FAQ on the WASP

[Update January, 2015: This post has been updated a bit for fans coming to it during the current NZ v SL ODI series.]

This post is written primarily for those cricket fans coming to Offsetting as a result of the WASP being used on BSkyB in Britain to cover the current series between England and Sri Lanka. As with the coverage in New Zealand, it has generated some reaction on Twitter. The aim of this post is to enhance the discussion by addressing some common misconceptions.

What does WASP stand for?

Winning And Score Predictor

How did WASP come about?

WASP was developed by Dr Scott Brooker and his Ph.D. supervisor Dr Seamus Hogan while Scott was studying for an Economics Ph.D. at the University of Canterbury.

What forms of cricket is it applicable to?

Limited Overs Cricket (including One-Day and T20 matches)

What does the WASP number mean in the first innings?

The score that the batting team will end up with at the end of their innings if both teams play averagely from this point on?

What do you mean by "play averagely"?

The model is based on the average performance of a top-eight batting team against a top-eight bowling/fielding team.

What does the WASP percentage mean in the second innings?

The probability that the team batting second will win the match, assuming that an average top-eight batting team is playing against an average top-eight bowling/fielding team.

What does the Par Score mean?

This is a measure of the ground conditions (including pitch, outfield, overhead conditions and boundary size) that exist on the day of the match. It is the average number of runs that the average top-eight team batting line-up would score in the first innings when batting against the average top-eight bowling/fielding line-up. It is decided by expert opinion (often the commentary team or the statistician looking at the history of the ground).

Why have a Par Score?

The average score in an ODI is around 250. Without a Par Score, WASP would predict 250 at the start of the first innings every time. With the Par Score, WASP may start off predicting 200 if batting conditions are very difficult or 300 if they are very easy. The Par Score method is not perfect as it is subjective, but it is a big improvement on simply assuming that all games are played in the same conditions.

Why does WASP change almost every ball?

That's exactly what it is designed to do. Every ball, whether the outcome is a six, a dot or a wicket, affects the likely outcome of the innings and WASP adjusts every time it receives new information with each ball.

If WASP keeps changing its mind, what is the point of it?

It is a measure of how the game is going and allows the viewer to follow the change in projected final total or probability of winning as the performance of the two teams ebbs and flows. It is a measure of which team is winning and by how much at any point of time. It also provides a way of assessing whether a partnership that is progressing slowly without undue risk is contributing to its team's probability of success (by steadily increasing the WASP number) or simply creating pressure for later batsmen. 

WASP predicted that my team had just a 1% chance of winning at one stage. They won. Was WASP wrong?

Probably not. We cannot tell by simply looking at a single match. A 1% chance means that WASP expects that the chasing team will win from that position one time in a hundred attempts. You may have just witnessed that one time. If teams regularly come back from a 1% chance of winning to win the match, then we would be worried about the prediction, but not in the occasional match. In any sport, teams very occasionally make a miraculous comeback and win from a seemingly impossible position. What this means is that they won from a situation where their probability of winning was extremely low. It does happen, but not very often, which is what makes those games to memorable.  

Does WASP consider the skill levels or form of the individual players or teams?

No. WASP predicts based on the average top-eight team against the average top-eight team. If the number-one-ranked team is batting against an associate nation, it is likely that they will do quite a bit better than the WASP projection. The same applies to a player in a very good or very poor run of form. Consider the WASP as a benchmark or starting point, and then adjust up or down based on your view of the relative strengths of the teams and players.

Because WASP doesn't take into account the particular players, it provides a measure of how well particular players are doing. For example, imagine that WASP was sitting at 225 in the first innings when a partnership between, say, Sangakkara and Matthews begins, and has risen to 300 by the time the partnership ends. That doesn't mean that WASP was wrong; rather it is a measure of how well those two batsmen have played (or alternatively, how poorly the opposition team have bowled and fielded). 

So WASP thinks that all players in top-eight teams are the same?

No. WASP knows that opening batsmen are on average different to number 11 batsmen. But it doesn't know that Chris Gayle is not the same kind of opening batsman as Alistair Cook.

Why does the WASP probability differ from bookmaker odds?

There are a variety of reasons for this. The relative strengths of the teams, the subjective opinions of the bookmakers and the balance of their book could all play a role. WASP is a measure of who is winning rather than who is more likely to win. For example, if Australia is playing Ireland, and Ireland gets off to a great start, then Ireland are winning at that time but Australia will still be more likely to win.

Then what is the point of it?

There are a number of sports where a snapshot of the scores at a single point in time does not provide a good indication of who has performed better, and so it is customary to provide more information. In tennis, it is not enough to report that a player is leading 4-3 in a set; we also need to know if the games have gone with serve or the if the player who has won 4 games is up a break. In golf, the total number of strokes is never reported for players who haven't finished the round; instead, score updates report the players' deviation from par. That essentially assumes that the player will achieve the par (mode) score on each remaining hole. WASP is a similar reporting of deviation from par. 

I want to follow how my team is doing; what should I be looking for? 

A batting team's likely score in the first innings or their probability of reaching the required target in the second innings always falls when they lose a wicket. This cost is typically much higher at the start of an innings than later on, when wickets in hand may not be so important. To allow for the inevitable fall in WASP when losing a wicket, a batting team should be looking to see WASP steadily increase during a partnership. If the bowling team can keep the increases in WASP low during each partnership and still take regular wickets, it can come out on top in the innings. 

Could WASP be an alternative to Duckworth-Lewis for adjusting targets in rain-affected matches. 
Yes it could. Sometimes, WASP will give a very different answer, partly because of its using a different criterion for fairness and partly details in the implementation, including it having an adjustment for the ease-of-batting conditions. Most of the time, however, it will produce a similar outcome. For example, in the first ODI between Sri Lanka and England, D/L initially set Sri Lanka a target of 259 as a result of the earlier rain interruption; WASP would have set 262. After the second rain interruption, D/L revised the target to 226; WASP would have set 220.

What if I have more questions?

Comment below, or ask us on twitter @srbrooker and @seamus_hogan.

Public Health and the Regulatory State

Pierre Lemieux points to the growing health regulatory state. The abstract:

Public health has moved from the public good component of health to everything related to health and, then, to everything related to society. If we take public health in its wide, total, social sense, it presumably explains or justifies much of the regulatory state. Virtually all state activities contribute directly or indirectly to some citizens’ “physical, mental and social well-being” (as the World Health Organization’s definition says). Public health requires social engineering, which cannot be achieved without controlling the lifestyles that the Philosopher King doesn’t like. Controlling lifestyles cannot be done without regulating the businesses that would allow people to satisfy their sinful preferences, and without preventing these people from circumventing the controls through black markets or other violations of government regulation.

Lemieux points to the difference between public health as it was conceived a couple of centuries ago, and its rather broader current scope. The galling thing is that classical public health provided true public goods: things that really can well be provided by the state:

Until the 18th century, public health appeared to be concerned with preventing communicable diseases through sanitation and the isolation of epidemics victims. In this sense, public health can be viewed as a response to the negative externality of contagious diseases or, alternatively, as the public good of preventing their spread.

Indeed. Gordon Tullock often chided the anarchists in the classroom by asking how they'd deal with quarantine in case of epidemic. Vaccination, sanitation, and reporting on and dealing with outbreaks of contagious disease seem eminently worthy activities. Public health has expanded substantially since then.

