Friday, 21 September 2018

Treasury Board

This week's column at Newsroom takes another look in at the problems at Treasury. A snippet:
'We're doing something about it'

Treasury’s response notes that Treasury has now put in place a work programme focused on economic capability, including training and developing existing staff and recruitment for economists.

But in the 2019 recruitment round for graduate analysts, while ten of fifteen had at least some background in economics, only four had at least Honours-level training in economics or finance. The recruitment process did little to distinguish candidates with an undergraduate minor in economics as part of another degree from those candidates with a Masters or Honours degree in economics.

And Treasury does not have any comprehensive way of tracking staff capabilities. It simply does not know if it is losing more trained economists than it is hiring. One wonders how Treasury would ever be able to tell whether it had succeeded in lifting its economics capabilities.

'Focus on the core business'

This matters. While a wide range of skills are required in policy analysis, Treasury’s unique role as lead economics advisor to the Government requires having substantial depth of economics capability. Treasury has to be able to apply a rigorous economic ruler across proposals coming from the other Ministries and to provide sound economic advice to its Minister and Cabinet.

That advice need not always be decisive, but it should always be reliable. And while that advice could often annoy Treasury’s stakeholders in other Ministries, they should not have reason to question Treasury’s competence in producing it.

Keeping all the stakeholders happy would be impossible. But doing a good job in Treasury’s core business is not. Treasury should focus on it.
I've been able to get a few things clarified by Treasury, with a few more yet to come under OIA. The blinded recruitment process for graduate analysts, at least for the most recent year, worked as follows.

Team managers told HR that they needed economists. So HR took all the applications and put them into two piles. Into the first pile went any application from someone with a minor in economics, a major in economics, an Honours degree in economics, a Masters in economics, and so on. Into the second pile went anybody without at least a minor in economics.

Then they ran a points sieve over the two piles. If you had a Masters in economics, you got 20 points. If you had Honours, you got 15 points. But there were points for a pile of other things as well. Strong Maori competence provided points. A pile of other things provided points, like their statement of interest in working at Treasury. Strong volunteer work gave 10 points. "Accolades" could give up to 10 points.

And then the highest ranked candidates would be able to get an interview.

See the problem? It's potentially a very flat payoff curve for training in economics, above a minor in economics, depending on how many points were available in all the other categories.

Getting a minor in economics is easy. There are thin routes through to a minor with next to no math and little theory. At Canterbury currently, that means Principles of Micro, Principles of Macro, a semester of intermediate microeconomics, one other 200-level paper, and one 300-level paper.

Honours and Masters is different. You have to take the more rigorous papers all the way up (or at least if you want to make it through with any decent grades), then do the more serious graduate coursework.

So I now have another OIA in checking on the points and categories. But it basically looks like HR there thinks economics can be picked up on-the-job by anybody with a minor in economics, so there's not much point in hiring folks with proper training.

Some teams, like the macro forecasting team, could put in more rigorous requirements for their group. But anybody not specifying that might be surprised by what HR considers to be an economist.

I again remember Frank Tay's piece in the inaugural issue of New Zealand Economic Papers explaining the minimum training prerequisites for professional economists in New Zealand:
Thirdly, I would stress a four-year full-time honours programme as the minimal "professional preparation for economists". I have in mind one which, in terms of depth of specialization in technical economics, falls between the level of the M.A. and Ph.D. courses recommended by H. R. Bowen, especially in the degree of theory, mathematics, statistics and economic history required.19 Obviously, this would violate the "depth and breadth" criterion of some teachers.20 But, unlike Professor Holmes, I believe this pedagogic conflict is real rather than potential and that a more effective solution than the "B-B variant" might be realised through the "Knight's Move". This consists in allowing students who have a first degree in the sciences and technology to sit, after a year's preparation, for a preliminary examination in economics equivalent to the Stage III level, say, in Macro and Micro economics, International Economics, Econometrics and Economic History, and then march straight into the Honours or Master's programme. True, such a scheme favours the Beta-plus and the more mature students, especially those with a substantial core of "Q" work behind them. However, a four-year Honours programme or the "Knight's Move" should give students a reasonably firm intellectual foundation for their own post-graduate professional development.
Emphasis added.

