,
30 tweets,
7 min read
Read on Twitter
Another dodgy economic study of the oil and gas ban?
The next one will show the biggest hit to GDP is to the consultancies that do them.
The next one will show the biggest hit to GDP is to the consultancies that do them.
The analysis is here: pepanz.com/assets/Uploads…
@Jasonwalls92! What are you doing reporting a figure like $28 billion over 30 years? Undiscounted. Not an annual basis. Virtually meaningless.
Only a few comments on this one. It's not worth my time to go deeper...
...actually, it'll wait until tomorrow night. It's certainly not worth my time at this time of night.
Initial issues from last night's scan:
Summary: The NZIER report relies on the MBIE analysis. And so it makes all the same mistakes. (No questions are asked about the reliability of MBIE's analysis. This is reeeeally bad.)
Summary: The NZIER report relies on the MBIE analysis. And so it makes all the same mistakes. (No questions are asked about the reliability of MBIE's analysis. This is reeeeally bad.)
And when I say it makes the same mistakes, it makes some of them worse than the MBIE analysis, and makes entirely new mistakes.
The first curiosity is that it's an attempt to estimate the impact to the entire economy whereas the MBIE analysis was just Crown royalties and taxes.
Nothing wrong with attempting that. But they come up with a figure that is no higher (or only slightly higher) than MBIE's.
Nothing wrong with attempting that. But they come up with a figure that is no higher (or only slightly higher) than MBIE's.
Very strange.
Note: the $7.9b quoted from MBIE's report is a different set of assumptions than yesterday's $28b. There is no perfectly comparable numbers between the two reports, but when you find the most comparable numbers and make some guesstimates from there, you end up with
Note: the $7.9b quoted from MBIE's report is a different set of assumptions than yesterday's $28b. There is no perfectly comparable numbers between the two reports, but when you find the most comparable numbers and make some guesstimates from there, you end up with
about the same numbers.
Probably something about GDP accounting.
But what that means is that we can reasonably say that if we were to correct NZIER's report for the same mistakes MBIE made, we'd come up with with a cost to the economy of $16 million (with an m) per year.
Continues here:
$28 billion sure sounds like a lot thanks to adding things up over decades and using all sorts of dodgy assumptions.
$16 million per annum is the figure you want.
$16 million per annum is the figure you want.
Those dodgy assumptions are:
- that the world does nothing more than it was doing as at last year to avoid catastrophic climate change
- that the oil industry has no financial risk
- that the world does nothing more than it was doing as at last year to avoid catastrophic climate change
- that the oil industry has no financial risk
The report then, even after all the dodgy calculations, goes on to present the numbers against other for comparison.
But it does stuff like compare the cost over 30 years to NZ's GDP in one year (not over 30 years).
But it does stuff like compare the cost over 30 years to NZ's GDP in one year (not over 30 years).
Ganesh won't criticise the way NZIER has done the GDP analysis on other grounds (like the ones above) becasue BERL does the same for its clients.
They (economic consultancies) all do. Commercial economists are largely broken.
They (economic consultancies) all do. Commercial economists are largely broken.
One last point, the view by NZIER reported in some media that emissions won't decrease is not new analysis - they've just restated the same wrong finding from MBIE.
This kind of stuff is so shady. The $28 billion is over 30 years. Our current GDP right now is $300 billion per year. If it doesn't grow at all, that's $9,000 billion over 30 years.
$28 billion is 0.3% of $9,000 billion, not 5.4%.
$28 billion is 0.3% of $9,000 billion, not 5.4%.
If you like misleading infographics, this report has it.
Here's a big number, and it's going to impact on households.
Here's a big number, and it's going to impact on households.
It's the reduction in GDP per Taranaki household over 30 years, but the report (correctly) earlier notes that consumption per household is a better measure. The consumption impacts are two thirds less than the GDP impacts ($9.4 billion versus $28 billion).
And none of this is risk-adjusted. This all carries a zero discount rate - as if the expected returns from oil exploration are certain.
They are, in fact, highly uncertain. The industry uses a discount rate of 10% meaning that the industry would prefer to have $100 now than an expected $260 dollars in 10 years time.
Continues here:
The NZIER report should have used a discount rate of 10%. It used zero, except at one point buried deep in the report where the highest it gets is 8%.
You're reading that excerpt right. NZIER says the cost to the economy of $2.1 is 'large' (accepting for the moment NZIER's 6% discount rate).
But what they've done is compared the cost over 30 years to one year's worth of fishing or forestry.
Shady.
But what they've done is compared the cost over 30 years to one year's worth of fishing or forestry.
Shady.
(And I don't even know if they've got that right - MPI says forestry is 3% of GDP which is $9 billion per annum.)
At a 6% discount rate, the NPV of NZ's economy over the next 30 years will be way north of $5,000 billion.
Which means the $2.1 billion is again around the 0.3% of GDP.
Which means the $2.1 billion is again around the 0.3% of GDP.
The authors aren't this dumb. This is deliberate boosterism to massively exaggerate the impacts. It's the kind of thing you get better with with practice.
