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The Dominion Post of Friday 18 April had a front page article on congestion charging for the Wellington region at peak commuting times. Congestion charges have much theoretical merit, but the conditions under which they deliver are beneficial are not that easy to assess. As I read through the article I became progressively more concerned about the proposed scheme. Let’s start by looking at those aspects of the proposed scheme that really are complete rubbish.

The government is looking for a way to cut taxes within the confines of its “four conditions”. Given the difficulty associated with achieving these conditions through personal income taxes, it is possible that the government may look at other forms of tax cuts, such as reducing the GST rate. However, any belief that a reduction to the rate of goods and services tax will be more likely to satisfy these conditions is misguided.

There are parallels between the struggles of the Southland economy and New Zealand’s struggles in an international context. Southland is isolated, its climate is challenging, its population and market is small, and agriculture is a big part of its economy. But through wise use of their resources and some smart choices, Southland has been able to turn itself around. As a nation we can learn from that.

The cost of propping up rail over the past fifty years can probably be totted up but it would be a disheartening job. Whatever the result the message is likely to be that rail, in its present form, is not a viable business in New Zealand. There may well be a case for subsidising urban passenger rail services and it’s not the focus of this article. But it’s well past time to take a hard-nosed look at the rail freight business in this country.

The mainstream acceptance of both the scientific consensus on global warming and the need for a globally binding cap on carbon emissions does not by itself indicate that we are close to reaching a satisfactory solution to climate change. The optimal policy response is still subject to massive uncertainty from three sources: risk around our central forecast of climate change costs, uncertainty about the cost of reducing emissions, and uncertainty about how we should share the cost burden.

In the last few weeks my colleagues, Gareth Kiernan and Adolf Stroombergen, have discussed the importance of what economists call allocative efficiency – ensuring that the nation’s resources flow into those activities where they are most valued. I continue with that theme. My aim is to present a measure of how big a deal allocative efficiency is for the New Zealand economy.

Last week my colleague Gareth Kiernan discussed the importance of what economists call allocative efficiency – ensuring that the nation’s resources can flow into those activities where they are most valued. A pre-requisite to achieving such an outcome is clear and consistent price signals. An area where pricing is rapidly becoming neither clear nor consistent is carbon pricing.

Last week we examined the importance of productivity in boosting New Zealand’s overall economic wealth, focusing heavily on the processes within business activity.  But economy-wide productivity is not just about the efficiency with which we produce certain goods and services.  Just as important in creating economic wealth is the decision about what to produce in the first place.

Improving the productivity of the New Zealand economy is often touted as the key to raising our standard of living from its current position in the bottom half of the OECD.  Grasping the “work smarter, not harder” mantra would seem to be particularly apt for a country where average working hours are among the longest in the world.

The recent hot summer has not only been bad for my skin, but for famers as well. A drought has reduced production of agricultural goods, undermining a major source of New Zealand export income. Furthermore, growth in both the number of people and cows has begun to stretch the water infrastructure in some regions, suggesting that a longer-term problem of water shortages beckons. When an economist hears the word shortage there is one thing we think – put the price up. So it is about time we set a price for water, by establishing a market.