There has been a lot of chatter about the Green’s understanding of economics lately, so I thought it might be apropos to have a look at their economic policy, just released. The key points appear to be:
Let’s start with the good bits. Read more
Yesterday, the ACT party released their tax policy (further discussion also over at Kiwiblog)
Some key points from ACT’s taxation policy include:
Tax distorts behaviour. The concept of the ‘excess burden of taxation’ is the economic loss that society suffers as the result of a tax, over and above the revenue it collects. Distortions occur because people or firms change their behaviour in order to reduce the amount of tax they must pay, which results in deadweight loss from taxation.
Matt Yglesias puts his finger on why you can’t trust political pundits to tell you what’s happening in an election race:
…ordinary people ordinarily just don’t pay attention to politics at all. They don’t think it’s interesting. But … [t]he political press, by contrast, finds electoral contests to be a kind of fascinating game about which it’s amusing to do tons of stories regarding the ins-and-outs of tactical gambits…
The kinds of people who are political reporters are self-selected to enjoy commenting on the race as if it’s a game, simply because talking about politics day in-day out requires them to do just that. To think that they are, in their view of politics, remotely representative of the voting population is ridiculous. In fact, their analysis of political events is highly unlikely to represent the views of the average voter. Read more
With the announcement of deposit insurance by the government for all our dodgy finance companies, being an economist who understands the concept of moral hazard (although in this case it would actually be adverse selection given that I would enter into the contract with government with the intent of exploiting an information asymmetry), I thought I would start my own finance company. Here’s what I figured would go on our ads which will feature a very trust worthy has been celebrity telling you how much you can trust us (any suggestions?).
Agnitio Finance will exclusively invest in the highest risk hedge funds available. We will offer an interest rate on deposits of 30%. While there will be a serious disconnect between the riskiness of our assets and liabilities, don’t worry, we offer extensive deposit insurance, which you don’t actually have to pay for. In fact, you get to share the cost of this insurance with every other tax payer in the country!
Agnitio Finance: Zero Down side
My recent post on universal student allowances was relatively provocative (I thought it might be a little more provocative – maybe it would have been if I said all students and all unemployed people should borrow money instead 😛 ). As a result, it is a good time to briefly go through the way I see the labour market and a few of the things I think are important for analysing it.
The labour market is a difficult thing to analyse given that it is the only input to production where we also value the outcome for the input! The best way to look at labour in this case is to separate out the person selling the labour and the “labour input” – so when you go to work you are “selling an input” and the price you receive is your compensation for that – the wage.
Fundamentally, the labour market starts with the core bit – actual working labour. There are people who are employed in firms working for those that own capital.
Now, just by looking at employees and capital owners we can’t say anything about the labour market without rabid conjecture an flying euphemisms. In order to get an idea about how the “trade” between the owners of labour and the owners of capital occurs we need to get an idea about the people who do own labour but aren’t selling it.
Note: Very long post – skip to conclusion if you want, I doubt you will lose anything 😉
So in National’s tax package they have dumped the R&D tax credit. Businesses seem disappointed – but this isn’t enough information in of itself to tell me whether getting rid of the credit is socially optimal or not.
In order to analyse this we have to think about why an R&D tax credit could be socially optimal and then see whether that scheme actually worked in the appropriate way to increase social welfare.
Let’s give this a go 😉