Category Archives: Growth & Innovation

External Impacts and the NZ Economic Growth Rate

This entry was posted in Growth & Innovation, Macroeconomics & Money on by .

Prepared May 2004, with thanks to Les Oxley.

Keywords: Growth & Innovation; Macroeconomics & Money;

This paper is an econometric successor to my 1997 book In Stormy Seas, and my 2004 lecture The Development of the New Zealand Economy. I pointed out there that post-war New Zealand GDP grew at broadly the same rate as the rest of the OECD except to the extent the export sector experienced changes in profitability indicated by the terms of trade and the real exchange rate.

Some Comments About the Theory and New Zealand Economic Growth

This entry was posted in Growth & Innovation, History of Ideas, Methodology, Philosophy on by .

Formal contribution to the MED Panel on economic growth: 24 March, 2004.

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

In the last three weeks we have had three interesting introductions to elements of growth theory. I do not see them as independent paradigms contesting with one another, but rather they are different facets of a more comprehensive growth theory. One thing which came through clearly, is that Solow’s neo-classical model of growth, now 45 odd years old, was both a powerful stimulus to growth theory, but very deficient. Much of the work of the last five decades has been trying to overcome those weaknesses. Many remain unresolved, and the empirical underpinnings of growth theory are still tenuous. Yet we tend to lapse back into a pure Solow model with its high degree of aggregation and vague notions of technology.

The Development Of the New Zealand Economy (short Version)

This entry was posted in Growth & Innovation on by .

Paper for the Ministry of Economic Development Seminar Series: 25 February, 2004.

Keywords: Growth & Innovation

Notes: This is a the short version (about a third of the original’s length) of The Development of the New Zealand Economy.

1. The Political Economy of New Zealand’s Economic Development
2. Changing Sectors
3. The Course of GDP
4. The Long Run: 1861-2003
5. The Post-war Era
6. The 1966 External Shock and After
7. Explanations for the Slow New Zealand per capita GDP Growth
8. Non-Explanations for the Slow New Zealand per capita GDP Growth
9. Some Errors of Method
10. What Happened After 1984? Why the Great Post-War Stagnation?
11. The Importance of Thinking Sectorally
12. The Next Political Economy?
13. Conclusion

The Development Of the New Zealand Economy (i)

This entry was posted in Growth & Innovation on by .

Paper for the Ministry of Economic Development Seminar Series: 25 February, 2004.

Keywords: Growth & Innovation

Notes: This is a long paper, and is in two parts. There is a short version (of about a third the length). Despite its length, many of the arguments have had to be abbreviated. Some guidance is given in the text of web references where there is greater detail. More material will be found in the Index of New Zealand’s Economic Performance. The foundation source is the book “In Stormy Seas”

Go to Part II

1. The Political Economy of New Zealand’s Economic Development
2. Changing Sectors
3. The Course of GDP
4. The Long Run: 1861-2003
5. The Post-war Era
6. The 1966 External Shock and After
7. Explanations for the Slow New Zealand per capita GDP Growth
8. Non-Explanations for the Slow New Zealand per capita GDP Growth
9. Some Errors of Method
10. What Happened After 1984? Why the Great Post-War Stagnation?
11. The Importance of Thinking Sectorally
12. The Next Political Economy?
13. Conclusion

Appendix: Rankings and Relativities
Appendix II: Recent Developments in the Terms of Trade

The Development Of the New Zealand Economy (ii)

This entry was posted in Growth & Innovation on by .

Paper for the Ministry of Economic Development Seminar Series: 25 February, 2004.

Keywords: Growth & Innovation

This is a long paper, and is in two parts. This is the second part. Go to Part I. There is also a short version (of about a third the length).

Despite its length of the long paper, many of the arguments have had to be abbreviated. Some guidance is given in the text of web references where there is greater detail. More material will be found in the Index of New Zealand’s Economic Performance. The foundation source is the book “In Stormy Seas”

Part II consists of

10.What Happened After 1984? Why the Great Post-War Stagnation?
11.The Importance of Thinking Sectorally
12.The Next Political Economy?
13.Conclusion

Appendix II Recent Developments in the Terms of Trade

A Blooming Future: Are We Up to a Good Flower Show?

This entry was posted in Globalisation & Trade, Growth & Innovation on by .

Listener 10 January, 2004.

Keywords: Globalisation & Trade; Growth & Innovation;

The Netherlands produces annually about $9 billion of flowers and related products, of which it exports almost $8 billion (and imports and exports another billion). In contrast, New Zealand exports a paltry $70m. The difference is all the more astonishing because Michael Porter in The Competitive Advantage of Nations argues that the Dutch have no comparative advantage in the growing of flowers. Rather, they have built up a technological excellence and maintain a quality edge at the forefront of world production and distribution.

Punishing Exports: How Our Monetary Policy Inhibits Growth.

This entry was posted in Growth & Innovation, Listener, Macroeconomics & Money on by .

Listener: 20 September, 2003.

Keywords: Growth & Innovation; Macroeconomics & Money;

Remember the teacher who put the whole class into detention because of the misbehaviour of some rowdies at the back? Exporters have a similarly bitter view of the Reserve Bank (RBNZ). It has maintained a high base interest rate (coming down slowly) because the domestic rowdies have been putting inflationary pressure on the economy. Relatively high interest rates affect the rowdy businesses, but also the rest of the economy, especially exporters, because high interest rates tend to push up the exchange rate and reduce the profitability of exporting.

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

This entry was posted in Growth & Innovation, Listener on by .

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.

The Sectoral Approach to Economic Growth

This entry was posted in Growth & Innovation on by .

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 by .

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 by .

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 by .

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 by .

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 by .

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.

Intervention and Innovation

This entry was posted in Growth & Innovation, History of Ideas, Methodology, Philosophy on by .

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.

Is Small Beautiful?

This entry was posted in Growth & Innovation on by .

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.

Competitive Advantage

This entry was posted in Growth & Innovation on by .

Third draft of Chapter 6 of Transforming New Zealand. Comments welcome. (Second Draft).

Keywords: Growth & Innovation;

What determines a successful exporter? (Observe the question is in the Porter approach that ‘firms, not nations, compete in international markets’, although we shall see that national economic policy has a role.) The list is long and includes the right product, advanced and advancing technologies, a capable work force, effective marketing and distribution, entrepreneurial initiative, good fortune … However, the single most important requirement is medium term profitability. If the business is not getting enough revenue to pays for its inputs and its debt servicing, it will eventually go bankrupt.

Exporting and Growth

This entry was posted in Growth & Innovation on by .

Third draft of Chapter 5 of Transforminng New Zealand. Comments welcome. (Second Draft).

Keywords: Growth & Innovation;

As a general rule, but not exclusively, the sectors which can grow fast in New Zealand – faster than the rest of the economy – are exporting. Indeed world trade – exports and imports – grows about as twice as fast as the world economy (we mention below why this should be so). The export sectors have a key role in the growth of small open multi-sectoral economies, drag the domestic economy along with them, accelerating its growth rate, while largely funding the imports which also tend to grow faster than the rest of the economy. However not all exports can be accelerated.