##sion between firms. paul conway challenges us all, including policymakers : assist small, remote, firms into the global economy ; improve the matching of jobs and skills ; use immigration wisely to lift human capital ; make investment easier and more effective ; moderate the pace of population growth to encourage capital - deepening ; improve competition in the services sector ; and strengthen the economic returns from science and innovation. so with problem identification and solutions outlined, wouldn ’ t we just move on to resolution? short - termism challenges us always and everywhere. paul conway, ( 2018 ), ‘ can the kiwi fly? achieving productivity lift - off in new zealand ’, international productivity monitor, no. 34, spring 2018. why do we run into roadblocks to long - termism? capitalism is necessary, and a marvel, driving human welfare in a strongly positive direction for a few centuries now. but we all know – even adam smith, the godfather of free markets knew – that capitalism is not perfect. markets can, and do, fail for a variety of well researched and understood reasons. otherwise, why would we need government, regulators, and a central bank? a significant challenge is human myopia, the inability and / or unwillingness to think about the long - term. after all, ‘ she ’ ll be right ’. myopia is actually incentivised in many of our contracts – the drive to shorter deadlines and frequent reporting for rapid personal gratification. this shorter horizon is a perverse outcome. annual bonuses for example can lead to excessive risk taking, lack of concern for unintended consequences, and a desire for short - term cost cutting and lack of reinvestment. however, the bonus was implemented with the intent of ‘ buying the employee in ’ to the business for long - term gain. the myopia challenge is further enforced by what is known as the ‘ principal - agent problem ’. the advent of the remarkable limited - liability company structure has liberated economic activity. these legal structures allow people to take risks with their and others capital, but with more limited personal financial consequences. the limited liability structures do, however, mean that responsibility for all of the outcomes of business activity can be compromised. hence the list of rules, regulations, and company directorship codes that exist. the line between the owner of the capital ( the principal ) and the manager of the capital ( the agent ) is lengthened. ‘ who owns a company? ’ is a

we receive lots of anecdotes, and some of the data we analyse may only be a few weeks out of date. but the most comprehensive measure of output in the economy, the estimate for gross domestic product, is not available for almost three months after the end of the quarter to which it refers - and then for the next year or so that figure is subject to revision, often to very substantial revision. thus for example, the first estimate made by statistics new zealand for gdp in the march quarter of 1996 indicated that the economy was growing at an annualised rate of some 1. 5 per cent. a year later, statistics new zealand estimated that the annualised growth rate for the march quarter of 1996 was actually some 4. 2 per cent. the policy implications of those two numbers are radically different. cynics have suggested that god made economic forecasters to make weather forecasters look good. but at least weather forecasters can look out the window, and with reasonable accuracy know what the weather is at the present time. economic forecasters do not have that advantage. if monetary policy works well, it can help the economy adjust to the unforeseen shocks which will inevitably hit us from time to time, whether these be sudden changes in export prices, sudden changes in import prices, or whatever. this should have a tendency to smooth fluctuations in output to some extent. but it is quite unrealistic to expect that monetary policy can eliminate the business cycle completely, and we have never claimed that we can do so. no matter how prescient the reserve bank had been, the sudden collapse of the korean economy was always going to have a hugely negative impact on the new zealand forestry industry, and on parts of the new zealand tourist industry. we should not, and do not, feel embarrassed about being unable to fully offset events such as that. in years past, some economists, recognising the very great practical problems involved in forecasting over the period relevant to monetary policy, suggested that as a substitute for economic forecasting central banks should simply concentrate on keeping some measure of money supply growing at a rate consistent with the inflation target. alas, central banks around the world found that keeping money supply growing at a stable rate was not only very difficult to do in practice but it also provided rather poor control over inflation. as a result, virtually all central banks admit to having abandoned such a monetarist approach to monetary policy, and even those central banks which continue to