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I’m no great fan of contemporary conceptualism and have no intention of defending it, though I have close friends who most certainly would. To me it’s at best wry amusement, we can laugh at Damien Hirst’s automatic masturbating BMW, but it can’t possibly have the shock value of Duchamp. Duchamp changed the way we look at art, though I would cite Van Gough’s ‘Chair’ and ‘Boots’ as also significant in this direction, as were the painters who smashed the idyllic myth and portrayed rural labour as it really was. In the modern age art ceased to be merely bourgeois entertainment and became confrontational (or some of it did). This is obvious if we look to the designs of the Bauhaus, even though Mies tried to keep the Bauhaus out of politics (it influenced most modern design and particularly typeface and graphic style that can still be seen in advertising). Consider how boring and predictable the daubs beloved of the Nazis and Stalinists were. Ultimately contemporary conceptualism is safe despite all its posturing, it would hardly appeal to the likes of Saatchi were it not so. Someone like Beuys on the other hand, is most certainly not ‘safe’. Walking through a gallery of his fat is not pleasant, but then it’s not intended to be. I didn’t find walking round a concentration camp pleasant, nor going into the underground trenches at Hellfire Corner, I find Beuys a bit like that, I don’t want to go back, but I’m glad I’ve been.

I think it’s worth remembering that much art and music that’s now considered mainstream was revolutionary and caused outrage when first performed. I doubt if anyone with any taste would seriously object to Stravinsky or the Ballet Russe today. Whilst art is certainly multi-faceted and virtually impossible to define, I regard this shock value as an essential part of it. It drags us kicking and screaming into a new reality, other works serve to confirm what we are and what we know (and it does many other thing besides). Art needs to be experienced in the flesh, I though Picasso was good from illustrations, when I spent some time with his work I quickly grew to love him and rate him as the greatest since the Renaissance (but again my subjective view, though I could certainly argue the case). I could never understand the fuss over Rothko until I stood surrounded by those immense canvasses and felt the impact. It would seem that modernism simply ran out of steam and the post-modernist influenced contemporary conceptualists are all we’re left with for the present. I can’t stand Gilbert and George, I find them glib, glossy, and fatuous. I was saying this to a friend who works at the Tate, he is a keen fan of conceptualism, before I could finish he cut in and said, “Of course not, they’re gay fascists.” He may be right. I’m not that keen on Glass’s music, but I recognise that he’s important and sometimes give him an ear, I’ve even enjoyed him at times, I think that’s a matter of mood coinciding.

I don’t think it’s a matter of location per se, it’s social milieu that creates the cross-fertilisation. Vienesse society must have been fairly small, if they didn’t know each other they’d have known people in common. In 1930s Germany the artists, led by Piscator, would take a state opera house for a season of radical productions. The only one I know of that was actually a communist was Eisler, the rest were fellow travellers, but I think you should remember the social conditions pertaining at the time for the majority before you reject this out of hand. As Gross said, “Better a canvass than a workers’ cottage”, when a bullet fired in a riot penetrated a classic work. When there’s no other vehicle for social change and conditions are bad with no chance of improvement, we shouldn’t be surprised if people adopt the extermes of revolution or fascism.

You’re starting to convince me somewhat over the taxation issue, I’ve never been really at ease with the NuLab approach. I do have a problem in that neither has appeared to work on previous occasions, but I’m afraid I can’t offer any other solution. Such economic debates aren’t really my forte, I prefer to be advised; although not someone I quote very often (unless as a piece of shock rhetoric), I quite like Bakunin when he was asked about the role of experts: “If I need a new pair of boots I ask around and find out who the best bootmaker in the area is. I let that man explain to me about quality of leather, stitching, the best soles and heels and such like, but I don’t let him decide what style of boots I wear.” I agree with you completely over the incentive issue, if we wish to break this dependency culture it seems the only way to go about it to me. Apart from the percentage ownership already mentioned, I don’t really have a problem with wealth itself. I think there are concerns where wealth and business combine to allow undue influence and power, as exemplified by the likes of Gates and Murdoch, but that problem is probably best resolved in another way entirely.

