Author Archives: Brian Easton

The Exchange Rate (index)

This entry was posted in Index, Macroeconomics & Money on 26th July 2003 by Brian Easton.

Keywords: Macroeconomics & Money;

A correspondent, R.B. Chrystal, to The Listener asked

Why do we have a floating currency and what advantage is it to the country in general? To me it seems that all it does is allow another tier of parasites, ie currency speculators, into the system as well as create more uncertainty for our exporters. The strength or weakness of our dollar seems to bear very little relationship to the strength or weakness of our economy, as was touted when it was floated.

My answer, published in The Listener of 1 August 2003 is given below. Go to Brian Easton’s response I asked another economist to look at my reply. He thought it fine but also offered his account, which does not address the respondent’s question directly, but gives greater insight into official thinking. Go to another economist’s response <

Performance Anxiety: Why Incentive Systems Often Fail

This entry was posted in Education, Listener, Regulation & Taxation on 26th July 2003 by Brian Easton.

Listener 26 July, 2003.

Keywords: Education: Regulation & Taxation;

In one of his witty essays in The Intellectual in the Marketplace, George Stigler describes a fictional Latin American university whose vice-chancellor aimed to raise the quality of the academic staff by a system of competitive exams. In order to win, the academics gave up teaching, so the system was changed to provide incentives to teach well. A further change had to be made to incorporate research achievement. Each time the ‘contestants’ found ways around the rules, the system was distorted and goals not attained. Eventually the VC moved on, to a position where he is as conservative as his radical reputation allowed, and his old university lapsed back to its traditional ways.

University Financial Statements, Operating Surpluses, and Student Fees

This entry was posted in Education, Governance on 18th July 2003 by Brian Easton.

Prepared for some members of the councils of Tertiary Educational Institutions. (The choice of the VUW accounts to illustrate the general issues is fortuitous, and is not intended to reflect in any way – positively or negatively – on the university.)

Keywords: Education: Governance;

Statement of Financial Performance

Debates about student fees usually focus on the ‘Statement of Financial Performance’ which describes the revenue and expenditure of the Tertiary Educational Institution (TEI). However we shall see that other accounts are also important in order to understand this one. Table 1 shows the 2002 Statement of Financial Performance for the Victoria University of Wellington (VUW).[1] Its website is where you can find the details. (Attached to most line items is a ‘note’ which it is always wise to check when if you are interested in that line.)

Road Signals: Who Should Pay for Traffic Decongestion?

This entry was posted in Environment & Resources, Listener on 12th July 2003 by Brian Easton.

Listener 12 July, 2003

Keywords: Environment & Resources;

In a typical year motorists drive 3.6 percent more kilometres (more than the growth of GDP), while the road network hardly increases. It might seem a good thing that we are using our roading capital more intensively. Unfortunately road-use does not follow standard market behaviour, so the ‘good thing’ is also the economic ‘bad’ of increasing congestion. Once that congestion occurred in a few hotspots, in the morning commuter rush hour, and most particularly in Auckland. Today Wellington and Christchurch seem to have congestion for long periods in the day, while many Auckland roads are congested from dawn to dusk (and after in winter).

A Visit to Poyais

This entry was posted in Business & Finance, Listener, Political Economy & History on 5th July 2003 by Brian Easton.

Review of SIR GREGOR MACGREGOR AND THE LAND THAT NEVER WAS: The Extraordinary Story of the Most Audacious Fraud in History: David Sinclair (Review $59.99)
Listener 5 July 2003.

Keywords: Business & Finance; Political Economy & History;

The story told here is so extraordinary that I wondered whether the book was a hoax. Its writer, David Sinclair, is a reputable English financial journalist with non-fiction books to his credit (notably The Pound: A Biography), but belongs to a profession which often has a hankering for fiction. However, his key references appear in international bibliographies, while a Google search found independent mention of the country of ‘Poyais’ about which the fraud occurred.

Deflating News: Just How Sick Is the World Economy

This entry was posted in Macroeconomics & Money on 28th June 2003 by Brian Easton.

Listener 28 June, 2003.

