How Many Jobs is 23,510 Really?

According to the Australia Institute and Bruce Chapman – professor of economics at the Australian National University – not many.

THE impact of the carbon tax on the mining industry will be “trivial” – so small that for practical purposes it will be “invisible,” according to one of Australia’s leading labour market economists.

“Something like 370,000 people every month go from not having a job to having a job, and something like 365,000 people every month do the opposite,” he said. “That’s the change every month. The Minerals Council has projected its change over a period of 10 years.
“The additional outflow would be five people for every 10,000 who would have left in the month anyway. I am happy to call that invisible. I was going to draw it for the report but I couldn’t – you can’t draw a graph because the effect is too tiny.
“What it says is the carbon price debate should have nothing to do with job-loss figures. The labour market issue should be seen to be irrelevant. It is not interesting, it is not something we should spend any further effort analysing.”

I don’t know about that – let’s start off by pointing out that the Australian National University itself only employs 3,639 full-time equivalent employees. On Chapman’s logic the consequence of shutting down the whole university would be trivial too.

This whole argument that the carbon price will have no labour market consequences is something its proponents have tried to avoid. The Treasury modelling on an ETS (but not the actual CPRS) avoided a labour market analysis on the grounds that it couldn’t actually be undertaken! Rather the modelling assumed full employment in the long run and allowed real wages to decline to ensure that occurred. The table below summarises the Treasury modelling of the CPRS impact on the economy relative to a business as usual case.

Real wages decline – quite a lot IMHO – relative to the business as usual outcome and that suggests substantial labour market turmoil and the model is being forced to equilibrate at a no-unemployment equilibrium. As readers know, it is a lot harder for economists to force the real world to comply with their modelling than for those economists to force their modelling to comply with their own pre-conceptions.

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121 Responses to How Many Jobs is 23,510 Really?

  1. john malpas

    labour market is a grand term. But what does it mean to a suddenly unemployed storeman or coal operative when they lose their employment because of ‘climate change’.
    Sounds like the old ‘selling your future for a pot of message’.

  2. Sleetmute

    Don’t forget the Treasury CGE modelling was also based on the assumption that the rest of the world implements a carbon price.

  3. kennedy

    The decline in real wages decline does not suggest “substantial labour market turmoil”.

    Assuming productivity growth of 1.5% p.a. till 2050 and real wages increasing with productivity growth real wages will be 80% higher in 2050 than today (i.e. our material standard of living will be 80% higher than today).

    Under the worst case (Garnaut 25) the real wages level will 10% lower – so only an increase of 70%.

    This is before controlling for any negative externalities related to climate change.

  4. Sleetmute

    Sorry, I should have said the rest of the developed world, including the US, Japan, former Soviet Union and Canada.

  5. .

    I think Bruce is forgetting these are permanent job cuts. The States are now restricting natural gas exploration – so where will the new jobs appear – or will they be offshored? This will not end well.

  6. kennedy

    The decline in real wages decline does not suggest “substantial labour market turmoil”.

    Assuming productivity growth of 1.5% p.a. till 2050 and real wages increasing in line with productivity growth, real wages will be 80% higher in 2050 than today (i.e. our material standard of living will be 80% higher than today).

    Under the worst case (Garnaut 25) the real wages level will 10% lower – so only an increase of 70%.

    This is before controlling for any negative externalities related to climate change.

  7. daddy dave

    This is before controlling for any negative externalities related to climate change.

    Okay, Kennedy, so people of the future in 2050 will be so rich that they can afford a 10 percent pay cut.

    So – a carbon tax will give them a 10% cut.
    Climate change will give thme – what? probably less than a 10 percent cut.

    This is before controlling for any negative externalities related to climate change.

    Those externalities are coming either way, because climate change will happen whether or not Australia gets a carbon tax.

    Australia without carbon tax:
    we suffer the negative effects of climate change

    Australia with carbon tax:
    we suffer the negative effects of climate change
    plus
    we’re 10 percent poorer

  8. big dumb fu

    The goal has always been to reduce the mining workers to their knees. Those uppity mine workers making all that money and buying jet ski’s and such. Take em down a peg I say. And why not hurt everyone else too. Don’t worry, labor voters will be compensated.

  9. .

    The problem is once they start earning that sort of money, the working class dudes re examine their beliefs and stop voting instinctively ALP.

    That’s what they really want to stop. That’s why the concern about performance pay for teachers is a false flag (unwittingly or not) – the real concern is the Teacher’s Federation for example won’t be a strong leg for the ALP table.

  10. big dumb fu

    Spot on dot. The problem is these pesky aspirational people realising that they are now the “rich” that should have half their income confiscated.

  11. val majkus

    can’t find this report for download
    I’m curious to see if it carries a disclaimer like the report ‘The Critical Decade’ does

  12. Sinclair Davidson

    val -see first link above.

  13. kennedy

    Daddy Dave:

    A lower does not mean we are “10% poorer” – it means the wage level is 10% lower. Lower real wages would actually cause redistribution of wealth upwards to asset owners / landlords (the average wage would have lower purchasing power).

