goonix

Changing tastes and preferences in the market for NZ wine

/18 Comments/in , , , /by

The owner of Montana Wines and New Zealand’s largest wine company, Pernod Ricard, is set to cull its contracts with wine growers in the Gisborne region.

This action is in response to falling demand for chardonnay and sparkling pinot noir wine, both domestically and internationally. Chardonnay exports reportedly fell 12-14% last year alone. The culprit? Chardonnay’s fairer sister, sauvignon blanc. Apparently we are seeing a significant supply-side ‘correction’, as producers respond to a structural demand shock – consumers’ changing tastes and preferences. Indeed, last year sauvignon blanc overtook chardonnay as New Zealand’s most consumed white wine.

Try as they might, Pernod Ricard have not been able to sway the mighty consumer to stick with the product they have contracted for, despite “new product development, innovative packaging, capital investment and changes in wine style”.

I know at least one TVHE author that might be a little disappointed seeing his favourite varietal taking such a pounding. As for me, well I’ll stick with my reds thanks.

goonix

The carbon emission circus is coming to town

/17 Comments/in , , , , , , /by

Late last week the Government announced that they were running a public consultation on the emissions target for 2020.

The Government already have a long term goal of reducing carbon emissions to 50% of 1990 levels by 2050. Long term goals tend to work quite well for Governments as it gives the public the idea that they are proactively doing something but realistically they will never be held to account if and when they don’t meet the target, as they don’t align all that well with the three year election cycle. But I digress.

This consultation process is part of setting the ‘interim’ goal for the year 2020. Environment Minister Nick Smith has quite correctly identified that setting this target requires a trade-off between our economy, our international reputation and, obviously, the environment.

Ultimately this 2020 goal will be presented in international climate change conferences at the end of the year, including the post-Kyoto Copenhagen Conference. I’m sure we will all be waiting with bated breath to see what the outcome of this Conference will be.

Of far more interest are recent ‘cap and trade’ developments around the world. Obama *just* got his bill passed by the House of Representatives while in Australia the proposed Carbon Pollution Reduction Scheme (CPRS) is very much struggling to gain legs.

New Zealand’s version of cap and trade, which will aim to reduce emissions to the 2020 (and subsequently 2050) goal looks set to be determined sometime later this year, although early indications are that it will be somewhat like the Aussie model. To blatantly oversimplify things, the Aussie model is a more politically palatable version of cap and trade, with lots of pressure-group exemptions and handouts to favoured sectors, as compared with the version NZ originally had planned for under the previous Government, which was more of an economically pure ‘you pollute, you pay’ model.

The final design of New Zealand’s scheme will be very interesting indeed…

Matt Nolan

Question on loss aversion

/17 Comments/in , /by

I have a question on loss aversion, as I am confused.  I keep seeing loss aversion defined like this:

our tendency to feel sadder about losing, say, $1,000 than feeling happy about gaining that same amount

But this sounds like diminishing marginal utility to me.  I mean, the $1,000 dollars I’m losing provides me with a greater level of satisfaction than an addition $1,000 would provide me with.

My feeling was that loss aversion was a situation where my satisfaction would be lower in a situation where I lost $10,000 and ended up with $40,000 than it would be in a situation where I gained $10,000 and ended up with $40,000 – even though in both situations my endowment was the same.

I thought loss aversion was about an additional payoff relevant factor (namely that the direction of the change in my outcomes is also payoff relevant, as well as the strict outcomes) not an arbitrary way of framing diminishing marginal utility.

If someone could explain where I am making a mistake it would be much appreciated 🙂

Matt Nolan

Quick thought …

/10 Comments/in , /by

Strict neo-classical economists need to realise that there ARE systematic deviations from tightly defined rationality and as economists we should try to understand these deviations (although preferably deviations can still be incorporated into a more general version of our framework).

Behavioural economists should realise that these deviations are far less common than they believe, and even if they do exist they aren’t necessarily policy relevant.

Example for both sides, the conjunction fallacy.

Matt Nolan

Governments love to take credit for things they have nothing to do with Part XXX

/15 Comments/in , /by

So when consumer confidence rose in December because of falling fuel prices there were people saying it was because of the National government. When net migration started to turn at the start of 2009 there were mummers of it being because of the National government. Now that it is clear that departures have collapsed Immigration minister Jonathan Coleman has decided to show us just how deluded politicians can be by stating:

“Under the Labour government, with its high taxes and disincentives to getting ahead, thousands of our brightest and most talented people chose to seek their fortunes overseas,” Dr Coleman said.

“Now, these people are choosing to either stay in New Zealand or return home to build a better, brighter and more prosperous future under the National government.”

You have to be frikken kidding me. For one, the National government is still running the same set of policies as Labour. And more importantly as the article points out:

Dr Coleman did not say whether the international recession had anything to do with the situation.

When the international recession IS the reason. Foreign labour markets have collapsed, why would New Zealanders leave the safety and comfort of family here when there are no jobs for them overseas. It is blatantly obvious that the ability to get and security of work overseas is a more important factor for individuals than which set of politicians is sitting around in the Beehive.

Now, I guess it makes sense for a politician, the actual immigration minister no doubt, to pretend that they have had an impact. However, they have not. In fact I find this sort of talk embarrassing, as it trivializes the ways that I believe government can help society and mis-informs people as to the primary role of government.

Update:  Seems that some of the comments at Kiwiblog also take Dr Coleman’s message to heart.  I realise David Farrar didn’t say it, he knows better than that, but I also don’t see him correcting Dr Coleman’s assertion in the same way he would have corrected it when Labour was in power …

Matt Nolan

The lingo never changes …

/4 Comments/in /by

From a blog that it looking at each day in 1930 we have this beaut of a quote (ht Paul Krugman, and initially Scott Sumner):

Leading economists and market observers are looking for clues on how long the current trade depression will continue. Since 1873 there have been thirteen periods of business depression. Ten of these had an average length of 15 months. The remaining three were much longer, but there were exceptional circumstances in each case that it is clear don’t apply here. Credit is easy, inventories are not high, and the banking system was never sounder. Therefore the current depression should not last longer than 15 months. Since it began in July of 1929 in improvement is to be expected at the start of the fourth quarter.

So during the Great Depression people were saying it was more moderate than previous significant downturns.  Interesting 😀