Deficits, RBNZ, and the IMF
The IMF, in all its infinite glory and knowledge, has decided to give New Zealand some advice on fiscal and monetary policy. Here is my take on their sermon from the heavens.
Jobs and production
In the comments to the “Sigh” post, rainman raises the following reason for government action against currently employed temporary workers:
What then do the displaced workers like the welder in this story do? Go on the dole?
Now, the primary argument against this is that the “displaced workers” aren’t solely displaced. The immigrants are doing a job making things, and therefore this will “create work” for other people.
However, there is another, more fundamental argument against that. And it comes from the idea that we aren’t actually after “making work” (work is a cost after all) we are after making stuff and having a nice living standard for people.
The labour market and wages
David Farrar has a very good reply to this post from Tane at the Standard.
There are a few points I would like to make as well though. Tane says:
David Farrar made the same fallacy the other day, the minimum wage isn’t there to make us all rich, it’s there to ensure that people on low incomes are able to live their lives with some basic dignity and security
Well, the minimum wage is a poor tool to do this. The best wage to ensure that people have a minimum income is from the state to provide it directly – which they do with the unemployment benefit. In this case everyone has a minimum living standard, but by joining the labour market they can improve on this. Although I believe there is a case for a minimum wage – the case for “increasing” it is much more debatable.
The next section is the bit David discusses:
Why I’m sick of hearing about “productivity”
There is nothing wrong with productivity, I love productivity. But why does this government have to bang on about it like it is an issue they actually have control over.
Increasing productivity implies that we can make more stuff for the same amount of labour and capital – now this is a completely good thing, we can be wealthier without any more work! However, surely when I put it this way alarm bells must start to ring!!!!
Tarot card reading and Economic forecasting
So I’ve started reading the moral philosophy and economics book I was discussing, and on the eighth page I found this quote:
The idea that studying ethics could help people do economics or policy analysis may seem far-fetched. Why not consult tarot cards instead?
Now I do not agree with the first part of the above paragraph – policy analysis requires value judgments to reach conclusions, and understanding ethics helps to inform value judgments.
But my focus is on the second part of the paragraph. Why the dig at tarot card reading?
My impression that his focus is on the broader form of economics that requires value judgments in order to reach conclusions – however, if this is what he is focused on tarot card reading is virtually equivalent. Let’s discuss why:
Why does that sounds familiar?
Matt asks me to elaborate on an email exchange we had about the incentives that face economists. In particular, how could we explain smart macroeconomists parroting the value-laden, overtly political rhetoric of Krugman or Mankiw during the current crisis. Sure, Mankiw and Krugman have a stellar publication record and can afford to rest on their laurels, but that’s not the case for most. So why don’t they take this opportunity to show their chops and give us some macro insight into what’s going on? Read more