Afternoon roundup

The tabs...

• Earthquake strengthening costs on one Wellington performance venue have increased from $90m to $182m and now to $329m (Dom, Herald). We have no clue what strengthening the recently quake-designated Michael Fowler Centre and Opera House might cost. Would it be crazy to expect a billion dollars across all three? After $100m more than necessary on a library? All for a town of about 200,000 people where the water pipes are a century-old collapsing mess? It's a good thing Wellington's pretty...
• Mothers of underweight babies below a cut-off get substantial US government support; those just above the cut-off don't. Run the RDD and find no effects of funding on outcomes. 
• NZ's National Party promises non-finance spending two percentage points of GDP higher than Ardern promised in the 2019 Wellbeing Budget. 
• Devastating New Yorker piece on the Ariely / Gino mess. Harvard's Business School is not a serious place. 
• Admin staff at the Auckland Uni law school are substantially happier than faculty. I keep wondering when somebody might set up a union that represents only academic staff. 
• Superb BusinessDesk piece on Sean Colgan, who backed Rako in its fight with the Ministry of Health. And has leant David Seymour a plan for the election campaign. 
• My piece in this past weekend's Stuff papers covers two recent NBER working papers on zero-sum thinking. 
• California's math curriculum is nuts. Unfortunately, this kind of nuttiness is also infecting New Zealand.
• A lot of US voters are confused about whether Robert F Kennedy Jr is Bobby Kennedy. They identify the picture of Bobby Kennedy from the 1950s, the father of Robert F Kennedy Jr, as being Robert F Kennedy Jr. He's aged remarkably well if so; the father would be turning 98 later this year. Every time you learn a little bit more about voters, just be amazed that the world isn't even worse. 
• For six years, NZ had a government that expressed commitment to wellbeing as its highest goal, and yet this. 
• So Sanitarium ran into some supply issues and cut supply to The Warehouse before either Foodstuffs or Woolworths. Which seems more plausible: that the whole thing is a stitch-up by the big supermarkets to get Sanitarium to cut out a low-price potential competitor, with a new grocery regulator watching? Or that the big supermarkets have longstanding contracts where they pay a bit more to have clauses providing greater security of supply? I'd bet on the latter, but nobody else seems to have considered that possibility.

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. 

Afternoon roundup

A long-delayed closing of the browser tabs:

• A compilation of the Official Information Act requests that Health New Zealand ignored or delayed. I doubt anything gets fixed without penalties for OIA non-compliance.


• CarbonNews ($) reports more investments into Ruminant BioTech, which has a slow-release bolus that massively reduces cattle methane production. 70%. If this thing winds up being able to be delivered at a reasonable price-point, that's agricultural methane emissions solved. Nitrates will still be a problem. But 70% reduction is well beyond any of the targets for long-lived gas reduction. 


• Who is Dril?


• Learning from Houston's townhouse reforms.


• If you take away combustion's harms, there's no particularly good reason to worry about people enjoying nicotine. Do you complain about their caffeine? The excellent Clive Bates. 


• And on the same topic, note too the speech by UK Minister Neil O'Brien on avoiding NZ-style prohibitionist approaches.

  Now of course some would go further - to stop people to start smoking in the first place. The Khan Review last year advocated the New Zealand approach - a full phase out of smoking, with the age of sale increasing over time to cover all adults.
  This would be a major departure from the policy pursued over recent decades which has emphasised personal responsibility and help for people to quit. And it is the help for current smokers to quit that we want to focus on. 

• An older piece by Pete Boettke that I'd missed on the genius of Armen Alchian. Certainly one of the Pantheon of the Econ Gods. Really important points on markets as a filtering tech. It doesn't matter if people are stupid, obnoxious, or daft. You can still model them as rational and the model tracks because that's what survives. Read!

And in honour of the Boettke piece...

Presenting...

GMU Balenciaga -- Economics with attitude 😎 pic.twitter.com/wzWiOnnd73

— Samuel Hammond 🌐🏛 (@hamandcheese) April 9, 2023

Life expectancy and health outcomes

There's a literature on everything, so I expect someone's already done this. I'd be keen to see the result if someone has.

There are almost-certainly piles of disorders that are particularly damaging when you're older rather than younger, and where there are apparent differences in effect by ethnicity after correcting for age. 

I know that the Ministry of Health here has pointed to differences in Covid outcomes by ethnicity in multivariate analysis correcting for age but there will have to be lots of other ones.

