back to article Really, govt tech profit cash grab is a PRIZE-WINNING idea?

So, that favourite of mine and of Andrew Orlowski, Mariana Mazzucato, has been awarded a prize by the New Statesman in the field of political economy. Given that her message is that government should be getting more of the pie, that's the sort of political economy you would expect the magazine to like. However, I find there's …

  1. Graham Marsden

    " I find there's a gaping hole or two in her arguments. I'll concentrate on just one here"

    Translation: Let me cherry-pick one argument that I can nit-pick and use that to "disprove" her entire case.

    Interestingly, TW doesn't mention this bit:

    "Some economists argue that the reward for the state comes through taxation. This, in theory, is right. Innovation-led growth should lead to an increase in tax revenue – but not if the companies that benefit the most from innovations don’t pay much tax compared to the income they generate, not only as a result of loopholes but also because of their continual lobbying for tax incentives and tax cuts that they say they need to foster innovation. It’s not a coincidence that groups such as the National Venture Capital Association helped convince the US government to reduce capital gains tax by 50 per cent in only five years in the late 1970s – an “innovation policy” later copied by Tony Blair’s government. (A policy that even Warren Buffett has admitted has had no effect on investment but lots on inequality.)"

    TW says "We're only making the observation that if we allow someone who has increased global growth rates so markedly to keep his pile of cash, then this will encourage the next person with an idea that might boost global growth rates to get on with it. This is not a moral nor justice "deserved rewards" style argument. It's a purely utilitarian one regarding incentives that induce people to try."

    What he doesn't say is that, rather than the so-called "Trickle Down" effect that is supposed to make us all better off, what we actually get is a "Trickle Up" effect that concentrates more wealth into the hands of a minority, making it *more* difficult for others who want to try to actually get even one foot on the ladder because those at the top can manipulate the markets to undercut newcomers, not to mention leveraging their wealth into political influence.

    "economics is is all about incentives and perhaps we might expect a professor of the subject to grok that"

    And perhaps we can hope that TW will realise that there's a difference between the incentive to try and the incentive of those who have a monopolistic hold on the market (Google, Amazon etc) to ensure that nobody gets to successfully compete with them.

    1. Tim Worstal

      Re: " I find there's a gaping hole or two in her arguments. I'll concentrate on just one here"

      "What he doesn't say is that, rather than the so-called "Trickle Down""

      I've said absolutely nothing at all about any "trickle down" effect. That being where Steve-o goes and buys a new yacht with his billions and thus provides a living to a few carpenters.

      I talked about the consumer surplus that comes from innovation. The benefits that you and I get from using some new thing that an entrepreneur has managed to put together and produce.

      And it's that second that Mazzucato is ignoring which is why I pick her up on it.

      1. Graham Marsden

        @Tim Worstal - Re: " I find there's a gaping hole or two in her arguments..."

        > I've said absolutely nothing at all about any "trickle down" effect. That being where Steve-o goes and buys a new yacht with his billions and thus provides a living to a few carpenters.

        Exactly! Meanwhile his products are being made by the cheapest labour possible, being sold by people who don't get paid much more and the profits go into his bank account and to those who are rich enough to be able to put spare money into shares to get dividends.

        In the mean time we get the latest shiny-shiny which will rapidly become obsolete or break down and probably has no servicable parts in it (maybe not even a replaceable battery!) so we're induced (if not forced) to "upgrade" to "benefit" and so it goes on.

        Cui bono?

        1. Yet Another Anonymous coward Silver badge

          Re: @Tim Worstal - " I find there's a gaping hole or two in her arguments..."

          But to an economist Hurricane Sandy was a massive boost to GDP, all that rebuilding work and all those increased insurance premiums.

          It's rather surprising that the government relies on unpredictable natural disasters and doesn't, for example, merely nuke the eastern seaboard periodically.

          1. Tim Worstal

            Re: @Tim Worstal - " I find there's a gaping hole or two in her arguments..."

