Friday, 13 July 2018

Kiwibuild lotteries

I'd put together a few notes on the Kiwibuild lottery last week in advance of a radio slot that got bumped in favour of an interview with Lauren Southern.* I blame all of you who complained about her visit. Nobody would have even known she and that Molyneux guy were coming to New Zealand if there hadn't been the reliable outcry demanding they be banned, and then that makes a story that makes them win regardless of whether they're barred entry to New Zealand. Just silly.

Anyway, back to Kiwibuild.

As background: the government's trying to get a lot more houses built in Auckland, and one of the ways it's doing that is through the Kiwibuild program, which will be building some houses directly and guaranteeing the purchases of others off the plans - the latter part might be a consequence of the government having banned foreign buyers from buying those houses and apartments off the plans to rent out and consequently screwing up the financing of new developments.

The houses are not going to be cheap, but are going to be cheaper than a lot of houses on offer in Auckland. But setting a low income ceiling guaranteeing them to low-income buyers could mean built houses would go unsold because they're still pretty expensive. So they have a high income cap and a lottery if they're oversubscribed.

I'd put together a few notes before the scrubbed interview; they're below.
  1. Kiwibuild is only a very minor part of the real efforts to restore housing affordability. The real action is in changes in infrastructure supply that can enable more land to be brought into use in housing, and that can enable greater density in town. The constraints have been that Council has not been able to run the infrastructure the city needs under its current debt limits. Fortunately, the government’s latest statement on Kiwibuild noted that they’re looking at things like project-based financing that can unlock land for housing.

  2. A substantial part of what Kiwibuild is doing is just displacing other construction that would have happened anyway. Treasury and MBIE disagreed a bit over the figures on this, but Treasury at least was taking displacement seriously while MBIE assumed there would be no displacement. Displacement is very likely when the construction sector is running at or near capacity – workers and materials that would have been used in other developments will get used in Kiwibuild houses instead (whether they’re built directly by government, or bought off the plans by Kiwibuild from existing developers).

  3. Leaving that aside, Kiwibuild provides affordable housing not so much by selling houses below market prices, but rather to the extent that it increases the overall supply of housing. If all that happens is a displacement of existing building and sale at below-market prices, then there is that potential lottery problem. But if it expands housing supply successfully, then overall prices can start easing back and there’s less of the lottery component because house prices ease back. I understand there’s a 3-year ownership rule in place before the owner of a Kiwibuild home can on-sell it. 

  4. The proposal to require Kiwibuild owners only to on-sell their house at below-market prices to another Kiwibuild-qualified buyer, or to let the government take a proportion (half?) of the sale proceeds, risks skewing homeowner incentives around maintenance and upkeep. I own my house, and I pay to keep it up to spec not only because it makes it nicer to live in, but also because it maintains the resale value should I ever want to sell. If I expected that the government would take a pile of the proceeds from any sale, then I’d do a lot less of that. To avoid that problem then starts getting into messy accounting finagling of keeping track of all of your receipts for home maintenance and charging that against the government’s side of any Kiwibuild sale proceeds – and invites inflating those figures with other shenanigans. 

  5. Basically, the hassle doesn’t seem worth it unless the government is really convinced that Kiwibuild and the government’s other initiatives to address housing affordability won’t work. If prices ease back, the lottery aspect does too. But that makes for a bit of a catch-22. The other problem I worry about a ton is that the real cost of Kiwibuild is in bureaucrats’ time and attention. There are only so many folks in the Wellington bureaucracy who can actually manage to do anything. Some of the good ones are working hard on getting things right for infrastructure financing. The more of the good ones that get pulled over to sort out messes around Kiwibuild, which is still far less important than sorting out infrastructure, the less likely we are to get out of this mess.
* At point of queuing this post for ski-holiday-week, I don't know whether the interview is to be rescheduled. 

Wednesday, 11 July 2018

Hate the game - Sale & Supply of Alcohol edition

The outcome is absurd. Someone should not be prevented from buying a bottle of wine just because they have their teenager with them. But the problem isn't the store or the check-out clerk, it looks instead to be the rules.

The Herald's rounded up several cases of folks being turned away from the supermarket checkout because they have alcohol in the cart and the kids in tow.

Here's the Sale & Supply of Alcohol Act 2012.

Section 239(1) makes it an offence to allow alcohol to be sold or supplied to any person under the purchase age. 239(8) says you're in trouble if you know or have reasonable grounds to believe that the alcohol is intended for a person under the purchase age. While section 240 provides an exemption for on-licences, so if you have your parent along, it's all fine, but I can't see any parallel rule for off-licences.

So if I'm reading all of that right (I am not a lawyer), it is legal for a parent to buy alcohol, bring it home, and supply it to their minor child. It is legal for a parent to go to the pub with their minor child and to buy a beer for their child. But if the check-out clerk at the off-licence has reasonable reason to expect that a parent at the supermarket is buying the alcohol for a minor who is with them, then the store can be up for fines of up to $10k and potential loss of licence for up to seven days. Since the police like running stings and the penalties are high, you should expect risk aversion.

One potential solution would be to extend the exemption in Section 240 to off-licences. I have no clue how the supermarket clerk could tell that the two people at the check-out are parent and child, but neither do I have any clue how the bartender can verify the same thing at the pub if the parent passes the beer to the seventeen year old.

Monday, 9 July 2018

Sugar messes with your brain

Boyd Swinburn endorses a new Chilean study on sugar taxes.
Chile increased its sales tax on soft drinks above a threshold by 5%, from 13% to 18% (the high-tax soft drinks), and reduced its tax on lower sugar soft drinks by 3%; there's a separate no-tax soft drink category presumably covering diet drinks.

Here's the key table.

If we believe the result, increasing the tax on high-tax soft drinks by 5%, reducing it on low-tax soft drinks by 3%, and not changing the tax on no-tax soft drinks did nothing to consumption among low-SES groups but massively cut consumption of high-tax and no-tax soft drinks by high SES groups. 

And the later tables say that tax pass-through was imperfect: there was a 1.6% increase in the price of all soft drinks: a 1.9% increase in high-tax item prices and a 1.7% drop in the price of low-tax items. So the wedge between high- and low-tax products, as seen by consumers, increased by 3.6%. The proportionate change in high SES consumption of high-tax drinks was a 31.3% reduction. Where we struggle to find evidence of effects in other studies, this one says there's an incredibly high price elasticity of demand among rich people but no effect among poor people. 

Chris Snowdon finds the results unbelievable; I'm not sure he's wrong. The big drop in consumption of no-tax soft drinks suggests something else is going on. 

Just as a guess - was the tax accompanied by a vilification campaign against soda generally? High-SES groups might then have responded but low-SES groups ignored the messaging. Low tax soda became cheaper, so there was some substitution to that category from both no-tax and high-tax soda that coincided with an across-the-board drop in soda consumption among high-SES groups. That is just a guess though. The results don't make a lot of sense. 

Here's the thing about this debate. As far as I can see there is virtually no downside to the tax. Products that include a lot of sugar would cost more. So what? There is literally no hardship to that because nobody needs them. We can choose to buy them, or not. No biggie, and if we do buy them, the state gets the benefit of the revenue. So even if it has no effect on obesity at all it seems benign because the tax is largely optional, unlike (say) petrol duty. And if it does have an effect on obesity, even better.
I always struggle when trying to see the world as people like Nick R see it. As I look at the world, if someone enjoys something, and you take it away from them, that has to be a harm to them as they see it. Like if Nick R enjoyed, I dunno, fancy cars, and I proposed a big luxury tax on the kinds of cars that lawyers like, surely it would sound ridiculous to claim "there is literally no hardship to that because nobody needs an Audi. Lawyers can choose to buy them, or not. No biggie, and if they do buy them, the state gets the benefit of the revenue." But it's nonsense, right? Those who buy something else instead are harmed by the tax. That excess of cost to consumers over the tax revenue to the state matters. And who am I to say that Audi-lovers should be taxed more than people like me who drive a ten-year-old Honda?

As Elron McKenzie might put it, "If everyone taxed all that they hated, where would we be? There would be nothing left. Because sooner or later, no matter how nice the things are that you like, somebody will hate those things too, and will want to tax them. And then, next thing you know, your favourite stuff is gone. So, like, what good is it, eh? So just keep the neutral GST."

Friday, 6 July 2018

Paying for more hostages

Ok, here's a fun one.

Set up an industry through heavy subsidies. An ancillary education sector sets up around it, training workers for that industry. Then when it comes time for an economic impact study, count as a benefit of maintaining the subsidies that workers trained for the subsidy-industry would have a drop in wages if they had to shift to another industry. Meanwhile, keep ramping up training schemes to build up more hostages for the subsidy-industry.

