How do you mitigate a problem like a NIMBY?

I think I might have a partial solution to NIMBY blocking of urban intensification: a way of paying them at the margin for disamenity effects.

The one-line version: if your neighbour develops, your taxes drop.

Here's how we do it. Or at least the initial sketch-outline blog version of it. I'll expand on it later and, hopefully, fix the problems with it that you'll helpfully point out.

Consider a city of 10,000 dwellings and 12,000 households. Most of these dwellings contain one household, but some contain two households because there are more households than there are dwellings. The City collects $10,000,000 in taxes, with a $1,000 per-dwelling tax, on a standard Council rates system: the Council specifies how much money it needs to collect and that amount is apportioned across dwellings based on the relative value of the dwellings. Dwellings with higher total capital valuation pay more in tax. In this case, they're all identical for simplicity of exposition but nothing requires that they be identical or pay identical taxes.

Suppose that, in this set-up, somebody wants to put up an apartment building that would contain 100 dwellings to house 100 households. The developer pays Council a development levy that covers the building's interconnection costs: the costs the building imposes on Council. Since people would move into this building from existing overcrowded dwellings, there's no additional cost on Council of additional capitation-based services. Specify for now that each of these apartments has the same capital valuation as existing dwellings for simplicity, though again, that will vary in the real world. Council still needs to collect $10,000,000 in taxes in total to cover those services, so long as it's set the development levy correctly.*

Under the existing system, the $10,000,000 in taxes will now be spread over 10,100 dwellings rather than over 10,000 dwellings. Each dwelling consequently remits $990 in taxes. If the neighbours of the apartment building get more than $10 in disamenities from the apartment building's existence, they will lobby against its construction.

Now the RMA has some mechanism for identifying neighbours who are affected by the new development. Maybe some experience more traffic, maybe some lose a bit of view, and maybe others lose a bit of neighbourhood character. Specify that these effects, for this apartment building, extend over 100 dwellings in a circle around the new apartment building. Again, in the real world, it won't be a circle, but it doesn't matter. The RMA and Councils already have some mechanism for identifying affected neighbours; whatever that mechanism is has, in this case, identified these 100 dwellings.

Council needs to raise $10,000,000 in total, but nothing says that we need to spread the abatement provided by the new apartments to the city as a whole. In fact, on thinking about it, it seems pretty silly to spread the abatement so broadly. We've identified a set of affected neighbours who bear the costs of the new development but get the same tax abatement benefits as everybody else. Why not define a Special Ratings Area by the dwellings that experience disamenities from the new development, using whatever process is already in place for defining affected neighbours?

Let's instead specify that the total rates collected from both the new development and all the affected neighbours remains constant after the new development's construction. Those 100 dwellings used to remit, in total, $100,000 in taxes: $1000 each. Dwellings in the circle paid $100,000; dwellings outside of the circle paid $9,900,000. Outside of the circle isn't affected by the apartment building. We'll say now that all of the dwellings inside the circle, including the dwellings in the apartment building, have to remit $100,000 in taxes in total. Since there are now 200 dwellings in the circle instead of 100, the per-dwelling levy is now $500 instead of $1000. The dwellings outside the circle continue to pay $9,900,000 and the necessary $10,000,000 is collected in total. Now, neighbours would need to enjoy more than $500 per year in disamenity effects in order to wish to block the development.

This doesn't solve every problem in the world. There are neighbours who would experience more than $500 per year in disamenities and would still NIMBY up. But there will be a range of neighbours in the $10 to $500 range who cease their opposition.

If we wished a stronger counter-NIMBY effect, we could say that all dwellings inside the circle remit in total the necessary $100,000, but that the new apartments are levied at the rates that obtain outside of the circle. Only the affected neighbours then enjoy the benefits of the Special Ratings Area. The total amount collected will be the same. But, in that case, and in this example, the new apartments each remit $1000 in taxes while the 100 affected neighbours each see a complete rates abatement. So we would only hear complaints from NIMBYs experiencing more than $1000 in disamenity effects.

If the apartment development were large enough, and if the number of affected neighbours were small enough, one could imagine scenarios where the neighbours received a negative rates bill: had there been 150 apartments each remitting $1000 in taxes, and the same number of affected neighbours, there would have been $50000 in surplus to distribute among the 100 affected neighbouring dwellings: a $500 cash bonus each instead of a $1000 rates bill. In that case, it would take $1500 in disamenities to trigger NIMBY activity.

I doubt you would want that this be locked in in perpetuity.** I would expect we could see this system apply in the first year. Perhaps after 10 years, the circle as a whole, including the apartment, could remit a total rates bill equal to a half-way point between the total amount remitted inside the circle prior to the development and the total amount that would be remitted had every dwelling inside the circle, apartments included, paid the same amount as those outside the circle.

The steady-state for the circle going from 100 dwellings to 100 dwellings plus 100 apartment-dwellings could then be $150,000 in total taxes rather than $200,000. Prior to the development, the 9900 dwellings outside the circle remitted $9,900,000 in total taxes; now they'd only need to cover $9,850,000, so their rates bill would drop from $1000 each to $995 each. Each of the 100 apartments would remit the same $995 in taxes, covering $99,495 of the circle's $150,000. The remaining dwellings in the special ratings area would remit $505 each in taxes. Everybody's better off. Affected neighbours get strong abatement. Other pre-existing dwellings see a small amount of abatement too. And we reduce overcrowding because we have found a way of compensating the NIMBYs.

Now real world ratings systems are more complicated than this. More valuable dwellings remit more in tax. What I'm here establishing is a new Special Rating Area within which the city could apply its standard differential progressive capital value taxation scheme, charging more valuable dwellings a greater share of the amount that needs to be collected and less valuable dwellings a smaller proportion. It's just that instead of applying it over the city as a whole, they carve out areas around new developments as defined by the affected neighbours, and re-apply the standard apportionment formula to levy a total amount of rates across dwellings within that defined area. The rates bill for those in the area has to drop relative to what they pay in the current system, and NIMBY pressure consequently drops too.

Note further that these kinds of benefits should be stackable. If your dwelling is affected by two different new developments, you should see cumulative rates decreases.

Questions for readers:

1. Does a system like this apply anywhere in the existing world?
2. Are there obvious gaping holes that I'm missing?
3. What seems like a fair and politically sustainable time path for the special ratings area?

I'm sure there are many practical implementation issues like the calculations for dwellings in overlapping special ratings areas. And maybe we'd want gradations within the Special Ratings Areas where the most affected dwellings see the most abatement. But this all looks pretty feasible.

It seems like a good idea. Surely somebody has thought of this before. And surely somebody else has explained why it can't work. I'll look forward to your pointers.


* In the real world, they could under- or over-shoot. I've heard many arguments that Councils currently have incentive to over-shoot because doing so shifts the tax burden to new residents over existing ones and to discourage development to avoid NIMBY complaints. I can deal with the latter problem here, but we'll otherwise assume that the developer levies are set correctly.

** And especially where new dwellings might cater to new residents rather than for a shuffling of existing ones: the Council's total budget then has to increase for services that have a per-capita cost, and we don't want to give those outside the circle strong reason to lobby against the new development.

Independent is an interesting word

I presented to the Ministerial Forum on Alcohol Advertising and Sponsorship a few months back with a brief submission on recent evidence on the effects of alcohol advertising on consumption behaviour.

