Tuesday, 10 December 2019

Reader mailbag - competition for the sporting market edition

A learned reader writes in response to the post on competition among sporting leagues:
You are generally right about the lack of competition for the market in sport but I suggest you have a look at FINA, the world body and Olympic entity for most aquatic sports: swimming; diving; water polo; artistic swimming (formerly synchronised swimming); high diving; and open water swimming, along with masters for all these events. It faces competition for the sport in high diving, open water swimming, swimming and provision of competitions for masters (ie the geriatric). In swimming there are three competitors to FINA: international life saving that has a lot of swimming events, including many held in pools with international competitions; NCAA, about which you will know more than me; and now the International Swimming League (ISL). The latter runs a series of international teams events with some different formats for competition e.g. skins.

After some argie bargie and arm wrestling FINA and ISL have worked out how to co-exist in competition. You can now set FINA world records at an ISL event i.e. they have decided it is pointless to have two sets of world records.

Guess what? Among the world bodies controlling sport I think you will find that FINA is right up there in terms of innovation and trying to satisfy participants and the audience. Way ahead of IAAF, FIFA and most of the other Olympic bodies. The only organisation that comes close, that I am aware of, is UCI, the controlling body of road cycling, track cycling, bmx, cyclocross and mountain biking. UCI effectively contracts out its major road cycling events around the world to commercial entities. The events these companies run largely fund UCI and the companies have a big say in driving it. Swimming at the Olympics draws the largest female/male audience. Gymnastics the largest female audience and Athletics the largest male audience. You don’t see much swimming in NZ on TV as they are very much into rugby, soccer and other team sports and tennis i.e. New Zealanders like watching on TV sports where they can get very annoyed by the referees interfering in the outcome.

... Two of the [FINA] innovations were the introduction of mixed relays (2 men and 2 women) and use of wet suits in cold water temperatures in Open Water swimming. Why NZ would favour these innovations is pretty obvious. Both these have been adopted and have been great successes among participants and audiences.

Why has FINA “tolerated” competition but many other international sporting organisations do not or have not faced it? Am I right about the results of competition for the sport in swimming?
I'm also reminded of an excellent student essay in my graduate public choice class from... over a dozen years ago now... looking at the political economy of Formula One racing and how the threat of teams exiting to form their own league forced some innovation and changes in revenue sharing. In car racing, there's innovation within codes, and competition across codes (F1, Indy, NASCAR, probably more that I don't know about). 

We're heavily into territory where I haven't enough grasp about the stylised facts to be able to do much. It feels like the lack of credible threat of exit will matter in the North American leagues. 

Monday, 9 December 2019

The year of delivery

The Government will move to ban non-compostible fruit stickers today in response to a huge new report about single-use plastic, Stuff understands.

It's understood the Government will also move to ban plastic cotton buds and single-use plastic cutlery, items which both have biodegradable alternatives made out of bamboo.

Compostible apple stickers do exist but are not in wide-use.

The announcement will be made on Sunday morning as part of a response to report from the Prime Minister's chief scientist, alongside a host of other measures.
Have seen a lot of support on twitter for this from people annoyed at having to peel stickers off of apples; I suspect shops will switch to the biodegradable ones unless there's some other better and cheaper tech out there to let shop clerks quickly tell whether they're ringing up a $3.99/kg apple or a $5.99/kg fancy apple.

On the plus side, the bit about plastic cotton buds had me quickly checking their availability at Ali Express - and they're easily available there, along with the wooden stick ones, and at much lower prices than I'm used to seeing here.

I wonder whether the government will yet be making any announcements of the kinds of infrastructure bonds that Phil Twyford talked about in opposition and during the election, and that I know that Treasury has been working on.

One policy instrument for each target, and every agency in its place

My column in today's Fairfax papers argues that central banks really don't have any business playing in climate change policy. It isn't that climate change isn't important; it's rather that central banks have one big job - two if they're also responsible for prudential regulation. 

A snip:
In October, the Reserve Bank's general manager for governance, strategy and corporate relations highlighted the bank's growing focus on climate change. As part of the same press release, governor Adrian Orr noted the bank's role in "greening the financial system" and managing environment and climate-related risks.

Some of this makes sense as part of the Reserve Bank's role in prudential regulation. If a bank's capital stock includes a lot of farm mortgages that would be underwater with a change in emissions policy, then those risks should be considered when weighing that bank's overall position.

Of course, there are policy risks across many different sectors - just think about how Trump's tweets can affect different portfolios.

But the Reserve Bank seems to wish to go further than that, noting the importance of integrating sustainability factors into portfolio management, and recently purchasing US$100 million of green bonds. The current remit of the Monetary Policy Committee includes a preamble noting the government's economic objective of moving towards a low-carbon economy.

And there we start worrying about whether the instruments are suited to the targets, and whether the bank may be over-reaching.

Getting policy around climate change right is incredibly important. But it is not a job to which a central bank is well suited. We would not ask the Reserve Bank to help ensure that vaccination rates are high enough to prevent outbreaks of contagious disease, and we should raise an eyebrow if it started volunteering to do the job. It is a job better suited to others. And climate change policy is better left with the Climate Change Commission. The Emissions Trading Scheme is the best instrument for mitigating New Zealand's emissions.

If prudential regulation reaches beyond considering climate change risk as one of many factors affecting the soundness of a portfolio, to instead start nudging companies into changing their practices around climate risk, we start getting into Tinbergen's problem. Making prudential regulation more about climate change makes it less about the soundness and efficiency of the financial system. We then risk doing poorly for both.

This weakening of focus on core central banking business is hardly unique to New Zealand. Traditionally, central banks have sought to be sectorally neutral in their market operations: if a reserve bank must purchase bonds as part of monetary policy, it tries to do so without skewing the pitch in favour of one sector or issuer or another.

If pitch-skewing is appropriate, that is for democratically accountable parliaments to decide rather than central banks. But Christine Lagarde, the recently appointed president of the European Central Bank, is reviewing whether its bond portfolio should shift from market neutrality to preferring green investments.

These kinds of policies do not just violate Tinbergen's warnings. They also risk the independence of monetary policy if parliaments object to reserve banks taking actions going beyond monetary policy and normal prudential regulation.

And there are dangers too if markets come to expect that central banks might not pursue purely monetary goals in any crisis requiring quantitative easing.
This stuff shouldn't be hard, and it shouldn't be part of the RBNZ's remit.

Make sure that the ETS is working properly. Have a binding cap. Share the burden of getting the cap down to where it needs to be through a declining allocation to grandparented emitters and crown buyback and retirement of emission permits. Keep an eye on the ETS prices to make sure that they don't run ahead of prices in places that also take this stuff seriously. And set a regime, in concert with the OECD, for running carbon-equivalent tariffs for imports from places without a carbon price, and for exemptions of carbon charges on exports to places where the product would compete with products without a carbon charge.

None of that needs a greening or re-jigging of the financial system. It all works better if the financial system is working well, but that's about it.

Reserve Bank independence depends on strong cross-party consensus that the matters over which the Bank is independent are matters that require that independence, and that the Bank isn't straying from its wheelhouse.

Meanwhile, Rod Oram argues that ACC and other government investment funds should divest themselves of anything relating to oil, but with broader implications of course.
ACC’s role, though, goes far beyond a fiduciary responsibility. By being less than world class in its investment policies and practices on carbon, it is exacerbating climate change. That in turn only adds to our health burdens which ACC is meant to help alleviate.
I suppose that sort of thing sends a moral signal and stuff, but it just doesn't make much sense. If you want folks to use less stuff that generates GHG emissions, put a price on GHG emissions.

Imagine that there are two companies on the stock market, a dirty one and a clean one. There's no carbon tax. Ex ante, expected returns to investment in both stocks must be equivalent or funds would shift from one to the other until they were equivalent.

Then, the great awokening happens and a large investor decides it doesn't want to invest in the dirty one anymore. So it sells off its shares and uses the funds to buy shares in the clean company. If the large investor is large, then that action starts pushing down the share price in dirty and increasing the share price in clean. But there's no carbon tax - remember. The expected return on dirty starts going up - nothing in the fundamentals has changed. Investors who just care about return on investment will sell their shares in clean at over-the-mark prices to buy the bargain dirty stocks.

If the large investor is not large enough to buy up all the shares in clean, then we just wind up with the large investor owning nothing but clean, and other investors holding more dirty in their portfolios.

If it is large enough to buy up all those shares and still have cash left over, then things start getting more interesting. It can signal a desire to put more capital into clean, so clean can fund its next project which it otherwise couldn't have funded because the return on that project was (expectationally) lower than the going rate. So the large investor can start reducing the cost of capital for clean, but only at the expense of lower returns for its investors. So it cannot simultaneously be true that the clean investor both affects the real world, and earns expectationally higher returns on its investment.

