What is austerity?


It seems like the meaning of the word 'austerity' has transmuted over the past five years, from referring to the balance of fiscal policy, to purely relating to spending issues. For example, Jeremy Corbyn's Labour is widely interpreted as being anti-austerity, both in the popular imagination, and even by Keynesian economists like Simon Wren-Lewis. But his shadow chancellor, John McDonnell, has promised to aim for the same fiscal policy as George Osborne, the man most closely associated with UK austerity! I suspect that the process has gone something like this:

  • Osborne proposes a fiscal policy that is genuinely austere in Keynesian terms—i.e. he aimed to close the deficit year-on-year 2010-2020 on whatever measure you like (cyclically-adjusted, current budget, raw deficit)
  • This is attacked as fiscal austerity, which is inappropriate, according to New Keynesian economists (i.e. the mainstream of macro), when the central bank's policy interest rates are at the Zero Lower Bound while it is nevertheless undershooting its macro targets (not that it actually was undershooting these targets)
  • The popular mind associates 'austerity' with Osborne's economic policy generally, the most concrete and close-to-home example of which is reduced public services spending, rather than the less tangible (supposed) aggregate demand deficiency (supposedly) driven by fiscal austerity
  • Thus 'austerity' is associated not with the budget balance (or any adjusted measure thereof) but simply the spending side of the government's balance sheet, and its general approach to public expenditure (e.g. Robert Peston's definition of austerity as "public spending cuts in a recession")

Alternatively, this meaning change might indicate that the right won the battle on fiscal austerity.

Inflation was well above target despite austerity and the zero lower bound—monetary policy was dominant. Unemployment crashed, employment rose to its highest ever level and highest ever rate as a percentage of the working age population. Slow growth (surely driven by poor productivity) during 2011 and 2012 turned around, and even labour productivity growth might be returning. Wages may now be seeing solid real growth for the first time in years, just as inflation dips into negative territory and GDP grows solidly.

If fiscal austerity is supposed to hurt the economy through reduced aggregate demand and employment then it doesn't feel like such a great argument to hit the Tories with—austerity hasn't seemed to work that way. But if 'austerity' is used as a nebulous term for a general agenda, like 'neoliberal', then it might have legs. Its credibility is helped by the ambiguity it's given when mainstream macroeconomists use it to describe ostensibly similar (but actually quite different) things.

This leads to an interesting symmetry. Wren-Lewis and others have attacked the government for using deficit reduction as an excuse to cut social programmes that he believes they actually want to do for other (ideological) reasons. It seems to me that we're also seeing the converse: those opposing spending cuts for their own ideological reasons use the language of macroeconomics, like 'austerity', to give themselves their own political cover.

Then again, never attribute to malice that which is adequately explained by ignorance.

Can you spare a few pence for the regulator?

The announcement by the chief executive of the National Council for Voluntary Organisations that there should be a new organisation to regulate the fundraising activities of charities was paradoxical in a sector supposedly grounded in voluntary action and philanthropy. Sir Stuart Etherington and three members of the House of Lords recently authored a review in the wake of goings-on deemed to have been sharp practices by certain well-known charities in persuading some people to part with donations.

One of the report’s recommendations is to have a levy on charities’ fundraising to pay for such a new regulator – the Fundraising Regulator.

Apart from anything else, in 'austerity Britain’ asking charities to fork out to fund such a thing is surely not on. Charities already get criticism for not spending enough on their stated aims, whether that perception is justified or not.

I can see it now:

"£1 in the tin for the Good Cause and don't forget the extra 34 pence to help the deserving regulator."

(Director’s note: cut to stock video of 87 administrators slaving away over iPads in a modern office - with appropriately sad musical soundtrack?)

Instead of reaching for the quango toolbox, just fix whatever the problems are. There are enough laws and codes of practice to assist in that. There is also the Charity Commission, for example. Then again, its chair has been quoted as saying:

‘"I think it is inevitable that the sector will have to assume much more of the responsibility for funding its regulator," he said. "It happens in many, many other parts of society and there is no reason why it should not happen in this one."’