            To some economists, yes. Because GDP measures economic activity, value added. What it does not measure is wealth, so it doesn't measure wealth destroyed: it just measures the value added as we try to reconstitute that wealth the storm destroyed.

            A well known problem with GDP: noted by Simon Kuznets, the guy who invented the concept in hte first place. GDP ain't perfect and it is only what it is.

    2. P. Lee

      Re: " I find there's a gaping hole or two in her arguments. I'll concentrate on just one here"

      > making it *more* difficult for others who want to try to actually get even one foot on the ladder because those at the top can manipulate the markets to undercut newcomers, not to mention leveraging their wealth into political influence.

      +1 for that. "Intellectual property" is the big one here. Remember Aereo? Companies don't even need patents that will stand up in court, they just need something that sounds vaguely related so they can tie up innovative competition in legal bills.

      Worse, for all the talk about "wealth creation" there's no analysis regarding productivity beyond dollar figures. A great deal of the tech industry (including smartphones) does little to make people more productive. You could reply to an email a bit faster, but does that faster response actually improve production? Is most of the usage actually fb & cat videos? Encouraging people to spend money on cat videos or music videos doesn't increase wealth, it merely reallocates it. Like a lottery, its a tax on the not-so-bright. Wealth creation via tech requires some improvement to process. Using VoIP to move call centres to outer mongolia isn't it.

      1. DaveDaveDave

        Re: " I find there's a gaping hole or two in her arguments. I'll concentrate on just one here"

        "Encouraging people to spend money on cat videos or music videos doesn't increase wealth, it merely reallocates it. Like a lottery, its a tax on the not-so-bright."

        Ah yes, the classic 'I know better than the fools how they should spend their money'. Funny how that particular piece of nastiness always rears its ugly head in discussions like this, but those pushing it are always opposed to extending the principle to themselves.

      2. Tim Worstal

        Re: " I find there's a gaping hole or two in her arguments. I'll concentrate on just one here"

        " Is most of the usage actually fb & cat videos?"

        To an economist that is wealth.

        People like FB and cat videos. People can now have more FB and cat videos. People now have more of what they want to have. People are richer.

        This is true of anything. If people had all the goods and services they desired (unlikely, but stay with me for the thought experiment) and they also liked leisure, and we worked out a way that they could still have all of those goods and services but they needed to work one hour less a week to get them then they''re richer. By whatever that value of one hour of extra leisure is to them.

        The economists' idea of "wealth" is a very wide one.

      3. Johan Bastiaansen

        Re: " I find there's a gaping hole or two in her arguments. I'll concentrate on just one here"

        Exactly, if one has a disruptive idea for a device, the bloody thing better not have rounded corners.

    3. Tom 13

      Re: " I find there's a gaping hole or two in her arguments. I'll concentrate on just one here"

      Any argument that begins with assuming the State ought to own something produced by a citizen is more fundamentally flawed than the nit TW is picking.

  2. DJKp

    Steve Jobs and his employees had some good ideas, and were able to profit thereby. But much of the profit came because Apple's patents gave it a monopoly, backed by the full force of the US govt. criminal law. Not only that, but Apple's costs were much lower than they would have been in a true free market because of a cartel to cut wage costs, and lobbying to allow cheap, indentured foreign workers (H1-B visas). Thus the profits were only partly from innovation, they were also from access to power, allowing monopolies (patents) to be purchased and enforced, and costs to be (unlawfully) cut.

    Finally, there is something morally wrong --- yes, repugnant --- where one man's labour results in several orders of magnitude more money than it is possible to spend in one lifetime.

    1. Anonymous Coward
      Anonymous Coward

      @DKKp (Morally wrong?)

      Thats the way the world works and if you don't wanna play, please take YOUR hard earned money and give it away to the layabouts too lazy to earn it for themselves.

      You and the ubiquitous government DON'T have any right to my money!

