Loyalty as corruption

An older piece, but worth noting.  

Mr. Jardin not only denounces his respected paternal grandfather, but by extension all the other "very nice people" of wartime France.

The book centers around Jean Jardin, who was chief of staff to Vichy Prime Minister Pierre Laval in 1942 and 1943. Dismissing what he deems a "whitewash" perpetrated by his own family and accepted by a nation afflicted with Vichy-era "blindness," Mr. Jardin insists that grand-père was a key collaborator. He claims that by virtue of his post, Jean had full foreknowledge of the notorious July 1942 roundup of 12,884 Jews, including 4,051 children, who were deported to Auschwitz and nearly all died there. Mr. Jardin is now accused of settling intergenerational clan scores in public, but his real sin appears to be his implication of still-upstanding French citizens in the Holocaust.

...

As Mr. Jardin sees it, a certain moral code, exemplified by his "loyal" grandfather, was crucial to the Vichy machine. "In the end it was not at all necessary to be a monster to participate in the worst. There was an anti-Semitism of the state. Men like my grandfather were prepared to do absolutely anything to preserve a little fragment of national sovereignty," Mr. Jardin observes. "They preferred that the French police came to arrest Jewish families rather than let the German police do it. It is disturbing. In any case in my family there has not been any [feeling of] guilt after the war. My grandfather had the feeling of having done good. It is incredible." [emphasis added]

The bolded part bothers me. I suppose you could build a Sen Paretian Liberal argument that it's better that the French policeman, who wouldn't enjoy the roundup, conduct it rather than allowing the sadist to do it if the sadist's jollies are a bad (which they are). But I still wouldn't buy it.

Liberals (in the NZ and European sense) cringe when loyalty is offered to the state.

"A few weeks ago I found myself around a table at the Elysée with [French President Nicolas] Sarkozy, at a lunch with three writers and a journalist and a historian," Mr. Jardin recounts. "The historian suddenly said to me: 'But you don't have a lot of proof against your grandfather; [Mr.] Sarkozy got up out of his chair, cut her off and said 'Madame, I have had a lot of chiefs of staff.' He gave her a lesson explaining that a chief of staff was nothing like a government departmental head. It was evident listening to [Mr.] Sarkozy that the prime minister's chief of staff could not but be intimately associated with the decision.

All the same, in Mr. Jardin's telling, the historian insisted that "'that did not constitute proof.'" Then, "[Mr.] Sarkozy's temperature rose and he said something incredible which came from his gut: 'Madame if I asked [French Interior Minister and Mr. Sarkozy's former chief of staff] Claude Guéant to organize a round-up of 13,000 Jews next week in Paris, whatever the circumstances, I know Claude would resign. His [Mr. Jardin's] grandfather did not resign.'

Promising signs

Christchurch's IT community is leading the move back downtown with plans to build an IT hub at the corner of Tuam and Manchester.

This has been in the works for rather a few months, co-led by Wil over at Stickmen Studios. Google's on board with help from Canterbury alumnus Craig Nevill-Manning, who might send you embarrassing pictures of Seamus from the early 90s if you ask him politely; Craig is son of Seamus's former advisor, Professor Richard Manning.

Three cheers for the rebuild! Downtown needs a few really great anchor projects like this one.

Here's EPIC's proposal. Here's Council's press release.

About time we start getting some good news. Congrats Wil and team for steering it through this far; I'll look forward to seeing it completed!

I'm still also hoping for a Christchurch Ikea.... For some reason, the old post here linked has been getting a lot of traffic. I hope that foreshadows good things to come. iPredict opened a market on a Christchurch Ikea Friday afternoon; trading's hovered around the 18% mark. I'm mildly long based only on the uptick in blog traffic.

Things I learned this afternoon

Fairfax has an awesome infographic on its latest poll results. David Farrar reports Keith Ng's the guy behind it; it's hellacool.

It is impossible to come away from the detailed breakdowns with anything other than thorough admiration for the juggernaut that John Key has built. iPredict's saying 90% likely that he forms the next government; I can't think of anything that's a more sure bet on iPredict; I'm very long and have been for rather a while (1400 shares long National bought at average of $0.76; 1200 short Labour at average of $0.22 but hedged by a few hundred on the Labour Justice Minister contracts that span the Labour space but were much cheaper than buying Labour).

Things that surprised me:

• National Party support is stronger in Auckland (60%) than on the Mainland (55%). The rural/urban split still kinda holds, but National still has 55% of the urban vote to 62% of the rural.
• There is NO gender split on support for National. 56% of men and 56% of women support National on the Party Vote. ACT is a sausage-fest (3.6% to 0.7%), but that's not a big surprise. A bigger surprise is that the gender split on the Greens is so small: 6.2% of men and 6.5% of women support the Greens. There is a big skew towards Labour among women, which mostly comes at the expense of ACT, Maori, and NZ First.
• Green voters are the ones saying they're most likely to move overseas: 3.6% say they'll definitely move overseas for the long term. Sure, NZ isn't as green as the Greens would like. But where is better?!
• Among those who voted National in '08, 82% say they'd pick John Key as most preferred PM; "don't know" is next on 14. Among those who voted Labour in '08, only 19% say Phil Goff is their preferred PM and 21% say Key. Read that again. More people who voted Labour in '08 prefer John Key as PM than prefer the current Labour Party Leader. 43% of Labour's '08 vote say they don't know who they want as PM. Of those intending to vote Labour this time around, 20% say Goff is the best PM, 46% don't know, and 16% say Key is best.  If this isn't enough to get Labour to knife Goff, I don't know what is. iPredict says only a 10% chance of that happening; I'm going long.

Things that didn't surprise me:

• National polls best among the 35-59 set: 60% support among that group. But they still have 49% of those under 35 and 55% of those over 60.
• ACT polls best among those over 60, with 2.9% support there to the 2% in the younger cohorts. Not particularly surprising as ACT has been pushing policies that resonate with social conservatives, alack alas. 6.6% of the oldies like NZ First but nobody under 35 does.
• Few that voted National in '08 plan to flip to Labour - 4.5%. But 11% of those who voted Labour last time around plan to vote National. Labour is keeping only 79% of those it had in '08; National's keeping 92%. Even the Greens are only keeping 62% - 11% of former Greens are flipping National.

The only interesting question is whether National will govern alone or need a coalition. If it goes coalition, 32% of those saying they'd vote National this time prefer ACT as partner; don't know is next on 25%, then the Greens on  19%. More National supporters prefer a Blue-Green government than prefer a National-United Future government (1.8%) or a National-Maori government (13%).

If there were a button for a National-Green coalition government where Greens got responsibility for copyright and for marijuana law reform, I'd be pushing it. As only 13% of Green supporters prefer coalition with National, they'd then spend three years rending themselves asunder over their supporting National. And, we'd get decent copyright policy as well as a voice for civil liberties.

Intervening for the surplus

Paul Walker asks whether consumer surplus can ever justify government intervention. Arguing against Sam Richardson's contention that consumer surplus from the Rugby World Cup can justify government intervention, Walker notes:

Three question came to mind for me: 1) If CS is a reason for government involvement in a project then isn’t this a reason for government involvement in almost everything? I meant the CS generated by computer software, for example, must be huge and thus should the government not subsidise Bill Gates?! 2) If there really is enough CS to justify government involvement doesn’t this tell us that that real issue here is one of the pricing of the event? If the council priced in such a way as to capture the CS, e.g. some form of price discrimination, then evaluation of its investment would be easy, just look at the profits generated. 3) If there is a large amount of CS to be captured then why have the council involved at all? Why not just let the private sector run/build the event/stadium, pricing in such a way as to capture the CS, and let the event stand on its own economic feet? No government involvement is necessary.

What's Walker missing? If there's a market failure preventing the realisation of potential consumer surplus. Imagine that the local folks putting together a bid for the RWC set up their bid optimally with respect to maximal extraction from those who could attend games: lots of tiered pricing, lots of tied sponsorship arrangements, lots of merchandising. And the bid were just shy of making it. And, suppose further that each and every Kiwi got $10 in warm fuzzies just from pride in knowing the event were here being held. If there's no market in which they can express their preference for the event's being held, and if the event wouldn't be held absent the contribution from those folks who'd never attend a game but who would enjoy benefits, then that can be an argument for government intervention.

Now, the warm fuzzies can be internalized through sponsorship arrangements: if those not attending the game get warm glow from the games, sponsors may capitalize on that warm glow. But we'll specify that the $10 per person is over and above any amount that can be capitalized on by sponsors.

In that case, you could argue for government involvement. You need a market failure of some sort to make the CS argument for intervention hold. It's not nonsensical on first principles. But it's rather unlikely that we've been made better off by the investment. Why?

First, we'd have to know that the potential CS made it worth the cost.

Second, we'd have to ask why alternative mechanisms for solving the coordination problem among those experiencing warm glow weren't attempted. KickStarter is an awesome mechanism for this. You put up your project and your required funding threshold; folks pledge money and are only called on for funds if the collective willingness to pay is high enough. Sure, there could be free rider problems, but there are ways of turning assurance contracts into dominant assurance contracts. If RWC never even bothered trying KickStarter and went instead immediately to the guys who can use guns to force your contribution, we might be sceptical that they really believe that there are net gains to the public (or that the latter is just easier for them).

Finally, we'd have to weigh up whether the losses from bearing the market failure - the forgone benefits - really justify the costs of intervention.

I'd put 20:1 against that the NZ government's investment in RWC meets any kind of sane cost-benefit analysis. There are states of the world in which such investments can be optimal; we're just rather unlikely to be in that world.

Tomorrow's election results, today

Matt Burgess and the iPredict team today launched Electionresults.co.nz, which provides live projections of Parliament's composition based on current trading prices over at iPredict.

They're currently forecasting 59 seats for National in a 122-seat Parliament. National would have its choice of ACT with 6 seats, United Future with 3 seats, or the Maori Party with 3 seats as coalition partners.

The Parliamentary Projections are largely powered by prices in the Vote Share market, but with accounting for prices in a few critical seat markets. So ACT's 6 seats would drop to zero if ACT were not to get Epsom; NZ First's 5% expected vote share would likely start turning into seats if the price on the Peters contract, discussed here, were to pass the 50% mark.

The whole initiative is sponsored by Exceltium (Matthew Hooton) and Scoop.

Awesome work guys!

Again, what crisis?

There is no great crisis in aggregate alcohol consumption stats in New Zealand. Via David Farrar:

Per capita consumption is down since alcohol liberalisation in 1989, though slightly up from 1997.

What about problem drinking? Incrementally up among some age groups; incrementally down among others. From the 2010 Ministry of Social Development's Social Report:



Problem drinking among the 15-24 age group is no different than it was in 1996 prior to the reduction in the legal alcohol purchase age. Things are up a bit for 25-44 year olds and down a bit for 45-54 year olds, though all those differences are really small.

Ah, but what about marginal and worried-over population sub-groups? From the same report:

Table H6.2 Age-standardised potentially hazardous drinking prevalence rate (%), for adult drinkers, by ethnic group and sex, 1996/1997, 2002/2003, 2006/2007

	European/Other	Māori	Pacific peoples	Asian	Total 15+
1996/1997
Male	31.0	46.1	48.2	11.6	30.9
Female	12.0	30.6	20.8	5.1	13.3
Total	21.6	38.3	38.1	9.4	22.3
2002/2003
Male	29.9	42.4	44.1	11.5	30.6
Female	13.3	24.1	24.3	4.8	14.2
Total	21.7	32.9	36.1	8.6	22.5
2006/2007
Male	32.1	46.8	46.6	12.9	31.2
Female	14.5	28.5	25.8	3.8	14.7
Total	23.1	37.5	37.7	8.9	22.9

Source: Ministry of Health
Notes: (1) Rates are age-standardised using the WHO world population. (2) People who reported more than one ethnic group are counted once in each group reported.

