Economics

Unintended consequences always undo policy objectives

Rodney Hide explains in the NBR:

Too often we evaluate government policy by what politicians say they are trying to achieve. That’s what gets reported. That saves having to think.

But good intentions are not enough. It’s actual results that matter. And politicians may mean well but still prove a disaster.

To rely on what politicians promise is to be continually misled and let down. We need to see what their policies will actually deliver. That requires we think and apply a little bit of economics.

In 1999, the Labour Party won votes saying it wanted to reduce the burden of student debt. The intention was lauded. The policy was to drop the interest charge on students to zero.

But free loans created the incentive to borrow more, not less. Students who didn’t need a loan could make $3000 while completing their degree simply by reinvesting their free money back with the government. The incentive for students is now to borrow whether they need the money or not.

Officials advised the new Labour-led government that free loans would add an extra $600 million to student debt within two years. The effect was as predicted.

Within the year the proportion of eligible students who borrowed jumped 10% and the amount the borrowed jumped on average per student 23%.

The loan scheme’s administrators concluded, “The increase in borrowing in 2000 can be attributed to the change in the interest rate write-off policy, which reduces the cost of the borrowing.”

The free-loans-to-students policy produced the opposite result to what politicians promised: student debt went up and the debt burden on students increased.

The intention was good. The outcome was lousy. Students are now more indebted than ever.

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The real reason behind the UN’s continued scare campaign over global warming

Here is a clue for you…the UN isn’t interested in saving the planet from a non-existent threat, it is actually interested in controlling the planet, and one of their top officials has proved it.

The alarmists keep telling us their concern about global warming is all about man’s stewardship of the environment. But we know that’s not true. A United Nations official has now confirmed this.

At a news conference last week in Brussels, Christiana Figueres, executive secretary of U.N.’s Framework Convention on Climate Change, admitted that the goal of environmental activists is not to save the world from ecological calamity but to destroy capitalism.

This is the first time in the history of mankind that we are setting ourselves the task of intentionally, within a defined period of time, to change the economic development model that has been reigning for at least 150 years, since the Industrial Revolution,” she said.

Referring to a new international treaty environmentalists hope will be adopted at the Paris climate change conference later this year, she added: “This is probably the most difficult task we have ever given ourselves, which is to intentionally transform the economic development model for the first time in human history.”

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The problem with ‘ethical investing’

Yet again the Green party is lecturing us on ‘ethical investing’.

Can anyone see a problem with that?

The Green Party has called for the New Zealand Superannuation Fund to quit its investments in companies producing fossil fuel.

The fund’s chief executive, Adrian Orr, said it took the issue of climate change seriously and expected its exposure to fossil fuels to fall over time, and investment in renewables to rise.

“But a simple divestment call? The world is just not that straightforward,” he said.

The fund, set up by the previous Labour Government to partially pre-fund future New Zealand Superannuation payments, had $676 million invested in companies directly involved in fossil fuel production as of last June. That represented about 2 per cent of the fund’s assets.

Greens co-leader Russel Norman, in a paper released yesterday, makes an ethical case for not investing in companies whose activities are literally fuelling potentially catastrophic climate change.

He also points to a financial risk of stranded assets, citing analysis by the International Energy Agency and other bodies that the world’s coal, oil and gas companies already have in their proven reserves at least three times as much carbon as can be burned without exceeding the internationally agreed target of limiting global warming to 2 degrees Celsius.   Read more »

The take down of Piketty

The left-wing loves Thomas Piketty, but it appears that like most socialists he has lied about and massaged the data that he uses to make all sorts of claims that the luvvies of the left are all wetting their knickers over.

Tom Woods discusses the major errors in the Piketty book.

As one commenter says:

The main problem is not Piketty’s thesis but the fools that take the thesis as gospel and then either influence those in power or come into the position of controlling the levers of power to implement Piketty’s ideas. With that said,what happens when the “rich” refuse to pay Piketty’s suggested worldwide taxes? Or for that matter “shelter their wealth.” In the end Piketty’s ideas are not based on logic,reason or “human action” but strictly on a monopoly on the use of guns and force.

Listen to the discussion and be fully armed to counter the leftist arguments based on Piketty’s hallucinations.

