The America’s Cup is not about the money

The America’s Cup might be returning to NZ and local newspapers are already weighing in on what it means for the economy:

As Team New Zealand moves close to match point there is already speculation that the next cup series will bring over half a billion dollars in financial gain to the country.

Don’t believe it, says Shane Vuletich of Covec, specialist in economic evaluation of tourism and major events, who warns numbers already being used are far too large.

Vuletich and TVHE’s straight-talking Shamubeel Eaqub—”the economic benefits of a cup regatta in 2017 would be based on ‘over-hyped studies that are proven to be absolute b…….. after the fact.'”—are absolutely right: major events don’t tend to be good financial investments. What surprises me is that this is worth reporting. Read more

Series on tax: Part 8, inflation and tax

Matt Nolan finished his series of posts on tax by discussing “inflation tax” on interest.co.nz (Infometrics version here).

The article covers a lot of ground, discussing monetary policy, “one-off” money financing, and seigniorage.  These areas are all related, but all involve special elements.

Read more

Quote of the day: Sen on inequality and rhetoric

I am currently disappointingly short on time, I apologise.  So I will take this chance to quote from smart people, in this case Amartya Sen on inequality again.  This time at the end of chapter one from ‘Inequality Reexamined’.

The tendency to assume away interpersonal diversities can originate not only from the pragmatic temptation to make the analytics simple and easy (as in the literature of inequality measurement), but also, as was discussed earlier, from the rhetoric of equality itself (e.g. ‘all men are created equal’).  The warm glow of such rhetoric can push us in the direction of ignoring these difference, by taking ‘no note of them’, or ‘assuming them to be absent’.  This suggests an apparently easy transition between one space and another …

But this comfort is purchased at a heavy price.  As a result of that assumption, we are made to overlook the substantive inequalities in, say, well-being and freedom that may directly result from an equal distribution of incomes (given our variable needs and disparate personal and social circumstances).  Both pragmatic shortcuts and grand rhetoric can be helpful for some purposes and altogether unhelpful and misleading for others.

The purpose of thinking about this is not to say there is nothing that should be done.  But instead that, as was made clear here, these moral issues are too important to just relate to some vague partially related factor and pretend we have a silver bullet.  If we genuinely care, we need to try to understand why and about what – instead of using ‘grand rhetoric’ to simply make others think about how thoughtful we really are 😉

Read more

Quote of the day: Amartya Sen on inequality

I am currently reading “Inequality Reexamined” by Amartya Sen, as I’ve never read his books – only his papers.  This suits my current binge reading of inequality, income distribution, and methodology of economics and econometrics books I’m trying to read (albeit too slowly for my own liking).

Anyway, the prologue immediately neatly summarises a point worth noting.  I was reading a little way into the book, and decided that the stuff in the prologue served as a neat “taster” and that I wanted to share it.  So here we go!

The central question in the analysis and assessment of inequality is, I argue here, ‘equality of what?’

Not only do income-egalitarians (if I may call them that) demand equal incomes, and welfare-egalitarians ask for equal welfare levels, but also classic utilitarians insist on equal weights on the utilities of all, and pure libertarians demand equality with respect to an entire class of rights and liberties.  They are all ‘egalitarians’ in some essential way.

Read more

Diversification and picking winners

Following the concerns about botulism and Fonterra, there have been increasing calls for New Zealand to be “diversified” or even for the NZ government to “pick winners”.  Gareth Kiernan touches on these ideas, and why we should be careful with them here.  A choice quote:

Although economic diversity is useful in terms of limiting the volatility of GDP growth, it needs to be remembered that “picking winners” is generally a costly and futile exercise – politicians will usually be worse than entrepreneurs at where to invest resources, and are worse at letting poor performers go.

Remember, it is folly to look at the failures of markets and entrepreneurs without recognising the failures of institutions and government (as a large institution) as well.  In that context, aiming to help out certain firms looks more like taking risk off businesses and putting it on the taxpayer – a shift that hardly seems fair.

What do you think?

The ‘gummint’ should do something!

In an excellent article Deborah Coddington wrote:

“…encouraging voters to look to gummint for the good life is a futile exercise. No one in their right mind would willingly assign their choice of car, design of house, style of dress, or gardening habits to their local MP.

To preserve the New Zealand Quality of Life, it’s to ourselves we should look, not a bunch of representatives in one or another political party.”

I agree. Too often every perceived problem is met with an outcry for the government – or my preferred, gummint – to do something. Read more