jamesz

Alcohol and addiction: part II

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We posted recently criticising the method in which the Law Commission has decided to approach its revamp of alcohol regulation. In the comments there was some vociferous criticism of the BERL report on which the Law Commissions relied for its estimates of the harm of alcohol usage. We were also lucky enough to have a personal reply from the author of the report, explaining why BERL did things the way that they did. I thought this would be a good time to clear up any confusion about where I stand on the issue. Read more

Matt Nolan

April 09: RBNZ cuts OCR to 2.5%

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The RBNZ cut the official cash rate by 50 basis points to 2.5%. This wasn’t to surprising. However, the statement was a hell of a lot more dovish than I expected, especially:

We expect to keep the OCR at or below the current level through until the latter part of 2010.

So the RBNZ is stating that it will leave the OCR at or below 2.5% until LATE-2010. That is a commitment to expansionary policy for quite sometime. In that case, the RBNZ’s outlook for economic activity must have deteriorated substantially for late 2009 and 2010.

jamesz

Global warming affects who?!

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Treehugger thinks that this chart means we’re all deluded. It shows the percentage of people surveyed who believe that global warming will harm the groups described.

I think the chart makes complete sense and shows people to be remarkably sensible. Read more

Matt Nolan

Beer consumption and information

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I quite like the approach to “reducing beer consumption” suggested here:  tell people what type of food it is equivalent to scoffing down.

By doing this, we increase the information avaliable to the individual when they decide to drink.  As many people seem to be interested in a “healthy diet” or “keeping weight down” telling people that a shot of vodka (or Jager) is like eatting a chocolate bar could have a big impact on their consumption decision.

Information, in conjunction with an appropriate externality tax, and combined with liquour sales mechanisms that allow appropriate pre-commitment by individuals, would lead to awesome outcomes.  As a result, I am keen for this sort of information to be out there.

jamesz

Bicycle helmet laws kill

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I’ve previously suggested that mandatory helmet laws are bad for the environment. Well new research suggests that they’re actually bad for health outcomes, too:

A model is developed which permits the quantitative evaluation of the benefit of bicycle helmet laws. The efficacy of the law is evaluated in terms of the percentage drop in bicycling, the percentage increase in the cost of an accident when not wearing a helmet, and a quantity here called the “bicycling beta.”
…
Empirical estimates using US data suggests the strictly health impact of a US wide helmet law would cost around $5 billion per annum. In the UK and The Netherlands the net health costs are estimated to be $0.4 and $1.9 billion, respectively.

That’s a LOT of money and that lot of money in net health costs could save a LOT of lives. If there’s a net social health cost to mandatory helmet laws then they’re hurting more people than they help. That’s a good reason not to have them if you care about saving lives, or minimising harm, or maximising welfare. Read more

Matt Nolan

Why keep long rates low?

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Bank economists are saying that we should aim to keep “long-term” rates low – through the RBNZ committing to a future path of the OCR for the next 3-5 years at a low rate.

At first brush we could be cynical and say this appears to be in their interest – the OCR does determine their cost of borrowing from the RBNZ after all.  But I am not that cynical about the bank economists.  Ultimately when you look at their beliefs, the commitment to a low OCR makes sense.  They believe:

  • Growth and “capacity” will remain well below trend for the medium term.  Specifically – we will be below our “natural rate of output”.  This implies that we don’t have to worry about inflationary pressures (until we are heading back to the natural rate).
  • Short rates have already headed nearly as low as they can go – so they can’t be cut much further.
  • The RBNZ’s growth path is “too strong” – and so the market expects rates to begin rising in 2010.
  • If medium term rates are higher this provides a disincentive to investment – something that depresses near term activity further, thereby increasing the risk of some sort of “downward spiral” through unemployment.

So ultimately, the retail banks are saying that the RBNZ is too optimistic (as if they weren’t their implicit forecasts would commit a lower medium term set of rates).  I guess we will see what the RBNZ does on Thursday and find out if they agree …