mammalian species, is it? The aim and purpose of public policy should thus be to maximise the expression of that choice: precisely what the UK system does offer.