I hope that the OIA comes back showing I'm wrong. But Treasury's HR department being blind to the difference between a minor and Masters could explain at least some of the rot there. It cannot explain why the Chief Executive has allowed it to happen, but it can explain the hiring outcomes in the graduate cohorts, and it can explain why Treasury sees no need to track the outflow of trained economists relative to hiring.

I've also wondered how Treasury's Board has allowed this to happen. Any corporate board seeing these kinds of results would not be happy with the CE.

Yesterday, by complete coincidence, the Treasury and the New Zealand Initiative each announced a new addition to their respective Boards.

Treasury:
Livia Esterhazy has been Chief Executive Officer of WWF-New Zealand since May 2017. She has a strong professional background in marketing, brand and communications, including senior leadership roles with Clemenger BBDO (Managing Director 2015-2017), Assignment Group (Managing Partner 2012-2014) and Saatchi & Saatchi (General Manager 2009-2012). Her career has also included management positions with Kiwibank and the Commonwealth Bank of Australia. Livia Esterhazy is on the Board of Wellington Trails Trust and is a previous member of the Advertising Standards Board.
Us:
The New Zealand Initiative welcomes entrepreneur Stephen Jennings, CEO and Founder of Africa’s largest urban development company, Rendeavour, onto its Board of Directors.

“It is an honour to have Stephen join our Board,” said Roger Partridge, Chairman of The New Zealand Initiative. “Our mission is to create a more prosperous New Zealand for all New Zealanders. Jennings is a visionary international business leader and will bring valuable insights to the Initiative’s work.”

“I am delighted to be joining The New Zealand Initiative Board. The Initiative’s methodological, fact-based approach to policy is ideally placed to improve public understanding on many of the key challenges and opportunities facing New Zealand,” said Jennings.

Jennings is one of New Zealand’s most successful entrepreneurs. For more than 20 years, the Taranaki-born economist and investor has been living and working in emerging markets. A pioneer of capital markets in Central and Eastern Europe and Africa, he is responsible for more than $200 billion worth of investment into these regions.

As the leader of Africa’s largest urban development company, Rendeavour, Jennings now helps build city-scale developments in some of the fastest growing cities in Kenya, Ghana, Nigeria, Zambia, and the Democratic Republic of Congo. The developments include homes, offices, industrial areas, schools and hospitals and allow residents to live and work within their community without the burden of commuting across already congested cities.

Despite his long international career, Jennings has always maintained great interest in New Zealand. He shared his views on the future of New Zealand’s economy at a dinner lecture hosted by the Initiative in 2016.
It's awesome that Stephen's on board with us. 

Stephen Jennings' dinner address is embedded below.

Wednesday, 19 September 2018

Confidence in the Vice Chancellor

In a prior life, I was on Academic Board at the University of Canterbury as Economics Department representative.

The meetings were usually tedious. Much of the point seemed to be to provide a forum for people to air their grievances so they could feel they were listened to, but without consequence. There'd usually be somebody who'd make a five-minute speech about how neoliberal managerialism was ruining everything, and then would be happy enough until making the same speech again a few months later. It all helped me realise that the point of meetings often is not to achieve any outcome at all, but to make people feel listened to. But it was also an important way of finding out what was all going on in the rest of the University and initiatives being pushed that we needed to pay attention to.

Universities run under a dual governance system. The academics run curricular affairs through one governance structure culminating in Academic Board; the administrators run financial management through a parallel and overlapping one. It's confusing as all heck for anybody outside of the system, and for many within it. The Dean of Sciences is the one responsible for academic matters within all of the degrees awarded under the Sciences. The Pro-Vice Chancellor for Sciences is responsible for financial management of the College of Sciences, HR and the like. Sometimes the Dean and Pro-Vice Chancellor are the same person. And any curricular changes would have to run through both systems because they had both academic and financial implications.

