Friday, September 28, 2012

Doing Well by Doing Good: Sports Edition

New Zealand play Argentina in the Rubgy Championship again this weekend, so there will likely be more discussion of the role that the immediate past New Zealand coach, Graham Henry, has as a coaching advisor to the Argentinian team.  When the two teams met a couple of weeks ago in New Zealand, the media commentary on this focused on patriotism (how dare Henry work for the opposition), industrial espionage (there should be a stand-down period between coaching stints for different teams, since Henry still has information about current NZ structures), and social policy (it is good for the game to provide help to the less-strong teams).

In contrast, no-one seems to have considered the possibility that Henry's assistance to Argentina could be good for New Zealand. File this one under Honours problem sets I would like to write if I were teaching an appropriate course. The model is as follows:

The Rugby Championship is a two-round, round robin tournament (home and away) involving four teams: New Zealand, Australia, South Africa and New Zealand. New Zealand is clearly currently the strongest of the four teams and Argentina the weakest. The disparity is not so great that any result is a foregone conclusion, but realistically the gap between New Zealand and Argentina is large.  The biggest threat to New Zealand in the competition, then, is not the prospect that they might lose to Argentina. It is that they might split their two-game series with the other two teams, and have the competition decided by bonus points.

Helping out Argentina, therefore, would be to our advantage, if it raised the probability of their beating the other two teams by more than if it raised the probability of their beating New Zealand. I have no idea just what assumptions would be needed to make this model work, which is why I think it would make a great problem set. There might even be a letters-style publication here. I'll put co-authorship out for tender!

Black markets in everything: Cheese edition

A determined government can induce black markets in anything. Canada's 300% tariffs on dairy imports, designed to protect Canada's dairy cartel, seems to have induced a new cross-border smuggling trade. Where booze flowed South from Canada during America's prohibition, now cheese makes its way north.

Here's World Report:
 

Contraband cheese.

And there are allegations that Canadian police officers were involved in the smuggling.

I want to see a CBC cutesy version of Boardwalk Empire based around this concept. Nucky Thompson and the Dairy Cartel. Or, maybe better, a Christopher Guest documentary.

HT: Chad Wellington

Thursday, September 27, 2012

Popcorn, Parking, Exercise and the Theory of the Second Best

The University of Canterbury recently announced that it will be charging faculty and students alike something close to marginal cost for parking. The stated reason was that they saw no reason why scarce resources should be allocated to providing an amenity benefit that is of value to some staff and students but not to others.

The economists, of course, cheered. A parking permit at Canterbury is currently very cheap, but it is only a licence to hunt, not a guarantee of a park. We have been saying for years that parking should be charged at a market-clearing price. After all, charging parking at less than marginal cost generates a deadweight loss in which the marginal units consumed are valued at less than cost, and so reduces the total value that the university can deliver to staff and students. If there was a reason for thinking that the UoC-specific elasticities of demand of students or of labour supply of staff are higher for those who want parking than those who do not, you could make a Landsburg popcorn price-discrimination argument for subsidising parking, but that assumes that the University is a profit-maximising monopolist, rather than a not-for-profit utility maximising institution.

Then today, I heard from students that in another move, the Univeristy is increasing the student levy next year but including free gym membership as an offset. My first reaction was that this is the exact opposite of the move to increase the price of parking, and is silly for exactly the reasons that the former policy makes sense. But then it became clear. The students explained that a student levy can be added on to a student's interest-free student loan, whereas the cost of gym membership as an optional extra cannot. Given that every dollar of student loan is roughly equivalent to a straight out grant from the government of 33c if it is paid off at the slowest possible rate (from memory of a back-of-the-envelope calculation I made some time ago, so don't take this number to seriously), the new policy might make sense as a way of increasing the total government contribution to the University, as long as that benefit outweights the effect of the created deadweight loss, including, possibly, the cost to some students of having to queue for gym services.

But then I reaslied, we have to pay for parking permits out of after-tax income, but the University's expenditure on parking net of parking fees is not subject to fringe-benefit tax. So subsidised parking is also a way of increasing the government's total contribution to the University......   Isn't second-best analysis fun!

What's the use of National Standards data?

The anonymous blogger at Emil's Demesne* provides a few useful insights on how we might use National Standards data.

For readers outside of New Zealand, school-by-school data on student achievement rates will soon be published. An early version of that data came out this week when Fairfax compiled results from those schools willing to release their data early; the rest will wait until the government publishes the comprehensive dataset. Emil begins:

My own prejudices. I am a policy analyst with nil expertise in education. I support publication of national standards data. I am agnostic as to whether national standards should have been introduced in the first place, but furious at those “public servants” who sought to obstruct implementation of a lawful Government policy: no integrity.
I’m mainly interested in what the standards data can and can’t tell us, and how they might be used to improve education outcomes. The lens I’m trying to look through is how would I tackle this if I were at the Ministry of Education?

He follows up:

Where cross-school comparisons might come in useful is in identifying stand-out schools so that successful and/or innovative practices can be, where appropriate, replicated more widely. Obviously, what works in a school within one particular cultural, social, and economic context won’t necessarily work for a school that’s in a totally different one. You do your data analysis and your case studies, then you devise sensible categories and work within them.
So long as moderation is at least better than hopeless, in time, we’ll also learn quite a bit more than we already know about the impact of social and economic factors on academic attainment during the early years of school. This is important, because it’s these early years that are assumed to matter most. National standards data, for all its flaws, is or can be made rich enough to support meaningful research that will help us improve how we teach our children.
Depending on whether or not I can be bothered, I might write up some stuff on why I don’t like deciles as analytical tools. But not this week.

The post has nice context around why we shouldn't expect standardized testing or strong grade moderation in New Zealand. What should parents be looking at rather than just a school's ranking?

I’d look for signs that schools are using the standards sensibly on a student level. Especially for students not at standard, I’d want to see individualized learning plans, with achievable benchmarks/milestones. Ideally, these plans would be designed in and as a collaboration between teacher, student, and caregiver. Give the student a sense of direction and ownership: here’s what we want you to be able to do, here’s our plan for getting you there, and here’s how you’ll be able to feel your own progress along the way.
Over time, I’d look for signs that schools are using standards, in conjunction with the learning plans, to do some value-added appraisal of teachers. I would incorporate this formally into professional development structures. I accept that there’s only so much a teacher can be reasonably expected to do for kids who turn up hungry, have caregivers with significant reading difficulties, or who switch between schools a lot. (These are, incidentally, things that are thought to correlate pretty tightly with decile.) Placing appropriate weight on factors like this is something that I think standards will be able to do over time, even if they’re fairly messy.

Helpful advice. Our oldest starts in at proper school in February next year.

* Emil previously brought us chapter 1 of a short story chronicling how the Wellington bureaucracy might respond to a zombie outbreak, partially as follow up to a fun Twitter hashtag. I look forward to the story's second chapter.

Wednesday, September 26, 2012

Education regressions

Luis at Quantum Forest has been doing some great work with the schools data. I'm picking up on it with a few regressions. Raw performance data for the schools isn't all that instructive as schools have very different raw materials with which to work. But it would be nice to know how well a school does given the decile and ethnic mix of students coming into the classroom. So let's check that.

I'm using Luis's data here, modified slightly to work in Stata: I replaced the NA cells with . so that Stata would read things as numeric variables rather than strings. My do file and dta file are up at Dropbox.

Like Luis, I started by generating a variable giving the proportion of students either meeting or exceeding the standard in each of reading, writing, and maths. I then ran a few simple linear regressions with analytic weights equal to the total school roll: the dependent variable is an average and the schools average over different numbers of students.

Covariates are decile, decile squared, the number of students per full time teacher equivalent, proportion of each of {Maori, Pacific, Asian, International, Melanesian [MELAA, which could be an acronym for Middle-East, Latin America and Africa, says Kiwi Poll Guy in comments; he's likely right], Other} students (European dropped), indicator variables for each of {minor urban area (town), secondary urban area (suburb), main urban area (rural dropped)}, indicator variables for single sex boys and girls schools (co-ed dropped), an indicator variable for state schools (integrated schools dropped), an indicator for boarding schools, and indicator variables for each of the main types of school {composite, contributing, intermediate, secondary (full primary dropped)}.

Results are in Table 1, below. But first, a caveats. As best I understand things, these grades are not moderated. So any effects here could be saying either that some schools do a better job in teaching, or that some schools engage in grade inflation.

Table 1: Full sample: Reading, Writing, and Math

(1) (2) (3)
ReadingWritingMath

decile 0.0485***0.0363***0.0437***
(6.53) (3.67) (5.27)
Decile squared -0.00224***-0.00110 -0.00195***
(-4.39) (-1.62) (-3.41)
Students per teacher0.00282* 0.00362* 0.00215
(2.41) (2.35) (1.65)
Proportion of Maori students-0.0664* -0.0848* -0.112***
(-2.20) (-2.13) (-3.34)
Proportion of Pacific students-0.115***-0.114** -0.0676
(-3.52) (-2.63) (-1.86)
Proportion of Asian students-0.0796** -0.0787* 0.00448
(-2.63) (-1.97) (0.13)
Proportion of International students0.290 0.863** 1.510***
(1.23) (2.79) (5.76)
Proportion of MELAA students0.0952 -0.0934 -0.0722
(0.61) (-0.45) (-0.41)
Proportion of students Other ethnicity0.428 1.043* 1.040**
(1.35) (2.50) (2.92)
Minor Urban Area (Rural dropped)0.00817 -0.0104 -0.0257
(0.62) (-0.60) (-1.76)
Secondary Urban Area (Rural dropped)-0.0189 -0.0283 -0.0416**
(-1.33) (-1.52) (-2.63)
Major Urban Area (Rural dropped)0.00890 -0.00366 -0.0186
(0.80) (-0.25) (-1.50)
Boys school (co-ed dropped)0.101***0.118***0.205***
(3.90) (3.48) (6.87)
Girls school (co-ed dropped)0.125***0.181***0.142***
(5.60) (6.16) (5.44)
State school (integrated schools dropped)-0.0246* -0.0594***-0.0219
(-2.49) (-4.58) (-1.96)
Composite (Year 1-15) (Full Primary dropped)-0.0221 -0.0566* -0.0384
(-1.14) (-2.23) (-1.79)
Contributing (Year 1-6) (Full Primary dropped)0.0127 0.0345***0.0338***
(1.77) (3.64) (4.23)
Intermediate (year 7 and 8) (Full Primary dropped)-0.0673***-0.0974***-0.107***
(-6.07) (-6.64) (-8.65)
Secondary (Year 7-15) (Full Primary dropped)-0.0939***-0.110***-0.158***
(-6.78) (-6.06) (-10.15)
Boarding school -0.00755 -0.0716** -0.0475*
(-0.39) (-2.79) (-2.01)
Constant 0.574***0.527***0.569***
(15.48) (10.75) (13.78)

Observations 1006 996 1000
Adjusted R20.528 0.467 0.532

t statistics in parentheses
* p < 0.05, ** p < 0.01, *** p < 0.001

Decile matters greatly. All else equal, a school one decile higher has about a four percentage point increase in pass rates. But, decile matters at a decreasing rate: moving from Decile 2 to Decile 3 correlates with a 3.3 percentage point increase in maths pass rates while moving from Decile 8 to Decile 9 only improves pass rates by one percentage point.

Class size matters: schools with more students per teacher have higher pass rates. I suspect reverse causation here: for a fixed budget, those schools that are able to run larger classes are likely those that have fewer discipline problems and so are able to put those resources to other uses.

Ethnicity matters. A standard deviation increase in the proportion of Maori students reduces aggregate pass rates by 1.3 percentage points in reading and 2.2 percentage points in math. Similar trends exist for Pacific Island student ratios. I'd be pretty cautious in interpreting this one: if you run things decile-by-decile, the effects mostly disappear. The biggest negative effect seems to hold in high decile schools, but by the time you get to Decile 10 schools, the median school has only 5.9% Maori students. Results then may be a bit sensitive to a few outliers on the right hand side. Like Luis, I'll refrain from doing much more until the official results come out.

Single sex schools seem to do well; boarding schools seem to do poorly.

I generated residuals from each of the three specifications above. The residual tells us whether a school had a higher or lower pass rate than we would have expected given its characteristics. This either tells us how good (or bad) the school is at teaching, or how good (or bad) it is at grade inflation. Without external moderation, it's hard to tell. The residuals from the three specifications correlate strongly with each other: schools that are good (or grade inflate) tend to do so across the board. The lowest pairwise correlation was 0.57; the highest was 0.63. I averaged the residuals to get a composite score. A high residual means that the school's actual pass rate was higher than what we would have expected given its characteristics.

I'm not confident enough in the model to put up my own league table of residuals. But I will put this up. This is a scatterplot of the residuals showing just how much school performance varies after we have corrected for decile, ethnicity, and everything else in the above model. That can point to its being a bad model, the underlying data being bad, strong differences in teaching quality across schools, or a combination of all three.


There are decile 1 schools providing pass rates twenty percentage points or more above what we'd expect, given their characteristics (that's the 0.2 number on the y-axis); there is one decile ten school providing pass rates more than twenty percentage points below what we would expect given its characteristics. Differences in school performance simply do not come down only to decile. Decile's the most important thing. But differences in performance among schools of the same decile by definition have to be about something other than decile. I can't tell from this data whether it's differences in stat-juking, differences in unobserved characteristics of entering students, differences in school pedagogy, or something else. But there's something here that bears explaining. 

Update: Note also Luis's very sensible cautions about selection into the dataset with the preliminary data. Schools chose whether or not to release their results to Fairfax. I'd guess the bottom tail isn't in this distribution. 

Saturday, September 22, 2012

Charter Schools

Coming up as part of Canterbury University's "What If" lecture series, a lecture from Mike Feinberg on KIPP and the American experience with charter schools. Here's Feinberg at Forbes.com on KIPP at Houston.

From the University's announcement:
What If charter schools could make a difference?
Click to add this event to your calendar
Date: Wednesday 26 September 2012
Time: 6:30 p.m. to 8:00 p.m.Location: University of Canterbury
Contact: For further information regarding this event, please contact Shandley Wenborn by sending email toshandley.wenborn@canterbury.ac.nz or by calling 03 364 2346
Audience: The general public
Presented by Dr Mike Feinberg

Partnership Schools/Kura Hourua – known internationally as charter schools – are one of the Government’s initiatives aimed at addressing student underachievement. As a relatively late adopter of the concept, New Zealand has the advantage of being able to learn from the successes and failures of models in other parts of the world.

Join us for a discussion on what KIPP, a US network of 125 high-performing charter schools, has been able to deliver in terms of educational achievement and new ways for parents and communities to be involved in their children’s education.

Dr Feinberg co-founded KIPP, is currently Executive Vice-Chair of KIPP Houston, and serves on the board of KIPP Foundation. He has won numerous awards for educational excellence and public service/social entrepreneurship.
I will be seeking leave to attend. Evening engagements often require side-payments. But this one's likely to be worth it. I'll hope to see Christchurch-based readers there.

Friday, September 21, 2012

Do costs matter?

Sandra Jones says that optimal alcohol policy is invariant to measured social costs:
I think Dr Crampton is missing the point. I for one will not vote for (or against) government policy because the costs of death and suffering have been estimated at $5 billion, any more than I would if they were estimated at $10 billion or $100 billion.
As an Australian, I care that alcohol is second only to tobacco as a preventable cause of drug-related death and hospitalisation, with an estimated 3,000 deaths per annum; I care that our emergency rooms are clogged with people suffering from the immediate effects of their, or others, misuse of alcohol; and I care that every year almost 600 Australians aged 65-74 die from injury and disease, and 6,500 are hospitalised, as a result of drinking above the NHMRC guidelines[3].
I also care that 43% of Australians perceived physical assault in a public place to be a problem in their neighbourhood[4]; that alcohol is a significant contributing factor in domestic violence[5]; and that alcohol abuse is an important risk factor for child abuse, maltreatment and neglect[6].
As a parent, I care that 13% of all deaths among Australians aged 14-17 years – that is one per week – are a direct result of alcohol consumption; and that alcohol is responsible for the hospitalisation of 60 teenagers each week.
Perhaps Dr Crampton – and the alcohol industry – could spend a little less time arguing the exact calculation of the financial costs of alcohol and think about the real costs.  I am sure that every parent who has lost a teenager from alcohol misuse would estimate that single cost at much more that $15 billion.
Let’s stop pretending we don’t have a problem with alcohol.
In one important sense, I agree with Sandra. As we wrote in the introduction to our paper:
We argue that the standard economic case for intervention, which relies on identifying instances in which the marginal social costs of consumption exceed marginal private costs, is not established by Cost of Illness studies. First, these studies summarily ignore the differences between marginal and total costs. Even were it the case that total external cost exceeded total collected taxes, feasible interventions including excise tax increases can remain undesirable where marginal external costs are less than the excise rate.
You can have worlds where the measured social costs are orders of magnitude higher than collected excise revenues but no intervention passes cost-benefit analysis because harms are relatively inelastic to intervention; you can have other worlds where the measured social costs are orders of magnitude lower than the collected excise revenues but particular interventions pass cost-benefit analysis because particular categories of harmful activity are relatively elastic to intervention.

The only reason that I started caring about the measure of the total social cost of alcohol use is that bad estimates of it build demand for intervention on what look like sciency economic grounds when the sciency veneer is actually pretty thin. When BERL came out with its big shiny number, I just shrugged - another dodgy number in a world of dodgy numbers. Until Sir Geoffrey started citing it as motivating his call for much tighter regulations around alcohol and BERL's analysts refused to inform him that their figure was not fit for that purpose.

I'm sure that Sandra Jones' opposition to alcohol is completely invariant to the measure of the social cost. But I don't believe that's true of many voters who are deceived by cost of illness studies that present costs drinkers impose upon themselves as 'social costs', which then are interpreted in public debate as costs to the taxpayer.

It's worth perhaps also having a bit of perspective on where Sandra's coming from on alcohol, and here I'll part company with her rather more substantially.

Here's Hoek and Jones in the Journal of Social Marketing last year. First, some definitions:
The dominant approach focuses on individual-level behaviour change, or what is now described as downstream social marketing. This approach regards behaviour change as voluntary and relies on offers that create greater value than continuation of the risk behaviour. By contrast, "upstream" social marketing focuses on policy and regulation, with the aim of altering environments so these support and promote behaviour change. "Upstream" initiatives have much in common with work public health researchers undertake, suggesting that many benefits could be gained from stronger social marketing and public health alliances.
So upstream social marketing is regulation. Ok. So why do we need that rather than efforts that focus on individual responsibility? Let's check the section of the paper called "The Myth of Individual Responsibility" for some answers.
By promoting individual behaviour change, downstream social marketing campaigns risk reinforcing the impression that consumers themselves are responsible for their own choices, irrespective of the powerful stimuli that promote and reinforce these. Furthermore, individually oriented actions deflect attention from the companies manufacturing, distributing and marketing products known to cause harmful social and health problems and imply these cannot (and perhaps should not) be held responsible for their products' effects. Efforts to relocate responsibility back to these corporations thus require environmental changes that both recognise and ameliorate the influence marketing stimuli exert. 
Is this just tobacco and maybe alcohol?
For example, McDonald's and Coca Cola have undertaken extensive sponsorship of sporting events, from major international gatherings such as the Olympic Games and FIFA World Cup right through to smaller local activities, such as support of junior football codes. These activities indicate their endorsement of sporting activity and exercise, which is clearly part of a healthy lifestyle for all individuals. However, it also supports their claim that no foods are "unhealthy", that a sensible diet has room for "treat" foods, just as it should also include "everyday" foods, and that the way to enable inclusion of these treat foods is to undertake sufficient exercise. Individuals, therefore, need to manage their diets so these represent an appropriate balance of foods.
This reasoning has a powerful intuitive logic and few would deny individuals have an important role in selecting the foods they consume. However, this argument overlooks entirely the role food companies have in shaping individuals' food environments.
 And individual choice?
...far from limiting individuals' freedoms, regulation shaping consumers' choice contexts is actually the means of liberating those environments, thus enabling them to make free choices. Only by balancing environments so the voices of public health are not overwhelmed by the cacophony of commerce can individuals begin to make choices that are in their long-term interests. Without regulation to create these more even choice contexts, consumers faced with unremitting commercial stimuli are, understandably, likely to be swayed by these rather than longer-term social or health interests.
The Ministry of Freedom could maybe be in charge of making sure the choice context is just right.

In a paper section entitled "Tobacco control - daring to dream", they note how regulatory policies denormalizing tobacco use made downstream social anti-smoking campaigns more effective; this is meant to serve as example for the effectiveness of this partnered approach for other industries.

They conclude:
If high-risk behaviours such as smoking, excessive alcohol consumption and consumption of high fat, salt and sugar foods are to change, social marketers need to recognise, then manage, the environmental determinants of risk behaviour. This implies that they explore upstream measures and work alongside public health researchers to create a context where downstream interventions may flourish. [25] Jochelson (2006) summarised this approach when she argued that: "Legislation brings about change that individuals on their own cannot, and sets new standards for the public good". Because upstream measures affect the environments that shape and support behaviour, they should be regarded not as constraints diminishing voluntary behaviour but instead as the pre-requisites enabling full and free choices.
It's like the No Logo movement has bred with the public health movement. Count Chocula should be worried; his days may be numbered.

It's at least mildly amusing that Jones, who views people as massively subject to advertising in their roles as shoppers, seems to dismiss that voters' preferences might be corrupted by shonky cost of illness studies.

At least I have a framework for why I worry a lot more about the latter than the former: individuals bear the costs of getting things wrong in their shopping decisions and so pay a bit more attention there than they do when weighing up political choices where each vote has only a trivial chance of changing anything.

Thursday, September 20, 2012

GMO Memories

All the talk about nutty California regulations around GMO labelling reminds me of the summer of '98.

I'd only applied to George Mason University for grad school and I sure wasn't going unless I was funded. I picked up a job as legislative assistant in M.P. Howard Hilstrom's office in Ottawa; he was pretty happy to have me on only for the summer if GMU funded me or to continue on if not. He was the Reform Party Agriculture Critic, newly elected from Selkirk-Interlake. My undergrad had been a double honours in economics and politics. Hilstrom won by a pretty slim majority, so one of the first things I started working on was getting stuff out to the riding showing what he'd been doing in Question Time and the like - using the Franking privilege to send out as much persuasively informative but still non-partisan material as seemed reasonable. But the one policy area I got to play around with a bit was GMO labelling.

There was some pressure from some parts of the party membership to endorse mandatory GMO labelling. And there wasn't anything on it in the Blue Book - the set of policies endorsed at the conventions that gave the party line. So I got to write up something for the interim. I have no clue what happened to it afterwards; it was one of the last things I finished before heading back to Manitoba to pack up to drive down to Fairfax, Virginia. But if my memory isn't too terrible,* the bottom lines were something like:
  • Markets in organic foods flourish (where not constrained by supply management) despite there not being "Includes Chemicals!" labels on everything; guaranteed GMO-free products should similarly attract a price premium among those who want that kind of guarantee;
  • Mandatory "Includes GMO" labels will unduly scare shoppers who expect that the government only labels things that are dangerous; there's no evidence that GMO-foods are dangerous;
    • There would be a role for government in standard consumer protection "truth in labelling" regs to help ensure any GMO-free labels were not fraudulent;
  • The precautionary principle can't be the basis for rational policy.
I don't know whatever happened to the short piece I wrote. Since then, the Reform Party merged with the Progressive Conservative Party and the merged Conservative Party became the government. And Canada hasn't done anything nuts yet on GMO labelling. I like to think that I helped. Just like I like to think that the spare tiger-protection rock that I left near Parliament is responsible for the complete absence of tiger attacks on Parliament Hill since 1998. Some harmless almost-certainly-untrue beliefs do provide utility, if only via prospect theory.

The other bit of news that reminds me of the summer of '98: fishermen from the northern basin of Lake Winnipeg are finally getting more vocal about the Freshwater Fish Marketing Corporation. The FFMC is a strange little marketing board: it has the sole legal right to purchase fish caught commercially in parts of western Canada. It looks like they've rebranded themselves as "Freshwater Fish". From their FAQ:
Freshwater Fish is the centralized marketing body that buys, processes and markets all fish caught on a commercial licence in Manitoba, Alberta, and the Northwest Territories. We operate packing stations both directly and with agents throughout the regions and run a processing plant in Winnipeg. We do not issue fishing licences, set quotas or regulate opening and closing dates for the fishing season.
Now, the fishermen at the south end of the lake, at least in '98, didn't seem opposed to the FFMC. But the guys up north who'd suffer spoilage in getting their product to the packing plant and who weren't legally allowed to set up their own processing facility, well, they didn't like it. Nor should they have.

The case for abolishing the FFMC's monopoly was every bit as good as the case for abolishing the CWB's monopoly. Howard never looked particularly comfortable when I'd point that out - Reform was pushing hard for marketing freedom for Western Canadian grain farmers stuck under the CWB. But he had to get re-elected in Selkirk-Interlake, not in Churchill. James Bezan represents that riding now and has been critical of FFMC; I wonder what's changed.

* Whatever files I had are somewhere on an Intel 486 dx 2/66 that was almost destroyed by the time I upgraded. Fried keyboard I/O chip so I had to push hard on the letter A to bend the motherboard enough to make the connection if I wanted to use the laptop's keyboard; all storage on an external Jaz drive. I doubt I could pull anything out of it even if I could find all the bits.

Wednesday, September 19, 2012

A hopefully concluding note on the price elasticity of alcohol

A condensed version of the letter I'd sent to the Press appeared in its letters section last week. My shortened letter:
In Monday's Press, Doug Sellman argued that differences in our interpretations of Chris Auld's study on the effects of minimum prices on consumption hinged on that the clause "relative to other drinks" was missing in one journalistic interpretation. This is hardly the case.
The Sellman press release said "A recent Canadian study has shown that a 10% increase in the minimum price of alcohol reduces its consumption by 16% relative to other drinks." As this statement was interposed between sentences noting the effectiveness of minimum prices in reducing consumption of alcoholic beverages, the reader could be forgiven for drawing the conclusion that the study Sellman cites finds that large a reduction in consumption of alcoholic beverages relative to non-alcoholic beverages. However, "other drinks" here did not mean that.
The sixteen percent estimate instead tells us what happens to, for example, beer consumption when the price of beer increases substantially and consumers then instead consume wine. It is highly misleading to present this as the expected effect of an across-the-board increase in prices.
It is especially misleading when the cited study did provide an estimate of the effects of minimum prices: a minimum price that lifts all prices by ten percent would decrease aggregate consumption of alcoholic drinks by only 3.4%. Indeed, Chris Auld, the economist responsible for the empirical analysis in the work cited by Sellman and Connor, writes in comment on my blog, and subsequently confirmed by email: "Eric, for the record, I agree with your interpretation, and I think Sellman and Connor's wording is very misleading." 
Doug Sellman and Jennie Connor's reply in Monday's paper this week:
"Dr Crampton continues his attack on us and does not admit that he made a mistake in quoting from an incorrect secondary source (Sept 11). But he does downgrade the charge from "screamingly wrong" to "very misleading", and if he were to take several more deep breaths he would realize we are essentially in agreement. We have said often over the past three years that there is no magic bullet to change the heavy drinking culture and the harm that results from it.
Although raising the price is probably the most effective and easily enacted measure the Government could put in place, it is not going to achieve the degree of change that is needed on its own.
However, the fact that a 10 per cent rise in minimum price results in a 3.4 per cent decrease in aggregate consumption should not be dismissed as trivial.
A reinforcing set of alcohol reforms, involving marketing, accessibility, purchase age and drink driving, in addition to raising alcohol prices, is likely to be required to bring about substantial change to the out-of-control and damaging state of alcohol use in New Zealand."
I continue to fail to see how there is any relevance in whether one includes "compared to other drinks". If they'd said "compared to other alcoholic drinks", then I'd have been perpetuating a misquoting. Recall that "other drinks" here means other categories of alcohol, not fruit juice. Keeping it in only clarifies things for those readers who knew that Auld et al meant "other alcoholic drinks" but sure doesn't help things for those who didn't know it.

Further, it's Chris Auld that said "very misleading". I'd said, and continue to say, "screamingly wrong". I was just space-constrained in the letters section.

If I had to guess what happened in the Sellman and Connor press release, I'd guess something like the following - I could pretty easily be wrong though and would happily take correction. Sellman and Connor both got mad that John Key said minimum pricing wouldn't do much to curb heavy drinkers' consumption, they ran a Google Scholar search to find some estimate they could use to beat him up with, gave the paper the most cursory skim to find a line they could use, and then ignored the rest of it. They might not have even noticed the 3.4% estimate further down the paper.

But even on this fairly benign story, there's just a shocking underling failure to put the number in context. Again, if you look at Wagenaar's meta-study, you just can't find a single estimate from any of the 100+ papers surveyed that puts alcohol demand as being relatively price elastic (ie absolute elasticity value  > 1.0); it's all degrees of inelasticity. And Sellman and Connor were happy to jump on a number saying alcohol's not just price elastic, it's really really price elastic. You simply cannot have any familiarity with this literature and expect that a price elasticity of -1.6 could possibly be right. It would be like claiming that acceleration due to Earth's gravity is fifty meters per second squared. You can't know anything about physics and think it plausible that acceleration due to gravity on Earth is fifty meters per second squared; you can't know anything about alcohol economics and think it plausible that the price elasticity of demand is -1.6. It's about that level of magnitude of wrong. And it's hardly "dismissing" the effects of gravity to point out that it's only really 9.8 meters per second squared either.

And this pair are the country's go-to experts on the evils of the booze.

Tuesday, September 18, 2012

Banning the bulb - the information critique

I'd noted a few problems with banning incandescent lightbulbs. First, we can't be sure that one bulb is really friendlier than another without very comprehensive information on how they're manufactured; second, where New Zealand's ETS has things roughly right, at least when it comes to power generation, it's pretty hard to make a case for banning lightbulbs.

Bryan Walker notes a couple of studies suggesting that the cheaper-to-run bulbs are also friendlier to manufacture:
However I had a look to see what I could find, and came across this assessment of CFLs from a writer initially inclined to be sceptical about them, and this report on LEDs. It doesn’t look to be an issue.
A commenter at Offsetting found this one too.

I've no particular dog in this fight; if CFLs and LEDs are friendlier to manufacture, so much the better. But I'm still not sure that it's actually knowable. For example, Bryan's first link provides this table:

Here's a summary of the embodied energy in a light bulb (all numbers represent energy in kWh):
CFLIncandescent8 Incandescent bulbs
Glass0.170.110.88
Plastic0.6800
Electronics0.6600
Brass0.180.181.44
Operation*12060480
Recycle**1.6900
Total123.3860.29482.32
* This assumes the CFL bulb operates for 8000hrs and the incandescent bulb operates for 1000hrs
** This assumes that the energy required to recycle a CFL bulb is equal to its production 

Let's think about the plastics in the CFL and assume that the table has everything right about the direct energy costs of making plastic. But what about the energy costs of the machines that had to be bought to make the plastics? What about the costs of the machines that made those machines? We'd need to know everything about all the materials that go into all of the pieces of equipment that make the machines that make the machines that make plastics, and then everything involved in the materials used in making that prior set of machines, and so on all the way back.

Read Leonard Reed's I, Pencil. If a pencil's that hard to figure out, an LED bulb isn't going to be easier.

That's just the information problem on the supply side. What about heterogeneous customer demand based on their having very different uses for lightbulbs in different places? In large parts of the country in large parts of the year, waste heat from incandescent bulbs is not waste. It's just a less efficient way of partially heating your house. When I spend a dollar in power heating my house with my lightbulbs, I'm wasting about fifty cents if my heat pumps are twice as efficient as radiant heat; I'm not wasting the whole dollar. I don't want CFL bulbs in some outlets because they take just too long to wake up and provide light; in other spots in the house, it doesn't matter if it takes a couple of minutes to get useful lighting levels. A ban says there is no possible reason for a consumer to prefer an incandescent bulb that can outweigh the difference in power cost, and that just isn't true.

Walker continues:
Crampton’s second point was that an ETS which is functioning well removes the need for any regulatory interference in the market. “If power prices incorporate carbon charges via the ETS, then there’s no real economic case for pushing consumers to choose bulbs they don’t want.” He goes on to say that if the ETS isn’t producing the desired effect the answer is to improve the ETS, not make piecemeal interventions. It crossed my mind when I was writing the post that if the ETS was functioning at a level designed to drastically reduce carbon emissions there mightn’t be a need to bemoan the Government’s action on incandescents. But it is not functioning at that level, and the Government seems determined to ensure that it never will, or will only so far in the future as to be much too late.
If the ETS is broken and unfixable, then you can start making second-best cases for all kinds of stuff. But I'd thought it was least broken when it came to electricity generation.

But should New Zealand's ETS really go beyond that which everybody else is doing? "Drastically reduce" seems a pretty tough standard. Maybe it's the right one if everybody does it at the same time and agrees to be bound by it, but surely NZ going it alone in pushing for drastic reductions does a lot more to ruin the NZ economy than to delay global warming; we'd have to expect the rest of the world to be remarkably strongly swayed by New Zealand's example to expect otherwise. And that's just not going to happen so long as the mess in Europe and the looming potential economic mess in China are the headlines.

Walker continues:
Reining in carbon emissions has become a matter of high urgency, far outweighing concerns about government intervention in the economy. For that matter the ETS itself is an intervention, designed in its original intention to make markets assume the environmental costs which left to themselves they ignore. I see no reason why it should not be accompanied by other government directives which ensure that markets are not permitted to operate in areas that clearly slow the transition to a decarbonised economy.  We accept government mandates in many parts of the economy such as the compulsory insulation of new buildings and we rue failures in regulation such as allowed the emergence of leaky buildings.
Banning incandescents does not to my mind invoke the spectre of a centrally planned economy. It’s simply part of boundary setting for markets to operate within, a proper function of government and one buttressed by the urgency of the climate crisis.
The terms of the argument I think here have shifted a bit. First, my critique of lightbulb banning wasn't that it was interventionist; rather, that it was a worse regulation than having a working ETS. If the ETS were working correctly, there would be no efficiency case for banning lightbulbs; I'm not even convinced that there is a case for banning lightbulbs given the problems in our actual ETS.

I was hardly making the case that banning bulbs leads to a centrally planned economy. Rather, the knowledge requirements for assessing whether a ban is desirable and being really sure about it aren't far from the knowledge required to make central planning feasible.

If we want a shot at drastic reductions, though, we could do well to take another tack entirely. The ETS imposes some costs on the economy. Not huge ones, but they're real. Ditch the ETS and pour money into ag biotech research into improved pastoral systems for low methane; provide a free licence for anyone to use the resulting research. If it does nothing, then we've hastened global warming by maybe a day a century from now relative to NZ's having kept the ETS.* If it works, we substantially abate global agricultural methane emissions. A small country in the middle of nowhere with little influence might do better with the high variance play


* My baseline assumption here is that if New Zealand as a whole were shot into outer space tomorrow, with no further emissions of any kind, we'd at most delay whatever carbon concentration or temperature milestone we'd have otherwise achieved a century from now by at most two or three days. We're a pretty small dot.

Friday, September 14, 2012

Critique and the customer

If the point of an economic consultancy report is to convince serious officials at Treasury, the Reserve Bank, or the relevant Ministries of the economic case for something, and if the consultancy report has serious errors, you can do good by loudly critiquing it if it is wrong. Those who need to know whether the report is right will check the critiques and, if truth-seekers, will update. I understand that some of the serious folks at the Ministry of Health have strongly updated their views as to the appropriateness of Cost of Illness studies around alcohol consequent to critiques, very correctly noting that cost-effectiveness is the better measure.

But if the point of an economic consultancy report is to excite the hooples and to give a sciency justification for whatever some bunch of rent-seekers is trying to push, then critiquing it loudly only serves to provide advertising: this firm will produce the big shonky but sciency-looking number that your industry needs to get public support for whatever you're trying to push.
"Noise made, overtures to outside interests and enlistment of the hooples’ participation is what this situation demands." Al Swearengen, Episode 20, "Childish Things", Deadwood.
If that's what the reports provide, critiques might make things worse by letting the interests know who's best at exciting the hooples.

Want to show that your industry is the key linchpin for the regional economy? Want to show that your party's policy is the one for advancing economic prosperity? Yelling about how a particular consultancy produces numbers that are great for propaganda but bad for policy only serves to fuel demand where the ultimate audience are the hoopleheads.

What else can you say about a consultancy report that includes this in the concluding remarks?

The biggest cost will be loss of face for the “Mainstream Economists” especially the Bank economists, who have continually told us that this is the panacea: There Is No Alternative.  Their experiment will be at an end.
The audience isn't Treasury, the Reserve Bank, the boffins in the Ministry of Finance, academic economists, or anybody serious. It isn't you, Matt, as correct as your critique may be. Neither is it you, Paul: I watched you writing your critique as I went meta.  It's the hooples. And it's the reason that the New Zealand Economic Association really really needs an annual awards ceremony for the worst piece of economic consultancy work produced in the country every year.

So that the hooples can better be advised of the reputation of certain outfits.

Sell or lease?

Greece may lease some of its sovereign islands to help pay the bills:
As international inspectors in Athens scrutinise the country’s fitness to receive the latest aid payment, Prime Minister Antonis Samaras has said commercial exploitation of some islands could generate the revenue lenders need to see to continue funding the country.

The shortlist includes islands ranging in size from 500,000 square meters (5.4 million square feet) to 3 million square meters, and which can be developed into high-end integrated tourist resorts under leases lasting 30 years to 50 years, Mr Taprantzis said.

Legislation needs to be passed to allow development of public property by third parties and reduce the number of building, environmental and zoning permits needed before the plan can proceed, Taprantzis said.

Outright sales have been ruled out because the returns for the Greek state wouldn’t be higher than a leasehold arrangement, he said. Greece will attract more investment if an island is turned into a resort, he said.
I believe the explanations later in the story that complete sales would be politically difficult. But I sure don't believe that leasing out the islands would raise as much as selling them. As I'd written back in March:
Greece has somewhere around 6000 islands in one of the most beautiful parts of the world. Islands of legends and Greek Gods and stuff. Islands that, you'd expect, would be worth something to somebody. Some of them are privately owned and do trade. Here's one place you can go to buy one.

But all those islands are encumbered with Greek sovereignty. Own the island, own the  entanglements of the Greek state that make development, well, hard.
First of all, to date it is rather hard for someone to develop a private island because of the Greek state bureaucracy and the domestic Archeological Agency, which is stringent in its examination of every case that involves an island that may have antiquities of any kind lurking under its soil. 
And that's just for setting up the island as a holiday home. If you have to provide a stool sample to get through the regs letting you set up a web-based business, a Greek Island isn't going to be your first pick for doing anything innovative.

Imagine being able to bid on an island in the middle of the Mediterranean within a short flight of Europe, the mid-East, and northern Africa where Greece wouldn't just hand you title, they'd hand you sovereignty? There has to be a ton of value locked up in those islands that could be released by Greece being willing to relinquish sovereignty. Restrict it to the uninhabited islands to keep things simple, for starters.

Seasteading is cool. But imagine kickstarting it by letting a thousand sovereign islands bloom in the Aegean Sea? 
Leasing out islands with fewer regulatory encumbrances adds some value where the regulatory abatement is credible. But hasn't recent experience suggested that bare-land Greece would be worth more under alternative ownership?

Thursday, September 13, 2012

Dispatches from the front: Public Health edition

As semester constraints continue to bind, please enjoy this little interlude in our regular programming. The #PHC2012 hashtag captures tweets from attendees at the 2012 Population Health Congress in Adelaide. A few conference highlights (I'm not attending; I don't get invited to those shin-digs), from attendees via the Twitter feed. I'm surprised that Adelaide didn't collapse under the cloud of smug.
What?

In Australia? Really? I'd bet pretty heavily against it.

Recall Blakely's prior work in this area. [and here]. I like increased life expectancy, so long as it's not achieved by forcing people to lead bland lives. The stream seemed to suggest worries about ecological footprints and life expectancy.


I'm trying!

Wilkinson, of The Spirit Level, was keynote. Recall that The Spirit Level was completely debunked by Chris Snowdon (on the right) and is viewed as unreliable by Andrew Leigh. Leigh wrote:
One set of arguments suggests that we should care about inequality for what are called ‘instrumental reasons’. Inequality, some contend, is associated with worse outcomes in areas that society cares about, such as health, crime, savings and growth. This argument is put most strongly in The Spirit Level, by Richard Wilkinson and Kate Pickett. It is an argument that I used to believe. Indeed, I deeply want to be true, but my own research persuades me otherwise.[25] The closer you get to these asserted effects, the more fragile are the findings. If there are negative effects of inequality on those social outcomes, they must be extremely small. (There are also small positive effects. For example, my own work shows that inequality boosts growth, though the trickle-down process is slow.)
And, recall that Justin Wolfers destroyed the "not lead to happiness" result:
Using recent data on a broader array of countries, we establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. We show that the estimated relationship is consistent across many datasets and is similar to that between subjective well-being and income observed within countries. Finally, examining the relationship between changes in subjective
well-being and income over time within countries, we find economic growth associated with rising happiness. Together these findings indicate a clear role for absolute income and a more limited role for relative income comparisons in determining happiness.
Back to the twitter stream:



Prepare to be managed.


Yes. Very brave.

I assume they're looking to ban ads for fatty foods and that they're not trying to cancel reruns of Roseanne.


Ummm.... if they mean an arms-length body like Pharmac for funding decisions, that's totally justifiable. But I'm not sure that's what's here advocated.

I think this is a KPI for some folks.

Did Otago get a grant for this? Weeping.

And so you have a little glimpse into the world that the Public Health advocates are trying to bring forth.

Tuesday, September 11, 2012

What can you do with a B.A. in Econ?

Make awesome video games even more awesome, that's what. Valve's hiring another economist:
Economist

Valve’s multi-player games, as well as Steam (Valve’s successful trading platform), have allowed for the spontaneous emergence of complex virtual, yet quite real, economies. These economies are replete with rich trading patterns, fascinating ‘institutions’ (which have also sprung up organically), socio-economic conventions, and, generally, a host of economic phenomena that partly reflect what we observe in the analogue world and partly constitute new and unexplored behavioural patterns.
The task of a Valve economist is to make good use of the incredible wealth of data concerning these social economies, to pose fresh questions about their workings, and to generate methods for converting new knowledge about these economic vistas into tangible ideas that help improve our customers’ experiences.
Duties:
  • Research, design, develop, and validate economic models to explain user behavior for all of Valve’s products.
  • Design experiments to validate experimental hypotheses for in-game economies.
  • Provide insight into short- and long-term behavioral patterns of participants in virtual economies.
  • Inform decision-making at Valve by providing quantitative and economic rationale for various lines of inquiry.
  • Create new avenues of analysis based on existing economic metrics, as well as generating new domains of data to collect and investigate.
  • Collaborate with our business development team to improve the performance of existing pricing strategies and incentives for our customers and partners.
Requirements:
  • Graduate degree in Economics or related field
  • Advanced knowledge of statistics
  • Four years experience with:
    • Econometrics/data-mining or related field
    • Relevant analysis techniques that inform the creation of economic models
Recommended:
  • Proficiency in one or more of the following programming languages: C++, SQL, PHP, or equivalent
Now, what do I mean another economist?  Yanis Varoufakis has been working at Valve and blogged on his experience. I'm not sure if he's still there, but the blog doesn't say that he isn't. Here's Varoufakis on his first visit to Valve:
Within hours, an agreement was reached: I would become, in some capacity (that was to be hammered out later), Valve’s economist-in-residence. Valve is not the first video game company to have brought an academic economist on board (e.g. EVE Online were the first to do so, recruiting Eyjólfur Guðmundsson – whom I would like to thank for making my name sound almost easy-going…). My intention at Valve, beyond performing a great deal of data mining, experimentation, and calibration of services provided to customers on the basis of such empirical findings, is to to go one step beyond; to forge narratives and empirical knowledge that (a) transcend the border separating the ‘real’ from the digital economies, and (b) bring together lessons from the political economy of our gamers’ economies and from studying Valve’s very special (and fascinating) internal management structure.
Academia's a pretty good place. When it's working properly, it doesn't sound all that different from work at Valve, at least according to Varoufakis:
If I were asked my opinion of what Valve’s symbol should be, I would recommend a depiction of a wheel, like those which every desk at Valve comes equipped with so as to enable us to move about the company at will, to join whichever working group we want, to form new ones spontaneously and without seeking anyone’s permission. The said wheel, at least in my eyes, symbolises Valve’s attempt to create, within the company, a successful ‘spontaneous order’ based not on price signals but, rather, on decentralised, individuated, time allocations.

Many enlightened corporations do a song and dance about their readiness to let employees allocate 10% or even 20% of their working time on projects of their choosing. Valve differs in that it insists that its employees allocate 100% of their time on projects of their choosing. 100% is a radical number! It means that Valve operates without a system of command. In other words, it seeks to achieve order not via fiat, command or hierarchy but, instead, spontaneously.
I wonder what Paul Walker would make of this form of organization for the knowledge-based firm. As the New York Times writes:
Mr. Newell said that there was a better chance that Valve would “disintegrate,” its independent-minded workers scattering, than that it would ever be sold.
If the firm is just a bundle of contracts....

Monday, September 10, 2012

Rationalist reading

It's hard to fit magic into the rational universe. What happens to the laws of physics around conservation of mass if a wizard can turn herself into a cat?

I'd missed this one when it came out: Harry Potter and the Methods of Rationality. [HT: Aimee on the SciBlogs Google group]

Half-way down the first page, it started sounding an awful lot like Eliezer Yudkowsky. After this bit from the second chapter, it would have been shocking had it been anyone other than Eliezer.

The witch-lady was smiling benevolently upon them, looking quite amused. "Would you like a further demonstration, Mr. Potter?"
"You don't have to," Harry said. "We've performed a definitive experiment. But..." Harry hesitated. He couldn't help himself. Actually, under the circumstances, he shouldn't be helping himself. It was right and proper to be curious. "What else can you do?"
Professor McGonagall turned into a cat.
Harry scrambled back unthinkingly, backpedalling so fast that he tripped over a stray stack of books and landed hard on his bottom with a thwack. His hands came down to catch himself without quite reaching properly, and there was a warning twinge in his shoulder as the weight came down unbraced.
At once the small tabby cat morphed back up into a robed woman. "I'm sorry, Mr. Potter," said the witch, sounding sincere, though the corners of her lips were twitching upwards. "I should have warned you."
Harry was breathing in short gasps. His voice came out choked. "You can't DO that!""It's only a Transfiguration," said Professor McGonagall. "An Animagus transformation, to be exact."
"You turned into a cat! A SMALL cat! You violated Conservation of Energy! That's not just an arbitrary rule, it's implied by the form of the quantum Hamiltonian! Rejecting it destroys unitarity and then you get FTL signalling! And cats are COMPLICATED! A human mind can't just visualise a whole cat's anatomy and, and all the cat biochemistry, and what about the neurology? How can you go on thinking using a cat-sized brain?"
Professor McGonagall's lips were twitching harder now. "Magic."
"Magic isn't enough to do that! You'd have to be a god!"
Professor McGonagall blinked. "That's the first time I've ever been called that."
A blur was coming over Harry's vision, as his brain started to comprehend what had just broken. The whole idea of a unified universe with mathematically regular laws, that was what had been flushed down the toilet; the whole notion of physics. Three thousand years of resolving big complicated things into smaller pieces, discovering that the music of the planets was the same tune as a falling apple, finding that the true laws were perfectly universal and had no exceptions anywhere and took the form of simple maths governing the smallest parts, not to mention that the mind was the brain and the brain was made of neurons, a brain was what a person was -
And then a woman turned into a cat, so much for all that.
I'm enjoying this far more than I've enjoyed any part of the original Potter series (full disclosure: movies only, sorry). Watch especially for Harry's imagining how to arbitrage between Muggle-land and Hogwarts' where the latter runs a bimetalllic currency at a fixed exchange rate that differs from our price ratio. And fixing Quidditch.

The Last Ringbearer similarly dominates The Lord of The Rings. Hoorah for those authors (and their estates) who don't prosecute those creating fan faction!

Thursday, September 6, 2012

Tobacco plain packaging, if we cared about evidence

The Science Media Centre provides an expert round-up of commentary on a new paper finding, unsurprisingly, that people like branded tobacco packs more than they like plain packs. What's more relevant for policy, and what we really have no clue about, is whether changing the branding on packages has effects on aggregate sales or whether it works instead to break brand loyalty and move consumers to lower-cost no-name packs. As Professor Richard Edwards noted in his plenary address to the Oceania Tobacco Control Conference in Brisbane last October:
Plain packs have not been implemented, so evidence of the probable population impact must come from experimental studies, focus groups, surveys and so on; rather than rigorous controlled studies of the impact of the actual intervention in the real setting, as would be the ideal.
If we cared about knowing whether tobacco plain packaging has any effect, we could find out pretty easily. Set the whole thing up as a randomized policy trial. Some parts of the country get plain packs, some parts don't, and watch what happens over the subsequent few years. I'd sketched out a framework for that kind of trial back in April. Even better: if Australia is implementing the same policy, run the trial across both countries.

Instead, we're designing policy to avoid ever being able to find out whether it's had any effect. In Oz, they're bundling plain packaging with a simultaneous national increase in tobacco excise taxes. The effects of price increases will be hopelessly confounded with the effects of plain packaging unless there's reasonable ex ante state level variation in tobacco prices.
The price of cigarettes would rise to $20 a pack under a Gillard Government proposal that would reap an extra $1.25 billion a year in taxes.

The West Australian understands the Government is considering a 25 per cent rise in tobacco excise that would raise $5 billion over four years.

The plan emerged from a Treas- ury reconsideration of so-called "sin" taxes. It would repeat the financial windfall from an identical move in 2010.

The proposal is in line with long-standing advice from the National Preventative Health Taskforce and would lift the price of a pack of 30 cigarettes by $2.62.

Peter Jackson 30s, now about $18.30, would cost almost $21 under the measure and the price of Dunhill 25s would increase $2.18, taking the retail price to more than $19.50.

The excise increase may be timed to coincide with the introduction of mandatory plain-packaging for tobacco products on December 1. [emphasis added]

International research has found there is a 4 per cent fall in smoking rates for every 10 per cent increase in price. Anti-smoking crusader and Curtin University Professor Mike Daube said higher cigarette prices would discourage children and people on low incomes from smoking. "An excise increase sooner rather than later could also prevent tobacco industry efforts to subvert the impact of plain packaging by lowering prices," he said.
There are non-crazy reasons for wanting to bundle excise increases with plain packaging. If, absent brands, smokers see there being less difference between low cost off-brand cigarettes and higher cost branded cigarettes, they may substitute down to the lower cost cigarettes and then smoke more - I expect this is the main worry of the tobacco industry as they make their returns on the branded product. Consumption goes up but margins go down more than proportionately. Countering this with excise increases isn't entirely nuts if you want to curb smoking rates, but it makes it awfully hard to tell whether plain packaging does anything other than destroy the value of the tobacco companies' brands.

I still think a randomized policy trial is what's needed if we care about finding out truth rather than just beating up on Big Tobacco.