Archive for category: New Zealand Economics

NZI gave New Zealand a C mark (ht Kiwiblog).  My response was “ok, whatever really, although it is a pretty site”.  This has told some people that the government should turn around and randomly do things.  My response to this is “what?”

Now don’t get me wrong here, the site is very pretty.  But I don’t see any reason for policy intervention on the basis of the arbitrary, subjective, grades provided by the site, with no actual analysis of the trade-offs that New Zealand faces.  Now I’m not sure if NZI actually asked for intervention, they have in the past, but I’m not going to pin it on them this time.

This time it was Fran O’Sullivan.  I do not know how she gets to this point:

Frankly, the metrics the institute has dug up on this score are deeply shocking and suggest that unless there is a co-ordinated response from Government at central and local levels, many more Kiwis will find themselves compelled to look outside NZ to build their futures – particularly in Australia.

I was under the impression that she fell on the New Zealand right.  Again this draws me to the question, “when did NZ’s right become communist“.  This isn’t a centrally planned economy, the government doesn’t directly control the allocation of resources.

Now, a government can influence the allocation of resources indirectly through policy – but any policy is likely to have trade-offs.  As a result, if the government is looking at putting in a policy we should be trying to get a good idea of the costs and benefits associated with said policy.

This arbitrary call to arms on the basis that New Zealand is different to other countries is ridiculous.  The goal should be to have the best society possible (based on the desire of New Zealanders) given our limited means.  To do this we need to look directly at the costs and benefits on policies – instead of simply saying “we are behind Australia so something must be done”.

Update:  Ok, NZI said it as well: “And there is still no convincing strategic plan in place to improve performance”.

So just a note, New Zealand isn’t a corporation.  Policy is based on trying to, in some sense, maximise welfare given the limitations of data, the countries limited means, and the fact that we have to use imperfect democratic or revealed preference mechanisms to get a feeling for what people value.  Individual policy changes must be on the basis of weighing up trade-offs, I can’t see how a general “strategic plan” comes into this.

Where does this distinction come from.  Well a corporation MAKES the products and sells on the market – the government doesn’t.  The government acts to redistribute and change the nature of the situation where production takes place.  Again, “strategic plans” are for Soviet Russia, individuals, and businesses, not free democratic societies …

Update 2:  Actually, the main point I forgot to make (as I was so busy talking about how the govt does not control NZ like a corporation) was:

Cross country comparisons (which this is) are notoriously hard to make because

• data is inconsistent,
• the trade-offs nations are willing to face differ,
• the actual endowment of resources, and the trade-off associated with choices, differ between nations.

Given this these comparisons are a valueless exercise, and we should spend our time trying to understand the trade-offs inside New Zealand and make good policy based on this knowledge.

Serious, what in the hell.  I am sick of reports that talk about these massive benefits of government spending without actually looking at them in context with, you know, opportunity cost.

I was annoyed with the way a PWC report was used, and now this release on a Covec report is similarly dodgey.  The report is probably fine (although I have not had the good fortune of reading it), and probably defines exactly what they are looking at and why – I have faith in NZ economists.  But this:

Williams said the report showed that the Government’s contribution to a rescue package should be at least 25 per cent because the tax receipts would make it cost-neutral.

It makes me angry.  So angry I am going to avoid writing any more as I will end up viciously attacking politicians such as Mr Williams for obvious mis-information.

The only reason to get involved is real externalities, doing a partial eqm analysis and saying the tax take rises involves ignoring where the hell the tax comes from and the opportunity cost.  Treasury is right when they say this is neutral.

Update:  Paul Walker comes out in favour of this irritation.

Update 2:  Covec report is found here, and pdf here.