Monday 31 May 2010

Rural party?

Homepaddock reports on murmurings about the formation of a rural interest party, splitting from National over National's support for the emissions trading scheme. She thinks this would make things worse for rural folks.

I'm not so sure given that we're running MMP. So long as all those Rural Party folks voted National on the list, Rural on the electorate, MMP would give them a nice overhang, and National + Rural would have more seats than National would have had.

In other news, the much hoped for (among ACT folks) shift of National voters over to ACT with Key targeting centre...well, it might happen sometime, but not yet.
National's popularity has taken a dip, a new poll shows.

The One News Colmar Brunton poll, the first major one since the May 20 Budget, showed support for the National Party had dropped five percentage points to 49%, but remained well clear of Labour, which was stagnant on 33% support.

The poll showed the Greens had climbed to 7% support and the Maori Party to nearly 4%. ACT remained less than 2%.

In the preferred prime minister stakes, Labour leader Phil Goff had only 6% of the vote, 40 percentage points behind National leader and Prime Minister John Key.

Friday 28 May 2010

AoLDaily ... (or not).

Original post first as drafted, followed by correction.

I got my first internet access in 1994 via the University of Manitoba. Well, if you want to be really technical about it, we had BBS access back on the farm to VideoTEX and Telidon on the Commodore 64 back around 1985 (300 baud, if I recall correctly), but I'm not sure that really counted.

But lots of folks in 1994 hit the internet via America Online: AoL. Rather than being a just an ISP, they wanted to be a walled garden, with exclusive content for subscribers (like New York Times) and little reason for users to browse outside of the garden. The walled content garden is what's currently interesting.

Why? A daily read for me (and ought to be for you) is Arts & Letters Daily, edited by Denis Dutton - who's about 4 minutes away over in the Philosophy Department here at Canterbury.

A couple of days ago, Denis highlighted a book review by Kerry Howley:
Third-wave feminism combined combat boots and baby-doll dresses. Barbie was a mannequin on whom you practice giving abortions... more»
If you hit the link in my post, you'll get to a teaser for the review with a subscription pitch.

If you hit the link from Arts & Letters Daily, you'll get the full article.

BookForum has to be doing this at its server side via referring site recognition as there's nothing special in the URL.

Will Arts & Letters Daily become the new walled garden entry portal? Doubtful, despite Denis's refusal to post his Nota Bene pieces in an RSS feed. But it's certainly an interesting mechanism for BookForum to give a certain set of readers trial access without opening the whole thing up. They couldn't exist without subscription payments; they must reckon that ALD readers build buzz and are more likely to subscribe after a full text preview rather than a snippet, where folks arriving there just after a Google search for some content would be as or less likely to subscribe if they had full content rather than just the snippet.

Update and Correction. Arts & Letters Daily isn't that special, or at least not special for this particular reason. The link I've posted above works! So BookForum is allowing links in from the main blogging platforms then as well as ALD. I like this. The last thing a publisher ought to want to do is kill off social buzz about their content if that buzz helps build subscriptions. Further testing shows that other links I put up to BookForum from here delivers the full text article when hitting the link from their main site gives only the snippet. Neat!

So the perforated subscription wall stops the random Google content search - the kid looking for stuff for his term paper - and stops folks who come to the front page specifically looking for BookForum's content, but still allows ample social media linkage. Good stuff.

Thursday 27 May 2010


Come on, guys. Do you really believe that John Key, who gave up a massively well paying banking job to become Prime Minister, really cut the top marginal tax to give himself a pay increase? When he could easily have remained a banker with salary many multiples of his current wage? Or that he nixed the alcohol tax increase because he owns a vineyard? Give your heads a shake.

Wednesday 26 May 2010


The National Farming Review, the Federated Farmers' journal, has a very nice profile of Roger Beattie.
When someone describes their ideal world as "one of anarchy" images of Sid Vicious - pistols and punks in tow - creating chaos in pubs throughout the UK, come to mind. But when that person is entrepreneur-extraordinaire, Roger Beattie, the statement takes on a different beat, where anarchy allows for libertarian views to blend with eco lifestyles and big business in a surprisingly sensible, natural and profitable way.

Beattie is a fairly well known figure in farming, fishing and conservation circles. His anarchic approach to life and business has certainly contributed to that, but it's his continued achievements with offbeat ventures that have placed him at the forefront of numerous industries.
The rest of the article goes through his adventures in the Chathams and his fights with DoC: Beattie wants to save endangered weka by farming them for meat; DoC prefers they go extinct rather than be eaten. Hopefully, somebody will take a stick to DoC sometime soon to help them in getting their minds right.

I've posted the article to Scribd; it's also embedded below. It's probably easiest to open the file in a separate window.
Roger Beattie Eco Anarchist

...and Russia is weirder

In the middle of a small room, with dirty-white walls decorated with pictures of Jesus and an array of plastic plants, a young woman stands on a stool. She wears a cotton candy-pink ball gown. At her feet, three other women sew tiny flowers along the hem of her giant hoop skirt. Her lips are painted a circus- clown red; light brown curls frame her face. "A woman should always be beautiful," says Natalya Khapova, 26, as she poses on her pedestal. "Not just outside the fence. Even if she's in here, she should show her beauty. A woman is everything gentle and wonderful -- or she should be." The fence Khapova refers to surrounds the correctional facility UF 91/9, an all-women's prison camp some 20 miles away from the Siberian capital of Novosibirsk. Her ball gown is one of three outfits she will don for the prison's main event of the year: the annual "Miss Spring" beauty contest. As with most women at UF 91/9, the reason for Khapova's stay isn't entirely clear. At first, she says she was "just a witness" to an undisclosed crime. When pressed, she mutters that she was "an accomplice -- or something like that" in an assault and robbery charge. Khapova, who has six-and-a-half years left of her eight-year sentence, is one of more than 1000 female inmates serving time here for everything from drug possession to murder. Today, however, Khapova focuses on something decidedly more appealing than her long-term fate.

This annual pageant, which prisoners begin planning weeks in advance, bears little resemblance to, say, Miss America -- picture instead over-the-top costumes and makeup reminiscent of Cirque du Soleil, a static-filled stereo DJ-ing Russian pop music, and a cast of nervous contestants teetering dangerously in their borrowed stilettos. It's a welcome diversion from the monotony of life inside the jail, and a legitimate excuse for the prison staff to extend the women's curfew -- all the way to 2 a.m., rather than the usual 10 p.m. sharp. The contest also serves another purpose, as the winner's prize is neither money nor a modeling contract, but something far more precious: a ticket to freedom. "Early release" happens only by the recommendation of the prison staff to a special parole board. Foremost among the criteria for consideration is "active participation in the social life of the camp." Hence, the popularity of the Miss Spring contest.
Yes, get out of Siberian Prison early for winning a beauty pageant. I can imagine efficiency aspects of this. HT: Crime Economist

This Vanity Fair piece on the rise and fall of Russian filth and news magazine eXile also is excellent fun.

Tuesday 25 May 2010

Restaurants in everything: Conflict Kitchen

Susan sends me this one:
Welcome to Conflict Kitchen’s first iteration, Kubideh Kitchen. Conflict Kitchen is a take-out restaurant that only serves cuisine from countries that the United States is in conflict with. The food is served out of a take-out style storefront, which will rotate identities every 4 months to highlight another country. Each Conflict Kitchen iteration will be augmented by events, performances, and discussion about the the culture, politics, and issues at stake with each county we focus on.
They're in Pittsburgh at the corner of Highland and Baum in East Liberty: about a five minute drive from Susan's old neighborhood.

Conflict Kitchen currently serves Iranian food. They run limited hours as an add-on to The Waffle Shop, which seems as much performance art event as restaurant.

If such a restaurant opened in New Zealand, I may be tempted to recommend that New Zealand declare war on Ethiopia, El Salvador, Peru, and Afghanistan for starters. I'm a pacifist, but I do have my limits. Those limits may be kitfo, yucca, and kadu palow.

The UK is weird

ASBO orders: Anti-Social Behaviour Ordinance. If the neighbors think you're annoying, they can ask the police to get a court order that you be less annoying. And if you continue with the named forms of grievance-giving, it's then a criminal violation of the ASBO.

This woman recently received an ASBO order prohibiting her from receiving male visitors at her home late at night; she had reportedly been running a small brothel from her home. HT: Puddlecote.

This guy is banned from carrying anti-religious pamphlets in public.

Life is strange in New Zealand's antipodes. Very strange. Here in Christchurch, The Wizard [yes, that is his official name] regularly gives anti-religious sermons in Cathedral Square, though he's now in retirement; he's also been commended by the Prime Minister. Suburban owner occupied brothels (SOOBs) are at best a zoning concern.

Ketchup update

I noted that the healthists in the States are wrecking Heinz ketchup.

The best news of this morning?
Dear Dr Crampton,
Thank you for taking the time to contact us about our Heinz Ketchup.
We have no plans to change the Heinz Ketchup product that we sell into the NZ market, at present.
Thank you for your query.

