26,337 pieces of wellbeing

Late last year, I told you about the government's guide on how to fit in, have everyone like you and always be happy.



They called it "A Guide for Maintaining Health and Wellbeing". It has helpful instructions on the importance of making your bed, eating right (including checking the use-by date when buying food!), having a 'growth mindset' and all that.

I kinda wondered about how it is that folks who need to be told not to hit the snooze button too often get to set the rules about how everyone else runs their lives.

And I also wondered a bit about the cost - the hard copies are very nice; it would be a bit surprising if they were less than $20 a pop. Glossy thick pages (134 of them), spiral bound, and with those cuts at the edge so that you can quickly thumb to the different sections. What are those called anyway?

A loyal reader put in an OIA request to find out how many copies of the guide had been ordered.

The total spend on this won't have been small.

I'm also now a bit curious about orders adjusted by Ministry and Agency staffing. The Ministry of Education has a huge staff, but didn't need to order many copies - 2 in total. MBIE has more staff, and ordered 5800.

I also wonder whether those agencies who put in more orders per staff member experienced any greater increase in wellbeing as consequence.

Many thanks to the anonymous reader who put in the request.

Asset forfeiture WTF?

New Zealand's civil asset forfeiture regime still isn't as bad as America's. Seized assets don't go directly into the pockets of the police department making the seizure.

But this is a bit odd:

It was not fair and just in a community if people saw someone they knew was spending more money than they would have legitimately.

Most of the cases the unit dealt with were about disrupting organised crime, especially drug dealing, but it also looked at the proceeds of other types of crime such as tax cases, fishing offences, customs scams, and social welfare fraud.

One was about seizing the proceeds from people who had been making and fitting dentures but were not properly qualified.

Asset forfeiture as a backup to an occupational licensing regime? Really?

Class and fish

Suppose you grew up in a place where only the well-to-do were ever allowed to fish for trout, where the working class only had access to 'rough fish', and you were a committed communist.

If you moved to a place where trout had been introduced and were protected through fishing licenses while some native species were in trouble and generally unprotected, what would you do?

Charlie Mitchell tells us over in the Stuff newspapers. The story almost seems unbelievable. But here it is.

The life of J. Stewart Smith was long, colourful, and driven by an uncommonly strong sense of purpose.

By the time he died in 2008, aged 95, Smith had left a permanent legacy in his adopted country's bloodstream – its network of ponds, rivers and lakes.

This account of Smith's life and legacy is based on official documents and hundreds of pages of Smith's personal notes obtained by Stuff, as well as interviews with people who knew him. several of whom requested anonymity.

They reveal an enigmatic figure largely forgotten in New Zealand's recent history, but one who has had an outsized, and permanent, impact on the country's environment.

"Imagine if one guy was responsible for the introduction of rats, possums, rabbits, stoats and pigs to New Zealand," one former official familiar with Smith's activities says.

"Stewart Smith was pretty much that guy, but he just did it to freshwater ecosystems around the country."

He was pretty clearly a Marxist eco-terrorist.

To understand why Smith did what he did, it pays to understand the long-simmering battle over who gets to fish what.

New Zealand has several dozen native freshwater fish, most of which are nocturnal, discrete, and tucked away in streams far from civilisation. Few of them grow larger than 10cm; they don't make for great angling.

Recognising this, early European settlers decided to bring their favourite sports fish with them: Trout. Trout flourished in New Zealand's cooler waters, with limited competition from native species. The trout fishery is now so prosperous it attracts anglers from around the world.

Some immigrants, including Smith, did not grow up trout fishing, which in England was a sport reserved for the elite. They fished for the so-called "coarse fish" – among them rudd, perch, tench and carp, named for their rough skin.

This class divide bled into New Zealand. While trout soon followed the immigrants, attempts to bring in coarse fish were rebuffed, largely because they would compete with trout.

And so Smith, who paid dues to New Zealand's communist party for much of his life and had a pathological dislike for social hierarchy, sought to equalise the playing field.

You really need to read the whole thing.

Sound advice - if we'll take it.

Some sound-looking advice at Foreign Policy on the coming pandemic.

During the SARS epidemic, I traveled all over China and Hong Kong, interviewed people infected with the virus, doctors and nurses treating the disease, government officials, police—everybody. I was never concerned that I would become infected, despite being in the room with sick individuals. And that’s because I knew what precautions to take. Here are the most important ones to know:

1. When you leave your home, wear gloves—winter mittens or outdoor gloves—and keep them on in subways, buses, and public spaces.

2. If you are in a social situation where you should remove your gloves, perhaps to shake hands or dine, do not touch your face or eyes, no matter how much something itches. Keep your hands away from contact with your face. And before you put your gloves back on, wash your hands thoroughly with soap and warm water, scrubbing the fingers. Put your gloves on.

3. Change gloves daily, washing them thoroughly, and avoid wearing damp gloves.

4. Masks are useless when worn outdoors and may not be very helpful even indoors. Most masks deteriorate after one or two wearings. Using the same mask day after day is worse than useless—it’s disgusting, as the contents of your mouth and nose eventually coat the inside of the mask with a smelly veneer that is attractive to bacteria. I rarely wear a face mask in an epidemic, and I have been in more than 30 outbreaks. Instead, I stay away from crowds, and I keep my distance from individual people—a half meter, about 1.5 feet, is a good standard. If someone is coughing or sneezing, I ask them to put on a mask—to protect me from their potentially contaminated fluids. If they decline, I step a meter (about 3 feet) away from them, or I leave. Don’t shake hands or hug people—politely beg off, saying it’s better for both of you not to come in close contact during an epidemic.

