Tag Archives: environmentally Sustainable National Income

To the International Association for Official Statistics (IAOS),
Royal Statistical Society (RSS),
American Statistical Association (ASA),
Société Française de Statistique (SFdS) and
International Association for Research in Income and Wealth (IARIW)

Dear presidents Pullinger (IAOS), Ashby (RSS), Martinez (ASA), Marin (SFdS) and Reinsdorf (IARIW),

Your societies and associations have made public statements in support of Andreas Georgiou, former president of El.Stat Statistics Greece.

I have looked at the case and arrived at the conclusion that Georgiou was guilty as charged for the violation of duty, as was indeed confirmed by the Greek Supreme Court in 2018. It appears that Andreas Georgiou, Hallgrimur Snorrason (representative of Eurostat at El.Stat in 2010) and Walter Radermacher (Eurostat 2008-2016) have provided you with false testimonies about the Greek law of March 9 2010 that created El.Stat and the European Code of Practice of 2005 that was in force in 2010. They knew about the true legal situation and in fact worked to make changes in both the law (December 2010) and the Code (2011).

The documentation is in my new book “Forum Theory & A National Assembly of Science and Learning“. My discussion of the actual figures in national accounting of Greece 2009 is on pages 200-206, and there seem to have been made some arbitrary choices that are not fully clear to me. My discussion identifies many more points where important information is lacking. Overall, I advise that there will be a thorough investigation. I hope that you will indeed apply due diligence.

I already informed ISI and FENStatS via this letter, now online in slightly edited form to make it quotable for others. I regard the now online letter to ISI and FENStatS as an integral part of my letter to you now. I have the same requests for you as stated in that letter. Please inform your membership but please refer to my book instead of trying to rephrase the points in your own words because points might get lost in translation again. This letter to you is online now too.

Reading parts of my book, Richard Gill, emeritus professor in mathematical statistics in Leiden, and former chair of VVSOR (a founding member of FENStatS), informed me that he has revised his view, from an earlier signing of support to a (now disputed) statement by ISI. Klaus Kastner, retired banker who blogs on Greece, also has revised part of his view.

My disclaimer: I would like to see a thorough investigation in Dutch economics.

Sincerely yours,

Thomas Cool / Thomas Colignatus
Econometrician (Groningen 1982) and teacher of mathematics (Leiden 2008)
Scheveningen, Holland

PS. At IARIW, Peter van de Ven (formerly CBS now OECD) was IARIW president in 2010-2012, when the issue of El.Stat case arose. Van de Ven proposed to IARIW in 2016 to support Georgiou, apparently with deficient study of the underlying events. At CBS in 2009, Van de Ven removed the Tinbergen & Hueting figure of environmentally Sustainable National Income (eSNI) from the Dutch monitor on sustainability, using fallacies, see THAENAES Chapter 25 p289. I copy to Van de Ven at OECD and Kees Zeelenberg at CBS who is involved in IAOS – OECD.

Salah el Serafy (1927-2016) stated the following about GDP and NDP (Gross and Net Domestic Product):

  • “Selling natural assets and including the proceeds in the gross domestic product, GDP, is wrong on both economic and accounting grounds.”
  • Even though NDP is rarely estimated, depreciation of produced assets is fairly small and predictable. Declines in natural assets, on the other hand, may be large and volatile, and are not reflected at all in the estimates of GDP commonly used for macroeconomic analysis.”
  • “For economic purposes, a better approach would be to calculate the user cost component of resource declines, and either subtract this from GDP as capital consumption or (much better) exclude it from the gross product altogether.”

The term “user cost” merely indicates the investments that are required to maintain the resource level and quality.

Two flows

In the RES Newsletter El Serafy (2014) recalled:

“Exploiting finite natural resources without replenishment is akin to mining and Marshall had taken pains to explain that the surplus realized in mining, often miscalled rent, should be split into proper ‘rent’ which is income and ‘royalty’ which is capital.”

George Santopietro (1998) summarized El Serafy’s position as:

“El-Serafy (1989) argued that the surplus for a depletable resource represents two values: (1) a true income component which can be consumed; and (2) a separate depletion cost. The depletion cost is the amount that needs to be reinvested in order to sustain the economy’s ability to provide future generations with the ability to enjoy a non-declining level of consumption. In this line of thinking, the net price method overstates the true depletion cost. Von Amsberg took El-Serafy’s method and applied the strong sustainability criterion to it by calling for a depletion cost sufficiently large that when invested in the production of a substitute, future generations will be able to enjoy a non-declining flow of similar services.”

