Another angle on inequality

09/03/2014

Most discussions on inequality focus on income, and pre-tax income at that.

There is another angle on the topic:

. . . If you measure consumption inequality, it is far lower than pre-tax income inequality, because the top 40 per cent of earners pay more in than they get out, while the bottom 60 per cent get more out than they pay in. Indeed, in Britain the top 1 per cent generate about 30 per cent of the total income-tax haul. After such redistribution, the richest fifth of the population has only four times as much money to play with as the poorest fifth. . . .

This comes from a post by Matt Ridley who points out that poverty and inequality are both falling.

. . .  by any conceivable measure, absolute poverty has fallen dramatically over the past few decades, so why should it matter if the rich get richer? Today’s British poor spend half as much of their income on food and clothing as in the 1950s, while working many fewer hours, living about eight years longer and having access to phones, cars, medicines and budget airlines that would have amazed even the rich in the 1950s.

Moreover, here’s a question I’m willing to bet that chimpanzees would do better than people at: given that inequality has been rising recently in China, India, America and many other countries, is global inequality rising or falling?

The answer: it’s falling and has been for several decades, however you measure it. The reason is that people in poor countries are getting richer more quickly than people in rich countries are getting better off.

That fall in global inequality has accelerated since the start of the financial crisis. As Africa now experiences record rates of growth, the number of people trying to live on $1.25 a day is plummeting fast. Mr Rosling likes to show two charts in his talks: the graph of global income was once a two-humped camel; now it’s a one-humped dromedary, with the vast majority of the world’s people in the middle.

Here’s another question that I fancy the chimps would beat the people at: did poverty and inequality in Britain increase or decrease as a result of the recession? The answer is that both fell. Inequality has fallen to levels not seen since the mid 1990s, as it usually does during recessions, though it is still higher than it was in the 1970s. Meanwhile the Left’s favourite measure of poverty — those earning less than 60 per cent of the median income — has by definition gone down, because median income has gone down. Redefining poverty in this relative (and very inadequate) way has therefore rather backfired. . .

A percentage of median income is a very blunt instrument with which to measure poverty because a fall in the incomes of higher earners will improve the measure but make absolutely no impact on the problem.

As poverty and inequality improve the differences between rich and poor become less obvious:

Imagine being told that one of the people in a meeting is a genuine billionaire (I owe this idea to Professor Don Boudreaux). How would you tell which one? His bodyguards, private jets and grouse moors are outside the room; his shirt and jeans are unlikely to give him away (as they would in 1900); his Rolex could be a cheap imitation; his teeth, girth and height are probably unremarkable (unlike in 1800); even his Diet Coke is the same as everybody else’s. Much more than in the past, most inequality in this country these days — though by no means all — is in luxuries, rather than necessities.

That helps to explain why some welfare is now directed at people who already have more than enough, though it doesn’t make it any more right.

. . .  does income generally grow faster for people in the lowest fifth of the population or people in the highest? It’s the lowest, because many of those people are young, low-paid people just starting out on their careers, while many of the richest fifth are older people at the peak of their pay, about to retire. That is to say, the category “poorest fifth” may not seem to show much change, but the people in it do. Income mobility is far from dead: 80 per cent of people born in households below the poverty line escape poverty when they reach adulthood.

Mobility is very important. It’s not just how much people have which matters but the ability for those with less to get more.

But why, when both poverty and inequality are declining are both regarded as more serious issues?

None of this is meant to imply that people are wrong to resent inequality in income or wealth, or be bothered about the winner-take-all features of executive pay in recent decades. Indeed, my point is rather the reverse: to try to understand why it is that people mind so much today, when in many ways inequality is so much less acute, and absolute poverty so much less prevalent, than it was in, say, 1900 or 1950. Now that starvation and squalor are mostly avoidable, so what if somebody else has a yacht?

The short answer is that surely we always have and always will care more about relative than absolute differences. This is no surprise to evolutionary biologists. The reproductive rewards went not to the peacock with a good enough tail, but to the one with the best tail. A few thousand years ago, the bloke with one more cow than the other bloke got the girl, and it would have cut little ice to try to reassure the loser by pointing out that he had more cows than his grandfather, that they were better cows, or that he had more than enough cows to feed himself anyway. What mattered was that he had fewer cows.

For some the problem isn’t how much they have but that others have more.

If they use that to motivate themselves to improve their situation that can be good.

If it just makes them resentful and feel they’re owed more, even if they have enough, it’s  merely envy.

Hat Tip: Anti Dismal


Free trade is only real fair trade

31/07/2013

Fair Trade – that’s got to be good, hasn’t it?

