Matt Nolan

New Zealand dollar in decline

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Source (NBNZ)

Damn, I wish I had picked up this graph yesterday – as the 24 July was when the RBNZ cut the OCR, which made the TWI fall by about 100 basis points.

So since then, our exchange rate has slide a further 200 basis points. For people that prefer thinking of it in US$ terms, we have fallen from $0.77US per NZ$ to $0.70 (including a little time under $0.69US!)

Why the hell is this happening?

Update: The rebound in the dollar was bound to happen this morning following this post and the fact that other commentators have said the dollar would keep falling – it is the “curse of the forecast” after all 😛 – luckily the below discussion is about the general factors driving a decline, rather than a next day forecast 😉

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Matt Nolan

And we’re concerned about our housing market!

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Now that Quotable Value is telling us the New Zealand house prices are finally falling (down 2.2% on a year earlier in July), the reality has sunk in that this might be a long adjustment.

However, the downturn in the US housing market has been happening a lot longer, and shows no sign of abating.  Especially with some houses now selling for $499US! (ht Stackelberg Follower)

Matt Nolan

Cross-country cash rates

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In the Financial Times, Martin Feldstein wrote about the difference between the EU and US monetary setting regimes – specifically he wanted to answer why the EU was lifting rates, while the US had been cutting. (ht Greg Mankiw).

Ultimately, he puts this difference down to a number of factors:

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Matt Nolan

Specialization: Policy and morality

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Philosophy et certa links to an interesting paper by Richard Sharvy titled “Who’s to say what’s right or wrong?  People who have PHDs in philosophy, that’s who”.

At some level this makes sense – philosophers (can) specialise in the study of ethics and morality, and as a result of this training they will have a better idea of what is “right or wrong”, and why it is so, then other people.  My impression of “rightness” and “wrongness” is that it is subjective – deciding what is wrong involves making moral judgments.

As a result, if we accept this, then when forming policy it is Philosophers that should be the ones forming the subjective value judgments required to qualify what the appropriate policy is.

The job of economists is to describe – we have to objectively describe what happens to a bunch of variables in society when one of them is moved.  However, if Philosophers are the experts when in comes to value judgments – they should be the ones that place a values on different variables, so when the economists model moves it can come to some sort of conclusion.

What do you guys think?  How do other disciplines fit into the policy creation process?

Matt Nolan

Where is economics on the political spectrum?

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There seems to be a lot of discussion surrounding economists position on the political spectrum. My answer to this would be that economists are not a political group or a club so economists themselves will be spread over the political spectrum.

However, I have to admit that the process used when discussing economic issues does lend itself (or suits people would already think like it) to a specific way of thinking. As a result, I’m going to discuss where I THINK my own views stand using the definitions of wikipedia. As I am not a political scientist this discussion will be quite useless – so if any political experts would like to help me out in figuring out where my views lie, please give it a go in the comments section.

Ok here we go.

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Matt Nolan

Do economists ignore workers?

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Over at Econospeak Michael Perelman is discussing how he feels economists ignore the concept of a worker when they discuss economic theory.

There appears to be a fair amount of disdain in his post about the mathematical nature of economics. However, I will forgive him for this – he is a heterodox economist after all, so his very discipline is focused on critiquing areas where mainstream economic thought makes a wrong turn. Although I do not share the mis-trust of mathematical theory (infact I believe it is a very useful way to organise ideas (sort of like writing them down), I do agree with the concept that an over reliance on technical models, without an understanding of the underlying assumptions, can lead to spurious conclusions in economics (however, as we have said before, this is a problem with the subjective application of a model – it is not invalidate the model in of itself).

Anyway, the authour appears to believe that economists ignore the idea of a worker. Fundamentally, I get the impression that he is believes economics discusses the rights of capital owners in far more detail than we talk about the rights of workers. However, I’m not certain that I agree – let me try to explain:

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