Amongst the newsletters that I subscribe to is that of the Institute of Economic Affairs, the far-right, near Tufton Street based, mysteriously funded, so-called think tank.
Just before Christmas, a newsletter from its new director suggested that because he was having difficulty in deciding what to buy his sister-in-law for Christmas and feared that he might resort to gloves again, this was ambiguous evidence that we are, universally, unable to work out what another person wants and therefore the state should not presume to know what it is that people desire and should, as a consequence, leave us our own money to spend so that we might make the choice for ourselves.
As an example of personal incompetence turned into a policy-making proposal, this took some beating. That was not least because he ignored the option of a gift card, which would have exactly met the criteria that he supposedly imposed upon any such process by providing his sister-in-law with the freedom to choose for herself. Hypocrisy, mixed with straightforward incoherence, knows no limits on the right wing of politics.
But there is something more serious about this. The logic on view demonstrated three things.
The first is that, unsurprisingly, these so-called think tanks are still as dedicated as ever to a dogma that even they, apparently, cannot comprehend, let alone act upon.
Second, these groups are also so used to privilege that they cannot understand the difference between needs and wants. I would agree with them, and anyone else, that meeting wants is not the purpose of government. By definition, a want can only exist when needs have been met. This means that they will always, and by definition, be personal and whimsical in nature. It is not the job of government to interfere in such choices, if they happen to be available to someone.
It is instead the job of government to ensure that needs are met, and the nature of most needs is easy to define, and their absence is glaringly obvious in the lives of those impacted by them. And since almost no (unless under the influence of market-induced addictions) chooses to not meet a need, but does instead suffer them because of the structural consequences of the organisation of the society within which they live, which prevents them from doing so, it is, of course, the job of government to intervene to ensure that needs are met.
The failure to differentiate between the meeting of needs and wants is a perfect example of a category error of understanding by those privileged persons who work for these so-called tanks that are so lacking in empathy that the glaringly obvious passes them by.
Thirdly, what this claim shows is that the commonplace approach of the neoliberal, which is to take a micro situation and extrapolate it to the macro environment, implicitly assuming that this is a valid basis for reasoning, is totally misplaced. Unfortunately, almost all macroeconomic theory is created on this basis, with the exception of things like modern monetary theory and the economics that people like Steve Keen promote.
We all know that selfishness has an evolutionary role, which is why the gene that drives it has clearly not been extinguished. The goal of survival does, after all, have merit on occasion. I am not ignoring it. However, the idea that the right-wing wish to promulgate that we are really incapable of knowing the needs of others is utterly absurd and reveals personality traits that are rather unattractive.
Selfishness cannot be the basis of society. We cannot always walk on the other side. Those who suggest that we can have seriously misunderstood what it is to be human.
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My father used to summarise many problems extremely accurately
‘These people haven’t got any money’
While I cant predict peoples needs to the Nth degree the state can address peoples basic needs, things like an adequate and secure income, secure and affordable housing, education and health care, a functional justice and legal system etc etc.
Nothing radical.
All backed up by local authorities doing the gardening to sort out where things need some 121 attention
Beveridge nailed it years ago with his 5 evils and Attlee’s government put in place the policies to tackle them. A succession of Tory governments have set about dismantling Attlee’s achievements. The first job of an incoming government will be to start to rebuild what the Tories have dismantled.
I wish
I hesitate to disturb you in your covid-affected state, but feel this apparent typo really needs attention:
Under “Thirdly …”, surely “almost all microeconomic theory is created on this basis” should read “almost all macroeconomic ….”?
All best wishes to you and your wife, hoping you recover soon and do not suffer any long-term effects. From what little I’ve heard (including here in France), this latest wave is much milder than previous ones.
Thanks
Corrected
And feeling better this morning
Although I have given it to my wife
In the Great Backward (Great Britain), outside of all money is really government money, here’s a couple of key other things to learn:-
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3471369/pdf/nihms401950.pdf
https://www.researchgate.net/publication/265841569_The_Entanglements_of_Humans_and_Things_A_Long-Term_View
In the Great Backward (Great Britain) there is minimal recognition that “Money is a creature of the law” and “Government is the supreme arbitrator of what constitutes law” therefore market capitalism is ultimately dependent upon law since the latter by historic necessity has had to regularly stabilise the money component of markets.
https://lawandhistoryreview.org/article/forum-christine-desans-making-money-roy-kreitner-reenergizing-political-economy/
Taking a micro situation and extrapolating it to the macro environment, is an example of “The fallacy of composition”. It is where we incorrectly assume that what is true for an individual is also true for the group. It applies to several fallacies of economics.
☑️ The household budget myth: That the government budget works like our household budget. Since both derive their source of funding differently, the idea is nonsense. The government does not have to save in order to spend.
☑️ The Paradox of Thrift, where during tough times, we spend less hoping to save more. But this can lead to reductions in economic output. When the government implements these austerity measures, it can result in recession, cuts in services, and poorer health resulting in excess death rates (no exaggeration, see source below)
Sources
☑️ Fallacy of composition, https://en.wikipedia.org/wiki/Fallacy_of_composition
☑️ A government is not a household, https://neweconomics.org/2018/10/a-government-is-not-a-household
☑️ Mortality rates among men and women: impact of austerity (2023), House of Lords Report “… since the early 2010s. A recent study argued there have been over 300,000 excess deaths during this period,” https://lordslibrary.parliament.uk/mortality-rates-among-men-and-women-impact-of-austerity/
☑️ Deconstructing the Paradox of Thrift: The Austerity Conundrum (2023) https://fastercapital.com/content/Deconstructing-the-Paradox-of-Thrift–The-Austerity-Conundrum.html
☑️ Fiscal austerity – the newest fallacy of composition (2010) https://billmitchell.org/blog/?p=10547
Thanks
It’s the inconsistency and contradictory nature of their supposedly expert and informed level of thinking that gets me….
…. on the one hand they claim (re-using your words) that “we are, universally, unable to work out what another person wants and therefore the state should not presume to know what it is that people desire”, and yet on the other hand they’ll stand there and swear blind that this mythical beast they call “the market” is somehow perfectly capable and indeed uniquely placed to understand and deliver “what people want”. Frankly, I’ve observed better levels of reasoning from our spaniel!
Anyway, a belated Happy Christmas to you, Richard, and I hope you’re getting over your covid infection.
You must have a brighter spaniel than the two I once had. But otherwise we agree.
And thank you.
My retriever likes to lecture me on Nietzsche. I don’t have much to say. I know my limits.
🙂
That is some form of twisted logic – turning a personal failing into a government one. It beggars belief. Maybe that is what government is to neo-liberals – something to project their petty enmities onto, looking for a ‘fall-guy’.
And thus, the strong and established link of Neo-liberalism to Fascism is demonstrated again.
You are spot on with the import of micro into macro – Keen is also big on this. And right.
We all know the answers. Or should. The surveys in this country and even the U.S. (where the private health care system is pricing millions of loyal Americans out of healthcare) tell us that the they want government to do more not less.
As for the ‘selfish gene’, I always felt that what other commentators have said about human society is true – humans are pretty puny on their own and had to live together to survive.
Thus a balance was struck between the individual and the collective and thus we had behaviours like kindness and altruism which even now some want to privatise or add conditions to like ‘deserving’ and ‘undeserving’.
It is the creation of money that seems to have caused problems (a utility for all perverted by greed and a lust for power) and the creation and worshipping of a cadre of wealthy (not a cadre of the left as we constantly have rammed down our throats) seems to be the biggest threat to us all – a group of people who feel so powerful that they feel that they do not need democracy (and undermine it), religion, the law and now it seems, our labour.
Our lives seem driven by the desire of the rich to be free because we have at first shown tolerance and then veneration. Taxed far too low, enabled to enjoy rights that others cannot (from exporting their money our of tax jurisdictions to being able to insure other people’s assets and get pay outs when the rest of us can only insure what we own), the rich have now reached escape velocity from our society and we are all going to pay for THEIR freedom at our expense, putting our civilisation under tremendous stress which is then exploited by Fascist political science.
We should not be shocked by this, but we should have been weary and not let it happen. I believe that we knew it was wrong but supped up the promise that we too could be rich if we all just worked harder.
No one can say that we have not been warned. In many ways – far too many – greed is winning I’m afraid.
What a pathetic and undignified way for human development to end eh?
Over Christmas, this was one of the most thought provoking articles I felt – AI is definitely a rich investors dream project for which society might well pay a huge price whilst wealth just profits:
https://www.theguardian.com/commentisfree/2023/dec/23/ai-chat-gpt-environmental-impact-energy-carbon-intensive-technology
Whilst burning the planet…
I thoroughly recommend this book: https://www.waterstones.com/book/mothers-and-others/sarah-blaffer-hrdy/9780674060326
in which the author shows that co-operation predates homo-sapiens, and is therefore fundamental to our nature.
Also worth taking a look at this group: some very interesting talsk reorded there: http://radicalanthropologygroup.org/
Cooperation is so normal it is ridiculous to claim otherwise
Social Darwinism -survival of the fittest by competition – was the , not always explicit, basis for much of Imperialism, social eugenics, free market capitalism and was taken to extremes in Fascism with the extermination of the ‘untermensch’ .
