Economics

The government really is aiding and abetting money laundering by its lax approach to company incorporation

Published by Anonymous (not verified) on Mon, 19/02/2018 - 5:45pm in

Last December I wrote a blog post suggesting that the government was aiding and abetting money laundering by letting UK based companies be incorporated direct by Companies House without any checks on the identities of those doing so when the private sector is required to undertake appropriate money laundering 'know-you-client' procedures. I highlighted a report from Transparency International on the issue when doing so.

One reader wrote to his MP as a result and got this reply:

Four things worry me.

First, that the whole of the first page fails to address any question asked.

Second, that expediency is the basis for the answers in the first two paragraphs on the second page. There is no policy here. Rather there is a 'speed is good' and a 'no questions asked' attitude that means that money laundering risk is not even considered a risk that might prevent incorporation of a company.

Third, there is an apparent inability to spot that what the Registrar of Companies does when forming a company is identical to what a third party does and to have one rule for the private sector because the risk of abuse is recognised and another for Companies House simply because the risk of abuse is ignored is a red flag for risk existing - about which there appears to be a casual indifference hidden behind the glib suggestion that Companies House was not intended to be covered by regulation and so it is quite acceptable if it is not.

Fourth, the government seems quite unaware that their requirements do cause delays in the private sector, precisely because checks take time, but almost seem to take pride that Companies House circumvents this.

Overall there is evidence of an attitude that applauds regulatory laxness; fails to appreciate that abusers will always find and abuse the weakest link in any chain, and a total lack of awareness that this is weak link is what is being provided by Companies House.

In addition, there is no apparent awareness that because the UK is unusual in not requiring these checks the UK system is used to facilitate abuse elsewhere. Absurdly, many tax havens have better standards than we do, by some way.

Andrew Griffiths does not cover himself in glory with this reply. It is contemptuous of international standards; creates an unlevel playing field and does undoubtedly reflect a system where abuse is easy to perpetrate. I stand by my suggestion that the government is aiding and abetting money laundering by its laxness.

I would add that some simple changes in the law could correct this.

First, the right to refuse incorporation should exist where there are any doubts as to the intended legitimacy of the intended use of the company.

Second, there should be full anti-money laundering checks on incorporation.

Third, these should be required to be updated at least every three years (and maybe more often) unless another agent, such as an accountant, has confirmed they have alternatively checked the information.

That way we might just beat the abuse that is prevalent using UK companies. Right now we have not got a chance.

winter book forum 2018, part 2: what do people actually get out of college?

Published by Anonymous (not verified) on Mon, 19/02/2018 - 4:01pm in

This Winter, we are discussing Bryan Caplan’s The Case Against Education. The main issue: We invest a ton in education and it seems to do good. But is that because schooling acts as a filter or because schooling gives your concrete skills or better ways of thinking? If education is mostly a filter (the signalling model), we should probably cut back on education a lot.

In this post, I’ll discuss the types of evidence that Caplan reviews. His book is empirical in that the strength of the argument relies on what other researchers have found. A short blog post does not do justice to this work. For example, he asks – how much do people learn in college? How much do people use specific skills (like algebra) in the workplace? Is there any evidence that learning is transferable – that people acquire “critical thinking?” Each of these topics commands one’s full attention, but we can only skim through the best here.

As you can expect from the title of the book, the direct benefits of education are pretty sparse. Probably the most damning evidence are studies that show that people don’t learn that much in college to start with. Another important fact is that few people ever use the skills – the few they may remember  – in work. Thus, it is very hard to argue for the simple human capital argument – educations makes you better because you learn valuable things. This can’t be right because people don’t learn or retain much in college.

Two related points: In response to those who argue that education imparts critical thinking, he points to evidence that learning is actually domain specific. Learning one area doesn’t seem to help in most others. This is called “transfer learning” in psychology and it’s been rejected for a long, long time. Another fascinating point – if education improves you via human capital development, we’d expect your income to increase for every year of education you get. Instead, Caplan reports that studies of income show no increase in income until you hit 4 years of college – a classic sign of signalling – which economists call sheepskin effects.

Of course, no single study seals the deal and it may be that Caplan has misread some, or even a lot, of the studies. But is is unlikely he misread it all and it is consistent with the everyday view that formal education is not a particularly good way to impart skills. Thus, we should be very skeptical of claims that education is a great way to train people for the labor market. Next week: So what?

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A political impasse

Published by Anonymous (not verified) on Mon, 19/02/2018 - 8:30am in

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Economics

Australian voting patterns suggest that although the overall dominance of the main parties remains, voters increasingly vote against a party as opposed to for the opposition.

Clean oil that only costs $20

Published by Anonymous (not verified) on Mon, 19/02/2018 - 8:30am in

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Economics

If there's one big reason for the U.S. energy revolution, it's that new technology has allowed American companies to beat the competition.

