Imagine public spending were as efficient as possible & also were arranged in a stack from the most growth-promoting/least growth-destroying to the least growth-promoting/most growth-destroying, over the long-term. There would be three basic zones. 🧵 1/ In the first zone extra public spending would boost growth. This would be spending on things like courts, police, competition authorities, maybe some spending on roads, & potentially some on welfare such as unemployment benefits. 2/

Recently I've been hearing a certain argument in favour of nationalising utilities. It goes as follows. The govt can secure investment capital at a lower cost than the private sector - eg govt debt is cheaper than private sector debt. 🧵 1/ Therefore, the argument goes, by funding investment in infrastructure-heavy sectors through the govt balance sheet the required returns on the sector will be less (since one won't be funding the higher capital returns the private sector would require), so prices can be lower. 2/

Remember 2014, when George Osborne was planning to get public spending down to 35% of GDP? In 2022/23 total public spending is expected to be 47.3% of GDP. That is more than 1/3 larger, relative to the size of the economy, than was scheduled only a few years ago! *Why*? Public spending was only 39% of GDP before Covid. Perhaps it needed to be higher during Covid, but why is it justified for it to be so much higher, so many years later (still over 43% by 2027/28)?

Just for once, here goes. Some of the benefits of Brexit.
- Not being subject to EU regs designed for the Eurozone not for us, or more generally dominated by the Eurozone
- More flexible UK regs (quicker action; more u-turns)
- More targeted UK regs (no one size fits all)+ - EU itself works better without us so grows faster so we can export more to it (albeit not more than as EU members)
- Quicker non-EU FTAs (not slowed down by the interests of other EU members - interests irrelevant to us), & FTAs better-targeted at our needs
- End of the CAP+

A policy question for you to ponder. Apparently there is a growing trend of pornographic artists using age-reducing apps to make themselves look younger. So, perhaps that handsome young man you admire is actually 45 not 23 as he appears.+ +The policy question is whether pornographic material that is paid for that uses age-adjusting apps should be required to disclose that age-adjustment has been deployed?+

I see that lots of folk have decided that the downfall of Truss demonstrates that what they term "libertarian" economics should never be attempted again. But which bit of Truss' "libertarian" agenda do they think was so bad?+ Was it the reform of planning? Or more generally the idea of attempting regulatory & infrastructure reforms to boost the long-term growth of the economy?+

If I had to pick one thing I'm disappointed in Truss about it's this: running on a platform of no energy bills handouts but instead doing temporary cuts, & then as soon as she got elected announcing a massive energy handout & boasting of how the UK one was bigger than EU ones. It's all v well folk saying "any govt wld hv done an energy package" - Truss ran explicitly on not doing so, & there was no need for the UK one to be vastly more extensive than its European equivalents.

Truss' plan was the following. She wanted to:
- Introduce an energy package
- Introduce some temporary tax cuts & cancellation of tax rises, as we went into recession
- Boost the long-term growth rate of the economy
- Enact a fiscal consolidation based on the new LT growth rate Now I didn't agree with everything she did. My main objection was to the energy package, & in particular its universal nature. It was also the case that if she introduced an energy package on that scale & also introduced tax cuts, the degree of fiscal relaxation was always bound+

I wonder what it is that Tory MPs imagine Truss ought to have done differently? 🧵 When she became PM, energy bills were set to rise to £3.5k within a month. So she immediately announced an energy package. Do Tory MPs believe she should have delayed that? Or is their objection that she should have announced tax rises to pay for it at the same time?+

A wild idea. If Truss is looking for a policy u-turn to help end the current mkt turmoil, how about thinking again about the policy of paying millionaires >£4k/yr, potentially for the next ten years, to heat their swimming pools through the winter? And if the govt is looking for some signals to reassure mkts, how about it stops boasting about how its energy package is so vastly more expensive than every other country in Europe's?