    Those externalities are coming either way, because climate change will happen whether or not Australia gets a carbon tax

    The aim of the carbon pricing is to mitigate the impact of climate change. That is the starting point. If you don’t believe there is a problem then no action should be taken.

    If, however, you have a view that the science might be even half right then you have a obligation to act (if only for your grandchild’s sake).

    Australia is an extremely wealthy country (top 10 GDP per capita globally) and it is very hard to argue argue that we can’t “afford” to take action.

    But back to the original point: where is the evidence that a 10% fall in real wages in 2050 (Worst Case) would cause “substantial labour market turmoil”?

  14. .

    No. It causes a relative redistribution. The wealthy are also worse off.

    We’d be all poorer off, the more one relies on disposable wages, the more so.

  15. daddy dave

    The aim of the carbon pricing is to mitigate the impact of climate change. That is the starting point. If you don’t believe there is a problem then no action should be taken.

    No, I don’t believe that an Australian Carbon Tax will have any effect on global warming. If you have evidence that it will mitigate global warming, please share it with us.

    This tax has nothing to do with climate change. It won’t stop climate change, it won’t slow climate change, it won’t mitigate climate change by a single degree. So why are we introducing it?

  16. daddy dave

    But back to the original point: where is the evidence that a 10% fall in real wages in 2050 (Worst Case) would cause “substantial labour market turmoil”?

    That modelling assumes full employment which of course is never the case. At any rate, 10% loss in income across the entire nation is a massive, massive cost, for something that won’t even solve the problem it claims to address.

    (oh sorry – do I have that wrong? Did I hear you say it will stop global warming? Please tell us more)

  17. JC

    So why are we introducing it?

    We need to show countries like China that we really mean business.

    I’m sure too that once the US Congress sees what we’ve done they will be racing to the White House at the speed of light to sign on to President Obozo’s cap&trade.

  18. Sinclair Davidson

    Assume an orderly transition in the labour market is the new ‘assume a can opener’ joke.

  19. TerjeP

    So if we sack 20,000 public servants it really shouldn’t ruffle any feathers. In the scheme of things it will be invisible. A statistical blip that disappears in the normal monthly job churn. Nice.

  20. kennedy

    Sinclair,

    If you don’t believe the modeling assumptions then you should reject both the model and its conclusions.

    Can you please provide modeling (based on assumptions you agree with) that shows “substantial labour market turmoil”?

  21. kennedy

    Daddy Dave:

    No, I don’t believe that an Australian Carbon Tax will have any effect on global warming

    The underlying question here is do you believe climate change is any issue?

    1. If you do then you should present a solution that may help.

    2. If you don’t then you should be saying you don’t agree with the tax because it is solving a problem which does not exist (and the onus is one you to prove a problem does not exist)

  22. kennedy

    Daddy Dave

    That modelling assumes full employment which of course is never the case.

    We could have full employment is the government provided a Job Guarantee:

    Under the Job Guarantee policy, the government continuously absorbs workers displaced. from private sector employment. The Job Guarantee employees would be paid the minimum wage, which defines a wage floor for the economy. Government employment and spending automatically increases (decreases) as jobs are lost (gained) in the private sector. The approach generates full employment and price stability. The Job Guarantee wage provides a floor that prevents serious deflation from occurring and defines the private sector wage structure

  23. Jim Rose

    Sinclair, good point on labour market transitions.

    The carbon tax crowd come from much the same group that thinks the labour market is overrun with market failures, wage rigidities and quick declines among the recently unemployed into long-term unemployment and unemployability.

    If only if such labour market adjustment optimism was around when tariff cuts are discussed

  24. twostix

    The goal has always been to reduce the mining workers to their knees. Those uppity mine workers making all that money and buying jet ski’s and such. Take em down a peg I say. And why not hurt everyone else too. Don’t worry, labor voters will be compensated.

    Maitland, in what once was a bit of a grotty Labor shithole, now has four or five nice middle class / upper middle class housing developments springing up around it thanks to the mining funds around there. It’s a magnificent sight to see.

    The problem that Labor has, is that these miners, fabricators, electricians, etc, etc who are benefiting wholly from the mining boom *are and were* Labor voters.

    Judging by the last election result in Maitland and places like it anybody who actually cares about the Federal Labor Party continuing (is there anybody who does?) beyond the next couple of elections should be shaking in their boots.

    Or working to once again impoverish all the tens of thousands newly minted upper middle class families…hmmm.

  25. tbh

    Twostix, Dot, I can vouch for the change in voting intentions among some people I know in that situation. Many of them would have been rusted on ALP voters, but now that they have high paying jobs (mostly in the resources sector), they vote overwhelmingly Coalition, both state and especially federally. For some reason, they have it in their heads that the federal govt. are a threat to their livelihoods. No idea why.

  26. twostix

    The underlying question here is do you believe climate change is any issue?

    1. If you do then you should present a solution that may help.

    Umm, false dichotomy. There is such a thing as being helpless, plus your solution demonstrably *won’t help*. In the matter of reducing the entire worlds industrial emmission output, Australia is helpless.

    So the only rational solution for a tiny nation such as ours, is to wait until the major countries do, or don’t do something.

    Anything else is the worst form of narcissistic egotism. China, The US, Brazil, India, et-al don’t know, nor care, nor are the influenced by what we do or don’t do.

