Ministerial cars going electric is a great idea. The range limitations and range anxiety inherent to electric cars would mean ministers will find it much more difficult to do their jobs and therefore will have less time each day to mess up the economy and regulate unnecessarily.
One of the most productive things I ever saw the Green MPs do in Wellington was taking the bus to and from work.
I could not be happier when I saw Green coleaders Russel Norman and Metiria Turei waiting at a bus stop. They are just waiting, they will not working with a colleague, they were not working on their phones. They were just standing there doing nothing. That was the most productive moments of their times in parliament.
Every second a Green MP spends waiting for a bus and travelling on a bus and arranging to fit in with bus timetables is one second less spent making New Zealand a poorer country and deterring investment from coming to New Zealand through their high tax and heavy regulation policies.
Whenever there is a crisis in the labour market, the standard policy response is send them on a course. That makes you look like you care and by the time they graduate the problem will probably fixed itself. Most problems do. I found this bureaucratic response to labour market crises to repeat itself over and over again while working in the bureaucracy.
The standard policy response to a normal problem in the labour market is send them on a course. Clever geeks as yourself sitting at your desk as a policy analysis or minister did well at university. You assume others will as well including those who have neither the ability or aptitude to succeed in education. Lowering university tuition fees and easing the terms of student loans simply means that those who do well at university will not have to pay back as much to the government. People who succeed at university already have above average IQs so they already had a good head start in life.
The standard solution to growing inequality is to send people on a course. Trouble is that just make smart people wealthier without helping the not so smart and increases the chance of smart men and women marrying off together. This increases the inequality between power couples and the rest.
We are seeing signs that NFC transaction systems are replacing the current eftpos payment system with its lower fee structure.
This could result in a transaction fee structure monopoly, and increased charges to consumers as traders pass on their increased transaction costs through surcharges or increased prices.
The Commerce Commission seems rather concerned that one form of supply will be displaced by another at a lower price. This is the scourge of lower prices – a major preoccupation of competition authorities. They are yet to accept that lower prices should be always lawful under competition law.
The distribution of firm sizes reflects the rise and fall of firms in a competitive struggle to survive with competition between firms of different sizes sifting out the more efficient firm sizes (Stigler 1958, 1987; Demsetz 1973, 1976; Peltzman 1977; Jovanovic 1982; Jovanovic and MacDonald 1994b). Business vitality and capacity for growth and innovation are only weakly related to cost conditions and often depends on many factors that are subtle and difficult to observe (Stigler 1958, 1987).
The New Zealand Commerce Commission, the competition law enforcement authority, seems to have an infuriatingly simple and out-dated understanding of the meaning of competition. Joseph Schumpeter and Ronald Coase would be turning in their graves.
The efficient firm sizes are the sizes that survived in competition against other sizes. To survive, a firm must rise above all of problems it faces such as employee relations, skills development, innovation, changing regulations, unstable markets, access to finance and new entry. This is the decisive (and Darwinian) meaning of efficiency from the standpoint of the individual firm (Stigler 1958). One method of organisation supplants another when it can supply at a lower price (Marshall 1920, Stigler 1958).
What is even more distressing is the Commerce Commission is applying their archaic concept of competition to an industry subject to rapid innovation. Regulating innovation through competition law is never a good idea. The more efficient sized firms are the firm sizes that are expanding their market shares in the face of competition; the less efficient sized firms are those that are losing market share (Stigler 1958, 1987; Alchian 1950; Demsetz 1973, 1976).
If the firm size distribution in an industry is relatively stable for a time, the firms are their current sizes because there are no more gains from further changes in size in light their underlying demand and cost conditions (Stigler 1983; Alchian 1950; Demsetz 1973, 1976).
Temporary monopoly and rapidly changing market shares with the occasional dominant firm are all characteristics of the early stages of any new or innovating industry. The deadweight social losses from the enforcement of competition law are at their greatest in industries undergoing rapid innovation because of the possibility of error is at its height. Optimum firm sizes continually change over time because of shifts in input and output prices and technological progress (Stigler 1958, 1983).