There are two ways of thinking about age. You can think about it as years since birth. Or you can think about it as percent of expected life expectancy already expended. Same as how you can think about your fuel tank as how many litres of fuel you've used since you filled up, or as what percentage of the tank is left. 

Suppose that life expectancy at time of first birthday varies by ethnicity for whatever mix of environmental and genetic reasons. Fuel tanks vary in size. If you're counting litres of fuel used since the tank was full, there will be very different amounts left in the tank depending on the car. 

And suppose further that the true effect of some disorder on health outcomes depends on your remaining life expectancy before the disorder hit rather than your time since birth. Basically anyone who's at 95% of their life expectancy is going to have a rougher time with the illness regardless of whether that 95% mark hits at age 67 or age 80. 

If that's the underlying process, if you run a regression with health outcomes on the left-hand side, and age-in-years and ethnicity on the right-hand side along with whether someone catches the disorder, you're going to lump effects into ethnicity that might not really belong there for this particular disorder. 

It'll be true that a greater proportion of people with this ethnicity at that age die of the disorder, but the ethnicity variable will be a mix of underlying differences in mortality risk by ethnicity plus disorder-specific risks.

I'm not trying to criticise the MoH work here. I'm just wondering where this kind of thing has been considered in the literature. Do age-ethnicity interaction terms sort it out by allowing the effect of age on health outcomes to vary by ethnicity? MoH throws in a "hospital-registered co-morbidity" variable that will catch some of the 'effectively old for physical age' effect but wouldn't get all of it.

I just keep remembering that old Robert Fogel work looking at the health status of US Civil War enlistees, where the 50-year-olds of the 1850s were hitting the health problems of today's 70-year-olds. It'd be true to say that 50-year-olds of that era were at far higher risk of dying from heart attacks. But they were also way closer to end of expected life expectancy. So it wasn't just that heart attacks were worse then - it was that life expectancy was lower, people effectively aged more quickly, and something like a heart attack is worse when you're more run down. 

Other not-so-fun bit from that old NYT piece on the Fogel work, that could also be relevant these days:

Dr. Almond had a problem with the studies. They were not of randomly selected populations, he said, making it hard to know if other factors had contributed to the health effects. He wanted to see a rigorous test — a sickness or a deprivation that affected everyone, rich and poor, educated and not, and then went away. Then he realized there had been such an event: the 1918 flu.

The flu pandemic arrived in the United States in October 1918 and was gone by January 1919, afflicting a third of the pregnant women in the United States. What happened to their children? Dr. Almond asked.

He compared two populations: those whose mothers were pregnant during the flu epidemic and those whose mothers were pregnant shortly before or shortly after the epidemic.

To his astonishment, Dr. Almond found that the children of women who were pregnant during the influenza epidemic had more illness, especially diabetes, for which the incidence was 20 percent higher by age 61. They also got less education — they were 15 percent less likely to graduate from high school. The men’s incomes were 5 percent to 7 percent lower, and the families were more likely to receive welfare.

The effects, Dr. Almond said, occurred in whites and nonwhites, in rich and poor, in men and women. He convinced himself, he said, that there was something to the Barker hypothesis.

Afternoon roundup

The afternoon's worthies:

• Why do so many policy interventions help women, but not men? All kinds of intervention programmes, not gender-targeted, seem to have far larger benefits for women than for men. 
• Bryan Perry's latest compilation is out! It's the topic of this week's column at Newsroom, ungates tomorrow by pulling the /pro from the URL. 
• Europe is heading for a dark winter. 
• If we didn't now have a grocery producer price index, David Clark would wind up pointing to the next increase in grocery CPI as reason to break up the supermarkets. He'll probably do it anyway. But at least we can point to the underlying cost pressures now. 9.2%!
• The Future for Local Government Forum's report is due at the end of October. They've a big job to do. Central government has been strangling local government for decades. 
• Noah Smith on the 2022 Econ Nobel to Bernanke, Diamond and Dybvig. And Tyler Cowen , and Cowen on the Diamond Dybvig model.
  
• An Aztec counterargument to vertical supply curves in unimproved land. 
• Forest and Bird questioning the merits of Lake Onslow, and of 100% renewable electricity targets. 

Afternoon roundup

So many browser tabs before the rebooting can happen...