So that’s all right then.

All that seems to typify a mindset all too common among quangocrats; the public has to pay for something that it (the public) decides to do voluntarily so that some superfluous bureaucrats can come along and charge the aforementioned volunteers (the public) to tell them whether they are doing it properly. Marvellous piece of job creation.

This country needs another public regulator for this like a hole in the proverbial. How much more effort has to be expended on box-ticking and draining resources from useful voluntary effort? Let alone in creating at least two regulators in place of one.


Geraint Day is a trustee of two charities and co-operative sector activist but has not sought permission to write the above from any nascent quango that might want to vet volunteered expressions of opinion on charities.

On the consistency of Willy Hutton


Of the varied commentators that parade and prance across the national life we have a certain weakness for Will Hutton. As a wonderful example of the, umm, consistency which is required to remain as an authoritative national voice over the decades. For example, it's a very good idea, in fact we should remake British business in this image, that companies are largely family owned, with a secure shareholding structure, so that management can get on with looking to the long term of the business and not be distracted by the flightiness of the here today gone in milliseconds nature of the stock market:

The proposed new Companies Act would set out a new legal framework that will privilege long-term, engaged investment. Mutuals should be created to aggregate proxy votes, and cast them on behalf of shareholders. The basic voting share will continue as now, but it will attract more votes the longer it is held; if shares are lent, voting rights will be forgone. This will strike many in London as going too far – a dagger at the heart of British capitalism. But when Google floated, its founders Sergey Brin and Larry Page issued two classes of shares, with class A shares having 10 times more votes than class B – so Brin and Page ended up with 37.6% of the votes for 3.7% of the shares. As they said in the letter accompanying the initial public offering, “we have set up a corporate structure that will make it much harder for outside parties to take over or influence Google. This structure will also make it easier for our management team to follow the long-term, innovative approach.” Ten years on from the flotation, who can say they were wrong?

LinkedIn offered its original long-term shareholders 10 times the votes when it floated in 2011, and the Glazers floated Manchester United in New York rather than London because American rules allowed the family shares to have 10 times as many votes. Owners in mainland Europe – from the Wallenbergs in Sweden, who have holdings in most of Sweden’s top companies, to the Piëch family, part-owners of Porsche – use similar devices. Where there is business success and innovation, look for non-British corporate structures.

This trinity – business purpose, trusteeship and a range of committed shareholders – will be the foundation for the creation of purposeful companies, freed to behave like long‑term trusts rather than dance to the tune of peripatetic day traders. They will be value creators rather than rent extractors. It would be stakeholder capitalism in practice.

These proposals must be supported by a new takeover regime. The argument in hostile takeovers should not just be over price: it should be whether business purpose is being protected – with both sides being required to ask their shareholders’ view – and long-term shareholders’ votes privileged over those who have bought for a quick buck. The government should refer bids that create public-interest concerns and use the Competition and Markets Authority more aggressively. In short, takeovers, especially hostile takeovers, should be the exception rather than the rule of British business life.

We quote at length to show that this is not some throw away line, but central to Willy's vision of how business life should operate.

That was in February. This month we are told that it's a very good idea, in fact we should remake British business in this image, that companies are largely not family owned, with a secure shareholding structure, so that management can get on with looking to the long term of the business and not be distracted by the flightiness of the here today gone in milliseconds nature of the stock market:

Former CEO Martin Winterkorn, who resigned last week over the scandal, claims he knew nothing of what was going on, blaming a few unnamed executives for making a catastrophic error of judgment. Winterkorn was the consummate German engineer, knowing every dimension of engine performance; if he did not know how the dirty diesel engines of some popular VW brands were successfully passing US emission tests it was only because he chose not to ask. He did not need to. He had the backing of the Porsche family, who own just over 50% per cent of VW’s shares and who agree to vote as a block; the support too of the state of Saxony with a further 20% per cent –and of union members on the supervisory board. Winterkorn could run a company of 600,000, as Süddeutsche Zeitung remarked, as if it were North Korea.

