Archive
List of Initial Planks
Here is the first list of planks or building blocks for the discussion of explanations and explanatory models. It is likely incomplete but that is not fatal:
- All explanations (and models – a term I subsume within “explanation”) are stories;
- Concepts such as “reality”, “actual”, “real”, “truth”, “true”, “fact” or “exists” are of no relevance as generic undefined concepts;
- All stories are provisional and are expected to change, be updated, altered and added to (or subtracted from);
- The measure of a “good story” versus a “bad story” is whether or not and to what extent it fulfils its purpose;
- The correspondence of a story to anything else – most noticeably to “objective reality” is irrelevant, likely unmeasurable and often unhelpful; and,
- A purpose is a specified intent of some kind and may have a short or long life, may be broad or narrow and may be familiar or unfamiliar and much else.
Given that some sort of beginning is required, this will start things moving.
Some other points will be set out to amplify the above. These will also be incomplete, but their purpose is to lend some flesh to the bare bones laid out above.
Why reform is demanding
As NZ struggles to reform the RMA, some idea of the impact of NIMBY problems as well as the catyclismic events required to nullify them can gained from this:
The London Blitz and the NIMBYs
by Tyler Cowen December 11, 2021 at 2:16 pm in
NIMBYs can be so bad that they make the London Blitz look good:
We exploit locally exogenous variation from the Blitz bombings to quantify the effect of redevelopment frictions and identify agglomeration economies at a micro-geographic scale. Employing rich location and office rental transaction data, we estimate reduced-form analyses and a spatial general equilibrium model. Our analyses demonstrate that more heavily bombed areas exhibit taller buildings today, and that agglomeration elasticities in London are large, approaching 0.2. Counterfactual simulations show that if the Blitz had not occurred, the concomitant reduction in agglomeration economies arising from the loss of higher-density redevelopment would cause London’s present-day gross domestic product to drop by some 10% (or £50 billion).
Here is the full paper by Gerard H Dericks and Hans R A Koster, via tekl.
Volcanic Analysis
Matt Levine at Bloomberg is likely one of the best analysts Wall Street has. He is shrewd, unpretentious, on the money and his written output – daily – would easily match Tyler Cowan’s reading speed. He has a great description of El Salvador’s move to adopt bitcoin as its monopoly currency. It is “millennial capture” thumbnailed into a couple of thoughts and expressed succinctly….
“[T]his is an example of market segmentation by standing in front of a PowerPoint presentation at a Bitcoin party wearing a backwards baseball cap. This is market segmentation by slapping a cool name — “Volcano Bond” — on a bond that is strictly worse than a readily available alternative. This is market segmentation by combining a normal thing with (1) crypto and (2) a huge markup, and then marketing it to crypto people who want to pay the huge markup not to buy crypto (they can just buy crypto!) but to buy into a crypto adventure.”
While there is little doubt that digital currency will expand and perhaps clear the stage of other dangerous political instruments while shutting down the “Fed Watcher” industry to all our benefit…. There are likely to be stumbles along the way. Matt’s eyes are a great means for watching this. See Matt Levine – Bloomberg
No Full Substitutes
“You can’t replace reading with other sources of information like videos, because you need to read in order to write well, and you need to write in order to think well.”
— Paul Graham
One reason is that:
Writing is often the process by which you realize that you do not understand what you are talking about.
Unfortunately and an Eternal Curse
“a salutary lesson [is] that good economics often makes for poor politics. Especially when there is a trust deficit between the key stakeholders and the government; and the politics is partisan and non-consultative.” BBC 20-11-2021
Piece of classic Coltrane
Branford Marsalis, age 27 at the time, on a relaxed version of the classic…… Newport at it’s best. Branford Marsalis – Giant Steps – 8/26/1987 – Newport Jazz Festival (Official) – YouTube
Buy Now Regulate Later
The government has shown its typically regulatory interest in the burgeoning “buy now pay later” segment of the capital market. This “I can’t see the costs so it must be free” approach to relatively high risk easy come but not so easy go credit has been growing strongly in NZ just as it has elsewhere. Various “caring Ministers” have now shown considerable warmth to the idea of “saving” any poor darlings who get lost under this new money tree – and of course the weapon of choice is the fired up and ready to go legislative battery already operated by the various save our souls agencies.
There are, baldly, two choices here:
- Crunch all providers of any form of credit even handedly and thoroughly consistently, with the full blast of the “Ministers know what’s the best risk for you, what you can afford and what you need and I’m going to stop you and anyone trying to say otherwise from moving outside my plan for you.” The “here for you cradle to financial grave” approach to financial security – which is, incidentally, popular with providers since it tends to handily exclude the competition and lock in profit for the incumbent.
Or
- The far less popular, “time for some adulting. You know perfectly well there are no free lunches, and you know better than anyone else what you can and cannot afford. If you choose to disregard what you know in your head and your heart you stand to play your own Squid Game and lose. It has always been this way and with no “fools paradise regulation” to pretend to help you, you have learned how to deal with this. It’s a pain yes. But it’s realistic and long run you know you are better off”.
Unsurprisingly neither providers nor politician are in favour of this second approach. It generates competition, there are no babies to be kissed, it calls for “do nothing” and providers must seriously look after their would-be borrowers.
Either choice demands absolute consistency (or its simply not equitable or “fair”), serious enforcement (not cherry picking what regulators figure they can win in court) and it needs to provide disclosed risk low cost finance to those needing credit rather than a whimsical, dream on Yeah/Nah approach to capital.
Property Is Not Immediate Realisable Cash Wealth
This is the classic case of illusory wealth. ‘Level and trajectory’ of house prices creating risks for recent buyers – Reserve Bank Financial Stability Report (msn.com)
In the article there are two statements:
- Household wealth has grown by 27% so people have plenty of wealth and ability to withstand shocks. They then say more than half of this is through growth in home values – housing. That’s the RB
- Then Core logic say much the same. People have plenty of scope because their property has risen in value and they are wealthy.
NONE of that is liquid. It is not cash. It depends on
- The housing market staying up there
- Strong liquidity in housing markets
- Willingness of credit providers to take illiquid houses to secure the credit card
BUT
- You cant sell “bits” of houses
- A house takes six (6) weeks to settle…. No money for 6 weeks
- When liquidity drops vendors fix that by selling for less and prices go down
- So attempts to “drive liquidity into the market” reduce prices
The problem then is that lending is secured against illiquid assets which cannot be readily crystallised into cash in a timely fashion.
Property increases may produce a number of things. Immediately Realisable (liquid) Cash is not one of them.
Certainly an Historic Agreement
Global “leaders” (politicians) have reached the momentous decision to increase the tax on “big business” by 15% so as to improve the overall state of the world https://www.rnz.co.nz/news/world/454581/g20-climate-and-covid-19-also-on-agenda-as-world-leaders-meet.
Presumably the resulting revenue will be applied to “good works”. Even in New Zealand (one of the most tax efficient countries) each dollar of revenue raised by tax costs around $1.20 to raise – or “put in a dollar get $0.80”. At the same time there is the minor issue of reducing the incentives, passion and capacity of the world’s most successful enterprises by some significant amount to be ultimately born by their consumers who get to pay for this thereby reducing such contribution as they choose to make.
The remuneration of those reaching this historic agreement is of course funded by taxes.
The Rich Failing to Get Richer but the Poor ?
One longstanding and popular, even appealing and logical sounding to many, myth is that some immutable law means that the rich get ever richer while the poor get poorer. While the evidence has, for some 500 years or more, suggested that this is likely to be cute but wrong, the appealing doomsday characteristics of this tale has led to its continued popularity.
The last 8 years or so have shown that for the US at least, a more balanced state of affairs seems to exist in respect of growth.
The rate of growth in median income for the poorest quartile in the US is now just on twice that of the the rate experienced by the richest. Back in 2017 the numbers were similar across the divide, while in 2013 growth rates favoured the rich. As ever seems to be the case the melodramatic is trumped by observed data. For those in the poorest quartile that is good news just as it may be bad news for the attention seekers in so many media.
Eye2theLongRun 