Yet, I read, he only the phrase ‘survival of the fittest’ a few times but explained several times the ascent of man by our capacity to co-operate. Our capacity to cooperate has developed to also apply to people we don’t know.
Bishop Samuel Wilberforce in 1860 debated Darwinism and evolution with Thomas Huxley and asked about Huxley’s descent form the apes. ‘On his mother’s side or his father’s?’ The Bible or Evolution? The Captain of HMS Beagle said he rejected Darwin’s thesis and put his faith in the Bible. Yet there was an overlap and agreement in our obligation to one another. Utility and spirituality can reinforce one another.
To some extent I disagree – not in the basic process, not at all: but in the underlying assumption of stupidity on the part of IEA and others. Granted stupidity with the IEA does normally apply, but in terms of those behind them, I think it is important to recognise that they do recognise, themselves, as it were, what others here have called the fallacy of composition. The brighter amongst politicians, Civil Servants, and the ruling class are perfectly aware of the difference between needs and wants and the fallacy of as-household-budget-so-government-economy; nor is it that they just don’t care (though that too). It is that the need on their own part is to allow the vast majority of people to continue to believe that the government does not have the money to spend on them, and that what people need is really just what they want (this applies to “other people” of course – see various tabloid and other exposes regularly about scroungers on benefits, etc etc – who are always carefully chosen to be other, either geographically, socially or sometimes even physically). Meaning – (their intention) people “want” things (ie are greedy) whereas what people “need” should really just be about “what they would die on the spot without”. The writers of these pieces are much more intelligent and skilled than the standard of vocabulary often suggests – it takes skill to scam people, at the end of the day. The IEA either know all this or include idiots who have no idea what they are talking about. You come across them; I never have. I expect you know which applies.
I think the IEA is staffed by super privileged, fellow human being hating, idiots
Cooperation is central to humanity – even for Tufton Street residents. It’s just that their cooperation is confined to “fast tracking PPE contracts” and similar with “people like us”.
At its heart is a failure to mix. If you go to private school, then university and a job in finance you can lead your life without knowing what life is like for the vast majority of the population. My father always said that joining the army in 1944 (as a private) was the best education he ever got having to rub along with folk from all locations and backgrounds.
I do think that private education has a lot to answer for. In general, I think people should be able to spend their money how they like…. as long as it is not to others detriment – and it is clear that it is detrimental to our country as these individuals have an outsized role in running our country and they are making a complete mess of it. It starts on Day 1 as new pupils are indoctrinated with how special they are being at the particular School.
We need to make private schooling deeply unattractive. First, reduce tax breaks; second, make State schools deeply attractive (ie. resource them properly); third, make certain public roles open only to State school candidates; fourth, force elite universities to operate (small) quotas for the privately educated…. and no doubt your readers can think of more.
Let me say, I know many privately educated people that are great friends… but also some complete arses. I would add that those great friends are decent people despite their education, not because of it.
(I would also add that although I was educated at State expense it was a selective school. I have led a privileged life and it sometimes tough for me to understand other’s struggles… but I can try. And that is all I ask of others – try.)
Thanks
Labour are a least starting non this
I went to a sketched grammar school, and recognise that crated bias. But, it included a lot of genuinely working class boys (it was single sex). The shame was that most of them left at 16 despite good results.
I met some toffs at university but Peat Marwick (now KPMG) really introduced me to the breed. It was intensely public school dominated in my day – I think I was part of the grammar school quote they needed to do the work. Your comments applied.
Thank you, Richard.
Firstly, it’s good to hear that you feel better. One hopes your wife can rest and recover.
You may well be correct about PM / KPMG.
The founder, Sir William Peat, and his great grandson, Sir Michael, both worked for the family firm and, later, royal family, which calls itself the firm. Three generations of the Peat family formed part of the firm’s leadership. Sir John Griffith Jones, another Etonian like Michael Peat, chaired the Financial Conduct Authority. The firm has also provided officials to the Bank of England and establishment firms like HSBC. The connections, no longer just public school, help.
You are better placed to comment about the audit practice. I have my doubts about that practice and their other financial services related teams. Andersen is not the only peer that should have gone. The survivors should be broken up.
I should have added that the IEA anecdote is typical of the folksy and simplistic style these organisations adopt. It goes down well in the media and with the public, especially when Kate Andrews and Divya Chakraborty say it on Question Time. Not that the likes of Torsten Bell and the Grauniad are better. It sounds simple and sensible. This community is aware of the danger, but, unfortunately, most people are not. It’s like telling the public and media that the government should manage its money like a household.