No dispute whatsoever over immigrant labour, I’ve used similar arguments to the local lads here when they’ve been expressing resentment … ‘Don’t blame the people who come, were we they we’d do the same. Blame the government that’s allowed it to happen in this way.’

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Enough!

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The extension of the period to the early twentieth-century is not unreasonable. But if developments in culture, science and philosophy were related geographically, I’d find your examples quite worrying. From my perspective (I’d be interested to know if you feel the same, as someone who obviously knows a lot more than me about the modern arts), the music of Schoenberg and Berg, though undoubtedly innovative, is a wrong turn. Music began to lose its humanity, and became more of a pure intellectual exercise at that point. I realise that it was always intellectual, but it was more than that – art is the harnessing of those skills to something that creates a subjective response, and I’m not sure “yuk!” or “eh?” are the highest of the responses that one could provoke. There seems to me, from an uninformed perspective, a parallel between classical music and modern visual art, and their paths from vaguely incomprehensible but at least innovative at the turn of the last century, to neither interesting nor comprehensible at the turn of this century. Or, to put it another way, from my perspective, the arts disappeared (with some exceptions, obviously) up their own fundament during the twentieth century. I think one can track similar patterns in many other areas of thought during that period, but I had other developments than Austrian economics in mind. Hopefully, they are no more connected than being products of fertile conditions for intellectual experimentation.

On the subject of taxation and wealth, one of the interesting things – as your example of the Soviet Union, or the modern example of ten years of Labour government demonstrate – is that direct efforts to rebalance wealth-distribution often have little, no or even sometimes a perverse effect. I agree with you that a world in which the top 10% own 90% of the wealth seems wrong, but from a slightly different perspective. If those 10% (or their ancestors) genuinely earned their wealth through merit and prudence in an unbiased system, then I wouldn’t have a moral problem with it. I don’t have a problem with inequity or huge wealth, however extreme, per se. But I doubt that abilities are so unequally divided that this would be the result of an unbiased system (I would be less certain about prudence, which seems to be one of the defining factors that differentiates rich from poor, often over many generations). So I look at that unequal distribution as prima facie evidence that the rules that govern our prospects are biased. And when I look at those rules, I think I find many examples of bias. My response is not to think that that bias is inevitable and so redistribute to take account of it, but to look to improve the rules to eliminate the bias. If, having done so, there is still huge inequity between rich and poor, I will feel that such inequity is nevertheless just.

I should be clear that, by “biased”, I mean “different rules for different people or circumstances”. I don’t mean “failing to correct misfortune or disadvantage”.

Personal taxation and welfare is a classic – perhaps the most important – example of a biased system. What matters to household income and incentives is not the nominal rate of personal taxation, but the effective rate – the balance left after deducting all taxes and adding all welfare payments. Income depends on the net effective rate (household net income after taxes and benefits relative to household earned income before tax), and incentives depend on the marginal effective rate (how much an extra pound of income will increase the household’s disposable income). On the basis of these effective rates of personal taxation, Basic Income and Flat Tax (BIFT) provides a more progressive tax and welfare system, than does the current approach of progressive taxation and means-tested welfare (PTMTW).

It is well-known (I hope) that our current system of means-tested welfare produces very high levels of marginal effective rates of personal taxation on low-earners – often over 90%. For every extra pound that you earn, the loss of benefits means that the net effect is only to keep a few pennies. Who would look for (additional) work under those conditions? No wonder we have a growing underclass. It is generosity of welfare-provision, combined with budgetary necessity and calvinist distaste for supporting the undeserving, which produces this result. Perversely, it is the attempts to target support at those in need that places an ever-stronger stranglehold on many who might otherwise be able to work their way out of poverty. There is no way of avoiding this effect with a PTMTW system. The more generous you try to be, not only does taxation have to rise to cover the cost (with Laffer-curve consequences to tax-revenue adding to the burden), but also so does either the withdrawal rate (which further increases the marginal effective rate of taxation and therefore the disincentive to work), or the number of people dragged into means-testing, and therefore captured by these disincentives. It’s like golf (or at least, how I remember golf) – the harder you try to hit the ball, the worse it goes. Needless to say, Gordon has been trying to hit the ball out of the park.

