This week in economic news, a number of global banks have plead guilty to criminal charges, paranoia builds in regard to the housing bubble, Joe Hockey endorses a land tax and the relevance of mathematics to macroeconomic theory is questioned.
How ‘Mathiness’ Made Me Jaded About Economics — Noah Smith
Noah Smith discusses the profusion of ‘Mathiness’ – a term coined by growth economist Paul Romer to denote the unsubstantiated use of mathematics to support preferred theories – in macroeconomic theory.
Banks to Pay $5.6 Billion in Probes — Aruna Viswanatha
Five global banks have pleaded guilty to manipulating trading behaviour and agreed to pay fines of more than $5 billion in combined penalties. As one of the biggest industrywide investigations comes to an end, Aruna Viswanatha discusses the details of the charges and the remaining investigations to be held by global regulators.
Warwick Smith dissects the economic benevolence of certain taxes, particularly those targeting unearned income. He highlights Joe Hockey’s recent endorsement of the South Australian Labor government’s proposal of a land tax as an indicator of the treasurer’s growing appreciation of the economic advantages of such taxes, but adds that there is still much work to be done in this regard on a federal level.
With the Reserve Bank of Australia cutting rates to a historic low of 2.0 per cent, Patrick Durkin addresses signs of a bubble in Sydney and Melbourne’s house prices. Durkin explores Greg Medcraft’s concern for the financial system in light of rising house prices, low interest rates and elevated household debts, while ASIC responds to shocking findings which reveal a decrease in the importance of diversification by investors.