5. Inside your household, remove all of the towels from your bathrooms and kitchen immediately, and replace them with clean towels that have the names of each family member on them. Instruct everybody in your home to only use their own towels and never touch another family member’s. Wash all towels twice a week. Damp towels provide terrific homes for viruses, like common colds, flus, and, yes, coronaviruses.

6. Be careful with doorknobs. If it’s possible to open and close doors using your elbows or shoulders, do so. Wear gloves to turn a doorknob—or wash your hands after touching it. If anybody in your home takes sick, wash your doorknobs regularly. Similarly, be cautious with stairway banisters, desktops, cell phones, toys, laptops—any objects that are hand-held. As long as you handle only your own personal objects, you will be ok—but if you need to pick up someone else’s cell phone or cooking tools or use someone else’s computer keyboard, be mindful of not touching your face and wash your hands immediately after touching the object.

7. If you share meals, do not use your personal chopsticks and utensils to remove food from a serving bowl or plate and, of course, tell your children to never drink out of anybody else’s cups or from a container of shared fluid. It is customary in China to prepare several dishes for a meal and then allow everybody at the table to use their personal chopsticks to pull food from the common dishes: Don’t do this until the epidemic is over. Place serving spoons in each dish and instruct everybody at the table to scoop what they want from the serving dishes onto their personal plates or bowls, return the serving spoon to the main dish, and then use their personal chopsticks only to pick food from their personal plate or bowl into their mouth. Wash all food and kitchenware thoroughly between meals and avoid restaurants that have poor hygiene practices.

8. Absolutely do not buy, slaughter, or consume any live animal or fish until it is known what species was the source of the virus.

9. When the weather allows, open your windows at home or work, letting your space air out. The virus cannot linger in a well-ventilated space. But of course, if it is cold or the weather is inclement, keep warm and close those windows.

10. Finally, if you are caring for a friend or family member who is running a fever, always wear a tight-fitting mask when you are near them, and place one on the ailing person (unless they are nauseated). When you replace an old, dirty mask from the face of your friend or loved one be very, very careful—assume, for the sake of your protection, that it is covered in viruses, and handle it while wearing latex gloves, place it inside of a disposable container, seal it, and then put it in the trash. While wearing those latex gloves, gently wash the patient’s face with warm soap and water, using a disposable paper towel or cotton swab, and seal it after use in a container or plastic bag before placing it in your household trash. Wear long-sleeved shirts and clothing that covers your body when you are caring for your ailing friend or relative. Clean everything your patient wears or touches very thoroughly in hot soapy water, including sheets, towels, and utensils. If you have space, isolate the sick person in your household in a room, or a corner of a room, where they are comfortable, but separated from the rest of the household. If the weather is tolerable, open a window that is on the opposite side of the room, so that air gently blows past the patient’s face and then outdoors. Of course, don’t do this if it is very cold, as your friend or loved one will be made sicker if uncomfortably cold.

I hope somebody's running the numbers on a temporary halt to air travel from China to NZ. I expect that the cost of a temporary ban would be increasing at an increasing rate in the duration of a ban; the benefits would be increasing but at a decreasing rate. How contagious and fatal need the virus be for the marginal benefit curve to sit above the marginal cost one for a limited-duration travel hiatus? If it's contagious before there are symptoms, and each case infects more than 2 others (who each then go on to infect others), and the fatality rate is somewhere around 2%...

Anyway, be careful out there. And don't be offended if I decline any offered handshakes for a while.

Routing around the regulatory damage

I rather like this entrepreneurial response to the Reserve Bank's loan-to-value-ratio regulations.

Recall that the Bank required that banks issue no more than a small proportion of home loans to lenders with less than 20% equity.

I expected that this would have folks finding alternative sources of finance to help get to that 20% mark. Some will have family that can help, but not everyone.

And here's a market response.



YouOwn will put up some of the initial equity and take a part ownership stake, with the house buyer paying an equity charge to YouOwn. When the owner builds up enough equity to start considering buying out YouOwn's stake, they send it to a valuer so YouOwn gets its share of any gain.

It's a bit surprising that it's taken so long for this kind of thing to come through, but there was a fair bit of uncertainty about how long the LVR rules would stick around too.

HT: Reader mailbag. Thanks Pierre!

Good advice, if they'll take it

Treasury gets this absolutely right. You don't need feebate schemes for electric cars or emission standards for CO2, you just need carbon prices.

MoT employees worked hard to convince Treasury that there was a rationale for extensive intervention in the light vehicle market through the use of a feebate scheme and the imposition of an emissions standard, which almost every other country has. Treasury officials repeatedly argued that such policies could be costly and would have a limited impact on emissions.

Instead of market intervention, Treasury pointed to the Emissions Trading Scheme as the only necessary component for reducing light vehicle emissions to meet New Zealand's international obligations. In response to a request for comment, a Treasury spokesperson said, "The Treasury regularly provides economic advice on a range of topics, and government agencies regularly canvas a range of perspectives on their work".

Feebate's effect doubted

Treasury raised numerous concerns about the efficacy of the feebate scheme and ultimately recommended against introducing it, although they supported the vehicle emissions standard.

"We are not convinced by the need to intervene in the transport sector in the immediate term in the absence of a strong, predictable and durable carbon price. Measures such as those proposed run the risk of counteracting the price, particularly given their narrow focus," Treasury wrote in a draft comment on a Cabinet paper.