I'm hard pressed to see any there there. If you want to worry tons about the 1.5 percentage point increase in potentially hazardous drinking among Europeans, why not rejoice instead in the similarly trivial percentage point reductions in similar drinking by those from other ethnic groups?

MSD reported we had the 12th lowest level of alcohol consumption in the 30 OECD countries.

Doug Sellman and his ilk ought get honorary doctorates in marketing for their ability to convert the utter absence of evidence of any growing alcohol problem into a moral crisis justifying imposing large costs on moderate drinkers.

In other news, I LOVE how Blogger's new version makes it dead simple for me to paste tables from elsewhere into draft posts.

Rationality and economists

Andrew Gelman takes a swipe at economists. I think he's got things wrong. Let's work through it.

First, Gelman argues economists are inconsistent in arguing for consumer rationality while arguing that people need economists to help them overcome their irrationalities, largely about government policies. But these arguments are hardly inconsistent. In environments where individuals face real costs of being wrong or irrational, they consume little irrationality. At the voting booth, their likelihood of decisiveness is sufficiently low that they can indulge biased but comforting beliefs about the true state of the world. That's Caplan's rational irrationality model; I find it rather convincing.

Here's how Gelman thinks we square the circle:

OK, now to return to the puzzle that got us started. How is it that economics-writers such as Levitt are so comfortable flipping back and forth between argument 1 (people are rational) and argument 2 (economists are rational, most people are not)?

The key, I believe, is that “rationality” is a good thing. We all like to associate with good things, right? Argument 1 has a populist feel (people are rational!) and argument 2 has an elitist feel (economists are special!). But both are ways of associating oneself with rationality. It’s almost like the important thing is to be in the same room with rationality; it hardly matters whether you yourself are the exemplar of rationality, or whether you’re celebrating the rationality of others.

I think it's rather that economists recognize that there can be a rather large disconnection between policies that are politically popular and ones that would maximize a reasonable conception of a social welfare function. You can get it through the combination of rational ignorance and logic of collective action or other public choice problems; you can also get it through Caplan's rational irrationality.

Now, I know Gelman rejects that the expected instrumental benefits of voting are low; he says that an altruist weighs the benefits to everybody else of his voting to make things better and consequently voting passes a rational instrumental cost benefit analysis. But surely if your vote is the decisive one making everybody better off as you see it, it's also the one that makes half the voting population worse off as they see it. And so Gelman's argument fails unless the voter can place himself in an epistemically privileged position: he has to know that he's making the voters who disagree with him better off. And I just can't see how that happens. That half the population disagrees with you at the ballot box ought to make you more uncertain about the benefits of your preferred policy unless you truly have expert knowledge.

Fortunately, we economists often do have expert knowledge about economic policy. Well, maybe not about macro beyond a short list of "don't do these twelve things lest you completely ruin everything". But in micro and applied price theory, we're decent.

I rather liked Gelman's PS:

P.S. Statisticians are special because, deep in our bones, we know about uncertainty. Economists know about incentives, physicists know about reality, movers can fit big things in the elevator on the first try, evolutionary psychologists know how to get their names in the newspaper, lawyers know you should never never never talk to the cops, and statisticians know about uncertainty. Of that, I’m sure.

A public responsibility?

When we have a public health system, and when folks worry about costs others impose through the health system, all kinds of private behaviours have external effects. Will Wilkinson rightly chastises Mark Bittman's food nannyism:

Before getting to the problems with Mr Bittman's price-fixing plan, let's ask why this might be thought a legitimate function of government? Mr Bittman says:

[P]ublic health is the role of the government, and our diet is right up there with any other public responsibility you can name, from water treatment to mass transit.

"Our diet"? Interesting. Try this: Our pattern of sexual conduct is a public responsibility. Or: Our convictions are a public responsibility. Right up there with dog-catching, even! After all, one can come down with a killing disease rogering the wrong lad or lass. Moreover, wick-dipping is the leading cause of new citizens, many of whom will turn out to be a net drain on the public purse. Can we afford to continue allowing just anyone to inseminate just anyone? To ask this question is almost to answer it. And how about our convictions?! If folks get their heads full up with wrong notions, they might want to invade Yemen, vote Republican, draw to an inside straight, or eat a Twinkie, to the detriment of us all.

Wilkinson is right to use the reductio. But that can be dangerous; not long after I used mandatory ski helmets as reductio, I started seeing proposals entreating that mandatory helmets would save lives. When I wrote in the NZ Med Journal about the logical end of seeing public health costs as being basis for policy - bringing one's sex life from the private to the public realm - earnest healthists replied that they've happily prescribed subsidised condoms. Setting up signposts about what's logically implied by positions might well be taken as suggestions of where to go next....

Export monopolies

I'm usually pretty smug about New Zealand's free trading agriculture sector, especially as compared to Canada's mess of mandatory marketing boards and quota management systems.

At the margin, I'm going to have to get a bit less smug. And that hurts me. The National Post reports that the Harper government is going to allow western Canadian wheat farmers to sell the wheat they grow to the buyer of their choice.

Meanwhile, New Zealand still has the Zespri export monopoly. If you grow kiwifruit and you want to sell it someplace other than Australia or New Zealand, you're compelled by legislation to sell through Zespri. Writes Roger Kerr in the National Business Review (not online as far as I can tell here):

...it is an illusion to think that New Zealand can manipulate world markets. More important, there is intense competition from other fruits.
...
The former Dairy Board export monopoly was justified on similar arguments. Deregulation has shown them to have no validity.
...
In short, it is unlikely that Zespri has any exploitable market power as a monopoly seller. In reality it is a monopoly buyer (a monopsonist) and it is growers who are at risk of 'exploitation'.

