Thursday 30 September 2010

Crowdsourcing the Seismograph

@adzebill took the 11 Twitter guesses of the last aftershock's magnitude, which ran from 3.5 to 6, got an average of 4.37. The actual result? 4.5.

I'd guessed 4.8; I'd not adjusted sufficiently for being up on the 5th floor, where the initial rolling was followed by a sharp jolt and the building groaned. It was definitely bigger than the 4.3 of the other night (experienced at home, ground floor) and smaller than the 5.2 (also experienced ground floor at home).

What were the estimates on this one?

@hamishduff: 3.5 (retweeted)
@ericcrampton: 4.8
@malclocke: 4.4
@rafmanji: 4.0 (retweeted)
@HerrSchnapps: 4.5
@beazer: 4.2
@lightweight: 6+
@90_second_fall: 4.2
@heabe: at least 4.5

So 9 independent estimates, two of them retweeted by the same person so we probably ought not count those two as part of the sample. If we consider only the independent guesses of these nine folks, counting the "at least" folks as giving only a point estimate, then the average for the group is 4.456. The median, which is more robust to the "at least an X" estimates, gives a 4.4. Both are seriously good estimates of the actual magnitude.

I can't find Twitter archive on #eqnz older than 26 September. If anybody knows how to find the older #eqnz tweets, though, there would be a pretty interesting research project in this.
  • Is the median or mean twitter estimate more accurate?
  • Does mean accuracy improve over time with more exposure to quakes?
  • Do individuals who make estimates get more accurate with repeated quakes?
  • How does the variance of estimates move with the magnitude of the quake?
Somebody could have an awful lot of fun with this, if they had access to the full twitter history on the #eqnz channel.

Update: Friday's 5:06 PM shake, 3.7.
The guesses:
"mid-high 3's?" (I'll count as 3.75)
"late 3s, early 4s" (will count as 4.0)
Average: 3.87. A bit high, but not bad.

Update 2: 9 twitter guesses on this one. Average: 4.211. Actual: 4.2. We only actually need the geologists for the initial calibration exercises. Once that's done, we only need the seismographs to make sure we don't stray.

Nope, that's not a $20 bill lying there

Doherty at Reason points to a new site tracking the price of marijuana.

It's much cheaper in Canada than the States and cheaper on the west coast than the east.

I rather expect that trying to profit from those price differences would be rather riskier than exploiting price differences across different prediction markets.

Wednesday 29 September 2010

Left on Red

Some coordination equilibriums are more efficient than others. Here in Kiwiland, we drive on the left-hand side of the road like the Brits and Japanese, which gives us very nice access to second-hand Japanese cars for which we'd otherwise need to compete with the Americans.

The odder road rule has been "Give way to the right". Now, this always makes sense in roundabouts where the equivalent is "give way to traffic inside the circle". Very sensible. But it's been applied more broadly. If two opposing cars want to turn onto the same side street, the one making the right-hand turn (crossing traffic) has the right of way.

Give way rule change

That saves minor amounts of money in that we don't have to have as many traffic lights with arrows on them for turning traffic, but means there's reasonably complex calculation required before making a left hand turn. Why? Because if another oncoming car can cut-off the fellow turning right, then you can turn. Sometimes, that other car will swerve to go around the turning car, sometimes it won't. The same calculation applies if you're making the right hand turn: will the car behind the left-hand turning car swerve out and cut you off, or wait behind the turning car in which case you have the right of way. Our Erskine visitors always find this the worst part of adjusting to NZ driving.

The "true but little known fact" is that the official rules also give right of way to right-turning vehicles from minor side streets over right-turning vehicles from the main street because the car on the minor street is to the right of the car on the major street. Unless, as I understand it, there's a stop line in front of the car on the minor street and no stop line in front of the car on the major street. Except that none of the lines have been repainted in a decade so you never really can tell. Fortunately, people are smarter than rules and have converged on the norm of "major street traffic has right of way over minor street traffic". Except, of course, for newcomers who expect the rules to be as written in the rulebook rather than learning them from established practice.

The government has proposed a rule change so we're more in line with international norms: folks turning left will have right of way over folks turning right. I like the move if it's accompanied by retrofitting of some turn arrows on otherwise difficult intersections.

But while we're considering changing the road rules, here's one that really really ought to be adopted at the same time. Allow left turns on red lights after stopping. Almost all of North America (not Montreal) allows right on red except in spots where it's specifically prohibited; New York reverses the default rule. There surely will be some places where heavy pedestrian traffic or obstructed views makes it unsafe; it oughtn't be hard to single out those few places for "No turn on red" signs. But the default rule ought to allow such turns.

Confession time: I made left turns on red for the first year I lived here 'till I figured out that it was banned and I could be ticketed. Now I only do it when feeling particularly nostalgic and nobody's looking.

US data suggests very few accidents from these turns relative to the efficiencies gained.

If we're changing the rules anyway, now's the time to change this one. Make it so!

Relative tyrannies

In response to the earthquake, New Zealand's Parliament has given Gerry Brownlee, the Earthquake Recovery Minister, power to suspend or modify just about any law in the country in order to facilitate earthquake recovery. The extraordinary powers were granted for expediency, as nobody in Parliament seemed to know what set of laws would need quick amendment to ensure reconstruction, but it's still a major grant of powers to the Executive from Parliament. Weren't there English civil wars about protecting Parliamentary privileges against incursion by the Executive?

So Brownlee has, as some have pointed out, the power to decree that nobody would be prosecuted for murder for shooting taggers. Of course, there's no way he'd do so. The most likely effect some would deem unwelcome would be perhaps too little consideration being given to heritage preservation when deciding whether to bowl over unsafe buildings and perhaps what will wind up being transfers to developers. That's not to say that the act wasn't entirely overkill; I agree with Andrew Geddis's open letter:
In particular:
  • Individual government ministers, through “Orders in Council”, may change virtually every part of NZ's statute book in order to achieve very broadly defined ends, thereby effectively handing to the executive branch Parliament's power to make law;
  • The legislation forbids courts from examining the reasons a minister has for thinking an Order in Council is needed, as well as the process followed in reaching that decision;
  • Orders in Council are deemed to have full legislative force, such that they prevail over any inconsistent parliamentary enactment;
  • Persons acting under the authority of an Order in Council have protection from legal liability, with no right to compensation should their actions cause harm to another person.
These matters are not simply "academic" or "theoretical" in nature. Over and over again history demonstrates that unconstrained power is subject to misuse, and that even well-intentioned measures can result in unintended consequences if there are not clear, formal measures of oversight applied to them.
I'd think it's not the likely particular immediate effects of this legislation that we need to worry most about; rather, it's the demonstrated non-existence of any constitutional spirit that could hold in check more serious applications of such powers down the road. The same failings of constitutional spirit that allowed abuses by Labour last time around are allowing abuses by National (with unanimous support from the opposition) this time, and may yield worse yet to come.

Meanwhile, in America:
not only does the President have the right to sentence Americans to death with no due process or charges of any kind, but his decisions as to who will be killed and why he wants them dead are “state secrets,” and thus no court may adjudicate their legality.
Obama is arguing the executive has the power to execute American citizens without a trial, without even so much as an airing of the charges against them, and that it can do so in complete secrecy, with no oversight from any court, and that the families of the executed have no legal recourse.

You can’t even make the weak argument that the executive at least has to claim this power in the course of protecting national security. Because it doesn’t matter. Obama is arguing that he has the right to keep everything about these executions secret—including the reasons they were ordered—merely by uttering the magic phrase “state secrets.” In other words, that this power would only arise under a national security context is deemed irrelevant by the fact that not only is Obama claiming the president’s word on what qualifies as “national security” is final, he’s claiming the power in such a way that there’s no audience to whom he would ever need to make that connection.
So where Brownlee has a whole lot of powers, most of which he'd never use and would vehemently deny any intention of using; Obama says "Yeah, I might want to order somebody killed, I can do that. Sorry if you don't like it; actually, I'm not even sorry if you don't like it. Deal with it. Oh, and I'm also wanting a back door into all your email and VOIP systems that'll make it easier for viruses to get in but will also let me eavesdrop. You'll have to deal with that too."

Relatively speaking, NZ still isn't looking that bad. So long as the US keeps getting worse faster than we do...

Positive trend of the day: taking less offense

I'd posted before on New Zealand's uniquely pragmatic mechanism for determining what's acceptable language for broadcast television: namely, they survey Kiwis to ask them what's offensive. They read respondents a list of words, then ask them whether they'd consider use of those words in different TV contexts to be unacceptable. Then they draw the line based on respondent answers. None of this FCC trying to figure out what community standards are by asking a bunch of prudes.