It was actually John Hicks who distinguished fundist and materialist capital in accounting. In both cases there is Hicks’s accounting principle of keeping capital intact for income estimation purposes. El Serafy puts emphasis on fundist capital, thus with monetary value. A depletion of a natural asset can be compensated by a gain in other capital. The alternative is to look at the physical stock of goods. El Serafy: “damaged or depleted natural capital cannot easily be replaced with manufactured capital.”

A small model

Wondering what to make of this, I came upon the following small model. When you sell your house then the proceeds are not your income, so much is obvious. You might rent out a room to pay for the maintenance costs. Farmers sell the proceeds from their crop but keep some seeds for next year.

Since Keynes, macro-economics has tended to link consumption to income but let us now relate it to the capital stock that might be depleted.

Assume that the price of a depletable resource is p = 1, and that the resource stock K is capital too: K ~ p K. The first is in physical units and the second would be in money, but let us take the resource as the numeraire, so that K = p K.

  • For investment: Let physical investment J = b K. Let g be the physical return factor on physical investment. Then economic (gross) investment I = r K = (dK with d depreciation and i a rate of interest. We also have I = g J = g b K so that r = g b.
  • For consumption: Let w L be services without use of capital. For consumption of the depletable resource we distinguish a fraction s that is sustainable and a fraction u that is unsustainable. Total consumption is C = (s + u) K + w L, and we have sustainability when u = 0. Below relations allow us to deduce that s = (g – 1) b, so that sustainable consumption is determined by the physical return factor of physical investments.
  • From these two: u K are the user costs or investment that are required to keep the resource intact. When consumption is sustainable = 0 then such costs are not incurred.

In accounting of expenditure flows, it may happen that u currently is not even included in D, so that also NDP is off-track.

If u is in D then we find: NDP gives substainable consumption s K + w L, while the figure of GDP will be polluted by unsustainable depletion u.

Physical, sustainable if u = 0 Nominal, with p = 1
C = (s + u) K + w L C = (s + u) K + w L
J = b K I = r K = (i + d) K       (gross investment)
K[t+1] = (1 – sub) K + g J K[t+1] = (1 + r) KD
K[t+1] = (1 – u) K D = d K = (s + u + b) K = (r + u) K
s = (g – 1) b r = s + b = g b,     1 – u = 1 + i
d = s + u + b GDP = Y = C + S = C + I = (s + u + r) K + w L
0 ≤ s + u + b ≤ 1 NDP = YD = s K + w L = (g – 1) b K + w L

El Serafy rather wants to see that also GDP is income, which can be achieved by a separate deduction from the stock:

Physical, sustainable if u = 0 Nominal, with p = 1
C = (s + u) K + w L C = (s + u) K + w L
J = b K I = r K                                  (gross investment)
K[t+1] = (1 – sub) K + g J K[t+1] = (1 + r) KD* – Δ   with Δ = u K  as user cost
K[t+1] = (1 – u) K D* = d* K = (sb) K = r K     (without user cost)
s = (g – 1) b r = s + b = g b,   and r = i* + d* means i* = 0
d = s + u + b GDP* = Y* = C + S = C + I – Δ = (s + r) K + w L
0 ≤ s + u + b ≤ 1 NDP = Y*D* = s K + w L = (g – 1) b K + w L

An example is selling the natural resource, putting the proceeds into a bank, and live from the perpetuity. With i the money rate of interest, then sustainable income is s K = i K, so that s = i. Then b = 1 because all money is in the bank, and g = 1 + i = r. It follows that GDP = (1 + 2 iK + w L and NDP = i K + w L. Normally we do not regard the whole capital as the investment but for money it makes sense. In practice money in the bank is only a financial arrangement and the true return must still come from productive investments.

Environmental sustainability

Above model can be extended with environmental sustainability by replacing s + u with es + eu, with es ≤ s and eu ≥ u. For example, the home owner must put aside additional investments for an extension to the house to make room for solar panels or heat pumps, or to relocate it because of flooding. Sustainability and environmental sustainability have the same model here, and only different data. However, practical modeling can be different. Mere sustainability might rely on actually observed values of the going rate of depleting, while environmental sustainability with es and eu would require more involved modeling to come to grips with the current (conservative) expectations on future development.

Intermediate conclusion based upon this small model

I tended to favour GDP as based upon expenditure flows, since depreciation of produced capital tends to use accounting schemes that seem rather arbitrary. Now, however, it is clearer to me that depletion of natural resources may pollute these GDP data. Now I am starting to think that NDP would tend to be a better yardstick, provided that statisticians find adequate estimates of depletion of course. If those estimates are deficient then the use of NDP provides only the illusion of improvement though.

