I have a new peer-reviewed journal paper out this morning on a theme many on this blog might be interested in. Co-authored with Prof Andrew Baker of the University of Sheffield, the paper is entitled:
Modern Monetary Theory and the Changing Role of Tax in Society
The abstract is as follows:
Tax is traditionally viewed as the main funding mechanism for government spending. Consequently, social policy is often seen as something determined and constrained by tax revenue. Modern Monetary Theory (‘MMT') presents a reversal of the tax-spend cycle, by identifying a spend-tax cycle. Using the UK as an example, we highlight that one of MMT's most important, but under-explored, contributions is its potential to re-frame the role of tax from both a macroeconomic and social policy perspective. We use insights on the money removal, or cancellation function of taxes, derived from MMT, to demonstrate how this also creates possibilities for using tax to achieve social objectives such as mitigating income and wealth inequality, increasing access to housing, or funding a Green New Deal. For social policy researchers the challenge arising is to use these insights to re-engineer tax systems and redesign social tax expenditures (STEs) for creative social policy purposes.
The paper is open source and so can be read free-of-charge.
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I’ve just read the article, and it is just rehashed stuff you usually put our about MMT almost without exception. It is also unevidenced. You just make claims that MMT is correct and various things lead from that, when clearly that is not given to be the case.
I would also be careful about claiming this is a peer-reviewed paper. It’s not at all, is it.
It is an open access article, not a journal paper.
Which means it is not subject to independent peer review, nor is it being published in any journal.
And when you say peer review, you mean a couple of your friends.
“We offer our thanks to Professor Len Seabrooke of Copenhagen Business School and two anonymous reviewers for comments made on drafts of this article.”
I think you owe it to the reads of your blog to be honest, because you aren’t being so in an effort to burnish you academic and expert credentials.
This is a full peer reviewed paper
Open access for this jounral paper was paid for by the University of Sheffield
You are the person making the false claims
OK.
Which journal is the article going to be published in?
Was this article (and note, this is not an academic paper) INDEPENDENTLY peer reviewed?
Open access is not a journal and doesn’t require peer review.
As the article says itself:
“We offer our thanks to Professor Len Seabrooke of Copenhagen Business School and two anonymous reviewers for comments made on drafts of this article.”
Suggesting that this article is not a working paper, and was not independently peer reviewed. Claiming it has been when it has not is deliberately misleading and could affect the validity of other papers if this article is used as a source.
So my points stand.
It’s published
Follow the link
You are questioning the credibility of a major academic journal – Social Policy and Society – which most definitely had the article peer-reviewed
Very politely, you’re making a fool of yourself
Vien,
Try this – clearly confirms what Richard says – ‘peer reviewed’:
https://www.cambridge.org/core/journals/social-policy-and-society
Found via a quick Google for the journal, whose name – Social Policy and Society – is given alongside the paper. Easy enough to do if you were genuinely concerned.
He wasn’t concerned
Vien
I wonder, as many already have, whether you understand the academic peer review and publication process?
From your comments I rather expect not.
In fact the most amusing assertion you make is that open access publications are not peer reviewed, when in fact they currently cost more to publish than articles published behind a paywall. (There is an ongoing campaign to shift all publishing to open access, but that would kill the cash cow for the publishing houses now, wouldn’t it?)
To the other accusation that the reviewing peers are “a couple of friends”. Many academics within the same field (a requirement for peer review) are friends or at least acquaintances. So how do you get around that? One must assume that reviewers review with academic integrity. I would bet my bottom dollar that they do – nothing excites academics more than a chance to “gently” pick holes in presented work 😉
I will end by saying that, in my eyes, none of the points you made stand. Good entertainment though…
About 30% of this paper was rewritten after peer review
That was fine: their comments added value
Len Seabrooke helped a lot. He declined authorship, feeling he had not done enough. But he was not a peer reviewer
I can’t help but feel we’re arguing the same point in slightly different ways.
Also, hats off to Len Seabrooke for declining authorship when he felt he hadn’t done enough to be included. Very much the opposite way around to the prevailing attitude I have encountered thus far in academia.
Len and I are working on other papers
And actually, I declined authorship of a chapter this afternoon with him for the same reason he declined this one
We give credit where it is due
@Vien
As I work for a major publisher of academic journals I can categorically state that the link that you are making between open access and lack of peer review is absolute nonsense.
