Matt Nolan

But what is the problem?

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Over at the Dim Post it is suggested that New Zealand is somehow failing when company owners sell their assets to non-New Zealanders.

However, there is no issue with selling companies in of itself.

The “problem” might be that, as a whole, New Zealand residents appear to own a significant amount relative to their income and wealth.

If we do believe this is the case, then we have to ask why. Just saying “look we are selling stuff”, “look NZ owes some stuff” doesn’t tell us why this is the case, whether this is a problem, and if it is a problem what we can do about it.

If we think that there is some systematic risk from this behaviour, or that New Zealand residents do not recognise the risk associated with this level of risk, then we should be looking for policies that will improve said decision making – not arbitrarily looking at policies that will “force” saving or the voluntary sale of goods, services, or assets.

Is this point of view unreasonable? If we accept this point of view, we also have to accept that other New Zealanders might want to consume now, or may want to avoid the risk associated with “high return” ventures.  Given this, it is both unreasonable and harmful to social welfare to try and force New Zealanders to save to effectively subsidise the risk of business owners – which is what compulsory savings will be.

Matt Nolan

Housing tax changes – will they lead to a leap in rents?

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There have been a wide range of people saying that the changes to the tax treatment of property will lead to a leap in rents.  So will it?

I would say that the answer is yes, and no.  Here is why.

Read more

Matt Nolan

Green MP wants to limit access to universities

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Sorry, that was just me interpreting a consequence of this article – where a Green MP stated that he wants to outlaw cold damp flats.  As he says:

“We know that there are a lot of cold damp rentals out there and that lots of people have to live in them because they don’t have the money to move.”

Exactly, so by reducing the supply of rental properties and driving up their price, this bill will ensure that students who move to the city to get access to university won’t be able to – and so will have their lifetime options cut down.  That is exactly what would have happened to me, if I hadn’t have been able to live in dingy dingy properties.

And of course, this ignores the costs of administering the scheme – are we going to have people constantly patrolling flats for quality now?  Won’t this lead to “black-market” rentals.  If they think there are external benefits to insulation, subsidise the damn thing – don’t run around with poorly thought out policy like this please.

Anyway, I’m off to watch the Phoenix play …

Matt Nolan

It’s funny because it’s true …

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I suspect this is part of the reason why none of the economists I know play board games together …

Source SMBC.

It is true though, if you ever come out for drinks with us this is how we talk … hell, that is even how I plan on dressing in a few years time 😉

Update:  Eric Crampton points out another way of interpreting the comic:

Wait…maybe the comic means that there’s optimally a separating equilibrium. The all-economist games that are fun, and the non-economist games that would be far far less so….

I have to admit, if I was the little kid in this situation I would find the ranting about economics entertaining rather than scary – so Eric’s explanation makes sense to me.  When I was a little kid I liked to be the banker outside of the actual Monopoly game and have loans in the game, which would involve negotiating over interest rates – I thought it was brilliant but no-one else did …

Matt Nolan

Tertiary funding: What is the rationale?

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It sounds like the tertiary education minister and universities will come into conflict regarding funding, again.  In this specific case, I think both sides are wrong/focusing a bit narrowly.

The tertiary education minister is saying the government should link funding to performance measures – including work placement.  The philosophy guy that was asked disagreed, as they will get less funding (which is weird, as he goes on to say how employers value the skills from philosophy – so this is sort of a contradiction right – Dim Post was on this wave length as well).

In my opinion public funding of education should be based on the “external benefit” associated with said education.

When arguing against the governments suggestion I’d say, if someone can get a well paying job but there is no external benefit, why should the government fund these courses at a high level?

In a similar vein we can argue against the philosophy guy by saying there is nothing intrinsically “good” about having people running around doing a certain degree type in of itself.  We need to sit down and say “what is the external benefit associated with this”.  Once we know this we have the rationale to sort out funding.

I do not believe all courses should be funded equally.  But I also don’t believe that courses should be funded on the basis of work placement.  These conclusions come from my value judgments that:

  1. The external benefits of different courses differ,
  2. External benefits are not perfectly correlated with work placement.

Update:  Eric Crampton discusses the policy here.

Update 2:  Very different take on tertiary policy in the UK.  I can see an argument for lowering the subsidy on education for jobs with a high private benefit and low social benefit (ability to pay and externality arguments).  But what do they mean by a graduate tax?  Do I get an additional tax on me if I head over there just because I’ve been to university?

Matt Nolan

Economists and values

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Another great comic from SMBC:

To (as usual) kill the fun a bit, I would note that the Economist is explicitly placing value on life in order to understand trade-offs.  The “normal person” is still placing an implicit value on life when they discuss the policy – they just don’t want to say it.  This implies that the “normal person” is hiding the trade-off, making any policy recommendation they make less transparent.