Matt Nolan

Growth and resources: Cleaning up a fallacy

/19 Comments/in , , /by

Just quickly, I have to correct this statement by FrogBlog:

In other words if we continue to grow at 3 percent per year every year, as economists would have us do, in 100 years time we will be using and consuming 19 times more than we currently do

No, no we wouldn’t. Remember a little while ago I wrote about technology.

  1. It allows us to create more output with the same input of the resource,
  2. It allows us to access more of the input,
  3. It allows us to speed up the process of creating output from input,
  4. It creates new outputs that can be created with the input,
  5. It creates substitutes for the input.

As a result, even if we assume the worst case scenario that we cannot substitute and that there is no new technology we can discover that will get us access to more resources, technology can help by allowing us to make more with the same level of inputs. Economists target a level of “growth” (when economists have to talk about growth – rather than societies welfare) that they feel relates to growth in resources (such as population) and technology – this does not seem like an unsustainable goal to me.

Read more

jamesz

The pitfalls of political punditry

/5 Comments/in /by

Matt Yglesias puts his finger on why you can’t trust political pundits to tell you what’s happening in an election race:

…ordinary people ordinarily just don’t pay attention to politics at all. They don’t think it’s interesting. But … [t]he political press, by contrast, finds electoral contests to be a kind of fascinating game about which it’s amusing to do tons of stories regarding the ins-and-outs of tactical gambits…

The kinds of people who are political reporters are self-selected to enjoy commenting on the race as if it’s a game, simply because talking about politics day in-day out requires them to do just that. To think that they are, in their view of politics, remotely representative of the voting population is ridiculous. In fact, their analysis of political events is highly unlikely to represent the views of the average voter. Read more

Matt Nolan

No emergency cut was the right choice

/3 Comments/in /by

I was surprised at the time, but not doing an emergency cut appears to have been the right choice – go RBNZ 😉

I get this impression from here:

Source (NBNZ)

Read more

Matt Nolan

Housing shortage

/10 Comments/in /by

Following on from this mornings post on house prices, I thought I should touch on an article in the press today, about an upcoming housing shortage.

I’ll be honest here, terms like “housing shortage” and “over-supply” annoy me a bit – as what people are trying to say is that there are too many (or too few) houses to support the current price in equilibrium.

Now, at the moment “too few” houses are being built given what people perceive the equilibrium price to be. This price depends on the population inflow, and average number of people per dwelling, and the opportunity cost of the land.

I agree with this statement – house building has fallen way below sustainable rates. Read more

Will Taylor

Deposit Insurance Crackdown

/7 Comments/in /by

However much I was looking forward to launching my own incredibly risky finance company, I’m glad that the RBNZ and Treasury have tidied up what was a terrible decision by the government to extend deposit protection to finance companies at no charge.

Details here (ht: Migeul Sanchez). News coverage here

I particularly like the quote in the stuff article from an anonymous commentator

“The two-year deposit guarantee announced by the Government on Sunday was a “free lunch for [finance company] gluttons”

While I prefer the term economic opportunist to glutton:) I thin it sums up the situation before the rule change quite nicely.

Now that I think about it, 3% off the 30% return I’m promising may not actually be that bad given how risky our investments will be, we just need to work out how to get a BBB- credit rating….

Agnitio

Matt Nolan

Housing price free-fall on the cards?

/9 Comments/in /by

In the US, one of the main reasons given for the housing bubble was a result of an “over-supply of housing“.

In New Zealand we did not build that oversupply of housing even though population rose quickly pushing prices up.  This was because it was very difficult to get consents and we had a substantial shortage of builders 🙂

This is why we are unlikely to see a free fall in house prices like the one seen in the US.  Our bubble was only in the expectation of house prices – it did not feed into excessive construction and so when the price corrects it will be less harsh.

Discuss 🙂