VW is about production and jobs which trumps concerns about environmental sustainability – a culture than unites unions as much as the Porsche family.

And that's even in the same newspaper. So, umm, yes, the consistency of Willy Hutton. We wonder if he's heard of consistency?

Excellent news: only 30% of the population is knuckle draggingly ignorant


Or, we suppose, we could see this as deeply depressing news, that near 30% of the population is still knuckle draggingly ignorant. Because this question isn't about which variant of a free market economy makes people better off. Even we, arch marketeers that we are, will agree that all markets, nowt but markets and only markets isn't the correct operating system for a socio-economic polity. And Pew isn't asking about whether health care should be government supplied, government financed, insurance so or whatever. They're asking about the basic underlying principle, are we to have an economy that is roughly market based or one that has no markets?

And it really shouldn't be difficult for people to get the right answer to that question. Are roughly market based societies the ones that make the populace richer than not market based ones? Even at the possible expense of inequality?

The answer to this is probably the best researched one we have in all of economics. Because the largest ever controlled experiment was carried out into this very question: we generally call it the 20th century.

Hundreds of millions, then billions, were walled off into non-market economies at various times, from 1917 to 1945 and 1948, to return in 1978 and 1989. With some sad remnants in Cuba and North Korea still stuck in the abject penury of non-market economies. And we know the answer very well indeed. No non-market economy has managed decent economic growth (no, the Soviet Union managed, according to Paul Krugman, not one iota of total factor productivity growth over its entire span) while everywhere that has been a market economy for more than a couple of decades is opulently wealthy by any historical or global standard.

It really shouldn't be difficult for people to get the answer to this question right.

Still, to be cheerful about this, at least we have a decent estimation now of the upper possible bound of the Jezzbollah vote.

We're astonished that Polly Toynbee actually said this


Which, given the things Polly Toynbee normally says, inuring us to astonishment much of the time, means that it must be particularly outrageous:

I see a compromise here – though junior doctors may resist. Why not pay them fairly, train and employ many more so they are not endlessly filling gaps and overworking – but oblige them, in exchange for their expensive training, to work for the NHS for, say, a decade.

If they were indentured to the NHS, along with dentists, nurses and the other medical professions,

Toynbee is seriously suggesting that we bring back time limited slavery? Indenture?

Yes, that does astonish us. Two further points occur. The first being that of course if we're going to enslave people whose education the State has paid for, we'd really rather better stop hiring people that another State has coughed up the education fees for. Thus no foreign trained doctors or nurses should be hired until, say, a decade after they finish their training. not that the NHS would survive such an imposition. The second being that if those who have been educated at the expense of the taxpayer are to be indentured then, well, taxes finance the secondary educations of 93% of the populace. Why aren't all of them to be held in, bound to, the UK economy for some years? That Tony Benn repeatedly suggested that this should apply to any university degree shows that it is a vile idea: but if it applies to nurses then why not to everyone?

Addressing the real problem of social mobility in education


Social mobility is a desirable aspect of a modern society and it can be broadly defined as the ability of individuals from underprivileged backgrounds to climb the socioeconomic ladder. Education is both an important and necessary determinant of future earnings[1]. If we are to tackle social immobility, then we must have an education system that is inclusive and not divisive. That being said, it is a problem that the UK cannot seem to solve.

A commonly accepted measurement of social mobility is to compare the academic performance of children eligible for Free School Meals (FSM) with their ineligible counterparts, throughout the duration of their school career.

Let us first look at the attainment gap[2], which reveals a telling story:

graph 1

Percentage achieving ‘Level 4’ in English and Maths at KS2, age 11

graph 2

Percentage achieving ‘A* to C’ in English and Maths at GCSE, age 16

graph 3

Percentage achieving 2+ A-levels, age 19

Across 3 age groups, improvements in social mobility in terms of educational attainment over the past 10 years have been limited – if present at all. Even in light of the slightest signs of improvement, it would take decades to reach parity – and even this is uncertain amidst the unnerving cycle of politics. However regardless of political persuasion, it is difficult to argue against the fundamental fact that a premium for economically advantaged children exists., or in other words, a handicap on the underprivileged.

