Saturday, 18 August 2018

Zombies live

Nine years ago, BERL put out its study on the costs of alcohol use.

They're now pushing an inflation-adjusted version of the figure. The figure isn't good, and that they're pushing it now is worse.

The study was riddled with problems and became a laughingstock among economists. Among the methods BERL used to get a gigantic figure on the costs of harmful alcohol use:
  • Including every dollar spent by drinkers on alcohol if they consumed more than a medically-set threshold. You can't do this unless you're assuming that there are zero benefits associated with those drinkers' consumption. The threshold was equivalent to about two pints of strong beer per day. That's more than I drink, but it's odd to assume that folks consuming at that level get zero benefit from it.
    • Oh - that spending included excise tax. They included the excise tax paid as a social cost. So whenever you increase alcohol excise tax, you increase the measured social cost of alcohol unless consumption drops by at least enough to offset the increased expenditure per-unit. They eventually fixed that part when I mocked them for it; dunno if the updated figure includes excise paid by heavier drinkers as a social cost or not. 
  • Double-counting by including lost output among those who die early because of excessive alcohol use, and the value-of-statistical-life measure used by MoT which is inclusive of all costs of death including lost output.
  • In tallying health costs, they took Collins & Lapsley's aetiological tables that give the proportion of the burden of each disorder associated with alcohol use, then zeroed out all the disorders where alcohol reduces health costs. 
  • In tallying crime costs, they used a survey of prisoners who were asked how much alcohol contributed to their offending. Possible answers were "not at all", "a little", "some", "a lot", or "all". If the offender said at least "some", BERL attributed 100% of the costs of that crime to alcohol. 
    • Oh - they also counted the lost output costs of incarceration by assuming that those in jail would have been on the average wage otherwise. That doesn't make any sense unless you're trying to inflate figures. 
I could go on. The full tally is summarised here; the full report is here. Remember Marge listing Homer's failings at Catfish Lake? Anyway, maybe about a fifth of BERL's tallied figure could plausibly count as policy-relevant costs under more normal ways of handling things. 

BERL did not come out well from that study. Nana had to defend it on Jim Mora's show. That did not go well. It was called "Shonky" by a Treasury Deputy Secretary in the National Business Review - but I understand they had to pull back from that because the reporter had characterised it to the Dep Sec as a cost-benefit assessment that had forgotten to run the benefits side rather than as a cost-of-illness study that included a pile of private costs as net social costs by assuming the associated benefits to be zero. 

They presented it at the NZAE meetings; I was discussant. It was standing-room only because Matt Burgess and I had released our review of the report ahead of the meetings.

Geoff Palmer defended the study, and hired Marsden Jacob Associates to back him up on it since he was using it in his Law Commission review. They presented it as an independent review, but note that it's Marsden who was presenting at the anti-alcohol conference this past week. I'd summarised the Marsden-Jacob review here

This past week, BERL provided an updated measure at an anti-alcohol conference. The reporter who called me about it said it was an inflation-adjustment of the old figure rather than new workings; I haven't seen the new figure's workings to check. It's a higher figure than you'd get by inflation alone, so I expect they took the per-capita equivalent of the old figure, inflation adjusted it, then inflated by population increase over the period - but I don't know for sure.  
Eric Crampton, from think tank NZ Initiative, said many of Nana's figures were based on the 2009 study which had been mocked in economic circles for things such as double-counting and counting factors that shouldn't be counted.
Using total cost figures to inform policy was useless in cases such as this. For example, raising excise on alcohol may penalise moderate drinkers but studies showed would only slightly deduce what heavy drinkers drank.
That's not quite right. I'd said that my remarks were based on the 2009 study and would apply to the current one to the extent it relied on the old one. I haven't seen the new one.

But there are two big annoying things.

First, we're again back in the "let's make a big stupid number" world rather than thinking about cost-effectiveness. 

More worryingly, it appears BERL no longer worries about reputation cost associated with that prior work, which was plausibly by now well behind it. Why would you tie your name back to that mess now? None of the plausible answers are good. 

Tuesday, 14 August 2018

SST on vaping

While overall it's pretty favorable to that folks should be able to switch from smoking to vaping, there's still an overlay of unease about the companies that might be providing vaping kit. Regulatory uncertainty here has kept larger companies out, like the larger tobacco companies' vaping products; smaller NZ and international players have supplied vapers here instead.
With Big Tobacco-owned brands dominant in many markets, former smokers increasingly buy vapes from the same companies that sell the cigarettes they have given up.

Although Big Tobacco describes this pivot as about providing healthier options for smokers, others are cynical.

"What is the evidence that the tobacco industry is moving to a non-tobacco business model?" asks George Thomson, an Associate Professor at University of Otago's Department of Public Health.
Some tobacco companies are pushing hard on vaping, others haven't moved as far into that space. But I don't much get why any of that would be relevant to an appropriate regulatory framework here for vaping. Requiring plain-packaging warnings designed for smoking on reduced harm products doesn't make sense, regardless of whether the product was made by a tobacco company or someone else.
"The lesson that both New Zealand and the world has learnt is that you have to keep the tobacco industry out of the policy process," says Thomson.

"I think that equally applies to the vaping industry. Their business is to sell an addictive product to people and to make money from it."
It would be bad to let large incumbents set the rules in any industry - it would be hard to avoid bias against smaller competitors. But it's silly not to listen to those who have to run their businesses under those regulations.
"The worst thing New Zealand can do is introduce an overly restrictive regulatory framework," says [The New Zealand Initiative's Jenesa] Jeram.

"That's the kind of framework that favours the big companies that can afford to put in large applications and to meet all of the regulatory hurdles, and would come at the expense of the smaller players."

In contrast, Thomson — a self-acknowledged hard-liner on vaping — favours stringent regulation as a step toward New Zealand eventually becoming nicotine free.
It's good that Thomson's made clear that his goal is a nicotine-free New Zealand rather than just reducing the harms from smoking. Regulation intended to stamp out all use of nicotine will differ from that intended to reduce harms. If you want to minimise use, then setting up costly regulations to create a quasi-cartel among the largest companies will reduce consumption.

Jenesa's report on vaping is here.

Monday, 13 August 2018

Bag Ban

The Ministry for the Environment's consultation document on banning plastic bags is out.

The key table is in the appendix. Or at least the most interesting table. It shows, from a Danish study, the number of times a reusable shopping bag would have to be reused to have less environmental impact than current disposable bags.

The consultation document provides no cost-benefit assessment, but Question 8 asks those making submissions to assess whether the benefits might outweigh the costs.

I can only speak for our own household, but I doubt we're that we're that atypical.

We have a few reusable bags at home. The ones we have get reused a lot, because we use them on planned trips to the store. But most of our trips aren't like that. Most of them are grabbing a few things on the way home after getting off the bus. Maybe other people are happy to carry around reusable grocery bags every day on the off chance that they might need to grab milk, bread, eggs and butter on the way home. I'm not. On those trips, we use the disposable plastic bags. Because what else are you going to do? Walk home, get a bag, walk back to the shop? It's absurd.

The more likely outcome: buying the reusable bags on those trips, accumulating a stack of them at home, then finding some way of disposing of them down the line. The number of times these things get reused will be endogenous to whether disposable plastic bags exist. I'm expecting that the reuse rates will be dropping.

I also have a few hundred of the disposable bags now on order from Ali Baba because they're too useful around the house to do without. It may also be fun to bring those to the market for use as shopping bags after the ban.

Oh - another depressing part. MoE includes this line.
Retailers will profit from not having to provide free bags and by selling alternative carriers, and are in a good position to help their customers to transition.
Not a lot of economic intuition on display here. If it's true, it means that customers will choose stores based on whether bags are available. If that's true, the value destroyed by banning them is substantial. 

Saturday, 11 August 2018

A beclowning to come

Remember how Parliament beclowned itself in the Committee hearings about Uber? They fundamentally didn't understand the technology or how it worked.

If this makes it as far as select committee, we can at least console ourselves that the hearings will be entertaining.
New Zealand could follow the United Kingdom in bringing in age restrictions for online pornography and blocking websites which refuse to comply.