It's naive to believe that market turbulence is always triggered by news. The 1987 Stock Market Crash was famously not triggered by anything specific yet was the largest ever up to then.+ The mechanisms by which market turbulence arises are complex. My favourite paper on the topic is this one, using a beautiful illustrative model based on Aumann state spaces. jstor.org/stable/10.1086…

The govt, via the energy package, has raised public spending to its highest level relative to GDP since WWII apart from the Covid year. So unless it can withdraw from the energy package or raise the GDP growth rate markedly or it gets lucky, taxes will rise or other spending fall That's not a "u-turn". It's simply the blunt reality of what its energy package always implied. If someone thought otherwise, I'm afraid that was simply naive.

Why is it any more legitimate to inherit beauty or intelligence than to inherit wealth or connections? What makes inheriting those things ok? Is it that you think of your beauty or intelligence more fundamentally a part of *you* so they are not really things you *have* but *are*? You own the fruits of your labour (your property) just as much as you own your own hair. Of course, someone could take it away (just as they can cut off your hair). But that doesn't make it any less truly yours.+

Equality of opportunity is one of the worst political concepts ever devised.🧵 According to the doctrine of equality of opportunity (or "meritocracy"), the only thing that should determine your success or failure in life is your biological merit. If you are beautiful, clever, have good digestion, a nice sense of humour, you must flourish.+

My view, stated repeatedly publicly over the summer, was that the govt cld afford to engage in up to ~£60bn of fiscal loosening. It has chosen to engage in vastly more than that, by adding its energy package to its tax cuts - perhaps £250bn+.+ So there's no surprise to me that there has been a market reaction. The govt will have to, in due course, explain how the deficit associated with this is to be funded. I can see from a policy perspective that it needs a couple of months of planning to do that. So Nov shld be ok.+

Embarrassed for the IMF. This is the IMF self-declaring as a left-wing body. The UK should now withhold its IMF contributions.

https://twitter.com/faisalislam/status/1574846702871351297

I am 100% serious in this. If the IMF is going to declare publicly that the UK having 2 tax rates instead of 3 is unacceptable, the UK govt should withdraw from the IMF as UK membership of that body no longer serves any positive function.

If this is how the Russians use their conscripts, presumably their routing trigger kill ratios will go through the floor. More generally, I'd assume a large influx of conscripted forces will tend to favour a switch, at the margin, from corrosion/attrition tactics to manoeuvre tactics on the part of the Ukrainians - cos Russian routing triggers will drop, so manoeuvre returns cld potentially rise?

I still think the market reaction was mainly to what the mini-Budget said about the BoE decision, but I've thought of a potential secondary factor. The market may have felt that the mini-Budget implied a Labour victory in 2024/25 is more likely than they had previously thought.+ +Now that could be because they were hoping Truss wld hv something clever in the mini-Budget that wld turn things around, politically, that just wasn't there. Or they may have felt that what was there (eg the top rate tax cut) was so politically unpopular Labour will now win.+

I struggle to imagine any version of history in which Britain & its Empire failed to expand that isn't manifestly vastly worse than the history we've had.+ In almost any version of history without the British & their Empire it's v likely there'd still be widespread slavery, little to no democracy, no female emancipation, & less engineering or scientific advance. Maybe better music & architecture? More desperation-driven poetry?

Imagine a best-case scenario for Ukraine, where the Russians were driven out entirely by next March. What wld happen to energy prices then? The UK wld want to maintain sanctions til Russia's economy was so degraded it cld no longer sustain a military to threaten its neighbours.+ If other countries supported the UK in that then energy prices wld stay high til we created more energy or used less. That suggests medium-term energy creation plans are potentially useful, not just short-term ones, unless Ukraine is going to lose more territory soon.+

Energy prices are high because there isn't enough energy internationally. Not because of monopoly power, corporate greed, or anything else of that sort. When there isn't enough energy, energy prices being high is the correct thing to happen.+ Think of it like this. Buying in energy is an alternative to other things you might spending your money on, such as getting solar panels fitted, buying a wood-burning stove, flat-sharing with someone else, or spending money on other things entirely such as going to the cinema.