Quota management and environmental stewardship

I hadn't seen it put this way before, but it's rather nice. 

Dion Tuuta, Pou Whakahaere (Chief Executive), Te Kotahitanga o Te Atiawa, talked about the NZ Quota Management System at a fisheries symposium in February. The proceedings report paraphrased his comments:

The QMS does something very rare in Aotearoa, as Sir Tipene O'Regan, one of our chief negotiators of the settlement articulates, it blends a treaty right with a conservation system to achieve the outcome of sustainable use, which is a very Māori approach to resource management. So, by virtue of the 1992 settlement, the Quota Management System is the only fisheries management system mandated by Māori.

"The QMS is now 37 years old, and to me that continues to represent kaitiakitanga in action at a national level. It is generally misunderstood, it is maligned by those who oppose commercial fishing, but it has been a tremendous success for New Zealand in moderating unregulated fisheries pressure."

Similar approaches could yet be applied for water and nutrient management.

The tragedy of the anticommons and consenting

Just look at this hot mess. 

Crime, traffic and soft drinks are just some of the social ills Waiuku residents believe a new dairy would bring to their town.

A group of residents and a school in the south Auckland township have railed against a proposed corner shop, making submissions on a resource application by Paramjit and Parvinder Mehami to build a convenience store on View Rd.

“It would attract people hanging around people’s homes right next door, which would compromise everybody's safety,” wrote Samuel Voyce.

One submitter, who identified herself as Bronwyn L, was concerned food stores and hairdressers were “taking over the town”.

“It’s getting ridiculous for such a small town that isn’t deemed big enough to service a Burger King, [to have] more than 20 food outlets. It’s an absolute joke and something needs to be done about it.”

If you set a system that gives stasisists a veto over everything, don't be surprised when it's impossible to do anything.

We can't have nice things because we have a resource management system that finds it more important to consider the views of those worried about hairdressers taking over the town than to allow any development to ever proceed in any timely fashion. 

Afternoon roundup

I cannot count the tabs. A pruning:

• Danyl Mclauchlan on the depressing kludgeocratic budget.
• I still don't like that they're subsidising videogames.
• Peter Dunne expects capital gains taxes and wealth taxes to feature in Labour's platform
• V as classic and excellent antifascism
• Officials are looking at a carbon dividend. I sure hope it's in place before the government stops auctioning NZU. 
• A few bits from me on the budget, over at Interest.co.nz
• Hooked on Phonics worked for the UK. An older piece in AEJ: Ec Policy.
• The San Francisco Doom Loop
• New report out, covered at Newsroom, on failings in freshwater management. There still are better options...
• Don Brash is appropriately scathing about housing policy.
• For a new Great Exhibition.
• One advantage of being at a think tank: I can say what I believe to be true. 
• The government still doesn't fully understand that Covid is airborne. No mention of ventilation in the winter health plan. 
• My column in last week's Insights newsletter, on government public health forgetting there's still a pandemic on and turning back to telling us what to eat and drink...

Carbon capture and storage

Nikki Mandow at Newsroom has a long piece on carbon capture and storage.

It's really getting to be time that we have a regulatory framework in place for it. Sure, there aren't that many huge point-source polluters for capturing from smokestacks, but didn't the government just throw a giant pile of money at NZ Steel while claiming that flipping to an electric arc furnace would have huge effects? They can't both be right. 

And remember that CCS is bigger than just capturing from smokestacks. Lots of techs in development for direct air capture. In Nikki's piece, I mentioned the work Allan Scott's doing at Canterbury on olivine. By coincidence, Works in Progress notes another way of using olivine weathering for sequestering carbon. 

And The Economist figures carbon removal (point-source CCS and direct air capture) could wind up being a trillion-dollar business. 

Nikki gave me the closing word at Newsroom, and I'll post it here. This crap is going to wreck the path to Net Zero. 

A ‘hair shirt’ mentality

Crampton worries CCS has become tied up in an ideological debate between the value of gross versus net emissions reductions.

“The Government has been sending increasingly mixed signals, but I think more recently it has been wanting more focus on gross emissions.

“I don’t know that the climate cares about whether the next tonne of emissions that failed to be in the atmosphere is because someone failed to emit them in the first place, or because somebody sucked them out of the atmosphere directly. So long as you get to the same atmospheric concentration of carbon, it shouldn't matter how you get there.

“It almost feels like there’s this desire on the political side to wear a hair shirt around this, that it’s not real change unless we can feel the burn. It's like it’s cheating, like in their heads carbon capture and storage is somehow getting away from our obligation to reduce gross emissions.

“Even if it’s going to screw up our path to net zero.” 

The perils of Council-Owned entities

There's a lot of scaremongering about privatisation. If Councils sold off assets, unimaginable horrors might ensue. Just think of what the evil robber-barons might do. 

Worth looking at how Council-owned entities behave. 

Regional councils don't seem to do much to force councils into compliance. Whatever stories you want to tell yourself about cozy deals between private businesses and regulators, whether because of kickbacks, sinecures, or just camraderie, think harder about how those apply when Council is the one that needs to be monitored and regulated. 

Because this is the result. 

Fed-up Bromley residents say they are being tortured by a worsening stench from Christchurch's compost plant, which is aggravating asthma and ruining their quality of life.

Councillors have agreed to move the council-owned Living Earth organics processing plant, and will next month consider a report outlining options for kerbside green waste while staff work to find a new site.