• In praise of the Auditor-General
• Economists flocking to Silicon Valley
• NZTA runs ads supporting local government candidates who support NZTA cycleways. It's win-win. But probably not win-win-win.
• The Character Protection Racket. See also: Mt Vic, Wellington. 
• Fuelling the Energy Transition - a report from Energy Resources Aotearoa, which includes some neat case studies on marginal abatement costs and carbon prices driving uptake of lower-carbon tech.
• Globalisation and regional energy markets
• Pattrick Smellie on the polytech reforms
• What AirNZ status do you have to hit to make sure that you don't get seated next to the violent Mongrel Mob guy with Nazi tattoos on his face who's shirtless because they asked him to take off his Mongrel Mob jacket and he wasn't wearing anything under it?

Wellington hates economists?

Auckland University's Robert MacCulloch says that Wellington hates economists. I worry he's an optimist.

Robert's starkest example is the absence of monetary policy expertise on the Monetary Policy Committee. It was viewed as a conflict of interest. 

It points to how things are perhaps even worse.

There are more than a few people employed in the public sector with the job title "economist" who have very poor training and whose main job is putting sciency-sounding words around things they think the Minister wants to do anyway. 

Real monetary policy experts would be a challenge on the Monetary Policy Committee.

Real economists elsewhere in the Ministries would also be a challenge. 

Basically, if you learn to say "Market failure justifies what my Minister wants" or "Amartya Sen shows that the Minister is right; he is nuanced, unlike those market fundamentalists who oppose the wishes of our enlightened Minister", or "We need to listen to more non-neoclassical non-neoliberal thinkers like Raworth and Mazzucato", you'll go far in economics roles in too much of the NZ public service. 

The Taxpayers Union has a chat with MacCulloch. 

Let the ETS do its job

This week's column in the Dom Post and Stuff papers covers the results of the second Expert Economist Survey. 

A snippet:

New Zealand’s emissions trading scheme (ETS) has improved considerably over the past few years. Through the 2010s, the ETS was a lot more like a low carbon tax set at $20 per tonne.

Now that there is a real and declining cap on net emissions, the price of carbon has risen to $80 per tonne. The carbon charge in a litre of petrol rose accordingly, from about $0.05 to about $0.20.

A lot of Wellington officials support adding policies on top of the ETS. They argue that doing so can force emissions to reduce more quickly.

But when policies target sectors covered by the ETS and those sectors purchase fewer carbon permits, more permits are left for others to buy instead.

And while it is true that the government could take that opportunity to cut the ETS cap more quickly, it could cut the ETS cap more quickly and at less cost to the country as a whole without regulating fuel economy.

We asked whether our expert panel agreed or disagreed with the following proposition: “Tightening the ETS’s cap on net emissions would be a less expensive way to reduce carbon-dioxide emissions than a collection of policies, such as fuel economy standards for imported vehicles, that target emissions already covered by the ETS.”

Thirty-one per cent strongly agreed with the proposition, 54 per cent agreed, and the rest were either uncertain or had no opinion. No surveyed economist disagreed.

But that hardly means that economists see no role for complementary policies. Complementary policies can have an important role to play if there are complementary problems to solve.

The ETS puts a price on carbon that deals with the market failure we would otherwise have in carbon emissions. If other market failures unduly hinder adjusting to rising carbon prices, policies directly targeting those market failures may reduce the cost of mitigating emissions. Seventy-seven per cent of our surveyed experts agreed, and none disagreed.

So it is not that economists are opposed to regulatory activity per se. It is rather that those policies need to be appropriately targeted at real additional market failures.

To take an example, if you thought that an $80 carbon price hurt biodiversity because of pine tree planting, the solution would not be to tweak the ETS settings to ignore carbon sequestered in pine forests.

The solution instead would be a subsidy for planting native forests, or a charge reflecting the biodiversity cost of additional pine tree planting in places where more pine trees caused demonstrable harm.

Finally, we asked our experts to choose between two options for dealing with the harms that rising carbon prices can impose on poorer households.

The Government has been trying to target emission reductions in sectors that might be less likely to affect poorer households while also providing subsidies for electric vehicles.

But the Government has another option. It planned on selling 19.3 million ETS credits this year. At $80 per tonne, that would raise enough money to give every family of four a carbon dividend of more than $1200.

Our experts agreed that a carbon dividend is the preferred option: 15% strongly agreed, 54% agreed, 23% were uncertain, and 8% had no opinion.