So the ethical investing push does nothing unless it winds up having those investors forgo returns.

But putting a price on carbon would reduce the return to investing in dirty and increase the return to investing in clean.

And if we wind up in a spot where the government's various funds are pursuing investments based on the ethical views of those funds' directors rather than based on what makes most sense given their risk appetite and time horizons, then again we get into messes. There is risk of these things turning into government slush funds. Bright lines on this stuff are valuable - the funds should be pursuing the strongest possible returns rather than seeking to achieve other objectives.

Tuesday, 3 December 2019

Data preservation, IRD, and the OIA - the saga continues

About a month ago, I made an OIA request for IRD's documentation around data sentencing for the Colmar Brunton poll data.

As you'll recall, IRD had initially refused my request for the Colmar Brunton poll data citing tax secrecy, but updated that in November. They said that they should have refused the request on grounds that the data requested did not exist, because they'd requested that Colmar Brunton delete the data before I'd requested it.

I received a response yesterday.

I've replied noting that I have made a new request - I'd like the records around the sentencing decision. If IRD wishes to withhold that information on same tax secrecy grounds as it refused my prior request for the data, I think they'd need to say so.

I'm interested in how IRD viewed its requirements under the Public Records Act. IRD has authority to sentence its own records to destruction, but there are processes required around that. And I'd like to see whether those were considered.

It sounds like they wish to withhold that information under the tax secrecy provisions in Section 81 of the Tax Administration Act; I've followed up with IRD to check (and expect it to take another 20 working days for them to tell me). Pretty broad power, that one, if so. Is there anything that IRD would reckon isn't a tax secret?

If the government had wanted to exempt IRD from the OIA full stop, wouldn't they have written that into the OIA legislation in the first place?

Of IRD were not in compliance with its requirements under its disposal authority, it sounds like it would be impossible for anyone to know that because anything establishing it would be deemed a tax secret and withheld.

Update: IRD has advised that they are still considering my additional request, and that they have extended the deadline on that request to 17 January. So, see you next year on that one.

Chicago and Academic Freedom

Vic Uni Associate Dean Michael Johnston, and colleagues, want New Zealand's universities to adopt the Chicago Statement on academic freedom and free speech. 

I cover the case for it over at Newsroom today ($). A snippet:
The Foundation for Individual Rights in Academia chronicles violations of academic freedom and student speech rights in America, regularly tallying abuses like Northwestern University’s censorship of a department’s academic journal and its chilling investigations of other scholars; Texas State University’s threats to the funding of a student newspaper over content the administration did not like; and, DePaul University’s requiring a socialist student organisation not only to have security officers monitor their discussion with the author of a book on Karl Marx, but also to cover the security cost.

New Zealand seems far removed from these kinds of problems. But we are hardly immune.

Massey University’s blocking of an invited lecture by Dr Don Brash seemed to be rather more about the Vice Chancellor’s political differences with the former Reserve Bank Governor than about any purported security concerns. But it would be a problem in either case: neither the heckler’s veto, nor the ideologue’s, should have standing.

And when universities are caught between student groups protesting China’s repression of Hong Kong, and students from China potentially pressured by the Chinese Communist Party into launching counterprotests, appropriate responses are more difficult without a strong commitment to academic freedom for both faculty and students.

Universities can come to different decisions about how to handle difficult cases. When universities have a strong commitment to academic freedom and explain their decisions within that framework, differences in views about how any particular case should be treated can be fodder for the usual debates within a university.

But without that commitment, contentious decisions can look a lot more like a weakening of support for academic freedom. And that has implications for academia more broadly.
I expect an ungated version will be up at the Initiative's site tomorrow for those without a subscription.

I hope that Michael's initiative enjoys a lot of support.

Update: Ungated link

Wednesday, 27 November 2019

Sport and competition for the market

Colby Cosh's latest column would be great fodder for grad classes in Industrial Organisation.

We can think about sporting competition in a few ways. The obvious one is competition within the market. Teams compete against each other to be the best within the league's set of rules.

There's also a weak form of competition against other sports in the overall market for attention. Leagues adjust their rules to maximise profits across the set of teams; if the game isn't fun to watch, people will watch something else. So if the competitive balance gets out of whack, the league might use salary caps or entry drafts to make the game more competitive.

But there doesn't seem to be much competition for the market within a sport. If you want to watch professional hockey in North America, there's the NHL and its set of rules. If you want to watch professional basketball, there's the NBA and its set of rules. Canada and the US run different rules for gridiron football: CFL versus NFL, but it isn't like you can choose one over the other if you want to go out and see a game one day. The city you're in says which league you get to watch.

So we get to Colby's rather fun question. All the leagues have evolved to a stable form of the game with about 30 teams in each league and no interesting rule variants. Baseball gets a designated hitter rule in the American league but not the National league, and that's about it. Why isn't there more competition for the market?

Here's Cosh (go read the whole thing!):
In these league structures as we have come to accept them, teams become local monopolies, with little natural incentive to care for or experiment with their sport. Major league baseball was once the senior level of a healthy, commercially successful universe of ballplaying; now, “baseball” exists mostly to serve a televised spectacle that is 30 businesses in large metropolitan areas. All other play of the game above (or even at) the amateur level is defined by its relationship to those businesses. And this is more or less equally true of the other sports.

Which might be fine if it didn’t have other terrible effects. But the One True Business Model makes all the pro sports extremely conservative and incestuous. And each league is wedded to a single, all-prevailing rule set; even the vestigial divide in baseball that gave one “league” the designated hitter would no longer be tolerated.

Any new idea in rules or playing conditions must either be rejected or accepted wholesale after limited experimentation. (The “minor leagues” in the big four sports are suffered to exist partly for the purpose of trying out new rules, but this only emphasizes their status as subject principalities.) This, in turn, leads to endless tinkering inflicted on every fan simultaneously: witness the strife in American football over how to police pass interference, or the torment all sports have suffered over use of instant replay in officiating.

If you are a fan nostalgic for the game of basketball as it was played before the three-point line existed, or for hockey before the shootout, you have nowhere to turn. But it could be worse: you could be a player whose relevant skills are rendered obsolete by some singular, irreversible change in the rules and corresponding strategic imperatives. What are you going to do, go play in the other NFL?

The worst of it is that even as these cartels stagger toward a perceived single optimum of entertainment value, they can struggle, with equal difficulty, to let go of traditional axioms that are dragging them down. Major league baseball’s increasing transformation into a contest of strikeouts and home runs, with roughly 12 relief pitchers appearing in every game, is the obvious example.

I love all four of these games, but watching them is ever more like visiting a nice relative in an intolerable and dangerous neighbourhood. And, actually, I think there is a great long-term commercial reward for the first one of these major leagues to start seriously reconsidering its own monolithic structure. The most obvious candidate is the National Basketball Association, whose brilliant commissioner, Adam Silver, has put forward a proposal to interrupt the 82-game NBA regular season with a winter tournament.

This isn’t the orgy of destruction for which I long; I prefer to imagine a total anarchistic dissolution whose extreme limits even I cannot see. (What if there were no permanent teams, and everyone in baseball or basketball were a free agent every year? What if the L.A. Dodgers-Kings-Chargers-Lakers were one club that had to play all four sports in a calendar year with a strict 50-man roster?) But at least, dear God, Adam Silver is thinking about the future; he is thinking about attacking the unexamined, boring premises of his game/sport/cartel, which include “having a single ‘regular season’ that is a prelude to a single playoff tournament.”
If we contrast to New Zealand, cricket gives us three forms of the game. Some prefer 20/20, some prefer ODI, and the best people prefer a proper Test. International teams face all three forms of the game. Rugby takes a different tack, with different teams playing rugby union and rugby league, and not much player cross-over between forms.

And so the fun fodder for an IO seminar: Why do we get three forms of cricket within the same league where each team needs to be able to play all three; two forms of rugby played by different teams where there are often franchises of both leagues in the same city (Wellington has both the Lions and the Hurricanes); but, only one form of professional-grade sport in the North American leagues? Is it really plausible that the North American professional leagues have really evolved to the best-possible forms of the game?

I like the thought-experiment of the 50-man combined LA Dodgers-Kings-Chargers-Lakers.

Tuesday, 26 November 2019

Open for business?


Well, went through. The piece came out last week, but I'd missed that they'd put it up.

An opening snippet:
Sometimes, being at the front of the queue isn't a good thing.

