The visible hand in economics

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Dear avid TVHE readers,

We’ve finally set up our own hosting and have a new site  at www.tvhe.co.nz, if you could be so kind as to set your links/bookmarks/feeds to the new web address it would be much appreciated!

We have lots of exciting things planned for the blog in the future (including some new commentators and some tax calculators for you to play with!), we look forward to seeing you there:)

Cheers,

The TVHE team

I was slightly concerned when I saw the headline on stuff this morning “Nats eye bailout of big business”

If the government is saying ex ante that they will bail out big businesses I would be concerned as this has the potential to cause a moral hazard problem. This is where firms know they will get bailed out and thus make riskier decisions. The actual quotes from Bill English don’t appear the be as explicit as I originally thought they might be

“You’re in an environment when almost anything any government could contemplate doing is getting done somewhere in the world,” he said.

“There is a small chance that events that have transpired elsewhere could transpire here. You can’t ignore that and so we need to give some thought to the extreme event.”

Are quotes like this enough to give the big companies in NZ enough comfort that they will bailed out? Only time will tell….

Apparently the Aussies are blaming Fonterra’s Global Dairytrade online auction platform for lowering the price of milk.

Interesting. If the auction is simply reflecting the true value of milk then the I feel no sympathy. This quote from the manager of the auction system sums up it’s purpose

Fonterra’s global trade managing director Kelvin Wickham said the auction was all about “the international market getting a transparent price” and all global dairytrade was doing was “making it more transparent more quickly”.

As an economist that is music to my ears. On the other hand here’s the quote from the Aussies

“Given things are bleak with the economic outlook, people are holding back on purchasing to see what happens with the auction,” Ms Bills said.

“Mostly, the price doesn’t recover. It is fine to want to have a transparent price system, but why not open at the closing price? If you put a price out there for something in an auction, people see it as a reserve.

“Buyers are waiting to see the price from the auction before they make their purchase.”

So basically they want the auction setup so that it props up the price of milk, can’t say I really have much sympathy for that view….

The Standard don’t see the point in them and Fletcher Building would  rather have a standard construction contract that doesn’t transfer  risk to them and doesn’t require them to incur costs setting the arrangement up.

I’m FAR from an expert on the issue of PPPs, and there may be some valid concerns using them for roads in New Zealand. However it is important to recognize that PPPs can take many forms with different levels and types of risk shared between the two parties. One of the key purposes of a PPP is to let the party that can best manage  each source of risk bear it. if designed properly this doesn’t sound like a bad idea, if they aren’t designed properly it’s a bad idea!

Anyways, sorry I can’t provide more definitive commentary about this, if anyone wants to learn more about PPPs and there purpose/benefits I recommend checking out this report from Deloitte. It’s a couple years old now and I haven’t read it in a while so can’t really comment on its contents, but I remember it being a good coverage:)

Hello avid TVHE readers

Given that we are currently constrained to use wordpress themes (we will get our own hosting eventually and go custom), we keep a watch on the new themes that get added to see if any are more functional/look cooler then our current one.

One that appears to be a little more functional (I’m not sure I would say it’s cooler as it is a little girly!) has been released and we thought we would we would give it a go and see what you guys think.

The comment and post links on the right are a lot clearer and the posts also show the author, category and number of comments quite clearly at the beginning. Quotes are demarcated in text and it just feels a little less cluttered.

Please, let us know what you think!

I wish I had time at the moment to read Bryan Caplan’s new book or the piece he has written at Cato unbound on the myth of the rational voter. Having only done the briefest skim I can’t really comment on the conclusions he reaches. However, the title seams fairly self explanatory.

This has really made me think of all the people I saw interviewed during the election night coverage saying they used to vote Labour but had decided to vote for National because it was “time for a change”. When pressed why change was needed not one person had anything to say. I kept joking at the time that it was the  “obama factor” (where in my opinion change was needed). In hindsight I’m concerned that it was. I can’t help but find it slightly worrying that people voted National but didn’t really have a reason to other then “change”.

Agnitio: Happy National are in but worried about how they got there…..

Update: Thanks to the journalistic skills of Kimble and StephenR we know this chart is a hoax, it has however sparked some amusing comments on the IQ/party matches for NZ:)

While procrastinating doing work on the weekend I found this little stunner

Would be interesting to see a similar exercise for the 08 election

Agnitio


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