The full results are up over at the NZAE page.

Wellington has been trying to gaslight me for too long, trying to make me think that I'm the crazy one for continuing to think that the standard lessons I taught at Canterbury, the same standard core micro that's taught everywhere, is now somehow all wrong. The Survey is a nice sanity check for me. I'm not mad; the Ministries are madhouses. 

Morning roundup

The morning's worthies! And a couple shockers too. 

• Best news in rather some time. I'd want to see it extended out over a larger sample. But they're not seeing any difference in "long covid" symptoms between vaccinated people who've had breakthrough infections and people who never caught it. 


• The Australian Broadcasting Corporation would know better than to promote antivax cranks. But they'll write this stuff on econ without a second thought. Just to keep in mind next time someone tells you how awesome public broadcasters are. ANU Prof of Econ Rohan Pritchford is on point.


• Looks like Boston is following New Zealand's example - they're getting their own version of the National Policy Statement on Urban Development. 


• Writing pieces on the climate change effects of Covid in New Zealand because of effects on city transport, while ignoring that transport is covered by the Emissions Trading Scheme, is pretty stupid. 


• The coal tit is a careful shopper, but the weka is a crafty little rent-seeker. 


• Amazing. They're using laser pulses on fibre networks under Auckland to find tiny earthquakes that may predict volcanic activity. 


• Businesses still face difficulty in figuring out whether vaccination mandates for workers are legal. 


• BusinessDesk has put together a network map of people in the public sector. So you can see who is who, and who is connected to whom. 


• Pattrick Smellie's predictions for 2022. 

Job Openings for Economists - Spotify edition

This would be a heck of a lot of fun for somebody.

We are looking for an outstanding Head of Economics to join Spotify’s Content team. Our mission is to unlock the potential of human creativity by giving a million creative artists the opportunity to live off their work and billions of fans the opportunity to enjoy and be inspired by it. Are you a creative thinker who can combine a strong economic toolbox with a desire to learn from others, and who knows how to execute and deliver on big ideas. You would be working across the content teams and with many other related departments, providing economics, statistical and policy support that enable evidence-based decision making to help Spotify achieve its stated goal.

What you’ll do

• You will be working horizontally across the company, from markets to marketplace and licensing to policy. 
• You will be working closely with cross-functional teams across the company on complex and unprecedented problem-solving challenges that require fast turn-around solutions.
• You will be able to learn quickly and apply all relevant excel, coding and query skills available within the company, and to be able to build user-friendly tools on top of those data platforms
• You need to be able to present economic analysis clearly and concisely to both internal and external audiences who are not trained in the subject, including media.
• Work from our New York or London office, with occasional travel.

Who you are

• You have 7-10 years experience with a strong understanding of economics within the broader media and tech industries.
• You have 3+ years experience managing a team.
• You have excellent statistical training and a proven track record in constructing excel models (such as long tail analysis) for solving problems that are without precedent.
• An MSc (or above) economics training at a reputable university with a research background in applied macro and microeconomics, and proven modelling skills.
• Applicants with considerably more experience are encouraged to apply.
• You have a proven ability to commission and project manage large research projects. 

It is a plus if you

• Have experience in the music industry.
• Can demonstrate how you retain objectivity in your analysis and communication.
• Love working a dynamic and fast-moving environment
• Possess effective verbal and written communication skills.
• Have the technical competence to perform more advanced analytics:
• Analytics tools experience (such as Tableau)
• Experience performing analysis with large datasets
• Knowledge of conjoint software (i.e. Sawtooth) and other pricing tools

Econ lecturers: be sure to note this as one of the interesting places that a solid economics degree can take you. 

Doughnuts

Arthur Grimes goes through some of the problems in Kate Raworth's doughnut framework in a podcast with her over at Newsroom. 

I remember a review of some other book, ages back, that went along the lines of "what's true in it isn't new, and what's new in it isn't true."

Michael Cameron over at Waikato Uni reaches a similar conclusion.

This book is partly a critique of current economic thinking, and partly some of Raworth's ideas on a new model for economics. Any critique of economics hits the zeitgeist right between the eyes, and so this book got a lot of press when it was released in 2017 (e.g. see here), and again in New Zealand earlier this year when Kate Raworth visited the Treasury.

