Author Archives: agnitio

Cutting jobs at DOC and charging tourists more to walk tracks are separate issues

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Duncan Garner has posed the question of whether we should charge tourists more to use DOC trails to save the 100 Kiwi jobs the government is cutting at DOC

Now this conflates two separate issues:

  • If it is efficient to price discriminate and charge tourists more to use DOC tracks, why aren’t we doing it already?
  • Are the jobs necessary to provide the desired level of service from DOC?

Charging tourists more

The first issue implies that the government is leaving money on the table. If it is, then maybe this should be looked at. There may however be valid reasons why the government hasn’t. A basic requirement for price discrimination is that arbitrage isn’t possible. It’s entirely possible that if this pricing structure was implemented people would just get around as locals would find ways to buy tickets (or whatever one does when they book a tramp on a doc track) and pass them onto foreigners at a profit. I don’t know about you but I personally feel a little uncomfortable with the idea of DOC staff checking passports on the trails. It’s also possible that tourists would resent the price discrimination and be put off, which would have the opposite effect.

But, if the reasons to not do it don’t stack up (i.e. it would be profitable), the government should be doing it independent of whether or not it cuts 140 jobs….

Trimming the fat at DOC

The second issue is whether it was efficient for these people to be employed at DOC. I.e. Is DOC “carrying too much fat”/would we be better off with these people serving some other role in the economy? This leads on the next question of analysing whether the social costs of firing them (unemployment/retraining etc..) outweigh any efficiency benefit.

And that is something which I can’t personally answer due to a lack of information. But I would note that if there is an issue of the structure of the hierarchy leading to “too many chiefs”, cutting staff isn’t really going to have much of an impact on service – and it should be taken into account. If this is the factual situation we are in, then the government keeping them employed is a form of welfare, which should be taken into account when analysing the social costs of firing them.

“Living wage a test of small business’ mettle”

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Via Stuff this morning, great quotes from FIRST union leader Robert Reid:

“Why should a worker suffer for being employed by a business that maybe shouldn’t exist,”

As the debate about the living wage continues, we get yet another indication that unions are fine with unemployment – as their clients aren’t the unemployed.

Dom Stephens from Westpac (NZ’s 17th sexiest economist) is quoted further down in the article and rebuts things nicely, so I will just leave it there:

Large increases lifting the minimum wage above where the free market put it – “and I think it [proposed living wage] may be moving toward that” – very clearly affected employment, Stephens said. “It would worsen things for the most vulnerable members of society and improve the lot of those who stayed employed.”

 

Greenpeace enters the economic policy debate…sort of….

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I was interested to see this article on stuff about Greenpeace arguing for  a “green” economy. I even considered taking a peak at the report they have put forward by the  “German Aerospace Centre’s Institute of Technical Thermodynamics” until I got to this bit at the end of the article

Where the report stumbles is on the financial side, giving no detail on the level of investment required or the economic tradeoffs, making it impossible to judge if the transformation would be worthwhile or simply a pyrrhic environmental victory.

Argent said this was a deliberate choice, with the aim of the report to spark a discussion rather than getting too bogged down in the numbers.

Which basically means this report tells us nothing….

As a side note, as an economist I would replace “financial side” with “opportunity cost”  as it it’s not just “money” trade offs that need to be considered…social, environmental, and any other metric that will be part of the cost need to be considered. You can’t just look at non-monetary gains on the benefit side and ignore them on the cost side.

Looking for stock advice? Buy a cat…

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Via @NBR I came across this awesome article on the Guardian about a cat named Orlando that was pitted up against some investment professionals and students in a stock picking challenge. How did the cat pick stocks?

While the professionals used their decades of investment knowledge and traditional stock-picking methods, the cat selected stocks by throwing his favourite toy mouse on a grid of numbers allocated to different companies.

And the results? Orlando the cat unsurprisingly (to anyone who has studied finance and whose job isn’t giving investment advice) earned more money than the professionals.

At least the kids didn’t beat the pros, that would be embarrassing if they did….

Ch-ch-changes – new theme/commenting system

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Howdy loyal TVHE readers.

We’ve just done a bit of an upgrade/refresh to the blog theme and commenting system.

The two major changes are:

  1. The theme is “responsive” so should re-size and look normal on any device
  2. Comments are being done through Disqus which allows a little more interactivity.

Comments can still be left with just a name and email address allowing anonymity for those who choose etc… but if you want you can use twitter/FB or use a Disqus account.

Let us know if you have any issues with anything. If people have problems with Disqus we can pretty easily go back to the native WP system.

Banning relegation from the Premier League: More Investment certainty, less excitement?

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There has been a bit of talk recently about abolishing the promotion and relegation system in the English Premier League, mainly coming from the Foreign owners of Premier League clubs. A couple of quotes from this article sum up the argument, which is really about investor certainty:

a growing cartel of owners believe the Premier League should adopt the American franchise model to end financial fears linked to the massive cost of dropping out of the elite

…

Obviously, if I was an American owner and I owned a football club, or I was an Indian owner, I might be thinking I would like to see no promotion or relegation. My investment is going to be safer and my shares are going to go up in value

Relegation results in a massive drop in revenues so I can see an argument that owners will be more willing to invest in the clubs if they know that they will not be regulated. Basically, getting rid of relegation would give more certainty on the firms future cashflows. Interestingly, the Premier League already gives “parachute” payments to relegated clubs to help compensate for this.

The other side of this argument, voiced quite passionately by Sir Alex Ferguson, is that this would “kill English football”. For once, I’m inclined to agree with red nose. The Premier league would be so much more boring without relegation. Given the gulf between the top 6 or so teams and the rest of the 20 team league, the majority of the games would become relatively meaningless. Similarly, the Championship (England’s second division) would become pretty boring too. Given the big prize of promotion would disappear, who would actually care who wins the 2nd division??

Now you are probably wondering where the economics is, this is an economics blog after all. If the league is less exciting due to getting rid of the relegation system then fewer people will watch games on TV, go to games etc.. which means the league will suffer financially. My hypothesis is that supporters of the big teams would be still be just as interested, but supporters of the teams at the mid to bottom end would be less interested and that the Championship would die.

So there is a trade-off here. It’s possible that by giving owners more certainty through a “franchise model” the entire Premier League would become more even as owners would be willing to plow more money into their teams, this may make the league more exciting and make more people watch. But there would be a countervailing effect of potentially less revenue available to teams as fewer people bother tuning in (which is particular important with UEFA’s financial fair play rules coming).