Matt Nolan

Tyranny of the majority

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Any policy to ban smoking, on the basis of this, would count as “tyranny of the majority” in my opinion.

This reminds me of my favourite rule of thumb for policy:

Any regulation should be based on the idea of avoiding coercion either from the private or the public sector

On the flip side, any regulation that increases coercion (as banning tobacco seems to) is likely to be bad policy.

Matt Nolan

Dovish Jan for the Bank

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Reserve Bank statement is out for January.  They seem more negative on the world and feel inflation is more “comfortably” in the band.

If we want to know when they are going to move rates we have to keep an eye on:

  1. Monetary aggregates (for household debt accumulation),
  2. Labour market,
  3. Global growth.

Rates Blog also comments here.  Personally I’m more positive on both the world and near term New Zealand economic activity – and if the data shows this I would expect the Bank to move more quickly.

And also, what the hell – the 90 day bill rate is around 2.8%, inflation is around 2%, we are talking a real rate of 0.8% with expected real growth of say 2.5%.  We are in very very stimulatory territory here.

Matt Nolan

Burgeoning government bureaucracy? Links

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There is some suggestion that the size and scope of governments around the world has become excessive.  Two recent examples of this are:

The Standard has suggested that similar comparison in NZ could be a little out of whack, and in the most part I agree with them.  After all, Labour was elected to a third term on the promise of larger government, National was re-elected to keep it at that level, as a result I think society is suggesting that they want government to continue spending a quarter of our income.

However, I do disagree with them with regards to the idea that government spending didn’t markedly rise as a proportion of GDP in Labour’s third term – to me the GDP Statistics seem to suggest this was the big mover (with the recent increase solely the result of a recession, and “automatic stabilisers”):

The Hand

3D = Anti piracy?

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As recently reported, Avatar now holds the title of highest grossing film of all time.

Furthermore, the film has grossed over $800 million more than Hollywood’s previous blockbuster, 2008’s The Dark Knight.

Given that the themes and story quality of both films was equally awful, the only explanation (in my opinion at least) is that the piracy level of Avatar must be significantly lower than that of The Dark Night. The explanation for this I believe lies in that fact that one film was presented in 3D, while the other was not.

Thus, as the lay pirater is without 3D technology, has Hollywood inadvertently found a (short-term) solution to it’s declining revenue problem: making films in 3D?

Matt Nolan

Comic: Game theory and living arrangements

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Source SMBC

I am sure that anyone with a history of flatting can relate to this comic.

Matt Nolan

On “the” fiscal stimulus

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Over at Kiwiblog there is discussion of the Democrat loss in Massachusetts.  Reading through the piece David Farrar stated:

Priorities. Obama’s fiscal stimulus did little bar increase the deficit massively, and turn the country into deficit hawks. Unemployment went well beyond his worst forecasts

Now I found this statement unusal in that David’s writing is usually very balanced, and yet I do not find this statement balanced at all.  Why?

  1. We have no idea if Obama’s fiscal stimulus did anything until the data is all finalised.  In a couple of years researchers will be able to look over the data and discuss the design, implementation, and need of the scheme and reach an educated conclusion.  At the moment people can only present an opinion on the basis of ideology.
  2. Personally (going onto my ideology 😉 ), I think the fact that unemployment rose even further than expected was the result of the shock being larger than expected (and areas of the US economy being more fragile).  During the crisis the US government was able to borrow cheaply and use this borrowing to undertake investment when the cost of building this investment was cheap (thanks to the spare capacity in the economy) This sounds like a good thing to me …
  3. Unemployment as high as  10% indicates to me that there was a hole in demand – I do not believe that “structural” economic issues could be sufficient enough to warrant 1/10 people who want a job not being able to get a job.  With the Fed unwilling to soften its monetary stance further the government is in a position to be “consumer of last resort”.  Although I don’t really like the idea of this, in the face of sticky prices and a massive shock to the economy I have to concede that such a role exists in extreme circumstances.

As a result, if I had to guess I would say that the immediate crisis would have been worse if the stimulus hadn’t happened. This appears to be a moderate position among economists, between the “stimulus did nothing” and the “we needed more stimulus” extremes.

Now, we may find that the long run impact of this borrowing will be bad, and we may look back on the evidence and find that the scheme is flawed.  However, the point that “Obama’s fiscal stimulus did little bar increase the deficit massively” is an extreme view (that could potentially turn out to be true) – not an objective fact.