Libertarianism Versus Public Choice Theory

One of the points on my much maligned third ‘double standards’ post (incidentally, maligners, read these two if you haven’t before) was the following:

10. The state is useless at doing anything. We don’t, however, question its ability to define property and enforce contracts effectively.

as well as this:

4. Historical context matters for gold as a medium of exchange. The historical context of capitalism, however, can be swept under the rug.

This got me thinking: public choice theory potentially blows a massive hole in libertarianism, despite being one of the key components in their arsenal.

The history of capitalism offers a natural experiment in how public choice considerations affect the provision of private property and contracts. To put it simply: the private property has been distributed among a select few who have used it to perpetuate wealth inequalities. Contracts have become infallible to the point where ancient laws/traditions such as laws against usury and debt jubilees are currently unthinkable, politically speaking. Private owners of capital used the state to force peasants – who, in the 14th century, worked about a quarter of hours that the average person does now – to work 12 hour days in factories. Landlords have blocked any attempt to tax away their unearned rents.

In fact, the extent of the collusion between the state and capitalist/rentier class in the provision of private property makes overcharging pharmaceutical companies and mortgage lending GSEs look like childsplay in comparison.

Of course, you can argue against public choice theory on the grounds that politicians aren’t rational self-maximising robots, and do have some sense of public duty. You could also argue from a practical perspective – we need to put institutions in place to combat corruption. But this would be opening the door to all sorts of statist policies.

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  1. #1 by Surreptitious Evil on January 20, 2012 - 6:21 pm

    Well, dunno about you, but when I rented out the flat I’d bought as a student, I had to pay tax on the rent. Half of it in advance too. So the landlords ain’t doing too well at this block thing.

    • #2 by Unlearningecon on January 20, 2012 - 6:29 pm

      That’s not an LVT, the LVT falls directly on the landlord rather than the tennant.

      Also you’re confusing landowners with people who actually own and maintain property, a common misconception. The latter actually produce something, whereas the former simply claim to own the earth.

      • #3 by Surreptitious Evil on January 20, 2012 - 6:46 pm

        However, I’d bought out my feu, so I owned the land as well.

  2. #4 by Ken on January 20, 2012 - 7:18 pm

    Private owners of capital used the state to force peasants – who, in the 14th century, worked about a quarter of hours that the average person does now – to work 12 hour days in factories”

    So peasants in the 14th century worked only 10 hours per week? I think not.

  3. #6 by SR819 on January 20, 2012 - 7:23 pm

    I’ve had to study Public Choice Theory as part of my economics degree, and it really is the biggest load of rubbish I’ve ever read, and sums up how economics is not a science, but simply a pseudoscientific enterprise designed to promote the interests of the wealthy. We’re told by economists that governments are effectively rent seekers, who are not interested in the welfare of society but simply to feather their own nets. Their solution seems to be to privatise government and the let the market rule everything. Funny how neoliberal economists never apply their sceptical public choice theory to look at, for example, executive pay (and the cosy cartel that sets it), or the way businesses through extensive lobbying and funding given governments incentives to pursue policies in the interest of the 1%.

    I’m glad there are economics students who also think what we learn is a lot of rubbish, and how biased the subject is towards neoliberalism. I’ve had to sit through 3 years of listening to my lecturers trying to convince me that the welfare system is hugely distortionary, high progressive income taxes are undesirable and should be replaced by flat taxes, privatisation of industry will improve efficiency and that governments shouldn’t do anything about poverty and inequality because it would “distort” their beloved market.

    It’s high time people started questioning the pseudoscientific BS we’re expected to swallow. Eventually, with more people starting blogs like this exposing the subject (along with disbelievers like Steve Keen) hopefully funding for economics will dry up, and the discipline will cease to exist as a serious academic endeavour, like astronomy, and therefore will stop influencing policymakers.

    • #7 by Unlearningecon on January 20, 2012 - 7:33 pm

      Thanks for your comment. Out of interest, which university did you attend? I’m from the UK and it seems that US unis have far bigger problems than UK ones with political bias, though both share the same core flaws of course.

