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Modern economics

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Dave B
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Re: Modern economics

#1321 Post by Dave B » December 20th, 2014, 9:22 am

Latest post of the previous page:

Like the idea Thunders (and welcome back BTW) but it would be hell to administer I would guess. Then, employing another ten thousand bureaucrats to do the job would at least be giving them a job!
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015

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Alan H
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Re: Modern economics

#1322 Post by Alan H » December 20th, 2014, 11:10 am

I thought it was interesting too, but not sure it is practical for the reasons Dave gave. I'm not convinced it solves any particular problem, just offers a different way to do it, even if it is attractive.

Besides, I certainly can't see a Tory government wanting anything to do with it. They only deal in things that have a monetary value and that are profitable! On the other hand, maybe they could get VirginWork® to administer it and profit from it...
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

thundril
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Re: Modern economics

#1323 Post by thundril » December 20th, 2014, 11:51 am

Glad you guys like the idea.
I don't think it would take as much administration as the current means-tested benefit system. There's no requirement for teams to harrass the unemployed, snoopers to spy on them, etc. There's just one large data-base, (the 'time-bank') with a cell for each participant.
The time-value of each 'essential' good needs to be calculated, true: but this value only changes with changes in techniques and technologies; once established it does not vary at all from supplier to supplier (for our purpose) and it varies in time only slowly, (and almost always downwards!) There are thousands of students of economics, statistics, engineering business studies etc who could gainfully incorporate a bit of this reseach into their courses!

I would have thought the political Right would like it for a number of ideological and practical reasons: no 'tax-payers' money being handed to idle scroungers to pay for their fags booze and bingo'; the work-ethic emphasised in a very immediate way; a load of work done in the public sector that otherwise would have to be paid for the tax-payer (national or local) or else would be left undone.
Once the scheme is established nation-wide, there would be no need for unemployment benefit as such, because there would be no actual unemployment. An end to the disgrace of whole generations of future school-leavers expecting a life of idleness and benefits; less state interference in 'the market'. Don't see why the Right wouldn't just love it.
Nick?

Nick
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Re: Modern economics

#1324 Post by Nick » December 20th, 2014, 1:24 pm

Moi? :D

I'm going to give it some serious thought. I think it has some good aspects and some unworkable ones, but I want to give you a constructive response.

Welcome back, btw! :D

thundril
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Re: Modern economics

#1325 Post by thundril » December 20th, 2014, 1:33 pm

Hi :wave: Nick!
I certainly would appreciate a considered response from your perspective. A fuller version of the proposal is HERE

thundril
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Re: Modern economics

#1326 Post by thundril » January 1st, 2015, 2:20 am

Alan H wrote: . . I'm not convinced it solves any particular problem, just offers a different way to do it, even if it is attractive.
But it makes a very important difference. When you pay for something by working for society cash-free you are not receiving an unearned benefit; therefore there is no justification for any rule barring you from taking additional, paid work. Nothing barring you from starting up your own business. ... No need for snoopers and fraud officers.
Further, since anyone can participate who wants to, there is no need for income support to workers on low pay.
The worker/consumer makes a simple calculation, and acts in accordance with his/her own percieved self-interest;
Suppose some essential good has a time-cost of one hour, and a market price of £12.
If your usual job (the one you do for money) pays £6 an hour, you elect to pay the time price for the good. Assuming you have previously banked at least one hour's work for the local community or public sector, that was unwaged at the time, but is now effectively rewarded at twice your normal pay-rate!
OTOH, if your income is £20 per hour, you would be better off paying the market price.
Besides, I certainly can't see a Tory government wanting anything to do with it. They only deal in things that have a monetary value and that are profitable! .
All politicians are concerned with popularity. All three main parties in the uk are equally committed to capitalism, both its physical manifestation in the wealthy crony classes, and its ideology, as presented by the Torygraph, Sun, Daily Meldrew et al. They all try to claim that they can square the circle of reducing the deficit and promoting 'growth' whilst keeping taxes low. They all condemn, (albeit in different tones) the 'undeserving poor' on Benefit Street whilst keeping schtumm about the undeserving rich in the City..
But why should not the Tory Party in particular see the advantages of Fair-work?
Instead of the idle poor getting a 'benefits handout' which they might spend on bingo, beer and fags, only the absolute essentials would be available through this scheme. What's more, the participants would not receive even these essentials for free, merely they would be guaranteed an opportunity to do an amount of work comparable to the amount of work it took to produce those goods.
The tax-payer gains at both ends; no more paying out means-tested benefits (with all their attendant bureaucracy-costs) and a sizeable amount of public work done at minimal cost!