Keywords: Macroeconomics & Money;

Even the International Monetary Fund is beginning to talk about the possibility of world deflation, that is the general level of prices falling over the medium term. Although the tendency over the last thousand years has been for inflation (rising prices), deflation with slightly falling prices has happened: notably in England during the twelfth and fifteenth centuries, from 1660 to 1730, and during the life of Queen Victoria. There have also been sharp price falls for short periods – most memorably in the 1930’s depression. (My source is David Hackett Fischer’s splendid The Great Wave: Price Revolutions and the Rhythm of History.)

The Irish in New Zealand: Historical Contexts and Perspectives

This entry was posted in Political Economy & History on 14th June 2003 by Brian Easton.

Brad Patterson (ed). An unpublished review written in June 2003.

Keywords: Political Economy & History;

There are probably as many New Zealanders of Irish descent as there are of Maori descent – around 600,000 or 15 percent of each. But historian Edmund Bohan reminds us in this stimulating set of essays from a seminar in 2000, of a question posed by Patrick O’Farrell (who contributes a personal reflection on being New Zealand Irish). ‘How was it that New Zealand’s history came to be hijacked by English?.’

Recipe for Greed: What Will Happen in Iraq May Be What Happened in Russia

This entry was posted in Growth & Innovation, Listener on 14th June 2003 by Brian Easton.

Listener 14 June 2003.

Keywords: Growth & Innovation;

Americans take great pride in their role in the rehabilitation of Japan and Germany after the Second World War. Each went through great trauma – famine in Japan, inflation in Germany – but today they are generally respected members of the world community in contrast to their dreadful records before their reconstruction, and are the second and third to largest economies in the world.

Listener Publications (index)

This entry was posted in Listener on 9th June 2003 by Brian Easton.

The following consists of all the Listener columns, feature articles and reviews published on the website, in chronological order. All the items since 1998 are there, plus a selection of those published earlier, beginning with the first one in December 1977.

The New Zealand Listener Home Page

(The first 76 columns up to January 1981 were published in Economics for New Zealand Social Democrats.)

The Sectoral Approach to Economic Growth

This entry was posted in Growth & Innovation on 7th June 2003 by Brian Easton.

Chapter of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome.

Keywords: Growth & Innovation;

It is dangerous to focus – as the last chapter had to – solely on the aggregate economy. Being excessively aggregate means that some of the most important features of the economic transformation are ignored, especially how a small part of the world economy – New Zealand – can grow at a different rate from the world as a whole. The growth occurs in businesses, and so we need to think about how businesses grow. However being too disaggregated can also lead to misunderstandings. Some businesses grow at the expense of others, as they increase their market share. But we need not be detained by such activities despite their being important in terms of inter-business competition, indicative of business striving.

Theories Of Economic Growth

This entry was posted in Growth & Innovation on 7th June 2003 by Brian Easton.

Chapter 3 of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome.

Keywords: Growth & Innovation;

As in most human endeavours, a historical perspective is invaluable, especially since economic thinking on growth has evolved over the last forty odd years. Historically, economists concerned with economic growth focussed on the accumulation of capital. But in the 1950s there were two major developments in economic thinking about growth. The first, which had a microeconomics focus, was concerned with the allocation of inputs into production and the outputs that were produced. The second was concerned with the more aggregate (macroeconomic) concerns of technical progress. Each has an important role for capital accumulation, but it had a less important role in economic growth than in earlier theories.

Three Detailed Appendices to Chapter 2

This entry was posted in Growth & Innovation on 7th June 2003 by Brian Easton.

Appendix 2 of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome. (Some of this may be too technical to publish)

Keywords: Growth & Innovation;

Appendix I: The Maddison-OCD Data Base

Angus Maddison has provided a annual data base for production and population of the world economy between 1950 and 1998 (with some data going back to the beginning of the Common Era, but not continuously). [A. Maddison (2001) The World Economy: A Millennial Perspective (Development Centre Studies, OECD]

New Zealand’s Post-war Gdp Performance

This entry was posted in Growth & Innovation on 7th June 2003 by Brian Easton.

Chapter 2 of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome.