      • #8 by SR819 on January 20, 2012 - 7:57 pm

        I’m at Queen Mary (this is my final term), University of London. At my Uni it would probably be harsh to focus in the lecturers, who at QMUL are nice people and helpful if you’ve got a problem. However, they are totally “mainstream” in their teaching, and therefore all the policy conclusions that they come out with do support a “right wing” perspective, whether or not in their heart of hearts they actually believe it. For example, all models of progressive income taxes (and capital gains taxes) we study in Macro produce negative effects in terms of Output and Investment, and based on this analysis there is no way to justify them. When we look at Trade Unions, they are simply treated as an exogenous factor that damage long run growth prospects, without any analysis of why they exist and their positive effects.

        Someone coming away from this degree is likely to be hugely influenced in terms of their political views, all based on extremely dodgy models that are seriously flawed. It would be less damaging if these models were at least slightly critiqued and their limitations accepted, but our lecturers treat these models as if they are as powerful as Newton’s Laws of Motion.

        You’re probably right that explicit political bias is a bigger problem in the US. However, the UK also has problems. Last year, a group of top UK economists wrote a letter to the FT asking the government to eliminate the 50% top rate of tax, claiming it deters entrepreneurship and that it’s not raising any revenue (without any empirical evidence backing this up whatsoever) Most of the same economists agree with deficit reduction, yet the only sweeteners that they want to offer in this time of austerity is to the richest people in the country!

      • #9 by Unlearningecon on January 20, 2012 - 8:26 pm

        Interesting.

        Yes that sums up many problems with economics pretty well. My lecturers are actually about as moderate as it gets in a mainstream university so I’m lucky, but I still find it hard to write about models that I know are just wrong. It seems you felt similarly.

      • #10 by Unlearningecon on January 21, 2012 - 10:07 am

        FYI, Tim Worstall found your comment hilarious:

        http://timworstall.com/2012/01/21/more-unlearning-economics/

        …then proceeded to effectively restate the problems you listed with economics as if they are facts.

      • #11 by Navin Kumar on January 21, 2012 - 2:52 pm

        That’s kinda because it *is*.
        It’s rather difficult to understand an idea if you’re going to be thinking of rebuttals in your head non-stop. So it’s kinda telling the rest of us that you don’t fully understand what you’re studying.
        If you make 25k per year and are considered poor, you get (say) 10K in benefits and 35k overall. If you get a raise of 5k, you lose those benefits. So your household income *falls* to 30k. A raise actually reduces your income! So they face insanely high marginal tax rates. http://www.theatlantic.com/business/archive/2011/12/when-it-comes-to-taxes-on-the-poor-the-supply-siders-are-right/250099/
        Welfare benefits are good because poor people enjoy higher purchasing power. That’s very obvious. Less obvious are the market distortions – that’s why someone has to explain them to you. If you think the costs are worth the benefits – go for it! But understand them both: that’s what positive economics is. If you’re going to treat it as normative economics, you’ll never be able to learn anything through all that rage.

        Incidentally, this is a good case for restructuring (rather than eliminating) the welfare state so that it marginal tax rates don’t exceed 100% for some sections of the population.
        or the way businesses through extensive lobbying and funding given governments incentives to pursue policies in the interest of the 1%.

        Huh? You’ve just captured the essence of public choice theory (if you replace 1% (kinda vague) with X special interest group).

      • #12 by Unlearningecon on January 21, 2012 - 3:10 pm

        I’m not angry.

        Actually adopting a critical perspective on what you’re taught is a vital part of learning. I know neoclassical economics is presented as a ‘truth’ in classes, and nothing is questioned, and you’d like it if students didn’t ask any questions, but that’s an awful way of teaching.

        And, again: you’re just repeating standard neoclassical theory as if it’s fact. Empirical evidence suggests that, no, reasonably high marginal tax rates do not have a negative effect and might have a positive one. Big welfare nets potentially make people more secure and therefore open to change, as Ha-Joon Chang argues and as the success of Scandinavian economies demonstrates.

        http://www.angrybearblog.com/2011/11/peter-diamond-emmanuel-saez-paul.html

        It’s amazing how neoclassical economists think that they approach issues from a neutral perspective.

  4. #13 by JMRJ on January 20, 2012 - 7:35 pm

    Good discussion over here, not that I agree with everything, or even much. But it’s on the blogroll.

    • #14 by Unlearningecon on January 21, 2012 - 3:11 pm

      Thanks!

