Internet Party Policies

NZ's Internet-Mana Party announced a few policies this weekend. I wish they'd stuck to internet and surveillance issues. Here goes.

Internet Party leader Laila Harre said it would stop the controversial Trans-Pacific Partnership trade agreement, give students free tertiary education and instigate a royal commission on any spying on New Zealand residents by the Government Communications and Security Bureau (GCSB).

Let's take these in turn.

• I'm a bit of a TPP-sceptic, but I'd sure not want to stop it until the final text had been hammered out. There's some chance yet that it could be well worth having. We just have to be ready to turn it down if it isn't. Getting better dairy access to the US would be great, but so too would avoiding having US copyright laws imposed on us. Until we see the deal, we won't know what the trade-offs are.
• Free tertiary education seems a rather poor idea. After Labour put in interest-free student loans, a whole pile of other sectoral distortions followed. Why? Because every additional admitted domestic student meant a potentially substantial liability for the Crown. And so we started getting different funding arrangements with capped student intake. Either this policy would be extraordinarily expensive, or it would wind up reducing the number of places at Uni, or it would require substantial per-student cost-cutting at the Universities. 
• I could be sympathetic to the last bit, but I'm not sure what the point would be. We kinda know what they did, and the government has made it all legal. We don't need a Royal Commission. We need a redrafting of the legislation with input from the tech sector at ground level. [Update: Chris Yong, Internet Party candidate for Te Atatu, notes that the Commission enquiry would be into the handling of the DotCom case; the total review of the GCSB Act would be separate.]

Back to their policies:

Mana Party Waiariki candidate Annette Sykes said it would close prisons, while co-vice president John Minto promised to abolish GST but introduce a tax on financial speculation, and bring back the inheritance tax ditched by National.

• I'd really want to see what policies they're proposing to reduce the prison muster before commenting on closing prisons. If they can do it by legalising possession, cultivation and distribution of marijuana while releasing anybody jailed for only those offences, and if that were enough to do away with a prison, great. 
• Replacing GST with a speculation tax is an extraordinarily bad idea. The GST is a nice clean tax. Financial speculation taxes are rather harder to implement and, worse, don't make a lot of sense. The best case for them is that they might reduce excess volatility in currency markets, but that doesn't apply well to the kinds of long term cycles we get in the NZ dollar. 
• Inheritance taxes aren't uncommon around the world, but they do involve substantially more distortion than does the GST. Whenever you put in inheritance taxes, you have to put in a big apparatus around transfers from parents to children to avoid folks' just pre-gifting the inheritance. But when you do that, you also encumber a lot of ways that parents are already helping their children for non-tax-avoidance reasons. If an inheritance tax kicks in at $500,000, that will hit a pretty decent fraction of estates where the deceased owned a home. Do you then require that the grieving kids sell off the family home to pay the taxes? Or do you exempt the family home, and consequently induce even greater investment in housing? It's messy.

DotMana

Trading on the Kim Dotcom Internet Party stocks over at iPredict, complicated enough ex ante, has gotten even more complicated.

Prior to this weekend's rumours of an alliance with the Mana Party, the so-simple contract paying out $0.10 for every 1% earned by the Internet Party was really this mess:

Here's what you're trading on, if you're buying this contract. 

• The probability that DotCom actually forms a party (which I'd reckoned at 80% prior to this);
• The probability that DotCom is serious about the tweet (75%?);
• The probability that the Internet Party could poll above 5% prior to the deadline (which I put at even odds IF we get substantial GCSB Snowden revelations during the campaign);
• The expected vote share on election day. This expected vote share is:
• Zero if either of {No party, serious * less than 5%} obtain
• The vote share conditional on polling above 5% and conditional on DotCom being serious.

So, what the hell should you pay for a contract that pays $0.10 for every 1% of the vote earned by the yet-to-be-formed Kim DotCom Internet Party?

Let's label a few terms and make a few guesses. 