Academic Board would be the one that would be watching for things like policy around academic freedom.

The meetings generally included a report from the Vice-Chancellor on what was all going on at the University.

I'm trying to imagine going to a meeting of Academic Board after finding out that the Vice-Chancellor had apparently lied to the head of Academic Board.

The Chair of Massey's Academic Board met with their Vice-Chancellor Jan Thomas about free speech issues at Massey. David Farrar got a pile of documents by OIA from Massey, showing that the Vice-Chancellor had been working to keep Brash from visiting Massey well before any security concerns were raised. That presumably prompted somebody at Massey to send David the email that the Chair of Academic Board sent around at the University subsequent to her meeting with the Vice-Chancellor. Farrar quotes this bit.
I asked the Vice-Chancellor how long she had been aware of Dr Brash’s proposed lecture before she took the decision to cancel the lease of the room to the students. She told me that she had been aware of the event for many weeks and had been invited to attend. The students had also informed her that their planned programme of talks would include politicians from all New Zealand’s major political parties.

My understanding from what Professor Thomas told me, is that she had not considered cancelling the event at any point during that period, because she had no pressing reason to do so. She did not deny that she does not agree with Dr Brash’s views, but she pointed out that she had not at any stage banned him from campus nor insisted that the students disinvite him.
Maybe the Chair of Academic Board hadn't gotten things right. But if the Chair did, then the OIA documents show that the Vice-Chancellor was scrambling to find ways of blocking Brash's visit - and that suggests she was lying to the Chair of Academic Board.

I don't know how things will play out at Massey.

Vice-Chancellors do not report to Academic Board; they provide updates to Academic Board. The Vice-Chancellor reports to University Council, chaired by the Chancellor. Sometimes the VC sends the Deputy Vice-Chancellor to report instead if there's a scheduling conflict, but during my time on Academic Board, the VC did seem to make a point about being available to front to Board.

But I'd expect that a Chair of Academic Board who had been led to mislead colleagues because the Vice-Chancellor had lied to her would be in an impossible situation if the Vice-Chancellor continued; resignation as Chair of Academic Board would seem most appropriate. Academic Board is made up of academics on permanent appointments; it isn't like the Chair would be quitting her day-job. I can't imagine wanting to continue in that position, which requires having a decent working relationship with the VC, if the VC had lied to me and caused me to mislead my colleagues.

And I would hope that somebody on Academic Board would ask the Vice Chancellor, at her next report to Board, why they should believe a word she says when she seems to have lied to the Chair of Academic Board.

I would hope that the Chancellor would step in to resolve things before it ever came to that.

Thursday, 13 September 2018

Not-so-sweet advice

Imagine that you were the Chief Science Adviser for a Ministry.

You need to produce a short briefing note to the new government for some issue in your Ministry's remit.

Your Ministry had, just a couple weeks earlier, released a comprehensive report on the topic that your Ministry had commissioned from a top economics consultancy. Your Ministry had had the report since August, but had only just released it.

What the hell must be going through your head if your briefing note to the Prime Minister via the office of the government's Chief Science Adviser presents the opposite conclusion to the commissioned study and doesn't even mention that the commissioned study exists?!

So Peter Gluckman was on Radio New Zealand a while back. He talked about mounting evidence for sugar taxes. I'd heard him on the radio and wondered what the heck he was on about, but he's always had a soft spot for sugar taxes and never seemed to understand the economics around it.

But Nick Jones at the Herald followed up with an OIA request asking what he was basing things on.

And his office provided a two-page document produced by the Ministry of Health's Chief Science Adviser, Dr John Potter, summarising his views on sugar taxes. It was a very cursory document - tons of bullet points saying things like "Recent studies from Berkeley", so it's hard to tell which ones he's talking about.

