The refugee revolution

Nevil Gibson at the NBR notes the importance of migrants to New Zealand's arts scene. The Second World War brought refugees from central and eastern Europe. Their contributions are noted in a new book from Leonard Ball at Auckland University Press. Nevil writes:

Historically, despite being a 19th-century settler economy, immigration was minimal in the 1930s and popular attitudes were hostile to “strangers.” Even the arrival of some 1100 refugees allowed in up to 1940 was resisted in some quarters.

The author of a new book on these mostly central European refugees from Nazism says, “The doors to New Zealand were almost closed.”

Leonard Bell’s Strangers Arrive: Emigrés and the arts in New Zealand, 1930-80* describes the impact of those immigrants both before and after World War II. Supplemented later by Dutch migrants and those fleeing communism, they had a profound influence on architecture, the arts, education, industry, science, medicine, fashion, cuisine and much else.

A Czech refugee, Ernst Mandl (Mr Bell's father-in-law), was told by the New Zealand High Commission in London in mid-1939 that 16,000 applications from others seeking to leave Europe had been rejected.

A junior staff member of the commission, George Fraser, later recalled in his memoir, Both Eyes Open, that, ”We could have recruited some of Europe’s finest … but balked at it.”

Opposition came from groups as varied as the British Medical Association (which demanded “retraining” of doctors), the Returned Services Association and sports clubs.

Xenophobia and, let’s face it, anti-Semitism was commonly expressed in the media and in attitudes to hiring “aliens” from European countries – Germany and the former Austro-Hungarian Empire – that New Zealand had fought in World War I.

Those attitudes were also directed at European allies, such as the French, but were countered by local Jews, Quakers and academics, who were supportive of the refugees. (For another perspective, see Jewish Lives in New Zealand History (2012), co-edited by Mr Bell.)

Nevil goes through substantial contributions to the arts, culture and architecture from New Zealand's small group of admitted WW2 refugees - he calls it a cultural revolution.

I wonder what contributions the thousands who were turned away could have made here, and how many of them were murdered in Europe after finding doors closed.

Ball discusses his book here.

Afternoon roundup

The closing of many days' worth of browser tabs finds some gems.

• WeWork will be opening an entrepreneurship-focused primary school in New York. 


• Legal entrepreneurship provides a new variant on tax farming in America. One law firm's figured out how to cut a deal with city council letting it prosecute code violations on Council's behalf, and charge those fined for their prosecutions. We don't know how lucky we are in New Zealand.


• Sam Bowman on minimum alcohol pricing. One caution there: Pryce's thesis does show far less price responsiveness among heavy drinkers, but one reason for that is that they shift on the quality dimension rather than the quantity dimension. Minimum pricing makes it harder to shift to lower per-unit-price products in response to a price rise for those heavy drinkers who have already downshifted to low-value products. Pryce does correctly warn that the benefits of minimum pricing in curtailing heavy drinking are highly overstated - the stupid models have a baked-in assumption that heavy drinkers are more price responsive than moderate drinkers, and that has things backwards.


• Marco Tabellini finds voter backlash against immigrants despite immigrants' increasing employment among natives. He looks at European immigration to the US from 1910 to 1930. From his abstract:

  Immigration increased natives employment and occupational standing, and fostered industrial production and capital utilization. However, it lowered tax rates, public spending, and the pro-immigration party's (i.e., Democrats) vote share. The inflow of immigrants was also associated with the election of more conservative representatives, and with rising support for anti-immigration legislation. I provide evidence that political backlash was increasing in the cultural distance between immigrants and natives, suggesting that diversity might be economically beneficial but politically hard to manage.

  Sounds like the last NZ election.


• This is just amazing. Here's some folks at Laurier University in Canada berating a TA for a critical thinking course for having encouraged critical thinking. She showed video clips on two sides of an issue. The one that she's in trouble for using was a clip from a University of Toronto professor. The cultural revolution has hit Canadian academia. May New Zealand continue to be immune.


• Another sledgehammer taken to Nancy MacLean's Democracy in Chains. This one hits on her allegation that James Buchanan supported school segregation. He didn't.  

And a couple bits from me:

• I'm quoted in this piece where I argue the case for Working for Families instead of minimum wage hikes. 