No.

Over at Anti Dismal, Paul Walker discusses an article in The Economist by Amrita Narlikar and Dan Kim which argues that like a lot of other ideas that sound good in theory,  it does more harm than good in practice:

Despite the claims of its champions, the fair-trade movement doesn’t help alleviate poverty in developing countries. Even worse, it is just another direct farm subsidy of the kind most conscientious consumers despise. In the long term, the world needs free trade, not fair trade. . .

The stated purpose of the fair-trade movement is to give economic security to producers in developing countries — often of unprocessed commodities such as fruits, live animals, and minerals — by requiring companies and consumers to pay a premium on the market price.

Until now, any questioning of the fair-trade movement has been limited to the micro level. The movement has faced repeated criticisms, for example, for the relatively expensive fees that producers must pay to get a fair-trade label, which make it ineffective for many poor farmers. Another area of concern is just how lucrative the process is for middlemen and retailers. Finally, several studies show that very little of the premium that consumers pay actually reaches needy producers. Consumers might be surprised to learn that only one or two percent of the retail price of an expensive cup of “ethical” coffee goes directly to poor farmers.

The adverse effects of fair trade are even more worrying at the macro level. First, fair trade deflects attention from real, long-term solutions to rural poverty in developing countries; and second, it has the potential to fragment the world agricultural market and depress wages for non-fair-trade farm workers. . .

Walker points out in spite of the marketing which tries to convince consumers that Fair Trade is good for producers, they get only a tiny percentage of the money made:

An interesting statistic is that in 2010, retail sales of fair-trade-labelled products totalled about $5.5 billion, with about $66 million premium — or about 1.2 percent of total retail sales — reaching the participating producers. There has to be a better way of helping poor farmers. Having only 1.2 cents out of every dollar spent on fair-trade products reach the target farmers is a hugely inefficient way of helping these people. If people wish to help these farmers there has to be charities out there that can transfer more than 1.2 cents per dollar to them.

Also a more efficient and straightforward way to help poor farmers is to remove the massive OECD subsidies and tariffs we see on agricultural products. In other words, a move towards free trade is needed.

Fair Trade has a powerful brand but it’s not one which really helps producers.

They, and consumers, would have much more to gain from free trade, which is the only real fair trade.


Less bureaucracy more trade

10/06/2013

Quote of the day:

. . . the findings that apply to foreign trade will also obviously apply to the inland trade as well. The more bureaucracy there is then the less trade will get done: the simpler (or less of it) the bureaucracy there more trade will get done. And as it is indeed trade that produces economic wealth this would make us all richer.

What’s really interesting about the less bureaucracy on foreign trade results is that small firms gain as well as large. Thus we’re not seeing the small guy being trampled when the big boys are let off the regulatory leash.

So, there really seems to be no reason at all why we should not reduce bureaucracy in order to make us all richer. And those bureaucrats will now have to go and do something useful for a living: shame, isn’t it? Tim Worstall

He was opining on Anti Dismal’s post Making trade easier and less bureaucratic actually helps trade.

 


Rural round-up

20/10/2012

Kiwifruit breeder honoured for $3 billion contribution:

The inaugural kiwifruit industry award – the Hayward Medal – was presented last night to a kiwifruit breeder whose work has added around $3 billion to the industry and the New Zealand economy, Russell Lowe from Plant & Food Research.

The new award is named after another great horticulturalist and kiwifruit breeder, Hayward Wright, whose innovation and contribution established the industry. The kiwifruit Industry Advisory Council (IAC) established the Hayward Medal and IAC chairman Bruce Cameron presented Russell with the award at Zespri’s kiwifruit industry conference Momentum, saying his work defined the kiwifruit industry. . .

Commission releases draft report on first statutory review of Fonterra’s milk price manual

The Commerce Commission has today released a draft report on its first statutory review of Fonterra’s milk price manual. The manual determines how Fonterra calculates the farm gate milk price, which is the price paid by Fonterra to dairy farmers for their raw milk.

This is the first of two statutory reviews that the Commission is required to undertake each milk season under the 2012 amendments to the Dairy Industry Restructuring Act 2001 (DIRA).

This first statutory review requires the Commission to report on the extent to which Fonterra’s milk price manual is consistent with the purpose of the milk price monitoring regime. The purpose of the regime is to promote the setting of a farm gate milk price that provides incentives for Fonterra to operate efficiently while providing for contestability in the market for the purchase of milk from farmers. . .

Why co-operatives in farming? – Anti-Dismal:

A few days ago Ele Ludemann at the Homepaddock blog noted that Co-ops key to feeding world and in a sense she is right. Co-ops are more common in argiculture than any other sector of the economy. The big question is Why?

