The Laffer Curve arrives in UK

AustralianActuary Economics

The new Truss executive in the UK is setting out to restore a little faith in conservative politics economics. First, removal of the fracking ban. Now a tax reduction package described by most commentators as the biggest cut in taxes for decades. That’s excellent news. Yes, it needs to be followed up by expenditure cuts since the real measure of tax in an economy is the level of Government expenditure rather than the tax take. But, a tax cut will help even in the absence of an expenditure cut.

The reasons are well known. Arthur Laffer is the US economist credited with the naming rights of the Laffer Curve. In simple terms, Art’s point was that at a zero rate of tax, the total tax take would be zero. Likewise for a tax rate of 100%. In other words, the tax rate that would maximize the tax take was between 0% and 100%. What’s more, at higher rates of tax, a tax rate reduction would actually increase the tax take. That can only happen if economic growth increases. President Reagan understood the concept and the Reagan tax cuts were a huge success.

Now, 40 years later, the Truss government is following the same path. Well done Liz, this is a great start.

Updated population forecasts for China

AustralianActuary Life

Some readers may remember this post from last year where I included a UN forecast of China’s future population numbers.

It seems the UN has updated its forecast. Furthermore, a number of other institutions have forecasts that are even more pessimistic.

The implications of this, if borne out in practice, are significant. We will know in a few years if the peak has passed and the downward trend has commenced.

The imminent de-industrialisation of Europe

AustralianActuary Economics, Life

The de-industrialisation of Europe is now inevitable and imminent. With it will probably come political regime change. It will be rapid and dramatic, and most likely occur in the northern spring of 2023.

The seeds of this looming crisis have been sown over the last decade.

Firstly, European political power structures have done what they always do – become ever tightened; ever divergent from the wants, needs, values and expectations of the citizenry; increasingly reliant on the state controlled forces of the police, military and more recently media, technology and finance companies to censor and crush domestic political dissent; and never able to admit error or change policies.

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Trouble with definitions

AustralianActuary Business

If you can’t define what a woman is, how can you define “gender pay gap”?

I’m going to hazard a guess here: those acquaintances of yours who claim that there is a gender pay gap in Australia will be unable to define a woman when asked. You try it out for yourself.

There are two ways of defining gender pay gap. One is correct and the other isn’t. The incorrect way is to add up total earnings of men and women separately then divide by the total number of men and women respectively and compare the two answers. They will be different. That allows the unscrupulous and the unthinking to cry “gender pay gap!” very loudly. Just like how today’s story in The Age reports.

However, the above calculations merely represent average earnings of men and women. Nothing can be inferred about whether men and women are paid equally by looking at averages.

The correct way to test for a gender pay gap is to look at pay for equivalent work. Then you will find that Australian business does not pay different rates for men vs women.

Not every problem requires a law

AustralianActuary Life

I don’t know how the disgruntled will cope when Australia becomes a republic: “There are calls for a Royal Commission following [insert grievance text here…]” will disappear from the lead stories of The Age and The Guardian and Their ABC.

Reading into the story it seems the disgruntled underwent surgery for a Brazilian Butt Lift, which the reporter helpfully referred to as the BBL. The surgery went wrong, I think.

Now, having lead a sheltered life, I was unaware that the BBL could refer to either a round robin T20 cricket comp or a butt lift. It’s also not clear whether the lift is one performed only on butts of Brazilians or only by Brazilian surgeons or can anyone shuffle into the surgery and bounce out newly uplifted? I remain ignorant in this regard because I stopped reading.

Let’s keep Royal Commissions for more weighty topics.