But his note to the Prime Minister is dated 16 February. [updated on double-checking the date]

The NZIER report on sugar taxes, which said that most of the studies in the area are terrible but the ones that are sound find that the effects of sugar taxes on consumption are too small to have any plausible health effects, came out in January. It came out after I'd OIAed it from the Ministry - the Ministry had been sitting on it since August. [Update: I received the OIA on 31 January; NZIER released its report on its website on the same day]

And Potter didn't even see fit to tell the Prime Minister, in his memo on sugar taxes, that a comprehensive report commissioned by his Ministry reached the opposite conclusion to his two-page list of bullet points.

Just amazing. I can't imagine that Potter wouldn't have known about the NZIER study.

Anyway, Nick Jones got in touch with me yesterday asking for comment on Potter's two pages of bullet points; I had a chat with Hosking about it it his morning as well. [update: link here]

Our prior OIAed stuff is here; the NZIER report is here.

In the prior OIA stuff, Potter's a big fan of sugar taxes - and completely fails to understand John Gibson's work. But all that to one side: if you've got a report your Ministry commissioned and you disagree with it, better practice would be to note its existence and why you disagree with it rather than pretend it doesn't exist. Yeesh.

Wednesday, 12 September 2018

The sins of the Canadian father will be visited upon the Kiwi children

Visiting Canada with my kids would be a lot simpler if I weren't Canadian.

The kids are Kiwis. If we were all Kiwis and I didn't have Canadian citizenship, we'd just get an easy tourist visa. Done.

Canada's changed the rules for entry at the border. If they think you might be Canadian, you must travel on a Canadian passport. If Dad's Canadian, born in Canada, then the kids are likely sufficiently Canadian to need a passport.

But getting them Canadian passports requires proving that they're sufficiently Canadian. The process for proving somebody is Canadian is designed to weed out people faking being Canadian and who want to be Canadian and live in Canada.

It isn't designed for people forced to be Canadian by accident of their father's birth and who just want to go visit people.

And so there's a pile of stupid paperwork requirements that might make sense in the context of immigration control and making sure that non-Canadians can't fake being Canadian,* but that just stink when you're forced to do it if you want to be able to just go visit people.

If only there were some certificate of not-currently-deemed-Canadian that were easy to get and that would let them just use their Kiwi passports for travel. But oh no. Can't do that. Have to satisfy the High Commission that they're really Canadian enough.

The kids are currently sufficiently Canadian to be turned away at the Canadian border [or not allowed onto a plane] if they don't have a Canadian passport, but not sufficiently Canadian to have any easy way of getting a Canadian passport.

There's a big long form, and I have to send in my birth certificate, their birth certificates, a fee, wait five months for processing, then they'll have some "Yes you're a Canadian and you can now apply for a passport" certificate. And then we can apply for their passports.

You can check out of the Canadian Asylum any time you like, but you can never really leave.....



Anyway, I'm double checking with the High Commission on this one. It seems absurd, but it's a Canadian kind of absurd....

Update: the reply from the High Commission advised me to check the "Am I Canadian" quiz they have to see if the kids need to get their certificate of citizenship (less fun than it sounds). They also helpfully provided a list of some of the benefits of citizenship, none of which warmed my heart.

* We still need Canadian inspectors checking American backpacks for fraudulent Canadian sew-on flags in Europe....

Monday, 10 September 2018

Private-Public health partnerships

If I ever get homesick for Canada, a five-minute conversation with a Canadian government official's usually an excellent cure. It always reminds me why I left.

On Friday, I met with a few visiting Canadians to give a bit of a state of play on policy. One of them asked about the Pharmac system. I noted it seems the best part of the overall health system, but that I can't imagine that a larger country could get away with it - and especially not a country right next door to the US.

