Matt Nolan

No turning point in housing

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It is interesting to see the real estate blog calling a “turning point” in the housing market. For the sake of completeness, I’m going to attempt to call the opposite – namely I am going to put down the case for why the housing market will continue to remain slow.

Note that I am stating that it continues to remain slow – rather than making the even more specific argument that it will slow further. In order to defeat the idea that we have an upswing in the property market coming, I merely have to show there will be no upswing – after all it would be harder to record lower house sales volumes then we currently are 😉 . First, I will face up the facts that the real estate blog has put forward for an upswing, and then I will add a few more issues that I think will keep the real estate market depressed.

Also ultimately, the “heating up in the property market” appears to imply two things on the real estate blog, namely:

  1. Sales rising to normal levels,
  2. Steady house prices.

I will attempt to look at these issues separate – and I will discuss how these may trade-off.

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Matt Nolan

Is economics not transparent enough?

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Is economics not transparent enough?

I ask this question after reading this awesome post from the Freakonomics post (ht Antidismal) (Disclaimer: It is really only awesome if you are into economics 😛 ). Specifically, these two points that are often raised in presentations:

23. The motivation of the agents in this theory is so narrowly egotistic that it cannot possibly explain the behavior of real people.
24. The flabby economic actor in this impressionistic model should be replaced by the utility-maximizing individual.

Now as you might notice – these two criticisms contradict 🙂 .

Over time I have stated that one of the advantages of mainstream economics is that the assumptions it makes are transparent.  However, if us economists can’t agree on the appropriate characterisation of an economic actor (and thereby we adjust our characterisation in an ad hoc manner), how can the results of our economic models be transparent (as what determines the fundamental “rational agent” is unclear)?

Discuss 🙂 (I will try to come up with an answer when I wake up 😉 )

Matt Nolan

Boobs on bikes and violent male crime

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Source: Stuff

There has been a lot of discussion surround the recent Boobs on Bikes parade in Auckland. Specifically, there is a belief that pornography, which is promoted by this parade, causes violent male crime.

This is a bold claim – a claim I know practically nothing about. However, I’m going to try and describe the way I would frame the issue for analysis, so that we can have a structured discussion on the issue.

Before doing so I would like to note that other New Zealand blogs are discussing the parade – they are linked to here: (Tumeke) (The Hand Mirror *) (No Right Turn *) (Liberty Scott) (No Minister) (Public Address). Now for the discussion:

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Matt Nolan

The debt binge – who to “blame”?

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Has anyone else noticed the large swath of BNZ articles turning up around the internet, both on the Rates Blog and on Business Day (they also do more writing on their homepage). It is good – I like seeing economists getting out there and writing things.

Anyway, while I was looking through all these articles I noticed one by Tony Alexander on our “borrowing binge“. Now he is exactly right that households will, at some point, have to pay off debt. However, he does not cover the fact that households can also take on debt – as long as incomes are rising, households will be able to sustain larger and larger amounts of debt. This is an important point, and as a result I feel that his article appears to create more panic around debt levels then is really necessary.

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Matt Nolan

Wine and competition in New Zealand

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In the following story on Stuff, we are told that a New Zealand wine maker has sold a whole bunch of wine for $3.50 a litre – an incredibly low price for the premium brand.

The reason for these “firesales” of wine we are told is:

these big sales come on the back of a bumper harvest this season, resulting in surplus stock

So winemakers have had a bumper season – and as a result they are having to sell some of their wine excessively cheaply. Doesn’t this seem weird.

Well it makes complete sense when we think either:

  1. There is competition in the wine industry or,
  2. The wine company is able to price discriminate between markets

Discuss 🙂

Matt Nolan

Has the dip in petrol prices taken care of inflation?

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I was a bit confused when I heard a claim from Roger J Kerr that September quarter consumer price growth was only going to come in at 0.4%, leaving annual growth in the CPI at around 4%.

His justification for the weakening outlook for growth in the CPI was a softening in petrol prices – something that has indeed happened over the past four weeks. Although many of the point he raises are extremely relevant I feel that his conclusion (which implies that inflationary pressures are on the decline, that the RBNZ should feel more comfortable about cutting interest rates, and that the price increases in September will be that weak) appears to be well off the mark. Let me discuss why I think this:

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