My comments on the UK’s Law Commission consultation document on hate crime.

 

The Law Commission is a body composed mainly of lawyers which recommends changes in the law to the UK government. At least that’s my very brief description. Clearly for a more authoritative description you need to look at the LC’s web site.
 

The comments I submitted to the LC on their consultation document on hate crime are below.

 __________

 

1. The LC’s refusal to examine the basic rationale of the hate crime concept is the equivalent of the Navy having a review of aircraft carriers without re-examining the basic rationale of aircraft carriers.

Para 3.14 says, “It is also important to emphasise that our terms of reference for this review do not ask us to question the notion of more severe punishment for hate crimes or determine if it is principled. We simply intend to outline some of the main arguments that have been offered to justify more severe punishment in this context.”

So the terms of reference, which were decided by the Law Commission (LC) itself in consultation with the Department for Digital, Culture, Media & Sport, prevent the LC from examining the basic rational for the hate crime concept. That is the equivalent of the Navy having a major investigation into aircraft carriers without considering the basic rationale for aircraft carriers, which is clearly absurd.

“All silencing of discussion is an assumption of infallibility” – John Stewart Mill.

Moreover, the excuse given in the consultation paper for that omission, namely that there was not much call for the above basic rationale to be reconsidered in soundings prior to publication of the consultation paper is a poor argument. The lack of desire to question an idea certainly shows that the idea is part of the conventional wisdom. However the claim that because an idea is part of the conventional wisdom, that therefore the idea is probably valid has been shown to be flawed over and over throughout history. The idea that the Earth is flat used to be part of the conventional wisdom.

And finally, the above refusal to set out the justification for the basic hate crime concept is wholly inconsistent with para 3.10, which says, quite rightly, that “It is widely accepted that any punishment of wrongdoers by the state must be justified.”


2. The possible reasons for the rationale for the hate crime concept given by the LC are poor.

Despite the above claim that the basic rationale for the hate crime concept should not be re-examined, the LC does in fact devote considerable space to setting out what some of the basic justifications for the concept might be in Chapter 3. Ironically that exercise actually underlines the need for a reconsideration because the quality of reasons proffered for the hate crime concept are poor.

For example the first possible justification for the basic hate crime concept given in Ch3 is Barbara Perry’s. Her definition of hate crime includes the idea that it’s all about “subordination” of minority groups.  In addition to the flaw highlighted by Chakraborti and Garland (two critics of Perry’s cited in Ch3), Perry’s definition implies that threatening or abusive behaviour by for example non-Muslims in the UK towards Muslims (who are a minority) may constitute a hate crime, whereas the same behaviour by Muslim towards a non-Muslim would not constitute a hate crime because Muslims are a minority.

To illustrate, suppose someone hits a Muslim on the head while saying “All Muslims are idiots”. That might well be classed as a hate crime.  But if a Muslim hits a non-Muslim on the head and says “All Infidels are idiots”, that is NOT A HATE CRIME, according to Perry logic because Muslims are a minority. I conclude that Perry logic does not make sense.

 
3. Hatred as such is so inconsequential that the law should not bother with it.
 
Para 3.11 is flawed. It reads as follows.

Four key arguments have been associated with punishing hate crimes more severely than differently motivated crimes:

(1) Hate crime causes additional harm, namely to primary victims, but also to groups who share the targeted characteristic and to society more widely.
(2) Hate crime constitutes greater intrinsic wrongdoing.
(3) Hate crime offenders are more culpable than those who commit equivalent offences which are not hate crimes.
(4) More severe punishment sends out a message, denouncing the hatred as wrong.

Items 2 and 3 NECESSARILY follow from 1 and are thus superfluous.

Re item 4, it is extremely debatable as to whether hatred of some religions because of some of their unsavoury aspects is necessarily wrong. To hate Islam because of  female genital mutilation, beheadings, desecration of Buddhist and Christian statues, wife beating, suicide bombs, other terrorist attacks, Halal animal cruelty, mistreatment of apostates and forcing women to wear Burkhas (as in Iran), imprisonment of blasphemers (i.e. those who deny the existence of God) is ENTIRELY UNDERSTANDABLE and is not necessarily “wrong”.

