Matt Nolan

Tobin taxes?

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So the Green’s want a Tobin tax do they (ht Frog Blog and Stephen). Ok, so I’m hoping they aren’t justifying it on externality grounds – this leaves us with the conclusion that they must believe that it is the most efficient means available to make a certain level of government income.

They do seem to follow this point of view when they quote from a Guardian article:

Set at a lower level it would raise considerable sums of money. If a levy of just one basis point (one hundreth of 1%) was placed on all currency deals, governments would find themselves with an additional $70bn a year. At a time when they are chucking vast amounts of taxpayers’ money at the banks, that would be a nice little earner, and might help assuage the concerns that the public are going to pay for the folly of financiers.

I find it interesting that they see the money appearing out of thin air – if $70bn of tax is raised, it must come from some value somewhere. This is the same issue I have with people who like the financial transactions tax (furthermore, the assumption that capital/trade flows would not change when you tax them – even a little bit, is silly, as a result this over-estimates the associated revenue).

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Matt Nolan

Inflation breaks the 5% barrier

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Ok, so our pick of 5%pa inflation by September following the Budget was wrong – its even worse at 5.1%. Largest increase since June 1990!

I blame the re-weighting for the difference 😉

Note it will not stay over 5% for long – underlying “true” inflation (stemming from inflation expectations and its impact on the quantity of money) is closer to 3.5%.  Although I would like to point out that non-tradable inflation is horrendous at 4.1%pa – horrendous!

Matt Nolan

Kiwisaver and the current crisis

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How do we think the introduction of Kiwisaver has influenced the current economic environment?

Well, Kiwisaver will have worked through a number of channels but fundamentally, in the short term, it would have propped up savings (note, when I say savings I am talking about PRIVATE savings, not NATIONAL savings) and thereby reduced CONSUMPTION. Where does it increase savings:

  1. It effectively implies a higher tax rate – as money going into Kiwisaver is money that could have been redistributed through the tax system.
  2. By using tax money as a carrot it increases the incentive to save beyond that implied by the market – fundamentally, the government takes your own money and says it will only give it back if you save.

As we are struggling with a crisis of confidence, a short-term decline in consumption is probably not what we needed 😛

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jamesz

Is marriage really the answer?

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Family First and Rochester divorce lawyers have just released a report on the costs of the breakdown of the family unit. I might not have given it a second glance save that it is written by Dr Patrick Nolan, the more qualified sibling of our Dear Leader.

The thrust of the document, as you might expect, is that costs of having fewer intact marriages are very high. The report points to a bunch of private and social costs, such as increased risks of poverty, mental illness and infant mortality, and tries to put a dollar value on them. It ends up suggesting that the fiscal cost of the reduction in the number of marriages is about $1 billion per year.

I don’t have a sociology background or the knowledge to challenge any of the assertions made by the report, and I trust that Dr Nolan has calculated his costs in as objective a fashion as possible. However, it’s what the report doesn’t monetarise that is most concerning. Read more

Matt Nolan

Should we be bullish about food prices?

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According to Tony Arthur at BNZ we should be.  This is an essential issue for NZ as it determines where our Terms of Trade stays elevated – or whether it falls.  In turn it determines our national income, given what we produce.

I agree with many of the factors he states (although he is a bit bullish on them) but I think he ignores factors around the long run elasticity of supply of food.  So I thought I’d try a poll (my first one 🙂 ), and do a post based on discussing the dominant view later:

jamesz

The Greens on economics

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There has been a lot of chatter about the Green’s understanding of economics lately, so I thought it might be apropos to have a look at their economic policy, just released. The key points appear to be:

  • Income taxes cut;
  • Taxes on waste, pollution, speculation and scarce resources;
  • Commitment to buying NZ made and Kiwisaver investment in NZ;
  • Only citizens and residents allowed to purchase land.

Let’s start with the good bits. Read more