BIFT, through eliminating means-tested withdrawal of benefits, greatly reduces the marginal effective rate of taxation on low earners. Let’s say that individual (not household) BI were £4,500 and the FT rate were 43%. (Notice that, unlike most flat-taxers, I do not assume that a flat tax is necessarily a low tax, though I would like it to be as low as is consistent with providing those things that the state ought to provide. This is a starter for ten assuming no efficiencies had been made in government budgets, in order to compare like with like.) The net and marginal effective rates on high-earners would be pretty similar to what they are today. On £100,000, they would be 38.5% net and 43% marginal under a BIFT, compared to around 35.5% net and 41% marginal under the current system (it’s not possible to be precise about the current system because of the number of rules that depend on circumstance, but one consistent factor is that these calculations are including employee’s NI as well as income tax). But for someone on £5,000 (e.g. a part-timer), they would be -47% net (negative = receive more from than pay to the state) and 43% marginal under a BIFT, compared to -33% net and over 90% marginal under the current system. I know under which system someone is more likely to try to work a few more hours to increase their take-home. And under which system people are punished less if they are not able to increase those hours.

I could provide acres of even-more-tedious examples to demonstrate the point. But the generality is, though it may seem counter-intuitive, that a BIFT can be designed to be both fairer and more progressive than the current PTMTW system, or indeed any other system you are likely to be able to devise that includes progressive taxation and benefits that are not universal. And yet it provides only a safety-net, and not an income-related redistribution. A policy that is liberal in both the classical and the progressive senses. Strange, but true.

I have the same attitude to the importation of cheap labour to the detriment of our own lumpen proletariat and working class.

There is fault on two sides (government and “proletariat”) of the triangle in this (the cheap labour, for whom I have only admiration, being the third side). The “proletariat” often do not help themselves, but the primary responsibility must lie with government, partly because they are in a position to change things, and partly because it is their policies that make the “proletariat” less inclined or able to help themselves. One of the benefits of a BI, I believe, is that it could be linked to citizenship, so automatic to all existing nationals, but made conditional on payment of taxes for a sustained period of time by those coming to the country. That would tackle the usually-false accusations that “they” are stealing “our” benefits. And it would give nationals a head-start in competition for jobs; they start (say) £4,500 better-off than the foreigners, so ought to be able to out-compete them for jobs if they are equally suitable. Only the really useless should be unable to compete for low-paid jobs under those circumstances.

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you beg a lot of questions. The first of which is, “Why are you selling sweets to earn a living?” And the first thing I’d tell you is that if you’re doing that, then you’re living in a highly inegalitarian economic system which has obliged you to do it.

Yes, of course there would be trade between the two sectors, but it doesn’t have to be one in which people have to sell sweets or sex to earn a living, but because they freely choose to do that.

Oh, I see. So if I’m selling sweets in your version of my world, it’s because I have to. But if people are selling sweets in your world, it’s their choice. I get it, comrade. No need to explain further. In fact, please don’t.

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I have the feeling that my own contributions will probably wind down. It has indeed been very fast moving at times. If nothing else, it’s had me dig out my old copy of the Road to Serfdom, and re-read bits of it, and rediscover it to be as readable as I remembered it to be.

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I perfectly understood your point the first time you made it.

But when you say start off with “Let’s say…” you beg a lot of questions. The first of which is, “Why are you selling sweets to earn a living?” And the first thing I’d tell you is that if you’re doing that, then you’re living in a highly inegalitarian economic system which has obliged you to do it. To achieve equality in the simple theoretical economies I’ve begun to describe, it’s possible to show that if prices are set such that P2 = C2 – ( P1 – C1 ) . L2/L1, where C, P, L are costs prices and lifetimes of tools 1 and 2 in the ‘essential economy’, and the same relation applies to tools 3, 4, 5, etc, then F comes out exactly equal for everybody. There’s a whole range of solutions for this relation, but just one of them is the case where Pn = Cn, which is price set at cost. In a properly functioning competitive market, with different producers selling the same good, prices will tend to be driven down towards costs. So another thing I can tell about you as sweetseller is that you’re not working in a properly functioning competitive market. You’ve maybe got some monopolists in your economy who are pushing prices up towards value, and maybe higher. If the monopoly problem in your badly-functioning economy could be fixed, you wouldn’t have to sell sweets for a living. But you could still make and sell sweets if you wanted to it. You just wouldn’t have to.