"The Treasury considers that a just transition is best achieved through a credible and predictable carbon price delivered by an effective ETS, supported by policies that remove barriers to cost-effective mitigation options. However, we consider the evidence pointing to barriers in cost-effective mitigation through the light vehicle fleet is mixed," another draft comment stated.

If the carbon price doubles, the carbon component of petrol prices will go up from about 7 cents per litre to about 14 cents per litre. People will adjust their purchases of durables like cars in line with their expectations about the ongoing cost of running them.

If you don't think that that makes them adjust 'enough', think again and think harder.

If whatever response comes of that change in carbon prices isn't sufficient to get aggregate emissions in line with NZ's commitments, then there's something not working in the ETS and the first-order problem is fixing the ETS because it'll be more than just transport that's messed up.

If the cap is binding and in line with our commitments, then you should weaken your priors about how much adjustment is 'enough' in any particular sector. You don't know and I don't know. That's the point of using prices to coordinate this - it lets adjustment happen where it's least costly for adjustment to happen. And if there isn't much adjustment in any particular sector despite rising carbon costs under a binding cap, then you should be considering that adjustment in that sector might be more expensive than you'd previously thought.

Treasury worried that "the cost of a feebate and higher ETS prices creates a 'double burden' for those who need to purchase larger vehicles (e.g., rural industries) while creating a 'double benefit' for those who are able to purchase smaller and electric vehicles (e.g., urban dwellers)".

It is so good to see Treasury giving down-the-line sound economic advice. Climate change is too important to leave to half-baked schemes. Doing the most good we can requires hard thinking about cost-effectiveness.

The tender years

I go into a bit more depth, over at Newsroom ($), on our tendering system for the household chores. I wonder whether it will catch on among econ-minded parents. A snippet:

Back in 1968, economist Friedrich Hayek wrote that competition is a discovery procedure. Some information about the world simply would not exist without the process of market competition that discovers it.

Parenting is a discovery procedure too – some information about it is difficult to acquire without going through the process. Applying a few economic insights can make some bits of parenting just a little less painful – like sorting out the household chores.

Every household has some chores that the kids are just expected to do as part of the general terms and conditions of family membership. But other chores are more onerous, both for the kids and for the parent, and love and empathy within the family can only get you so far. Managing some tasks can too easily be more painful than just doing them yourself.

If cleaning the cats’ litter box is a particularly objectionable task, which kid gets the job? If they take it in turn, whose turn is it this time? Is dealing with the cat box really worse than sweeping the floors? How much worse? And what happens if one of the chores doesn’t get done?
...
But back to the tendering system. As parents, we really didn’t know what allocation of chores would result in the least amount of grief. We needed information that the kids could not really credibly deliver to us. They might not even know it themselves without being put to the choice. We needed a procedure to elicit that information. And, at least as importantly, we needed a procedure that reduced the hassle in getting the allocated chores done.

And sealed bid tenders seemed just the thing.

I'll link to the ungated version on our site when it's up. [Update - it's ungated at their site now.]

Public health, risk communication, and vaping

The editorial in the January 2020 issue of Drug and Alcohol Review worries that poor communication around illness caused by vaping illicit THC-based products in the US has risks:

The US investigation is still ongoing and the health authorities investigating the outbreak have not definitively identified the exact chemical that has caused the lung damage, which may be a chemical formed from vitamin E acetate. However, over the past 6 months, the evidence has strengthened considerably that nicotine vaping products are not the cause of EVALI. This has been reflected in the updated official communications from both FDA and CDC which have strengthened their warnings to avoid THC vaping products, particularly those purchased from informal sources. However, accurate, timely and complete reporting of these developments by the media has sometimes been lacking. The potential consequences of this misreporting include public misunderstanding, mistrust and potentially cases that could have been avoided if the correct information was widely communicated.

They worry about the risk of people continuing to use illicit THC products when much of the the media coverage was around nicotine-based vaping as potential cause.

Misreporting of the US epidemic continued after the CDC concluded that the outbreak was attributable to vaping contaminated illicit cannabis products. In Australia, the ABC television show 7:30 aired a misleading story on vaping (5 November 2019) that heavily featured nicotine vaping in Australia after a lead on the US outbreak of lung injuries ²⁸. There was no mention that the CDC and FDA had linked the outbreak to the use of contaminated illicit THC products.

Nor did 7.30 mention the absence of cases in the UK, where nicotine vaping is widespread among smokers, but the vaping of cannabis oils is not. Dr Chris Zappala, from the Australian Medical Association claimed, ‘We've seen a significant increase in recent months of vaping‐related illnesses. Patients who, unfortunately, are becoming so unwell that they're ending up in intensive care and as I'm sure people are aware, there have been some deaths related to vaping’. Neither he nor the reporter clarified that no EVALI cases have occurred in Australia. By omitting the role of THC vaping products, 7.30 withheld critical information from the public on how to avoid these injuries.

Australian standards of press reporting include the principles of accuracy, balance, clarity and avoidance of harm ²⁹. These principles are important given that the media is frequently cited by the public as a source of health information and influence health behaviour, however they are often found lacking ³⁰-³². The failures of the Australian and international media to accurately convey the facts about this outbreak put public trust in the media, and the health authorities in these reports, at risk and may encourage the public to ignore future warnings in the midst of serious health emergencies. Many of the responses to the outbreak proposed in these stories, such as banning flavoured vaping products or preventing access to nicotine vaping products, do not address the cause of the outbreak identified by US authorities, namely, the vaping of illicit cannabis products cut with vitamin E acetate.