Or, in other words, Gordon Campbell didn't like my take on New Zealand's film subsidies. Here's Campbell, taking issue with the bit Matt Nippert quoted from me in the Herald:
Crampton said the Sapere report - in concluding the subsidies generated more than $2 of economic benefit for every taxpayer dollar spent - was flawed in concluding most of the workforce would be left stranded out of work or in lower-paying jobs. "While that may be true during recessions, it is not true either on average or currently. And it is especially dubious where most of the film activity occurs in Wellington and Auckland," Crampton said.

Sure. Everyone knows there are 2,000 high paying, high skills jobs ready and waiting out there in Wellington. Or maybe they all could go north, and pick kiwifruit. Despite his vested interest in this issue, Peter Jackson was probably closer to the mark in the same NZ Herald article, to which he offered this observation:

"You seem to be asking whether New Zealand needs incentives. In my mind it's very simple: Does New Zealand want to have a film industry?"
There are two things going on here.

The Sapere report looks at multiplier effects through the rest of the economy with film subsidies. That's the part where I'm really dubious at current employment rates. In the absence of film subsidies, folks in the flow-on-effect industries wouldn't be jobless. There'd be some reduction in wages, but it wouldn't be substantial - and at least not in the medium term.

People directly employed in the industry currently would see job losses, shift overseas, or take employment at lower wages - yes. But where government is also helping to fund industry training for the next generation of hostages [zero percent student loans; normal tertiary subsidies], we might need to look at dynamic effects.

In the absence of subsidies, people would train for other industries instead, with smaller effects. Heck, it's plausible that while those who otherwise would have trained for and worked in the film industry would be made worse off training for other work, their salaries could be higher if film work carries a wage discount because of the prestige.

Anyway, it just seems odd to justify continued subsidies for an industry on the basis of wage and employment costs to workers who have specific skills in that industry when we're also training up new workers for that industry.

Thursday, 5 July 2018

Winning hearts and minds

Sunday morning's pleasant brunch at home wound up having me shushing the kids a bit more than usual. 

After universities, think tanks and sector groups are the next most prolific contributors of opinion pieces.

And well out in front among those is The New Zealand Initiative – a think tank funded in the main by the country’s leading corporates. The think tank has a weekly column in the National Business Review, a fortnightly one on and in 2017 published about 40 op-eds in the country’s newspapers. The Council of Trade Unions by comparison had 10 or so op-eds published last year.

The NZ Initiative op-eds tend to be well researched and strident. Here’s how its chief economist Eric Crampton began an op-ed on Stuff back in March:

"To begin with, sugar taxes are offensive. They presume that some government official knows better than you about what food choices are best for you. And when we think about how they're generally aimed at things like soda rather than expensive coffee drinks, they're also deeply classist. They presume poor people are too dumb to make the 'right' choices and must be guided by their betters."

And he concluded that piece with a dig at some Otago University public health academic who had written in support of sugar taxes.

"It is time that public health activists simply admitted that they got this one wrong and left us alone."

Despite describing public health professors as activists there was no disclosure on his own op-ed acknowledging that the New Zealand Initiative membership includes Coca Cola – a vocal opponent of sugar taxes internationally – plus the major supermarket chains.

On a subsequent op-ed on the NZME-owned Eric Crampton included this disclosure:

"The Initiative is funded by a broad range of corporate members including ones the Otago People wouldn’t like. Their membership has zero influence on my views of the Otago People’s work."

So things can get a little testy in the op-ed world. ...
While I do like that Radio NZ online has linked to the opeds, that's of little benefit to listeners who might be surprised to find out that the bulk of the Dom Post piece was about the Ministry of Health's advice on sugar taxes and the literature review that MoH commissioned from NZIER.

Both of those reached the same conclusions I have about sugar taxes.

Here's the bit Radio NZ didn't excerpt:
But don't just take my word for it.

The Ministry of Health commissioned the NZIER (New Zealand Institute of Economic Research) to review the literature on sugar taxes around the world.

NZIER found little effect of sugar taxes on consumption, and no evidence of health benefits.

And documents released to the New Zealand Initiative by the Ministry of Health showed that the ministry had reached a very similar conclusion about sugar taxes, advising the minister that there is "insufficient evidence that a sugar tax would be effective in reducing obesity".

The ministry also warned that the quality of evidence presented in favour of sugar taxes "is a major concern".

All of that means that, even if sugar taxes were easy to implement (and they are far from easy to implement), there would still be no good reason to do it.

It is time that public health activists simply admitted that they got this one wrong and left us alone.
Radio listeners could be forgiven for being led to believe that I hadn't put up any evidence in support of my views and that my views were based only on our membership. They might be surprised to see that the whole thing was based on publicly funded work.

