Matt Nolan

Australians denied insurance

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When I saw this headline:

Australians refused insurance because of poor genes

And this headline (ht Marginal Revolution):

Australians denied insurance for genetic reasons

I immediately thought that they were talking about all of Australia.  Then I read the article and realised how ridiculous this thought was 🙂

Supposedly some insurers are not allowing insurance because of newly testable genetic risk.  Now how do you guys view this, I see two ways:

  1. It is good.  It gets rid of the asymmetric information problem to some degree, so that we can have the “optimal” level of insurance.  People that are low risk will now be able to insure themselves more cheaply afterall.
  2. It is bad.  There is an endowment issue – some people are endowed with bad genes, and we want to redistribute to these people to make up for it.

Personally, I think even if we believe the second issue it would be better to have an efficient insurance industry and then redistribute ex-post …

Matt Nolan

In defence of bank’s forecasts (sort of)

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Roger J Kerr at the interest blog has made a number of good points in this post.

I agree that long-term mortgage rates look a bit vulnerable – if I had a mortgage the 5 year rate at 6.49% would be pretty tempting.  Still, I’m no expert (I’m barely an amateur) at picking mortgage rates, so I wouldn’t do anything on this speculation.

Still, there is one thing I don’t agree with in this post – his determination to bag the retail banks.  Roger makes it sound like bank forecasters and the RBNZ have a massively different view.  However, both expect a sharp bounceback – the main difference is “timing”.  Fundamentally, retail banks expect it to be 6-12 months later than the RBNZ does.

This graph from ANZ illustrates the point well (found here under 12th March 2009):

anz-rbnz-forecasts

Matt Nolan

Unions: More xenophobia

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The Union’s want non-New Zealanders fired before New Zealanders.  We’ve seen this type of nationalistic sentiment before, about outsourcing and through Buy Kiwi made.  This is all pure xenophobia – and I hope that our grandchildren will look back on this and be embarrased.

I have three issues with the idea that we should arbitrarily favour “New Zealand” workers:

  1. It presumes there is a limited pool of work – in actuality, having more workers also “creates more jobs.
  2. It presumes that the goal is “jobs” – the actual goal should be to create happiness.  A closer proxy to happiness would be efficient production – not “job creation” (which is just a wild catchphrase).  I realise that creating an environment of gainful employment is important – but the trade-offs have to be kept in mind.
  3. It presumes that we value New Zealanders more than non-New Zealanders.  Surely we are not that racist.

If a business chooses to keep on a non-New Zealander instead of a “New Zealander” it is because they are a better worker, or they offer greater flexibility to the firm.  Why should we impede the liberty of the firm and worker to trade freely just because we want to get an inefficient, inflexible, New Zealander in the job?

And trust me, the argument that Australia is doing it so we should is rubbish – do we really want to say that we have the same attitude to other races that Australia does!

jamesz

Why does that sounds familiar?

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Matt asks me to elaborate on an email exchange we had about the incentives that face economists. In particular, how could we explain smart macroeconomists parroting the value-laden, overtly political rhetoric of Krugman or Mankiw during the current crisis. Sure, Mankiw and Krugman have a stellar publication record and can afford to rest on their laurels, but that’s not the case for most. So why don’t they take this opportunity to show their chops and give us some macro insight into what’s going on? Read more

Matt Nolan

Happy St Patrick’s day

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It is St Patrick’s day.  Although I’m not Irish, my father was extremely Irish – so this has to be a holiday on par with anything othere … hence why I’m at work 😛

I would like to think that the day is about my brother, Patrick (who makes tax calculators), but I think it’s about this guy.  He is celebrated for driving the Pagans out of Ireland – well that doesn’t seem particularly nice.  Hopefully he did so in a way that was a potential pareto improvement, and involved adequate compensation.

Anyway, have a good St Patrick’s day.

Note:  Homepaddock and the Inquiring Mind are both celebrating as well.

jamesz

Cramer v Stewart: a bit disappointing

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I just watched the Jim Cramer vs Jon Stewart showdown on The Daily Show and I’m just not as impressed as some others. Stewart’s real problem with Cramer seems to be that he should have known that the meltdown was coming and told his viewers. By advising them to buy stock that he should have known was bad he is jointly responsible for the fomentation that led to the stockmarket crash. There are two reasons why I’m not convinced: Read more