PM. This simple model seems quite tricky. A one time deviation from sustainability causes a one time GDP growth, but also forces to continue to deviate from sustainability for ever more, with K[t] = (1 – u)^t K[0] merely to maintain the income level without any growth. It is only a simple model to clarify a basic idea. Salah el Serafy has more sophistication with the user cost.

Salah el Serafy again

El Serafy (2014) however advises that resource depletion is removed from income altogether (with my comments):

“Any presumption that removing ‘royalty’ (the capital element) from GDP entries relating to natural resources might be taken care of at the level of estimating NDP cannot be accepted for more than one reason.
First, NDP is not often reckoned at all, and if reckoned there is no unanimity over the amount to be used for the capital consumption involved. (TC: But would there be unanimity for correction at the level of GDP ?)
Second, natural resource deterioration due to commercial exploitation is not ‘depreciation’ in the accepted sense; it does not conform to standard wear-and-tear allowances applied at year-end to asset categories, and may in fact amount to as much as 100 per cent of the asset. In the latter case proceeds of the asset sale will all be a User Cost and must be exiled altogether from GDP. (TC: This is a matter of definitions. If Gross is taken as expenditure flows, then Net can be taken as depletion and standard depreciation. However, expenditure flows are not income indeed.)
Third, if stock erosion is viewed correctly as Marshall advised as emanating from ‘Nature’s store’, accounting conventions dictate that using-up stocks must be dealt with at the gross income estimation stage. Clearly natural resources are not ‘fixed capital’ but inventories, and the User Cost implicit in using them up should be recognized for correct accounting. (TC: But the situation becomes blurred, when the stocks can be used for investments to maintain the stocks, see above small model. In that case it makes some sense to define Gross as the expenditure flows, and deduct depletion with depreciation. However, expenditure flows are not income indeed.)
Such economic reasoning appears to escape the concerns of the estimators who have taken charge of the accounts resisting the economic logic behind the ‘greening’ quest.”


El Serafy did his doctorate in economics at Oxford in 1957, supervised by John Hicks, one of the giants in economics, and also famous for his insistence on proper accounting. El Serafy laments that this heritage has gotten lost:

“However, as the economists’ interest in studying social accounting faded the accountants and statisticians have taken over, often disregarding the concerns of economics, and disclaiming any hint that the national accounts should be estimating income.”

“Their message in brief is that no adjustment for environmental losses can be expected within the mainframe of the national accounts. This in effect is a death sentence on ‘green accounting’.”

Salah el Serafy has a point. The point has also been made by Tinbergen & Hueting.

This continues from former weblog text.

In the past, Dutch society had the pillars, or segregation – though not in the extreme form of Apartheid – notably between Protestants and Catholics, but also for the socialist labour movement. People could live in their own community without the need to deal with other concepts or to develop a personal sense of tolerance and open-mindedness. Only the leaders of the pillars had to bargain with one-another, and this could be restricted to more practical issues.This pillarisation started to break down in the 1960s and 1970s with the increased welfare and freedom and the advent of television and “globalisation”. Yet, there are still relevant structures, e.g. in political party memberships and newsmedia subscriptions and such.

“In their search for the conditions of stable and democratic political rule most of these political scientists came to believe that political fragmentation of a society poses enormous obstacles to the realization of stability and democracy. In their view the cleavages or fragmentation, created by differing social, ethnic, religious, and cultural groups, had somehow to be overcome before there could be any prospect of a stable, democratic regime. About fifteen years ago this dominant belief among political scientists was challenged by the young Dutch Arend Lijphart. In 1968 he published his The Politics of Accommodation: Pluralism and Democracy in The Netherlands. Both within the country and elsewhere (thanks to the English edition) the work was highly acclaimed. Its success was due, in large part, to his description of Dutch politics as a paradoxical case of strong social segmentation or pillarization which was also marked by stability and democracy. That is, contrary to expectations, Holland is both stable and democratic despite its extensive social cleavages.” (M. van Schendelen around 1985).

While the pillars have mainly disappeared, Dutch culture hasn’t developed yet the personal sense of tolerance and open-mindedness that is required for this new situation. Dutch people are no orphans without self-confidence, but the metaphor might be helpful. If I am correct, in the USA, there is now strong antagonism between strands of Democrats and (Tea Party) Republicans, but there is also an underlying idea of mutual respect, and the attitude that opponents have the right to speak their minds, which also involves the obligation to listen to them. Perhaps this is the pioneering spirit that relies on individual strength. Though, in Hollywood comedies, it are the eternal misunderstandings that cause most laughs. Whatever that be, my suggestion is that in Holland, discussions break down far too soon. One is treated at best with a smile but no longer listened to, with the hint that you should go and look for your own pillar to talk to.

