If you think of the world in a certain way, and someone disagrees with you, it’s natural to try to interpret their views using your mental framework. But often the frameworks are incommensurable, and it just won’t work. The long fruitless Keynesian / monetarist debate of the 1950s is one such example.
Suppose someone told you that real business cycles models were just AS / AD [Aggregate Supply / Aggregate Demand]. Would you agree? I sure hope not, as the speaker would clearly be inferring some sort of acceptance of the AS / AD model that you see in textbooks. The one with sticky prices. And yet it would certainly be possible to explain the RBC model [Real business cycle] using the AS / AD graph, just assume a vertical AS curve.
If you assume the AS curve is always vertical then you have no business using the AS / AD model, and if you think tight money usually leads to low interest rates, then the model is basically useless. You need a different framework. Now if tight money always led to low interest rates, I suppose you could make IS [investment saving] slope upward.
Can someone tell me the difference between assuming the IS curve slopes upward, and assuming that a shift to the right in the LM [liquidity preference money] curve causes the IS curve to shift far enough to the right so that you end up with higher interest rates and higher output?
Friday, 9 August 2013
Thursday, 8 August 2013
New housing scheme
Just a couple of years before a general election, as we are now, the Government will strive to convince us that its plans for the future are designed for the good of the country and, most especially, for our own good since it cares for us deeply.
That is why we need to scrutinise its proposals even more closely than usual and that brings us to Chancellor George Osborne's Help To Buy scheme which, he claims, is designed to revive the housing market.
In effect, the Government is underwriting part of the plan since would-be property buyers need find only a five per cent deposit, with 20 per cent being provided by a government loan and 75 per cent coming from a bank or building society. So, assuming all that financial help becomes available, we are looking at a scheme under which a potential buyer can purchase, let us say, a £100,000 property with a deposit of just £5,000.
What guarantee of credit status and ability to repay will have to be provided by the prospective property purchasers to whom the Government is proposing to lend our money and how much Government pressure will be applied to banks and building societies to take similar gambles with our money?
Recent statistics indicate house prices are rising at their fastest rate for more than three years and I am certain we shall see that trend continue, fuelled by Government-contrived low interest rates. This may achieve the Chancellor's political objective of making house owners feel good and therefore more inclined to vote Conservative. Unfortunately, it may also produce another house price bubble, falsely inflating property prices and making it even more difficult for first-time buyers to get on the house-buying ladder.
We must also remember that, although over time property values usually rise, sometimes they fall. For instance, in the United States some properties fell 40 per cent from their 2007 peak prices. Land is a long term investment.
The Chancellor's feel good proposals are politically very clever and may even play a part in helping the Tories win the next general election but two old and well-founded sayings come to mind. The first is that if something looks too good to be true it probably is. The second is Caveat Emptor, or Buyer Beware.
That is why we need to scrutinise its proposals even more closely than usual and that brings us to Chancellor George Osborne's Help To Buy scheme which, he claims, is designed to revive the housing market.
In effect, the Government is underwriting part of the plan since would-be property buyers need find only a five per cent deposit, with 20 per cent being provided by a government loan and 75 per cent coming from a bank or building society. So, assuming all that financial help becomes available, we are looking at a scheme under which a potential buyer can purchase, let us say, a £100,000 property with a deposit of just £5,000.
What guarantee of credit status and ability to repay will have to be provided by the prospective property purchasers to whom the Government is proposing to lend our money and how much Government pressure will be applied to banks and building societies to take similar gambles with our money?
Recent statistics indicate house prices are rising at their fastest rate for more than three years and I am certain we shall see that trend continue, fuelled by Government-contrived low interest rates. This may achieve the Chancellor's political objective of making house owners feel good and therefore more inclined to vote Conservative. Unfortunately, it may also produce another house price bubble, falsely inflating property prices and making it even more difficult for first-time buyers to get on the house-buying ladder.
We must also remember that, although over time property values usually rise, sometimes they fall. For instance, in the United States some properties fell 40 per cent from their 2007 peak prices. Land is a long term investment.
The Chancellor's feel good proposals are politically very clever and may even play a part in helping the Tories win the next general election but two old and well-founded sayings come to mind. The first is that if something looks too good to be true it probably is. The second is Caveat Emptor, or Buyer Beware.
Wednesday, 7 August 2013
Zero hours contracts
The use of zero-hours contracts by some retailers such as Sports Direct is a growing area of concern. Despite this, some employers still believe that zero-hours contracts can represent a good solution for all concerned and over a million British workers are thought to be employed on such contracts.
While zero-hours contracts have attracted considerable criticism, it is worth noting that they can bring specific benefits for employees. In particular, the flexible working arrangements provided by such contracts can appeal to students who value the choice they are given about when and how much they work because this means they can fit it around their studies. Working parents may also choose to work under such arrangements, simply because the flexibility of the contract means that they can manage their hours to fit around their home circumstances. The other benefit of a zero-hours contract is that it means people in full-time employment elsewhere can potentially supplement their income with a second job.
