Editorial, Radical Statistics issue 109

This issue of Radical Statistics begins with three pieces which provide an overview of the value of the UK census and the damage that its potential cancellation will wreak. These articles highlight the disquiet that academics, policy makers and the public should feel about government plans for 2021 and beyond. In the first piece Danny Dorling highlights some of the surprises that have emerged from the 2011 census and suggests that only a government that does not care about its citizens would favour a plan which effectively makes it impossible to find out about them in the future (about where people live, about their needs, about their ages… etc). In the second piece Paul Norman makes the argument for the census and for small area data in particular. He ends with an appeal to everyone who has used (or is intending on using) census data to contribute their experience to the ‘business case’ for retention. The third piece, by Emma Stevens, is based on research conducted for an undergraduate dissertation. Emma surveyed human geographers about their use of the census and about how the proposed changes will affect their work. This article shows that the arguments made by Danny Dorling and Paul Norman are echoed by human geographers from across the UK.

In the next section are three very diverse articles. The first, by Lucy Borland, provides shocking data on how changes in the regulation of lead in water in the UK (whereby 99th centile data is treated as a ‘maximum’) may mean that dangerous contamination is going unnoticed. Using equivalent data from Northern Ireland Lucy highlights the importance of absolute values where health is an issue. She also raises serious doubts about the effectiveness of tap-water sampling practices.

The next article, by Robert Grant, provides a timely overview of the history and potential of graphical representations. Robert shows that graphics can provide a fruitful way to make and disseminate radical arguments where these depend on statistical data. Perhaps most helpfully, he provides a wealth of practical suggestions, which will be invaluable for anyone toying with the prospect of learning more about data visualisation.

In the last article, Jonathan Bradshaw has written up his Radical Statistics conference presentation from February 2012. In this he uses York as a means for thinking about inequality and poverty and the ways in which these are measured.

The issue concludes with David Elliman’s enthusiastic review of The Geek Manifesto, Larry Brownstein’s comment on an issue raised in this book (and the review) – assessing tests of scientific competence, and finally Russell Ecob’s brief summary of the Radstats conference discussion on whether a fair voting system is possible, and what it would look like.

We hope that you enjoy, or at least are stimulated by, the articles in this issue. If you think that you have something to say that would be of interest to Radical Statistics readers, get in touch. We are always keen to receive articles, news stories or book reviews. If you are unsure about whether something is suitable, drop us an email and check.

Rachel Lara Cohen

Alastair Greig

Larry Brownstein

Email: editors @ radstats.org.uk  

 

Latest news from AllTrials campaign

Aside

Dear AllTrials supporters [N.B. Radstats is an organisational sponsor]

The AllTrials campaign has put together a more detailed statement about the registration and reporting of all clinical trials. This was developed from the meeting at the BMJ earlier this year and brings together discussions with hundreds of other organisations who have signed up to support the AllTrials campaign.

The statement sets out the different levels of information from registration to individual data (AllTrials is not calling for publication of individual data) and reflects the wide range of different formats in which results are presented.

Achieving the goal of all trials registered and reported will involve regulators and registries, clinical trial funders, universities and institutes, professional and learned societies and medical journals, patients and researchers, and their thoughts about what they will need to do to achieve it are included in the document.

You can download the PDF or read it online.

 This document is part of a continuing discussion which many different organisations are working on elaborating further over coming weeks and months. Please email views and contributions to:alltrials@senseaboutscience.org

And please keep people signing the petition at www.alltrials.net

Best wishes                                                                        

Síle

Dr Chris Peters

Campaigns & Policy Officer

Sense About Science

 Tel: +44 (0) 20 7490 9590

Mob: +44 (0) 7837 394 957

 www.senseaboutscience.org

On Twitter @senseaboutsci

2013 UK Budget: A contextual appraisal

Contributed by L Brownstein

Osborne’s latest budget was both a non-event yet contained some peculiar features. In discussing it I have avoided technicalities, particularly mathematical (= algebraic) ones. It isn’t that the algebra is difficult but there can be a lot of it and, therefore, difficult to keep track of.

One reason that this budget was such a non-event is that most of the measures that come into effect have already been passed, like the bedroom tax, so called. Another was Osborne’s concern to avoid any ridiculous mistakes.

