Morning roundup

The computer begs to be rebooted. But the tabs...

• There's an underlying demand-side problem to misinformation. You can't con an honest man...


• Some days, I love our Environment Minister. Here's David Parker giving Auckland Council a deserved slap for nonsense around character designations. People who want to protect character are "entitled to do that in respect to their own property. But in other parts of their suburb, there will be areas where more intensive housing will and should be built." EXACTLY!! If only central government would fix the incentives that encourage councils to do this...


• New Zealand regime around medicinal cannabis remains a broken mess. I think it was allowed to fall into disrepair on expectation that legalisation would be coming and make it redundant. It has to be very frustrating for anyone who needs cannabis as treatment, and anyone who wants to supply it. The Newsroom column is gated today, but I think will ungate tomorrow if you pull out the /pro from the link. In addition to all the other problems, medicinal cannabis suppliers have a tough time finding banking or insurance. 


• Kate MacNamara keeps digging on the messes around Covid testing regulation. Just impossibly frustrating. You can use a LAMP test to meet the testing requirements to fly to NZ. It's way more accurate than a RAT. But they're banned in NZ. If you try begging permission to use one here just to give some added assurance before going to visit a vulnerable relative, the Government just doesn't answer. Vogons would give the MoH an award for being more Vogon than anything they'd ever come up with. 


• One problem for all the "let's base policy on happiness" people at Treasury and elsewhere: the measures are crap and you can't do anything with them. Here's Bond & Lang, JPE 2019:

  "The necessary conditions for nonparametric identification are strong and unlikely to ever be satisfied. Standard parametric approaches cannot identify this ranking unless the variances are exactly equal. If not, ordered probit findings can be reversed by lognormal transformations. For nine prominent happiness research areas, conditions for nonparametric identification are rejected and standard parametric results are reversed using plausible transformations."

  If you can just run a plausible transformation on the dependent variable to reverse a result, you've got another degree of freedom to justify whatever policy you'd wanted to rationalise. 


• National Party leader Chris Luxon says he doesn't like corporate welfare in the climate response. Good! But the ETS revenues are hypothecated. Does he support putting them back into general revenues? Or, better, would he support a carbon dividend? I like National's emphasis on an ETS led approach, but that's harder if you don't rebate ETS revenues back to households. If he's not going to, he should promise to end the hypothecation that's let Robertson have a slush fund. 
  


• Princeton no longer supports academic freedom.


• Regulatory regimes can embed fragility against shocks. NZ building materials supply, US baby formula...

Ok. I think I can reboot now. 

The cannabis referendum

I hope that the cannabis referendum passes. It isn't the legislation I'd have written, but it is preferable to prohibition. 

Last week, The Helen Clark Foundation and the Initiative co-hosted a webinar with The Brookings Institution's John Hudak, author of Marijuana: A Short History, about America's experience with legalisation. 

You can catch it below. 

Public Address's Russell Brown covered the webinar here.

There's been a lot of misinformation about what would be allowed under the proposed legislation. I covered some of that in this week's column for the Stuff newspapers. 

A snippet:

The main scare stories really do not hold up. The legalisation experience abroad counters many of them; the restrictiveness of New Zealand’s proposed framework puts paid to much of the rest.

If you are not certain about any aspect of the bill, it is all easily checked. But a fairly simple heuristic can also work. Just imagine the bill was drafted by people who deeply mistrust business and commerce, who hate advertising, who are not all that keen on cannabis consumption in any case, and whose ideal cannabis operation would be a small non-profit community-based cooperative that employs people from underprivileged communities. Any provisions you might imagine would be drafted by that kind of group will not be far from how the bill really looks.

I worry that this makes for a bit of a problem. Social conservatives have very good ways of overcoming collective action problems. Where the Bill makes it rather difficult for any kind of larger businesses to get involved, you'll be less likely to draw any substantial industry funding in support of legalisation. 

