jamesz

Economics fiction writing

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It’s about a virtual world, similar to our own but slightly removed from it. It purports to have a set of rules that are internally consistent but has to constantly resort to ad hoc explanations for unusual behaviour. Yet, still, there is a lot of stuff that happens that is inexplicable within the rules of the universe and the powers that be tell us that we just have to accept that that’s the way it is.

So runs Megan McArdle’s critique of the new Harry Potter book. I agree with her but it didn’t spoil the book for me. Frankly, critiquing the economics of a book for essentially resembling the current state of the economics profession seems a bit rich to me.

Matt Nolan

Broadband penetration

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Found this little gem on Marginal Revolution.  It says that the OECD methodology for measuring Broadband penetration is flawed, as it measures per capita instead of per household rates (so countries with larger households are penalized, since people living in the same house can just share a connection). 

Now the OECD methodology for pretty much everything is flawed, but it did get me thinking, we are 21st in their measure of broadband penetration, could this be because of their inappropriately defined boundaries on what defines broadband uptake.

The answer is sadly no.  Under the new measure NZ comes in 23rd, down two places.  To make matters worse, Australia jumps 3 places to 13th.  Damn Telecoms lack of penetration.

Matt Nolan

Dairy farmers and their bling

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So, it looks like the dairy farmer is doing well.  This raises an interesting quesiton.  Are dairy farmers doing well because of:

a) Government help

b) The fact that their milk is sold by a monopoly

c) Favourable world commodity prices

d) Some mix of all three (note you can give a zero probablity to one of the options when doing this)

I think its mainly c).  Now the real issue I’d like us to try and figure out, is whether the government provided a positive role in the current dairy boom.  Has the government provided some structural assistance that could not of been provided in the free market?

Personally I doubt it.  But if someone can make a convincing argument for it, that would be pretty cool 😉

Matt Nolan

People in the UK don’t want to pay more fuel tax

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And I’m not bloody surprised either.  They already pay a very significant fuel tax, one that I feel covers the externalities associated with their fuel consumption.  When you have an externality, the government should tax to the point where the marginal cost of consumption is equal to the social marginal cost of consumption, taxing anymore than that is government failure.

However, in New Zealand we should pay more fuel tax, and I know one guy that agrees with me

What do you think?  (bonus points for picking up the obvious economic inconsistencies in the above article, as it will give me the opportunity to say what I really think)

Will Taylor

Why the Exchange Rate Makes Me Smile

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So the exchange rate has reached record highs much to the despair of the government, reserve bank and local exporters. There is one sector of the economy that is poised to benefit from this though…. ME

Given all the noise coming from the government about the exchange rate being overvalued and the fact that the reserve bank intervened when the dollar was still below $0.80, I’m thinking it’s a fairly safe bet that over the medium-long term the dollar will come back down. With that in mind, now is fantastic time to buy overseas shares and reap the gains as you ride the dollar back down.

It’ll also be a nice self fulfilling prophecy if will all start sending money overseas, we believe the kiwi dollar is going to fall so we dump it which causes it fall. Think about it, you could actually be helping our exporters by investing in foreign companies, I’ve never felt so good about not investing in the local economy!

Matt Nolan

Monetary policy: Aussie vs NZ

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At least one Australian and one New Zealand commentator feel that the RBNZ is too focused on inflation. They use the example of the RBA, which seems to be controlling inflation without trying to strangle the life out of the economy.

Do people agree with this? Is our Reserve Bank an inflation zealot? Or does our Reserve Bank have a better idea of the long-term costs of inflation, and as a result, is more interested in stamping it out?

I’m not even sure that the situations are comparable, Australia’s growth rates and productivity rates have far outstripped ours, giving their Reserve Bank more leeway to control inflation. After all March non-tradable CPI inflation was only 3.5%pa in Australia, compared to 4.0%pa in New Zealand, indicating a significant difference in domestic price pressure.