• Pp is the probability that there is a Party, say 0.8.
• Ps is the probability that DotCom really would kill the party if it doesn't poll 5% prior to the election, say 0.75
• Vh is the expected vote share conditional on a poll result of 5% prior to the deadline
• This one's hard to ballpark. You could make an argument for pegging it lower than 5% because a single outlier poll could be sufficient for his going ahead. But I expect that the state of the world in which he can get a single >5% figure is the state of the world in which we've had substantial GCSB revelations affecting NZ; in that state of the world, I'd put even odds on 5%. And so I'll stick it at 5, or $0.50 in iPredict prices.
• Vl is the expected vote share conditional on no polling result of 5% prior to the deadline.
• I'll peg this at 0.5%. If he goes ahead despite no polling result above 5%, credibility's shot. And it's also the state of the world in which there's no substantial GCSB revelations. So $0.05 in iPredict prices.
• Pt is the probability that the Internet Party polls at least 5% prior to the deadline.
• I'll peg this at at even odds IF we get substantial GCSB revelations during the election campaign, and nil otherwise. Supposing even odds on substantial revelations, that gives us 25%.

The expected value of the contract is then:

Pp*[[Ps*[(Pt*Vh)+((1-Pt)*0)]+[(1-Ps)*[(Pt*Vh)+((1-Pt)*Vl)]]]

Using my rough ballpark estimates, that's then:

0.8*[[0.75*((0.25*$0.5)+0)]+[0.25*[0.25*$0.5+0.75*$0.05]]]

= 0.8*($0.09375+.25*$0.04375)

= 0.8*$0.1375

= $0.11

And so I've put in a bid for 50 units at $0.09. I also put in an ask of 50 units at $0.15.

Denote as Pm the likelihood of a merger with Mana. Denote as Ph the likelihood that Hone Harawira wins his seat in a world in which he's merged with DotCom. If there's a merger AND if Hone's seen as very likely to win his seat, I expect DotCom would void his promise to kill the party were it short of 5% - every vote would count for the Internet Party if it had a seat under MMP.

I'm not going to put up the equation this time. It's going to be just too messy. But the following will matter:

• Pp, the probability that there will be a party, is now 0.98 (I expect)
• The party's expected vote share varies substantially based on whether they're allied with Mana.
• With Mana:
• On the upside, people may have fewer worries about throwing away their vote, but they shouldn't have had that worry anyway given the promise to kill the party were it not polling less than 5%. So maybe they get a bit of an up-tick from the expectation that there won't be a wasted vote.
• On the downside, you get an internet freedom, anti-surveillance party that's merged with some fairly non-standard economic ideas, conspiracy theories, and assorted random-draw oddities. The Green Party already combines internet freedom, anti-surveillance, non-standard economic ideas, and a slightly different set of random-draw oddities. I'm not sure what niche the DotMana Party then seeks to fill. Maybe it has a bit more "stick it to the Man" appeal than do the establishment Greens, but are there really many voters in that space? 
• So, the whole Ps argument is going to change then: the Party goes ahead conditional on polling above 5% or on Hone's being likely to win Te Tai Tokerau. Note that his odds there dropped from 90% to 83% over the past week. So we then have a 17% chance that Hone loses his seat. 
• In this world, the contract is really trading on the vote share for the combined party, and not simply on the likelihood of the party's reaching 5%. 
• Without Mana:
• On the upside, we're mostly back to status-quo ex ante;
• On the downside, there's the substantial WTF?! effect on those who would have been supporters of the Internet Party. I'd expected that an Internet Party could do well by staying well out of stuff other than internet issues: they'd then provide a landing spot for anti-surveillance or pro-internet voters who weren't comfortable with the Greens and who didn't trust ACT's commitment to freedom on this issue.* An alliance with Hone Harawira doesn't particularly make him more appealing to folks in that group, or at least I'd bet against it. 
• In this state of the world, and absent his buying some other MP, we're back to the calculation I'd run before, albeit around a lower mean due to the WTF effect.
• I have no idea how to start assessing the likelihood of a merger with Mana. My priors on what Hone Harawira might do on any margin are pretty flat. And Pm will matter.

