The baby boom: A result of what?

According to Mansoor Khawaja from Statistics New Zealand, the recent baby boom is the result of:

young women … refusing to follow their mothers’ decisions to have few children later in life

I don’t know – I might be a bit more cynical and suggest that young women are more likely to have children now because the government is subsidising it (eg Working for Families).  Of course this may turn out to be testable as:

Professor Pool and Mr Khawaja expect the recession to have a dampening effect in the next few years

While in my view, the fact that having a kid provides a guaranteed and stable income (from WFF) would actually increase the value of having kids, leading to a greater number of kids being born.  Although I guess this would be counter-acted by the potential loss of the tax credit (from lower hours, or potentially from the loss of a job).

And we thought New Zealand’s building slowdown was bad …

Check out Spain (ht Calculated Risk):

Just 135 new housing starts in the last quarter of 2008, and not a single one in December: That was the combined output in terms of housing starts for the G-14 group of Spain’s biggest developers

Yikes.  We are just under about 3,500 – and it looks like we could slump under 3,000 over the first quarter of the year.  But 135 housing starts is madness!

One major difference – Spain has a large over-supply of property (like the US), NZ doesn’t.  However, we definitely have pretty restrictive lending conditions for builders at the moment …

Quote of the day – tax cuts paying for themselves

This is from Alex Tabarrok:

Mark Thoma makes fun of Judd Gregg for thinking that tax cuts pay for themselves. Mark is right to make fun. What a ridiculous thing to believe. All the good economists know that it is spending increases that more than pay for themselves.

😀 . BTW, this is sarcasm – which is why it is awesome 😉

Also, apologises for the lack of substantial updating – I am extremely busy doing that “predicting things” stuff that I always say economists shouldn’t do

Blegging again: On Singapore refined oil …

Thank you for the excellent responses to my previous bleg on refined oil prices.

Sadly I am in need of a little more help :)

According to the data series kindly provided by John Macilree the price of refined fuel has jumped pretty sharply, even as crude prices have stayed low.  I am wondering if anyone knows why this has happened.

I have five potential theories:

  • A cost shock to refineries around the world,
  • World demand for oil has recovered increasing demand for the refined product – however, there has been stocks of crude oil (implying that it won’t show up in the crude price until later),
  • Recent price movements have given refiners a view of the elasticity of demand – and they have discovered that the profit maximising price is actually higher,
  • Refiners have fallen into a position where it is easier for them to tacitly collude,
  • Prices had fallen “too sharply” as crude fell, and the recent steep increase is a correction to equilibrium.

Cutting costs is not recessionary

Over at Kiwipolitico Anita states that the government will cut spending on government services by at least the same amount that they are going to increase the size of the fiscal stimulus by spending on infrastructure – and implies that this means that the fiscal stimulus is even smaller

Now, if the government cuts spending but continues to produce the same output this ISN’T akin to “removing stimulus” persee – we instead need to find the appropriate counter-factual.

First say that the government is going to cut the unproductive spending and use it somewhere else – in this case the action would actually increase the immediate income of the economy and help pull us out of the recession.

Say instead that the government held the money – this reduces the amount of debt they are going to take on, which allows the private sector to borrow (lower future tax burden and all that jazz 😉 ). Of course, people are currently more willing to loan money to government instead of firms – so this may not be a wise move on the part of the government in terms of short-term stimulus. However, then the question should be “why don’t you spend this saved money productively” not “why don’t you keep throwing the money at areas that are not producing anything”.

The main counter to this may be that “government cost cutting will lead to a lower level of government outputs”. If this is the case then we have an issue. This brings us to the fundamental question – is the $250m of spending the government is looking to cut currently being put to its best use? If it is then Anita is right – if it isn’t then the government is right.