If you lined countries up in a row, starting with the places least friendly to foreign investment, and ending with the places with the fewest restrictions, New Zealand would be near the front of the queue. In the OECD's 2018 survey, only Jordan, China, Malaysia, Russia, Indonesia, Saudi Arabia and the Philippines were more restrictive – and most countries were far more liberal.

So it is a bit odd to hear Trade Minister David Parker talking this week about the need to tighten up New Zealand's foreign investment regime. The Overseas Investment Act and its implementation need reform, but substantial tightening is not what needs to happen. Are we trying to catch up with China or vault past Russia in these leagues?

Afternoon roundup

This afternoon's worthies:
  • Vic Uni's James Kierstead and Michael Johnston in defence of free speech
    Liberalism and democracy, as Karl Popper recognised, rest on substantive values, values that have to be defended if liberal democracy is to survive and flourish. And it’s up to all of us to do the work of defending these values. If we say nothing while governments, corporations and ideologues threaten and quash the free expression of ideas, we are, at least tacitly, voting democracy out of existence.
  • What a beautiful validity check. Do better teachers really make students taller?

  • Business regulations and poverty
    Using panel data for 189 economies from 2005 to 2013, this paper shows that business-friendly regulations are correlated with the poverty headcount at the country level. This association is significant using the World Bank's Doing Business indicators on getting credit and contract enforcement. The findings suggest that the conduit for poverty reduction is business creation, as a source of new jobs and a manifestation of thriving entrepreneurship.
  • Mark Zuckerberg, Patrick Collison and Tyler Cowen talk progress.

Monday, 25 November 2019

Diversity in the Boardroom

I just loved Isabelle Solal and Kaisa Snellman's piece over in Organisation Science

They look at the effect of the gender of a company board appointment on subsequent sharemarket performance (Tobin's q). They summarise the existing literature, concluding (in line with the rest of the academic literature) that there is no particular effect of boardroom gender on company performance.

But then they do something rather neat. They look at how things vary based on company rankings on the KLD corporate social performance index. That index ranks companies by their commitment to corporate social responsibility objectives, and includes an index ranking a company's commitment to gender diversity.

They find that the gender of a board appointee has no effect on sharemarket performance, among firms with a low ranking on the KLD index. But firms with a high ranking on the KLD index, the appointment of an additional female director reduces Tobin's q. They reason that investors infer different things in the two cases:
We examine investor responses to board diversity and highlight a previously unexplored mechanism to explain negative market reactions to senior female appointments. Drawing on signaling theory, we propose that an increase in board diversity leads investors to update their beliefs about firm preferences. Specifically, we argue that a gender-diverse board is interpreted as revealing a preference for diversity and a weaker commitment to shareholder value. Consequently, firms with more female directors will be penalized. We test our argument using 14 years of panel data on U.S. public firms. We find that firms that increase board diversity suffer a decrease in market value and that this effect is amplified for firms that have received higher ratings for their diversity practices across the organization. These results suggest that observers respond to the presence of female leaders not simply on their own merit but as broader cues of firm preferences and that firms may counteract any potential signaling effect through careful framing.
I liked the piece enough that I made it my column over in the Fairfax papers today.
It is too easy to convince ourselves of things that are not true.

We all do it and it is hard to avoid. Some beliefs, from religion to sport, are just comforting. And when some comforting beliefs are very popular, being the one to say otherwise can be a bit risky.

But, at least in business, believing things that are not so can eventually get you into trouble. Businesses face the market test. And, for publicly listed companies, share prices can provide a quick signal that you may have made a bad decision.


The latest issue of Organisation Science, a top academic management journal, provides a wonderful case study.

...

And that helps us to understand why investors might respond in the way that Solal and Snellman discovered.

It may now be a bit passé to say it but improving shareholder value is a company's ultimate responsibility. There are plenty of wonderful things that companies do to help the communities they serve, but shareholder value is a hard bottom line. It is part of the market test.

Companies that keep that sharp focus on the bottom-line will make board appointments that they think will do the most to improve the company's performance.

When investors have little worry that the latest board appointment was made for any reason other than improving the company's performance, the gender of the latest board appointment has no effect on share prices. Investors simply expect that the best candidate was chosen.

But among firms highly rated for their commitment to gender diversity, an additional female appointment to the board reduced the firm's market value relative to the value of the company's physical assets (Tobin's q) by almost 6 per cent.

Solal and Snellman suggest that investors infer, in those cases, that the company is less worried about shareholder value than about other objectives. And that can be a worry if you care about your portfolio's returns.

While the literature showing no particular effect of boardroom gender on corporate performance is rather substantial, Solal and Snellman's results are still just one study. Others could yet overturn it.

But it does provide a bit of a warning for companies that put substantial effort into advertising their corporate social responsibility credentials.

If Solal and Snellman are right, then investors can be quick to infer that companies demonstrating their commitment to popular but mistaken beliefs have taken their eye off the ball.

The market test matters. And mistaken beliefs can be costly. 
The piece has not met with universal acclaim.

Over at LinkedIn, Sky director Rob Campbell writes:
I’m not sure whether Dr Crampton has ever worked in a listed company or been a director of one. As an academic he would not get much traction by grabbing one study in a quite active literature, even one based on meta analysis, and building an argument on it. The academic world has its own rigour.

But back in the listed corporate world the thinking runs a good deal deeper than “let’s appoint a woman or two and see if it lifts the share price”. We are all looking to improve the performance levels of our boards and management and it would be foolhardy to ignore the negative impacts of mono gender, mono ethnicity, mono experience on that. Not least because our shareholders (rightly) demand that we make the shift. So sell your shares in any business I’m involved with Dr Crampton, we will keep searching for better solutions.
It's a bit funny really. I note how desperately people want to believe something to be true that isn't true, and pointed to the metastudies of dozens of prior studies that show that there is no effect of boardroom gender on company performance, and that's the reply.

I hadn't known about the KLD index before. Someone's likely already done this study, but if it hasn't been done, it would be a lot of fun.

I'd be keen to know whether firms subject to greater regulatory risk show up differently in the KLD index. Maximising shareholder value, for some firms, also involves making sure that the regulators have warm feelings towards a firm because the regulatory risk is substantial. Anticipating the social preferences of those regulators and working to demonstrate shared values could be a way of buying friendlier relationships with the regulators.

Different firms and industries will face different regulatory risks from different administrations. There'd then be potential for identifying effects by looking at the composition of congressional oversight boards, or changes in the Presidency as the regulatory agencies will be affected by the tone set in the Executive, or firms that face regulatory risks in different states as well as federally.

You might think that, in general, firms that depend more on friendly relations with regulators will invest more in CSR efforts where doing so buys friendlier relations. It would be neat to see whether that's the case. One does hear incredibly interesting anecdotes consistent with that kind of story, but does it show up in the data?

Tuesday, 19 November 2019

Really protecting tenants

The government is making it harder for landlords to evict tenants, among a few other changes to the Residential Tenancies Act. 

It's a brilliant bit of politics. 

Suppose that successive governments have so screwed up the rules around getting new housing built and the incentives facing councils to consent new housing that we wound up with a housing shortage. 

Suppose further that your government got elected on a promise to fix the mess - but has achieved close to nothing on the file after two years with an election coming. Kiwibuild was never going to work, and wound up being a costly distraction from the real supply issues at play.

And suppose further that you really need anger about broken housing markets to be directed away from the government. 

What better play than changes to the Residential Tenancies Act? You get a lovely set piece then where landlords yell about the changes, and everybody who's mad about the status quo gets to blame landlords for the mess rather than sheeting that blame home to where it belongs. 

Of course it won't do much to protect tenants. It's palliative. When Auckland is deep in a housing shortage, it doesn't really matter how you fiddle with the Residential Tenancies Act. It's all second-order stuff. 

If you really care about protecting tenants, you need to have massive increases in housing supply. You need to have landlords competing for tenants. You need to have the run-down, damp, grotty dungers left vacant because people have other places that they can afford to live instead. When you're in a massive housing shortage and the alternative to a crappy house is a garage or a car, crappy houses get rented out. If we instead had a surplus of housing, those places would be left vacant and their owners would have to decide whether to refurbish or tear down. 

If you look over at the car leasing market, the provisions in standard lease agreements are way more friendly to the car's owner than are the provisions in house rental agreements. But consumers don't get shafted in those markets because there's ample competition among suppliers and it's easy to set up shop and import more cars if the others are doing a poor job. Like, if the only cars available for lease here were 30 year old Holdens with holes in the roof and a heater that would only work if you held your knee against the centre console just right - somebody would make a buck by opening a new company leasing better cars. 

But importing a car is pretty easy. If you want to build a new house, there are years of process. Auckland Council will make you hold everything up while deciding on street names FFS. We don't make car dealers hold the cars at the port until they've come up with unique names for each car that are culturally sensitive and have passed community consultation, but we hold up housing supply for it. 