However, the fact that a growing number of retailers are choosing not to use zero-hours contracts may be an indication of the public concerns now being raised about their use. In most cases, these concerns stem from having workers on ‘standby’ to cover busy trading periods, which may make the system susceptible to abuse.
The other risk to employers is that they may mistakenly believe the contract with the employee is ‘casual’ when it is actually a zero-hours contract. In such cases, the employer may not be aware that the zero-hours contract gives the employee more benefits and employment rights.
What should be looked at is the huge amount of people who are on these zero-hours contracts and do not know they are on them!
While zero-hours contracts have attracted considerable criticism, it is worth noting that they can bring specific benefits for employees. In particular, the flexible working arrangements provided by such contracts can appeal to students who value the choice they are given about when and how much they work because this means they can fit it around their studies. Working parents may also choose to work under such arrangements, simply because the flexibility of the contract means that they can manage their hours to fit around their home circumstances. The other benefit of a zero-hours contract is that it means people in full-time employment elsewhere can potentially supplement their income with a second job.
However, the fact that a growing number of retailers are choosing not to use zero-hours contracts may be an indication of the public concerns now being raised about their use. In most cases, these concerns stem from having workers on ‘standby’ to cover busy trading periods, which may make the system susceptible to abuse.
The other risk to employers is that they may mistakenly believe the contract with the employee is ‘casual’ when it is actually a zero-hours contract. In such cases, the employer may not be aware that the zero-hours contract gives the employee more benefits and employment rights.
What should be looked at is the huge amount of people who are on these zero-hours contracts and do not know they are on them!
Tuesday, 6 August 2013
Death threats
This Needs to Stop
The recent talk of the internet is a series of reminders that humans are still social primates, a species known for pack behaviour and escalating aggression against outsiders. The internet gives you a broader range of outsiders to reach and the digital equivalents of punches to throw.
If you follow the links in some recent collections of stories about incidents, you will find an indie developer driven from the market, death threats for changing reload times in FPSes or advocating cosmetic changes to currency, and add rape threats if the target in question is female.
I would prefer to discuss what is a reasonable level and form of negative feedback to deliver online, but we as a society do not seem to have reached a sane place yet. We have yet to craft an enforceable consensus that death threats are not acceptable. One police agency arrested someone for “terroristic threats” that no reasonable person would interpret as threats, while another suggested that Twitter should address the direct threats to specific victims rather than having police treat them as a criminal matter. I imagine the same approach is taken in asking Verizon to stop people from phoning in bomb threats.
I do not think it is possible to have too many voices condemning violent threats. I do not know how much good it does adding a voice here, given our readership.
The recent talk of the internet is a series of reminders that humans are still social primates, a species known for pack behaviour and escalating aggression against outsiders. The internet gives you a broader range of outsiders to reach and the digital equivalents of punches to throw.
If you follow the links in some recent collections of stories about incidents, you will find an indie developer driven from the market, death threats for changing reload times in FPSes or advocating cosmetic changes to currency, and add rape threats if the target in question is female.
I would prefer to discuss what is a reasonable level and form of negative feedback to deliver online, but we as a society do not seem to have reached a sane place yet. We have yet to craft an enforceable consensus that death threats are not acceptable. One police agency arrested someone for “terroristic threats” that no reasonable person would interpret as threats, while another suggested that Twitter should address the direct threats to specific victims rather than having police treat them as a criminal matter. I imagine the same approach is taken in asking Verizon to stop people from phoning in bomb threats.
I do not think it is possible to have too many voices condemning violent threats. I do not know how much good it does adding a voice here, given our readership.
Monday, 5 August 2013
Detroit a twist
Detroit's bankruptcy filing last month brought a double-barrelled bonus for lawyers - lots of much-needed work, and, due to a quirk of municipal bankruptcy law, no apparent need to disclose the fees they charge.
However, before lawyers from big-name firms could start totting up their billable hours, Judge Steven Rhodes made clear he wasn't happy with the lack of transparency. He said he wants to appoint an examiner to make sure fees charged to the city are fully disclosed and reasonable.
In reality, it is unlikely lawyers will object to added oversight given that they are being paid from taxpayer funds. In the overheated political atmosphere surrounding the case, having an independent examiner approve fees could give a degree of cover to lawyers who often bill as much as $1,000 an hour.
The outcome of Detroit's bankruptcy could set important precedents that will impact how other cities deal with billions of dollars in pension and bond obligations. With so much at stake, Detroit and its bond insurers and unions are likely to splash out on the best legal help.
However, before lawyers from big-name firms could start totting up their billable hours, Judge Steven Rhodes made clear he wasn't happy with the lack of transparency. He said he wants to appoint an examiner to make sure fees charged to the city are fully disclosed and reasonable.