I'm not going to peg new fair odds lines here. The initial market reaction had Internet Party dropping from 0.9% to 0.7%, spiking up to 1.5%, dropping back to 0.7%, then rising again to 1%. But it's a very thin market. I would be setting some buy orders at $0.05 (0.5%) and some sell orders at $0.15 (1.5%). But I've low confidence in either estimate and, more importantly, the market's going to move a lot when a final announcement comes on the Mana merger. Such announcements seem to like to happen when I'm driving and unable to trade. And so I'm staying the heck out of the order book for now.



* Jaime Whyte is very much against the expansion in surveillance that came with the GCSB and TICS legislation. His predecessor, John Banks, or at least Banks's office, very much favoured it. Some in the ACT Party come from the Sensible Sentencing Trust wing; I'm not sure they've ever seen an expansion in the police or security apparatus that they didn't heartily endorse. They trust that the GCSB will Do The Right Thing; they view the current surveillance arrangements as fully consistent with liberalism. Whyte doesn't. But that all does make it harder for ACT to commit to what I'd view as a liberal policy on these issues.

DotCom bets: they just got more complicated.

iPredict has a contract that pays $0.10 for every 1% of the vote earned by the yet-to-be-formed Kim DotCom Internet Party. The contract's price then is the market's expectation of the party's vote share.

But not anymore.

If #InternetParty won't poll 5+% before ballot papers are printed we'll self destruct & put our weight behind a party adopting our policies.
— Kim Dotcom (@KimDotcom) February 10, 2014

We now have a ridiculously complicated contract. Here's what you're trading on, if you're buying this contract.

• The probability that DotCom actually forms a party (which I'd reckoned at 80% prior to this);
• The probability that DotCom is serious about the tweet (75%?);
• The probability that the Internet Party could poll above 5% prior to the deadline (which I put at even odds IF we get substantial GCSB Snowden revelations during the campaign);
• The expected vote share on election day. This expected vote share is:
• Zero if either of {No party, serious * less than 5%} obtain
• The vote share conditional on polling above 5% and conditional on DotCom being serious.

So, what the hell should you pay for a contract that pays $0.10 for every 1% of the vote earned by the yet-to-be-formed Kim DotCom Internet Party?

Let's label a few terms and make a few guesses. 

• Pp is the probability that there is a Party, say 0.8.
• Ps is the probability that DotCom really would kill the party if it doesn't poll 5% prior to the election, say 0.75
• Vh is the expected vote share conditional on a poll result of 5% prior to the deadline
• This one's hard to ballpark. You could make an argument for pegging it lower than 5% because a single outlier poll could be sufficient for his going ahead. But I expect that the state of the world in which he can get a single >5% figure is the state of the world in which we've had substantial GCSB revelations affecting NZ; in that state of the world, I'd put even odds on 5%. And so I'll stick it at 5, or $0.50 in iPredict prices.
• Vl is the expected vote share conditional on no polling result of 5% prior to the deadline.
• I'll peg this at 0.5%. If he goes ahead despite no polling result above 5%, credibility's shot. And it's also the state of the world in which there's no substantial GCSB revelations. So $0.05 in iPredict prices.
• Pt is the probability that the Internet Party polls at least 5% prior to the deadline.
• I'll peg this at at even odds IF we get substantial GCSB revelations during the election campaign, and nil otherwise. Supposing even odds on substantial revelations, that gives us 25%.

The expected value of the contract is then:

Pp*[[Ps*[(Pt*Vh)+((1-Pt)*0)]+[(1-Ps)*[(Pt*Vh)+((1-Pt)*Vl)]]]

Using my rough ballpark estimates, that's then:

0.8*[[0.75*((0.25*$0.5)+0)]+[0.25*[0.25*$0.5+0.75*$0.05]]]

= 0.8*($0.09375+.25*$0.04375)

= 0.8*$0.1375

= $0.11

And so I've put in a bid for 50 units at $0.09. I also put in an ask of 50 units at $0.15.