I go through all of that over in my Newsroom Pro column this week. Well, not the political conspiracy theory part of it. I expect that the Prime Minister sincerely believes that this will help. And parts of it might. It could just be convenient coincidence that it gives them a nice set piece for landlords and tenants to yell at each other rather than noticing the lack of action on the substantial housing shortage. 

A snippet:
Charles Dickens quipped that an annual income of twenty pounds would result in happiness if annual expenditure were six pence less than twenty pounds, but misery if expenditures were instead six pence over twenty pounds.

Housing is a bit like that.

If we had 600,000 dwellings in Auckland and some 580,000 households needing housing, the result would be happiness. Instead we have about 540,000 dwellings and 580,000 households needing housing, and the result is obviously miserable.

...Tenancy regulation will not build more houses. It can only address some of the current symptoms of a fundamentally broken housing market.

Worse, it is the kind of move that makes the most sense if the Government is pessimistic about its chances of fixing the real underlying problem – making it easier to get new housing built.
Those numbers are a bit rough. The household estimate comes out of the 2013 Census because I've not seen yet any release of TA-level household counts from the 2018 Census - I used the 2013 midpoint estimate which I expects lowballs things. But the number of dwellings count is current.  

Police and guns

If this is right, it looks like New Zealand needs better police rather than stricter firearms laws. 

The man accused of the March 15 terror attack was supplied 2300 rounds of ammunition by using a police mail order form that also revealed to police he had an AR-15, a parliamentary select committee has been told.

The information was part of a submission from licensed firearms dealer Paul McNeill to the finance and expenditure committee, which is considering the Government's second tranche of gun law reform.

McNeill, who is also director of the Aoraki Ammunition Company, appeared before the committee on Friday via video link, but his submission was quickly taken offline in case it might affect the accused's right to a fair trial.

He told the committee he received a police mail order form from the Dunedin arms officer in December 2017 to supply the accused with 2300 rounds of ammunition.

"At the time, Brenton Tarrant was issued with a 10 year [firearms] licence, expired 8 September 2027, indicating he was issued a licence in September of 2017, which from my information was only a matter of five or six weeks after he arrived in the country," McNeill told the committee.

"This time, he has no family, no partner, no job, no footprint in the community, yet he was vetted as being fit and proper and obviously given a full licence which allowed him to arm himself."

McNeill said the mail order form also said the accused was in possession of a Norinco semi-automatic rifle as well as an AR-15 - the type of military-style semi-automatic firearm the Government made illegal in the aftermath of the March 15 attacks.

"So the police were aware he had these firearms," McNeill said in video footage that was removed from the Parliamentary website, but was later posted on social media.
So. The police granted the guy a 10-year firearms licence on minimal background check. They approved his getting 2300 rounds of ammunition. They knew or ought to have known that he had an AR-15.

I don't think the problem here at all is the lack of a gun registry. The problem instead seems to be that the unit in police that dealt with firearms checking stuffed up.

And I wonder how much police pushing for tighter gun control is to distract from that.

In last week's Insights newsletter, I noted some related problems: 
Policing by Consent

New Zealand’s basic bargain around firearms ownership and policing always seemed rather sensible. It was very much a feature of New Zealand’s general “Outside of the Asylum” approach to policy.

Background checks on potential firearm owners limit access to firearms in the interest of public safety. The police then have no need to be routinely armed. It seems a far more sensible approach than America’s, where a heavily armed public has increasingly led to a militarised police force.

New Zealand’s bargain seems to be breaking down with an increasingly armed police force coinciding with far tighter restrictions on civilian firearm ownership. It puts at risk basic principles of good policing dating back to London’s Metropolitan Police Force in 1829.

New Zealand is one of the few countries that has maintained an unarmed constabulary. Police Commissioner Mike Bush put things well in 2009 after a rare shooting of a police officer led to calls for arming the police. He described our unarmed constabulary as a unique and cherished feature of New Zealand policing, and warned that routine arming of police would make community policing considerably more difficult.

The fundamental relationship between police officers and members of the public changes when one of them has a sidearm at the ready. The trial of roving squads of armed police ready in case of armed incidents has already led to their use in more routine stops.

Sir Robert Peel outlined the basic principles of policing that have stood for almost two centuries as the foundation for policing by consent. Those principles recognise that policing and good order depends on the public approval of police actions and the willing cooperation of the public, and that both of those are diminished when police are too quick to resort to force and shows of force.

Policing is challenging. But there has been no surge in violent or property crime involving firearms; police statistics going back to 2015 suggest a flat or somewhat declining trend in court action. And restrictions on private firearms ownership have strengthened considerably over the past year.

New Zealand’s experiment with roving armed police should end. It is an unneeded show of force. And it is contrary to Peel’s dictum that the best test of police efficacy is the absence of crime and disorder rather than the visible evidence of police action in dealing with them.

Friday, 15 November 2019

Confusing the Monster-Ometer with the Frog Exaggerator - again

The latest results from the NZ Health Survey are up.

And so is Alcohol Healthwatch's take on those stats. They take it all as reason for tightening control on alcohol.

Go and have a look at the stats for yourself. For each of a pile of indicators, MoH slices up the data by gender, by age, and by ethnicity. It then says whether the difference between the latest stat and last year's stats, or 2014/15's stats, or the 2011/12 stats for the series that go back that far, are statistically significant.

Now one immediate problem is that if you've sliced up the data two dozen ways and you're running comparisons between three pairs of years for each of those slices, you've got a lot of potential comparisons. 24 comparisons per indicator times 3 year-pairs of comparisons, for the indicators where they have data going back over the whole period - which they don't for some because they changed their definition of hazardous drinking along the way. 

When you're slicing the data that way, you need to adjust your statistical tests for the problem of multiple comparisons. Why? Jellybeans. I'm pretty sure that MoH hasn't done that and that they're just running naive tests for each one.*  


So keep that in mind when noting changes that pop up as significant. Some of those will really just be noise. 

While the mean prevalence figures cited in each group are not age-standardised, the p-values are. 

Here is the full list of all statistically significant changes across the indicators. They always compare 2018/19 to 2014/15 and to 2011/12 when those years can be compared; I don't know why they don't run comparisons to the start of the series in 2006/07. The 2006/07 figures are almost always higher than the current ones. For most stuff, there was a big drop between 06/07 and 11/12, then a flattening. 
  • Past year drinking. There are 72 potential comparisons. One is down. Twelve are up. And 59 are unchanged. 
    • Up from 78.7% last year to 80.3% this year, an increase significant at p=.05. But not significantly different from 2011/12 (lower, but not significantly) and not significantly different from 2014/15 (higher, but not significantly). 
    • Down among 55-64 year olds when compared to 2011/12 (but not when compared to 2014/15 or 2017/18)
    • Up among 75+ when compared to 2011/2 or 2017/18, but not when compared to 2014/15
    • Up among Maori when compared to 2011/12 or 2017/18 but not when compared to 2014/15.
    • Up among Maori men when compared to 2017/18, and up among Maori women when compared to 2011/12 (but not the other years for either)
    • Up among Pacific when compared to 2017/18, and up among Pacific women in every year comparison
    • Up among Asian women when compared to 2017/18, but not when compared to 2014/15 or 2011/12
    • Overall this looks like a bit of an increase on last year's stats, but still more than three percentage points down on 2006/07 (to which they don't make comparisons). 
  • Hazardous drinkers (AUDIT score 8 or higher, among total population). Here there are only 24 potential comparisons because their data doesn't go back earlier than 2015/16 because of a data redefinition. 
    • Across those 24 potential comparisons, there are zero statistically significant changes. 
    • Looking at the changes without looking at significance, compared to the start of the period, 8 of the 24 are higher and the rest are lower. Compared to last year, 17 of the 24 are higher and the rest are lower. 
  • Hazardous drinkers again, but this time restricted to the set of those who consumed alcohol in the past year. Same drill as last time on the years of data. And, same as last time, zero significant changes out of 24 comparisons.
  • Heavy episodic drinking (at least 6 standard drinks), at least monthly, total population. I don't think 3 pints of decent beer is heavy, but I suppose these things are subjective. 24 potential comparisons because of year restrictions. One statistically significant change over last year: a drop among those aged 75+. That's it.
  • Same thing again, but restricted to past-year drinkers: identical. A drop among those aged 75+, no other statistically significant changes. 
  • Heavy episodic drinking, defined as before, total population, except this time at least weekly. 
    • Up among men; Up among those aged 18-24, Up among those aged 15-24, Up among European/other men - all as compared to 2017/18. The remaining 20 comparisons are unchanged. Doesn't look much different for those as compared to 2015/16, but they don't run that comparison. 
  • Heavy episodic drinking, at least weekly, among past-year drinkers.
    • This time, it's only up among European/other men. None of the remaining 23 comparisons are significant. 
So. We've got 240 comparisons. Of those, 17 show statistically significant increases, 3 show statistically significant decreases, and 220 show no change. I was doing eyeball-counting here, so let me know if you've caught a miscount. 