    Just like we don’t give a shit about what Tahiti, New Zealand or the Solomon islands do.

  27. Michael Fisk

    Kennedy, that job guarantee, assuming unemployment of say 500,000, would cost the budget about $14 billion per year. It might be worth the money, but is there any way of knowing that the skills taught through that program will be transferrable to the private sector? If not, then the program have a permanent ratcheting effect on public spending, rather than acting as a half-way house between welfare and sustainable private sector employment.

  28. Michael Fisk

    Anything else is the worst form of narcissistic egotism. China, The US, Brazil, India, et-al don’t know, nor care, nor are the influenced by what we do or don’t do.

    Of course when Howard was in office, the usual suspects never ceased to remind us of Australia’s irrelevance and powerlessness.

  29. kennedy

    Michael Fisk:

    The biggest (real) waste in our economy is unemployment.

    A Job Guarantee would ensure the unemployed are contributing to to income and growth.

    In that sense, it wouldn’t “cost” the budget $14 billion – it would increase Australia’s output (i.e. GDP) and be a net benefit to the economy.

  30. Michael Fisk

    From that Job Guarantee site:

    Learn about the Job Guarantee

    ——————————————————————————–
    Question 6 – How does mass unemployment arise?
    Unemployment arises because the budget deficit is too small relative to the desires of the private sector to meet its tax obligations and to save and to hold money for transactions purposes. Mass unemployment is a macroeconomic phenomenon and can never be a “real wage” problem.

    This is nonsense. The figure that most closely correlated with unemployment during the Great Depression was not government spending, but labour costs.

    http://www.brookesnews.com/092007usrecessionjobs.html

  31. kennedy

    Michael Fisk:

    The concept of “costing” the budget $14 billion is also erroneous for a nation which is sovereign wrt its currency.

    You may enjoy the following blog titled understanding the modern monetary system

  32. Michael Fisk

    The biggest (real) waste in our economy is unemployment.

    I agree.

    A Job Guarantee would ensure the unemployed are contributing to to income and growth.

    It would only guarantee that payments are being transferred from one group of people to another. It would not guarantee that the unemployed were producing goods and services that people actually want to use. Lots of people were “employed” in the Soviet Union, but producing rubbish that no consumer in a free market would touch with a barge pole.

    In that sense, it wouldn’t “cost” the budget $14 billion – it would increase Australia’s output (i.e. GDP) and be a net benefit to the economy.

    Again, only if those people are actually producing something useful. There is no reason to believe that taking money from one person and giving it to another increases overall welfare.

  33. .

    Oh for fucks sakes, these idiots are arriving here in droves.

    This is utter bullshit. The US trashed several currencies in it’s lifetime.

    A Job Guarantee would ensure the unemployed are contributing to to income and growth.

    No, it won’t. Work for dole contributes to growth…? Jesus.

    You may enjoy the following blog titled understanding the modern monetary system

    No I won’t. Massive debunking:

    http://catallaxyfiles.com/2011/06/02/who-knew-pre-keynesian-economics-actually-works/

  34. Michael Fisk

    Kennedy, I have been reading MMT websites for several months now. Some of their ideas are interesting and even appealing, but I still haven’t seen any clear explanation as to where they are getting the money. One minute we hear that governments can print to their heart’s content. The next minute Mike Norman pops up rubbishing the idea that governments print money.

  35. kennedy

    Michael Fisk:

    The figure that most closely correlated with unemployment during the Great Depression was not government spending, but labour costs

    Firstly, correlation does not prove causation.

    More importantly, during the Great Depression the US (and others) had convertible currencies (not Fiat). The Job Guarantee analysis is based on analysis anchored in our present day sovereign monetary system.* This is a very important point and makes a comparison between now and then somewhat difficult.

    * US, UK, Australia, NZ have sovereign currencies (floating exchange rate, non-convertible currency). the EMU countries are not sovereign wrt to their currency.

  36. .

    Alright let’s cut the BS…I wish Sinc hadn’t bowlderised this.

    A Job Guarantee would ensure the unemployed are contributing to to income and growth.

    No. It is a transfer payment to do work no one wants.

    The concept of “costing” the budget $14 billion is also erroneous for a nation which is sovereign wrt its currency.

    Rubbish. The US has already trashed several currencies.

    You may enjoy the following blog titled understanding the modern monetary system

    No. You guys have got to stop drinking the Kool-Aid. Thorough debunking:

    http://catallaxyfiles.com/2011/06/02/who-knew-pre-keynesian-economics-actually-works/

  37. daddy dave

    The underlying question here is do you believe climate change is any issue?

    1. If you do then you should present a solution that may help.

    Why? You haven’t. An ACT (Australian Carbon Tax) won’t help global warming.

    2. If you don’t then you should be saying you don’t agree with the tax because it is solving a problem which does not exist (and the onus is one you to prove a problem does not exist)

    Global warming will not cause the extinction of the human race, despite what Gillard implied recently. There’s no scientific evidence for such scare campaigns.

  38. daddy dave

    A Job Guarantee would ensure the unemployed are contributing to to income and growth.