      One mans labor is exactly that. HIS/HER Labor and the fruit of that labor which is money. Who are you to judge? How are you any kind of "moral arbeiter"? You have no such right.

      1. Anonymous Coward
        Anonymous Coward

        Re: @DKKp (Morally wrong?)

        "Thats the way the world works"

        Whatever the rights and wrongs of the various positions this is the most question-begging argument possible.

      2. Cipher
        FAIL

        Re: @DKKp (Morally wrong?)

        Well I suppose its about time our betters legislate how much wealth one can accumulate. That should stifle innovation nicely, once you've reached your cap, why go on?

        Oh wait... better idea... Make all you want but have the state give your surplus to those who haven't maxed out yet. In fact, if the state determines you are capable of making more, it would be codified that you had to.

        From each, to each. Yeah, that's the ticket...

      3. The Dude

        Re: @DKKp (Morally wrong?)

        Hear! hear!

        The pompous moralizing self-righteous left-loons should be first in line to have their money taxed and "distributed fairly", but it usually does not work that way and what actually happens is that they are first in line at the tax trough with cushy government jobs with fat benefits and pensions that people with real jobs are forced to pay for.

        1. This post has been deleted by its author

        2. DavCrav

          Re: @DKKp (Morally wrong?)

          "The pompous moralizing self-righteous left-loons should be first in line to have their money taxed and "distributed fairly", but it usually does not work that way and what actually happens is that they are first in line at the tax trough with cushy government jobs with fat benefits and pensions that people with real jobs are forced to pay for."

          You mean like Warren Buffett?

      4. DavCrav

        Re: @DKKp (Morally wrong?)

        "Thats the way the world works and if you don't wanna play, please take YOUR hard earned money and give it away to the layabouts too lazy to earn it for themselves.

        You and the ubiquitous government DON'T have any right to my money!"

        Idiot. You are responding to a comment that states clearly that Apple's billions are because it is protected by its government, both from a security viewpoint (theft is illegal) and by patent law. The government can either take as much of your wealth as it feels is appropriate for this service, or (in theory) Apple could alternatively refuse the government's help. With a tax rate of 70% or more, Apple is still much better off than if the world's governments didn't lift a collective finger to help when Apple gets attacked.

        One method to stop corporate tax avoidance would be to only offer governmental services to companies that pay an appropriate level of tax. Just as corporations say that it's technically legal for them to base themselves on the moon or wherever and avoid all tax, the government could (in the UK at least), simply not allow these corporations to sue for anything. The technical way this could be done is for the DPP to take over any corporation's lawsuit and decline to prosecute in the public interest. It's technically legal but highly dubious: they should appreciate the irony.

    2. Tom 13

      @DJKp

      We as a society decided a long time ago that intellectual advancement required patents and copyrights to protect the intellectual work of those who produce it. As this is now a fixed fact, it shows your thugishness in arguing it not exist at all. You might, as I do, quibble with its particular implementation here or there (copyright ought not be eternal for practical purposes, software should be protected by something more time limited, possibly even shorter than patents), but the rest of the argument is quite finished.

      Lastly, the most morally repugnant thing of all is that someone thinks they have the right to decide how much wealth any other person ought to have. That is nothing more than greed and lust masquerading as public service.

  3. Anonymous Coward
    Anonymous Coward

    I'd suggest that anyone/company who refers to themselves as "wealth creators" is probably not.

    1. This post has been deleted by its author

      1. Chris Miller

        Re: "wealth creators"

        It's a Tim thread, not an Andrew thread (though the latter does get an honourable mention).

  4. Anonymous Coward
    Anonymous Coward

    I'm sorry. You used the word Grok and in my opinion anyone who uses the word Grok has no value whatsoever and I immediately discard all your arguments, which weren't very convincing anyway. I studied economics at university and found they make up stuff, and when it turns out differently than they said it would then they just make up something else. And this was what my economics professor told us. To call it a science is laughable. Its more akin to haruspicy.