One pretty compelling recent piece of evidence is Jon Nelson's recent meta-analysis, published in 2011. The abstract:

This paper presents a meta-analysis of prospective cohort (longitudinal) studies of alcohol marketing and adolescent drinking, which accounts for publication bias. The paper provides a summary of 12 primary studies of the marketing–drinking relationship. Each primary study surveyed a sample of youth to determine baseline drinking status and marketing exposure, and re-surveyed the youth to determine subsequent drinking outcomes. Logistic analyses provide estimates of the odds ratio for effects of baseline marketing variables on adolescent drinking at follow-up. Using meta-regression analysis, two samples are examined in this paper: 23 effect-size estimates for drinking onset (initiation); and 40 estimates for other drinking behaviours (frequency, amount, bingeing). Marketing variables include ads in mass media, promotion portrayals, brand recognition and subjective evaluations by survey respondents. Publication bias is assessed using funnel plots that account for ‘missing’ studies, bivariate regressions and multivariate meta-regressions that account for primary study heterogeneity, heteroskedasticity, data dependencies, publication bias and truncated samples. The empirical results are consistent with publication bias, omitted variable bias in some studies, and lack of a genuine effect, especially for mass media. The paper also discusses ‘dissemination bias’ in the use of research results by primary investigators and health policy interest groups.

So he picked the papers that use a baseline and exposure design and concluded that there's really nothing much there except for publication bias.

The panellists didn't seem particularly friendly or unfriendly. Tuari Potiki asked why economists' conclusions on this stuff vary so much from the public health folks who'd presented earlier in the day, and the general tone of the Forum members seemed to be "what additional restrictions should we place" rather than "do any potential restrictions do more good than harm", but maybe I misread them.

Well, the anti-alcohol advocates didn't think the Forum was independent enough so they've made their own forum.* They're calling it the Independent Expert Committee on Alcohol Advertising and Sponsorship.

Independent's an interesting word, since the IECAAS is being hosted by Alcohol Action NZ, Doug Sellman and Jennie Connor's anti-alcohol lobby group, and consists of Sellman, Connor, Janet Hoek, Mike Daube and others. They reckon the Ministerial Forum, including NZ Drug Foundation's Tuari Potiki, wasn't independent enough because the CEO of the Advertising Standards Authority is also on the Forum. Sellman et al are correct that the Forum members aren't experts in alcohol marketing, but I'm really unconvinced that that makes them less independent.

IECAAS writes:

To date IECAAS members have found no significant new research that would invalidate the recommendations made by the Law Commission in 2010. In fact the evidence supporting major reform appears to be strengthening. The recommendation to phase out alcohol advertising and sponsorship apart from objective written product information over five years is therefore as important today as it was when first reported to the government in 2010. The only difference is that New Zealand could have made several years of progress had the government responded.

I wonder how hard they've been looking. There's a reasonably important piece in the Journal of Economic Surveys that they've missed. And a few others.

* I can't stop imagining Bender setting up his own theme park. Except this one would be way less fun than Bender's.

Reader mailbag: restrictive covenants edition

If the particular character of a neighbourhood is all that important, why don't residents protect it using covenants?

A reader emails me:

I don’t think it is Nimbyism if a neighbourhood wants to protect its own character. What is Nimbyism is denying others beyond your neighbourhood the same opportunity you had.

It seems counter intuitive to think a place like Houston which has few zoning laws gives local communities greater control to enable the protection of individual property rights by allowing those individuals to collectively agree to covenant those rights (which include the protection of special character areas like Franklin Rd) and yet not to interfere with others who may wish a different way outside that zone.

High density advocates hate the idea that Houston communities that fringe CBD areas can continue to live a lifestyle that they have agreed to and also stop others (like Dhyrberg) from coming in and destroying it.

I know that many new developments come with covenants restricting future use of the property: developers expect that residents want rules binding both themselves and their neighbours. I don't want to live in that kind of place, but in a world of heterogeneous preferences, some prefer homogeneity.

Is there anything legally that would stop residents in places like Epsom, Grey Lynn, or any of the other hotbeds of development discord, from jointly agreeing to bind themselves against future development?

Under the status quo, everyone on the street seems to have been given a property right in what anybody else does with their property even though no covenant was put in place. It's an odd conception of property rights to say that, because I bought my house with certain expectations of what my neighbours might do, I therefore am allowed to veto anything they may wish to do with it.

Imagine some street where most residents put value on the street's current character; some on the street would prefer to turn their houses to higher-density use. The current rules let the character-amenity people shout a lot and block the development; those wishing to develop have to pay off all the potential veto players in order to prevent their blocking. Shouting is cheap and, since a developer would have to pay off every potential shouter, there is incentive to pretend to care more than you really do. I'm sure much of the shouting is genuine. But we have little sense of the real dollar value of the experienced disamentiy.

An alternative framework would have those who love the neighbourhood's particular character draft up a covenant agreement and try to get all the owners to sign on. If there are neighbours who were set to re-develop instead, they'd either not sign and not be bound, or be paid by their neighbours to take on the covenant's provisions.

Coase tells us that in low transaction cost environments the two scenarios should be equivalent. Coase also tells us that all the interesting action is in the high transaction cost real world. Is it cheaper to overstate your preference against a neighbour's re-development, or to overstate your willingness to turn your house into a 3-storey set of condos to try to induce payments not to? The former is pretty easy. The latter generally takes a set of architectural and engineering drawings plus building consent applications.

I wonder whether it would be workable to do away with neighbours' ability to object to anything other than real environmental effects like shading by replacing the regime with a menu of covenant options that neighbours might wish to impose upon themselves consensually.

Thanks to my correspondent for useful discussion.

Somebody arbitrage and fix please

I've been explaining to folks 'round the office why we might wish to pay more attention to iPredict's markets on who will be Prime Minister than to the vote share markets. And I thought I might share it with you.

National's back up over 70% in the PM.National contract. If National wins, that contract pays $1; if they lose, it pays $0. It dropped into the 60s last week during the publicity around the Hager book, but it's now back up.

But, if we look at the major party vote share markets, it's hard to see how National could possibly be 73% likely to win. National's predicted to get 43% of the vote; Labour and the Greens are predicted to get 43% of the vote; minor parties get 14%. While NZ First may be more likely to go into coalition with National, Internet/Mana isn't, and Conservatives' wasted votes, if they get 4.4%, disproportionately waste votes that otherwise would have gone to National.

There's a bit of a problem in all the vote share markets though. You can only bring so much money into iPredict at a go, and folks might there be liquidity constrained. The winner-take-all markets can then just be more interesting. The VS markets, paying off at a penny for every percentage point earned by the party in the election, give little chance of large gains or losses. You can sink a whole pile of money into that market to get maybe a cent or two's return on a 43-cent investment. It's not all that great. The PM markets provide a less certain return, as there's bigger chance of large losses if your expectation of the probability is wrong or if the wrong side of the weighted coin turns up, but the 70 cent investment either gets you a dollar or it gets you nothing.

How can we tell that it's the continuous payout structure? iPredict also has a market where the National Party vote share pays out in buckets: one contract pays $1 if the vote share is over 43% (and $0 otherwise), another at $1 if the vote share is over 43.5%, another for 44% and up, and so on through 49%.

In the vote share (continuous) market, you pay $0.43 for a contract giving you $0.01 for every percentage point of the National vote. In the vote share (discrete) market, at current prices, you would pay $0.90 for a contract paying out at $1 if National gets more than 43% of the Party Vote. You'd pay $0.83 for a contract paying $1 if National gets more than 44% of the Party Vote. You'd pay $0.67 for a contract paying $1 if National gets more than 45% of the Party Vote. You'd pay $0.59 for a contract paying $1 if National gets more than 46% of the Party Vote. 46.5% is at $0.55 and 47% is at $0.48. So the market, in those bucketed contracts, expects National to get between 46.5% and 47%; the parallel Labour ones have Labour getting between 28% and 29%. That's rather more consistent with a 70% chance of National's forming government.

