Written evidence submitted by David Chester
SUMMARY OF
MAIN POINTS
1. The method for making decisions regarding
taxation changes should be based on an exact macroeconomic theory
(with experience taken into account, where applicable), which
is based on a more scientific approach than in the past.
2. The current method of making these decision
relies on simulations using models that contain econometric (statistical)
analysis, that are better suited for studies of a simpler nature,
rather than for modeling the whole of the social system. These
inexact methods were originally intended for use in simulating
time-series problems having a maximum of three variables, not
the hundreds currently used in the Finance Ministry Econometric
Models of the British macro-economy.
3. These present statistical-behavior approaches
to simulation are unsatisfactory due to the lack of precision
and they are unable to provide clearly understood results due
to the complexity of their outputs. Consequently it is no surprise
that HM Government cannot rely on them and seeks new and better
information.
4. A simpler method of analysis for policy-making
should be used which employs a scientific criterion based on Ockham's
Razor (as employed by most scientific theories). This is aimed
at reducing the complexity of the problem to an absolute minimum
with the aim of representing and understanding the basic reasons
for the holistic behavior of our social system.
5. Such an approach and methodology (systems
analysis engineering) as applied to macroeconomics, depend on
the limited capability for the actual functioning of the complete
system. The aggregate properties (as distinct from specific sectors
in society) are idealized so that response to change (technical
as distinct from behavioral) can be directly simulated (rather
than artificially introduced from the use of statistical data).
6. This approach to simulating our social system
as a whole does not need to be unduly complicated. The resulting
functional model (as developed by the author, see below) contains
only 19 variables passing between six major entities. This model
is suited for simulating the short-term autonomous response to
change where it seeks equilibrium according to a number of decision-making
criteria that are according to the nature of and contained within
our society.
7. The method will give clear results which are
useful for determining tax policy as a result of an exact and
scientific technique, which has no political relationship. The
author of this Memorandum has adopted it as a topic of his private
research. It has been written into the form of a 180 page book
"Consequent Macroeconomics—Rationalizing About How
our Social System Works", that is almost ready for publication.
(Examples showing the effects of different tax policies are included
in the work.) This written material is available and it can be
sent to the Select Committee for examination by their experts
as may subsequently be desired.
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