Things weren't better here, and I've been particularly disappointed in Radio New Zealand's coverage.

One fun one: on 12 November, the Science Media Centre rounded up commentary from local scientists about what was going on in the US and the results of more tests on lung tissue samples.

Their round-up included (my paraphrases):

• Auckland University's Prof Chris Bullen, who noted that it was 'widely known' that the mess was associated with contaminated black-market THC cartridges a month earlier;
• Dr Kelly Burrowes at the Auckland Bioengineering Institute at the University of Auckland, who noted that Vitamin E in THC cartridges could be the problem but that with more than 15,000 flavours out there in e-cigarettes, it is just too hard to tell what is to blame;
• Dr George Laking at End Smoking New Zealand who said that everyone had known for two months that the problem was Vitamin E acetate, that the CDC was too slow to catch up, and that the reports should not raise concern for NZ nicotine vapers;
• Dr Murray Laugesen, Adjunct at U Canterbury and long-time tobacco harm reduction advocate, who pointed to Vitamin E acetate and the need to get the regulatory framework around vaping set quickly;
• Prof Julian Crane, Otago Uni at Wellington, who pointed to Vitamin E acetate, noted that it was a possibility since the beginning of the problem, and that there's no worry for NZ nicotine vapers.

All up, 4/5 said that nicotine vaping has nothing to do with the US problem. 

Guess who RNZ picked to talk to about it? Go on. You don't even have to click the link, do you?

I just don't have a good model of why RNZ has been like this.

Healthy living through alcohol

The government's otherwise-banal guide to wellbeing had some rather misleading advice around alcohol. 

I've covered the J-curve pretty extensively here. Long story short, moderate alcohol consumption reduces your risk of all-source mortality, even after adjusting for all of the objections that the temperance folks like to throw at things. 

So the better answer is that moderate drinking comes with negative risk. 

The latest from the British Medical Journal provides further evidence. The table below shows healthy life expectancy at age 50 under a variety of different conditions, including a healthy eating index, smoking, physical activity, alcohol use, and BMI. The effect isn't big compared to other things in there, but moderate alcohol consumption comes with higher life expectancy at age 50. 

And so, throughout the rest of the piece, when the authors tally up an index of healthy behaviours, folks in the study are considered to engage in low-risk drinking not if they teetotal, but rather if they consume moderately: 5 to 15 grams per day for women, or 5 to 30 grams per day for men. 

So if you want to maximise life expectancy, eat a healthy diet, don't smoke, get at least 3.5 hours of physical activity per week (I recommend brisk walking while searching for Pokemon), drink moderately, and keep your BMI between 18.5 and 24.9. The combined effects can give you about an additional decade.

Mileage may vary

I wouldn't have expected this. And I couldn't make any sense of it until I saw the line "investments in complements to production" and thought about it for a second. And then it made sense.

The World Bank's released a policy working paper on the effects of cash and in-kind food transfers in Mexico on student learning. Here's the abstract:

This paper studies the medium-term impact of early-life welfare transfers on children’s learning. It studies children who were exposed to the randomized controlled trial of the Mexico’s Food Support Program (the Programa de Apoyo Alimentario, PAL), in which households were assigned to receive cash, in-kind food transfers, or nothing (a control). The children are matched with administrative data on primary school standardized tests, which were taken four to 10 years after the experiment began. The findings show that in-kind transfers did not impact test scores, while cash transfers led to a significant and meaningful decrease in test scores. An analysis of the mechanisms driving these results reveals that both transfers led to an increase in child labor, which is likely detrimental to learning. In-kind food transfers, however, induced a greater consumption of several key micronutrients that are vital for brain development, which likely attenuated the negative impacts of child labor on learning. 

How could a cash transfer to families increase child labour? If the cash enables a rural family to buy more livestock that then requires more on-farm labour from the kids, which reduces the kids hours of schooling and increases their likelihood of attending a lower quality school.

A healthy puzzle - PHARMAC and health insurance

Here are a collection of stylised facts about health insurance in New Zealand. At least I think they're stylised facts. Call them Eric's perhaps-incorrect understanding of the world.

Together, I wonder if they make sense.

1. The public health system covers a lot of stuff, and PHARMAC subsidises the most cost-effective drugs;
2. There are lots of newer drugs that PHARMAC doesn't subsidise. It can take a while for drugs to be registered with MedSafe for use in New Zealand, it can take a while for a registered drug to be sent to PHARMAC for consideration, it can take a while to run the CBA on drugs once an application is made, and it might take a while for any particular drug to hit the priority list. Note that this is not at all a critique of PHARMAC.
3. The CBA that PHARMAC runs will have a variable threshold because different drugs will come in different years; they get the most cost-effective combination of drugs given their budget for the year, which can mean that the dollars-per-QALY (quality-adjusted life years) cutoff varies. Again, that isn't a PHARMAC critique, it's something that just happens when you've got a fixed budget every year and you can't shift funds across years. 
4. Leaving aside that dollars-per-QALY can vary considerably across sectors of regulation, the amount that's chosen will reflect some social preference, and individuals may have personal willingness to pay for QALYs that are higher than that, or they may be more risk averse.
5. Given 1-4, you would expect that people with a higher willingness to pay for QALYs or other health outcomes would be purchasing health insurance with fairly extensive coverage of pharmaceuticals that aren't on PHARMAC's list. For example, suppose that your opportunity costs of time are much higher than average and a funded treatment requires a lot more time in-hospital while an unfunded one has more opportunities for self-management. You might be more willing than most to pay extra to not have to show up at hospital all the time - and to buy insurance on that basis. 
6. About a third of Kiwis have private health insurance. Health insurance providers do not seem to compete extensively on coverage of non-subsidised drugs - or at least I've not seen the ads for it. Except when it comes to cancer. But there are lots of conditions out there that are not cancer. The main thing that folks seem to look for in private health insurance is getting access to a nicer hospital room and access to specialists to avoid waiting lists in the public system - and presumably coverage of a greater range of cancer medications. Southern Cross does offer a policy providing a lump-sum payment of up to $300k in a critical illness event (cancer, cardiac, organ transplant, loss of independent living, functional loss or stroke), but there may be other areas where access to unfunded medications might be of value.
7. Direct-to-consumer advertising of pharmaceuticals is legal in New Zealand. 

I could be wrong about any of those points. 

If the points are correct, I start wondering about calls to increase the PHARMAC budget.

PHARMAC as single-buyer is able to get deals that would be difficult for anyone else to get. But the things that it does cover should reflect willingness to pay for health - it just does it on our behalf because it can negotiate those better deals. At some point it's better to buy things other than healthcare; the cut-line should reflect some underlying measure of preferences. 

If there were real effective demand for unfunded medications, beyond those covered by PHARMAC, wouldn't we see evidence of it in folks asking their insurers for coverage of a broader range of unfunded medications? 

If they don't, it could be because they just don't know about those medicines. But insurers could advertise on the basis of their coverage of a more extensive list. And we don't see that, or at least I haven't seen it. And I've done enough google searches on health insurance when writing this that I should be getting targeted ads for it by now. 

Maybe you think that the health insurance market is too concentrated so there isn't sufficient competition among them. But there's the alternative route: direct-to-consumer advertising is legal in New Zealand. The supplier of some new drug can go over the top, advertise it directly to consumers, and suggest that they not only ask their GP about it but also ask their insurer to add it to their list in case they ever get that condition. Doctors seem to hate that advertising - they keep wanting it to be banned. But it isn't currently banned, and I've not noticed many of those ads.* And if they show up in places I haven't noticed, they haven't led to insurers competing on coverage of unfunded pharmaceuticals. 

So the remaining possibility is that there just isn't that much effective demand for those drugs. And if that is the case, even among those who can afford private health insurance, then it substantially weakens the case for large expansions in what PHARMAC covers, except potentially in the interval where the drug would be worth it under the deals that PHARMAC could make, but not under the deals that a private insurer might get. And it just doesn't seem plausible that everything that isn't cancer winds up in that interval, does it? It seems more plausible that actual willingness to pay for that stuff in a country that's rather poorer than the ones that set the pace of medical innovation. But it would also then seem really really weird that there aren't people too poor to self-insure for the the expensive unfunded pharmaceuticals, but unable to afford to buy insurance for it. Why wouldn't we see even half of those going for private health insurance going for plans including far more extensive coverage of unfunded drugs?

Another potential explanation is that an insurer would take just as long to evaluate a drug as PHARMAC and come to the same decision, so it's pointless. But I understand that ACC can and does cover non-PHARMAC subsidised drugs that are registered either here or abroad - and the classes of cases that ACC can cover is far more limited than could be covered under private insurance. Basically - if it's a drug that treats something that was due to an accident, ACC can consider it. It can also consider weird cases where a delay in a cancer diagnosis gets considered to be an accident (which starts seeming like a stretch of ACC, or something inviting delays in diagnosis). 

There are potentially other explanations. Is the market for health really about health? Maybe you could go to a more sociological explanation and say that people just expect that the government's covering the stuff that's really worthwhile, and there's no point in bothering with the other stuff; private health insurance buys the feeling of having done the right thing and the obvious benefits of shorter waiting times, but folks are overly confident that whatever the government's bought on their behalf is good enough - and so over-discount any advertising they might see. In that case maybe some true preference for health isn't being expressed because of mistaken beliefs about whether public funding might match the preferences of those willing to spend more per QALY. But again, you still need advertising to be ineffective right?

So I still don't have a great explanation about why we don't see insurers competing on coverage of pharmaceuticals not covered by PHARMAC; my expectation is that there's little effective demand, but I'm not confident in that explanation. Are any of my quasi-facts less truthy than I'd thought? Or have you a better explanation for them?

For what it's worth, we have private health insurance coverage that we started when the kids came along. The policy has a very very high excess and so it is very cheap - it's basically catastrophic coverage. I see zero point in insuring against things you can cover within your credit card limit. But the policy had and has less coverage of unfunded drugs than I might have hoped for - and especially for a catastrophic-care kind of policy. And I've not seen policy options since that had more extensive coverage. 