The future — something we know very little about

Published by Anonymous (not verified) on Mon, 19/02/2018 - 5:54am in

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Economics

All these pretty, polite techniques, made for a well-panelled Board Room and a nicely regulated market, are liable to collapse. At all times the vague panic fears and equally vague and unreasoned hopes are not really lulled, and lie but a little way below the surface. Perhaps the reader feels that this general, philosophical disquisition […]

The inexorable flow towards Brexit chaos

Published by Anonymous (not verified) on Sun, 18/02/2018 - 7:11pm in

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Economics, Europe

A few days off normal work provide new perspective. Or at least, the refresh old ones by providing the room for a new angle.

Over the last week I have had my focus on Oxfam and related issues. But that has not meant I have ignored other issues. Like Brexit. And on that I realise I am quite genuinely anxious. I mean by that the sort of anxiety that can actually induce real, physical symptoms that are a manifestation of worry.

Almost a year after Article 50 was triggered, and 20 months after the country voted to leave the EU (whatever that means) the reality is many fold.

First, it is clear that we have no idea what we voted for.

Second, we have no idea what to do about whatever we might have voted for.

Third, as a consequence we have made almost no net effective progress towards achieving anything at all.

Fourth, we have upset an almighty lot of people as a consequence, with some, like the Irish, having very good reason for that.

Fifth, it would seem we have won no new friends, at all.

Sixth, the UK's two leading political parties have both looked incompetent on this issue.

Seventh, whatever might happen next March is something we are hopelessly unprepared for.

Eighth, of course it is possible that this will not matter. Except in a world of regulation, which is what this is all about, that seems to be exceptionally unlikely to the point that relying on this being the case would be very unwise.

In other words, it is very apparent that decisions need to be taken and yet no one seems to have the slightest idea what to make decisions upon because no one has the slightest clue what outcome is really desired, and when.

Of course I simplify just a little, but only a very little. When we cannot even be sure whether there will be a transition and whether there will be customs borders the scale of paralysis we face is quite staggering.

And in that case my anxiety is not based on the long term consequences of Brexit. In the long term most things can be managed. It's the short term that worries me.

In a highly complex, rule based, system the smallest of unforeseen and unplanned changes can have great significance. And we are looking at massive unplanned change. Of course that means things will go wrong. They are simply bound to.

And it remains my great fear that this will have short term impact. In particular if, as is likely unless some urgent action to prevent borders is taken, there is massive customs clearance chaos as a result of a lack of preparedness then supply lines for business will be extended and business insolvencies will simply flow one after the other as cash flows collapse in that situation.

Should I be worried? Yes, because I see this risk as real.

Should I be anxious about it? Probably not, because there is almost nothing I can do about it. But then, we all know those are the hardest problems to deal with. We're inexorably moving towards Brexit chaos and no one seems to be doing anything about it. I wish I knew why.

Donny Boy

Published by Anonymous (not verified) on Sat, 17/02/2018 - 8:23pm in

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Economics

A Saturday diversion:

 

Taking a Stroll Down Memory Lane (ii)

Published by Anonymous (not verified) on Sat, 17/02/2018 - 12:15pm in

Resuming from last time: Signs that things weren't fine for capitalism and that people started to notice didn't end with a few scattered economists discussing things among themselves, or some economics students demanding unspecified changes in academic syllabi. Not even with the mega rich performing their annual rituals at Davos.

The electoral victories (2007 and 2008, respectively) of Kevin Rudd (Australia) and Barack Obama (the US) are further signs, particularly with the unleashing of a campaign representing Keynesian economics as a sort of "progressive" economics.

There's more, if that doesn't convince you: the Bernie Sanders and Jeremy Corbyn phenomena are other, clearer, examples. Indeed, in their cases the backlash by the Democratic and Labour mainstreams against even the modest shifts leftwards those two guys represent fits in well with the main topic of this post (more on this later).

In fact, the rise of the loony far right, however troubling, also points to dissatisfaction with the current situation.

On top, there's the growing talk of an uninhabitable Earth. (On the other hand, things in Ethiopia are going mighty fine, or so I've been told. So, capitalism's fans can breath again).

----------
Amidst the mounting disappointment with capitalism and globalisation and now with inequality (both of which Labourites and Democrats contributed to create), since at least the 1990s an academic movement sprang out not so much to rehabilitate reformist social democracy, but to resurrect it altogether from its grave.

The idea seems to be to try and remove the Blairite-Clintonite taint hanging over it.

That’s, more or less, when long-forgotten names started to pop up around in popular media.

Karl Polanyi, for instance. Don’t get me wrong, I have nothing bad -- or good, for that matter -- to say about that Karl: although I’ve started reading about him and his ideas, I’m not ready to make any pronouncement, yet. This jury is still out.

The reactions to Polanyi, however, puzzle me. On the one hand, people whose opinions I respect seem to think highly of him. A point goes to Polanyi.

The obsessive ill-will others demonstrate towards him suggests he might have been onto something, too. Believe it or not, that kind of thing may not make Polanyi's case, but it still helps it.