  5. KeithR

    "...the ubiquitous government DON'T have any right to my money!"

    Actually, matey-boy, if the law says otherwise, then it DOES have an actual, exactly-what-the-word-means, right to it.

    1. moonrakin

      BS sunshine - more like it has the ability to take stuff away from you - legal considerations are simple fig leaves

  6. Anonymous Coward
    Anonymous Coward

    Own your data

    Changing the laws so all the data we generate is clearly our data and has to be paid for will make it more difficult for companies to take it and sell it as their own. Innovation still encouraged but not theft disguised as innovation.

    1. Cipher

      Re: Own your data

      Yeah but...

      No one sez you have to give them the data. Fire up a hardened, access controlled LAMP server and share with your real friends. Shouln't be much of a bandwidth hog once you trim those 250+ FB friends down to people you really know...

      Alternately, use email, make a listserv thing for your family. Or even better use your phone or arrange, gasp, to meet people in real life at the pub...

      1. Anonymous Coward
        Anonymous Coward

        Creator as King

        In the old days.

        When I went into a shop and bought a mars bar for cash the data created was not mine, it could only be used for vague demand pattern analysis (mars bar demand at that price at that time, over time)

        Today

        When I use my debit card to process the same transaction I gift a whole purchasing history of every interaction I had with that (or associated) companies.

        (my debit card issuer doesn't currently have any way to monetise that data (for all transactions over all time), give them time)

        As this data is only generated by my actions, it must be my data (no matter how it is gathered)

        It could be argued that as I am in the public domain when I am generating this data then the information itself is not propriety, derived data may or may not be.

        (I would argue that because the data is not made publicly available at point of capture then the ownership of the data is already established, the question now becomes one of who is getting paid)

        How much do you have to process public domain data for it to become propriety information ?

        1. a pressbutton

          Re: Creator as King - data generated by actions

          not so black and white.

          data belongs to those who observed and recorded.

          (apart from some medical data, but even then - try asking the NHS to delete all your data including the data of yours that has been anonymised and incorporated in a large set)

        2. Tom 13

          Re: Creator as King

          Simples.

          Your first mistake was paying for a Mars (TM)* bar with cash. Everything else is the result of this mistake.

          Your second mistake is assuming the transaction created the data. The data always existed, it simply wasn't tracked because it was too much trouble for the shop owner to record it.

          Your third mistake is that it isn't even the card creating the data, it is the increase in computing power and it's application at all levels of the purchasing process.

          At this point you've got three strikes and you're out. Your further mistakes are moot.

          *Note the capital letter demarcating a proper noun as well as the (TM) indicating the name is a trademark owned by Mars Incorporated company.

  7. ecofeco Silver badge

    What utter bollocks

    The game is rigged. Period. The powerful always do whatever they can to reinforce their power and the rest can go hang.

    While there are people who rise up from poverty to wealth, they are the exception, not the rule. The rule is no matter how hard you try, without the right connections and some luck, you are going to eventually hit a wall. A wall put there by the powerful.

    In all of history, the "middle classes" as we know it today are an aberration. Some type of feudalism has always been the norm. These days, it's a type of modern corporate feudalism.

    Then there is the luck factor. Don't think for one moment you can ignore this very powerful influence. Without luck, your brilliant idea and heart attack level of perseverance will mean nothing.

    Last but not least, there is the Marie Antoinette syndrome. The rich and powerful eventually blame the not so fortunate for their unfortunate circumstances. This always causes a backlash that deprives the oh so smart and witty of their power and to lose their heads.

    Thus it has ever been since recorded history.

    1. Anonymous Coward
      Anonymous Coward

      Re: What utter bollocks

      ecofeco is The Register's resident Russell Brand.

  8. Henry Wertz 1 Gold badge

    It's a matter of who to tax...

