Archive for the ‘Uncategorized’ Category

General Debate 15 August 2014

August 15th, 2014 at 8:00 am by Kokila Patel

X is for X-efficiency

August 14th, 2014 at 11:00 am by David Farrar

The NZ Initiative struggles to find an economic term starting with X:

It would have been a stretch for us to relate X-rays or Xylophones to economics. Lucky for the ABCs of economic literacy, Harvey Liebenstein prefixed the word inefficiency with a big X when proposing the concept of X-efficiency in the 1960s. It is the only economic concept in MIT’s Dictionary of Modern Economics listed under X.

X-inefficiency arises when firms fail to achieve the maximum possible level of output from given inputs. It contrasts with allocative inefficiency, which is the failure to produce the optimal mix of outputs, even if each output is produced at least cost.

X-inefficiency represents a forgone opportunity to increase profits, wages or both. A text-book monopolist would not fail to maximise profits but, in practice, some firms might.

The New Palgrave Dictionary of Economics cites, as evidence for the existence of X-inefficiency, a study in 1981 of a Ford plant in Germany that was producing 50 percent more automobiles with 22 percent less labour than an identically-designed plant in the UK. (Presumably German workers were getting paid commensurately more, reflecting their greater productivity.)

Differences in labour market laws, entrenched labour market practices, cultural attitudes to work, performance and pay may make it hard for even a profit-maximising owner to raise the productivity of the UK plant to the German level. But if wages are sufficiently lower in the UK, a profit-maximising owner might be able to make enough profit out of the UK plant to justify not closing it and shifting all production to Germany.

Managerial slack is a related source of X-inefficiency. Employee managers are likely less motivated than owner-managers to maximise profits. Owners may be unable to fully overcome this problem. Diffuse ownership may be one reason why owners might fail in this manner.

Laws that make it unduly difficult to hire or fire managers or workers or to target incentives at top-performers (performance pay) may contribute to X-inefficiency. For example, anti-takeover laws may protect under-performing management teams.

Performance measures across firms and countries, such as the Ford factory one above, can help identify egregious cases of X-inefficiency, but eliminating its causes may be too hard if they are entrenched.

The theory is controversial because if people prefer not to work as hard and as productively as they could, and consider the lower wage to be a price worth paying, they are actually optimising. Their lower productivity is efficient.

Two to go.

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General Debate 14 August 2014

August 14th, 2014 at 8:00 am by Kokila Patel

Now they want to control our cheeses also!

August 13th, 2014 at 1:00 pm by David Farrar

The Guardian reports:

Many popular cheeses on sale in UK supermarkets contain high levels of salt, despite meeting government reduction targets as part of the drive to improve public health, campaigners have warned. …

Cash called on the government to introduce much more challenging targets on salt reduction in cheese as a “cost-effective” way to improve public health and to follow the much tougher lead set by the US. …

Professor Graham MacGregor, chairman of Cash, said: “Reducing salt is one of the most cost-effective measures to reduce the number of people suffering and dying from strokes, heart attacks and heart failure. Cheese is a big contributor of salt to the UK diet and it’s vital the Department of Health forces the cheese industry to implement the new targets immediately – and to set more challenging targets for the future.”

I’ve got a better idea. How about people be left for themselves to decide if they want to buy cheese with a lot of salt in it, or cheese with not much salt.


General Debate 13 August 2014

August 13th, 2014 at 8:00 am by Kokila Patel

RIP Robin Williams

August 12th, 2014 at 11:41 am by David Farrar

3 News reports:

Actor and comedian Robin Williams has been found dead, his publicist has announced. He was 63.

He was found in his home and the cause of death is believed to be suicide.

“Robin Williams passed away this morning,” his publicist said in a statement.

“He has been battling severe depression of late. This is a tragic and sudden loss. The family respectfully asks for their privacy as they grieve during this very difficult time.”

“This morning, I lost my husband and my best friend, while the world lost one of its most beloved artists and beautiful human beings,” Williams’ wife Susan Schneider said.

“I am utterly heartbroken. On behalf of Robin’s family, we are asking for privacy during our time of profound grief. As he is remembered, it is our hope the focus will not be on Robin’s death, but on the countless moments of joy and laughter he gave to millions.”

How very very sad. I’m stunned.

It is a reminder that even the apparently happiest and funniest people can struggle with their mental health.

I loves so many of his shows and movies. Mork & Mindy was great, and Good Morning Vietnam and Dead Poets Society are my favourite of his movies.

It was during one of his appearances on David Letterman that it struck me what a comic genius he was. Normally Letterman is the one doing most of the talking, but Williams came on and just took over and engaged with the crowd for probably five minutes or more without a pause, before Letterman got to say anything. His stand up skills are almost unsurpassed.

A huge loss to his family, but also to the entire world of comedy. A very sad day.


