A New GDP measure (GDP-B) in a digital economy

Although GDP is a good measure of what it is supposed to measure, there are always questions about whether it is the right measure when asking a given policy question. This was the driving motivation behind the Living Standard’s Framework and the development of a suite of measures to inform our views on wellbeing, as I’ve previously written (with Anita King and Nairn MacGibbon).

The focus of this post is on digitization. In an era of digitization, economists have become more and more concerned about whether the conventional way of calculating GDP is appropriate for asking questions about changes in consumer welfare (surplus) through time.

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How does uncertainty affect economy? What about monetary policy?

Why uncertainty matters?

The OECD has been warning everyone (Economic outlook 2019) , that the trade policy tension and uncertainty around it hit global economy hard. My question is, how can we think about uncertainty and its influence on monetary policy?

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Forward guidance and unconventional monetary policy in NZ?

Forward guidance and unconventional monetary policy

I recently noticed that swap rates purchases were discussed as an unconventional monetary policy tool are discussed in Reserve Bank’s bulletin “Aspects of implementing unconventional monetary policy in New Zealand”.

Namely, they state:

Purchasing interest rate swaps could be a way to signal that the Reserve

Bank expects to keep the OCR low for a prolonged period. Swap rates

comprise the expectations of future policy rates, the term risk premium,

and margin for bank credit risk.”

So why would we want to keep OCR persistently low in long-term? Let’s have a closer look at this.

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A bad econ model is better than the alternative

Let us talk about this.

https://twitter.com/Noahpinion/status/1041714463060049920

I will be using this model myself next week to talk about migration (opps post timing changed and that was already up), so lets have some fun talking about this.

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Migration and wages: A model that is wrong but useful

The link between migration and wages is complex and confusing – especially when it is often communicated about in different ways (eg are we talking about wage growth now with regards to monetary policy, wages in specific industries due to the changing make-up of the economy, or long-run real wages?).  And I can’t be much help here.

However, I think this is one place where carefully using the macroeconomic model taught in ECON101 can help us to think about the issues a little bit – especially if we are narrowing the question to only “what is the monetary policy consequences of changes in migration flows“.  Now this model is wrong, assumptions in it are wrong, the outcomes it describes aren’t forecasts – but it clearly articulates tendencies we observe following a change in economic circumstances which will hold in more realistic models, and clarifies assumptions that may make these tendencies false.  We have pointed at this before for monetary policy – but lets outline a bit more now.

It is a model for thinking about the potential consequences of something in a critical way – not something that we accept uncritically as truth.  To me this is pretty damned useful as a way to start thinking about something, so let’s do it!

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“Left Youtube” is overusing the labour theory of value

While I have been MIA over the last four years a lot has changed on the internet and in terms of economic and social discourse.  The weird infatuation of the alt-right with “globalists” and nonsensical economic arguments is particularly upsetting – and I’ll be discussing how the decline in persuasiveness of economists has helped these types of people fill the void in the future.

My concern four years ago was that the non-rationalist identity politics of the left would open this type of negative nationalistic politics on the right – or would at least be used as a foil for it.  The refusal to actually state our assumptions and values is a failure irrespective of the intentions we hold.  In that way, when exploring Youtube I’ve been pleasantly surprised by the leftist video blogs – and their willingness to fully articulate their views.  Key examples of this are Shaun, Contrapoints, and Philosophy Tube.

However, these channels are distinctly “anti-capitalist” in terms of wanting sizable change in the status quo.  I am a mainstream economist that believes in incremental change.  A full discussion of this would be interesting – but give me time.  But to do so we need to get something clear about the labour theory of value that I am hearing them describe – it doesn’t make sense as a justification for anything let alone as a “theory of value”.

Note: The actual labour theory of value has been defined many ways – and the most profitable Marxian interpretation I’ve seen is trying to understand LTV as part of a subsistance wage argument on factor income shares.  That isn’t the focus here.

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