Department of Internal Affairs Minister Tracey Martin, who also holds the children's portfolio, says young people are being "bombarded" by internet pornography and she wants censorship laws to be strengthened.

"This is a really, really big issue to New Zealand and we are going to have a serious conversation about it," she told the Herald.

"And I hope to make sure we have this conversation in this term of Government."

Martin supports the approach of the United Kingdom, which has ambitious - and controversial - plans to introduce mandatory age verification for pornographic websites later this year.
Interesting questions could include:

  • How will government develop a list for a Great Filter? Does it know about the problems in the UK's list and age verification setup
  • How does this mesh with New Zealand's privacy regime? If a foreign website is compelled to collect personally identifiable details on Kiwis that they would never otherwise wish to collect, what obligations do they face under our privacy regime? How can we tell whether those obligations are being met? What recourse might a Kiwi have in case of breach? Could a Kiwi sue the government if information produced under state compulsion were leaked and used inappropriately? 
  • Does the government know what the letters V, P, and N might together mean in this context?
  • What will be the appeal provisions for sites wrongly listed as being pornographic in nature, and age-blocked? Would they impose undue burden on millions of website owners, and on every Kiwi who wants to find information on topics where bots do a hard time in knowing it when they see it, from sexual health to breast cancer?
  • If they follow the Brits in having "porn viewing codes" issued to those over the age of 18, what do they do when somebody leaks the code number and tracked viewing habits of Cabinet Ministers? Like, if Winston Peters is worried somebody leaded his Superannuation details...
  • Will our porn-watching habits be included in IDI? 
  • Why does the government think there is any market failure here when parents can already make use of parental controls if they wish?

Wednesday, 8 August 2018

A picture of a conflict of laws

I'd noted there were likely to be fun conflict of laws issues when reduced harm tobacco products were simultaneously required to comply with tobacco plain-packaging warnings about the dangers of smoking, and forbidden from making misleading claims on the labeling under standard consumer law.

Here's what it now looks like. Philip Morris's Iqos device heats tobacco without combustion. And this is how they are required to package the 'heets' tobacco sticks used by the device.

I wonder how the Commerce Commission will treat it if someone complains that the packaging is misleading. They could not provide any prior advice about how they would treat it

Friday, 3 August 2018

A weak Treasury response

A friend sends me Secretary Makhlouf's response to my NBR column in last week's Treasury's internal newsletter:

Economics and the Treasury There is an opinion piece in today’s NBR critiquing the representation of economists at the Treasury, with a strong focus on our hiring of non-economists.  I hope that nobody takes this opinion piece personally.  Economics expertise is absolutely valued by the Treasury – we need it and want to build our capability in it – and we are always delighted to get job applicants with tertiary qualifications in economics.   But we also know that considering only people with economics degrees would mean shutting ourselves off from a very big pool of talented applicants.  Doing our job well requires knowledge, analytical skills, an understanding of context, and the ability to explain clearly.  It depends on the minds, insights, and life experiences of the people that make up our organisation.  Broader thinking strengthens rather than dilutes our capabilities as the Government’s lead economic and financial adviser, and our high performance in areas like forecasting, tax advice, analytics, long-term funding advice and many other fields demonstrates this.  I want everyone to know that we value the contribution you make to the Treasury irrespective of what your particular academic discipline is.
 Moreover, and more fundamentally, I think that this critique represents a strain of thinking which narrows the role of the Treasury and what good economics is actually about. I’ve spoken about this publically many times in the last few years.  And you can expect me to continue to stress this point in the public domain.
Good economics is broad. It encompasses any area where choosing agents face opportunity costs. I am not arguing for a narrowing of the domain but of a deepening of the economic talent pool at Treasury to make sure they're able to produce reliable economic analysis across it.

It would be absurd to claim that Treasury should only hire economists. A fresh economics graduate would make a hash of things if set to do Vote analysis work unless under the guidance of someone who really knew the accounts. I've got a PhD but I haven't any accounting background - I wouldn't be suited to a lot of that work either. Treasury needs accountants. It needs tax specialists. It needs lawyers.

