It's Reddell's fault

That whole "let's charge everybody for their OIAs" thing? Looks like it's Mike Reddell's fault.*

From an OIA request by Alex Harris:

I'd have thought that giving Mike the papers he'd written wouldn't involve a lot of work. He could probably even rattle off the names, dates, and file locations for them to make it simple.

* It really isn't Mike's fault.

Update: Note Reddell's comment below, and RossM and Elinor Dashwood on how much bureau work goes into each OIA request.

Update 2: Reddell comments here.

School Fairs and showing-you-care equilibra

The curse of inefficient "showing you care" equilibria. I'd hit on the economics of charity races a few times; Mike Reddell went after school fairs this past weekend.

From his excellent rant:

We don’t usually get very involved in the fair. But I’d donated perhaps $25 of ingredients a while ago for people making preserves, sweets etc. And yesterday I made them a plate of chocolate marshmallow slice – a slightly fiddly recipe and, between ingredients and time, that probably cost at least $15. My nine year old is on the School Council and was “coerced” into manning a stall. She spent two and half hours doing that. I’m not sure how to value her time, but it isn’t zero.

And because she was on the stall and they needed parent volunteers as well, we weakened and put in half an hour or so each (getting to and fro etc made that perhaps 45 minutes each in total). How to value our time? Well, the marginal cost has to be above the average cost, and one needs to think in after-tax terms. $50 per hour seems very much towards the low end, but if we run with that, it was a donation of $75 between the two of us.

After running the numbers, he reckoned that it cost them rather a lot to provide a bit to the school:

That adds up to a contribution of $125 from our family – costed at the low end of a possible range of estimates. Had we just written a cheque for $110 to the school as an additional donation, we’d have been able to claim back a tax refund (as it would be a charitable donation) for a third of the amount. So we spent $125 to provide the school $110, even though we could have provided the same benefit to the school for perhaps $73. This can’t be an uncommon story. I might have costed our time a bit higher than the average parents would have, but this is a decile 10 school. Parental time is scarce and valuable.

And then there's all the time put in by the organisers, and the time wasted by the kids in prepping for the thing.

Were there any offsetting gains to compensate for the wasted $52? Well, it was nice to see the nine year old responsibly helping run the activity (but she has other involvements outside the home). Perhaps some people get a warm fuzzy feeling from “doing something together for the community”. But this is a school. We don’t apply this funding model to the local GP or, say, the supermarket We write a cheque. As a pro-defence conservative, the old liberal line about holding cake stalls to fund the air force once annoyed me a little, but…….they make a fair point. Cake stalls to fund our education system?

Now I know that high decile schools are somewhat caught. They are funded much less well than lower decile schools, and they are not allowed to charge fees. They can ask for “donations”, and most parents pay them, but even at lower-end decile 10 areas (which is how I’d characterise Island Bay), the resistance will start to rise if the requested donation is raised too far. But the economics of the current model just don’t seem to add up. And while there are deadweight losses from taxes, from the less inefficient taxes they are not as large as the waste implied by my cost calculations above.

I suspect that, from the school's view, there are benefits from parent engagement beyond the cheque. And I also suspect that muggles just don't view these things as harshly as economists do. We see the inefficiency and it causes huge disutility. Others view the participation as a benefit, not a cost, and so put value on their time measured against other fun things they could be doing instead.

Heck, some people even show up for graduations.

Mike's reckoned I'd be able to point to fun academic papers looking at the topic. I can't think of any off the top, but reader pointers appreciated.

Update: I left this as comment over at Croaking Cassandra. I still wonder about a general theory here:

Can’t point to any lit off the top, but a general theory on this needs to explain also why we wind up with ‘charity race’ equilibria rather than ‘work overtime and donate to the cause followed by a parade for the donors’ thing. And it might also have to explain why university graduation ceremonies are as tedious as they are for each and every person involved. And it’ll be related to the rise of the higher-cost religious denominations in the US relative to the ones that don’t ask as much of adherents.
There’s something weird going on in ‘showing you care’ equilibria where our normal intuitions break. Costs become benefits.

Monetary policy needs mates?

Here's Brian Fallow at the Herald.

The European Central Bank and Bank of Japan are printing money, and while the US Federal Reserve has at least stopped doing that, it is apparently in no rush even to start lifting interest rates from the emergency levels it cut them to during the crisis. Such heavy dosages of monetary stimulus carry serious side effects. They have inflated asset markets around the world, including the Auckland housing market.

The IMF warns that "The main medium-term risk for advanced economies is a further decline of already-low growth into near stagnation, particularly if global demand falters further as prospects weaken for emerging market and developing economies."

Countries (such as New Zealand) which are not fiscally constrained and which significantly rely on net external demand should ease their fiscal stance in the near term, especially through increased infrastructure investment, it says.

Fiscal conditions in New Zealand are likely to become more stimulatory regardless of any policy change, simply because of the "automatic stabilisers" as unemployment rises and revenue growth slows.

But the IMF is right to call for more than that.

It is a bit too easy for the Government to leave the task of moderating the cycle entirely to the Reserve Bank.

That task, never easy, is especially difficult in the current international environment, governor Graeme Wheeler said in a speech on Wednesday.

As the saying goes, monetary policy needs mates.

Fallow's article could make sense if, say, NZ monetary policy were already near the zero bound and they'd not figured out how to run less conventional moves. But to the extent that monetary policy needs mates in New Zealand, it needs help in keeping Auckland house prices from spiralling ever upwards. It doesn't need help in any fiscal demand pushes. Fortunately, Chris Parker over at Auckland Council seems to be making some headway.*

With inflation having been below the bottom of the policy targets agreement bound for a heck of a long time, and interest rates nowhere near the zero bound, it isn't right to say that monetary policy needs mates in preventing unemployment. It's closer to right to say that monetary policy's barely been tried.

Mike Reddell raises a few pertinent points here. 


* Here's the nice part on Auckland:

Item 13: Housing Supply, Choice and Affordability: Trends, Economic Drivers and Possible Policy Interventions

Chris Parker, Chief Economist for Auckland Council, spoke to the committee on his recently completed report Housing supply, choice and affordability; Trends, economic drivers, and possible policy interventions, which was publicly released on Wednesday 30 September 2015.

The report identifies a range of levers on both the supply and demand side that could be considered to address the housing affordability problem in Auckland.

Following a recommendation in the report, the committee decided to endorse a target of bringing down the ratio of median home purchase price-to-median household income to five to one by 2030. The ratio is currently nine-to-one. [emphasis added]

It also agreed in principle to include the target in the forthcoming refresh of the Auckland Plan and noted that the council needs to continue to work in partnership with the Government if this housing affordability target is to be met.

Mr Parker says including this target in the Auckland Plan is a really positive step towards making housing more affordable. “It will help shape and focus our thinking moving forward. It will provide us with a tangible, achievable goal to frame up the decisions the council needs to make to create the world's most liveable city including affordable housing", says Mr Parker.

The committee also requested that the council progress the next stage of the Auckland’s housing affordability work by undertaking further analysis and advice on the issue of housing affordability in consultation with Government agencies, to be completed in February 2016.

The Chief Economist’s housing affordability report was commissioned by Mayor Len Brown and Deputy Mayor Penny Hulse. It is an independent economic think piece and is not council policy. However, it will help inform the council's ongoing strategy for action and advocacy. It is availableon council’s website.

Kudos to Chris!