But locals have warned they are at breaking point and cannot put up with the sickening smell under a council timeline of up to five years.

Bromley woman Vickie Walker said the overpowering "vomit-like silage stench" left her feeling sick to the stomach, caused headaches and coughing and stopped her from spending time outside.

"It's torture, it's driving me crazy," she said.

"I just can't believe that we have to live like this on this side of town. It's bloody inhumane."

Walker said she had been treated for pneumonia and a lung infection, and had been diagnosed with a wheeze since the start of the year, while other family members in Bromley were suffering from asthma.

"With composting, they tell you that you need to wear a mask because there's stuff in there that's not good for you," she said.

The plant has been the subject of many complaints since it opened in 2009, although the stink differs from the stench from the burnt-out wastewater treatment plant in the same suburb.

Walker's neighbour Katinka Visser said the compost smell had worsened since the start of the year, despite council assurances offensive odours were being managed.

If this were a private company, it wouldn't happen. Regional council would feel far more free to appropriately enforce the rules. There would at least be compensation for those affected. But if it did happen, there would be hue and cry about the evils of capitalism and the failures of capitalist systems to rein-in the oppressors. There would be demands for nationalisation. 

Shame there's no calls for privatisation here....

Oh. The article notes that Environment Canterbury, the regulator, has thus far assessed a whole $7,000 in fines to Council, and a further $4,000 to Waste Management.

That'll show them. Great stuff. 

Reader mailbag - on circular economies

My column for this week in Newsroom, jointly authored with Otago Uni's Dennis Wesselbaum, goes through the findings from the latest survey of New Zealand's economists.

The survey asked NZAE members whether they were familiar with circular, doughnut, and mission-based economics. It asked whether inclusion of those concepts has improved policy analysis, and whether increased focus on those approaches would improve policy analysis. It finally asked whether those concepts should be included in the core curriculum of economics.

Respondents from academia found these concepts to be of very limited value. Respondents from within government either found the concepts to be helpful, or were uncertain about them. 

For example, here is the pattern of responses to question 3, which reads: 

"Economic policy would be improved by placing greater weight on [each of Doughnut Economics, Mission-based economics & the Circular Economy], even if it meant less analyst time and capability was available for other types of analysis."

The modal academic strongly disagreed that any of these improved analysis. The same was not true for government-employed economists.

I have, for some time, worried about the apparent disconnect between New Zealand's academic economists and people employed as economists by the Ministries in Wellington.

Government-employed economists seem to have picked up an awful lot of trendy-sounding things that resonate with Ministers. They rarely talk with academics. And many have no clue or do not care how far they have strayed from the academic consensus. 

It is a problem. 

A lot of angry people in the Newsroom comments section told me how evil I am to be neoliberal and such. But the more useful comments I heard back were via email.

In one case, the correspondent had had no clue that circular economics was anything other than mainstream. Because it's all they'd heard in policy discussions. 

In another case, a Mayor provided this dispatch from a meeting over the past year, edited slightly to anonymise the response. 

It reminded me of a meeting I was at XXXX weeks ago, the aim of which was to discuss regional policy making to deal with the effects of climate change. A number of the sessions were reasonably sensible until we came to a session on "Food Security". The presenter talked for an hour on all the things we should be doing in the future to make sure we and our communities would not starve. We had ideas such as cutting large farms into smaller farms so that more people would be able to grow their own food. We had the (food) productivity growth that would follow more people putting their scraps into their worm farms and so on and so.

 

I waited for a discussion of food chains, markets, supermarkets, growing food at scale so that large numbers of people get to choose what they eat, the wonders of our internal transport mechanisms - and I waited and waited. And waited. It never happened.  These presenters were meant to be planners and I despair. By comparison a donut economy sounds like something I might actually eat and enjoy.

There is an awful lot of woo infecting policy. Normally it's the economists who insist on rigor to stop this. That failsafe is not nearly as safe, in Wellington, as it ought to be. 

And unfortunately the Government Economics Network, whose purpose should be to upskill government-employed economists, mainly seems to highlight heterodox approaches that have less support among mainstream economists but are convenient for rationalising policies that Ministers prefer. 

When I taught Econ 224 at Canterbury, Econ & Current Policy Issues, I included a few things as defence against the dark arts - stuff I thought the kids needed to know so they could bat back woo when they encountered it. 

I wouldn't put any of these three surveyed items in the core. But it would be great if some of our principles classes could remind students that we have an entire field of environmental economics. It isn't that economists don't care about the environment, as fans of circular stuff seem to believe. It's that we want solutions that work. Environmental economics is rigorous. Other options are not. 

A cigarette burn in the Crown Accounts

Late last year, the government passed legislation intended to sharply reduce the sale and consumption of legal tobacco. 

It is also intended to reduce smoking rates; how good a job it will do with that will depend on how efficient the smugglers get. But it will definitely reduce the sale of legal tobacco that draws excise. 

From 1 April 2025, Very Low Nicotine Concentration rules will be in force. Only authorised tobacco products will be allowed to be sold, and only tobacco products with less than 0.8 mg/g nicotine content will be allowed. That's section 57I of the revised Smokefree Environments and Regulated Products Act.

How much is 0.8 mg/g? 

Sources vary a bit. But this CDC study had mean nicotine concentrations in cigarettes of 19.2 mg/g. 