Yours sincerely,

Serena Olsen
Consumer Service Consultant
Phew! The "at present" is slightly worrying, but I'll take it as good sign overall.

CWF-RTB, NSFW and other acronyms

Mike Masnick at TechDirt argues that artists need build business models robust to the non-existence of copyright: they need to connect with fans and give them a reason to buy. I've previously highlighted his analysis of Trent Reznor's business strategy.

I wonder what he'd say about this recent Freakonomics piece on how the pornography industry is being hit especially hard by diminished effective copyright.
Whether harmful or not, YouTube’s success has unsurprisingly led to imitations. Among them are the hugely popular “porn-tube” websites like, and These aggregate short clips of both amateur and commercial pornography, posted by the site’s users. Like YouTube, a tremendous amount of content is made available for free. But there are important differences between YouTube and porn-tube, beyond the fact that the people featured on the porn-tube sites are naked. The effect of these clips on the porn industry is clear—and profound.

The biggest of the sites, Pornhub, is currently the 53rd most heavily trafficked site on the Internet. By contrast, is No. 59, the website of the New York Times is No. 96, and (the site of the best-known high-end porn producer in the U.S.) is No. 19,543. (YouTube is no. 3.) Sales of porn DVDs are collapsing, and the revenues of subscription-based porn sites are drying up. Vivid did sue one of the porn-tube sites for copyright infringement, but that suit was dropped in 2008 and the targeted site continues to operate. There is some talk within the porn industry of a coordinated litigation strategy a la the recording industry’s campaign against Internet file-sharers. But there are other insiders who note that copyright suits have done little to stop the implosion of the major record companies, and who despair of any litigation-based solution. And, unlike the record industry, pornography producers have shown no interest thus far in suing their customers for illegally downloading porn. The industry has preferred instead to appeal to customers’ better instincts – in this video, for example, a group of porn stars pleads with customers not to use the porn-tube sites.
I'm not going to copy the video for this post; go to Freakonomics if you want it.

So, what's then the future for internet pornography?
In short, the porn-tube sites probably won’t kill the porn industry. But they will change it. Production is likely to shift even more from “features” to short porn-tube-friendly clips. At the moment, the commercial porn industry, concentrated in L.A.’s San Fernando Valley, turns out more than 1,000 new feature films every month. This model probably cannot be sustained in a porn-tube world. Pornography is, in large part, a utilitarian product, and for most consumers, the purpose for which it is employed is served just as well by a five-minute porn-tube clip.

We can imagine at least two distinctive strategies emerging that will allow porn producers to survive in a market ruled by the porn-tube sites. The first would be to go upscale — to build a porn-industry brand by associating it with highly-paid stars and high production values. (CNN recently reported on a $4 million 3D porn film about to commence production.) And then diligently send legal notices and sue to keep your content off the porn-tube sites. Large, successful producers like Vivid seem already to be following part of this course. Vivid has two full-time employees sending out hundreds of notices every month demanding that porn-tube sites take down their copyrighted content, and they, along with several other large players, have discussed coordinated copyright lawsuits.

The other strategy is likely to be a much more significant part of the porn industry’s future. Many producers will take advantage of falling production and distribution costs to produce a huge amount of pornographic content catering to every imaginable sexual taste. Revenues may come from banner ads, or from click-throughs to sites offering services, like live chats and video on demand, that cannot easily be copied. The commercial producers will compete with amateurs, and also with entrepreneurs who use porn clips as advertisements for other, more highly paid services – for example, already many porn actresses use clips to attract clients to their more lucrative work in strip clubs. In any case, the pornography business is likely to become progressively lower-margin and competitive. Consumers will pay less, and get more.
All right, a bit of analysis now. The first proposed strategy, I'd argue, is doomed if it relies on suing all the potential clip sharing sites. Hasn't really worked in music.

An alternative litigation strategy that could work would be use of copyright infringing honeypot sites whose viewers would then be threatened with copyright lawsuits for downloading pirated content, with threat of public disclosure of everything the viewer had been watching. I suspect a lot of viewers would pay up rather than have notice served to them at work and the whole list of viewed videos read aloud, for example. Marginal Revolution links through to suggestions that malware installs may also be a revenue source; stories like this may work to push folks to the legitimate pay sites.

Going upscale could work if the inevitably-linked short clips successfully demonstrate that the higher-value production would be worth purchasing, but that only works to the extent that the sharing sites restrict themselves to short clips, which then depends on whether short clip or long clip viewers are more likely to click-through for ancillary services.

The second suggested strategy turns the product into a commodity - a loss leader for higher priced services. Not a great outcome either for performers. Especially when, at least according to comments on the Freakonomics piece, there are an awful lot of amateur performers who upload their materials for free.

I wonder whether things might not sort out more via a Masnick-style "Connect With Fans, Reason to Buy" strategy, albeit in Not Safe For Work form. Clips build brand for particular performers, who give reason to buy by coupling physical artifacts or other amenities with purchases of DVDs or online club subscriptions.

Opportunities here will be far more limited than for musical artists though. Music fans often gain utility by displays of fandom: wearing t-shirts or buttons or stickers that demonstrate the fan's affiliation with the artist and that mark the fan out for other fans of the same artist. The t-shirts tell the world "I'm the kind of person who listens to and affiliates with X." So while it's more than possible for Amanda Palmer to sell higher-end bundles including CDs, t-shirts, and other exclusive branded items letting fans show everyone in the world that they're fans of Amanda Palmer (another nice Masnick interview with Palmer here), porn performers might have fewer such opportunities as fans of particular artists may gain less utility from public displays of affiliation. Heck, even shameless economists have a hard time writing about this market without blushingly hoping that folks won't interpret interest in interesting economic problems with just a prurient mindset. The culture may have changed over the last fifty years, but not that much. In any case, performers could perhaps sell higher-value bundles including more discreet items: items worn by the performer, props from the set, and so on.

The other way for performers to monetize their celebrity from freely shared clips is through touring. In music, CDs become the loss-leaders for concerts; in pornography, filmed performance may become the loss leader for performances in various adult conventions and clubs.

Longer term, I'd then make the following prediction, albeit with relatively low confidence: a low end market dominated by freely supplied amateur clips that has commodity status, with hosting sites trying to drive click-throughs to higher valued ancillary services; and, a higher-end market where a much smaller number of performers are able to generate fan loyalty for purchase of higher-priced bundles and attendance at touring events.

In other news, the Australian clamp-down on pornography continues.

Art as investment

Room for Debate takes on art as investment.

First up, Denis Dutton.
Paintings and sculptures remain the locus of yet another kind of value. A painting is in principle the singular physical product of an individual artist’s hand and mind. Its complex textures and color gradations will likely make it impossible to trust the accuracy of any reproduction. As we see it today, “Nude, Green Leaves and Bust” is, down to exquisite detail, exactly what it is because of Picasso’s skill and expressive power.

In this respect, the painting is a perfect, intricate and utterly irreplaceable record of a historic artistic achievement. Whether or not you regard it as a truly great Picasso (personally, I don’t), it is a solid investment: Picasso’s place in the foreseeable future of art seems assured, and with it the interest and value of this painting.

The high prices commanded by top-end works of art are often ridiculed as somehow crazy or even obscene. Why is paying $100 million for an ugly downtown office building acceptable, while the same sum paid for an object of enduring beauty is a scandal? I rather find reassurance in the idea that in at least some of its forms, beauty can be a traded — and sublimely expensive — commodity.
I can agree with Denis that a Picasso is likely to be a better store of value than a random draw emerging artist, but solid investment? I can't buy it. If there are two assets you can purchase, one of which provides only a flow of returns over time while the other provides both a flow of returns and consumption benefits, with a pretty wide distribution of the utility derived from that consumption across individuals, you have to expect that the return on the latter must be lower than that on the former.

I don't worry that the price of the stocks in which the university's superannuation fund invests is artificially inflated (and money returns diminished) by a few weirdos who like to frame stock certificates and hang them on their walls. But if I'm buying a Picasso as investment (and, middle-brow guy at best, drawing minimal consumption benefits from having the thing around), and the next bidder over earns not only capital gains but also a whole pile of smugness benefits from having a Picasso on his wall, well... that's not an auction I want to win.

Next up, Eileen Kinsella.
The abundance of blue-chip artworks available this season sparked global demand. Experts tell me that when rare works like the Picasso, which was from a private collection and had been off the market for 50 years, or the $28.6 million Jasper Johns Flag (from the collection of the late Michael Crichton) come on the block, they will find buyers no matter what the economic backdrop since they are so rare.

The reasoning is that the quality of the work will make the buyer confident in his acquisition, no matter what is going on elsewhere in the art market or in the broader economy. Buying right now seems to be concentrated at the high end of the market where, as one dealer told me, “a relatively small number of international buyers are willing to spend lots of money on a very small number of objects.”