One of the problems besetting discussion of economic policy and budgets is that so many journalists, even those who have some economic training, make fundamental errors. Two who usually, though not always, avoid doing this are William Keegan of the Observer and Larry Elliott of the Guardian. Keegan has written more than once that, in his opinion, Osborne is the worst chancellor in living memory, and he remembers Macmillan’s one year stint as chancellor. Another astute economic commentator is Aditya Chakrabortty of the Guardian.  One journalist for whom I have a great deal of respect is Andrew Rawnsley of the Observer. When discussing political matters, he is quite insightful, but when discussing economics, he invariably gets it wrong, as he did this weekend. So, it is important to be able to distinguish the empirically relevant comments dealing with economic issues from those that miss the mark, for whatever reason. There are journalists whom I have not named but whose work is eminently worth reading.

What we are experiencing is a private sector crisis portrayed as a public sector crisis.

First, let me note that although Osborne and Cameron still try to blame the Labour Party for the ‘disastrous’ legacy they left the coalition to contend with, this discourse has been somewhat replaced with claims that it is Europe’s plight that is hampering the UK’s recovery, a claim he made in this budget. Labour Party spending had nothing to do with the creation of the crisis. Their lack of sufficient oversight of the investment banking sector was, however, a contributing factor. It is highly unlikely that the present government, had it been in office at that time, would have done any better, given its actions so far.

Second, he did something quite odd with respect to the Bank of England. Although it was unclear what was meant, since he never spelled it out, some of his and the Treasury’s responsibilities appear to have been shifted to the Bank of England.

There are matters that need to be clarified in order to interpret the budget and its fallout. First, there is the nature of money. Second, there is the relationship between taxation and government spending. Third, is the character and function of welfare spending.

Since all budgets are political in character, indeed, are ideological in nature, they inevitably affect someone adversely. The real question to ask is, as Cicero did, Cui bono, Who benefits, which he attributed to the Roman consul, Lucius Cassius. In virtually all of Osborne’s budgets, the relatively well-off benefit and the poor do not, even with measures claimed to do so.

The second thing to say is that the UK is not Europe and it isn’t Greece, in fact, it is nothing like Greece economically. Because the UK is not a member of the Eurozone, any economic similarities are purely fortuitous. The countries of the Eurozone function more like US states or Australian territories than sovereign nations like the UK. This difference makes a big difference in the range of economic policies a sovereign state has to hand, something not available to the individual European nations. Individual US states and Australian can, and indeed sometimes do, go bankrupt. Sovereign states, on the other hand, due to the kind of monetary system they have, cannot economically go bankrupt. Sovereign  can always, in principle, pay the country’s debts. The only exception is if the political system intervenes, as Congress has done in the past in the US. Contrary to an article of the Constitution which stipulates that the government can always pay its debts, Congress can ensure that the government is unable to pay its debts. But this is not because the government has run out of money.

A third thing to notice is that credit rating agencies’ ratings have no relevance whatsoever to sovereign nations. A credit rating is an index of how likely the organization being rated is likely to go bankrupt. As the UK can never go bankrupt, these ratings are economically irrelevant. However, they can be politically relevant. Which they are in Osborne’s case as he made them a rod for his own back.

A fourth thing to notice is that the economic problems facing the country have nothing to do with the public sector, except incidentally. The fiscal crisis is the consequence of a private sector bubble, not overspending by the public sector.

A fifth thing to notice is that when politicians and journalists contend that some measure is being funded by the taxpayer, this is false.  While the measure is being funded by the government, it does not follow from this alone that it is the taxpayers who are picking up the tab. The issue is where the money is coming from. This point and the second point are linked.

Where does the money the government spends come from? It arises ex nihilo. From nothing. Government creates the money it needs out of thin air. This is the essential difference between what is known as a metal money system and a chartal money system. Many economists and most journalists think in terms of metal money systems. They think something must back up government spending. They are right, but it isn’t anything physical, like gold. It is something intangible, like confidence that the government won’t collapse, or the like.