DotBets

There not yet being iPredict markets on Kim DotCom's yet-to-be-registered political party, I've been reduced to bilateral bets.

I figure there's an 80% chance, or thereabouts, that there will be some new political party with which Kim DotCom is affiliated. 

I also put even odds on that there will be substantial Snowdon GCSB revelations during the election campaign. Our election is coming up this year. The Snowdon releases thus far haven't said much about New Zealand, but he and Greenwald seem to be timing things for best media effect. So why wouldn't they have saved any of the good NZ stuff for the election? 

Conditional on this party's being established, and conditional on there being substantial GCSB stuff coming out during the election, I expect that Kim DotCom will be exceptionally well placed to capitalise on it. And so, in that state of the world, I put even odds on that DotCom gets 5% of the party vote.

So 0.8 * 0.5 * 0.5 = 20% chance that DotCom gets 5%. One chance in five.

@BKDrinkwater and @kiwipollguy reckoned that overstated DotCom's chances. So they each put $80 up against my $20. If some DotCom party gets in at 5%, they each owe me $80. If some DotCom party doesn't get in at 5%, I owe each of them $20. @ClintVSmith did a bit of yapyapyap about how my numbers were wrong, but wouldn't put any money on it. 

That both Drinkwater and Heffernan took the other side of the bet suggests that I've likely overestimated things somewhere. I'm not sure which parts of the combinatorial they figured I'd overestimated. I suppose iPredict will let me know sooner or later. 

I've reckoned that there's space in the NZ political market for a party that's strong on civil liberties but is also friendly to free markets. The Greens own the "civil liberties, except around smoking tobacco and eating, plus heavy state control of the economy" space. ACT has the free market spot but isn't credible on civil liberties when it comes to surveillance issues: ACT's enthusiastic support of the GCSB power extension means they've no chance on that issue, regardless of any leadership change. No new party, or at least no successor to ACT, can come up in the traditional liberal "free minds, free markets" space while ACT is still there. 

But a civil liberties party that stays basically neutral on economic issues other than favouring whatever makes internet better could do really well. 

Chris Keall over at Ars Technica provides a nice summary of last week's cancelled DotCom party. Kim DotCom planned an album release party and everyone was invited. The Electoral Commission thought it might count as "Treating" - providing of gifts in hopes that those so-gifted would reciprocate with votes. This application of the law doesn't make any darned sense to me. Suppose that, at your party's annual convention, a band played. Would that be treating? How about if you have a hospitality suite with free drinks? What if the party's meeting is held in an exclusive spot that's otherwise hard to get into, and the fee for attending is way less than the venue would normally charge out at? And if the distinction here is whether the event is members-only, surely DotCom could have signed up each and every attendee as a $1 member of his new party and called it members-only too. 

Rob Hosking figures that DotCom's potential party is frivolous and that DotCom's main interest is in making himself extradition-proof. 

At its core there is an adolescent mindset here: uncritical fandom with all the depth and maturity as a bunch of screaming teenagers at a Justin Bieber concert on the positive side, and on the negative side, a pubescent screech of "you're not the boss of me!" directed at both the current New Zealand government and the US authorities.

I'm not sure that changes much of the reckoning above. Sure, he doesn't have a slate of policies. But, at least for now, that ambiguity is a major advantage for him. Without policies, every fan of DotCom, adolescent or not, can project their idealised policies onto him. Any policy he announces will disappoint some faction. Staying quiet on everything other than surveillance and internet policy gives him flexibility for any post-election negotiations. 

And a "You're not the boss of me" party could crack 5% if we get Greenwald/Snowdon revelations that, hypothetically, the NSA's Waihopi spy base is being used to scrape down and store each and every text message sent within New Zealand, monitor all our phone calls, and that NSA has taps on the cables running into New Zealand.