Matt Nolan

Political quiz

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We have discussed where we stand on the political spectrum before, but now it seems that there is a quiz that tells us where we stand (ht Kiwiblog). Below I will tell you the results of the different authors here:

Matt: National (83%), United (73%), NZF (64%), ACT (63%), Labour (61%), Progressives (50%), Greens (46%)

Matt Comment: Very surprised with my results – I didn’t think that my views were so close to those of other parties. My main focus was on economic/employment issues along with the environment.

Goonix: ACT (82%), National (62%), UF (55%), NZF (48%), Labour and Greens (35%), Progressive (28%).

Goonix Comment: The quiz results are pretty much bang on for me. The high ACT score demonstrates my broad alignment with libertarian principles while at the same time my fundamental distaste for military action (the primary area that I disagree with ACT on). The rest of the order makes sense and I’m very happy that I’m less than half aligned with NZF/Labour/Greens/Progressives. 🙂

Agnitio: National (72%), UF (71%), ACT (69%), NZF (62%), Labour (55%), Progressive (49%), Greens (40%).

Agnitio Comment: I didn’t know United future stood for antyhing so I’m surprised by by 71% rating with them! Other then that no surprises I guess. Interesting thing about the Greens is I agreed with them 92% on environmental issues yet they still come in on 40%, just shows how crazy I obviously think the rest of their policies are! Bring on the Blue-Green party!

Rauparaha: Labour (66%), United Future (65%), National (61%), Greens (60%), ACT(59%), Progressives (58%), NZ First (46%)

Rauparaha Comment: I seem to have a fairly uninformatively narrow spread. Parties are either too socially conservative for me or too economically prescriptive. It’s nice to see that I at least don’t side with Winston on many things.

goonix

Private prisons: National’s policy and “the proper scope of government”

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Today National released their corrections policy, which would allow the private sector to tender for the management of prisons.

Although not a completely ‘new’ concept for New Zealand (Auckland Central Remand Prison was privately run under the last National Government) it nonetheless raises the issue of when is it appropriate for such services to be ‘contracted out’ rather than provided ‘in-house’ by the government.

Hart, Schleifer and Vishny’s “The Proper Scope of Government: Theory and Application to Prisons” asks the question when should a government provide a service in-house, and when should it contract out provision? (Anyone interested in the full article may be able to locate it here).

The authors’ develop a model for asset ownership (in this instance a prison), which can be owned by the private sector, who contract back to the government, or alternatively can be owned outright by the government.

The central finding of the paper is that the private sector has relatively stronger, but seemingly contradictory, incentives to both reduce costs (driven by a profit motive, which comes at the expense of quality) and increase quality (to get a higher price from the government, who is an ongoing buyer of the service). In this instance the quality of a prison entails order in the prison, amenities that prisoners receive and rehabilitation.
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Matt Nolan

A second recession?

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Or so say economists at Infometrics (a organisation I am involved with 😛 ).

Why should we expect another recession over the first half of 2009 – especially when we are coming out of a drought!

Well one justification could be that households are highly indebted, and the price of that debt is going up – so now households will want to pay some of it off.  When households are paying off debt they can’t consume – a factor that will reduce economic activity.

Discuss 😛

Matt Nolan

Providing a “capital injection” for households?

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It appears that National intends to do just that following this election – providing grants to individuals who lose there job beyond the unemployment benefit, but only for “during the recession”, and only “needs based”.

This is probably one of the most ridiculous ways anyone could try to deal with the current recession – although I guess increasing taxes, slashing spending (especially on the supply side), and then hiding it under the PM’s pillow would we a little sillier.

Lets think about this grant a little – what is National trying to say?  Do they think the unemployment benefit is too low?  That is supported by this quote:

The support plan was designed to help them remain confident and carry them over until they got another job.

If so, why don’t they just increase it, instead of fluffing around with “grant schemes”.  Or do they believe that unemployed people will be worse off during the recession than not in the recession – because that doesn’t make much sense to me.  I thought the cost to households in the recession stemmed from unemployment and lower real wages – being “unemployed” is just as bad in any state.

If National actually wants unemployment benefits to be partially time limited – then introduce that scheme, instead of some fluffing grant. Either they are introducing that policy, or they are trying (unsuccesfully) to sound like they are dealing with the financial crisis.

Overall, what the hell are the parties doing – is any party actually going to try to do what is best for the country in the face of this external shock … didn’t think so 🙁

Matt Nolan

A run on finance companies – but not in the direction you’d expect

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So investors are “rushing” to finance companies to invest money.  One of my economist friends just told me he tried to invest money in a finance company, just to be told that they were “over-subscribed”.

I have two concerns stemming from this:

  1. Moral hazard:  Finance companies will invest in higher risk ventures to get the return – knowing that there downside is covered by the government.
  2. Bank funding:  Given suggestions that banks may face a funding crisis, a movement of funds from banks to finance companies can’t be a good thing 😛

I suspect that Bank’s decision to charge a premium based on the quality of investments will have some impact – however, is the premium high enough to solve these problems?  I guess we will know once we see the new set of deposit rates that finance companies come out with.

Matt Nolan

Random statement of the day

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This from the Minneapolis Fed:

Thus, roughly 80 percent of such business borrowing is done outside of the banking system. The claim that disruptions to the banking system necessarily destroy the ability of nonfinancial businesses to borrow from households is highly questionable

There are two ways I can read this quote, one that I agree with and one that I dispute. The first way is that “this isn’t the end of the world” – I agree with this, and I still think that people too closely linked to the financial markets are expecting worse outcomes for the global economy than will actually occur.

However, I think the Minneapolis Fed’s paper overplays it a little and suggests that there is no credit rationing element – only a risk-price element.
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