Matt Nolan

But what is the problem?

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Over at the Dim Post it is suggested that New Zealand is somehow failing when company owners sell their assets to non-New Zealanders.

However, there is no issue with selling companies in of itself.

The “problem” might be that, as a whole, New Zealand residents appear to own a significant amount relative to their income and wealth.

If we do believe this is the case, then we have to ask why. Just saying “look we are selling stuff”, “look NZ owes some stuff” doesn’t tell us why this is the case, whether this is a problem, and if it is a problem what we can do about it.

If we think that there is some systematic risk from this behaviour, or that New Zealand residents do not recognise the risk associated with this level of risk, then we should be looking for policies that will improve said decision making – not arbitrarily looking at policies that will “force” saving or the voluntary sale of goods, services, or assets.

Is this point of view unreasonable? If we accept this point of view, we also have to accept that other New Zealanders might want to consume now, or may want to avoid the risk associated with “high return” ventures.  Given this, it is both unreasonable and harmful to social welfare to try and force New Zealanders to save to effectively subsidise the risk of business owners – which is what compulsory savings will be.

Matt Nolan

Housing tax changes – will they lead to a leap in rents?

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There have been a wide range of people saying that the changes to the tax treatment of property will lead to a leap in rents.  So will it?

I would say that the answer is yes, and no.  Here is why.

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Matt Nolan

Tertiary funding: What is the rationale?

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It sounds like the tertiary education minister and universities will come into conflict regarding funding, again.  In this specific case, I think both sides are wrong/focusing a bit narrowly.

The tertiary education minister is saying the government should link funding to performance measures – including work placement.  The philosophy guy that was asked disagreed, as they will get less funding (which is weird, as he goes on to say how employers value the skills from philosophy – so this is sort of a contradiction right – Dim Post was on this wave length as well).

In my opinion public funding of education should be based on the “external benefit” associated with said education.

When arguing against the governments suggestion I’d say, if someone can get a well paying job but there is no external benefit, why should the government fund these courses at a high level?

In a similar vein we can argue against the philosophy guy by saying there is nothing intrinsically “good” about having people running around doing a certain degree type in of itself.  We need to sit down and say “what is the external benefit associated with this”.  Once we know this we have the rationale to sort out funding.

I do not believe all courses should be funded equally.  But I also don’t believe that courses should be funded on the basis of work placement.  These conclusions come from my value judgments that:

  1. The external benefits of different courses differ,
  2. External benefits are not perfectly correlated with work placement.

Update:  Eric Crampton discusses the policy here.

Update 2:  Very different take on tertiary policy in the UK.  I can see an argument for lowering the subsidy on education for jobs with a high private benefit and low social benefit (ability to pay and externality arguments).  But what do they mean by a graduate tax?  Do I get an additional tax on me if I head over there just because I’ve been to university?

Matt Nolan

The taxing issue of burden

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One thing I have noticed of late is that many people want to talk about tax cuts in terms of “who gets what”.  We see someone with an income of $XXX and say they will get $Y a week from the tax cut.  I find this perplexing as I have never seen tax this way.

The reason why I find this way of looking at tax changes strange is that it ignores how prices change in response to the structure of the tax system.  I fear that, to many people, this seems like a benign (possibly even esoteric) issue – when actually it is one of the most essential issues to keep in mind when thinking about the design of a tax system.

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Matt Nolan

GST does increase the incentive to save

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In a recent Herald article (found on interest.co.nz, where I find it easier to read straight from the screen) Bernard Hickey discusses the increase in the goods and services tax and savings. The article makes a number of good points, but I do not agree with the conclusion.  For my thinking read below 😀

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Matt Nolan

Fiscal policy camps

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In an email exchange with fellow economists from around the place I made the following wild conjectures on why fiscal stimulus could be seen as a good idea – but isn’t necessarily first best.  Feel free to read and critique 😉

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