So the rules reduce nicotine concentration by over 95%. 

Or to put it a different way, if a normal beer has 5% alcohol, this is like reducing the maximum alcohol content to 0.21%.

The level is low enough that it simply isn't plausible that people would start smoking a lot more, or smoking more heavily, to try to get those last bits of nicotine. It would be like trying to get drunk on 0.21% beer. It just isn't going to happen. As my most favourite footnote in a tax review put it, you'd die of water poisoning well before you ever hit alcohol poisoning at those kinds of concentrations. [I've snipped the bit from the Henry Review as footnote because it's just so good.]

Ok. So we're all on the same page here right? The intended and near-certain effect of the legislation is to cause a very sharp reduction in the number of legally purchased cigarettes that draw excise.

How big will be the effect? Your thumb-suck is as good as mine, and better than mine if you're a smoker. 

But let's think it through.

In the month or two before the new rule comes in, I expect massive stockpiling of real cigarettes. It will give a surge in excise returns for FY 2024/5. Smokers who can afford to will buy however months' supply is plausible to store. An unopened pack probably stays fresh for at least a year, maybe two? 

I do not think it crazy to expect this. Remember that, when government used to do big increases in excise, it would do them on very short notice specifically with intention of avoiding stockpiling of cheap pre-hike cigs. We have two years to prepare for this one. I expect everyone will be fully responding to incentives: there will be ample supply to meet stockpiling needs ahead of the rule change. 

Households will stockpile their own cigs. Many households that smoke will be unable to afford to do so. Others will stockpile real cigarettes on their behalf, and sell them illicitly afterwards - a greyish market competition to the black market that will be out there. 

So FY 2024 will see a surge in tobacco excise returns, much of which will be a bringing forward of excise returns that would have obtained in FY 2025. 

Cigarette sales will plummet in April 2025. 

Some who'd been completely unaware that the change was coming will buy the new cigarettes and learn whether they want to keep buying them. 

As others work through their stockpiles, they'll do the same thing: buy a pack of the new cigarettes, then decide whether to flip to something else or try another pack; try that next pack, decide whether to stick with them or flip to something else. And so on. There'll be incoming new-tryers and a decay function. 

Say that stockpiles are largely run-down by October 2025. We're likely to be at steady state or close to it by April 2026. Some proportion of current smokers will have quit; some will have shifted to vapes; some will have shifted to the black market; and, some will continue to smoke VLNC cigarettes. 

A VLNC cigarette is like a 0.2% beer. What do you think steady state looks like?

Well, MoH gave what it thought the answer was. It's in the 2021 RIS. They expect that it would take two years for smoking rates to drop by 73%. 

If half of that drop is in the first year, then they're expecting the sale of excised cigarettes to drop by about 36% in the first year.

So the Ministry of Health's Regulatory Impact Statement on its SmokeFree intentions had VLNC rules reducing smoking rates by about that amount. We can safely leave aside arguments about black market or whatever else. This is just the Ministry's projections assuming no shifts to the black market, which doesn't pay excise anyway so doesn't matter.

What do you think happens to collected tobacco excise if the legislation works in the way that the Ministry of Health intended and projected?

I think it's safest to assume that tobacco excise revenues, in 2026, after we've gotten through whatever surge and trough was due to stockpiling, are going to be a lot lower. 1 April 2026 is one year after the law comes in. Sales of excised tobacco should be 36% lower at the start of the year and decline by another 36% over the course of the year. 

That means excise will be about half of what it otherwise would have been, for 2026, and much lower after that. 

Recall that Minister Robertson promises a return to fiscal surplus in 2026. OBEGAL of $600 million. 

But let's have a look over in the notes. It's always good to look in the notes. And there we see Treasury figuring that the government will collect $1.710 billion in tobacco excise. They've projected a slow and steady decline in tobacco excise revenues, in line with overall declines in smoking rates. They've obviously not factored the VLNC rules into their workings yet. 

And fair enough. It can take a while to run the figures. This has taken me about 20 minutes, but it's very thumb-suck. 

As a rough cut, I expect tobacco excise in 2026 to be about half of what it otherwise would have been. So a drop in revenue of $855 million as compared to forecast. 

So a $600 million 2026 surplus becomes a $255 million deficit. 

This isn't a criticism of the SmokeFree policy. It's the just working through the implications of the policy as promised.

The government is trying to have it both ways here. It wants the reductions in smoking, but wants to pretend there won't be any effects on revenues. It cannot have both. It's one or the other. 

I've called it the cigarette burn in the Crown Accounts.

What really really does puzzle me is why Treasury didn't bother including it as a substantial fiscal risk in BEFU. It's a lot more than the $100 million threshold for inclusion. 

Had a short column over in The Dom on it. 

Update: ASH had had serious critique of the modelling work on the reductions in smoking with VLNC. The critique makes sense. But then you'd have wanted both the smaller numbers on expected tobacco decline, and commensurate figures on excise, in support of the legislation. Can't pass the legislation claiming massive effects on smoking, then backtrack when running the excise implications, right?

FOOTNOTE

Finally, the bit from the Henry Review. So fun. 

Tyler's warning for New Zealand

A warning from Tyler Cowen (Bloomberg, republished by BusinessDesk): higher income countries are going to need to attract more migrants. But there's a problem:

If you were thinking of leaving your country, would you rather go to a wealthy country with higher tax rates, or one with lower tax rates? Especially if the country with higher taxes has a long tradition of not welcoming migrants, and you would be less likely to find any expatriates there? Besides which, due to their ageing population, those countries may simply be boring, at least for young people.

