RBNZ report for savings working group
Is very good. Read it.
I don’t agree with 100% of it, but I agree with the vast vast majority of it.
Good article from Brash
I said before that I have a few issues I will go into with the 2025 Taskforce report – but not today. When saying that I also discussed an article from Fran O’Sullivan – I used both these things as a starting point for discussing why I felt there was a statist bias among the right in NZ.
However, Don Brash does an excellent job of taking apart O’Sullivan’s article – and although I disagree with elements of the description and framing of the Taskforce report I was wrong to put him in the statist camp if this is how he thinks. I would also note that the savings point he mentions holds strongly for China – but I would suggest you read the article yourself.
Sustainable economics conference
Just come back from the sustainable economics conference – it is still going for a few hours, but it is just on politics now and I’m not a politician 😉
It was Green party hosted, so I have the impression that many of the ideas (especially when mentioned by their own MPs) were their ideas.
Now, there are a number of final value judgments I disagreed with, I felt the idea of crisis was overplayed, and the early characterisation of “neo-classical economics” was in many ways wrong and attacked economists too much – also they were too willing to blame the GFC (Great Financial Crisis) on any pet theory that existed. BUT, these are all minor quibbles, and overall I was impressed with the discussion.
My main quibble is that sustainability was treated as the primary goal – this is still a “throughput” towards the main goal which is the welfare of the appropriate group on earth. Assuming sustainability is the sole goal is equivalent to an extreme assumption about the makeup of the environment and/or the welfare function. However, I will let this slide as I got to note it here 😉 .
The Green MPs spoke well, and showed a willingness to discuss and think about trade-offs, I was impressed with them. There still seemed to be a feeling of “command and control” among some elements of the discussion, and there were specific issues I disagreed with, but overall I felt that the MPs were actually some of the best speakers – David and Russel spoke very well, and at least in terms of the framework they used I largely agreed with them.
The afternoon economic discussion was civil and sensible – and the policy conclusions that the speakers came too made sense. So much so that if the Green party actually discussed their framework with Labour, National, and ACT (namely thinking about natural capital and accounting for externalities) they would find a large amount of agreement.
Now, this is the thing – the disagreement between parties is about the magnitudes, the quantitative figures, not the qualitative idea of allocation.
Given how much abuse the descriptive economic method took during the morning, I was surprised that the actual discussion on economic policy turned around and used it – surprised in a pleasant way.
Good on the Green party for getting this together – if you focused on discussing these issues and committing to studies that would try to work out the value of any policies objectively, I would vote for you.
If I continue to hear about capital controls and changes to monetary policy (none of which were raised at this conference thank goodness) then I will not vote for you.
That is just me though.
Export prices, import prices, terms of trade, and inflation
As a small little open economy, international variables are incredibly important to us. The international rate of return, world prices for tradable goods, and the availability of external people, goods, and services, all have a disproportionate impact on us.
When discussing external prices, people constantly hear economists talk about the terms of trade (note, the wiki article is crap). During 2007 the Bank was (appropriately) lifting the official cash rate on the back of New Zealand’s climbing terms of trade. However, what all this meant, and what was going on didn’t really seem clear to everyone at the time.
The terms of trade tells us about the price of what we sell overseas relative to what we buy in. This is all very nice, but when people see this they might wonder why the Bank would want to react. To understand what was (and is) going on with our terms of trade we do need to differentiate between both sides of the ratio – export prices and import prices.
New Zealand’s right continues to remain statist
The combination of this article from Fran O’Sullivan, where she treats the NZ economy like a business, and the frankly poor Taskforce 2025 report has flustered me. [We have seen these actions before mind you]
I aim to do a full post discussing the Taskforce 2025 report another time, when I have a moment, but the two main issues were:
- It abused the data to make ideological claims rather than honestly looking at it (it is like they didn’t actually talk to anyone who analysed NZ historic data),
- It ignored the fundamental trade-off between efficiency and equity – this can be forgiven as long as it is mentioned as a policy relevant factor to be looked at before setting policy itself.
In a similar vein, O’Sullivan seems to think that government needs to pick winners (how they can judge business conditions better than the people actually trading I do not know) and subsidise exports – because for some reason giving other people our produce is a good thing because it makes the GDP stat look bigger.
She bemoans “purists” – a camp I guess I am in – because we care about the efficient allocation of resources, and the welfare of society, rather than using a bunch of business jargon and pretending we can centrally run an economy.
I believe that in both cases, the Taskforce report and O’Sullivan’s article, the authors believe they are suggesting what is best for everyone – what is best for society. But this just tells me that they are confusing what a firm is and what a country is when making recommendations – it is not governments role to centrally determine society, and anyone that thinks government can pick winners, or that cutting the fiscal deficit right now will make magical things happen, is mistaken.