From the perspective of the ideology of capitalism, a really big point in favour is this: once such a scheme is established nationwide, there is no justification for minimum-wage legislation.
If any money-paid work you choose to undertake is simply for the purpose of buying non-essentials, there is no justification for the state interfering in the wage-negotiation by which you agree to sell your time to an employer.
With access to life’s essentials guaranteed in return for an equitable amount of work for the public good, participation in the cash-paid labour market would be truly free, on both sides. What's not to like, from the conservative pov?

Nick
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Re: Modern economics

#1327 Post by Nick » January 5th, 2015, 3:20 pm

thundril wrote:Hi :wave: Nick!
I certainly would appreciate a considered response from your perspective. A fuller version of the proposal is HERE
Hi Thundril :) I've composed a response, but it seems to be incompatible with this computer. I'll have to see if I can do something else with it....

jdc
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Re: Modern economics

#1328 Post by jdc » January 6th, 2015, 2:48 am

thundril wrote:Short version:



Fair Work: like workfare, but actually fair.


Imagine the DWP has established a time-bank, in which anyone with a NI number can open an account. You send off your details and a photo; you get back a swipe-card. You look on a website, or visit your local job-centre, where you will find a list of jobs that need doing in your locality. These will be socially beneficial tasks; in the public sector, in the local community or for a recognised charity. You choose something that suits your skills and abilities. You go along and do some of this work. You don’t get paid, but the hours you work are credited to your time-account.

Now you go to market. Some goods, (those that society has currently designated ‘essentials’) have a time-price quoted alongside their money-price.
The time-price of a good is set by an ongoing process of research into the actual amount of human time it takes to produce it.
You have a choice: for these goods you may pay the money price, or the time price.
If you elect to pay the time-price, the vendor invoices the DWP for the good. The DWP pays the market price to the vendor, and deducts the time-price from the participant’s time-account.
Crucially, you are not receiving an unearned benefit; therefore there is no justification for any rule barring you from taking additional, paid work, or starting your own business..

To be ethically acceptable to all major sections of public opinion, participation would have to be entirely voluntary, albeit with the clear message that, if the scheme could be fully implemented nationwide, unemployment benefits would become unnecessary, and therefore would no longer be available.
With regards voluntary work, finding sufficient (suitable) work for everyone who wants to do it might be more difficult than you think. I've worked (paid and unpaid) for a number of organisations that use volunteers and vacancies aren't really that common. I've spent more time turning down potential volunteers than advertising for volunteers.

There's also the fact that volunteers need to be supervised - a manager can only manage so many volunteers. If there was a large increase in the number of volunteers, there would likely be a need for an increase in paid managers to supervise them. There are more costs associated with volunteers than just lunch or bus fares.

There are something like 2m unemployed (the official figure in October was 1.96m) and I'd be surprised if there were 2 million vacancies for volunteers. Then there's the suitability factor. And geography - your potential volunteers might not live in the areas where volunteers are needed.
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jdc
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Re: Modern economics

#1329 Post by jdc » January 6th, 2015, 3:08 am

This scheme has a time bank, swipe cards, and a database of jobs. I presume all shops will need some kind of technology to read the swipe cards. It sounds like a large IT project would be required. As far as I know, these tend to be hugely expensive and often suffer from all kinds of problems. Presumably, shops will not be paying for this project as there seems to be little nothing in it for them so there will be a large cost to the government. There's a fun graphic here showing how many billions of pounds (NB: not all on IT!) are tied up in projects with varying likelihood of success: http://www.theguardian.com/technology/2 ... sal-credit. Unachievable: 7.7bn. In doubt: 81.7bn. There are references in there to expensive projects that have already been shelved. 224m on e-borders, 10bn on an NHS IT project. On Universal Credit: "The Department for Work and Pensions has already written off £41.1m in IT related to Universal Credit, according to its accounts for 2012/13, and a further £91m has been spent on IT assets that will support service for the first five years only." More here on the trouble with govt IT projects: http://www.theguardian.com/society/2013 ... ystem-10bn "Previous IT-related government problems have included a breakdown of the child support agency, which left thousands of families without money; chaos within the passport agency; a tax credit system which was left vulnerable to fraud; late payments from the rural payments agency; and difficulties in tracking foreign national prisoners."

