Must read on austerity vs spending.
This John Lanchester article is a must-read, but a wearing one as it bears no route to salvation. Summary: the coalition’s austerity programme has failed and the cuts promised are impossible to deliver.
What I really don’t understand is why I don’t hear of any UK journalist or any campaigning organisation going after the coalition using the facts set out. [Update: one person is, sort of.]
Tidbits I didn’t know or hadn’t fully realised.
- The structural defict will be higher after three years of Osborne’s structural-deficit-cutting budgets (pace some creative accounting).
- That GDP measures the velocity of money, which doesn’t feel much like product.
- Governments are not households: they need to keep money moving around to create GDP.
- The multiplier: the difference between earning £10 and saving it and putting it into the economy where there could be a chain of six further transactions before the £10 is saved, thus creating £60 of GDP. This ratio and process is the multiplier.
- The IMF has discovered that its recommended multiplier has been wrong:
In the October edition of its regular World Economic Outlook, the IMF studied the question and announced that governments had been basing their calculations on the effects of austerity using a multiplier of 0.5. So for every £1 billion removed from government spending, GDP would contract by £500 million. The IMF looked at the relevant historical data, and concluded that the real multiplier for austerity-related cuts was higher, in the range of 0.9 to 1.7. So that same package of £1 billion in fact removes as much as £1.7 billion of output.
- The 30% cuts needed in unprotected, unringfenced departments are impossible:
‘for the Ministry of Defence an 18 per cent cut means something on the scale of no longer employing the army.’ Upgrade the level of cuts to 30 per cent and the cuts are, I suggest, politically and practically unachievable. To truly cut public spending, the coalition will have to go after targets which it has explicitly ruled out cutting: health and schools.
- Government spending is increasing, even in real terms, despite all the austerity and cuts talk.
- Two-thirds of the welfare budget is spent on pensioners, not on ‘dole scroungers’. Politicians have managed to make many of us feel that it is the other way round, and that benefit fraud is the most important issue.
Election maps has helped me understand a little more about the US election and why the standard map doesn’t “feel” right.
As an example, here’s one with states altered to indicate population sizes.
Must-read article discussing the options for Romney (clearly no longer valid in defeat) and Obama in dealing with the “fiscal cliff”.
Main take-out: if Obama does nothing, the world does not end in Jan 2013 and he ends up with a much stronger hand against the Republicans (e.g. how can they campaign on ‘lower taxes to raise defence spending’?). With the writer, I can’t see this happening, but what a nice position to be in for Obama.
People who download music for free purchase more music than people who don’t download music for free, say a survey in where do Music Collections Come From?
Sounds right to me, and looks right for books as well.
It seems that all those people reading Kindles or other e-readers on the way to work are actually consuming more books than they did before.
That’s pretty hard-hitting (PDF) from the St Louis Fed:
The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded – which, as evidence shows, has no correlation with measured productivity.
Their solution is just as clear:
Both theoretically and empirically, the political economy of government operated patent systems indicates that weak legislation will generally evolve into a strong protection and that the political demand for stronger patent protection comes from old and stagnant industries and firms, not from new and innovative ones. Hence the best solution is to abolish patents entirely through strong constitutional measures and to find other legislative instruments, less open to lobbying and rent-seeking, to foster innovation whenever there is clear evidence that laissez-faire under-supplies it.
The implied bargain in the patent system of faster progress thanks to enlightened and protected sharing of innovations seems to have broken down or never existed in the first place.
It is also the case that modern “disclosure” in patents is negligible – it is essentially impossible to build a functioning device or software program from a modern patent application, a fact which is especially clear since some patented ideas do not – and cannot – work. A case in point is the patent for moving information through the fifth dimension.
You think about how much value Tim Berners-Lee created and how he didnt actually capture very much of it. It was captured by companies like Google, Apple, Twitter, and Facebook. You also think about the other extreme, where companies like Goldman Sachs managed to extract a great deal of value from the economy, but as the 2008 financial crisis demonstrated, they did so while actually destroying value for the overall economy. So that got me thinking about how value creation and value capture are not the same thing.
worth reading in “the Clothesline Paradox” | Conversation | Edge.
Fabulous quote from Rick Santorum:
We will never have the elite, smart people on our side.
Two contrasting essays which are well worth reading:
Also interesting is Obama’s sword shaking at China, which should undercut one of Romney’s key campaign tactics.
Feynman nails it, as always. Can we say this to the reshuffleshambles lot? The rest of the article is a great selection of his thinking too.
… as I’d like to show Galileo our world, I must show him something with a great deal of shame. If we look away from the science and look at the world around us, we find out something rather pitiful: that the environment that we live in is so actively, intensely unscientific. Galileo could say: ‘I noticed that Jupiter was a ball with moons and not a god in the sky. Tell me, what happened to the astrologers?’ Well, they print their results in the newspapers, in the United States at least, in every daily paper every day. Why do we still have astrologers?