    No, it wouldn’t.
    Check out the little-known economic experiment known as the USSR for more details.

  39. kennedy

    MF, You may be confusing the following two points:

    Sovereign Govts can and do print money every time they spend. Taxes merely drain private sector net financial assets – they do not fund spending.

    QE in the US is NOT increasing the money supply (i.e. printing money) – they are merely swapping long dated bonds for cash.

    Re: Jobs Guarantee:

    It would only guarantee that payments are being transferred from one group of people to another.

    No – it would increase total income and GDP

    It would not guarantee that the unemployed were producing goods and services that people actually want to use.

    That is a design challenge for a JG – the JG would not compete with the private sector would only provide a wage floor.

  40. kennedy

    Daddy Dave – you may like to read some of the literature which would make for a more informed contribution.

    Maybe you could enlighten us on a few ways a JG is different to communism?

  41. Michael Fisk

    Kennedy, what exactly is the point of collecting taxes in that case? I have never understood that point about MMT. Why do you even need to collect taxes at all? Set the tax rate at zero and just print money to finance all spending.

  42. kennedy

    Global warming will not cause the extinction of the human race

    That is not a reason not to act. I would set the bar slightly below “extinction of the human race”. Sinclair seems to think 20,000 jobs is a good enough reason not to act.

    Will climate change have an impact on the available real resources? food production? sea levels?

    If yes, then lets try minimise the impact.

    If no, then lets oppose the carbon tax by saying carbon is NOT a problem.

    You need to get your story straight.

  43. .

    How convenient, YOUR correlation isn’t causative but MINE is!

  44. .

    Right.

    1. The US has already destroyed several currencies. Sovereignty is not a guarantee.

    2. MMT has been debunked by JC and myself here:

    http://catallaxyfiles.com/2011/06/02/who-knew-pre-keynesian-economics-actually-works/

    3. Make work schemes cost real jobs. They are just transfer payments to do work no one values.

  45. kennedy

    MF,

    Taxes create demand for the currency. A fiat currency is not convertible – the reason people demand the currency is that it is the only way of extinguishing tax liabilities.

    See the answer to Question 1

  46. Jc

    QE in the US is NOT increasing the money supply (i.e. printing money) – they are merely swapping long dated bonds for cash.

    Kennedy

    What stupid website did you retrieve this stupidity from?
    Fed buying bonds is a direct action to increase the money supply, you nimbus.

  47. daddy dave

    That is not a reason not to act. I would set the bar slightly below “extinction of the human race”.

    The bar is considerably lower than the public are being led to believe. Sea level rises of about a metre are predicted. Some changes in global weather patterns will occur over a period of several decades. That’s about it.

    But in any case, these things cannot be stopped. Carbon emissions are skyrocketing worldwide. The carbon tax won’t stop that. Global warming is here and there aint no stopping it.

    If yes, then lets try minimise the impact.

    An Australian Carbon Tax doesn’t do that. It doesn’t stop/change/slow/mitigate global warming. So, how do you suggest we “minimise the impact?” (ie something that might actually work)

  48. .

    Taxes create demand for the currency.

    No, they don’t.

    I don’t know why Sinclair has put my nice comments in moderation as well as my barking mad ones, but the US has seen the destruction of several currencies. MMT is built on lies.

  49. kennedy

    I agree – nuclear power can be part of a solution to climate change. But we first need the following:

    i. Daddy Dave to say if he thinks there is a problem (so we can act if there is); and

    ii. Sinclair to prove evidence of “substantial labour market turmoil” based on his modeling so we knowhow to protect jobs and income

  50. kennedy

    US has seen the destruction of several currencies

    Evidence rather than name calling please.

  51. daddy dave

    me: I’m worried about nuclear proliferation across the globe. I demand an “anti-nuclear weapons tax.”

    kennedy: won’t work.

    me: do you believe in nuclear proliferation?

    kennedy: but a tax wont’ stop nations building nuclear weapons.

    me: We have to act, for our children.

    kennedy: what, with a tax? how does that help?

    etc

  52. Michael Fisk

    Kennedy, why can’t you simply create demand for the currency by forcing all private transactions to be made in that currency?

  53. Jc

    Taxes create demand for the currency.

    This level of idiocy needs to be punished in the severest way possible.

  54. .

    Evidence rather than name calling please.

    Learn some ^%$#ing history you ignorant %#@*ing %$#@!

    http://en.wikipedia.org/wiki/Early_American_currency

  55. twostix

    If no, then lets oppose the carbon tax by saying carbon is NOT a problem.

    Ok…Carbon is NOT a problem….

    If yes, then lets try minimise the impact.

    Who pray tell is the us in “let’s”? If by “us” you are talking about us in this country alone then nothing that we do will in any way shape or form alter global emissions.

    If by “lets” you mean mankind as a whole then…LOL! Copenhagen was the only chance you had on that one and how did that go? Oh that’s right, China, India and the rest gave you the big fat middle finger.

  56. daddy dave

    Taxes create demand for the currency.

    How? That makes no sense at all.

  57. kennedy

    Daddy Dave – we will have to agree to disagree.

    I believe there is a problem and we should try to minimise the cost / impact.