But I'm not sure that Lemieux quite nails the problem. He points to the growth in spending on healthcare by the government, to voter ignorance, and to bureaucratic incentives within the healthcare sector as generating the increase. But if rational ignorance were the main problem, then making voters aware of the growing paternalistic regulatory state would be enough to stop it. Instead, many voters are quite supportive of the growing paternalism. And if we take an interest group story, why has the public health bureaucracy and associated interest groups been able to run its rolling maul on consumers and affected producer groups? A standard Olsonian concentrated interests story would explain why the bureaus beat consumers, but wouldn't as easily explain nontrivial voter support for regulatory interventions curbing their preferred consumption behaviours, nor would it explain why the bureaus and public health interest groups beat the affected industry groups.

We're getting closer when Lemieux writes:

Contemporary public health cannot be pursued without lifestyle controls, and lifestyle controls cannot be imposed without harming some real individuals. The lifestyles hit today are often different from those targeted in the past by social hygiene, racial hygiene, or the eugenic movement. Often, though not always, the targeted lifestyles belong to individuals among the poorest social classes. Sometimes the regulatory controls are accompanied by entitlements that make them easier to swallow and to enforce. The victims of public health lifestyle controls are numerous. Gerard Hastings admits that “the behaviours that [public health workers] all address comprise a typical Saturday night out for large sectors of the population.” (Hastings 2012, p. 2)

Here's my take on it.

Health care takes up an increasing part of government budgets due to an expansion in the proportion of basic healthcare covered by governments rather than privately, due to demographic change, and due to increased cost of dealing with those illnesses that were once untreatable. Health budgets are then really salient. Voters are always looking for no-cost ways of saving money. All those political parties that promise vast savings by identifying "efficiencies" and stamping out waste? They're appealing for a reason.

Next, put in bogus "social cost" measures that work to convince voters that drinkers, smokers, the obese, and generalised "others" are to blame for substantial parts of the health budget, rather than the ageing boomer cohort. The vast majority of the costs tallied in these studies, when not simply fabrications of double-counting, are costs smokers, or drinkers, or the obese, impose on themselves. But they're presented to the public as "costs to the country" rather than "costs incurred by the obese, smokers, and heavy drinkers." Sure, they're all members of the public too. But the number of times I've seen people cite these social cost figures as though they're costs to the health care system or to the government more generally - I call it a deliberate effort to confuse the public on the part of the public health movement. When challenged, they'll admit that the figures are mostly costs borne by the consumers of unhealthy products. But it's pretty rare to see that in the press releases put out by the health lobby. Instead, it's all framed as "costs to the country", with the implicit and never stated footnote being "costs to the country mostly consist of costs borne by people in the country who are heavy drinkers and smokers."

Paternalistic interventions to reduce others' drinking and smoking and eating, and especially when combined with stock images of lower-class obese people, or of drinking teenagers, then gain public support because they seem a free-money deal, like abolishing the budget deficit by identifying "efficiencies". Why not support interventions when those other people are costing you so much through effects on the public health system and the tax system? Except that drinkers aren't really costing others all that much, smokers are a boon to the public purse, and who knows which way the true fiscal effects of obesity run?

Beware the Stalin Gap.

Update: I think space constraints in the symposium issue hit Pierre's article. Here's some of his prior work on the topic in Regulation and at EconLib.

Housing constraints

You'd usually think it would be much harder to put up new student housing at a University with a downtown campus than one out in the suburbs where land is cheaper.

The Herald reports plans for almost 500 new student dorm rooms near Auckland University. A commercial property company is putting a site to market with plans either for student dorms, or for office towers. The dorm version would come with parking for 75 cars.

The University of Canterbury has been working on plans for more accommodation on its Dovedale campus, the former teacher's college near the main Ilam campus. The Press reported back in April:

Ilam Upper Riccarton Residents Association spokeswoman Jane Tyler-Gordon said residents were concerned about how the Dovedale site would be developed and were "up in arms" when the university revealed it had plans for a 250-student accommodation hall."What people don't want to see is a student village with a pub in the middle and loud music," she said.

I don't know what's now going on with the Dovedale site. I have the impression that the University is substantially constrained by veto rights that the neighbours seem to have over the place, but that could of course be wrong and I do not purport to speak for the University.

But I do not imagine that plans for residence towers with about 500 student dorm rooms would be well received. At 75 car parks for 500 rooms, I can imagine neighbours complaining that students would park on "their" streets. If there were more on-site parking, the neighbours would complain instead about congestion and about stormwater runoff's effects on neighbouring streams. If there were student amenities on-site, like a pub, the neighbours would complain of loud students. If there were not, the neighbours would complain of students parading to and from the bars at Church Corner. Basically, anything that involves there being more students around the University will get them angry, and especially if the students behave like students.

New Initiatives

Roger Partridge, Chairman of the New Zealand Initiative, writes on upcoming projects at NZI:

New initiatives for a better New Zealand

Roger Partridge | Chairman | roger.partridge@bellgully.com

Last week the New Zealand Initiative joined the chorus of approval for Finance Minister Bill English’s fifth budget. And rightly so. The budget confirmed that the threatened “decade of deficits” has been averted by careful fiscal management, to the envy of New Zealand’s OECD peers. Unlike his counterpart across the Tasman, Bill English could be forgiven for performing a pre-budget speech jig. But while we may have become the envy of our Australian neighbours, New Zealand’s medium term growth prospects are hardly stellar. Over the five-year forecast period, New Zealand’s average real gross domestic product growth is forecast at only 2.8 per cent, well below the rates our economy achieved for much of the 1990s. The forecast growth is even more miserly when compared with many of our neighbours in the Asia Pacific region. Singapore’s forecast for real GDP growth of nearly 3.5 per cent over the next five years makes New Zealand’s prospects look a little pedestrian. There are many big issues for our policy-makers to tackle: New Zealand’s international ranking in educational achievement has fallen. Up to 30 per cent of primary school students are not meeting national standards in literacy, with significantly lower rates for Maori and Pasifika students.  Nearly 8 per cent of the population is dependent on some kind of welfare benefit, and that’s not including superannuation.  In a global context, New Zealand could certainly do better. Our ranking is poor in the OECD’s FDI Regulatory Restrictiveness Index.  Productivity is another issue, as New Zealanders work about 15 per cent longer than the OECD average to produce about 20 per cent less output per person.  We believe new thinking is needed in these areas. In our first two years we have developed solutions to assist our policy-makers tackle the housing affordability crisis, address the very real concerns many of our parents and schools have about teacher quality, and respond to the alarming decline in New Zealand’s international attractiveness as a destination for foreign investment. We have been pleased with the receptiveness of politicians on both sides of the House to our ideas. As our organisation has developed the strength and depth of its research team, and with the appointment of Dr Eric Crampton as our new Head of Research, we have the confidence to tackle a broader range of issues. Yesterday the Board of the New Zealand Initiative approved an ambitious plan for our team to develop research-based solutions to many of these issues. We will be looking at compact cities, demographic change and the housing market, examples of teaching excellence, New Zealand’s natural resource opportunities, the case for economic growth, New Zealand’s fiscal future, improving numeracy and maths teaching methods, examining the scope for social bonds in New Zealand, and the effects of household saving policies. And these are just some of the projects we will aim to tackle over the coming years. We are confident we will come up with innovative thinking in all these areas. If our policy-makers listen, we will see our Kiwi economy really fly. Watch this space.