The difference amongst political commentators arises from the way in which we wish to tackle this problem.


A leftist approach on two fronts

Do nothing - Sweden is a better society to be lower class in[3]

The American Dream is a mere illusion and we should learn from the Swedish. Our futures are determined by our surnames and those of aristocratic descent are destined for a life of luxury. For those of us that are born into less privileged families, we need to accept our fate and it is the moral duty of the state to protect us from the Five Giant Evils[4].

A National Education Service[5]

Enter Jeremy Corbyn. As we have a lifelong healthcare service in the NHS, it is only right that we have one for education: the NES. By modelling the NES on the same building blocks that founded the NHS, we should “invest in learning from cradle to grave”. This will provide the opportunity for anyone throughout their lives to learn new skills or retrain.


Dismantling one argument at a time

We should indeed protect the most vulnerable in society, but following a Nordic-style system of state protection could well prove counterintuitive and lead to an upward debt spiral, burdening generations ahead. Transitioning into a vastly different model is costly and time-consuming, with no guarantee of success. Whilst unequal distribution of goods is a natural product of capitalism, we can still limit its impact. But trying to mitigate the consequences of failed mobility means we lose sight of the real problem at hand. By doing this, we create more problems for ourselves in the form of state-dependency and so forth.

Indeed, education is a right and not a privilege, which is why it should always remain free in one form or another. However, the NES is one step too far, and Corbyn’s proposition of an NHS-style education system is a dangerous one, given that healthcare costs spiralled from the get-go (and in fact exponentially) up until recent measures were implemented to curb this trend.

graph 4

In times when our government should be austere, such a policy would reverse the progress we have made over the past 5 years. Corbyn’s utopian vision of the NES is ultimately unsustainable and it could very well do more harm than good without yielding noticeable improvements in social mobility.


A call for structural reform

Our struggle is not financial, and therefore money will not solve the problem of failed mobility. Instead, it is structural and lies within the system itself. From an anecdotal perspective, grammar schools are a great vehicle to climb the socioeconomic ladder – but not in its current form. It is true that often the advocates of grammar schools are those who themselves have benefitted from such experiences, and there is overwhelming evidence to suggest that such an opportunity for upward mobility is not widespread enough. That is not to say that grammar schools are per se bad for social mobility, but rather their current system of selection is fundamentally flawed and is in drastic need of change.

Hadow’s The Education of the Adolescent (1926)[6] formed the principle of primary and secondary school segregation at age 11. On this premise and with the introduction of the tripartite system of education, grammar school entry was determined on the basis of 11-plus performances. Of the remaining grammar schools in the country, selection is still being conducted in similar fashion. The problem with this method is that the age of 11 is arbitrary, out-dated and untested to any sophisticated academic standard. In any case, the age is merely a historical accident more than anything else, yet this issue is often very little discussed.

Rigorous academic research needs to be undertaken to find a fair age to test children’s true, underlying intellectual maturity. In fact, evidence finds that choosing an incorrect age can be detrimental to a child’s development and in doing so inhibit the ability for the underprivileged to climb the social ladder. Research additionally finds that failing the 11-plus, for many, has proven to be psychologically scarring by limiting self-confidence. As a result, many do not dedicate themselves as much to education to avoid remembering previous failures. This characteristic can be detrimental to professional development in the working world, thereby placing a lifelong glass ceiling on career trajectory.[7]

The consequence of selecting an incorrect age makes hiring tutors for entrance exams an attractive investment for the middle and upper classes. This means that in addition to academic research on intellectual maturity, there is also a need to tutor-proof entrance exams, otherwise there will become – as there is to some degree today – a culture of testing on the basis of wealth over intelligence. By levelling the playing field, only then can education become merit-based.


Steps forward

We have discussed a variety of evidence which suggests that there is a need to modify our current education system and in particular we must introduce a fairer way of testing children on the basis of merit and not wealth. In our current system, the underprivileged are subject to an unfair and unmeritocratic method of selection. Statistics show the extent to which this is true, with students of grammar schools being less likely to be eligible for Free School Meals than those in non-selective schools. The Sutton Trust found that less than 3% of grammar school students were eligible, which is meagre compared to the non-grammar average of 18%.

