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Debunking Economics - the podcast
The Aggregate Problem
Season 1, Ep. 375
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The UK’s unemployment rate is 4.1%, the inflation rate is growing at 3.1% and the economy is growing at 0.6% quarter on quarter. That’s how the economy is doing, what more do we need to know?
Well, it would be useful to know whether the unemployed are predominantly in certain income groups, or that income growth was greater in particular parts of the economy Like, more for capitalists and less for workers?
As Steve and Phil discuss this week, economists are building business models built on aggregates. Breaking down aggregate data into functions in society, or income, will add a lot of extra complexity to models, but they would do a much better job of showing us what’s going on. For example, central bank policy right now aims to restrict spending and wage growth to tame inflation. But, even if that was the cause of inflation, what if those creating inflation by spending more on services, are distinct from those facing the consequences of central bank policy, losing jobs and paying higher mortgages?
Steve points out that as the economy slows – and it has to because of climate change - knowing the distribution of income and consumption becomes vitally important. Unless we are prepared to see the rich grow richer at the expense of everyone else.
Economic models are built on aggregates of key variables. Those aggregates hide distribution impacts. That makes it easier for central banks to pursue monetary policy without worrying about the consequences.
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403. Should we tax the rich?
44:05||Season 1, Ep. 403It’s often the easy excuse on how to fix the problems of wealth inequality - just tax the rich more. Former trader turned YouTuber economist Gary Stevenson argues regularly that it’ll fix a lot of the problem. He’s right that the wealthy own assets and the richer they become the more the price of those assets increases. Take land as an example. The government is on a push to build more houses to benefit lower income earners. But who owns the land those houses will be built on? The rich? So, who wins from the demand for more land? Gary’s argument is if you tax hard enough the rich will be forced to sell assets which will bring the price down. Steve’s less convinced, simply because the uber-wealthy have always found a way to avoid taxation. But he thinks the argument also ignores (or isn’t aware of) the fact that government deficits create money. Perhaps the focus should be ore on where that deficit spending ends up. Maybe we should get Gary on the podcast.402. Will Trump drive us to a better tax system?
39:11||Season 1, Ep. 402It’s likely that many countries around the world will face import tariffs in retaliation for imposing a value-added-tax on American goods sold in their own country - alongside other goods, taxed equally, that are not from America. As Steve outs it this week, “What tortured brain cells have communicated to other tortured brain cells to make a proposition that VAT on imports from America is discriminatory”.Still, it looks like it might happen. And how do you resolve that situation. Do you get rid of a value added tax? Phil asks whether that could be a good thing. It’s unfair, complicated, bureaucratic and easily avoided. Would we all be better off with a transaction tax?401. There is no energy transition happening
35:08||Season 1, Ep. 401Are we kidding ourselves when we talk about an energy transition? Sure, we are using more renewables than ever before, but the planet is also using more fossil fuels than ever before. Phil asks Steve whether part of the problem is that we pout faith in incumbent energy companies managing that transition. The way BP and others have switched focus back on fossil fuel exploration shows how ill-conceived that expectation was. But, irrespective of who drives the transition, is it too much to expect that we will leave energy untapped. If renewables provide a new source of energy, won’t we just use up more energy, because the more there is the greater the productivity, the better off we are.Watch the video of the podcast here: https://www.youtube.com/watch?v=ArfsehlKMo8&t=2s400. Is there a ceiling to economic supremacy?
36:01||Season 1, Ep. 400Donald Trump is doing everything he can think off to improve the US economy. Tariffs, cutting government spending, bringing manufacturing back home, accessing more resources and lowering the cost of energy. Will it work? And, if it does, Phil wonders whether there’s a ceiling to how far the US economy can grow. Or does it grow at the expense of other countries/ In other words, Phil wants Steve Keen to explain what happens as the US, the world’s leading economy, tries to heighten its supremacy.399. Bringing manufacturing home, the Japanese Way
41:45||Season 1, Ep. 399In a recent podcast Phil suggested that bringing manufacturing home to America won’t necessarily create jobs, because most factories will be automated. They just need one man and a dog, he said. The man to turn the machine on, and the dog to make sure he doesn’t touch anything else.That touched a nerve with Brian Hanley has spent his life refining manufacturing processes. The key ingredient suggests, is people. Elon Musk was the latest to try the lights out approach and realised it didn’t work.Instead, if the US wants to succeed with a competitive manufacturing sector, it needs to look to post-war Japan. Workers were an integral part of the refinement and adaptive nature of manufacturing processes, in part because of the company-based (rather than industry-speciifc) union structure. Listen in to find out how Japan’s adaptive approach is what’s needed if the US is to develop a successful manufacturing sector.Two books related to this, that Brian says should be required reading or every economist:- Kanban Just-in Time at Toyota by Japan Management Association- The Sayings of Shigeo Shingo by Shigeo Shingo398. Are we giving up on climate change?
40:17||Season 1, Ep. 398Donald Trump, as the world’s highest profile climate change denier, has famously said, repeatedly, that he wants to drill baby drill, to make US energy even cheaper. It’s already half the price of Europe, and all the productivity benefits that provides. Phil and Steve talk about whether this the final nail in the coffin in a world which is paying lip service to the changes required. Is nuclear our only way to fast track a workable solution?397. The trade war has begun
41:06||Season 1, Ep. 397Reciprocal tariffs could be coming to every OECD country if we believe everything Donald Trump says. He sees VAT as a tariff imposed on US imports, which means he wants to impose the same amount on those countries for goods they export to America. That would apply to every OECD country and, supposedly, the President has said there will be no exceptions. Does this mean a global trade war is just about to happen? Steve has been a supporter of protectionism as a way to aid growth, and understands the need for America to bring jobs back home, but not with the “bull in the China shop approach” that Trump is taking. But Phil asks whether the horse has already bolted. The web of international supply chains is well established and difficult to break. Haven’t we all benefited from lower cost goods? And even if you brought back production functions would automation mean few new jobs would be produced? In short, is Trump too late to make a difference. Will he just create chaos?396. Do we need a reserve currency?
41:28||Season 1, Ep. 396The new US Treasury Secretary Scott Bessent recently re-iterated the US desire to remain as the world’s reserve currency, because they like a strong dollar that’s in demand worldwide. Burt he also says he doesn’t want other currencies weak, because that gives thema trade advantage. That sounds like a “cake and eat it” philosophy. This week Phil asks Steve whether the US would be better off if it wasn’t the reserve currency, and whether, in these days of electric transfers, do we actually need a reserve currency?395. More on how money is created
35:37||Season 1, Ep. 395Phil asked Steve a lot last week about how bank create money through the loans they issue. But he has been, it’s fair to say, a little less convinced about how government deficits create money. So prepare for a light bulb moment as Steve breaks down the process that sees the government spending more, with more money moved to the private sector, and people buying bonds, effectively with new money. They also answer a couple of listeners questions -one on the impact of Donald Trump’s tax cuts, another on crypto and another on a Worgel-like supplementary currency. Which of those creates new money?