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Cheap weed in Washington State after legalisation causes glut in supply

Washington State legalised cannabis and in the first year growers rushed to market hoping to make a killing…predictably there was an over supply and prices dropped through the floor.

Have you ever been tempted to buy your dog a truckload of steaks just to see if there was a limit to how many of them they could eat at just one sitting? Well when marijuana became legal in the state of Washington, we were similarly curious about whether there was a theoretical maximum amount of pot that its residents could smoke… and now our questions have been answered.

The Associated Press, via ABC News, reports that marijuana sellers in Washington are actually suffering from large unsold surpluses of pot, as supply is now vastly greater than demand for the demon weed inside the Evergreen State.   Read more »

Labour in the UK declares a crisis in energy…problem now solved

Oh dear lord, it seems Ed Miliband has David Cunliffe and the NZ Labour party advising them.

They are even mimicking declaring a crisis for particular industries and just like in New Zealand they have tried to come up with their own power solution.

It has of course been widely mocked.

Labour’s flagship energy price freeze was branded ‘a joke’ last night, as senior figures in the party confirmed it has been reviewed in the light of falling prices.

The price freeze, which Mr Miliband pledged would last until 2017, has been thrown into turmoil in recent weeks as a slump in the price of oil saw the prospect of falling energy prices.

The Daily Mail revealed yesterday that Labour is conducting a U-turn on the policy, which was launched by Ed Miliband in 2013.

It has now been ‘re-branded’ as a price cap, which will allow bills to fall to reflect tumbling wholesale prices.

Yesterday E.On became the first Big Six firm to offer a cut in gas prices of 3.5 per cent to its customers, and others are expected to follow suit.  Read more »

Will Labour run on a Financial Transaction Tax?

Labour have a finance spokesman who has never worked in the real world, and basically has very little idea about finance.

It wouldn’t be surprising if he did what the Democrats are doing now they are in opposition, and promote a Financial Transaction Tax.

To pay for the plan, the U.S. would impose what Van Hollen called a tiny fee on market transactions, of 0.1%. A Democratic aide said the fee would apply to any buy or sell transactions, and include stocks, bonds and derivatives. The plan would also limit tax deductions on CEO pay above $1 million.

So far this type of tax has only been promoted by the looney left, in the form of the Alliance and Jim Anderton, Mana, and the Greens.

5. Financial Transaction Tax

The Green Party will:

  1. Involve New Zealand with the group of countries working to agree on a tax on international currency movements, to set up a fund to provide capital for poor countries to improve their social and environmental wellbeing. This would discourage currency speculation without being high enough to impede genuine trade.

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Bugger, another global warming catastrophe claim busted

It looks like, contrary to the alarmists views, that global warming is actually helping wheat production, not hindering it.

Forbes reports:

Global wheat production set new records in 2013 and 2014, contradicting alarmists’ claims that global warming is reducing wheat harvests.

Global warming alarmists and their lapdog media allies decided Christmas Week 2014 should be filled with claims that global warming is crushing wheat production. Grist, Reuters, the UKGuardian, and the Columbus Dispatch are among the many news organizations parroting alarmist assertions that global warming is reducing wheat harvests. The Reuters article, for example, cites a study co-authored by several global warming alarmists to claim, “In recent decades, wheat yields had declined in hotter sites such as India, Africa, Brazil and Australia, more than offsetting yield gains in some cooler places including parts of the United States, Europe and China.”

Reuters did not indicate whether it had fact-checked the straightforward claim that global crop yields have been declining in recent decades. Reuters also failed to provide any countering viewpoint, giving readers the impression that declining global wheat yields are universally recognized. Knowing, however, that global warming alarmists and their ventriloquist dummies in the media often make straightforward factual claims that are proven false by objective, verifiable data, I decided to fact-check their straightforward claim about declining global wheat yields.

Not only are global wheat yields not declining, they are rising at a spectacular pace. According to objective U.S. Department of Agriculture (USDA) data, global wheat yields have risen by 33 percent since 1994. Moreover, there has been a 4 percent increase in areas harvested for wheat, indicating increased atmospheric carbon dioxide, improved soil moisture, and global warming are making more lands suitable for wheat harvests. Cumulatively, the 33 percent increase in wheat yield per acre and the 4 percent increase in land harvested for wheat add up to a near 40 percent increase in the global wheat harvest since 1994.