    You don’t believe the problem is serious (” Sea level rises of about a metre are predicted. Some changes in global weather patterns will occur over a period of several decades. That’s about it”) and we can do anything in any case.

  58. Jc

    We should introduce the guillotine for that level of stupidity, dad.

    In that way our gene pool at least gets trimmed of it’s fat tail on the negative side of be curve.

  59. Michael Fisk

    Kennedy. That Billyblog claims there is no relationship between wages and employment. Why, then, don’t they call for a doubling or even quadrupling of the minimum wage?

  60. kennedy

    Daddy Dave – you Australian dollars are not convertible into anything – Australian dollars are a Fiat.

    This means you can not walk up to the RBA, give them your Australian dollars and demand Gold or any other commodity at a fixed rate of exchange.

    (In the US, under the Gold standard prior to 1971, you could take US$35 and exchange for an ounce of Gold).

    So, what are your Australian dollar good for and why do we value them? they are the only currency which can which can be used to extinguish your Australian tax liabilities.

    You can not pay your Australian taxes with USD!

  61. Jc

    Daddy Dave – we will have to agree to

    No we don’t. That’s bullshit. By spreading bullshit around the web you have no fucking right to call a truce.

    The only face saving thing you can do is apologize.

  62. daddy dave

    You don’t believe the problem is serious (” Sea level rises of about a metre are predicted. Some changes in global weather patterns will occur over a period of several decades. That’s about it”) and we can do anything in any case.

    No, I accept that there’s a problem but
    a) it’s been hyped (note the reference to “extinction” by a political leader that nobody bothered correcting
    b) it may be too late
    c) it is certainly not stoppable in the real political world as total carbon emissions will continue to rise worldwide
    d) a Carbon Tax won’t have any impact on global warming at all.

    I notice that you keep skating around (d), because you know it’s true. In fact, it makes me wonder what the true motive for the carbon tax is, anyway. Everyone knows it can’t really stop global warming, so what’s the real reason for it?

  63. .

    You can not pay your Australian taxes with USD!

    No, you got to the market and sell them and then pay.

    Daddy Dave – you Australian dollars are not convertible into anything

    Neither were the currencies of the thirteen colonies and the continental dollar before they were scrapped.

  64. Michael Fisk

    So, what are your Australian dollar good for and why do we value them?

    I use most of my Australian dollars to conduct private transactions with other residents of Australia. There is no other common unit of exchange. Nothing to do with taxation.

  65. .

    Chartalism and MMT are built on lies and mathematical chicanery.

  66. daddy dave

    Daddy Dave – we will have to agree to disagree.

    JC, what he’s trying to do is declare me a skeptic and therefore, I’m right in my own deluded world view. Except I’m not a climate skeptic, I’m an “Australia-saves-the-world-by-taxing-itself” skeptic.

  67. Michael Fisk

    In fact, it makes me wonder what the true motive for the carbon tax is, anyway. Everyone knows it can’t really stop global warming, so what’s the real reason for it?

    I got it! The REAL reason behind the carbon tax is to create demand for Australian dollars.

  68. Jim Rose

    even current job was sacred when deregulation, tariff cuts or privatisation was floated.

  69. twostix

    Some changes in global weather patterns will occur over a period of several decades.

    That’s certainly never, ever happened before. Everything in the climate is completely static and utterly predictable by the grand bishops in the various climate science institutions.

    Like the non-stop rain this year.

    Glad they saw that coming.

  70. kennedy

    “Billyblog claims there is no relationship between wages and employment”

    That may be correct on a Macro Level because a Jobs Guarantee is a way to ensure Full Employment. It is definitely not true on a Micro Level (i.e. at the individual firm level).

    Today’s Billy Blog is all about the minimum wage decision and inlcudes the following:

    …small businesses or any businesses for that matter consider they do not have the “capacity to pay” that wage [minimum wage], then a sophisticated society will say that these businesses are not suitable to operate in their economy. Such firms would have to restructure by investment to raise their productivity levels sufficient to have the capacity to pay or disappear.

    This approach establishes a dynamic efficiency whereby the economy is continually pushing productivity growth forward and in tat context material standards of living rise.

    Conflating economic effects between micro and macro is a ploy/trick many people use when debating economics.

  71. daddy dave

    This means you can not walk up to the RBA, give them your Australian dollars and demand Gold or any other commodity at a fixed rate of exchange.

    I can walk into any bank except for the RBA and do that. The economy doesn’t just exist because the central bank deems it to exist. It exists anyway.

  72. Michael Fisk

    That may be correct on a Macro Level because a Jobs Guarantee is a way to ensure Full Employment. It is definitely not true on a Micro Level (i.e. at the individual firm level).

    Yes but Kennedy there isn’t really a neat distinction between the two is there? If the majority of businesses respond to a wage decision by reducing hiring, the macro effect is an increase in U/E (can we leave the JG out of this for a minute – it’s a non-existent program that will probably never be created).

  73. kennedy

    I use most of my Australian dollars to conduct private transactions with other residents of Australia. There is no other common unit of exchange. Nothing to do with taxation.

    Agree – and it is just accepted and standard to use Australian dollars today.

