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Australia Water Market

37:12 recording · EN · 8 speakers

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Brief overview

Australia's water market and New Zealand's inflation target show how rules and credibility reallocate scarce resources.

  1. Markets move water to its most valuable useTrading in the southern basin added about $117 million a year, roughly 12% more produce, meat and wool from the same water.
  2. A bigger pie is not a bigger sliceWolfers calls it one of the deepest lessons in economics: efficiency creates winners and losers, and the promised re-slicing never happens.
  3. Credibility and transparency can beat inflationMultiple equilibria means expectations become reality, so a central bank everyone believes can pull an economy into the virtuous cycle.
Executive Summary AI
  • Planet Money Summer School opens a seven-continent, eight-week world tour hosted by Robert Smith, starting in New Zealand and Australia with Australian economist Justin Wolfers of the University of Michigan as guide.0:58
  • Wolfers argues other countries are laboratories where the same economic principles meet different rules, demographics and leadership, and that the rules of the game decide who benefits from an exchange.3:03
  • The first case study, from a 2021 Indicator episode by Stacey Bannock-Smith and Darian Woods, covers Australia's water market, where anyone — even non-landowners — can trade water; Neil Hughes of the Australian Bureau of Agricultural and Resource Economics and Sciences measures benefits in the southern basin at about 12% of the value of water rights, roughly $117 million a year.8:57
  • Sheep and cropping farmer Carly Marriott saw temporary water jump from $100 a megalitre to $1,000 a megalitre, blamed investors she called water flippers, and drove her family five hours to protest at Parliament in Canberra, prompting a government review whose three lessons were regulation, rules that reflect a changing climate, and widely shared information.10:10
  • The second case study, from Karen Duffin and Sarah Gonzalez in 2018, tells how New Zealand's Arthur Grimes invented inflation targeting — zero to two by 92 — and Don Brash forced inflation down from 9% while unemployment passed 11 percent, a transparency-and-credibility trick the Fed adopted when Ben Bernanke named a 2 percent goal on January 25th, 2012.21:11
Key Quote
“The truth is, Robert, I was not ready, wait for it, koalified to teach that one.”
— Justin Wolfers2:35
Key Quote
“It rains. That's it. God decides.”
— Justin Wolfers5:11
Key Quote
“From $100 a megalitre to $1,000 a megalitre.”
— Carly Marriott10:21