    • #15 by John77 on January 22, 2012 - 3:35 pm

      My wife took us to one of Ha-Joon Chang’s lectures at her alma mater and our teenage son politely* pointed out one of his fallacies while I was trying to contain myself from shouting at him. If he really knows what he’s talking about, why does he say that?
      History demonstrates that people are more willing to embrace change when there are no welfare nets or where they are/would be overwhelmed by trying to support a status quo that is no longer viable.
      *much to our relief: like many teenagers, he finds it a strain to suffer fools gladly

      • #16 by Unlearningecon on January 22, 2012 - 11:37 pm

        People are certainly more willing to embrace revolution when things have become so bad they have nothing to lose, yes. But I don’t think that refutes Chang’s point.

        Chang’s point was that, if there are large and appropriately designed welfare nets, people are more willing to take risks setting up a business/taking new jobs. It’s the same reasoning that applies to consumer protection, limited liability laws and so forth. And as I said, the success of Scandinavian & some Central European economies demonstrates this.

      • #17 by John77 on January 23, 2012 - 9:26 am

        I wasn’t talking about Revolution – most revolutionaries are spoilt middle-class brats like Castro – but migration or joining the army when the crops fail: a good example is the large-scale migration from the cottonfields to Detroit or from the dustbowls to California in the 30s.
        The most successful Central European economy is the Czech Republic except during the 45 years when it had a large, allegedly universal, welfare net.

      • #18 by Unlearningecon on January 23, 2012 - 9:52 am

        - I’m pretty sure that the peasant’s revolt, French Revolution, Communist revolutions and basically every other revolution were not started by ‘spoilt middle class brats’.

        – So you effectively seem to be endorsing the idea that letting things get so bad that people have to abandon their hometowns/countries is the way to bring about change?

        – That’s quite a claim about the CR, do you have any supporting evidence? There are plenty of successful economies in Northern and Central Europe with large welfare states, such as the Scandinavian ones, the Netherlands, Germany.

      • #19 by John77 on January 23, 2012 - 10:14 am

        Actually the French revolution was led by the middle classes and supported by a few aristocrats, as was Cromwell’s .Lenin was middle-class. The peasant’s revolt was not a revolution, nor an attempt at one.
        I was not recommending that you let get things so bad that people abandon their homes – I was pointing out that historical evidence contradicted Ha Joon Chang’s claim
        Scandinavia and The Netherlands are not in Central Europe on any normal definition of “Central”.

      • #20 by Unlearningecon on January 23, 2012 - 10:23 am

        The general idea that revolutions are started by spoilt middle class people is ridiculous. Sure, the leaders are generally upper class as they tend to have had an education and the ability to mobilise people, but they only put a face on far bigger problems that exist independently of themselves.

        With HJC, let’s rewind and get this straight:

        – He says big welfare states make people more open to job changes/setting up businesses.

        – You say, ‘no in the past a lack of welfare state meant things got so bad people enacted massive migration and other big changes’.

        That’s not a rebuttal of his point.

        I said ‘Northern and Central Europe’ initially.

      • #21 by John77 on January 23, 2012 - 11:16 am

        You are moving the goalposts again. You started with:
        “Big welfare nets potentially make people more secure and therefore open to change, as Ha-Joon Chang argues and as the success of Scandinavian economies demonstrates.”
        I rebutted your statement.
        The success of the Norwegian economy is a result of North Sea oil; that of Sweden to its wartime neutrality and selling arms; that of Denmark largely to the massive income it has had from the Common Agricultural Policy.
        You now say: “He says big welfare states make people more open to job changes/setting up businesses.”
        The World Bank reports that, after the UK, two of the next three countries that are the easiest places to set up a business are Scandinavian which means that the welfare net is not , prima facie, the sole or primary reason why there a lot of business start-ups. Silicon Valley isn’t in Scandinavia.

      • #22 by Unlearningecon on January 23, 2012 - 11:49 am

        No I’m not. Can you not see how those two statements are the same? We’re talking about economic security here. The goalposts are where they always were.

        You have not rebutted my point at all. You’ve described two very different situations: one where people have it so bad they feel the need to uproot, and one where welfare states make them secure enough to take risks.

        Even if I accept your assertions for which you have provided no evidence (at a first glance, Sweden have a robust engineering industry that is not specific to arms and whilst its defence spending is low, the difference between it and the average is only 1-2% of GDP which I doubt is responsible for its success. Your claims about Denmark do not stand up to any scrutiny at all, as agriculture is only 4.6% of GDP. I’ll accept your point about Norway), there are plenty of other countries such as Finland and the Netherlands where large welfare states are compatible with high growth and low unemployment. Similarly, since S. Korea ‘liberalised’ its markets in the 90s, there have been far more fears over job security and young workers are only willing to take jobs in areas such as medicine where security is high.

