Kiwiblogblog raised the issue of labour shortages in New Zealand. As well as mentioning the labour shortages in New Zealand, they also stated that similar labour shortages exist overseas. Some of these shortages (eg doctors) have existed for a long time, all around the world. However, if this is the case why isn’t the wage rising to try and take care of these shortages?
Kiwiblog discusses the musings of an economist at a Business Roundtable retreat in this post.
Now of course the economist had a number of good points (it is an economist after all), but there are a few points I would like to discuss in a little bit of detail (although not much 😉 ).
Here are my musings:
Stuff mentions a survey done by Research New Zealand on petrol prices and household consumption of petrol. In the survey they found a number of results that seem to follow the basic idea of a demand curve.
From the article the results were:
It is entirely possible that these facts were cherry-picked by the NZPA article, however lets try to understand them.
I saw an interesting piece on Breakfast this morning (now that I have a “real” job I’m actually up that early) about how today is buy no petrol day.
Apparently the idea is if we all buy no petrol today this will “hit the petrol company’s bottom lines” and make them clean up their act or something like that. This just reminded me of my honours macro course when we talked about the different effect permanent and non permanent shocks have on the economy. To cut a long story short, temporary shocks have no real effect while permanent ones d0 (if tax cut today will be followed by a tax rise next year you save now to pay for the tax rise later (i.e no change in consumption), if the tax cut is going to be permanent then you will probably spend more (i.e consumption increases, the economy is stimulated and everybody is happy).
Applying this logic to our current situation, everybody not buying petrol for one day, while a great way to raise awareness (it made breakfast!), is not going to have any effect on the oil companies behaviour if the people who didn’t buy petrol today are simply delaying filling up until tomorrow.
In summary if people want to change petrol companies behavior by hurting them financially, it needs to be done by a permanent decrease in petrol consumption as this will have a non transitory effect on profit, not just be a blip on the radar that is gone the next day.
I haven’t had a coffee yet so I don’t have the energy for sarcasm
Agnitio
Stats NZ reports a marked increase in the NZ birth rate. There are three ways to view this: first, you could use it as Quest does to suggest that maths and equations are stupid and we should just trust the politicians’ instincts. Unfortunately for Quest, there is no statistical evidence for that position 😛
The Standard claims that an increasing fertility rate is a signal of the good economic times brought about by the Labour government. This connection seems a bit results driven to me. Particularly so when the correlation between per-capita GDP and fertility is strongly negative worldwide. It may be the case that Labour’s policies have encouraged people to have children, but that’s hardly the same as signalling a rosy future for the NZ economy.
Finally, one might ask what economic theory has to say on the issue. While the theory on growth economics has a patchy empirical record, it does have an explanation for the negative correlation between fertility and GDP per capita. Essentially, higher fertility rates mean that the resources of the economy have to be spread across more people. Those people do create value but, since productivity has decreasing marginal returns, they don’t create as much extra capital as they consume. Thus, higher birth rates lead to an increase in GDP, but a lower GDP per capita in the long run. So perhaps the increased birth rate doesn’t bode so well for NZ after all.
I was just reading a post on forecasts for US economic growth at Econbrowser. In it the author says: “However, even back in December, the White House forecast was slightly more optimistic than the private sector consensus”. This ‘overconfidence’ in the economy seems to have been a common theme in US public sector forecasts over recent years.
Compare this to Treasury forecasts of the New Zealand economy, which have been consistently below the private sector consensus – that is the reason why tax revenues have consistently surprised on the upside in New Zealand.
Here we have two government authorities, one which constantly overstates economic growth and one which understates economic growth. Why do you think we have this difference?
Update: My brief thoughts are below the flap: