Matt Nolan

The inflation fighting trade-off

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Note: Other posts in this discussion are available under the tag “inflation debate“.

So, after calling on you guys to give me some indication of your views on monetary policy we discussed what inflation is, and then we moved on to discussing the costs that stem from inflation. We are now ready to discuss the big topic – the trade-off between inflation and other things.

I’m glad that we managed to talk about this topic this year, as it is the 50th anniversery of the paper “the Relationship between Unemployment and the Rate of Change of Money Wages in the United Kingdom 1861-1957” written by our own Dr Phillips. In this paper Dr Phillips found that, over this period, there was a negative relationship between money wage changes and unemployment.

This was eventually broadened to a negative relationship between inflation and unemployement, which gave rise to the Phillips curve. Initially this led economists to believe that there is a trade-off between inflation and unemployment. However, the instability of the Phillips curve when policy analysts tried to take advantage of this relationship (when analysts tried to use the relationship it disappeared), and the popularity of the natural rate hypothesis (stating that there is a “natural rate” that unemployment settles at), led to a movement away from this, and the statement that there is no long-run trade-off between inflation and unemployment! (now viewed as the NAIRU)

Taking this as given, what other trade-offs are there? Read more

Will Taylor

Mallard’s Economics: Making KiwiSaver “fair”

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The one thing I hate about election year is seeing policies which are put in place to win an election and no basing in economic theory.

Reading this quote from Trevor Mallarad made me angry

“…there is no way that it is fair for one employee to be paid less each week in their take home pay than an employee doing the same tasks, simply because they choose to be in KiwiSaver and the other employee doesn’t.”

Either Trevor Mallard is an idiot and he truly believes this, or he’s not an idiot and is doing this to try and win an election.

Just remember Kiwisaver savings are a form of income.  If we give both enrolled and non-enrolled people the same take home pay, then we are effectively saying that people on the Kiwisaver scheme should be paid more for the same task – explain to me why Mr Mallards concept is fair again?

Agnitio

Matt Nolan

Reply: On flat tax

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Over at the Standard they are discussing the perceived inequity associated with a shift from a progressive income tax system to a flat income tax system.

This is an issue we have discussed before in this post. In the post we asked “what is the equality-efficiency trade-off” and “is the tax system the best way to redistribute income”.

The first question matters, because if we are reducing growth in the economy sufficiently by redistributing income it may be the case that lower tax cuts are parteo superior – which implies we could say they were better without having to make any assumptions (apart from the assumption that people prefer more). Even if the efficiency gains are not that strong it does imply that less than 78% of the population (the figure that the Standard states) will have a higher tax bill.

The second question matters as even if we are in a situation where a certain set of value-judgments implies that redistribution is optimal, there may be a better may to do it than through a progressive tax system.

Now even ignoring those two points we have the issue that “fairness” is a value-laden concept.

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Matt Nolan

The real Alan Bollard

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Tell you the truth – this is gold! (ht Not-PC).  The full set of adventures are caught here (*).

Matt Nolan

Did ANZ-National attack the public service?

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It appears that the Standard is unhappy (*) (*) (*) with the ANZ-National piece on government sector spending (*).

Now the criticisms of the ANZ-National line appear to be:

  1. Its only a 4 page insert in there weekly report,
  2. The definition of backroom and frontline is self-serving and wrong,
  3. The report relies on the belief that all spending on backline staff is waste.

I can understand the Standard’s irritation at some of the headlines that have been taken from the piece – but nonetheless I feel that their criticisms of the actual discussion that ANZ provides are off the mark, here’s why:

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Matt Nolan

4th Annual Condliffe Memorial Lecture

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Eric Crampton from the University of Canterbury pointed out that there will be an interesting presentation on tax policy on the Tuesday the 15th of July. It will be hosted at the University of Canterbury (further details below the flap).

The lecture will be presented by Professor Joel Slemrod and is titled Tax policy in the Real World – a very topical issue!

Anyone interested in attending should RSVP to Virginia McKenzie (virginia.mckenzie@canterbury.ac.nz) by Friday the 11th of July.

Further details about timing, the paper, and the authour are provided below the flap.

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