Matt Nolan

Flexibility and inflation targeting – the RBNZ discussion

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According to the Rates Blog, Dr Bollard will be doing a speech on “Flexibility and the Limits to Inflation Targeting”.

I am looking forward to the speech – it is an important issue, and Dr Bollard and the staff at the RBNZ definitely know what they are talking about.

Generally I have shown myself to be an inflation hawk and passionate lover of inflation targeting (*) (*) – but I am looking forward to hearing the arguments provided in this speech, and will be more than happy to be proven wrong if that is the case 😉

I may write about the speech at some point – if there turns out to be anything of great interest in it.

Update: The speech was very good – I will comment tomorrow, another commentator is writing something tonight and I’m not a fan of having more than three posts a day on the blog 😉

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Matt Nolan

A very inconvenient question

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Over at Econlog they mention a uncomfortable question that is asked at Instapundit:

If somebody offered us our current income tax system for the first time, would we buy it?

Now when we have defended progressive taxes on this blog we have often assumed that it is a revealed preference for society – in fact this is a favored measure we have for actually revealing (to some degree) what is optimal (here, here, can’t actually find any of the tax posts 🙂 ).

How could this work? How could we have a system that is not optimal.
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Matt Nolan

The frogs challenge: Discuss imports

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In a discussion on our trade balance frog blog states that mainstream economists won’t talk about the import side of the ledger. Now I’m a mainstream economist (I think I should put that on my business card 🙂 ) so I decided that I should take up the challenge.

So lets have a look at the tables. First I will discuss Frog Blog’s claims about the import series, and then I will discuss the way I see it:

Update:  Anti-Dismal captures the essence of confusion surround the issue of exports and imports here, fundamentally reminding us all that it is consumption that is good – not employment per see (the end is the target, not the assumed means!).  Very good 🙂

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Matt Nolan

Government in perspective: What is the “other”?

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When people look at government they often see a group of people that they feel are responsible for taking care of the country. Looking deeper, some people see a representation of society that is supposed to do what is in the social interest. Looking again we might see an organisation who is dominated by interest groups and competes with other institutions for resources in the national economy.

All these views of government are true. This does not make them evil or virtuous, they are merely a central component of the current social structure.

Now no matter what view you have of government, there is one thing you are likely to believe – that government should do what is in your countries best interest. However, is this right?

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Matt Nolan

Credit crisis comes to Australasia?

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Following the freezing of Hanover finance’s finances we have heard that the National Australia Bank, and the Australia New Zealand Bank have both had to increase provisions for bad debt (NAB, ANZ).

These revelations put the relatively dovish stance of the RBA and the RBNZ in perspective – after all, central bankers are more than aware of the fact that the Great Depression was, at least partially, the result of a collapse in the banking sector which exacerbated a tightening in credit conditions. In a sense, the credit crisis in Australasia is now as bad as it has been in modern times – even if (arguably) things are improving in other parts of the world.

Even so, every time I attempt to pat the RBA or RBNZ on the back a couple of phrases come in the back of the head and prevent me, these phrases are “moral hazard” and “inflation”.

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Matt Nolan

Reply: Climate change: the heresy of pragmatism

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Idiot/Savant disputed our claim that market mechanisms are the best way to fight climate change on pragmatic grounds – namely stating that a regulatory solution that works would be better than a “market-based” solution that does nothing. Now I don’t disagree with this – however, I do think that I/S heavily mis-represented both our claim, and our initial criticism of what he said.

As comments are disabled on I/S’s blog No Right Turn, I have to reply by way of a blog post 🙂

In this post, I/S makes a number of claims I would like to dispute:

  1. We accuse I/S of anti-market bias for considering regulation,
  2. We state that a market mechanism is always superior to regulation,
  3. The argument is whether regulation is better than nothing – not better than the ETS,

Now it is best to answer these claims backwards – lets start with 3:

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