.@ReserveBankofNZ MPS inflation forecasts vs. actual. Via @jamespeshaw: http://t.co/TjPvcoVsbI—
Jayne Ihaka (@Jayniehaka) July 29, 2015
@ReserveBankofNZ will never be any good at forecasting
30 Jul 2015 Leave a comment
in economics of information, entrepreneurship, financial economics, macroeconomics, monetary economics, politics - New Zealand Tags: entrepreneurial alertness, forecasting errors, The pretence to knowledge
A severe commentary
29 Jul 2015 Leave a comment
in macroeconomics, politics - New Zealand Tags: central banks, forecasting errors, monetary policy, The pretence to knowledge
I don’t place much weight on criticisms of forecasting errors. If someone is any good at forecasting the economy, they would be fabulously rich through trading on their own account rather than working in a central bank.
The fact that Reserve Banks can’t forecast with any greater accuracy than anybody else is a bit of an indictment considering they have inside knowledge of the future course of monetary policy.
By the way, I wrote my masters sub thesis on official forecasting errors.
Plenty of commentaries have remarked on the very low inflation numbers out this morning.
None (that I have seen) has highlighted what a severe commentary these numbers are on the Reserve Bank’s conduct of monetary policy over the last few years.
Reciting the history in numbers gets a little repetitive, but:
• December 2009 was the last time the sectoral factor model measure of core inflation was at or above the target midpoint (2 per cent)
• Annual non-tradables inflation has been lower than at present only briefly, in 2001, when the inflation target itself was 0.5 percentage points lower than it is now.
• Non-tradables inflation is only as high as it is because of the large contribution being made by tobacco tax increases (which aren’t “inflation” in any meaningful sense).
• Even with the rebound in petrol prices, CPI inflation ex tobacco was -0.1 over the last year…
View original post 1,600 more words
Rent control and housing quality
18 Jul 2015 Leave a comment
in economics of regulation, politics - USA, urban economics Tags: expressive voting, offsetting behaviour, rational ignorance, rational irrationality, rent control, The fatal conceit, The pretence to knowledge, unintended consequences
Why is Danish electric power more expensive than anywhere else?
17 Jul 2015 Leave a comment
in energy economics, environmental economics, global warming Tags: Big Wind, climate alarmists, Denmark, expressive voting, green rent seeking, power prices, rational ignorance, rational irrationality, renewable energy, The pretence to knowledge, wind power
Do Residential Energy Efficiency Investments Deliver?
15 Jul 2015 Leave a comment
in energy economics, environmental economics, environmentalism, global warming Tags: climate alarmists, energy conservation, expressive voting, nanny state, offsetting behaviour, The fatal conceit, The pretence to knowledge, tokenism
The researchers found that the upfront cost of efficiency upgrades of a large randomized controlled trial of 30,000 homes in Michigan came to about $5,000 per house, on average. But their central estimate of the energy savings only amounted to about $2,400 per household, on average, over the lifetime of the upgrades.
After the upgrades, homes used 10 to 20 percent less energy for electricity and heating. But, that was only about 39 percent of the savings that engineering modelers had predicted ahead of time. The program simply wasn’t as effective at saving energy as everyone thought.
A living wage helps well-off households more!
10 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, econometerics, income redistribution, politics - Australia, politics - New Zealand, politics - USA, Public Choice, rentseeking Tags: activists, British economy, British politics, do gooders, expressive voting, living wage, rational ignorance, rational irrationality, The fatal conceit, The pretence to knowledge, unintended consequences
Do Living Wage advocates realise it helps richer households more than poorer ones? My take: telegraph.co.uk/finance/budget… … http://t.co/YPTB6v7tSB—
Fraser Nelson (@FraserNelson) July 10, 2015
It usually begins with the RMA – fewer warm, dry homes as an unintended consequence of regulatory restrictions on land supply
10 Jul 2015 1 Comment
in applied welfare economics, economics of regulation, industrial organisation, labour economics, law and economics, politics - New Zealand, poverty and inequality, property rights, survivor principle, urban economics Tags: consumer products standards, do gooders, economics of regulation, nanny state, offsetting behaviour, rent control, The fatal conceit, The pretence to knowledge, urban economics
The Government admits that its proposed insulation and smoke alarm standards for rental properties could push up rents by more than $3 a week. Under legislation to be introduced in October, social housing would have to be retrofitted with ceiling and underfloor insulation by next July, and all other rental homes by July 2019.