Only once these criteria are satisfied will grammar schools be a true vehicle for social mobility and in doing so the educational attainment handicap of underprivileged children can be reduced. The answer is reform.

We have justified the existence of grammar schools and what they can have the potential to achieve if executed correctly. If things stay as they are, though, those who are unsuccessful in grammar school selection are left behind in comprehensive schools, destined for academic underachievement. This is driven by a combination of the psychological scarring aforementioned and the low quality of teaching standards in comprehensive schools.

A free economy and strong communities honour the dignity of every person, rewarding effort with justice, promoting upward mobility, and building solidarity among citizens.”

-Paul Ryan, US politician

In order to achieve this and contrary to what Corbyn and many others believe, the education sector needs to move away from the hands of the state. The introduction of academy schools under firstly New Labour and furthered by the Tory-Lib Dem coalition was a step in the right direction. By taking schools out of local authority red tape regulations, schools were given a greater degree of autonomy leading to improvements in teaching standards. This is because free choice over teacher pay structures means that good teachers are rewarded adequately. Not only this, but also the greater funding from central government and private institutions can be invested into providing the best facilities. Autonomy over one’s curriculum additionally allows for a flexible learning process – one that is conducive to innovative teaching techniques and allows for more creative thinking amongst students.

Consequently, academies improve the quality of a school. Our current government can go further by converting more struggling schools into academies in areas of local deprivation. This is a simple method to reduce the premium, as there is evidence to suggest a positive correlation between poorer students attending poorly performing schools. Indeed, research has shown that academies have shown positive effects on social mobility[9]. Since the Education Act of 2010, most academies have been ‘converters’, whereby previously successful schools have become autonomous. Given that these schools are located disproportionately in rich regions, much more needs to be done to support the conversion of underperforming schools into the alternative ‘sponsored’ academies.

graph 5

If less advantaged children remain unable to make the most of our education system, there is no way of achieving a socially mobile society. Urgent action is needed to curb the trend and it is important that the poorest in society receive a good and just education, as a means to escape poverty and improve their living standards.

Scientific research suggests that a child’s brain development is most malleable when youngest, which implies that changes need to be made at a primary level too to lift the performance of state-funded schools to that of private ones. Whilst primary schools have been given the opportunity to convert to academies, this has not been widespread enough for one reason or another, as seen below.

graph 6

What’s worse is that even with the lack of primary academies, the trend of underperforming schools not being converted proportionally to sponsored academies is again prevalent at primary level. The number of converters far exceeds the number of sponsored academies at both primary and secondary level (as seen in the table above previously).


Lessons from Iceland

We can learn of lot from the Icelandic model of education, where the level of social mobility, as measured by the influence of parental socioeconomic background on a child’s secondary education, is the highest of all OECD countries (country code ISL).

graph 7

We look to why this may be the case and pay particular attention to the Icelandic education system below:

graph 8

Academic separation is not undertaken until 16 and in doing so a level playing field is created. ‘Compulsory’ schooling from 6 to 16 ensures that each student has gone through the same educational experience. In fact, most of the Scandinavian countries follow this type of education system, which is perhaps why they fare so well. Whilst greater mobility may be the case because of the high levels of educational spending, its structure is also something that stands out as different to the UK’s and something that is worth considering.

As mentioned, the first major difference is that academic separation starts at the age of 16.

Secondly, even though Iceland’s education spending as a percentage of GDP is in line with other Nordic countries, which have previously been higher than average, what makes Iceland so mobile is its special focus on pre-primary and primary schooling. This type of schooling is an integral part of child development, as we have previously established.