The danger is that countries with more restrictionist immigration policies will get locked into low-migration outcomes for the foreseeable future, whether they like it or not. It’s hard to say when this point of no return might be reached – but it is another argument for taking in more migrants today. And accepting more migrants today is an investment in accepting more a generation from now, which is when countries will really need them.  

Risk for New Zealand 

Take the example of Canada or Australia, two countries that have had relatively open immigration policies. Twenty years from now, when wealthy countries may be competing more for new migrants, Canada and Australia will be in an especially strong position to attract the most productive foreigners. 

The risk of being locked out of competition for migrants may be even greater for smaller countries such as Denmark or New Zealand. 

 

Evening roundup

The accumulated worthies:

• Dave Heatley on the publicly-provided goods that should, and should not, draw user charges - and how to tell the difference. Public transport should be charged. I'd add that, when congestion charging is finally in place, the case for subsidising public transit really goes away. Or at least the economic case for it. 
• If you think that NZ hosting FIFA matches is worth at least $11 per capita in fun and festivities, then that's fine. But there might be better uses of the money. And if you think the spending buys us anything other than a festival, you're deluding yourself. A few bits from me in this piece. 
• New Zealand's holiday pay rules are so complicated that the Ministry of Health has spent $50 million on consultants trying to deal with it. They now estimate that they owe backpay of $1.8 billion due to incorrect holiday pay calculations. 
• Otago's public health people prefer prohibitionist approaches to vaping, with restrictions ramping up as smoking rates decline. 
• Westpac argues for vertical separation of the supermarkets to encourage competition. Their report ignores regulatory restrictions against new large-scale entry, other than nodding at removal of covenants. Bizarre from a sector that's likely to be hitting its own market study soon, and ought to prefer that interventions have sound logic. 
• New Zealand has a new policy in the event that boatloads of refugees arrive: detention. UNHCR has some reasonable concerns. 
• Concentration in graduate economics education.
• Scott Sumner on Noah Smith's pessimistic vision.
• Water flows downhill and restrictions on housing supply drive housing price growth. Nathaniel Baum-Snow in the Journal of Economic Perspectives. 
• Want affordable housing? Make sure there's ample excess zoned capacity. 
• Council-owned wastewater treatment plans are often a mess. Regional councils seem to feel constrained against properly enforcing their regulatory duties. 
• An oldie but a goodie: Alex Tabarrok on The Happy Meal Fallacy
• Some cautions about the "Gas stoves cause asthma" hypothesis. A lot of the underlying research isn't that sound. 
• Remember how SCTV came up with Bob & Doug McKenzie in response to a demand for 2 minutes more Canadian-content per episode? Think about that when considering CanCon rules for pornography in Canada....
• The Spinoff has a pre-budget roundup. Six months ago I'd have put very high odds on some form of a carbon dividend showing up. Now, with some problems in the last auction, it's harder to say. Still some odds of it though. A few bits from me in this piece. 
• Peter Griffin on Rocket Lab's successes. This really was one where NZ's regulators stepped up to quickly set an enabling regulatory framework. 

Unrest in the forest; trouble with the trees

My column from the Saturday Dom Post and Christchurch Press. Looks like I'm stuck behind the paywall; there should be an ungated version up at The Initiative's website in due course [now linked].

A snip:

Federated Farmers and Beef and Lamb New Zealand have stepped up their campaigns against carbon forestry.

Federated Farmers objected to a Dutch company’s purchase of two sheep and beef farms for tree-planting, arguing it would mean fewer jobs and people in rural towns.

Beef & Lamb New Zealand commissioned work pointing out that New Zealand’s emissions trading scheme (ETS) is friendlier than others to forestry, while suggesting that the difference is not to New Zealand’s benefit.

How the Government responds will provide a signal about whether the country is serious about getting to Net Zero. Kicking trees out of the ETS would set a very poor precedent.

The problem with the ETS isn’t that it encourages carbon sequestration in trees. The ETS is, and should be, focused sharply on reducing the country’s net emissions. That’s what it was built to do, and that’s what the Zero Carbon Act’s Net Zero target requires. Our being out of step with other countries is not always a fault. We do get some things right occasionally.

The problem rather is that any large change in technology, or big movement in prices of different goods, brings lots of other changes – some of which require direct regulatory responses.

If the Government’s response to these problems is to break the Emissions Trading Scheme, rather than deal with issues as they emerge, at the level of government most suited to each problem, our entire climate response is in jeopardy.

This is just Tinbergen. Multiple targets require multiple instruments. The ETS is there to target net emissions. Targeting net emissions will mean a whole pile of relative prices change, behaviour changes, and some emergent outcomes may be undesirable for whatever reason. 

Rather than run piecemeal changes to the ETS whenever that happens, target the undesirable outcome directly in whatever least-bad way is available. 

How quickly they forget

So we're three and a bit years into the pandemic. We have a decent vaccine that prevents most mortality, but there were 250 Covid cases in hospital as of midnight Saturday, we're getting about 12000 cases a week, and who knows what the long-term Long-Covid cost is going to run to.

The Government has resurrected a Public Health Advisory Committee that'll get to take on one big project a year.

There are lots of great options to choose from.