Thus, Dutch people might seem open minded but actually there is fundamentalism, fueled by uncertainty and the need to cling on to something.

A course “Economics from a pluralistic perspective” (newspeak)

The example in this weblog entry concerns what professors Irene van Staveren and Rob van Tulder call “pluralism“. This appears to be Orwellian newspeak for something that excludes key information that proper pluralism would include. It is “Free of charge to follow the course, € 50 to get a certificate”, though apparently you still must register with Coursera.

“Wondering why economists have not predicted serious financial crises? Shocked by economic assumptions of human behavior as self-centered and focusing only on what can be measured? Asking yourself if there are no sensible economic alternatives to free markets? Then you are at the right place to learn economics! Economic pluralism means that a plurality of theoretical and methodological viewpoints is regarded as valuable in itself and is simply the best way in which economics can make progress in understanding the world. This MOOC will illustrate economic pluralism not only in substance but also in form.” (EUR website)

This case concerns science and education, and involves Van Staveren’s and Van Tulder’s suppression of scientific ideas that they apparently don’t want to hear and don’t want to tell their students about. A scientist might specialise, and no longer be able to see beyond the blinders of this specialisation. In that case the scientist is no different than any other lay person, except for a general training in methodology and integrity of science. In this case, we are dealing with pluralism and generalisation, which are the opposite of specialisation. Hence the omission of key information is a much more serious issue.

My analysis in 1990 was that the Trias Politica fails, and that democracy requires an Economic Supreme Court. The economic crisis 2007+ confirms this analysis. Now, fellow economists may have other analyses, but it would be unscientific not to mention my analysis. Certainly when you target for pluralism, then also the proper analysis better be mentioned.

The former weblog entry already mentioned some important elements. We continue with the list.

Sustainable Finance Lab

Irene van Staveren is member of the so-called “Sustainable Finance Lab” (SFL) at Utrecht University. There is no good reason to combine finance and sustainability, but it might be good marketing for some bankers, and fashionable for the news media and students looking for something to study. Former RABO banker Herman Wijffels can call himself a professor now, and redirect criticism on his former banking activities to his new image on sustainability. In Dutch there is this 2013 warning by me.

I alerted Van Staveren about the malconduct by Klaas van Egmond at SFL. Van Egmond is an engineer in food technology, who has insufficient background in economics, but who doesn’t care about this, since engineers know better. He switched to the issue of the environment, and became head of the Dutch research institute on the environment. There he maltreated Roefie Hueting’s analysis on environmental sustainability. With the 2007+ economic crisis, he presented Dutch parliament with a model exercise that flies in the face of economics. These two issues are discussed here. Van Staveren didn’t respond to my criticism though she could at least have asked her SFL partners to reply to the criticism.

Holland also has environmental researchers like Rob van Dorland who do serious work on the environment. I am afraid that they get so-called “information” about economics from confused Klaas van Egmond. When I alerted Van Dorland about this issue, he rejected my warning as “spam”. Well, this is curious. The email exchange is here. This was part of the exchange above, that Van Staveren neglects to look into. It would have been better when she had corrected Van Egmond and informed Van Dorland that my information and warning had been correct.

At SFL there is also Dirk Bezemer, who disinforms the world about economists who warned about the 2007+ crisis.

At SFL there is also Mark Sanders, who advises the scientific department of the political party D66. I have asked Sanders to look in the D66 claims on improved democracy with district voting, referenda, and direct elections of prime minister and mayors. He refused to do so, and didn’t transfer my request to other people at that D66 department so that my new analysis would be looked into. Dutch readers can look here. A recent discussion on voting theory on this weblog is here.

Poor families paying for environmental costs

With global warming and deteriorating environment, the costs of the environment rise, and thus also costs for families, either directly or via taxes. For some persons this might be an argument not to include environmental costs into prices, since it would increase poverty.

“In the near future, an average three-person household will spend about €90 a month for electricity. That’s about twice as much as in 2000.
Two-thirds of the price increase is due to new government fees, surcharges and taxes. But despite those price hikes, government pensions and social welfare payments have not been adjusted. As a result, every new fee becomes a threat to low-income consumers.” (Der Spiegel 2013)

“Americans can’t afford higher electricity prices.” (Forbes 2013)

However, this situation is not fundamentally different from the past, when families already faced the question of survival and subsistence. Let me thus refer to my analysis on unemployment and poverty in DRGTPE. A short text is “Don’t tax sweat“. Dutch readers might look at this.

