Gulnara Nolan

Pandemics and scarcity – thinking about grocery prices, overall demand, and understanding policy

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With the pandemic news moving quickly Matty convinced me to spend more time on Twitter to keep up with the news (my account is here if you want to follow). I saw some interesting links regarding the economics of COVID-19 which I would like to share and comment on – and I decided to run through all these points on one post .

Here are the topics I cover. Each is titled, so you can scroll down if you are only interested in one these:

  • A jump in the CPI even as demand falls? Consumer prices may rise in the short term, even as expenditure is falling – and this “price level” change is not necessarily indicative of a supply shock.
  • How to visualize the “timeline” of COVID-19 and the economic elements.
  • What does ECON101 think?
  • On humility: During the health crisis public health experts are the primary people able to analyse the issue and help with policy. Economists main role remains defining the trade-offs, but not deciding policy.

I don’t want to state what policies I think are good and which are bad. Instead I just want to share these points, as they are ideas I am using to understand what different policies might be trying to achieve as an interested person.

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Gulnara Nolan

The World Bank’s financial aid scandal

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It is a pity that the World Bank’s Chief Economist Penny Goldberg has resigned after being in a role for only 15 months. Her resignation appears linked to the scandal around the financial aid leakage to private accounts in financial havens. 

The brief story is that when the World Bank provides financial aid to aid dependent countries, some of these funds appear to be transferred into the private accounts of the “elites” in the countries mostly known as “financial havens”. She then left because the research on this issue wouldn’t be published by the World Bank.

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Gulnara Nolan

What is the difference between sterilized and unsterilized intervention?

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Recently I’ve been trying to get my head around the difference between a “sterilized” asset purchase by a central bank and an “unsterilized” purchase. Here is where I’ve gotten to – happy for any comments or clarifications!

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Matt Nolan

Tweeting the curse of distance

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Via Owen Williams on Twitter came this gem:

This is true, shipping is a pretty big deal.  However, Aaron Schiff pointed out another common cost of being in NZ:

This is of course the curse of distance – both from the “production” of goods and from large centres of “consumption” (where the fixed cost of transporting can be spread over more customers).  The OECD has discussed this cost before, and NZ’s Productivity Commission also mentions it when discussing why productivity in New Zealand is relatively low.

Nice to see Amazon giving us some concrete examples we can use to discuss the phenomenon though – well nice until you want to buy anything 😉

Matt Nolan

Some broad lessons from the GFC

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I had to do a brief chat about the Global Financial Crisis, “mistakes” that were made, and the role of the international financial architecture, for a organisation I’m not naming with people I’m not naming.  It was Chatham House rules, but nothing particularly rough was said – so I’m more not naming anything as I like to let people’s minds run wild!  Anyway, here are the notes I wrote for myself in preparation – make of them what you will.

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Infometrics

Dynamic comparative advantage: Costs and benefits, the case of Cuba

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Political and economic systems are often fraught with emotional comparisons.  Few create more of an uproar than Cuba – with those on the far left seeing it as an ideal to aspire to, while libertarians view it as a fundamentally broken and immoral state.  However, no matter how we feel it is always useful to ask what the trade-offs are, and what “theories” these ideas are indicative of.  This is what Mieke Welvaert did on her recent post about Cuba trading doctors (Infometrics link here).

Cuba provides an interesting case study in how government policies can help individuals coordinate in their choice of job and educational attainment.  However, it also shows some of the costs of trying to generate a “dynamic comparative advantage”: the misallocation of human capital as people are pushed into specific areas, the restrictions to freedom required to solve the time inconsistency issue between government and the service providers, and ultimately the risk of being exposed to an industry ‘picked’ by a government.

In truth is does appear that one of the key issues, when looking at how the system works, is the freedom of choice of the individuals involved – understandably, people’s beliefs and judgement around this in ethical terms should drive their view on what is appropriate.