    But, imagine for instance that the Australian Govt decided that you could only pay taxes in a newly created Koala Currency? They could enforce taxes with the Australian army. police and the rule of law. Would you still want you wages to be paid in Australian dollars?

    Underlying the daily working of the economy is the fact that only Australian dollars can be used to extinguish tax liabilities.

  74. Michael Fisk

    This approach establishes a dynamic efficiency whereby the economy is continually pushing productivity growth forward and in tat context material standards of living rise.

    Now I’ve seen it all. Increasing minimum wages raises productivity.

  75. Michael Fisk

    But, imagine for instance that the Australian Govt decided that you could only pay taxes in a newly created Koala Currency? They could enforce taxes with the Australian army. police and the rule of law. Would you still want you wages to be paid in Australian dollars?

    Kennedy, that’s a diversion. The Australian government must logically have created a currency BEFORE it started taxing people in that currency. The question is, if government spending does NOT rely on taxation (according to MMT) and if people need to use currency to conduct all private transactions anyway, what exactly is the purpose of taxation? Why even bother having any kind of budgetary process? Why not just print every dollar spent?

  76. twostix

    then a sophisticated society will say that these businesses are not suitable to operate in their economy.

    You seem to have some weird part fascist part utopian communist hybrid vocabulary.

    It’s most amusing.

  77. .

    Conflating economic effects between micro and macro is a ploy/trick many people use when debating economics.

    No, the effects are more or less the same.

    A lack of aggregation has been called “scandalous” by well known macroeconomists and it is built on another lie – that aggregation is a fallacy. There is aggregation even if the pattern may not continue. Choosing to ignore aggregation altogether instead of doing the hard yakka of getting to know how it works is intellectually lazy.

  78. .

    The US has already trashed currencies. MMT is built on lies and ignorance.

  79. daddy dave

    Such firms would have to restructure by investment to raise their productivity levels sufficient to have the capacity to pay or disappear.

    That’s already happened. They’ve already disappeared (e.g., textiles). Mysteriously, we now have an intractable problem with a small portion of the population with long-term unemployment.

  80. kennedy

    MF @ 4:25pm:

    the important distinction is that the Government is only setting the Minimum Wage. They are not setting marginal wage.

    There is no proven correlation between the minimum wage decision and employment – see this link.

    Economists that claim there is a link must be able to explain why minimum wage lower in the US and unemployment is higher?

  81. JC

    I

    t is definitely not true on a Micro Level (i.e. at the individual firm level).

    Today’s Billy Blog is all about the minimum wage decision and inlcudes the following:

    …small businesses or any businesses for that matter consider they do not have the “capacity to pay” that wage [minimum wage], then a sophisticated society will say that these businesses are not suitable to operate in their economy. Such firms would have to restructure by investment to raise their productivity levels sufficient to have the capacity to pay or disappear.

    This approach establishes a dynamic efficiency whereby the economy is continually pushing productivity growth forward and in tat context material standards of living rise.

    It’s this level of rant malicious stupidity that makes me think the Conroy filter would be a good deal because we could ban sites like Billy blog, Zerohedge and Naked Capitalism, perhaps also throwing their owners into an asylum for the mentally impaired.

    Kennedy, why stop at the minimum wage. We could run masses amounts of businesses out of existence and have the best productivity numbers in the world.

    You nimrod, productivity is a function of a well running economy and also a function of rising living standards as the capital to labor ration increases. It is not a be all and end all for government intervention to run businesses out of town.

    Abu Gharib is not good enough for people swallowing this swill and for those peddling it.

  82. kennedy

    MF:

    1. If Taxation didn’t exist people wouldn’t use the currency to conduct transaction – it would be a useless piece of paper

    2. Taxation provides a means to regulate agreegate demand and conduct fiscal policy (automatic stabilisers etc)

    3. If the government spent (i.e. created demand) in excess of the productive capacity of the economy then it would generate inflation (Government do have REAL restrictions on spending – the productive capacity of the economy)

    The Australian government must logically have created a currency BEFORE it started taxing people in that currency.

    4. Yes – and then the government has to spend in order to provide the private sector with the currency which they can use to satisfy their tax obligations

  83. JC

    You seem to have some weird part fascist part utopian communist hybrid vocabulary.

    It’s most amusin

    It’s really fucking pernicious and concerning because you end up with nimrods like “Kennedy” not only swallowing this swill hook line and sinker but as peddling it around the traps.

    You’re right. It’s really an insidious form of fascism making the rounds again.

  84. kennedy

    C’mon JC:

    productivity is a function of a well running economy and also a function of rising living standards as the capital to labor ration increases

    Productivity increases living standards (not vice versa).

    Capital / Labour ratio is not relevant – how much capital was required to create Google? Just some productive PHD students!

    The politics (minimum wage etc) is pretty irrelevent – lets just start with giving people an understanding of the modern monetary system

  85. JC

    1. If Taxation didn’t exist people wouldn’t use the currency to conduct transaction – it would be a useless piece of paper

    You fucking idiot. There was no income tax in the US before 1917 the Greenback was in existence.

    Fiat currency has support primarily because it’s used as legal tender to settle debts. Not taxation.

    You imbecile, Kennedy.

