Thursday, 26 May 2011

Money and the media

It's kinda annoying - especially for believers of rational expectations - to see price-expectation setting announcements in the media. *click on link to see why*

It's even worse that they (the Government) would set up very, very, very vague expectations of subsidy removals before any concrete announcement, which of course means that the public would already over-react to the slightest hint of that policy move. Yes, even economists - sometimes, unknowingly - set price expectations (for good and ill). *frown*

And of course...there wasn't any cuts today.

Frankly, I think firm-level and employee-level price expectations will be very distorted following this weird turn of events. There's only so many times you can say "review" before expectations become immuned to announcements. And that's gonna lead to lots of (longer-term) problems...particularly if labour markets - which are solely in need of reform - are going to be continually biased for firms. No amount of minimum wage laws are going to fix that!

*Even more annoyed after writing this post...need some Kool Aid*

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