But watch for Winston. NZ First is at 4.8% in the standard vote share market, but he's also odds-on to take more than 5.5% of the vote. The Conservatives only have a 29% chance of topping 5%.

Somebody with time ought to go in and fix things so there isn't free money sitting between the bucketed and continuous vote share markets.

Why do all political parties hate renters so much?

There are two main ways people can meet their accommodation needs: renting and owner occupancy. Both involve making annual payments for housing services either in rental payments, interest payments on a mortgage, or to the extent that an owner occupier has paid of his or her mortgage, in the opportunity cost of forgone interest from having money tied up in the ownership of a house. A lot of people, myself included, prefer to own their own home rather than renting. For others, renting is the preferred method of meeting accommodation, and a third group would prefer to own but rent due to not being able to secure a large enough loan.

Now I can understand a desire to help those in the that third group, particularly since they are likely to be disproportionately drawn from the poorer members of society, but if the mechanism for doing so is to make buying a house cheaper while simultaneously making renting more expensive, the mechanism will actually be hurting the most vulnerable members of the group it is seeking to assist--those sufficiently liquidity constrained that even with the assistance house purchase will still be out of reach.

And yet, the three main political parties' policies on housing seek to penalise this group of renters. The reason for this is that rental accommodation and owner-occupied accommodation are pretty close substitutes on both the demand and supply side of the market, and so their prices are very closely linked. Any policy that either makes it easier to purchase a house for owner occupancy or more costly to own a house that is rented out, while not doing anything to increase the total stock of housing, must make renting more expensive.

So, for example, a policy (Labour-Greens) to level a capital gains tax on residences but exempt residents' first homes, will make it more expensive to be a landlord in a market where house prices are expected to increase in the future requiring a higher rental rate to compensate. A policy (Labour) to prevent foreign non-residents from owning domestic residences to be rented out will have the same effect. And a policy (National) to give tax breaks to first-time house buyers will similarly favour owner-occupiers at the expense of renters, operating here through the demand side.

I would love to see each of the leaders questioned in the televised debates on why they think the effect of their proposed policies on renters would be an acceptable cost.

Landslide costs

Christchurch Council and the government will buy out some Christchurch properties at high risk of landslide. Here's Chris Hutching at NBR:

The government and Christchurch City Council will buy 16 Port Hills properties.

"The latest council-commissioned GNS Science reports show 37 green-zoned homes are in areas where the risk to life from mass movement (sometimes called landslide) is considered intolerable,” according to a council media statement.

An intolerable risk is defined when “the risk to life from mass movement in any one year is equal to or greater than one in 10,000.”

Geonet identified 37 at risk properties in total.

Ok. Recall that the value of a statistical life for policy purposes in New Zealand, or at least the one used by MoT for transport planning and subsequently adopted elsewhere in policy, is $3.85 million per fatality.

Let's work out whether the policy here makes sense.

The median 4-bedroom house in Redcliffs/Sumner, where most of this kind of risk obtains, is $690 per week. Let's take that as the value of housing services over and above the value of services that would be provided by a park in the same spot: the rental costs understate the value of housing services of owner-occupied properties, but parks provide some value too. Let's be safe and call it $500/week extra value. For a year, let's round that down to $25,000 per year. We want an annual figure because the 1/10,000 risk is annualised. Alternatively, we could take the value of the house and the lifetime risk of landslide for that house's life.

If a house has an intolerable risk at a 1/10,000 risk of landslide death, and if that risk is sufficient for buying out the home-owner and taking that property out of housing use, then we're willing to forego $25,000 per year in housing services to avoid a 1/10,000 risk of landslide death.

Now let's suppose that a 4-bedroom house, our valuation basis here, has 5 people in it.

$25,000 * 10,000 = $250,000,000.

$250,000,000 / 5 = $50,000,000

The Ministry of Transport is willing to spend up to about $3.85 million to save a life by roading improvements that prevent deaths.

The government here is spending at least $50 million per (ballpark) statistical life saved.

I'm not sure that this makes a lot of sense where there are other projects that, for the same total cost, could save more expected statistical lives.

Unless we think that dying in a landslide is about thirteen times worse than dying in a car accident. I'm really rather sure I'd rather die in a car accident than in a landslide. Suppose a genie came to me and said, "Eric, you and your family, I know with certainty, have a 10% chance of dying in a bad car accident next year. It'll be quick though. Would you like to trade that for a 0.8% chance of your family dying in a landslide? It'll be pretty terrible."

If you were given that choice, and you'd take the deal to get the landslide instead, then the government's buyout doesn't make sense. If you prefer the car accident, then the buyout can make sense.

Update: Note too that there's an important difference between houses and roading investments. The government, in the latter case, makes investments to mitigate risk of death and accident for anyone using that road. While there may be some roads that risk-averse drivers avoid because they're too terrifying, we all have reasonable expectations of safety on government-owned roads. If I choose to buy a house at the bottom of a very unstable hillside, I have demonstrated that I'm comfortable with that risk. While it's true that the earthquakes reveal more about the actual risk and that some owners may have erred, that could be an argument for an insurance payout for the amount of capital loss, not for buying the owners out and barring future residential use. All we then need is the one-time compensation, plus a great big highlighted section at the front of the property's LIM report noting the substantial landslide risk present at the property. If some prefer taking that risk for a lower-cost house, why should that be illegal?

When Hooton's away, a Crampton will play

I filled in for Matthew Hooton in the NBR's Opening Salvo this week. It's only in the print edition; here's a taste. [Update: here for subscribers]

We can count the costs of apartment stories left unbuilt. In a well-functioning market, developers will build upwards until the cost of an additional storey roughly equals the extra revenue the developer gets from selling the extra floor space, unless we think that property developers do not really like money all that much. We have pretty good data on what it costs to build a five-storey apartment building as compared to a four-storey one. If a fifth storey left unbuilt because of height limits, whether due to viewshed protection or for other regulation, could have sold for two to three times its construction cost, as the presented study found, the effective regulatory tax imposed by height limits is pretty high. If you add up the value of all the missing apartments, the total figure is going to be massive.

While urban planners often take a lot of stick for wishing to force people into compact city forms, and sometimes rightly so, urban height limits that artificially prevent density impose a regulatory tax that either pushes prices up or pushes cities out. Auckland’s metropolitan urban limit has been pretty binding and artificially restricts building out; regulations barring development upwards need at least as much attention.

The economists at these sessions used similar method to estimate the regulatory tax implicit in zoning regulations in places like Epsom, Remuera, Point Chevalier and Grey Lynn. Add up the construction costs of a new house and the per-square-metre land cost. According to the study presented, which remains in the final polishing stages, mean house prices exceed those real costs by at least twelve percent in places like Epsom: it’s a regulatory zoning tax. The Greens’ Julie-Anne Genter was exactly on point when she excoriated ACT’s David Seymour in the Epsom candidates’ debate for opposing denisification. What kind of free-marketer thinks it right and proper to give neighbours several houses over a veto right over what I might wish to do with my house? One that needs to win votes in Epsom.

Do get a copy that you might read the whole thing. For the Genter-Seymour debate in question, hit the 8:50 - 9:16 mark here.

Real decline?