To see why start from the idea that there are two basic ways to organise production, via contracts or via ownership. So what are the costs of each? First consider the costs of contracting. In farming one reason for the formulation of co-operatives was monopsony power. Farming is a business with many producers of highly homogeneous commodities. It is one of the most competitive of all industries. In contrast, the middlemen-handlers and processors – who purchase farm products are often highly concentrated and hence have the potential for exercising a degree of monopsony power over the farmers they deal with. Such monopsony power can be accentuated by seasonality or perishability of agricultural products. . .

Moovers and shakers in dairy industry – Linda Clarke:

Rakaia dairy farmers Rebecca and Brent Miller live in a fish bowl.

Their 1070-cow farm borders State Highway 1 just north of the Rakaia overbridge, and every man and his dog can see what they are up to.

Rebecca says the couple jokes about living in the limelight, but they farm with pride, knowing the cows and land they manage are scrutinised regularly by passing dairy farmers and are often photographed by tourists, who are taken by the green grass, black and white cows and snowcapped mountains. . .

Meatworks plans for Chathams – Gerald Piddock:

The viability of a meat processing plant on the Chatham Islands will be decided by its farmers later this month following the completion of a study into the feasibility of the facility.

The study was finished last Friday and will be presented to the Chatham Islands Enterprise Trust committee later this week.

From there it will be discussed with the islands’ farmers and other interest groups over the next fortnight, Chatham Islands Enterprise Trust chief executive Brian Harris said. . .

And from Facebook:


Greens want to keep milk price high

22/08/2012

Remember how the Green Party was concerned about high milk prices in New Zealand and wanted something done to make it cheaper?

They’ve changed their tune now and want to keep Canadian milk prices artificially high.

They don’t say that explicitly but that’s what their oppositionto the Trans Pacific Partnership  which would remove agricultural regulations such as Canada’s supply management system for dairy, which aims to preserve farmers’ livelihoods would do.

These farmers’ livelihoods are being paid for through higher prices for dairy products paid for by tax payers and consumers.

A free trade deal which opens the Canadian market to dairy products from other countries – including New Zealand and their closest neighbour the USA – would improve the range and lower the prices for consumers.

It would make life more difficult for some Canadian dairy farmers just as removing subsidies in the 80s did for farmers here, but I don’t know a single farmer who wants the protection back.

Once  Canadian farmers adjust they’ll find they are much better off answering to the market rather than to politicians and bureaucrats and consumers. If they’re not they’ll follow market signals and swap to a different land use from which they can make a decent living without the need of protection or subsidies; or they’ll sell to someone who can cope with the real world.

As Anti Dismal says:

 . . . Some Canadian farmers can’t make a living without regulation and protection, so they should be doing something else. Also the farmer’s lifestyle is costing Canadian taxpayer a huge amount. De-regulation would remove much of these costs to the Canadian taxpayer.

Hasn’t Metiria noticed that New Zealand de-regulated its farming in the 1980s, and yes some farmers went under, but today farming is better and stronger then it ever was under the old protection and regulation regime. . .

Kiwiblog nails it:

. . . So the NZ Green Party is against NZ dairy farmers being able to have fair access into Canada!!! Their concern is to protect inefficient subsidized Canadian farmers, not to help NZ farmers export more milk. . .

. . . The Greens basically don’t like trade. They voted against the FTA with China which has seen us export an extra $12 billion to China since it was signed. They want Canada to keep up its tariffs of up to 300%.

As the most remote developed country in the world, trade is vital to our future. Yet, the Greens want to kill it off. . .

The Green party wanted New Zealand farmers to subsidise New Zealand consumers when the price of milk increased here. Now they want Canadian taxpayers and consumers to keep subsidising Canadian farmers and keep New Zealand produce out of that market.

Any subsidies or protection is unfair and expensive to taxpayers, consumers and other producers.

This is the party which says it promotes fair trade but it doesn’t accept that if it’s not free it’s not fair.


Make trade not war

18/06/2012

Make love, not war was a catch-cry of the 1960s.

Make trade, not war might not sound as good but trade is a very effective deterrent to hostilities:

If we were living in earlier times, our country would be a prime target for invasion and takeover.

Our combination of natural wealth and small population would put us square in the sights of a bigger, aggressive nation looking to expand. We would be Gaul to Caesar’s Rome, England to Canute’s Denmark.

Our luck in settling a fertile country watered by plentiful rain is envied by many.

As the foodbowl of the South Pacific, we are eyed by countries worried about their ability to feed a population growing in numbers and in quality of life. They show no inclination to invade, thank goodness.

The paranoid among us would point to a takeover by stealth through the purchase of farmland but I don’t see that.

We are beneficiaries of the generations who fought to ensure a country like ours could thrive unmolested. And, befitting such enlightened times, we share our wealth with those who would formerly have enslaved us. It’s called trade.

We don’t have a lot of food to trade but it is of the highest quality. Rightly, we have recognised that we can make the most of our natural resources by feeding the more discerning among the world’s consumers. . .

Trade beats hostility and if we can’t provide quantity we can provide quality.

And for anyone who extols the virtues of fair trade, the only true fair trade is free trade?

Hat Tip: Anti Dismal who added a quote from Otto T. Mallory:

If soldiers are not to cross international boundaries, goods must do so. Unless shackles can be dropped from trade, bombs will be dropped from the sky.


Consumers pay price for protecting producers

08/05/2012

The Canadian commitment to dairy farmers to continue protection is putting the interests of the minority ahead of those of the majority.

It’s consumers who pay the price of tariffs on dairy products of up to 300% . The cost isn’t only a monetary one, they also pay the price of fewer choices.

Most New Zealand farmers resisted being dragged into the real world but now, nearly three decades on, it would be difficult to find any who would want to go back to subsidies and tariffs.

The process of losing subsidies was painful but the result is worth it.

Forcing us to meet the market has made us much better at what we do. We think about, and act on, what people want to buy rather than what the government is going to pay us to produce. Consumers here and overseas have benefitted from that.

The only fair trade is free trade apropos of which Anti-Dismal shows how it started.


Whose money is it?

22/04/2012

Opponents to the sale of the Crafar farms to Shanghai Pengxin, and other foreign investment, talk about the owners taking money out of New Zealand.

But whose money is it?

Anti-Dismal clearly explains it’s ours and it’s useless anywhere else:

. . . Let us assume for a moment that these evil foreigners make a NZ$1 profit which, in an effort to piss-off Michael Fay, they wish to take it back to China. How do they do it? Clearly a New Zealand dollar isn’t worth anything in China so the Chinese holder of NZ currency will have to sell their NZ$1 to buy Yuan. But why would anyone want to buy said NZ$1? The only use for a NZ$s is to buy something made in NZ. Thus the buyer of the NZ$s must want it to buy a NZ export of some kind. What is Michael Fay’s problem with this? The NZ$1 doesn’t go overseas in any meaningful way, it gets spent on New Zealand produced goods and services no matter who gets the profits from the ownership of the farms. If a New Zealander gets the profits they spend them on New Zealand made goods and services, if a foreigners gets the profits they sell the NZ$s to someone who wants to buy New Zealand made goods and services.

In short New Zealand will not lose “around $15 million in earnings every year” if the Crafar farms are sold to the Chinese. For New Zealand’s wealth and prosperity, it does not matter where the profits  from New Zealand businesses end up. All that matters for the New Zealand  economy is that New Zealand remains a place where business transactions  take place – irrespective of who owns the business. New Zealand’s (real) wealth is the amount of goods and services produced each year, no matter who owns the business that do the producing. What we want is for firms to be owned by whoever will use those resources most efficiency, no matter what their nationality. Any investment that moves resources towards a more efficient use is a good investment for New Zealand, again no matter what the nationality of the investor . . .

The farms in question are already owned by foreigners – the banks which put the business into receivership.

If they were bought by New Zealanders, they’d be funded, at least in part by foreign debt, adding to our already heavily indebted state and paying interest to foreign-owned banks.

Why is paying interest to  foreign lenders not regarded as a problem if letting a foreign owner take some of the profit from their investment is so bad?


Finding the money to fatten the assets – UPDATED

12/11/2011

Quote of the day:

Once a basket case, Air NZ is now a prized asset – and it only got that way because we allowed private investment to fatten it up. We have capital-hungry assets that will lose value and even function if they don’t have serious money spent on them. But we can’t afford to feed them, because we’d have to borrow even more from overseas lenders to do so. Which is, of course, how we, and much of the developed world, got into the pickle we’re in now. Jane Clifton

This is a point that has escaped the parties and people opposing National’s plan to sell minority stakes in a few state owned enterprises.

The country is facing another two or three years of deficits so has nothing to spare for investing in SOEs to help them grow.

If a minority share isn’t opened up to other investors the government will either have to increase its borrowing or let the assets stagnate or go backwards.

Neither of those is a sensible or desirable option for the companies or the country.

Even if the government’s accounts were back in surplus, would investing in these companies be better use of the money than improvements to health, education and other areas which could make a positive difference to the lives of us all?

