Matt Nolan

Government in perspective: What is the “other”?

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When people look at government they often see a group of people that they feel are responsible for taking care of the country. Looking deeper, some people see a representation of society that is supposed to do what is in the social interest. Looking again we might see an organisation who is dominated by interest groups and competes with other institutions for resources in the national economy.

All these views of government are true. This does not make them evil or virtuous, they are merely a central component of the current social structure.

Now no matter what view you have of government, there is one thing you are likely to believe – that government should do what is in your countries best interest. However, is this right?

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Matt Nolan

Credit crisis comes to Australasia?

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Following the freezing of Hanover finance’s finances we have heard that the National Australia Bank, and the Australia New Zealand Bank have both had to increase provisions for bad debt (NAB, ANZ).

These revelations put the relatively dovish stance of the RBA and the RBNZ in perspective – after all, central bankers are more than aware of the fact that the Great Depression was, at least partially, the result of a collapse in the banking sector which exacerbated a tightening in credit conditions. In a sense, the credit crisis in Australasia is now as bad as it has been in modern times – even if (arguably) things are improving in other parts of the world.

Even so, every time I attempt to pat the RBA or RBNZ on the back a couple of phrases come in the back of the head and prevent me, these phrases are “moral hazard” and “inflation”.

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Matt Nolan

Reply: Climate change: the heresy of pragmatism

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Idiot/Savant disputed our claim that market mechanisms are the best way to fight climate change on pragmatic grounds – namely stating that a regulatory solution that works would be better than a “market-based” solution that does nothing. Now I don’t disagree with this – however, I do think that I/S heavily mis-represented both our claim, and our initial criticism of what he said.

As comments are disabled on I/S’s blog No Right Turn, I have to reply by way of a blog post 🙂

In this post, I/S makes a number of claims I would like to dispute:

  1. We accuse I/S of anti-market bias for considering regulation,
  2. We state that a market mechanism is always superior to regulation,
  3. The argument is whether regulation is better than nothing – not better than the ETS,

Now it is best to answer these claims backwards – lets start with 3:

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Matt Nolan

Gift or investment: Lil Wayne edition

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Over at the excellent intersection between anthropology and economics blog, there is a discussion about the Lil Wayne, his latest album, and how this fits into the idea of a gift economy.

[Disclaimer: I haven’t listened to Lil Wayne, so my knowledge on the marginal benefit of his music is severely limited.]

Here the question is asked:

Specifically: who’s going to buy this album when they have been so generously gifted with Carter’s work for free?

But it has been popular – very popular. This raises the next query:

It may be that Lil Wayne has succeeded here because he is, in the opinion of Rolling Stone, the “best rapper alive.” If you are this good, ubiquity and generosity have no penalty. Free for all or fee for all, it doesn’t matter. We have to listen. But intuitively this seems wrong. Surely the incentive for “giveaways” should be more pressing for lesser talents.

This is what I would like to discuss more, in context of a “gift economy”.

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Matt Nolan

July Mortgage rates: A question for our readers

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Hi all,

Does anyone know why ASB cut mortgage rates following the OCR decision? Bank credit funding costs have been going through the roof – which is why the RBNZ felt that it needed to cut the OCR just to prevent large increases in mortgage rates!

I’ve heard that Kiwibank can cut rates because of the large amount of domestic funding it has under its thumb. I was wondering if there is there something specific to ASB that has allowed them to cut rates? If anyone has any idea I would love to hear from them in the comments.

Update: Westpac as well – still only the two year rate though, so it could still be viewed as “cheap” advertising.

Update 2: According to Good Returns this was the interest rate action:

Following the Reserve Bank cutting the official cash rate by 25 basis points last Thursday, ASB, TSB, Bank Direct, Sovereign and Westpac all reduced their two-year rates.
ANZ and National Bank broke ranks with their competitors and announced they would cut one year fixed rates as well as two year rates. Their two year rates came down 25 basis points to 8.95% and their one-year rates are down 20 points to 9.20%.

Hmmmm.

Matt Nolan

Price indicies: A discussion

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Note: Other posts in this discussion are available under the tag “inflation debate“.

With the trade-off between inflation and other things behind us, and a justification for inflation targeting, we have a good base to discuss current activity and issues. The aim is to now discuss other methods of fighting inflation – however, before discussing this I think it is important to discuss another technical issue: How do we measure inflation?

This is both an incredibly important issue, and a highly contentious one. While I was going to write a long post on this, Dr Chinn at Econobrowser beat me to it (and also did an infinitely better job than I could have 😉 ). Dr Chinn discusses how we use the CPI to measure inflation, and the limitations of this measure (especially in terms of individuals expectations of what inflation is!). As a result, he covered all my main points 🙂

However, I will write some additional stuff anyway 😉

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