Nick wrote:This is equivalent to 0.25% of turnover, a sum smaller than the gain GSK has probably made from the decline of sterling, so meh, not really material. Meanwhile in other news, the ability of much of Europe to fund medical research has been severely damaged by the dramatic recession caused by the
operation of the Euro. What do you say, animist? Or doesn't Johnny Foreigner count...?
in a sense, no, foreigners do not count over this.
Crikey! I didn't think you'd go for that one! So why should anyone care a stuff for anyone else? Is it really "I'm all right, Jack"? And if one thing is international, it is medical research. So the devastation of Southern Europe impacts in British resident too, doesn't it?
Your argument seems to be this. We should as country take a gigantic leap into uncertainty
There's almost as much uncertainty in remaining within the EU. And where there is more certainty, it is more certainty of movement in the wrong direction. Less democracy, and the further hobling of the open market.
and against most economists' advice,
Normative economics does not tell you what is "right". It tells you what is likely to happen in the event of various scenarios. It all depends what parameters you are setting. If one doesn't care about Johnny Foreigner, then, well, all sorts of "advice" is possible!
because some other countries in the EU are suffering because of the euro.
... but that's OK, is it? Why? The Euro represents the very essence of the grand project. It has already failed catastrophically, and no nation state shows any inclination to give up its autonomy, the only way it might possibly work: German tax-payers don't want to pay for Greek pensioners.
Sounds very strange to me, and I doubt that other Brexiters would agree with your thinking here. If countries like Greece want to the leave the eurozone or the EU itself, that is their decision.
Indeed it is. But the EU has sought to make leaving as difficult and as painful as possible. They have drawn the elastic so tight, that any break would be painful, but they insist on increasing the tension, not reducing it. Even in spite of this, the suffering populace are not going to be given the choice, because they are likely to vote "the wrong way".
Look, Nick, as an economist you know that marginal costs do count.
Indeed, as well as marginal revenue. And in this instance, though we have seen a relatively tiny increase in costs (because of government, btw) we have seen a decrease in marginal costs, plus an increase in marginal revenue, since the Brexit vote. But then, as a PPE graduate, you know that, eh?
not much of an economist, me, and it was long ago.
Ah! Explains a lot!
And, I might add, tax is also a cost which hurts companies and their ability and inclination to fund ground-breaking research. Labour is proposing pretty much 45% icrease in that cost. So how many sick people is Labour proposing to kill....? I thinkwe should be told!
Probably this is a case in point and I should not have specified marginal costs, since you are right to say (as I was aware) that production stops when marginal cost exceeds marginal revenue. But surely the effect of an exogenous cost increase via Brexit would in fact shift the supply function upwards (?) so that there would be a new demand-supply equilibrium at a lower output.
Indeed. But consider this: most of the costs arise because of the EU's proposal to erect barriers to trade post Brexit. It is not the UK which is resisting free trade, but the EU. Furthermore, there are huge costs imposed on companies which have bugger all effect, except to reduce their capacity to produce. I look forward to your bonfire of unneccessary regulation!
And while such a general increase in costs will not put GSK (or probably any other drugs giant) out of business, it might make particular drug lines less profitable, even to the point of unprofitability.
It's not a general increase in costs, though, is it? And not imposed by the UK, but by Brussels. It hits the shareholders, but not the profitability of any particular area of research, except in so far as the EU might withdraw from mutually advantageous co-operation, for political reasons.
Why has the fall in sterling's value increased marginal revenue? - just asking.
If drugco develops a drug in the UK, looking internationally, its costs are lower if research is conducted in the UK, and its profits on export from the UK greater.
If a producer decides that marginal costs are too much then they will stop producing.
External costs are not a marginal cost, are they?
They don't vary with production, do they? In this instance they are a one off. I doubt they are significant enough to stop GKN from operating in the UK, especially as other marginal costs are down, and marginal revenue up as a result of the Brexit vote. By way more than £70 million.
I think I answered the first point above.
Hmmm... you think...?
Of course increased external costs will be part of total costs, and marginal cost/revenue thing presupposes a stable supply curve.
I don't think you actually mean a stable supply curve; rather that investment etc will be hit by uncertainty. True. So why is the EU hell-bent on perpetuating and increasing uncertainty?
I am not suggesting that GKN will cease to operate, only that its output may be affected - I don't claim to know by how much.
We agree, but for different reasons
If other marginal costs are down, this is not relevant, is it,
why on earth not? Of course it is! Hence the huge improvement in manufacturing industry in the last quarter.
unless this decrease is directly related to Brexit?
It is, because of the reduction in the exchange rates.
What this piece does suggest is that costs of so doing will increase because of Brexit, and some at least of these costs will be passed onto the NHS.
...except, of course, that revenues will increase having left. So why should the NHS be charged more? (I think there are various controls on this sort of thing, though I'm not sure what..... Drug companies don't have a blank cheque, do they....?
But if, as we have seen, revenues from such research are higher, then there is no need to charge the NHS more, is there?[/quote]can you explain why the revenues are higher.[/quote]If prices are expressed in Euros, then profits, in pounds, will be higher.
It may be that drugs companies use Brexit costs as a reason to increase prices while ignoring countering effects connected with the latter - I would not know or trust them not to.
Your prejudice is showing! See above for explanation.
That is what we were talking about, not the effects of the euro.
But they are inextricably linked, aren't they?
no, at least only in your mind, and please see above
I'm losing the plot here! It seems we both need to "see above" !
And do please stop braying meh, it don't mean a thing and it is in fact demeaning - geddit?
Sorry you don't like the phrase "meh", (though I never "bray"!) but it does seem to sum things up fairly succinctly: that the evidence put forward doesn't have much value. And it's not quite as insulting as "geddit?"
At least you didn't say "Capiche?"
I certainly did not mean to be insulting (meh sounds more of a bleat than a bray!), and I tend to say "geddit?" when I have tried to make a silly pun, as now. So capiche?
Having met you and shared a pint or two (actually we had our own, but that's how the phase goes
) I know that no malice was intended.
It's a pleasure to debate with you, animist.