True
KPMG. I think the history for the other three letters in the name is something like this: James Marwick (son of Sir James Marwick, Town Clerk of Glasgow) and Roger Mitchell, two accountants who first met as Glasgow University students (1880?), met up again in New York (1897) and set up Marwick, Mitchell there. After Marwick retired Mitchell met Peat, to create Peat, Marwick Mitchell around 1925. The ‘K’ I think comes from a European partnership KMG (?), which had merged with the venerable Glasgow firm of Thomson McLintock, and others (1970s/80s); and in 1987 consolidation ended with KPMG in the race that ended with the Big Four.
Roughly (more or less, and off-the-cuff; give me a break, its Christmas). The founder of HSBC was Robert Sutherland, a Scottish banker who formed it on ‘Scottish banking principles’ (an idea he appears to have derived from a Blackwood’s Magazine article; see, Iain Watson’s unpublished Edinburgh University PhD, 2017 on the Comparative History of post-1950 Scottish Migrants in New Zealand and Hong Kong). I will not take us further into the history of the Princely Hongs; but names like Jardine and Mathieson come to mind. Google them. I think Smithers is indulging a little too much sepia-tinted, nostalgia inflected ‘toffs and chimney sweeps’ mythology into the broader nature of Britain’s unbridled, piratically buccaneering, imperial history; to be frank.
The Peats were still there when I was.
I did an audit for Gerry Peat. I was astonished that he signed the audit report Peat & Co, refusing to recognise Marwick and Mitchell. That would not be allowed now, but that was another era.
You have eloquently described the sheer endemic silliness that eventually brought us to our knees.
What is allowed or not does not extinguish the inherited propensity to silliness, which survives, as we can all observe; advisedly from some distance.
I’d recognise all of that, having dealt with the City and finance a lot, and being an ‘army brat’, having been sent back to boarding school. Something I’d never have done to my own children.
Another aspect that explains the culture of the City and finance is their total disconnect from wider society, the economy and the bulk of business. Back in the 70s and into the 80s they had fully staffed branch networks with managers who at least knew something of their customers and locality. District and regional offices had people with specialist skills and significant autonomy. Starting in the 90s these were steadily run down as all the power and (obscene) rewards shifted to the trading and investment banking arms. The experienced staff and managers were dumped and expertise in business sectors went.
As a result they have lost all sense of what is happening in the wider world – and care even less. In Adair Turner’s words, socially useless. We will not rebuild the economy without a profoundly changed financial system.
As for KPMG, I passed through them when they took over the small consultancy I worked for. This had started in Boston, spun out of Harvard and MIT, with mostly experienced people who had done real jobs! Within a few years we had all left as the KPMG culture was a complete anathema.
At the time, KPMG stood for Klynveld Peat Marwick Goerdeler. Or as Apple, who were a client, christened them, Keep Paying the Money Guys!
🙂
[…] By Richard Murphy, part-time Professor of Accounting Practice at Sheffield University Management School, director of the Corporate Accountability Network, member of Finance for the Future LLP, and director of Tax Research LLP. Originally published at Tax Research […]
My take on the gloves is that if the Director of the IEA took a little time to get to know his sister-in-law, to genuinely have enough interest to listen to her properly even for a short while, he would come up with many ideas for gifts for her. And even if he still brought her gloves (always a good present!) he might at least know what colours she likes, what style she might prefer. And even if he got it wrong, at least he’d have made a real attempt, hence the saying ‘it’s the though that counts’. It’s such a small example, but it says so much about him and his lack of care for people.
Agreed
It might need repeating, but ‘social darwinism’ besmirches the great man’s name and provides a spurious justification for stains like Toby Young to claim superiority over other humans – God’s chosen race for the non-religious, maybe. A fascistic doctrine indeed, and one acted out with brutality in more than one area of the world.
Many actual scientists have stressed the obvious need to cooperate for survival, as we have been a prey species for almost all of our evolutionary history. We still are, under wilder circumstances. Collective action is often our only strength, and under most circumstance the normal reaction by helping others to our own slight detriment. Selfishness is a poor evolutionary strategy.
Of course, to meet needs by collective action is socialism, now an extreme ideology.
Anyway, glad you’re a bit better.
Has it crossed his mind that there are many people who would love to be able to consider buying their sister-in-law a present but their choice is between presents for the children or a Christmas dinner. Choice is only meaningful if everyone has access to the same options and equal power, or means, to express and fulfil their choice . Otherwise it is simply a smokescreen for privilege.
https://www.theguardian.com/uk-news/commentisfree/2023/dec/27/britain-hunger-malnutrition-
A continuation of the malnutrition argument, which fits very well here.
I like Michael Marmot’s work. He follows me on Twitter and so might read this blog.