Patrick Honohan recommends an amendment to allow for a two-part pricing schedule in today’s Irish Times: you can read it here.
Month: August 2009
RAND recently held a conference on the implications of behavioural economics for financial decision making. Among the talks include Sendhil Mullainthan on behaviourally informed financial regulation. All of the videos are available below including talks by Richard Thaler and others. The main implication so far of this literature is that consumers make relatively predictable mistakes when making financial decisions and that various ways of simplifying the choices involved and making them more active can improve people’s lives and the functioning of markets. People should watch some of the videos before making up their mind. The simplistic arguments about paternalism do not apply here in the same way as they would to arguments around policy proposals such as mandatory pensions.
Addendum: The NBER have also posted up a number of very useful videos on how to implement experimental methods in real-world economics.
While there has been a lot of discussion of the draft NAMA legislation’s definition of long-term economic value, there has been very little attention paid to its clause discussing current market values.
There are two interesting aspects to the discussion of market value. First, there is the fact that it is being discussed at all. We know that there is a very limited number of transactions in the current market for development and investment property, so it might have been expected that the government would fall back on the claim that there was no market as a justification for moving straight to the dreaded long-term economic value. (And indeed, the Minister for Finance, did mention illiquidity on Morning Ireland despite its absence from the legislation.)
Second, there is the wording of what is meant by current market value. The legislation defines it as
the estimated amount that would be paid between a willing buyer and a willing seller in an arm’s length transaction where both parties acted knowledgeably, prudently and without compulsion
This sounds eminently reasonable doesn’t it? The parties are acting knowledgeably. They are being prudent. Presumably, then, they are aware of the stuff discussed in the long-term economic value definition—that the current crisis will abate and the financial system will become stable—and are factoring this into their decisions.
The Irish Times reports
Tax revenues collected by the Government up to the end of July are €575 million lower than the Department of Finance expected a little over three months ago, with the shortfall in receipts trebling over the last month.
DoF report here.
This looks like bad news but I have to admit that short-term revenue forecasting spreadsheets are not one of my hobbies. So, anyone with better expertise than me care to weigh in? What’s our 2009 budget deficit looking like after this?
The US debate on how to tackle its high public debt has expanded to take in some non-orthodox solutions:
U.S. Government Stages Fake Coup To Wipe Out National Debt