If they've not adjusted the p-stats for multiple comparisons, we've likely overstated the number of significant results. 

If you want to use a Frog Exaggerator, you can point to some of the significant changes among the 240 potential comparisons and say that they're big. But folks should know you're using a Frog Exaggerator rather than a Monster-Ometer.

 

And while the old and new indicators on hazardous drinking aren't comparable, we might expect that the direction of change in the measures would be comparable. There were big drops in hazardous drinking among youths 15-17 from 2006/7 to 2011/12 on that earlier measure, then a flattish trend after that - and similarly for those aged 18-24. Over the longer period, drops among youths are washed out by increases in older cohorts. Hazardous drinkers, among those 15-17, dropped by over 40% from 2006/7 to 2015/16, and dropped by about a quarter among those aged 18-24. Any recent flatlining should be read in context of prior unmentioned drops in youth hazardous drinking. 

Similarly, consumption of 6+ drinks at least weekly on the old measure showed that 25.6% of 18-24 year olds were in that category in 2006/07, with prevalence dropping to 20.6% in 2011/12 and then bouncing around to land at 15.1% in 2015/16 - a drop of over ten percentage points over the interval. By the new measure, prevalence in 2015/16 was 20.4%, dropped to under 17%, then came back up to 21.1% in 2018/19. So that's an increase on last year, but it will still be a decline on 06/07.


* Update: MoH confirms that they're reporting the unadjusted stats. That's all fine - there are plenty of folks who'd need the naive t-stats. But it does mean that if you're looking across the set of them, you need to remember that you probably need a tighter threshold for the p-values. 

** For those who don't know that excellent Simpsons episode: Professor Frink thought he'd found the Loch Ness monster. The machine was going nuts with beeping. But it was just a frog. Why? He was using the Frog Exaggerator rather than the Monster-Ometer. One might ask why he bothered bringing a Frog Exaggerator out on that scientific expedition in the first place. But good on Frink for letting everyone know he'd accidentally pulled out the Frog Exaggerator. Not everyone does that. 

Thursday, 14 November 2019

Film subsidies are stupid, a continuing series

So. 

The New Zealand government, committed to wellbeing, believing that tax is love, wanting to ensure that every loving tax dollar spent provides the greatest possible increase in wellbeing, and fronting the Christchurch Call to stop harmful speech, has put $243,000 towards a Chinese propaganda film with the tagline "Anyone who offends China, no matter how remote, must be exterminated."

Thomas Coughlin has the story over at Stuff:
The film was not made directly by the Chinese Government, but by a slew of Chinese state-owned enterprises, including the China Film Group Corporation, China's largest film producer, and Bona Films.

Bona Films is a subsidiary of China Poly Group, another state-owned enterprise. China Poly Group is an unusual conglomerate housing the world's third largest art auction house and a real estate business, and has "longstanding ties to the military and the family of the former Chinese leader Deng Xiaoping," according to The New York Times.

The strong allegations made against the Chinese film industry's activities in New Zealand are made in forthcoming research from China expert Professor Anne-Marie Brady.

In it, she says growing cooperation between the Chinese and New Zealand film industries, combined with New Zealand's screen production grant means "taxpayers are now subsidising China's propaganda films".

Her concerns aren't just confined to Chinese films — she said the growing ties could have a chilling effect on New Zealand's own cinematic output. 
I don't know quite how you get around this if you're going to have an international film subsidy regime.

Like, maybe you could imagine some vetting to make sure we're not subsidising the production of propaganda films (dammit, I always misspell this and have to go back and correct, and I blame these guys) for authoritarian governments. But can you imagine the diplomatic mess where an arm of the NZ government tells film companies linked to the Chinese military and linked to the high echelons of the Chinese Communist Party folks that the NZ government considers their film to be authoritarian propaganda?

Not having international film subsidies would be a pretty clean way of not having to make those kinds of calls.

And, as reminder, the arguments for the subsidies are largely bunk.

You'll most frequently hear the argument that the subsidy is just a rebate on taxes paid here on activity that otherwise wouldn't have occurred here, so it's costless.

But that's wrong in general equilibrium. In the absence of film subsidies there would be fewer films made here, but people would work in other industries instead. Industries that do not get a tax subsidy. Those other industries are smaller than they otherwise would be because resources have been competed away by the subsidised industry. The subsidy won't increase total employment, it'll rather shift the kinds of tasks that are undertaken here as compared to abroad.

The more sophisticated argument is that the artificially-large film sector makes it cheaper and more feasible to produce NZ content here. International film subsidies have brought production that's built facilities and expanded capabilities, so it's then easier for NZ On Screen to get actual New Zealand work produced.

And that's certainly true. But we have to ask about value for money. International film subsidies cost on the order of $100 per household per year - or at least that's what it worked out to when I'd looked at the budgeted spend for 2020 earlier this year. Add in additional cost for training subsidies to work in that industry to keep it at that scale. And think about what other valuable services all the smart folks working in that industry, because of subsidies, could have been providing elsewhere if they hadn't been pulled into film work because of the subsidy regime.

Is it really plausible that the typical household, if offered the chance to decide, would really want $100 from their annual tax bill going to pay for international film production here rather than being shifted to health, to education, to Pharmac, or to themselves in lower taxes?

2020's budgeted international film subsidies are $171.6 million. Pharmac's budget is around a billion per year. You could then increase Pharmac's budget by around 17% if you stopped paying international film companies to make movies here instead of elsewhere, and put the money instead into Pharmac.

Is it plausible that whatever benefits are generated by international film subsidies, including that it makes it easier to produce great stuff like Wellington Paranormal and Hunt for the Wilderpeople, are higher than what we'd get by giving the money instead to Pharmac?

As for the argument that we have to keep subsidising the film industry because so many people now work in that industry... my column in our Insights newsletter earlier this year:
We all know that best policy is not paying off the kidnappers. Countries that get in the habit of paying the kidnappers encourage the taking of more of their nationals as hostages. It’s a dangerous game to get into because it’s so hard to stop.

But would any country be so daft as to not only pay the kidnappers, but also deliver to them the next round of hostages as part of the bargain?

If you think no country would be so mad, think again. It’s how the film subsidy regime in New Zealand works – as it does in every other place that chooses to play the game.

Last September, The Herald’s Matt Nippert reported that the Labour-led government had decided to continue the previous National government’s film subsidy scheme. Minister Parker ruled out changes where thousands of jobs could be at risk because business viability was threatened by ending subsidies, and where commitments by the National government risked lawsuits if the subsidies ended.

So there are your hostages: thousands of workers in the film industry who would have to shift to other employment, or shift offshore, if the subsidies ended. And here’s the payment to the kidnappers: the budget estimated that New Zealand will spend $113.6 million on screen production grants targeting international productions this year, with $171.6 million budgeted for 2020 – or about $100 per household.

Meanwhile, a host of New Zealand government-funded polytechs and universities train students towards diplomas and bachelors in screen production, diplomas in on-screen acting, bachelors of design (stage and screen), certificates in applied filmmaking and television, and more.

The government is subsidising specialised training students for jobs in an industry that would shrink dramatically in the absence of further subsidies to that industry, and further subsidies to that industry are justified on the basis of the jobs that would be put at risk if the subsidies ever ended.

To put it plainly, the government is teeing up the next round of hostages.

Had governments been this smart in the early 1900s, subsidies for training in the fine art of making buggy-whips would have been accompanied with bans on cars to protect the jobs of the whip-makers.

To crib a line from an excellent ’80s Cold War film, the only winning move in the international film subsidy game is not to play.

Semester Abroad Sanctuary

The Chinese University of Hong Kong does not look like a safe place for students.

After the Canterbury earthquakes, a lot of universities, both here in NZ and elsewhere, made it really really easy for Canterbury students to do a semester as visiting students.

I don't know how many students at the Chinese University of Hong Kong would want a semester abroad in New Zealand. And it could be that the messes there will be over by the time university starts up again in New Zealand.

But it could be good if New Zealand's universities had a chat with each other, and with Immigration New Zealand, about what they could do in hosting students from Hong Kong needing a safe space come the next semester, should it remain unsafe in Hong Kong.

Update: Why not consider semester-abroad students from Hong Kong for summer semester?