* I think I learned about the chicken pox vaccine because of an ad. It might have been from friends in the States who'd gotten the vaccine for their kids though. Either way, it sure wasn't from our GP. She was a very nice GP, but I was colossally disappointed on this margin. We rocked up and asked about the chicken pox vaccine (as soon as we heard about it) and whether it was yet available in NZ. She said that it surely was, "but you know you'd have to pay for it out of pocket". I was utterly aghast. A week out of work for a kid with the chicken pox is way more expensive than the vaccine, even leaving aside the potential for later-life shingles and pain and suffering for the kid. Of course we'd have wanted to have paid for it had we only known about it! I guess she'd had too many patients just uninterested in things they had to pay for. But we immediately asked what other vaccines she hadn't bothered telling us about. She noted one that prevented some kind of gastro disorder, so we got that vaccine too. They both wound up being funded a few years later. I would have been furious if the kids had wound up with preventable chicken pox just because the GP didn't think it worth bothering to mention the existence of things that you had to pay for. The chicken pox vaccine is cheap and you definitely want it for your kids regardless of whether the government pays for it. Other conditions - the relevant drugs will only be needed if you get the condition, and it could well be worth getting insurance that covers the drugs relevant to the condition, but you need to find out about their existence somehow, so you know to make sure your insurance covers it (or to know that your insurance should cover a broad range of unsubsidised medicines). 

Anyway, all of that is to say that you just can't trust your GP to come out and tell you things that you should know about but advertising might help fill the gaps. 

Parentonomics

My column for next week's Newsroom will go through a bit of econo-parenting. I wanted to check my earlier review of Josh Gans's excellent "Parentonomics", but found it had disappeared down an internet memory hole; it had been in the Christchurch Press in 2008. I've dredged it up from my Google Drive archives and am posting it here.

Review of Parentonomics

As with most things in life, it comes down to a cross-price elasticity. If you're a careful parent who's made sure that sugary and fatty treats are a complement to healthy foods rather than a substitute for them, which is to say that you'll allow them as an occasional reward for good behaviour rather than as a daily staple, you should welcome every bit of advertising on the kids' morning cartoons - it increases the price that kids are willing to pay for those treats and consequently the amount of good behaviour that you can extract from them in exchange. If you can control the supply. At least according to Melbourne Business School economist Josh Gans.

Dilbert creator Scott Adams tells us that having a working knowledge of economics is like having a mild superpower: it provides a pretty useful framework to help in understanding the world. Gans's latest book, Parentonomics (University of New South Wales Press, 2008), applies the economist's mild superpower to parenting - from the delivery room to school concerts. The results? Generally hilarious and often helpful.

Parentonomics is presented as a series of chapter vignettes written primarily to appeal to an audience of non-economists. Gans avoids economic jargon like "cross-price elasticity" - the tone far more Dave Barry than textbook. The informal narrative is bolstered by reference to empirical findings from the social sciences and intuitive explanations of the relevant theories. So we find that reasonable amounts of television viewing doesn't seem to have adverse effects on kids' school performance and that car seats for kids aged 2-6 don't really seem to add much safety over and above just wearing a normal seatbelt.

Parentonomics is at its best in chapters like "Toileting" where Gans applies economic reasoning about incentives in order to provide rewards for achievement of certain ... outcomes, then watches as the subjects of his regulatory regime alter their behaviour to obtain the promised reward in ways that meet the letter of the law rather than its spirit: when the child is rewarded for having a clean nappy when he wakes up in the morning, don't be surprised to find a pile of dirty nappies hiding behind the dresser. Other highlights include negotiating with infants and optimal punishment schedules for older children.

In other sections, Gans's economic applications are more observational than prescriptive: they help us to understand why things are as they are rather than help us in doing anything much about it. So Gans argues that, at a resort complex where his family frequently vacations, the folks who wind up paying for the "kids eat free" deals at the participating resort restaurants are the childless people going to the other restaurants: keeping the cheaper restaurants full of noisy kids helps induce others to pay more to go to the higher-end venues. Gans later wonders why airlines seem unwilling to make simple moves to make flights easier for families. Perhaps, following his earlier logic, it's that frazzled families as co-passengers also help make business class travel that much more enticing to the childless. I'm not entirely convinced by that argument, but I'm not sure that the counterarguments don't also cut against Gans's restaurant story.

In another interesting application of cross-price elasticity, Gans offers a blog, that provides interesting tidbits of economic analysis of parenting. I started following the blog about a year before Parentonomics came out; Gans started offering teaser bits from the book a few months ahead of the book launch. Some of the anecdotes and analyses that made it into the book also can be found in the blog, and of course the blog updates regularly with new material while the book does not. Is the blog then a complement to the book or a substitute for it? I find them rather complementary. Not least because it's a lot harder to take the blog to bed with you at night to read to your wife when the 11 month old is letting neither of you sleep.

Minimum wages and employment

Stuff's Susan Edmunds asked me for comment on the employment effects of the latest round of minimum wage hikes. She chose the right quotes out of this more verbose missive I'd sent through, copied below. 

“Minimum wage hikes always bring argument about the effects of those increases on jobs. MBIE regularly provides estimates of the number of job losses likely to be caused by different levels of increase; this time, MBIE expected that the increase to $18.90 would reduce employment by about 6,500 jobs, with some 242,400 workers overall being affected by the minimum wage increase. The employment reduction is not really an estimate of the number of people who might be dismissed because of the wage hike but rather will include jobs that are not created in the first place.

New Zealand’s labour market remains very strong. Employment rates since 2016 have been at historic highs. I worry a lot less about the minimum wage hike causing problems in the current employment environment and a lot more about what it will do come the next economic downturn. New Zealand’s minimum wage, relative to prevailing wages, is very very high by international standards. The most recent OECD data, from 2018, had our minimum wage as the fourth-highest in the world, relative to median incomes, and the highest in the world when compared to average incomes. The effect of a minimum wage on employment depends on its ‘bindingness’ – how many workers would earn a lower wage but for the minimum wage. The closer the minimum wage is to the median wage or to the average wage, the more binding it is. And the more binding it is, the greater the expected effect on employment come the downturn.