But as part of the background, I'd noted that we have a fairly standard mixed private-public health system: a public health system combined with a private system that seems to work rather well. The public health system can contract in expertise and capacity when it needs it; having that available makes the public system better.

And I got to hear the ever-so-Canadian phrase two-tier. It's the phrase that Canadians use to give themselves an excuse for not thinking. Somehow, Canada got its national identity wrapped up in being not-American, and the public health system is a big part of that. Canada's version of a public health system is not like New Zealand's - there isn't a complementary private system in the same way. Anybody suggesting one gets accused basically of treason. Because any private provision would be two-tier, and result in outrage on the CBC and claims that the system was becoming Americanised, rather than just being like most other public health systems.

So stories like these would never happen in Canada. Instead, the queues would just get longer.
Capacity constraints see Canterbury DHB spend $143m on private surgeries

Thousands of hip, knee and other elective procedures have been outsourced to private providers in Canterbury over the past five years at a cost of about $143 million.

Canterbury District Health Board (CDHB) members say increased outsourcing has been necessary to meet demand, especially given post-earthquake capacity constraints.

"There's no point having a philosophical objection to using the private sector, because if we weren't able to access it thousands of people would have missed out on publicly-funded elective surgery," Andy Dickerson said.
...
CDHB member Aaron Keown said the health board had been closely monitoring the volume and cost of outsourcing. The CDHB could be penalised for not meeting Ministry elective surgery targets, he said, and people needed to realise bringing operations back in-house did not necessarily result in large savings.
...

The CDHB spent the most on outsourcing procedures to private providers including Canterbury Orthopaedic Services, which trades as Leinster Orthopaedic Centre, Southern Cross Hospitals and St George's Hospital.

NZ Private Surgical Hospitals Association president Richard Whitney said the private sector was already the dominant provider of elective surgeries in New Zealand,.

It could perform many procedures "for the same price that the public sector would be credited with" and would play an increasingly important role as demand for surgeries increased, driven by an ageing and growing population.
Private health insurance here remains cheap. We have a high-deductible plan basically as catastrophic coverage. I cannot be bothered saving receipts for reimbursement for any of the routine stuff - and why bother? We don't have car insurance to protect against the costs of an oil change.

The mixed system just works.

But boy did hearing the term two-tier in that Canadian accent bring back terrible memories of how stupid public policy debates are back in the Asylum. So glad to be out.

Saturday, 8 September 2018

Zombie alcohol stats

We thought we'd killed it with fire a decade ago. But BERL's social cost of alcohol has shambled out of the grave. I hit it anew over at Newsroom:

Zombies are hard to kill. Since the classical zombie only really occurs in fiction, accounts vary. But it never seems easy. Things that would kill or at least stop any normal living creature barely seem to faze the undead.

Zombie statistics are at least as hard to kill. These statistics, despite being horribly unsound, insinuate themselves into public debate and stay there. Tim Harford’s excellent BBC series More or Less makes a running feature of the statistics that, no matter how often you think you’ve cut them down, pick themselves up and lumber on.

I was very surprised to see one of New Zealand’s worst zombie statistics come back to life a couple of weeks ago. Put to the grave almost a decade ago, it returned at Alcohol Action New Zealand’s conference in August. BERL’s Ganesh Nana was reported to have claimed that alcohol-related harm costs every New Zealander $1,635 per year, for an annual total of $7.8 billion.

The figure seems to be an inflation and population-growth update of BERL’s 2009 estimate of the social costs of harmful alcohol use. The figure was nonsense at the time; an inflation adjustment to nonsense is hardly an improvement.

Let’s go through just what went wrong in that prior study, and why I was surprised to see its resurrection.

Friday, 7 September 2018

Satisfaction (Treasury stakeholders can't get no)

So Treasury sat on its 2017 external stakeholder survey for a year. In February, it told itself that it would release the results of the survey when it had achieved sufficient progress in improving things. It provided me the survey this week in response to an OIA request, but who knows when they would have otherwise gotten it up on their website.* 

The 2015 version of the survey was up within a couple of months.