If large firm size is better at serving consumers, the large firms start to grow and smaller firms will die or be absorbed until the untapped gains from growth in firm size are exhausted. Firms increase in size and decrease in number when this adaptation becomes necessary to survive. If a smaller firm size is now better, smaller firms will multiply and the larger firms will decline in size because they are under-cut on price and quality.
The life cycle of many industries starts with a burst of new entrants with similar products. These new or upgraded products often use ideas that cross-fertilise. In time, there is an industry shakeout where a few leapfrog the rest with cost savings and design breakthroughs to yield the mature product (Jovanovic and MacDonald 1994a; Boldrin and Levine 2008, 2013). Fast-seconds and practical minded latecomers often imitate and successfully commercialise ideas seeded by the market pioneers using prior ideas as knowledge spillovers. Their large market shares are their prizes for winning the latest product races, not the basis of their initial victories.
New entrants regard a large firm size as a premature risk rather than an advantage of incumbency they should mimic as soon as they can. New firms set-up on a scale that is well below the minimum efficient production scale for their industry (Bartelsman, Haltiwanger, and Scarpetta 2009). New entrants choose to start so small to test the waters regarding their true productivity and the market’s acceptance of their products and to minimise losses in the event of failure (Jovanovic 1982; Ericson and Pakes 1995; Dhawan 2001; Audretsch, Prince and Thurik 1998; Audretsch and Mahmood 1994).
Competition law can subvert competition by stymieing the introduction of new goods and the temporary monopoly often necessary to recoup their invention costs and induce innovation. The puzzlingly large productivity differences across firms even in narrowly defined industries producing standard products lead to doubts about the efficiency of some firms, often the smaller firms in an industry. Some firms produce half as much output from the same measured inputs as their market rivals and still survive in competition (Syverson 2011). This diversity reflects inter-firm differences in managerial ability, organisational practices, choice of technology, the age of the business and its capital, location, workforce skills, intangible assets and changes in demand and productivity that are idiosyncratic to each individual firm (Stigler 1958, 1976, 1987; De Alessi 1983).
Technological progress comes from innovations that are the result of profit orientated research and development in the course of market competition. The two main inputs into innovation are the private expenditures of prospective innovators on R&D workers and equipment and the publicly available stock of knowledge on which they hope to build (Aghion and Howitt 2008). Any profits of successful innovators last until others innovate to supersede previous innovations (Aghion and Howitt 2008).
Harold Demsetz argued that competition does not take place upon a single margin, such as price competition. Competition instead has several dimensions often inversely correlated with each other. Because of this, a competition law disparaging one form of competition will result in more of another. There are trade-offs between innovation and current price competition. Manne and Wright noted in the paper, Innovation and the Limits of Antitrust that:
Both product and business innovations involve novel practices, and such practices generally result in monopoly explanations from the economics profession followed by hostility from the courts (though sometimes in reverse order) and then a subsequent, more nuanced economic understanding of the business practice usually recognizing its pro-competitive virtues.
A competition law enforcement authority should never pretend to know which trade-off between innovation and price competition and between competition and temporary monopoly are optimal. Every competition authority should simplify the regulatory environment by simply saying lower prices are per always lawful. The New Zealand Commerce Commission should do this but it has not.
I have not even touched on the use of competition law to subvert competition such is the pursuit of Microsoft and Google by its business rivals through competition law.
The easiest way to tell if a merger is pro-competition is if the remaining firms in the market oppose it. If it was anti-competitive, they could match the higher prices of the merged firm. The reason they oppose the merger is the merged firm will start undercutting them on price. When was the last time a competitor complained about their rivals putting their prices up? Either they hold their prices and take their business or follow their pricing lead: can’t lose.
…Bagchi and Svejnar carefully went through the lists of all the Forbes billionaires, and divided them into those who had acquired their wealth due to political connections, and those who had not. This is kind of a slippery slope — almost all billionaires have probably benefited from government connections at one time or another.
But the researchers used a very conservative standard for classifying people as politically connected, only assigning billionaires to this group when it was clear that their wealth was a product of government connections. Just benefiting from a government that was pro-business, like those in Singapore and Hong Kong, wasn’t enough.
Rather, the researchers were looking for a situation like Indonesia under Suharto, where political connections were usually needed to secure import licenses, or Russia in the mid-1990s, when some state employees made fortunes overnight as the state privatized assets.