As distinct from the latter hate, actual violence towards a racial or religious group is a different matter of course: the law should definitely intervene where violence takes place.
 

4. The extent of emotional distress caused by criticising a religion is not a reason to ban such criticism.

Paras 3.16 to 3.20.

Paras 3.16 to 3.20 try to advance the argument that the hate crime concept is justified because some groups, e.g. religious groups, suffer more of an emotional reaction to hate crime than other groups.

The fact that some groups suffer more of an emotional reaction is not necessarily the fault of the perpetrator of the alleged hate crime. For example Christians and Christian priests have not raised strong objections to cartoons which poke fun at Christianity for decades now. In contrast, Muslims are famous for exhibiting EXTREME emotional and violent reactions to cartoons which poke fun at Islam. That is not the fault of anyone who composes or publishes those cartoons, particularly in Western countries, where the right to poke fun at religion is now well established.

Moreover, it is the height of arrogance and cheek to migrate to another country and then object to part of its culture, e.g. a long established tradition of poking fun at religion. That form of cheek clearly often causes an “emotional” reaction and the occasional resort to “violence” by members of the indigenous community.

If it is wrong for members of an indigenous or native community to cause “emotional” or “violent” reactions among members of an immigrant religious community, then an equal amount of wrong or harm is perpetrated when the cause/effect relationship runs the other way.

In fact as already intimated just above, it is arguable that members of an immigrant community have LESS RIGHT to cause emotional or violent reactions among indigenous people than where cause and effect run the other way, and for the simple reason that it is a widely held principle accepted pretty much World-wide that there is an obligation on immigrants to abide by the laws and customs of the country they migrate to. After all, immigrants first or second generation are always free to leave the country they have migrated to and return to a country immersed in the culture they claim to be superior to that of the country they have recently arrived in.

As for the actual REASON why first or second generation immigrants are not prosecuted for causing “emotional” or “violent” reactions among indigenous populations, that’s plain as a pike-staff to anyone with any political insight: the latter sort of prosecution does not “fit the narrative” put by the political left and the politically correct.  


5. The views of just one person are not statistically significant.

Para 3.24 cites the views of just ONE PERSON (a Muslim). One is not a statistically significant number.

 
6. The frequent use of the word “might”.

3.96   (Concluding paragraph of Ch 3). This claims that “we have outlined the main rationales for hate crime and hate speech laws…”.

Well that rather conflicts with the above mentioned claim by the LC that they do not intend setting out the basic rational for the hate crime concept.

Next, far from having “outlined the main rationales for hate crime…”, Chapter 3 is actually little more than conjecture: witness the fact that the chapter contains the word “might” about twenty times (in the main text, never mind the voluminous footnotes). In other words there is nothing that resembles a clear, unambiguous argument leading to an indisputable conclusion or anything near an indisputable conclusion to the effect that the basic hate crime concept is valid.  Instead, all readers are given is a large number of POSSIBILITIES, as is implied by the frequent use of the word “might”.


7. Stirring up hate.

18.197 This reads, “We provisionally propose that where intent to stir up hatred cannot be proven, it should be necessary for the prosecution to prove that:
(1) the defendant’s words or behaviour were threatening or abusive;
(2) the defendant’s words or behaviour were likely to stir up hatred;
(3) the defendant knew or ought to have known that their words or behaviour were threatening or abusive; and
(4) the defendant knew or ought to have known that their words or behaviour were likely to stir up hatred.

Comments:

First, it is not clear whether the prosecution would need to prove all four of those misdemeanours, or just one.

Second to prosecute someone simply because their words are “likely to stir up hate” (as in sections 2 and 4 just above)  is absurd and for the simple reason that some people (as mentioned above) are so sensitive to any slight that absolutely any disagreement with them may “stir up hate”. For example the simple claim that there is no God, widely accepted as a perfectly reasonable statement in most countries, is likely to “stir up hate” among the religious, particularly Muslims.

Also the word “threatening” is also far too vague. For example someone might “threaten” to organise a demonstration against the Labour or Tory Party. Is that “threat” wrong? Clearly not. In other words if the LC intends the word threaten to refer for example to “threaten to engage in physical violence” then the LC should say so.


