Branding too big to fail: TBTF

Too big to fail has to be one of the “catch phrases” of 2008.  Catch phrases often deserve some fan art – however, over 2008 I didn’t see any.

The Minneapolis Fed obviously felt that fan art was necessary – which lead to this banner (ht CPW):

Excellent.  The related post is here.  In it, they discuss how to identify and quantify the issue in the future – so Fed action does not appear so “ad hoc”.

December quarter NZIER QSBO

The NZIER December QSBO is out.  Ohhh dear …

Let’s just say that the domestic economy appears to have cooled rapidly in the December quarter – and businesses are running scared of the March quarter.

It does appear that there is more than a structural correction going on now – confidence, and as a result demand, have given way.

The labour market data will be key for determining whether the RBNZ cuts 100 basis points, or more …

Israel-Palestine Conflict: A general model?

This blog tries to remain relatively apoliticial. I do not intend to break this by illustrating as opinion on the Israel-Palestine conflict, it is a difficult issue which I could do no justice. However, I do like to try to understand the world around me, so a relatively generalised model that describes these types of conflicts and “international policy advice” in the situation would be useful to me.

I aim to sketch out a few thoughts I have based on the study of economics. If there is a political scientist out there (or anyone else for that matter), I would be more than happy to hear about the multitude of logic flaws in my description ;)

Read more

Is the US overestimating its “potential”?

Over in the good old US the Congressional Budget Office has released their forecasts (ht Paul Krugman). It is an ugly sight, as would be expected, with growth falling miles below its “potential” level and a large negative output gap opening up.

As Paul Krugman points out, this type of large output gap would provide massive deflationary pressure – he suggests that we could have a deflation rate of between 3-5%!

Now, I’m sure his logic is spot on given this estimate of potential output – however this raises a question for me, has potential been forecast correctly? Generally, growth in potential output is forecast to be relatively stable – and trends along with historic growth. But this doesn’t feel quite right. There are two reasons why this may fail:

Read more

Licensing fees vs open source software

I work (if you can call it that…) for an organisation that uses a suite of Microsoft applications. In addition to Windows XP it runs MS Office. For the ability to do this, a licensing fee, probably quite sizeable (I don’t know though) is paid to Microsoft.

Now, it was pointed out to me that an open source alternative, “Open Office” is compatible with MS Office, and has most all of the same functionality. There would have to be some retraining, however, to ensure that everyone could use it correctly.

It was put to me that my organisation could save quite substantial sums (even after the cost of retraining for its use) from changing to this alternative, and that there would be very few costs to the change.

I searched for reasons why this person was wrong:

  • We work collaboratively with a lot of other organisations, and need to be using the same software. But apparently they are completely compatible.
  • The support that microsoft offers means it is much safer to use MS office. I can’t recall the response, but apparently this isn’t a big deal.
  • People just won’t retrain and will insist on using MS Office because it is what we know. My friend scoffed with contempt.

Why do we all pay so much to use Microsoft intellectual property? I have my suspicions why, but would like to hear from others.

A justification for taxing congestion: Multiple equilibria with a roading alternative?

Recent posts below (see “Taxing congestion: how I might justify it“) have sought reasons as to why toll-roads are so often touted as an economically efficient measure. For my part, I am quite sceptical that the are universally efficient, and struggle to find a compelling reason why they are even efficient most of the time. However there are some circumstances where it is quite conceivable that they can be efficient. Where there is a (slower) alternative to the road with a congestion charge, and different drivers place different values on congestion free travel, congestion charges/tolls can lead to an efficient sorting of road users between the (faster) toll road and the (slower) free road, resulting in socially optimal outcomes.

The intuition goes something like this:

Read more