Peter Oborne says tax and macroeconomic policy are subjects "which most people regard as important but unintelligible” (reg req). This is odd. I’ve long regarded them as intelligible but unimportant.
Take the three big aims of economic policy:
1. Faster economic growth. This paper (pdf) argues that national governments cannot increase log-run real GDP growth. That renders superfluous the open question of whether faster growth is a good thing or not.
2. Macroeconomic stability. Robert E Lucas has argued that the welfare gains from stable growth – for a given trend – are tiny (pdf). Revealed preferences suggest he’s right – if people really were concerned about macroeconomic instability, they would have developed macro markets, markets in GDP-related securities, to insure against such fluctuations.
3. Equality. The Gini coefficient for post-tax incomes has not changed since 1996-97 (table 26 of this pdf). However, the 90-10th ratio of incomes has fallen a little, and there has been some reduction in relative poverty (pdf).
On the big issues, then, the Chancellor’s work has been unimportant, at least relative to the attention it’s got.
You might reply that it has, though, been unintelligible, as the tax system is incomprehensible.
It is, but the incomprehensibility is perfectly intelligible. First, it’s best not to try to understand the tax system. As a classic episode of Colditz taught us, it’s dangerous to get to close to mental illness.
Second, the incomprehensibility serves a useful function. It creates work for tax lawyers and accountants, and gives the rich ways to escape tax. In this way, two constituencies which might oppose big government are appeased.
Luckily, though, if we keep our affairs simple – and don’t get any damnfool ideas about starting a business - it’s easy to avoid having to think too much about what the Chancellor does.
And this is a wholly good thing. It’s the mark of a civilized society that politicians don’t much matter; compare A.J.P Taylor’s description of pre-1914 England to parts of sub-Saharan Africa today or Soviet Russia.
The gravest indictment of Gordon Brown is not that his work has been unimportant, but that he and the rest of New Labour are trying to make it important.
People care about stability of employment, not growth per se, surely? And the Lucas paper linked doesn't really say that output stability is worthless; it says that further improvements are not worth having - simply not fucking things up is a fairly important achievement.
Posted by: dsquared | February 19, 2006 at 05:53 PM