• Cost-effectiveness of tighter ventilation standards in reducing the burden of transmissible disease would be great. It's possible that it's extremely cost-effective. But it might not be! And how does it compare to UV light? The latter has looked really promising. And how should that kind of cost-effectiveness evaluation weigh the insurance aspect? This kind of intervention would also reduce the transmission risk of other stuff we haven't yet hit. Even just running improved ventilation in schools to reduce run-of-the-mill sickness would reduce days out of school.
• This would be a big project. I don't think anyone in government is tracking what Covid/long-Covid has done to labour force availability. If the number is big, then potential benefits of avoiding more long-Covid could be big. If it's trivial, then they're smaller. 
• Are our regulatory standards up to spec for these kinds of emergency scenarios. Crampton keeps arguing that we should just approve anything that's been approved by two other agencies, so we can get access to drugs in a hurry in scenarios where it matters. Is he nuts? What would be the downside he's missed?
• Can we build a better MIQ plan in case we ever have to do this again? The last one kinda sucked. It was fragile and would not scale. 
• Vaccination rates have fallen off a cliff and measles is back. What does a robust and equitable vaccination programme look like? We used to have by-DHB targets for vaccination. It's all been downhill since those were abandoned. 
• Public health starts with the local GP's office, but we're very short of GPs and few are coming through the pipeline. Every part of the system blames the others. No point in scaling up in the med schools as there aren't enough registrar positions. No point allowing foreign doctors to come in; there won't be registrar positions for them and they might not even stay. Why not expand the number of registrar positions? Not enough doctors who want to supervise 'em. Great big fun problem. How about easing back requirements for doctors from places like Canada so they can easily practice here? What about expanded scope-of-practice nurse-practitioners? 

Anyway. Lots of potential options.

Here's what they're doing, as the single project they're to be doing this year.

The resurrected Public Health Advisory Committee will tackle access to healthy food and other factors that shape our eating habits as its first major project, Marc Daalder reports

Is New Zealand fulfilling people's right to healthy food?

That's one of the questions a new public health committee is striving to answer in its first major project.

...

Minutes from the committee's first meetings show it hopes to tackle big issues like climate change and rural health. However, Health Minister Ayesha Verrall asked it to investigate food environments as its first main topic of work. Under the terms of reference, the committee has to complete at least one major piece of work each year.

"This was a topic where expert advice on solutions would be beneficial. It was acknowledged that the topic was broad and complex, but there were factors in the food environment space causing harm to New Zealanders’ health. Food security issues were heightened through the Covid-19 pandemic and continue to cause pressure due to cost of living. The PHAC would need to think creatively," Verrall said, according to the minutes.

"Minister Verrall asked the PHAC to consider the food regulatory system, including food labelling and composition, acknowledging New Zealand’s regulatory system is joint with Australia through Food Standards Australia New Zealand (FSANZ)."

So I'll continue to be the only one wearing a mask at public sector events, and the Public Health Advisory Committee will be working on my right to healthy food and protecting people against the evils of ads for unhealthy foods. 

It's like the last three years didn't happen, and we're back in the spot where MoH is more interested in making sure DHBs can ban soda from the cafeteria than in ensuring there are vaccinated hospital staff during a measles outbreak. 

Valuing food security

Suppose you got $500 in annual value from owning your car. Would you consider paying $6500 per year to insure that car? I'm not talking about third party liability or anything like that, just insurance for the value of the car. Would it make sense to pay thirteen times the annual value of the car for insurance against the car failing?

Obviously not, right?

My last couple of columns over at Newsroom go through the latest report from the Infrastructure Commission on the cost of the Auckland urban-rural boundary, and the proposed Auckland Future Development Strategy.

Together, they mean that Auckland is blowing about $1300 per square meter in real value (or about $65 per year at a 5% discount rate) in order to protect precious agricultural land that might generate maybe $5 per square meter in gross (not net) potato revenues.

Bonkers. But such is the Cult of the New Zealand Potato. 

Adherents of the Cult of the New Zealand Potato and Ancillary Horticultural Products worry greatly that if houses are built on Precious Agricultural Land, there will be no food. 

Normally we'd figure that, as developers buy agricultural land for housing, the price of remaining agricultural land will go up if it's actually scarce. And that that process is an automatic governor. But the Potato Cult knows that markets don't work that way and that markets undervalue that which is truly priceless: potatoes, grown on very specific pieces of land, decades from now. 

The Potato Cult, combined with restrictions under the National Policy Statement on Highly Productive Land, and a few other bits of wiggle room, gave Auckland Council all the room it needed to ban new subdivisions. 

So. 

My column at Newsroom, a fortnight ago, covered the latest paper from the Infrastructure Commission. The Commission found that a square meter of land just inside Auckland's urban boundary is worth about $1300 more than a square meter of land on the other side of the boundary, after accounting for the costs of making ag land ready for urban use. 

$1300 per square meter. $600k added cost for a 500sqm section at the edge of town. $5 million per acre. 

If you're willing to pay half a million more for a home close to downtown amenities, as compared to one out in the suburbs with a long commute, just think through the effect when a house at the edge of town costs $600k more than it really ought to. Prices are inflated across the entire urban gradient. Density is great, but rules banning building at the fringes make central townhouses more expensive too. 

So far so good. The rules at the fringes are dumb, but our enlightened leaders will see that and fix things right?