8. The length of the LC consultation document.

Finally, the LC consultation document is EXTREMELY LONG: around 150,000 words according to my back of the envelope calculations. Like about 99.99% of the UK population I have not had time to look at more than a very small proportion of this document. But what I have looked at appears to riddled with flaws and false logic. It would not be unreasonable to conclude that the ENTIRE document is about equally badly flawed.  

George Selgin supports full reserve banking, perhaps inadvertently.

 
George Selgin (GS) has been one of the more heavyweight and vociferous opponents of full reserve (aka 100% reserves) over the last ten years or so. But he now seems to support the the idea in a recent Tweet. The tweet (which you may need to scroll down to see) reads “I favor @DanAwrey's suggestion that FinTech payment service providers (not to be confused w/ Pass-Through Investment Intermediaries) be exempt from most bank regulatory requirements, provided they back customer deposits 100% w/ Fed Master Account balances.”

The above “Dan Awrey suggestion” is actually one which I dealt with on this blog recently: see here.

I probably wouldn’t have bothered commenting on GS’s above tweet had that been the ONLY instance of his backing full reserve. But it’s not the first time he has backed it – deliberately or inadvertently I’m not sure.

The REASON the above tweet amounts to support for full reserve is as follows.

First, full reserve consists of making totally safe bank accounts available to everyone, where those accounts are safe because either they are actually offered by the central bank and are run by the central bank. So called “Central Bank Digital Currency” is an example of that arrangement: an arrangement which looks like becoming a reality in China quite soon.

An alternative is to have commercial banks offer those sort of accounts, but ensure that for every dollar in such accounts, the commercial bank concerned has a dollar deposited at the central bank. Ben Dyson, founder of Positive Money advocated the latter option in his book “Modernising Money” and in later publications. 

Now an account at a fintech backed “100% with Fed Master Account balances” to quote GS’s tweet comes to exactly the same thing as the latter Dyson suggestion.

As for “available to everyone”, given that almost everyone has a smart phone, PC or similar, nowadays, then those fintech accounts are to all intents and purposes “available to everyone”.

Another important element of full reserve banking is that once anyone who wants a totally safe account of the above sort has one, there is then no point in having government (i.e. taxpayers) back accounts at private banks. And indeed GS has long advocated what he calls “free banking”: that’s a system where banks enjoy no state support and do anything they like as long as they obey the laws that other corporations have to obey, like the law of contract.

However, it could be argued that not everyone has a smart phone or PC, thus what GS is advocating is not EXACTLY the same as full reserve. But it's certainly very near.  

 

An amusing video by Richard Murphy.

 


In his video entitled “Why we should be paying the nurses much more than 1%” he claims (about 1 minute 45 seconds in) that government thinks the NHS “does not add value” to the economy because it does “not sell anything”: i.e. government just assumes that the output of the NHS equals the cost of running the NHS.
 
Well assuming that by “government” he means the present Tory government as distinct from a government run by some other party, the problem there is that the Labour Party ever since the Labour Party was founded has employed exactly the same method of valuing the output of the NHS for the purposes of calculating the NHS contribution to GDP (and same goes for the rest of the public sector). Indeed, it’s a bit hard to see what other criterion CAN BE USED to measure the output of the public sector, defective as the latter measure is. And in fact every other government in the world does the same.

Moreover, very much the same problem applies where something IS SOLD. The reason in two words is “consumer surplus”. That is because you pay £X for something (which in turn will mean the costs of producing will likely be quite near £X), that does not mean the item concerned is worth £X to you because it’s quite possible that had the price been £(X+Y) you would still have bought it, in which case the item is worth £(X+Y) to you. Thus arguably we ought to count the item, when it comes to computing GDP as being worth £(X+Y). (Economists refer to that £Y as “consumer surplus”).  

 

The multiplier.

Second, Richard Murphy about half way thru the video trotts out an old canard about the multiplier (about half way thru - about 4 minutes 20 seconds). The multiplier is the increase in GDP derived from one dollar extra deficit, and that increase in GDP can be much more than one dollar or less than one dollar. The multiplier will be high if money spent on something tends to be spent quickly and it ends up in the pockets of people or firms which in turn spend the money quickly, passing the money on to others who spend the money quickly, etc etc.

