Matt Nolan

What are we asking with productivity in NZ?

/5 Comments/in /by

Danyl posted about the recent Productivity Commission paper on Australia vs NZ productivity differences recently.  If you ignore the politics and conspiracy (the timing of the paper was well known and they were asking people to write about it, hence why I wrote this at the time) he asks a good questions, why have we seen relative productivity drop up?

I gave a fairly casual response in the comments – which was ignored as other people busily made things up 😉 :

Read more

Matt Nolan

What does it mean to have “many models”

/2 Comments/in , , /by

Dani Rodrik has been arguing that the mistake many economists, and non-economists, make is to look for “one right model” – when in truth economics is a form of craft, where you have a multitude of models and need to know what is appropriate in different circumstances (ht Economist’s View).

To anyone who has studied microeconomics, or applied microeconomics, to any level this wouldn’t be surprising.  Furthermore, it would be seen as the common view of many economists.  This may seem incredibly weird to non-economists – especially since many economists and non-economists share the view that there is an ‘objective reality’, and therefore this single reality seems like it should be described by one ‘super model’.  But let me explain.

Read more

Matt Nolan

Absolute minimums and relative poverty

/in , /by

Recently we discussed the idea of the equity-efficiency trade-off in very broad terms.  As we noted, in order to discuss such a concept we need to think about a series of issues about groups.  Some of these are easier to conceptualise than others – one of the simplest (albeit not simple) is poverty.

Now anti-poverty policy has had a long, and varying, history.  And as this video from Marginal Revolution discusses, many of the principles that we now argue about society has been debating for a long time.

Furthermore sometimes people talk as if poverty has been conquered – and in an “absolute poverty sense” the data seems to back this.

However, although poverty is an “absolute” concept, it isn’t so much about absolute income – as absolute deprivation in terms of capabilities (which includes the ability to function within society, and self-worth in a community).

Read more

Matt Nolan

Some links against a Living Wage

/7 Comments/in , , /by

With the Living Wage idea cropping up around the place, I’ve noticed a couple of places where there have been criticisms of the result:

  1. A review by Brian Scott, where he points out that many of the defined “needs” required to get this wage are in fact not things some people in society would put in their defined “minimum” – this raises an interesting question of “what is poverty”, something we will lightly touch on here on Monday 😉
  2. An analysis from Treasury based on their arithmetic microsimulation model (Taxwell).  This essentially says “if the change in the minimum wage caused NO change in behaviour, who are the people who would see their income increase”.  So this DOES NOT rely on any employment effects or the such (although they will occur in New Zealand, given how high this would push the minimum wage relative to the average wage) – and it shows that most of the benefit in this optimistic scenario does not go to the group the Living Wage campaign wants targeted.

Now some may say that this is a suggestion to businesses, not a demand for policy.  That is fine – I remember working at the Warehouse and being paid a bit more for that role as part of their desire to build a “community” among staff.  And it was good.  But if it is just a request for firms to consider, why keep yelling at politicians?

Read more

Matt Nolan

New Year’s Resolution: Get a handle on inequality in New Zealand

/5 Comments/in /by

It is 2014, isn’t that nice.

As I’ve promised, this year I’m going to write more on income inequality (and broader issues of inequality) when I get the opportunity.  With the recovery in the labour market and economy running above expectations, there may be less need for us to comment on macroeconomic issues here – a welcome change from when we started posting and the Global Financial Crisis took root.

However, this isn’t really an issue that an individual, or even a single discipline, can cover in the detail it deserves – so I am hoping that a wider variety of individuals from the broad church of social sciences can come visit us here to deliver guest posts on the issue.

Furthermore, we’d like to think about this in a New Zealand context – we mostly write about the New Zealand economy here (although James is doing a good job covering the UK), and recognising how different the issues are here than overseas is important.

This thinking is important.  As Len Kenworthy says (via Economist’s View):

I believe, as I said earlier, there are good reasons to object to the high and rising level of income inequality in the US. Yet I fear the American left’s recent move to put income inequality reduction front and centre might be harmful rather than helpful. It may foster a conviction that the key to addressing America’s social, economic and political problems is to reduce the top 1%’s share or the Gini coefficient.  That could distract attention from more direct and effective efforts to address those problems.

This is a view I agree with, and one of the key issues I had with the suggestions put forward in the Spirit Level.  Questions of policy are not easy, and trying to flesh out both a description of the trade-offs involved and an admission of the principles of fairness we may value are essential before we can even think of reaching a policy conclusion 😉