It is not the case that Iceland’s educational spending is extreme, given that its average expenditure per student per year at $9180 is lower than the OECD average of $9487[9]. Even more interestingly, Iceland spends a lot more on pre-primary and primary schooling than secondary and tertiary schooling and this is reflected upon in the table below.

graoh 9

This has resulted in lower than average class sizes in infancy years, where in 2011 Iceland had the lowest student-to-teacher ratio throughout OECD countries in pre-primary and primary schools at 6:1 and 10:1 respectively. As a comparison, the UK average public primary school class has 26 students – 5 higher than the OECD average. Coupled with the fact that British primary school teachers work for fewer hours than average, there is a great deal that has to change in the current primary education structure to ensure that children in the most important period of development are receiving enough individual attention.

graph 10

Source: 2010, OECD (Argentina, China, Indonesia) and UNESCO Institute for Statistics, World Education Indicators programme

As such, Corbyn’s NES plans are unfounded and unsustainable. Given the UK’s circumstances, a spending increase can only be justified if spent on primary schooling. The UK averages higher education expenditure across primary, secondary and tertiary schooling than the OECD average, much of which was fuelled by New Labour. Despite this, the annual spend per pre-primary student is only $6493 compared to the average of $6670. A better approach would be to shift spending from secondary and tertiary schools to pre-primary and primary. Disregarding the lack of spending in pre-primary schooling for a moment, the lack of teaching hours and overcrowded classrooms makes it all the more necessary that the education sector drives for efficiency gains through privatisation.

There is no quick-fix solution to social immobility, but with fundamental structural reform in our education system, long-overdue progress can be made.


Sources cited

[1] http://www.bls.gov/emp/ep_chart_001.htm

[2] https://www.gov.uk/government/publications/social-mobility-indicators/social-mobility-indicators#attainment-at-age-11-by-free-school-meal-eligibility

[3] http://www.theguardian.com/commentisfree/2015/feb/04/social-mobility-equality-class-society

[4] http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/19_07_05_beveridge.pdf

[5] http://labourlist.org/2015/07/education-is-a-collective-good-its-time-for-a-national-education-service/

[6] http://www.educationengland.org.uk/documents/hadow1926/

[7] http://www.telegraph.co.uk/education/educationnews/9547771/Adults-put-off-education-for-life-after-failing-11-plus.html

[8] https://www.kcl.ac.uk/sspp/departments/education/web-files2/Becky-Francis/What-the-Government-should-be-doing-to-increase-social-mobility.pdf

[9] http://www.oecd.org/edu/Iceland-EAG2014-Country-Note.pdf

Yogi Berra the economist


It's for those who follow American rounders to tell us how important he was to that game, and of course Yogi Berra was famous for his sayings:

He was particularly noted for his fractured relationship with the English language, and Yogi Berraisms were eagerly sought after by collectors. Famous examples included: “It ain’t over till it’s over”; “This is like déjà vu all over again”; “When you come to a fork in the road, take it”; “Baseball is 90 per cent mental, the other half is physical”; and “Always go to other people’s funerals, otherwise they won’t go to yours”.

We, however, would like to point to his skill as an economist. Contained here in this phrase:

Nobody goes there anymore. It's too crowded.

It can, of course, be read just as it is. And yet the second possible reading manages to describe such large amounts of the world. Hipsters, Veblen Goods, conspicuous consumption, why trendy restaurants and nightclubs have their moment in the Sun then die, even why popular beat combos have cycles of popularity.

Nobody important (or "famous", or "cool", or "fashionable") goes there any more. It's too crowded.

To distill pretty much the entire post-subsistence human economy into one short phrase. Now there's an achievement to aspire to, eh?

As ever, the problem with Richard Murphy is that he has no knowledge of the subject under discussion


This is just a lovely example of what's so wrong with the various pronouncements of Richard Murphy, the confused soul behind Corbynomics:

And this opens up the space for him to suggest a wealth tax, in his imaginary budget. “It was inconceivable in the past. But as a result of the work that the Tax Justice Network has done opening up the world’s secrecy jurisdictions, now if people move their assets offshore, we can find them again.” He has other specific proposals – a tax to replace national insurance, which was designed around jobs that don’t exist any more, and “we would need to explore new taxes for the 21st century, which are largely untried. A progressive consumption tax, so people with very few transactions would have very low tax. We have to discourage conspicuous consumption, which is eating up our planet.”

