This is the personal website of Eric Sheppard.

Here I aim to document musings, commentaries and full-length articles on various subjects, primarily economics and philosophy.

Keep what you make, compensate for what you exclude others from

How to use this website

Commentary

Short and pithy commentary. No context included. If you are familiar with the area, then this saves you time. If you are not familiar with the area, I reccomend feeding it to the LLM of your preference. Better it is written according to your preferences than mine.

Articles

Occasional full-length articles. Generally only written with the intent to be published in a zine.

Useful Links

Cooperative Individualism: A website managed by Edward J. Dodson, which archives numberous Georgist and other articles.

Center for a Stateless Society: Self-described as “A Left Market Anarchist Think Tank & Media Center”, they publish articles, commentary and a podcast.

Prosper Australia: An Australian non-profit organization in the Georgist tradition

Henry George Foundation Australia: A foundation to promulgate the economic principles of Henry George

Fresh Economic Thinking: The blog of Cameron Murray

Mises Institute: Self-described as “a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.”

Praxeology - Roderick T. Long: The personal website of philosopher Roderick T. Long

Ayn Rand Institute: Works to promote the philosophy of Objectivism

Fractional Reserve

Premise

Unless you reasonably expect to pay everyone you owe in full when due, pay only in proportion

This is phrased to:

eliminate the “bank run” where the first n creditors are paid and the remaining get nothing
still allow some risk taking, eg not preclude regular business to business contracting or trade credit
will almost certainly tip the balance in favour of equity over debt
build on existing “trading insolvent” and “par condicio creditorum”
exits from funds with non-liquid assets have to be negotiated with the other shareholders

Notes

The primary issue is that deposits issued by different banks are backed by a different pool of assets. Therefore these deposits should not have an 1:1 exchange rate. The rate should be continuously floating

Another issue is the artifical 1:1 exchange rate between bank deposits and base money

References

Forecasts and Reliability

With regard to AEMO’s forecasts of whether it will meet the required reliability standards:

It actually makes sense that AEMO would forecast that they won’t meet their reliability standard after a fixed point in the future. It is expensive and inefficient to guarantee today that a particular standard will be met more than N years in the future, where N is probably 2-3 years. The market will resolve any reliability issues long before they arrive.

Company Taxes and Rent

Regarding:

ATO data shows ‘Mining and Resources including oil and gas’ AUD$32.38bn against ‘Beer, drinks and associated retail/hospitality as a broader definition’ AUD$717.2m. As an example, Asahi as the top beer company does not come even close to Woodside.

Company taxes are a distraction here. It is better to analyse with no company tax, which is the correct rate anyway: production should not be taxed.

Alcohol manufacturers pay for their capital equipment and inputs at market price, and as such their return on capital is not persistently different to other industries. Alcohol excise is effectively a tax on the production of alcohol manufacturers such that a portion of that market’s surplus is transferred to government and another portion is lost entirely. This is welfare reducing unless it can be shown that alcohol consumption is inefficiently high.

Resource companies pay for their capital equipment and some inputs at market price, but record nothing in their COGS for the natural resource itself aside from royalties. This means their return on ‘capital’ is persistently high.

Ricardo told us the real story in 1817. Return on capital should never be persistently high in one industry over the long term due to competition. Instead some of the return on ‘capital’ for a resources company is in fact return on land: rent. ‘Persistently’ is important because some part of the returns may be quasi-rents on inelastic capital, and those are rightly attributed to the investor.

Unfortunately royalties are a poor mechanism because they fall equally on different qualities of deposits and leave much of the rent on the table at the best deposits. The PRRT has the right idea but is poorly designed giving incentives for wastefully high investment in capital.

Ideally, would-be extractors would bid for the rights to extract a quantity within a time period thus revealing the rent. Instead of collecting a small portion of the rent via company taxation, the full rent at the time of bidding can be collected, leaving no reason to tax other returns on capital and labour.

Land price increases reduce capital formation

Consumption out of national income flows is backed by production, but any consumption out of a price increase is dissaving. Consumption out of land price gains is especially problematic: the land was never accumulated, so the dissaving, which reduces capacity for capital formation, is not matched by any earlier investment.

Consumption due to rising land prices is a contributor to the reduction in capital stock per person.

Planning is incredible

… Forthcoming. There are multiple interpretations of incredible. Only one negates the meaning of the root.

It’s OK to have inequality, except in natural resources

… Forthcoming

Dear MMT: your accounting is just fine but keep the communism at home where it belongs

… Forthcoming. This should be fun. An LLM will expand beautifully in the meantime.

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