I also worry a bit that the bill doesn't do much to make it easier for employers needing to deal with a worker who shows up impaired. It's less a problem in the US, because it's rather easier to fire workers there. Here, it could be an issue:

That also leads to a bit of a problem, even if your ideal cannabis operation looks like the kind of business likely to be authorised and licensed under this draft legislation. How can employers whose workplaces involve risky activities like heavy machine operation ensure that they can maintain appropriate health and safety regimes, while not running into trouble with employment law?

It is a difficult circle to square.

Employees should have the right, in a legalised environment, to consume cannabis on the weekend. But employers should be able to discipline workers who show up to work while impaired. The bill does little to enable the latter.

Proving that an employee is impaired can be difficult. Workplace drug testing is a poor indicator of on-the-job impairment; cannabis use over the prior weekend can too easily be caught in those tests if the threshold is set at a low level. Further, if an employee’s terms of initial employment did not include provision for drug testing, it can be difficult to add those provisions later.

Prohibition makes it risky for workers to show up to work while impaired, the consequences could be worse than an angry boss. Removing that constraint, while not providing better ways for employers to ensure on-the-job safety, can make for a problem.

I hope the cannabis referendum passes, and that the bill is brought to Parliament. When Parliament considers the bill at committee, it should also think on how to balance workplace health and safety requirements. Making it easier for employers to add testing requirements to employment contracts may help.

Afternoon roundup

The tabs... there are so many of them.

A few notes on the closing of the tabs.

• Tyler Cowen is excellent on herd immunity. Those who urge us not to worry about the virus used to claim that herd immunity would kick in and the virus would burn itself out. Now they tell us not to worry because the death rate has dropped. But herd immunity was supposed to stop case numbers from rising. And even places with lotsa Covid aren't there yet - other than perhaps at San Quenton. 
• Sam Bowman has a neoliberal agenda for the 2020s: YIMBYism, support for immigration, and carbon pricing (he says carbon taxes, but if you've already got an ETS, that'll do the job). Neoliberalism is a bit of a political swear word. Oliver Hartwich goes through the history of the term - the actual neoliberals were more 'third way' types. Whether the term should be buried or reclaimed is a bit of an open question. 
• Steve Ambler and Nick Rowe on NGDPLT.
• Freedom of speech doesn't encourage terrorism. It reduces it. Here's Eskildsen and Bjørnskov in Political Studies. Why? They suggest "(1) more freedom of expression makes it easier for the police and intelligence agencies to gather information on potential terrorists and targets, and (2) freedom of expression works as an outlet for displeased citizens through which they can openly express their discontent instead of resorting to terror."
• Chris Bishop and Phil Twyford had an excellent panel discussion, hosted by Warren and Mahoney, in which they went through urban and transport policy. This kind of thing makes you really appreciate what we've got in NZ. 
• Get yourself a city councillor with a digger. It helps.
• Support for immigration improves, albeit on a bit of a tough to interpret question. If folks recently said that the amount of immigration should increase, are they thinking about policy as it was before Covid, or are they thinking about current border restrictions?
• Helen Clark comes out in support of the euthanasia bill. I agree with her. 
• Superb piece from Colby Cosh on tax and legal cannabis in Canada. It isn't enough just to look at the tax take on cannabis. Is it a complement or a substitute to alcohol or tobacco? What are the general equilibrium effects? 
• Every supporter of circular economies and zero waste should support this initiative.
• Can you build a new tech hub? It's harder than it sounds.
• Razib Khan on Brahmin Privilege
• Keas are awesome
• Arthur Grimes on getting targets back into government.

Almost anything beats prohibition, including the draft cannabis legislation

The draft cannabis legislation, as written, is better than prohibition. Even without amendment, those inclined to vote should vote for it.

There's still a lot in it that I don't like though.

The prohibition on growers also running retail operations, presumably intended to prevent large commercial grow operations with vertically integrated retailers, will also prevent anyone from running the kinds of cellar-door operations that have been very important in wine tourism.

Sure, cannabis is nothing like wine. But is it that hard to imagine folks spending a morning at a grower's in Northland, seeing he fields, meeting the growers and workers, touring the facilities, sampling some of the product , having a bit of lunch maybe with a nice wine, ordering some for delivery back home, then bicycling over to tour a different one in the afternoon?