I'll be helping out with many of these projects when I come in at NZI, then, I expect, helping to shape new project proposals.

Worker rights

Kiwi workers fare better than their Aussie counterparts, at least according to the ITUC.

The International Trade Union Confederation has come out with a new ranking, showing which countries' workers are most likely to experience rights violations. I'll disagree with the ITUC on some aspects of this: I don't believe that is consistent with any reasonable notion of rights to make it illegal for an employer to hire replacement workers during a strike, for example, and I'm not sure whether that counts as interference in strike action in their survey. But we'll agree entirely on others: freedom of expression is good, disappearance of trade unionists is bad, violence against workers or unionists is bad, and restrictions on freedom of movement are bad.

Countries are ranked 1-5, with countries ranked "1" experiencing only irregular violation of worker rights, "2" having slightly weaker collective labour rights than "1", "3" experiencing regular violations of rights, and so on.

Australia ranks a "3" on their scale; New Zealand gets a "2". Top scores to Barbados, Belgium, Denmark, Estonia, and a few others.

I'd always had the impression that the trade union movement here was weaker than that in Australia. Australia's national awards system has no counterpart in New Zealand. And yet the big international trade union body put New Zealand ahead of Oz.

If New Zealand weren't clipped from their map (I hate it when folks do this), it would show up as the same colour as Ireland: a shade lighter than Oz. Remember this the next time the Council of Trade Unions talks about how terrible things are in New Zealand: NZCTU is an ITUC affiliate.

Update: I'm not sure how much weight we should put on any of these figures. Is it plausible that it's better to be a union leader in South Africa than in the United States? That Russia is friendlier than Canada? That Venezuela and Australia are on par with each other? Some of the big picture stuff looks ok: Europe is generally more pro-union than Canada, which is more pro-union than the US. But so much else looks to be out-of-whack; I expect it's better explained by pandering to Union-affiliated political parties in third world countries than by any real on-the-ground experienced differences in workers' rights. 

More drinking stats

The WHO report on alcohol shows that Kiwis aren't that heavy of drinkers. Kiwiblog covered the highlights, so I hadn't hit it here. But there are a few things there yet worth noting.

First, the report tallies both official and unrecorded consumption, so the figures are a little bit higher than the official stats I tend to rely on here. The report doesn't explain particularly well how they record the unrecorded consumption. It doesn't matter a lot for New Zealand: they list average recorded consumption per capita aged 15+ at 9.3 litres, and unrecorded consumption at 1.6 litres, so the increase isn't that substantial. But here's the sum total of their description of the method, in Appendix IV:

An additional survey on unrecorded consumption was used to improve estimation of unrecorded consumption in some countries. In this survey, sent to 42 countries with at least 10% unrecorded consumption as part of the total consumption, the nominal group technique was used to solicit five expert judgements per country. In addition, a systematic search was conducted on all published literature (Rehm et al., 2014). The data obtained were analysed and fed back to the experts who used them to arrive at a final estimate.

So it sounds like expert guesses on consumption of home-made alcohol. It wouldn't surprise me if home production were increasing with excise, but does it seem plausible that home-brew has increased from an average of 0.5 litres [2003-2005] to an average of 1.6 litres [2008-2010] of pure alcohol per person aged 15+ in New Zealand? Say that 1% of us do any home brewing or home distillation: that would be 166 litres of home production per still or per brew kit. Seems high. If the beer is around .05, that's over three thousand litres per year per home brewer, if about 1% of the population are home brewing. Note that my 1% guess is based on a rough estimate of the number of people I know and the number of people I know who do any home brewing or distillation. Even if it's 10% of the population doing it, the numbers still seem implausibly high.

The Press notes that, per drinker rather than per capita, our consumption figures are higher, though they get the figure wrong: the WHO reports that we're at 13.7 litres pure alcohol per drinker. But they get this right:

But despite warnings about a binge-drinking culture, the figures show rates of "heavy episodic drinking" are well below many other countries.
Less than 6 per cent of the drinking population admitted to consuming at least six standard drinks on one occasion in the previous month.

Summarising from the WHO report:

• Per capita (aged 15+) consumption, in litres of pure alcohol, was 10.9 litres on average from 2008-2010. 
• Per drinker (aged 15+) consumption, in litres of pure alcohol, 2010, was 13.7 litres.
• 4.5% of the population aged 15+, and 5.6% of drinkers aged 15+, consumed at least 6 standard drinks on at least one occasion in the past thirty days. Six standard drinks (60 grams pure alcohol) is a six pack of 4% beer, 3 RTDs at 8%, or three-quarters of a bottle of wine. 

Sellman notes:

National Addiction Centre director Doug Sellman said the data showed the average New Zealander, of 15 years and over, was drinking about 16.5 standard drinks a week.

This suggested more than half were drinking in a risky manner, with health guidelines recommending no more than 15 standard drinks a week for men and 10 for women.

Alcohol consumption per head had increased by 13.5 per cent in New Zealand from 2005 to 2010, despite factors including a recession and an ageing population, he said. "This suggests the heavy drinking culture in New Zealand is being driven by strong factors which can overcome these."

These included "relentless" alcohol marketing, cheap availability, and a drinking age of 18, Sellman said. "As long as we have about 10 New Zealanders dying every week as a result of drunkenness, we deserve the unhealthy reputation of being a wild-south binge-drinking country."

I'll quibble a bit here. 10.9 litres does work out to 16.5 standard drinks per week on average, but consumption seems skewed: the median will be rather below the average in this kind of data, and especially where non-drinkers are included, so I'd be pretty reluctant to say that more than half are drinking in excess of health guidelines. I'd also be a bit nervous about relying on estimates that imply pretty substantial levels of home alcohol production based on "expert assessment" rather than inferred from things like distillation supply sales.

I also note that while total per capita consumption is up a bit from 2005 to 2010, it is substantially down on the 80s and early 90s, and consumption declined again after 2010.

If "relentless" alcohol marketing, cheap availability, and a drinking age of 18 are to blame for everything, why are youth drinking rates down? Why does the Productivity Commission note New Zealand's particularly high alcohol prices?

Again, here's the Ministry of Health's 2011/2012 survey findings:

• Since 2006/07, the level of hazardous drinking among past-year drinkers has significantly decreased for men (from 30% to 26%), but not among women (13% to 12%).

• People aged 18–24 years (particularly men) are at higher risk of hazardous drinking. Among past-year drinkers, about 44% of men and 26% of women aged 18–24 years have hazardous drinking patterns. However, the rate of hazardous drinking has decreased significantly in past-year drinkers aged 18–24 years from 2006/07 (49%) to 2011/12 (36%).

Emphasis added above. Prices haven't abated; marketing hasn't abated. The drinking age has stayed 18. But hazardous drinking has decreased, and has particularly decreased among youths aged 15-17. I'd summarised the broader stats here and here and here.