![](https://i0.wp.com/www.interest.co.nz/sites/default/files/embedded_images/image/House%20price%20ratio.jpg)
An important driver of lower quality housing in New Zealand is the restrictions on land supply. The costs of those restrictions, land makes up 60% of the cost of new houses rather than 40%. Land prices have doubled and tripled in a number of cities. As the Ministry of Business, Innovation and Employment has said:
The median price of sections has increased from $94,000 in 2003 to over $190,000 today (compared with $NZ 100,000 per section in the US), ranging from Southland ($82,000) to Auckland ($308,000)…
Section costs in Auckland account for around 60% of the cost of a new dwelling, compared with 40% in the rest of New Zealand.
The RMA is the Resource Management Act and was passed just before New Zealand housing prices started to rise rapidly.
![housing prices and RMA housing prices and RMA](https://utopiayouarestandinginit.com/wp-content/uploads/2015/07/housing-prices-and-rma_thumb.png)
Source: Dallas Fed; Housing prices deflated by personal consumption expenditure (PCE) deflator.
Higher land prices for new houses spill into the prices of existing houses, which are now much more expensive than they need to be but for the RMA inspired land supply restrictions in Auckland and elsewhere in New Zealand.
![](https://utopiayouarestandinginit.com/wp-content/uploads/2014/08/urban-limit_thumb.jpg?w=972&h=510)
One way in which homeowners and landlords can keep costs down when buying a house either for their own use or as an investment property is not to invest in insulation and smoke alarms. Deposits are less, mortgages are less and rents are less. It all adds up.
$3 is not much for some but it is enough that some parents cannot find $3 or so per week to feed their children breakfast. Joe Trinder, the Mana News editor blogged about the great expense of feeding the kids for ordinary families.
![image image](https://utopiayouarestandinginit.com/wp-content/uploads/2015/07/image_thumb48.png)
Put simply, you cannot argue that a few dollars is a lot of money to people on low incomes but ignore the consequences for their welfare of a $3 per week increase in their rents.
If tenants were willing to pay for insulation, landlords would provide well-insulated rental properties to service that demand. Walter Block wrote an excellent defence of slumlords in his 1971 book Defending the Undefendable:
The owner of ghetto housing differs little from any other purveyor of low-cost merchandise. In fact, he is no different from any purveyor of any kind of merchandise. They all charge as much as they can.
First consider the purveyors of cheap, inferior, and second-hand merchandise as a class. One thing above all else stands out about merchandise they buy and sell: it is cheaply built, inferior in quality, or second-hand.
A rational person would not expect high quality, exquisite workmanship, or superior new merchandise at bargain rate prices; he would not feel outraged and cheated if bargain rate merchandise proved to have only bargain rate qualities.
Our expectations from margarine are not those of butter. We are satisfied with lesser qualities from a used car than from a new car.
However, when it comes to housing, especially in the urban setting, people expect, even insist upon, quality housing at bargain prices.
Richard Posner discussed housing habitability laws in his Economic Analysis of the Law. The subsection was titled wealth distribution through liability rules. Posner concluded that habitability laws will lead to abandonment of rental property by landlords and increased rents for poor tenants.
https://twitter.com/childpovertynz/status/618985237628858368
What do-gooder would want to know that a warranty of habitability for rental housing will lead to scarcer, more expensive housing for the poor! Surprisingly few interventions in the housing market work to the advantage of the poor.
Certainly, there will be less rental housing of a habitability standard below that demanded by do-gooders in the new New Zealand legislation. In the Encyclopaedia of Law and Economics entry on renting, Werner Hirsch said:
It would be a mistake, however, to look upon a decline in substandard rental housing as an unmitigated gain.
