The Great Debate UK

from MacroScope:

Who will win this year’s Nobel Prize for Economics?

And the Nobel laureate for economics in 2010 is?

Thomson Reuters expert David Pendlebury might have an idea. At least one of the picks from his annual predictions of winners (economics, chemisty, and so on) has won a Nobel prize over the years. Here is his short-list for economics this year.

* Alberto Alesina of Harvard University in Massachusetts for research on the relationship between politics and macroeconomics, especially politico-economic cycles.

* Nobuhiro Kiyotaki of Princeton University and John Moore of Britain's University of Edinburgh and the London School of Economics for their Kiyotaki-Moore model, which describes how small shocks to an economy may lead to a cycle of lower output. It described Japan's real-estate crisis in the 1990s and could describe some of the causes of the recent U.S. recession.

* Kevin Murphy of the University of Chicago for research in social economics, including wage inequality and labor demand, unemployment, and how medical research pays off.

But what are your views? Who do you think deserves the prize for 2010 on October 11?

In support of a “super law” to clamp down on tax avoidance

-Nizar Manek is a writer based at the London School of Economics. He blogs at Albino Whale. Follow him on Twitter. The opinions expressed are his own.-

In this current state of ‘austerity’, with a proliferating tax avoidance industry whose reason for existence it is to creatively exploit the ever-complicating fiscal spaghetti of taxing statutes – the new loopholes for avoidance which inevitably arise upon construction of new legislation, Benjamin Franklin would of course be wrong in his conclusion on certainty, that: “In this world, nothing is certain but death and taxes”.

Of the certainty deemed necessary for tax legislation, it is well acknowledged that it necessarily makes revenue collection increasingly uncertain. Contrived avoidance schemes follow in the wake of specifically targeted legislation: tax law followed to the letter. Abuse of Low Value Consignment Relief, an EU tax relief on goods exported from the Channel Islands, for instance, results in a VAT loss of over 110 million pounds per year. We might consider a proverb of Sir Francis Bacon:

“If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties”.

So it is with tax avoidance, estimated to cost 17.5 percent of the total ‘tax gap’ – around 7 billion pounds per year (the figure is disputed as an underestimate).  It was in 1996 when John Avery Jones, the eminent Judge of the Upper Tax Tribunal, argued (pdf) that the result of the unending pursuit of ‘certainty’ in taxing statutes is that “tax legislation is now more than four times as long as it was 25 years ago, but I do not believe it has achieved any more certainty, rather the reverse”. “There is nothing new in complaining about the complexity of tax legislation”, he said: “Every generation does it”.

Indeed, since 1997, Tolley’s Yellow Tax Handbook, the guide to fiscal legislation, has more than doubled in volume, swelling to over 11,000 pages – at the same time, increasing the administrative burden faced by the tax collection bureaucracy.

The efficacy of a statutory General Anti-Avoidance Rule (GAAR), a ‘super law’ to clamp down on avoidance already adopted by a number of common law jurisdictions – Canada, New Zealand, Australia, and others, is now being considered by the newly established Office of Tax Simplification, due to report to the Chancellor. Following the 1998 Budget, the GAAR proposal disappeared, in part for lack of ‘certainty’. It may now be attached to the 2011 Finance Bill, with or without success – and against much inevitable lobbying expenditure from business.

Pranab Bardhan on the economic rise of China and India

In its May economic outlook, the Organisation of Economic Cooperation and Development projected upward growth outlooks for BRIC countries Brazil, Russia, India and China — the world’s four largest emerging economies.

Strong growth in those economies is helping to pull other countries out of recession, the OECD said. The Paris-based organisation projects that China’s GDP growth will exceed 11 percent for 2010, and anticipates that India’s real GDP growth will be 8.3 percent. Russia‘s GDP growth is expected to be 5.5 percent, and Brazil‘s is projected at 6.5 percent. By comparison, the OECD projects that the Euro area will see 1.5 percent real GDP growth, while the UK will see a 2.2 percent growth.

The “BRIC” acronym was created by Goldman Sachs economist Jim O’Neill in 2001 to mark a shift of economic power from the West. In June 2009, the BRIC leaders met in Yekaterinburg, Russia, for a summit, which was seen as the beginning of a geopolitical alliance, although their economies are very different: Brazil’s economy is based on agriculture; Russia’s on energy exports; India’s on services and China’s on manufacturing. At that time, the BRIC countries accounted for 40 percent of the world’s population and about 15 percent of its economy.

In a new book titled “Awakening Giants, Feet of Clay: Assessing the Economic rise of China and India“, Pranab Bardhan, a professor of economics at the University of California, Berkeley, dissects some generally accepted beliefs about the economies of China and India — arguing that they are oversimplified — to provide a new perspective on what to expect from the two countries in the future.

He examines the impact of economic growth on politics, people and the environment within China and India.

Bardhan spoke to Reuters about his book at his office at the London School of Economics where he is serving as BP Centennial Professor for 2010 and 2011. Watch the video here:

Slavoj Zizek on resurrecting the Left

Soon after the global financial crisis erupted in 2008, treatise “Das Kapital” saw a resurgence in popularity throughout eastern Germany.

The 1867 critical analysis of capitalism by Karl Marx became a bestseller for academic publisher Karl-Dietz-Verlag, as a rejection of capitalism set in following intense financial turmoil.

More than a year later, questions over the validity of the capitalist economic system remain in focus amid ongoing concerns about the cost to society of bank bailouts, high unemployment and stimulus measures.

If anything, the financial crisis has made capitalism more lean and mean, author and philosopher Slavoj Zizek told Reuters ahead of a talk at the London School of Economics.

“Capitalism as we knew it cannot survive — it’s the time for mobilization.”

Zizek, International Director of the Birkbeck Institute for the Humanities in the University of London, posits in his new book “First as Tragedy, Then as Farce” that “critical leftists have hitherto only succeeded in soiling those in power, whereas the real point is to castrate them . . .”

Zizek suggests that those in power should be undermined via “patient ideologico-critical work” rather than direct confrontation.