In reality, it is unlikely lawyers will object to added oversight given that they are being paid from taxpayer funds. In the overheated political atmosphere surrounding the case, having an independent examiner approve fees could give a degree of cover to lawyers who often bill as much as $1,000 an hour.
The outcome of Detroit's bankruptcy could set important precedents that will impact how other cities deal with billions of dollars in pension and bond obligations. With so much at stake, Detroit and its bond insurers and unions are likely to splash out on the best legal help.
Friday, 2 August 2013
Bradley Manning
The 25-year-old was found guilty earlier in the week of espionage and more than a dozen other charges which together could result in a jail sentence of more than 100 years for the largest leak in US history.
However, in a blow for the American government, he was acquitted of aiding the enemy, the most serious charge against him. Prosecutors had argued that Osama bin Laden used the leaked documents to hatch plots against America!
The soldier waived his right to a jury trial and his fate was decided by Col Denise Lind, the military judge who presided over his court martial at Fort Meade, a military base outside Washington.
She cleared Manning of aiding the enemy, but convicted him of six counts of violating the Espionage Act, five counts of theft and several other minor counts. The 20 charges of which he was convicted or pleaded guilty could result in a total of up to 136 years in prison.
Now lets get this into perspective.
Jordan Robertson footballer, 21, pleaded guilty to causing death by dangerous driving at Leicester Crown Court given 32 months.
Marcus Barney absconder, 27, handed a seven year sentence for causing the death of Carol Tegg in a car accident in New South Wales.
Daniel Forshaw unemployed, 22, was given a four year sentence for killing Sandra Bullock with a motor bike in Liverpool.
Just three of the hundreds & thousands of examples of today's justice hand outs, the question is telling the public about government lies worth over 100 years?
However, in a blow for the American government, he was acquitted of aiding the enemy, the most serious charge against him. Prosecutors had argued that Osama bin Laden used the leaked documents to hatch plots against America!
The soldier waived his right to a jury trial and his fate was decided by Col Denise Lind, the military judge who presided over his court martial at Fort Meade, a military base outside Washington.
She cleared Manning of aiding the enemy, but convicted him of six counts of violating the Espionage Act, five counts of theft and several other minor counts. The 20 charges of which he was convicted or pleaded guilty could result in a total of up to 136 years in prison.
Now lets get this into perspective.
Jordan Robertson footballer, 21, pleaded guilty to causing death by dangerous driving at Leicester Crown Court given 32 months.
Marcus Barney absconder, 27, handed a seven year sentence for causing the death of Carol Tegg in a car accident in New South Wales.
Daniel Forshaw unemployed, 22, was given a four year sentence for killing Sandra Bullock with a motor bike in Liverpool.
Just three of the hundreds & thousands of examples of today's justice hand outs, the question is telling the public about government lies worth over 100 years?
Thursday, 1 August 2013
Bedroom Tax court ruling
Inevitably, there will be a great deal of smoke and noise about the government's victory in the courts over what Labour [and the BBC] call the "bedroom tax". This decision does not mean necessarily that the Court believes the DWP [Department of Work & Pensions] was morally right to restrict housing benefit to a certain number of rooms per family. Nor does it make that policy immune to other political challenges.
What it did rule was that a separate bedroom for a disabled family member could not be regarded as a human right. That is, that the disabled were not being discriminated against by the refusal of the government to provide sufficient housing subsidy to guarantee them separate bedrooms.
That the court would have decided this should have been a foregone conclusion.
It would create unworkable and even absurd demands on the benefit system if anyone with a special need could claim that government provision for that need was his legal right. How about all the disabled or ill people now on housing waiting lists who have no adequate home at all? How about people whose temporary physical or mental illness might qualify for exceptional consideration?
It might be morally desirable [or not, depending on your outlook] to have all these personal variations of need catered for, and the government does make discretionary funds available to local councils for just that purpose, but it cannot be a legally binding "right".
This is just another example of how the notion of civil rights, with all their attendant legalistic implications is being misused. What is good or kind or compassionate, is not necessarily a matter of law.
What it did rule was that a separate bedroom for a disabled family member could not be regarded as a human right. That is, that the disabled were not being discriminated against by the refusal of the government to provide sufficient housing subsidy to guarantee them separate bedrooms.
That the court would have decided this should have been a foregone conclusion.
It would create unworkable and even absurd demands on the benefit system if anyone with a special need could claim that government provision for that need was his legal right. How about all the disabled or ill people now on housing waiting lists who have no adequate home at all? How about people whose temporary physical or mental illness might qualify for exceptional consideration?
It might be morally desirable [or not, depending on your outlook] to have all these personal variations of need catered for, and the government does make discretionary funds available to local councils for just that purpose, but it cannot be a legally binding "right".
This is just another example of how the notion of civil rights, with all their attendant legalistic implications is being misused. What is good or kind or compassionate, is not necessarily a matter of law.
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