The survey results aren't all bad. But on the key area I've been worried about around Treasury's economic capabilities, they aren't good. We can apply our usual bit of skepticism where a lot of the respondents to these surveys would be other Wellington types who might have their own unreasonable reasons for being mad at Treasury, but that should be in the fixed effect.

I go through it in this week's Insights newsletter.
Among those people interacting with Treasury about its core business of economics, macroeconomics, and fiscal projection, satisfaction dropped from 70% in 2015 to 47% in 2017. The proportion of stakeholders viewing Treasury staff as well-informed dropped significantly, as did overall confidence that staff do a good job, that Treasury challenges thinking on critical issues, and that Treasury can offer insights.

One highlighted survey response noted that “Treasury staff are personally a pleasure to work with, but they don’t have a strong background in economic analysis.” It is no particular surprise that lifting the quality of staff was near the top of the list of things stakeholders wanted Treasury to focus on.

The August survey results were reported to the Executive Leadership Team in November 2017 and discussed in February 2018. This week’s letter from Treasury says they are working on building economic capabilities through measures like training existing staff and through recruitment.

When Treasury would have released the Stakeholder survey, barring being prodded, is anyone’s guess. Only four of fifteen hired by Treasury in the 2019 graduate recruitment round had at least Honours-level training in economics and finance; I doubt that counts as addressing the concerns raised in the survey.

The consequences of Treasury’s failed experiment in de-emphasising economics will be felt for a long time. Treasury needs again to be the place where top economics graduates want to work.
The OIA materials are all available at the link above as well.

I have another couple of requests now in; the OIA due date will be 4 October.

Treasury said that they're working on building economic capabilities through training and recruitment.

So I have asked for details on their in-house training programme, including any syllabus and curriculum, and any assessment or review that Treasury might have undertaken benchmarking knowledge provided through that programme against university training in economics.

On building capabilities through recruitment, I have asked for detail on the qualifications and fields of analysts, senior analysts, principal advisors and senior managers hired for each of the past several years, as well as the same detail on people leaving Treasury for the past several years. I know of a couple of great senior people who have joined Treasury recently, but I also know of other great people who have left. It would be nice to have a sense of that flow.

Finally, I've asked for more detail on Treasury's award-winning blinded recruitment programme.


I understand that the process also blinded the applicant's field of study, or at least that it did so for some recent years. I want to know more about that. 

I'd like to know:
  • at what levels of recruitment it applied;
  • over which years' recruitment it ran;
  • what evaluation framework was set up when they implemented the thing and any evaluation that was subsequently undertaken;
  • whether it really did scrub out the applicant's field of study
    • and, if so, over what period;
    • and, if so, what analysis formed the basis for deciding to do that, and what analysis was undertaken in assessing the effects of doing that;
  • on what basis Treasury was able to choose among applicants if they knew nothing about the applicant's grades, degree level, or university; 
  • what the applicant pool looked like in each of the last few years, what the pool of applicants extended interview invitations looked like, and what the pool of extended offers looked like (degree and majoring field). Basically, I want to know if economists stopped applying to work at Treasury or whether the blinding knocked econ applicants out, and what the time path there looks like. 
Stay tuned. Maybe they'll tell me.

* Update: the thing's on their website, but only listed as 2017. They don't say when it was undertaken in 2017. Colmar Brunton ran the survey in early August; responses were received by respondents from about 31 July, with a four-week response window. So all responses would have been in by late August. This was in the email I'd received from Treasury as a respondent, so you can see the timeline here:
What happens to the results?Colmar Brunton will analyse the results and provide a report to the Treasury in September.  The report will be published later on the Treasury’s website. Previous research has provided valuable information on what the Treasury needs to do to better engage our stakeholders.
Maybe they've only sat on it for 11 months if they received it late September. It's well out from 2015's 2-month turnaround.