I’m not going to explain how I know this, but it’s something that drops out of slowly building up an understanding of how economic systems work in the way that I have been, building up step by step from first principles.

So I’d still say that the ‘essential’ and ‘leisure’ sectors of the economy can be kept separate, in the sense of not interfering with each other. Yes, of course there would be trade between the two sectors, but it doesn’t have to be one in which people have to sell sweets or sex to earn a living, but because they freely choose to do that.

And that’s not even getting into the tricky question of defining which goods and services are “essential” and which are not.

That’s quite easy actually. Goods are ‘essential’ goods if they increase F, and ‘leisure’ goods if they don’t.

But the deeper issue is really one of how to look at economic systems. And it seems to me that there are essentially two approaches. One of those is the line that I have adopted, whereby you build up from simple situations, gradually making things more complex, until you have something that is a good approximation of the real world, and then you make decisions about how to change it based on the knowledge. This is the theoretical physics approach. And as I have approached economics, it’s as a branch of theoretical physics.

The other approach is to start with the whole real shebang, sweetsellers and all, and get to learn empirically how it all behaves, as prices move around, etc, so that you build up a nice set of empirically derived equations derived from the raw data. I think this is called econometrics.

In reality, both are needed, just like with theoretical physics. But, in the end, we’ll only understand how economies really work when have both a good theoretical and empirical knowledge of how they work, and be able with confidence to correct problems that arise in them.

But I suspect that you’re not even going to agree about this.

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I’m not that much in disagreement with your taxation economics, and if I say very much I suspect that we’ll be at cross purposes, but I think there is cause to widen wealth so that we’re more akin to Germany and Scandinavia [it seems obscene to me that in the modern world 10% should own 90% of the wealth and, as I love pointing out, exactly the same figures as for those who controlled wealth in the Soviet Union. In Germany/Scandinavia a third of the population own 90% of the wealth. In the UK the same 10% own 80% of the land if we remove the land average sized houses are built on from the calculation. Plato regarded the kind of distribution we have as producing an unstable society]. Isn’t this part of what Thatcher attempted to do with wider share ownership and sale of council houses, even if her scheme failed because people cashed shares in for the quick profit? Hence I don’t go with a simple flat rate and give some support to progressive taxes, but not quite in the way NuLab see it. I don’t want to increase the tax burden on most of the middle and lower middle classes, or on skilled workers. I agree over the minimum wage, I was in Australia when it was introduced there and, despite the dire warnings from the Liberal Party right-wing, it made no significant difference. I have no time for the argument that there are companies that will be forced out of business, if companies can’t pay a decent living wage they deserve to be forced out of business, the vacuum will soon be filled by more efficient ones that can. I have the same attitude to the importation of cheap labour to the detriment of our own lumpen proletariat and working class. We’d soon have heard the screams if the highly skilled and computer literate Hong Kong Chinese had been given entry and had been allowed to reduce middle class wages and conditions.

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AP (27/6 10:25AM),

Post-chemo or just tired and/or busy, I don’t think any of us can keep up this pace, fascinating as it is. But could you expand just a little on the visual arts and music point? Are you thinking of Brahms and Klimt? Or were there others? Otto Wagner? I’m not well up on the history of the arts, and I’m not at all convinced that artistic, scientific and philosophical blossomings are related, but parallels are interesting.

However, if we want a precursor to Freud’s psychology wouldn’t it be more profitable to look towards James?

