A guide to drinking responsibly

With a three-day weekend coming up, and a Rugby World Cup final, I published an economist’s guide to drinking responsibly in the Dom last week.  You can read it here.  What are my tips?

So what tips do I have when it comes to drinking?  I have already mentioned only taking out a small amount of cash.  You can also dress down and not take your ID (depending on your age and the types of bars you go to), or you could take up a Saturday morning activity.  Feel free to thank me in advance for your much reduced hangover.

If you want to know how I got there, you’ll have to read the article 😉

The trouble with desiring change for the sake of it

In a good post by Doug Reich (ht Not PC) he discusses why the current protests appear to have a great deal of “protesting for the sake of it” rather than having explicit – or testable – desires.

The dangerous thing with such protests is the ability for someone to capture the crowd with a false goal – coming up with a solution that is not good just because it can be sold via an underlying urge of the protesters to do something that makes them look altruistic … or more generally makes them look like they were part of some change.

Unlike Doug, I am not willing to call this a problem of the left – instead, this is what I view as a problem of holism – something that exists among all political groups.  For example, the “right” in New Zealand have their measurable goals – meaningless targets that are not based on anything, targets that give them the satisfaction of thinking that are causing progress (here, here, here).

Before we can really say what change in desirable, we need to understand WHY things happen and HOW changes to organisation and policy have an impact on them.

Doing this is hard – it is costly.  People want the satisfaction that comes from “feeling like you are progressing society” without taking on the cost of actually thinking about the policies – as a result there is an incentive to demand change more often, and with a smaller amount of understand, than is actually “optimal”.  This is obvious, it sounds obvious, people will tell me its obvious – and yet the logical conclusion of actually trying to have a real argument before pushing change is IGNORED by both the left and right.

Now some will say “its not ignored, there are studies/evidence”.  But 99% of the time the studies or evidence that are used are either cherry picked, poor research, or were set up with the conclusion already in mind – forcing change down peoples throats in the face of this type of evidence is just as bad as protesting for no real reason.

When it comes to policy, the best changes we can make are in areas where we have the best understand and information – it just happens that we have the best understanding and information about ourselves.  As a result, as a person our main focus on “change” and “fairness” should be within ourselves and related to our own actions.  What’s that saying … be the change you want to see.

We all want to – and should – fight the inequity around us.  But we can’t do this until we understand why it occurs and how it can be influenced.  However, we can only get to this point by doing the hard yards and playing in the “lab in our minds” (and in conjunction with the research of other on these issues) and discerning what can be called “tendency laws“.

A willingness to work out these tendencies, and implicitly treat other people on the same intellectual level as ourselves, is the way to understand the need for change – not overwrought simplifications of what defines “others”, which appears to the basis of both the 99% protests and the push for a measurable GDP target for NZ.

A message to tomorrow’s protesters

Update:  The protest that I’m arguing against in the first half of the post isn’t till the 5th of November (thanks Seamus!).  However, my main critique in the second half applies to both protests insofar as the first protest is focused on inequality again.

Personally I AGREE with a some of the issues being put down for the first protest – and would potentially head along if it wasn’t that the bullshit inequality line is being sold so hard (including in the picture for the site).  Sigh

I see that a number of people have decided that, on Saturday, they are going to camp outside the Reserve Bank of New Zealand in Wellington to protest.  After seeing a similar protest on Wall Street these protesters have stated that they are the “99%” (a statement that implies that they aren’t part of the 1% that is assumed to own most of the capital) – and they are protesting for “change”.

I understand why people feel worn down, I understand the power and importance of non-violent protest, but I have to say something that will likely upset the protesters and many of my closest friends:

This protest and its message are wrong, and by doing it you both ignoring the real issues in the world and acting in a selfish way – and for that reason I think less of every single one of you.

That’s a pretty damned cutting statement – so let me discuss why I believe this.

Read more

Missing the point on value

Wow, sorry milk manufacturers but these comments make you sound insane:

Milk product manufacturer Goodman Fielder’s head of dairy, Peter Reidie, said yesterday that the debate around the price of milk had created a false perception about the value of milk.

Goodman Fielder took 210 million litres of the 600 million that Fonterra was required to make available to competitors, and sold to supermarkets.

A 2-litre bottle of branded milk for $4.80 “is outstanding value, and we are talking the New Zealand consumer in to saying that it isn’t“, Reidie said.

“So they are buying Coca-Cola or V or something else instead, and that is not good messaging.”

Ok.  Consumers know what milk is.  They know what coke is.  They can see the price of both in front of them.  They choose coke because the relative price of milk is too high … implying that the value they receive from it is too low.  The consumer says this.

Instead of accepting that, the milk manufacturer is saying “you should be willing to pay more for milk”.  That is his entire comment.

This has nothing to do with the “debate around milk” and it has everything to do with the relative price of milk being higher than other substitute goods.  Given that this high price represents the scarcity of milk, that is fine.  Given that consumers are substituting away given these prices this is fine.  However, there is no merit to the idea that “consumers aren’t buying milk because they don’t realise how good it is” – that sounds like the comment of a desperate sales person.

NZ downgrade on high debt, foreign incompetence

That is the story for this, that and the fact that our stock of debt is still elevated.

My view of where we are heading has been heavily downgraded over the past week.  NZ policy makers have done a great job, the government and the RBNZ have been sensible.  NZ households have worked with what they’ve been given, and our businesses have responded to changing external conditions.

But Europe, and to a lesser extent the US, are mammothly incompetent.  We’ve now reached a point where it looks like these nations are pushing the world into a crisis – a slow moving train wreck type of crisis.  Hopefully, someone wakes up and taps the brakes soon.

On the note of the downgrade Fitch said:

New Zealand’s high level of net external debt is an outlier among rated peers – a key vulnerability that is likely to persist as the current account deficit is projected to widen again, reflecting a structural savings/investment imbalance.

This is a structural issue we should indeed chat about more at a later date.

Update:  List of feedback on Rates Blog.

Update 2Off goes S&P.

A point on inflation for all of us to remember

From the always excellent Money Illusion blog:

The key point is that if the Fed pays attention to inflation at all, it should be increases in the price of stuff built with American labor.  They shouldn’t care about the inflation rate that matches some mythical “cost of living,” as the Fed can’t do anything about adverse supply shocks.

In a small open economy like New Zealand we are constantly peppered by supply shocks.  In such an environment what the RBNZ “should” and “can” be doing is very different to targeting the “cost of living” – which is truly set by real economy factors.

A lot of people in NZ get confused, and think that the RBNZ sets the cost of living – this is a myth that comes from, IMO, poor explanations by economists regarding what inflation is and why we should target it.  This myth needs to be dispelled.

We have discussed this all before in the “inflation debate“, specifically with regards to what is inflation here and what are the costs here.