The Palma ratio is a measure of inequality within a jurisdiction.

The Palma ratio is the share of all income received by the 10% people with the highest disposable income in a jurisdiction divided by the share of all income received by the 40% people with the lowest disposable income within that same jurisdiction.

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A parent company is a company that controls another company (which is then called its subsidiary com­pany) either by owning more than 50% of the share capital of the second company or by controlling the composition of its board of directors.

A parent company may have thousands of subsidiary companies, some of which will themselves be parent companies, in which case they are called intermediate parents. In that case the company at the top of the hierarchy of control is called the ultimate parent company.

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Any (usually unincorporated) arrangement where two or more people agree to work together to undertake a trade and share the re­sulting profits or losses.

A partnership can be between individuals or companies or a mixture of both.

See also limited labiality partnership, which is private legal entity form of partnership.

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See trade creditors.

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A system of deducting tax, national insurance, social security and other payroll tax contributions  owing by employees at source when their employer makes payment to them.

PAYE stands for “pay as you earn“.

The employer is responsible for making payment of the tax owing by their employees to the relevant tax authority within their jurisdiction.

PAYE systems became commonplace after the Second World War as the level of personal income taxes and social security contributions owing by employees increased as the level of average earnings rose in most developed countries. Rules vary from country to country, but the system itself is commonplace.

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See social security contributions, national insurance contributions, PAYE and income taxes.

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A pillar of neoclassical thought is the claim that markets work efficiently because everyone has access to perfect information. Buyers supposedly know everything sellers know, and vice versa. No one can deceive or conceal. If that were true, prices would indeed reflect reality. But capitalism's great secret is secrecy itself.

Assumption

The textbooks say that in a competitive market, knowledge flows freely and instantly. All participants can observe prices, quality, and future prospects. There are no trade secrets or insider advantages. Information costs nothing, and because everyone knows the same things, markets become perfectly efficient, with prices revealing the “truth” about value.

Reality

In practice, information is power — and it is never shared equally. Consumers rarely know what companies know about costs, quality, or risk. Financial institutions thrive precisely on opacity: they package debt into forms so complex that even regulators struggle to understand them. Corporations use intellectual property and legal secrecy to protect profits. Tax havens exist to hide ownership and transactions from public scrutiny. The rise of data monopolies has made asymmetry even worse: tech giants know everything about us while we know almost nothing about them.

When information is hidden or distorted, markets misprice risk. Investors chase illusions. Speculators profit from ignorance. The 2008 financial crash was built on the systematic concealment of bad debts, rated “safe” by agencies paid to look the other way. Far from being rare exceptions, such asymmetries are the rule.

Why It Matters

If knowledge is unequal, market outcomes cannot be fair or efficient. The pretence of perfect information legitimises deregulation by claiming that markets self-correct when, in truth, they self-deceive. Transparency is not an optional extra; it is a public good essential to democracy as well as economics. Without it, power and wealth concentrate. Reforming capitalism, therefore, requires not more competition but more honesty: open asset registers, clear accounting, and an end to secrecy jurisdictions that distort global trade, amongst a great deal else.

Summary

Markets do not run on truth; they run on secrecy, and until that changes, “perfect information” will remain a convenient lie.

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A permanent establishment is an office, factory, or branch of a company or other non-resident person in another jurisdiction.

Under double tax treaties, business profits arising from trade in a country are taxable in that country if there is a permanent establish­ment located within it. The existence of permanent establishments can be subject to dispute as a result.

Permanent establishments may include construction sites or oil platforms in place for over six months. They can also include computer file servers.

Rules regarding permanent establishments can be dependent upon arrangements con­cluded in double tax treaties.

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This blog post, which explains what I mean by the term political economy, was published on 20 October 2025 and is shared here because of its relevance:

A comment on this blog, posted this morning, made me realise that when I talk about political economy, which is a phrase that recurs throughout my writing, not everybody understands what I mean. I am not referring to an academic sub-discipline or an abstract branch of theory. I am talking about the only way that economics can, in my opinion, make sense.

Economics is not, and never has been, a neutral science. It is a social practice. It describes how human beings organise the resources available to them, whether they be labour, other species, capital, or the planet we live on, and, in doing so, express their choices about power, ownership, and fairness. Those choices are inherently political. To pretend otherwise is to disguise ideology as mathematics, which is what economics, as it is now taught, does.

That, in essence, is what political economy means to me. It is the study of how power and policy shape economic outcomes, and how economic outcomes, in turn, shape power and policy.

That said, it might be appropriate to add a bit more explanation to this.

First, political economy begins by acknowledging that there is no such thing as an economy separate from society. Every economic act, from a wage negotiation to a tax policy, happens within a political context. When governments decide how to spend, who to tax, or which industries to subsidise, they are not responding to immutable laws of supply and demand. They are making moral and political choices about what sort of society we wish to live in.

Second, political economy insists that the state is not a bystander. It is the most powerful actor in the economic system, as the issuer of our currency, the provider of public goods, a regulator of markets, and guarantor of rights. To deny that role, as neoliberal economists have done for decades, is to retreat into fantasy. Markets do not exist in a vacuum: they are built, sustained, and shaped by law, policy, and the institutions of government.