However, for some students of environmental economics this still might seem to be a new issue. I don’t know whether this is the case with Van Staveren and Van Tulder. They neglect to respond, and thus I really don’t know. Given that they neglect me, I presume that they also neglect my work, so that they might have above confusion.

Unemployment and poverty in general

In 1996 Ruigrok & Van Tulder “The logic of international restructuring” presented the important insight that globalisation actually was regionalisation. Fears about global competition were exaggerated. For Dutch readers: see this. This analysis fitted an earlier study by Andre Middelhoek at CPB in an evaluation of the Treaty of Rome, that there was mainly intra-industry specialisation.

In 1998 I gave Van Tulder a copy of the Dutch book “Werkloosheid en armoede, de oplossing die werkt (W&A) (pdf online). Van Tulder would look into it and get back to me. He hasn’t.

Date: Wed, 15 Apr 1998
To: Thomas Cool
From: Rob_van_Tulder
Subject: Re: Boekje over werkloosheid en armoede, i.v.m. uw analyse;  reactie?

Geachte mijnheer Cool,
ik heb uw boekje in goede orde ontvangen. Ik heb het slechts kunnen
doorbladeren. Momenteel is me weinig tijd gegeven voor enig substantieel
leeswerk. Dat zal in de komende weken z’n beslag kunnen nemen. Ik zal dan
graag contact met u nemen.
met vriendelijke groeten,
rob van tulder

Google Translate:

I have received your book in good order. I’ve been able to browse only. At present, I have little time for any substantial reading. That will be possible in the next few weeks. I will be happy to contact you.

Now I see that Van Tulder made a 2008 study about poverty for UNRISD, the United Nations Research Institute for Social Development. There is no reference to this book or my work.

“This paper addresses the way in which the largest firms in the world are coping with their involvement in the issue of poverty at home and abroad. It will be analysed in particular whether different ‘varieties of capitalism’ (VOC) or ‘business systems’ (Cf. e.g. Whitley, 1999; Jackson and Deeg, 2008) and different industries lead to different approaches towards poverty. The paper focuses on the one hundred largest firms in the world – as measured by 2006 turnover (see Annex). The sample contains sufficient representative firms from five industries and three different varieties of capitalism, to facilitate international comparison: (1) Anglo-Saxon (containing in particular US firms), (2) Continental European (in particular French and German firms) and (3) East Asian (in particular Chinese and Japanese firms). This paper is largely descriptive. It aims at identifying and documenting various strategies that can be and are employed by corporations to reduce poverty, it tries to come to a first assessment on the profoundness of these strategies, while also considering which variety of capitalism (and business leadership) seems to develop the most pro-active strategies towards poverty reduction.” (Van Tulder 2008, UNRISD)

The study targets businesses, but a key point for such a study would be:

  • Business leaders should plea with the government for a general policy to alleviate poverty, since it is the government that can resolve main issues, including the prisoners’ dilemma for the individual companies.
  • Resolution of poverty in OECD countries would be an important step, since it would set an example for countries with less democracy and resources.

Indeed Van Tulder in his chapter 2 presents a more general discussion how businesses are getting involved in the poverty issue, and W&A fits in this general framework, but isn’t referred to.

Why oh why did Van Tulder not get back to me about this book that I gave him ? It might be that he simply forgot ?

Wage moderation policy

Van Tulder (2000) (in Dutch) p178 & 180 refers to the Dutch wage moderation policy, but without the criticism given by Kleinknecht, see this earlier weblog entry.

The policy of wage moderation is also discussed in W&A as a key angle to understand unemployment and poverty in Holland and the OECD. See DRGTPE on exposed and sheltered sectors of the economy.

Reading DRGTPE

In 2010, I alerted Van Staveren about DRGTPE and the Dutch booklet DOK for a general public. Van Staveren indicated that she would look at it, so I sent her the relevant links. I haven’t received a reaction since. A 2014 discussion about the failure of the Trias Politica and need for Economic Supreme Courts is here.

From: “Staveren, I. van (Irene)”
To: ‘Thomas Cool / Thomas Colignatus’
Date: Tue, 16 Feb 2010
Subject: RE: Mijn analyse over werkloosheid en armoede

Geachte Thomas Cool,

Hartelijk dank voor uw mailtje en interesse in mijn werk. Als u me (een link naar) uw werk over de Trias Politica en uitbreiding met een Economische Hof zou willen toesturen, zal ik dat met belangstelling lezen.

