The visible hand in economics

Archive for March 2008

From the Hive we see that the government may be having trouble getting its mandatory biofuel regulation through parliament. Anyone that knows me will know that this makes me glad, not because I’m a climate change denialist (I’m willing to trust the experts on this one), not because I’m concerned about biofuel not having a net positive impact on carbon emissions, but because I don’t think the scheme is properly synchronized with the fact that we have a “carbon price” (through the carbon-trading scheme).

Why does setting a price for carbon mean that we don’t need to make biofuel’s mandatory? In order to explain this I’ll look at the three main criticisms I might get for this position (I’m hoping more criticisms can be added in the comments 😉 ):

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Lots of people are ripping in to Monica Prasad after her op-ed in the NYT on carbon taxes. She says that

Denmark, Finland, Norway and Sweden have had carbon taxes in place since the 1990s, but the tax has not led to large declines in emissions in most of these countries… [T]he insight they provide is that if reducing emissions is the goal, then a carbon tax is a tax you want to impose but never collect.

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People are talking insistently about recession in New Zealand. Driving the recent spate of concerns is the deterioration in consumer confidence over the last three months. All three of the indicators we follow (Colmar Brunton, Roy Morgan, and Westpac McDermott-Miller) have shown a significant deterioration in consumer sentiment since the start of 2008.

Now a small part of this decline is seasonal – however even taking this into account, there has been a worsening in consumers current financial situation and a significant fall in consumer expectations of their financial situation over the next 12 months.

Both the Hive and Roy Morgan state that the Reserve Bank needs to look at cutting rates, in order to avoid a recession we don’t need. However this raises the question, do we need a recession?

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I read recently about the Vélib’ program that Paris is running and what a boon it is for the environment. Apparently Ken Livingstone is keen on making London more bicycle friendly, and cities like Copenhagen are already full of cyclists. The decrease in pollution as a result of the reduction in cars must be quite significant. What is it that prevents New Zealand cities from adopting similar, cyclist-friendly inner city roads?

Perhaps it’s not so much a supply issue as a demand issue. Perhaps fewer people want to commute by bicycle in NZ. A major factor in their decision not to use a bicycle might be the requirement that helmets are worn on the road. Read the rest of this entry »

I don’t know why I was reading both the About Town blog and the Times, but I was and now I have to write about it.

Mrs Saunders raises an interesting question, namely:

If, as most people seem to be saying, New Zealand women are a bunch of sex predators who will do anything for a double vodka and almost anything for a mocha latte, how is it that prostitution is still a viable business?

This is a fair question, as she says:

After all, a double vodka costs $7.50 but full sex with a street walker costs $50 – $60 (cheaper in Papatoetoe and deals of 2 for $60 are available if you know where to look). And a mocha latte costs around $3.50 whereas the cheapest sex option costs $20.

However, I think this is a question that we should be able to answer fairly easily with our economist hats on.

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A couple of weeks ago I asked why people might avoid finding out how worthy a charity is. People know that they’ll give to worthy charities and yet they shy away from finding out that a charity is worthy so that they avoid giving. Why might this be?

There aren’t many situations in which rational agents choose to avoid obtaining information costlessly. The times when they might are when it gains them a strategic advantage. However, you’re not playing a game against anyone else when you pass a collector on the street. The only person that you could be said to be playing against is another temporal self. Carillo and Mariotti’s paper on strategic ignorance explains how a person might choose to avoid information in order to gain an advantage over their future self. If you’re keen to get quasi-technical about it, read on. Read the rest of this entry »

The government is introducing ways to reduce the compliance costs associated with building homes. By doing this, the government can increase the supply of properties, lowering the price of houses, and thereby increasing housing affordability.

No doubt this will be an interesting policy to look over, however this is not what I am going to do right now. Instead I am interested in Professor Roy Fleetwood’s (of Victoria University’s Architecture and Design Faculty) dual claims that”the plan risked creating cardboard cut-out houses” and that “the Kiwi dream was to build your own home, but individuality was highly prized”.

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