A whole lot of that would be illegal under the legislation as drafted.

The grower is not allowed to run a licensed consumption facility. Licensed consumption facilities are not allowed also to have alcohol. And prohibitions on advertising would likely make it hard even to put up a normal product list with descriptions and prices within the shop. The names of products and prices are fine; any additional notes wouldn't be.

Russell Brown, who's more a fan of the legislation than I am, also worries about this part

The bottom line of the section quoted above also embodies a more recent approach: a ban on vertical integration, which has been an element of reform in Mexico. No business will be able to both produce cannabis and sell it to the consumer, which restricts market dominance.

The economist Eric Crampton has already noted that the vertical integration ban would preclude “cellar door” type operations, where a producer could show and sell farm-grown cannabis to visitors (which would undoubtedly be popular with tourists). But I think there are larger impediments to that, most notably in the banket ban on advertising – including advertising inside R20 stores. You won’t be able to smell or see your weed – or even a picture of it – just a price list.

It’s not clear to me the extent to which even attributes of of the products will be able to be described, to tight is the advertising ban. But the particular effects of any given cannabis strain strain are governed as much by which terpenes are present as by THC level – weed that smells like cheese will have a very different effect to weed that smells like piney or citrusy, believe or or not – and anyone buying it needs some way of knowing that.

I do think there’s a level where this gets infantilising. If we’ve decided, as a nation, that adults can use this drug, then not letting them see it or get information about it, even on licensed premises, until they’ve bought it – when they will be free to look at it, smell it and consume it, even right there on the spot – just seems a bit silly.

And the cap on the quantity of cannabis that can be sold in the commercial market will make it very hard for the market to respond to changes in demand that can come with, for example, the return of tourism. Quantity restrictions will push prices up whenever demand is higher than normal, and that will encourage shifts back into the illegal or informal market. If the government had any intention of setting excise to try to maintain retail prices to consumers around where they are now, it'll be harder to do that under the quantity restriction.

The cap is likely to turn into a sinking lid where the cap is supposed to be set with a view to the purposes of the Act and the Harm Reduction Strategy, all of which focus on minimising the harms of use.

The Authority has to decide among potential growers vying for a share of the annual production cap. They're meant to take into account factors listed in Section 85, including representation of communities traditionally harmed by cannabis, generation of social benefits and employment.

Those applications come in for the share of the annual cap, so every year there will be costly application processes trying to prove the social worthiness of one grower relative to another.

There's no mention of potential tradeability of permits; it's presumably prohibited where the point of the permitting process is to make sure that the portions of the cap are divvied up according to the preferences of the Authority as guided by the Act. But that also could cause problems if a grower experiences crop failure in one year, for example. With wine, if one part of the country has a great year and another part is a bit average, it all washes out. If there's drought hitting apples in Hawkes' Bay but Central Otago's fine, then we get apples from Central instead. Nobody has to reallocate permits in accordance with social worthiness.

This whole thing looks rather ripe for rent-seeking.

And while the regime at least doesn't punish those under the age limit for being in possession of cannabis - or at least avoids criminalising them - it would criminalise social supply to 19 year olds in cases where, for example, a parent may prefer to provide a bit from their own home-grown supply than have the kid rely on informal supply from less savoury folks. Sure, in theory, illicit supply's supposed to be wiped out. But suppose you have an 18 year old at home that you know is getting weed elsewhere and that it's dodgy-as. Unless you're able to find and dob in the kid's supplier, you can't really block that access route. And you can't supply small amounts of better product for supervised consumption.

And if you regularly have guests over who consume cannabis, be careful about Section 177: you could be considered to be running an unlicensed premise for the purpose of cannabis consumption even if no money changes hands.

On the good side though:

• Excise would be based on weight and potency rather than ad valorem;
• Edibles will be allowed - though I don't see any mention of the standard-dose kinds of packaging that have been useful elsewhere;
• There's a review 5 years into the regime to see how it's working;
• It isn't as bad as prohibition. 

Afternoon roundup

This afternoon's worthies on closing out the accumulated browser tabs:

• Russell Brown on cannabis reform, including links through to reasonable critiques of the Berenson work that's been floating around.


