Tuesday, November 20, 2012

Wellington envy

File under "Things I'd attend were I in Wellington".

Treasury has been doing a lot of great outreach work. The Government Economics Network has been working to bring a bit more economic understanding to the rest of government; as part of that, GEN, in conjunction with U Vic, has been sponsoring some rather interesting debates. 

Coming up this Friday, NZIER's John Yeabsley will argue that Treasury's standard 8% discount rate for public sector projects is too high; U Vic's Professor Martin Lally will provide the opposition. The Ministry of Health's Bronwyn Croxson serves as commentator. The Victoria University Chair in Public Finance is running the event, sponsored by the GEN [thanks, Cherry, for the correction]. Other debates in the series are here.

Treasury and Vic are also putting on a conference on the country's long-term fiscal position 10-11 December. Hopefully they're able to make some progress in locking-in a phased increase in the superannuation age.

As background for Friday's debate, here's Treasury's Primer in Cost-Benefit Analysis. Section 3.3 covers the choice of discount rates. The whole document is rather useful; I point my Econ 224 students to it in my week on Cost-Benefit analysis. I especially like Section 5.4, "Tips and Traps", where they warn that if the net present value of something seems exceptionally high, the analyst ought step back and wonder why it hasn't been done before. The folks at Positively Wellington Tourism might have had a look at that before suggesting that their proposed tourism promotion strategy would yield a 50:1 benefit-to-cost ratio. If the December conference helps fix retirement policy, then spending on that conference could well have that kind of net benefit. I'm more skeptical about it for other tourism initiatives.

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