        John, would you agree that limited liability laws make an economy more dynamic and businesses more willing to take risks? This is the same reasoning as I’m using.

        The fact that businesses are relatively easy to set up in Scandinavia is not mutually exclusive with the idea that welfare nets create security which makes economies more dynamic.

        Seriously, have you ever studied formal logic? Your posts make absolutely no sense whatsoever. Have you read a list of formal fallacies?

        http://www.nizkor.org/features/fallacies/

  5. #23 by Wheylous on January 20, 2012 - 11:16 pm

    “peasants – who, in the 14th century, worked about a quarter of hours that the average person does now – to work 12 hour days in factories”

    You’re right. We should return to the happy days of feudal Europe.

    • #24 by Unlearningecon on January 20, 2012 - 11:20 pm

      The perils of feudalism have been exaggerated, though I would of course not advocate a return to it.

      Anyway, the point isn’t about returning to feudalism, it’s that wage labour has rarely been ‘voluntary’. This creates a massive problem for many libertarians

  6. #25 by Wheylous on January 20, 2012 - 11:18 pm

    “despite being one of the key components in THEIR arsenal.”

    Who is this they? I’d appreciate it if you would stop lumping all libertarians into one group. There are moralists, Chicago school libertarians, Austrians, minarchists, anarchists, who knows what. You take a mishmash of these to criticize and then give off the impression that they’re even contradicting themselves as if all libertarians are one person.

    • #26 by Unlearningecon on January 20, 2012 - 11:25 pm

      I think the vast, vast majority of libertarians would question the efficacy of the state when confronted with a state-centric policy prescription, citing public choice style arguments in their defence. In fact, I can guarantee it.

  7. #27 by John77 on January 20, 2012 - 11:49 pm

    Could you be so kind as to explain what factories existed in the fourteenth century?

    • #28 by Unlearningecon on January 21, 2012 - 9:48 am

      Sorry, this is what happens when I don’t proof read my blog posts.

      Of course, it wasn’t in the 14th century that this began to happen. I was just using that as an example of how peasantry wasn’t quite as abysmal as its often made out to be.

  8. #29 by Jonathan M.F. Catalán on January 21, 2012 - 3:21 am

    Jeffrey Friedman has criticized public choice theory on other grounds, if you’re interested at looking at that.

    • #30 by Unlearningecon on January 21, 2012 - 3:12 pm

      I gave it a quick google but couldn’t find anything, to which particular article/paper are you referring?

      • #31 by Jonathan M.F. Catalán on January 21, 2012 - 5:38 pm

        I know it through a seminar I did with him, but he has a problem with the focus on incentives. Sometimes politicians simply don’t operate off straight economic incentives.

        See: The Rational Choice Controversy.

        He also talks about economism in Engineering the Financial Crisis, although I think in this book he’s more wrong than right (because, ultimately his case is an incentives argument). He just disagrees on what incentives caused the financial crisis.

      • #32 by Unlearningecon on January 21, 2012 - 5:48 pm

        Thanks for the links.

  9. #33 by JMRJ on January 21, 2012 - 3:53 pm

    Really, though, public choice theory has a point, despite the occasional contradictions:

    http://www.reuters.com/article/2012/01/20/us-usa-holder-mortgage-idUSTRE80J0PH20120120

  10. #34 by Natalie Solent on January 21, 2012 - 6:04 pm

    I’ve taken the liberty of reposting here a quote from George Orwell’s memoir of the Spanish civil war, Homage to Catalonia, describing the realities of peasant life. No capitalist he, but he was a sharp observer:

    “Men in ragged blue shirts and black corduroy breeches, with broad-brimmed straw hats, were ploughing the fields behind teams of mules with rhythmically flopping ears. Their ploughs were wretched things, only stirring the soil, not cutting anything we should regard as a furrow. All the agricultural implements were pitifully antiquated, everything being governed by the expensiveness of metal. A broken plough-share, for instance, was patched, and then patched again, till sometimes it was mainly patches. Rakes and pitchforks were made of wood. Spades, among a people who seldom possessed boots, were unknown; they did their digging with a clumsy hoe like those used in India. There was a kind of harrow that took one straight back to the later Stone Age. It was made of boards joined together, to about the size of a kitchen table; in the boards hundreds of holes were morticed, and into each hole was jammed a piece of flint which had been chipped into shape exactly as men used to chip them ten thousand years ago. I remember my feelings almost of horror when I first came upon one of these things in a derelict hut in no man’s land. I had to puzzle over it for a long while before grasping that it was a harrow. It made me sick to think of the work that must go into the making of such a thing, and the poverty that was obliged to use flint in place of steel. I have felt more kindly towards industrialism ever since.”