So we then have to wonder whether minimum wage hikes are the best way of helping the working poor. To begin with, a lot of the increase in the minimum wage will be clawed back by the government for workers receiving Working for Families or other income-linked support. MBIE estimated that while a minimum worker receiving no other income support would see a 6.45% increase in take-home pay due to the minimum wage hike, an Auckland-based couple both earning the minimum wage while receiving Working for Families and the accommodation supplement would see only a 1.7% increase in take-home pay. And the minimum wage is not all that well targeted, if the idea is to make sure that people can afford to support a family. A lot of minimum wage workers are in higher-earning households, at least according to decade-old work by Gail Pacheco and Tim Maloney. That work is now grossly out of date, but Statistics New Zealand does not exactly make it easy to update those things. Enhancing Working for Families can be better targeted, and with less harm to employment come any downturn.” 

Looking at the OECD table again, we were tied for fourth-equal rather than fourth outright - we're tied with Portugal. Above us are only France, Chile and Turkey. 

Creating urban commons problems

If you weren't already familiar with the 9th Circuit ruling in City of Boise vs Martin, and you've been aghast at the stories coming out of San Francisco, you might want to read this LA Times piece by the Manhattan Institute's Stephen Eide. 

On Monday, the Supreme Court announced it would not review City of Boise vs. Martin, a 2018 ruling handed down by the San Francisco-based 9th Circuit Court of Appeals. In Martin, the appeals court struck down prohibitions on sleeping and camping in public that the Idaho city had enacted to address homelessness. Boise’s ordinances did not pass constitutional muster, according to the 9th Circuit, because they inflicted “cruel and unusual punishment” on that city’s homeless population.

By allowing Martin to stand, the Supreme Court leaves local officials powerless to stop the expansion of homeless encampments. In many West Coast cities, the burgeoning number of tents have left sidewalks in some neighborhoods awash in trash, human waste and used needles and have led to outbreaks of infectious diseases such as hepatitis A and C and rodent infestations.

But as notorious as the homeless crises of Los Angeles and San Francisco are, the consequences of the Martin ruling are most ominous for cities like Boise.

It's well worth reading the whole thing. I hadn't known that New York is now spending over $3 billion annually on homeless services. 

The Age of Invention

If you haven't already subscribed to Anton Howes's weekly newsletter on economic history and innovation, you should. He aims to cover the causes of the British Industrial Revolution and the history of innovation.

I hadn't known that the length of a cricket pitch goes back to the length of a standard surveying chain, Gunter's chain, set in the 1620s.

And Howes explains how the 1720s "Bubble Act" preceded the South Sea Company's crash rather than responding to it:

Importantly, as a result of the South Sea affair, Parliament introduced major restrictions on new companies. The famous “Bubble Act” of 1720, for example, prevented the formation of any new joint-stock companies with transferable shares - the kind of basic corporate form that we take for granted today - unless specially incorporated by act of Parliament or by royal charter. Curiously, the restriction was not a reaction to the crash. The Bubble Act actually preceded it, having been created by the South Sea Company itself. In order to funnel more investor money into puffing up the value its own shares, it had used its political connections to get Parliament to essentially ban the creation of any stock-market competitors. But despite the short-term aims of the act, the restrictions remained in place for well over a hundred years. Many of the most capital-intensive innovations of the British Industrial Revolution, including the rise of factories and the spread of the steam engine, thus took place despite severe limitations on companies’ ability to form and raise funds. Elements of incorporation like limited liability - again something we take for granted today - would not be made widespread until the mid-1850s.

A decade ago, this would have been a blog rather than a newsletter. Sometimes, technology regresses I suppose.

Unions, bagels, and the mob

It all started out as a set of bakers with secret knowledge of how to make bagels properly. It became a union, ensuring that the holders of the secret knowledge were the ones to profit from it - almost more like an old craft guild but with pickets. 

And then the mob came in. 

A fantastic story over at Grub Street. Strongly recommended; superb storytelling around a story that was great to begin with.

A snippet:

The excessive hours mandated in such environments were so brutal that in the late 1920s, bagel bakers, primarily immigrants from Eastern Europe, banded together in protest. The result — Union Local 338, under the umbrella of the Bakery and Confectionery Workers (B&C) International — offered a measure of professional leverage. Beginning in the 1930s, if one wanted to run a bagel shop in Manhattan, one had no choice but to employ union bakers. They were, after all, virtually the only men in town capable of making a proper bagel, not to mention exceedingly judicious when it came to imparting their wisdom. So comprehensive was this mandate that bakery owners were prohibited from manning their own ovens at the risk of costly and relentless picket lines outside their shops. (Picketing was the official response to virtually all major labor disputes. The union prevailed every time.)

Union Local 338 never grew much past 300 bakers, but the power it held was enduring. Membership was intentionally exclusive, based on the lineage-driven, old-world tradition of passing down a generationally honed craft from father to son. On this basis, acceptance was limited to the sons of existing 338 members (with the rare son-in-law and occasional nephew sliding quietly under the rope), a structure that retained an exclusively Jewish identity. Until American-born offspring began to turn over No. 338’s roster in the 1950s, the local communicated primarily in Yiddish, its correspondence and record-keeping entirely indecipherable to outsiders. The newspaper of record, the one read by bakers during their breaks, was the Yiddish-language daily Forverts — the Forward — which today publishes online in both English and Yiddish.

