Global corporations, price discrimination, and NZ

I see that there is a new paper out discussing the fact that both tradable and non-tradable prices in New Zealand are “high” relative to what people are paying around the rest of the world.  I am used to the argument about non-tradable prices being high RELATIVE to tradable prices, but the tradable price argument is a bit of a fun twist on it all.

Eric Crampton has summarised the results, and Patrick Nolan from the Productivity Commission has had a chat about it.  Update: Donal has a couple of posts here and here.

My intention was to argue with them, especially Patrick as he is my brother.  But everything they wrote, and what I’ve read of the paper, was entirely reasonable – so I’d suggest reading those yourself 😉

Instead I will “add value” by making an unsubstantiated claim that may ad hocly explain this from the paper:

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‘Communist’ isn’t the cat call it used to be

I see Kiwiblog cat calling the Labour party as Communist, because it wants to have a bunch of policy settings that are seen as either common or at least admissible nowadays – but were revolutionary in the mid-nineteenth century.

I honestly don’t see the point in doing this.  The Cold War is over now, and both social and physical scientists are finally getting free of the constraints inherited from that period.  To say that the Cold War constrained and influenced the debate on what to research, and the rhetoric to use, would be an understatement.  Just read a biography on scientists during the period (eg Lakatos), or listen to an interview where Piketty talks about his willingness to discuss trends in capital to output ratios – with the Cold War open we can have a more open and honest discussion on trade-offs.

Honestly, calling someone out as Communist nowadays means as much as calling them Nazi, I can’t help but ignore whatever is being said.  This is a pity, as inherent in the extremes of Nazism and Communism were negative attributes that can easily be underplayed in policy – ignoring the agency, and value, of the individual.  Instead of cat calling, it is probably better to make arguments along this line 😉

Here  I am not trying to say we can’t disagree with social policies, I’m just saying it is possible to do so on merit.  This is why the discussions about trade-offs, and the limits to knowledge, are what matters.  Furthermore, collectivist thinking is not solely the domain of obvious social policy, but other views that may seem right of centre.  Thinking about trade-offs makes this clearer.

Now, my impression is that social scientists and economists had it a bit better than physical scientists – a lot of economists had Communist sympathies, and fell in love with the managerialist command and control nature of policy.  Furthermore, they saw themselves as these (high status) managers.  This would be a trend that is of genuine concern as it would involve managerialism and valuing the individual as a unit (or production or health), rather than through their capability to live a good life.  These arguments deserve thought, not cheeky political gamesmanship!

Discussion Tuesday

Double-barrel question today – make sure to answer them separately, or point out if you are only answering one part.  The answers to both questions are not obvious btw:

In New Zealand, the government is now a larger part of the economy than it was under Muldoon.

In New Zealand, the government should be a larger part of the economy than it was under Muldoon, given the changes in technology and social structure.

Once again, remember that these are points for discussion – I am not saying I agree or disagree with them.

Beware the seductive simplicity of the Spirit Level

I see that the Spirit Level authors are in town, and as a result there was a recent Herald article took aim at income inequality in New Zealand, relying strongly on the book ‘The Spirit Level’.  A conversation about the inequalities society believes are fair, or at least justifiable, is a good thing.  However, the Spirit Level’s claims that simply targeting measures like the Gini coefficient will make everyone better off is a misleading, and dangerous, place to start this conversation.

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VSR: Very silly regulation?

When discussing it’s new monetary policy Labour was keen to explain why they felt a change was necessary, and why a variable Kiwisaver contribution rate should be investigated.  However, to investigate such a policy it is important to ask some specific questions – this is what Gareth Kiernan did in this article (Infometrics link).

In announcing its new monetary policy proposals, Labour has shown an admirable ability to think outside the square. …. Unfortunately, there are a lot of problems with Labour’s idea and the assumptions behind it.

His list of 10 questions are:

  1. Should KiwiSaver be compulsory?
  2. Does New Zealand really have a savings problem?
  3. How good is Australia’s compulsory savings scheme for their economy?
  4. Do compulsory savings programmes actually increase savings anyway? 
  5. What effect do compulsory and limited-access savings have on the robustness of financing decisions?
  6. Is New Zealand’s permanent current account deficit really a problem?
  7. Are our ‘high’ interest rates really caused by our rigid monetary policy framework?
  8. How much of our mortgage interest payments go overseas?
  9. Does the export sector really need a lower exchange rate?
  10. What about compliance costs for businesses?

His answers to these questions give a case for why the VSR may not be good policy at all.  What are your thoughts?

 

 

 

National’s not alternative budget: Budget 2014

There is excellent commentary on the Budget here (Kiwiblog, Economics NZ) and really cool visualisations by Keith Ng here (his post here).  I suggest looking at those, it is much better than anything I can offer here.

However, I can’t help talking.  And looking through the budget documents I felt that something has been confirmed for me:  The National party has a stronger focus on social justice, equality of opportunity, and outcomes for the ‘worst off’ than either Labour or the Greens.  This came out here:

While the Labour and Greens alternative budgets were focused on industrial subsides (the “Green energy bank” is a form of industrial subsidy) – subsides that will benefit those who have the money to invest in the first place – National has come out with a budget focused on families/parenting, and a sixth budget that boosts real expenditure on education and health (at a time when the government was generally hesitant to spend).

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