But it doesn't need recruitment rounds where only one of nine recruits has a graduate qualification in economics when it's also been losing more senior economic talent.

And it doesn't need to be setting a recruitment framework that tells good economics graduates that Treasury is a place where they are not wanted. New Zealand is a small town. When Treasury goes around the country making recruitment pitches emphasising that you don't need economics to work at Treasury, and celebrate having not hired any single-major economists, decent graduates who want to do economics can easily conclude that that work is no longer welcome in Treasury.

And I know that I am far from the only one noticing the problem.

Working for Families as employer subsidy - again

Susan St John takes issue with what I'd written on Working for Families.

I'd tried posting a reply to her over at the Daily Blog, but my comment disappeared into the ether immediately, and when I tried logging in with Twitter, it told me I wasn't allowed. Maybe they don't like me there.

I'll hit it here instead, but wish I didn't have to type it again. And here's my original blog post.

Prof St John's primary argument is that subsidy incidence does not apply because of the lump-sum nature of Working for Families. It isn't a wage subsidy on top of earnings. Rather, the In Work Tax Credit provides you with $72 per week so long as you're working at least 20 hours per week, then abates if your family income gets high enough.

But I think about WFF around the extensive margin, with the in-work tax credit helping to front the fixed costs of being in work in the first place. Reservation wages can wind up being high if you have to deal with the hassle of sorting out being a working parent, but once that's fronted, things can be different.

Consider a worker with a high reservation wage, because of those fixed costs, and where the reservation wage is then higher than any employer's willingness to pay. For some people, the IWTC would be at least sufficient to flip things at that extensive margin by covering those fixed costs. You then get, from the employer's perspective, a normal looking labour supply curve from that worker that begins at the 20-hour mark, and unwillingness to supply less than that amount of labour. I don't see why you wouldn't get some division of the IWTC between employer and employee. But it hardly seems the most important thing going on with IWTC.

As I understood things in the mid-2000s, the point of WFF with the IWTC was to encourage people off of benefits and into work. Employment among single parents has increased - although at a cost to hours worked by married women and (to a lesser extent) by married men because of the higher EMTRs in the clawback ranges. Abolishing the work requirements for the IWTC, as St John recommends, turns the programme into a family-income-linked child benefit that doesn't do the same job in encouraging labour force participation. I suppose folks can argue the merits of that; I prefer the work linkage.

I still expect it would make more sense to boost the incomes of working families with dependents by increasing the in-work tax credit than by increasing minimum wages.

And I'm a bit perplexed by Prof St John's suggestion that I want to turn WFF into EITC (America's wage subsidy), and her consequent demand that I defend EITC. The in-work tax credit is broadly similar to EITC, except without a phase-in period.* I'd have to look a lot more closely at both to make any suggestions about changing WFF here to be EITC. 

* And FFS don't make a big list of all the other differences and damn me for not listing them all.

Thursday, 2 August 2018

More on that 'new' study on alcohol and pregnancy

I'd posted yesterday on some new work being reported by Radio New Zealand on drinking during pregnancy.

I didn't know where that work had been published because it's the rare New Zealand media outlet that will ever link to a journal. So I went to the older Superu work with which I was familiar. The numbers in the reporting looked very similar to the old study, so I figured it was safe to look to the old study's numbers on the more detailed breakdowns of heavier and lighter drinking. There's a sharp difference between heavy drinking during pregnancy and having a drink or two per week, and the media stuff I'd seen was all on the prevalence of any drinking rather than getting into that detail.

I'd figured that the new work must have been using an updated version of the Growing Up In New Zealand data - maybe a new wave of mothers had entered the dataset.

And then the Science Media Centre pointed me to the new study, out last Friday at the New Zealand Medical Journal. The nine-author piece uses the same dataset as the Superu study. The main analysis is very similar to the Superu study. It does not cite the Superu study but rather presents itself as new work.

Both studies present the raw stats and the proportion of women falling into the different consumption buckets at the different stages of pregnancy.

Both studies run some multivariate analysis using logistic regressions to get characteristics associated with different levels of drinking at different stages of pregnancy.

Superu includes some neat transition probability matrices that the new NZMJ piece didn't.

