Capital Allocation Decisions, New Share Issues, Company Pricing, Share Buybacks And Capital Formation.
A big title but really a pretty brief simplified model to get people reading from the right sheet-music. We are accursed with Keynesian national accounting that produces a trained blindness, and with neoclassical undifferentiated blob understandings of capital. We are blinkered by static-equlibrium theories of the firm that do not track capital accumulation over time but only seek to predict instant pricing decisions. So we need a simplified model that is closer to the real world and I will seek to provide that here.
The reason I need to do this is we are getting intensely idiotic proposals, like the carbon tax, and the proponents just have no inkling of an understanding of the destruction they are conspiring to create.
Worst of all we have the idea that a carbon tax can be compensated for by a reduction in other taxes. In no way is this true. As we shall see after we have provided the simplified model of capital allocation.
The idea that a carbon tax can be compensated for is wrong. But it also contains a string of other wrong assumptions along with it. In that way paradoxically the proposition defends itself quite nicely. Like Obama’s cabinet there is simply too many scandals to go after and the sheer weight of them divides peoples energies and protects the usurper.
In this same way the idea that carbon-tax can be revenue neutral and therefore mitigated contains a shitrain of dumb ideas that each protect eachother from criticism and protect the main completely fucked up thesis.
Here we will only deal with one idea, and that is that the harmful effects (wrongly thought of by neoclassicals as “distortion” just to show their ignorance) can be compensated by less distortion emenating from a compensatory tax cut elsewhere.