Ik neem aan dat u bekend bent met mijn boek waarin ik betoog dat er drie economische waardendomeinen zijn en dat een economie pas goed functioneert als die drie (vrijheid/ruil; rechtvaardigheid/herverdeling; zorgzaamheid/de gift) in evenwicht zijn? (Voor de zekerheid: Irene van Staveren, The Values of Economics – an Aristotelian Perspective. Routledge, 2001.)

Hartelijke groeten, Irene van Staveren.

Google Translate:

Thank you for your email and interest in my work. If you would like to send me a link to your work on the Trias Politica and expansion with an Economic Court, I will read that with interest.

I assume you are familiar with my book that I argue that there are three economic value domains, and that an economy only works well if those three (freedom / exchange, justice / redistribution, care / gift) are balanced? (For sure: Irene van Staveren, The Values ​​of Economics – An Aristotelian Perspective. Routledge, 2001.)

PM. I am aware of the work by Arjo Klamer and Deirdre McCloskey on (virtue) ethics. Van Staveren wrote her thesis with Klamer and McCloskey was in the thesis commission. It had been my intention to look at Van Staveren’s thesis, but this hasn’t been urgent for me to do so yet.

Closing off

This discussion already takes two weblog entries. Let me close this off now, with a salute to George Orwell, apparently born in the same year as Jan Tinbergen (1903-1994).

Eric Blair / George Orwell (1903-1950)

Radar TV is a consumer awareness programme, with Antoinette Hertsenberg in the role of Ralph Nader. Hertsenberg is annoyed that banks rule supreme again. Banks caused the 2007+ economic crisis and should have been tackled, cut up into pieces and put under surveillance. None of this happened, and we are heading for the next crisis.

Radar TV had two broadcasts in 2015 about borrowing and debt repayment, and then on January 14 2016 had a third event, a college / lecture, with presentations by three “experts” followed by discussion with the audience.

Unfortunately, the “experts” were no real experts: Dirk Bezemer, Klaas van Egmond, Gerhard Hormann.

A major problem is that economist Bezemer and engineer Van Egmond repeated the disinformation that they already committed with respect to Dutch Parliament in 2015. I reported on this in November 2015. Thus, Bezemer & Van Egmond have learned nothing and continue disinforming others.

PM. Some email-exchange on this with Van Egmond is included in this report, that deals with another issue, namely Rob van Dorland ((KNMI) in the context of the environment and climate change (check Paris 2015).

In earlier broadcasts but not now: Arnoud Boot

The earlier Radar TV broadcasts showed professor Arnoud Boot of the University of Amsterdam. He did not perform at this college / lecture.

Boot agrees on this: the ECB is buying time with its Quantitative Easing at the rate of EUR 60 bn per month. This money only stays in the financial circuits, reduces interest rates for savers and pensioners, raises stock prices for the wealthy, and doesn’t generate real investments when demand is wanting. When economies do not redress the banks then the next crisis will hurt even more.

There is a longer interview with Boot by “gold bug” Willem Middelkoop, December 24 2015. Around 2008, Middelkoop warned for an even bigger crash, set up a business advising people to buy gold and commodities rather than paper, and then sold his business. The bigger crash did not come. Apparently he still is taken seriously by some people. See my earlier discussion of the “gold bugs“. The 2015 interview with Boot shows that Middelkoop can ask some standard questions that are interesting when you haven’t heard them before. He doesn’t ask the critical ones. Boot doesn’t mind that people don’t ask the critical questions.

It is informative that Boot announces that he and the WRR (scientific council) will put out a report in April 2016 about disengaging the economy from the financial sector. Hopefully Boot and WRR will look at my paper “Money as gold versus money as water” (2013). Boot however fails by not protesting against the censorship of science by the directorate of the Dutch Central Planning Bureau, see here.

Bezemer repeats disinformation

Dirk Bezemer (University of Groningen) started out as an economist in agriculture and development. He shifted to finance after the crisis in 2007+. This change is acceptable. Also John Kenneth Galbraith (1908-2006) started out as an agricultural economist. Jeroen Dijsselbloem, the current (financial) president of the Eurozone, is an “agricultural engineer”. While this is acceptable, the problem lies in the attitude. When Dijsselbloem gets criticism that his knowledge on macro-economics is lacking, then he should pay attention, see here. When Bezemer receives criticism that he misinforms others, then he should take notice.

Bezemer drew much attention with the paper “No one saw this coming”. Bezemer here quotes Alan Greenspan, and then shows that there were warnings that Greenspan did not listen to.