• I provided Interest's Top 10 last week. Highlights there include a nice NYT piece on the alcohol-cancer studies, a great piece from Russell Brown on how Auckland Council's liquor people screwed up a Lorde all-ages show, and Dunedin's impending problem where the Easter trading ban will coincide with an Ed Sheeran concert. 

More drinking stats

The Press reports that the new NZ Health Survey data is up. Smoking rates are down; obesity's up. Here's how they describe the drinking stats:

Meanwhile, 748,000 people, or 19.5 per cent of the adult population are considered "hazardous drinkers", according to a World Health Organisation definition, which takes into account a combination of factors including binge drinking, dependency, and the impact alcohol has on people's lives.

Another indicator headed in the wrong direction is one which measures mental health. This survey found that 7.6 per cent of people suffered from "psychological distress", and a high or very high probability of anxiety or a depressive disorder.

You could be forgiven for thinking that meant the drinking stats were worsening. Here's what the data says instead for adults aged 15+:

• There are more abstainers. Past-year drinking has dropped by just under a percentage point, with drops for both men and women, and across almost all age groups. None of the single-year changes are significant, but the drop since 2006/7 is significant overall, for both genders, and for almost all age cohorts. 
• Hazardous drinking is down from last year, from 20.8% to 19.5% overall, with a percentage point drop for women and a point and a half drop for men. The drops are across just about every age cohort. Youth hazardous drinking (15-17 year olds) is down from 7.9% to 7.6%. Hazardous drinking among 18-24 year olds is down from 37.1% to 32.9%. Note on this measure though that we only have data from last year and this year because they changed the definition. 

The stats are here.

Unemployment targets

Grant Robertson wants the Reserve Bank to follow a dual mandate, targeting both inflation and unemployment.

RBNZ already weighs unemployment, both because inflation targeting requires having a sense of the slack available in the economy, and because policy targets agreements have required that the bank minimise unnecessary variability in the unemployment rate while targeting inflation.

I expect a formal dual mandate is riskier than Rob Hosking at the NBR suggests. A sound governor backed by a good board will recognise that the long-run Philips curve is vertical and seek to minimise longer run unemployment by providing stable inflation rates around the middle of the inflation band. But if a governor and board are chosen explicitly by the Minister to focus on unemployment, that could be decidedly worse. Policy targeting lower unemployment while taking an eye off of inflation will succeed in delivering permanently higher inflation while doing nothing to reduce long-run unemployment.

And where Robertson says he wants unemployment down below 4%, where it was in 2005-2008, we should remember that there are a few ways of doing that. The labour force participation rate in 2005-2008 never reached 78% in the June quarter annual figures (for those aged 15-64, so isolating from changes in retirement behaviour). It has been above 78% since 2014 and sat at 80.4% in the 2017 June annual figure. The employment rate, 2005-2008, was 74.8 in those annual June figures; in 2017's figures, it was 76.2%.

As I read the figures, we've had strong population growth and strong employment growth. Together those mean that a new tranche of workers enter the market, start looking for work, find jobs, and a new tranche of incoming job-seekers follow on behind. At the same time we've had a strong push to get people from benefits into work. All of those have boosted the participation rate and the employment rate - and the churn from new entrants coming in has pushed up the unemployment rate a bit.

Getting the unemployment rate down by a point would be pretty easy: stop work-testing things at MSD, and slow the arrival of new migrants who bring partners who spend a couple quarters looking for work before landing a job. The labour force participation rate would drop, as would the employment rate. But if all you care about's the unemployment rate, that'd do it.

Buttery

Joe Bennett makes the case for butter, as only he can.

Miss Turner, who was as old as it was possible to be and had a throat like a turkey, made us fish out our blobs and put them together. Whereupon she added salt, patted the whole into shape with a pair of wooden bats, and then made us sandwiches. It was the last time I enjoyed a science lesson and the only time I ate one.

But butter is even older than Miss Turner was. It's been discovered by every human society that's had the wit to steal milk from other mammals. Great cuisines are founded on butter. You can't make a croissant with low-fat spread. Every Indian dish starts with ghee. Deprive Tibetans of yak butter and they see no point in going on.

Butter is such an obvious good. To taste it is to know so. It enriches any sauce, any anything. I once compiled a list of foodstuffs that butter did not improve. Ice-cream was one, and I wondered whether cucumber was perhaps another. End of list.