Now a flaw in that idea (as I’ve pointed out a dozen times on this blog) is that stimulus money costs nothing in real terms to create (as Milton Friedman pointed out). Thus if government wants to expand output of something where the multiplier is LOW, that’s not a problem in that government and central bank simply have to print more money (which to repeat, costs next to nothing to print / create).

Of course stimulus appears to be more complicated than simply printing money, but that’s what it boils down to half the time.

There is, however, an argument in favour of attaching some importance to the multiplier, which is that where a form of public spending has a high multiplier, the rise in the debt and/or stock of base money will be lower for a given effect on employment than is the case with a low multiplier. And given that raising taxes so as to counteract the inflationary effect of an excess stock of base money at some point in the future may be necessary, and given that that may prove politically difficult, then clearly that’s an argument for skewing things in favour of high multiplier forms of spending.

But exactly how much importance should be attached to the latter point is near impossible to say with any certainty. In short, Richard Murphy’s point about the multiplier is more complicated than he seems to think.

Fractional reserve banking causes excessive debts.

 
 

There is a widely accepted view that the existing, i.e. “fractional reserve” bank system, is partially responsible for the amount of debt owed by households and other entities in the private sector. Indeed, the latter “excessive debt” charge is one of the basic points made by advocates of full reserve banking, the alternative to fractional reserve.

For a list of about sixty economists who oppose fractional reserve and back full reserve, see here.

While I basically agree with the above sixty economists, there is a glitch in the argument they often put which could do with being rectified, as follows.

It is often claimed that the right that private banks have under fractional reserve to print money amounts to a subsidy of those banks, which in turn leads to an unjustified expansion in the whole lending and debt creation process. For an example of that sort of claim, see the second half of p.31 of “Creating New Money” by Joseph Huber and James Robertson.

In addition, critics of fractional reserve often argue that there is something much worse involved in fractional reserve than the latter subsidy: fraud. That is, a fractional reserve bank is one which (among other things) accepts deposits, 2, grants loands, and 3, tells depositors that their money is safe, which it quite clearly cannot be: reason is that when a bank makes enough silly loans (and banks have done that regular as clockwork for at least five hundred years), the relevant bank CANNOT repay depositors their money.

However, if a bank were to engage in the latter “accept deposists and lend” activity and tell depositors that the bank will do its best to ensure depositors’ money is safe, while not ACTUALLY PROMISING to be able to repay depositors their money, that would be an entirely open and honest free market transaction. Ergo there is, at least in a sense, nothing wrong with money creation by private banks: i.e. there is nothing wrong  with letting banks create the latter sort of INSECURE money.

The problem  comes however, when governments get involved. That is, when depositors lose money, there’s an outcry and demands are made that government should do something, which of course they do in the form of implementing taxpayer backed deposit insurance and multi-billion dollar bail outs for banks.

And that is a subsidy – for several reasons. First being insured by an insurer with  an infinitely deep pocket, i.e. the right to grab limitless amounts of money off taxpayers, is a subsidy. Second, multi billion dollar bail outs are clearly a subsidy.

Third, banks are actually just one type of lender: there are also for example pension funds and mutual funds which lend to corporations when the former funds buy corporate bonds. There’s no multi-billion dollar bail outs for those funds when things go wrong. Thus deposit insurance and bailouts amount to preferential treatment for one type of lender, and that ipso facto is a subsidy of the latter lender.

So to summarise, the subsidy of banks that occurs under fractional reserve does not lie in the fact of private banks being allowed to create / print money as long as that money creation is confined to the above mentioned relatively INSECURE form of money.

The subsidy occurs when government gets involved and tries to turn that insecure form of money into near totally secure money, backed by the right, where necessary, to extort money from taxpayers. And I'm pretty sure that point was missed in the above "Creating New Money" work.
 

So is central bank created money also subsidised?

And from that it might be deduced that, by approximately the same token, a subsidy is involved when the state creates money in a slightly different way: i.e. has its central bank create money (so called “base money”) with that money being spent into the economy. Certainly George Selgin seems  to make the latter claim.

