Tag: Economics In Action

Incentives and rewards are not the same thing, and people who complain that the spirit of Christmas is eroded by commercialisation are not simply priggish. The direct juxtaposition of the purely commercial exchange with the exchange based solely on mutual affection is offensive and unstable.

The dynamism of a market economy comes from innovation in products and processes, and radical innovation in products and processes often – in fact usually – comes from outside the existing market structure.

Sophistication of method is used to torture data to reveal conclusions that do not obviously follow from them, but which fit either the researchers’ preconceptions or the sponsor’s policy objectives, or both.

The interpretation of fairness is culturally specific but rarely does it correspond to measures of income inequality. Fairness is a perception, not a Gini coefficient.

The books that Britain exports have long been made from trees grown abroad. Then globalisation meant the paper was also made abroad, and increasingly the printing took place overseas. Soon selling a book will involve no physical objects. The division of labour becomes ever finer and generally increases the wealth of all involved in the production process.

Irrationality lies not in failing to conform to some preconceived notion of how we should behave, but in persisting with a course of action that does not work.

The distinction between the creation and the appropriation of wealth is vital, if not always clear. But our ability to recognise it will determine, not just the fate of individuals, but the future of modern capitalism.

Activities that are good in themselves are good for the economy, and activities that are bad in themselves are bad for the economy. The only intelligible meaning of “benefit to the economy” is the contribution – direct or indirect – the activity makes to the welfare of ordinary citizens.

Wherever there is uncertainty, market prices reflect the beliefs of those who are more than averagely sanguine. The result is a reserve of illusory value, constantly depleted by events and replenished by fresh uncertainties.

There is no simple answer to the question: “How should capital gains be taxed?” So there are as many different regimes as there are national tax systems and they are often, as in Britain, in a state of seemingly endless flux.