Posted by: graemebird | February 26, 2009

Massive Failure In Humphreys Logic/Witness Humphreys Being Proven Wrong Totally, And Then Do A Runner.


So here is Humphreys trying to argue, unsuccessfully, that the carbon tax will not do much harm since he now says it will be ineffectual. His argument that it would be ineffectual is idiotic and wrong. Its a static argument as usual. Humphreys makes static arguments that don’t include time and capital spending in their reckoning.

But he makes the argument that a carbon tax will be ineffectual here. No doubt he will tell the alarmists that the carbon tax would be powerfully effective. Which of course it will be. Its powerful effectiveness will come from misdirecting investment funds and from destroying wealth and energy production.

But Humphreys will have it that it will be powerfully effective at reducing CO2 AND!!!!!!! that it will be a marvellous revenue raiser allowing substitution away from other taxes.


As the malinvestment and the wealth destruction continues, the effectiveness of this tax as a revenue raiser must reduce. Hence as time goes on we get more and more economic damage proportionally and in comparison with less and less government revenue. Until such time as the level of damage as a numerator over the amount of revenue as a denominator leads to an awesomely high figure of economic wreckage as compared to revenue raising.

So we see that John fucked up incredibly in his analysis. Since he only thinks static-equilibrium and final goods output.

He never thinks of TIME and the flow of CAPITAL GOODS SPENDING.

I really must labour this point. Carbon tax will be a massive wealth destroyer immediately. But you can expect it to raise some revenue at first this is true. As the destruction of wealth and the malinvestment continues the carbon-taxes effectiveness as a revenue raiser reduces.

Here are other bits and pieces I’ve written on this one point and it will be repetitive but its most important that people absorb the reality of this. John makes foolish assumptions every step of the way. But even assuming that carbon tax revenue will lead to income tax reductions (which it won’t) his argument is STILL totally flawed:

Carbon tax starts off even worse than a tax on retained earning right from day one FOR REASONS EXPLAINED CAREFULLY (YOU PATHETIC LIAR) but it just gets worse dollar for dollar. Since as the carbon tax does more cumulative harm it raises less and less revenue.

You have placed yourself in the same ignorant camp as Nick Gruen falling for his own computer model on the alleged benefits of tariffs.

If we put a tariff specifically on Chinese consumer goods only, and substituted that tax by cutting a tax on retained earnings at first we would have a net gain (from a likely capital accumulation response point of view) so long as the Chinese didn’t retaliate. I would never make naieve assumptions like this but you seem to love naieve assumptions.

Since the one tax is less bad at first then the other, for wealth creation purposes, we would likely have a gain in growth. But here is the thing. The longer the tariff was left on (elasticities must relate to a time period DUMMY. In the long run all virtually all demand curves are elastic) the less revenue it would raise and the more investment distortion it would create. Hence in the long run we would get all the damage without the tax substitution (bear in mind there is no such thing as this tax substitution).

So what might seem like a good idea at first is a disaster and the fact is there is no getting away from the need for spending cuts. Spending cuts are what we need to use for revenue problems and not really bad new taxes.

So in the same way this carbon tax cannot be seen as a direct substitution tax raiser. In the final analysis you will have all of the damage and very little of the revenue. Massive amounts of punitive damage and no revenue raising. In fact a destruction in the revenue generation from other taxes because of general wealth destruction and malinvestment.

This is not a bare assertion. The reasons are explained carefully. DON’T LIE ABOUT THAT SORT OF THING AGAIN HUMPHREYS YOU ECONOMICS KNOW-NOTHING.

We go through this cycle where Humphreys argues for his carbon-tax, is proved wrong, and then when he’s proved wrong he tells lies and does a runner. Then once again, after a brief pause he starts promoting the carbon tax again. This has gone on for two years now and if anyone reads what happened this time and can show he understands the argument I can track down another thread where the exact same cycle was repeated.

He also went through this cycle with Gerry Jackson. To cheering crowds of ignorant economists he argued against Gerry Jackson, got whipped, while our know-nothing economists ludicrously had him down for the win.

I explain everything absolutely clearly and if you think that Humphreys wins the argument you need to simply re-read and re-read until you get it.

Here is the thread where Humphreys was proven wrong totally and then did a runner:



  1. Speaking of massive failures in logic……Sinclair Davidson has an article which starts off promising for a change. But then ends with this gargantuan monument to human idiocy:

    “The problem with the whole debate is that an ETS is bipartisan policy which means that no real debate has occurred. If we’re to follow Coase’s advice, and if we believe some policy should be adopted, the policy trade-off isn’t between having an ETS or nothing, but rather between having an ETS or some form of carbon tax.”

    How about get out of the way of beneficial CO2 emissions? How about you get out of the way? Or did you not think of that option hey dummy?

    Time to save the taxpayer some money and cut off Sinclairs funds. If we fire enough of these CO2-bedwetters we can have any tax cut we want and still run strong surpluses.

    Really all Sinclair is doing is press-ganging Coase into CO2-bedwetting. But Coase would presumably never have anything to do with this idiocy. If Sinclair attempt to make the argument straight we will see that he is full of shit.

    Actually he’s not just hiding behind Coase. He’s gone further and he’s hiding behind a sheila interpreting Coase. And behind this sheila there is Sinclair hiding behind his finger.

    What he is not hiding behind is any sort of straight argument in his own words. This is a conjuring trick for the carbon tax. Its a Pigouvian tax and more than anything Coase was anti-Pigouvian. Here Sinclair turns Coase on his head by the technique of conjuring-the-Sasquatch. Ontologically he has Coase supporting carbon tax when Sinclair is devoid of any justification for a carbon tax at all.

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