A time bank, swipe cards for all, and readers in every shop won't come cheap. And possibly won't work at all.
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thundril
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Re: Modern economics

#1330 Post by thundril » January 6th, 2015, 10:06 pm

jdc wrote:This scheme has a time bank,
That's just a large, very simple database. One cell for each participating household. (Or a block of about half a dozen cells per participating household,, if you want to get really fancy.)
swipe cards,
very old and well-understood technology these days. How many loyalty cards have you got in your wallet?
and a database of jobs.
Absolutely not. The local government already has its own systems, and other participating community and charity organisations need only log onto a website, say what skills they are looking for, and on the same website input the hours people have worked that they wish to bank. That's it.
I presume all shops will need some kind of technology to read the swipe cards.
The provision of one reader per participating outlet can be supplied at little cost. Because the system is by its nature quite difficult to defraud, these readers do not need to be very new tech.
It sounds like a large IT project would be required. As far as I know, these tend to be hugely expensive and often suffer from all kinds of problems. Presumably, shops will not be paying for this project as there seems to be little nothing in it for them so there will be a large cost to the government. There's a fun graphic here showing how many billions of pounds (NB: not all on IT!) are tied up in projects with varying likelihood of success: http://www.theguardian.com/technology/2 ... sal-credit. Unachievable: 7.7bn. In doubt: 81.7bn. There are references in there to expensive projects that have already been shelved. 224m on e-borders, 10bn on an NHS IT project. On Universal Credit: "The Department for Work and Pensions has already written off £41.1m in IT related to Universal Credit, according to its accounts for 2012/13, and a further £91m has been spent on IT assets that will support service for the first five years only." More here on the trouble with govt IT projects: http://www.theguardian.com/society/2013 ... ystem-10bn "Previous IT-related government problems have included a breakdown of the child support agency, which left thousands of families without money; chaos within the passport agency; a tax credit system which was left vulnerable to fraud; late payments from the rural payments agency; and difficulties in tracking foreign national prisoners."

A time bank, swipe cards for all, and readers in every shop won't come cheap. And possibly won't work at all.
Fair enough, you have identified a few possible problems. Most of which are overcome by the time-honoured KISS method. But my question to you is this. Do you think the basic idea is worth considering? If yes, then perhaps you could propose some way to address the possible problems you have identified. If no, then can you say why you think the idea is in principle a bad one, rather than a good one that might be difficult to implement?

Nick
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Re: Modern economics

#1331 Post by Nick » January 7th, 2015, 2:48 pm

I need to copy my response from Libre to something that this forum can recognise. Help!

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Alan H
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Re: Modern economics

#1332 Post by Alan H » January 7th, 2015, 4:56 pm

Nick wrote:I need to copy my response from Libre to something that this forum can recognise. Help!
You could save it as a .doc file, but I have enabled .odt files now, so you should be able to attach it now.
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

Nick
Posts: 11027
Joined: July 4th, 2007, 10:10 am

Re: Modern economics

#1333 Post by Nick » January 10th, 2015, 2:17 pm

Thanks Alan, I really appreciate that. However, it seems that this (public) computer won't allow me to transfer odt. files from my memory stick. Hmmm...

Nick
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Re: Modern economics

#1334 Post by Nick » February 7th, 2015, 11:17 am

We have had some discussion of Starbucks before, but an interesting diagram came up in the Times on Jan 27th. Sorry, it's behind a paywall, so you'll have to trust me on what it says. For the average cup of cappaccino at £2.27, the breakdown in costs is as follows:

Coffee 4%
Milk 4%
Packaging 8%
Rent/rates 15%
Admin/ overheads 15%
Staff costs 24%
VAT 17%
Profit 13%

Some may say that the fact that the coffee costs less than the packaging tells us all we need to know about Starbucks, but I want to talk tax and such like.