Open access just means that the funding for the publication process (including the peer review) is provided in a different way (i.e. not by paid subscriptions).
If you are going to post negative/critical posts it is even more important than usual that you get your facts straight.
Thank you
Does it matter whether the paper is peer reviewed? How about reading the paper – it is not so long – and judging for yourself? The concept of a spend-tax cycle is an interesting one. The notion is far from new – it was recognised by Adam Smith. ‘Spend’ by government is what gives rise to economic rent, which would not exist otherwise because property rights are derived from government.
I am not sure, however, what ‘Modern Monetary Theory’ even is. The appellation ‘new’ or ‘modern’ attached to anything is uninformative. How long does it continue to be ‘modern’? However, the paper makes some important points about the nature of money which are very ancient indeed (‘render unto Caesar’), and which should always be kept in mind, for example, that the fundamental purpose of money is to facilitate the payment of taxes, with its use as a medium of exchange being secondary.
My main criticism of the idea as it stands is that so much government spending gives rise to little or no value, and in some cases negative value, and there is no reliable means of measuring this; some of the current infrastructure projects currently under construction and proposed are in this category. The concept also raises the question of how this value is to be re-captured by government in a way that ensures that those who pay it back in tax are the ones who derived the benefit from the spending? That this should be so is implicit in Smith’s First Canon of Taxation, that ‘The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state…’ So the authors are to be congratulated in bringing to attention ancient principles which have been forgotten for most of the part hundred years at least.
You are right – I am interested and thank you.
Still working my way through the paper but I note that, unless I’m missing an explanation in the text, Table 2 appears to contain an error.
The 3 totals make sense, but only if NI contributions in the first column are £221bn.
I spotted this by observing that the row for NI did not add up.
Apologies (obviously), if I’ve missed something.
Damn….
Gosh, “Vien”, wind in your neck. I suspect this is “in press” and will appear in issue 3 of volume 19 in a month or two.
Here is a link to volume 19, issue 2, April 2020 – https://www.cambridge.org/core/journals/social-policy-and-society/issue/97B423E5360B59E7E7CB94DC10596C91
That includes several academic “articles”, including one open access article by Harvey M. Jacobs on “Whose Citizenship? Social Conflict over Property in the United States”. With a proper citation and everything: Jacobs, H. (2020). “Whose Citizenship? Social Conflict over Property in the United States.” Social Policy and Society, 19(2), 343-355. doi:10.1017/S1474746419000460
But I suppose that is not a real “paper” either, just a journal article.
(If it is “in press”, perhaps they can still correct the table, Richard.)
It is in the press…too late for corrections….
I tried to follow the two links under Table 2 to find the Treasury and HMRC sources. (They are marked in blue – 2018 and 2019a.) But both took me somewhere else. Is my browser screwing this up or are the links incorrect too?
They worked when I checked the drafts….
And that was some time ago as these things take a long time to get published
Works for me in Chrome. So the links are OK.
Thanks
I have now worked out what happened here
The figure for NI in the left hand column of table 1 has been copied in error during typesetting into the figure for NI in the left hand column of table 2
Heaven knows why….
But it’s so obviously a typo we have asked for it to be put right
Thanks Gordon
Ah yes!
Regards, George
(no worries, I’m quite often called Gordon)
Sorry!!!!!
Looks interesting, but is incredibly difficult to read due to the format and style of type. Could you re-format either
with a serif typeface (eg Times) in two columns and a little white space between the lines (about 120%) or with a serif typeface in a slightly larger size, again with about 120% space between lines. There is a general rule that body text should have between 50 and 70 characters per line.
If you send me a copy of the original WP document to the above email I would be happy to do this and return it as a pdf.
What version are you looking at? The pdf version available is in standard journal article format and perfectly readable.
It is, though, not obvious that it is available as the pdf icon is next to the highlighted HTML link and doesn’t look clickable. It is.
So glad you’ve done this, Richard. It’s a great help in explaining taxation to people.
Thanks
The pdf I downloaded appears to be the standard version. Whoever was responsible has not followed what is considered typographic best practice as regards choice of typeface, font size, line width and leading (line spacing). You need a bright light and good eyesight to read it without difficulty. This seems to be part of a wider trend within design generally. Information which was painstakingly obtained a generation or two ago has been forgotten. It is the same reason why the seats on your new train are so uncomfortable. It might be worth taking this up with the publishers.
