Category Archives: Business & Finance

Bursting Out: Don’t Panic – the US Slump Might Be a Good Thing in the Long

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Listener 31 March, 2001.

Keywords Business & Finance; Macroeconomics & Money

As I write, there is vigorous debate about the current US economy downturn. In the jargon the question is whether it will be a V, U or L – the second half of each letter indicating a quick rebound a slow rebound, or a drawn out depression. It is noticeable that informed opinion is moving towards the more pessimistic end of the possibilities, although most commentators currently reckon on the U rather than the L.

There Is a Jungle out There

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The Stock Exchange is where small fry get eaten by lions

Listener 17 March, 2001.

Keywords Business & Finance

There is no necessity for a stock exchange. In the early days, people traded shares by personal contact. But shares could not be readily bought or sold, and investors could not readily liquidate their investments. The stock exchange created a common knowledge of prices and availability. It became easier for corporations to raise risk capital, because investors were more willing to put their money in, knowing it was easier to get it out. Businesses could raise equity for a new venture or major extension. Banks provide the additional funds at a lower cost, because the shareholders took the risk.

Metrology and the Economy (lecture)

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Paper to the National Measurement Conference, 14 July, 2000.

Keywords Business & Finance

In October, the Mars Climate Orbiter spacecraft burnt up in the Martian atmosphere because the acceleration data for controlling its thrusters had been provided in pounds of force (US customary units) but entered into the space craft’s computer as newtons (the SI unit). Little information was obtained from the trip, so most of its $US240 million was a complete waste. This is a spectacular example of how measurement failure can be costly, but in some ways it is misleading. The costs of a failure to have a sound measurement system are generally more subtle than that, as are the benefits. In total, a system failure from an inefficient measurement system may be relatively more expensive than the loss of a single spacecraft.

Pop Goes the Bubble? Think Of the Sharemarket As a High Chain Letter.

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Listener 9 October, 1999.

Keywords: Business & Finance;

Every time a share is sold, someone else buys it. So the dollars that someone puts into the sharemarket to buy shares equals the amount the ex-shareholders takes out. Suppose there are more people who want to put dollars in than who want to take them out. The potential buyers will have to give an incentive to some shareholders to turn their shares into cash. That inducement is the price of the share going up. So if cash is trying to get into the sharemarket, the prices of shares rise: if cash is trying to get out, they fall. However, in the actual trading the amount of cash that gets in equals the amount that gets out.

Electric Rhetoric: Sneering Instead Of Thinking

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Listener 17 July 1999

Keywords: Business & Finance; Regulation & Taxation;

Concerned with what he thought was the excessive influence of women in New Zealand poetry, Rex Fairburn, writing to Denis Glover in 1934, described them as the “menstrual school.” It was a silly gibe – an adolescent using words not then mentioned in polite company. The rhetoric was unforgivable, if far too typical of the New Zealand vice of pigeon-holing one’s opponents with a superficial personalised witticism, rather than cogently facing the issue being debated. That is exactly what a recent editorial of The Dominion did when it accused minister of energy, Max Bradford, of a “Return to Muldoonism”.

The Whimpering Of the State: Policy After MMP

This entry was posted in Business & Finance, Distributional Economics, Education, Governance, Health, History of Ideas, Methodology, Philosophy, Literature and Culture, Macroeconomics & Money, Political Economy & History, Regulation & Taxation, Retirement & Savings, Social Policy on by .


Auckland University Press, 1999. 269pp.

The policy process has changed dramatically following the introduction of MMP. Fascinated by the theatre of politics, we too easily ignore the major changes in policy approaches and outcomes. Today, without an assured parliamentary majority the government has to consult over its policies rather than impose them. Along with the increasing recognition that the policies of the past have failed, the policy blitzkrieg has almost ceased and commercialisation is being shelved.

The Whimpering of the State looks at the first three MMP years with the same lively, broad -ranging and informed approach as Easton’s successful The Commercialisation of New Zealand, which described the winner-takes-all regime before 1996. Again there are case studies: health, education, science, the arts, taxation. retirement policy, and infrastructure. Policy possibilities are explored. Yet, as the title of the book suggests, any releif from the ending of Rogernomics is offset be a realistic pessimism arising from a shrewd analysis of the continuing deficiencies in New Zealand’s political and social structure. Although written for the general public, this book will also be read by politicians, policy analysts and students, and will shape policy thinking in the MMP era. Publisher’s Blurb

Weighing It Up: a Case for Government Intervention

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Listener 27 March 1999.

Keywords Business & Finance; Regulation & Taxation

Just suppose there was no government agency concerned with accurate weights and measures. How would you know that the `kilogram’ of the bananas you were buying weighed a thousand true grams? You could carry you own scales. Not trusting the draper when you want to buy two metres of cloth, better carry your own ruler. A few percent difference – the butcher’s thumb on the scales – may be the difference between profit and loss, between whether the customer gets a fair deal or is ripped off.

Tales Of Soes: a Review Of Books About Corporatisation

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Listener 30 January, 1999.

Keywords: Business & Finance; Governance;

One of the great upheavals of the 1980s was the `corporatisation’ of the state owned enterprises (SOEs). Following widespread concerns in the late 1970s, the 1984 Labour Government reorganized the government’s businesses into private corporations in every aspect except that the shareholders were a couple of government ministers. As many as seven major studies have been published on corporatisation. What can we learn from them?

The Casino Economy: Using Other People’s Money to Become a Millionaire

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Listener 5 December, 1998.

