The visible hand in economics

Archive for the ‘Government Policy’ Category

I see there is some talk of compulsory redundancy payments after this sad story.

Now even though it would be nice if those people hadn’t been left high and dry after all their years of commitment, it is important that we try to get an objective idea about the costs associated with the scheme.
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I have no doubt that my views here will be contentious – but they need to be put forward nonetheless.

I think that Treasury (or some mix of part of Treasury and IRD) should function at arms length in the same way as the Reserve Bank, and that they should set tax rates in the same way that the RBNZ sets interest rates.

Now, let me discuss why.

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In net terms I am AGAINST the probation policy being put through today. That puts me in a pretty significant minority among my economics peers, oww well it gives us something to talk about. However, I would also add that I am NOT THAT against it – I am only against it in net terms because of value judgments.

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Please, explain to me how the current probation policy is different from the one National is going to introduce!

I know about economics, but these subjective terms like “natural justice” do not have a clear meaning to me :( .

I was all ready to rail against the scheme this morning because I thought they were making probation period compulsory – however, now that I can see that isn’t the case I need to find out more about it before I say what I think.

Tane at the Standard states that:

All National’s proposed legislation would do is remove the right to fair process and natural justice

So how exactly does this impact on policy. What are the definitions of “fair process” and “natural justice”. Once I have an idea I’ll talk about the policy, and I’ll compare it and the current scheme to the extremes of “compulsory” and “no probation” – using economics to frame the issue.

Update: I have been informed that the main differences are:

The 90-day provision will apply to any workers employed by businesses with fewer than 20 staff. Workers who are sacked by their employer in their first 90 days on the job will be unable to challenge their dismissal or take a personal grievance case.

Is there anything else?

Kiwiblog has a good run down here.

Copyright tvhe.wordpress.com ©

It looks like National has decided not to continue with the previous government’s plans to introduce a standard for lightbulb efficiency. They say

We want to encourage people to [switch], we think there may be benefits for them to do it, but it should be a choice they make as consumers.

It’s a good point: efficient CFL bulbs are tough to dim, take time to reach full brightness and don’t bring out the sparkle in chandeliers, apparently. So why would we want to force everyone to use them when they’re clearly not suited to some applications? Of course, if people did use them in their homes and offices, where they are suitable, it would be great for reducing our national power consumption. Read the rest of this entry »

The Standard has been stating that tax cuts should be “fairer”. Now in principle I have no problem with things being “fairer” – however, defining what is fair very is subjective, and what the Standard sees as fair and what I see as fair might be different.

Still, both the Standard and No Right Turn go on to quantify what they feel is an injustice – the fact that a greater proportion of the tax cut will go to the wealthy. However, for what they are saying to be true, the wage everyone is paid following a tax cut must not change (or must change by the same lump sum) regardless of their current income – yet this is not the case.

Many moons ago we discussed tax incidence – I think it is time to run with this again, taking for granted some of the assumptions about the labour market that the Standard has provided us with over time.

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According to a recent book by Christian Broda and David E. Weinstein (Prices, Poverty, and Inequality: Why Americans are Better Off Than You Think) (ht Marginal Revolution) growth in income inequality was less pronounced in the US because of changes to the quality and cost of goods that “poor” people purchased.

This indicates to me that a tiered consumer price index could be a useful thing.  Currently the household economic survey (HES) provides an annual tiered income measure (where we see the average income of different income deciles).  However, this nominal measure is not particularly useful if the change in prices experienced by different groups are very diverse.

As a result, a similarly tiered CPI measure (so a CPI for each income decile) would actually give us a much better way to figure out change in “real income” and thereby a fairer measure of the distribution of real income – which is something we care about.

Surely the HES has a measure of purchases by different income groups.  As the CPI is broken down into different products it should be possible to take these weights and come up with a loose set of indicies that represent the price inflation faced by different income declines shouldn’t it?


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