This is why we are seeing a resurgence in the market. Confidence has returned at a rapid rate. Spring sales in the past two weeks were over $1.1 billion, up considerably from the total for last year. Top collectors are fully aware that the best examples of blue-chip art have been snapped up by major museums and important private collections.
Doesn't that sound like "The housing market is bouncing back nicely with lots of buyers being drawn in by all the great mortgagee sales. It's rare that the mansions owned by investment bankers come on the mortgagee market, and so they're snapped up when available."

Third, Donald Kuspit.
Long before the economy almost collapsed a year ago, art-savvy people argued that works of art are the new equities: one can make more money in the art market than in the stock market. The value of Picasso and Giacometti kept increasing while the value of General Motors and General Electric decreased. Stock prices go up and down, but the stock of certain artists keeps going up.

Why? Is it because their works are unique, making them prized possessions, or because they were avant-garde innovators, not to say geniuses? The answer has less to do with the artists’ achievement and more to do with the fact that people are buying the brand name and getting the work along with it.

The name is the high-priced, desirable, one-of-a-kind commodity, not the work, which has a certain incidental relationship to it. This has to do with the celebrity culture: artists have been absorbed into its spectacle. Their creativity has been appropriated by it, making every celebrity seem like a great artist in the making, and every artist a celebrity in the making, aspiring to make spectacular art.
"...certain artists...". Yup. And the same holds true too of "certain stocks". The paintings I did in kindergarten - those have really tanked in value. But shares of Microsoft purchased around 1980: those did really well over the same period. Clearly stocks are great and art is terrible. Ahem.

A fairer test would be for an art expert to pick a bundle of works sold today, then check the appreciation of that bundle against a couple of international stock indexes over time. I'd also worry about liquidity problems. It's always easy to cash out a stock portfolio. But art markets are much thinner.

Finally, Kathryn Graddy.
The art market is alive and well. Should we be surprised? Frankly, there are not a lot of other attractive assets out there. Yields on Treasury bonds are at all time lows, the current risk-reward profile of the stock market appears to be less than ideal, and gold prices are at dizzying heights.

The recent record-breaking prices fetched at auction for blue-chip artworks reflect this sentiment. Giacometti’s “Walking Man” and Picasso’s “Nude, Green Leaves and Bust” are both well-recognized and lasting creations. Even if many art critics complain that Picasso’s Nude is not one of his best, the painting is still a well-known piece by a famous and innovative artist.

The buyer of this work has invested in an asset that could act as a store of value both in the presence of inflation and general economic uncertainty. This buyer will also receive dividends in the form of enjoyment and recognition — among friends if not the public.
I'm no art guy, but I'd thought the Picasso was somewhat less than a well-recognized piece: the press called it "rarely seen", having last been exhibited in 1961. Clearly a Picasso, but "well recognized"?

And, it's the "dividends in the form of enjoyment and recognition" that I worry would reduce the expected value of the money returns, at least for the naive investor, to below what he'd be getting with more standard investments.
Many people did not enjoy the financial turbulence of 2008 and early 2009. If liquidity and income are not important considerations, investing in cultural assets may well be the way to go. Fine musical instruments, another alternative asset, have been a solid investment through both booms and busts, and have largely avoided many of the ups and downs of the art market.

Nonetheless, these fortunate buyers of cultural assets should recognize their moral obligation to make their purchases available at least at times for the public to enjoy.
"If liquidity and income are not important considerations"... some investment! The last paragraph seems distinctly odd. I'd thought these kinds of markets - common value, incomplete information - more plagued by winner's curse than by fortunate buyers. And bundled moral obligations to show the work? I suspect a fair few art collectors get a lot of utility from loaning their works out, if only because of the little plaque that then goes under the piece while it's on exhibition: "On loan from the private collection of X". But unless the work were sold under a restrictive covenant demanding that the work be exhibited, I have a hard time seeing the case for a moral obligation.

Monday 24 May 2010

Quarantine and the State

Gordon Tullock always chided the anarchists in his public choice classes because of two matters he figured were impossible to handle absent the State. The first: interconnection of roading networks. He didn't think private road owners would make it easy for commuters to move from one owner's roads to the other, or that they'd make it easy for roads to cross each other. The second: quarantine. If a deadly epidemic were to break out, private institutions couldn't use force to implement necessary quarantine.

Turns out that the State can't handle the second one either. Writes MacDoctor of the recent H1N1 flu scare:
The Herald reports that a report by Martin Dawe of the first two weeks of the Swine Flu epidemic is intensely critical of the lack of planning and poor coordination of data resources. This was the MacDoctor’s impression of the entire debacle. I knew of a potentially deadly strain of Mexican flu three days before NZ1 landed with what was to be “ground Zero” of the Swine Flu epidemic. At that time the data looked extremely alarming. Nothing short of a full epidemic response would have been appropriate. Yet people were allowed to walk off that plane and mingle with the population for nearly a day before anyone reacted with any sort of real response. I blogged on how, nearly 3 days after NZ1 landed, a patient who was on that flight wandered into the A&M, in which I was working, with flu-like symptoms, because Healthline had sent them there. That particular lady was not seen by a public health nurse until nearly 24 hours later, when she was promptly given Tamiflu.
So the country with the best chance of anywhere in the world of implementing effective quarantine [we're a very long flight from everywhere except Australia], with public institutions generally regarded as being among the most competent in the world, couldn't handle quarantine. But, at least if they didn't ramp up, that made sense because swine flu turned out to be not all that bad, right? Well...
At the other end of the crisis – when it turned out that it wasn’t really a crisis after all – it took weeks for the public health guys to stop sending me updates and even longer before we were asked not to notify the disease. This is exactly the reverse of what should have happened. When we have data that suggests there may be a dangerous virus on our way, there should be a prompt response to try and limit the spread of the disease. This response should be swift and sharp. It is better to be completely over-the-top about such a thing than dangerously blase. As soon as the data tells us that there is no crisis, or that further intervention is pointless, there should be an equally rapid (or, at least, staged) stand-down. Otherwise massive medical resources are being wasted in a futile effort to stem either a minor disease, or a severe one that is already epidemic.
None of this should really come as much surprise.

Sunday 23 May 2010

OIA and the Marsden Jacob Report

Some results of a couple of OIA requests.

On 23 September 2009, Marsden Jacob produced a short proposal for the Law Commission outlining the work it could do as part of a "Scoping Study of Optimal Taxation of Alcohol in New Zealand." The Law Commission's "tight timeframe ... precluded a competitive tendering process. ... MJA was invited by the Commission to undertake the work as it has experience in alcohol policy and other social policy issues including gambling and the role of pricing in delivering health outcomes."

Now, if you run a Google Search, you'll find Marsden Jacob Associates. Don't hit the third link on the front page: that's my prior post noting that, with respect to its review of the literature, Marsden Jacob and Associates either is incompetent at basic reading comprehension, or deliberately promulgates lies. I'd guess they're well pleased that that particular line is what's excerpted in the Google search and shows up third on the front page. But scrolling on over to their list of professed expertise on their site, you don't see alcohol anywhere listed. Hitting "alcohol" in their search box: again, nothing listed. But they have been active in the anti-alcohol campaign. Dr. Marsden presented a paper at an anti-alcohol conference also attended by Sir Geoffrey Palmer in August 2009; perhaps that's when Palmer decided they'd be best suited to produce his no-compete, non-tendered report. But, Marsden Jacob has written at least one prior alcohol report, here. Perhaps that plus a friendly chat at an anti-alcohol conference is sufficient for a no-compete contract.

The work proposed, at proposed cost of $28,800 for twelve days' work, would have been "presented in succinct, polished written drafts, but would not be intended, at this preliminary stage, for wider distribution." Dr. John Marsden's letter to the Law Commission continues:
As discussed, a study for wider distribution would require considerably more work to make it able to withstand the anticipated antagonistic and heavily resourced response.
Well, they got the "antagonistic" right.

The limited scoping study included billing for two days of literature review, to be undertaken by Gene Tunny, Senior Economist at Marsden Jacob. And so now I know who was primarily responsible for the literature review.

Sir Geoffrey Palmer's reply of 29 September notes:
I realize that a 'wider distribution' of your study may necessitate a higher degree of quality assurance, and would be comfortable considering an increase in your proposed fees to cover the additional days required for ensuring the work meets your standard for inclusion in our final published report.
Marsden Jacob received the proposed increases - for a total of $60,000 - with the final product to be delivered mid-November. But it certainly didn't take any kind of heavily resourced response to find rather serious problems in their work. Rather, a very cursory reading of their report would have been sufficient for anyone familiar with the ongoing debates here.

I subsequently corresponded with John Whitehead at Treasury, who indicated that Treasury had recommended that the report be subject to independent quality assurance.

I today received an OIA response from Brigid Corcoran at the Law Commission stating that:
Sir Geoffrey asked the Secretary of the Treasury to examine the Marsden Jacob Associates (MJA) report. The Secretary's response to this request is included in the Commission's final report along with the MJA report, as Appendix 1. The Treasury advised that 'some form of independent quality assurance would be prudent' in relation to the reliance in the MJA report on the policy-analytical framework developed at the University of Sheffield. However, the timeframe for the publication of our final report precluded the Commission taking action on this advice. Rather, we included the Secretary's letter along with the MJA report in the Appendix in order to ensure the Government was aware of Treasury's view in relation to this particular aspect of the MJA analysis. It will be up to the Government to commission a review of the MJA analysis should it choose to do so.
Recall the timeline. Law Commission gets the report mid-November and publishes its report end-April. Treasury replies 2 February. And there was no time for an independent review? It took me all of a couple of hours to note that they'd completely screwed up. The first time I saw the report was on its publication; basic professional courtesy suggests providing advance copy. Heck, basic professional prudence recommends it: who better to point out if you've completely screwed something up than the guy being attacked? The best summary of the Marsden Jacob report, with respect to its review of the literature, remains "Marsden Jacob and Associates either is incompetent at basic reading comprehension, or deliberately promulgates lies".

It's also interesting that Palmer has so frequently chosen to cite the Marsden Jacob numbers despite Treasury's noting that the report needed independent quality assurance. Perhaps Treasury should be a little less veiled in its critiques. At some point, Treasury is going to have to start being a little bolder.

Again quoting Birgid Corcoran, this time in her letter of 11 May to Roger Kerr (who sent in one of the OIA requests here noted):
The work proceeded on the basis of Sir Geoffrey's letter and the final MJA report met the Commission's requirement that it be completed to a 'publishable' standard.
An undergraduate student turning in a paper that so severely mischaracterised its sources would receive a stern lecture from me at minimum, but apparently the standards in a Canterbury undergraduate economics course are higher than the Law Commission's standard for work meant to influence policy. Interesting.

If anyone's particularly keen on seeing the whole thing, I've uploaded it to Scribd, here; I've also blockquoted above the entire response I received from Ms. Corcoran regarding independent review of the report.

The quality of policy advice in New Zealand is abysmal.

Saturday 22 May 2010

Fiscal externalities and personal choice

I'd previously raised sexual behaviour as a bit of a limit case of where interventions can wind up taking us if we want to tax or regulate any activity that imposes costs via the health system. I'd also worried that greater socialization of health costs leads to greater calls for such interventions.

And now Half Sigma's worrying about the public health costs of homosexual activity. There, the argument is explicit. Because of the public health system, whether ObamaCare, Medicaid, or prior restrictions on insurance company ability to set actuarily fair prices, we all have an interest in otherwise private risk-taking activities.

He previously linked to some evidence of relatively high rates of HIV among DC's gay community.

Of course, there's only an insurance externality here in private markets if the insurer were prevented from charging actuarily fair rates prior to disease onset; such regulations are one way that the costs of individual activity can be socialized.

In a Crampton-ideal world, we never would have had a publicly funded health system but rather income transfers to the poor coupled with mandates to purchase minimal catastrophic insurance coverage. Moral hazard problem solved. But if the political process has decided that it's better to socialize the costs of risk-taking because it's somehow unfair to charge actuarily fair insurance rates, then why is it not also unfair to charge Pigovean taxes on behaviour that would wind up effectively replicating, at rather high transaction cost, the actuarily fair insurance premiums? Or, worse, that we start taxing or regulating only those risk-taking behaviours that garner social disapprobation? I still hold that second best is to leave the fiscal externalities off the table. There is no obvious stopping rule that keeps us from moving from "people who smoke cost me money and should be taxed" to "people who have risky sex cost me money and should be heavily regulated as a per unit tax would be unfeasible".

I worry that calculations like Half-Sigma's are far more likely to lead to anti-gay sentiment than they are to lead to actuarily sound health insurance policies. It's not all that hard to imagine aggregate health spending figures on HIV/AIDS coming up in election campaigns in the redder parts of the US map a few years down the line....

Friday 21 May 2010


Over the last year, loyal readers will have noticed my increasing annoyance with half-measures, missed opportunities, and genuine backsliding by the current National-led New Zealand government.

The budget was mildly better than I'd expected: it reduced my net annoyance with the current government. I'd put some chance on their reducing the top rate to 33 only in steps; that's why I was long on iPredict on both [33-35) and [35-38). I am disappointed that the budget includes overall spending increases and hope that Treasury's forecasters have things right on future growth rates and the return to budget surplus.

Matt Nolan points out, now that TVHE is back up (switch to blogspot, Matt :>) that going much further would have gone counter to election promises; however, all the half-measures and backsliding previously was, I'd thought, meant to build up political capital to be able to do something a bit bolder. Maybe locking in a schedule for increases in the retirement age. Maybe fixing Working for Families so that effective marginal tax rates on middle income earners with kids wouldn't be crazily high (yes, the middle income tax drop will help a bit there, and yes, they did fix one WFF rort in stopping folks from using rental property losses against income to be eligible for WFF).

Seamus wondered (chats in the hall, not on the blog) why they maintained a gap between the top marginal rate and the corporate rate: surely this still provides incentive for folks to hide income in companies if possible. I hope that it leaves open the opportunity to drop the top rate down to 28% sometime in future, but I'd put less than 2% chance on it.

It's been somewhat more fun watching the contortions of the left blogs trying to engineer situations in which middle or low income earners could potentially be left worse off on net. The GST increase, as telegraphed very clearly, was completely compensated with cuts to lower tier income tax rates. It's almost as though some analysts are running maximin: nothing in the budget matters except for the position of the worst off, and even a Pareto move would be terrible because the gains at the upper end could somehow have instead been channeled to the bottom end. The Council of Trade Unions also has been pretty funny. Writes NBR:
It was fundamentally unfair, CTU economist Bill Rosenberg said.

Someone on $106,000 a year would get a tax cut 10 times that of a person on the minimum wage, Dr Rosenberg said.

"Even worse, someone on 10 times the minimum wage gets a tax cut of $153.92 a week, which is around $150 a week more than the person trying to get by on the minimum wage."

He did not point out a person on the minimum wage at present paid taxes of $74 a week, while a person earning 10 times that paid $1737. A couple on the minimum wage who had two children would pay no tax.
He also didn't point out that the guy on the minimum wage is also unlikely to own a bunch of investment properties being hit with changed depreciation and reduced ability to write off property losses against other income. I'm mildly curious how many CTU members are on the minimum wage anyway.

Extra time

Inside Higher Ed notes increasing worries about extra time allocation in exams for students with learning disabilities.
This time the battleground was Princeton University, where first-year student Diane E. Metcalf-Leggette sued the university last fall, charging that it stood in violation of the Americans With Disabilities Act by declining to give her twice as much time as most other students to complete exams -- Metcalf-Leggette has been diagnosed with dyslexia and attention deficit hyperactivity disorder.
Metcalf-Leggette, who had lobbied for double the standard test-taking time allocated to non-disabled students (plus 10-minute breaks every hour), hired her own neuropsychologist to conduct an independent evaluation. Based on the second opinion, Princeton agreed to let Metcalf-Leggette take 50 percent more time on exams than most of her peers. But Metcalf Leggette insisted that anything less than twice the standard allocation would be inadequate, and declined to withdraw the lawsuit.
I'd favour moving to a system allowing students with such disabilities as much extra consideration as they'd like, conditional on all such assistance being reported fully on the student's transcript. An employer ought to know that it may take a potential employee twice as long as another potential employee to complete the same task.

Thursday 20 May 2010

Why do they have to ruin everything good?

Healthists. Lousy rotten healthists.

First they came for the smokers. Then they came for the drinkers. They're coming for the fatty foods.

And now they're ruining ketchup.
For the first time in 40 years, Heinz ketchup is changing its famous recipe - by lowering the salt content in an effort to appeal to more health-conscious consumers, the company said yesterday.


Jackson said the company had been planning the change for about two years. But it is coming just as Mayor Bloomberg and other politicians are leaning on big food companies to kick the salt. Heinz was one of 16 major food manufacturers that last month signed onto the National Salt Reduction Initiative, a plan led by Bloomberg to get companies to cut back on the salt in their products.
Heinz's recipe for ketchup was one of the world's perfect things: it couldn't be improved upon. Wrote Gladwell a few years ago:
Today there are thirty-six varieties of RagĂș spaghetti sauce, under six rubrics—Old World Style, Chunky Garden Style, Robusto, Light, Cheese Creations, and Rich & Meaty—which means that there is very nearly an optimal spaghetti sauce for every man, woman, and child in America. Measured against the monotony that confronted Howard Moskowitz twenty years ago, this is progress. Happiness, in one sense, is a function of how closely our world conforms to the infinite variety of human preference. But that makes it easy to forget that sometimes happiness can be found in having what we've always had and everyone else is having. "Back in the seventies, someone else—I think it was RagĂș—tried to do an 'Italian'-style ketchup," Moskowitz said. "They failed miserably." It was a conundrum: what was true about a yellow condiment that went on hot dogs was not true about a tomato condiment that went on hamburgers, and what was true about tomato sauce when you added visible solids and put it in a jar was somehow not true about tomato sauce when you added vinegar and sugar and put it in a bottle. Moskowitz shrugged. "I guess ketchup is ketchup."
You simply couldn't improve on Heinz ketchup. And now it's being ruined for the healthists.

And, as Puddlecote points out, Heinz already had a low salt low sugar version out on the market. The health conscious consumers already had that option available. Read his whole post, of course.

Somebody please tell me that Watties here in New Zealand won't be implementing the new formula. Otherwise, I'll have to stock up. Any backlash in NZ would be very limited relative to what might be expected in the States as most folks here prefer a horrible tomato sauce (sickly sweet with minimal vinegar or salt) to proper ketchup.

Come the revolution, Doug Sellman, Michael Bloomberg and all the rest will be locked in a beige room and fed nothing but strained peas to a soundtrack of Enya. Come the revolution.

Bellesiles and redemption

Scott McLemee fisks the New Press's publicity campaign for Michael Bellesiles's forthcoming book. The publisher's blurb reads:
“A major new work of popular history, 1877 is also notable as the comeback book for a celebrated U.S. historian. Michael Bellesiles is perhaps most famous as the target of an infamous ‘swiftboating’ campaign by the National Rifle Association, following the publication of his Bancroft Prize-winning book Arming America (Knopf, 2000) -- ‘the best kind of non-fiction,’ according to the Chicago Tribune -- which made daring claims about gun ownership in early America. In what became the history profession’s most talked-about and notorious case of the past generation, Arming America was eventually discredited after an unprecedented and controversial review called into question its sources, charges which Bellesiles and his many prominent supporters have always rejected.”
McLemee helpfully reminds us that Bellesiles wasn't just controversial: he had the Bancroft prize withdrawn because his prior book was found to have been unprofessional, misleading and deeply flawed by a committee of his peers at Emory University. On the publisher's blurb, McLemee writes:
These sentences have absorbed and rewarded my attention for days on end. They are a masterpiece of evasion. The paragraph is, in its way, quite impressive. Every word of it is misleading, including “and” and “the.”
McLemee is very unimpressed with the New Press: while folks like Bellesiles ought to have a chance at redemption, it should be accompanied with a fair bit of due diligence rather than a whitewashing of their past.

And Nolan gets testy

Matt Nolan over at TVHE posted the other day a take-down of the Greens' latest energy policy. I'd given it only a quick skim as there's little chance anything the Greens currently are proposing has a chance of making it into policy and I do have opportunity costs of time. And, Seamus is far more the electricity industry guy anyway.

Nolan argued reasonably that Green policy seems more focused on redistributive ends and social justice campaigns rather than environmental concerns; he wished for a new Green party that would focus more strongly on environmental concerns and leave the other stuff to one side.

It's not particularly surprising that a Green Party here winds up being a coalition of environmentalists and social justice campaigners: the set of voters who care about the environment AND who are happy with property rights based solutions (you know, the kind that actually work) is near empty (I don't vote; I'm not sure if Roger Beattie votes; Nolan probably does; not sure if Brendan votes there anyone else?) while the set of voters who care about the environment and who also have a bunch of other mixed bag social justice concerns is pretty large. Just look at the usual motley assortment of placards at the random environmentalist rally.

But Nolan since pointed back to the discussion going on there in the comments, where he and his co-bloggers have been eviscerating the Green Party's representative who's there been defending their energy policy. I'm not sure I've seen Matt get testy like this before: it's kinda fun. I'll not be weighing in as I haven't read the Greens' current proposal, but I'd be surprised if Nolan here were wrong. Go and enjoy if you follow TVHE but haven't been watching the fight.

Court philosophers

At a philosophy seminar last week, the speaker argued claims that "taxation is theft" are nonsensical because property rights are defined legislatively as a social construct: consequently, taxation can never be theft because the property was never yours to begin with. You only held rights subject to the constraint that some of the property would be taken by the state.

I'm not much of a natural rights guy, mostly because I figure my natural right in the state of nature would be to run away as fast as I could from folks with clubs or, preferably, to have allied with some guy who's really good with a club to protect me from others - maybe I'd do his homework for him or something.

But I'd still reckon that the guy with the club in the state of nature would be violating my rights. I own myself, regardless of statutory convention. Suppose that statutory convention held that anyone who wears blue on a Thursday that's a full moon becomes slave of the state. Even were I to screw up and thereby legally become a slave, I'd argue that my right to self ownership has been infringed upon rather than that my right to self ownership existed only subject to statutory convention.

And I worry about conceptions of right that say that, because something's defined as a statutory convention, rights-talk goes out the window.

I can imagine the philosophy seminar of a thousand years ago where the Court Philosopher argues against the man whose bride was ravished by the Prince on her wedding night, saying that the maidenhead always belonged to the Prince by Droit du Seigneur and that it consequently wasn't a violation. (yes, yes, Droit du Seigneur is largely apocryphal, but thought experiments are allowed in both philosophy and economics.)

Is there an argument for "taxation isn't theft" that doesn't also support "Droit du Seigneur isn't rape"? The best answer, I'd think, would have to rely on a contractarian turn where we had hypothetical agreement behind the Veil to a set of rules allowing for taxation. But the contractarian turn requires self-ownership behind the Veil or something a lot like it, otherwise hypothetical agreement isn't necessary. But if we want to deny those pre-existing rights, I'm having a hard time seeing a mechanism for getting "taxation isn't theft" without risking "Droit du Seigneur isn't rape". If it's just "whatever is agreed to by majority is just, and the majority would support only one of those", we get the usual obvious problems. A "justice is efficiency" argument would be coherent, but the speaker was making the argument for the moral necessity of a highly progressive tax system in order to fund heavy redistribution: an equity argument rather than efficiency. If it's instead "justice is maximizing my social welfare function which considers taxation to be ok because the statutory convention in this case I find fine but not droit du seigneur because that statutory convention is repugnant", well, preferred SWFs are like belly-buttons...we all have one.

I didn't press him on this line as there were a few bigger problems in the paper: namely, that if his bottom line were that certain government services must be provided, he'd perhaps do better by not having a hard commitment to the justice attributes of any particular tax system and instead try to cover equity concerns via spending programmes after having raised the necessary amount of tax by the most efficient means possible. And the norm in philosophy seminars seems to be somewhat different from the economics norm. In all disciplines, a fair bit of question time is devoted to giving questioners the opportunity to show how smart they are. In economics, this tends to be done via penetrating questions and holding the speaker to providing an answer; in philosophy, it seems more to be via wandering stories that seem not actually to have any kind of question attached to them. In econ, folks using the latter mode attract snickers; in philosophy, it's me.

Wednesday 19 May 2010

More on intrafamily effects and externalities

Eric wonders if there is a serious treatment of intrafamily effects and whether these should be accounted for as externalities. I don’t know of any literature on this (not that I have looked), but a couple of points do occur to me.

First, rather than get caught up in a semantic debate about what is the exact definition of an externality, we need to focus on what is the implication of declaring an intrafamily effect to be an externality when conducting cost-benefit analysis. Typically, we are looking to set the optimal level of a Pigouvian tax. Eric suggests that a husband and a wife are in a contractual relationship, and so, by our normal definitions of an externality, all external effects are contractually internalised. To a non-economist that sounds like the sort of callous, evil thinking we expect of economists, who think that the complexity of human relationships can be reduced down to maximising behaviour and market relationships.

But now consider the alternative view that the costs imposed on someone by his or her alcohol-affected spouse is an externality. By this view, it would be appropriate, if possible, to levy a Pigouvian tax on the drinker equal at the margin to the cost imposed on the spouse. It wouldn’t matter that the revenue goes to the government rather than the spouse, as long as the revenue, in principle, would be sufficient to compensate the spouse for the harm caused. Furthermore, it wouldn’t even matter if the tax had no effect on the behaviour of the drinker. By the logic of externalities and Pigouvian taxes, inelastic demand would simply reveal that the benefits to the drinker were greater than the costs to the spouse, and so it would economically efficient to not abate the behaviour. To me that sounds like the sort of callous, evil thinking we expect of economists, who think that the complexity of human relationships can be reduced down to maximising behaviour and market relationships.

My point here is that we shouldn’t even go down the route of using the language of externalities and cost-benefit analysis to think about intra-family issues. If we want to slot them into the welfare economist’s toolkit, it is much more in the domain of equity issues. This applies equally to costs imposed on children.

This relates to my post last year on accounting for irrationality in cost-benefit analysis. The point there was a world-view that says people are irrational does not automatically lead to a conclusion that self-imposed costs should be accounted for within the cost-benefit framework. Rather, we should estimate appropriate Pigouvian taxes based on narrowly defined external costs, and then ask, separate from the cost-benefit analysis, whether, for paternalistic reasons or for concern for family members, it would be appropriate to make further interventions at the margin, and whether taxes would be the appropriate instrument. Unlike the case of intervening against genuine externalities for efficiency reasons, the elasticity of demand is crucial in determining the appropriateness of tax interventions to deal with these problems.

This relates to my second point. I have enough Irish ancestry to have historical family anecdotes of alcohol consumption by men imposing costs on their wives and children. But these are not anecdotes of Jake the Muss types, but simply of non-violent men who drank away too much of the family income. These costs were real (and were the reason, I believe, that the pre-1991 family benefit was paid directly to mothers). That doesn’t mean, however, that it would make sense to roll them into a measure of social costs and use that to justify higher taxes that would, if demand is inelastic, result in even more of the family income being drunk away.

Tuesday 18 May 2010

Intrafamily effects and externalities

If anyone knows of a serious treatment of intrafamily effects, I'd like to know about it.

I'm reading through the Australian tax review's notes on alcohol [The "Henry" Report]. At footnote 18, they write:
These costs [social costs of alcohol] are more limited in scope than those used in the cost of illness methodologies that have been developed in the public health literature (for example, Collins & Lapsley 2008), which also include many of the costs that individuals bear themselves. To estimate spillover costs relevant for setting rates of tax, it is necessary to exclude private intangible costs (such as pain and suffering), and the loss of household production from premature death or sickness. That said, the distinction between private costs and spillover costs is not always clear. For example, if a family utility and decision making model is used, alcohol-related violence against family members and the loss of family disposable income are private costs; but, if an individual utility and decision making model is used, costs borne by other family members are spillovers.
I agree of course than an economic approach, unlike a public health approach, discounts private costs. That's the method Matt and I used, and for which we were excoriated as harsh rationalists by those who like to find big numbers.

I've done a bit of searching, and I have found no adequate treatment of how to handle intrafamily effects. Here's my best cut at it, but if anyone can point to a better treatment, please let me know about it.

First, in the Coasean world, there can only be intrafamily effects, not intrafamily externalities, regardless of whether we take an individual or family level decision model. Why? Because husband and wife are in a contractual relationship. Just as it wouldn't be a positive externality on me if my employer decided to double the available staff parking spaces, it's also not a positive externality on Susan if I decide to cook a really nice Sunday dinner. The availability of parking wasn't something in the employment contract I signed with my employer, and the frequency of nice Sunday dinner provision wasn't in the marriage contract I signed with Susan; they're both effects within incomplete contracts. When Canterbury and I eyed each other up back in 2003, we each took our best estimate of the likely positive and negative amenities we'd provide for each other and decided that the bundle was worthwhile; should either of us be too disappointed, the relationship can always be terminated (albeit with more difficulty for my employer than for me due to labour law, but that just increased the minimum expected quality threshold required for hiring). Similar conclusions were reached when Susan and I eyed each other up starting back in 1999 and moving to contract in 2002.

Continuing in this Coasean line, the marriage market is a two-sided matching problem. Specify for the moment that men and women lie along a quality distribution. Quality is of course multidimensional: we're all Lancasterian goods. And, people can place greater or lesser weights on various characteristics so individual preference orderings may vary somewhat from aggregate rankings. But we'll keep to a simplified distribution for now without particular loss of generality. At the left tail of the distributions are hopeless violent cads, cheats and deadbeats of various persuasions. At the right tail are decent folks with steady jobs, good prospects, loving dispositions and other good qualities. Left of the median are lots of folks with bad characteristics but many redeeming qualities; at the far left side of the distribution, there are only the bad characteristics.

In this kind of two-sided matching problem, we generally expect folks to match up with a partner at a similar point on the opposite gender quality distribution (or same gender, if that's the preference). Somebody at roughly the 70th percentile ought to match up with someone roughly at the 70th percentile; somebody at roughly the 10th with somebody roughly at the 10th, and so on. There of course will be errors along the way - some information is only revealed with certainty post contract, and some people seem to willfully misperceive things or to vastly overestimate their ability to fix their potential partner's adverse characteristics. But we ought to see rough matching along the broad quality dimension.

Now, suppose that a couple partners up: they're at the 25th percentile. She's an alcoholic but has redeeming qualities; he's overweight and lazy but has redeeming qualities as well. Each is the very best partner that the other could afford given each person's endowment of characteristics. He would have preferred a woman much like his partner who didn't drink as much; she would have preferred a man who exercised more and helped more around the house. But those folks weren't in either person's budget set.

After the contract is signed, the husband starts complaining of the effects of the wife's drinking on the marital environment. Now, this may well be a harmful effect within the marriage, and the husband certainly would be happier if the wife drank less. But so too would she be happier if he went on a diet and helped out more around the house. Again, each was the best partner the other could afford at time of contract. You might as well complain that the Honda you could afford didn't have the heated seats of the Mercedes you couldn't afford.

In the Coasean world, it's very hard to see any case for inter-spousal externalities.

If we relax Coasean assumptions somewhat to allow transactions costs - gaining information about a potential spouse's characteristics is costly and exit also is costly - it still would be difficult to see these sorts of things as externalities rather than just effects within incomplete contracts. Again, nothing in my contract with Canterbury says how many parking spaces there must be; my employer may irritate me by continuing to replace parking lots with buildings, but it imposes no externality on me by doing so. If the employer chisels sufficiently on the bundle of uncontracted amenities, I can always exit in hopes of finding another employer. Information costs will make search a lengthier process and exit costs will make folks more wary of entering into contractual arrangements prior to gaining sufficient information. Exit costs will have each partner more willing to endure a given amount of post-contract opportunism by the other, but the present discounted value of those expected chiseling costs cannot exceed the one-off cost of exit or folks will exercise the exit option.

If we want to start calling all kinds of inter-spousal effects "externalities", we start to make a hash of the entire concept of externality. Starting at year one, we drill into our students that something can't be an externality if it's part of a contractual relationship: externalities have to be effects on external parties. And a marriage partner is hardly an external party.

This all sounds rather harsh. I'm certainly not endorsing bad behaviour within marriage; many of the bad effects partners can impose on each other are rightly criminal offences rather than simply grounds for contractual dissolution. But not every bad thing in the world is an externality, just like there are plenty of bad things in the world that aren't market failures.

Begging and performance art

Farrar reports on a journalist's experience with begging; the journo apparently earned reasonably well. I'm not sure we can extrapolate from his experience to that of others. But here's the more interesting bit from the cited journalist:
The IRD said my begged money is considered a gift and does not attract tax. That is unlike street buskers, who are supposed to declare their earnings.
How does IRD draw the line between street performers and beggers? Surely some beggars could be considered performance artists, and some performance artists are of sufficiently poor caliber that donations would be more akin to gifts (a link would be too cruel). Drawing lines is never easy.

Monday 17 May 2010

Coalition stability

MacDoctor notes the New Zealand press hyperventilating about threats to the stability of National's coalition agreement with the Maori Party. He's right. How can we know? The contract at iPredict is only trading at 10 cents. The price rose from about $0.08 to about $0.10 with the current kerfuffle, but it seems to be much ado about nothing. I'd love to see Kiwi journalists having to take a position on iPredict corresponding to their predictions: it would be the equivalent of their having to breathe into a brown paper bag a few times before submitting their copy.

Friday 14 May 2010

Another NZ legal bleg

I've seen a fair few online summaries of folks' rights when detained by police in the United States. In short: say nothing except that you wish to speak only to an attorney. And, ask whether you are free to leave or whether you are being detained. If they're just asking questions hoping you'll trip up but you're not under detention, it's worth knowing that you're actually free to go.

James at L'Esprit de l'escalier begs for similar summary advice for New Zealand. I don't know if such a source exists. The best I've been able to find is now almost ten years out of date. Anybody know whether the link here still applies or whether a better source now exists?

Update: Gonzo recommends this summary and apparently is having problems with the comments form. I hope this isn't a common problem.

Libertarian diasporas

Will Wilkinson asks why so few American libertarians fond of Tiebout ever have exercised their exit option; I waved a friendly hello from New Zealand which, despite its problems, I'd argue still offers greater personal freedom than does the United States.

The US beats NZ on:
  • Firearms ownership
  • Ability to do what you want with your own property if you're way out in the back woods where nobody's watching: in NZ, you'd still need Resource Consent and tourists may still have right of access to your property's rivers and streams.
  • Income taxes are higher in NZ on folks on a Professorial salary: 40% top marginal tax rate kicks in at $70,000 (including the 2% ACC PAYE Earner's Levy). A comprehensive Goods and Services Tax at 12.5% increases the overall tax burden: on the next dollar I earn, I'll get to spend $0.475 $0.533 (thanks Sam) net of GST. But, local rates are relatively low: I pay about $2100/year on our house: schools are funded out of income taxes, not local rates.
  • Smokers face greater restrictions here than in the US
We roughly tie on:
  • Ridiculous city zoning and bylaw enforcement (swimming pools, subdividing and the like)
  • Most day to day living
But NZ dominates on:
  • A less enthusiastic War on Drugs: what drug raids we have tend not (yet) to be conducted by paramilitary squads who seem to like killing corgis and terrifying the children. If California passes legalisation, rank ordering here may change.
  • Civil asset forfeiture is new here and hasn't as yet generated the horrible abuses seen in the US, though that may well change
  • Gay marriage is legal via civil union: Eleanor's birth certificate even had a tick box in case Eleanor had two mommies instead of the standard mother and father; in the former case, the lesbian partner would have counted as "Second Parent". This kind of respect would have to count for an awful lot for folks in that category.
  • Prostitution is legal and seems to have improved outcomes for sex workers. Recognition of same sex relationships and legalisation of prostitution were the two best things achieved under Helen Clark's Labour government; John Key has done nothing that comes close and seems likely to do nothing that comes close. A couple points reduction in income taxes rates, if ever enacted, counts for less in terms of aggregate liberty than these two achievements of the Clark government.
  • Ease of starting a business: nothing like the US regs that force someone wanting to open a hair braiding salon to get professional certification as a hairdresser, for example.
  • Relatively simple and hassle free income tax system; the majority of wage earners don't even need to file a return
  • Free trade, both domestic and international, is the norm: I don't need the permission of any marketing board to grow, sell, or purchase a potato or to milk a cow
  • If I wanted to, I could buy a still and start distilling my own whiskey with no fears of the Revenuers. Overall alcohol policy is far more liberal than that in the US, though that's under some current threat.
So, why haven't all the libertarians moved to New Zealand? Well, negative liberty isn't all that matters. A Senior Lecturer here at Canterbury at the top of that scale earns about $100,000 NZ, or about $72,000 US at current exchange rates. That's not all that high by US standards: entry level salaries at lots of places Stateside are higher. But it's enough to put me at the 97th percentile of earnings here. A round trip ticket that would have my family visit both sets of grandparents would cost about ten percent of my before-tax income; we don't get home often. As Susan also works, our household income would be even higher on a New Zealand decile scale, but isn't all that impressive in US terms. Cost of living here is relatively high too: fixed costs and small market problems. Think hard about how much value you put on Amazon one-click free shipping.

I can understand why libertarians placing high weight on gun rights relative to other civil liberties would stay in the US rather than moving here. Those with a broader rights-weighting system ought to prefer New Zealand; the income loss could perhaps give a way of measuring how greatly the non-movers value those freedoms. Suppose the expected income loss for someone moving here is a quarter. Can a gay couple value legal recognition of their relationship by more than a quarter of their income and still remain in the US rather than moving to New Zealand?

So, Will, why aren't you here yet?

Thursday 13 May 2010

Phil Goff on Monetary Poicy

It seems that Phil Goff feels sorry for those people who voted National only to see the Nats pretty much follow the same policies, and so is coming up with policy proposals to make those people feel better about their vote. I was particularly struck with this one:

Mr Goff said yesterday that Labour would give the Reserve Bank new powers to regulate the economy, suggesting the present focus on inflation will be expanded to include the stability of the dollar, full employment and economic growth.

For argument’s sake, let’s pretend that this is a serious policy proposal and think about what it means and how it would be implemented. First of all, what are these “new powers” that could be given to the Reserve Bank. At the moment, the Bank has the ability to set interest rates for borrowing and lending between it and financial institutions, the ability to buy and sell securities in the open market, and some capacity to regulate the financial sector. What “new powers” could the Bank be given that could have an impact on employment and growth: the ability to set taxes; responsibility for the minimum wage; education policies? If there are such powers that are within the ability of the government to give to the Reserve Bank what is the constitutional argument for giving these to the Bank rather than retaining them to exercised by the government and subject to parliamentary scrutiny?

Second, how would the Reserve Bank’s new focus be written? The academic literature on optimal monetary policy often imagines that central banks are, in fact, concerned with more than just maintaining low and stable inflation, and so postulate a quadratic loss function in which the monetary authority seeks to minimise a weighted sum of squared deviations of inflation from target, output from trend, etc. Are we seriously going to start writing quadratic loss functions into the Reserve Bank Act, with parliamentary debate on the exact weight to put on to each term in the function?

Now, I fully realise that Goff's speech is just political grandstanding rather than a serious policy position, but the worry is that this sort of announcement could force a future Labour government to make some kind of superficial tweak to the monetary policy environment to create the illusion of change. The likely implementation of Goff’s stated policy would probably be the insertion of some weasel words into the policy targets agreement along the lines that the Reserve Bank is responsible for maintaining an undefined level of stability in an unspecified exchange rate, unemployment at the undefined level considered to be “full”, an unspecified level of economic growth, a win for the All Blacks in the World Cup, and general contributions to world peace.

When it comes to monetary policy and central bank independence, however, even weasel words can have bad consequences. This kind of muddying of the objectives, while not making any difference to currency stability, employment or growth, would effectively remove any accountability from the Reserve Bank for its actions, since any decision could be justified as being based on seeking to improve outcomes for one of the multiple objectives it now has responsibility for.

I may be censored

I critiqued BERL's drug harm index in the Spring 2009 edition of the NORML News.

NORML now reports that the last three issues of NORML News, including Spring 2009, have been referred by the police to the New Zealand Censor.
In another sign authorities here are ramping up the drug war, New Zealand's most popular marijuana magazine NORML News has been sent to the censors.

"This seems to be more fallout from Operation Lime, the massive raids on gardening stores earlier this month," said NORML News editor Chris Fowlie.

"Now the secretary of Internal Affairs has referred the past three issues of our magazine, which promotes law reform and civil rights, to the censors."

"We are outraged they are trying to censor our free speech. The magazine is an important campaign tool for us to raise awareness about drug law issues, especially at this time when the Law Commission is reviewing the Misuse of Drugs Act."

The Law Commission's issues paper has called for the removal of penalties for drug use and a general winding back of marijuana prohibition in favour of tolerating or cautioning users and licensing medical marijuana growers.

"Suppression of free speech is one of the very harms of prohibition that we are campaigning against. Authorities are deliberately trying to interfere with our rights."

The issues sent to the Office of Film and Literature Classification are:

NORML News Winter 2009
NORML News Spring 2009
NORML News Summer 2010

Until this is decided, NORML News remains on sale at more than 150 outlets nationwide, including many mainstream book and magazine stores, as well as gardening stores, tobacconists and herbal high outlets.

30,000 copies are printed of each issue - the next is due out in July.

See for the nearest stockist, and get your copy now before it is banned!
Regardless of the Censor's office classification, my critique of the drug harm index remains available here. Although I'd mildly enjoy the bad boy props of having published in a banned publication, I do hope the Censor's office is reasonable.

Wednesday 12 May 2010

Market failure watch: Adverse selection at the buffet table

“The aim of this study was to investigate whether the eating behaviors of people at all-you-can-eat Chinese buffets differs depending upon their body mass. The resulting findings could confirm or disconfirm previous laboratory research that has been criticized for being artificial.
METHODS AND PROCEDURES: Trained observers recorded the height, weight, sex, age, and behavior of 213 patrons at Chinese all-you-can-eat restaurants. Various seating, serving, and eating behaviors were then compared across BMI levels.
RESULTS: Patrons with higher levels of BMI were more likely to be associated with using larger plates vs. smaller plates (OR 1.16, P < 0.01) and facing the buffet vs. side or back (OR 1.10, P < 0.001). Patrons with higher levels of BMI were less likely to be associated with using chopsticks vs. forks (OR 0.90,P < 0.05), browsing the buffet before eating vs. serving themselves immediately (OR 0.92, P < 0.001), and having a napkin on their lap vs. not having a napkin on their lap (OR 0.92, P < 0.01). Patrons with lower BMIs left more food on their plates (10.6% vs. 6.0%, P < 0.05) and chewed more per bite of food (14.8 vs. 11.9, P < 0.001). DISCUSSION: These observational findings of real-world behavior provide support for laboratory studies that have otherwise been dismissed as artificial.”

The main puzzle isn't how the researchers managed to measure how many times the patrons chewed each bite of food; rather, it's why prices manage to induce a pooling rather than separating equilibrium: we don't see only Mr. Creosote at the buffet table.

Candidate explanations:
  • Low consumption consumers with a strong preference for diversity within a meal? But then surely there would be buffets for them with smaller plates and "Seconds ok, thirds bad" rules.
  • Strongly risk averse customers with appetite uncertainty? Highly implausible.
  • Lots of places have lunch buffets rather than dinner buffets: time then serves as constraint on customers, and folks who can eat a lot quickly pool with folks in a big hurry to eat and willing to pay a premium for a speedy meal. I like this one, but buffet dinners still exist.
  • The buffet is loss-leader for overpriced drinks. But then we'd expect high appetite folks happy with water as drink to drive a similar result
  • Restaurants tend to be frequented by groups that will include both low and high appetite types. But isn't there evidence of some sortition of friend groups along BMI? And even absent sortition, wouldn't friend groups with highest average appetites be most likely to choose a buffet for the group?
  • Quantity and quality preferences are negatively correlated: the high consumption folks eat a higher proportion of cheap starches and carbs while the low consumption folks eat a higher proportion of more expensive meats? The study makes no mention of high versus low cost item proportions, but it seems plausible. Mr. Creosote was so odd because he wanted all of the really high quality stuff mushed together in a bucket, after all...
  • Restaurant margins are high enough that losses on the high demand customers don't matter much. This seems implausible given rather low margins in this market; and, in that case, wouldn't we expect entry with cream-skimming (again, a small-plates buffet with perhaps no more than one allowed refill)?
  • Rules allowing them to kick out or refuse seating to high demanders; of course, then there are the lawsuits by those whose rapacity knew no satiety. I've never seen anyone outside of the Simpsons actually kicked out of a buffet; it's been years since I've been to one though.
Other explanations welcome!