This week's column went through Auckland's draft Future Development Strategy. The FDS is, I think, the first to be produced under the new sets of rules. It doesn't bode well for the future. You see, Auckland Council reached for every possible excuse for restricting development. The incentives they face have not changed, so of course they would. 

The FDS basically forbids the private plan changes that have otherwise enabled paddocks to turn into housing. 

There are lots of reasons. 

Since NPS-HPL restricts turning ag land into housing, they've noted the importance of that highly productive land. Sure, NPS-HPL allows building on ag land if there's a good case for it, but Auckland Council doesn't want a good case for it. They want to prevent development. 

Since councils are now supposed to consider carbon emissions, that gets brought in here too. Never mind that urban emissions are covered by the ETS. And ignore that it would make sense to set new bus routes to any big new developments anyway. 

Neither of those are the underlying reason. They're the palatable excuses. The former appeals to the potato cult. The latter to cargo-cult notions of how to get emission reductions. 

If we took the potato cult seriously about what they claim to want, it would almost certainly be more cost-effective to build a giant cold-store facility for a Strategic Potato (and Ancillary Horticultural Products) Reserve. Keep five years' supply. Pretend we're in Game of Thrones and Winter is Coming. Every year, release the oldest frozen supply from the reserves while replenishing with fresh. Would tide us through all manner of implausible scenarios.

It would be really really stupid. But it would be less stupid than banning building on Precious Agricultural Land when letting housing be built on that land is worth an extra $1,300 per square meter - or about $65/sqm year if you run it at a 5% discount rate. 

As compared to about $5 gross revenue/sqm/year from potatoes. 

Which is where I got the numbers for my stupid insurance example at the start. You shouldn't be willing to pay more than the value of a thing as an insurance payment against the thing ceasing to exist. But that's what we're doing. We are foregoing $65 in value-as-housing per year to protect $5 in gross potato revenue per year, just to be sure we never run out of potatoes (which can be imported way more easily than housing services, if we don't impose anti-dumping duties, which NZ has threatened before when frozen European potatoes were cheap). 

Except that's just the rationalisation.

The FDS points to the real reason. Council doesn't like out-of-sequence or leapfrog developments because that makes it harder to plan, fund, and finance infrastructure. They want development to happen exactly in council's planned sequence, so any new water pipe very quickly has lots of users to help cover its cost, because council at its budget constraint has to pay off infrastructure very quickly, because infrastructure funding and financing is a mess. And because council sees little of the upside from growth but has to deal with the potato cultists, why bother? Failing to fix the problem also helps prop up property values for existing owners in town - they vote, while those unable to move to Auckland don't vote in Auckland elections. 

Fundamentally silly outcome, but right in line with what you'd expect given the incentives. 

These restrictions will worsen the problem that the Infrastructure Commission pointed to. Making it harder to build at the urban/rural boundary will reinforce that land price differential and help ensure that the carbon-friendly walkable downtown developments remain unaffordable. 

How to get out of the mess?

• Let councils use project-based funding with long-term infrastructure bonds, ring-fenced away from council main balance sheets, financed by payments over time from the beneficiaries of that infrastructure. Making it not impossible to fund and finance the kit needed to support growth would get rid of one important barrier. 
• Let councils share in the benefits when they enable, rather than block, urban economic growth.
• Over the medium term, have tighter restrictions than NPS-UD and MRDS on councils where the median house price is very high relative to median household incomes - with freedom earned by restoring housing affordability. Council cultures will take a long time to shift otherwise. 

Afternoon roundup

The afternoon's worthies:

• If you want to know why rail in NZ is all messed up, look at how the thing's structured. Egads. 


• New York going back to phonics, after noticing that whole-language ideology caused a lot of illiteracy.


• Matt Nolan on inflation and the Australian budget.


• A National Party candidate out on the campaign trail, handing out flyers for a Law and Order public meeting, walks in on a dairy robbery. Wonder what'll happen when a Labour candidate walks in on one. Seems higher odds than it ought to be. 


• The Motor Trade Association wants vehicle emission checks as part of the Warrant of Fitness. Not crazy for vehicles generally used in places with air quality problems. 


• Alberta's NDP are picking up a policy that was tried and failed at the Federal level: a tax credit for kids' sport. The thing mainly subsidised families who already had kids in sport. 


• Another council leaves Local Government New Zealand. 


• I'm not the only one expecting at least some inflation-adjustment of the tax thresholds. I'd hope that they'd be announced in the budget next week. 


• Worries about government deciding to censor whatever it considers to be disinformation aren't just fever-swamp ravings. Look at what Canada's Liberal Party is putting up for consideration.
  

  The story, it is now admitted, was true. Mr. Chong’s family was being targeted. The Globe’s sources were right, and The Globe was right to report what they had to say – even if they remained unnamed. Had it not, the matter would never have come to light, Mr. Chong would never have been told, and no Chinese diplomat would be going home.
  
  And yet even as the Liberal government was tacitly endorsing The Globe’s use of unnamed sources, the Liberal Party was busy demanding the practice be outlawed. Resolution 472 at the party’s national convention, passed without debate, calls on the government to “explore options to hold on-line information services accountable for the veracity of material published on their platforms and to limit publication only to material whose sources can be traced.” How very tidy.
  
  Understand: the government has no more business “holding” anyone “accountable” for the “veracity” of anything. But the second part, urging the government to ban all material whose sources cannot be “traced” – material like, say, The Globe’s reports – is frankly chilling. Any crank can present a motion of course. But it was the party at large, the party in power, that passed it.

