Not everything has to be mandatory

Back in the days of dial-up, my mother-in-law had a really cheap ISP service. She didn't pay very much, and the ISP put ads on top of everything. There was some kind of ad bar at the bottom of the browser no matter what site she was on. But the ads didn't bother her and she wanted a cheap service. They bothered me whenever I used internet when visiting at her place, but I wasn't the one paying for it.

It was totally legal to have that. Did every ISP do it? No. Just that one. Everybody else signed up with other ISPs and didn't have that - just the normal ads. But imagine if it had been banned, then somebody proposed removing the ban. It's easy to imagine horror stories about every ISP doing that, until you think through the logic of it.

And so I don't get the fooferah around the American legal changes around ISPs and client privacy. Some people who don't care about their browser trails will be able to get cheaper internet service in exchange for their ISPs being able to sell on their histories to advertisers for better targeted ads. Others won't. I didn't sign up for my mother-in-law's ISP but I'm glad she was able to; I wouldn't sign up for a less privacy-friendly ISP but am happy enough for others to, if that's their preference.

I talked with NBR Radio about it Thursday; I expect it'll go up sometime soon if it isn't already. There are some details about the American proposal that I don't know about and that do matter. If the ISP can sell your prior browser history without your knowing about it or consenting, that would be bad. But so long as it only applies on a forward-looking basis, then the market will segment between those who care about browser privacy and those who don't. And even if it doesn't, consumer backlash against selling prior history surely will also matter if people actually care about it that much.

I'd expect this even in the case of cities where broadband competition is limited. Even a monopolist does better by segmenting the market - although in that case, the ISP could extract more than it ought to be able to from privacy conscious consumers. In competitive broadband markets, it shouldn't matter.

A policy letting ISP clients choose lower cost packages in exchange for less privacy worries me a lot less than policies mandating that ISPs keep years of client data on file for the government to snoop through without the browser's consent.

To H-1B or not to H-1B: the skilled migrant visa question

Bottom line: it would be darned hard for a skilled worker in the US on an H-1B visa to land a New Zealand Skilled Migrant Visa without a job in hand here.

Immigration New Zealand screens these things using a points system. They're currently accepting Expressions of Interest from those with point totals higher than 160.

What's required to get 160 points? Here's the calculator.

Suppose that you're 29 years old. You received your tertiary education in the US and received your PhD in an area of absolute skills shortage when you were 27. You worked your way through university, always in that same area of absolute skill shortage, and you're working now in the States.

• Age 20-29: 30 points (the highest for the category)
• Level 9 or 10 postgrad degree: 60 points (the highest for the category)
• Qualification in an area of absolute skills shortage: 10 points
• 10+ years experience in a comparable labour market or in an area of absolute skill shortage: 30 points

Ok, that gets you to 130 points. The minimum is 100, but they're not considering EOIs less than 160.

A skilled employment job offer in NZ is worth 50 points. I can't see how you get past 130 without that offer in hand. You can bump it up to 150 total by having a partner with a recognised qualification of Level 7 or more (20 points), but that's about it. Having the job offer in hand is critical to getting over the current points threshold.

And so there are a pile of qualified, productive people in the US on H-1B visas who potentially would love to come here given what's going on there. They'd be good for the tech sector here. But without a job in hand, they can't really do it. And flying out to New Zealand on a job-hunting tourist trip is risky if you're on an H-1B and getting back into the US is dicey. 

Meanwhile, employers vary in ability to deal with immigration issues. The base mechanics aren't rocket science: here's Immigration New Zealand's summary:

Offering a job
You’re allowed to offer a job to someone who doesn’t have a visa but your offer should be conditional on that person getting a visa.
We use a points system to decide who we’ll invite to apply for residence under the Skilled Migrant Category.
For your candidate to be able to claim points for their job offer, it must be for:

• a skilled occupation

• full-time work (at least 30 hours a week)

• permanent employment for 12 months or more, or on a contract basis, if your candidate can show us they have a history of consistent contract work, a current contract for services, and that the work’s likely to be ongoing 

• an employer who has good workplace practices and complies with immigration, employment and other laws.

Applicants whose jobs are on one of the skill shortage lists or are in an identified growth area are more likely to be successful.

Nevertheless, an employer could easily be put off by the process: if the visa issuance is conditional on the job offer, and the job offer is conditional on the visa, then the employer may worry about Immigration limbo until the visa is approved after the job is offered. They could have Schrodinger's Employee: both hired and not hired, until the paperwork clears Immigration.

