Winner of the New Statesman SPERI Prize in Political Economy 2016

Wednesday, 24 February 2016

Our money

The UK government is currently trying to stop researchers who receive government grants from using their results to lobby for changes to laws or regulations. Nothing surprising there: this government has shown no hesitation in trying to rig the system to make its own re-election more likely. (Wonder where they got this idea from? Is this kind of thing now regarded as normal in the UK and therefore permissible behaviour?)

What I thought was interesting was the reported motivation for introducing the new rules.
“According to the Cabinet Office, it is intended to broaden government action aimed at stopping NGOs from lobbying politicians and Whitehall departments using the government’s own funds.”
The government’s own funds. You can imagine an irate cabinet minister saying “we gave them our money to do research, and now they are using this research which we paid for to question our policies”. The problem with this logic is that it is not the minister’s money. It is public money disbursed to departments, which departments use to fund research. The research should then be public research, which should be available to all the public (including the researchers) to make any points they wish. The real scandal here is government commissioned research which is not published when it is completed.

This reminds me of a much more common misuse of language, which is to talk about public money as taxpayers money. I had a go at this here. This widespread misuse of language is no accident: the political right is way better at this kind of framing than the left. It legitimises a (natural) desire not to pay taxes, but also encourages a sense of entitlement, which leads to an us (income tax payers) and them (only indirect tax payers) mentality which is so socially destructive. It is this same sense of entitlement that leads government ministers to think they own the research that was funded with public money.  


  1. "Those who hold the purse strings are fond of repeating that ‘He who pays the piper calls the tune’. Let them never forget that in a society wholly devoted to practical skills there can be no pipers and that those who call the tune will be met with uncomprehending silence. And once the pipers are gone, they may never been heard again.”

    E H Gombrich, in his lecture from 1985, the first time the Thatcherites began their attack on the universities.

  2. Does this mean for example that farmers (private sector, gut instinct) will be able to extoll the virtues of badger culling -- but ecologists (academic, statistical modelling) won't be able to point out the folly?

  3. I am not familiar with these particular proposals, but it is perfectly sensible for the recipients of public money to be politically neutral. A good example is the BBC, another is the civil service. This doesn't mean that academics shouldn't be able to ask positive questions (e.g. perform policy evaluations) - just that the conclusions of these should be used by others to lobby, who are not funded out of public money. The IFS is another great example.

    Further, this would probably improve the credibilty of academic research as a whole. There's a suspicion of some on "the right" that academics are not dispassionate assessors of evidence but have their own policy preferences which both shape both the research questions they ask and the answers they give. This may not be true, but anything which dims this perception would probably make it more likely that public policy would be informed by academic research.

  4. Look at it as UK plc. Taxpayers' money is really Taxpayers' "Equity" like any regular plc Shareholder. Instead of UK plc citizen shareholders having "retained earnings", it has government "retained spending", which the neo-liberals call the "national debt".

  5. The Government are extending what they have already said they are going to do to charities with this policy. This displays an inept sense of paranoid behaviour on their part. 'Criticism' can (and if rigorous) should be constructive: either around refining a policy position or putting forward well researched alternatives. Further, creative thinking and innovation in universities and research organisations could be stifled (with wider impacts on the economy) through such draconian thinkng.

    Blenheim's point about the BBC is a good one. They should be objective but human beings by their nature cannot be. An editor or a journalist will have a bias or inflection on most things. Worse still when the top brass at the BBC are appointed by the Government of the day and come from backgrounds where the Chair was married to an ex Tory politician, the Head of News was a former Time journalist and the former political correspondent was a young Tory.

    Worse still, organisations on the 'left' are more likely to be finacially supported by the taxpayer (that's taxpayer not Government - the 'right' always tell us that Government does not have any of its own money) while those on the 'right' are business or privately funded (eg Taxpayer Alliance, Countryside Alliance, SDP/Liberal Alliance (!)) but are rarely transparent where the money comes from.

  6. The mainstream constantly identify the wrong contrast to the explanatory statement made by MMTers. The statement that government spending isn’t financed by taxes and borrowing is not contrasted with the statement that government spending is financed some other way (viz., by "printing money"). It is contrasted with the statement that the converse is the case: government spending funds tax payments and purchases of government bonds. This is most easily expressed by first rearranging equation (1) from above:

    (1a) G = T + θ + β.

    For example Palley in his critique of MMT reads this equation ‘right-handed’ (as Joan Robinson would say), interpreting it to mean that the government’s spending (G) is financed by net tax revenue (T) plus the printing of currency (θ) plus the selling of government bonds (β). MMTers read it ‘left-handed’: the equation tells us that the government’s spending finances the non-government sector’s payment of tax (T), accumulation of currency (θ), and purchasing of bonds (β).

    This is a conceptual shift of extreme importance. But it is *not shown in the equation itself*. It is a matter of how the equation is read: left-handed or right-handed. Thus by proffering the equation as evidence that the central MMT claim is “widely understood and acknowledged” Palley shows only his own failure to understand or acknowledge that claim. The point, for MMT, is not the inclusion of the term θ. It is the way in which the whole equation is interpreted.

    Why is the shift so important? If the equation is true, what difference does reading it left-handed make? Doing so gives us a new view on the central aim of macroeconomic policy. Standard macroeconomics sees two roles for government spending. First, obviously, it pays for the goods and services supplied to the public sector. Secondly, it supports aggregate demand – if and when monetary policy is insufficient for this purpose. The MMT insight – that equation (1a) should be read left-handed – gives us a different perspective on the second purpose. The point is not simply to support aggregate demand. It is, far more specifically, to finance the non-government sector’s tax payments, its purchases of government bonds, and its accumulation of currency balances.

    1. BTW full article by Palley here in his critique of MMT:


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