The monetary system that virtually all nations use now is known as a fiat money system with flexible exchange rates vis-á-vis other sovereign countries. This is a money system where the money is self-created. There are hybrid systems, such as the one running between the end of WW2 and the early ‘70s, where you had a fiat money system being treated as a metal money system with gold as the backing. However, since Nixon’s famous statement that we are all Keynesians now, the global currency system has been a fiat money system with flexible exchange rates.

The Eurozone could operate a fiat money system like that of the UK or the US or Australia or Japan, but its organization prevents it from doing so. The Eurozone demands a federal economic system with a federal treasury and a federal bank with the requisite powers. While the Eurozone has a central bank, it does not function as a lender of last resort. It can only exercise this function under the table, which renders it ineffective. It has no federal treasury. Creating these institutions would mean a small loss of sovereignty, but this is small beer compared to the loss of economic sovereignty they lost when they joined the Eurozone.

So, when Osborne or Cameron say that the government or the treasury has no money, this can only mean that it hasn’t been created yet. What does having a fiat money system mean for public spending on for instance the NHS, or schools, or indeed welfare? It means that the UK can meet all its internal financial obligations without any difficulty whatsoever. (I am ignoring the spectre of inflation for the moment.) So, whenever a government minister contends that the government can’t pay for something like schools or the NHS, they either do not know what they are talking about or they are lying. The issue isn’t whether the government can pay for our schools or the NHS, it is whether this is the best way of running these organizations.

This is a problem concerning which institutions should be public and which private (or a hybrid). And this includes banks. My position is that it would not be a bad idea to have government banks where all citizens deposit their money and companies get their loans and leave casino banking to private banks. But this is a separate issue.

If the government can create its own funding out of thin air, what is the need for taxes? In a fiat money system, taxes are not needed to fund government expenditure. Taxes do three related things. (a) They legitimate the established currency – taxes can only be paid in the legitimate currency, which is what the government says it is, hence the current furor over the bitcoin. (b) Taxes also direct or constrain private spending. This can, of course, be overdone, and there is an argument for cutting taxation during a deflationary period like the one we are in now. An obvious example is VAT, a crude sales tax. (c) From our current perspective, perhaps the most important function of taxes lies in its redistributive function, thus enhancing surplus recycling, necessary for capitalism to function at all. Put starkly, taxes take the excess from the rich and redistribute it to the poor — this function is related to the second point but is not identical to it. The current coalition is misusing the latter two functions of a fairly functioning tax system, either possibly for perverse reasons of their own or through sheer ignorance about how the modern currency system works.

So, when Osborne gives himself credit for spending on this or that, he is doing nothing special. The monetary system within which he works can’t prevent him from doing this. It is not whether he spends that is the issue, it is what he spends his budget on. What is even more important is where he restricts his spending. As we have seen, there is nothing to prevent Osborne spending his budget on anything he likes, as much as he likes. He can spend as much as he likes because in a deflationary economy, there is no likelihood of inflation, that is, there is no likelihood of inflation as a consequence of any spending he engages in. Overspending on his part would only become a problem were there full employment.

The inflation we have is due to external factors, like the weather causing food prices to rise, and the like. It is not due to any internally generated wage-price spirals, which can cause inflation to get out of control. When such positive feedback processes take place, the need is to control all the elements of the process, not just one, as was done in the US. Nixon froze both of them. Freezing prices irritates capitalists while freezing wages irritates labourers. Hence, the need to deal with both of them simultaneously in order to be fair to all parties.

Osborne has noticed that banks aren’t lending. This is for a number of reasons. One is that the money that the government has put into what are basically insolvent institutions has been used to pay down their debts and to pay back the government. Whatever is left over has been sitting in the banks. It is known that corporations are sitting on funds instead of spending them. Neither individuals nor businesses are asking banks for loans. Banks are not lending because no one is borrowing. Those who can don’t wish to. And those who haven’t been able to still can’t.

Why hasn’t QE, quantitative easing, worked?