    • #35 by Unlearningecon on January 21, 2012 - 6:07 pm

      Peasantry obviously wasn’t the same everywhere, and appears to have been far more favourable in the UK than elsewhere. I’ve no doubt that the Spanish civil war was awful.

      But NONE of this changes the fact that peasants were forced into factories. Was Orwell even aware of it? I’m not sure.

      • #36 by John77 on January 22, 2012 - 7:48 pm

        Forced?
        In an alternative universe the factory-owners dragged them in with whips?!?
        Orwell knew what he what talking about after serving in the Spanish Civil War. You seem not to do so.

      • #37 by Unlearningecon on January 22, 2012 - 11:26 pm

        Forced meaning they were separated from their means of production through game laws, land confiscation and other legislative measures, with the intent of creating a workforce dependent on wages.

    • #38 by yorksranter on January 23, 2012 - 8:03 pm

      you do know Orwell wrote in the 20th century? has it crossed your mind that Spain has a history of its own, like proper countries?

  11. #39 by SR819 on January 21, 2012 - 6:21 pm

    Lots of economists still make the claim that they’re teaching “positive” economics and make no value judgements. Well, how would a mainstream economist justify this paragraph in Williamson’s Macroeconomics ed 4 page 164 (International Edition):

    “Suppose that total factor productivity z increases. As mentioned previously, the interpretation of an increase in z is as technological innovation (a new invention or an advance in management techniques), a spell of good weather, a relaxation in government regulations…”

    That last bit is crucial. What evidence does Williamson have that total factor productivity (which is really difficult to measure anyway and as a concept is dubious in itself) would improve if government’s became more laissez faire? This type of bald statement can be found in many other textbooks, and it’s clearly not an example of a value-free, “scientific” objective statement.

    • #40 by Unlearningecon on January 21, 2012 - 6:24 pm

      Economics cannot be value free when it takes complex institutions with a rich history – such as private property and contracts – as a given and then proceeds to develop objective ‘laws’ around them that cannot be broken. What they’re effectively saying here is that private property etc. are unquestionable, when of course they are open to debate. No wonder libertarians think they are ‘natural rights’.

      • #41 by JMRJ on January 21, 2012 - 6:33 pm

        “Economics cannot be value free when it takes complex institutions with a rich history – such as private property and contracts – as a given and then proceeds to develop objective ‘laws’ around them that cannot be broken. What they’re effectively saying here is that private property etc. are unquestionable, when of course they are open to debate. No wonder libertarians think they are ‘natural rights’.”

        That’s why, in the end, economists must yield to…lawyers. Our world is not so much experiencing a financial crisis as it is a ‘rule of law’ crisis. It seems you might actually be in agreement with that, somewhat. A little. Maybe.

      • #42 by Unlearningecon on January 22, 2012 - 12:14 am

        Well I think you’re right but only in the way that any societal crisis could potentially be painted as a ‘law’ crisis. If you check out Yves Smith’s ECONNED, she shows how many high level US judges/magistrates went to law schools that were also indoctrined with neoclassical economics. So it’s sort of a joint thing.

  12. #43 by SR819 on January 21, 2012 - 6:30 pm

    This almost unquestioned believe in the wonderful advancement of society due to the Industrial Revolution is also only part of the story. The New Economics Foundation found that 12th Century Britain in many ways got a lot of things right compared to post industrialisation. This is not to say we want to go back to living like they were but it does make you think at least:

    http://www.guardian.co.uk/books/2010/jun/03/hay-festival-2010-medieval-serfs

    • #44 by John77 on January 22, 2012 - 5:23 pm

      There is no polite answer to someone who posits that those living on the edge of starvation took 170 days holiday a year.
      The noun is “belief” not “believe”.