Every dollar can be spent only once.

Letting individuals and organisations feed a few energy companies with their spare cash allows the government to put its dollars to better use elsewhere.

UPDATE:

While much has been made of the expected price for the partial sales, Anti-Dismal points out that’s not as important as improvements to the efficiency and productivity of the economy.


Rural round-up

05/07/2011

Young Farmer contest #5 Will Grayling – RivettingKate Taylor:

Photos make the world go around…. here’s a selection of photos of Will in action at the 2011 National Bank Young Farmer Contest in Masterton over the past week – Wednesday’s welcome at the Masterton Town Hall where Will’s likeness to Prince Harry was first mentioned; Thursday’s technical day at the historic Brancepeth homestead and the speech back at the Solway Copthorne; Friday’s practical challenges, head to head (s) and agrisports at the Solway Showgrounds and finally the evening show at the new Wairarapa College auditorium. . .

Politicos turn to the land – Sally Rae:

Everyone, it seems, is the farmer’s friend – after all, it is election year.

Act New Zealand leader Don Brash probably summed it up best at Federated Farmers national conference in Rotorua when he said those attending would be “enduring a procession of politicians”. . .

Fonterra to pour $250m into Darfield – Tim Cronshaw:

Dairy giant Fonterra wants to pour another $250 million into trebling milk production at its Darfield site with a new dryer vying to be the largest in New Zealand.

The co-operative entered talks about stage two of the project with neighbours at a community meeting yesterday and is about to begin the consent process. The plan is to have the second dryer built by 2015 as the $200m site, still being constructed, is expected to be at full capacity by then.

 German investors pay $33m for farm – Collette Devlin:

A German investment management company is now possibly the largest player in rural land in Southland after it spent $33million to buy a dairy farm at Dipton.

Aquila AgrarINVEST Investitions Gmbh was granted approval under the Overseas Investment Act to secure the acquisition of rights or interests in up to 100 per cent of the units of Glencairn Ltd Partnership, which owns or controls a freehold interest in 1401ha of an existing dairy farm. . .

Following role models could double NZ food production:

Following role models could double NZ food production

New Zealand could produce enough food to feed around 40 million people if every farm performed at the same level as the most profitable, said Ballance Agri-Nutrients Chairman, David Graham.

He was speaking at the Ballance Farm Environment Awards annual showcase held in the Hawke’s Bay on 25 June.

“New Zealand currently produces enough food to feed approximately 20 million people. We know our most profitable farms achieve an economic farming surplus of $3,500 per hectare, yet the average farm achieves just over $2,000 and about half of all farms are operating below this.

“To double the amount of people we can feed we must lift our production by working on assisting the bottom half of this bell curve to lift its game.” . . .

My word, look – speculation works – Tim Worstall:

This followed a report on Thursday that showed US farmers had planted more corn than analysts had expected and that stocks of the grain were higher than forecast across the US.

Corn futures fell more than 6pc on Friday, bringing the fall since a US report was issued to about 10pc. . .

The Great corn con – Steven Rattner:

FEELING the need for an example of government policy run amok? Look no further than the box of cornflakes on your kitchen shelf. In its myriad corn-related interventions, Washington has managed simultaneously to help drive up food prices and add tens of billions of dollars to the deficit, while arguably increasing energy use and harming the environment.

Even in a crowd of rising food and commodity costs, corn stands out, its price having doubled in less than a year to a record $7.87 per bushel in early June. Booming global demand has overtaken stagnant supply. . .

Hat tip:  Anti-Dismal


Economic literacy

06/06/2011

My decision to study what was then called Stage I Economics at university was not made for the best of reasons.

Lecutres were at 11am and the other subjects I was considering all had 9am lectures.

I took the later start and managed a B- in the final exam by choosing to answer questions which required the use of words rather than numbers.

Either I took in and retained more than I thought or luck was on my side when I got 12/13 in an economic literacy test (missed one by not reading answers carefully).

If I scored that well the questions can’t be very difficult but the average score in a poll commissioned by the Federal Reserve Bank of Minneapolis was only 45%.

Hat tip: Anti-Dismal


Did you see the one about . . .

22/05/2011

The tertiary education conundrum – Mydeology thinks it’s time for a rethink.

I wannabe a pseudo scientist – has Michael Edmonds got a deal for you!

21 accents – Zen Tiger on 21 ways to say . . .

If you want a hundred trillion dollars – Anti-Dismal on hyperinflation.

What makes some people vote – Lindsay Mitchell on the power of positive personality.