Even where Immigration NZ is doing a great job and moving fast, there's still risk: foreign governments can take a long time to process police background checks if NZ insists on them. The FBI is fast, but if somebody's in the States on an H-1B visa, they might need to get a police certificate from India (for example). And then everything waits on that.*

Some potential solutions?

• Count possession of an H-1B as being worth 40 or 50 points towards a skilled migrant visa.
• Deem anyone on a current H-1B visa to have passed the relevant police background checks as they would have passed them to get the H-1B in the first place and would have been deported from the US and had their visa revoked if they'd committed crimes while in the States. 
• Set a temporary visa category for those in H-1B visas letting them move here and work here for a year, with automatic transition to the skilled migrant category on receiving employment. Put in big print on the visa form that regardless of the expiration date on the visa, any employer offering a job can be assured that the migrant will be given a longer term skilled migrant visa immediately on an employment offer being extended. Heck, print it all really clearly on an official looking sheet of A4 so the visa holder can give copies of the paper to any potential employers worried about immigration hassles. 
• Coordinate with NZ tech employers to run some recruitment fairs up the US West Coast, with an immigration official along for the ride and able to issue visas on-site for any US H-1B holder who's been extended a job offer from a Kiwi employer. 

New Zealand suffers from shallow talent pools in too many areas. This is something simple the government could do right now to improve things. It targets entry to the kinds of skilled migrants that even NZ xenophobes claim that they want here. It's a pool of talented people many of which are likely ready to jump ship and come over. 

The government seems to be shying away from this one for fear of giving Winston a stick to beat them with, but this seems the kind of immigration drive that even NZ First should love. 

* Simple personal story on that one. When Canterbury extended me the job offer in March 2003, they said I could take up the offer anytime before February 2004 when classes started. So I spent a few months in Germany as a post-doc at ZEI at the University of Bonn. I put in my police background checks with the FBI and the RCMP really early, long before we left for Germany. And I also sorted my medical checks too. The FBI processed things quickly, because they're geared up to run fingerprint checks quickly. I think the RCMP at the time had two 80 year olds using magnifying glasses and checking applications against a big printed record of criminal fingerprints. Anyway, the RCMP took so freaking long to process my background check that my medical certificate expired. And so I needed to get a new medical check in Germany. 

Immigration NZ moved hellafast to make sure everything was in order for me to be able to fly out to Christchurch to take the job, once I was able to get them the RCMP paperwork, but there was SFA they could do while waiting on the paperwork. I had my American Green Card already, and a sane process would have just said that the Canadian check I'd done to get my American Green Card was sufficient for NZ purposes because I hadn't lived in Canada since 1998 anyway.

Now imagine all of that from the perspective of a private sector employer instead of a university that's happy for me to just show up sometime over the 10 months after the job offer was extended. 

Stonefields

I know you're supposed to hate the game and not the players, but the people living at Stonefield sure make it hard.

Anne Gibson reports that Auckland Council's knocked back developers' plans to add three apartment blocks and 11 terrace houses at Stonefields.

Matt Maingay, who leads neighbourhood action organisation Stonefields Lobby Group, welcomed the council's decision.

..."We support what Todd Property have achieved, but people need to make sure developers don't overstep this balance, that design doesn't completely ignore its surrounding, and that compromise can be beneficial to everyone. The benefit of Auckland growing at such a late stage is that we have the chance to avoid other cities' mistakes.

"If it hadn't been for a unified, concerned, and proud community, Aucklanders would have lost a little bit of themselves," Maingay said.

It struck Aaron Schiff as odd:

@EricCrampton the thing that struck me about this is, Stonefields is a new development but already residents are NIMBYing.

— Aaron Schiff (@aschiff) March 29, 2017

And Conan (surely not his real name) reminded us about this from last year:

@aschiff @EricCrampton is this the same amazing group that got the flying fox removed as kids having fun were making too much noise?

— Conan Gorbey (@arnie03) March 29, 2017

He's right:

A flying fox in a children's adventure playground has been temporarily disabled after noise complaints from residents.

An Auckland Council sign at Playtime Park, next to the Stonefields estate at the base of Mt Wellington, explains that tests carried out showed that noise generated by flying fox users "exceed levels permitted in the residential area".

According to the sign, the council was looking at options - including relocating the flying fox - and the community would be advised on the next steps soon.

Orakei local board member Kit Parkinson confirmed the flying fox had been disabled, but said he would know more about what had happened after a meeting today.