Taking the items in turn: I hope you'll accept that they have to buy coffee from abroad! They have been accused of diverting profits by buying through Switzerland. However, apparently some 75% of world coffee is traded through Switzerland. Not because of tax, but because it has established itself as the leading market, in just the same way as London has for marine insurance or fine wine. Secondly, there is vast amounts of tax law concerning "transfer pricing", ie the artificial transfer of profits overseas. HMRC have all the clout they need to stop this. Indeed, at its simplest , they would disallow an element of the cost. But they don't. Sure, the Swiss brokers make a profit, but that is for the service they provide, and not to do so would be a reverse form of transfer pricing by the Swiss, wouldn't it?

Incidentally, it does show the relative cheapness of them buying "Fairtrade", especially if they make a virtue of it and can therefore charge more because of it.

Milk: tax is paid by the milk producers, as well as all their suppliers. A justifiable cost, I'd say.

Rent: All of which is subject to tax in the hands of the landlords, ultimately at up to 45%.

Rates: huge, and a direct contribution to the places in which they operate.

Admin and overheads: more allowable costs, eg telephones, on which their suppliers will pay taxes.

Staff: Income tax, employees and employers national insurance is due, so around 35% of this is tax.

VAT: this is very high at 17%. In other words, 85% of the price of a cup of coffee is value added by Starbucks. Effectively the benefit of being able to supply you with a presumably acceptable cup of coffee at a desired location at the right time. So when we hear about Starbucks "paying no tax" on a historical turnover of £3 billion, we can see that that is complete nonsense.

Profit: This year they have made a profit, by closing loss-making outlets. Note also, that there is a difference between profits and taxable profits, which are always likely to be lower in a younger growing company. We see exactly the same will Ocado, who have only just started to make any profit at all. And, we hear, the swines are then sending profits back to the US. Is that a tax-dodge? Hardly! US corporation tax is a lot higher than in the UK.

Is Starbucks a good business model? Dunno, but that is up to them.
In a recent interview with the Evening Standard, Mark Fox, Starbucks’s new UK chief executive, said there was “nothing abnormal about the way Starbucks is run in the UK” and said what he found “abnormal is that we haven’t been making a profit”.
But does it contribute materially to the tax revenue of the UK? Absolutely!

But let's go further. What if Starbucks were to make extra profit, by raising their prices, in order to pay more corporation tax. What would the implications be?

First, their customers would effectively suffer a loss of income. Secondly, their sales would fall, impacting on VAT, staff and staff taxes, the value, and hence the tax-take from the rents they pay. And there would be a loss of business by those firms with which customers might otherwise have engaged. All small increments, of course, but the direction of travel is clear. And most important of all, it would not be the company which pays for the corporation tax, even if they write the cheque. The tax would be passed on to the drinkers, either in price increases or a reduction of product (shutting marginal outlets, say.)

So let's not hear any more nonsense about Starbucks tax status. And, if Hodge the Dodge can't understand that, she should resign in favour of someone who does.

Nick
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Re: Modern economics

#1335 Post by Nick » April 19th, 2015, 11:56 am

Oh... No responses... Oh, well.

Changing the topic, Lloyds Bank is to be returned to the private sector. We, the public, have already recovered the value of the bail-out, besides saving the economy. Now it is time to crystalise this.

Sadly, it is being spun. Besides being, shall we say, luke-warm that those with modest savings should invest in individual shares, rather than collective investments which spread the risk, the supposed people's discount being offered, is no more than one would expect with any such sale of shares. The most important thing, as far as the company is concerned is that all the shares are sold. That is why such discounts are ubiquitous in rights-issues and such like.

On a similar matter, I'm not sure if I've mentioned this before, but I think there are alternative ways of selling shares in privatisations to raise more money for the nation. By setting a price, at a level which would ensure a complete sale, usually at a discount, it encourages people to over-apply, in anticipation of their allocation being scaled down.

Instead, the promoter should invite bids for shares at a price of the purchasers choosing. With computer applications only it should not be hard to administer, but maybe it might be required that options are limited to say 5p bands in price, and the shares in 100's.