  It really feels like appetite is being whetted about pressing need for crackdowns on whatever a government can consider to be disinformation, and that it will end very badly if it's allowed to happen.
  

Youth vaping rules

If youths are vaping, it's not for want of rules prohibiting supplying youths with vape.

The rules are broadly modelled on the rules around supplying minors with alcohol.

The Sale and Supply of Alcohol Act has a fine of up to $10k on licensees selling alcohol to minors and up to $2k for others.

The SmokeFree Environments and Regulated Products Act [I'll still call this SFEA out of habit, not SFERPA] has a fine of up to $10k for a business selling vape to minors and of up to $5k for others.

For alcohol, it's a defence to have believed on reasonable grounds that the customer was not under the purchase age - like if they provided a very credible fake ID. See 239(6).

Same deal for vape (and cigarettes, and other regulated product) at 40(4) of SFEA.

For alcohol, there's exemption in licensed premises if the minor is accompanied by parent or guardian and is supplied by the parent or guardian (240). No such exemption for vape as there aren't licensed premises.

Section 241 of SSAA prohibits alcohol supply to minors anywhere, on pain of a fine of no more than $2k, unless supply is by a parent, with consent of a parent, or if there were reasonable grounds for not believing the minor to be a minor. 

Section 41 of SFEA prohibits vape supply to minors in public places on pain of a fine of no more than $2k. There's a defence if the minor supplied a credible fake ID (4), or if the kid just took your stuff without your knowledge and where you took reasonable precaution to avoid it. 

So a parent at a restaurant can order a beer for their 17 year old, and can give permission for their kid to be supplied with one in a public place or a private place. A parent cannot give permission for their child to be supplied with a vape in a public place. 

But, there are no restrictions on providing a vape to a minor in a private place like a living room.

I don't know that there's a good case for tightened restrictions on access by minors. I also wouldn't support restrictions on kids getting a frappucino. Nicotine without combustion isn't that different from caffeine.

But if the government or an incoming government really wanted to do that, it could have parts of the vape rules more closely mirror the alcohol rules in prohibiting supply to minors regardless of whether it's a public or private place. If it did so, it really ought to also copy over the exemptions for supply by parents or guardians. 

Section 343 of SSAA makes it an offence for a minor to purchase alcohol from a licensed premise, subject to a fine of not more than $2k. Presumably this gets invoked if someone did use a fake ID and put the shop at risk. This bit could also be ported over, if you think that fining kids for trying to buy a vape with a fake ID is a good idea. Don't think it causes much harm, as compared to fining kids for possession. 

But worst of all would be if National, spurred on by Mike Hosking's crusade against vaping on Newstalk ZB, put in Australian-style restrictions. We'd wind up with a giant black market in vapes, and more harms because of it. The current regime has product notification rules that ensure that ingredients are notified, and if something's found to be a problem, they'll know what products carry it. Black market vapes aren't in that regime.

Tobacco prohibition

Last year, Guy Bentley and I put together a joint submission on New Zealand's proposed very low nicotine content rules. 

We noted an interesting parallel to alcohol prohibition. During US alcohol prohibition, near-beers of very low alcohol content remained legal. But they didn't prove very popular. Of course, the VLNC rules would amount to prohibition of smoked tobacco. They wouldn't amount to prohibition of nicotine, because vaping would remain legal. So overall effects would be harder to peg.

It's Section 2 of our submission. The section's far more extensive, but the most relevant bit is right up front, in 2.2 through 2.4:

2.2 VLNC rules, if sufficiently binding to make smoking unpalatable, amount to tobacco prohibition. Alcohol prohibition in America allowed the sale of ‘near-beers’ of less than 0.5% alcohol. Despite beer-like liquids being legal, illicit trade in alcohol flourished. We will here refer to VLNC rules sufficiently stringent as to make cigarettes unpalatable to current smokers as constituting tobacco prohibition. 

2.3 However, alcohol prohibition was fundamentally different from the proposed tobacco prohibition. Alcohol itself was prohibited except as prescribed medicinally, or as used in religious sacraments. Under stringent VLNC rules, cigarettes would be de facto prohibited, while nicotine would remain legal if delivered through vaping. 

2.4 How tobacco prohibition will play out in New Zealand, where the illicit tobacco trade is growing but where many legal and safer forms of nicotine are available, is impossible to predict accurately. 

Pretty clear, right? The section, as a whole, goes through the reasons that it's hard to peg what proportion of current smokers flip to reduced-harm alternatives, and how the VLNC rules would affect how we think about other bits of the legislation like retail tobacco outlet licensing. 

Here's how Otago University Public Health's Janet Hoek characterises things in a piece at The Conversation. She doesn't name us; we're too Voldemort for that. But she does link our submission.

Who gains from black market scaremongering?

There are obvious risks to relying on industry evidence. In 2006, a US court found international tobacco companies acted with “intent to defraud or deceive” the public about the harms from smoking for decades.

A New Zealand lobby group supported by tobacco companies appears not to have critically reviewed industry evidence but instead amplified the claims. Its submission during the consultation process for New Zealand’s smokefree legislation erroneously argued the measures would amount to prohibition. It drew incorrect parallels with alcohol prohibition in the US.