Wednesday, 13 November 2019

Campaign finance balloons

I used to spend a bit of time on campaign finance when I taught public choice - the evidence on whether money buys politicians' votes, extent to which campaign expenditure influences outcomes, different models of lobbying activity and the like. 

I liked there to note that campaign finance reform is a bit like squeezing on a balloon. Things will always pop back out in other places, and you have to watch for that.

Guyon Espiner's found one spot where the balloon has bulged out:
A mysterious foundation that loans money to New Zealand First is under scrutiny, with a university law professor saying although it's lawful, it fails to provide the transparency voters need in a democracy.

Records show New Zealand First has disclosed three loans from the New Zealand First Foundation. In 2017, it received $73,000. Then in 2018, it received a separate loan of $76,622, in what the Electoral Commission says was a loan executed to "replace the first loan". In 2019, it received another loan for $44,923.
...

The only information known about the foundation is the names and addresses of the two men who are trustees. They are Brian Henry, who acts as a lawyer for the New Zealand First leader Winston Peters, and Doug Woolerton, a former New Zealand First MP.

When contacted by RNZ, Mr Henry said, "There is nothing to talk about. That's the end of the conversation," and hung up.

As well as his role as a trustee for the New Zealand First Foundation which loans money to the party, Henry is also the "judicial officer" for New Zealand First. The position means Mr Henry gives legal advice to the board of the party, serves as a member of the constitution committee and chairs the disputes committee.

Mr Woolerton left Parliament in 2008 and now runs a lobbying firm. His company is called The Lobbyist and its website offers media strategies, services in "drafting changes for legislation" and "personal introductions" where appropriate.

"I am not prepared to talk about it at all," Mr Woolerton said of the New Zealand First Foundation. "It is not something that I am able to talk about. It is not something that you talk about at all."

Mr Woolerton wouldn't say what the foundation was, what his role as a trustee involved or whether he believed he had conflicts of interest given he also ran a lobbying firm.
So. The guy who runs the foundation that can take anonymous donations and make loans to New Zealand First on the back of those donations is the same guy who can be hired as a lobbyist to suggest drafting changes for legislation and make personal introductions.

And New Zealand First has a fair bit of sway over legislation given the current coalition environment.

There is no corruption in New Zealand....

Monday, 11 November 2019

No pressure

I'd failed to keep up with South Park and have finally caught up with most of the excellent Season 19. 

After a Whole Foods opens up, Randy Marsh finds himself charity-shamed for not wanting to add $1 to his purchase to help increasingly dubious causes, then shamed for only adding a dollar.

In my reader mailbag, I find the following. It was emailed to parents at one of the Wellington primary schools:
November 8, 2019

Support Staff Make a Significant Difference For All Our Children

I know you will all agree that this talented team of staff make a significant positive difference to our school, including our library and teacher aide staff. Their collective agreement is currently being negotiated between NZEI and the Government. These staff are currently employed directly by the school but we are reliant on the Operational Grant and our parent donations to pay them.

To increase their pay rate to better reflect the vital contribution they make to the school we require a change in the Government funding.  Schools must be resourced to pay staff fairly, ensure secure employment and provide high quality learning support.

As part of a national day of action I encourage staff and students to wear something orange on Monday 11th November in support of our wonderful support staff.

Ngā mihi nui,
I have no view on the merits of the pay rate claims in that sector. But it seems off to require primary school children to do this. 

Oh, you're not wearing orange. Why do you hate our support staff?


Regulatory plumbing and insurance pricing

Insurance pricing winds up a mess when the government leans on insurers to not price insurance fairly. 

Minister Robertson last week admonished insurers not to use more granular pricing in ways that would leave some parts of the country uninsured or 'uninsurable'.

Currently, people who live in low risk places cross-subsidise people who live in high risk places. This happens explicitly through EQC, which does not risk-base its prices for coverage. But it also happens implicitly when the state either hints or (now) shouts that it'll come down hard on the industry if prices are set to reflect risk.

And it then all causes a mess.

In the absence of the regulatory shadow, we'd expect one of two things to happen. Either insurers would start offering cheaper insurance deals based on granular data on actual risk, or a new entrant would come in and cherry-pick the safer parts of the country for insurance deals, with prices that reflect actual risk and no cross-subsidy.

Instead, while prices in Wellington are higher than more stable prices, prices between risky places in Wellington and safer places is flat.

This will cause distortion, encouraging too many people to live in places that are relatively risky. Fair premiums would see higher insurance costs in places like Petone.

I hit on these problems in this week's column in the Fairfax papers, reminding of the consequences of inviting the Three Stooges to do your plumbing. I stole the analogy from Pete Boettke - thanks/sorry Pete.
There was a great old The Three Stooges bit about plumbing that teaches us a lot about regulation.

The Stooges were a trio of hapless idiots who produced comedy gold in the days before colour television. In 1940's "A Plumbing We Will Go", the team tried to fix a leaking basement pipe – not much noticing the damage their repairs were causing to other pipes, to the ducting, to the floors, and to the wiring.

For all the plumbing work, the basement just wasn't getting any drier — and the rest of the house was wrecked. Regulation is too often like that, creating multiple new problems for every problem it tries to solve, and a never-ending cascade of regulation trying to patch the leaks caused by the prior rounds.
...

Failing to price risk properly also makes councils want to restrict development in riskier places – even for people would have been willing to pay high insurance premiums.

The whispered answer I'll usually get on asking around is that insurers worry that they would be stomped on by central government if they allowed home insurance premiums to reflect risk.

Insurance prices in places like Petone would skyrocket. People would complain to the government.

Government would respond – and probably poorly. Insurance would look unaffordable to too many people – and especially if people started betting that higher rates of uninsurance would mean the government would bail them out come the quake. Both of those concerns would have the government step in to regulate insurance charges.

This kind of worry never seemed implausible, but it always seemed a bit hard to prove. But, Finance Minister Grant Robertson warned insurers last week that they should not allow risk-based premiums to result in insurance unaffordability in risky places.

And we're back to the Stooges and plumbing. If insurers price risk properly, they'll be in trouble with Robertson. If they don't, councils will increasingly look to zoning to undo the mess. And that causes cascading sequences of additional problems.

We should be careful when asking government to turn regulatory wrenches. Government plumbers too often fail to notice the other pipes they break along the way.

The Three Stooges - "A Plumbing We Will Go" (1940) from daniel lansing on Vimeo.

Saturday, 9 November 2019

Illicit markets and Bali Booze

The Herald reprints an Australian story on a couple of tragic deaths in Bali from drinking cocktails that had methanol in them. 

The story argues that methanol is likely the result of home distillation.
But what the young tourists were experiencing was far from a hangover. They'd consumed a toxic cocktail laced with methanol hidden in their drink.

Without taste or smell, the young travellers had no idea what they'd been served at the bar.

Methanol, while closely related to ethanol (which is found in wine, beer and quality spirits) is far more toxic and can be found in drinks made from home-distilled spirits.

Commercially made spirits are safe to consume because manufacturers use technologies specifically designed to ensure methanol is separated from the ethanol that goes into the bottles we purchase.

Home brew systems, however, makes separation more difficult meaning methanol can be mixed in with the ethanol.
I understand that there can be methanol in the first flush from a distillation run, that it's easily separated and tossed out. But if you're bottling off the still and not doing that, well, there could be problems. And while every distiller should know to toss the fores, well, things get messy in illicit markets where they're also happy to throw other dodgy stuff into the brews.

There are tons of stories out there on methanol poisoning in Bali. Story seems to be that high alcohol taxes lead to informal untaxed markets that have other dodginess. I don't know whether it's adulterated product or really poor practice in illicit distillation; either way, I'm really not keen on going to Indonesia.

I expect that part of the problem is if it takes a long time to know you're poisoned, and if people bar-hop, and if the mess is idiosyncratic to particular bottles at particular outlets, it'll be hard to tell whose fault anything is.

And I wonder whether anyone's responded to the problem by investing heavily in brand - "Yeah, drinks at our resort are $2 instead of $1, but we have secure supply chains and test our supplies regularly." But it's harder to build that kind of a brand in a tourist market with lots of one-off transactions.

HT: TasmanSkies

Friday, 8 November 2019

Ice Cream Makes You Happy

An excellent response to a stupid complaint to the Advertising Standards Authority, a ludicrous ruling from the ASA, and a milquetoast response from the manufacturer.

First, the stupid complaint about an ad outside a dairy noting "Ice Cream Makes U Happy". 


I wonder if E Fowler has ever tasted ice cream. And wouldn't kids who've walked a kilometre from school to the dairy deserve an ice cream?

