Author Archives: Simon Robinson

I’ve noticed here on LibDemVoice that when we have a discussion about the economy and what the Government can afford, it usually descends into a very technical argument about the nature of money: is money a flow, as mainstream economics says, or is it destroyed by tax, as Modern Monetary Theory (MMT) advocates believe?

Wouldn’t it be nice if there were an alternative way to think about expenditure that avoided these arguments and got to the root of what is really going on when we decide whether something is affordable? Well, there is! Instead of counting money, try thinking about the actual resources consumed.

How does that work? Here’s an example:

Most LibDems agree that fixing the crisis in social care should be a priority. That means we need more social care workers. There are currently around 1.8 million people working in social care in the UK (Report for Skills for Care and Development). Let’s say, for the sake of argument, that we decide adequate social care requires 10% more workers. That’s nearly 0.2 million people.

Here is where thinking about resources kicks in. Let’s say you do somehow recruit 0.2 million more social care workers. That doesn’t by itself change the size of the available workforce, so it must mean 0.2 million fewer people doing something else. Some other industry will have to produce fewer goods or services because it will have fewer workers. Which industry? Well, in theory the Government could make that decision by taxing or cutting spending on some specific thing. Or it could let the market choose — which will mean the jobs will be lost in whatever industry is least able to compete for those workers. But either way, we will gain more social care but lose out in some other way.

Another example: junior doctors are about to go on strike. They want more money, which the Government says it can’t afford. How would that work economically? Again, think about resources rather than money: the relevant resource here is all the things that people might buy with their money — food, travel, housing, and so on. The total quantity of available goods and services people can buy (the size of the “cake”) won’t change just because you give junior doctors a salary increase. What would change is that doctors would get a slightly bigger share of that cake. And — guess what — that must mean a smaller share for everyone else, translating into a small loss of standard of living for the rest of us.