This is something I have not the slightest control over
I wonder if this would make the WM lower the rate of the marginal tax on earnings on Universal Credit payments. I’m on UC and I offer myself as a private science tutor. As an example I recently gave a tutorial and the headline payment was £25 for an hour. The website I use took its cut which reduced it to £18.75, we then have to subtract the £3.60 I spent on bus fare which they let me claim.
They then apply a marginal tax rate of 63% on every £ remaining: £15.15 so they will reduce my next month’s payment by £9.54 leaving me with just £5.61 for an hour’s highly educated work.
I then have to carry the £9.54 forward in my account until next payment month or I will then be short.
My information is that when the Home Office first designed the system it consulted behavioural scientists on what would be a good incentive for claimants to pick up work. They then came down around 40%. Then the Treasury got involved and upped it to 63%. The extra 3% really rankles and seems extremely petty.
Obviously I don’t do this for the money, it would not be worth it and is obviously below the minimum wage. If I get established, when I gain employment and get rid of UC (no accommodation component) I can keep the full £18.75 (minus travel) which would make it decent pin money.
Also all this knowledge and understanding in my head would otherwise do nobody any good.
I don’t know if this is an appropriate place to raise it, but something I have not seen (or recall having seen anywhere – maybe I’ve just missed it) is any discussion of the significance (if any) of tax as fiat debt in the mmt/mtt spend & tax system (or elsewhere).
It occurs to me that in the same way that money is fiat money – that is a ‘thing’ with a defined, fixed, value because the sovereign says so – tax is fiat debt – debt that is owed purely because the sovereign (government) says so – something that only the sovereign is able to do. And that – at least to some extent – this is an essential prop in the system. Not sure if or how this is helpful or meaningful, or not.
I will think about that
My 500 word response to Jeremy’s question is a potted history of the situation up to the end of the Tudor period ie 1600, plus a bit of economics background theory which remains valid. If there are major inaccuracies, please put me right. As you say, 420 years have elapsed since then but I have said nothing about those four centuries. That has filled libraries!
If you look at the origin of tax in England the picture becomes clear. Tax was originally paid to the sovereign in kind, through the provision of military and other services such as the administration of law. The nobility were given land holdings with the intention that the rents should be used to cover the costs of providing these services. In the feudal system, these reciprocal rights and duties were passed down in a chain to the lowest level. Lands were given to the church with the intention that the rents should be used for the upkeep of churches and the provision of what are now generally considered as social services – teaching, care of the sick, infirm and indigent. Before the Conquest, the Sovereign held the land of England on behalf of the people. After the Conquest, the concept of Sovereign holding was transformed into ownership; technically, the Sovereign owns all the land of England; there are also the Crown Estates, which include parts of Central London, Hackney, the Royal Parks, and the seabed from high water mark to the 12 nautical mile limit of territorial waters; these land is directly owned and managed by the Crown Estates Commissioners, with the revenue going directly to the Exchequer (minus the Civil List expenses); this land is effectively nationalised, a point worth bearing in mind when the subject comes up for discussion, for example fishing rights.
The Domesday Survey was a rent assessment to determine liability to pay tax (still in kind). The situation changed after Magna Carta when the nobility retained their land rights but got rid of their duties, forcing the Sovereign to levy taxes, including a land tax called ‘Scutage’. The church retained its lands until the Reformation, when they were distributed to the nobility. The cessation of the services led to further taxes, such as the local property tax, the Rates, introduced at the beginning of the seventeenth century with the introduction of the first of the Poor Laws.
Thus taxes are essentially rent paid to the sovereign for the provision of services by government. At a bare minimum, this means defence of the realm (including diplomatic relations with governments of other lands), protection of land rights granted to title holders, administration of justice, the provision of highways, flood defences and whatever else is needed to maintain good order in the realm. It was noted by the French Physiocrats that the burden of all taxes is ultimately at the expense of rents, since they are a claim on the same revenue stream. The conclusion also follows as a corollary of Ricardo’s Law of Rent, which was based on many years of careful observation.
And I would suggest that is now a far too narrow view of tax
This is 2020