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Archive for the ‘Economics’ Category

Carbon Tax Nonsense

12 Jul

The Australian government recently announced their Carbon Tax plan – a tax of $23 per tonne of CO2 pollution applied to about 500 big companies, and compensation in the form of tax breaks and family assistance for low-income households.

There’s a lot of nonsense about the tax going around in the media and social media. Here’s my take on some of it.

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Is Australia’s Economy In Trouble?

15 May

Australia seems to have emerged from the Global Financial Crisis relatively unscathed. However, I recently read something that made me wonder – are we really in good shape at all?

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1 Comment

Posted in Economics

 

Carbon Taxes vs Emissions Trading Schemes

28 Apr

I had been planning to write a post explaining the logic behind a Carbon Tax or an Emissions Trading Scheme. The schemes are almost equivalent, and the way they work to reduce pollution is like this : by making it more expensive to pollute, people pollute less. If you make the cost of pollution equal to the damage pollution causes, then people only pollute when it’s actually worth their while to do so.

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A 90 Percent Tax???

28 Mar
Is it worth saving for the future?

Is it worth saving for the future?

Steve Landsburg, at his blog, tells a little fairy tale about taxes. His conclusion is that because some income gets taxed several times, a dollar earned today might be taxed at a rate of 95% before it gets used. A valid criticism of his parable is that it only applies to the uber-rich in the USA. Well, I decided to see how the fairy story would play out under different circumstances. Specifically,

  • Instead of taking place in the USA, the story below happens in Australia.
  • Instead of happening to one of the wealthiest of the wealthy, it happens to family on a mid-range income – a typical “Aussie Battler” as one Prime Minister Past was fond of saying.

So….

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The Magic of Prices

11 Mar
How can prices help produce things cheaply?

How can prices help produce things cheaply?

Prices are a lot more than people think. They are not just an amount of money. They are a powerful optimisation tool, designed to get things done as efficiently as possible. Consider this parable I wrote, arguing with someone who was trying to argue that we should do away with markets, trading and prices. I wanted to prove to him that letting people set prices and bargain, aiming to maximise their profits would achieve the same allocation of resources as the best centrally planned solution, but need less information to work.

To give credit where it’s due, this example is strongly inspired by one I found (I think) in this book.

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The Price Of Milk

10 Feb

One controversy that hit the news recently is the price of milk.

In short, the major supermarkets each have their own ‘generic’ milk brands. They also stock other milk brands. Recently, the major supermarkets started a price war, dropping milk to $1 per litre (down from $1.22 last year).

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Hatten Down The Batches!

03 Feb

On the 2nd of February, 2010, Cyclone Yasi plowed into northern Queensland. It was perhaps the largest and most powerful cyclone in Australia’s history. It cooked up, amongst other things, a social networking storm, with zillions of people around the world posting their opinions on Twitter and Facebook and other social media.

Cyclone Yasi - Salellite Pic by NASA

Cyclone Yasi - Satellite Pic by NASA

One of my friends set his facebook status to

I think it’s disgusting that some Queensland stores are charging ten times the usual price for Hatch Batteners. Good luck Queenslanders, our thoughts are with you.

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2 Comments

Posted in Economics

 

Better Than Interest Rates

08 Jul

In my past two blog posts, I explained how wage-based inflation is caused by a prisoner’s dilemma contest between millions of wage earners, and how the reserve bank uses interest rates to change the contest to force people to cooperate.

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Posted in Economics

 

Combating Employment

23 May

In my last post, I explained how inflation can be caused by people getting payrises without producing anything extra. If people can do this, it leads to a “prisoner’s dilemma” situation – if both players demand a payrise, both are worse off. If neither do, both are better off. If only one does, the guy who gets a payrise is better off, and the guy who showed restraint is worse off.

If there were only two workers in the economy, they could negotiate and come to some agreement. Unfortunately, in the real economy, there are more than two workers, and the payrise-inflation game becomes a multi-player prisoner’s dilemma.

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Posted in Economics

 

Inflation and the Prisoner’s Dilemma

01 May

To combat inflation, the reserve bank raises interest rates. Have you ever wondered why? What do interest rates have to do with inflation, after all?

At first glance, you might think raising interest rates should increase inflation. After all, when interest rates go up, zillions of people find their banks charging more interest on their mortgages. So : why do reserve banks raise interest rates to fight inflation?

The answer is surprising.

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