    People who got their money honestly -- I was never a big Steve Jobs fan but he did -- are not the problem here. People who actually came up with new ideas, or (in the case of Apple) took existing ideas and implemented them so they sold well (Apple fanbois do like to pretend they invented the portable music player among other things... they did not) deserve to profit from this.

    But, at least here in the US, though, you had people who are basically stock investing plutocrats whining about being "job creators" and "wealth creators" who did not create any jobs, and "created" wealth for themselves only, by abusing credit default swaps and so on then whining they *had* to be bailed out when they lost. (Yes, as they like to point out, these were generally loans that they repayed... but so what? It's still not fair to everyone else... a trained ape could make money hand-over-fist if they are allowed to make unlimtedly risk investments, whine until they get a loan when they are wiped out, then use those loans to buy (very!) low and sell high.)

    The other problematic investors use high-frequency trading to game the stock system; their trading systems will actually see what trades are going into the trading queue and use EXPLOITS to shove their trades AHEAD of yours, taking your profits as their own. For example, if you had a stock you wanted at least $1.50 a share for, and found a buyer offering $1.52, great you've made 2 cents a share profit, right? Oh, no! The HFT will shove it's trade in between, buy your stock at $1.51 (if not $1.50) and then sell it to that other guy for $1.52, taking your profits while contributing absolutely nothing of value (they claim they "provide liquidity" but this has been thoroughly debunked). Again, creating wealth for themselves, nobody else.

    Oh, and to top it of, these types of investors don't seem to actually want to SPEND their money, just to sit on it and make more; they are not trickling down money to anybody. I could be wrong, but I would think THESE are the type of people that the gov't might be wanted to heavily tax. And honestly, they should.

  9. Henry Wertz 1 Gold badge

    Ran out of time to edit my last post..

    I just wanted to add, there ARE plenty of wealthy to very wealthy investors who either got lucky or were flat-out shrewd investors. Warren Buffet I'm looking at you! That said, Buffet's flat-out said that he thinks he should be taxed much higher than he is now. He's also pointed out these wealthy really SHOULD worry about the middle and lower class. He figures (and it sounds logical to me) they are the backbone of the economy, if they only have enough income to pay their rent and cheap food and have no discretionary income left over, then sales of these discretionary items will drop off (games and game systems, movies both in theater on DVD/Bluray and online, nicer clothes, nice places to go out to eat, all vacation-related items like hotel rooms, airline tickets, to name a few...) and the diminshed market for these items would lead to the economy continuing to shrink in a sort of downward spiral.

    1. Tom 13

      Re: Ran out of time to edit my last post..

      If Warren Buffett were really worried about the little people, or really thought he should be taxed more, he'd pay his taxes promptly, not continue a ten decade old lawsuit to avoid paying taxes because by continuing the lawsuit he's continuing to make profits on money properly owed to the government:

      http://www.newsmax.com/Headline/buffett-irs-back-taxes/2011/09/01/id/409520/

      Hypocrites cannot be cited as single authorities on moral issues.

  10. jasonbrown1965

    So, ever more for the ever less?

    Not seeing much biting of feeding hands in this article.

    More like the same old formula where we spend all our time arguing about the rights of the rich, rather than solving the problems of the poor.

    Wealth creation. Heh.

  11. Wilco

    Tim - so everything is fine is it? No need to make any changes, the market will sort itself out?

    I don't think that will wash any longer. The UK has a massive deficit, largely due to a vast market failure in 2007, and the prof is making a valuable contribution by saying that we can look at things differently.

    It may well be true, on average, that entrepreneurs capture only a modest percentage of the total benefits of innovation. That doesn't mean that we shouldn't try and find ways to address the fact that companies benefit hugely from many different types of publicly funded goods and services and they don't necessarily pay a fair amount for those services under current arrangements.

    In the short NS article she doesn't say much of substance about what she actually suggest doing, but I really don't think that you can rule out any attempt to reframe the relationship between the public and private sector on principle

  12. This post has been deleted by its author

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