The ASA upheld the complaint. Absolutely absurd, inside-the-asylum stuff:
A majority of the Complaints Board said the advertisement could undermine the health and well-being of individuals. This is because the advertisement contains an implicit claim that there is a link between ice cream and happiness. The promotion of this link could potentially undermine the health and well-being of individuals because ice cream is a high fat, high sugar food, and the desire to be happy is universal. The majority said the large size of the advertisement and its location on the outside of the store were relevant.

A minority disagreed. The minority said ice cream is widely recognised as an occasional
food, a nice treat, and the advertisement is not making any scientific or nutritional claims.

Is the advertisement socially responsible?

A majority of the Complaints Board said the advertisement was not socially responsible
because the advertisement could undermine the health and well-being of individuals.

A minority disagreed. The minority said the advertisement was socially responsible and did not undermine the health and well-being of individuals. 
This is absolutely nuts.

No sane industry self-regulatory body could select members that would reach this decision.

The ASA takes a lot of heat from public health campaigners who'll argue that industry self-regulation is inadequate and that the state needs to do it directly. It looks like the ASA is so worried about that kind of prospect that it jumps to ban claims that ice cream makes you happy. And I fail to see the point of industry self-regulation in that case. If it were all given to the Chief Censor to manage, at least the bootprint of the State would be visible in these kinds of decisions.

Christian Bonnevie's take over at Stuff is excellent:
You would think that Unilever, the maker of Streets ice creams and the billboard at the centre of this grand conspiracy, would stand up for happiness. But alas, all we get is the usual corporate waffle about "how important it is for New Zealanders to eat a balanced diet, maintain a healthy weight and to look after their mental wellbeing".

So bland. So wet. The classic "make it go away" comment that probably passed through a dozen lawyers before being sent to media.

Where's the passion for your product, Unilever? Do you actually believe in it? You were presented with an opportunity to show some personality and stand up for the average Kiwi ice-cream lover. Instead, you quietly file an appeal and talk about being committed to promoting mental and physical health.

We don't care. We just want good ice cream. Because it makes us happy.

It's a bit unfair to pick on Unilever, as their response has become the sad and predictable default setting of big corporates in recent years. Much of this is because in an outrage-fuelled society they can only see risk, not opportunity.

It's even understandable given the penchant of faceless bureaucrats to come up with such consistently stupid rulings and not even have the stones to put their names to them.

But that's why it's even more important for businesses to stand up to authorities like the ASA, loudly. Otherwise they won't just be banned from advertising happiness, they'll be taxed even more to deliver it.

Thursday, 7 November 2019

Vaccination, compulsion, and paternalism for the lower orders

The National Party has come out in support of encouraging greater vaccination uptake.

But it sure isn't the way I'd do it.

National's suggested docking the benefits of those on benefit whose kids aren't keeping up with their vaccinations. Some in National have suggested extending that to payments under Working for Families, but that appears more controversial.

We can go back to first principles and note that there's a reasonable case for government intervention to encourage vaccination - as I have done previously. There is compulsion all over the place in public health, except where there's an actual market failure case for using compulsion.

I think that case is strongest when it comes to those workers most likely to be in contact with not-yet-vaccinated youths, and with people whose immunity may otherwise be compromised. So, ECE workers and workers in the hospitals and public-facing parts of the health system.

A case for docking benefits as a way of encouraging vaccination you'd think would have to start with data showing far worse vaccination rates among beneficiaries - is there a there there?

Unfortunately, it's hard to find data on anything like that. The closest we've got are the Tier 1 immunisation stats which sort immunisation coverage by DHB area, by deprivation, and by ethnicity. They have those stats for immunisation status as of 6 months, 8 months, 12 months, 18 months, 24 months, and 5 years.

When I look at those stats, differences by DHB are huge as compared to differences by deprivation.

Take immunisation coverage at 8 months for example. Look at the gap between immunisation coverage for the least deprived quartile and the most deprived quartile. On average, the difference is 5.7 percentage points in the most recent data. In MidCentral, the gap is 13.4 percentage points - and it's 38.1 percentage points over on the West Coast, albeit with small sample issues. But in Tairawhiti, the gap is -4.6 percentage points: vaccination coverage rates there are higher for the cohort more likely to be in receipt of benefit. And similarly in Canterbury: vaccination rates among the most deprived are five percentage points higher than for the least deprived.

Why is it that vaccination rates among the most deprived quartile in Canterbury DHB is higher than the vaccination rate among the least deprived in 13 of 20 DHBs? Have they done something there that other DHBs should be replicating? Variability in immunisation rates among the most deprived, across DHBs, is larger than variability in immunisation rates among the least deprived. What on earth is going wrong over on the West Coast, where there's that 38.1 percentage point gap and only 61.9% of the most deprived quartile bother with vaccination?

The standard deviation of immunisation rates across DHBs is 4.1; the standard deviation of vaccination rates across deprivation quartiles is 1.9. There's nasty stuff in some DHBs and in particular in some DHBs for the most deprived quartiles, but it's harder to see this as a generalised poor people problem. National immunisation rates for the most deprived, at 8 months, are 88.3%; for the least deprived, it's 92.6%.

Were I suggesting policy targeting vaccination, rather than playing into other things, I'd be looking at:

  • Compulsory vaccination as employment condition in the state-funded health sector, for both new and existing staff. They impose substantial direct risk. And how many antivaxxers will look at the recent reporting on low sector uptake and take it as reaffirming their beliefs? 
  • Compulsory parental notification of vaccination status of employees at ECE centres, and consider making it a condition of receipt for 30-hours free. Like, the government made it compulsory that piles of workers in ECE have qualifications - even where there's no good justification for it - but we don't even know whether ECE workers are vaccinated? Come on. 
  • Bring back the BPS targets around vaccination, penalise DHBs for vaccination rates less than 90%, reward them for rates above that. The DHB-level vaccination stats are hardly secret, but DHBs have no particular incentive to go and figure out what works or learn from each other. If DHBs faced financial incentives to ensure broad immunisation coverage, they might decide it's worthwhile to send somebody out to see just what Canterbury is getting right - or whatever DHB has population most comparable to theirs but higher immunisation rates. 
    • There are piles of things you can imagine DHBs trying out. Catch-up vaccinations at school for those who missed them. Making sure that all schools get a visit from the nurse with the jabs. Sending a public health nurse along on Plunket visits. Sending public health nurses along to ECEs where vaccination rates are known to be low. How far can you get just by making it really really easy for folks to be vaccinated?
  • Tell the Health Research Council that funding for research in public health, aimed at policy changes or behavioural interventions, should focus on the traditional remit of public health in vaccination and contagious disease rather than noncommunicable disease. I have OIA requests in now with MoH trying to get a handle on whether they've been putting any funding at all into vaccination work. We get piles of HRC grants for stuff like discouraging youth smoking and drinking and advocating for sugar taxes; it's hard to see anything like it for vaccination. It looks like they made a grant to Auckland Uni's immunisation centre. But there just hasn't been much research work there yet on encouraging vaccination uptake. They've done literature reviews, and they have an annual set of charts that come out of the Tier One vaccination stats, but nothing like the research push that HRC makes into noncontagious disease. I suspect that Janet Hoek, all on her own, gets more funding for anti-tobacco work than the government's provided for research into encouraging vaccination. But I'd like to know. 
But National's push does play into my general theory of where we get paternalistic regulation - it's generally targeted at poor people, whether or not it makes sense. And it will be fun to watch people explain why it's okay to make it a condition of benefit, but not okay to make it a condition of WFF. Maybe there's finer-grained data that would let them show that the gap is far larger when you look at beneficiaries compared to other kids in low income quartile households, but I really doubt anybody's even looked at it. 

Tuesday, 5 November 2019

Not an unintended consequence

Remember how Labour was elected on a promise to ban foreign speculators from the NZ housing market, then set legislation that was far far broader than that?
Stuff's Susan Edmunds reports on one of the inevitable consequences of that legislation:
A UK-born New Zealand permanent resident says he's been cut out of the property market by restrictions on foreign buyers, because his job requires him to spend time overseas.

Residential land can now only be sold to people who are citizens or permanent residents, with exceptions for Australians and Singaporeans.

But people with a residence visa need to meet conditions. They must have a residence-class visa, must have lived in New Zealand for the past 12 months, have been present in New Zealand for at least 183 days of the past 12 months, and be a tax resident.

Richard Moore moved to New Zealand to serve with the police in Northland as a strategic intelligence analyst in 2005, and bought a house in Whangarei.

He has since taken roles with the United Nations, and is current serving as a security analyst in the department of safety and security in Austria. He has also been posted to Nigeria, Cambodia and Lebanon.

Moore sold his Whangarei house in 2016 with the plan to buy land further north to build a home for his retirement,

But in May this year he found that his job might make that hard to do.

