Sunday, 27 October 2013

Cars, phones, and dirigiste policy

Here's public health specialist Nick Wilson on a potential measure to stop drivers from using their phones.
But it is possible that there are other options to be explored, including ones that we canvas in the NZ Medical Journal piece. One of these options could be a requirement that all new cars imported into NZ (eg, from the year 2018) could be required to have technology that automatically stops mobile phones in the vehicle from ringing when the vehicle is in motion. That is “smartcars” could automatically turn off “smartphones”.
A non-exhaustive short list of reasons why this seems a bad idea:

  • Unless you're relying on a Bluetooth connection with the car, you'd need some kind of compliant phone that automatically interfaces with the car. International phone manufacturers and car companies don't exactly jump when NZ says so.
  • Bluetooth is sufficiently finicky that it wouldn't work automatically.
  • If you are connected with your car via Bluetooth, it's typically to run a hands-free calling system with your radio. Phone rings, you hear it through the radio, you say "Answer", it routes the call through the radio's speakers. The system that would let you shut down call answering is the one that enables hands-free answering. 
  • The first thing I would do if Nick got his way on this would be to download an app blocking it. 
  • How could the car tell which phone belongs to a driver and which belongs to a passenger? Do you want to ban passengers from talking on the phone too?
  • If NZ is the only country adopting this idea, you're going to have a hard time convincing any car manufacturer to support the tech. Best you could then hope for is something that gets added onto the car at point of import. Something that could be ripped out of the car by me when that happens - sheer bloodymindedness can be a powerful motivation for learning which bit of electronics needs to be circumvented.
  • It'll hike the cost of new cars compared to used ones, encouraging people to keep older cars on the road for longer, worsening our fleet average age and our emissions profile.
  • Talking is hardly the most distracting thing you can do with a cellphone while driving. Reading Twitter is another. Will the system have to decide which apps are allowed and which ones aren't? How, when there are a billion potential apps out there?
  • Get off my lawn and get out of my car. That can be a reason. One that isn't given enough weight these days.
I'm sure you can come up with other reasons. 


  1. Hey Seamus. I just read one of your old posts on capital gains tax and got the impression that you considered it double taxation - i.e. taxing the same income twice. Is that your view or did I misinterpret?

  2. Typical health advocate - lets try and ban an activity first before we think about how technology could make the problem go away. The passenger vs driver example you give is a classic example of this type of muddled thinking.

    As it happens Apple and the major auto manufacturers are busy developing systems to integrate Apple's Siri voice recognition system into cars.. hands free calling may well be the first step... hands free texting, Twitter updates, Facebook posts are all in line as would be voice control of music or podcasts. Voice activation of maps is also quite possible.

    So by 2018 it is quite possible that most new cars sold in NZ would have some form of Siri type voice (hands free control) over a number of in car activities....

    Nick Wilson is clearly not thinking things through - his first reaction is to ban something - instead of looking and seeing how technology today is actively finding solutions...

  3. I'm still waiting for the Homer Simpson designed car to hit the market. That would save me far more distraction than anything around cell phones.

  4. John. There are many different ways a CGT could be structured, and the problems with each would be different. My view is that the only CGT that avoids all of the problems is a broad-based value-added tax. But my bottom line would be the following:
    a) To the extent to which any other form of CGT removes an existing distortion between two activities, it exacerbates some other distortion.
    b) In particular, to the extent to which a CGT raised revenue, it would be adding an extra level of taxation to capital, which is already taxed three times in some cases (once as original labour income, once as the tax on real interest, and a third time from the inflation tax on principal).
    c) There are large economic and political costs to finely tuned complex tax systems, so while Ramsey looks good on paper, we should have a uniform rate of GST on all goods; while the optimal tax rate on capital income is zero, we should tax it at the same rate as labour income; and while you can make a case for some exquisitely finely crafted CGT, the optimal rate is zero.

  5. I'm inclined to agree with Seamus' point c - that there should be no capital gains tax (or the optimal rate of CGT is zero on a system with one) - but I'd like to open up another question related to the taxation of capital gains on a specific form of wealth - the family home.

    There is a conventional argument (I think Seamus mentions Gareth Morgan's restatement of it somewhere ) that somehow a capital gains tax would correct for an alleged distortion created by failure to tax income from owner occupied housing. Personally I think the two ideas here ideas are very distinct and trying to say one is a distortion correction for the other is, well just naive..

    I can see in National Accounts that , because owner occupied housing is such a massive component of the flow of services actually produced (but not transacted in arms length market transactions) , it makes sense to "correct" the accounts in some way by making estimates (albeit on naive partial equilibrium assumptions about transaction prices for rental units being the same whether or not the existing stock of owner occupied housing were to be supplied on the market and existing owner occupied demanders were to rent in the market).
    But what I can't see is how anyone in there right mind can actually think that in terms of NET rental INCOME there actually is any taxable profit at all in owning and renting out a second house - or that there would be any net income from the imputed rents to owner occupied housing. I'm pretty sure that a cursory investigation of IRD tax filings would show that most "mom and pop" rental houses return losses on an annual basis, using IRD permissible deductions for expenses. (I know that investment analysts thrash this point to death when they try to advise clients about returns in property markets vs returns in broad based equity markets - even after allowing for nominal "capital gains" net of inflation ), Ie the "marginal" rental unit in market transactions makes no net economic income at all. Thinking of trying to figure out net income (not jut net rental gross value) that might be imputed to owner occupied housing I am positive that the net flow returns - valued at any credible appraisal of the labour inputs extensive home production for maintenance services - would be negative. The moral hazard problems associated with renting vs owning would only reinforce this point - since renters don't have the incentive to and don't take care of valued improvements to property the way owners do, if the marginal market rental creates zero net income then the marginal owner occupied imputed rental will have negative imputed income.

    I guess the general point I want to make is that when conceptualizing, calculating , estimating imputed service values from an asset don't ignore the issues of home production of "value". The CGT sympathizers don't seem to recognize this point - home production matters, a lot, and the tax system cab distort this- seriously. I seem to recall a paper by Walley arguing something like this when discussing optimal (distortion minimizing) taxation rules - households vs individuals. Taxing individuals at different marginal rates distorts choices in home production between primary and secondary workers and that distorted choice can overwhelm any alleged efficiency gains from taxing primary and secondary workers in the household at different rates (because of differing labour supply elasticities).

    ps nice to hear from u John Small!