On the other hand (you know what they say about economics) other things seem less favourable to Polanyi. I got a feeling of almost back-handed compliment when I saw ultra-Keynesian Brad DeLong, a self-described “neoliberal freak” who flies his flag high for globalisation, singing the praises of Polanyi and Alexis de Tocqueville …  at the same time, in the same sentence, for Christ’s sake! One suspects that maybe is not so much what Polanyi wrote that recommends him to DeLong and that Polanyi was indeed elusive, as Daniel Luban said:

“To some extent Polanyi’s current popularity reflects the desire of the non-Marxist left for a champion of its own to compete with that other Karl.”

If that's not a sign something's wrong with capitalism, I don't know what is.
----------
This leads us to the subject of revisionism. Just like Karl Polanyi may have gained new fans at least in part because his surname is not Marx, I’ve seen others going even further back in time in search for an anti-Marx champion. (The good and wise like to identify ideologies and philosophies with names: Hayek becomes synonymous with "liberalism", Marx with "socialism", Keynes with whatever it is Keynesians believe, and so on).

Like I said, I'm not ready to make pronouncements about Polanyi, but I'm more than ready in Eduard Bernstein's case.

(TO BE CONTINUED)

The Bayesian folly

Published by Anonymous (not verified) on Sat, 17/02/2018 - 4:18am in

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Economics

Assume you’re a Bayesian turkey and hold a nonzero probability belief in the hypothesis H that “people are nice vegetarians that do not eat turkeys and that every day I see the sun rise confirms my belief.” For every day you survive, you update your belief according to Bayes’ Rule P(H|e) = [P(e|H)P(H)]/P(e), where evidence […]

Mencius on Status Quo Bias

Published by Anonymous (not verified) on Fri, 16/02/2018 - 10:29pm in

6A8: The trees of Ox Mountain were once beautiful.  But because it bordered on a large state, hatchets and axes besieged it.  Could it remain verdant?  Due to the rest it got during the day or night, and the moisture of rain and dew, it was not that there were no sprouts or shoots growing there.  But oxen and sheep then came and grazed on them.  Hence, it was as if it were barren.  People, seeing it barren, believed that there had never been any timber there.  Could this be the nature of the mountain?!  When we consider what is present in people, could they truly lack the hearts of benevolence and righteousness?! That by which they discard their good hearts is simply like the hatchets and axes in relation to the trees. With them besieging it day by day, can it remain beautiful?--Menghzi/Mencius, 6A8, translated by Brian Van Norden p. 149 (in Van Norden/Ivanhoe)

The quoted passage is much discussed in analyses of Mencius's account of human nature. Mencius seems to believe that we (universally) have an innate disposition toward goodness. Famously, human nature is good (xing shan 性善). In Eric Schwitzgebel's felicitious phrase, according to Mencius 'moral development is an inward-out process of self-discovery.' This does not mean that according to Mencius social conditions play no role; on the contrary, as the trees of Ox Mountain passage suggests social factors are enabling and conditioning factors in this moral development (about which more below).

Human nature’s being good is like water’s tending downward.  There is no human who does not tend toward goodness.  There is no water that does not tend downward.  Now, by striking water and making it leap up, you can cause it to go past your forehead.  If you guide it by damming it, you can cause it to remain on a mountaintop.  But is this the nature of water?!  It is that way because of the circumstances.  That humans can be caused to not be good is due to their natures also being like this. (6A2)

But it's also the case that Mencius suggests that there is an inner cognitive disposition, or direction (I am naturally inclined to think of a Conatus) toward goodness. One way to put this -- again drawing on Schwitzgebel is "that the office of the heart is to concentrate (si 思 – think, reflect, ponder, concentrate).  If it concentrates then it will get [Virtue].  If it does not concentrate, then it will not get it."

One may, of course, disagree with Mencius's claims about human nature (as is displayed in the famous debate with Xunxi). But Mencius's homely examples bring out a methodological point and a political insight that eludes many: first, the empirical evidence of people's behavior (or as the economists say, revealed preferences) may say more about circumstances than about their worth: in years of famine, for example "most young men are cruel. It is not that the potential that Heaven confers on them varies like this. They are like this because of that by which their hearts and sunk and drowned." (6A7).

That is, Mencius interprets social reality in terms of a model: there is a human nature that in the right social circumstances and governance will incline toward pro-social behavior. Deviations from this (natural tendency toward) pro-social behavior need to be attributed to social causes and bad governance.*

Second, this has an important political consequence: social unrest or anti-social behavior is evidence of bad governance and misrule. It is a familiar enough thought (drawn from Confucius/Kongzhi) that esuch unrest may be a sign that the Heavenly Mandate may be endangered. But a further, nice benefit of this stance is that it prevents victim blaming.

 

*It is made explicit that the model itself is informed by empirical observation. But little is said about what may motivate further revision to the  underlying model.

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