    2. Taxation provides a means to regulate agreegate demand and conduct fiscal policy (automatic stabilisers etc)

    How fucking confused are you. Which once dormant neurons are firing up causing you to say this shit.

    3. If the government spent (i.e. created demand) in excess of the productive capacity of the economy then it would generate inflation (Government do have REAL restrictions on spending – the productive capacity of the economy)

    The Australian government must logically have created a currency BEFORE it started taxing people in that currency.

    4. Yes – and then the government has to spend in order to provide the private sector with the currency which they can use to satisfy their tax obligations

    I’m serious. Are you in the middle of a stroke? Are you having a stroke because this is what I imagine it would look like over the web.

  86. val majkus

    Sinc thanks for that; I did see it after my post
    My response is that a report can be in support of anything no matter how stupid
    Like a lawyer says any expert opinion is for purchase
    but there’s still the credibility of the opinion
    and the opinion belongs in this case to the authors who have (I assume) no clients

  87. kennedy

    “.”

    No, the effects are more or less the same.

    A lack of aggregation has been called “scandalous” by well known macroeconomists and it is built on another lie – that aggregation is a fallacy. There is aggregation even if the pattern may not continue. Choosing to ignore aggregation altogether instead of doing the hard yakka of getting to know how it works is intellectually lazy.

    Have you heard of the Paradox of Thrift?

  88. kennedy

    Over and out – see you next time

  89. Biota

    I’m no economist but don’t think I need to be to say that Kennedy’s 1 – 4 are a bit strange. Taxation is parasitic not productive. Even if it does get handed back in part through capital works they could be achieved without taxation.

  90. kennedy

    JC:

    Taxation provides a means to regulate agreegate demand and conduct fiscal policy (automatic stabilisers etc)

    I don’t think it is very controversial to say taxation (and spending) can be used regulate aggregate demand.

    But I like the way you fire for effect.

  91. .

    The paradox of thrift proves just about nothing to make MMT look more appealing. There is an optimal savings rate. Spending money at will and financing it through a worthless currency being inflated is so far off base it isn’t funny. We can be guaranteed that the optimum savings rate will not be achieved.

  92. .

    I don’t think it is very controversial to say taxation (and spending) can be used regulate aggregate demand.

    Yes it bloody is. It ignores 50 years of macroeconomic research.

    Even if it works, you cannot do it in a timely and accurate fashion.

  93. kennedy

    Biota:

    I strongly urge you to read the link @ 4:58 and to come to your own conclusion.

    It is written for non-economists.

    You may find it answers some of the questions many economists can’t properly respond to such as why US debt / GDP so high but US Govt interest rates are so low?

  94. kennedy

    “.”

    The paradox of thrift link was to show you why we need both micro and macro analysis.

    Saving on a micro level might majke sense but if every individual save we have a MACRO problem with spending.

    It is completely independent of MMT.

    What is the optimal saving rate and how do you derive it? I’m interested.

  95. JC

    Capital / Labour ratio is not relevant – how much capital was required to create Google? Just some productive PHD students!

    Oh really.

    What has when it was starting up got to do with Google now in its present form, you nimbus.

    How productive is it?

    Lets looksee

    Google has 40.5 billion is total assets.

    Considering the fact that it has no plant and equipment in the manufacturing sense that’s a fucking load of comuting assets, you nimbus.

    In March 2011 it had 26,316 employees which means it had $1,540,000 assets to each employees.

    That’s a lot of computing equipment, you moron.

    Google has enormously large capital to ratio, you dickhead.

    Stop talking about shit you don’t know.

  96. kennedy

    “.”

    There is plenty of “research” showing government spending and taxation effects aggregate demand.

    If taxes have no effect why are people so concerned with a carbon tax?

    If spending has no effect then how do you explain the jump in retail sales which directly correlated with the government stimulus in late-08 and early-09?

  97. JC

    I don’t think it is very controversial to say taxation (and spending) can be used regulate aggregate demand.

    Kennedy, you should be horse whipped.

  98. .

    Saving on a micro level might majke sense but if every individual save we have a MACRO problem with spending.

    No, we don’t. It means there is policy credibility problem if people are pulling up stumps.

    http://en.wikipedia.org/wiki/Golden_Rule_savings_rate

    But of course, you believe in a crackpot theory built on historical lies so the K/L ratio means nothing to you.

  99. .

    There is plenty of “research” showing government spending and taxation effects aggregate demand.

    If taxes have no effect why are people so concerned with a carbon tax?

    This proposition is impossible. Decreasing disposable income will always lessen aggregate demand.

    If spending has no effect then how do you explain the jump in retail sales which directly correlated with the government stimulus in late-08 and early-09?

    Retail sales are not GDP. At the time the savings rate was so high that the Keynesian multiplier could not possibly be anything but less than one.

  100. JC

    There is plenty of “research” showing government spending and taxation effects aggregate demand.

    Who has said it doesn’t you fucking moron?

    Nearly everyone here would say that most government spending is sub-optimal.

    and you’re totally fucking confused. You suggested earlier that the government can use taxation and spending to regulate demand.

    They can’t do it optimally, you doofus.

    You meathead, Kennedy.

