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  • rmacculloch

A nice, down to earth article has appeared in Stuff on the solution to the shortage of water in Auckland. It is written by Eric Crampton and is called "Water is too precious to be so cheap".

Instead of rationing, Auckland should be better pricing water. Cheap prices encourage the wasteful use of water. And for those who worry that low income folks may do worse under higher prices, then think again. The extra revenues gained from the wealthy who are using lots of water to fill pools and water gardens could be used to grant rebates that would make low income consumers better off than they are under the current system. Here is Eric's full article:

  • rmacculloch

Last week, a famous US economist, Alberto Alesina, died suddenly. The NZ Labour and National Parties should take note of what he stood for at this time of massive public spending and borrowing which will double, if not treble, public debt. To the extent that the Covid 19 package, so far, has offered relief to the vulnerable, it is to be commended. However, to the extent it marks a permanent return to big government, then beware.

Alberto was known for arguing that cuts in high levels of public spending can increase private consumption and investment, leading to a boom. Why? It may lead to a view that taxes are not going to rise, or may even fall. He called this an "expansionary fiscal contraction".

The same logic implies that our government should already be turning its attention to prioritizing quality spending. A signal that it intends to pay off our ballooning debt by cutting wasteful and non-essential programs may lead to more investment and higher growth. But signs that our debt will be paid down by hiking taxes may dampen the economy.

Both of our major political parties are presently looking like taking NZ down the latter route.

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Robert MacCulloch

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