Nolan rightly hits on a bit of chicanery in reporting on BERL's policy costings for the Greens:

Investing to maintain real spending

This one is genuinely disappointing as it seems to be an almost explicit misinterpretation of Budget forecast figures.

The numbers for claiming falling real expenditure come straight from the Treasury forecasts here, but are then deflated.  This sounds good on the face of it, and people do this all the time.  However, it ignores that there is both unallocated spending, and allowances for additional spending in future Budgets – both which largely get allocated to Health and Education on the day.

It is an “open” secret that the Health and Education numbers work this way – as both Labour and National want to announce increases in spending on these items on the day. [Note: It is just like "tax cuts to get rid of fiscal drag" - political marketing all the parties do].

Now BERL is likely aware that the Budget Economic and Fiscal Update leaves out that unallocated spending. It's right there in the darned table. Here:

So what do we have here? For each line, we have the expenditures by spending area. For example, health rises from $12,368m in 2009(actual) to $15,274 in the 2018 forecast. BERL then goes and deflates that by expected inflation; the Greens then claim that there's a real cut in spending.

Now take a look at the line reading "Forecast for future new spending". That's the line where Treasury makes its best wink-wink-nudge-nudge guess as to future operating spending announcements, some of which it's possibly already had to cost for future government policy announcements, and some of which will be based on expectations of future inflation adjustments.

When BERL runs its inflation adjusted accounting on Core Crown Expenditures, it finds a 9.9% nominal and 2.8% real spending increase over the next three years. That total Core Crown Expenditures category includes the future spending increases. Those future spending increases have not been allocated across spending categories. If it were allocated proportionately across all categories, the weighted average of the different categories' increases would wind up being 2.8% real. But BERL doesn't assume that. It just takes each line from the BEFU and inflation adjusts it while ignoring the forecast future new spending.

Nolan is right. And it's worse than that. Nolan points to the 2013 Note 8 adjustments to BEFU. The 2014 table above has the forecast increases right there in the same table where BERL would most likely have pulled its data. It would be really hard to miss it. And if you didn't miss it, it would be really hard not to know that it would be really misleading to run a deflation adjustment without incorporating future expected spending increases where some of those increases would be to offset future inflation! 

The forecast new capital spending and unallocated contingencies are in the 2014 Note 8 adjustments; there's another $2.5 billion in forecast new capital spending by 2018. None of that's included in BERL's accounting.

Nolan's evaluation, noting that he's an Infometrics economist who hadn't worked on the report:

One thing I will point out, after reading the Infometrics report for the first time, is that they don’t say the things in the Green’s summary – but if you do a costing for a party, that is the way they will sell it.  The BERL tables on the other hand do imply what the Greens take from them – and that is very disappointing as they are misleading.

So the Greens put the best spin they could on the Infometrics numbers, as would any other party. But they could have been misled by the BERL tables. And that turned into some very erroneous headlines for the Greens, and some embarrassment when the Minister of Finance used a yellow highlighter to point them to what BERL failed to notice:

@RusselNorman @stevenljoyce Here it is. P119 BEFU "Forecast for future new spending" - the line BERL missed. pic.twitter.com/V2pnaYwXdq
— Bill English (@honbillenglish) August 19, 2014

I love that our Minister of Finance will come in and correct these kinds of things, or at least somebody in his office on his behalf (who knows whether he runs his own Twitter account).

It looks like Russell Norman honestly believed that there was no provision for future spending. I wonder whether he's satisfied with the advice he received.

Hagar and the Horrible

I haven't yet read Hager's book. But reporting on the book tells me, of things relevant to my interests:

• WhaleOil often posted pieces written by corporates (or their intermediaries) attacking their enemies, without attribution, and for pay. 
• Some of Whale's attacks on Doug Sellman's nanny-state anti-alcohol advocacy (and assorted other food, beverage and tobacco health lobbyists/researchers), and Whale's own nanny-state anti-RTD advocacy, were paid pieces commissioned via Carrick Graham.

James Dann quipped:

ridiculous that the alcohol lobby would pay whale oil for attacks against Doug Sellman when @EricCrampton will do it for free
— James Macbeth Dann (@edmuzik) August 18, 2014

Indeed.

Assuming that all of the stuff that Hager put up about Whale's "Infomercial" posts, as summarised by others, is correct, the most damning is the one on RTDs. Whale had had a bit of a reputation for not liking nanny-state interventions or those academics who spend a lot of time pushing policies restricting our access to those substances - and especially where they're doing it on government grants. The anti-RTD posts were off-key. Either Slater was less consistent than I'd have expected, or something else was up.

I expect that the other bits were inframarginal, in that they were consistent with what I'd have expected Whale would have said anyway if he'd written them himself. The payments there perhaps don't reflect well on some of the sponsors, but I doubt they changed what Whale was going to say anyway on those kinds of topics.

Whale apparently had to be paid to note that Doug Sellman's blaming of excessive alcohol advertising for drunks' stealing alcohol-based hand-sanitizer was batty. I'll say it for free: it's a bit nuts to blame alcohol advertising for drunks stealing and drinking alcohol-based hand-sanitizer. We occasionally hear stories about folks stealing a lamb or two for home slaughter and consumption. Should we blame BBQ Culture? NZ Beef & Lamb advertising? No. It's also a bit odd to cast Sellman's blaming of excessive advertising as "evidence-based", as I cannot imagine any study exists looking at theft of and consumption of hand sanitizer as it varies with the intensity of alcohol advertising. It's assertion. I'm also asserting that it is really rather implausible that ads for Woodstock or whatever else are to blame for kids' stealing hand sanitizer. I've previously asserted that, contra Sellman, Woodstock ads are hardly likely to cause middle-aged women to think it's ok to have affairs with their sons' friends. While Sellman does do some evidence-based work, he also engages in a lot of advocacy that's not nearly as rigorous.

For the record, here at Offsetting:

• You will never find a post written by somebody other than the post's listed author. I'll sometimes blockquote from anonymous correspondents, or from named correspondents, but I don't put others' copy up on my name. 
• I have never taken pay for a post. I've not been offered pay for posts either, other than the spam ones everybody gets for link-exchange things. So I guess I can't say I've successfully resisted serious temptation either. Anybody willing to offer me a million bucks for a post is welcome to try though; I would require payment in advance of discussions.
• I sometimes get tips for material for posts, or for things I should OIA, from all kinds of places. Ministries, industry, NGOs. I don't want to out what are sometimes whistleblowers and sometimes other insiders. If the topic looks fun I'll have a look at it and will post something on it if I think it's blogworthy and if I have time to get around to it. Those often have "A correspondent points me to...". I recognize that every single one of these correspondents has his or her own game going on and treat things accordingly.
• I disclose where relevant. As summary of past and current things, little of which should be any kind of surprise:
• I wrote a report on the social costs of alcohol for NABIC, the Australian alcohol industry group;
• I presented some of that report's findings for NABIC in Oz;
• After I'd done a similar report for free in NZ in 2009, the Brewers flew me up to Beervana to talk about my results and gave me a free ticket to the event. It was really pretty fun. More fun than insinuations from the antis that I'd been secretly paid to write that report.
• The Brewers Association of Australia and New Zealand supported my work at Canterbury from December 2013-June 2014 through a deal with the University where I spent about a day a week providing them advice on reports and articles about which they wanted analysis, doing a bit more work on alcohol's social costs for a one-day workshop in Oz, and laying the groundwork for some longer-term projects that, alas, ended with my leaving Canterbury.
• Because I felt bad that I hadn't gotten as much done as I'd hoped to with the project's truncation, and partially because the topic's inherently interesting, I did a bit of analysis on advertising and sponsorship regs to present at the Ministerial Forum on Alcohol Advertising and Sponsorship, mostly pointing to and explaining Jon Nelson's very nice metastudy on advertising. I wasn't paid to do that work, but I wasn't out of pocket for the same-day flight to Auckland to present. The "I felt bad about it" only covered that I spent time on it, not the content of the analysis.
• In the interregnum between finishing at Canterbury and starting at NZI (and evenings for a bit before finishing at Canty), I did some expert witness work on the effects of on-licence closing times for the local alcohol hearings at Tasman; I'm likely to present at the Wellington LAP hearings as well in a month or so. The Hospitality Industry Association had me do that work, but it's expert witness stuff under court guidelines: my assessment of the evidence, rather than advocacy. I think that the evidence being put up by the police in favour of heavily restricted closing times is pretty biased and missing any of the lit that suggests closing times has very little or no effect on bad outcomes; some of the evidence put up in favour of there being substantial benefits from early closing times also has some ...issues. But I've not been blogging about it because it seems unwise to put up all my findings here when the Police lawyer's been trawling the blog for ad hominem attacks; putting up all the bits of analysis while the hearings haven't yet finished seems ill-advised. I don't think the overall body of evidence is consistent with strong reliable benefits from reduced closing times: there's way too many findings of no effect. I'll post on it when it's all done, but with disclosure that it was part of that expert witness work. I tweeted from the hearings but haven't posted on them. I'd also provided a bit of advice to Independent Liquor on evidence around RTDs.
• I might pick up other side consultancy work from time to time where time constraints permit and where a project looks fun, but if I blog on that topic, I'll note that I've done funded work on it. 
• I think that's it. Other minor bits and pieces like getting a bottle of wine as honorarium for giving a talk here and there aren't really worth going through.
• Oh, I now work for the New Zealand Initiative, a Wellington think-tank whose members are listed on their website. I don't have to clear blog posts here with them or anything like that though. The most you might notice would be that I start bugging you to attend NZI functions here in Wellington, or blogging more on the research coming from NZI as I'll have far more of a hand in it.

I think that's about it. Feel free to hate my views, conclusions, and methods if you like, but know that they're my views, conclusions, and methods.

I likely need to get around to reading Hager's book. I'm curious whether we'll get an iPredict contract on whether Collins survives to the election. The covariance between that stock and PM.National would be interesting, as would some Granger causality tests.

More refugees?

It looks like New Zealand won't be taking any more refugees despite the ongoing messes in Iraq and Syria.

"We want from the New Zealand government to accept refugees from Syria and Iraq, especially who have relatives here," says Assyrian community spokesman Khaled Tomas.

But Prime Minister John Key won't budge on New Zealand's annual refugee quota of 750, even though reports in Australia say the Abbott government is considering taking 4000 Syrian and Iraqi Christians.

"I think we took a group of 150 Syrian refugees as part of our UNHCR quota, and we're always looking to see on a humanitarian basis what we could do," says Mr Key.

It's little comfort for Kiwi Assyrians desperately trying to protect their loved ones and one of the oldest Christian communities in the world.

"We had churches in Mosul for 1800 years, and they're all destroyed," says Iraqi priest Father Kanon Toma.

Now the terrified Christians and Yazidis are prepared to leave their ancient cultures behind and start again.

The community in New Zealand has only one wish – for them to have a better life.

I'm not sure what's underlying Key's decision. Maybe it's the case that none of the refugees from there can get to any airport or seaport that could convey them to New Zealand anyway. Maybe NZ has no capacity to sort refugees from ISIS fighters who might wish to come visit.

But if it's just worries about the potential cost of accepting refugees, well, there is perhaps a solution to that. Get a number on the marginal cost to the government of providing assistance to a refugee for the refugee's first couple of years. Set up a PledgeMe drive so those who'd be happy to help support bringing people over can do so. If the cost of an additional refugee is x, and the drive raises 50x, let in 50 more refugees.

The Greens' tax and child poverty policy

I spoke briefly on Morning Report this morning on the topic of the Green's proposed policy to increase the income-tax rate to 40% for incomes over $140,000 and use the revenue raised to fight child poverty. Our brief pre-recorded interview covered a number of different aspects of the policy, of which they used my comment on the income-tax hike. The main points I made were as follows:

• On the expenditure side, it is a laudable goal to seek to reduce child policy, but I have a couple of concerns with the proposed mechanisms for achieving this:
• I would like to see more details on how replacing the In-Work Tax Credit with a general tax credit that doesn't require 20+ hours worked each week would affect the incentives to work. I take Susan St John's point (from the same Morning Report piece linked to above) that it is unfair to separate children in poor families into the deserving and undeserving poor based on the employment status of their parents, but the potential unintended consequences of creating new poverty traps needs to be acknowledged. 
• I wonder about the evidence base to backup the suggestion that problems with child poverty eliminated by providing parents with more income support. More income may well be a necessary condition, but I am mindful that we live in a country with a shockingly low immunisation rate for children from impoverished backgrounds even though immunisation is free. 
• To be fair, there are other aspects to the proposed policy than increased benefits (or reduced taxes) to poor families with children, and these may well be worthwhile, and I am not sure that the proposed income supplements wouldn't be effective; I just feel that this is a hugely difficult area that is not well understood. I would feel a lot more confident in these proposals if the proposal were to experiment with a few different things and to collect good data on effectiveness before committing a massive expenditure that will be hard to reverse if the policies turn out to be ineffective or counter-productive. 
• It is on the revenue side that I can't take the policy seriously at all:
• By all means seek to raise revenue by cracking down on tax avoidance, but this is a bit like trying to save money by eliminating inefficiency in the public service. In reality the revenue gains are probably small; realistic budgeting should assume gains of zero until the revenue actually materialises. After all, one of the reasons that it is possible for people to structure their affairs to avoid paying tax is that the tax system has complexities that have been put in place to achieve specific objectives; removing the complexities also implies abandoning those objectives. 
• But this is just a detail. The kicker for me is the proposal to increase the tax rate to 40%, only for incomes above $140,000. This smacks heavily of offering the other kid's bat--that is, asking people to feel good about alleviating child poverty without asking them to make any sacrifice themselves. Seriously, there is very little income earned above $140,000. Why not start the income threshold for the top rate at a much lower income level. That way, you would raise more revenue from the very rich (they pay tax on their first $140,000 of income, not just the incomes above that level), and you would be asking the comfortable middle class to contribute to the laudable goal of reducing child poverty as well. A politics that boasts that only 3% of tax payers will see their tax bill rise is a politics that assumes the average New Zealander doesn't care at all (other than rhetorically) about child poverty. Greens' co-leader, Metiria Turei was asked about this in a different segment of Morning Report this morning, but she evaded the question. 

Note: Matt at TVHE has posted on this policy as well and makes many of the same points and some others. In particular, his final bullet is spot on. 

A nice send-off

Philip Matthews at The Press gave me a nice send-off in the weekend Mainlander section.

On the first day of his last week in Christchurch, economist Eric Crampton perches on a stool at Black Betty cafe, orders two espressos and passes one over to his interviewer. Then he starts to explain why he is leaving.

Is it the push of Christchurch or the pull of Wellington? Crampton arrived here in November 2003 to take up a position at the University of Canterbury. Nearly 11 years later, he and his young family are leaving.

It is not the weather. As a Canadian, he thinks Christchurch has "the world's perfect climate".