Kerr calls for the Productivity Commission to hold an inquiry into whether Zespri's monopoly ought to be maintained, noting that the OECD and 2025 Taskforce already have recommended an end to the monopoly. I'm not sure what additional good is done by having another agency find that monopsonies are bad, but I suppose truth bears repeating.

Rugby Court [updated]

Apparently the RWC is getting its own court, situated in the offices of its own law firm, to adjudicate disputes arising from the crazy emergency legislation passed to protect the RWC against such evils as little girls setting up lemonade stands on the sidewalks where rugby fans might walk. Writes Jock Anderson at the National Business Review (you should subscribe...):

In line with war-time-like emergency powers to keep non-believers in check, the rugby world cup will have its own kangaroo court.

But how much it will cost the taxpayer for a High Court judge to sit on it, with support staff, remains a mystery.

Commercial disputes arising at the rugby tournament will be dealt with by High Court Justice Douglas White at the private offices of Russell McVeagh – the official law firm of the rugby world cup.

And you can't even show annoyance by boycotting sponsors: any RWC losses arising from lost sponsorship wind up being covered by the government anyway. [Update below]

Most big law firms have a slice of the tournament’s lucrative legal gravy train, according to the New Zealand Law Society’s LawTalk magazine.

Russell McVeagh acts for Rugby World Cup Ltd (the tournament owner); Buddle Findlay acts for Rugby New Zealand 2011 Ltd (the joint venture between NZRU and the government).

Minter Ellison Rudd Watts acts for RTH (the official travel and hospitality provider), a number of corporates on rugby world cup 2011 related issues, and was appointed to represent a number of inbound teams including those from the Pacific islands.

LawTalk reported a significant part of the tournament’s legal framework would be the Major Events Management Act, which was passed with the protection of the tournament as its primary goal.

It’s aim was to “maximise the benefits to New Zealanders, prevent unauthorised commercial exploitation of the tournament at the expense of the organiser or sponsors, and to ensure the smooth running of the tournament.”

Big-dollar global sponsors will be working with Russell McVeagh and a small army of “monitors” to jealously ensure their rights are protected.

This sort of thing pushes me from being ambivalent about rugby to actively hating it.

Update: In the comments below, Anon writes:

"any RWC losses arising from lost sponsorship wind up being covered by the government"

This is not correct. The government covers 2/3 of the losses from Rugby New Zealand 2011 Ltd, which is responsible for organising the tournament. So not buying tickets costs the government money.

Rugby New Zealand 2011 Ltd has nothing to do with sponsorship, which is is handled by Rugby World Cup Ltd, a subsidiary of the International Rugby Board. So boycotting sponsors has no effect on the government.

And so I will reduce at the margin my likelihood of buying stuff from RWC sponsors. I'm really lazy, so the effect won't be large. But if sponsorship helps internalise warm glow positive externalities from events, such marginal reductions in purchasing likelihood ought help internalise angry glow negative externalities.

I report, you decide

Ok. In the comments, tell me whether the Otago Daily Times editorial staff are:

1. Lazy and don't check their figures: they just copied from the NZ Herald editorial (noted here) and couldn't be bothered to check anything. Seriously, check the Herald piece; they totally lifted the Herald's argument.
2. Idiots
3. Deliberately trying to mislead their readers

My vote's for the first. But I'm curious what others think. The more often they do this, the more inclined I am towards the third. From today's editorial:

Those who argue anti-smoking legislation goes too far do so on grounds it intervenes in rational personal choice, even when that choice is for an addictive drug. The difficulty with this argument is a right of personal liberty ceases to be that when it affects the rights of others. It has been well demonstrated passive smoking can be harmful to individuals forced to inhale the smoke exhaled by others.
The case for liberty is on less solid ground, too, when the cost of smoking to the public purse, estimated to be $1.7 billion a year, is considered.

Again, the $1.7 billion figure comes from Des O'Dea's study of the costs of smoking. The $1.7 billion figure includes a whole pile of costs that smokers impose upon themselves and only about $350 million that smokers cost others via the health system. And again, quoting from Des's study:

...it does seem reasonably apparent that the tax contribution of approximately $1 billion annually by smokers exceeds substantially the external costs of smoking which fall on non-smokers. If savings on pension costs from premature mortality of smokers were added as well the net fiscal contribution of smokers, to the fiscal gain of non-smokers, would be further increased. 

If the Herald and ODT repeat a lie often enough, it becomes a public truth.

Rugby costs

Massey's Sam Richardson agrees that estimates of economic benefits from the Rugby World Cup are nonsense:

Dr Richardson, who researched public spending on major sporting events for his PhD, says the $507m to $700m bandied about is a lofty and unrealistic figure.

His study of 11 major sporting events in New Zealand found only three had any significant positive effect on the local host economy’s gross domestic product during the event itself – the 1999 Netball World Championship in Christchurch, the A1GP motor race in Taupo and the 2005 British and Irish Lions rugby tour.

I don't know anything about the netball championships or the motor race, but I'd be surprised if any substantial public funds went into the 2005 tour.

“Maybe the Government shouldn’t talk about economic impact,” he says. “I do not think we should be using economic impact as a justification for hosting sporting events. Maybe we should forget the magic figures and focus on the long-term benefits.”

Dr Richardson is sceptical of any argument that suggests we are going to get something tangible out of hosting events. “The bottom line is yes, we are going to bring in visitors, and yes, they will spend money. We also know that the taxpayer will pick up a sizeable chunk of what is expected to be a loss of around $40 million.

“To justify this, what becomes more important is what New Zealanders think of the event, and our enjoyment. If anything it is the value of the ‘warm and fuzzies’ and our perceptions and experience of the event that is a more defendable measure of success.”

