Friday, 18 January 2013

Taxpayers money does not buy solutions to economic problems.

Chris Dillow produces evidence that there is no relationship between financial reward and creativity.
Well a nice example of that springs to mind. On the one hand there is the IMF, which as Ann Pettifor points out is “an institution with a staffing of about 1100 professional economists (most of whom have PhDs) and an overall personnel budget of about $800 million”.  It’s made a total hash of things. As Bill Mitchell has said over and again, it’s not fit for purpose and should be closed down.
 In contrast, there is Positive Money which works on a shoe string: its turnover last year was I think £40,000.  That wouldn’t pay the salary of one IMF PhD  - never mind the costs of the early retirement packages available to IMF employees.
I’m not saying Positive Money is perfect and that it gets everything 100% right. But the “creativity per dollar” ratio of PM is VASTLY better than that of the IMF.
As for this blog you are now reading, I get paid NOTHING for producing it.
The nearest the IMF gets to being creative is taking an old idea and making a hash of it: at least that’s the case with Benes and Kumhof’s recent paper on the Chicago Plan. When I say “hash”, I mean the following.
B&K incorporate in their proposal a massive debt jubilee. Now debt jubilees are actually a complete nonsense and for the following reasons. First, do we write off the mortgages of those who have got two million dollar mortgages so as to enable them to buy five million dollar houses? I think not.
Second, take two people on lowish incomes. One might decide to buy with a 90% or 100% mortgage, while the other rents. Than along comes the jubilee, writes off the mortgage, which effictively means giving a house to the first individual: clearly a nonsense.
So how do B&K get round this? Well they just assume that everyone is on the same income and has the same amount of debt: COMPLETELY, TOTALLY, 100% unrealistic.
But that’s what you get from academics sitting in ivory towers desperatly trying to justify their salaries. REALITY doesn’t interest them too much, as Simon Wren-Lewis pointed out.

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