Update: Farrar seems right on our rank ordering: we're about the 96th heaviest drinkers when ranked on consumption per drinker. My spreadsheet gives me 97th, but the dataset had some strange country duplication. In 2003-2005, we were about 91st. So we're falling in the "heaviest drinker" league tables.

Fixed costs in small countries, again

The Productivity Commission explains New Zealand's high prices:

The overall messages from this analysis are:

• Modelling the determinants of non-tradables prices using the extended FG model works fairly well in general, and especially for a group of OECD-Eurostat countries. 

• This supports the hypotheses that: 

• Non-tradables prices are higher in association with higher values of capital and unskilled labour endowments, and trade deficits; 

• Non-tradables prices are lower in association with higher values of skilled labour, and population;  

• Tradable prices also tend to be higher where non-tradables prices are higher both because this raises the (non-tradable) input costs for tradables, and because high tradables prices are impacted by „trade impediments‟ and indirect taxes. 

• The model suggests NZ‟s relatively small population and high tradables prices tend to raise its non-tradables prices relative to other countries. NZ‟s lower than average capital endowments should serve to counter-act these high prices, but modestly. (NZ has the 28th highest ranked capital endowment, and 25th highest capital/labour ratio, out of 43 countries). 

• For labour endowments, taking a ratio of skilled labour (differences) to population (differences), NZ is ranked 29th out of the 43 OECD-Eurostat countries in this ratio, so that its relatively low skilled labour per capita also serves to raise its service prices.

• NZ's relatively high price of non-tradables is estimated to add around 40% to the domestic consumer price of tradables, compared to border or factory gate prices. This is also around the OECD-Eurostat average cost share. 

• However, after accounting for this 'cost share of non-tradables' contribution, NZ's tradables prices remain fairly high by international standards. A "good candidate" to explain this are the transaction costs associated with NZ‟s distance from markets. Though we have not examined direct evidence on this here, numerous other studies have suggested the importance of such factors; see, for example, McCann (2003, 2009). 

• Based on "adjusted" tradables prices that removes the "cost share of non-tradables" element, NZ's tradables prices are around 6th highest in the 43 country OECD-Eurostat sample – behind such countries as Iceland, Norway and Japan (see Figure 6). These are also countries relatively distant from many of their key markets. (For Japan at least, other protectionist measures may also be relevant). However, Australia is ranked 19th out of 43 countries in its adjusted tradables price, suggesting that to the extent that there are "disadvantages of distance", Australia manages partially to avoid or overcome these.

• As Figure 6 shows, NZ is like a number of other small countries with a high adjusted tradables prices (e.g. Cyprus, Malta, Denmark, Finland, Israel, in addition to the "small and distant" economies of Iceland and Norway). This suggests that size or other characteristics of domestic markets/populations may be important in ways not already accounted for by the FG model's variables.

Labour has been exercised lately by the high costs of an increasing population: new migrants come in and bid up the price of housing where housing supply cannot expand to meet increased demand. They might worry instead about the longer-term costs of being small if they block migration. We can't do much about distance. But we can get bigger.

Other points worth thinking about:

• Our relatively high cost of alcohol and tobacco is particularly noted by the Commission; this does run contrary to the usual story we're told about alcohol being too cheap in New Zealand.
• I wonder whether results would be affected much by taking PriceSpy import prices instead of domestic landed prices for some consumer goods. How much does PriceSpy, and related services, constrain domestic prices?
• Gemmell's prior work showed footwear and clothing to be expensive here. I note that footwear still here attracts a 10% tariff. We could fix part of our stupid-high-prices problem by getting rid of the tariff that helps make one of those price categories more expensive than it needs to be. Sir Roger tried back in 2010; National vetoed the change.

If you're Wellington-based, Norm Gemmell's talk on all of this starts in Lecture Theatre 3, Rutherford House, Victoria University, in about 2 minutes.

Update: See also Donal and Matt.

Drug testing and discrimination

If employers assume that minorities are more likely to take drugs than are other groups, and if you think that drug-taking makes for a worse employee, they could be fuelling a really bad equilibrium. Individuals can't easily signal that they're clean without simultaneously seeming weird (by, for example, voluntarily offering to undergo drug testing), so they pool with drug users and are less likely to get a job offer.

This happens whether or not the employer is right about the relative rates of drug use. If the employer is wrong, that employer will bear some losses by failing to hire quality candidates, and especially when labour markets are tighter. But, worse, initial misperceptions on relative drug use can turn into a bad self-reinforcing equilibrium: if everyone is going to think you're a stoner regardless of whether you do drugs, why not at least enjoy the consumption benefits? We then get the same kind of pernicious equilibrium that Glenn Loury talks about in his work on discrimination.

One way of breaking that equilibrium is to allow employers to require drug testing: it lets clean employees quickly demonstrate that they're clean and consequently breaks the pooling equilibrium. Drug-using potential employees are worse off, because they can't mask type as easily, but those who aren't benefit by the separation.

That's the theory. Abigail Wozniak shows that the empirics hold up. Here's an early ungated version of her paper; here's the NBER Working Paper.

Nearly half of U.S. employers test job applicants and workers for drugs. A common assumption is that the rise of drug testing must have had negative consequences for black employment. However, the rise of employer drug testing may have benefited African-Americans by enabling non-using blacks to prove their status to employers. I use variation in the timing and nature of drug testing regulation to identify the impacts of testing on black hiring. Black employment in the testing sector is suppressed in the absence of testing, a finding which is consistent with ex ante discrimination on the basis of drug use perceptions. Adoption of pro-testing legislation increases black employment in the testing sector by 7-30% and relative wages by 1.4-13.0%, with the largest shifts among low skilled black men. Results further suggest that employers substitute white women for blacks in the absence of testing.

It feels good to oppose mandatory testing, thinking that it somehow is nicer for minority groups. But that opposition mostly works to encourage employers to substitute over to groups that they believe are less likely to take drugs. Another for the continuing series here on feeling good while doing harm.

I note this now because Twitter tells me that Radio New Zealand will be talking drug testing in 15 minutes.

Previously:

• Feeling good, doing harm
• Feeling good, doing harm: aid edition
• Hunt it to save it
• Competing for aid

Wellington-bound

I am very pleased to announce that I'm moving to Wellington to serve as Head of Research for the New Zealand Initiative. I'll begin there in August, with precise timing depending on our sorting out moving from Christchurch.

I'm really looking forward to working with the team there. In addition to the great set of projects they have lined up, I'll have scope to help shape future research. Loyal readers at Offsetting may see some minor interruptions in service while we move house, but blogging will continue - this time as part of the job description.

I'll miss my friends in Christchurch and the Department here terribly. But some opportunities are too good to miss.

The New Zealand Initiative is the successor organisation to the New Zealand Business Roundtable, Roger Kerr's think-tank, and the New Zealand Institute, David Skilling's. It's going to be a lot of fun. And, I hope I'll there be able to do just a bit more to help keep New Zealand the best place in the world to live.

Here's the NZI press release.