• Some excellent data work by Mike Reddell looking at the time path of employee compensation in NZ. Labour worries a lot about what they see as a declining labour share of income. Here are the key graphs.
  
  First up, employee compensation as fraction of GDP, adjusted for production taxes and subsidies. It's up on where it was in the 90s, but has been flat for the past decade.  
  
  
  
  Next up, wages as fraction of nominal GDP per hour worked:
  
  
  Reddell's summary:

  There is a fair bit of short-term noise, but the trend is pretty clear. On this data, wages have been rising faster than the overall earnings capacity of the economy. That was so in the 00s, and has been so – albeit to a lesser extent – in recent years too. For anyone inclined to want to debunk the analytical unadjusted series, note that this chart is not wildly inconsistent with the labour share chart I showed earlier: the labour share of total income has increased since the early 00s, with the biggest change occurring in the pre-recession 00s themselves.

  The underlying problem remains low productivity growth.


• Labour markets remain tight.


• These wonderful maniacs coded folklore from 1,000 pre-industrial societies to look for common traits that could be used in testing social science conjectures. Pastoral oral traditions have more motifs of anger and retaliation; foraging societies have more leisure-related motifs; political centralisation correlates with more use of trade and money words and with respect-related motifs. And old folklore predicts current views about things like toleration of socially deviant behaviour. Read! 


• Nudges are far less beneficial when we consider the psychological costs imposed on the nudgees. 


• Peer effects matter. Or, an argument against school zoning rules that concentrate disadvantage.


• Requiring a job search period before benefit uptake can be rather beneficial. It increases earnings and reemployment, without worsening health or crime outcomes.  


• Informal governance matters in disaster planning. I'm reminded of last year's Christchurch Earthquakes Symposium, where Hurunui District Council's Hamish Dobbie explained [my take on part of his talk] how their Council worked to enable civil society organisations rather than supplant them after the Kaikoura earthquakes. 


• And finally, Nate Silver:

  How my brain interprets every Brexit explainer: https://t.co/7smQVKMP76

  — Nate Silver (@NateSilver538) January 15, 2019

Good character?

National wishes to impose a 'fit and proper persons' test for those supplying legal medicinal cannabis.

National's associate health spokesman Shane Reti said medicinal cannabis manufacturers and employees should be "fit and proper persons".

National has proposed clean slate legislation requiring no terms of imprisonment and no convictions for seven years for employees, and even tougher standards for licence holders including no associations with gangs.

"The industry was adamant that it understood the need to be absolutely squeaky clean in this new industry and they were up for that," Reti said.

David Farrar suggests it is appropriate that those in the industry have no convictions within the past seven years.

I keep saying the best approach to cannabis legalisation is to look at alcohol and see whether the rules there would work for cannabis. For alcohol, a license applicant's suitability matters:

Suitability of an applicant may take into account: business or industry knowledge to effectively operate a licensed premises; recent experience in the industry; criminal history, association with undesirable people, or previous behaviour relating to the sale of alcohol. Suitability of the applicant is an issue that Police considers in the investigation of licence applications as it has access to information not generally available to the public. However, community groups can provide information that may not be available to Police.

Where an existing licence is being renewed with no changes to conditions, the suitability of the applicant will be the only ground for objection.

I would expect that this, applied to cannabis, should mean that people with current gang affiliations would not be deemed suitable, that those with criminal histories not relating to cannabis would not be deemed suitable unless they had cleaned up their act, and that those whose prior offending related only to the sale, supply, or possession of cannabis should be deemed suitable. I would also expect that the licensing authority would weigh things up as a whole for any applicant.

So I would hope that someone who had a criminal record as a drug dealer would not be excluded from being a potential licensee. Otherwise, I'd hope that the licensing authority just uses the same kind of criteria it uses when deciding on alcohol licensees. A new licensee's prior expertise with cannabis should count positively, rather than negatively, in that evaluation.

It would be manifestly unjust if those who have been most harmed by prohibition were locked out of a newly legal industry in which they have developed some expertise.