Taxation made fun

The other book I left half-finished before our holiday was Rebellion, Rascals and Revenue by Michael Keen and Joel Slemrod. Believe it or not this is a very jolly book about taxation – covering textbook issues such as tax design, tax burden, tax administration etc. The underlying message about the economics is: it’s complicated. Indeed, it isn’t just about economics, but tightly intertwined with politics and power. The implicit follow-on message: there cannot be an ideal tax system good for all time. Indeed the book ends with the challenges posed by globalisation and digitalisation, suggesting some possible solutions – even hinting at the prospect that land value tax is one of these.

The fun comes in through the many historical episodes of taxes going wrong. This makes it a kind of tax version of the wonderful Crewe and King Blunders of Our Governments, which I always put on my public policy economics reading list. The book takes us from medivaeval times to the present and around the world (albeit with a US-UK bias). The knowledge and range of the authors is impressively encyclopaedic, and the quality of the writing is superb.

So I greatly enjoyed reading the book with the slight reservation that it isn’t clear who the intended audience is. At 500 pages with detailed footnotes it is a bit long for the general reader, unlikely to get picked up in airport bookshops (remember those?) I could see recommending sections to students for a bit of light relief as well as a non-technical account of issues they are covering in their public finance courses; but it isn’t a text book. There isn’t a discernible narrative, chronological or analytical arc – it’s episodic and didn’t seem to suffer from my reading it in separate chunks. Having said that, the book will answer any question you might ever have had about taxation in principle or practice and is highly entertaining too. What a combination.

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Summer reading

It’s been the holidays, and I was part way through two books before we even left to go to the West Wales seaside. So this is a bit of a round-up.

One of these was The Party and The People: Chinese Politics in the 21st Century by Bruce Dickson. For someone like me who knows so little – reading a bit, two trips to Beijing – this is a wonderfully informative book. There is a lot about the institutions and processes of government, including the importance of the regions, and post-Mao developments in politics. Each chapter addresses a question – for example, How are Leaders Chosen? Does China have a Civil Society? – with a mild inclination to debunk received wisdom (such as the trope that China is becoming more nationalistic over time – it is one of the most nationalistic countries along with the US but if anything that is diminishing over time). There’s very little on the economy, the focus is entirely politics. I took away two messages: the over-riding concern of the Communist Party with social stability and its own role; and the fact that Xi Jinping may have destabilised an unusually stable regime by undoing the system that was in place to limit leaders’ terms and have an orderly succession. Highly recommended. My sense is that even real China experts would find this interesting.

81HZVq2FS0L._AC_UY436_QL65_I’ve also re-read after many years Scott Lash and John Urry’s Economies of Signs and Space (1994), which I first read in 1997, just as my first book The Weightless World was published. They cover (from the sociological perspective) exactly the same territory as my book and I must say I think we were all equally prescient about the kinds of changes being brought about by digital technology and the subsequent structural changes. One way in which they were far ahead of me though was identifying the importance of environmental pressures – I’d forgotten it was in there. Another difference between them and me is in their conversation with the literature on post-Fordism, emphasising changes in consumption rather than production; economists are generally not all that familiar with that literature. Anyway, I went back to it because I have the honour of giving this year’s Urry Lecture at Lancaster University in late October.

51jSbl9RTkLOther holiday reads: Peter Godfrey-Smith’s Metazoa, an absorbing account of what other creatures can feel and think (who knew fish can distinguish blues and classical music); Jean Rhys’s brilliant Wide Sargasso Sea; Eric Ambler’s Mask of Dimitrios with the frisson of the mood of the late 1930s and that sense of inevitable upheaval on the horizon; Legacy by Thomas Harding – a history of the Lyons commercial empire from a single immigrant entrepreneur in the late 19th century to one of the UK’s biggest food producers and retailers which en passant invented the LEO computer and was then broken up by the late 20th century.

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The business of digital disruption

It has taken me a shamefully long time to read Will Page’s excellent book Tarzan Economics. Will was Spotify’s economist and before his move into the music business had worked for the Scottish Government. So he has the distinct advantage of being able to wear two pairs of spectacles to look at digital disruption, the policy lens and the lens of the disruptor. The term ‘Tarzan Economics’ refers to the leap businesses need to make from one vine in the business jungle as it descends, to another vine, in order not to crash to the ground. The book combines economic analysis of digitalisation with business advice, and carries off the combination. It isn’t in quite the same league as Shapiro and Varian’s now old classic (1998) Information Rules, but on the other hand is far more up to date and gives us a front row seat for what has happened in the music business.

It was always astonishing to me (see Sex, Drugs and Economics) that the music business reacted to the Napster et al threat by deciding it would be a good idea to prosecute their biggest fans (rather than responding to the demand for unbundling). As Will writes, “If piracy of a particular artist was increasing, the lawyers would be getting worried about intellectual property being stolen, whereas the promotion departments would recognise they had a hit on their hands.” The book identifies the real threat to any content business being the limited amount of time and attention we all have. There are nice examples of more sensible ways of responding (other thany trying to put your customers in prison). One is the Atlanta Falcons having made their stadium a pleasant environment with good, reasonably priced food and no rip-offs. Elasticity of demand is such that revenues per attendee have risen substantially, attending the game winning out for enough people over watching on TV from the La-Z-Boy recliner at home.

The book is structured around (as the subtitle has it) ‘eight principles for pivoting through disruption’. These include for instance tactics for working the dynamics of the long tail and how to price discriminate: voluntary donations can raise more than conventional pricing, for instance, the famous Radiohead experiment in voluntary payment for their album (followed later by release of a special boxed set) being one of the examples here. I found the chapter on the use of data, including Spotify examples, fascinating. There’s a lovely anecdote about Will visiting Richard Thaler, who came up with the answer after the company’s data scientists had failed to discover – despite intense data mining – exactly why Discover Weekly was such a success; I won’t spoil the story.

Will is one of the band of enlightened economists who can think more broadly than many. He gives the specific example here of the limitations of the cost-benefit analysis – for example in deciding whether to invest in a museum; the inspiration and education it provides need to be in the mix along with the visitor numbers and entry fees. Not surprisingly given his Spotify role, he argues that the music industry held on to its damaging old vine for a decade too long but things are looking rosy now – I’m not sure all of the music industry buys into this cheerful, new vine outlook. Nevertheless, it was one of the earliest industries to face profound digital disruption and the lessons are well worth pondering. As Will says, the aim of the eight principles and the examples in the book is not to proclaim answers but to help readers ask the right questions about their situation and pick the most appropriate strategies and tactics.

Whether you are involved in a disrupted business or just interested in digital economics, Tarzan Economics is a terrific read, very nicely written, and with the economic analysis sweetened with plenty of examples. Will will be appearing at the Bristol Festival of Economics talking about it in November.

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Productivity and the pandemic

This is a collection of essays that does what it says in the title, Productivity and the Pandemic. The book has a UK focus and, as an output of the Productivity Insights Network, a strong interest in the geographic impact of the pandemic shock to the economy. The chapters range from the future of cities to mental health, from housing markets to entrepreneurship. As always with an edited volume the contributions vary, and few people will want to read cover to cover rather than picking out the chapters of interest to them. Another issue of course is that the pandemic isn’t over so it is quite early to be trying to evaluate its impact.

Nevertheless, there are some interesting chapters. I enjoyed the chapters on global supply chains and on firm strategies under uncertainty, although neither of them offer definitive answers about pandemic impacts. But clearly the questions of resilience and uncertainty will figure in policy debates from now on. Such tightly coupled production and distribution networks might not be the thing in future. (I write as food distribution seems to be in question again in the UK because of ‘pinged’ workers needing to isolate, and a threatened haulage strike, and Brexit.)

I also particularly liked a later chapter on ‘The Paradox of Efficiency’ by Ekkehard Ernst, about hedging risk in uncertain times. This is clearly a related issue but goes beyond supply chain issues to mention ‘over-provision’ of robust public services rather than running them hot. This is a conclusion I drew with some colleagues, looking at NHS hospital productivity in 2020. Ernst writes: “The countries that provided relatively abundant public services managed to fare significantly better in containing and managing the pandemic.”

This is an assertion – there is no evidence provided here to support it – but one well worth testing. More broadly, we need to start thinking about risk-adjusted productivity measures: what’s the climate risk impact on agricultural productivity for example?

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Divisions

I devoured Amartya Sen’s wonderful memoir, Home in the World. It covers his early years growing up in what is now Bangladesh, his schooling in Santiniketan (attending the school established by Rabindranath Tagore, to whom his family was close), college in Calcutta and then at Trinity College, Cambridge. The book ends at the early part of his academic career, in Cambridge and visiting posts in California and Massachussetts.

It’s a beautifully-written book and illuminates Sen’s intellectual formation. Clearly his family and Tagore played an enormously influential role, and so too the intellectual ferment in Calcutta in the early 1950s. Tagore’s school sounds remarkable in the freedoms it gave students and its emphasis on the role of reason, in unreasonable times. The political upheavals of the British withdrawal and partition play a relatively low key role in this story; but it has a lot to say criticising the religious and caste divisions in the sub-continent then and now, with many excursions into its history. Needless to say, the British don’t come out of this well.

The account intertwines the history of Bengal with Sen’s personal history and his intellectual development – particularly why he became interested in social choice theory at a time when few other economists were working on it, and his Cambridge colleagues warned him against pursuing it. There are interesting sections on Buddhism, and on Marx – in effect what each contributed to Sen’s reaction to the Arrow Impossibility Theorem (the possibility of agreement in restricted domains even if not about fundamental metaphysical views of the universe in the former case, and “a pioneering contribution to the understanding of the epistemic implications of observations” in the latter.)

Among all this, a personal history, with the most gripping episode being early treatment with radiation therapy for oral cancer as a new student in Calcutta. Thank goodness he survived. Anyway, highly recommended.

I also read this week The Northern Question: A History of a Divided Country by Tom Hazeldine. The divided country in this case is England, and the book traces modern divisions pretty much back to the Dark Ages (it is nevertheless quite short!). It essentially portrays the northern (and south western) regions as colonised by the capital, and repeatedly sacrificed for the sake of the financial sector. The book argues that it is not surprising the Conservatives should always favour southern financial interests: “The Conservatives are first and foremost creatures of the South,” (although they have won more Northern English seats more of the time than I had realised). Hazledine’s quarrel is with Labour Governments that tilted the same way, from Macdonald and Snowden, to Wilson, to Callaghan and Healey, to Blair and Brown. This is the main point of the book. It concludes, “[Labour] has routinely swallowed a definition of the national interest that puts sterling and the City ahead of manufacturing and the North.” Looking at the trajectory of sterling over time it is hard to believe many of our governments have really wanted a strong currency, but I’m easily persuaded that City interests have generally dominated. Or at least a Southern governing class perspective that sees all the rest of the country as uncouth provinces. Brexit may prove the exception – we will see. Not that damage to the City in this case will do anything to influence the North-South divide.

Then this weekend in the garden Kazuo Ishiguro’s very fine novel Klara and the Sun. More than any other novelist I can think of, he presents the world comprehensively through the perspective of one character – in this case, a humanoid AI. Very thought-provoking, and a page turner, finished it in a day.

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