QE is a sort of fiscal policy where the money goes to the banks who are then supposed to lend it out, the assumption being that there are borrowers to lend to. The problem is that the banks have been using the money to pay down their debts, pay back the government, increase their capital reserves, and pay bonuses to their high level employees. It is for reasons such as these that QE hasn’t led to growth. A better fiscal policy would be for the government to directly give the money to businesses or individuals who would then spend it. Tax cuts for the rich won’t lead to spending, while substantial tax cuts for the poor would. Because of the crisis, the surplus recycling mechanism has stalled. Benefits for the rich tend not to be recycled, while those for the poor do. Osborne has consistently failed to place money where it would be used as opposed to saved, or if he places it with the poor via one measure, he removes it with another. The result is that the economic position of the poorer either remains the same or worsens as a more or less direct consequence of his policies.

Since Osborne has consistently hammered the welfare system, this surely must be because it is a drag on the economic system. Well, it would be, were we operating in a metal currency system where there is a finite amount of money. Since we are operating a fiat monetary system, there is in principle an infinite amount of money available to the government. In fact, the welfare system ensures a certain degree of circulation and recycling. A better welfare system would naturally ensure greater degrees of the circulation and recycling of money to the benefit of everyone. From this point of view, there is no economic justification whatever for cutting welfare payments. All justification thus tends to be moral in character. Andrew Mellon, Secretary of the Treasury under Hoover, insisted that the rot had to be purged out of the system. This purging applied only to those who weren’t rich or if rich had misspent their money. It can then be legitimately asked: who are Mellon, or Osborne for that matter, to make moral judgments about the rest of us? An identical argument can be made for the pension system. The public pension system is not in trouble. It will never default, unless made to. Hence, there are no economic  reasons for Osborne to do what this budget and previous budgets have done to the public pension system.

It is clear that economics as a field of study is not just about money and its distribution and recycling in the absence of the social and cultural, indeed ethical, context in which economic activities take place. Osborne makes it clear that he understand this in relation to overseas aid, even though it is only 0.7% of GDP, which given the scale of the UK economy is trivial. However, it is when he deals with the domestic situation that the ethical imperatives become cloudy. It is an odd situation where the poor have to be “beaten” in order to work whereas the rich have to be “bribed”. Investment bankers appear to need to be bribed with bonuses in order to carry out their jobs. Their salaries are obviously insufficient motivation.

One of the most important matters in the last budget is the child care provision that is designed to enable those who care for their children to go back to work by enabling them to take advantage of child care facilities which would otherwise be too expensive for them. It is of interest, and perhaps indignation, who benefits from this particular piece of legislation. Here is a chart I scanned from the Observer of 24 March.

childcareobs24mar2013

It seems obvious that those whose need is greatest benefit least if at all from this scheme. In fact, the beneficiaries are those who pay a certain amount of tax in addition to those families where both parents work. This distribution of funds makes no economic sense.

This entire budget is like this. In this budget and the last, the richer benefit the most and the poorest the least, but in general, everyone loses. If this isn’t a budget based almost entirely on moral premises as opposed to economic ones, then I don’t know what is. Take the LibDems’ £10,000 tax credit or personal allowance. Who benefits? Again from the 24 March Observer [below].

squeezeobs24mar2013

The Treasury contends that even after all allowances are taken into account, the overall impact of the tax and benefit changes will be negative, as can be seen in the chart. In fact, according to the Treasury, the richest 10% are a little over 2% worse off while the poorest 10% are a little under 2% worse off. This difference will not make much difference to the top 10% whereas it will make a great deal of difference to the bottom 10%.  In the Treasury’s view, virtually all households are worse off.

The economic rationale underwriting this set of figures is deeply flawed. And it increases the economic inequality that we are experiencing now. The perspective I outlined above would turn this on its head. Such inequalities lead to de-legitimization of the social contract. In the US, some of the rich already live in gated communities and have for the past 30 years. And they feel the need to carry guns. Part of this lies in the US’s history, but part lies also in the grotesque economic inequalities that have become so pervasive in the US.  Neither the US nor the UK governments, however, have done much to shift the economic burden on their citizens, especially since the financial crash of 2008. If anything, this budget entrenched them further, while claiming the opposite is taking place.

In assessing this budget, we must never forget that the financial crisis arose from excessive leveraging in the private sector, most particularly the investment banking sector, not overspending in the public sector. What we are experiencing is a private sector crisis portrayed as a public sector crisis. There is a public sector problem, but this derives from the public sector bailing out the private sector responsible for the crash of the economic system, which occurred because of the absence of sufficient safeguards, safeguards that were in place from the thirties until the ‘80s and ‘90s when they were dismantled.