In fact, in the absence of substandard housing, options for indigent tenants are reduced. Some tenants are likely to end up in over-crowded standard units, or even homeless.
The straightforward way to increase the quality of housing in New Zealand without increasing poverty is to increase the supply of land.
As land prices fall, both homebuyers and tenants will be able to pay for better quality fixtures and fittings because less of their limited income is paying for buying or renting the land.
Can NZ double migrant investors and entrepreneurs from $3.5 billion to $7 billion at no cost to taxpayers!?
07 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, economics of bureaucracy, entrepreneurship, income redistribution, industrial organisation, managerial economics, organisational economics, politics - New Zealand, Public Choice, public economics, rentseeking, survivor principle Tags: corporate welfare, entrepreneurial alertness, industry policy, industry targeting, The fatal conceit, The pretence to knowledge
I didn’t notice any discussion in the Cabinet paper of a government doing this before and whether their investment promotion efforts succeeded or not. This latest policy proposal cannot even count as evidence-based policy dreaming, much less a serious contribution to public policy.
Hoping to double incoming foreign investor and entrepreneur migration from $3.5 billion to $7 billion inside three years without spending any extra public money is breathless public policy making. I am sure lots of governments previously tried to get something for nothing.
It will be helpful if ministers pointed to where overseas governments have been successful in doubling foreign investment by simply reprioritising existing investment promotion efforts.
There are at least 2,500 national, provincial and city investment promotion agencies out. Some of them must have been subject to some sort of evaluation as to their success.
This overseas literature review would be in addition to the recent findings of the Ministry of Economic Development about the poor performance and perhaps futility of the foreign direct investment promotion by New Zealand Trade and Enterprise.
Imagine how much bigger a boost in foreign investor and entrepreneur migration lays before us if actual real new money was put on the table.
via beehive.govt.nz – Strategy targets international investors and Evaluation of NZTE investment support activities [929 KB PDF]
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HL Mencken on the Harmful Digital Communication Bill
26 Jun 2015 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, constitutional political economy, economics of crime, economics of media and culture, economics of regulation, law and economics, liberalism, politics - New Zealand, Public Choice Tags: chilling effect, disorderly conduct, free speech, infotopia, Internet trolls, meddlesome preferences, nanny state, offsetting behaviour, The fatal conceit, The pretence to knowledge, unintended consequences
Banning Bottled Water: the Unintended Consequences.
26 Jun 2015 Leave a comment
in applied price theory, economics of regulation, health economics, politics - USA Tags: meddlesome preferences, nanny state, offsetting behaviour, The fatal conceit, The pretence to knowledge, unintended consequences
Starting in 2012, the University of Vermont began a process of requiring that all campus locations selling beverages provided 30% “healthy” beverages, and then that all locations phases out all sales of bottled water.
There were two hope: 1) reduced use of bottles, when bottled water was no longer available, and 2) that healthier beverages would be consumed.
The orange line that drops to zero shows bottled water being phased out. The rising line at the top shows the rise in sugar-sweetened beverages. The red line in the middle that rises sharply shows the rise in sugar-free beverages.
via CONVERSABLE ECONOMIST: Banning Bottled Water: Unintended Consequences.
Ben Elton on the fraying of the Left
19 Jun 2015 Leave a comment
in economics of media and culture, politics - Australia, politics - New Zealand, politics - USA Tags: Ben Elton, expressive voting, Green Left, Leftover Left, rational ignorance, rational irrationality, The fatal conceit, The pretence to knowledge
Gun-free zones an easy target for killers | John Lott
19 Jun 2015 1 Comment
in applied price theory, economics of crime, economics of regulation, law and economics, politics - USA Tags: game theory, gun control, John Lott, mass public shootings, offsetting behaviour, read killers, The fatal conceit, The pretence to knowledge, unintended consequences
Mises on the dangers of specialisation and economic analysis
17 Jun 2015 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, constitutional political economy, Ludwig von Mises Tags: division of labour, methodology of economics, philosophy of economics, The fatal conceit, The pretence to knowledge
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