Science journalism is not the same as science – Larvatus Prodeo on the science news cycle.

91863 – Credo Quia Absurdum Est deals with a spam phone caller and also has a funny story about Mummy’s job.


Rural round-up

03/04/2011

Current season better than last – Allan Barber blogs:

After what all processors termed a challenging season last year, the mood this season is decidedly more buoyant after a solid first four months when dry weather throughout the country produced good stock flows. Regular rain since early February in the main farming regions has slowed things down a bit, but the onset of autumn and the dairy cow cull will ensure reasonably consistent livestock availability without any likelihood of a seasonal peak.

Showing ’em how – Martin van Beynen reckoned mustering was easy:

I am often asked for advice – as in “How would you like your face smashed in?” – so it was no surprise when Steve Palmer and Kara Lynn sought my help for the autumn muster on their high- country station, Tinline Downs, near Waiau in North Canterbury.

Steve and Kara had heard about my mustering expertise via an article in this newspaper about Lakes Station near Lake Sumner.

In the course of investigating a controversial gate on a paper road, a photographer and I found ourselves in the middle of a muster run by the legendary Ted Phipps, who owns the Lakes Station with Chief Justice Sian Elias.

One of Phipps’ farmhands, a raw young lad, took exception to the position of our vehicle, blaming it for the way some of the sheep were returning through a gate.

This was nonsense, of course, and I attempted to explain that the problem might, in fact, be a lack of dogs or men behind the sadly disjointed mob coming up the road. 

This advice came from the benefit of many years mustering our eight chooks and the flock of sheep – so vast that we knew the name of each individual – on my parents’ 10-acre block.

The advice was taken very much in the spirit in which it was intended, and some very rude language ensued.

Then Phipps arrived, and some more rude language followed, in which the word “townie” was used in a less than favourable way. . .  

The original story which prompted the invitation to muster is here.

NZ wool carpets and rugs launched in US:

New Zealand rugs and carpets using strong wool drawn from Wool Equities Ltd and New Zealand Romney suppliers will be unveiled in prestigious US stores on Friday.

The Just Shorn collection will be launched surrounded by in store displays including wool bales, woolshed doors and videos of New Zealand farmers telling their stories about working with sheep and wool. About 30 rug stores and 85 carpet stores in the luxury IDG chain (part of CCA Global) will feature the collection. . .

Steve and Jane win first East Coast environment award – rivettingKate Taylor posts on the Wyn-Harris’s win:

Congratulations to Steve and Jane Wyn-Harris – the inaugural winners of the East Coast Ballance Farm Environment Awards.

You know, I’m actually looking forward to not typing that ECBFEA phrase for a while! . .

US milk production – shouting down the suply chain – Dr Jon Hauser at X-Cheque blog writes:

If you are into numbers, the trends in demand and supply are a fascinating topic and especially when you apply the concept to the dairy industry. The theory is simple – an increase in demand allows prices to rise, encouraging supply growth. As stocks and supply increase to the point of excess prices fall resulting in a contraction of supply and reset of the supply demand balance. The reality is a long way from simple and that has certainly proved to be the case in our research on the US dairy market. . .

Better communicaton = better in-calf rates – Pasture to Profit writes:

I’ve just seen a simple idea to improve communication between staff on a pasture based spring calving dairyfarm in Dorset, UK. This came to light at the “Realfarmer” discussion group…..a group for Herdsmen & Herd Managers/farm staff on pasture based dairy farms. “Tail Tape Id”…. yes that’s right “Tail Tape Id”! . . .

This is one for the X-files – Anti Dismal writes:

There have been some seriously weird things said about the price of milk recently but this comment in an article from stuff.co.nz has to be the strangest yet:

Dairy market heavyweight Fonterra is artificially inflating the price of milk in New Zealand in a deliberate campaign to lessen competition, says an official complaint to the Commerce Commission.

Now I can not for the life of me see how inflating the price of milk can lesson competition.

We wrote about the milk price investigation here, all very exciting.

However, a new article on the stuff site started with this:

Dairy market heavyweight Fonterra is artificially inflating the price of milk in New Zealand in a deliberate campaign to lessen competition

What?  This is beyond my understanding – I need someone to get in here and explain to me how increasing the wholesale price of milk will lead to a reduction in competitive pressures.

There have been some seriously weird things said about the price of milk recently but this comment in an article from stuff.co.nz has to be the strangest yet:

Dairy market heavyweight Fonterra is artificially inflating the price of milk in New Zealand in a deliberate campaign to lessen competition, says an official complaint to the Commerce Commission.

Now I can not for the life of me see how inflating the price of milk can lesson competition. . .