If warm fuzzies are the potential external benefit justifying government investment, we're on very shaky ground. It's a possible market failure, sure, but one reasonably solved privately by sponsorship arrangements and merchandise sales.

Dr Richardson, of the School of Economics and Finance at the Manawatu campus, says the benefits associated with participation might be a better rationale for wanting to host the events than purely economic impact.

“FIFA has selected New Zealand to host the 2015 Under-20 Men’s World Championship. As hosts we get the right to participate, which is huge for us, especially as it is something that can improve the quality of our football.”

I'm pretty sure the All Blacks would have been in RWC regardless of whether we're shelling out to host. As for FIFA, I hope that we're not going to invest any substantial public funds on the basis that that's the payment necessary to get FIFA to let us play.

HT: Ed.co.nz

Previously:

• Oh the many ways I pay for rugby....
• Stadiums

Probabilistic Peters

Recall that under New Zealand's MMP system, a party enters Parliament on winning a single electorate or on passing the 5% threshold on the popular vote.

So New Zealand First re-enters Parliament if they get more than 5%. Winston Peters is party leader and rather likely first on their party list. If they get 5%, they get around 6 MPs. So if Peters is in the top six on their list, he's in if NZ First gets 5%.

iPredict says NZ First is likely to get 5% of the vote: trading's hovered on or just under 5% for the last month.

But iPredict says Winston Peters has a 22% chance of re-entering Parliament.

Potential explanations:

1. The Vote Share market is wrong: thin, flat payoff curve
2. The Peters to Re-Enter market is wrong (unlikely: thicker, binary contract)
3. Peters likely to step down in favour of Michael Laws or someone else, declining to pursue re-election

Full disclosure: I'm 144 shares long on Peters to re-enter Parliament, but bought entirely on price swings that seemed odd; I paid an average of $0.0653 for those contracts. I'm also 90 shares short on Vote.2011.NZF, but again I was just running against what seemed to be high prices at $0.0518.

Because of the chances of #3, above, I'm pretty wary of viewing the two markets as a potential arbitrage play. Anybody else have insights here?

Defending the taxi cartel

The new taxicab regs are soon to take effect. From the first of August, cabs will have to have video cameras and be on 24-hour monitored dispatch. I'd suggested that security had bugger all to do with the regulatory move and that it was just an effort at cartelization by the Taxi Federation.

And now we hear rent-seeking Taxi Federation head Tim Reddish whining that jitneys may have found a loophole: if they register as private hire, they're exempt from the camera regs.

But many taxi companies are struggling with the extra cost of the measures, so are becoming private hire services in a bid to save money, the Taxi Federation says.

In a bid to stop rogue operators, federation executive director Tim Reddish has written to Transport Minister Steven Joyce warning that "the natural flow-on from this will see the emergence of an "under the radar' mini-cab type operation that will have the potential to decimate the legitimate and fully compliant taxi industry".

Under operator licensing legislation, private hire cars must not be metered – instead carrying passengers at an agreed price – and they must also be prebooked.

But an article in the federation's industry magazine says taxi companies are ditching their approved taxi operator status and switching to private hire to avoid the new measures.

"Taxi companies ... convert to private hire in the belief they can do much the same thing without complying with existing taxi laws, let alone tough new rules on security cameras, dispatch systems and duress alarms."

Have no fear, the government will act to protect the cartel:

Transport Agency spokesman Andy Knackstedt said most private hire operators were legitimate services like limousines and wedding vehicles, but the agency was "focusing our attention" on the small number of services "competing illegally with approved taxi organisations by accepting casual hires without the prescribed requirement for a prebooking".

A separate operator in Palmerston North was prosecuted and fined $6632, with a month's suspension of his commercial drivers' licences.

"Where we find evidence of such illegal operations we will undertake prosecutions."

Mr Joyce said he was looking into the industry's concerns.

HT: @HerrSchnapps

The safety regs are less a barrier to entry than nonsense taxicab medallion systems that limit the maximum number of cabs in an area; fortunately, the cartel hasn't yet successfully argued for those in New Zealand. I think Joyce is too sensible to be swayed by that blatant of rent-seeking; the safety regs came in on the back of a couple of nasty incidents of violence against cabbies and the usual "Something Must Be Done". It would be harder to get public support for full cartelization.

There's an awesome spot in the market for the private hire company that figures out an Android/iPhone dispatch system: it could totally satisfy the regs and would beat standing at a corner or looking for a taxi stand. Unless the Taxi Federation prevents that kind of competitor from emerging.

Show business for ugly people?

Well, maybe only for those who are only ugly on the inside. Ugly on the outside: that'll turn off voters.

A new Massachusetts Institute of Technology study found that so-called “low-information voters” — those who watch a lot of TV but who aren’t up-to-date on policy issues — are most likely vote for a candidate based on looks alone.

For every 10-point increase a candidate gets because of his or her appearance, about half of that increase comes from the voters with the least amount of political knowledge and the most time spent in front of the TV.

The study analyzed data from two surveys conducted during the 2006 midterm elections: the Cooperative Congressional Election Study, which surveyed voters on their candidate preferences and television-watching habits; and a study headed by Princeton University professor Alex Todorov, which asked participants to rate ’06 Senate and gubernatorial candidates based solely on appearance.

“People judge other people all the time when they first meet them, but once they learn more about them they update their impressions and forget their initial judgments,” said MIT associate professor Gabriel Lenz, who co-authored the study. “The problem with democracy is that we ask people to vote in all these elections where they don’t know all that much except their first impression.”

Here's the full paper.

In equilibrium if we've a thick market of potential candidates, I can't see how this generates any particular inefficiency. Sure, it gives an additional dimension over which parties need to optimize in candidate selection, but in sufficiently thick markets, the tradeoff in moving from the slightly less attractive to the slightly more attractive candidate won't be that large. The only problem is if you've got thin markets such that the quality gap on other margins is large as you move up the beauty scale. But that too should be a disequilibrium phenomenon. They've said that politics is show business for ugly people. Well, if the returns to beauty start ramping up in political markets relative to other markets, more beautiful people start selecting into politics rather than other endeavours. Hamermesh found that the beautiful select into professions where beauty is rewarded; why should this be any different?

