Author Archives: Matt Nolan

Housing and the value of individuality

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The government is introducing ways to reduce the compliance costs associated with building homes. By doing this, the government can increase the supply of properties, lowering the price of houses, and thereby increasing housing affordability.

No doubt this will be an interesting policy to look over, however this is not what I am going to do right now. Instead I am interested in Professor Roy Fleetwood’s (of Victoria University’s Architecture and Design Faculty) dual claims that”the plan risked creating cardboard cut-out houses” and that “the Kiwi dream was to build your own home, but individuality was highly prized”.

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Social devolution or individual freedom?

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Here I am going to discuss an issue that is way over my head – but is extremely important for the practical application of economic concepts. I am going to discuss how changes in economic policies can influence social structure.

I decided that I would attempt to write about this after reading this post. In the post the daily dissident laments the collapse of community and the movement in consumerism and its impact on individuals.

The first argument against this view is the idea of individual freedom – individuals have the right to make their own choices, and the frame of communal society alienates that right. However, it is possible to look at the idea of community while providing individuals with rights.

The most basic way to frame this problem initially is as a prisoners dilemma. Continue Reading →

March 08: Fed cuts rates to 2.25

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Another month, another 75 basis point rate cut by the Fed. This is (close to) what the market expected, so I can’t imagine that it would have much impact on anything. However, the statement was interesting.

Does anyone else find it interesting that the Fed cut rates by 75 basis points but still wrote a whole paragraph (1/3 of the meaty bit) on the risk of accelerating inflation compared to last time when they said:

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

The most interesting bit was:

Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.

If the CPI measure ticks up, will this be the end of rate cuts?

Economic uncertainty – time to get scared?

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Today I noticed two very different stories about the outlook for the New Zealand economy. From Bernard Hickey (h.t. Kiwiblog) we have a dramatised version of what ANZ and BNZ are saying about economic conditions. From Berl we have a more moderate story which is closer in form to all the other analysts (such as RBNZ, Westpac, and Infometrics ;) ).

Now don’t get me wrong – everyone is expecting a slowdown in economic growth. However, the question currently is, are we going to have a technical recession or not?

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Why rent a house when you can buy?

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A common argument that I hear for buying a house is that paying rent is a waste of money. The main proponents of this point of view seem to be my parents’ generation, however it is a point of view I can’t easily agree with.

To compare buying a house to renting a house, we have to look at what we are buying in each case, and what the costs and benefits of each choice are. In the case renting a house we are purchasing ‘housing services’, while in the case of buying a house we are purchasing housing services AND an asset. The fundamental view that we should buy instead of renting comes from the fact that we receive an asset on top of the value of the services it provides. In some sense, the generation that is suggesting that we should all buy houses is doing so, because it was a (successful) rule of thumb that they followed at our age. However, the current situation is a little different.

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