I have some difficulty in seeing the contribution provided by the new 9-author NZMJ piece given the existence of the 3-author Superu piece of three years ago.

And the NZMJ piece by Fiona Rossen, David Newcombe, Varsha Parag, Lisa Underwood, Samantha Marsh, Sarah Berry, Cameron Grant, Susan Morton, and Chris Bullen did not cite the prior work by Superu's Jit Cheung, Jason Timmins and Craig Wright.

Some questions we might then wonder about:
  • How does it take nine authors at Auckland University to replicate part of the work undertaken by three authors at Superu three years ago?
  • Did none of the nine authors know about the prior Superu work? Are any of those authors part of the Growing Up In New Zealand team? It may matter - I'm pretty sure that access to that study's data is by application, so somebody had to have authorised Superu's access three years ago. It isn't a public dataset where it's plausible that work could be undertaken that the data provider wouldn't know about. This one's locked up
  • If none of the authors and none of the referees at the NZMJ knew that this work had already been done by Superu, what does that say about standards of that journal?
I have let the journal editor know about the problem, and to their credit they're following it up (I apparently wasn't the first to note it to them either).

I wonder what the outcome will be.

I find it remarkable that the referees chosen by a local field journal in one of their areas of specialisation (go and count the number of alcohol articles that the NZMJ publishes by the public health crowd) did not catch the prior Superu work. 

Coasean noises

I loved this picture making the rounds on Twitter.
And so I made a small suggestion.

Where residential development is proposed adjacent to a noisy thing, put a note on the title that noise control officers will entertain no complaints from those properties about the noisy thing. If it is on the Land Information Memorandum, it will be noted by buyers. Developers then have a few options:

  • Develop as usual, know that the buyers will see the noise notice on the LIM, and sell at a lower price;
  • Install more substantial sound-control insulation than would otherwise be in place, and note the insulation in the marketing for the properties;
  • Pay the owners of the adjacent noisy thing for abatement of the noise.
Which is chosen will depend on how much people hate noise, how expensive it is to insulate the houses, and how expensive it would be for the noisy thing to be less noisy. 

Making it very explicit on the title, and potentially requiring active explicit disclosure of the noise restrictions and sign-off by the buyers, helps guard against the usual political economy worry that people will buy the property at a discount (because of the noise) then lobby for the banning of the noise. 

Wednesday, 1 August 2018

Alcohol in pregnancy stats [updated]

Radio New Zealand reports on a new iteration of the Growing Up in New Zealand study looking at maternal alcohol use during pregnancy. I have been unable to find the cited study, so we'll go with RNZ's reporting for now:
The lead researcher of a new study that has found nearly a quarter of women drink alcohol during the first three months of pregnancy says the findings prove more needs to be done.

The findings were part of the Growing Up in New Zealand study following nearly 7000 children from birth until they are aged 21.

The study found while 71 percent of women drank alcohol before becoming pregnant, 23 percent continued through the first trimester and 13 percent continued to drink further into pregnancy.

It concluded drinking was common in New Zealand women, particularly among Pākehā and Māori, and some women drank alcohol heavily during pregnancy.

Auckland University professor Chris Bullen said the findings show New Zealand's drinking culture needed to change.

"I think why we're seeing it in European and Māori women is because of the prevalent drinking culture and I think that's fundamentally where things need to change, so that alcohol isn't a norm and it certainly isn't regarded as a thing that you do if you are possibly, likely or currently planning to be pregnant."
Again, I haven't the study. But we do have the prior iteration of it that Superu looked at a couple years ago. Keep in mind that there's a vast difference between having a drink or two per week, and having several drinks per day.

