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A new twist on the Laffer Curve

The Laffer Curve is a description of the theoretical optimum point of taxation rate on a population. It implies that there’s a ’sweet spot’ of taxation where the most income is generated for government coffers. Set the taxation rate too low and the government misses out on potential revenue. Set it too high and an increasing proportion of the population finds ways to avoid tax, moves abroad or simply works less because the extra effort isn’t worth the reduced extra reward. What the Laffer Curve doesn’t explicitly take into account is the effect on a population of the perceived morality of public spending. For example, while an argumentative person might perceive taxation to be nothing more than demanding...

posted on: May 28, 2009 | author: Alex

The FIRE goes out

Countries like the UK have come to be known as FIRE economies, because they consist largely of companies involved in Finance, Insurance and Real Estate. These markets were seen as far more sexy and productive than boring old manufacturing or farming. Which, according to a certain viewpoint, is true: there’s a limit to how much stuff people really need, so once your manufacturing and food distribution processes are suitably efficient it seems wasteful to pour more resources – and people – into making and growing stuff when you can make far more money working out how to flog what you and other countries make at higher prices to more people. However, if your manufacturing and agricultural base shrinks too far, you end up being dependent on imports for the necessities in life. This is a problem. To put it simply, you can probably do without home contents insurance but...

posted on: Sep 18, 2008 | author: Alex

The trouble with bankers

Usually on this site I write features about various aspects of the financial system, leaving Lance to concentrate on the current affairs opinion pieces. But it’s becoming increasingly difficult to remain dispassionate. The financial system is having a bit of a wobble at the moment, rather like that earthquake that hit the UK recently, knocking a few glasses off the shelves and knocking a few minor celebrities off the front pages, at least for a day. What has been called a ‘credit crunch’, and ignorantly predicted to be ‘over by Christmas’ (though, like the war, nobody states which year), is actually something rather more serious: in all probability it’s a return to normality. Risk is now being priced...

posted on: Mar 25, 2008 | author: Alex