This budget does nothing to deal with the essential insolvency of the banks and their egregious practices.

Especially since two of the largest have been effectively nationalized. It is often said that the taxpayer owns these banks. This is true only in so far as the taxpayers/citizens own their own government. Even were we to agree that citizens own their government, it doesn’t follow that the taxpayer is paying the salaries of the bankers. While the government is paying the salaries of the bankers, with our implied consent, the taxpayer is not effectively involved. This is because what government spends is not dependent on its tax base  – taxes are not the foundation of government expenditure, as I mentioned above.

It has been said by some that this budget may have been a preparation by Osborne to be replaced in the summer Cabinet reshuffle.  The 2010 intake and senior Tories want Redwood or Hague to be Chancellor. Because Osborne’s budgets have had so little relation to reality and, therefore, have either had no effect or had a quite pernicious effect, his position has become increasingly vulnerable, leading to a number of his own party wanting him removed as Chancellor.

Check out two recent research reports by Donald Hirsch on the contradictions inherent in Osborne’’s tax benefit/universal credit schemes:

A miminum income standard for the UK in 2012: Keeping up in hard times. http://www.jrf.org.uk/sites/files/jrf/minimum-income-standards-2012-full.pdf

Tackling the Adequacy Trap: earnings, incomes and work incentives under the Universal Credit. http://www.crsp.ac.uk/publications/tackling_the_adequacy%20_trap.htm

The analysis of he and his colleagues is in my view devastating for Osborne’s policies.

– L Brownstein

 

Please act *now* if you want to save small area population data!!

Please act *now* if you want to save small area population data!! Dear colleagues

Image from Photologue_np on flickr

 

Understandably, only a few of us can invest much time in following the plans for future censuses and you may therefore be unaware of recent developments. If you are a user of small area census data, please read on and act if you can – there is a real risk of losing the small area census data that you currently take for granted.

ONS are currently undertaking research on potential replacements for the conventional census in 2021. Although that seems a very long way off, recommendations need to go before parliament next year and the preparatory work is already well advanced. Based on the series of roadshows run by ONS last autumn, they have not received convincing high-value use cases for small area population attributes. Arguments such as “they are used to target local services” are not sufficiently robust to stand up to the inevitable financial scrutiny. A leading option is to derive basic age/sex data from linked administrative records and to use social survey data to obtain the types of population attributes that would previously have been obtained from the census – (ethnicity, LLTI, tenure, car ownership, employment, etc.) This would clearly not deliver small area data of the current quality, if at all.

We are urgently appealing to the research community to have your say: if no case is made, it seems entirely likely that ONS will not be able to include generation of costly small area data as part of the recommended option. If you can demonstrate high-value research (and ideally high-valued impacts!) based on small area 2001 census data, please mail us – we need to marshall further evidence by the end of February. Ideally, we are seeking identifiable research with an estimate of value and impact and/or an indication of why it could not be done without high quality small area data. If you can supply a paper or URL where further details could be pursued, better still.

NB This is about England and Wales, although Scotland and Northern Ireland will be reviewing the same issues in due course. If you want to find out more about Beyond 2011, see http://www.ons.gov.uk/ons/about-ons/what-we-do/programmes—projects/beyond -2011/index.html Although there is not a formal consultation currently open, you can also mail them at beyond2011@ons.gsi.gov.uk With many thanks, David Martin, University of Southampton Email: D.J.Martin@soton.ac.uk Paul Norman, University of Leeds Email: P.D.Norman@leeds.ac.uk

[Reposted with permission from the radstats jiscmail list.]

Press Release: World Class Conference in York This Weekend

20 February, 2013

This Saturday, a hundred experts will come to York to discuss and debate issues of inequality and poverty in the world today – and yesterday. For over a century, York has been at the centre of this debate, since Seebohm Rowntree completed his pathbreaking poverty survey in 1900.

Rowntree’s story will be addressed by Professor Jonathan Bradshaw from York University in the first session at this weekend’s event, which is at the Priory Street Centre in central York. This session is also co-sponsored by the Yorkshire Philosophical Society, and will  provide a launch for the new book on the Rowntree family by local author Paul Chrystal (to be confirmed).