The Visible Hand in Economics has similar thoughts in a couple more points on milk:

We wrote about the milk price investigation here, all very exciting.

However, a new article on the stuff site started with this:

Dairy market heavyweight Fonterra is artificially inflating the price of milk in New Zealand in a deliberate campaign to lessen competition

What?  This is beyond my understanding – I need someone to get in here and explain to me how increasing the wholesale price of milk will lead to a reduction in competitive pressures. . .

GE – 10,000 years in the making – Jon Morgan writes:

Pamela Ronald is trying to talk around a mouthful of kiwifruit, yoghurt and muesli. She’s eating breakfast at the Intercontinental in Wellington and it’s the only spare time she has in a busy round of media interviews and public meetings before flying to Auckland for a conference.

Between bites she talks about food.

“I’ve just spend a few days with friends in the Bay of Islands. They fed me really well and everything I ate, except the fish, was genetically altered.”

No, it wasn’t a meal of secretly imported food from a country that allows genetic modification. It was food bought in the local supermarket.

“Everything we eat that is farmed is genetically altered,” she explains.

“It is just the result of a long line of 10,000 years of gene manipulation.”

She should know. She is professor of plant pathology at University of California’s Davis research campus. With husband Raoul Adamchak, she has written Tomorrow’s Table on the worlds-colliding idea of integrating genetic engineering with organic farming. . .

Shearing captial’s title takes a serious hit:

Te Kuiti’s quarter-century boast to being the shearing capital of the world took a hit when young Hawke’s Bay-based Far North gun Rowland Smith won the New Zealand Open final in the town’s Cultural Centre last night, without a single local hope in the final field.

For the first time since the event was revived in 1985, there were no Te Kuiti or other King Country shearers in the big final. It is thought also to have been the only time the field did not include Te Kuiti icon David Fagan, who was eliminated in the afternoon’s semi-finals.

Stirring anthem written for vegetables #997 at Will Type for Food:

We are the turnips my friend
We’ll keep on growin’ till the end . . .

(This could be a winner in Southland during Swede season).


Trade makes both parties better off

21/02/2011

Prime Minister John Key spelled out the benefits of trade in his opening address to the US-NZ Partnership Forum:

The US is New Zealand’s third-largest trading partner.

Two-way trade between our countries was worth more than NZ$7.5 billion last year.

The US is a major market for our export products, both agricultural and industrial, and a major source of imported commodities and inputs to production in NZ.

It’s also our second-largest source of foreign investment and third-largest tourism market.

And, at the same time, it’s our second-largest destination for overseas investment, and our third-most favoured destination for New Zealanders on short trips overseas.

Our economies are closely linked.

As we recover from the economic downturn, it’s vital that both of our countries support international trade, including through negotiation of free trade agreements.

With a population smaller than that of many cities in the USA we have a lot to gain from free trade but, contrary to the views of protectionists, trade benefits both partners.

Anti Dismal says:

 Economists never tier of telling people that trade makes both parties better-off, but to no avail people still see countries as competing.

But we don’t compete with other countries, this is a false analogy that comes from thinking that countries are like firms, they’re not. As, even, Paul Krugman has said, A Country Is Not a Company. The point is that Coke and Pepsi, for example, do compete, one gains at the others expense, but New Zealand and Australia, for example, don’t, their loss is not our gain. International trade is not a zero-sum game. To see this, note that while Coke may wish to put Pepsi out of business, so that Coke can increase their sales and prices and therefore profits, New Zealand would not gain if we put Australia “out of business”.

Why? Well in the Coke/Pepsi case, Coke gain a lot, in terms of sales and profits, from not having Pepsi to complete with and lose little since Pepsi doesn’t buy much , if anything, from Coke. Or Coke from Pepsi. This is not true of the New Zealand/Australia example. We may gain some sells if Australia stopped producing, but we would lose much more. Australia is our biggest export market and if they “went out of business”, they would stop importing, and that would hurt us a lot. Also they are suppliers of much of our useful imports and that would stop too, which would hurt us even more.

If all the energy which went into protecting economies was put into freeing them instead we’d all be better off. The Partnership forum is another small step on the way to that goal.

Free trade brings more than economic gains.

Muray McCully said in his address to the forum:

Free trade deals, either now in operation or under negotiation, provide the framework for an even greater level of engagement in trade and economic relations.

With those trading relationships, closer ties of almost every type have been created.

New Zealand now has a huge stake in the stability and security of Asia and we have tried to reflect this in our participation in the evolving architecture of the region.

The decision of the United States to join the EAS brings with it a potential for those regional bodies to play an even greater and more effective role in delivering a stable prosperous region, providing a platform for improved economic prospects for all of its partners.