  101. kennedy

    C’mon JC:

    You said:

    productivity is a function of a well running economy and also a function of rising living standards

    I think you meant to say:

    “over the long term, a well running economy and rising rising living standards are a function of increasing productivity”

    My point is that you can have increasing productivity without huge amounts of capital.

    For Google, have you striped out cash from their balance sheet?

  102. JC

    My point is that you can have increasing productivity without huge amounts of capital.

    you can over capitalize, sure. But what’s your fucking point dagwood.

    For Google, have you striped out cash from their balance sheet?

    No why. Why do it to google and not other firms to compare?

  103. kennedy

    “.”

    the saving rate is high because the government is running a deficit.

    have you ever heard of the sectoral balances?

    a simple accounting identity

    public deficit = private sector surplus (ignoring the external sector).

    you need to do some reading.

  104. kennedy

    “.”

    What is the golden savings rate for Australia? are you talking household saving? corporate saving? public savings?

    Can we save whilst running a CAD and maintain aggregate GDP?

    You really need to Read Some More

  105. JC

    It has $10.2 billion “in Cash and equivalents”

    BHP has:

    $78 billion in assets.

    $10.8 billion in cash and equivalents and around 72,000 employees.

    BHP, one of the most productive and efficient firms in the world has a capital to labor ratio of around $1,100,000 per employee.

    Google has more!
    Google has a fucking ton of computing power, you moron.

    Kennedy you are a nimrod of the worst order.

  106. kennedy

    JC: Why don’t you help poor “.” out?

  107. JC

    you need to do some reading.

    Is this Homer?

    Homer if I find out it’s you, I will stick your head in a vice until it hurts and leave you there for a few days or week or months.

    Don’t you dare it be you.

  108. jumpnmcar

    Is that the same Bruce Chapman ANU that was”"”principal economic advisor to the Prime Minister Paul Keating, 1994-96.”"”

    http://www.assa.edu.au/fellows/profile.php?id=57

    Hope he’s not biased in any way.

  109. JC

    Is that the same Bruce Chapman ANU that was”””principal economic advisor to the Prime Minister Paul Keating, 1994-96.”””

    Labor’s golden years. Lol

  110. .

    Can we save whilst running a CAD and maintain aggregate GDP?

    Yes. We’ve been doing it for years with budget surpluses.

    public deficit = private sector surplus (ignoring the external sector).

    you need to do some reading.

    You’re full if it. MMT is built on two lies: the US has never junked a currency and that the external balance is zero. This is nuts.

    the saving rate is high because the government is running a deficit.

    No. It went up as the GFC hit and is still high because of expectations.

    You need to stop making up data and get a clue.

  111. .

    Can we save whilst running a CAD and maintain aggregate GDP?

    Yes. We’ve been doing it for years with high economic growth and budget surpluses.

    You Nimrod. “Read more”…

    Get a goddamned clue.

  112. JC

    Dot, it’s freaking homer.

  113. .

    No wonder his history is as solid as Swiss cheese.

  114. JC

    He’s been gone for months and his sudden re-appearance with his rank stupidity makes my heart rate to race.

    In fact he turned me religious. I now pray to God to try have have him dumped in Dante’s worse circle of hell.

  115. kennedy

    “.”

    Have you seen the Households saving ratio in Australia? Not sure you can say we have been saving when the household debt ratio has been rising.

    You are very ignorant and not interested in a serious debate.

    Yes the savings rate went up as the GFC hit – have you heard of the government deficit and the stimulus package? that may correlate to household saving?

    Yes. We’ve been doing it for years with budget surpluses.

    Exactly – CAD, budget surplus but PRIVATE DIS-SAVING (this
    is an accounting identity!

    public + private + external = 0

    duh!

    btw, I am not homer

  116. Michael Fisk

    If it is Homer, it just shows that we need a supreme revolutionary council of moral guardians in charge of Conroy’s filter, to stop crank economic theories gaining wider circulation. In fact, I’d like to nominate Ayatollah Cambria to be chairman of the council.

  117. JC

    btw, I am not homer

    You must be related then.

    Not sure you can say we have been saving when the household debt ratio has been rising.

    Depends how it’s looked at you doofus.

  118. JC

    In fact, I’d like to nominate Ayatollah Cambria to be chairman of the council.

    That would be fun. Every single leftwing blog and blogger would be banned with serious fines and imprisonment if they tried to post comments or blog threads. Not one would be spared.

    As you keep saying, they have nothing to add to any debate, Fisk. Nothing.

  119. .

    Have you seen the Households saving ratio in Australia? Not sure you can say we have been saving when the household debt ratio has been rising.

    This is so stupid since you agree with me that it has gone up.

    Yes the savings rate went up as the GFC hit – have you heard of the government deficit and the stimulus package? that may correlate to household saving?

    The stimulus was 1-2 years later.

    public + private + external = 0

    The second lie which forms an assumption of MMT is that external equals zero. (The first is that the US has never trashed a currency).

    That fact that we had a large CAD, good growth, low levels of money supply, low inflation, private saving, and budget surpluses for much of the Howard years (and the US in the Clinton years) goes to show that MMT doesn’t work in practice. It’s bunkum.

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