However, I found the book to be quite unbalanced and full of lazy writing. Raworth is a great fan of metaphors and stories, but to my taste they were overdone. Moreover, large chunks of the book were unnecessary in order to make the central argument. The first couple of chapters essentially create a strawman of economics, which Raworth can then set alight. The economics she describes, with GDP growth as its core and only goal, is not an economics I recognise. Her argument is valid in many places, but she doesn't contribute anything new in pointing out that decision-makers are not purely rational. In her desperation to make us believe that economics and economic teaching is not fit for purpose, she far over-sells her argument.

It depresses me when Wellington bureaucrats, with minimal training in economics, see imprimatur from Raworth having given a talk at Treasury, and take the book as some kind of overturning of economics.

Listen to Arthur on it. Economists are fans of economic growth because economic growth tends to correlate with all of the things we really do care about. And we favour making sure that external costs are appropriately incorporated: carbon taxes or an ETS; appropriate water charging frameworks and the like. The worry for me is that when folks take Raworth too seriously, the become complaisant about the merits of economic growth, and what we give up if we don't fret our current low productivity growth rates or the growth costs of other policies.

A few weeks ago, James Shaw tweeted:

“Researchers say that 7% of global GDP is likely to vanish by the end of the century unless ‘action is taken.’ Japan, India and *New Zealand* lose 10% of their income.” -- ScienceDaily https://t.co/HXDXn31Nph

— James Shaw (@jamespeshaw) August 21, 2019

It's good to worry about this.

But it's also worth understanding what 7% of global GDP is, at the end of the century. If annual economic growth rates were just 0.09 percentage points lower every year over the next eighty years, that's a 7% difference in GDP at the end of the line. So if economic growth were 1.91% instead of 2% over that period, GDP would be 7% lower at the end of eighty years. Growth compounds; small differences in any year add up to big differences down the track.

How often do we throw away fractions of a point of GDP growth, reasoning them to be small, and taking Raworth's kind of rhetoric too seriously - and not considering the long term consequences?

A world without opportunity costs?

From Question Time yesterday comes a useful question for anyone setting Principles-level exams. Discuss this exchange with reference to theory as discussed in class. 

Hon Amy Adams: How can he say that he's used "evidence and expert advice to tell us where we could make the greatest difference to the well-being of New Zealanders", when the Government has chosen to pour hundreds of millions of dollars into fees-free tertiary at the expense of giving Pharmac enough money to keep pace with inflation?

Hon GRANT ROBERTSON: The premise of that member's question is incorrect. Money that supports education, money that supports health, and money that supports housing are all part of the Budget; one is not at the expense of the other. What we're doing is actually making up for the enormous under-investment of the previous Government.

…

Hon Amy Adams: Why was spending $7 million on Artists in Schools a higher well-being priority than the mere $6.5 million needed to reinstate cochlear implant funding that his Government cut in last year's Budget?

Hon GRANT ROBERTSON: Again, the member is not reflecting the Budget process that she knows well. These things are not trade-offs against one another. We are creating an environment in which we're investing in well-being across all sectors of the economy. In the health sector, this Government has a record that is far superior to that Government.

Robertson could be right if they just set a total amount that will go to health, then weigh bids within health against other bids within health - but that would also make a bit of a nonsense that the wellbeing budget ensures every dollar provides the greatest possible increment in wellbeing. 

Morning roundup

The morning worthies:

• Why do academics resent markets? Nozick was right.


• Chris Ruhm on shackling the identification police. No, this isn't about the TERF wars. It's more important than that. Ruhm worries that the need for clean identification constrains the questions empirical economists now investigate. I worry that it also means multi-year lags in getting reasonably but not perfectly identified in economics, and that public health work that thinks you can solve endogeneity with a logit gets published on PLOS.One or at the Lancet within minutes, so you can have years before error gets corrected because econ makes the perfect the enemy of the good. 


• New Zealand's Chief Censor is building his case for regulating porn on the internet. I hope he realises that he can only do more harm than good in this area before he does harm. 


• Every get frustrated that Statistics New Zealand only ever releases cross-tabs that somebody working there thought would be important, and that getting other cross-tabs is a huge hassle? Well, IPUMS has solved that over in American data. Here's the mobile-friendly version of their site letting you build whatever cross-tabs you like out of ACS data. And remember that IPUMS hosts data for other countries too, so we could totally have access to this kind of facility instead of waiting for the never-will-come made-in-NZ variant. I'd yell again about the lack of open data in NZ, but Stats seems to be falling apart in even trying to get the last Census out, so they've bigger things to worry about right now. 