Another York speaker is Professor Richard Wilkinson, whose celebrated book ‘The Spirit Level’ argued why greater equality is better for everyone. The conference organiser, John Bibby, said, “This will be an argument accepted by most of the attendees at this conference, which is organised by Radical Statistics, a group of left-wingers interested in applications of statistical data”.

Other sessions will discuss inequality in India, the 2011 population census in the UK and will debate whether the 2021 census should be cancelled.The theme of the final speaker, Stewart Lansley, will be  “The Costs of Inequality”, on which he has written a very well-received book.

You can follow the conference live on Twitter, hashtag #radstats. For full information see http://www.radstats.org.uk/conference/york2013/

———-END———–

Radstats 2013 Conference:
Inequality and Statistics

Registrations are now being accepted for the 2013 Radical Statistics conference – Inequality and Statistics – taking place on Saturday 23 February, 2013 in York.

Please see /conference/york2013/ for further information on all speakers, topics, location, social events and registration.

Or view an A4 flyer to post or distribute at /conf2013/A4Flyer.pdf

Programme highlights:

Jonathan Bradshaw: The Legacy of Rowntree

Danny Dorling:The 2011 Census: What surprises are emerging and how they show that cancellation is stupid

Ben Baumberg and Robert de Vries: Statistical Catfights and the ‘Spirit Level’

Stewart Lansley: Inequality: It’s role in the crash and the crisis

…and much, much more!

Hutton & Stewart on the autumn statement and welfare hits + Addendum

Both Will Hutton and Heather Stewart made swipes at Osborne’s approach to welfare in general and the benefit cuts in particular. Hutton’s attack centered around the notion of a social contract. He claims that Osborne’s autumn statement shredded that contract to pieces without entirely dismantling it. The notion of fairness is still a fundamental part of British life and can be crushed only with difficulty. As is known with certainty now, even our closest relatives, the common chimpanzee and the Bonobo have an understanding of fairness, ie., equitable distribution. Both humans and chimpanzees are able to depart from distributing resources equitably, but only humans can do so on such a grand scale and to such large sections of the community.

The fact is that the number of scroungers on benefit is a miniscule part of the population and nowhere near the size that Osborne would like the population to believe. Hence, the amount paid out by the government as a consequence of deception doesn’t amount to a hill of beans and will, in fact, cost more to retrieve than is spent. This is not sound economics.

Hutton says of Osborne that he is an economic illiterate. This certainly seems to be the case. In economic terms, virtually all of his economic policies have been pro-cyclical rather than counter-cyclical. In other words, if an economy is going into depression, government policies ought to be aimed at getting the economy going in the other direction. His policies have consistently made the economic situation worse rather than better. And pointing at external influences are at this juncture misdirection at best.

Stewart posits a hypothesis about why Balls flummoxed his rebuttal to Osborne, that he was surprised by the OBR figures. This may be true but there is I think a deeper mechanism at work in Balls’ case. And this is that he doesn’t really have an adequate understanding of how to fix the economic situation any more than Osborne does. What is good, however, about Balls’ position is that the government of which he would be a part would not engage in the slashing that Osborne seems to revel in.

Hutton thinks Osborne an economic illiterate. I am afraid that this charge also applies to Stewart. She asks the following questions. “And when Osborne puts some flesh on the bones of his latest austerity plans, in a spending review now planned for 2013, he will have a whole list of charges to chuck at Balls and his colleagues. Would they reverse the benefits cuts? Yes? Then what else would they cut instead, or what taxes would they raise to pay for it?”

The economic fact of the matter is that taxes are not needed to pay for any government program. That is not what taxes are for. Among other things, they forge a community together, thereby, in Huttonian terms, underwriting a community’s social contract, part of which cements us all together. It is this social cement that Osborne and part of his party is, in my view, perhaps unconsciously, trying his best to rip asunder. For support for this view from Robert Choate himself, watch his interview with Paxman where he almost admits this very point (but is apparently saving what he really thinks for his memoirs).