In November, the Herald reported that residents had complained about noise and kids' "squealing" coming from the flying fox at the playground, which opened in September, as well as large sand areas used to create a landing zone beneath the equipment.

I really really hope that the government moves on the Productivity Commission's recommendations around better urban planning.

Update: Does anybody know whether the original consents had apartments/terraced housing in them on this timeframe, or whether this was a new request?

Publication bias and the file drawer

Economists have known about file drawer problems for rather a while; DeLong and Lang was on the syllabus when I was in grad school in the late '90s. 

My Canterbury colleague Andrea Menclova's wished to do something about it. If papers with insignificant results get put in file drawers for want of suitable publication outlets, why not start a journal of insignificant results? She's been thinking about this one for a while; it was a not infrequent lunchroom conversation topic.

She's now blogged on it, which I'm taking as an optimistic sign that her proposed journal might actually get going. She writes:

Series of Unsurprising Results in Economics (SURE)Is the topic of your paper interesting, your analysis carefully done, but your results are not “sexy”? If so, please consider submitting your paper to SURE. An e-journal of high-quality research with “unsurprising” findings.
How does it work:

• We accept papers from all fields of Economics…
• Which have been rejected at a journal indexed in EconLit…
• With the ONLY important reason being that their results are statistically insignificant or otherwise “unsurprising”.

To document that your paper meets the above eligibility criteria, please send us all referee reports and letters from the editor from the journal where your paper has been rejected.  Two independent referees will read these reports along with your paper and evaluate whether they indicate that:

1. the paper is of high quality and
2. the only important reason for rejection was the insignificant/unsurprising nature of the result

Submission implies that you (the authors) give permission to the SURE editor to contact the editor of the rejecting journal regarding your manuscript.
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, exclusively focus on provocative topics.

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.

Feedback is definitely invited! Please submit your comments here or email me at andrea.menclova@canterbury.ac.nz.

Water pricing

And here we go for another edition of "Because you've misspecified the problem, your proposed solution might make things worse."

The past couple of weeks have had renewed anger about water bottling plants. If you buy land with water drawing rights attached to it, you don't get charged for drawing that water. The value of the water is baked into the selling price of the land. And so whoever owns the land with the drawing rights gets to appropriate any unexpected increase in the value of water drawing rights, and anybody buying land at market with those rights would, expectationally, only wind up earning a normal rate of return on that investment.

So far so good. But when people buy land to irrigate paddocks, run cows, milk the cows, dry the water out of the milk, and export the milk powder to China, nobody gets too upset. When they just bottle the water directly and export it to China, nationalists get mad and anti-corporate people see it as a big giveaway.

Labour's proposing charging water exporters. I expect it's feasible to do it, or at least for new plants. But the underlying problems are all still there: nobody really knows whether the highest valued use of water is in spraying it onto paddocks, or in bottling it for export, or leaving it in the river. If you put a charge on one type of water drawing, but not on the others, and if it turns out that the water really is more valuable being bottled directly, then you could be doing harm.

So the underlying problem is getting the right allocation of water across potential users, within constraints imposed by existing use rights and likely iwi ownership claims if drawing rights ever turned into more formal property rights.

Charging water exporters for drawing solves a political problem, but otherwise doesn't do much good. Land with water drawing rights already attracts a premium reflecting the value of the water. Any charge on bottling plants then requires that bottlers put a higher value on water than do irrigators: the bottler not only has to outbid an irrigator for the land, but also has to pay some premium on top. Since there aren't a ton of these things showing up, the value of water to bottlers can't be *that* much higher than the value to irrigators.

What's a potential solution then?

Fritz Raffensperger proposed a pretty innovative water trading system for the Canterbury plains, where the underlying hydrology was mapped well enough. It recognised the flow-on effects of drawing from a pile of different node-points on a pile of other node-points, and set node-pricing accordingly. Then, holders of drawing rights could trade: buying the right to draw more, or selling back their existing allocations, with water flowing to its highest valued use.

But what about the environment and rivers? His system allowed a minimum flow constraint that would automatically scale back drawing rights in dry years to maintain a minimum flow rate.

So how do you manage the politics around all of it and incipient iwi claims? I don't know if the sketch below would work, but I think it's a starting point.

First, define the minimum flow of a river for it still to really be that river. Maybe the flow rate that's at, say, the 25th percentile of unencumbered flow in a typical year. I don't know what the right number is there, but there will be one. That can be the minimum flow rate in the Raffensperger trading setup.