The spectacular gains in wheat yields show no signs of slowing down as the Earth continues its modest warming. The year 2014 saw the highest global wheat yield in history, exceeding the 2013 yield that had also set a new record.

Looking a little closer at wheat production data, the alarmists’ propensity for telling lies extends far beyond lies about global wheat production. It turns out the alarmists and their media allies are also telling lies about wheat production in the very nations and continents they claim are experiencing wheat production declines — India, Africa, Brazil and Australia.

Alarmist lie? Well I never. Same with media…who would have ever thought it?

Let’s start by looking at Africa. Egypt is the only African nation that cracks the global top 20 in wheat production. In Egypt, wheat output has quadrupled during the past three decades, with the past 10 years producing the 10 highest wheat crops in Egyptian history. This is quite a contradiction to Reuters’ claim that “In recent decades, wheat yields had declined in hotter sites such as India, Africa, Brazil and Australia….”

And it’s not just Egypt, either. Africa’s second largest wheat producer, Morocco, produced its largest wheat crop in history in 2013.

On the other side of the African continent, South Africa alsoproduced record wheat yields in 2014, continuing a trend of rising South African wheat yields that extends back to the 1980s. Taking advantage of rapidly rising wheat yields, South Africans have been able to cut the area cultivated for wheat production to merely one-third of 1980s levels while still maintaining steady total wheat production. This has enabled South Africans to produce additional crops on former wheat farms and return much of the cropland to its natural condition for Africa’s iconic wildlife.

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About that income inequality thingy the left always bang on about

All last year we heard various Green and Labour politicians go on about income inequality…and how the “poor” of New Zealand are sooooo hard done by.

On top of that they claim that National is evil incarnate and the poor are being hammered by National just for shits and giggles.

They point to all sorts of weird economists who have written books that upon examination the facts don;t stack up.

Buy that has never stopped the left-wing pushing a massive lie on the people, just look at global warming by way of an example.

Since they like quoting reports and overseas facts how about they report this one…the one that says that inequality isn’t growing, it is reducing….and has been for 20 years. (Kind of like there has been no warming for 20 years also)

Income inequality has surged as a political and economic issue, but the numbers don’t show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years. It’s a fact that hasn’t been noted often enough.

The finding comes from a recent investigation by Christoph Lakner, a consultant at the World Bank, and Branko Milanovic, senior scholar at the Luxembourg Income Study Center. And while such a framing may sound startling at first, it should be intuitive upon reflection. The economic surges of China, India and some other nations have been among the most egalitarian developments in history.

Of course, no one should use this observation as an excuse to stop helping the less fortunate. But it can help us see that higher income inequality is not always the most relevant problem, even for strict egalitarians. Policies on immigration and free trade, for example, sometimes increase inequality within a nation, yet can make the world a better place and often decrease inequality on the planet as a whole.

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So-called OECD report into inequality slammed by Rodney Hide

In the NBR Rodney Hide does what no mainstream journalist apparently bothered to do, actually read the co-called report by the OECD into the economy.

Andrew Little and Russel Norman were involved donkey deep in slamming the government over the “report”, but it appears they didn’t read it either.

Rodney Hide did however.

[W]hat a proposition! That inequality hampers growth.

It sounds nonsense, but is it? I thought on your behalf, dear readers, I should wrap a wet towel around my head and find out.

The first thing I noted was that it’s not an official OECD report. It’s a working paper. “The opinions expressed and arguments employed are those of the author.” “OECD Working Papers should not be reported as representing the official views of the OECD.”

Ok so not a report at all, just a working paper from some womble.

The study itself starts badly saying it’s not known whether inequality has a positive or negative effect or whether it has any effect at all. The author has no theory. There is no testable hypothesis.

Undaunted, he dives into 40 years of data across 31 countries. His trusty computer and statistical package grinds away.

Aha, out spits a result. It’s significant! But it makes no sense. Especially the bits that didn’t make news.

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