In short, the benefit cuts can be reversed without the need to raise taxes to pay for any such reversal. Related to this is Osborne’s fear that the country will lose its credit rating. The rating of credit agencies refers to the likelihood that the UK will go bankrupt. This is impossible, unlike the countries in the Eurozone who have given up their sovereign currency. He surely knows this, but if not, his fear can result from the City losing its foreign investment drawing power. Had the City not been allowed to become so central to Tory policy, this would be an irritation but nothing more. But this fear lies also in other false economic ideas held by the Chancellor. One of them is the one held by Heather Stewart, that taxation supports government spending. Balls has given every impression that he also is in thrall to this falsehood. Were he to divest himself of this unfounded idea, he would find himself in a better position to battle Osborne’s socially divisive, inequitable, iniquitous, and economically unsound policies.

Hutton:

http://www.guardian.co.uk/commentisfree/2012/dec/09/george-osborne-new-social-contract

Stewart:

http://www.guardian.co.uk/business/2012/dec/09/autumn-statement-compassionate-conservatism-officially-dead

Addendum: on balanced budgets

One item that I left out of the previous account of the welfare hits but which has been part of the coalition’s belief system for some time – balanced budgets. This government, as have governments before it, believe in balanced budgets and have reaching such a state as a policy goal. Bill Clinton actually achieved this.

The notion of a balanced budget is a goal of a political administration is a useless goal and a potentially destructive one. Stephanie has a terrific metaphor of deficit/surplus interaction between the public and private sectors. It is a see-saw – the kind you find in children’s playgrounds. What you find in this metaphor is that surpluses in the public and private sectors cycle around the balance point but never settle on it. They never settle on it because the economy is always in motion. As anyone who has ever used a see-saw knows, you have to keep the see-saw see-sawing back and forth passing through the middle, or balance, point. If you stop and get off, one or the other side will slide to the ground where it will stop.  A successful see-saw ride will be one where neither side will go too far in either direction, which will disturb the cycling equilibrium and be potentially dangerous for one or both of the children. The same is true of the economy.

Here are Kelton’s graphics illustrating the point. First, the see-saw in its simplest situation.

As you can see, if one sector is in deficit, the other is in surplus. The trick is not to let either sector become too extreme. In these graphics, G = government expenditure and T = Taxation Revenue.

Now, capital accounting is added. But this does not alter the way the mechanism works.

For further information, I recommend Kelton’s own posts.

What happens when government tightens its belt, as the coalition is presently doing.

http://neweconomicperspectives.org/2011/05/what-happens-when-government-tightens.html

US not broke and Clinton surplus destroyed the economy

http://neweconomicperspectives.org/category/stephanie-kelton/page/2

Kelton’s See-Saw version of the deficit-surplus interaction taking capital accounts into account, as it were.

http://neweconomicperspectives.org/category/stephanie-kelton/page/4

Osborne’s Autumn statement

Well, many of you will have seen the budget and Balls’ response which began with a good deal of stuttering, widely reported by no explanation. If anyone has a hypothesis about why Balls began his retort by effectively stuttering, I would be glad to know. Even though he recovered after a few minutes, his response wasn’t very effective.

The primary reason for that I would argue for his ineffectiveness is that Balls, and Ed as well, has no well developed alternative to articulate. Effectively, he and others in the Labour Party assume as true the neoliberal economic theories that underpin Osborne’s major policies, though he slightly modified them in this statement. Policies guided by neoliberal economic principles have failed not only this time but every time they have been tried, either in western countries or in developing countries. This is fundamentally because they have no empirical relationship to the real world. They only work in toy economies.

They look correct to some people because the Keynesian position has been distorted and Keynes didn’t quite get all of it right. After the publication of the General Theory, he was already thinking about how to revise it. The theory should really be called the Keynes-Kalecki theory, as in a review of the General Theory the year following its publication, Kalecki corrected errors in Keynes’ theory of effective demand.

QE, which King is so fond of, is ineffective re job creation because it directs funds to banks who either hoard it or use it to pay down their toxic balance sheets. Osborne almost seemed to realize this when he proposed infrastructure projects. However, it looked a bit too little too late. And he doesn’t yet seem to have bitten the bullet. Besides, the money that has been put into the various QEs undertaken by certain sovereign governments is not enough to even make a dent in the banks’ toxic balance sheets, so great are their debts. Basically, it is money thrown away.