Next declare that the river owns itself, but that the local iwi is its guardian and acts on its behalf. Grant the iwi rights to another margin on top of the river's minimum flow rate. They can leave it in the river, or they can sell it to other users; they could also buy back drawing rights from other users to achieve higher river flow. And so too could folks like Fish & Game for rivers where they'd want higher flow for trout fishing.

Finally, existing drawing rights have to be respected. If the catchment is already over-allocated relative to sustainable extraction rates, then you have to scale things. We already have that kind of setup in the fishing quota management system where quota landings are a fraction of the year's declared total allowable catch, with the TAC varying as sustainable harvest rates vary. The government might have to buy back drawing rights if the catchment is over-allocated once the minimum river flow and iwi allotments are sorted. On the other side, though, the government would earn money through selling drawing rights in under-allocated catchments.

Then run the Raffensperger water trading model. There would need to be a bit of fiddling because irrigation has some water flow back into the rivers/aquifer and bottling plants don't, but it could be sorted. The government would buy back drawing rights through that setup to get over-allocated catchments into line.

That's just a first cut sketch at a solution: it would need a fair bit of working up yet. And there are plausibly other better solutions. But this one at least is trying to get at the real underlying problems. And of course it would all be better if partnered with a market in effluent built on the kind of model Taupo's running for nutrient management.

Advantages:

• Respects existing use rights;
• New drawing requires buying the right to do so;
• Water flows to its most highly valued use.

Disadvantages and things to be worked out:

• Setting initial minimum flow constraints would be very contentious and risk locking in too high a level (note that it's easier to buy water back into the river if the flow constraint is too low than it is to get agreement to ease a too-high constraint later).
• The politics could still be a disaster. I've specified here what seems to me a reasonable outcome of a negotiation process, but iwi would likely open by claiming that all water is theirs and the Crown claiming none of it is and farmers objecting to minimum flow constraints in dry years. And assigning ownership of residual drawing rights in under-allocated catchments to Council, iwi, or Crown would be contentious. As an economist, I just invoke Coase and note that I don't care who owns it so long as they can then trade it. Maybe they could each get some of the unallocated parts. 
• How to handle dry years is still a problem. If you set the drawing rights like fishing quota, as part-shares of the available water that year, then farmers needing set water volumes for stock on hand would face very high costs in buying that water - while the river maintained normal flow. If it's instead a quantity right that doesn't scale, the government would need to buy back allocation to maintain minimum river flow - and that would be expensive. Ultimately the thing likely needs to scale the minimum flow constraint to the shadow price that drops out of the optimisation. 

Economic Impact Assessments and the value of fishing

Me at Newsroom on the perils of using economic impact assessments to measure the value of anything - this time, rec fishing:

The New Zealand Marine Research Foundation’s commissioned economic impact assessment of recreational fishing in New Zealand says that fishing generates $1.7b in economic activity. Legasea argues “We now have a handle on the value of recreational fishing” and that the results provide “enough evidence to support a recalibration” from commercial fishing to high-value recreational fishing.

But there are two problems. First, even if the economic impact assessment figures were correct, that still provides no basis for deciding whether the next fish caught would be more valuable in a commercial boat or on a recreational hook. And, second, the numbers come from an economic impact assessment. Let’s deal with the second one first.

Enjoy! I also got to quote from one of my favourite Stephen Gordon tweets.

Our Research Fellow Dr Randall Bess provided the numbers I used at the end of the piece. Keep an eye out for his coming report on recreational fishing....

Age-restricted fast foods?

Doug Sellman's latest prescription for reducing obesity:

Does the fast food industry need to be regulated?

Prof Sellman believes only New Zealand's law makers can forcibly change and control the booming fast food industry.

"Government regulation is the answer. It is the tobacco and alcohol industry story all over again.

"The price of freedom from government regulation is enslavement of large numbers of the population to these profit, rather than health-driven industries."

But Prof Sellman isn't optimistic the Government will do anything to effect meaningful change in the fast food industry.

"Unfortunately, we live in intense neo-liberal economic times when public health is given less value by governments to the GDP contribution of big business, while the harms are relatively discounted."

What can be done to combat the booming fast food industry?

Prof Sellman suggests the following measures:

• Dismantle the marketing
• Increase the price
• Reduce accessibility (density of outlets and hours of sale)
• Increase the age of purchase
• More incentives for people to leave their cars at home

Yup. Total neoliberal conspiracy that we don't have minimum purchase ages for food.

But remember, there are no slippery slopes from tobacco regulation to every other damned thing that Doug Sellman doesn't like.