I was about to post a comment on Eric’s blog – but then the comment got long, and I realised I needed a blog post. So here it is.
Eric Crampton raises some important points regarding the Reserve Bank’s view on the ETS in New Zealand. Essentially, they are ignoring it – a policy decision that a lot of analysts have disagreed with. However, this is one of those cases where I would tend to side with the Reserve Bank, lets work through the discussion to figure out what value judgments I’ve made to get there 😉
Update: Eric discusses further here.