Friday 25 March 2011

Wagers, we have wagers

Matt Nolan and Andrew Coleman set a bet over at TVHE. Here it is.
If the CPI grows by more than 15% between its December 2010 level and its December 2015 level (excluding any changes to the GST rate), Matt pays Andrew $100 (in Dec 2010 prices)

If CPI grows by less than 15% during this period, Andrew pays Matt $100 (in Dec 2010 prices).
I added another $100 to Andrew's, so Matt's on the hook for $200 if RBNZ lets inflation get a bit out of hand.

The December 2010 CPI index was 1137. So if the CPI December 2015 is less than 1307, Matt wins his two bets.

Why did I make this bet? Because I bear psychic costs if the inflation target isn't met. It grieves me when quasi-constitutional things are batted aside. And so in the state of the world where I'm depressed, I get paid $100. In the state of the world where I'm happy that RBNZ has followed its mandate, I pay $100. Equalizing utility across potential world states is where it's at, man.


  1. AKA Emotional insurance...this is why I only ever bet against the All Blacks

  2. Is money particularly valuable to you in states where you're unhappy?

  3. @Ryan: Money buys me more utils when unhappy than when happy.

  4. i find it interesting that its $200 in dec 2010 prices, not 2015 prices. if it were 2015 then it hedges matt's bet, esp if inflation got really out of control, ha