The visible hand in economics

Archive for the ‘Microeconomics’ 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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The Commerce Commission appears to have found an unusual source of anti-competitive behaviour: schools forcing parents to use a monopoly supplier of school uniforms. Apparently schools often accept payments from clothing manufacturers in exchange for exclusive rights to sell the school’s uniform. Then the manufacturers extract large rents from their monopoly position by charging high prices to parents.

The Commerce Commission is concerned about the monopoly position that the manufacturers have but, recognising the convenience of a single contractor, recommends that the schools use a tender process to ensure value for the parents. Read the rest of this entry »

I’ve been looking at air fares for overseas travel recently and somethign stood out. When you stop over in a city it costs a whole lot more to stop over for a few days than it does to just transfer flights and pass through. I would have thought that getting to your final destination faster was something people would pay for. Yet, the longer you’re happy to take over your trip, the more you end up paying! 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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The DomPost contained an article on the potential for metering Wellington’s water supply. The question is asked: should Wellingtonians pay for their water? This issue┬áis a hot topic, having been discussed at Kiwiblog, Infometrics and TVHE earlier this year.

Historically, water has been provided for by the various Wellington councils out of rates. Water is not currently metered, which implies that regardless of how much water each household takes, their rates do not vary. This arrangement has led many to believe water is in some way ‘free’, as they are not forced to pay for their specific usage and the cost is embodied in rates which cover many council services across many households. With water use of 400 litres per person per day in Wellington, relative to the national average of 160 litres, it appears water users here are not internalising the cost of their water usage.

Current arrangements do not allow for the pricing of scarcity. Read the rest of this entry »

The previous Labour government bestowed a legacy upon NZ that included the first ever review of broadcasting regulations.

Essentially the question being asked in this review is: does the current market situation warrant government intervention?

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The world price of oil has now declined to under $50US a barrel, a third of it’s peak value (live prices here).

This takes me back to a post we did at the end of May – when fuel costs were pushing up at a rate of knots. The topic was covered in the name: Collusion, multiple equilibrium, and petrol prices.

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