• Martin van Beynen reports on costs of the government's student loan scheme. Comments from me included, but Martin gives me an undeserved promotion. 

Morning roundup

The week's closing of the browser tabs brings some fun:

• Supermarkets find consumers nicking the shopping carts when they no longer can get plastic bags. Carrying bags around everywhere just in case you might realise you need to do some shopping might work for some people (and hooray for them!) but not for everyone. I wonder if anybody is tracking how many of the reusable bags are winding up in the tips because nobody needs the dozens of bags that easily accumulate - they're of little use as bin liners.


• Oliver Hartwich says it's time for a little game theory on Brexit


• SmokeFree Action UK's poster encouraging pregnant women to vape instead of smoke sends the right message. Nice. 


• In similar line, I liked this chart in the Annual Review of Public Health earlier this year. I continue to wonder why we aren't looking at a risk-proportionate excise regime where less harmful tobacco products would carry far lower excise than smoked tobacco. 
  


• Alex Tabarrok points to Matt Levine's proposal to free people to invest in things the SEC thinks are dumb investments. Basically, you sign a form agreeing that it's a dumb investment, an SEC employee slaps you hard across the face, then you're allowed to invest. Less rigamarole than the 'accredited investor' regime. 


• The economics of apologies. The best form of apology compensates the harmed party. 


• Trackless trams. Neat. Allows for far more flexibility, and is much cheaper than putting in rails. 


• MBIE notes the advantages of flexible workplaces with coming technological change. It'll all be ruined if we get fair pay agreements specifying terms and conditions across entire industries and occupations, but nice to think about. 

Dispatches from the Core

I'd hit some of the highlights of this year's NZAE meetings over at the National Business Review shortly after the meetings. I'd delayed posting it here until more of the conference papers were up on their website; that happened while I was out skiing.

It's up now though, so here you go:

We are lucky that, last year, economist Aaron Schiff provided us with an excellent collective noun for a grouping of economists. Owls, in concert, form a parliament. Economists, in convention, form a core.

Or at least they hope to.

In economics, the ‘core’ is the set of alternatives that cannot be beaten by some option from outside of the set. So a good economics conference will bring together all of the ideas that cannot be beaten by ideas that didn’t make it to the table.

Last week brought the 59^th annual conference of the New Zealand Association of Economists. I attended and here bring dispatches from the core. I learned a lot about a lot of things.

Boston University’s Robert King led with a plenary address highlighting the importance of reserve bank credibility. Everyone understands that point: Credibility is expensive to build if you don’t have it, and important to guard when you do. Professor King’s work tries to understand what happens when people are not sure whether the reserve bank really will follow through on its intentions.

I take as implication that a bank must especially guard its reputation when undergoing changes that might bring uncertainty about its intentions – as in any transition to a dual mandate.

Understanding maternity
AUT’s Lydia Cheung explained how the 20-hours free early childhood education policy resulted in a 4-10% decline in earnings for new mothers. Anticipating the subsidy that would come in at age three, new mothers worked less during their child’s first two years. Motu’s Isabelle Sin showed the substantial drop in earnings for new mothers relative to new fathers, with large drops in the number of hours worked and reductions in hourly wages that are particularly large for mothers who took more than a year to return to work. Understanding the wage gap requires understanding maternity.

Victoria University’s Ilan Noy demonstrated the regressive effects of EQC’s land coverage. A substantial portion of claims wind up coming from landslips on slopes from relatively more expensive properties but land coverage is free with every EQC policy with prices that do not vary with land risk. Related work by Motu’s Sally Owen, showing the regressivity of EQC coverage in the Canterbury earthquakes, won the Seamus Hogan Memorial Prize.

The plenary address from New York University’s Julia Lane was beautiful and filled me with despair. She explained how America is starting to build toward the kind of linked administrative data that New Zealand has in its Integrated Data Infrastructure. Unless Statistics New Zealand is able to adopt some of the more open data practices being developed in the US, I expect our IDI will be lagging American data within a few short years.

Some of the papers I'd noted that hadn't then been available now are - links now in the blockquote above (but not in the NBR original). More papers are available via the conference website - which weren't available at the time of the conference.