…The negative effects of wealth inequality are largely being driven by politically connected wealth inequality. That seems to be the primary channel that drives this relationship…
a 3.72 percent increase in the level of wealth inequality would cost a country about half a percent of real GDP per capita growth. That’s a big impact, given that average GDP growth is in the neighbourhood of two percent per year
@Wonkblog Australia high up on crony capitalism list but grew same rate as USA since 1950shttp://t.co/MiOEeMFu9k
In the UK, foreign-born are much more likely to be over qualified than native born highly educated not in education with less difference between men and women. More men than women are overqualified for their jobs in the UK. Over qualification is less of a problem in the UK than in the USA and Canada.
In the USA and Canada, there are few differences between native and foreign born men in over-qualification rates. Foreign-born women tend to be more over-qualified than native born women in the USA and more so in Canada. Many more workers are overqualified for their jobs in the USA and Canada as compared to the UK.
There are large differences in the percentage of people with tertiary degrees and the education premium between these three countries that are outside the scope of this blog post. These trends may explain differences in the degree of educational mismatch.
To begin with, under human capital theories of labour market and job matching, what appears to be over-schooling substitutes for other components of human capital, such as training, experience and innate ability. Not surprisingly, over-schooling is more prominent among younger workers because they substitute schooling for on-the-job training. A younger worker of greater ability may start in a job below his ability level because he or she expects a higher probability to be promoted because of greater natural abilities. Sicherman and Galor (1990) found that:
overeducated workers are more likely to move to a higher-level occupation than workers with the required level of schooling
Investment in education is a form of signalling. Workers invest so much education that they appear to be overqualified in the eyes of officious bureaucrats. The reason for this apparent overinvestment is signalling superior quality as a candidate. Signalling seems to be an efficient way of sorting and sifting among candidates of different ability. The fact that signalling survives in market competition suggests that alternative measure ways of measuring candidate quality that a more reliable net of costs are yet to be discovered.
Highly educated workers, like any other worker, must search for suitable job matches. Not surprisingly, the first 5 to 10 years in the workforce are spent in half a dozen jobs as people seek out the most suitable match in terms of occupation, industry and employer. Some of these job seekers who are highly educated will take less suitable jobs while they search on-the-job for better matches. Nothing is free or instantly available in life including a good job match.
A more obvious reason for over qualification is some people like attending university and other forms of education for the sheer pleasure of it.
Anyone who encounters the words over-qualified and over-educated should immediately recall concepts such as the pretence to knowledge, the fatal conceit, and bureaucratic busybodies. As Edwin Leuven and Hessel Oosterbeek said recently:
The over-education/mismatch literature has for too long led a separate life of modern labour economics and the economics of education.
We conclude that the conceptional measurement of over-education has not been resolved, omitted variable bias and measurement error are too serious to be ignored, and that substantive economic questions have not been rigorously addressed.
What’s the greatest economic tragedy in modern history?
The obvious answer is communism, which produced tens of millions of needless deaths and untold misery for ordinary people. Just compare living standards in North Korea and South Korea, or Chile and Cuba.
But if there was a second-place prize for the world’s biggest economic failure, Argentina would be a strong contender.
Here’s one fact that tells you everything you need to know. In 1946, when Juan Perón came to power, Argentina was one of the 10-richest nations in the world. Economic policy certainly wasn’t perfect, but government wasn’t overly large are markets generally were allowed to function. Combined with an abundance of natural resources, that enabled considerable prosperity.
But Perón decided to conduct an experiment in statism.
Here’s how Wikipedia describes his economic policy.
Campaigning among workers with promises of land, higher wages, and social security, he won…
Why Evolution is True is a blog written by Jerry Coyne, centered on evolution and biology but also dealing with diverse topics like politics, culture, and cats.
In Hume’s spirit, I will attempt to serve as an ambassador from my world of economics, and help in “finding topics of conversation fit for the entertainment of rational creatures.”
/cdn0.vox-cdn.com/uploads/chorus_asset/file/3966560/11754389_920572351334762_1285855543300283646_o.jpg)
Recent Comments