Balko on the War on Drugs

It's heartening that nearly a million people have now seen the Columbia video. But it needs some context. The officers in that video aren't rogue cops. They're no different than other SWAT teams across the country. The raid itself is no different from the tens of thousands of drug raids carried out each year in the U.S. If the video is going to effect any change, the Internet anger directed at the Columbia Police Department needs to be redirected to America's drug policy in general. Calling for the heads of the Columbia SWAT team isn't going to stop these raids. Calling for the heads of the politicians who defend these tactics and promote a "war on drugs" that's become all too literal—that just might.
Radley Balko on the aftermath of the rather nasty, but all too typical, video of a militarized SWAT team raid on a family home where they shot up a corgi and terrified the children in pursuit of a joint.

Tuesday 11 May 2010

Minimum drinking age [updated]

David Farrar has been pushing (here and here) for the implementation of a minimum drinking age rather than an increase in the minimum purchase age. In New Zealand, minor in possession of alcohol isn't an offense but purchase by a minor is.

Implementing a minimum drinking age, with infringement punishable by a small fine but with potential for the police to insist on the kid coming to court, is a far better solution to whatever perceived problems there might be with minors drinking than is an increase in the minimum purchase age.

A fair few folks who get irritated by drunk kids are irritated because drunk kids are often, well, really really irritating. We've been mildly annoyed by raucous house parties down the street from us from time to time. But a minimum drinking age solves that problem rather handily: you'd be amazed how better behaved teenage house parties can be if everyone there knows he or she could get a ticket if the cops busted the party. And because everyone knows that, few parties ever become enough of a problem for the cops ever to have to bust the party. Growing up in Manitoba, the minimum drinking age was 18 unless you were in your parents' company. Of course, everyone was drinking from 16 or so onwards, but we did it discretely, because we didn't want the $99 fine. And, the RCMP typically used discretion wisely. If a group of kids weren't bothering anyone but had booze, they'd usually just ask that they dump it out or, at worst, ask the kids who from the group wanted to take the ticket with everyone else chipping in for costs. But if they were up to no good, everyone could get the ticket and could be hauled up in court. Nobody wanted that, so the vast majority behaved. And the ones that didn't got fines.

I think Farrar's being rather too strict in saying it should be illegal for a 15 year old to have a glass of wine with his parents at dinner, but the general thrust is right. A minimum drinking age, with a lower limit for a minor accompanied by parents, makes a lot more sense than increasing the purchase age.

And, since it's David Farrar who's pushing it, I'm further shorting on iPredict the contracts paying a dollar if the minimum purchase age is increased to 20.

Update: Gonzo raises valid points against a minimum drinking age: namely, that kids will be put off bringing their friends to hospital if they're worried about being fined. I'd not support a minimum drinking age if it were more than an infringement notice with minimal fine because of those kinds of worries. I'd also hope for a policy barring hospitals from calling the cops on kids coming in for treatment for alcohol, and that such policies were well advertised to teens. And, I'd a fair bit about the use of police discretion if poor kids of the wrong colour wind up being more likely to get a fine than upper crust white kids for the same behaviour. On net, I'd expect a minimum drinking age to be less bad than increasing the minimum purchase age.

Update2: Matthew Proctor in comments advises that such matters would fall under doctor patient confidentiality, but also rightly notes that most paranoid teens wouldn't believe it absent a public education campaign.


From today's Christchurch Press:
Obtaining methamphetamine may be getting easier despite a Government crack down on the drug, a report says.

The first in a new six-monthly series of government reports issued yesterday on progress against the drug methamphetamine came as the Government announced that $5.9 million would be spent improving Customs security to control the importation of illicit drugs.

"If you look at price, availability and purity – the three main indicators of successful strategy – none of that has shifted an iota," Mike Sabin, group director of policy consultant MethCon, said.

The report says the availability of methamphetamine, also known as P, "may have become slightly easier" in the middle of last year compared to the year before.
How do we get out of this hole? I know! We'll dig our way out!
The Government is giving Customs a $5.9 million boost in next week's budget to help with the war against the illicit drug trade.

Customs Minister Maurice Williamson said the funding would allow Customs to move into the digital age with more advanced tools to detect the activities of drug criminals.

"Tools of this kind are vital if we are to more effectively clamp down on criminal gangs and the `P' (methamphetamine) trade," Mr Williamson said.

Mr Williamson said the budget would also provide additional operating funding of $1.2m, rising to $1.7m a year over the next four years to fight the illicit drugs trade.
Guys, you've got to dig up, remember?

Update: too funny. No Right Turn picked exactly the same post title as I did for this one.

Monday 10 May 2010

Chutzpah [updated]

Update 12 May: Lichtenstein's estate has backed down. Excellent.

  1. Roy Lichtenstein creates pop art heavily derivative of panels of graphic novels. As best I'm aware, he didn't pay royalties to anyone whose work he used.
  2. A band buys a piece of art from an artist who, as part of an art class, painted another piece of work derivative of the same comic book panel as the one used by Lichtenstein; they use this as an album cover
  3. Lichtenstein's estate, whose website includes a scary "don't steal our IP" intro, sends a threatening email to the band:
    “Dear Elsinore Music,

    You have adapted a Roy Lichtenstein image for the cover of your new album. This is a copyright violation. Please contact me.

    Shelley Lee
    Manager of Intellectual Property
    Estate of Roy Lichtenstein
    745 Washington Street
    New York, NY 10014
    T (212) 255-4570 x105
    F (212) 727-3138”
Whole sordid affair here; ht Boing Boing.

Roy Lichtenstein's work could not have existed if the standards of copyright enforcement his estate seeks to enforce on others had been enforced on him. Low costs of creation for me, but not for thee.

Transformative work as defence for Lichtenstein under fair use?
"The closer my work is to the original, the more threatening and critical the content. However, my work is entirely transformed in that my purpose and perception are entirely different. I think my paintings are critically transformed, but it would be difficult to prove it by any rational line of argument"

Wrote the Boston Globe a couple of years back:
After visiting a Lichtenstein exhibition in Chicago, attorney Mark Weissburg wrote an article titled ``Roy Lichtenstein, Copyright Thief?" ``I was struck by the fact that Lichtenstein was never sued for copyright infringement," Weissburg wrote. ``Under copyright law if you copy a protected work without permission you are breaking the law . . . . The Copyright Act also prohibits what are called `derivative works.' These are works that play off of or incorporate or embellish another work. Virtually every one of Lichtenstein's paintings was either an out and out copy or at least a derivative work."

Intellectual property attorney Stacy Friends agrees. ``It is just like sampling, and this is considered `stealing , ' " she says. ``The question to be asked is why people who clearly had a right to sue chose not to. In the time period that we are talking about, there might have been some historic leeway for fine art." It is possible that a copyright holder did threaten to sue, and instead reached a private settlement, she speculates. It is now a moot point. The statute of limitations for copyright infringement is three years.

Comic book companies owned the original copyrights. DC Comics declined to comment for this article. Russ Heath, a DC artist whose work Lichtenstein used, says the publisher was never interested in suing Lichtenstein, probably because there wasn't much money to be made. ``He never even had me over for a cocktail, and then he died. So I guess I'm out of luck."

Ninety-year-old artist George Tuska couldn't come to the phone, but his wife, Dorothy, says they had no idea that a 1961 Buck Rogers panel drawn by her husband became ``Emeralds," a valuable Lichtenstein canvas. ``Oh my God," she says. ``That is unbelievable." Sotheby's sold ``Emeralds" to an anonymous buyer for $1.6 million in 1999.

One artist whose work Lichtenstein appropriated, Joe Kubert , says he doesn't care. ``My focus is on what is happening today." As it happens, the Lichtenstein Foundation uses an exact copy of a Kubert picture of a fierce dog, titled ``Grrrrrrrrrrr!!" to illustrate a warning to copyright violators on its website. Grrrrr indeed.

``Nobody seemed to raise this issue way back when," says the Foundation's Cowart. ``This wasn't supposed to be about exploiting the exploited. We are all in favor of having the drawers and writers receive as much credit as humanly possible. We owe them esteem but can't pay them back for the royalties they might have received."
Can't pay the prior artists back royalties, but can send chilling copyright notices to the folks going forward. Copyright is broken and Roy Lichtenstein's estate is shameless.

Deconstructing Lichtenstein has been pairing Lichtenstein paintings with the comic book originals.

Now, I'd agree with Lichtenstein that moving the art from a comic book page to canvas IS transformative. But surely then too would be taking a Lichtenstein piece and transforming it for use a handbag, on a bumper sticker, or on an album cover.