"In May this year I flew back to New Zealand - the UN classifies this as my place of origin and they give me a return flight every two years -  to examine a list of plots up in the Far North. Deciding on one I obtained a lim report and instructed my lawyers to check out the property, I also contacted my bank  in regards to a possible mortgage, it was then the bank told me I may be ineligible to buy the property. Checking with my lawyers they confirmed this state of affairs.

"Basically since the introduction of the Overseas Investment Amendment Act 2018, I am no longer considered an ordinary resident, having been outside New Zealand for six months in the last 12 months and thus ineligible to purchase property or land. I could apply for special dispensation, which would cost $2600 non-refundable but I would still be required to sign an undertaking I interned to return to New Zealand in the next three  months and live there for the next 12 months uninterrupted. Working for the UN this was not going to happen.

"This really is an insult to those who dedicate their lives to serving in the international community and represent New Zealand while they do so."
I'm quoted later in the piece. Susan asked me whether this were an unintended consequence of the legislation. It is not an unintended consequence of the legislation. This is the legislation working exactly as designed. It was designed to cast far too broad a net, and it has cast far too broad a net.

Monday, 4 November 2019

Data preservation?

Is there any requirement that public agencies not have data destroyed?

Ages back, I'd put in an OIA request of IRD looking for the tax polling data that they had commissioned. If you'll recall, IRD was accused of partisanship when it had Colmar Brunton run some polls on public views on different taxes, and the polling included some political identification questions for the respondents.

I never bought that there was any partisan purpose to the polling - IRD has good reason to want to know attitudes to tax. And political identification questions could simply be part of the standard battery of questions provided in the baseline poll that IRD's questions were added to.

So I OIAed for that underlying data, figuring that the data's being public would mitigate any worries about partisan use of the data, and that the data would also be interesting for others. I'd have been keen to see how support for capital gains taxes played out.

I made my OIA request on 12 February. On 12 March, IRD refused the request. They noted that polled individuals were given assurances that their data would be kept secret. So that made it important for the integrity of the tax system that the individual-level data be withheld. I went to the Ombudsman, wondering whether Ministries could get around the OIA by providing assurances to people in meetings, for example, that notes or recollections from those meetings would be kept secret.

Anyway, that Ombudsman process has been going on for months. But on Friday (1 November), I got a letter from IRD saying they'd given me the wrong grounds for refusing the request. They'd requested that Colmar Brunton destroy the data on 9 February.

We knew, from the SSC report of July, that IRD had made that request of Colmar Brunton; I'd assumed that IRD continued to hold its own copy of the data because they'd refused to give it to me. I presume that Friday's letter means that IRD requested the destruction of the only copy of the data.

I've followed up with the Ombudsman's office asking whether there's any public records requirements that Ministries and agencies like IRD preserve data like this rather than destroying it when media starts calling. Recall that IRD started getting media calls on the polling (from the SSC report) on 5 February, and was interviewed about it by the Fairfax papers on 7-8 February. They requested the data's destruction on 9 February.

It would seem a bit off if it were possible to avoid OIA requests by preemptive data destruction.

Previously:

Wednesday, 30 October 2019

Public health, externality, and vaccination

Paternalism is contentious. Arguments for state action to protect us from ourselves are fraught. I come down pretty heavily on the anti-paternalism side of the argument, but I've heard respectable defences of paternalism.

But policy around vaccination is hardly paternalistic. There's a clear market failure that could be pointed to in any sound Regulatory Impact Statement.

In a place with relatively high vaccination rates, the primary benefit from your getting vaccinated goes to other people. The risk of catching anything is low, because everyone else is vaccinated. If you also get vaccinated, you very slightly reduce your already low risk of catching anything. You also very slightly consequently reduce the risk of anyone else catching anything - there's still risk among those who are vaccinated, and there are others out there who cannot be vaccinated because they either are immunocompromised, or are too young to be vaccinated. The latter effect is the bigger one. Since that benefit accrues to everyone else, you should expect undervaccination relative to a first best.

Of course, that only holds during normal times. If free-riding rates increase, then you get an outbreak - and consequent strong incentives not to free-ride but to get vaccinated and quickly. That brings a surge in demand for doses of vaccine - but vaccine cannot store for a long time and takes a long time to make.

Consequently, it is very easy to justify policy action that encourages regular uptake of vaccination. And if you're going to justify compulsion in anything health related, compulsion in vaccination seems the obvious place to start. And if you're going to start compulsion in vaccination anywhere, the very very obvious places to start are with those workers most likely to be coming into contact with the immunocompromised or children too young to be vaccinated.

In other words - people who work at hospital, and people who work with children.

I can't guarantee that compulsion is there warranted, but if it's warranted anywhere in anything to do with health-affecting activities, it's in this case.

There is already a pile of compulsion around health and health behaviours.

The government banned the sale of sodas in hospitals, for example, for the protection of the patients.

The government is considering a ban on small bits of food that public health people consider to be less nutritionally worthy, like popcorn, in early childhood centres - because of the choking risk. Radio New Zealand reports seven cases of choking in ECE centres from 2016.

If you smoke in your private automobile, and there are children in the car, then it doesn't matter if you're in a convertible with the top down driving down the highway at speed - the cops can fine you. And if you don't pay the fine, ultimately you can wind up in jail. For the protection of the children.

Bans are the strongest form of compulsion. But the list of nudges and shoves around alcohol, tobacco, and various foods, whether in place or proposed, is not small.

So you would think, with that much compulsion already all over the place in health, for the purported protection of health, in piles of areas where the justification is slim at best, that the one big thing that would most justify compulsion would already have been attended to, right?

RIGHT?

Here's what Eloise Gibson found when she went looking.
- Only two of New Zealand’s 20 DHBs know what proportion of staff are immune to measles, whooping cough or other infectious diseases.

- The Ministry of Health says health workers should be vaccinated to lower their risk of spreading serious illnesses, but DHBs don't make it compulsory.

- At least two DHBs make vaccination a condition of employment for new staff, but not existing staff. It is possible to work in a patient contact role in a newborn intensive care unit or maternity ward without being vaccinated.

- At last count, almost half of staff at one DHB had not had a whooping cough vaccine. Up to 11 percent were not immunised against measles.

- A measles-infected staff member worked at a Christchurch hospital while contagious last month and other hospital workers have also had measles this outbreak.

- In some regions, only a third of hospital midwives are accepting the recommended free flu vaccinations.
Stephen Franks pointed me to one potential reason: when Waikato DHB tried requiring that unvaccinated staff wear masks, the New Zealand Nurses Union threw a fit.

And over in the ECE centers, staff who never bothered getting vaccinated had trouble getting vaccinated come the measles outbreak.
Vaccination is the best protection against measles but because babies can't receive their first MMR (measles, mumps, rubella) vaccine until 15 months, babies younger than that are particularly vulnerable.

Becky Casale said she was shocked to learn early education and daycare providers, whom she paid to look after her infant daughter, had no legal obligation to check staff were vaccinated or to tell parents about unvaccinated staff.

Casale said she knew a receptionist at a north Auckland daycare who was completely unvaccinated.
Measles has an incubation period where you're contagious before you might even know you're sick. Parents packing an 'unhealthy' snack for their own kid's ECE lunch will get in more trouble than some antivax clown who decides to work at hospital, or at an ECE centre.

At least in ECE centres, we might hope that competition among centres for kids will have them highlighting their pro-vaccination credentials like 100% vaccinated staff and that they kick out kids who don't keep up with their vaccinations.

Harder to see that happening with hospitals. Heck, I wouldn't even have considered that hospital staff might not have been vaccinated.

How is it that we've wound up with a system that is happy to impose compulsion, for health reasons, and especially where children are involved - except in the cases where it is most strongly justifiable? A system that can tell you how many choking incidents in ECEs involved small bits of food, but that cannot tell how many ECE or hospital staff are vaccinated?

When it comes to soda, and tobacco, and alcohol, the public health crowd will insist that it's impossible to have informed consent. But, for ECE centres, and hospitals, and midwives, it's caveat emptor, with parents expected to know that they should check whether staff are antivaxxers. Like, a warning label on a pack of smokes wasn't considered enough warning about the dangers of cigarettes. They also needed plain packaging and taxes and a pile of other rules. But the person you hand your three-month-old to at ECE - not even a warning label that that person's an antivaxxer. The orderly cleaning the room your newborn is in at hospital? No label there either.

None of it makes sense - until you remember that the point of public health is not public health. If the point of public health were public health, full vaccination would be a condition of employment at public hospitals. And public health types would have dealt to vaccination at ECE outfits long before they moved to hector folks about what they put in the kids' lunches.

Previously: