We need an effective Public Service
At the NZ Economics Forum on Friday, Oliver Hartwich delivered a frank assessment of central agencies. He asked why Treasury, the lead economic advisor to the government, is advertising senior economic analysis positions that require “good relationship skills” and “comfort working at pace” but not economics. He notes the Reserve Bank is giving senior appointments…
Keep readingAre inflation expectations still anchored?
The Reserve Bank surveys households and businesses for their inflation expectations. As you’d expect, expectations have shifted recently with the rise in the CPI. But households and businesses have parted ways in the long term outlook. Households think inflation five years from now will still be at 5%. That is up 2% from a year…
Keep readingPerhaps this is why Italy and Greece are struggling
A recent report by David Law at the NZ Initiative has this astounding chart: The bottom four countries are the four underperforming European PIGS. Little wonder Italy and Greece are in fiscal crisis territory when every $1 transferred to people on low incomes means sending $4 to people in the top 20% of incomes. I’m…
Keep readingWordle
If you have been on Twitter, you have probably seen pictures like this: This is Wordle, an addictive little game where the goal is to work out the five letter word in six guesses or less. There is one Wordle a day. Guesses tell you something about the solution: Green means the solution has that…
Keep readingGiving it away
Carbon News reports: THEY’VE declared a climate emergency and now the government is taking steps to ensure we can continue to drink chilled Sauvignon Blanc in a warming world.Agriculture minister Damien O’Connor has announced the government is investing in a seven-year programme led by Bragato Research Institute to help future-proof the sustainability of New Zealand’s…
Keep readingDid Rod Carr mislead the Environment Committee?
Yesterday, Rod Carr appeared before Parliament’s Environment Committee as Chair of the Climate Change Commission. Carr made the following statement (at 5:10): I think the first thing to do is recognise not only as Chair but the Commission itself accepts that markets and prices will provide significant signals to producers, consumers and investors, that will…
Keep readingWe already have congestion pricing
It’s a rainy morning in Wellington. There have been crashes on my road to work. The roads are full. Uber wanted to charge me $84 to get to work by 9am. The usual price is $21. So I’m going to Zoom in for the 9am and come in after that when, I expect, prices will…
Keep readingLow expectations
The Herald reports: Andersson, leader of the Social Democratic party, decided it was best to step down from the post [Prime Minister] more than seven hours after she made history by becoming the first woman to lead the country. Myself, I would have gone with “less than eight hours.” Perhaps something was lost in translation.…
Keep readingTo Minister Shaw: Please explain
Yesterday, in the Herald ($), I challenged Climate Change Minister James Shaw to explain how his Emissions Reduction Plan lowers emissions. In this post, I want to head off what he is going to say. His lines are, frankly, not right. So let’s get that on the table and go through the argument before he…
Keep readingWhy Reserve Bank independence matters
The case for Reserve Bank independence on monetary policy is obvious. If politicians have control of the money supply, they will use it to support their re-election. But what is the case for Reserve Bank independence on financial regulation?* The question arises because the Reserve Bank is looking at disclosure rules and possibly other regulations…
Keep readingEmail to the Reserve Bank
The Reserve Bank says climate change is a risk to financial stability. It is proposing to regulate accordingly. A recent paper by the Federal Reserve Bank of New York finds weather disasters are profitable for large banks because they increase loans. In view of the apparent gulf in the two positions, and the lack of…
Keep readingContrasting substance on climate
The Reserve Bank keeps saying climate change threatens financial stability. It has been saying that for three years. No previous Reserve Bank Governor agrees, judging by their silence on the matter. As I said in last week’s report on the Reserve Bank, after three years of looking the Reserve Bank has not been able to…
Keep readingUntrue statements as boilerplate
Stuff reports: A group of more than 100 New Zealanders, including two former All Blacks and musician Neil Finn, has written an open letter to New Zealand Rugby saying it is going against its own leadership principles by making a major deal with an oil, gas and plastics company. Good luck to those who have…
Keep readingThe case for a carbon dividend in two charts
A carbon dividend takes the revenue from auctions of emissions units for the ETS and gives it back to households. This year, the sale of emissions units will raise around $1.3 billion.* That is around $750 per household. The following two charts show a) low-income households spend more of their incomes on carbon than other…
Keep readingNot about emissions
With its Emissions Reduction Plan released last week, the government is promising unprecedented control over every aspect of your life. How you move. What you eat. Where you live. How you heat your home. It is little short of a revolution. Between its emissions plan and next year’s Budget, which will also be about climate…
Keep readingHow do officials think about the costs of expropriation?
The government has introduced legislation which will allow the Minister of Health and the Director General to take over private companies doing COVID testing (further description is here). The likely target of this change is Rako, which has sought a commercial negotiation with the government for the last year. The amendment, which is before the…
Keep readingJust when you thought it could not get any worse
Having banned saliva testing for more than a year, the government is now proposing to take it. As in, expropriate inventors and manufacturers of COVID testing products. Newsroom ($) quotes the Chief Executive of Rako, Leon Grice: There is other legislation where the Government can come in and expropriate or requisition private property – that’s…
Keep readingA climate policy framework
John Cochrane has written a long essay in National Review called ‘Climate Policy Should Pay More Attention to Climate Economics’ with a subtitle of ‘Without numbers, we will follow fashion.’ The article is beautifully written, hardly a single one of the 3,500 words is wasted. In arguing for economics in climate policy, Cochrane covers many…
Keep readingThe ETS is extraordinary
Just a reminder of what an extraordinary achievement the New Zealand Emissions Trading Scheme (ETS) is. Introduced in 2008, the ETS covers around 96% of GDP. Apart from the carve-out of agriculture, the ETS has no domestic exceptions. Many offshore schemes exclude small businesses, and/or transport. Ours does not, making it probably the most comprehensive…
Keep readingBig picture, people
According to a tweet by the NBR, pundits are calling the Emissions Trading Scheme (ETS) dysfunctional after its $50 price cap was breached at Wednesday’s auction. Big picture, people. Wednesday’s auction was roaring success for the credibility of the ETS system, of the government’s emissions budgets, and of the political sustainability of a carbon price…
Keep readingOnly ten beers on the table
The response by James Shaw to today’s breach of the ETS price cap has reminded me of the most helpful analogy I have heard to describe how a binding ETS cap really does neutralise every policy under the cap under nearly all foreseeable circumstances. The analogy comes from Eric Crampton. It involves beer. To recap…
Keep readingWhy not subsidise more EVs, Minister?
This morning’s Emissions Trading Scheme (ETS) auction resulted in a clearing price of $53.85, breaching the $50 price cap. The government issued an additional 1.6 million ETS emissions units from a reserve to defend the cap.* These extra units will raise New Zealand’s emissions by 1.6 million tonnes. The law requires the extra units to…
Keep readingHow much land do we really need to plant with trees?
Both the government and the Climate Change Commission have misrepresented how much land will be covered in forests in 2050 with current emissions policies. In its final report, the Commission told the government the existing policies and the Emissions Trading Scheme at $50 will deliver net zero emissions in 2050. That extraordinary finding put a…
Keep readingKeep climate policy focused on the social cost of carbon
A new paper in the journal Climate Policy says “Keep climate policy focused on the social cost of carbon”. Its abstract: In the context of climate change, the application of cost-benefit analysis to inform mitigation policies can help to achieve the best outcomes and avoid the worst: spending trillions of dollars but failing to get…
Keep readingAnother reason to love natural gas
Natural gas does not just save us from burning coal. It saved us from nuclear. In the 1960s, nuclear power was seriously considered for this country until the discovery of the Maui gas field in Taranaki 1969: In 1968, the national power plan first identified the likely need for nuclear power in New Zealand a…
Keep readingThe iron law of electricity
My Insights #2 this week: Events have rather overtaken last week’s blackout. The outage on the evening of 9 August left 35,000 households in the dark for up to two hours on the coldest night of the year. This week we published a paper on the blackout by Carl Hansen, the former Chief Executive of…
Keep readingNumpties
Let’s Get Wellington Moving wants to spend $350 million to reduce emissions by 1,000 tonnes. That is a bad deal – for you, the environment, just about everyone except Let’s Get Wellington Moving, it seems. Here is part of the summary of a plan called “City Streets”: Let’s pretend for a moment that the government…
Keep readingNew competition for the Flat Earth Society
Supermarkets are easy, apparently. So easy, according to this article on Stuff, that you can set up and run a chain of them and at the same time “actively work towards other government goals across the environment, technology, business, and the labour market.” What does that mean? The author helpfully explains (I am not making…
Keep readingOpening statement on the Natural and Built Environments bill
My opening remarks to the Environment Committee this morning on the Natural and Built Environments bill, which will replace the RMA: Any planning system must allow trade-offs between competing outcomes. Property rights confront owners with some but not all of these trade-offs. The reforms should be based on understanding which trade-offs the planning system needs…
Keep readingHow Musk deals with complexity
Elon Musk has given a personal tour of SpaceX’s Starbase at Boca Chica in Texas to a Youtuber, Tim Dodd aka the Everyday Astronaut. You can see the first part of the interview here. Musk’s interview is in his capacity as Chief Engineer at SpaceX. Musk is also the CEO of Tesla and a founder…
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