Exactly. James may, for all I know, have been a more significant influence on Freud’s thinking. But Freud studied under Brücke and borrowed and extended an idea of his as the basis of the development of ideas on the human mind that bore little relation to Brücke’s work. My point was that we wouldn’t describe Freud as a physiologist for this reason, and we shouldn’t describe Marx as a classical economist because he studied Smith and borrowed and extended one of his ideas. If James was Freud’s real precursor (I don’t know much about James, so I couldn’t comment), I would suggest that the equivalent role for Marx was played by Auguste Comte, not Adam Smith. Your point about Marx’s plans to write about “the influences of such things as ideology and culture on social structures” reinforces this connection with the founder of sociology. This is not to deny the significant influence of others (e.g. Hegel, Owen, and, yes, Smith) in Marx’s confused thinking.

I may be wrong, but I don’t think Marx or Engles (or Lenin or Trotsky for that matter) ever called for ‘wealth to be shared equally’, they did call for a much more equitable distribution. (27/6 10:33AM)

I can’t find anything to contradict you, though I haven’t done a thorough search. But this usefully drags the thread back to one of the important points that got left behind – your suggestion (25/6 10:12AM) that “the link between freedom and prosperity would seem very iffy unless some level of egalitarian distribution is also assumed”. How does one define equitability, and how does one know what is the right level of redistribution? How will you know when everyone is equal enough? Do you think everyone will agree what that level is? It’s a question to which “majority opinion” is a very bad answer, given the ease with which the majority can exploit the minority, and their historical inclination to do so (as noted by Jefferson, Adams and Franklin), whether you view that as the bourgeoisie exploiting the workers, the indolent exploiting the industrious, or whatever.

This brings us to the question of distributive justice. And here I have to admit that I have barely made a dent in Rawls and none at all in Nozick. Perhaps when I get a chance to go through A Theory of Justice (which sits patiently outside my bathroom, but usually yields to more entertaining fare), the scales will fall from my eyes, and I will understand both why and how one would redistribute for egalitarian purposes. But at the moment, I’m afraid I don’t see any sense in it. It seems like a problem to which only woolly solutions have been proposed because they are answers to a badly-framed question. We could go into the theoretical arguments for different forms of distributive justice, but for me, it is enough to observe that the poor in mature capitalist economies are richer than the rich in mature communist economies. It is clear, both theoretically and empirically, that free markets are the most effective means to coordinate social cooperation in the division of labour to allocate scarce resources to the satisfaction of people’s wants. (And that includes their needs, idlex. Please don’t imagine that that debate is useful here.) I don’t deny that inequalities tend to increase in free markets, but so long as the poor are better off under free markets than under collectivist economies, I don’t care if the rich are even richer. On this basis, it seems to me that free markets are preferable from a welfare as well as an efficiency point-of-view.

Redistribution is a way of making free markets less free, efficient and effective. It encourages short-termism and discourages prudence. It encourages consumption and discourages saving. It reduces the reward for hard-work and innovation, and increases the reward for indolence. It distorts valuations and incentives, encouraging the over-production of some (typically low-quality, disposable) goods and under-production of other (typically higher-quality, more long-lasting) goods.

Rather than redistribution, I go for Winston’s safety net, on a moral basis, and leave it at that. Of course, I still have to make a judgment then about what level of provision should be made for the needy, but at least I am trying to judge that on the basis of cost-of-living, rather than the more elusive notion of fairness or equity.

And as a tempter to further debate, I argue that:

(a) the best way to provide that safety net, to minimise distortions to the market and bureaucratic inefficiency and cruelty, is through a Basic Income, and

(b) having provided that safety net through a Basic Income, further redistribution through progressive taxation is unnecessary and undesirable, and should be replaced with flat (and, as far as possible, harmonised) taxation rates.

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Then there’s my wife, who takes some of the money left over from selling sweets, having deducted the cost of buying more sweets and buying the essentials of life, and buys a handbag, even though she already has several. Definitely non-essential. But the handbag-maker doesn’t think so. Without customers like my wife, he’s out of a job and starving. But so long as people buy his handbags, he can not only buy the necessary food and drink, but he can occasionally also buy sweets. Not essential, but it keeps me in food and drink.

You can reduce this down to only essential goods. But you will be in Communist Russia, or modern North Korea. As soon as you allow for non-essential goods, you have to allow for the producers of those non-essential goods selling their products in order to be able to survive. To deny this is the most ridiculous case of self-deception I have ever seen.

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