Here's Superu's 2015 take on it. First, the question asked:
“Now, thinking just about alcohol, and thinking about before you were pregnant, and
during your pregnancy.
On average how many drinks of alcohol – beer, wine, spirits …
  1. Did you drink per week before becoming pregnant or before you were aware you were pregnant
  2. Did you drink per week in the first 3 months of pregnancy
  3. Did you drink per week after the first 3 months of pregnancy”
The following possible responses were listed on a showcard: “I did not drink alcohol”,
“Less than 1 drink per week”, “1 drink per week”, “2 drinks per week”, “3 drinks per week”, “4–6 drinks per week”, “7–9 drinks per week”, “10–14 drinks per week”, “15–19 drinks per week”, “20–39 drinks per week”, “40 or more drinks per week”.
I expect the first three months' figure will then be an average of the period before they knew and after, so the drop from the pre-awareness category to the first-trimester category will understate the drop after the respondent became aware of the pregnancy.

Here's what they found:

86.6% in that prior iteration did not drink after the first trimester, so 13.4% did. And 77.4% did not drink during the first trimester, so we're at the same 23% consuming during the first trimester. Both figures match the newly reported study.

But the older Superu work had the finer details on consumption patterns - since the broad aggregates are identical, I doubt we're far wrong in looking to the older breakdowns in the absence of the new study. Why oh Why won't RNZ link to the studies they're reporting on?

The vast majority of those who consumed alcohol after the first trimester, in the Superu study, consumed less than four drinks per week.

Superu wrote:
There is a sharp contrast between the patterns of alcohol consumption before and after awareness of pregnancy. Around seven in 10 women (71 percent) reported drinking alcohol before becoming aware of their pregnancy. The proportion quickly reduced to 23 percent in the first trimester, and to 13 percent after the first trimester.


In the first trimester after becoming aware of their pregnancy, more women chose to stop drinking or consumed less alcohol. More than three-quarters of women (77 percent) reported that they did not drink alcohol in the first trimester, which was more than double the percentage who did not drink prior to awareness of pregnancy. Percentages of women for all other levels of alcohol consumption during the first trimester were lower than before. However, there were still 7 percent of women who reported drinking four or more drinks per week during their first trimester while knowing they were pregnant.

In the second and third trimesters the percentage of women not drinking alcohol increased to 87 percent. Of the women who said they drank alcohol during the second and third trimesters, two-thirds consumed less than one drink per week and less than 1 percent of all pregnant women reporting drinking four or more drinks per week during those periods.
There are pretty strong demographic correlates among the heavier drinking cohort suggesting that targeted interventions might make more sense than population-wide measures.

Recall also Emily Oster's literature survey [the full treatment is in her book] around the relative risks of light drinking as compared to heavier drinking. Castigating women for having a drink or two per week seems like bullying.

UPDATE: The excellent Science Media Centre emails me to let me know the study is in the latest NZ Medical Journal. Here's the key table.

It is identical to the 2015 Superu study. It is amazing how media picks this stuff up as new findings and absolutely fails to notice that there's nothing new here. The NZMJ piece has some logistic regressions; so did Superu. The main difference is that NZMJ takes this a strong call for population-level restrictions on alcohol (along with an accompanying editorial from, you guessed it, Sellman and Connor), where Superu just puts up the numbers and provides a fairly reasonable conclusion:
On a more positive note, the analysis reveals the presence of a strong, across-the-board intention to reduce alcohol intake, even among the “Hardy drinkers”. The challenge for public health is how to help these women translate this good intention into successfully stopping drinking as early as possible during pregnancy. For each of the different pathways identified in this report, different levels and types of support may be needed and the women may need to be encouraged to stop drinking at different stages of the pregnancy. Women who made changes slowly will need to be incentivised differently from those who made changes quickly. Women who drifted or regressed will need to be supported at the critical times to stop them from reverting back to drinking.
Figuring out how to encourage the <1% of women whose drinking during pregnancy is risky to scale back is really important. And I doubt like heck that there's any kind of evidence base for Connor and Sellman's suggestion that banning alcohol sponsorship in sport might help with this.

I do not understand how this got published at the NZ Med Journal. At any decent economics journal, it either would have gotten a desk reject if the editor knew the area or a referee would have looked at it, saw that made no particular contribution given the existence of the Superu report, and recommended rejection.

The authors didn't even cite the prior Superu report. Did they know it existed? Did the referees? Did the editors? What a clownshow.

Oh, and it took the NZMJ article 9 authors to come up with analysis similar to what Superu did 3 years ago with 3 authors.