jamesz

Wellington City Council are not welfare maximisers

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The Wellington City Council seems pretty keen to tear up Manners Mall and turn it into a bus route. As any good local body would they’ve had a round of consultation which resulted in 74% of the 722 submitters opposing the plan and 20% in favour.

You may think that would give the council pause for thought. However, they commissioned a survery of 500 constituents which suggested that 68% supported the plan. They are now using that survey to suggest that the submissions form a biased view of what the electorate wants. How can we make sense of this data and which number should we prefer? Read more

Matt Nolan

Another NZ econ blog closure

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Sadly Bernard Hickey has stopped posting at his Show Me the Money blog.

Luckily he still has the Rates Blog to post on.

On the sad side, Dismal Soyanz and Partially Unexpected have gone quiet.

But on the plus side, as of last month Anti-Dismal is back.

I hope New Zealand can keep a good number of economics blogs going – it is a good way for us all to discuss and learn about NZ specific economic issues. Is there any NZ economics only blogs that I have missed here?

Note: Kiwiblog, Not-PC, TUMEKE, and the Standard deserve honorable mention for the amount of relatively in depth economics discussion they put together – the other NZ blogs on my blogroll (and beyond) also put down a fair amount of economics discussion, which is excellent.

Update:  Following a comment I’ve just seen another NZ economics type blog – Brad Taylor’s blog.  If I had more categories I would say political economy to be more precise.  I have a lot of time for political economists – they have a lot of useful skills I don’t have!

Matt Nolan

Cartoon: Intergenerational Equity

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A great illustration of intergenerational transfers in action:

Source(* Dilbert Cartoons)

Matt Nolan

Is credit card availability falling?

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In the US it appears that this may be the case.  American express is offering some clients a $300 gift card to close their accounts and pay off credit card debt in the next few months (ht Marginal Revolution).  This is interesting, given that a few months ago (in the middle of the explosion of the credit crisis) there still appeared to be plenty of available credit for consumers.

Will we see the same sort of deals in New Zealand?  According to RBNZ figures (here) credit card limits are still growing at a reasonable clip (4.3%pa).  Furthermore, we know that credit card rates have fallen – implying to me that banks/credit card companies are still willing to provide credit to consumers.

However, interest bearing debt has also risen quite sharply – as “interest bearing debt” is generally debt that is in some way overdue this way be a concern.  In the US it was concern about overdue payments that has lead to a pull back in credit card availability – implying that there is scope for it to happen here. When looking for a new credit card which you will sure get approved, visit this review of the surge mastercard.

Personally, I think a sharp decline in peoples willingness to use credit cards will be the primary factor behind growth in credit debt going forward – as a result, I would expect the interest rate on credit cards to fall further as well.  I don’t think we will have to worry about credit card companies trying to restrict lending amounts …

Matt Nolan

The spectre of unemployment

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For me, there are two categories where the costs of rising unemployment fall (ignoring any indirect costs through taxes and benefits):

  1. The costs of an unemployed person/resource (so their pain, and the fact that we have a market that isn’t clearing),
  2. The costs to those who become scared that they are going to become unemployed.

Often when we think of recessions we think about people who become unemployed – as it is hard for them. If you are an economist you probably also think about how much the under-utilisation of resources vexes you (I know I do).

However, the cost of fear, and the uncertainty that comes with it, can be just as devestating – just ask 1 in 5 New Zealander’s.

As we have mentioned before – the costs of a recession fall disproportionately on those that lose their jobs. However, the very human attribute of fear ensures that some of the psychological cost is indeed spread around.

Update:  Although this does mean that 4 out of 5 people aren’t scared of losing their jobs at present.  Are we that safe, or is their more fear to come.  I think that the economic situation could be much stronger than some economists are stating (stronger than the NZI 11% UR call, or ANZ’s 8%) AND we could still have more households becoming fearful.

Matt Nolan

NZX at a five year low

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So the New Zealand stock exchange is at its lowest level in five years.  So what’s going on?

  1. Has the market been over-valued this whole time?
  2. Has the value of our capital (the implied future earnings of that capital) really fallen levels unseen in five years?
  3. Is the market over-reacting?
  4. Or finally, is the NZX-50 just massively unrepresentative of the actual performance of New Zealand capital?

However, to put our fall in perspective, the US S&P has just hit a 12 year low – and that is a much broader index.  I find it hard to believe that the value of capital in the US is down to its 1997 level …