Matt Nolan

The Herald on compulsion

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Their case is so compelling, they don’t need to actually make it.

Also, rewriting the start for kicks I find …

So compelling is the case for slavery that it is a mystery why the Government is setting up yet another working group [ed “so compelling is the case”  WTF, did Yoda write this – actually that would be “so compelling the case is” wouldn’t it].

It needs only look at the New World, where the concept has proved so successful over recent centuries that almost two-thirds of landowners now support an increase in slavery rates.

Trekking down the same path here will address a number of pressing issues. In reality, it is not a question of whether there should be slavery but when and how it should be introduced.

Yes, the slavery comparison is excessive.  But compulsory superannuation is a forceful, ill conceived, idea.  Expect more ranting next week – I might even go into a little more detail 😉

Matt Nolan

Warning: Text book notes

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I’ve found that I don’t learn much reading – I prefer to write things in order to learn them.  I don’t know what it is, when I’m reading I just stop paying attention.  My favourite way to learn things is for someone to say it at me – but this isn’t always practical.

As a result, there will be occasional posts where I am arbitrarily writing about a chapter in a text book.  I’ll be starting with a refresher on the basic New Keynesian model, and then moving through books from there.

I will label posts that are of this nature so that you can skip them – they won’t have anything really in them but my run down of what I think is in a chapter I’ve just read.  I’m only putting them up here, so I can go back to them later – if I didn’t save my notes here I would probably lose them.

Matt Nolan

Spirit level: A more fundamental concern

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I agree with Dim Post that the choice of countries to add to the choice of countries made in the Spirit Level is a bit arbitrary (although I think Not PC and Kiwiblog also have a point regarding how sensitive the regression results are to the choice of countries that aren’t strictly the largest outliers in the sample) – but I still think that this particular “regression” is a steaming pile of unmentionables.

Lets ignore the fact that the slope of the  “regression line” appears very sensitive to the addition of a few countries.  Lets instead focus on the fact that it is a poor regression and that there isn’t a clear “theoretical background for causation”.

Read more

Matt Nolan

Bleg: A question on compulsory super

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So if the main justification for compulsory super is that “people are too stupid to save for themselves”, how can we say that a government made up of these same people will be able to determine the “right” level of savings?

Matt Nolan

The New Keynesian Framework and employment persistence

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Over at Econlog, Arnold Kling stated that “persistence” in employment implied that the New Keynesian story was off (ht Marginal Revolution)

This sounded a bit funny to me – New Keynesianism is a framework for models, one where I had seen the persistence in unemployment, and employment (which is a well known stylized fact) before.  So I went to google:

Awesome google search.

And it immediately came up with a working paper from two of the big boys – Blanchard and Gali.  Conclusion being:

The extent of real wage rigidities determines the amplitude of unemployment fuctuations under the optimal policy. Furthermore, unemployment displays intrinsic persistence, i.e. persistence beyond that inherited from productivity. The degree of persistence is decreasing in the job finding rate. Hence, the more sclerotic is the labor market the more persistence is unemployment.

In the paper there is discussion of models with hiring costs, labour market frictions, rigidities in the real wage, and in nominal prices.  They don’t discuss some other things I’ve seen from New Keynesians, such as employment/investment/production decisions made off the back of a lagged state variable, but those sorts of concepts are rolling around as well.

In essence, the New Keynesian framework is grappling with a large number of issues, and trying to analyse them in a consistent way.  I just find it a little strange that we would say “and so the New Keynesian story is wrong” just because some of the current models can’t pick some things – it is like saying “microeconomics is wrong, because it doesn’t perfectly describe all human behaviour”.  Yes, it is a discipline that needs investment and time – but as a framework for putting models inside, it is pretty useful right.

I’m not saying things are perfect now, but I am saying that all the hating on the New Keynesian framework seems a touch out of place – given that all it is doing is providing a transparent and internally consistent method where people can build their own model of the economy by introducing what they believe are realistic “core” assumptions.

Matt Nolan

Missing words: ACT’s campaign against the ETS

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From the NBR Twitter:

Hide: Having John Boscawen as Deputy Leader will further elevate ACT’s campaign against the ETS

At first I was like who cares.  Then I realised that there were two words missing, it should read:

Having John Boscawen as Deputy Leader will further elevate ACT’s (economically illiterate) campaign against the ETS

This concerns me a little more.  Before yelling at me for daring to call a right wing party economically illiterate, the discussion of said issues is here and here.  Now you can yell – if I’m honest it was a touch strong 😉

Fundamentally, the existence of the Kyoto agreement creates a liability from carbon production (a liability – not to be confused with the net liability position, like ACT has constantly), and as a result NZ set up an ETS such that this liability is at least partially faced by those who create it – rather than the tax payer.  Sure, we could have a much better ETS, and sure we could leave the Kyoto agreement (if we believe the cost is lower), but ACT isn’t campaigning on this – they are just campaigning against the ETS and so essentially saying we need higher taxes to subsidise industry …

Ahhh, and I see he will be Minister of Consumer Affairs and Associate Minister of Commerce.  Hopefully, ACT show themselves less ideologically blinkered with other economic issues then they are with the ETS.

Note:  I have realised that this week, the more “right wing” parties have really pissed me off.  It is good, I was worried this blog was starting to sound too anti-Green and anti-Labour when it is really just anti-crap policy.