NZ Inc: Good marketing, bad for society

Indeed, as Brennan McDonald states here (Update: and with more discussion here):

The phrase NZ Inc is so nauseating. Please stop using it. New Zealand is a collection of individuals, firms, government agencies, councils, charities, families, iwi and a whole lot of other fluid groups that change their composition and goals frequently.

Update:  Paul Walker also discusses here.

This comes back to this post I popped up about something Mai Chen wrote.

The lack of discussion of trade-offs, or comparisons of counterfactuals, is a perplexing feature of this sort of writing [eg NZ Inc] for an economist – and makes the statement mentioned above absolutely useless for policy analysis.

The phrase “NZ Inc” is marketing for businesses who can benefit from the government taking on risk for them.  Given that the government is linked to the taxpayer, it is the taxpayer taking on risk for them.

Now, all political parties have fallen for this trap, and I’ve spent far too many long hours arguing the point with them.  They will say “isn’t being aspirational a good in itself” and I say yes.  Then they say “shouldn’t we make aspirational policy” and I say, no that is stupid.

Sometimes I’ll be told we need “measurable goals”.  And by sometimes I mean someone tells me that at least once a week.  There is only “one goal” for “society” – meeting the social contract and maximising the “social good”.  Can you measure that, can any of us measure that?

We have elections, and we have plenty of clear measures of other types of outcomes, but the only way we can figure if we are “meeting that” is to honestly describe trade-offs between things and then have society vote (even though this is not perfect, given Arrow’s Impossibility Theorem).

This NZ Inc and measurable goals business INVOLVES presuming what we want.  Which just means it is vested interest groups passing off what is in their interest as in the “national good”.

Discussing, measuring, and debating trade-offs is hard!  But if we actually care about people in society we would actually do this.  And we would use a relatively broad principle for understanding it – such as the long-term benefit of the consumer, rather than the maximisation of some random indicator (like GDP, or export volumes) which just happens to coincide with the interests of the individual selling it to us 😉

Note:  People think I’m being pedantic with all this.  I am not, and if you think this point is a “pedantic point about policy” then I would suggest reading a bit more about normative economics – and how crazy complicated the “real world” actually is in terms of the trade-offs we face.  People that are trying to simplify it to sell their own policy aren’t always doing it out of the goodness of their heart … and even when they are, their experience blinds them to the impact these policies have on others.  True story.

 

  • Isn’t the idea of NZ Inc just allowing people to talk about Kaldor-Hicks welfare improvements using a commonly understood archetype? If it leads to people trying to measure things that might help us understand social social welfare then that isn’t necessarily a bad thing.

    You say that what is more important is to discuss trade-offs, which the metaphor obscures. I’m not convinced it does obscure them but, even if we accept that, economists regularly find it useful to talk about the welfare function. The idea of NZ Inc provides a commonly understood way to discuss ideas of welfare changes.

    What you seem to be arguing against is the way interest groups claim that what is in their interests is society’s interests. But that is a problem entirely independent of the NZ Inc metaphor.

    I’m not a fan of it, as you know, but that’s because I think it can be misleading when people think of a country as a company. In terms of the welfare discussion you’ve highlighted, I think it’s essential to have a good metaphor for public discussion, even if this one isn’t ideal.

    • Indeed – as I noted at the bottom, the “long-term benefit of consumers” is a more appropriate archetype. As it is less likely to be abused by people “treating the nation as a firm or households”, and allows a way for us to step back and pull out trade-offs between measured variables.

      Don’t get me wrong, I am not saying economists do this perfectly at all. But NZ Inc obfuscates trade-offs and gives an archetype/metaphor that can easily be taken out of context when we try to discuss broad questions of redistribution. And this is what concerns me.

      • I think the ‘consumers’ idea is fairly poor because it sets up a false conflict between consumers and ‘business’. I agree that we need a better metaphor to replace NZ Inc with, but I’m just not sure what it is at the moment and I don’t want to let the good be the enemy of the adequate.

        • Oww I do agree with that – and it is one of the concerns I have with the focus on consumer surplus and not producer surplus.

          However, I think with careful use we can use this concept as a “long-run” concept to get the idea of trade-offs across. In the same way Layton does in his energy piece. Ultimately we are “all” consumers, and the idea that what ultimately matters is the value of consumption individuals have is true.

          The purpose isn’t to produce, but to “consume” – production is a means to that end. (Although we can go a step further and say consumption is a means to the end of true satisfaction, which gets much more interesting:

          http://www.tvhe.co.nz/2013/05/31/is-it-production-or-consumption-that-matter-in-a-sense-it-is-neither/

          Perhaps this would be a good issue for us to write about here – you have been reading more moral philosophy than me, as a result you should kick it off 🙂

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