Keywords: Growth & Innovation;

This chapter looks at New Zealand’s post-war economic performance via the measure of GDP per capita. It does not consider the relevance of the measure – the topic of the next Chapter – but we note here that Gross Domestic Product (GDP) is the standard international measure of output, in which the net value production of each market sector of the economy is aggregated together and (for international comparative purposes) valued at a standard set of international prices (a phenomenon which is indicated by the expression ‘purchasing power parity’ (PPP) prices). The effect of using the same prices for every year is that year to year changes measure the volume of production (or real output) independently of inflation.

The GDP Target

This entry was posted in Growth & Innovation on 6th June 2003 by Brian Easton.

Appendix 1 of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome.

Keywords: Growth & Innovation;

The growth debate in New Zealand assumes an appropriate economic target is per capita Gross Domestic Product, or GDP. This appendix pays little attention to the population dimension of the target, but it looks at, as intensively as space allows, GDP. Initially it explains what the concept is, what was the measure’s original purpose – understanding the business cycle, and how it became interpreted to have a broader meaning – as a measure of welfare. Then the chapter looks at some of the criticisms of the measure – most notably its coverage and its distribution. However far more important is the extent to which it actually measures a nation’s welfare. The evidence is that it does not.

The Point Of It All

This entry was posted in Growth & Innovation on 6th June 2003 by Brian Easton.

Chapter 1 of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome.

Keywords: Growth & Innovation;

The Purpose of Policy

Asking about the purpose of public policy is only a little less frustrating than asking about the purpose of life. But if we dont ask either question we may lock ourselves into paths which are patently wrong. There is a danger of New Zealand doing this, if public policy focusses exclusively on maximizing material output, as measured by GDP or one of its related indicators.

Working with Technological Innovation

This entry was posted in Labour Studies on 3rd June 2003 by Brian Easton.

Chapter of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome.

Keywords: Labour Studies;

The endogenous account of technical change means that all workers are involved in the application of new technologies. It is not a matter of some white-coated workers turning up at the warehouse taking the blueprints and handing them over to business that put them smoothly into practice. In practice workers can be intimately involved with the technology transfer process.

Intervention and Innovation

This entry was posted in Growth & Innovation, History of Ideas, Methodology, Philosophy on 3rd June 2003 by Brian Easton.

Chapter of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome.

Keywords: Growth & Innovation; History of Ideas, Methodology & Philosophy;

Underlying much modern economic analysis is a faith in the efficacy of the market, which Adam Smith attributed to an invisible hand which promotes a beneficial end which is not the intention of those involved in the market transactions. Actually, his much cited ‘invisible hand’ includes support for domestic over foreign investment which suggests that the future customs officer was not quite the free-marketer his followers attribute to him. Indeed scholar Emma Rothschild, observing he mentions the invisible hand only three times in all his writings, suggests he was being ironical. Even so, Smith’s conjecture led economists to wonder to what extent the market promotes a common good.

Infrastructure

This entry was posted in Business & Finance, Environment & Resources, Globalisation & Trade on 3rd June 2003 by Brian Easton.

Chapter of TRANSFORMING NEW ZEALAND. This is a draft. Comments welcome.

Keywords: Business & Finance; Environment & Resources; Globalisation & Trade;

One of the curiosity of standard economics as it is presented to the public and, indeed, often as it is taught, is the neglect of transaction (and information) costs. Ronald Coase, recipient of a Nobel Prize in economics in 1991, for some seminal insights (identified 30 years earlier) into the way that economic behaviour is modified by them. The section on the Resource Management Act below, sketches the insight. Subsequently, a handful of economists, most prominently Joe Stiglitz who received the Nobel Prize in 2001, have elaborated their role. In fact a considerable amount of government activity is focussed on reducing transaction costs, despite their role often being overlooked. All the more puzzling because those most involved in the economic debate – economists, accountants, bureaucrats, lawyers, politicians, even managers of businesses – are at the transacting end rather than the providing end, of the economy.

Is Small Beautiful?

This entry was posted in Growth & Innovation on 3rd June 2003 by Brian Easton.

Draft Chapter 10 of Transforming New Zealand. Comments welcome.

Keywords: Growth & Innovation;

New Zealand economics suffers from a cultural cringe. Much of the debate is dominated by an idealised model of the American economy. Very little thought is given to in what ways the New Zealand economy differs from the US economy, other than to assume that th differences are unfortunate and must be addressed by making New Zealand more like America.