      • #45 by Unlearningecon on January 22, 2012 - 6:50 pm

        Honestly, there’s no polite answer to somebody who rejects evidence in favour of ideology or theory.

      • #46 by John77 on January 22, 2012 - 7:35 pm

        I *never* reject *valid* evidence in preference to my theory or ideology – although I am not willing to believe in “cold fusion” until I get independent data.
        You assume that I reject evidence when I debunk a stupid claim that has no evidence to support it. What evidence do you have that mediaeval peasants took 170 days holiday a year or worked a 10-houir week on average? There is a brilliant quote from one on my son’s favourite TV programmes “How stupid do you think I am?”.

      • #47 by Unlearningecon on January 22, 2012 - 11:28 pm

        He quite literally linked you to evidence. I have linked to Michael Perelman’s book above. You are simply ignoring the evidence.

      • #48 by John77 on January 23, 2012 - 9:11 am

        Linking me to a quote in the Guardian with no supporting evidence is not itself evidence and it was that which provoked my initial retort; secondly you didn’t link me to a book – you linked me to a bookshop trying to sell me a “Secret History”.

      • #49 by Unlearningecon on January 23, 2012 - 9:49 am

        OK, the Guardian is intellectually dishonest as are the NEF.

        Also, a book detailing historical events doesn’t count.

      • #50 by John77 on January 23, 2012 - 11:33 am

        How often do your cows need milking?
        If you are on the edge of starvation do take an extra day’s holiday or do some work to get more food?
        I am not prepared to pay £16 for a book which calls itself a secret history.
        In the twelfth century, Villeins had to spend time working their lord’s land and yeomen were liable to military service

      • #51 by Unlearningecon on January 23, 2012 - 11:52 am

        You’ve internalised the idea that peasants were on the verge of starvation. Learn some history:

        You don’t have to buy the book – you can read the first chapter on Amazon to get an idea of where it’s coming from.

        John, you are rejecting evidence because it conflicts with your beliefs. Just admit it.

      • #52 by John77 on January 23, 2012 - 8:48 pm

        http://www.thefreelibrary.com/Famines+through+history-a0114325996
        95 famines in Britain in 300 years 1200-1500

  13. #53 by John77 on January 22, 2012 - 4:05 pm

    I am not a “libertarian” and none of my economic examinations stated that they covered “Public Choice theory” but I have to take exception to “the private property has been distributed among a select few who have used it to perpetuate wealth inequalities”.
    Firstly that is junk: private property is wealth inequality, not the means to perpetuate wealth inequality; secondly “distributed” suggests that it is an Act of God, rather than the result of individuals working hard and spending less than they earn; my father inherited less than nothing and, like our parents, his three children have all spent much of their time (and more than their inheritance) on charitable work – a modest amount of private property (or Christian faith) has given us the confidence to work to alleviate poverty and its effects.
    A cynic would say that political power is used to create wealth inequality and that Wilson in the 1970s and Brown in the 2000s are dramatic examples with members of public sector unions (NUM, ASLEF, MGWU, TGWU, Unison, Unite) and lawyers gaining massively at the expense of the rest.

    • #54 by Unlearningecon on January 22, 2012 - 11:31 pm

      Private property was initially distributed amongst a few due to old feudal/aristocratic inequalities, and they have used their power/money to maintain these inequalities. This is standard history.

      Your claim about income being the result of individuals working hard is classic just-world-effect reasoning and is based on circular logic: people earn what they deserve so it’s fine.

      And if you think public sector unions are currently the problem then there is really no hope. Remind me which group of people transferred trillions of pounds/dollars worth of public money into their pockets in 2008?

      • #55 by John77 on January 23, 2012 - 9:53 am

        Please re-read my post. I did not say anything about people earning what they deserve. I said that wealth was the result od spending less than you earn.
        Your standard history would leave us with a concentration of wealth held by the feudal aristocracy whereas the vast bulk of it is owned by the middle classes and their descendants. [The Queen's private wealth does not come from the middle ages but from Queen Victoria to whom a large number of devoted subject left legacies in their wills].

      • #56 by Unlearningecon on January 23, 2012 - 9:55 am

        ‘secondly “distributed” suggests that it is an Act of God, rather than the result of individuals working hard and spending less than they earn’

        This seems pretty synonymous with a ‘people get what they deserve’ mentality. Don’t move the goalposts.

        The bulk of wealth in the world is currently controlled by the financial class.

