Productivity Commission on NZ vs Aussie productivity

Recently I’ve been talking a bundle about inequality in incomes, and fitting it within an idea of “equity”.  However, as we’ve chatted about, policy choices often involve conceptualising an equity vs efficiency trade-off.  A fundamental part of how we understand where we are in relation to this trade-off, especially with reference to “efficiency”, comes from thinking about productivity.

With this in mind, the Productivity Commission has been thinking about New Zealand’s productivity performance.  And given that along many characteristics New Zealand and Australia are similar they have decided that looking into the productivity gap between these countries helps us to understand this issue.  This led them to release a working paper titled “Investigating New Zealand-Australia productivity differences:  New comparisons at industry level” on their main site (links can be found here).

Read more

National chooses “sexy” movie protectionism

Bah, I come back from a conference to this.  Film subsides/protectionism is back in vogue I see.  Not happy with just spending other people’s money to get to go to functions about the new Avatar movies, our politicians have decided to increase the amount of other people’s money they will give to all people who decide they feel like filming here.

From Dragoliz’s deviantart

Read more

QOTD: Plato

Those who are too smart to engage in politics are punished by being governed by those who are dumber.

Economists like to think they’re above politics and deal only with positive questions. Is that really much of a boast?

On the comments of Pope Francis

I’ll admit a bias here – my middle name is Francis, so no doubt I am being overtly generous to his comments when I discussed them on Rates Blog last week ;) .  Or potentially I’m am being harsh, because I am particularly unhappy that I ended stuck with a middle name I didn’t particularly want.

All kidding aside, the way different economists reacted to the Pope’s comments was fascinating for me – and also helped to reinforce the idea that often when we discuss things as economists, it can be hard to hide our normative assumptions.  As I pointed out here, I was raised with a fairly significant Catholic upbringing – and in the context of what I remember being told about when I was young his comments were not terribly strong.  I felt he was making some statements that were factually wrong, but it was on the basis that those within the Church actually believe in a more equitable distribution of wealth (even if it is significantly less wealth).

These normative value judgments about the distribution of income run past economics – economics is a descriptive discipline that allows us to fairly represent the trade-offs, not to determine what trade-off is right.  However, as an individual I would also note that the normative value judgments of the Catholic Church are hardly going to be representative of society as a whole – as a result, we do not need to say that the Pope is wrong with what he is saying in order to disagree with him.

However, as the end of my Rates Blog piece does point out, factually his two main “testable changes in society” are completely false.  Make of that what you will.

Is it a bubble?

I was at the Press Gallery Christmas function last night in Wellington. Great do. I have renewed respect for journalists’/government relations types’/politicians’ drinking ability.

At some stage I got cornered on what would happen to Auckland house prices. Having no good answer I resorted to the Keynes line that markets can remain irrational for longer than you can remain solvent.

This morning I thought I would have answered it more as The Economist writes:

“Manias can last much longer than investors think, as many contrarians discovered to their cost during the dotcom boom of the late 1990s. Nor do investors know whether a bubble will be resolved through a sharp fall in prices or a long period of stasis, in which inflation erodes prices in real terms.”

And the folly of forecasting asset prices is neatly encapsulated by Irving Fisher (Professor of Economics at Yale University), in 17 October 1929, soon before the crash:

“Stocks have reached what looks like a permanently high plateau.”