On Monday he starts as the head of research at the New Zealand Initiative think tank, which evolved out of two earlier free-market groups, the Business Roundtable and the New Zealand Institute. He has put in an offer on a house in Khandallah. His only just repaired home in South Brighton is ready to go on the market.

He will lead a research team of five. His presence will allow executive director Oliver Hartwich to get out of the office, lift the initiative's low profile and raise funds.

Hartwich must also shake off some history. The Business Roundtable was a vehicle for Roger Kerr but it was limited by an adherence to 1980s free-market reforms and close links with the ACT party.

Crampton has not seen any party affiliation at the New Zealand Initiative.

"They're trying damn hard to not have any," he says. "They're trying to go where the data takes them and I will be keeping a hard line on that."

As examples of evenhandedness, he says that both Deputy Prime Minister Bill English and Labour leader David Cunliffe have been invited to speak. And when Crampton was a guest speaker at last year's ACT conference at wealthy backer Alan Gibbs' farm?

"I gave them heck for not focusing enough on civil liberties. I talked about the mess in the Christchurch rebuild. How moving away from the state-directed planning that ACT supported could have been useful."

I think I'd there said "that the ACT-supported government supported"; I don't think that ACT was pushing the command-and-control route. It still would have been nice to have had somebody in there fighting the Brownlee faction a bit more vocally.

Christchurch couldn't have picked better weekend send-off weather. And now to work, and to nail down the house so that the family can move up. Anybody want to buy a gorgeous character 1930s weatherboard 4 bedroom (3 double, 1 single), 2 bath place in South Brighton with a solar-heated pool?

Gluten-free, but don't tell anybody

While most of the anti-gluten seems badly overhyped, there are some people for whom gluten poses substantial dietary risk. They need to know if a product has gluten in it. And producers of gluten-free products are generally pretty happy to let potential customers know about it.

Except when the government makes it illegal to tell customers about it.

When I read this, I'm less convinced that New Zealand is outside of the asylum. Here's Scott Anderson on labelling problems at Kereru Brewing.

My friend is gluten-intolerant, and the discomfort the gluten in wheat and barley bring is one of the reasons beer doesn’t feature in her preferred drinks. But she’d heard of the Auro. “I’ve heard it’s the best gluten-free beer around!” she said.

“That’s great to hear,” replied Chris, “you should get some while you can. Because this batch will be the last. Won’t be allowed to sell it soon. Or at least call it ‘gluten-free’.”

Chris explained that the Ministry of Primary Industries (MPI) has recently released new guidance for what can and can’t be used to promote or label beverages containing more 1.15% alcohol by volume, and “gluten-free” is now prohibited.

Later, I checked out MPI’s Guidance for Alcoholic Beverage Claims and Statements, published 6 May 2014, and confirmed that from 18 January 2016:

“…nutrition content claims or health claims must not be made for food containing more than 1.15% Alcohol By Volume (ABV). The exception to this is a nutrition content claim about energy content or carbohydrate content.”

Meaning, from that date, no product labelled or described by the retailer / brewer with such claims can be sold in New Zealand.

A “nutrition content claim” is defined by MPI as:

“…a claim that is made about the presence or absence of a biologically active substance, dietary fibre, energy, minerals, potassium, protein, carbohydrate, fat, salt, sodium or vitamins; glycaemic index or glycaemic load that does not refer to the presence of alcohol and is not a health claim. “Gluten free” is captured under the definition of nutrition content claim.”

It’s interesting to see “gluten free” pulled out for emphasis there by MPI there and in other passages of the Guidance; clearly this has been published to directly inform brewers that they can’t put such a statement on their beers. Because if you’re going to be really pedantic about the above statement, perhaps mentioning a particular strain of yeast might be mentioning the presence of a “biologically active substance”.

And to think, just a couple days ago, I was making fun of America for its beer label dictator.

These regs don't come in until 2016 so there should still be time to fix this. It sounds like gluten is in the unhappy spot of being something not quite serious-enough to be an allergen but probably more important than a "health claim". Were it an allergen, then everybody would be required to put on labels saying "May contain gluten". If it's not an allergen, then nobody's allowed to advertise "gluten-free", because it's bad to associate healthiness with beer, even if moderate drinking is healthy.

If that doesn't work, perhaps SOBA could produce a list of Gluten Free beers, and whatever organisation exists for the no-gluten people could link to it.

Forgiveness beats permission: Antony Gough edition

In post-quake Christchurch, getting anything done was effectively illegal. And so those determined to get things done needed to be creative.

Georgina Stylianou reports on a talk Antony Gough gave at Canterbury yesterday. He'd said a few similar things in his address to the College on receiving his Honorary Doctorate earlier this year.

He told the packed meeting room not to take no for an answer and listed examples of when he had successfully challenged authority in the past, particularly after the earthquakes. 

He gained temporary unpaid employment with a demolition company to get access to one of his damaged central city buildings. He also convinced his engineers to do another inspection of a property with the sole purpose of rescuing his computer servers.

He managed to obtain the first month-long pass into the CBD red zone and became the ''naughty person who would go into town and take photos''.

...

''I told them there was no way that was going to happen... I broke the rules and got the square reopened.''

As the unpaid employee of a demolition company, he was able to pack up luggage left behind by guests at the Poplars Apartment Hotel and spent thousands of dollars shipping it around the world.

Antony Gough: hero.

I'm sure many others have stories of sneaky night-time raids to rescue cordoned-off computer servers. Hopefully, sometime in the future, they'll be able to tell their stories without fear of being fired for it by their overly process-bound bosses.

It would be interesting to have a measure of the degree to which different firms or industries make it easier to seek forgiveness for doing awesome things than to seek permission to do it in the first place.

I'm not sure academia would come out well.

Grade deflation

Results from Princeton's grade deflation experiment are well worth reading. Catherine Rampell reports on it here and here. Princeton aimed to reduce the proportion of awarded As to reduce variability across departments. Some departments responded more vigorously than did others, but mostly in their 100- and 200-level offerings.

At Canterbury, we always had a measure called the Difficulty Index. It wasn't perfect, but it was a lot better than just targeting the proportion of As. It worked as follows. Each student's grade in a particular class was compared to that student's average across all other courses that year. So if a student in my Public Choice class got a B+ but got an A in all the other classes, my class would get a notch up in the difficulty index for that student. Do that for all students in all courses and you have a difficulty index. Where there are enough students who do courses across different departments, you can get cross-departmental measures of difficulty.

Every year, we'd get reports, to the Department, of which courses were more than a standard deviation away from average difficulty, on either side. The Teaching Committee or HoD would have a chat with the lecturer in those courses about it, unless there were some particular reason we expected that course would prove consistently difficult or easy. We aimed to keep our big first year courses right at the middle and didn't mind so much if our core math-based second year theory papers proved difficult. I think one year my Current Policy Issues came up as being too difficult: students in that course earned lower grades than they did, on average, across their other courses. So I adjusted my grading a bit.

I always wished that we could do away with straight Grade Point Average measures and provide instead difficulty-adjusted GPAs. A student earning straight A+s in courses where everybody gets an A+ would then get something like a B unless the students taking those courses also did exceptionally well in their other courses.