You might expect that Bezemer might learn from such a paper that he himself should not make the same mistake as Greenspan. You might hope that Bezemer has become very careful in listening to criticism and warnings by others. However, Bezemer does not refer to my analysis since 1990 that also warned about the risks in the current economic structure. See my 2009 memo on this. He doesn’t do anything with my email to him about this. He does not study it, he does not write about it, he does not speak about it. Bezemer deliberately blocks my analysis with a wall of silence. We are 7 years further now, and Bezemer hasn’t found time to look at an analysis by a fellow economist who worked at the Dutch CPB in 1982-1991, and who was hit by censorship and foul dismissal.

This clarifies the distinction that I make between Boot and Bezemer. Both of them neglect the censorship of science by the directorate of the Dutch CPB. But Bezemer is much more outspoken about the blindness. Bezemer selected that blindness as his topic of research, and as a scientist he should look at all the evidence.

It is becoming a running gag on this weblog that Bezemer disinforms others. I already reported that he disinformed Sweden in 2012 and Dutch Parliament in 2015. It is not a running gag but a serious issue. This weblog has a scientific position, and malconduct by scientists cannot be neglected. Please note that I have not been following all that Bezemer has been doing or presenting.

In minute 90 Bezemer states that there is not enough communication about the issue (“Er is te weinig gesprek over.”), which neglects that he himself blocks my analysis with a wall of silence. Dutch readers may look at my evaluation of the deficient Report on Banking, written by Herman Wijffels (see below) and Arnoud Boot. Bezemer disinformed Radar TV not only on my analysis. When Klaas van Egmond made similar errors as I had warned about, Bezemer did not pass on my criticism (and did not say to me why my criticism would be deficient).

Bezemer: "There is not enough discussion." Source: Radar TV minute 90

Bezemer: “There is not enough communication.” Source: Radar TV minute 90

Klaas van Egmond repeats incompetence

Klaas van Egmond (University of Utrecht) is a food technology engineer who turned to environmental issues, who became head of the Dutch environmental planning agency (MNP), and who in the 2007+ crisis became co-founder of what they call the “Sustainable Finance Lab” (SFL) at UU.

In minute 110 in the college / lecture, Van Egmond rallies against banks that sold mortgages using the argument that the economy would continue to grow and grow forever.

  • He laments how dumb people have been in believing those banks.
  • He laments how mean and false those banks have been, since they must have known that their story was too good to be true.

However, in his own presentation (minute 45:30), Van Egmond presents a plan with “positive money” so that the economy can grow again (at least to 2050, perhaps not for ever and ever). This is inconsistent. In itself one can imagine an argument “continued growth is only possible with positive money”, but Van Egmond’s statement at minute 110 is apodictic against growth in general.

Growth by Van Egmond, Source: Radar TV minute 45:30.

Red line: growth by Van Egmond, Source: Radar TV minute 45:30.

More fundamentally, the “positive money” plan that Van Egmond presents suggests that the government would have billions from seigniorage to spend on public goods (perhaps even thirty billion). He suggests that this seigniorage is currently appropriated by banks. However, as I wrote him, he neglects both the proper value of the velocity of money and transaction costs. The payment system does not come for free. See my paper “Money as gold versus money as water” (2013) for an indicative calculation that seigniorage would be needed to cover the costs of the payment system. Unless you want to pay a percentage at each transaction, of course.

What is flabbergasting is that Van Egmond in an email acknowledges that he disinformed Dutch Parliament in 2015, but he still repeats the same disinformation at Radar TV in 2016. In this email he states both that he caused confusion for Parliament, and that a velocity of money of 1 (stock of money M = P Y / V = P Y = nominal national income) needs “careful attention”. Either this “careful attention” is a diplomatic rephrasing of “oops, this was a serious mistake” or he really doesn’t see the issue even when it has been pointed out to him: but in the latter case it is not clear what the “confusion” would be. Overall, Van Egmond disinforms Radar TV that above growth path would be feasible in the manner that he dreams up.

“Ik heb met de veronderstelling dat de velocity = 1 (geldhoeveelheid ongeveer gelijk aan BNP (pY)) inderdaad verwarring gesticht. Hoewel we op grond van onze berekeningen die veronderstelling menen te kunnen rechtvaardigen, is voorzichtigheid inderdaad geboden.” (Van Egmond, email 2015-11-18, here p26)

PM. There is the following curious issue. In the real-time broadcast Van Egmond stated that no economist had seen the crisis coming. I could not find this statement in the online version. Has it been edited out, or did I not search well enough ? In the session at Parliament, Van Egmond stated the same, and he quoted the paper by Bezemer as if this had shown that no economist had seen the crisis coming. The session at Parliament showed that Van Egmond hadn’t read Bezemer’s paper and misstated its summary. Perhaps Bezemer now protested, and Radar TV allowed Van Egmond to delete the passage ?

