The Greens understand economics
Posted on: October 17, 2008
Or so Russel Norman said when asked by Paul Henry earlier this week what the most common misconception about the Greens is. What do you think? I’m going to try a poll for the first time ever on tvhe, hopefully it works:)
I somehow stumbeled across this article from the greens (don’t ask me how..) which I think illustrates their understanding of economics
http://www.greens.org.nz/node/20081
I’ll be honest and admit I stopped reading the article after the paragraph i’m about to reproduce so I’m open to accusations of trolling, but this was little gem
“Reducing saving by cutting KiwiSaver is the same as increasing debt. It won’t show on the Government’s balance sheet, because Key has swapped Government debt for private debt. Lower savings will show up on households’ balance sheets as increased private debt, which is already too high,” Ms Fitzsimons says.
Two points here:
- Households face a budget constraint, how does lowering saving increase debt?!?
- people might borrow against their government subsidized kiwisaver account (ht Matt Nolan)
I’m slightly baffled on how lowering savings increases debt. If we look at things at a very holistic level consumers have income and borrowings which they can use to save, consume or pay off debt.
If you push down savings you can consume more or repay more debt, if anything it seams to be me lowering savings will reduce debt.
Now i’m just hoping that someone tries to argue that by having money in Kiwisaver that money grows and thus you can use that to pay off your debts, do it, I dare you:D
Agnitio
47 Responses to "The Greens understand economics"
October 17, 2008 at 2:40 pm
“Lower savings will show up on households’ balance sheets as increased private debt, which is already too high”
Who is she to tell people how much they can borrow or not borrow?
If there is an institutional market failure then fine – she should say what it is and let us discuss it objectively, to see if it actually exists.
However, I don’t think she is working off this basis – she is working off the “people are lemmings basis”. Never bring that up with me when I’m drinking – I get a touch … emotional 😛
October 17, 2008 at 2:46 pm
lol, I’m definitely bringing ti up enxt time we go drinking:P
At the end of the day savings is a stupid way to reduce debt. if you are paying 12% interest on a loan, paying that off is effectively a risk free return of 12%, that’s a pretty damn good deal!
October 17, 2008 at 2:49 pm
I expect to hear a lot about it Labour weekend pre-Phoenix. 😉
October 17, 2008 at 3:02 pm
“The Greens understand economics”
I suppose this was implicitly a question, and we have effectively answered NO.
At least – that is how I voted 😛
“At the end of the day savings is a stupid way to reduce debt.”
Lets not forget that saving is reducing debt – one of the issues with Kiwisaver is that it creates a disjoint between the two – thereby implying that you can’t use some of your capital to achieve the highest expected return!
“I expect to hear a lot about it Labour weekend pre-Phoenix.”
I suspect you will hear all sorts of stuff over that weekend – although I doubt much of it will make much sense
October 17, 2008 at 3:20 pm
I wish I had investments available that had a 20% risk free return other then paying off my credit card….
October 17, 2008 at 3:40 pm
It’s hit a few hitches courtesy of the reserve bank and treasury…..
it wouldn’t quite be risk free, just zero down side.
October 17, 2008 at 3:54 pm
I know these polls are self-selective at best and therefore fairly meaningless, but to ask people in a forum that deals with economics at a post-grad level a binary yes-no question about whether a bunch of organic farmers and woolly jumper knitters understand economics is a bit like asking if the Catholic Church understands the Large Hadron Collider.
October 17, 2008 at 3:58 pm
Hi Bill
The poll was an after thought for a bit of fun. If the Catholic Church starts making public comments that they understand physics I will definitely start a new poll on that:)
October 17, 2008 at 4:03 pm
“I know these polls are self-selective at best and therefore fairly meaningless, but to ask people in a forum that deals with economics at a post-grad level a binary yes-no question about whether a bunch of organic farmers and woolly jumper knitters understand economics is a bit like asking if the Catholic Church understands the Large Hadron Collider”
Indeed 🙂
However, as I’m easily the most left-wing of the authors I’ll jump in for them.
They do understand that externalities exist – a concept many in government struggle with.
Sure they seem to ignore the idea of market failure, and when a logical argument doesn’t support their ideology they will spout stuff about people being stupid (implicitly).
However, they obviously understand SOMETHING about economics since they can talk about the existence of an externality!
October 17, 2008 at 4:05 pm
BTW, I am making the argument but I did NOT provide the current 1 yes vote!