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General Debate 12 August 2014

August 12th, 2014 at 8:00 am by Kokila Patel

Monday Motivator – Untitled

August 11th, 2014 at 10:54 am by Richard Hume

Monday Motivator 30

Untitled, Ubud, Bali

I have just stepped off the plane after spending the last couple of weeks in Bali. It was my first time there and I loved it….very friendly people, great food and wonderful photo opportunities all around….what is not to like.

This image of an intricate doorway was taken one morning in a lane-way in Ubud. I haven’t yet given it a title but you may want to suggest one….I will give a poster of your choice away to the best suggestion.

Still uploading to the site so no larger view of it this week.


Richard []

YouTube: Timeless – A Panoramic Journey

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General Debate 11 August 2014

August 11th, 2014 at 8:00 am by Kokila Patel

General Debate 10 August 2014

August 10th, 2014 at 8:00 am by Kokila Patel

The Nation debate

August 9th, 2014 at 2:00 pm by David Farrar

Stuff reports:

Colin Craig has successfully muscled his way into TV3′s minor parties leaders’ debate tomorrow morning after taking his case to the High Court.

TV3 executives decided outside the High Court to include the Conservative party leader after he successfully applied for an injunction preventing the debate from airing without him.

TV3 Director of News Mark Jennings said it was either include Craig or cancel the debate and it was not fair to prevent the other parties from being heard. 

Lawyers for Craig applied for an injunction in the High Court at Auckland this afternoon to prevent TV3 owners MediaWorks from airing a debate on its programme The Nation without the Conservative Party leader.

Party leaders from United Future, ACT, the Greens, the Maori Party, New Zealand First and Mana, were due to face off in the debate at 9.30am tomorrow morning.

Justice Murray Gilbert ruled that Craig had an arguable case that TV3′s selection criteria – gaining a seat at the previous election – was insufficient.

I agree that a backwards criteria is insufficient. it locks out parties that have done well since the last election. I’m not saying that means the Conservatives should have been included – just that TV3′s criteria was lacking.

I didn’t watch the debate. What did people make of it? Who was best and worst?

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General Debate 9 August 2014

August 9th, 2014 at 8:00 am by Kokila Patel

General Debate 8 August 2014

August 8th, 2014 at 8:00 am by Kokila Patel

Keeping It Voluntary: the Case of Smart Meters

August 7th, 2014 at 3:00 pm by David Farrar

A guest post by Mike Wilkinson:

If someone buys electricity, the seller needs to measure how much they’re using.  Smart meters do this electronically and they’re read automatically, making them a big step into the digital age.  How best should that step be taken?  By keeping it voluntary is what’s shown by comparing New Zealand’s smart meters with Australia’s.

The New Zealand Government more or less leaves companies to themselves to decide about smart meters.  Competition between electricity companies motivates installation.  There are now smart meters in over 50% of the country’s households and businesses, a figure growing by the day.  And since smart meters here are voluntary, they are installed only when companies want to use them.  They come at no additional cost to consumers.

The approach to smart meters in Australia has been very different.  In 2006, the Victorian State Government directed that over two million smart meters be installed in Victorian homes.  Since it was mandatory, this approach has been much more costly for consumers.  According to this Australian Productivity Commission report (see p. 383), it’s raised households’ electricity bills by over $100 annually.  Moreover, Victoria’s mandated rollout has contributed to uncertainty across Australia, delaying companies from installing smart meters.  In the rest of the country, only a few consumers actually have them installed.  This is in stark contrast to New Zealand, where the majority do.

The long term benefits of smart meters are indeed uncertain.  It isn’t clear which sort of technology is best for them and companies naturally disagree about how worthwhile they are.  New Zealand has been able to work through this – it has kept things voluntary while maintaining competition.  Meanwhile, Australia has shown how government intervention can make things worse by raising costs for consumers and creating uncertainty for companies.

Despite that uncertainty, one thing is clear: consumers in New Zealand are already benefiting from smart meters.  They allow many of us to see our electricity usage on a daily or even a half-hourly basis, almost in real time.  Worried you’re consuming way more electricity this winter?  Just look up your company’s website and see.  Gone are the days of waiting for an ‘estimated’ read at the end of each month.

Politicians occasionally show little respect for what’s occurring voluntarily when they suggest making certain things compulsory.  Labour MP David Shearer recently suggested that New Zealand’s smart meters were ‘plain dumb’.  He proposed introducing minimum standards for them, implying consumers should bear the cost of making those standards mandatory.  This comparison of New Zealand’s and Australia’s smart meters questions the wisdom of such an approach.

Smart meters could become very important in the future.  For example, if lots of people start plugging in electric vehicles for power at the end of each day, these meters could make all the difference for ensuring our electricity networks keep operating.  Whichever way they might be used, though, New Zealanders can be assured that they’ll benefit the most if our Government continues to keep things voluntary and competitive.


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General Debate 7 August 2014

August 7th, 2014 at 8:00 am by Kokila Patel

W is for welfare

August 6th, 2014 at 3:00 pm by David Farrar

The latest from the NZ Initiative series:

The biographies of top economists indicate that they were often motivated to study economics in order to be better able to contribute to the common good.  