FOR IMMEDIATE RELEASE 19 May 2014 MEDIA RELEASE The New Zealand Initiative names Dr Eric Crampton as new Head of Research Dr Crampton’s international academic experience will grow the Initiative’s reputation as New Zealand’s leading business think tank Wellington (May 19) –  The New Zealand Initiative today announced that Dr Eric Crampton has been appointed as its new Head of Research. Dr Crampton, a senior lecturer at the University of Canterbury and author of the popular economics blog Offsetting Behaviour, will take up his new position in August. Dr Crampton will lead the Initiative’s research team to develop recommendations for New Zealand’s most pressing public policy questions. The Initiative’s Executive Director Dr Oliver Hartwich said: “We are delighted to have secured Dr Crampton for this new role. His economic expertise, his international experience and his ability to effectively communicate complex ideas will help to grow The New Zealand Initiative’s output and influence.” Dr Crampton is a Canadian-born economist, who obtained his Ph.D. at George Mason University (Fairfax, VA) under Professor Tyler Cowen. He was a visiting fellow at ZEI at Bonn University (Germany), and has been a lecturer and senior lecturer at Canterbury University since 2003. Dr Crampton’s work and publications have covered a wide range of public policy topics, including public health, competition law, and the analysis of political systems. His blog Offsetting Behaviour is among New Zealand’s top-20 blogs and recommended by the American Economics Association in their ‘Resources for Economists’ list. He also edits The Dismal Science for The Royal Society’s SciBlogs initiative. Dr Crampton’s appointment underlines The New Zealand Initiative’s goal to be the country’s leading evidence-based public policy think tank. Dr Hartwich said: “The New Zealand Initiative is all about developing robust and fresh ideas to make New Zealand a better country. Dr Crampton shares this vision and we look forward to his contributions to public policy debates.” About the New Zealand Initiative The New Zealand Initiative is an evidence-based think tank and research institute, which is supported by a membership organisation that counts some of the country’s leading visionaries, business leaders and political thinkers among its ranks. Our members are committed to developing policies to make New Zealand a better country for all its citizens. We believe all New Zealanders deserve a world-class education system, affordable housing, a healthy environment, sound public finances and a stable currency. The New Zealand Initiative pursues this goal by producing well-researched reports and hosting high level conferences and events. For more information visit www.nzinitiative.org.nz. For more information contact: Ben England Communications Officer The New Zealand Initiative Ph +64 4 494 9109 ben.england@nzinitiative.org.nz

Update: Here's Nevil Gibson on the move.

And some of my favourite tweets:

NZ Doge denies allegation that @EricCrampton is moving to Wellington to be advisor on the #economicupdoge #nzpol

— NZ Doge Party (@nzdogeparty) May 18, 2014

@EricCrampton @nzinitiative Congratulations Eric, the Wellington Wonk community will be very happy to have you!

— McCluskey. (@JordanMcCluskey) May 19, 2014

@EricCrampton @nzinitiative Is the conclusion of your research going to be: "Smaller Government"? #spoileralert

— Keith Ng (@keith_ng) May 19, 2014

@EricCrampton it was because of the Ethiopian food, wasn't it? @nzinitiative

— Graeme Edgeler (@GraemeEdgeler) May 19, 2014

@EricCrampton @nzinitiative Congrats! Would be fun to come talk about NZ religion trends in global context one day.

— Conrad Hackett (@conradhackett) May 19, 2014

.@EricCrampton My official reaction: What a monumental loss for the university, which did not know how to deal with your talent. #FFS!

— Luis A. Apiolaza (@zentree) May 19, 2014

@EricCrampton Congratulations, Eric. We'll miss you here!

— CherylBernstein (@CherylBernstein) May 19, 2014

.@nzinitiative's win is our loss. @EricCrampton is the closest thing to a public intellectual for Canterbury. Damn you Eric.

— Luis A. Apiolaza (@zentree) May 19, 2014

@zentree @EricCrampton More important still: is the craft beer scene in Wellington better than Christchurch?Was that a factor in your shift?

— sHr0oMaN (@sHr0oMaN) May 19, 2014

Bam. Excellent! @EricCrampton http://t.co/NrDWd7Zdd7

— Jim Savage (@khakieconomist) May 19, 2014

@EricCrampton Congratulations Eric, a loss to our university though!

— Matt Scobie (@MatthewRScobie) May 19, 2014

@EricCrampton Brilliant news - and a great coup for @nzinitiative. Congrats, both!

— Mike Heine (@TheHeindog) May 19, 2014

@EricCrampton @nzinitiative Congrats to you and NZI on an outstanding appointment.

— Stephen Kirchner (@insteconomics) May 19, 2014

@EricCrampton @nzinitiative Great move Eric - I look forward to seeing the fruits of this initiative!

— John Small (@smalltorquer) May 19, 2014

Best wishes for the shift, @EricCrampton. Be sure to keep a look out for Bryce Wilkinson. He's a bit of trouble, that one.@nzinitiative

— Mike Wilkinson (@MikeWilkNZ) May 19, 2014

.@nzinitiative lucky to get someone of your calibre, @EricCrampton. Hope you don't stop debunking the alcohol numbers foaming out of Otago.

— Nicola Rowe (@nz_nicola) May 19, 2014

I'm sure I'm not the only person who thinks @nzinitiative's hiring of @EricCrampton is a big step forward for public policy debate in NZ!

— TVHE (@TVHE) May 19, 2014

Congrats @EricCrampton on the outstanding new opportunity. Wellington has the highest mean coffee quality in the country.

— Scott Brooker (@srbrooker) May 19, 2014

Things I wish TradeMe Property could do

For reasons soon to be made clear, we've been perusing TradeMe Property's Wellington offerings. TradeMe is the country's best overall aggregator of available property listings. [Update: see here].

Here are the things that you can currently do on TradeMe Property:

• Restrict your property search by:
• Bedrooms (we want 4+);
• Number of bathrooms (we want 2+);
• Neighbourhood (we're flexible);
• Price range (likely <$800k; Wellington's way more expensive than Christchurch);
• Property type (house, apartment, section, townhouse, unit)
• You can find out, for any property:
• Zoned schools, out-of-zone schools, unzoned schools;
• Maps, property boundaries, great links through to Google Maps.

Here are some things that could easily be done, but aren't currently done:

• Chorus maintains a great map of network capability. For any property, you can see if they're on the fibre network, whether VDSL2 is available, whether ADSL2 is available, or whether you're stuck on standard ADSL. Our house at New Brighton is on VDSL2 and gets 40MB/s to the cabinet downstream, 10 MB upstream. I'd like to be able to restrict property searches to those getting at least ADSL2 and strongly prefer VDSL or fibre; a decent internet connection is worth a lot to me. Scraping that detail into TradeMe Property would be pretty easy, once Chorus's website is back up.
• Update: Vodafone has it too. Somewhere in TradeMe's back-end it should be able to just pull address details for both of these to see what's available. 
• Update: Mashblock! I'd been going through the Census's front-end, but that's cumbersome. Mashblock goes straight from address to Census meshblock and tells you the neighbourhood's demographics. There's still important Census stuff available that isn't yet on mashblock, like household composition and education, but Mashblock's a good start. And especially since the StatsNZ version is really cumbersome if you want quick stats on an address. 

Here are some things that could be done, but might be harder, and might only matter to me.

• Wellington District Council has great maps showing hazard risks. There's a combined hazard map providing all-source risk of earthquake shaking, liquifaction, tsunami, and landslide. And, you can also get it by each of those risks individually. I would like to be able to restrict my search as follows:

"Return only houses showing low all-source risk, but add to that any weatherboard or wooden house where risk is only due to earthquake shaking, because old weatherboard places fare well in shakes so long as other risks are low."