Other work of note now available online:

• Richard Meade's look at some NZ economic history: the effects of the Native Land Act's Ten Owner rule. I had no clue about this, and Richard wrapped it all up in a beautiful little model. Read the paper. 
• Peter Nunns looks at housing supply elasticity. 
• Greenaway-McGrevey, Pacheco and Sorenson look at the redevelopment premium: owners of already-developed properties see a price drop when their neighbours are allowed to intensify with a rezoning. 
• Cheung and Brooke show that newspaper advertising rates are lower in places with free suburban newspapers - competition matters. 
• Robert MacCulloch and Sir Roger Douglas provide a reimagining of the welfare support system
• I did not attend Treasury's session in which they noted Treasury's diversity and inclusion programme which saw the scrubbing of the word "analysis" from Treasury's recruitment ads as overly male-coded saw the identification of the word 'analysis' as gender-coded, and attempts to de-gender the ads (the paper doesn't say that they scrubbed the word analysis - I read it too quickly). Those interested in priorities at Treasury might wish to read the paper.

Treasury needs economists

If you hated economists and wanted to punish them by throwing a dart at a group of Treasury analysts, odds are you wouldn't hit an economist even if you did hit somebody. 

I run through the numbers in this week's print edition of the NBR, following on from a couple of OIA requests. I'd asked Treasury about the qualifications of people employed at Treasury as analysts, senior analysts, principal analysts, and senior managers. UPDATE: the NBR piece($) is now online, along with Nevil Gibson's take on it.

Independently, but potentially as result of mutual commiseration about the state of the world, the Taxpayers Union put in a request looking for the proportion of new graduate analysts with economics qualifications.

Here's the current state of Treasury.

At the Analyst level, 19 have a qualification in economics or finance, 14 have another qualification, and the qualifications of 34 are unknown.

At the Senior Analyst level, 14 have a qualification in economics or finance, 34 have another qualification, and 45 are unknown.

Among Principal Analysts, the qualifications of 12 are in economics or finance, 12 have another qualification, and 11 are unknown.

Economists have stronger representation among senior managers: 23 have a qualification in economics or finance, 15 have another qualification, and 17 have an unknown qualification.

Treasury has eight staff at those levels known to have a PhD. Of those, two are economists (a Senior Analyst and a Senior Manager), one is a sociologist (Principal Advisor), one is an accountant (Senior Manager), and four have a PhD in “Major Not Specified”.

In any case, it appears that the New Zealand Initiative, with a total staff of fourteen including administrative staff, includes more PhD economists than the entire New Zealand Treasury – but perhaps it only appears that way because smaller organisations are more likely to know the disciplines of all of their staff members’ doctorates.

A separate OIA request by the New Zealand Taxpayers Union showed that four of 24 hires at the Analyst level last year had an economics qualification. Among those hired last year with an Honours degree or higher, two of 14 had an economics qualification. That suggests Treasury has not been trying to boost capacity on the economics side, though it couldn’t rule out more senior hiring boosting economic capabilities. But the stock of trained economists at Treasury remains low. 

How Treasury's meant to manage building a brand new system for running budgets under the living standards framework, while handling its rather important day-job tasks, and not really having that many trained economists around... I don't know. Treasury doesn't work in some kind of magic world without opportunity costs.

You'll have to pick up the NBR for the rest.

But check out this beaut visualisation of the problem that our excellent Joel Hernandez put together.

After the NBR went to press, I noticed another OIA that the Taxpayers Union had run. This is the qualifications list of the 2018 graduate cohort hired in.

Double-major undergrads, at least at Canterbury, ran a pretty thin version of the economics degree: principles-level micro/macro, intermediate micro/macro, then any four papers at 300 level. Double-major heading to Honours at least would be taking the serious papers.

The 2017 cohort was about as bad. The 2019 cohort's better, depending on how seriously you take the economics training of people doing double-undergraduate degrees with three majors. 10/15 had some economics in their degrees, but only 4/15 have Honours or better in economics or finance. Honours is the minimum training for a professional economist.

I expect to be following this up in more columns yet to come.

Oh - and don't pretend that this is some problem for which you can blame the Labour government. This mess very much started under Bill English's watch as Minister of Finance.

