The continuing delusions of Gareth Morgan: Part XVIII, The RMA edition
Readers, I ask you: Can Gareth Morgan still be taken at all seriously?
Since the day he sat in a spa pool sipping a well-earned champagne after his son’s sizeable sale to Fairfax, Captain Morgan has spiralled swiftly downhill. He’s now such a rum old bloke you’d think he was swallowing the giggle juice by the gallon.
There is no topic on which he hasn’t voiced an opinion, without seeming to ever trouble himself with either facts or fruitful thinking first.
Today, his chosen topic is the RMA and the housing crisis. The latter, declaims the Captain from the pulpit of the NBR, has nothing to do with the former. Just as my nickname for this gobshite has nothing to do with my total disrespect for his acumen.
The words “nothing to do with” are Captain Morgan’s. As in “The housing crisis has nothing to do with the RMA.” Or as in ‘housing prices have nothing to do with restrictions in housing supply,’ which is what his argument amounts to. Or as in, ‘prices have nothing to with supply,’ which is the economic argument this alleged economist is actually making.
Because he is not saying the price of X has very little to do with the supply of X. He is saying it has nothing to do with its supply, or any restrictions thereof.
Gareth Morgan was once thought to be an economist. Yet we don’t even need to know much about the RMA (which Gareth doesn’t) or to embrace the most sophisticated economic arguments about how prices are formed (which Gareth’s either forgotten or is too soused to remember) to know there’s something wrong with his bald and bungling mis-statement.
The most sophisticated economic argument about how prices are formed might include a distinction between two kinds of markets: those in which a good’s supply is severely restricted (in which case, like Remuera property and rare Grand Masters, the bidding war from buyers prevails), and those in which a good’s supply is unrestricted and the good is virtually reproducible at will (in which case, like hamburgers and the Houston housing supply, the cost of their production looms large). In both the distinction and the manner in which prices are formed then, supply has everything to do with it.
But we don’t even need to go all they way there, because as old economist Alfred Marshall used to say, the twin forces of supply and demand are like the blades of a pair of scissors. We don’t need to inquire which blade cuts our hair, any more than which of supply and demand primarily set our prices: both do the job.
In other words, supply always and everywhere has at least something to do with prices. (If you still don’t believe me, just imagine that all new housing supply in a city had ceased altogether after an earthquake, say, and everyone in the city was bidding on the diminished and now somewhat rickety supply.)
So let’s say it again: supply always and everywhere has at least something to do with price.
But our Gareth knows better. In his mind, and from his pulpit he declares, that housing prices have nothing at all to do with restrictions on supply, and the minister of housing should therefore and henceforward cease fretting about them.
The mad man is waving around a scissor with only one blade.
The fool and former economist uses the phrase “no-brainer” in his piece. That accurately describes the grey matter used to write it.
But to paraphrase something Ayn Rand used to say, never bother to examine a folly, ask yourself only what the mutt is trying to achieve.
What he’s trying to pull down, still, is a a capital gains tax.
He may or may not believe a word he says on this subject or any other – and whether he does or not, it’s safer just to ignore every one of them – but he does believe ever asset-owner everywhere should be soaked should their assets rise in monetary value.
So asset owners everywhere should beware. Because there is a flatulent fool on the loose, and he still has influential friends …