• Wellington is all valleys and hills; it's hard to tell which get any sun unless you live there. SunCalc provides sun positions at different times of day; you can also change the date to get seasonal effects. As it's overlaid onto Google Maps, you can pretty quickly see if you're going to be badly shaded by surrounding hills. It should be possible to turn that into a sun score. 

I emailed a Wellington realtor explaining what we're looking for; he laughed at me as he'd never had anybody put first priority on where the house sits on the WDC earthquake risk map. While this makes me worry about how seriously Wellingtonians take earthquake risks, it does mean that there shouldn't be particularistic price premiums on safer houses. And that's good for me. 

We started out looking at Karori, Khandallah, Johnsonville and Aro Valley; we've started looking more at Island Bay as you seem to get rather more house for the money there, and the commute in to downtown doesn't seem at all unreasonable. But I'd happily accept advice from those with better local knowledge. I will look forward to meeting far more of my Wellington readers.

Bringing sexy back: EMTR-style

In the leadup to yesterday's budget, I'd tweeted that, were there any talk on tax rates, I'd be far more keen on seeing action on effective marginal tax rate schedules rather than on headline rates. I just don't believe that the 33% rate has any substantial pernicious effect on labour supply decisions when compared to the near 100% EMTRs* hitting some parts of the lower income ranges where abatement rates over multiple benefits combine for awfulness.

Keith Ng was sceptical:

@EricCrampton @rsalmond @DeepRed6502 yeah good luck making EMTRs politically sexy.
— Keith Ng (@keith_ng) May 14, 2014

This morning, Sam Warburton rose to the challenge.

Making EMTRs sexy. @EricCrampton @TVHE @keith_ng pic.twitter.com/6rPd19lAFD
— Sam Warburton (@Economissive) May 15, 2014

For the original graph, hit NZIER's paper on Working for Families.

@Economissive is consequently today's #FF.


* Update: Effective Marginal Tax Rates tell you what portion of your next dollar is kept by the government. It combines your headline marginal tax rate at your income level, your ACC contribution, and any reduction in income-contingent benefits. Income-linked benefits like Working For Families reduce with family income rather than just with personal income. Suppose you're a single-earner family on $40,000. The non-earning spouse wishes to re-enter the workforce. While the marginal tax rate will be low on part-time earnings, the effective marginal tax rate can be high because it scales with family income rather than with personal income. So the schedule above shows that, for some income ranges and in some family circumstances, you can effectively receive zero dollars out of a raise or from working more hours: the government claws it all back out of your WFF or other benefits.

Mmmmm.... Nitrates

Loyal readers will recall that Manitoba's government set up rather a bit of a Catch-22 for the Cavers, farm entrepreneurs producing charcuterie. While their cured meats were safe and produced following Italian standards, they were not following Manitoba regulations. Because there were no Manitoba regulations. And so the government confiscated all their produce despite having just given them an award for agricultural innovation.

Here's the latest, from Manitoba agribusiness reporter Bill Redekop at the Winnipeg Free Press:

The case sent shock waves across rural Canada. The Cavers are trailblazers in on-farm food production and have mentored other farmers, speaking at agricultural seminars and workshops. Plus, they had just won the Great Manitoba Food Fight and $10,000 for their prosciutto, a cured meat aged and dried for up to a year,.

So when the province raided their farm, it was like Ben Johnson being caught with steroids. The Cavers' livelihood depends on their reputation as ethical food producers. Their business concept is small, transparent food production, versus factory farms and multinational corporations. The $600 fines hardly mattered -- their reputation did.

The Cavers had no intention of paying the fines. The court date was set for this October. The couple phoned the provincial government, trying to find out what evidence it had against them. They wondered if they were going to need a lawyer. That's when they learned the province had dropped charges against them three months earlier, without telling them. The province told the Free Press a technical error was discovered on the tickets issued to the Cavers, which made them invalid.

It may be testament to what people think of the government that the raid didn't hurt the Cavers' business. In fact, business shot up.

The Cavers continue selling meat, but not charcuterie.

The Cavers still aren't sure what they did wrong. Leading up to the raid, health inspectors regularly visited their meat-curing operation, they say.

The issue wasn't that they made unsafe food--the cured meat the province seized and destroyed had never been tested. It was that the Cavers hadn't documented each step as carefully as mass-produced foods, said Pam.

Examples she gave included the weight of the prosciutto prior to salting, the weight of the salt going into the prosciutto, the weight of the prosciutto before drying and the weight afterward. Instead, they only weighed the meat before and after the process. Nor did the Cavers know which pig each item came from.

Then in June, inspectors told the couple not to sell any cured meat. An inspector made a follow-up visit in July. Clint asked what they could do to make the charcuterie saleable and the inspector said he'd get back to them. Then came the raid in August. The Cavers insist they had complied with the province's order and not sold any of the meat since June.

The story's not yet over. The province is insisting that the Cavers add nitrates to their cured meats; the Cavers are rather sure they can produce safe products without it.

HT: Mom.

Budget 2014

Budget 2014 is coming out today. Members of the NZ econ blogsphere will be tweeting their reactions (at #NZ14). In preparation, I thought I would link back to a previous post of mine calling for better press coverage of budgets, here, and, since an election-year budget is always an election issue, a post from the 2011 election about what to ignore in the economic policy section of parties' election manifestos, here. The latter contained a couple of points specific to the 2011 election, but 4 timeless points, that are worth restating. These were

1. Decide whether what matters to you is what serves your selfish interest or what would serve the social good. If you are genuinely concerned about the social good, you should ask what sacrifices you are being asked to make, not how others are going to pay.
2. Pay no attention to a policy that promises to create jobs or reduce unemployment, unless it specifically mentions labour market policy.  
3. Ignore promise of goodies to be financed by stronger economic growth.  
4. Ignore any policy that labels social spending “investment”.

(I expand on each of these further in the original post.)

Matt has covered off alternative-budget, election-manifesto announcements from ACT, Labour, and the Greens. It would say that ACT fails on Point 3, and Labour on Point 2. I fully expect to see all the parties failing on one or more of these by the time of the election, and I will be looking out for examples in today's budget and the resulting discussion.

A request for a one-handed economist

Hoisted from the Economics Department all-staff email list: a request from an echo-chamber. I've redacted the sender's name and contact details. Meredith, our departmental administrator, sent it round on his request.

Subject: Request for speaker about Public Private Partnerships -- their disadvantages and weaknesses.

Thankyou Meredith for for helping me with my request.I am a member of the coalition  Keep Our Assets Canterbury. We wish to hold a seminar about the aspect of PPP's that I mentioned above. The stance of the coalition is that we oppose them.We hope to hold this seminar in late June or early July, on a Saturday.  We are wanting to have as many non- academic people  in the audience as possible. Participants in this proposed seminar are free to go elsewhere to be persuaded that PPP's are good.
Would any of your colleagues in the Dept of Economics at Canterbury be willing to be a speaker?If they are, I can be contacted by email, or at [redacted]

Would for a world in which coalitions sought to find out whether they were right rather than wanting only the confirmation of priors.

