at LAANTA has replied to my reply on his post on the problems with utilitarianism.
In this reply he states two issues that he sees with my view of utilitarianism, namely:
I plan to reply to the reply of the reply under the flap 😛
Sticking with almost dog headed determination to the inflation side of the story, I am going to discuss part of the retail trade series for March. All my data comes from free tables from Stats, so you guys can all look at it and yell at me if I make any mistakes 🙂 .
Furthermore, I’m going to stick with the Aggregate supply shock explaination of everything. Why? Well everyone has turned dovish at the sight of lower employment and lower retail sales volumes. Given the distinct possibility that the slowdown is the result of some aggregate supply shocks, the inflation side of the story deserves a run out.
The headline shock for retail sales over the March quarter came from the 1.2% (seasonally adjusted) drop in total retail volumes – in other words the quantity of stuff sold was materially significantly lower over the March quarter than in the December quarter, even taking account of the normal seasonal effects (such as Christmas).
What this headline misses out is that the price of “retail goods” rose by a massive 2.1%? over the quarter (not seasonally adjusted) – implying that there was approximately no-change in the value of spending in retail between March and December.
Time constraints are preventing me from saying anything. However, I will link to an interesting piece by economists Chris Worthington (here, here, or here).
This piece was a rebuttal to this one, which was based off this research. Another rebuttal was found here.
For me, the money quote from Chris’s article was:
People tend to notice the price rises of things they buy regularly (food and petrol), but are less likely to notice price falls in things they buy infrequently – and it is the latter group where many of the price drops occur.
Not only do I 100% agree, but furthermore I would add that people notice price hikes more than price falls.
For example, I remember people complaining about the unbelievable petrol prices in late 2007 and so forth. However, petrol prices only rose above the levels reached in mid-2006 in March this year – in other words even the nominal price of petrol was lower than what people had been paying up until this point, but most people felt that the prices were unheard of.
How did this happen? People notice fuel prices rise – but they don’t notice when they fall!
Dr Cullen has told businesses to increase productivity. Although this sounds utterly ridiculous, given that businesses will make all profitable investment they can in order to make their output at a lower cost (unless you believe there is a conspiracy to keep wages low 🙂 ) there could possibly be some method to his madness.
Treasury has been working hard on the productivity issue this year, but it is a difficult issue. If we could costlessly increase our productivity then we would have no trade-offs, as output could become un-limited. As a result, the trade-off they have been interested in is the trade-off between current investment in productivity and the future benefits. To make matters even more difficult, the factors lying behind productivity remain somewhat of a black box – a subject where an individuals industry expertise trumps the musings of a whole team of economists.
Given that information regarding productivity is implicitly tied up in businesses and given that the choice of investment in infrastructure and R&D are often subject to positive spillovers, Dr Cullen’s strategy of Jawboning may be ingenious.
Well, much in the same vein as the employment numbers:
Source: NBNZ website.
A 1.2% quarterly fall in retail volumes! A negative GDP quarter in March now seems inevitable. This one hurts!
The support for a tax free threshold in New Zealand appears wider than for almost any other policy. The right supports it, the left supports it – then why is it not government policy, and why do I not support it?
A tax free threshold at $9,000 would cost approximately $3.5bn (according to Patrick Nolan’s NZIER tax cut calculator from November 07), and would give everyone earning over $9,000 the same chunk of money (assuming that other tax thresholds remain unchanged).
Lets discuss why the policy may be popular along the political spectrum: