jamesz

Best article on the Treasury website?

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Fortuitously stumbled across this while looking for something else. Arthur Grimes investigates the Arbee:

In his “Life Among the Econ” Axel Leijonhufvud took an ethnographic approach to describing the Econ tribe and, especially, two of its components: the Macro and the Micro. My purpose is to delve further into the life of the Macro, specifically examining the Arbee sub-tribe. The task of our research is to examine the nature of the Arbee reaction to claims by other tribes and sub-tribes that the Arbee rituals have caused The Imbalance in The Economy. Specifically, their highly formalised OC Ritual (OCR) has been blamed for creating The Imbalance … It is the rituals of the Arbee that many claim to be the cause of The Imbalance in The Economy. If only the Arbee were to conduct their ritual in a different manner, the prices, expenditure and living standards would all right themselves.
…
The OC Ritual is a highly stylised dance. The first move involves no actions by the priests, just observation of other dancers. The priests observe the effect on all prices that result from the bigfella man’s resource directives. The high priest has a contract with the bigfella man that price rises must be kept to within a certain sacred range.

Hilarious, yet serious, it’s worthwhile reading the whole thing. See Leijonhufvud for the background.

Matt Nolan

Careful with regulation

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Here is an article I wrote for the fine people over at Idealog on regulation.  The primer is:

Tobacco prices must be higher, alcohol availability is going to be limited, and even Coca-Cola has come in for a lashing for being an addictive substance. But this obsession comes with a cost that policymakers need to face before they impart harm on innocent Kiwis.

Feel free to go over to the site to see what I said and comment 😉

jamesz

Palmy: better with economists

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A couple of weeks ago Matt and I had the pleasure of attending the annual NZAE conference in Palmerston North. Attendance was disappointingly low, which I blame on Palmy, but it was great fun nonetheless. For that we can thank Seamus, who blogs at Offsetting Behaviour: he organised the whole thing, presented a couple of papers, and somehow didn’t end up looking frazzled the entire time. In fact, it ran incredibly smoothly from the perspective of an attendee, with only a few minor hiccups at the conference awards that I’m sure were intentional gags to provoke a few laughs! So thanks to Seamus and the organising committee for an excellent event and we look forward to seeing more of you there next year.

I didn’t manage to see everything I wanted to but here are a few highlights. I’m sure Matt will want to add a few of his own, too.

  • The blogging session was novel and saw a great presentation from Berk Ozler. If you’re not already reading his blog, Development Impact, you can read what he had to say about the conference here. The following panel discussion was interesting, although it would have been nice to have more time for comments and discussion from the floor. I hope it encouraged a few more people to comment on the NZ economics blogs; I’ve certainly seen a few attendees of that session jump into our comment threads since, which is great!
  • The keynote’s I saw were all fantastic. Lutz Kilian’s presentation on oil markets was more interesting than oil market econometrics have any right to be. He’s also a very forceful and persuasive presenter; I certainly wouldn’t want to be on the other side of an argument with him, that’s for sure! Leslie Young’s comment on the complexity of financial systems and the differences between China and America’s markets was also very insightful.
  • Watching Andrew Coleman advocate for a capital gains tax, followed immediately by Seamus putting up a slide entitled ‘Capital gains taxation is an insidious taking’, was entertaining. I don’t think they actually had a substantive disagreement but it’s always fun to see two excellent economists take opposing sides in a debate.
  • Arthur Grimes’ presentation on wellbeing indices brought interesting empirics to the discussion of their value over and above GDP measures. I think that’s worthy of a blog post on it’s own.
  • But the best part of a conference isn’t the papers, it’s the people. NZ economists are an incredibly friendly, knowledgeable, and welcoming bunch so I highly recommend turning up next year, if only for the beer and banter!

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Matt Nolan

Tarotnomics: Part 1 – The cards

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While enjoying the economics at the NZAE conference this year, I felt that, in 2013, I should really submit something.  After a few beers I worked out that my comparative advantage likely lies outside the core of economics – and so I decided that a paper on the economics of tarot card reading was in order.

Now I have written on this issue briefly before, and I have even given the economy a tarot card reading at one point.

With the idea in mind, and motivated by the suggestion at NZAE from Berk Ozler that crowd sourcing papers was a good idea – I’m going to put together the concepts on the blog.  The way I see it, I’m doing the paper in my spare time, and I do the blog in my spare time, so why not mix the two.

As a starting point I want to do something pretty simple – I want to explain broadly what the actual tarot cards are.  Once we have that, we can move on to thinking about readings, and then get an idea of how a tarot card reading represents a type of “model”.  With that in mind, we can work out what attributes of a model this reading has.

Once we’ve then listed down what an economic model is, we can compare and contrast – through this process, we can hopefully shine a light on what economic models represent, how they are useful, the things we have to keep an eye on, and the possible pitfalls.

Note:  If there is anyone around with knowledge about analytical tarot card reading then comments would be much appreciated – especially if you are also well versed in economic methodology, given that’s the direction I’m coming from here.

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jamesz

There’s no new criticism

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Mark Blaug in 1997:

Modern economics is sick. Economics has increasingly become an intellectual game played for its own sake and not for its practical consequences for understanding the economic world. Economists have converted the subject into a sort of social mathematics in which analytical rigour is everything and practical relevance is nothing. To pick up a copy of The American Economic Review or The Economic Journal these days is to wonder whether one has landed on a strange planet in which tedium is the deliberate objective of professional publication. Economics was once condemned as “the dismal science” but the dismal science of yesterday was a lot less dismal than the soporific scholasticism of today

Matt Nolan

How to sell superannuation changes

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While sitting today I got very confused.  I realised that I could really see future generations currently stealing resources off me in the way I keep hearing.

Now, as was quickly pointed out to me by my work colleagues’ resources are in fact being “stolen off me” in two ways:

  1. Future taxes will need to rise to pay for superannuation
  2. Knowing that superannuation is available, the older generation is saving less now and increasing consumption – thereby pushing up interest rates and the price of consumption.

Very good, we have our fundamental reason why superannuation is unsustainable – because tax rates will need to rise in order to satisfy the governments “balanced budget” constraint.

Now if we believe it is the hubris or straight selfishness of older generations that is behind the refusal to change the superannuation age to make it affordable – then frame it in terms they understand.

Say that, when they are retired it will be the next generation in charge.  The next generation won’t be willing to increase taxes, and so will cut them off – forcing them to leech off their children or live an impoverished existence.  If the younger generations show this degree of bloody-mindedness now then older generations will definitely cut back on consumption, and start saving for their retirement.

They might even be willing to “make a deal” regarding the retirement age.

So if that’s the way you think, stop saying how much Gen X  and Gen Y are going to get hurt by the superannuation issue – point out the potential for the Baby Boomers to have the rug pulled from under them, giving them a miserable impoverished retirement.

Easy.

Note:  I don’t want anyone to suffer here.  I’m just part of Gen Y, and we were raised during the reforms – so I’ve learnt to think about these matters in a more, say, clinic way.

Update:  Bill picks up that the population demographics aren’t in favour of my proposal – while Eric indicates that no-one really is 😉 .  I’d note that my joking proposal was mainly just a way of showing that there is a “cost” turning up, and we are thinking about how to share this burden between people – it isn’t just a case of baby boomers robbing everyone blind!