What I'd missed was the nice time trend. For each and every swear word listed on their summary sheet, and yes they don't asterisk anything out there so consider yourself warned if you blush easily, fewer people took offence in 2009 then in 1999. Respondents were asked whether the use of each term was "unacceptable". Restricting ourselves to the words included in all years, the average "unacceptability" rate was 43% in 1999 and 32% in 2009. The most offensive and least offensive terms on that list showed the same five percentage point decrease in offensiveness, but the f-bomb showed a nineteen percentage point drop over the period: only 51 percent deemed it unacceptable in 2009.

We are taking less offense than we did a decade ago. I count that as generally a good thing.

What does this all mean though:
  • If you want to be offensive, you need to ramp things up. Be more creative; combine existing offensive terms in new and amplifying ways. I'm thinking Deadwood, but less anachronistic.
  • If we've seen an increase in use of such language on TV over time, that means that there's diminishing marginal offensiveness with use of terms. So we'd expect the time trend to continue.
  • Note that newly measured terms rate, on average, as more offensive than the old stand-byes. The median of all 2009 measured terms is 31% deeming offensive; new terms rate as, at median, 45% unacceptable. So "Jesus Christ" dropped from 41% to 31% deeming it unacceptable, but put a participle in the middle (newly measured) and it's more offensive than either the root term or the modifier. And, I'd bet that if you flipped the participle for the compound noun that precedes it on the list, it would be even more offensive. Some of this will be due to novelty, some due to a multiplicative effect.
  • For the former combination, we'd really need individual level data to suss out whether it's exceptionally offensive because the set of persons deeming the root terms unacceptable don't overlap perfectly and they're catching the union of the sets, or whether new people deem the amplified term to be offensive. These are important questions; I wonder whether the underlying data is available.
Update: And, of course, even the most unacceptable term on the list can show up on broadcast after 8:30, as it did last night.

Update2: HT: @CherylBernstein

Tuesday 28 September 2010

Stupid symbolic policies

New Zealand's Labour Party has promised to ruin the world's cleanest GST by exempting healthy foods. As many have pointed out, it's hard to deny other merit goods their due once the door has been cracked open.

But would it even do any good? No, says our current Erskine visitor Jon Klick. From his recent paper:
In recent years, much attention has been directed at the ongoing increase in body weight, and what might be done about it. We use data from the National Health Interview Survey (NHIS) for the period 1982-1996 to estimate models relating measures of body weight (BMI, a dummy indicating that a person is overweight or obese, and a dummy indicating that a person is obese) to two food price indexes constructed using regional BLS price data as well as the official BLS food price index. The most aggressive use of our results suggests that variation in year-to-year food prices is unlikely to explain much of the increase in body weight over our sample period. This conclusion holds true regardless of the food price measure we consider.
In short, regional variation in food prices over the period, comparing baskets of "healthy" and "unhealthy" foods, explains very little of the rise in obesity in America. The best counterargument would be that tiny changes might accumulate over time. So maybe we'd see an effect in a decade or two.

Of course, things could run the other way as well. If food, as a whole, becomes cheaper than other goods, then people will consume more food relative to other goods. If the total increase in food consumption is greater than the effect of shifting from relatively unhealthy to relatively healthy foods, then obesity goes up, not down.

Prior GST posts here and here.

Monday 27 September 2010

Reporters do not understand causality

The latest in a continuing series. Today's edition: the effects of video lottery terminals, or "pokies". A couple of public health researchers from Massey presented work at an anti-gambling conference arguing that increased presence of pokie machines causes crime. Here's the Press on it; the story was also picked up in the Dom Post and Southland Times.
The more pokies in your neighbourhood, the higher the crime rate, new research has found.

Problem gamblers stealing to feed their addiction could explain the link to higher crime levels, police and gambling experts say.

The nationwide, year-long study by two Massey University academics used census data to prove the link between crime levels and the location and number of gaming machines in a community.

Co-author Martin Wall said he was surprised the impact of problem gambling on the wider community showed up in national crime statistics. "What was surprising was that there was a statistically significant link between the density of machines and crime rates," he said.

"People lose a lot of money on pokie machines and do not really control it. This affects families and communities.

"We have proven that this effect is big enough to show up in crime rates. That is quite a surprise because the number of problem gamblers in New Zealand is quite low. The effect must be quite big if you can detect it in statistics."
And that is, of course, the first thing that ought to give you pause. Is it more plausible that the small number of problem gamblers are responsible for a whole lot of crime, or that something's funky in the statistical method?
Christchurch problem gambling expert Peter Jamieson said there was a clear link between crime and pokie addiction.

"This research backs up what we see every day," he said.

"The slang for pokie machines is that they are a gambler’s heroin. Crime and gambling go together very well. We get many people sent to us by the courts."

Jamieson, co-ordinator for the Salvation Army’s Oasis Centre for Problem Gambling, said many people were referred for gambling addiction counselling by the justice system.

"Ripping off the bosses – that is the biggie," he said. "We also get people who have committed petty stuff like selling things stolen from work or stealing courier packages . . . They need to get some money because they are desperate to gamble."

Christchurch has 114 venues for gaming machines and a total of 1767 pokies.

Christchurch policing development manager Inspector John Price said police often dealt with the "fallout" of problem gambling.

"There is definite causation between burglaries and gambling," he said. "People commit crimes to fuel their gambling. We just pick up the pieces in the end, unfortunately."

Wall said the next stage of research will look at ways to control gambling harm.
Nowhere did the study address causality. They have regressions with crime and other outcome variables on the left hand side, a pokie machine measure on the right hand side and controls for three confounds: population, urban or rural status, and the area's measure on the New Zealand Deprivation Index. That isn't enough to show a causal relationship; it's just correlation. Imagine that pokie machines have no causal relationship with crime. What might generate the correlation?

Well, pokie machines tend to be placed in bars, either downtown or in suburban commercial areas. If those venues are somehow different than other places of similar population and deprivation, and tend to be associated with higher crime levels, then the correlation could simply mean that pokie machines tend to be placed in spots that tend to have higher crime rates.

So if pokie machines aren't randomly sprinkled across the country but rather are put where their owners expect to make the most money - basically, near the kinds of folks whose impulse control issues would similarly dispose them to criminal activity, then we can't say anything about causation using this method.

So, how do you deal with the problem? Instrumental variables. Find something that's correlated with pokie machine presence that's not correlated with the crime rate. Now that's not easy. But that's what you'd have to start doing to be able to start talking about causality. Another method would be regression discontinuity design. There are licensing boards that decide whether a venue's allowed to have pokie machines. Compare places that just barely passed muster to be given licenses with those that just barely didn't. I have no clue whether the licencing trust board deliberations are public record so I don't know whether that's feasible. Third, natural experiment. Are there places that had something weird happen? Every now and again, Internal Affairs orders that some venues shut down their pokie machines because they're not meeting the terms of their trust deeds. If any of them are shut down for a long enough period, you could check whether the exogenous change in status had any effects on the crime rate.

All of those above approaches would be reasonably hard. Here's one that would be reasonably simple. Run the regressions exactly as they are now, but on data from prior to the legalization of pokie machines. As best I can tell, pokies started being allowed around 1990 and rolled out over time. This one would actually be a fun project for a future honours student project: are pokie machines so evil that their effects run backwards through time like tachyons? Look to see whether places that get pokie machines a year later have higher crime rates than places that don't get pokie machines a year later.

I've also a few worries about their measure of crime. I've talked a few times with the stats folks at NZ Police trying to figure out how to get decent disaggregated crime data. The answer I usually got was that it can't be done. So it's not surprising that the authors here used crime reports by police station, then applied average rates for each police station to its constituent meshblocks, then mapped that back up to Census Area Unit averages. But there are other problems, or at least from my recollections of chats with the police about their statistics. Within a city, some police stations will take lead on different offenses regardless of where they happened. So all fraud cases might be handled downtown with petty crime handled by branch stations. Maybe they've fixed things up since, but when I'd asked a couple of years ago they said there was no way of mapping those crimes back to the originating station.

But let's assume that that's been fixed. We still have the very big problem that crimes will be measured where they happen, not based on the residence of the offender. So if you burglarize a place or commit fraud against your employer, it's the victim's address that enters the crime stats. Again, where are pokie machines? Mostly in bars downtown and in bars in commercial areas. Is the measured strong relationship between pokie availability and fraud then reflecting that problem gamblers might defraud their employers, or that the objects of fraud might be close to the kinds of commercial areas where pokie machines are placed? Do we see a relationship with robbery because of the pokie machines, or because pokie machines tend to be near places that get robbed?

I'd said:
There's one simple question that ought to be required for any journalist interviewing any social scientist on any issue like this: "How did you address causality?" It's a simple question. If the researcher says "Oh, we used a panel design to get within-subject effects" or "Oh, we instrumented by using...", that's a great start! If not, all you've got is correlation.
Kiwi journalists just don't ask the question.

That ol' Somali Spirit

“Taxes are annoying,” explained one olive oil exporter in Mogadishu about why he was buying missiles for insurgents.
From an excellent Gettleman piece on Somali piracy.

Another very nice tidbit that ought make us skeptical of potential western efforts to impose systems:
The Italians and the British colonized separate parts of the territory, but their efforts to impose Western laws never really worked. Disputes tended to be resolved by clan elders. “Kill me and you will suffer the wrath of my entire clan”—that, to many people, was law and order. The places where the local ways were disturbed the least, like British-ruled Somaliland, have fared much better in the long run than south-central Somalia, where an Italian-run colonial administration supplanted the role of traditional elders. South-central Somalia continues to fester as a source of bloodshed, Islamist radicalism, and piracy. Somaliland just held a peaceful election and—even rarer in Africa—a peaceful transfer of power.

Sunday 26 September 2010

Union busting - Daily Show edition

From The Daily Show. Their intrepid reporter finds that UFCW Nevada hires temporary workers at minimum wage with no benefits to protest outside WalMart against WalMart's work conditions, then cuts their hours without compensation because the union guy who would deliver their placards two days a week is on holiday.

The Daily Show was featured in New York Magazine recently:
It’s hard to top a kick in the nuts.

Especially when the kicker is Linda McMahon, the Connecticut Republican candidate for the U.S. Senate. Pure comedy gold.

Jon Stewart watches the tape and doubles over with laughter. He and fifteen of The Daily Show’s writers, producers, and performers are gathered around a 40-inch flat-screen TV inside the show’s Eleventh Avenue offices early on a Thursday morning in August. Creating a segment for tonight’s Daily Show around this footage, from one of World Wrestling Entertainment’s harmless little skits, would seem to be easy. Maybe they can just run the nut shot repeatedly. Along with another clip of McMahon, the co-founder and former CEO of WWE, chugging a beer and drooling foam down her cheek.

Except that the goal here isn’t simply topping the kick in the nuts—it’s using the scrotum slam in the service of a larger point. Oh, Stewart & Co. enjoy a lowbrow laugh as much as the folks over at South Park; heck, next week they’re publishing a book that includes some excellent masturbation jokes. But Stewart and The Daily Show became America’s sharpest political satirists by aiming at least a little bit higher.
The whole article is excellent.

Saturday 25 September 2010

A Canadian tobacco hypothesis

Hypothesis: Punitively high Canadian tobacco excise tax rates have nothing to do with health or Ramsey, and everything to do with economic development on Indian Reserves.


Almost 700 kilometres away at Six Nations territory in southern Ontario, another fenced compound -- just down the road from the site of a new tribal police headquarters -- harbours more unmarked tobacco factory buildings. A security guard heads off an uninvited visitor and moments later another plant employee roars up in a pickup truck, politely making it clear the interloper is not welcome.

Such secretive plants are dotted throughout these and two other Mohawk communities in Ontario and Quebec, as many as 50 all told, according to estimates from police and tobacco-business insiders.

Their tax-free, dirt-cheap product is decried by antismoking advocates, non-native politicians and the mainstream tobacco industry.

The native product accounts for an estimated 30% of cigarettes smoked in Canada, and has dragged to a halt the steady, decades-long decline in smoking rates, critics say. They also represent $2-billion a year in lost federal and provincial revenue.

But on reserves grown accustomed to poverty, the factories are the heart of a solidly entrenched economic powerhouse, broadly supported and responsible for new mansions, nice cars and general financial wellbeing. In a striking reflection of the complex relationship between non-native governments and First Nations, they are often allowed to operate with virtual impunity.

"I look at the tobacco industry as the basis for a diversified economy for the Six Nations," said Bill Montour, elected chief of that community. "We want to be part of this whole idea called Canada, but we're not going to be coerced into saying 'Well, you've got to do it this way.' "

Edna Holyome, who owns a smoke shop at Six Nations that sells those locally made cigarettes, puts it more simply. "Tobacco," she said, "is our natural resource."
And why haven't the Revenuers stepped in to do anything? Ah, right:
Past confrontations like the 1990 Oka crisis near Kahnawake and the Six Nations land-claims dispute near Caledonia make the idea of ending the business by force less than palatable for any outside government.

"There is no real push, there is no real force that is trying to stop this industry because, honestly, if they do come in, there's going to be another crisis," said Steve Bonspiel, editor of Kahnawake's Eastern Door newspaper. "It will be defended ... Any attack on the industry is an attack on the community, is an attack on our rights."

The economic benefits are readily apparent, though have also created tensions.

All the factory owners at Six Nations are millionaires, said Ms. Holyome, part of a new commercial association. And everyone who makes money from the business has to buy a new car, she laughs, from Cadillac Escalades to Hummers and even Porsches.

"Today, we're known [to neighbouring Quebecers] as the Hummer people," Tim Jay Montour, a tobacco wholesaler at Kahnawake, said with a grin. "People have pride when they have money. It's changed us from a one-horse town to a boom town."
The complete series, with links to the Mohawk internet gambling initiatives, is well worth reading.

Friday 24 September 2010

A prediction

For the next couple of months, if National Prime Minister John Key thinks there's any hope left for the ACT Party, he'll spend some time providing symbols that will infuriate the economic right. He'll look for ones that are relatively cheap, like appointing "history's greatest monster", former Finance Minister Michael Cullen, to head up New Zealand Post (history's truly greatest monster here). Cullen won't do any worse than the average appointee to that position, but he'll rile up the folks who'd be at the margin between ACT and National.

When and if he's lost hope that ACT can ever get itself together, those symbols disappear and he starts pushing a more liberal economic line, or at least providing those symbols. He can't go as far as Brash did, but he can certainly destroy ACT without much effort - kill Epsom, and tack slightly more right on economics. He won't move far in overall positioning - it's worse that moderate voters switch to Labour than that hard core economic liberals just stay home on election day. The former counts against you twice while the latter counts against you only once. National then moves farther to the right in the longer term as it absorbs former ACT activists into its party base.

The day Key stops attacking Douglas and starts talking up economic liberalism, dump your ACT stocks at iPredict.

Warm houses in cold climates, dead stock in warm paddocks

Most of us are familiar with David Friedman's beautiful application of fixed and marginal costs to housing. If you live in a warm climate, you spend not too much on insulation. The marginal cost of increasing the internal temperature is then higher, so you keep your house cooler. If you live in a cold climate, you have to incur the insulation cost because the alternative is likely freezing to death indoors. The marginal cost of heating is then lower and so you'll have warm houses in cold climates and cold houses in warm climates.

New Zealand lamb farmers are currently experiencing massive stock losses due to a big snowstorm down south. This isn't exactly unprecedented; it seems like every second or third year since we've been here, there's been a big snow storm during lambing somewhere in the country that has killed a bunch of lambs and ewes. This one seems worse than prior years' though.

These pretty heavy stock losses always puzzled me a bit. I grew up on a mixed farm in southern Manitoba. Our beef cattle calved out starting around the third week in February and finishing in March. If calving went later, then there'd be elevated risk of scours for the calves with the mucky spring thaw and variable temperatures - the calves needed to strengthen up a bit before the spring. And so the first calves often were born on very cold February nights. Daytime highs of -20 celsius or worse; nighttime lows of -40 celsius weren't completely uncommon, though -30 was more typical.

But we never had stock losses like the farmers here have with snowstorms. With about 50 or 60 cows calving out in a season, we might have gotten two or three calves that didn't make it; those deaths were far more typically due to the cow lying on the calf or strangling during an unattended birth than to being born in a snowbank at -40. Here, it's likely hundreds of thousands of lambs that are dying in the snow. Why? Friedman's story. Because the weather was on average terrible, we had to use practices adapted to it. The young cows stayed in a corral near the barn where they could be quickly attended to if things went wrong; the more experienced cows were in another corral also close to the barn. They were all on straw bedding with lots of good hay and alfalfa (lucerne). If they weren't, they'd all have frozen or starved to death in the pastures. So the marginal cost of ramping things up a bit on a really cold night - putting out more fresh straw bedding and being extra sure to go out two or three times overnight if a cow was due instead of once or twice - wasn't that high. But the farmers here have all their stock out in paddocks far from help. The marginal cost of getting them to a paddock close to the house in the very short notice before a serious snowstorm is high, and keeping them all on hay close to the house would waste a lot of winter paddocks.

And so you get dead stock in warm paddocks and relatively happy cows at -40.

It's likely all optimal. But I wonder whether having adapted to this kind of agricultural practice hasn't helped make things like Crafar more likely.

Thursday 23 September 2010

Bizarre NZ coalition politics

Bringing our foreign readers up to speed:

New Zealand runs a variant on PR called Mixed Member Proportional Representation, modeled on the German system. Parties enter Parliament if they either earn 5% of the Party Vote, in which case they're given seats proportionate to their share of the Party Vote, or if they win an electorate seat, in which case they're also given seats proportionate to their share of the Party Vote. A minor party earning 4% of the Party Vote (voters make two ticks on their ballot - one for their electorate MP, one for their preferred Party) gets zero seats unless it also wins an electorate, in which case it gets about 5 seats in total.

The Green Party consistently gets around 7% of the vote but no electorate seats; it consistently enters Parliament and its voters don't have to worry about wasting their vote.

The ACT Party consistently gets less than 5% of the vote and so is dependent on winning leader Rodney Hide's seat in Epsom. Hide's fortunes in Epsom depend on National winking at its voters to tell them to give Rodney the electorate vote while giving their Party vote to National.

ACT was a fairly principled liberal party, then was decimated in 2005 when Don Brash, then National leader, ran a campaign that drove ACT out of the market. If National were going to support liberal policies, why support a minor party? Brash lost, and ACT was down to two MPs. ACT came back in 2008 with 5 MPS pushing a more right wing than liberal platform, with lots of policies appealing to the law & order constituency. Hide in particular seems to have viewed a move to being a reliable partner to National as being of utmost importance this session and so took on one job - the Auckland city amalgamation - handed him by National as a chance to increase his profile and to demonstrate competence on a major initiative. Of course, city amalgamations are rather antithetical to basic Tiebout considerations, and ought be viewed suspiciously by liberals, but that was of minor concern. Proving steady hands and a willingness to do the grunt work in order to get concessions on things like the Regulatory Responsibility Bill he viewed, I think, as more important.

Internal scraps within ACT led to leaks of Heather Roy's complaints against leader Hide, then leaks of material David Garrett disclosed to the Party prior to his running for office that led to his resignation from Parliament. After Garrett resigned from the Party but before he resigned from Parliament, Prime Minister John Key announced that he was prepared to work with anyone from ACT except for Sir Roger Douglas.

It's been obvious for a while that Key wants massive distance between himself and Douglas, mostly because folks view Douglas poorly. Douglas wears all the blame for the transitional costs of economic reforms with most voters and is given none of the credit for the longer run benefits; he also supports economically liberal policies that might scare off moderate Key supporters. So John Key told reporters that he'd work with anyone except Douglas and that he opposes the "far right" economic policies that Douglas supports, including a bunch of things that Brash campaigned on in 2005 and other things that National supported while in Opposition.

Douglas then, understandably, tweeted "Why's Key so afraid of me? He then put out a press release with a cute ad showing himself and the policies he supports for achieving National's stated goal of catching up with Australian incomes on one side, and a man with his head in the sand on the other, labeled John Key.

Now, if the point of a National-ACT coalition is that Key gets to blame ACT for a bunch of economically liberal policies while maintaining appeal to moderate voters, you'd then expect ACT to rally behind the Douglas ad and reassert its liberal policies while Key made a show of opposing those policies.

Instead, Rodney Hide steps up to defend John Key against the Douglas ads. The head of a minor party sides with the PM against one of his MPs.

John Key was probably trying to throw a lifeline to ACT. The more he reminds economic liberals about ACT's economic liberal policies and how moderate he is relative to ACT, the fewer voters flee back from ACT to National and the easier time Key has of taking the middle tack. That was the point, I'd think, of his gratuitous swipe at Douglas. And, the more folks are talking about ACT being a party of economic liberals who care about principles and policy, the less they're talking about ACT's numerous other troubles.

A contract paying $1 if ACT returns a single member to Parliament at the next election is now around $0.58. At what contract price does this become self-fulfilling prophecy as National would then have to run a serious candidate against Hide in Epsom? ACT's going to have to pull something out of the hat soon....

Gouging - another missed opportunity

The Christchurch Metallica show sold out in 21 minutes.

It was, by reports, awesome. Nothing from St. Anger, minimal from Black album, lots of classics, lots of Death Magnetic. I saw them in '91 in Winnipeg (too much Black album); this sounds like it was a better show.

And now I regret not having gone to find a scalper.

Ticket scalping's been a bit of a puzzle to economists for a while - why don't the artists charge market clearing (gouging) prices and cut out the scalper entirely? I've posted a bit on this here, as well as here here and here.

In other gouging news, the comments thread over on my piece in The Press has been, in short, hilarious. My favourites:
lisa #7 04:51 pm Sep 17 2010
this article is why everyone hates economists
I love that I am personally responsible for everyone hating economists. It may be true in our faculty meetings though.
Kiwi Anarchist #8 09:37 pm Sep 17 2010
What happened to The Left in this country? It's time to get off your backsides and start organizing and fighting for yourselves and your hard-won rights before people like Eric Crampton have them taken from you!
Bloody peasant!

Wednesday 22 September 2010

RSS versus front page...

A one-day snapshot of how SiteMeter distorts reader numbers where a large proportion come by RSS.

Sitemeter: Monday, 20 September, 201 visits, 409 page views.
Feedburner: Monday, 20 September, 10,435 views, 130 clicks.

One day's RSS traffic beats what I'll get all month via front page traffic. It's an abnormal day, sure: one post hit the shared feed for a few folks with a lot of subscribers: more than 9000 views for that item. And some folks think RSS is dead....

Loving local democracy [updated]

The comic book came in the mail recently. The one with the pictures of all the candidates and their platforms.

Michael Hansen is again running for District Health Board. Last time, he promised to put an end to the Council folks who send the vans around emitting "nefarious tingle rays". What's his platform this time?
There is no such thing as "schizophrenia". It's all done with two way transmitting bugs to talk to mainly young people with potential. If the "talking" is ignored, they are stung with an electronic cruelty machine.
Major heart surgery may be a thing of the past if experiments I have done by flushing veins through with sulfaric (not sulphuric) acid with the registered CLR (Calcium, Lime, Rust) chemical, to get rid of lime, waterstone and cholesterol by making an insertion at a wrist vein. I can't go any further, and need 2 medical students to continue this.
We spend money on wars, football stadiums grand projects, while women with breast cancer only get 9 months "Herceptin". I will speak on this, even if we have to fund "generic Herceptin" from India.
Genetically modified fat tomatoes etc, result in genetically modified fat people. Exercise is not much help. Watch what you eat.
Given the relative impotence of district health boards, is his campaign really less credible than some others? Hansen's also running for mayor.

Other long-shot candidates seemed to be using the free space as advertising for their small businesses.

At least it's entertaining.

Joe Bennett's column today is excellent:
As I left the city I passed a poster advertising a candidate for the local elections. Here's the text on the poster in full: "Do you believe that parking at the hospital should be free? I do."

"Now that," I exclaimed to the steering wheel, "is a belter, a real biscuit-taker. In the long and inglorious history of election campaigning, has there ever been a slogan so blatantly emotive and yet so spectacularly trivial?"

"I was rather proud of it," said a voice from the back seat.

"Who said that?" I said.

"Me," said the voice, "the guy on the poster. The candidate. Call me Candy."

"Candy," I exclaimed, "how nice of you to join me for a hypothetical debate to while away the drive towards a windscreenful of mountains."

"What's wrong with my poster?" said Candy.

"In the long and inglorious history of election campaigning . . ."

"Yeah, I got all that," said Candy. "Blatantly emotive and spectacularly trivial, wasn't it? But what I want to know is what's wrong with it. I mean this is an election. And we're not going to pretend that an election is anything other than a mood- driven popularity contest, are we? Surely you're not going to suggest that it's about policy."

"Well," I said.

"Look," said Candy, "in the last couple of weeks the poll ratings of the two main mayoral candidates in this city of ours have reversed. Yet the two men haven't changed. Their policies haven't changed. And despite the quake, the city hasn't changed. The only change is that one of the candidates has been on telly a lot doing leaderly stuff. Apparently he's even winning the race for the Auckland mayoralty that he's not standing for. Now tell me what that tells you."

"I know, I know," I said, "but calling for free hospital parking is just a way of painting you as the good guy, oozing sympathy for the sick like a wounded Florence Nightingale. Hospital parking, I mean, it's so simplistic."

"Simplistic!" said Candy. "Have you seen the other campaign posters round the city? They make mine look like one of the denser texts by Noam Chomsky. Most of them consist of a photo of the candidate, the name of the candidate and a bloody great tick to remind the unwashed what to do. And that's that. At least I address something specific. Yes, I'm fishing shallow, but that's where the fish are."

"Point taken, Candy," I said. "I don't doubt your motives are as pure as the snow on Mt Hutt, and that you'd make a wonderful councillor or health board member or whatever it is you're standing for, but you can't deny that your little rhetorical question - and crikey, there's an emotive device as ancient as ancient Greece - is nothing other than a bribe."

"Of course, it's a bribe," exclaimed Candy as we speared across the plains past the evacuated prison. "When was an election ever won without bribes? Voters are selfish. But don't you see how clever the whole thing is. On one level it's a concrete proposal that only the hard of heart could disagree with. But on another level it ramifies. It suggests that I am a caring sort of guy who believes that the well should subsidise the unwell, that the fortunate should support the unfortunate. In other words, to clever dicks like you, it implies that I am politically Left of centre. Neat, eh? So much said in so few words. Concrete and specific, yet symbolic. As I say, I'm rather proud of it." "Candy," I said, "I'm warming to you. Indeed I've half a mind to vote for you. What was your name again?"

"It was on the poster," he said.

"Was it?" I said, "Was it really? I didn't notice. I was too intrigued by the subtle simplicity of your message."


"You still there, Candy," I said.

"You were right," he said in a voice steeped in gloom. "I should have listened. It is a lousy poster. But not because it's too simple. The trouble is that it's too bloody sophisticated. I should have gone with the tick after all. Bugger it."

And so saying he was gone.
I've seen the signs all over town too. I've cursed at them, thinking about how the already congested parking lots would be worse than useless at zero price. How could they be worse than useless? Think about a mom in labour whose partner pulls into the lot to drop her off then stuck in a queue of cars that are all waiting for somebody to leave.  He can't move, and she's getting to be in a hurry.

But I cannot remember the guy's name either. Absolutely no clue.

Kyoto obligations

I argued that New Zealand ought to withdraw from Kyoto and work instead to achieve greater greenhouse gas reductions by pouring R&D funding into agricultural biotech that would be shared without charge with the rest of the world.

The alternative is that we stop taking Kyoto seriously - as have most other countries, as best I can tell. What are the consequences of not meeting Kyoto targets by 2012? Let's check the scary notice they've sent to Canada for its potential non-compliance:
13) Non-compliance with emissions targets is not an issue that can come before the enforcement branch until after the end of the commitment period in 2012.
a. A country in non-compliance with its 2012 target has 100 days after the expert review of its final emissions inventory to make up any shortfall (i.e., to buy credits).
b. If such a country still misses its target, it must make up the difference, plus 30%, in the second commitment period after 2012. It is also suspended from selling emissions credits in the emissions trading mechanism and within 3 months, it must submit a plan on the action it will take to meet second commitment period target.
14) There are no financial penalties under the Kyoto Protocol, nor is there any consequence which involves loss of credits (although there is a loss of access to the carbon market).
So the consequence of not meeting the target is that the similarly non-binding next round's target is going to be even tougher. Well slap me with a wet bus ticket.

It's no surprise then that Canada seems to be ignoring Kyoto.

As far as I can tell, New Zealand seems the only country in the world that is ready to impose serious costs on itself for carbon mitigation. Somebody PLEASE correct me if I'm wrong about this. Are there other countries with potentially large Kyoto liabilities that are actually going to buy credits to get out of the problem come 2012? Europe has an emissions trading system, but is chock full of cheap credits from defunct Soviet industry. Otherwise, I can't think of any example of anything more than lip-service. It's even arguable that NZ wouldn't buy credits in 2012 to meet its deficit, but we'll see. TVHE argues in favor of NZ's ETS on the assumption that the government would be picking up the tab if a system weren't in place; I'd like to see an iPredict contract on whether the government WILL buy credits to meet the expected deficit. I'd be shorting at prices higher than $0.50 given the latest polling numbers.

I really don't buy arguments of the form "Oh, we have to do it because of our international obligations, and everybody will hate us if we don't." Folks have jumped up and down a bit about Canada's thumbing its nose at Kyoto, but can anybody point to a single bit of hard evidence that it's done any real harm to Canada? Or, that anybody actually is paying attention to what we are doing? Heck, the Wikipedia article on government action in response to Kyoto doesn't even mention NZ's emissions trading scheme, though somebody may now go and change it. The burden of proof ought be on the folks warning about serious international sanction. When somebody points to a carbon tariff being placed on Canadian goods, I'll start taking these arguments seriously.

I find it implausible that the NZ government can do more good by cutting aggregate emissions through an ETS than by funding more work on things like GE clover that reduces methane emissions. These kinds of technological improvements reduce our GHG emissions AND help reduce everybody else's too, especially if we release the tech under some form of Creative Commons licence. Our research comparative advantage, and our national comparative disadvantage in terms of GHG emissions, is in agriculture.

We could plausibly argue that other countries' GHG reductions achieved through use of our tech should count towards our meeting our Kyoto obligations, if we wanted to stay within Kyoto. At least it would be lip service towards Kyoto while doing something real about emissions, unlike most other countries' lip service.

Tuesday 21 September 2010

More nonsense on blood alcohol limits

The latest press beat-up: the government has ignored expert advice from its officials, obtained by OIA, on the benefits of reducing the drink driving limit.

As I noted a few months ago, we simply can't tell whether the number of accidents involving drivers in the 0.05-0.08 range is very high, about what we'd expect, or very low, unless we know how many drivers on the roads at different times of day are in that range.

It's a little galling. Suppose that Expert Advice noted that women drivers were responsible for 50 deaths in 2009, followed by bleating about banning women from driving. We might expect a competent press to ask whether this is a particularly high number given the proportion of female drivers on the road. Since the 2009 road toll was about 300 deaths, and women would be a bit fewer than half of all drivers (since driving couples tend, for whatever reason, to mostly have the man driving), the proper conclusion from a finding of 50 deaths would be that women are safer than average. But you can't know that unless you know the accident rate rather than just the number of accidents.

Other bits of particular nonsense in The Press's coverage:
Last year, road crashes involving alcohol killed 137 people and caused 565 serious injuries at a social cost of $875m.
The social cost figure will be overstated to the extent it includes costs that drunk drivers impose on people inside their own vehicle. And the figure does include those costs. By memory, somewhere around 17% of injuries accrue to people outside of the drink driver's vehicle. The social cost figure has to be reduced to be a number that economists would consider a reasonable measure of actual external costs. And, you'd want the number of accidents where alcohol was responsible for the crash, not just where the driver had had alcohol. Sober drivers have accidents too: a proper accounting would include only the costs of excess accidents.
The Government was told that, based on data in about 300 international studies, a lower limit would save up to 33 lives and prevent up to 686 injuries each year. Aside from social cost savings of between $111m and $238m a year, ACC expected additional savings of up to $94.5m on claims.
I'd need to have a look at those studies to be able to comment on them. They're almost certainly expecting that reducing the limit will have reasonably large effects on drivers who would otherwise be driving at alcohol levels well in excess of the current limit. There's some evidence of such effects, but I'd want to look carefully to look at whether they controlled for things like enforcement blitzes that tend to accompany changes in drink driving laws and endogeneity issues where areas in which drink driving has attracted greater stigma and areas experiencing spikes in drink driving accidents are the ones most likely both to see reductions in drink driving AND reductions in the legal limit. I'd suspect both to be fairly major issues, and I'd be very surprised if Transport officials evaluating the lit were competent to know how to read this stuff. I know I've seen one study showing that reductions in blood alcohol limits were associated with crash reductions a year or two prior to the law change, suggesting that endogeneity issues are going to be just a bit important.

But assuming for the moment that their numbers on deaths and injuries are correct, we'd need to compare a corrected measure of social cost savings against reductions in consumer surplus that would result from the lower blood alcohol limit. And, from memory, these social cost figures tend to include things like health costs; adding claims savings then constitutes double counting, unless they've been far more subtle than I'd expect in how they've run those figures.

At least Transport Minister Stephen Joyce seems to be standing up to the wowsers for now.

In which Seamus proposes a tidy solution

The lunchroom a few days ago discussed price gouging, among other earthquake related topics. Seamus proposed a very nice solution to a few linked problems; as he's been rather quiet here of late, I figured I might as well write it up on his behalf. All errors in the proposal as interpreted by me are, of course, attributable to him.

First, we know that the Earthquake Commission invests stupidly heavily in domestic assets - in particular, government securities. The appeal of investing these things domestically seems insurmountable, regardless of how much downside risk it exposes us to.

Second, we know that people hate profiteers. They get angry at the idea that anybody might earn excess profits because of somebody else's suffering, even if that's the most efficient solution to the problem and is most effective in making everybody better off in the long run. Better, they reckon, that everyone starve equally than that prices adjust to give an incentive for folks to bring food into the region, with richer folks potentially first in line. This gives governments a derived demand for stupid policies.

Seamus's tidy solution: get the Earthquake Commission out of government assets and reallocate investment to a portfolio of domestic stocks that we expect to jump in case of an earthquake. We could identify those reasonably easily just by looking at NZX data from the past couple weeks.

Now, who earns the rents when prices jump in the wake of a disaster? The folks who owned stock in the companies getting the rents prior to the price move. If the government's earthquake compensation portfolio is weighted towards assets that are likely to increase in value after an earthquake and are likely to increase most if nobody mucks around with prices, then government has stronger incentive not to give in to populist pressures to interfere with prices.

Problem with the solution: we have a very thin stock market. Total capitalization of the NZX building-sector stocks was about $5 billion end August (about $6 billion now) - not far off from the total purported value of the Earthquake Commission's holdings. And we'd hardly want EQC having more than a minority stake in anything lest we start seeing political interference in private companies through government stock holding.

But EQC taking a 5-10% stake in the building sector, across the board, to replace other parts of its domestic exposure, doesn't seem crazy. At least it's far less crazy than having those assets in the parts of the domestic sector expected to drop in value if the insured event transpires.

To be clear: I still can't see any case for EQC holding domestic assets, and I don't get why this isn't all just handled through reinsurance anyway rather than by having EQC hold an asset portfolio. But this would be better than status quo.

Monday 20 September 2010

Yer either fer us or agin us

I've taught from Lomborg's Skeptical Environmentalist and Copenhagen Consensus. Bjorn Lomborg hasn't denied global warming; rather, his expert panels assessed that popular anti-carbon initiatives simply failed cost-benefit analysis. Spending a lot of money on carbon mitigation seemed wasteful compared to spending money on providing micronutrients and vaccines to kids in poor countries.

Lomborg recently assessed some better anti-warming initiatives, like investments in low carbon energy research, and found those provided decent value for money.

Folks who haven't read Lomborg's prior work carefully enough paint this as Lomborg having recanted. He's not changed position; he's just evaluated the potential benefits of a less crazy set of policies.
The fact that I've always asserted the reality of man-made climate change never seemed to make an impression on my critics. What mattered was that I had the temerity to question two key tenets of the received wisdom about global warming: I was skeptical of the idea that we were facing the apocalypse, and I didn't accept that the only solution was to mandate drastic cuts in carbon emissions.

That's the way it is with heresy—there is no middle ground. Either you believe global warming is the worst problem mankind has ever faced and that cutting carbon is the only solution, or you are an antiscientific ignoramus who probably thinks the Earth is flat.

My reputation among climate activists worsened in 2008, when the Copenhagen Consensus Center, the think tank I founded, published the results of a wide-ranging cost-benefit analysis of solutions to 10 of the world's most pressing problems. We assembled a group of top economists and asked them to assess which solutions to which problems would deliver the most bang for the buck. In addition to global warming, we considered issues like malnutrition, unsafe drinking water, malaria and terrorism.

The main global-warming solution our experts analyzed was the carbon-cutting approach advocated by Al Gore and endorsed at the 1997 global climate summit in Kyoto. We found that compared to solutions to other problems, direct carbon cuts were woefully ineffective. For example, while every dollar spent on fighting malnutrition would yield nearly $20 in benefits, every dollar spent on cutting carbon would avoid much less than a dollar of global warming damage. When we published our list of investments we thought should be prioritized, cutting carbon was near the bottom. Once again, I was pilloried for being a global warning denier.

The Kyoto approach is not the only way forward. In 2009, we convened another group to look at a variety of potential solutions to climate change beyond simply cutting carbon. Our experts (including three Nobel laureates) identified a number of other approaches to the problem that were economically feasible and likely to have a quicker and more powerful impact.

The most promising involved massive increases in R&D funding for green energy technologies and geo-engineering. I spent a good part of last year and most of this year advocating for this sensible approach to solving global warming, which is "one of the chief concerns facing the world today," as I said in an Aug. 31 interview with the Guardian, the British newspaper.

What happened next was startling. The Guardian reported my commonplace observation as evidence of "an apparent U-turn" by "the world's most high-profile climate change skeptic." This set off a media stampede; news organizations around the world scrambled to report my so-called change of heart.
Climate policy is too politicized for nuanced positions.

Here in NZ, we would do far far better by:
  1. Formally withdrawing from Kyoto
  2. Abandoning the ETS
  3. Pouring R&D funds into agricultural emission mitigation technologies that would then be shared with the world at zero charge.
We would do far more good in slowing global warming by helping the rest of the world mitigate agricultural methane emissions than we would by anything else we could possibly do given the trivial scale of New Zealand's aggregate emissions. Every dollar poorer we make ourselves via the ETS is a dollar we can't spend on methane reduction R&D. If New Zealand were swallowed up by the ocean tomorrow, the complete elimination of our carbon emission might slow global warming a century hence by what, a week? A couple of days? But if we could figure out new GE forms of clover or livestock that seriously reduce agricultural methane emissions not just in New Zealand but also for other livestock producing countries, that would have potential to do a whole lot of good.

Sunday 19 September 2010

MediaWatch on iPredict

Radio NZ's MediaWatch programme highlighted iPredict's numbers on the Christchurch mayoral race (hit the 4:37 mark.)

The host there is a bit skeptical of iPredict, wondering on what basis traders chose to reverse the odds on Parker post-quake given the absence of polling, and noting that iPredict's numbers aren't a poll but are rather the views of a bunch of betters on whether Anderton or Parker will win.

First off, iPredict's track record is pretty good (hit the iPredict tab, below).

Second, prediction markets are generally better than polls, not worse than them. Folks updated their views on the likely election outcome four hours after the quake. Not immediately after the quake, but rather about the time Parker started demonstrating competence in response to the quake. And that's when the price moved. And the price kept moving as Parker continued demonstrating competence, with traders expecting that voters would be entirely reassessing the candidates' relative merits.

Days after iPredict moved, Twitter started moving. I've been watching the #eqnz hashtag reasonably closely over the last couple weeks. For the first few days, there wasn't much politics. Then folks started talking about how pleased they've been with Parker and how they'd be worried about a mayor who spends half his time in Wellington as a sitting MP. For every tweet along the lines of "I hope people don't forget how terrible Parker was about X", there are a half dozen or more saying things along the lines of "I was going to vote Anderton but now I'm supporting Parker." That's now started to turn a little, with news that Parker's polling well also for the Auckland election, and Christchurch has to put out at least nominal opposition to anything that Auckland likes; some on Twitter also see Parker as being in cahoots with National on the emergency powers front and Twitter's heavily anti the emergency powers legislation. But what I could draw out of Twitter, and out of the letters pages from the local papers, showed a decent shift towards Parker. iPredict's numbers aren't inconsistent with what other signals we've got.

MediaWatch goes further, wondering how it is that Parker's seen such an increase in support; the host there blames coverage that's been equating Parker with Giuliani. I'll call BS. Parker demonstrated no particular skills during his prior run as mayor. Nothing screwed up too badly, no huge scandals, but unease about several smallish issues which incensed a few groups - like bailing out developer David Henderson, the proposed addition of a music conservatory to the Arts Centre, and the expensive new city hall. Then Anderton formally announced his candidacy and started running a really good campaign. I'm no fan of Anderton, but I'd probably have pushed the button for him over Parker given Parker's push for an expensive light rail system for the city. And Parker seemed determined to destroy his own campaign. The feature Press interview with the Mayoress would have put off a fair few Christchurch voters. Everything changed when Parker started post-quake management. Why?

For starters, Anderton's always dodgy position that he could be both Mayor and MP for Wigram was thrust to the fore. Before it wasn't salient - it didn't much matter if he'd let a few balls drop for the year before the Parliamentary elections. Suddenly it mattered a lot to have a full time mayor.

Second, it became a lot more important that the local guy be on good terms with the government. Key does better on that front than Anderton.

Third, it gave Parker a new shot at demonstrating competence; he passed very well.

iPredict may have overshot a bit - there's plenty of chance for Parker to start screwing up again in the coming fortnight. But that's seeming a fair bit less likely. I don't see any reason to go heavily for one or the other at current prices. I'll curse my Anderton-heavy portfolio, but backing out at current prices doesn't seem likely to improve my position.

If MediaWatch's Colin Peacock thinks the Christchurch numbers are out of line, there's a lot of money he can make by going in and buying Anderton at $0.25. I paid a lot more than that for my Anderton contracts (grumble...)

A bargain at twice the price

Last year I posted on the Puah Institute, who help ensure that Jewish couples in need of assisted reproduction techniques are able to follow Halachic law. One part of this service is exceptionally strict supervision of gametes all the way through the system, ensuring they wind up where they're meant to with no mix-ups. I'd written:
...the article [National Post, here] notes a low low price of about $100-$500 for a service that watches your gametes like a hawk and makes extra sure of no mixups. Seems like a bargain that anyone in that market would grab. If the notional cost of a mixup is say $7 million (pulled out of the air based just on VSL measures; I have a hard time imagining the compensating differential that would make me equally happy across world-states), seems pretty cheap even if the baseline probability of mixup is pretty low.
I wonder now how low that baseline probability really is. The National Post now writes:
Lawyers for two families suing a well-known Ottawa fertility doctor for allegedly using the wrong sperm samples to create their children say they believe other patients of the clinic may be in for a surprise.

Dr. Bernard Norman Barwin and the Broadview Fertility Clinic, which he owns, are the targets of two lawsuits launched in Ontario Superior Court seeking a combined $3-million in damages for “heightened anxiety, depression and frustration,” among other things, suffered by the families.

Both statements of claim, obtained by the National Post, ask the court to order a test of Dr. Barwin to rule out “the possibility that he is the donor whose sperm was used to inseminate.”

Pam MacEachern, lawyer for the two families, said she is investigating the possibility that her clients aren’t the only parents who may have been inseminated with the wrong sperm, given the proximity in time, 2005 and 2007, between the alleged incidents.

“The fact that it happened to two people a couple of years apart in very similar circumstances gives us a lot of concern,” Ms. MacEachern said yesterday. “We believe that there’s a good basis to believe that it probably has happened to other people.”
We fortunately were never in the market for these kinds of services. But were we, I can't imagine not going with something like Puah, if they'd accept atheists people who would seem to have converted very recently.

It's odd that trusted middlemen haven't emerged in this kind of market who, unaffiliated with the center, would provide the kind of monitoring service provided by Puah.

Saturday 18 September 2010

At least one of the two is not a truth-seeker

Ron Jeremy, possibly the world's most famous male porn star, has had regular debates across the United States with Craig Gross, pastor of xxxChurch, which tries to help folks stop watching pornography. Writes Gross:
I started 8 years ago, created a software called X3watch that is keeping almost 1 million people accountable online and I am most often known as the Porn Pastor. I have only had sex with one woman who happens to be my wife.

Ron says we are just alike. He has been with 5,000 women and I have been with my wife of 12 years almost 5,000 times.

Just alike… Well not really.

Ron is for porn and I am against porn. We are opponents on stage. In fact we have debated each other over 60 times in the last 4 years. We have debated at Yale, Ohio State, University of Southern California, Texas Tech, and in a few weeks we start the school year off with another debate at the University of Tennessee.
They have debated each other over sixty times.

It would be interesting to see those sixty debates and whether either debater's opening position changed at all in response to the other's position. They have failed to iterate to a joint position after dozens and dozens of repeated arguments about the same issue. At least one of them is not a truth-seeker (and see here).

Also interesting: lots of secular venues like universities will host these debates but very few churches will:
Why is the church so afraid to hear the other side? I think it would be a great outreach to bring the debate to a church but every time I pitch it to a church or Christian college they say, "We could never let him on stage at church."

I don't get it. But then again, these are often the same people who say I should not even be friends with him, let alone on a tour bus with him. I know Zacchaeus was a short dude in the Bible but how can we overlook that story and see the example Jesus set for us to go after people?

Two friends of mine, Miles McPherson and Ryan Meeks have agreed to do the unthinkable. On October 9, Ron and I will do the unthinkable and head over to The Rock, a church in San Diego. A few months later on March 5 we will bring the debate to Eastlake Church in Seattle, Washington.
Universities are at least nominally committed to truth seeking. Churches, less so.

It would be interesting to have before and after audience polling to see how many folks changed positions post-debate across the different venues.

Friday 17 September 2010

Further defence of price gouging

I wrote:
...When the stores opened that morning they had only a fixed supply of bottled water available. How should they have allocated that very scarce supply among all the potential customers?

The method they chose, by and large, was first-come, first-served. But is that the method most likely to ensure that the woman needing clean water for mixing baby formula would get some while folks like me, who only needed it for doing dishes, didn't? That seems pretty unlikely.

Instead, it went to the people who were best able to queue. The folks with the most pressing demands might have worked harder to get to the front of those queues, but it's pretty unlikely that those who wound up getting water were the ones who needed it most. Instead, it would have been the folks living close to grocery stores who didn't have pressing property damage to deal with.

Now, imagine that prices had been allowed to do their work. A litre of water might have risen from about a dollar to perhaps even $10, noting that there's no reason a shop can't take IOUs when the eftpos is down.

With the price hike, folks with less pressing needs would have left water on the shelves for those whose needs were more pressing. The guy who needed the water only to do the dishes would have left it on the shelves for somebody who needed it more - not out of the goodness of his heart, but out of concern for his wallet.


The most pressing needs get first attention when prices allocate scarce supply; that doesn't work as well under first-come, first-served.

Price increases also draw in supply from further afield. We've heard a lot over the last couple of years about skilled tradespeople moving to Australia in pursuit of higher wages. Right now, their services would really be appreciated here in Christchurch.

But if the prevailing wages prior to the quake were enough to send them off to the West Island, a price freeze here is unlikely to draw them back. If they look back across the Tasman and instead see hourly rates double what they'd been earning prior to moving to Australia, they might consider spending a few months back home helping out.

John Jackson and Canterbury Employers' Chamber of Commerce chief executive Peter Townsend argued that some grand supremo might be needed to ration out scarce tradesmen, ensuring that resources go to the most critical areas first.

But how can any such supremo decide how much I value having my wall fixed as compared to how much my neighbour values having her chimney fixed, let alone weighing up priorities across different damaged factories and retail outlets?

Economist Friedrich Hayek proved back in 1945 that it's impossible for any supremo to be able to do that accounting; prices, by contrast, do it automatically by forcing each of us to weigh up how much we value having a job done now as opposed to waiting for prices to drop.

And no supremo can order Kiwi tradesmen working in Australia to come home. ...
Responses to a couple of critiques:

Some other rationing system may be fairer.
Perhaps, but I can't think of any that could be rolled out in the hours following an earthquake. Recall that it took over a day for City Council to get tanker trucks with water to affected areas. Think that implementing a rationing system would be quicker? I'd put even odds on the system not being operational before standard water supply came back online. Further, any rationing system would have to deal with the Hayek knowledge problem: the Supremo would have to peer into each supplicant's soul to determine how much he really needed the scarce good.

It hurts poor people.
No. No no no no NO. Having gouging rather than first-come-first-served hurts only the people who would have been first in the queue under first-come-first-served (henceforth, FCFS). Everybody else, by definition, cannot have been made worse off. Why? Because under FCFS, they get nothing (by definition - there's nothing on the shelf when they get there); under gouging, they can CHOOSE to get nothing, or to buy something at a high price. If poor people were most likely in the front of the queue, then it might hurt those poor people. But it would help the poor people behind them in line. Are the poor people at the front of the line that much more morally worthy than the poor people at the back of the line?

Further, why would we expect that it would be poor people first in line under FCFS? Rich people are more likely to use cars rather than buses, right? Did any of you see any buses running after the quake? Me neither. Rich people are less likely to be single parents than poor people. Who's more likely to be able to queue up quickly in an emergency: somebody who's in sole charge of a kid (or several kids) who are terrified because of an earthquake, or somebody who can leave the kids with the other parent?

The only counterexamples I can think of are that poor people might be more likely to live within walking distance of shoppes if they've no cars, and that rich people might have been more likely to have to rush off to attend to their business premises.

Weighing all this up, it seems to me that poor people are less likely to be at the front of the queue. If that's the case, then gouging transfers utility from relatively richer folks at the front of the queue to poorer folks at the back.

The best argument against price gouging is that stores doing so will lose customers. But that's an argument about how individual firms should optimize - not an argument for legislation to accentuate already too strong incentives to avoid price hikes.

Max Stearns, currently visiting at the department, provided a nice anecdote about price gouging during Hurricane Katrina. After the hurricane hit New Orleans, a couple guys from a few states north of Louisiana loaded up a truck with some generators and hurried down, intending on selling the generators at a good profit. They were arrested for profiteering. Does that make it more likely that generators make it to where they're needed?

I'd argue further that economists have an important job here. Voters, very frequently, have very very wrong beliefs about the effects of policies. Policies that sound like they help the poor very frequently don't. Just because voters like protectionism doesn't make protectionism good policy; it's the economist's job to point out the very real costs of acting in accordance with protectionist preferences.