Well the answer to that is that creating and spending money in the latter way does not NECESSARILY  involve preferential treatment for any given sector of the economy. Of course government and its central bank CAN CHOOSE to use new central bank money to favour a particular sector, but that form of money does not OF ITS NATURE involve a subsidy of any  one sector in the same way as fractional reserve banking plus bank bail outs involves a subsidy of private banks.

For an example of using new central bank money to favour a particular set of people, perhaps the most obvious and large scale recent example is QE, which has raised asset prices and which has been a boon for the rich.  

Charlatans, poseurs, frauds and time-wasters just love the word “sustainable”.

The word sustainable is essentially meaningless. Of course the phrase “environmentally sustainable” means something, and it’s an important phrase. That is, we certainly need to do far more to combat climate change and other pollution related problems. But the word sustainable is nearly always used ON ITS OWN, and in circumstances where it is far from obvious what any environmental implications might be. I.e. the word is normally used to pad and/or do a bit  of virtue signalling.  

But the fact that the word is as good as meaningless does not stop hundreds of academics and similar repeating the word ad nausiam. Another reason they repeat it over and over is because it’s FASHIONABLE.

In contrast, there are blogs authored by high quality academics (I’d cite for example Simon Wren-Lewis and Frances Coppola) who scarcely ever use the word.

Fashion fools a large majority of the population. If it was fashionable to march up and down the street, one arm raised at fourty five degrees, and chanting “Sieg Heil”, then about 95% of the population would be happy to do just that. As Edmund Burke said, “Custom reconciles us to everything.”
 

So who ever said anything should be “unsustainable”?

One absurd aspect of the word is that no one in their right minds advocates anything that is UNSUSTAINABLE in the sense that it is likely to collapse in pile of rubble shortly after being set up or constructed. For example does anyone advocate the construction of traditional brick built houses that collapse after three years?

Does anyone advocate the manufacture of cars with no rust proofing?
 

Shock horror: we’re surrounded by “unsustainable” stuff.

And  finally I have some utterly DISASTROUS news for the zombies who keep repeating the word sustaionable: we’re surrounded by things that are not sustainable. Human beings are not sustainable in that they die approximately eighty years after being born. Cars only last about fifteen years. Houses last roughly a hundred years on average.
 

Conclusion.

If you want to spot an academic, journalist or economics think tank wonk who has no worthwhile ideas, but is desperate to make it look like he or she is doing something, just see if the individual concerned uses the word sustainable in the title of their work or in the introductory paragraph.

The latest bit of woke nonsense from Positive Money.

 

 
Positive Money was founded by Ben Dyson around ten years ago with a view to promoting full reserve banking (aka “Sovereign money”, aka “100% reserves”, aka “narrow banking”). And that’s what PM did for at least the first five years of its existence.

Unfortunately it now spends much of its time pushing a number of bizarre woke ideas like the one pictured above which appeared recently on Instagram.

There are several flaws in the idea that colonialism is responsible for climate change. For example Britain was the first big time polluter in terms of CO2 emissions and that stemmed from coal mining. And clearly a proportion of that coal was used to power ships which helped bolster the British empire. Unfortunately though the British empire PRECEDED coal powered ships by a good hundred or two hundred years. I.e. prior to coal powered ships there were (gasps of amazement) sail powered ships!

Looks like the connection between colonialism and pollution is a bit tenuous, but it gets worse, and for the following reasons.
 
Had Britain had no colonies at all, why would that have made much difference to the amount of coal mined in Britain? Much of that coal was used for power generation WITHIN Britain and to power railways WITHIN Britain and for the production of steel used WITHIN Britain!

As for Positive Money’s idea that capitalism is responsible for pollution, is the suggestion supposed to be that non-capitalist economies (e.g. Russia between 1917 and the collapse of communism in the 1980s) don’t consume coal and crude oil?

Moreover, the fact that a significant proportion of the coal mined in Britain was exported direct to colonies and used to power factories which exported products to those colonies still doesn’t prove a connection between colonialism and pollution. The reason is as follows.