Van Egmond is a danger for his & the environment

The UU “Sustainable Finance Lab” (SFL) has been created by Klaas van Egmond and Herman Wijffels. At some time Arnoud Boot joined up. Van Egmond & Wijffels create the image as if they are supportive for the environment but critical of banks. Klaas van Egmond, however blocked Hueting’s analysis on the economics of the environment. Wijffels is a former CEO at RABO Bank, guilty of the same behaviour as banks in general, while Wijffels himself turned RABO Bank from a co-operative into the competitive bonus-driven bank that contributed to the LIBOR scandal. A diagram of the relationships may help to better see the abuse of science at Utrecht University.

Diagram of the abuse of science at University of Utrecht

Diagram of the abuse of science at Utrecht University

One would think that Dutch people are interested in rising sea levels. If there is one nation other than the island nations that will drown, one would expect that Holland would pay keen attention to Climate Change. Instead, Holland appointed Klaas van Egmond to become director of the Dutch environmental planning bureau (MNP).

Van Egmond blocked the analysis by Roefie Hueting on environmental sustainability. See my earlier weblog text on Hueting’s analysis.

In that same email of November 18 2015, Van Egmond argues that he didn’t see anything in Hueting’s analysis after “careful consideration” (my translation into English). However, Van Egmond never published what those “careful considerations” were. Thus he blocked a scientific discussion on those, and swept the issue under the carpet. In the email he states another apodiction: as if we cannot assess environmental damage. This runs counter to economic theory that policy better be formulated with the best information available. You may not like the quality of the information but it still is the best available, and you can at least try to handle the uncertainties as best as possible.

There is more: As long as Van Egmond uses such apodictions and doesn’t state in scientific manner what his objections are, we can suspect that his view actually is a matter of ideology and blindness. Namely, there are (at least) three approaches w.r.t. the economy and the environment:

  • (Neoclassical) Economists, like Pigou, Keynes, Robbins, Tinbergen, Hueting and me, who rely on the theory of economic welfare and national income accounting. Yes, there are discussions amongst economists, but they are all aware that governments must take decisions about next year’s budget. The Tinbergen & Hueting approach was much discriminated against by mainstream economists who were and are not interested in the environment. See my draft book: The Tinbergen & Hueting Approach in the Economics of Ecological Survival,
  • Engineers like Dennis Meadows and Van Egmond, who use “system dynamics” developed in engineering, for which economic theory is a distraction. This was used by the Club of Rome report that neglected price developments and such (so that many economists lost interest). The model that Van Egmond tries to use at “Sustainable Finance Lab” (with above misleading diagram on growth) is from this type of research.
  • Mathematicians like Georgescu-Roegen start with thermodynamics and entropy. Obviously entropy is a key notion in physics, but as long as the Sun keeps emitting light then Earth has an inflow of energy, and this approach on entropy may be abstractly correct but is not immediately relevant in terms of economics. Fleeing from Europe, Georgescu-Roegen came in the USA and they might have given him a professorship in statistics but they gave him erroneously a professorship in “economics”. There is a curious role by Herman Daly who had a B.A. and went directly to a Ph. D. in “economics” with thesis supervisor Georgescu-Roegen (see here). Daly continued with what is called “ecological economics” but which is not really economics. The field florished for a long while because mainstream economists were not so much interested in the environment.

The basic idea by SFL seems to be that the current structure of finance causes insustainability both for finance and the environment. This is a nice slogan that combines two topics that are somewhat popular. There is no proof for that slogan however. It is somewhat curious to link the notion of an insustainable financial debt to the issues of environmental sustainability. It makes more sense to regard the two subjects separately. See Hueting for the environment. See DRGTPE for finance, with updates in “Common Sense: Boycott Holland” (CSBH) and “Money as gold versus money as water”.

Gerhard Hormann and mortgage debt

A final Radar TV “expert” is Gerhard Hormann, urban planner and political scientist, who advised people before the 2007+ crisis to get rid of their mortgages. Hormann did not discover the risk himself but was alerted by a book by historian Eric Mecking. Perhaps it is useful to look at this connection later on, and see how Mecking and Hormann react when they hear that they have been disinformed by economists Wijffels, Boot and Bezemer.


The anatomy of Holland shows a morass fitting for a delta. It is encouraging to hear that Bezemer agrees that there is not enough communication and that Boot is working on yet another report on the banks. The issue will remain in people’s attention, perhaps till the delta is flooded by rising sea levels. It still is useful to boycott Holland till the censorship of science since 1990 by the directorate of the Dutch CPB is lifted.