October 17, 2008 at 4:07 pm
I reckon Rauparaha might be more left wing then you:)
maybe that can be the next feature, the political compass of TVHE contributors:)
October 17, 2008 at 4:10 pm
“I reckon Rauparaha might be more left wing then you:)”
Ahhh, I think you are right there.
I am on the left side of the authors here then 🙂
Goonix is definitely the right side 😛
October 17, 2008 at 4:12 pm
I could pretty much predict the results now, Rauparaha left, Matt center-left, Agnitio center-right, Goonix right
October 17, 2008 at 4:13 pm
https://tvhe.wordpress.com/2008/08/12/where-is-economics-on-the-political-spectrum/
You got me – centre-left 🙂
October 17, 2008 at 4:18 pm
hehe
lol, I never realised it was called the “Nolan Chart”….
October 17, 2008 at 4:28 pm
Most common surname in Ireland my man – as a result, Nolan’s infect all sorts of disciplines 😛
October 17, 2008 at 4:37 pm
A more interesting poll would be rank the ALL various political parties in terms of
a) their understanding of economics,
b) their level of cynicism in allowing short-term political considerations to override this understanding (which could be viewed as their understanding of psychology),
c) their willingness to act in an economically rational way once they are enjoying the baubles of power, and
d) their knowledge of high-energy physics.
October 17, 2008 at 4:40 pm
I suspect the Greens would rank surprisingly near the top on poll number one in my list (and no I didn’t vote for them in Agnitio’s poll).
October 17, 2008 at 6:40 pm
On the political compass I’m around 4,-4 (i.e. libertarian). Silly one-dimensional labels like left/right wing say nothing and I’m surprised you guys are using them. 😛
October 17, 2008 at 6:49 pm
Having said that, I give a lot of respect to the Greens because they are one of only two principled parties in parliament (although that doesn’t detract from their horrible policies).
October 17, 2008 at 7:07 pm
“one-dimensional labels like left/right wing say nothing and I’m surprised you guys are using them”
They say very little – but they are fun to characterise people with 🙂
Ultimately we all have different views on the perfection of markets and the ability of government to solve failures – these are normative issues where we can differ, and where these labels can be useful to build simplistic characterisations
As long as we recognise there limitations we are fine.
“Having said that, I give a lot of respect to the Greens because they are one of only two principled parties in parliament”
True, but for some of them the principle is that “people are inherently stupid” – this is a principal I personally find abhorrent. As a result, I can’t respect them for their “principaled stance” on many issues
October 17, 2008 at 7:41 pm
when i say left and right I’m always talking about the economic axis. I don’t think I know anyone I would class as socially conservative (atleast none of my friends in NZ are…)
October 17, 2008 at 8:33 pm
The funny thing I’ve noticed about the political compass is that in practice the parliamentary poltical centre of gravity in New Zealand is firmly located in the top right quadrant (i.e. authoritarian-leaning, right-of-centre economics) but the rhetoric (and the voting public) is scattered all over the shop.
The Green Party is the only obvious exception. OK, maybe the Progressive Party too (as if that actually counts for anything).
October 17, 2008 at 10:30 pm
I looked at the political compass results the other day for the 2008 NZ election and I am somewhat skeptical about some of the results. For example, there is no way ACT would be in the authoritarian half. I think it’s based purely on their stance on crime. To think that if I was voting for the party closest to my personal position I would be voting for Labour is an absolute joke. LOL.
October 18, 2008 at 7:14 am
Even if the Green Party (a small under resourced party) are wrong on that point they arguably have a point (the major point) that economic growth can’t continue for ever (as discussed in the latest New Scientist issue)?.
http://www.newscientist.com/channel/opinion/mg20026786.000-special-report-how-our-economy-is-killing-the-earth.html
October 18, 2008 at 7:32 am
Presumably when politicians get in power the public service have some influence?
October 18, 2008 at 7:53 am
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October 18, 2008 at 7:55 am
“To think that if I was voting for the party closest to my personal position I would be voting for Labour is an absolute joke”
Really, I always thought you’d look good at a Labour party conference Goonix.
“Even if the Green Party (a small under resourced party) are wrong on that point they arguably have a point (the major point) that economic growth can’t continue for ever (as discussed in the latest New Scientist issue)?.”
Not necessarily. As long as technology provides a means to make more output from the same number of inputs there is always scope for growth – as long as the “growth” exceeds the loss of “natural capital”.
I think that the “growth” position that many media people use is indeed unsustainable – but hopefully that is not the basis for growth people use in analysis.
