Matt Nolan

Confusing social responsibility

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I see Brian Rudman suggesting that we make a government remuneration board for workers on low wages.  Some concerns:

  1. This isn’t “society giving people a fair go” – this is one set of people being told to increase the amount they pay for a factor of production, it is put down as their responsibility and it is a cost they respond to.  Does this sound heartless to you?  If so I apologise but I find it heartless that people confuse income adequacy and the value of an individual by what they do for “production” – it is the way we convolute the two that upsets me 😉
  2. You increase this cost, you reduce firms incentive to give people a go and/or they increase prices to consumers.  Before someone says hikes in the minimum wage don’t reduce employment let us note a few things:  It has been shown that the low relative minimum wages in the US, when increased, don’t lead to immediate layoffs.  However, the higher the minimum wage, the more likely layoffs are.  Recent evidence shows that even at this lower level, net job creation does fall over time.  Furthermore, in the long run this leads firms to subsidise away from labour – this is part of the argument for “productivity improvements” and “capital intensity” that people use to justify the “efficiency” impact of the minimum wage … we get the efficiency impact if firms actually cut hiring.  Note:  So may say, excellent, we want substitution!  But do not forget to think in a GE, and open economy, sense – how do we fund this investment in capital, what do the relative margins tell us about the loss in consumption now relative to a potential gain in consumption in the future.  This arguments rely on sets of interactions and spillovers between firms that I find a stretch …
  3. A renumeration board you say.  There are two ways I could see this going:  It is a small board that just sets the minimum wage for everyone, and so is a simple waste of money.  It is an incredibly expensive large board … in which case it sets differential wages and finds ways to extract rents.

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jamesz

The America’s Cup is not about the money

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The America’s Cup, which fans can bet on by finding words like Coral Near Me, might be returning to NZ and local newspapers are already weighing in on what it means for the economy:

As Team New Zealand moves close to match point there is already speculation that the next cup series will bring over half a billion dollars in financial gain to the country.

Don’t believe it, says Shane Vuletich of Covec, specialist in economic evaluation of tourism and major events, who warns numbers already being used are far too large.

Vuletich and TVHE’s straight-talking Shamubeel Eaqub—”the economic benefits of a cup regatta in 2017 would be based on ‘over-hyped studies that are proven to be absolute b…….. after the fact.'”—are absolutely right: major events don’t tend to be good financial investments. What surprises me is that this is worth reporting. Read more

Matt Nolan

Five year anniversary of Lehman Brothers

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Sunday was the 5-year anniversary of the failure of Lehman Brothers – there was a live-streaming Twitter account, an good article by Liam Dann reminiscing, and a pointer to what he wrote about the crisis at the time.

Given how well his article held up, I was tempted to see what embarrassing things I said at the time – given that the magnitude of the deterioration was definitely worse than I could tell in real time.  Luckily, my posts are simply descriptive things pointing out some of the factors we need to keep an eye on (here on the day, here a few days later) – my view of the situation had shifted significantly since the failure of Bear Sterns in March (where I comment about moral hazard in comments).

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jamesz

Copyright infringement laws are not working

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According to Rebecca Giblin of Monash University:

It has been more than three years since the first countries began implementing ‘graduated responses’, requiring ISPs to take a range of measures to police their users’ copyright infringements. Graduated responses now exist in a range of forms in seven jurisdictions. Right-holders describe them as ‘successful’ and ‘effective’ and are agitating for their further international roll-out. But what is the evidence in support of these claims?
…
[There] is little to no evidence that graduated responses are either ‘successful’ or ‘effective’. The analysis casts into doubt the case for their future international roll-out and suggests that existing schemes should be reconsidered.

Infometrics

Series on tax: Part 8, inflation and tax

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Matt Nolan finished his series of posts on tax by discussing “inflation tax” on interest.co.nz (Infometrics version here).

The article covers a lot of ground, discussing monetary policy, “one-off” money financing, and seigniorage.  These areas are all related, but all involve special elements.

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