Matt Nolan

Supermarket competition is a good thing!!

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Is someone trying to be ironic when they say that a new chain store that sells close to expired stock cheaply is a bad idea because it will “cause obesity”. Adolf at No Minister is right here when he says that these guys are doing the right thing, and that the critique on the grounds of obesity seems out of place (ht Kiwiblog).

If people want to eat enough and put on some weight that is their decision. After all WTF is an “obesity epidemic” – I didn’t realise people could gain weight just from looking at me after I’ve eaten 😉

Say that there is an externality from obesity – well then we should try to solve that, not regulate the supply of food. No the idea of an externality may lead to a “fat tax“. Poor information for consumers might drive us to label foods in better ways. But there is no value to be gained from refusing to allow competition in supermarket sales.

Truly, these people that focus on obesity DO NOT CARE about the happiness of people – they only care about the fact that they don’t like obesity. It makes me sad 🙁

And if you try to defend these claims on a basis similar to “people don’t know what’s good for them” I suggest you just write down what you just thought and read it …

Matt Nolan

High dollar is a symptom, not a cause

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BERL’s (cheif) economist Ganesh Nana has been telling people that the Reserve Bank needs to act to get the exchange rate down. I disagree in the most part and agree in another arbitrary part.

The fact is that the “high” NZ dollar is the result of a bunch of factors: peoples willingness to lend to us, the willingness to take on risk, our own willingness to accept their credit, a high terms of trade, our higher real interest rates, and a belief that the asset value of our dollar is higher than it was in the 90’s. There is no issue with the dollar doing what it does here.

I do agree that we have an issue of “production” vs “consumption”, namely we are taking on a great amount of debt and as a country this makes us vulnerable. But in this case the questions should be “why are we taking on all this debt?’ and “is there a problem with this debt accumulation?” (like we asked here) – not “is the dollar too high?”.

The Reserve Bank should not move to crack the $NZ down, instead we should all ask why New Zealand as a whole has taken more debt on and figure out if their are any structural issues in the economy that a change in government policy can improve.

Note: Another thing I would note is that the RBNZ can lower the dollar by trying to temporarily lower real interest rates (by printing money and dropping the nominal interest rate). This again promotes consumption above investment, and surely wouldn’t help correct any “imbalance” that we are focusing on here! Let us not forget the impossible trinity here (we discussed this here).

Focusing on the dollar is like focusing on easing a patients symptoms while leaving the underlying disease untouched!!

Update:  Scott Sumner does a small discussion on prices.  The exchange rate is a price, as he notes the important thing is “why the price has changed” not what the price is per see.  The price is not the underlying issue but the factors driving the price.

The Hand

From the Hand: BERL on Crampton-Burgess on BERL

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Following the incessant blather on the BERL report into the cost of alcohol Ganesh Nana has come out to defend the report (Hat Tip this guy).

Why bother? After all we all know that any report on costs will be filled with wild conjecture and pointlessly misrepresented by the public.

Well it turns out the Dr Nana felt the report has been too heavily misrepresented and wanted to clear some things up, so I guess that’s fine.

Except that there are two significant ways that his reply leaves me wanting:

  1. His criticism of rational choice is nonsensical,
  2. He refuses to admit that BERLs own work was the result of wild value judgments in the same way as the Crampton-Burgess reply.

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Matt Nolan

Careful with this investment now …

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So I hear that Wellington’s Morrison & Co’s Public Infrastructure Partnership fund is going to start spending the government’s “$500m infrastructure fund” ($100m of which is arbitrarily from the Super Fund).

According to the article they:

see significant potential for the fund because of under-investment in the past and because the Government is facing many years of budget deficits

I find this strange since:

  1. We haven’t necessarily had under-investment (discussed here and here)
  2. Spending more makes the budget deficit worse, not better

Now I have no problem with PPP’s, as I have this fantasy that the private sector part of the investment will actually listen to market signals, and do things that provide an economic benefit.

However, I think we need to be careful here. We are in a situation where, as a nation, we have been borrowing to invest (poorly at times) – do we really think that ramping up the number of arbitrary public projects based on sketchy cost-benefit studies is going to help us here. Or will it hinder us?

Matt Nolan

Has the government been “over-spending”?

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The question of whether the government has been over-spending is not one I can actually answer – as there is no way of telling exactly what sized government New Zealand wants. However, looking at how government spending compares to recent history can give us some idea about what is going on. Lets do this in the below graphs.

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Matt Nolan

Missing the point on productivity

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I hate the “goal” of productivity growth personally. I think any policy goals we have should be based on equity and allocative efficiency, not trying to make arbitrary ratios look pretty.

However, I also disagree with Idiot/Savant’s description of productivity and how he feels that a productivity target is anti-worker (h.t. CPW).

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