I’ll be honest, I appreciate it – slack writing is one of my worst habits! And why is the first reply I wrote the last one on this list 😛

Of course I know what you meant, but that’s not going to stop me teasing you about what you said!

Also you know what I mean – we should be transparent about the implied welfare function … how’d I fall into that trap!

😛 – clear is too strong a term I guess …

I’m glad you have a clear idea of the welfare function to draw policy conclusions from 😉

The whole, productivity line makes me a bit nervous. It leads itself to pushing for export oriented, large, firms with social support. It makes the idea of NZ Inc seem more appealing. It starts to seduce people into the idea that if we just support the right businesses NZ will be the next Singapore … but without all the bad things that come with it. This is one of the issue with cross-country comparisons … as we all know!

From what I’ve read from the symposium there was plenty of good stuff, talk about competition, institutional environment, openness – and how these things help out. But in talking about a “productivity paradox” I genuinely fear that the public will view these things (which are extensions of the reforms) as unimportant, and more general state support for exporters as important – and to be absolutely honest, so of the suggestions that appear to have come out of the conference were also pushing in that direction. There are plenty of ways to lift GDP and savings that will in turn reduce welfare – without a clear idea of welfare in our minds, I get concerned about policy conclusions …

Much of the time I think people just use productivity as a proxy to complain about whatever they think are the ‘real problems’ in society. It’s unhelpful and Treasury shouldn’t be pandering to it.

I think your insight is pretty accurate and useful Blair – it just leads me in a slightly different direction. Instead it merely makes me think that international GDP comparisons are suspect – and are a poor way of actually describing the inherent “wealth” or “consumption value” associated with living in a certain country!

I also think you are correct in saying that, if we are subsidising savings less than other countries, we will end up with less capital and lower GDP. This all makes sense – but when our goal is a broad version of welfare, maximising GDP doesn’t really make sense to me. I think sometimes we all get a bit lost when hunting around with this. This is why I’m always banging on that we need to “find the failure” before we talk about the solution.

This is one of the reasons I get pretty annoyed with talk about productivity – it is a whole other step backwards from thinking about policy in terms of answering failures. Productivity differences are at most symptomatic of something – and may well not mean anything. Research why is important – but trying to “solve” it in of itself is a mistake:

http://www.tvhe.co.nz/2013/01/24/limited-knowledge-provides-the-limits-to-government/

GDP, productivity, inequality, prices – these things aren’t levers we pull, they are loose indicators of the essential welfare and happiness of society. We are interested in the later, and we should always be trying to come back to that 🙂

When I was a kid, I was taught that our distance and lack of population meant we were poor, but having lived and worked in Japan, the US, UK and Australia, I now have the opposite view, i.e. that our geographic setup is very lucky. Being isolated from, and selling high-end food to an emerging middle class seems highly fortuitous. We have soil, sun and water, a terrific labour force, little violent internal conflict or corruption and a fairly dynamic society. Shipping is cheap, and there are plenty of wealthier, more productive countries with <10m populations, even just starting with the letter S! So I started to look to macro and micro explanations.

In a micro sense, I think the answer is in retrograde planning policies. Having half or more or Auckland zoned as 500m2 minimum single dwelling blocks is f'ing insane. Read Ed Glaeser people.

In a macro sense, I think there is a burning shortage of equity capital (I think this is less internationally mobile than debt) and it stems from the lack of any kind of serious pre-funded pension system. This is a major differrence to any other OECD country I am familar with and I think it is a massive distortion.

I agree with you here. There is certainly plenty of room for work.

My priors are the same, but they are easily shifted as work is released!