Alternatively, suppose that one of the main outputs of politicians is preening on television. Policy is secondary. Don't we all enjoy greater consumption benefits from seeing attractive people on television than from seeing unattractive people? Marketers clearly think so; check the cast of the average sitcom or commercial.

If your expectations of policy and politicians are sufficiently low, it's harder to get worked up about how things could be worse. The losses from idiot voters choosing the most attractive candidate seem unlikely to be particularly worse than the overall losses from idiot voters full stop.

New Zealand data from 2005 suggested the most politically ignorant voters disproportionately leaned Labour. Is this confirmatory or contrary evidence?

Catching cheaters

Panos Ipeirotis notes the extreme cost to lecturers of pursuing cheaters.

By the end of the semester, 22 students admitted cheating, out of the 108 enrolled in the class.

The process of discussing all the detected cases was not only painful, it was extremely time consuming as well.

Students would come to my office and deny everything. Then I would present them the evidence. They would soften but continue to deny it. Only when I was saying “enough, I will just give the case to the honorary council who will decide” most students were admitting wrongdoing. But every case was at least 2 hours of wasted time.

With 22 cases, that was a lot of time devoted to cheating: More than 45 hours in completely unproductive discussions, when the total lecture time for the course was just 32 hours. This is simply too much time.

When 1 out of 5 students in the class being involved in a cheating case, the lectures and class discussions became awkward. For the rest of the semester there was a palpable anxiousness in class. Instead of having friendly discussions, the discussions became contentious. Not a pleasant environment.

This, of course, had a direct effect to my teaching evaluations. Instead of the usual evaluations that were in the region of 6.0 to 6.5 out of seven, this time my ratings went down by almost a point: 5.3 out of 7.0. Instead of being a teacher in the upper percentiles, I was now below average.

The Dean’s office and my chair “expressed their appreciation” for me chasing such cases (in December), but six months later, when I received my annual evaluation, my yearly salary increase was the lowest ever, and significantly lower than inflation, as my “teaching evaluations took a hit this year”. (And I publish in journals not endorsed by Business Week, but I will leave this story for another time.)

Josh Gans explains that optimal structures take enforcement out of lecturers' hands so that enforcement is more credible.

So what should the administration do to change the equilibrium? First, take the enforcement of cheating out of the Professor’s hands. Employ a policing person who is the one who receives the Turnitin results and decides what to do about it. Make it their job and you solve the free-riding problem right away. You also allow cross-course, repeat offender detection. And you change the cheating equilibrium to one where enforcement is expected. Finally, the Professor has their hands clean and so suffers no conflict over teaching evaluations.

Canterbury isn't far from this. Everything is run through TurnItIn. Anything that looks dodgy, I hand off to the Head of Department. There's still a short meeting between the student, the HoD, and me, but it's short and the HoD is the bad guy. And there's reporting within the College (and hopefully extending within the University) on proven cases of plagiarism such that track records get established; we then can apply schedules with increasing marginal penalties.

This was all getting pretty reasonably firmed up in the pre-quake world. I'll be using TurnItIn again this semester; hopefully, I won't have to haul anybody into the HoD's office. But TurnItIn has embedded itself nicely here; after a few years, most students have cottoned onto that they can't get away with the dumber forms of cheating.

NZI on Youth Unemployment

From their latest report:

Many young people are leaving school but are not finding their way into
permanent work, resulting in high levels of unemployment. Part of the problem is that many youth have become disengaged at school, failed to become well qualified and so are not competing successfully with older workers. The problem is especially acute now that jobs are less available than they were prior to the recession.

A case has been made that removal of the youth minimum wage just as the recession began has reduced the competitiveness of our youth as job applicants, contributing to the youth unemployment increase (Crampton, 2011; Douglas, 2011). New Zealand has had high youth unemployment relative to adult unemployment for a long time though, so removal of the youth minimum wage is not the source of the problem, though it may have exacerbated the situation recently.

The eight countries in the OECD (2010d, pp.103-104) with a youth minimum wage do have lower youth unemployment, on average, than the countries without a youth minimum wage but there are many countries that have low youth unemployment and no youth minimum wage.

I'd be willing to bet that the ones seeing no particular harms on young workers are also the ones where the effective minimum wage is low relative to the average wage. Where the constraint doesn't bind...

And, as careful readers will recall, I've never made the claim that abolishing the differential lower youth minimum wage caused all of the ramp-up in youth unemployment: maybe 8 points of the current 27.5% youth unemployment rate could be due to the change.

But I'm glad that folks other than me are starting to think that maybe, just maybe, forcing employers to pay a 16 year old $13/hr was a rather bad idea.

Keeping busy

I spent last week in Australia handling a bit of press around the work I've been doing with Matt Burgess and Brad Taylor on alcohol's social costs; I also presented at the Australian Conference of Economists's Dodgy Awards arguing the case for preventative health being the worst of the lot. I didn't feel at all bad about losing to Henry Ergas; I also booed loudest (the measure of victory) for the Australian debacle of a National Broadband Network.

Here's some of the Australian coverage:

Chris Kenny in The Australian:

Alcohol taxation is expected to a target for reform at the National Tax Forum in October and the Henry tax review said taxes on alcohol should be set to address "the spillover costs imposed on the community of alcohol abuse". Therefore, the estimates of those costs are a crucial element of the debate.

Health lobbyists are pushing for higher taxes on alcohol and have consistently said the costs to the community total $15bn, a figure from a 2008 paper by Australian academics David Collins and Helen Lapsley.

But the new study by Eric Crampton, commissioned by the National Alcohol Beverage Industry Council, says most of the negative costs of alcohol are borne by private individuals and the public costs total just $3.8bn, which is less than the $4bn raised by alcohol taxes.

David Penberthy in the Sunday Telegraph (Australian Edition):

In the UK, the term now being used by the health lobby is "passive drinking". It doesn't mean that a drunken colleague will walk past you at work drinks and suddenly you're putting your bare bum on the photocopier and singing Danny Boy. Rather, it's a way of tallying up every social cost from problem drinking and using that as the basis for a more muscular assault on alcohol.

Independent research being pushed by the alcohol and hospitality industries shows the social cost from problem drinking has been overestimated by around $10 billion.

It says many of the costs caused by alcohol (such as a shortened life span or an injury) are borne by private individuals, not the broader community, and argues the health lobby is wrong to count the money alcoholics spend on alcohol as a public cost, when the money is coming out of no one's pocket but the poor alcoholic.

When I wrote a column about the Cancer Council's declaration alcohol was a carcinogen, I received an interesting email from a psychologist at one of our better universities who had done a lot of work with a prominent cancer organisation. He wrote that, with the war against tobacco largely won, there was now a funding-driven obsession within the organisation he worked for to identify new sources of harm, even if the science was contestable.

"There is an army of people who sit there trawling through data sets and article data-bases trying to find links between cancer and just about everything (the latest is broadband and electrical devices!).

"On alcohol and cancer I can confirm that the evidence is flimsy and being grossly over-stated. Much of the evidence or risk-statements are based on risk-ratios, e.g., if you drink you are 30 per cent more likely to get cancer, but they often don't tell you that this might be one in 10,000 to 1.3 in 10,000! They fall victim to a sort of fallacy of extension in which it is assumed that, because people who drink a lot of alcohol have significant risks of alcohol, we all share part of this risk if we drink a bit of alcohol."

This fallacy of extension has reached Canberra. Health Minister Nicola Roxon should think long and hard before she throws her lot in with these no-fun prohibitionists who would treat us all like babies.

Nigel Hawkes at Straight Statistics:

Professor Eric Crampton of the University of Canterbury in New Zealand is presenting a counter-estimate to the Australian Conference of Economists in Canberra in a session devoted to the annual “Dodgy” awards, in which economists compete in arguing that their particular policy area is the dodgiest.
He’ll be arguing the case that preventative health suffers from the worst application of economic analysis to policy of any branch of economics. (His full argument appears in a paper co-authored with a colleague from the University of Canterbury, Brad Taylor, and Matt Burgess of the Institute for the Study of Competition and Regulation in New Zealand.)
The $15 billion claim came from Professor David Collins of Macquarie University and Associate Professor Helen Lapsley of the University of Queensland, and relates to data for 2004-05. In New Zealand, similar methods have been used to calculate an annual cost of $4.8 billion – which, given the relative populations of the two countries, is even higher, per capita, than is Australia’s $15 billion.
Crampton says these figures are meaningless because they include costs drinkers impose on themselves – including the actual costs of buying their drinks – but exclude any figure for the enjoyment they might have derived from consuming them.

Note that the linked version is the paper as presented at the NZAE meetings three weeks ago; I'm cleaning the many typos and redundancies out of that version. The Straight Stats piece was picked up by Risk Blog (Swedish)

Me in the Canberra Times (Thursday)

Me at The Punch (the subeditor picked the headline).

Brad at Menzies House.

Judith Sloan is clearly a woman of refined and discriminating tastes.

Others: Andrew Starke at The Shout (Industry trade magazine).

I also hit the TV Ten news last Monday night and the drivetime show on ABC Canberra, as well as a few other radio bits for stations whose call signs dropped from my brain almost immediately.

Here's the presentation given at Canberra; I didn't have time to get to the Nudge slides at the end. Ah well.

compared to Frédéric Bastiat, Eric points me to the comments section of the Labour Party’s blog, where I am compared to Paul Henry. Specifically, commenter bbfloyd described my comments on Labour’s tax policy as

a series of personal opinions based on a worldview that can only be described as the result of a privileged upbringing

followed by

update.. just checked seamus’ blog… he writes like paul henry with a university degree. similar degree of narcissism.

Eric says that bb has me about right, although it is not clear if when he checked the blog it was my posts or Eric’s much more numerous ones that he was looking at.
This is all good fun, but it is the “worldview … of a privileged upbringing” that puzzles me. I’d describe my upbringing and current socio-economic status as comfortably middle class, which is privileged, but hardly what one would normally associate with that term. For the record, I have an income well in excess of $5,000 per year, well below $150,000, no assets that would ever be subject to a capital gains tax, and am a vegetarian who spends an absurd fraction of his income on fresh fruit and vegetables. That is, like most comfortably middle class people, and probably more than most, I would stand to gain a lot from Labour’s proposed tax policy. Such is Director’s Law. How that is consistent with my worldview, I’m not so sure.

Four Christchurcheans

I complain that the toilet blocks in our barracks aren't heated.

Susan (wife) replies: Toilet block? We're using a portaloo in the parking lot; council won't fix the pipes under the building for months.

A good sixth of Christchurch: Quit your whining; at least you can flush the loo at your house!

And we descend into the Pythonesque...

Apparently the toilets at the South City Mall are about the only working ones for a reasonable section of town. You'd think this would be a selling point: get the punters in to use the facilities; sell them a coffee and a doughnut. Working toilets as loss leader. But, again only by reports, the cleaning staff there really aren't keeping up with demand for the facilities; Susan prefers the portaloo that's cleaned regularly to the nice warm one a 5 minute walk away that, well, isn't.

Those of you in less earthquake-munted parts of the world give a silent moment's thanks for working sewerage...

An odd kind of insurance

Sometimes, it's hard to tell the difference between insurance and lotto.

Recall that the general point of insurance is to equalize utility across world-states. So you forgo some utility in the good state of the world by spending money on insurance so that you get some bonus utility in a bad state of the world. Yeah, yeah, this requires that the marginal utility of money not get out of whack across the two world-states; if you don't get many jollies from money in the bad state of the world, this doesn't work. But let's hold that constant for this case.

A Manitoba pool and hot-tub company took out a weather insurance policy such that if temperatures hit more than 34.5 degrees Celsius on 18 July, they'd get a big payout. They then told customers that if the temperature hit 34.5 degrees, they'd get a full refund on any pool, hot tub, or water heater they bought between 1 March and 4 July this year.

In March, the owners of North West Wholesale -- a pool and hot-tub company -- took an insurance policy on the weather. This means, if temperatures reach more than 34.5 C at the Richardson International Airport today, people who bought either a pool, hot tub or water heater from the company between March 1 and July 4 will be eligible for a full rebate.


People may have scoffed at the store owners back in March on the gamble they took, but some 80 customers may be laughing their way to the bank, as Environment Canada is predicting a 35 C high for this afternoon.
...

But chances may have been better for Tuesday's weather, as Environment Canada predicts temperatures could be much higher in Winnipeg and southern Manitoba.

The projected high is 37 C, which will most likely prompt the weather agency to issue a humidex advisory, said Environment Canada meteorologist Eric Dykes. 

(HT: Mom)

Today's temperature at the airport reached 33 degrees (link valid 18 July but probably just gives current day's temperatures thereafter), so the insurance event wasn't triggered.

But if I were sinking a pile of money in a pool, I'd want the refund if the weather turned out too cold to use the darn thing rather than in the state of the world in which I'm very happy with my purchase. And so it seems more like lotto than insurance for the customers.

Seriously... daytime highs of -20 in winter (night-time lows of -40); +33 in summer. Winnipeg's only really liveable for five weeks around May-June and another five weeks mid-September through mid-October. The other 42, unliveable. And then there are the mosquitoes. On the upside, I don't think they've ever had an earthquake. Floods, often. Tornadoes, rarely. But never an earthquake.

Overstating tobacco costs

Remember how I've been banging on about how cost studies get used dishonestly to push illiberal policy? Here's the NZ Herald (HT: @CJSBishop):

Smokers may complain that they are being victimised, but their arguments about personal liberty founder on a fundamental point of principle: you don't have the right to hurt yourself if you are hurting other people in the process.

Three Act MPs voted against the law requiring products to be kept out of sight, because they supported "rational personal choice". But is it rational to avail yourself of a product which inescapably harms the user when used as directed? Certainly not, when that harm becomes a drain on the public health system and society as a whole.

The tangible economic costs of smoking - in health care and loss of production because of illness or early death - are of the order of $1.7 billion a year, almost twice what is collected in tax.

Anyone claiming the right to set fire to that sort of public money needs to come up with an argument more cogent than personal liberty.

To their credit, Maori MPs are driving this. Associate Health Minister Tariana Turia introduced the latest bill and Hone Harawira, when a Maori Party MP, forced a select committee inquiry into the tobacco industry.

I'd like to thank the Herald for making my argument for me.

IF smokers actually cost the health system substantially more than they contribute to the health system via tobacco excise taxes and to the fisc in general by drawing lower overall superannuation payments (due to premature mortality), there could be a case for increasing tobacco excise taxes. We'd need to do some analysis to make sure things held at the margin, but there'd likely be a good case for increasing taxes.

Here the Herald is citing not the MoH's bogus figure on the health costs of figure (fisked here). Rather, it's Des O'Dea's commissioned report for ASH and SFC. Here's the bit from the O'Dea study that the Herald didn't cite:

Leaving aside these difficulties, it is certainly reasonable to assume that most of the additional health-care costs caused by smoking are borne by non-smokers through additional taxes (smokers do pay some share of these taxes). Also it is reasonable to assume that most of the 'lost  production' costs of premature mortality and increased morbidity are borne by smokers and their households (though there is some loss of profits also, and of tax revenue to government). A considerable amount of work would, however, be needed to get precision on these matters.

Without trying to calculate a precise estimate of 'external costs' it does seem reasonably apparent that the tax contribution of approximately $1 billion annually by smokers exceeds substantially the external costs of smoking which fall on non-smokers. If savings on pension costs from premature mortality of smokers were added as well the net fiscal contribution of smokers, to the fiscal gain of non-smokers, would be further increased. [emphasis added]

To reiterate our point, however, our argument for continuing, and increasing, high taxation of smoking is not based on an 'externality' argument. It is based on the argument that the total costs of smoking are high, and that taxation is an effective means of reducing these total costs. By far the largest component of these total costs, however it is valued, is the 'health loss' experienced by smokers themselves – their lost years of life and diminished quality of life. (p.46)

Read that again: even without counting savings to the pension system, smokers cover their costs about three times over. Des O'Dea is dead honest in his work here: he's not trying to sell private costs as being social. ASH wanted a number that included private costs; he gave them one. And, he honestly said that the case for increased taxation is to reduce the costs that smokers impose on themselves. That's an honest paternalism.

Unfortunately, once these figures get out into the wild, they're interpreted as costs smokers impose on others. Here are the components of O'Dea's $1.7 billion figure (Table B.1, p.44); you judge for yourself whether the Herald's right to call these costs on the public:

• Reduced production from mortality: $570m (I call private)
• Reduced production from morbidity: $280m (I call private)
• Resources diverted for tobacco consumption: $650m (I call batsh*t insane to consider this public: it's what smokers spend on their cigarettes net of excise taxes)
• Resources required to treat induced diseases and other consequences: $350m (public external transfer cost. This is the real cost to the health system)
• Smoking-induced fires: $15m (largely private, barely worth arguing about as such a small part of the overall figure)

So more than a third of the $1.685 billion is smokers' spending on cigarettes and only $350m are real external costs through the health system.

I wish that the Herald's editorial writers were just a bit more careful in how they present these things.