Third, political economy looks at who benefits. It asks the questions that mainstream economics avoids. These are issues like:

• Who gains from this structure of ownership?
• Who bears the cost of this form of taxation, which might be very different from who appears to pay it?
• Whose labour is undervalued, and
• Whose wealth is protected the most?

It is in these questions that the real moral content of economics becomes visible.

Fourth, political economy is historical. It understands that today's arrangements, such as the privatised utilities, the deregulated finance sector, and the dominance of shareholder value, are not inevitable. They were created by policy choices that reflected particular ideologies and interests. And they can, equally, be changed.

The consequences of ignoring political economy, as I understand it, are all around us.

When governments claim that “there is no money left,” they hide from public view the reality of sovereign currency creation and the capacity of the state to fund what it chooses to value.

When policy is reduced to the “sound finance” of balanced budgets and fiscal rules, we end up with a politics that manages deliberately created scarcity instead of building sufficiency.

When economics is stripped of politics, it becomes a convenient alibi for inequality. It allows wealth to accumulate unchallenged and poverty to be dismissed as individual failure. It turns questions about justice, security, and dignity based on real-life experience into technical debates about productivity and growth.

In other words, the depoliticisation of economics is itself a political act, and one designed to preserve the privileges of those who already hold economic power.

The conclusion, then, is clear. If we are to rebuild a society that works for people rather than for markets, we must reclaim economics from the myth of neutrality. We must see it again as political economy.

That means restoring moral purpose to economic debate.

It means demanding that questions of tax, spending, and ownership be judged by whether they advance collective well-being, not just by whether they please the bond markets.

It means recognising that the economy is not an abstract machine, but the sum of our shared choices about how to live together.

Political economy is not a return to the past. It is the recovery of the reality of living together in community.

It is the insistence that, if economics is to serve humanity, it must once again begin and end with politics.

Comments 

When commenting, please take note of this blog's comment policy, which is available here. Contravening this policy will result in comments being deleted before or after initial publication at the editor's sole discretion and without explanation being required or offered.

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A politically exposed person (PEP) is someone entrusted with a public function, such as a politician or employee of a government agency. The term is sometimes inclusive of their relatives and close associates.

Banks and other financial institutions are supposed to treat PEP clients as high-risk clients for money laundering purposes, applying enhanced due diligence at both the inception of the relationship and on an ongoing basis to en­sure that their financial resources do not represent the proceeds of corruption.

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A tax that levies the same amount of tax on each person liable to pay it irrespective of their ability to pay.

Poll taxes are correctly seen as regressive and so unjust as they do not take into account the capacity that  a person has to make payment of the sum owing in proportion to their income.

The attempt to introduce a poll tax to fund local government in the UK in the late 1980s and early 1990s and the subsequent protests and riots it gave rise to was one of the principal reasons for the downfall of Margaret Thatcher as UK prime minister after eleven years in office.

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An underlying crime, such as drug trafficking, which generates illicit money to be laundered meaning that it is a necessary element of building a criminal money-laundering charge. According to the Financial Action task Force tax evasion should be classified as a predicate offence for money laundering but that is not commonplace.

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A situation in which individuals or companies can negotiate their tax treatment in the state in which they have a tax liability. Pioneered by Switzerland in the 1920s, the arrangement is commonplace in tax havens and secrecy jurisdictions but there has also been evidence of this happening in locations such as the United Kingdom and Ireland as well.

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These are sums paid in cash in advance of the economic benefit of the payment arising, which means that the value attributable to future periods is carried forward as a prepayment. These sums are recorded in current assets on the balance sheet or statement of affairs  of the reporting entity.

Prepayments include deposits paid for work to be done, insurance premiums paid in advance and other such items.

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This entry is based on a blog post on 3 November 2025.

I wrote about supply and demand curves here yesterday. I said that the ideas implicit within them are total nonsense, as the claims in the basic model - the only one anyone ever recalls - are based on economic functions.

What really happens when prices are chosen?

So, the real question is what those talking about pricing by business should actually be talking about. This is something I know about from a great deal of practice and no small amount of accounting theory.

The important thing to note is that, almost entirely contrary to what the economic theory of supply and demand curves suggests, the vast majority of prices in the real economy are chosen rather than imposed. That is because, contrary to the assumptions of microeconomics;

• No one knows everything. In fact, most people retain remarkably little price information about the things they buy, even when they buy them quite often. I know there are exceptions, especially when money is very tight, but my observation is true of most people, for most products, most of the time.

• Very few goods are identical, almost anywhere. Even the same product (think of a branded box of tea, as an example) in two supermarkets half a mile apart is not the same. They are not just in different locations, but few people buy tea in isolation, so the price of a box of tea is not independent of the price of other products in each store.

• There aren't countless sellers of anything, and since most vendors still serve small geographic areas, there aren't limitless buyers either.

• The consequence of these facts means that most vendors of almost any product have some degree of market power: they can choose prices, at least within the limits of what they know about their markets, although it should be noted that their own knowledge of that will definitely be incomplete.

• There are both fixed and external costs for any institution that they will always want to cover: they do not, almost ever, think in marginal terms, contrary to what economists suggest.

There is no invisible hand

As a result, almost no firm will ever wait for an invisible hand to tell them what to charge. Instead, they set prices. To do so, they use cost accounting, desired profit margins, and corporate strategy to direct their decision-making.

The consequence of all that is that supermarkets, builders, manufacturers, airlines and many other sectors use targeted mark-up pricing based on the estimated costs of supplying a product plus a desired profit percentage, and stick to that price until competitive or regulatory pressures force a change. Even when they adjust, it is usually to protect margins rather than to find a mythical equilibrium.

What is more, administered or regulated prices are everywhere, including utilities, pharmaceuticals, telecoms, and transport. Governments themselves set prices in sectors such as energy, rail, and student education, whilst central banks fix the most important price of all, the cost of money.

Prices reflect power

Prices are not, in that case, neutral signals of scarcity; they are the outcomes of bargaining power and institutional design.

Employers suppress wages because labour markets are not competitive.

Landlords can raise rents because tenants have nowhere else to go.

Global corporations can charge what they like because we have allowed markets to consolidate into oligopolies.

Price setting, in other words, is not an issue determined by markets, but is instead a political process. It expresses who has the ability to impose their preferred outcome on others.

Expectations and stories shape the rest

The exception to this "normal" process of price setting for goods and services is to be found in financial and speculative markets, where prices bear almost no relationship to underlying cost. The price of oil rises because traders expect war, not because there are fewer barrels available. Stock markets move on belief, not the real value of companies. House prices rise because people believe they will keep growing, until they don't.

Prices in these cases reflect what might be best called the momentum of the underlying narrative.  The tidy intersection of curves on a graph tells us nothing about this behaviour.

Money matters 

In a monetary economy, the ultimate constraint on prices is not physical scarcity but purchasing power, but even this is not determined by markets.  If governments inject more money through spending or banks expand credit, more money chases the same goods. When the state withdraws money through taxation or banks tighten lending, demand falls.

Fiscal and monetary policy, therefore, frame the entire pricing system. Pretending that the market sets prices without acknowledging the monetary environment is a category error; it confuses outcome with context.

What follows from this?

If prices are not imposed by market power, or discovered by businesses and consumers as a consequence, but are instead chosen or administered and are shaped as much by power, government policy and the availability of credit rather than supply and demand, then the task of economic policy is to manage the institutions with most influence on this process, and not to chase imaginary microeconomic equilibria.

That means:

• Regulating monopolies and oligopolies properly.

• Supporting unions and wage bargaining to rebalance power.

• Using fiscal and monetary policy together to stabilise prices and incomes.

• Accepting that price stability is a social goal, not a mathematical accident.

The fact is that prices are social constructs. They tell us less about scarcity than about who decides. And the neat intersection of supply and demand curves, which has misled generations of economists, probably deliberately hides the real lesson, which is that every price is a reflection of power. If we want fairer prices, we need more equitable power. That is the economics that Funding the Future is about.

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A company whose shares are not quoted on a stock exchange meaning that they are not readily or publicly traded.

The shares in private companies cannot usually be sold without the consent of the company or its other owners, who are also likely to have the first option on acquiring them.

In many countries little or no information need be disclosed on the activities of such companies even though their members enjoy the benefit of limited liability. For the issues arising from this see Companies House or Registrar of Companies.

A company can be private even though very large: the matter is determined solely by whether its shares are quoted on a stock exchange or not.

A private company can be  public interest entity (PIE).

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See private company.

Limited liability partnerships, unlimited companies and foundations are also private legal entities.

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There are two types of profit. They are realised profit and unrealised profit (see separate glossary entry).

Both increase the capital of a company by increasing shareholder funds. However, only realised profits may be used to make a dividend payment since only they have given rise to a cashflow consequence.

The identification of the difference between realised and unrealised profits is as a result contentious and open to manipulation or arbitrage within accounts.

A realised profit is the outcome of a transaction undertaken during the course of trade that results in the income generated from that trade exceeding the expenses associated with it meaning that a profit is earned that might result in cash being returned to the reporting entity undertaking the trade.

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See income statement and accounts.

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A progressive tax is one where as a person's income increases the amount of that tax that they pay increases in proportion to that income, i.e. their percentage tax rate increases as their income goes up. Compare with regressive taxes and flat taxes.

In a progressive tax system, the overall tax system displays this characteristic.

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See cell company.

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This term usually relates to a long term liability of a reporting entity.

A provision is a best estimate of a future obligation owed by a reporting entity as a result of a commitment that it has made to a course of action where the precise sum owing is of uncertain timing or amount on its accounting reference date.

Provisions are one of the areas where the inherent uncertainty in accounts or financial statements becomes readily apparent and the exercise of judgement is required.

See also contingent liabilities.

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Public goods are a supply of goods (sometimes) and services (more commonly) that are provided without the intention of profit being made to all members of society, usually by a government, but possibly by a private sector organisation.

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