Yet those of us who love butter have been out of step with the zeitgeist. By zeitgeist I mean the usual culprits in the dietary field, the harpies of health and wellbeing, the five-a-day fanatics, the officials of single-issue pseudo-medical lobby groups with names like the Society for the Healthy Heart, or Guardians of the Arteries. Who funds these people I don't know, but I do know that for decades they were as one in vilifying butter.

Butter kills, they said. It lodges in our workings and it stills our fluttering hearts. It blocks the blood, the brain, the organism. Shun butter or die, they said, and they went on to preach more virtuous diets. They praised the Italian diet of olive oil, pasta and organised crime, the Japanese diet of seaweed, rice and slavish devotion to authority, the diet of anywhere but where we were.

And people paid attention. They always do. It's vanity and fear of death. At the sight of a pat of butter the longevity freaks and Lycra narcissists leapt aboard their exercycles and pedalled away from it as fast as they could go.

He continues, noting that the end of the demonisation of butter has led to an unwelcome increase in its price. You should read the whole thing - it's fun.

And for more on the price of butter, and other grocery items, here's Aaron Schiff!

Cluster scepticism

Harvard Business Review has a look at business clusters. A nice snippet:

No government official ever got fired for promoting clusters—those concentrations of interconnected companies, specialized suppliers, service providers, training institutions, and support organizations formed around a technology or end product within one area or region. Popularized by Harvard Business School’s Michael Porter, cluster strategies have been promoted by governments throughout the world, which tout clusters’ key role in fostering entrepreneurship and economic competitiveness. Though entrepreneurial clusters do exist naturally and can be important elements of an ecosystem, there is only questionable anecdotal evidence that governments can play a major role in breeding them. In a rare critique of the cluster mantra, the Economist reported:

“Typically governments pick a promising part of their country, ideally one that has a big university nearby, and provide a pot of money that is meant to kick-start entrepreneurship under the guiding hand of benevolent bureaucrats….It has been an abysmal failure….Experts at Insead looked at efforts by the German government to create biotechnology clusters on a par with those found in California and concluded that ‘Germany has essentially wasted $20 billion—and now Singapore is well on its way to doing the same.’ An assessment by the World Bank of Singapore’s multibillion dollar efforts to create a ‘biopolis’ reckoned that it had only a 50-50 chance of success. Some would put it less than that.”

The problem is that over the years people have mistaken Porter’s description of the benefits of clusters for a prescription to go out and build them from scratch. In fact, in a 1998 article in this magazine (“Clusters and the New Economics of Competition”) Porter himself anticipated that the dynamics of clusters would be misunderstood by governments:

“Government…should reinforce and build on existing and emerging clusters rather than attempt to create entirely new ones….In fact, most clusters form independently of government action—and sometimes in spite of it. They form where a foundation of locational advantages exists. To justify cluster development efforts, some seeds of a cluster should have already passed a market test….”

The piece points too to the importance of sound legal and regulatory systems, and the risks in government sponsored venture capital funds that retard innovation by flooding the market with "overvalued, poor-quality deals".

Teacher effectiveness

Massachusetts has been doing some interesting work on teacher effectiveness. Findings so far:

• There are large differences in teacher effectiveness. A teacher at the 75th percentile, relative to the median, improves student achievement by the equivalent of 13 to 15 weeks of learning;
• The cumulative effects of more effective teachers are large. Getting a teacher even only at the 60th percentile rather than the median over fourth through eighth grades provides the equivalent of an extra two months' learning over those five years. Gaps between exemplary teachers and unsatisfactory ones are even larger;
• Low income students are much more likely to get teachers rated as unsatisfactory or as needing improvement;
• Inequities in access to effective teachers increase gaps in achievement between poorer and richer kids.

Wouldn't it be nice if it were possible to do the same work here? There are substantial achievement gaps between low-decile and high-decile schools. Some of it would come down to family effects, whether genetic or environmental. But some of it would also come down to differential effectiveness of schools: recall that there is high variance in outcomes even among low decile schools. 

What would it take?