But what is meant by the common good and what policies contribute to it?  After all, in general elections, voters are commonly confronted with at least one party advocating higher taxes in order to make New Zealand a better place for New Zealanders – and at least one other party advocating lower taxes in the same cause.

Welfare economics is a branch of economics that explores what might be meant by the common good, and seeks to evaluate economic policies on the basis of their effects on the well-being of members of a community.

As explained previously in the economic ABCs, an insight that has endured since Adam Smith (1776) is that competition, in conjunction with security in person and property, induces even solely self-interested butchers, bakers and the candlestick makers to serve their customers’ interests. Otherwise we freely take our business elsewhere.

During the 20th century, welfare economics formalised this insight into the proposition that stylised competitive processes will produce a zero waste welfare outcome.  It is optimal in the sense that no one person’s (self-perceived) welfare can be increased with reducing that of at least one other person (whether such a change is worth doing regardless remains a moot point).

Welfare economics has clarified the many situations in which the same competitive processes will potentially fail to maximise welfare in this sense. These include problems of monopoly, public goods (such as national security and communicable diseases), environmental pollution, income distribution, poverty, malleable preferences and distorting taxes. Economists have formally shown in many of these cases how a well-motivated government might ideally use taxes or regulations to improve general well-being.

Nevertheless, related branches of economics have also illuminated many difficulties that confront government action, including problems of voting behaviour, inadequate information and political and bureaucratic incentives.  The UK TV series, Yes, Minister, brilliantly depicts these difficulties. “Doing good” in government is subject to the Law of Unintended Consequences.

What about the welfare state? One of the earliest uses of this term was in the1942 Beveridge Report that ideologically proposed that the state was responsible for individual welfare “from the cradle to the grave”. What followed was a dramatic increase in taxes and social service spending in member countries of the OECD, albeit with significant national variations. Its effects on well-being will long be debated.

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General Debate 6 August 2014

August 6th, 2014 at 8:00 am by Kokila Patel

General Debate 5 August 2014

August 5th, 2014 at 8:00 am by Kokila Patel

General Debate 4 August 2014

August 4th, 2014 at 8:00 am by Kokila Patel

General Debate 3 August 2014

August 3rd, 2014 at 8:00 am by Kokila Patel


August 3rd, 2014 at 6:20 am by David Farrar

Stuff reports:

Pilot Zaharie Ahmad Shah probably used Malaysia Airlines flight MH370 to commit mass murder/suicide, according to a book by two Waikato authors.

The captain of MH370 may have even glided the out-of-fuel aircraft to its final end in the southern Indian Ocean and sunk it intact, say Geoff Taylor and Ewan Wilson, authors of Goodnight Malaysian 370 – the truth behind the loss of Flight 370.

The authors suggest Zaharie, who prided himself on his technical expertise and methodical nature, may have got satisfaction out of making the Boeing 777 virtually impossible to find in what they described as “the ultimate post-mortem triumph”.

The book, released on Amazon Kindle on Monday and in hard copy on August 10, was written after extensive research in Malaysia and interviews with family members and friends.

Wilson, a pilot and former chief executive of two airlines, said the book analyses every possible scenario of what could have happened to the ill-fated airliner that left Kuala Lumpur for Beijing at 12.41am on March 8.

“We were able to completely rule out any possibility of catastrophic structural failure, rapid depressurisation, electrical failure, fire or being shot down as possible causes for MH370′s loss,” said Wilson, who also has transport air investigation qualifications.

“They simply couldn’t have happened. Through a process of elimination, we were left with the uncomfortable and very tragic likelihood that Zaharie – because of some personality disorder, depression or emotional breakdown – killed himself and everyone on the aircraft deliberately.”

I have no expertise in this area, but it seems pretty obvious that one of the pilots was responsible.

However reckon they know what happened:

When it was first announced that flight MH-370 disappeared without a trace, there had been voices suggesting that the same plane will be later used in a false flag operation.

Personally, I tried to ignore the speculations thinking that no secret agency could ever conduct such an insanely-obvious operation, expecting that the rest of the world is stupid enough to buy it.

Boy, was I was wrong! …

If the US secret services got possession of the MH-370 jet, then it was a child’s play for them to set it up for a false flag operation suiting their needs. After the story of a passenger jet having been shot down by pro-Russian separatists broke loose, Russia lost a lot of credibility and support due to the US propaganda machine.

Conspiracy nutters are such fun.

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General Debate 2 August 2014

August 2nd, 2014 at 8:00 am by Kokila Patel

General Debate 1 August 2014

August 1st, 2014 at 8:00 am by Kokila Patel

General Debate 31 July 2014

July 31st, 2014 at 8:00 am by Kokila Patel

General Debate 30 July 2014

July 30th, 2014 at 8:00 am by Kokila Patel