First, from Johann Hari. I assume this can’t be from the Tax Justice Network, because they are professionals, and know the difference between a stock and a flow. Surely. Johann wrote a wonderful passionate polemic against revolting tax avoiders. I really enjoyed the piece. But this bespeaks a lack of understanding of the difference between debt (a stock) and the deficit (a flow):
The invaluable Tax Justice Network has calculated that rich individuals “avoid” £13bn a year and rich corporations £12bn. (Indeed, a third of Britain’s top 700 companies haven’t paid any tax at all.) That’s enough to double the education budget – or to pay off Britain’s entire deficit in seven years without a single dent in public spending.
£25bn is a huge amount of money. But you don’t ‘pay off’ a deficit. Both are annual amounts – flows. The deficit would be reduced by ~1.8% for each year if we got £25bn somehow, but the savings from zero avoidance do not accumulate to the deficit, they accumulate to the debt – the stock. Which is due to be £1300bn, not £175bn. Given the moral righteousness on his side, I hope someone from TJN has a quiet word with Johann to make sure that sloppy thinking does not undermine the value of his cause …. this approving blog is not a good sign, however. Cutting avoidance would be a good start to the mammoth task ahead. £25bn every year would be lovely, though if it assumes invariant behaviour from the tax-avoiding oligarchs it is probably unlikely. But it is a bad idea to go around implying that is all we need to do. We need to raise taxes and cut spending as well, I’m afraid. Let’s not weaken the will through faulty logic
Next elementary error: Mark Anthony and Caesar as ego-mad rivals? I’d expect better from the Economist. They should go back and read one of the most gripping scenes in theatrical history (in fact everyone should from time to time). Anthony was Caesar’s man. Schumpeter must have been thinking Pompey and Caesar, Pompey and Crassus, Anthony and Octavian, or something else. How did this get past? Or am I missing something?
Posted by Andrew on March 21, 2010 at 1:26 am
It says “so much for… Caesar and Anthony” or there abouts. Could that not be a comment on two powerful people coming together and it not coming off? I.e. Google and Apple could have been the Caesar and Anthony, but ended up not being so.
Posted by freethinkingeconomist on March 21, 2010 at 8:41 am
Interesting idea – though the stabbing to death of Caesar by (Microsoft? Intel) makes the analogy even more complicated …
I wonder which of the players in the current drama would echo this:
“I am not orator, as Brutus is
But as you know me all, a plain blunt man
that love my friend”
Posted by Straus on March 21, 2010 at 3:49 am
Confusion about “debt” and “deficit” is rife in the media and among politicians. I am sure that when 90 per cent of people hear Gordon Brown or Alastair Darling talking about halving the “deficit” in four years, they fondly imagine that they are talking about the total amount the government owes. I must say I haven’t noticed our public service broadcasters doing very much to clarify the confusion: a serious dereliction of duty, in my view.
Posted by freethinkingeconomist on March 21, 2010 at 8:40 am
(name drop alert). Stephanie Flanders told me she spend a lot of time explaining this very distinction.
Posted by Philip Walker on March 21, 2010 at 9:21 am
It clearly hasn’t worked internally, never mind anywhere else! A few days ago I submitted a formal complaint to the Beeb about exactly this problem. I wait to see what comes of it.
Posted by james on March 21, 2010 at 9:13 am
What do you make of Ann Pettifor’s suggestion w/ re: Treasury Deposit Receipts?
Posted by freethinkingeconomist on March 21, 2010 at 11:07 am
could you post me a link? Then, when I have finished the under-resourced childcare part of my weekend, I would love to read about it
Posted by Daily View 2×2: Jenga special on March 21, 2010 at 10:02 am
[...] Elementary errors: Giles Wilkes on the important difference between a stock and a flow. More interesting and useful than I’ve made it sound. [...]
Posted by Tim Worstall on March 21, 2010 at 12:19 pm
Hari’s also wildy underinformed about the Romans and domicile as well (see! see what I did there? Got both the talking points into one comment!):
“A domicile was a “true” Roman – born and bred there – while a tax resident was a mere colonial, who could be asked to pay more.”
Roman citizenship wasn’t based upon born and bred. Anyone could become a Roman citizen….it was the defining point about the citizenship structure, that some barbarian tribesman could aspire, in one lifetime, to become a “Roman”.
He’s confusing domicile and citizenship.
Posted by freethinkingeconomist on March 21, 2010 at 2:11 pm
I hadn’t picked up on that, dammit that would have been a Dillow-esque leap between seemingly disparate subjects. Missed opportunity.
I had intended to search TJN for whether they in fact get stock and flow mixed up, but worried that the process would get me way too annoyed
Posted by Knocking down a Straw man « Though Cowards Flinch on March 21, 2010 at 12:35 pm
[...] we have have Giles Wilkes commenting on a piece by Johann Hari which, well-meaning though it is, is ruined by the fact that he thinks [...]
Posted by links for 2010-03-21 « Rumblegumption on March 22, 2010 at 1:33 am
[...] Elementary errors « Freethinking Economist [...]
Posted by Daily View 2×2: Jenga special | Mark Pack on March 22, 2010 at 12:44 pm
[...] Elementary errors: Giles Wilkes on the important difference between a stock and a flow. More interesting and useful than I’ve made it sound. [...]
Posted by Those wish washy liberals down at the SWP « Though Cowards Flinch on April 10, 2010 at 11:02 am
[...] Giles Wilkes said when Johann Hari made exactly the same mistake: This bespeaks a lack of understanding of the [...]
Posted by The rubbishness of Rawnsley « Though Cowards Flinch on September 5, 2010 at 10:05 pm
[...] of economics to sell yourself as a ‘progressive’ commentator. As Johann Hari has also found to his reputational cost, that no longer [...]