• It is possible to build contextualised achievement measures for high schools. Grades on externally invigilated NCEA standards can be used to build an outcome measure [or whatever other outcomes you like], and IDI background data can be used as conditioning variables to see which schools over- or under-perform relative to student background characteristics.
• It is currently impossible to link that back to teachers to get a measure of teacher effectiveness. Nothing links students to teachers in the background administrative data, so you don't know which students map to which teachers. And nothing links teachers to schools - or at least if there's a way of linking it, we've not seen it. 
• It is possible to build a contextualised achievement measure for primary schools, but only at one step removed: you infer primary school achievement by outcomes for those schools' students once they get to secondary school. You could try building it out of National Standards data, but it would likely be a bad idea. Students' progress towards National Standards is evaluated by their teachers and you don't want them gaming that. And it looks like Labour's going to scrap National Standards anyway. 

I doubt we get better measures of teacher effectiveness or school performance without strong parent demand for it. I'd be pretty surprised if there weren't similar problems here in getting great teachers into our more challenging schools (on average).

Conditioning on partisanship

Glad to see somebody's worked out the numbers on this one.

It's bugged me how American papers have been quoting Trump's continued high approval ratings among Republicans without doing much to correct for that the people most disgusted by Trump will have stopped identifying as Republicans.

John Holbein points to this piece, which tries to put some bounds on the effects. Just conditioning on stated past voting record won't do it where recall bias matters and where folks might not want to remember having supported something that's now kinda ugly. So they try to adjust for 'missing' partisans of the President's party relative to a baseline measure. The key figure is below, followed by the authors' discussion.

In the lower panel of Figure 2 [pictured above], we plot observed partisan approval rates, the bounds on the compositionally-corrected partisan approval rate, and 95 percent confidence intervals for the upper and lower bound during the first 163 days of each presidential term.23 The marker is the observed partisan approval rate, the first capped line extending out from the marker are the bounds, and the second set of capped lines are the 95 percent confidence intervals on the lower and upper bounds.

Trump’s observed partisan approval rates are very low compared to the same period during Obama’s first term, but are roughly comparable to Obama’s second term. More relevant for our analysis is how the bounds evolve over time. The lower bound on the compositionally-corrected partisan approval rate is quite low during Trump’s presidency. In 14 of the 23 weeks, the lower bound is below 0.8. With only one exception, the lower bound on Trump’s compositionally-corrected partisan approval rate is lower than the lower bound from the analogous poll during Obama’s second term. The observed partisan approval rate is partially an artifact of missing respondents who would have previously reported Republican partisanship. While President Trump’s observed partisan approval rate has received much attention, the data are also consistent with the possibility that his partisan approval rate is quite low relative to recent presidential history.

I'm surprised the lower bound of the adjusted interval is as high as it is. 

Valuable upzoning

Allowing greater density can bring down housing costs while increasing the value of existing property. It isn't magic. A piece of land that can be turned into townhouses is more valuable than one that cannot be. Each of the townhouses would be more affordable than the prior house, but the property becomes more valuable even before the townhouses are built.

Auckland Council's economist has run some of the numbers since the unitary plan. 

Our results show that in the most densely upzoned areas of the Auckland isthmus (Glen Innes, Mt. Wellington, Onehunga, Mt. Roskill, and Pt. Chevalier – areas B, C, D, and E on the map), upzoned properties sold on average for a premium of more than $90,000 when compared to neighbouring properties that were not upzoned, controlling for all of the observable attributes of the property as well as the strong overall price changes Auckland experienced over this period.

Across the city as a whole, upzoning added $34,000 on average to the value of a property. 

Council economist Shane Martin makes the case for taxing those windfall gains to help fund the infrastructure needed to enable development, and notes one difficulty: since markets are pricing in the value of upzoning very quickly, Council might want to hasten any announcements of how it would fund the infrastructure so that that could also be priced in. 

The timing of the land value increases also has policy implications. We now have evidence that markets in Auckland react to announcements of policy changes rather than waiting until policies are enacted. That is, when council signals that a policy change is being considered, and the market believes that signal to be credible, prices react. This means that council must consider how it plans to fund new policies (through various mechanisms, including targeted rates), not only before the policies are enacted, but before they are announced. 

It would be difficult for Council to use that kind of infrastructure financing policy if the property turned over between the upzoning announcement and the infrastructure financing announcement. It is easier to announce a policy bundle that provides a net small windfall for current owners than to do it in two parts, the first part of which provides a windfall gain and the second part of which imposes costs on potentially different owners.