Matt Nolan

Sigh, more like SCF?

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So this isn’t what I wanted to hear:

Mr Key also warned that other finance companies may go under and the government would continue to look after investors by keeping the guarantee on investments in place.

I think he meant:

Mr Key also warned that other finance companies may go under and the tax payer would continue to take on all the risk for investors by keeping the guarantee on investments in place.

Look.  I had no problem with the idea that we needed to do something in wholesale markets during the credit crisis to prevent an effective “bank run”.

But the two problems with keeping this going now is that:

  1. This problem is gone now,
  2. Given the fact that funds flooded into risky assets after the guarantee there is a definite case that we should have done less.

Contrary to what Kiwiblog said that “It is easy in hindsight to say that one should not have had the guarantee scheme, but in late 2008 the wordl financial system was on the brink of possible collapse, and pretty much every OECD country did much the same as a stability measure” I think it is perfectly fine to critique the scheme.

Why?  Well we KNEW there were issues with our finance firms, and we stuck them into a scheme rapidly without doing due diligence on a whole lot of the stuff.  And we made this f’ing critique AT THE TIME – so we are allowed to make it now 😉

Lets just think here for a second.  Effectively government was taking on all the risk, so why weren’t the insurance premiums insuring that all the return also went to government?

If it is hard to observe the price, couldn’t we have just said that people who entered the scheme couldn’t increase lending – this would have allowed the scheme to protect deposits without leading to the “increased risk taking” that has taken place.

Bah.

Matt Nolan

Policy success measured by decline in consumer surplus

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Via the Herald (ht Education Directions):

The Illicit Drug Monitoring System report found the price – commonly regarded as the best measure of police success against the drug – had increased each year.

Interesting.  So they use ever rising prices as a measure of ever rising success.  This is weird on two grounds:

  1. We are using regulation, not the market – yet using prices as an indicator seems to point out that we could use a market mechanism here.
  2. If we accept the market mechanism, then even in the face of externalities there is an appropriate “price” – if we go past that I wouldn’t call that a “success”

Also, they seem to have trouble attributing appropriate causation:

Dr Wilkins said dealers around the world had reacted (to restrictions) by filling the (Ectasy) pills with other substances, including methamphetamine, which could create a highly dangerous cocktail of drugs.

…

A revival in LSD use, possibly as Ecstasy users look for a stronger drug.

So they attribute the rise in LSD use to “addicts” wanting a stronger fix – even though they have already admitted that the consumers value of Ecstasy has been lowered by tightening restrictions overseas, which have reduced quality and increase the potential health impact.  If anything I would say that the “obvious” reason for the substitution from Ecstasy to LSD would be the result of these tighter restrictions …

Matt Nolan

The Herald on compulsion

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Their case is so compelling, they don’t need to actually make it.

Also, rewriting the start for kicks I find …

So compelling is the case for slavery that it is a mystery why the Government is setting up yet another working group [ed “so compelling is the case”  WTF, did Yoda write this – actually that would be “so compelling the case is” wouldn’t it].

It needs only look at the New World, where the concept has proved so successful over recent centuries that almost two-thirds of landowners now support an increase in slavery rates.

Trekking down the same path here will address a number of pressing issues. In reality, it is not a question of whether there should be slavery but when and how it should be introduced.

Yes, the slavery comparison is excessive.  But compulsory superannuation is a forceful, ill conceived, idea.  Expect more ranting next week – I might even go into a little more detail 😉

Matt Nolan

Poor case for super

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If this is the case for compulsory super, then I guess I better figure out where I’m going to move once it gets introduced – as it is obviously going to be poorly thought through and adhoc.

Lets start:

Read more

Matt Nolan

Subsidising household services?

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Eric Crampton notes that Peter Dunne views income splitting as a subsidy for “household services” – as he thinks the secondary partner in a relationship should be at home more often.

Ok, well he is right that it is discouraging second earner labor supply, and so will end up with second earners staying at home instead.  But is he correct when he says we need to subsidize household services like cleaning and required pest control services of which you can learn more here.

Just yesterday CPW pointed out to me that we don’t tax household services provided in a relationship – even though it is a service.  As a result, it is already subsidized.  In fact, we could argue that we should be taxing the imputed rental value of said services – given that they are part of the inherent structure of the household (and households are effectively just firms).

Arbitrary tangent

In many ways we could say allowing people to form families is a way of “dodging tax” is that something a civilized society such as New Zealands wants to promote!

Overall, I think Peter Dunne has convinced me that we need to not only avoid income splitting – but start taxing people based on how much they clean their own house.  Sure, looking at how I keep my house, this would see a significant fall in my tax burden – but I swear I’m not asking for anything on the basis of self-interest ….

Tangent over

So, in seriousness, we have to ask – why do we have someone wanting to implement a policy on the basis that it will reduce labour force participation by secondary earners?  Does he seriously want society to revert to some sort of 1950’s traditional household mold?  Even if he does, and even if YOU think that this is what society should do – do you think it is right for government to implement policy to achieve such goals?

That my friends is really a bridge too far – no-one, not even economists, have the foresight and the knowledge to say that they should be the ones determining societies institutions.

Matt Nolan

The elephant in the room: Compulsion

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Compulsory super is being suggested, again.

I agree with Kiwiblog’s first statement that compulsory super is bad policy – but then he states:

However KiwiSaver is close to de facto compulsory as it is opt out, and the subsidies are so great you have to be very poor or very stupid not to take them up.

Serious, what the frik.

It is opt out, because it wants to “change the framing” of saving, in order to see if people have a framing issue with savings.  However, they messed any potential for using this as a test for framing by epically subsidising the scheme – subsidies which are inefficient and generally unfair.

I wouldn’t use the dumb subsidises in Kiwisaver as any sort of argument for compulsion.

Trust me, if we are about to get into a debate on the merits of compulsory superannuation there is going to be a lot of “against” posts on this blog – lets hope we don’t go there.

Update:  An anti-compulsion post on Policy Progress that is worth flicking over.