Matt Nolan

Keeping NZ inflation in perspective

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Holy shit.  Since I’ve started getting the chance to read opinion pieces again I’ve noticed one extreme theme running through them – a sharp and angry fear of inflationary pressures.

This in itself doesn’t bother me, but it has been combined with people saying that ALL of the following will happen:

  1. The economy will implode
  2. The currency is/will be too strong
  3. Borrowing will be/is too high.
  4. We will have out of control inflation.

And that ultimately this is the RBNZ’s fault.

Like some sort of arbitrary rant, a large number of commentators have gripped onto any negative element element they can about the domestic economy, laid it down as a failure of monetary policy, and then used it as an excuse to attack the Reserve Bank.  To be honest, I find it all patently ridiculous.  Let me explain why, saying all these things will happen at once is inconsistent.

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Matt Nolan

The day where Panadol was needed

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I realise that oft times my writing style, and the writing on this blog is very “faux academic”.  That suits my purposes as I like having the fully described arguments that come from this sort of writing – however, it can also be boring.

In order to help related economic ideas to the common man, I’ve decided to start up a Friday post – a day in the life of an economist.  In these posts I will go through everyday things, and discuss how economic ideas can crop up while we are living our daily lives.

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Matt Nolan

In defence of government funded tertiary education

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As a young child I was told repeatedly that education was a right, and that society should pay for it – not just at the primary level, not just at the secondary level, but at the tertiary level as well.  Being an argumentative child I disagreed repeatedly.  In I make a point of still disagreeing whenever I run into my mother.

If I was to boil down my argument I’d say “the individual benefits from their education with higher wages and the satisfaction involved”, I would then go on to say that “we should only fund the public benefit associated with education – which is shown to be lower than the current level of funding”.  This would lead to the reasonable conclusion that we should be cutting funding to tertiary education, not increasing it.

Now this was all well and good when I was a young impulsive lad, but as I’ve grown older I’ve become unhappy with the idea of reaching conclusions.  As a result, I find it a bit uncomfortable that I would find this solution “obvious” – and with a few seconds of thought I’ve realised why.

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Matt Nolan

And back

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Apologises for my delay.  Just before Easter I said to myself I wouldn’t blog or read a blog until I wasn’t working a weekend – I only expected that to go on for 2 weeks, but then a lot of work kept turning up.  As I’m anticipating not working on the upcoming weekend I’ve decided I’m allowed to blog again 😉

Given that a lot of the work I do is business planning, and given that business planning is seen as an investment, and given that investment tends to “lead” the economic cycle – I can conclude that the fact I’ve been flat out is pointing to an economic recovery.  About time.

Now, I haven’t read any blogs – I’ve especially missed Kiwiblog, Offsetting Behaviour, Anti-Dismal, and Marginal Revolution.  I won’t actually be able to start reading them again until next week – so for now any posts from me are just going to be things off the top of my head.

I also haven’t had the chance to read comments for when I disappeared – I will do that when I get a chance, and do posts to reply.

The quantity of posts will be fairly limited in the short-term, as my presentations schedule is pretty full on.  Quantity will increase over time.

For today, feel free to just get annoyed about what I wrote in the Dom Post on Saturday – which is up on stuff here (and the Infometrics site here).

jamesz

NZAE conference

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Well, the NZ Association of Economists conference is done for 2011. It’s a chance for all economists to get together and talk nerdy without fear of social reprisals, although the food is another popular topic of conversation — it was pretty good this year, if you’re wondering. There were plenty of great presentations and star turns from both Tim Harford and Ricardo Reis. The latter hung around for most of the conference and even attended the dinner, which left me completely starstruck!

Of course, it is also a chance for bloggers who normally interact only through the interwebs to talk in person and this conference was no exception: as the sole representative of TVHE I was accosted and lambasted by both Eric and Seamus from Offsetting Behaviour for our lack of recent activity. As Matt has previously mentioned, things have been a bit busy for us at work lately but blogging is Matt’s second highest priority so he’ll be back just as soon as he has a free hour or two.

In lieu of a post about Serious Issues I thought I’d let you know what the bloggers at NZAE got up to. Read more

Matt Nolan

A good illustration of tax incidence

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Via Marginal Revolution we have seen this post from Steve Landsburg.

So what happens if the government takes Mr. Kendrick’s $84 million away? Answer: A bunch of zeros and ones get shifted around on bank computers. Mr. Kendrick goes right on pushing his cars around. And nothing else has changed.

Unless, of course, the government decides to spend some of that $84 million. Now the government consumes more goods, Mr. Kendrick consumes no fewer, so someone else must consume less. Who is that someone else? The answer depends on the details of the transactions, but the most likely answer is that when Mr. Kendrick withdraws $84 million from the bank to make his tax payment, the bank makes fewer loans, interest rates rise, and someone cancels a vacations, or postpones a car purchase, or abandons a half-built factory. Who bears the burden of the tax? The people who cancel their vacations and car purchases and factories, that’s who. Not Mr. Kendrick.

Now this is a caricature – like a lot of good economic description – but it does illustrate a point.  If we place tax on one group, be it the rich, or the “bankers”, it isn’t clear who actually faces the burden of this tax until we have a look over all the changes in choices that occur … tax incidence is key.

This is one reason why I remain against a Robin Hood tax.