Note: Economic theories do not assume growth a lot of the time – as they do not assume increases in the “supply” side of the economy. I would trust scientist more with the figures for changes in natural capital, which I think could then be used to separate growth from resource use and growth from technology – this could be used to estimate a “natural” rate of growth from technology.
“Presumably when politicians get in power the public service have some influence?”
As advisors yes – but if the government does not want to listen they can get the public service to justify the policies they want. A move that is a bit disappointing. I think that most of the public service should be on external contracts to government – that would help.
October 18, 2008 at 11:36 am
The Greens latest brilliant policy is to cap NZ’s population at 5.7m. Not 5.6m, or 5.8m, but 5.7m. This perfect number is achieved through limiting the amount of children NZers have here but at the same time increasing immigration.
Stunning.
October 18, 2008 at 11:43 am
You should do a post on it Goonix. I’ll read about the policy at some point, I am currently a bit busy trying to estimate the damage recent events will have consumption in NZ 😛
October 18, 2008 at 12:34 pm
Aye carrumba.
I decided to have a look at the entire press release.
I’m not the sharpest knife in the draw but IMHO the rest of the article only reinforces your initial impression, Agnito.
I’m pretty sure there is a lot of good work done out there on “green economics”. It’s just a shame that the Greens have not bothered to actually do the leg work or at least employ someone who understands economics to give some intellectual rigour to their policies.
It strikes me that the Green Party do not like choice – and despite them having some intelligence, this is a reflection of their immaturity as a political party. It is entirely possible to have green policy outcomes – you just need to provide the appropriate choice or in new-speak “have the right nudge.” Instead, they all to often go for the “I know better than you, so do what I tell you to” approach.
But then that might also require some thinking about economics….
October 18, 2008 at 12:44 pm
“you just need to provide the appropriate choice or in new-speak “have the right nudge.” Instead, they all to often go for the “I know better than you, so do what I tell you to” approach.”
Completely agree Dismal, completely agree!!
October 19, 2008 at 10:00 am
The Greens have at least one economist who just wants to save the planet, but there are a hoard of crankies in dominance.
October 19, 2008 at 11:00 am
“The Greens have at least one economist who just wants to save the planet, but there are a hoard of crankies in dominance.”
Sounds like government organisations in general 🙂
October 19, 2008 at 4:40 pm
I see Not PC calling Paul Krugman an”alleged economist”.
Some of those (economists?…… (Not sure where they belong)) people such as George Reisman , Owen McShane, seem to see the world as a big toy: man climbs in and provided he follows the system man always comes out smelling of roses. There is no overpopulation or resource depletion and you can’t wreck the environment.
October 19, 2008 at 7:38 pm
“I see Not PC calling Paul Krugman an”alleged economist”.”
He was, once. Today he is more of a pundit, if not outright political hack.
October 19, 2008 at 7:47 pm
“It strikes me that the Green Party do not like choice…”
They just dont like people making choices they disagree with. Most politicians are the same. The difference is that the Greens are the ones most disposed to use governmental power to force compliance.
They are so intent on working against human nature that they will inevitably resort to complete social domination to do their “good” work.
The NZ Greens: voted ‘Most likely to oppress their fellow man’ in their college year book
They spent most of the following year tracking down all copies of the year book and replacing the term “fellow man” to “fellow person”.
October 20, 2008 at 10:01 am
“There is no overpopulation or resource depletion and you can’t wreck the environment”
Actually there is – the market price takes into account the scarcity of resources over time – that is one of the major points of a price. The Greens don’t accept this, and as a result they assume the very problems in the system that they want to fix without explaining why – however, without understanding why we don’t know how best to fix them.
“He was, once. Today he is more of a pundit, if not outright political hack.”
To be fair, he still does a lot of reasonable public analysis – when he isn’t being a party hack.
“They are so intent on working against human nature that they will inevitably resort to complete social domination to do their “good” work.”
They refuse to acknowledge there own ideological predispositions – and that is why they fail.
October 20, 2008 at 11:43 am
“repeat the last sentence in the voice of Yoda”
Dude, economists are hard out like Jedis. I’ve forgotten why, but when I remember there will be a blog post 😛
jesus statues…
Keep up the good work…
agnitio
cpworthington
dant03
goonix
metrosideros
rauparaha
Robbie Allan
stevedoogue
Matt Nolan
The visible hand in economics 
October 17, 2008 at 2:39 pm
By having money in Kiwisaver that money grows and thus you can use that to pay off your debts….