Economic prosperity and political stability, what’s not to like?


Short term gain long term pain on benefit

12/02/2011

Benefits aren’t designed to give recipients a very good living for a very good reason – that would be a disincentive to independence and mean low income working people were little, if any better off as wage earners than they’d be on benefits.

The ones who manage a two-year holiday on the dole are the exception and even those of us with Presbyterian upbringings who’ve had some experience of  living on a very low income would find it difficult to manage on a benefit for long.

Why then do some people see benefits not as temporary assistance through a bad patch, but a long term solution?

Anti Dismal has an answer:

The most compelling explanation for the marked shift in the fortunes of the poor is that they continued to respond, as they always had, to the world as they found it, but that we — meaning the not-poor and un-disadvantaged — had changed the rules of their world. Not of our world, just of theirs. The first effect of the new rules was to make it profitable for the poor to behave in the short term in ways that were destructive in the long term. Their second effect was to mask these long-term losses — to subsidize irretrievable mistakes. We tried to provide more for the poor and produced more poor instead. We tried to remove the barriers to escape from poverty, and inadvertently built a trap. – Charles Murray, Losing Ground, p. 9

 This is why the government is aiming to encourage those beneficiaries who could work to do so. It is in the best long-term interests of beneficiaries and the country to have more people independent.

That doesn’t mean it will be easy.

The job market is tight and many unemployed are unskilled. Some would find it difficult to juggle child care and work and might find the cost of child care took too much of their wages.

It might well cost more in the short term to help people into work than to have them on benefits but if it can be done it will be worth it for them, and the rest of us, in the long run.


Did you see the one about . . .

18/01/2011

Eat up those carrots – Michael Edwards at Molecular Matters (via Sci Blogs) – on the beauty benefits of caretenoids.

Wednesday whimsy Larvatus Prodeo has found the Cake Wreck Blog.

Judges rule on on landmark case of Sod’s Law vs Parkinson’s Law – News Biscuit reports from the court.

Politics is a poor process for resolving issues – Eye to the Long Run show how the market can be bettter than politics.

The crash from an Austrian perspective – Anti Dismal has six good points.

Tall toilet tales – Around the World  across the spectrum from low hygiene loos to high tech ones.


Recipe to make Adam Smith weep

18/01/2011

Take a  house once lived in by one of Scotland’s great thinkers, Adam Smith.

Set aside to deteriorate.

Throw in a rescue plan and the money to carry it out.

Beat with assorted regulations and bureaucracies.

Leave to stew.

The whole story is in The Scotsman, but it couldn’t happen here, could it?

Hat Tip: Anti-Dismal


Did you see the one about . . .

27/12/2010

Happy Solstice Day Larvartus Prodeo celebrates the solstice with photos. While there check out All I want for Christmas – a list of rights and freedoms which are priorities for modern living.

The story I can’t really tell – Liberty Scott reminds us not everyone is free.

Trade and Farming – Anti Dismal on which came first.

How economics saved Christmas – Roger Kerr with a different version of the Grinch Who Stole Christmas.

Policy implications of happiness – Offsetting Behaviour on  exactly what the title says.


Did you see the one about . . .

17/10/2010

Undo, cut, tape . . . wait that’s not right – old technology meets new at Something Should Go Here.

Graham Lay on New Zealand English – guest post at  Quote Unquote

My shoes don’t eat meat – Laughy Kate on vegan footwear.

The recession made us poorer – Macdoctor puts the blame where it ought to be.

Silver Ferns turn into golden ferns – RivettingKate Taylor shares her excitement.

Who is punching above their weight – Eye To The Long Run does the numbers on the Australian & New Zealand medal tally.

An alternative to Breakfast – the fifth of Keeping Stock’s daily posts for those missing Paul Henry.

If real wars were like trade wars -Cafe Hayek  shows how silly it all is (Hat Tip Anti Dismal). 

Who should pay for university – Anti Dismal on student loans.


Did you see the one about

23/09/2010

Same planet, different world Oswald Bastable on bookless homes.

Mapping internet sensation stereotpypes – Lucia Maria has found some new world wit.

Muppets in blue goNZo Freakpower casts the blue end of the blogosphere as Muppets.

How did the poor come to be poor – Anti Dismal on why understanding wealth matters more than understanding poverty.

Building inpsectors – Credo Quia Absurdum Est on why practical experience beats the a bloke with a folder.

Reaching Atip – Cactus Kate explains fashion week.

Be careful Gareth – Patrick Smellie on the fine line between integrity and hubris.


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