Matt Nolan

Rant on more NIIP complaints

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I wrote this as a comment over on Dim Post on this blog post.  Then I decided, why don’t I just use this rant as a blog post instead, so I don’t need to think of anything else to write?  Sure, very few people will see it, but it will reduce my workload for the day 🙂  So here it is:

Update:  Danyl notes the post here.  Just to be clear – I’m probably far too terse in this post, but that is due to exacerbation about the issue.  I love Danyl”s stuff, and read the blog all the time, but the line I quote in this post just saw all the frustration from recent years come out of me in a rant 😉

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Matt Nolan

A tax by any other name

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Over on Frog Blog Russell Norman says we should have a rational debate about policy – in this instance the idea of having the RBNZ finance government spending by buying government bonds when the government increases spending.  Good, this is the right sort of attitude, we should be willing to debate and discuss everything – and to do so in a logical, clear, and transparent manner.

Now, as I’ve discussed that I don’t agree with his policy conclusions.  The post I’ve linked too was pretty clear on things – but I’m going to do a shorter post here.  Since that QE post I’ve talked with people who are pro this sort of financing, and in this post I am explicitly trying to talk about the trade-offs in a way that is consistent with the way they have 🙂

I would note that, getting the RBNZ to purchase bonds when other monetary policy actions are consistent with their inflation mandate will violate their inflation mandate – it will violate their “non-monetization” commitment in this sense.

This is important, as it implies that in the first instance bond purchase financing is essentially a tax.  This is something I will get to in part 5 of the tax series I’m popping up at the moment.  I’m only up to part 3 at present (out tomorrow), so the argument will have to wait till then.

Let me give a brief flavour though.

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Matt Nolan

Beware those bearing gifts of free exchange rate depreciation

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I don’t like to write about other economists, unless it is to say how sexy they are.  But I can’t let this slide

Ganesh, why, why are you willing to sell soundbites that do not cover off the trade-offs you are advocating?

The Berl economist told deer farmers in Wellington the bank should become a daily trader till the exchange rate fell to “something sensible for our export sector”.

Asked if New Zealand had the resources to do this, Nana replied, “It’s called a printing press. I’m not kidding,” he said to laughter.

It would be a transfer of wealth, from the people who consume imports, “the baddies”, to the people who earn exports, “the goodies”.

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jamesz

Computers in education

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Back in 1087 Robert Solow quipped that “You can see the computer age everywhere but in the productivity statistics.” With the increasingly integral use of computers in schools, some researchers asked whether you can see it in the pupil achievement figures. Apparently not…

Computers are an important part of modern education, yet many schoolchildren lack access to a computer at home. We test whether this impedes educational achievement by conducting the largest-ever field experiment that randomly provides free home computers to students like those you can now find on sale at stores like 25pc. Although computer ownership and use increased substantially, we find no effects on any educational outcomes, including grades, test scores, credits earned, attendance and disciplinary actions. Our estimates are precise enough to rule out even modestly-sized positive or negative impacts. The estimated null effect is consistent with survey evidence showing no change in homework time or other “intermediate” inputs in education.

Note that they only gave computers to children, they didn’t then change lessons and teaching to take advantage of them. Consequently, the message is more that computers alone are not enough, rather than suggesting the computers won’t help.

Matt Nolan

Series on tax: Part 2b – let’s experiment with explanations

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In the second part of my series on taxation I wrote about distortion and burden.  But I’m not sure whether my description about wedges and how people respond to prices was necessarily clear enough for a non-economist audience.  So I’m going to experiment with some other ways of articulating what I mean – ways that are equivalent, but for different people may be clearer.

Note:  I apologise in advance if this is a bit scattered – if you have questions or comments note them down in the comments, you’ll be doing me a favour 🙂

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jamesz

Why didn’t we see it coming?

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A lot of things in economic models are ‘exogenous’ and outside our usual frame of investigation. Not just little, unimportant things but big things, too: innovation and technological change, recessions, bubbles in markets. On some reading of economic models each of these things is unknowable and unpredictable. Obviously that’s far from satisfactory and lots of people are working hard to change things. Via Mark Buchanan, here is an interesting perspective on why things turned out this way:

To look at the economy, or areas within the economy, from a complexity viewpoint then would mean asking how it evolves, and this means examining in detail how individual agents’ behaviors together form some outcome and how this might in turn alter their behavior as a result. Complexity in other words asks how individual behaviors might react to the pattern they together create, and how that pattern would alter itself as a result. This is often a difficult question; we are asking how a process is created from the purposed actions of multiple agents. And so economics early in its history took a simpler approach, one more amenable to mathematical analysis. It asked not how agents’ behaviors would react to the aggregate patterns these created, but what behaviors (actions, strategies, expectations) would be upheld by–would be consistent with–the aggregate patterns these caused. It asked in other words what patterns would call for no changes in micro-behavior, and would therefore be in stasis, or equilibrium. (General equilibrium theory thus asked what prices and quantities of goods produced and consumed would be consistent with—would pose no incentives for change to—the overall pattern of prices and quantities in the economy’s markets. Classical game theory asked what strategies, moves, or allocations would be consistent with—would be the best course of action for an agent (under some criterion)—given the strategies, moves, allocations his rivals might choose. And rational expectations economics asked what expectations would be consistent with—would on average be validated by—the outcomes these expectations together created.)
…
If we assume equilibrium we place a very strong filter on what we can see in the economy. Under equilibrium by definition there is no scope for improvement or further adjustment, no scope for exploration, no scope for creation, no scope for transitory phenomena, so anything in the economy that takes adjustment—adaptation, innovation, structural change, history itself—must be bypassed or dropped from theory.