On Saturday I had an article in the Dominion Post on New Zealand’s debt levels, and why I think we need to spend a bit of time thinking about “why” this level of debt arose before yelling out for things like compulsory superannuation. My conclusion was:
This issue deserves a much more in-depth analysis then the quick look over the statistics I have provided here. It requires time looking over the data and trying to understand where there is a distortion in the market, either resulting from market or government policy failure. Then any savings policies that are introduced should be based on our analysis of these distortions – not on the eagerness of fund managers to receive funds from compulsory savings schemes.
The article is here. If anyone wants to quote from it or any such, please attribute it to the Dominion Post.
If you merely want to discuss it with me, do so in the comments. Note, I am very tied down at the moment, so it will be a while till I respond to comments – however, in time I will 
So this isn’t what I wanted to hear:
Mr Key also warned that other finance companies may go under and the government would continue to look after investors by keeping the guarantee on investments in place.
I think he meant:
Mr Key also warned that other finance companies may go under and the tax payer would continue to take on all the risk for investors by keeping the guarantee on investments in place.
Look. I had no problem with the idea that we needed to do something in wholesale markets during the credit crisis to prevent an effective “bank run”.
But the two problems with keeping this going now is that:
- This problem is gone now,
- Given the fact that funds flooded into risky assets after the guarantee there is a definite case that we should have done less.
Contrary to what Kiwiblog said that “It is easy in hindsight to say that one should not have had the guarantee scheme, but in late 2008 the wordl financial system was on the brink of possible collapse, and pretty much every OECD country did much the same as a stability measure” I think it is perfectly fine to critique the scheme.
Why? Well we KNEW there were issues with our finance firms, and we stuck them into a scheme rapidly without doing due diligence on a whole lot of the stuff. And we made this f’ing critique AT THE TIME – so we are allowed to make it now 
Lets just think here for a second. Effectively government was taking on all the risk, so why weren’t the insurance premiums insuring that all the return also went to government?
If it is hard to observe the price, couldn’t we have just said that people who entered the scheme couldn’t increase lending – this would have allowed the scheme to protect deposits without leading to the “increased risk taking” that has taken place.
Bah.
Via the Herald (ht Education Directions):
The Illicit Drug Monitoring System report found the price – commonly regarded as the best measure of police success against the drug – had increased each year.
Interesting. So they use ever rising prices as a measure of ever rising success. This is weird on two grounds:
- We are using regulation, not the market – yet using prices as an indicator seems to point out that we could use a market mechanism here.
- If we accept the market mechanism, then even in the face of externalities there is an appropriate “price” – if we go past that I wouldn’t call that a “success”
Also, they seem to have trouble attributing appropriate causation:
Dr Wilkins said dealers around the world had reacted (to restrictions) by filling the (Ectasy) pills with other substances, including methamphetamine, which could create a highly dangerous cocktail of drugs.
…
A revival in LSD use, possibly as Ecstasy users look for a stronger drug.
So they attribute the rise in LSD use to “addicts” wanting a stronger fix – even though they have already admitted that the consumers value of Ecstasy has been lowered by tightening restrictions overseas, which have reduced quality and increase the potential health impact. If anything I would say that the “obvious” reason for the substitution from Ecstasy to LSD would be the result of these tighter restrictions …
Their case is so compelling, they don’t need to actually make it.
Also, rewriting the start for kicks I find …
So compelling is the case for slavery that it is a mystery why the Government is setting up yet another working group [ed "so compelling is the case" WTF, did Yoda write this - actually that would be "so compelling the case is" wouldn't it].
It needs only look at the New World, where the concept has proved so successful over recent centuries that almost two-thirds of landowners now support an increase in slavery rates.
Trekking down the same path here will address a number of pressing issues. In reality, it is not a question of whether there should be slavery but when and how it should be introduced.
Yes, the slavery comparison is excessive. But compulsory superannuation is a forceful, ill conceived, idea. Expect more ranting next week – I might even go into a little more detail
If this is the case for compulsory super, then I guess I better figure out where I’m going to move once it gets introduced – as it is obviously going to be poorly thought through and adhoc.
Lets start:
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Eric Crampton notes that Peter Dunne views income splitting as a subsidy for “household services” – as he thinks the secondary partner in a relationship should be at home more often.
Ok, well he is right that it is discouraging second earner labour supply, and so will end up with second earners staying at home instead. But is he correct when he says we need to subsidise household services?
Just yesterday CPW pointed out to me that we don’t tax household services provided in a relationship – even though it is a service. As a result, it is already subsidised. In fact, we could argue that we should be taxing the imputed rental value of said services – given that they are part of the inherent structure of the household (and households are effectively just firms).
Arbitrary tangent
In many ways we could say allowing people to form families is a way of “dodging tax” is that something a civilised society such as New Zealands wants to promote!
Overall, I think Peter Dunne has convinced me that we need to not only avoid income splitting – but start taxing people based on how much they clean their own house. Sure, looking at how I keep my house, this would see a significant fall in my tax burden – but I swear I’m not asking for anything on the basis of self-interest ….
Tangent over
So, in seriousness, we have to ask – why do we have someone wanting to implement a policy on the basis that it will reduce labour force participation by secondary earners? Does he seriously want society to revert to some sort of 1950′s traditional household mold? Even if he does, and even if YOU think that this is what society should do – do you think it is right for government to implement policy to achieve such goals?
That my friends is really a bridge too far – no-one, not even economists, have the foresight and the knowledge to say that they should be the ones determining societies institutions.
Compulsory super is being suggested, again.
I agree with Kiwiblog’s first statement that compulsory super is bad policy – but then he states:
However KiwiSaver is close to de facto compulsory as it is opt out, and the subsidies are so great you have to be very poor or very stupid not to take them up.
Serious, what the frik.
It is opt out, because it wants to “change the framing” of saving, in order to see if people have a framing issue with savings. However, they messed any potential for using this as a test for framing by epically subsidising the scheme – subsidies which are inefficient and generally unfair.
I wouldn’t use the dumb subsidises in Kiwisaver as any sort of argument for compulsion.
Trust me, if we are about to get into a debate on the merits of compulsory superannuation there is going to be a lot of “against” posts on this blog – lets hope we don’t go there.
Update: An anti-compulsion post on Policy Progress that is worth flicking over.
So Chris Barton in the Herald stated:
Those who call for a cost-benefit analysis of the (broadband) plan don’t understand the internet
O.o
It is obvious from this statement that Chris Barton doesn’t understand what a cost-benefit analysis is, and just wants fast internet so badly that he is willing to ignore any points against such a scheme.
His implicit point is that there are benefits in the future, and there is uncertainty around how these benefit will pan out – while this is true, it makes a proper cost-benefit analysis more important, not less. Bleh.
Arnold Kling makes an important point when discussing market failure on Econlog:
Instead, it says that every industry is dysfunctional in its own way. But every industry is dysfunctional.
He points out that this may lead people to the conclusion that:
And in every case, experts wielding the power of the state are presumed to make things better.
Now, to the sheer majority of people this conclusion would seem suspect – which in itself tells us that there is something amiss. The “something” that is missing is the imperfection of government policy.
Yes markets fail, but the state isn’t able to perfectly correct for such things. In order to justify intervention, we need to be able to say that the cost of market failure exceeds the costs associated with government intervention.
This raises an interesting issue – if it is up to policy makers to make a judgment call on these costs, and for some reason they believe that their abilities are greater then they are are (say because they don’t face punishment if they fail, and so never have to update their beliefs with regards to their abilities) then we are more likely to get government intervention when it is inappropriate then no intervention when it is appropriate.
That is just a little point to keep in mind – and is probably one of the justifications for having a Treasury department that looks at the quality of spending rather than just balancing the books.
So, a while back a post on housing and production got criticised, but I didn’t notice. I shall respond now, as I need something to post on. (I would also note that there are 1 million brilliant comments in the initial post – good stuff guys.)
In a strict sense building a house doesn’t increase measured productivity – however, when making my statement that was never my claim. My claim was that housing was productive – my intent was to show that a house could be seen as investment as it creates a stream of value.
Now, I was obviously far too unclear, and I’ll admit that for sure – so slap me down and take a point off me.
However, I was so loose with my terminology because I’m lazy … but also because I see the “focus on productivity” as inherently silly. We don’t value the “productivity”, we don’t go around doing things with “productivity” per see – I would love higher productivity, as it means I get more stuff for the same inputs. But I would love it because I get more stuff, not because I get more productivity statistic.
And this is the essential issue that is missed when looking at housing.
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