Nicotine products will in fact remain available, either as approved treatments (such as nicotine replacement therapies) or through vaping products. Prohibition arguments are as baseless as they are misleading.

I'm glad she included the link at least. 

The natural reading of her piece at The Conversation is that our submission ignored that nicotine products will remain available, and that our submission intended to mislead people because we have tobacco company members (among 70 or so members). 

Please read our whole submission, and Hoek's full column, and judge for yourselves which of us had intent to defraud or deceive. And draw your own conclusions about academic standards at my shop, compared to Otago University. 

I've sent a note to The Conversation asking whether this meets their editorial standards.

Morning roundup

We have too many tabs open here at the Crampton Discount Browser Tab Warehouse, and we have to liquidate stock immediately. All the links you can handle at rock-bottom prices.

• Turns out that, entirely predicably, subsidising electric cars gives a pile of money to rich households while doing bugger all to reduce emissions. Just as we told them two years ago. Stupid. 


• I'm not a Ben Sheeran fan, but I'm cheering for him in this lawsuit. Another stupidity long foretold. If you haven't read Spider Robinson on Melancholy Elephants and Infinite Copyright, do attend to that. That's the stakes on the Sheeran lawsuit. 


• Meanwhile, Chris Luxon wants to follow Australia in banning vaping, if National should form government. I'm cheering for the smugglers in this one. I don't know why Luxon's pro-smuggling. On the plus side, I love having something I can cheer about no matter who wins the election!


• The government says it wants a no-frills budget. NZ's videogame sector's pretty convinced that subsidies to the videogame sector aren't a frill. I think NZ should go further than simply not playing the subsidy game. Instead, NZ should seek the equivalent of international arms control agreements banning film and videogame subsidies. The dangerous nature of these subsidies is obvious if we're even talking about having them in a year that's going to require a lot of budget restraint. 


• Looks like there's a treatment option for lakes with too much phosphorus. Of course, New Zealand doesn't seem interested. Presumably it isn't sufficiently circular. Too much like waste-to-energy plants that solve the obvious problem, but that don't solve the underlying problem of regulators wanting to tell people what to do. If the thing works, farmers ought to be able to fund remediation if that's more cost-effective than other options. 

Low-hanging fruit and criminal justice

If there are obvious answers around what to do with kids under 12 who steal cars and use them to ram into shops to steal stuff, those answers aren't obvious to me.

But in other areas... the low-hanging fruit is just so obvious. 

The results of South Dakota's 24/7 programme have been obvious for years.

How does it work?

If the court assigns a no-alcohol condition, you either get an alcohol monitoring ankle cuff, or you have to show up at the police station to keep blowing zero on a breathaliser. The ankle cuff is simpler. 

If you're found in violation, you spend a night or two in the cells soon after - possibly the next weekend. Punishment is certain, swift, and short. 

Initially set to deal with repeat drink drivers, it wound up even reducing domestic assault. It also reduces mortality among drink drivers assigned the no-alcohol condition. RAND ran the numbers on it. It works.

It would easily mesh with New Zealand's Drug & Alcohol courts, so long as they kept the aspects that seem to make it work in the US: the certainty of swift consequence. Not going back to have a conversation with your probation/parole officer that might or might not lead to something in a few months. The certainty of that you'd ruin your next weekend if you breach conditions. 

It's not hard to see how it works. If your mates insist that you come out drinking with them while you're on a no-drinking parole/probation condition, it's a heck of a lot easier to say no if everyone involved knows that that means you'll soon be spending a night or two in the cells. 

When Mark Kleiman came out to give a talk on this stuff for the NZ Drug Foundation almost a decade ago, he noted that offenders coming off the no-alcohol condition in Hawaii's version of 24/7 sometimes asked to be kept on the requirement, as a way of binding themselves to the straight and narrow. If you have a metapreference against drinking, because you know that your future self will be tempted and can't handle it, the programme helps. 

Anyway, I was reminded of it when reading this.  

The driver behind a fatal car crash which claimed the life of mother-of-five, Kat Broad, has pleaded guilty.

Brent James Tiddy, 26, who appeared via audiovisual link, entered the guilty plea to the charge of reckless driving causing manslaughter before Justice Cameron Mander in the Dunedin High Court on Tuesday morning.

Kat Broad, a 42-year-old mother-of-five, was a passenger in a white Honda Accord which crashed into a tree near the southern entrance to the Otago town of Waikouaiti about 11.20pm on January 23

The court heard the Palmerston-based labourer held a driver licence, and was forbidden from driving by police.

The night of the crash he was driving Broad’s Honda, with Broad in the passenger seat.

...

A crash investigation showed he lost control due to excessive speed, with speed data retrieved from Broad’s cellphone showing the vehicle travelled up to 158kmh.

Tiddy’s blood alcohol level was recorded at 140 milligrams (mg) per 100 millilitres (ml) of blood, the legal limit is 50 mg.

He was remanded for sentencing at August 20.

A monitored no-alcohol condition, with certain, swift, and short punishment for violation, can be a more powerful deterrent than a driving ban where breaches are unlikely to be detected - unless something very bad happens.

It's impossible to say if 24/7 would have stopped Tiddy from deciding to get drunk and then violating his no-driving condition.

But the US evidence suggests that 24/7 stops an awful lot of people like Tiddy from doing this.

I don't know why we aren't running 24/7. It's simple. There are a lot of hard problems in justice. This isn't one of them.