I think the Princeton experiment shows that edicts from on high can help a bit, but I wonder whether those gains can be sustained. I also wonder whether it doesn't unduly penalise the really hard courses that are only taken by the brilliant. If everybody in some upper-division crazy-hard math course gets an A+, and they all deserve it because they're brilliant, the Department shouldn't be penalised for that. Strict GPA proportion targeting penalises students in those courses. A difficulty-index would instead show that course to be of average difficulty if the students in those courses also earned an A+ in every other course, and of above-average difficulty if some lower ability students came in and did badly.*

GPA-seekers would flip from looking for easy courses to looking for those courses where they'd do really well relative to other students. That's not perfect, as there are are plenty of students who could be very well advised to take an essay-based course because they're not very good at writing essays and need to learn it (or math courses for the less mathy), but it's surely better than having them seek the ones where they have a relative advantage and where the grading is easy.

These kinds of measures can also be really helpful in setting University-wide scholarships where GPAs across Departments are otherwise not comparable. I'd always worried that our Econ students suffered in University-wide scholarships for graduate study because we kept a much tighter lid on top-end grades than did some other Departments. Difficulty-adjusted GPAs could likely have solved that problem.

And now a bit of chart-porn from the Princeton study. The x-axis has the percentage of As awarded in the early period; y- has the proportion during the deflation period. Economics maintained a pretty low proportion of As in both periods. The top chart has 100 and 200-level courses; the bottom, upper-division.

* We can imagine more complicated versions of the difficulty index where it's adjusted for these kinds of composition effects, so that the difficulty of each of the courses in which a student is enrolled is factored into the calculation of any particular course's difficulty.

Finally, some good news

Dave Kelly's not too pleased with parts of the Christchurch Central Development Unit's plans for downtown residential development. If this is the complaint, I'm taking it mostly as good news.

He notes:

1. Residential height limits have been increased, with the higher limit applying over the whole area;
2. Allowance for buildings taller than the height limit, with limited grounds for rejecting such applications;
3. No neighbourhoods get special protection from potential building by neighbours;
4. Avenues for neighbour complaints are more limited;
5. No requirements for urban design consultation, which may facilitate the building of small apartments.

The only thing in here that might not be a-ok is whether CCDU got the recession planes right for shading. A big apartment building going up south of you is a much smaller deal than one going up just north of you. Existing owners' rights to sunshine do count for something; ideally, this would be handled through bargaining or, if hold-out problems were too severe, by payment of set fees to the affected neighbours for loss of amenity value. 

Small apartments suit a lot of people. We shouldn't ban people from building them, just because some people might not think you should live in one. Some people can afford big, well-appointed apartments. Other people can afford either a big apartment built to a lower standard, or a small apartment that's really well kitted out. And some others can only afford poor, cheap apartments. Regulations banning small apartments hit the latter two groups. Some folks will be in apartments bigger and less well-appointed than they'd like; others won't be able to afford their own apartment at all. 

Imagine if we had comparable rules about cars. No car can have less than so much total interior capacity. Ban imports of any vehicles that have less interior space than, say, a Rav4. Some who'd prefer a high-end small car might have to shift to a mid-range mid-sized car. Those who can only afford a used Fiesta won't get a car. And many won't be able to afford the fuel to drive as much as they'd like. Sounds really dumb, right? Suppose it were the status quo, though. And somebody proposed letting people buy Minis and Fiestas. We'd get the op-eds complaining about how it isn't fair that some people would then be forced FORCED! into small cars when it's some basic human right to be in a big car. 

I'm glad that CCDU's seeming to get one largely right here. 

Convention Centre Certainty

One bit of uncertainty around the rebuild has now been resolved: the Convention Centre precinct is going ahead. The private sector partners were announced on Friday along with a few more details on funding. 

Georgina Stylianou from The Press called me Friday asking for comment; I emailed her this after a chat.

“It’s pretty hard to tell whether the Convention Center Precinct offers value for money on the information currently available. While we know the Crown is contributing $284 million, we don’t know what portion of that is dedicated to the central convention hall and what portion is targeted at enhancing the rest of the precinct.”
 “I get nervous about business cases based on estimated flow-on benefits from large numbers of high-spending conventioneers as these things have a tendency to be overestimated. While those kinds of benefits were mentioned recently in support of the project, I don’t believe we’ve here yet seen any kind of business case at all. The Crown is contributing about $800 per person in Christchurch towards this precinct, or about $2200 per household. I hope that more of the details will be released soon so that we can judge whether we’re likely to get that much value from it. It would be nice to know, for example, in the case that the facility draws fewer conventions than hoped, whether any losses fall on the private sector partners, the City, or the Crown.”

I also noted that the $500m total cost isn't that far out of line with the speculative number that came out in NZ Property Investor a couple of years ago.

Until more details are released, it's going to be pretty hard to tell what's all going on there. Does the $500m in total include the hotels' investments in new facilities around the Centre? How much of the Crown contribution is for the Convention Centre Building, and how much is for the surrounding land? Does this mean that the Town Hall is now superfluous and that any insurance money from it could be put towards roads and other works?

That every i be dotted, and every t crossed

Vox did some digging into the promising new Ebola treatment. They find:

• The TKM-Ebola treatment developed by Canada's Tekmira was funded by the US Defense Department after primate trials proved completely effective. They got $140 million from the DoD. 
• The FDA halted the Phase One trials in July. From Tekmira's news release, linked-to by Vox:

  "We have completed the single ascending dose portion of this study in healthy volunteers without the use of steroid pre-medication. The FDA has requested additional data related to the mechanism of cytokine release, observed at higher doses, which we believe is well understood, and a protocol modification designed to ensure the safety of healthy volunteer subjects, before we proceed with the multiple ascending dose portion of our TKM-Ebola Phase I trial," said Dr. Mark Murray, President and CEO of Tekmira Pharmaceuticals. "We will continue our dialogue with the FDA, provided for under our Fast Track status, in order to advance the development of this important therapeutic agent."

• A vaccine also is hitting the FDA Fast-Track, with human testing to start in September.

I expect that a Canadian company becomes subject to FDA approval processes for a drug to be used in Africa because of the link to DoD money; FDA approval presumably was part of the DoD requirements. 

It is pretty unlikely that any sponsored prize could match the level of funding that the DoD is throwing at Ebola. And I can't see how additional money helps somebody like Tekmira spring over those rigid FDA walls. 

I wonder why the Phase One trials are being conducted on healthy volunteer subjects rather than field tested on individuals known to have been exposed to Ebola. I suppose it could then be harder to distinguish side-effects, but why couldn't they run the field trials in parallel with the FDA trials?

Professor Paul Hunter here talks a lot of sense:

Prof Paul Hunter, Professor of Health Protection, University of East Anglia, comments:“I welcome the latest initiative from the World Health Organization to convene the group of ethicists to discuss using experimental therapies in the management of Ebola. Given the likely outcome in most patients with infection without specific therapy, I think that most doctors would want to try such therapies for their patients and for themselves if infected. The current system of ethical review of trials of medical interventions have made substantial contributions to protection patients from potentially ineffective or harmful treatments. However, it would be intolerable if this system was so inflexible that it contributed to the deaths of patients who could be saved.

“In my view the ethical case is unequivocal. If a patient is likely to die and an experimental therapy has a reasonable chance to prevent death then it should be given. However, this does not mean that any old drug could be given. For an experimental compound to be given there should be good prior evidence that the therapy will work, the patient or his relatives should give informed consent wherever possible and whenever the therapy is given proper records must be kept and the outcome reported to WHO. Ideally the WHO should produce a list as soon as possible of experimental drugs/therapies where there is sufficient evidence for them to be considered.”

From the same Science Media Centre release, and by contrast, Professor Jonathan Ball:

“Giving unlicensed and untested (at least in humans) treatments and vaccines is a very thorny ethical issue.

