Commerce Commision: Times are a changing

Paula Rebstock has resigned

Update: It isn’t on the Commission’s website yet but Mark Berry has been named the new chair. (I subscribe to the Commission’s news releases, loser I know!)

TVHE Twitter

Following a suggestion from Bernard Hickey (blog here) we have decided to set up a TVHE Twitter.

http://twitter.com/TVHE

If you use that and want to add us on go ahead 🙂

More bad tax policy …

There is a good reason why I want tax policy to be set independently – so that the true cost associated with the dumping of the regional fuel tax can be realised.

Lets ignore the conjectures and hyperbole about how we are raising funds to “electrify the railway”.  If government is going to spend a certain amount of money (which it is whether it is a regional body or a national body paying for the electrification) we should be interested in raising funds for this spending in the most efficient way possible.  Furthermore, we would prefer to tax in such a way that we actually get people who benefit from the spending to pay for it.

There are two ways that I see the fuel tax as more efficient than what the government is suggesting – which is effectively higher income taxes in the future.  Firstly, the fuel tax was an externality tax.  Because the social cost of fuel consumption is greater than the private cost the government can place a tax and (potentially) improve outcomes!  Even once this justification is used up, we have another one – Ramsey Pricing.  Demand for petrol is inelastic, so we can raise a set amount of revenue with a lower “dead-weight loss” (loss of happiness from the tax) than if we taxed goods with more elastic demand.

Secondly the fuel tax was at least partially targeted – as it raised the revenue for the public good work from the region where the work was going to happen.

Dumping the this tax implies that national income taxes will have to be higher than they would have otherwise been.  This implies that we are using a less efficient, and less targeted, means of taxation to achieve a level of government spending in Auckland and Wellington (which in this case just happens to be on a railway – something that needs to have its merits debated separately).  Bad policy.

Liverpool 4 – Man U 1

Hell yes.  Twice in one year – beautiful.

I don’t think we are in range to win the title – but this win has to give us hope.

Quote 19: Dani Rodrik on the problems of economics again

This was a quality quote (ht Economist’s View):

Paradoxically, then, the current disarray within the profession is perhaps a better reflection of the profession’s true value added than its previous misleading consensus. Economics can at best clarify the choices for policymakers; it cannot make those choices for them.

I have to admit – I agree with Dani Rodrik a more during a credit crisis than I do outside of one (although, it is a small sample 😉 ).

Note the last statement in the quote – we cannot make choices for policymakers. Why? Because it involves making value judgments we are ill equipped to make. I was concerned that economists had forgotten about this – but it turns out I was just looking at the wrong economists!

However, given his own argument – why did he term contemporary macro a failure? Is it because he thinks that the use of a scarce resource (time) in a role that isn’t offering the best social return is bad? I think we need someone to frame a potential incentive issue for macroeconomists here (wink wink Rauparaha 😉 )

The post March 09 MPS $NZ bounce

Realising that I am probably low on content Bill Bennet (his blog) gave me a question to write a post on:

Why did the NZ$ shoot up against the A$ when the official NZ interest rate dropped below Australia’s? The declared rate was pretty much the one anticipated and the $’s climb was dramatic.

There are two primary reasons:

  1. The recovery in the US market which was “increasing risk aversion” (yuck) at a similar time (and we are a “riskier dollar”),
  2. The distribution of expectations surrounding the rate cut.

Here is a picture with the bounce:

nzdtwi_2_3weekgif

Source (NBNZ)

And below is the email I sent discussing the expectations issue.

Read more