Matt Nolan

Born short

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No in the title to this post I am not complaining about my lack of height.  I am simply discussing the housing market 😉

The Worthwhile Canadian Initiative gives an interesting point on housing:  We are all born with a short position on housing.

This has an interesting implication.  Since short positions involve risk and since long positions involve risk (as rental costs/incomes are volatile), the low risk position is to own one house.

As a result, we would expect the rate of return on housing to be LOWER than other asset classes.  An interesting point to keep in mind!

The Hand

From the Hand: BERL on Crampton-Burgess on BERL

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Following the incessant blather on the BERL report into the cost of alcohol Ganesh Nana has come out to defend the report (Hat Tip this guy).

Why bother? After all we all know that any report on costs will be filled with wild conjecture and pointlessly misrepresented by the public.

Well it turns out the Dr Nana felt the report has been too heavily misrepresented and wanted to clear some things up, so I guess that’s fine.

Except that there are two significant ways that his reply leaves me wanting:

  1. His criticism of rational choice is nonsensical,
  2. He refuses to admit that BERLs own work was the result of wild value judgments in the same way as the Crampton-Burgess reply.

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Matt Nolan

Introducing the Hand

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As you will have noted all four of the current authours (Matt, Rauparaha, Agnitio, and Goonix) have been running at close to full capacity outside of the blog, and so blog material has been lacking for the last three months. Furthermore, we have barely been able to respond to comments.

To help push along blog output we have expanded the effective labour force by introducing “the Hand”. It will cover issues that the rest of us either don’t really care about or don’t feel that we know enough about. However, the authour of the Hand will not remain constant. Effectively, it is a guest blogger.

The Hand differs from previous guest bloggers in that it allows people to post with us without having to think up their own pseudonym. This should reduce the cost associated with producing a piece for us, increasing output at the margin.

The first “the Hand” post will take place at 8am tomorrow on the BERL alcohol report – the one issue I can think of that I’m both sick of hearing about and haven’t read anything about 🙂

Matt Nolan

Careful with this investment now …

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So I hear that Wellington’s Morrison & Co’s Public Infrastructure Partnership fund is going to start spending the government’s “$500m infrastructure fund” ($100m of which is arbitrarily from the Super Fund).

According to the article they:

see significant potential for the fund because of under-investment in the past and because the Government is facing many years of budget deficits

I find this strange since:

  1. We haven’t necessarily had under-investment (discussed here and here)
  2. Spending more makes the budget deficit worse, not better

Now I have no problem with PPP’s, as I have this fantasy that the private sector part of the investment will actually listen to market signals, and do things that provide an economic benefit.

However, I think we need to be careful here. We are in a situation where, as a nation, we have been borrowing to invest (poorly at times) – do we really think that ramping up the number of arbitrary public projects based on sketchy cost-benefit studies is going to help us here. Or will it hinder us?

Matt Nolan

Has the government been “over-spending”?

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The question of whether the government has been over-spending is not one I can actually answer – as there is no way of telling exactly what sized government New Zealand wants. However, looking at how government spending compares to recent history can give us some idea about what is going on. Lets do this in the below graphs.

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Matt Nolan

Missing the point on productivity

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I hate the “goal” of productivity growth personally. I think any policy goals we have should be based on equity and allocative efficiency, not trying to make arbitrary ratios look pretty.

However, I also disagree with Idiot/Savant’s description of productivity and how he feels that a productivity target is anti-worker (h.t. CPW).

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