Under the union, bakers’ hours were soon strictly controlled, with wages rising to match those of high-end plumbers and electricians, plus paid vacations, life insurance, and pension plans. With a direct line between union members and their fathers who worked the benches before them, it was impossible to take such gains for granted. It also made concessions nearly impossible when it came to negotiating contracts.

Ultimately, it barely mattered to shop owners. In a thriving industry that by the mid-1960s was pumping out more than 2 million bagels per week to a market only just beginning to reach beyond New York City, they could afford it. With their industry grossing some $20 million per year, these men purchased homes on Long Island, drove fancy cars, and sent their children to prestigious colleges. It was a copacetic ecosystem, working out favorably for all involved.

Naturally, the Mafia wanted in.

Mining the landfills

I've been following Sierra Energy's waste-to-energy tech for the past year; it's pretty interesting.

Mike Hart presented on it here in Wellington late last year; his presentation is below.

 

I liked this bit from his most recent newsletter (I find a subscription link here), on waste reduction:

Thirdly, if and when we reach the point where communities are using less and do not produce enough waste to power a FastOx gasifier, the gasifier can then be used to mine landfills. Landfills emit methane for 100 years and many of the landfills (open and closed) are not properly consented- they continue to leach into the ground and pollute the ground water year after year. Additionally, as the return on investment is commonly in just a few years, there is no economic loss once a community stops creating waste.

A couple of years ago, I'd suggested that we should view well-managed landfills as storage sites for future recycling. The future is coming. 

Re-thinking fees-free

Roger Smyth, formerly head of tertiary education policy at the Ministry of Education, writes over at Times Higher Education about New Zealand's fees-free policy:

So how did the first stage in the fees-free policy work out in New Zealand?

Let’s look at the 2018 New Zealand tertiary education enrolments data and compare them with the government’s forecasts for 2018. Those forecasts – based on enrolment trends up to 2017, demographic data and predictions about the labour market – took no account of the fees-free policy. This means we can compare the actual enrolments in 2018 with what was expected in the absence of the fees-free policy. From this, we can estimate the effect on enrolments of the policy change.

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Student enrolments in New Zealand across time

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The actual 2018 outcome is within the 95 per cent confidence interval for the forecast – within the margin of error. In other words, the actual result was in line with what would have been expected in the absence of the fees-free policy. That means there was no statistically measurable effect on enrolments from the change in policy. None at all.

Another test of the impact of the fees-free policy is to look at the population aged 18 and 19 – the age group most likely to be affected – and to ask what happened to their participation rates. Figure 3 above shows the proportion of the population aged 18 to 19 who were enrolled in tertiary education over the past 10 years.

The trend in the participation rate reflects the labour market. Youth unemployment remained relatively high in New Zealand in the years following the global financial crisis. But, as the youth labour market began to strengthen after 2013, the enrolment rate began to drop. Fees have much less effect on enrolments than employment factors. The tertiary participation rate continued to fall in 2018, despite the fees-free policy.

If the government were to judge the success of the policy on how it lifted access to post-secondary education, it would have to give itself a fail grade. The report card might read: “Tried hard but made many basic errors.”

He also notes that if we take seriously survey results from Canterbury Uni, where 5.8% of students said that fees-free was critical to their decision to enrol (and we perhaps might think that an overestimate), it would still mean that taxpayers had to fund the fees of 47,000 students to enable 2,700 enrolments across the system in 2018.

Smyth's piece over at Ed Central is also well worth a read.

So how should the government target its spending better?  How should it address problems in access to tertiary education?

An excellent 2018 report, by Ministry of Education researcher, David Earle, is the most comprehensive and rigorous study yet of access to tertiary education in New Zealand. It provides a blueprint for what not to do to address barriers to access.

The study analysed participation in post-school education across an entire birth cohort, using Statistics New Zealand’s integrated data infrastructure, which links anonymised data from the government agencies managing the education, tax, welfare, migration, employment, health and justice systems – data on ethnicity, school performance, school truancy, socio-economic status (SES), parental education, income, occupation and criminal record….

Applying statistical techniques to control for all these variables, Earle has worked out which factors are associated with risk of non-participation in tertiary education at Level 4 or above.

Unsurprisingly, he finds that achievement and performance at school dwarfs other factors.  But after controlling for school performance, some other factors also play a part. For instance, people whose parents have higher qualifications are more likely to enter tertiary education at Level 4 or above. Students who grow up in more deprived neighbourhoods are less likely to enrol, even once other factors are controlled for. Māori are less likely than the general population to go on to higher education, even if they have done well at school. People who use mental health services are less likely to advance to higher levels of education.

However, many of the dozens of other variables tested in this study have no significant influence on participation in higher education once school performance is taken into account.  These include parental income, truancy and family transience.

The inference from Earle’s research is that interventions that target factors shown to be not statistically significant should be quietly set aside. For instance, given that parental income wasn’t found to be significant, interventions directed at lifting participation of young people from low-income families by reducing costs are not likely to work, given current student support policies.  It’s no surprise that a financially-focused access initiative – like the current fees-free policy – had minimal effect on participation.

What this suggests is that access initiatives should focus on lifting school achievement among those groups which the research shows are less likely to participate – those raised in low SES areas, Māori, those whose families have lower educational achievement. The University of Auckland’s StarPath programme, with its emphasis on improving school achievement through changing practices in lower decile secondary schools, is an example of an intervention that targets the right things.

That’s a quite different form of intervention.  It’s not as straightforward as removing fees.  It may take longer.  It might attract less notice and generate fewer votes. But it might just work.