Seamus comments, "Well I guess, technically, a speaker who sees only disadvantages and weaknesses in PPPs and would much rather see assets sold off to the private-only sector would meet his criterion, but I'm not sure it is what he has in mind."

Welcome Kirdan

The excellent Kirdan Lees has a post on Labour's proposed monetary policy up at TVHE. I don't know for sure, but since he posted under the byline "Kirdan" rather than "The Hand", (the catch-all for guest posts at TVHE), I am assuming he has joined the TVHE team. If so, that is great news.

Mostly, Kirdan is spot on with his post. But blogging is boring if it becomes an echo chamber, and I disagree with one aspect of his post, which is summarised by his statements that "Getting kiwis to save more is probably a good thing", and "compulsory Kiwisaver probably pushes in the right direction".

Here is my comment on the post at TVHE

Kirdan, I am puzzled by your statement that making kiwisaver compulsory pushes in the right direction, and that encouraging New Zealanders to save more is probably a good thing. Saving means forgoing one good thing (consumption today) in order to get a different good thing (consumption tomorrow for yourself or your heirs). What is the welfare framework for thinking that people are making the wrong decision on that margin? Note that Investment is an intermediate good into the production of future output. If we did proper intertemporal accounting of GDP we would consider future discounted consumption as part of GDP, but deduct Investment spending as an intermediate good. Having one-period measures of GDP means that we double count investment twice: I is included in current GDP and future C is included in future GDP, but mis-measurement is not a reason to favour one consumption path over another.

And here is Kirdan's reply.

On balance I have enough sympathy with macroeconomic balance models – which show lower real interest rates and exchange rates from a better savings-investment balance – to favour promoting savings a bit more.
I used the phrase “probably pushes in the right direction” since most microeconomic studies suggest sufficient savings while the macro evidence suggests New Zealanders have a way to go.
Both the micro studies and the macro data are pretty fraught though. The revisions to GDP and the savings track in the UK show just how fragile the conclusions economists draw in this space can be.
The Treasury, the Reserve Bank and the IMF all suggest the exchange rate is 5-15 percent “overvalued” and point to savings being an issue. So some savings imbalance seems a reasonable problem definition for the Labour Party to start from.
I don't see GDP as the discounted sum of current and future consumption.

I'm afraid this still doesn't do it for me. Let me note that I can see all sorts of reasons based on market failures, externalities, paternalism, or intergenerational equity why one might reach the policy conclusion that the market is delivering too much current consumption. My problem with much of the policy debate is that these underlying values are never made explicit. As Matt at TVHE would say, we need to discuss trade-offs. Yes, Treasury, Reserve Bank, and the IMF: I am looking at you.

It is hard to make every part of one's analysis explicit in a blog post, and even harder in a reply to a comment, but I want to push Kirdan to provide a bit more.

First of all, what is a macroeconomic "imbalance"? I know we hear that term all the time, but I don't understand it. Countries don't borrow and lend, individual people, firms, and governments do for their own reasons. The sum of all borrowings less the sum of all lendings, may not necessarily equal zero at any time, but it is exactly balanced (by the laws of arithmetic), but the sum of all overseas lendings less the sum of all overseas borrowings, and is equally balanced by the difference between the sum of all NZ individual decisions to import less the sum of their decisions to export.

Second, why does the fact that models show lower real interest rates and exchange rates from higher savings (or lower investment?) imply that one should favour promoting savings. Those of us who are net savers and net importers beg to differ!

Finally, no, GDP is not the discounted sum of current and future consumption. It is what it is, and shouldn't be blamed for not measuring what it doesn't try to measure. But the discounted sum of current and future consumption is a better welfare measure than the discounted sum of current and future GDP. Focusing on the latter would lead one to see favouring savings as a way to increase welfare, but without articulating a reason for believing that the current decisions about consumption versus saving are inappropriate in some way, it does seem to be begging the question.

Price gaps and policy

Growing up in Canada, I was always really irritated by American prices well below ours. I remember trying to call Commodore to direct ship me an Amiga 500 in, I think, 1989, because the Canadian retail prices were rather in excess of the American prices; they sensibly wouldn't do it, because doing so would not have been welcomed by their Winnipeg retailer.*

There are plenty of good reasons that prices can vary across borders. Leaving aside taxes, if something about borders require separate distribution networks and channels, then the country with higher fixed costs and smaller markets would pay more. And there can be reasons to price discriminate across markets even absent differences in costs.

Policy responses to these price differences vary. New Zealand runs what I think it about the best policy possible on this one: make it real easy to import goods from abroad, set a high enough exemption on GST on imports that most goods don't get held up at the border, and refuse to have any part in enforcing supplier exclusive licensing arrangements with retailers.

New Zealand Post, a State-Owned Enterprise more innovative than other post offices because it is not protected by a monopoly on mail delivery, runs an expensive but very handy reshipment service: YouShop. A lot of American retailers simply refuse to ship overseas, whether they don't want the hassles of dealing with international freight, with international customs and duties, or whether they're hindered by supplier exclusive territorial licensing arrangements. YouShop lets Kiwis order anything they want in the US and have it shipped to an address in Oregon; they then on-ship it to you in New Zealand. It's not cheap, but it breaks the dumb geographic restrictions. I bought a pair of Merrell shoes through it that otherwise weren't available in NZ; the set-up works.

So: if you want to reduce the price differences between your country and the US, just set policy to make it really really easy for anybody to import directly from the US and elsewhere. It's not perfect, but it bounds the price gap that can be sustained. Nobody needs to monitor the prices: customers do that themselves. And so too do entrepreneurs: a whole array of importers exist on PriceSpy who pull in supply from Singapore and on-sell it to Kiwis at lower cost than the licensed NZ retailers. That's where I got my Samsung S3 a few years ago: the default phone setting was Singapore, but it wasn't hard to change; a factory reset would mess things up more than it would if I had a Kiwi phone, but I saved a few hundred dollars. I was also able to get an Everki laptop bag delivered to me in NZ for less than the US retail price; it came direct from Asia.

Now, with that in mind, what would you expect Canada to propose in response to continued price differences between Canada and the US? Here's Andrew Coyne:

“Canadians work hard,” the last federal budget thundered, “and should not be gouged with higher prices simply because of where they live.” And yet, it was scandalized to report, “some companies charge higher prices in Canada than in the U.S. for the same goods.” Accordingly, the budget promised “legislation to address price discrimination that is not justified by higher operating costs in Canada.” The Commissioner of Competition would be charged with enforcing it.

The mind reels. How many companies are there operating on both sides of the border? Hundreds? Thousands? How many thousands of different goods sell in both countries? The government, to be sure, was not proposing to set all these prices directly. Rather, it was proposing to monitor them, each and every one of them, in both countries and in all markets in each, continuously; and not only to monitor the sale price, but the operating costs of each, including not only the costs of production, but of distribution, marketing and retailing as well; and not only to monitor prices and costs and the differences between them, but also to correct any domestic price that exceeded its U.S. equivalent by more than the difference in the operating costs of each — a quasi-judicial process that would include gathering evidence, laying charges, holding hearings, considering and rendering a verdict, and finally ensuring compliance, or rather meting out penalties for non-compliance. Subject to appeal, of course.

Coyne goes through the many reasons this is a dog of an idea. But he doesn't give the simple solution. Open the border to more direct consumer imports from the US, refuse to use Customs Agents to enforce corporate exclusive licensing arrangements, put a high de minimus threshold for excise or GST application, get rid of the dumb arrangements Canada's typically had where UPS had to run things through a customs agent at the border and tack on a high charge for doing so, and direct Canada Post to open a company in the US that exists solely to provide on-shipment to Canada of things Canadians want to buy from American retailers.

It's more than a bit easier than monitoring thousands of prices and trying to decide which ones are right.


* I now can't remember where I got it. But get one I did. With the "fatter" Agnus chip too, a RAM expansion, and Workbench 1.3. I was in about the 7th or 8th Grade and so hopefully can be forgiven for unrealistic expectations of success in calling Commodore.

Remembering Gary Becker

Blogging has been very light recently as the Department has been kept administratively busy, and I'm late to commenting on Gary Becker, who passed away recently.

Like any economist, I have long know of Becker's work, but my own research hasn't taken me in the same directions, and so I have not engaged with it directly, and therefore not competent to write a Eulogy. But I would like to relate one anecdote. Back in the mid-1990s, I attended the ASSA meetings in (I think) Chicago, where there was a session on race involving three Nobelists: Lucas, Friedman, and Becker. Friedman was ill, unfortunately, and so could not attend, and Lucas chose to talk about growth rather than race. Becker's talk, in contrast, was engaging, and surprisingly (to me, based on reputation) very un-ideological and fully recognising both the power and the limitations of theory for thinking about ideas. But, it was a throwaway line that I remember the most. Apparently, when he went to publish his thesis on the economics of discrimination, the working title was Price and Prejudice, but he was persuaded by his editors to go with the more prosaic, The Economics of Discrimination. Darn editors. Fortunately, Greg Clark, has more reasonable editors. 

The way I know it's May

I know it's May when the Christchurch Press calls me seeking comment on Council asset sales. Georgina Stylianou quotes me in this morning's Press. Here's the full comment I'd sent her, not all of which could make it into her column.

“We’ve suffered from a lot of wishful thinking over the last three years. After the earthquakes, a lot of people really wanted to believe that we would have a sparkling new city funded by insurance payouts. And as each of us has had to come to grips with the difference between what we might have hoped our house insurance contracts covered and what the fine print actually says, the Council similarly has had to realise that it can’t budget based on wishful thinking about what they’d like to be owed in insurance payouts. Unfortunately, a lot of hopes were built up based on expectations of the larger payouts, and a lot of projects were mooted around those. It’s hard for politicians to step back from those, and doubly so when so many of us have had so many disappointments over the last three years. But where the real tradeoff is deciding between Council spending money on things like big stadiums or things like making sure we have overpasses and sewers that are safe and fit for purpose, well, I really hope we put more priority on the more boring core infrastructure.”

“Compounding the problem has been the regulatory and planning morass that has kept downtown from springing back to life. Vacant downtown lots do not return much to Council in terms of property tax.”

“I note that Minister Brownlee is questioning some of the figures in the report. I’m not an accountant and cannot vouch for the figures’ accuracy. But I do worry that things could yet be rather worse than the report suggests. The report explicitly notes that it makes no accounting for the costs that will be involved in fixing our now very flood-prone neighbourhoods. I doubt that Council will be able to avoid incurring pretty substantial costs in fixing places like the Flockton Basin and parts of Woolston.”

“The KordaMentha Report explains pretty reasonably what the Council’s options are. There’s little room to take on more debt, so we either have to spend less, increase tax revenue, or sell other assets. A mix of the three seems most appropriate. Sorting out the regulatory morass downtown so that we can again start having reasonable property tax revenues from downtown would be rather helpful on the revenue side. I think we should be considering cancelling the new stadium rather than just delaying it: too many property owners have to sit in limbo, under threat of expropriation, not knowing when or whether their businesses will be taken from them to make room for the stadium. And, again, we should be considering selling some of Council’s assets. Every May since the earthquakes we have talked about Council asset sales. And every year we’ve failed to do it. Council should be fully divesting itself of assets that are at least as well managed by the private sector in order that the funds can be put towards those things that are really important, like fixing our roads and drainage system. I worry that, if we do not sell assets like the Lyttelton Port of Christchurch, Council’s substantial financial pressures will instead squeeze excess dividends from those assets and run down their capital stock. And, in a decade’s time, we will have substantial problems arising from deferred maintenance and poor investment. Selling these assets off now may be the best way of ensuring their future. Selling the family silver so you can afford to re-pile your foundations and avoid having the house fall over is sad but sometimes necessary. What use is silverware if your house has fallen down?”

See this post for the general arguments around Council asset sales, and for the May 2011, May 2012, and May 2013 Press discussions around asset sales.

Harmful registries

New Zealand's Police Minister Anne Tolley is proposing a national sex offender registry. 

I don't know what's all planned for this registry. If it's restricted to violent or dangerous offenders, with access restricted to checks by employers for positions involving access to children, then it could do some good. Unfortunately, these things do often wind up overreaching. Here's Reason Magazine from a couple of years ago:

“Without the registry,” says Shirley Turner, “he would still be alive today.” She is referring, in a 2006 interview with Human Rights Watch, to her 24-year-old son, William Elliot. He was murdered that year by a pedophile-hunting Canadian gunman who found his name and address in Maine’s online database of sex offenders. Elliot’s crime: When he was 19, he had sex with his girlfriend, who was three weeks shy of 16, the age of consent in Maine.

The panic that followed Megan Kanka’s murder produced an alarm system that often fails to distinguish between dangerous predators like Timmendequas, who had a record of assaulting little girls, and nonviolent lawbreakers like Elliot, who posed no discernible threat to the general public. They are all mixed together in the online registries of sex offenders that every state is required to maintain as a condition of receiving federal law enforcement funding—a mandate imposed by another Megan’s Law, enacted by Congress in 1996.

American rules typically bundle completely nonviolent, no-risk offenders with the most violent rapists. They're restricted in many states from living near schools or parks or daycares. Some neighbourhoods consequently built tiny parks with the specific purpose of making it illegal for an offender to move in nearby. Consequently, there is literally almost nowhere that sex offenders can live in some places:

Registration only rarely leads to murder, but it routinely ruins relationships, triggers ostracism and harassment, and impedes education and employment. These burdens are compounded by state and local laws that ban sex offenders from living near schools, parks, day care centers, and other locations where children congregate. Such restrictions, which often apply even if an offender’s crime had nothing to do with children, can be so extensive that entire cities are effectively off limits. In Miami local residence restrictions have given rise to a colony of more than 70 sex offenders who live under the Julia Tuttle Causeway, a bridge that crosses Biscayne Bay. 

And the registry can be forever:

A man who was convicted of statutory rape when he was 16 for having consensual sex with his 14-year-old girlfriend told Human Rights Watch: “We were in love. And now we are married. So it’s like I am on the registry for having premarital sex. Does having premarital sex make me a danger to society? My wife doesn’t think so.” 

I hope that the Kiwi policymakers looking at this stuff will design it to avoid the kinds of problems evident in the US. Restrict it to violent or otherwise risky offenders, and restrict access to it.