He's just entirely unaware of all the other stuff that people have been thinking about economics and tax. The progressive consumption tax for example: it's generally thought of as a very good idea indeed. But not because it would reduce consumption, as he seems to assume. Rather, because it would make the future richer: that is, it would over time encourage more consumption.

The essential insight behind it is that investment increases the future size of the economy, consumption might provide that short term boost to demand, but investment is what really grows economies. And we also know that if you tax something then you get less of it: thus the progressive consumption tax aims to not tax investment, capital, or the returns to either.

What really happens is that anyones' savings end up inside a giant ISA or IRA style vehicle. Any additions to savings are not taxed in any manner. Any returns to such savings or investments that are reinvested are not taxed. Any income which is consumed, or any drawing down of savings which is then consumed (or, obviously, returns to capital which are then consumed) are taxed in much the same manner that income tax works now, at rising, progressive, rates.

The observant will note that this is not compatible with a wealth tax. Even the half awake will note that the effect of such a system is to not tax wealth. In fact, the entire point is to not tax wealth, but to allow it to roll up while invested so as to increase the wealth and income of the future society: and thus to increase the consumption opportunities of that future.

And this is the basic problem with all of Murphy's ideas. Other people too have thought about these various points and problems. And Murphy's entirely unaware, startlingly ignorant in fact, of the evidence found, logic used and conclusions reached by those others. Turning on the free money tree of Peoples' QE is monetisation of government spending and we know how that turns out. Capital allowances are in the tax system for good reason: because we tax businesses on their profits, not their turnover. A certain amount of both tax avoidance and tax evasion are going to be there simply because a society without either will have no liberty. And the point and purpose of a progressive consumption tax is so that we do not tax wealth, rather than that we do: and it is to make the future richer, encouraging more future consumption too.

It is this that really grates. Not just that we disagree with Murphy's assumptions and between dislike and abhor his suggestions, but that he proceeds without noting that tens of thousands of very clever people have ploughed these same furrows over the centuries. And he's simply flat out ignorant of the truths they have uncovered.

The housing crisis has a simple solution: build, baby, build


Over at the IB Times I've written about the government's housing targets (not worth the paper they're written on, basically), and why we want to concrete over the green belt – well, at least some of it:

By freeing up green belt land the supply of housing could grow enough to let prices fall considerably. All of this would actually require very little green belt land to be built on – less than 1.5% of it would give us the space we'd need to build an extra 1.4 million new homes. We could build one million homes around London on just 3.7% of the capital's green belt.

Could the private sector do it? It already has – during the 1930s housing boom, private construction rose from 133,000 houses per year in 1934-45 to 279,000, in just one year – and these houses were affordable. If you come, they will built it.

The cost of extra infrastructure could be more than covered by capturing "planning gain", with the government buying green belt land, reclassifying it and selling it at the market rate to the private sector, keeping the gains for itself.

Trimming the edges of the green belt would suffice, but I'd like to go further. Much of the countryside is worth protecting, but much of the green belt itself is not. It doesn't provide amenity to anyone who doesn't live there already, it's bad for the environment, and it makes housing cripplingly expensive.

Read the whole thing. I've tried to make it as comprehensive as possible, as a useful 'cut out and keep' piece to send to people who haven't thought about how easily we could solve the housing crisis.

Recent books in the ASI's pile


The ASI receives more books than it can get round to giving a full review of, but here are some particular interesting recent ones you might want to check out.

Describing itself as a work of 'creative non-fiction' it's a wide-ranging thesis on the city. Get it if you love their wonderful twitter account.

Probably one to look at in the library, given the price, this handbook seems to be the most authoritative work from practitioners and experts in the area; a more scholarly take on The Beautiful Tree.

I'm really glad this book exists.

Tyler Cowen says this is 'one of the very best philosophical treatments of libertarian thought, ever' and what can I add to that?

The list of reviews on the back is very impressive: Dani Rodrik, Mike Munger, Lant Pritchett, Tyler Cowen, and the topic is hugely interesting.