Matt Nolan

Economist magazine says legalize drugs

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As said, the economist magazine says legalize drugs (ht Carpe Diem).

This isn’t a big issue to me personally – relative to what I see as “big issues” like the current recession.  However, I can definitely see some good in legalizing (and taxing) drugs (something we were discussing here).  For some reason though, it is an issue where I think emotion has moved ahead of good policy design.

Pure regulation is often not the best solution – how much are we hurting peoples welfare by keeping many drugs illegal.  I don’t know, my goal is to have a government introducing policies that maximise welfare – and I believe that legalizing (and taxing) the use of some drugs may well be welfare enhancing.  With the Economist saying the same sort of thing I feel like I’m starting to form an opinion 😛

Matt Nolan

New blog from NZ economist

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Offsetting behaviour by Eric Crampton (ht Anti-Dismal).

Already there is a set of post on policy ignorance up.  Here is a quote from here:

Political ignorance then is ignorance about how the political system works in general rather than necessarily ignorance about any specific policy issue

I can tell you’re interested, go give it a look already 😉

Matt Nolan

Micro and macro: How to view them together

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In a comment to a post on Anti-Dismal about a post on the Standard, which I have also commented on here, Clinton Smith said:

If you think that macroeconomics is the same as microeconomics because of where the word economics comes from, you’ve got a long way to come.

I thought I should lay down what I think – and so I did in the comments at Anti-Dismal:

Methodologically macroeconomics should simply be applied microeconomics. Microeconomics is the general discipline, and macroeconomics is a specific application (and set of value judgments) that can be used for (economy-wide) policy.

Trying to do macro without an understanding of micro is like trying to fix a machine without knowing how it works – hence why so many “non-economists” (I hate that term) get lost.

This is how the macro-micro distinction rolls around in my head – but of course, it is not necessarily that simple.  Do you guys have any idea about how I could improve this distinction – I think a set of posts might be in order for discussing this issue.

Matt Nolan

Cartoon: Economic debate

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I am still too dazed and confused to provide even a blog level of debate. As a result, here is a comic (ht SMBC):

Read more

Matt Nolan

Surprise fall in Aussie GDP: What happened

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One piece of information managed to shake me out of my flu induced daze for long enough to write a post – Australian GDP had a surprising fall over the December quarter, falling 0.5% (seasonally adjusted) on September.

Appears that inventory accumulation was knocked down sharply – that is very interesting.  Usually during a recession inventories are a positive contributor – as spending slows more quickly than production.  This implies to me that the fall in GDP may not be sustainable – as inventory accumulation will need to build back up.

As a result, even with a 0.5% fall this quarter, I’m not sure if we are going to see an Aussie recession (two quarters of negative growth) quite yet …

Of course – the steep fall in their terms of trade is concerning – but that is a story for when I’m actually able to think 🙂

Matt Nolan

Debating the paradox of thrift

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I’m sick today – and since economics and sickness don’t really roll together I can’t say much.

However, it looks like Econlog has been busy with authors discussing the paradox of thrift.

Robert Murphy is against it, Bryan Caplan is against a policy solution, and Arnold Kling disagrees with both of them.

How I feel about this has been described previously here, and summed up here.  Feel free to say what you think about the issue here 🙂