A colony is a country which the colonising country dominates through the use of FORCE. In  contrast to that, there are countries which any given country, including a coloniser, can trade with WITHOUT the use force.

Now to take the example of Britain and the railways which Britain built in one of its colonies, India, suppose Britain HAD NOT colonised India, but had nevertheless, after inventing railways, gone along to India and said: “How about we build a railway system for you for several billion pounds (at 2021 prices) which will bring you enormous economic benefits.”

Well India would presumably have said, “We’re up for that”.

The moral is that the fact that historical examples of colonialism involved extra pollution, does not prove that absent that colonialism, things would have been much different: in particular, the total amount of pollution could easily have been much the same.  


.

The Tony Blair Institute proposes a fiscal rule.

 

That’s in a work published yesterday and entitled “Fiscal Rules, OK?”

There’s a good summary of the failures of various fiscal rules between 1997 and the present on pages 6 to 11 of this work.  

The fiscal rule proposed in this work, as one of its authors admitted during the associated webinar yesterday, is complicated. By comparison, my preferred rule (which I think is pretty much MMT compliant) is ultra simple. It simply consists of: “The deficit should be whatever keeps unemployment as low as is consistent with hitting the inflation target, while interest on the debt is held at or near zero”. And that in turn is in effect close to the Simon Wren-Lewis / Jonathan Portes rule which says that stimulus should be implemented via interest rate cuts except where interest on the debt is near zero, in which case fiscal stimulus should be implemented.

The Tony Blair Institute (TBI) rule consists of four elements. The heading for the first is “1. A Long-term Government Debt Objective and Implied Deficit Ceiling.” And that involves declaring what the ideal debt / GDP ratio to aim for in ten or twenty years is.

Well there’s a big problem with a long term debt / GDP ratio objective, which is that the size of the debt itself influences demand, and it is plain impossible to say years in advance what sort of assistance from deficits and debts the economy will need in ten or twenty years time. I’ll expand on that.

Government debt is essentially money that private sector entitites have deposited at a bank called “government”: i.e. that debt is an asset as viewed by the private sector. Thus the higher the debt, all else equal, the more the private sector will tend to spend. Plus of course, the deficit itself stimulates demand.

But if say there’s an increased desire to save or hoard money in ten years time, the appropriate debt will be higher than absent that desire to save or hoard! Or if consumer and/or business confidence is much higher in ten years time than it is now, then all else equal, a LOWER debt would be suitable. Conclusion: aiming for a specific amount of debt in ten or twenty years time is a questionable objective.

The truth is that government does not have much choice about the size of the debt and the stock of zero interst yielding base money (and the sum of those two is sometimes referred to by MMTers as “Private Sector Net Financial Assets (PSNFA)). For example if PSNFA is lower than the stock of PSNFA that the private sector wants to hold, then the private sector will save in order to acquire its desired stock and we get Keynsian “paradox of thrift” unemployment.

 

The second element.

The second element of the TBI fiscal rule is headed: “2. A Real-Time Affordability Test.” And the first paragraph under that heading reads, “The deficit limit would then be adjusted to reflect the affordability of additional borrowing. The adjustment would be calculated based on the difference between the real interest rate on government debt and the long-run growth rate, such that the government’s scope to borrow is expanded when borrowing is cheaper and reduced when it is more burdensome.

The flaw in that idea is that it assumes governments and central banks have no control over interest on the debt. As MMTers have explained over and over, interest on the debt is what MMTers often call a “policy variable”: i.e. governments can pay any rate of interest they want. To illustrate, if a governments wants to pay nothing at all, it can: it just needs to implement stimulus by creating and spending zero interest yielding base money into the economy in whatever amount is needed to bring full employment, and not offer to pay any interest to anyone.

 

The third element.

This consists of a so called “escape clause” similar to the Wren-Lewis / Portes idea, namely that fiscal stimulus kicks in where interest rates are near zero and stimulus is definitely needed. Well doesn’t that rather clash with the “aim for a specific debt / GDP ratio in ten or twenty years time” objective? If fiscal stimulus continues to prove necessary, then the debt is simply going to rise and rise, perhaps to somewhere near Japanese levels.
 

Conclusion.

I favour the ultra simple MMT type rule.