Apparently my pointing to the Ministry's work on this stuff needs some kind of health warning, but all the anti-sugar advocates who either ignore that work or make such a hash of reporting on it that you wonder why NZIER hasn't sued them for libel - that doesn't need a health warning.

Anyway, all of it led to former-Prime Minster Helen Clark being mad on Twitter.

I don't know that I won any hearts or minds in the exchange, but I had my fun.

Clark punted to public health advocate Sudhvir Singh when I asked what specific problems she could point to in either MoH's work or NZIER's; he pointed to a table of jurisdictions that have implemented taxes and some estimates of effects, but wouldn't provide any detail on whether NZIER botched anything in their review. She also endorsed Swinburn in pointing to the Otago blog post that criticised NZIER for not including publications that were outside of the commissioned review window.

NZIER report author Sarah Hogan waits still for a reply on this one.
This also amused me.
For my sins, my Twitter notifications window are filled with public health zealots retweeting and liking Helen Clark's ponderings about the price of soda and bottled water; none of them seem to have noticed the links to prices at Countdown.*

Just look at this hot mess.

Defeat Sodatron? Barking. Absolutely barking. One for Chris Snowdon's slippery slopes file.

* And yes I know water can be more expensive than Coke in some dairies or petrol stations - that's just the local retailer having some local pricing power, knowing their market, and knowing that the kind of people who want to buy water are pretty price inelastic at that point. They could always choose to stock the cheaper varieties at lower price points if they wanted.

Wednesday, 4 July 2018

Around the traps...

I've not had a lot of time for blogging over the past week, but you can catch a few bits from me around the traps:

Interesting take on evidence-based policy

The anti-alcohol folks are pushing for stronger and mandatory warnings on drinks about the dangers of alcohol consumption during pregnancy. 

This bit was particularly interesting:

Baddock argues attempts by the alcohol industry to promote measures to reduce FASD have been ineffective and rather seek to debate the evidence.

The NZMA submission urges decision-makers to be aware of, and pre-empt, industry counter-arguments to public health measures such as mandatory labelling.

Baddock says a standard alcohol industry tactic has been to cite lack of evidence as a reason not to do something, which has been used by others such as the tobacco industry to "thwart and delay" public health measures like plain packaging.

"It's not just alcohol. I think any industry tends to be resistant to anything mandatory that might affect their sales."

However, she is hopeful the alcohol industry will "come on board" with mandatory pregnancy warnings. 

"I would love to see the alcohol industry put up their hand and say FASD is a real problem and we need to be helping reduce the harms done [by alcohol]." 
Traditionally, the status quo has some weight. Those proposing changes to the status quo have to provide some evidence that the change will be beneficial - that the gains will exceed the costs. In areas where evidence on gains and harms is hard to come by, we can look to international evidence - or run trials.

It is a bit odd to pre-emptively say (my paraphrase): "Hey, we don't have any evidence that our policy proposal will do any good. We ran some focus groups suggesting that people don't pay much notice to current labels, but we have no particularly good reason to expect that mandatory labeling will change real-world behaviour in the cohort we should be worried about. But anybody pointing out the absence of evidence - we're going to pre-emptively say that they're industry shills."

Another fun bit - the anti-alcohol people worry that messages like 'it's safest not to drink while pregnant' might strengthen beliefs that light drinking in pregnancy is harmless.

Here's Emily Oster on that. She included a nice section on alcohol in her review of all of the evidence on the dos and don'ts during pregnancy.
There exists no large (or even small) randomized trial about drinking during pregnancy; such a thing is never likely to exist. This is not unique to drinking, of course – there are no large randomized trials of Tylenol usage in pregnancy, either, just a lot of large observational studies. And some women will read the existing evidence and still choose to abstain. But there is a growing body of data suggesting that, if women choose to have a glass of wine, there is no evidence they are harming their baby.

Telling women that an occasional glass of wine is more harmful to their baby than heroin or cocaine is misleading and may also be potentially dangerous. It surely would not be supported by the vast majority of the medical establishment. Focusing on punishing and shaming women who choose to have an occasional glass of wine during their pregnancy also takes away important focus from helping women who are struggling with truly problematic drinking and the social problems that often come with it. 
So they're worried that people might draw the correct conclusion from the labeling - that heavy drinking during pregnancy is a very very bad idea, but a glass of wine every other day is going to be fine.

Again - the anti-alcohol people will not be happy until they have incrementally gotten us to alcohol plain packaging. It's salami-slice tactics, exactly the same as used in the push against tobacco,  incrementally piling on restrictions until the only thing allowed on the packaging is warning labels and small-print indication of the manufacturer.