An interview with Robert Choate showed that Choate, while not being able to criticize Osborne due his present position, showed that he knows that credit ratings are meaningless for sovereign states with their own currency and that government doesn’t have to borrow, unless it decides to because the relevant interest rate is low. As for the basic interest rate, it can be kept low in perpetuity. Taxes should be used to control inflation by inhibiting spending and to direct spending into certain areas, as well as legitimating the sovereign currency. They should never be thought of as a basis for government spending, because government doesn’t need taxes to back their spending, something Choate knows only too well.  When pressed by Paxman in the interview, to explain his hints, he only said that we will have to wait to find out in his memoirs. However, no one, even Paxman, later picked up on Choate’s hints in the interview about what he really thinks of Osborne’s policies.

To rely on exports when every other country with whom you would do business is experiencing the same difficulty is incredibly stupid and shows that Osborne doesn’t quite know what he is doing. His comments about those on welfare were exceedingly ignorant. The stupidity of his position is that people who aren’t working don’t really want to would only be true were there jobs to go to. The basic fact is that there are fewer jobs than there are people looking for them. The jobs have to be there first to justify his basic assumptions about people’s motivations. History does not support Osborne’s ignorant comments.
In fact, Osborne’s social policies and comments directed to those on benefits, who are obviously not well off, is redolent of the ideas of the late 19th and early 20th century social Darwinists. For those of you interested in the way in which evolutionary biological ideas creep into discussions of the nature of human society, it may be of interest to those who do not read in this area that Darwin did not subscribe to the view of unbridled competition even for the Primates. It follows mutatis mutandis that Darwin’s view of chimpanzees applies to human social groupings. This view of unbridled competition may have seemed self evident in the late 19th and early 20th centuries, but seems rather dated now. Yet, the idea refuses to die. A number of Osborne’s social policies could have come right out of early 20th century social Darwinist tracts. One of social Darwinism’s greatest critics was Lester Ward. Alas, no commentator has yet made this connection. It seems so obvious to me. Am I missing something?

Now, one problem with the post by Pilkington is that it is rather technical. And it is a piece on the political economy of the financial sector rather than economics per se. That should make it easier to read, but for some it might not. Basically his message is that by putting the money back into banks, it acts as a feeder mechanism for financial speculation, which is what needs to be toned down rather than reinforced.

I have also included a piece from the Independent by David Blanchflower. His position is that Slasher Osborne’s jobs policies are guided, not by empirical evidence, but by ideology. We all know this, but is is salutary to see figures from the Department of Works and Pensions that reinforce this view. It is impossible to believe that millions of people are scroungers. It defies rational consideration.

Here are the links:

Blanchflower: http://www.independent.co.uk/news/business/comment/david-blanchflower/david-blanchflower-ideology-rules-the-coalitions-jobs-policies-8374461.html

Pilkington: http://www.nakedcapitalism.com/2012/12/philip-pilkington-monetary-policy-and-metaphysics-how-economists-try-to-naturalise-terrible-policies-and-disappear-into-their-own-theories.html

Post contributed by Larry Brownstein

Radical Statistics Issue 107 – Editorial

This issue of Radical Statistics comes out of the February 2012 Radical Statistics Conference, which was held at the British Library in London. The conference focused on the Mis-Measurement of Health and Wealth and was the best ever attended Radical Statistics conference. Five of the eight presentations given at the conference are collected here (we hope to include the remaining three presentations in some form in a future issue of Radical Statistics).1 As a set, the papers published here are very much in the radical statistics tradition: they do not simply critique mainstream methods of measuring, but also reveal the social necessity of challenging such measures and begin to propose alternatives.

The issue begins with Howard Reed’s critique of the ways that UK debt statistics are constructed and interpreted. He unpicks the UK Coalition Government’s ‘maxed-out credit card’ explanation of current government finances, and demonstrates the links between this reading of the data and the ‘austerity’ policies which are responsible for slowing growth in GDP (and therefore exacerbating the debt/GDP ratio). Howard also points out that contrary to popular opinion, the previous Labour government’s real spending was very much in line with historical precedent. Continue reading