Matt Nolan

Outsourcing jobs – whats the issue?

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Yesterday we had the dual announcements of both Fisher and Paykel and ANZ moving work overseas.

The Standard has taken issue with this activity. Particularly, two posts at the Standard lamented the “exploitation” of foreign workers and stated that consumers should stand up to protect domestic jobs.

On a separate note we have seen the closure of a Dunedin knitwear company at the same time, while the D&B payment survey shows that manufacturers are taking a long time to pay their bills, taking 53.6 days on average (can only find old one 😛 ):

What do these stories have in common other than the sad fact of job losses? What do these stories tell us about the New Zealand economy?

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jamesz

Climate change and the decision to delay

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I went to a debate about climate change a few days ago and, uncharacteristically, decided to take notes of my thoughts throughout the talk. In order that they not be wasted I’ve decided to do a series of posts on some of the interesting points that came up in the course of the seminar. Today’s topic is whether it would be less costly to delay doing something about climate change. Read more

Matt Nolan

Biofuels and food prices

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Why is everyone acting so surprised about the fact that biofuel regulation will (and has) led to higher food prices? We said it would in August (well to be fair, Keith Woodford from Lincoln University said it before us, and other people were saying it before that 😉 ).

However, unlike some commentators, we do not believe that the fact that world food prices are rising should impact our decision on whether to make biofuels mandatory (something I don’t agree with), as NZ’s demand for biofuels will be so small that it won’t have an impact on the world price for food.

Also there are some unintended benefits for NZ from the mandatory regulations in the US and Europe. Corn etc has become more expensive, making it more costly for foreign dairy farmers to produce milk. This is part of the reason that milk spot prices have doubled over the last year – injecting a lot of money into the NZ economy.

On that note, I want to complain about this: (h.t. Kiwiblog)

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Will Taylor

Bringing people into the country is strategic but having electricity isn’t??

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So we have been talking about asset sales (or the blocking of) in relation to Auckland airport a fair amount lately. As you may or may not have picked up I don’t really have a problem with the idea as the assets in question were already owned by investors and nothing bad had happened. We are talking about two profit maximizing investors exchanging ownership of an asset; they have the same incentives to make money regardless of whether they live here or overseas. We aren’t talking about privatization where the government is selling something to private investors where the incentives between the two parties could arguably be quite different (profit maximization vs. welfare maximization) although they often coincide. That however is a different issue.

I was a bit astounded to read this morning that aparantly the government is unlikely to block the sale of part of our electricity distribution network but not an airport. Not because I have a problem with the sale (I’m perfectly comfortable with it) , more that I think if you apply the same incorrect logic that blocked the AIAL sale, you should be more worried about electricity lines.

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jamesz

Unwanted pregnancy and default options

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It is well known that the default option for a choice hugely influences the outcome of peoples’ decisions. Governments exploit this regularly by, for instance, using opt-out rather than opt-in schemes for pension plans. The idea here is to encourage people to choose the ‘right’ thing without actually constraining their decisions making in any way. People tend to be comfortable with an arbitrary choice of default option for a new scheme. For existing schemes, a decision to change the default option from the status quo might meet with considerable opposition. However, using the power of the default option to influence peoples’ choices could potentially have a huge impact on problems that our society currently faces. Read more

Matt Nolan

Why does the target rate matter?

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WIth inflation heading far outside the Reserve Bank’s target band both Kiwiblog and Kiwiblogblog have had a little to say about inflation targeting.

David Farrar at Kiwiblog states that inflation outside the range is bad, and in fact our relevant target band should be 0-2%. He also states that we can act like the target is truly the point at the middle of the band – ergo we currently have a target of 2% (in the 1%-3% band). David then finishes by saying that current interest rates will have to stay high – something that will be a concern to people.

Wat Tyler (a good historical reference of a left wing blog may I add) disagrees with this way of looking at the target, states that interest rates were higher in the 90’s and so should not be such a concern, and says that a little breakout from the inflation target doesn’t matter – as long as we keep inflation in single digits.

Both sides have points – lets try to dig a little deeper and figure out what my opinion is 😉

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