Keywords: Business & Finance

Use $20,000 to deposit on a $100,000 house, borrowing $80,000 from the bank. Get a friendly valuer to say the house is worth $200,000. Get the bank to lend you another $80,000 against the value of the house (so you have a mortgage of $160,000). With the $80,000 of cash the bank has just given you, buy another four $100,000 houses, borrowing another $80,000 on each house. Get your pet valuer to double the price of the four new houses, so your houses are now worth a $1,000,000. You can borrow an extra $320,000. Repeat.

History Repeats: when Will Financial Markets Ever Learn?

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Listener 21 November 1998.

Keywords: Business & Finance

Desperately keen to go to a film in a fire-prone theatre, you choose a seat which gives you a good view, near an exit. A fire starts during the screening. You head for the door, and are crushed as everyone else does too. Your mistake is the “fallacy of composition”: that which applies for the individual, may not apply if every individual acts on it. One of my earliest lessons in economics seems forgotten today.

Heretic to High Priest: Krugman ‘sort of’ Predicted the Asian Crisis Three Years Earlier

This entry was posted in Business & Finance, Globalisation & Trade, History of Ideas, Methodology, Philosophy, Listener, Macroeconomics & Money on by .

Listener: 15 August, 1998

Keywords Business & Finance, Globalisation & Trade, History of Ideas, Methodology & Philosophy, Macroeconomics & Money

“A decade ago, he was the most celebrated heretic. Today, Paul Krugman is the high priest of economics, his career transformed by the unintended consequences of his own iconoclasm. Some of his radical instincts remain; but they now serve a different purpose. The vigour with which Krugman once probed the outer limits of economics is now used to protect its core values. Through his popular writings, he defends the dismal science by exposing fallacies in the public discussion of economics issues.” (Prospect, April 1998)

Notes for a Presentation on Maori Exporting

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Presentation to a TPK seminar. June 1998.

Keywords: Business & Finance; Globalisation & Trade; Growth & Innovation; Maori;

The Maori economy has made exceptional progress in recent years. Preliminary figures from the 1996 Population Census show that the numbers of Maori employed have grown considerably faster than the Maori adult population, and that additional employment has tended to be in the better quality jobs: more at the managerial level, more involving greater skills. Job growth has also been strong in those industries to which the Maori has given priority: agriculture, forestry, fishing, and tourism. (See the attached table.) In summary the Maori Development Strategy of upgrading Maori skills, increasing Maori work experience, and emphasising Maori business in key growth industries has been extremely successful.

Deals for the Dealers: How Financiers Were Saved After the Crash

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Listener 1 November, 1997.

Keywords: Business & Finance;

The 1987 crash was devastating to the New Zealand financial sector. Debts of many corporations now exceeded the market value of assets, which had been bought at greatly inflated prices (or in the case of financial assets, were valueless when the issuer went bankrupt). Moreover, the financial sector makes it money from financial dealing. The margin charged on any deal is narrow, but when there are plenty during a boom, the pickings are rich. After a crash, deals dry up, and so does the revenue of the financial sector. Many institutions went to the wall, and their workers joined the unemployed from the productive sector. Except for those who specialised in corporate liquidations, the rest took pay cuts, and returns on their investment were low and zero. Some firms just squeaked through.

Boom and Bust: Can We Learn from the 1987 Crash?

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Listener: 18 October, 1997.

Keywords: Business & Finance;

In the weekend after the sharemarket crash of October 1987 I read every book on financial crashes I could find. Unlike too many advisers and commentators I knew this was “it”. Earlier I had written how the relationship between share prices and company earnings (profits), “the P/E ratio”, was well above historical trends. That meant that the return from investing in shares was from capital gains, not from their earning real income from productive assets. (But it was only afterwards I realized that the earnings being reported by many companies was based on the capital gains they were making out of their share trading, so a true P/E ratio was even more exaggerated than I thought.) The market was being driven by blind greed, feeding the fickle bubble of speculation. When the bubble bursts, prices crash. If history warns that collapses followed such booms, reviewing past experiences might tell about the economic fallout, and even how to avoid future disasters.

Money Speaks: The Information Battle Is Now Fought in the Market Place

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Listener: 14 June,1997.

Keywords: Business & Finance; Literature and Culture;

Once it was “knowledge is power”, so the powerful kept the knowledge from the populace. Integral to the evolution of democracy was the making available of that information to everyone. Perhaps the high point was the 1982 Official Information Act (OIA), which makes it much easier to find out what the government is doing – or not doing.

Callovers, Chalkies & Chips:

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Once Upon A Time You Could See the Stock Market.
Listener: 19-26? April, 1997.

Keywords: Business & Finance; Globalisation & Trade;

While economists talk about “markets”, and business commentators personify them, it is rare to be able to see one as they are described in the textbooks. The stock market, which buys and sells company shares once had such a visible presence. David Grant’s book Bulls, Bears, and Elephants: A History of the New Zealand Stock Exchange is rich with stories of share market dealing – not all of which were honourable. It also pictures the stock market through time.

Profit or Public Good: There Is Logic to Roger Kerr’s Views on Business Respon

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Listener 15 March, 1997

keywords Business Economics & Finance; History of Ideas, Methodology & Philosophy

This column agrees with Roger Kerr, the executive director of the Business Roundtable, that “we should not confuse corporate social responsibility with gestures such as saving endangered species or sponsoring Christmas concerts in the park. If they are honest, most businesses that make these efforts admit they do to add value to their firm or brand.”