Update: the underlying OIA requests:

• Mine
• The Taxpayers Union (1) - used in the data visualisation
• The Taxpayers Union (2) - which is excerpted above in image form

Tay on the education of economists

Frank Tay, back in 1966, in the inaugural issue of New Zealand Economic Papers, suggested the minimal training prerequisites for professional economists in New Zealand:

Thirdly, I would stress a four-year full-time honours programme as the minimal "professional preparation for economists". I have in mind one which, in terms of depth of specialization in technical economics, falls between the level of the M.A. and Ph.D. courses recommended by H. R. Bowen, especially in the degree of theory, mathematics, statistics and economic history required.19 Obviously, this would violate the "depth and breadth" criterion of some teachers.20 But, unlike Professor Holmes, I believe this pedagogic conflict is real rather than potential and that a more effective solution than the "B-B variant" might be realised through the "Knight's Move". This consists in allowing students who have a first degree in the sciences and technology to sit, after a year's preparation, for a preliminary examination in economics equivalent to the Stage III level, say, in Macro and Micro economics, International Economics, Econometrics and Economic History, and then march straight into the Honours or Master's programme. True, such a scheme favours the Beta-plus and the more mature students, especially those with a substantial core of "Q" work behind them. However, a four-year Honours programme or the "Knight's Move" should give students a reasonably firm intellectual foundation for their own post-graduate professional development.

He wasn't, and isn't, wrong. Note that he was responding to Frank Holmes's suggestions around the curriculum.

This is relevant to tomorrow's column in the NBR on Treasury's hiring practices.

Sure!

We've known about the problems of publication bias at least since 1992. If it's easier to get statistically significant results published than insignificant results, then there are whole literatures that become untrustworthy. 

Andrea Menclova at Canterbury is doing something about it. This has been a while in the making - we were talking about it when I was still at Canterbury. Good things take time, and now it's live.

Suppose your paper has been rejected from an EconLit-indexed journal, with the only important issues raised by the referees being that the results are unsurprising or insignificant.

Submit your paper along with the referee reports and the letter from the rejecting journal, and it will be considered at SURE Journal: Series of Unsurprising Results in Economics

Aim and Scope

The Series of Unsurprising Results in Economics (SURE) is an e-journal of high-quality research with “unsurprising” findings.

We publish scientifically important and carefully-executed studies with statistically insignificant or otherwise unsurprising results. Studies from all fields of Economics will be considered. SURE is an open-access journal and there are no submission charges.
SURE benefits readers by:

• Mitigating the publication bias and thus complementing other journals in an effort to provide a complete account of the state of affairs;

• Serving as a repository of potential (and tentative) “dead ends” in Economics research.

SURE benefits writers by:

• Providing an outlet for interesting, high-quality, but “risky” (in terms of uncertain results) research projects;

• Decreasing incentives to data-mine, change theories and hypotheses ex post or exclusively focus on provocative topics.

I love this project. I hope it attracts a lot of great work that would otherwise be accumulating dust in file drawers.

The Natural

Twitter is wonderful for pointing you to things you should have known, but had missed. 

I'd missed (then) Don McCloskey (now Deirdre)'s 1992 piece in the Eastern: The Natural.

Richard Bower is an economist right down to his wing tip shoes. He knows Sophocles and Shakespeare all right, but (there it is again) he believes in economics. not all economists do, of course. Bower does, as I do, and as perhaps fifteen percent of the profession does. Give the Bowers or the McCloskeys any social situation, from insider trading to an obstreperous teenage child, and they look to economics for an answer, or at least for a good running start.

People who "believe in economics" tend to agree on who the best economists are. They admire economists like Armen Alchian, Ronald Coase, Gary Becker, Gordon Tullock, Leland Yeager, economists often as not unknown to the unbelieving mainstream of the profession.

...

So Bower and I agree on economics. Our agreement makes our one disagreement about teaching it puzzling. Bower thinks that we can teach economics to undergraduates. I disagree. I have concluded reluctantly, after ruminating on it for a long time, that we can't.

Read the whole thing if you, like me, had missed it. McCloskey concludes that Bower overestimates the ability to teach economics to undergrads because he is a natural economist, who comes by the way of thinking easily, while McCloskey took a long time to learn it - and good teaching materials are hard to come by.

But teaching materials for thinking like an economist have gotten better since '92. Harold Winter's texts are excellent. So are Tim Harford's. And all of Marginal Revolution University. And blogs.

Business school structure and performance

Please answer this short survey if you are familiar with academic economics departments. I had a previous version of this up earlier, but have fixed a couple of errors in it - apologies to the three people who answered the prior version. This one more accurately reflects what I need to know about. More context to come.

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