Burgernomics – Consumer surplus explained

Tens of thousands unemployed – meh

I’ve been a bit surprised at the lack of fuss over the Reserve Bank’s forecast of 6% unemployment in 2011 in the June Monetary Policy Statement. 

 

 

 

 

 

 

 

 

 

Given how a couple of hundred lay-offs usually makes the news, I’d have thought the possiblity tens of thousands out of work might have caused a stir.

I guess there are two possiblities it hasn’t been news.  Perhaps 6% unemployment is seen as a particularly surprising outcome, the current rate is historically low.  Alternatively  there are few people taking the RBNZ seriously.  The Treasury seem to think the RBNZ’s going to be proven wrong.

 

 

Subprime Crisis explained

While various reputable news organisations have sought to explain the causes of the US subprime mortgage crisis none have come close to the clarity and accuracy of this powerpoint.

Interesting Times

It’s interesting economic times when you get a story on record low unemployment and in the same newspaper get an ultimate doom and gloom story.  

While drought’s always bad for a commodities exporter like New Zealand, high dairy prices should offset that.  While a fall in house prices could reign in domestic spending and shocks offshore could reduce firms’ revenues, we’ve high employment and the government’s in surplus to cushion such blows. 

What is different from the downturn of the late 90s is how heavily indebted households are. Things could turn nasty for some people.

Money does talk and you don’t need many listeners.

In this week’s Listener, the assertion is made that, “there’s little evidence that big money can sway an election result in any serious way.”   As part of the rationale for this Freakonomics’ Levitt’s campaign spending research is referred to.

Where the Listener article gets it wrong is that while it takes very large amounts of spending to make small differences – halving your spend costing you 1% or doubling it only gaining 1% of the vote – a 2% difference could be the difference between winning and losing. 

The 2005 election results illustrate the difference 2% can make at the margin.

Biofuels, food and coffee

There are a number of shock-horror comments being made about biofuels crowding out food production.  These statements are ultimately superficial. 

While land currently producing food is being converted to produce biofuel crops, the tradeoff between food production and other activities is nothing new.  There’s much arable land being used for non food production – cotton for clothes, rubber for tyres or tobacco. Biofuels are just another commodity.

Let’s remember land that could be growing food for the poor is currently providing us with the unnecessary luxuries of fair trade coffee beans and chocolate.