Example: the government proposes to sell company X with an estimated value of 105p per share. To "get the sale away" to would be normal to set the bid price at a discount, say 95p per share. However, instead of investors making applications at that price, they bid at a price they are prepared to pay. Multiple applications would be permitted. Thus, to take a unit trust as an example, the fund manager might decide that the cheaper the price the more s/he'd like to buy. Say:

1,000 shares at 120p
5,000 at 115p
10,000 at 110p
15,000 at 105p
25,00 at 100p
50,000 at 95p
75,000 at 90p

When all bids are in, the shares are allocated, starting with those who are willing to bid the most. But the price paid would not necessarily be the price bid. Using my example, there may not be enough bidders at 120p to get the shares away, so bidders at 115p would be included. This would continue until all shares are allocated, but the price paid would be at the level where the allocation stopped. Given the tendency for more to be demanded as price falls, it is extremely likely that allocation would need to be scaled down for bids at the ultimate strike price.

Let's suppose the level at which allocations are used up is at 105p. Our UT investor would therefore be allocated 16,000 shares, being the total of bids above the strike price, plus a scaled down allocation of the shares applied for at 105p.

In this way, all shares will be sold, but much more of the profit on the discount will be transferred to the seller, ie the nation, as the shares would be sold at a price within 5p of the market price on the first day of trading. Stags would be disappointed, but who cares about them? :D

Waddya think?

Fia
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Re: Modern economics

#1336 Post by Fia » April 25th, 2015, 1:27 pm

Neat.
trickle down economics.jpg
trickle down economics.jpg (23.51 KiB) Viewed 3831 times

Nick
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Re: Modern economics

#1337 Post by Nick » April 28th, 2015, 9:12 am

:sad:

And there was I, thinking that Fia, or even someone else, or indeed anyone, might be commenting on my observations....

thundril
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Re: Modern economics

#1338 Post by thundril » April 28th, 2015, 1:27 pm

Looks like you're not the only one who doesn't care about the stags, Nick! :wink:

ETA: It looks like sound reasoning to me. Would this be a viable (or legal) way for a private company to offer shares?

lewist
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Re: Modern economics

#1339 Post by lewist » April 28th, 2015, 2:09 pm

Nick wrote:Oh... No responses... Oh, well.
Not everyone has your passion for these things, Nick.
Carpe diem. Savour every moment.

Nick
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Re: Modern economics

#1340 Post by Nick » April 28th, 2015, 6:29 pm

thundril wrote:Looks like you're not the only one who doesn't care about the stags, Nick! :wink:
:laughter:
ETA: It looks like sound reasoning to me. Would this be a viable (or legal) way for a private company to offer shares?
I like to think so. I know of no legal reason why not. That doesn't mean there isn't one, though....

Ron Webb
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Re: Modern economics

#1341 Post by Ron Webb » April 29th, 2015, 2:08 am

Re: Starbucks --
Nick wrote:Taking the items in turn: I hope you'll accept that they have to buy coffee from abroad! They have been accused of diverting profits by buying through Switzerland. However, apparently some 75% of world coffee is traded through Switzerland. Not because of tax, but because it has established itself as the leading market, in just the same way as London has for marine insurance or fine wine.
According to Reuters, the point was that they were buying their beans from their own subsidiary in Switzerland; and the suspicion was that the internal price was set artificially high, in order to transfer profits to them. It's hard to prove that, however. The Swiss subsidiary was described as only "moderately profitable", but (remarkably!) "Swiss law does not require the unit to publish accounts".
VAT: this is very high at 17%. In other words, 85% of the price of a cup of coffee is value added by Starbucks. Effectively the benefit of being able to supply you with a presumably acceptable cup of coffee at a desired location at the right time. So when we hear about Starbucks "paying no tax" on a historical turnover of £3 billion, we can see that that is complete nonsense.
Well, since the VAT is collected at the point of sale, it's hard to say whether the corporation or the consumer is actually paying the tax. Even so, do you really think that 17% is a reasonable tax rate for corporations? How much are personal tax rates in UK?
Profit: This year they have made a profit, by closing loss-making outlets. Note also, that there is a difference between profits and taxable profits, which are always likely to be lower in a younger growing company. We see exactly the same will Ocado, who have only just started to make any profit at all. And, we hear, the swines are then sending profits back to the US. Is that a tax-dodge? Hardly! US corporation tax is a lot higher than in the UK.
Starbucks UK was paying substantial royalties on "intellectual property" to its European head office -- supposedly in Amsterdam, although the president of the parent company is actually in London. It's not clear where the money went after that, but (again from the Reuters article) "Professor Michael McIntyre at the Wayne State University Law School said it was rare for such fees to be repatriated to the United States."

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