      • #57 by John77 on January 23, 2012 - 9:58 am

        “Remind me which group of people transferred trillions of pounds/dollars worth of public money into their pockets in 2008?”
        No-one
        The shareholders in the banks lost billions. The government bought control of RBS and a large minority of Lloyds at a steep discount to NAV because they knew the shareholders didn’t have enough cash to take up two gigantic Rights Issues simultaneously

      • #58 by Unlearningecon on January 23, 2012 - 10:01 am

        Are you seriously suggesting the bailouts were legitimate? I don’t give a f*** if a few shareholders lost billions, we are talking about trillions here, not even counting all the implicit subsidies and BoE emergency loans. Very few bankers have been fired and they are still getting paid loads, thanks to being propped up with public money.

        Also, you don’t mention the U.S. bailouts, which were even more of a travesty with no strings attached at all.

    • #59 by John77 on January 23, 2012 - 10:04 am

      “The bulk of wealth in the world is currently controlled by the financial class.”
      a) “controlled by” is not the same as “owned by” if you are referring to the management of investment funds by financial institutions
      b) not true anyway
      The value of privately-owned businesses and property exceeds the amount of wealth managed by financial institutions

      • #60 by Unlearningecon on January 23, 2012 - 10:08 am

        They both own and control the bulk of wealth/money.

        See here:
        https://plus.google.com/108355875976043487436/posts

        Also, yes, in total they may not have a majority. But that doesn’t change that there is a huge concentration of control and wealth.

        http://krugman.blogs.nytimes.com/2012/01/15/but-the-top-0-1-percent-isnt-diverse/

        Are you an investment banker? Honestly only someone with a vested interest could be defending the industry like this.

      • #61 by John77 on January 23, 2012 - 11:52 am

        Your link takes me to a blog by Moira Brennan which seems to be demanding jail sentences for a few hundred thousand Americans. Krugman’s blog suggests that doctors and lawyers are rich.

      • #62 by Unlearningecon on January 23, 2012 - 11:54 am

        Whoops,

        If you scroll down you’ll see she’s posted a link to a picture of the U.S. financial system. JP Morgan is at the centre.

        From Krugman:

        ‘If you add together nonfinance executives, “financial professions”, real estate, and lawyers, you’ve got more than 70 percent of the total’

        The financial class, yep.

    • #63 by John77 on January 23, 2012 - 11:41 am

      I think the bail-outs were stupid. Legitimacy is in the eye of the beholder. My point is that the UK government acquired assets at a discount to any objective valuation on a forced sale basis after changing the rules and that the government has gained, not lost by this. Similarly the US Treasury is stated to have made/be making a profit on its deals with US banks.

      • #64 by Unlearningecon on January 23, 2012 - 11:55 am

        Even if the governments make a monetary profit it doesn’t change the impact of the crisis.

      • #65 by JMRJ on January 24, 2012 - 4:07 am

        Well said counselor.

  14. #66 by Unlearningecon on January 23, 2012 - 12:02 pm

    John, I am putting an end to this tiresome exchange. You have rejected evidence, split hairs, made no logical sense and most importantly we are completely off topic.

  15. #67 by John77 on January 25, 2012 - 12:28 am

    I take grave exception to the suggestion that I in any wise condone fraudulent behaviour by banks, whether British* or American. To point out that all the so-called bail-outs (with the exception of one building society in Gordon Brown’s constituency) in the UK were AT THE EXPENSE OF bank shareholders is not to endorse mismanagement. I am on record as complaining about Northern Rock’s mis-statement about the “profitability” of its unsecured lending (it was actually making a loss after taking into account its funding costs) years before the crash. However none of the big banks were insolvent (unless you call B&B “big”) – yes, I have read Andrew Caldwell’s report on Northern Rock: have you? The losers were bank shareholders including millions of small savers who had placed their savings with Halifax or Northern Rock or Alliance & Leicester or Cheltenham & Gloucester or Leeds or Bradford & Bingley. when they were building societies.
    @moiracathleen, may I suggest you read reports from US Treasury to Congress? It would take to long to detail here but they allegedly show that the US government is making a profit from TARP.
    Glass Steagal is irrelevant – I don’t think it should have been repealed either, but it is irrelevant.

    *My elder son is working evening/night shift helping to identify cases where people were mis-sold PPI

  1. This is really very amusing indeed
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  3. Inevitable | Lawyers on Strike
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