The infected US healthcare workers are receiving a type of treatment (antibodies that specifically target the virus) that has a reasonably long safety track record, so it isn’t surprising – given the high fatality rate in the current outbreak – that they are happy to receive the therapy.

“But not all drugs are safe – that’s why we have very stringent clinical trials. One could argue that the current outbreak provides a perfect arena in which to test new drugs, but that isn’t without risk. We don’t know their safety, we don’t know if they are likely to work – sure they have been tested in animals but these studies don’t always tell us what will happen in humans.

“Also, who do you give the drugs to – infected people from the general populace, or healthcare workers battling in the frontline? Restricting treatment only to healthcare workers and volunteers could be seen as unethical, but treating the larger number of local infected people isn’t easy; the supply isn’t large enough and trying untested treatments that may or may not work and may or may not be safe might reverse all the efforts made building trust and goodwill.

“At the end of the day, good infection control is what is going to beat this virus.” 

There's one good way of finding out what happens in humans. We know that the fatality rate is about 60% among those with this strain of Ebola. Get the drug to one of the hospitals, use it on patients there, and see if the survival rate is substantially above 40%. If the drugs don't work, the patients are no worse off. If they have side effects, those side effects are likely preferable to the disease's effects in at least 60% of cases. I'd be pretty mad if some medical ethicists stood between an Ebola-infected me and a treatment that, while unproven in humans, had been very effective in primate trials. Perhaps mad enough to give them a great big sloppy kiss.

Ball's right that in the long term, it'll be infection control that stops things like Ebola. Does that mean we should abandon those infected until cultural practices around treatment of the dead in West Africa change?

Blood Markets

Supply curves slope up, even for blood.

Sydney's Robert Slonim will be speaking at Canterbury on the use of economic incentives to improve supplies of blood. Slonim's work on encouraging blood donation through use of compensation has featured recently here at Offsetting.

From the blurb for Slonim's talk at Canterbury:

2014 NZEEL Distinguished Lecture:
Professor Robert Slonim
University of Sydney

The Science of Giving, Economics and Improving Blood Supply

When: Thursday, 18 September 2014, 5:00pm - 6:30pm
Where: Law 108 Lecture Theatre

Blood supply in most countries falls well short of meeting demand. This presentation highlights six scientific studies that Professor Slonim has conducted to better understand motives for volunteerism in general, and donating blood in particular. The studies combine naturally occurring data with natural field experiments. The results show that basic economic principles apply to blood supply (eg offering economic incentives increases supply), despite long-standing beliefs to the contrary, and that the market for blood can be improved using economic design mechanisms.

Robert Slonim is a Professor in the School of Economics at the University of Sydney. Professor Slonim completed his undergraduate and MBA studies at U.C. Berkeley and received his PhD from Duke University in 1995. He was a postdoctural student the University of Pittsburgh from 1996 to 1998 and then joined the Department of Economics at Case Western Reserve University as an Assistant Professor. After being promoted to Associate Professor, Robert Slonim moved to the University of Sydney in 2008 as a chaired professor.

Professor Slonim has published papers in leading journals on a wide range of topics primarily using experimental economics methodology. He has studied the effects of learning in games, endogenous determinants of preferences and conducted an evaluation of an educational natural experiment on economic decision making. He has been very innovative in his use of experimental methods that have both theoretical importance and have also represented important findings for matters of public policy. He is currently working with the Red Cross and blood donation centers around the world to better understand blood donation motivation and behavior.

Professor Slonim has been awarded over a dozen competitive grants including two National Science Foundation grants for his research. He recently received a five year Australian Research Council discovery grant for his investigation of determinants of prosocial behavior in the context of blood donations. He is an Advisory Editor at Journal of Risk and Uncertainty and has been recently appointed the Editor of Journal of Economic Science Association. He has published over 30 articles in prestigious international journals, includingScience and Econometrica. 


Contact: For further information regarding this event, please contact Maros Servatka, email:maros.servatka@canterbury.ac.nz or phone +64 3 3642631

RSVP: We invite you to RSVP to this lecture by registering online

Link to the UC Events Calendar: www.canterbury.ac.nz/events/EventDisplay.aspx?ItemId=5069

For more on this topic, hit the organ markets tag...

In the Coromandel, on top of Mt. Moehau

We love Moe, but I was a bit disappointed last night.

Moe's a furry monster who lives on top of Mt. Moehau in the Coromandel. And he has a NZ kids' tv show that's well worth watching. Last night, we watched the episode where Moe, who was running a fan to cool him off because the heater was too hot, was to learn about something beginning with the letter 'P' that could help him to conserve electricity. Moe thought electricity was something magic that came out of a power bar without limit.

Understandably, I was expecting something other than a trip to the Benmore power station. They did a great job showing how electricity is generated, but that doesn't really help Moe to understand why he should turn off the heater rather than run a fan in addition to the heater if he's too hot.

'P' shouldn't have been for Power Station (Whare hiko).

Our 6 year old learned a different lesson. We've been running a space heater in his room on cold nights in the rental house we're in while our house is being fixed and before moving to Wellington. He turned it on out of habit on a very warm night last weekend. When it turned cold again, he didn't turn the heater back on. When I asked him why, he told me, "Mom said I'll have to Pay for the electricity". Which she must have told him would be the consequence of running the heater on a warm day. I told him not to worry about it on cold nights as I'd cover it, but that he would if he flipped it on when it wasn't cold.

No trip to Benmore Power Station can do more than a simple lesson in Prices. P. Prices. Which perhaps translates as utu, but perhaps not. [Update: I'm told the transliteration of value is wariu, and utu is used colloquially.]

Your fun definition as belated part of Maori Language Week:

utu

• (verb) (-a,-ngia) to repay, pay, make a response, avenge, reply.
  Utua ai au e rima herengi i te wiki (HP 1991:26). / I was paid five shillings per week.
• (noun) revenge, cost, price, wage, fee, payment, salary, reciprocity - an important concept concerned with the maintenance of balance and harmony in relationships between individuals and groups and order within Māori society, whether through gift exchange or as a result of hostilities between groups. It is closely linked to mana and includes reciprocation of kind deeds as well as revenge. While particular actions required a response, it was not necessary to apply utu immediately. The general principles that underlie utu are the obligations that exist between individuals and groups. If social relations are disturbed, utu is a means of restoring balance. Gift exchange, a major component of utu, created reciprocal obligations on the parties involved and established permanent and personal relationships. Traditionally utu between individuals and groups tended to escalate. Just as feasts were likely to increase in grandeur as an exchange relationship developed over time, so could reciprocal acts of vengeance intensify. Utu was not necessarily applied to the author of the affront, but affected the whole group. Thus utu could be gained through a victory over a group where only the most tenuous of links connected the source of the affront with the target of the utu. Any deleterious external influence could weaken the psychological state of the individual or group, but utu could reassert control over the influences and restore self-esteem and social standing. Suicide could even reassert control by demonstrating that one had control over one's fate, and was a way of gaining utu against a spouse or relative where direct retaliation was not possible. Such indirect utu often featured within kin groups.
  He mea peita anō hoki e ia, ā he utu tika tāna utu i tono ai mō āna mahi (TW 28/8/1875:170). / They were also painted by him and the price he asked was right for his work.
  (Te Kākano Textbook (Ed. 2): 48;) See also utu ā-hāora

I love the sense of reciprocity that's built into price on this definition, but I'm not so sure about the link to hostility and revenge. Same in English though... you'll pay a price if you think otherwise....

Perhaps Moe should subscribe to the New Zealand Initiative's weekly updates. P is for Price came up a couple weeks ago there....