And just because customers may have misguided beliefs about the effects of price gouging doesn't make a store's holding prices constant (with consequent empty shelves) the best of all possible worlds; rather, economists ought to be pointing out that the beneficiaries of sticky prices in the face of crisis aren't the poor but whomever lucks into being first in the queue. If customer antipathy to price gouging stems from a misguided application of a laudable love for the poor, then jumping up and down a bit about the actual effects of such policies is important.

Bottom line: price gouging in a crisis hurts only those who would otherwise have been at the head of the queue, and there's no good reason to think that poorer people would disproportionately have been represented at the front of those queues. I'd rather expect the opposite.

Things that would make Sir Geoffrey's head explode: French edition

Wine in French supermarkets now comes in self-serve tanks at 1.45 euro/liter.

Bring your own resealable bottles, Poland Spring containers, jerrycans, whatever. Or you can get one at the store. Select your grade (red, white, or rosé). Pump. Print receipt.

Astrid Terzian introduced this concept that hearkens back to a bygone era when wine would arrive in Paris shops in tonneaux and consumers would bring their own flagons to fill. But today, Terzian says, she started this scheme in fall 2008 to fill a niche, tapping into two key themes, environmental awareness and the economy. (She actually wanted to buy a wine property and run a B&B but it was too expensive. So she turned to what she says she knew how to do: sales.) The elimination of packaging mass means that the wine can be shipped much more efficiently from a cost and carbon perspective.

The cost-savings are passed on to the consumer in the form of low prices of 1.45 euros/liter (about $2/liter). She installed her first machine in June 2009 at the Cora supermarket in Dunkirk and now has them installed in eight supermarkets in France. The wines vary; one is a 2009 from the Rhone, technically a vin de pays méditerranée.
I don't buy cask wine and so would be more than a bit nervous about trying this contraption.

But imagine the reaction from the righteous here were New Zealand supermarkets to adopt this innovation. Wine for about NZ$2.50/liter. It would be considered a worse crisis than the earthquake.

Thursday 16 September 2010


As I generally consider Ugg boots a public bad, their monopolization under dodgy use of trademark law serves to restrict supply and consequently gives me utils (or, rather, reduces util-depletion from seeing Uggs). Being publicly spirited, though, I still don't like the trademark trolling. Salmon notes that Ugg was a term in common use in Oz for a style of boot before it was trademarked in the States. The Ugg company then outsourced production to China and threatened trademark litigation against the original Australian companies that made the boots in the first place. Classy.
The point is that there are lots of Ugg boots. The most popular Uggs are made by a US company in China. That company owns a bunch of trademarks, which somehow means that the WSJ can talk with a straight face about “genuine UGG boots”, while saying that all other Ugg boots are fakes. But the fact is that an Australian Ugg boot, made by a company which long predates the Ugg trademark, is by any sensible definition just as genuine, if not more so, than the boots that the WSJ is falling over itself teaching us to recognize and distinguish.

Yet somehow Conley feels impelled to inform us that if a boot is made in Australia — the home of the Ugg boot — then “it is not an UGG”.

To give an example of how ridiculous this all is, imagine that an American company — maybe even Deckers, you never know — decided to buy up a small knife-making company in Thiers, France. And say that after doing so, it started to register the name Laguiole, and the famous bee symbol, in jurisdictions around the world.

Deckers then decides to outsource production of Laguiole knives to China, while at the same time slapping anybody else trying to sell Laguiole knives with a cease-and-desist order. It starts impounding any Laguiole knives which are imported into the US, and shuts down any market in Laguiole knives on eBay or in other marketplaces.

Laguiole knives have been made by thousands of French craftsmen for over 150 years, but suddenly there would only be one “genuine Laguiole® knife”, and all the others would, overnight, be branded “counterfeits” or “fakes”; their sales would collapse, while Deckers would essentially hijack all of the brand value which has been painstakingly built up over the generations. And heaven forfend that anybody else try to make Laguiole knives in China — those would get seized at customs, and branded as “blatant criminal operations” by Deckers’ in-house counsel.

If that were to happen, one would hope that the WSJ would try to expose the evil trademark troll, instead of running gushing articles about how the company was serving up “stunning results in the midst of a global recession”. It certainly wouldn’t — one hopes — tell its readers how to make sure they were buying a genuine Laguiole® knife rather than an expensive French “fake”.

Conley mentions in passing, in his piece, that after Deckers lost the lawsuit in Australia, it failed to pay certain legal costs of the winning side, as required under Australian law.

Douglas on Director's Law

Sir Roger Douglas writes eloquently on Director's Law:
To get a policy programme passed into law all you need is 50 percent of the population, plus 1. This 50 percent can be made up of any collection of people across the voting spectrum. It could be made up of the poorest 50 percent, or the richest 50 percent, or somewhere in between. The question is – who is it most likely to be?

It is possible that it could be made up of all the people in the bottom 50 percent plus 1. But this seems unlikely to be the case. Why? Because the situation that has lead to you being unsuccessful in the market place is likely to lead to you being unsuccessful in the political market place too. These are often things like low skills sets or lack of motivation or low levels of literacy (a terrible failure of state education). Whatever it might be, the effect is the same. This group is unlikely to succeed as a voting coalition.

On the other hand you might think that the most likely coalition would comprise of the richest 50 percent plus 1. Again, this is unlikely to be the case. Why? Well, the people at the very top are where we want to get the money from to finance our pet projects. It makes sense to exclude them from the voting coalition so that you can plunder their wealth. It is worth sacrificing a few votes to get most of the money that funds everything else.

So who then benefits? It is likely to be the middle-income bracket at the expense of both the very rich and the very poor. The middle-income bracket is a group that is most likely to have the influence, not just because of their voting power, but also because they permeate so much of the public sphere. They write for the newspapers; they provide the candidates that stand for election; they make up most of our academic institutions etc. This phenomenon became to be known as Director’s Law after Aaron Director. Director’s law states that: public expenditure is used primary for the benefit of the middle class, and financed with taxes which are borne in considerable part by the poor and rich.

We only need to look to the Australian elections to see that this is true. Let us think of some of the major policies that have been in contention. Large investments in broadband, sizable subsidies offered to first home owners, and to owners of homes who use solar panels, generous paid maternity leave – the list goes on. The people who are likely to be able to benefit from these are those people who have a job, can afford to buy a house and computer etc.

New Zealand is not immune to Director’s Law either. Minimum wage is a good example – it locks the poorest out of the job market despite advocates arguing it is for the poorest in society. Their lack of skills (usually because the state run education sector has failed them) means that businesses cannot justify paying them the minimum wage. Who benefits? The middle-income worker – they are able to lock out the poorest in our society from competing for minimum waged jobs. Tertiary education is another example. Again, it is always sold as helping the poor but it is a transfer of wealth to the middle-classes. Overwhelmingly the people that attend universities are from middle-income families. They force those who do not attend university to pay for them to go to university through taxes – usually the poor.

Never confuse the intention or the rhetoric of a piece of legislation with the outcome. We have told ourselves lies. We have created a myth around government of Robin Hood. This eases our conscience, we feel like we are helping the poorest in society. What we have actually done is created a system that benefits us at the expense of the poor. If we are to make sound policy we need to abolish this myth once and for all.
I read this, and I weep that anything Sir Roger says has John Key sprint in the opposite direction. Some days, it seems that if Sir Roger were to introduce a Member's Bill simply giving Parliamentary affirmation to that New Zealand is awesome, Key would give speeches in Parliament about how lame the country is.

If you think the poor don't pay much in taxes, look again at alcohol and tobacco excise rates.

Wednesday 15 September 2010

Emergency Powers


JAR JAR GERRY BROWNLEE stands in his pod before the chamber, as it floats in the middle of the taking up a vast space.

JAR JAR: BROWNLEE: In response to the direct threat to the Republic Christchurch mesa propose that the Senate Parliament give immediately emergency powers to the Supreme Chancellor Governor in Council.

Uproar. JAR JAR BROWNLEE looks a little sheepish.

Brief silence, then a rolling wave of APPLAUSE. JAR JAR BROWNLEE beams and bows.


PALPATINE KEY: It is with great reluctance that I have agreed to this calling legislation. I love democracy... I love the Republic Constitutional Monarchy. But I am mild by nature, and I do not desire to see the destruction of democracy. The power you give me I will lay down when this crisis has abated legislation expires, I promise you. And as my first act with this new authority, I will create a grand army of the Republic Earthquake Recovery Commission to counter the increasing threats of the separatists of spending an extra day drafting legislation that takes due account of our constitutional freedoms rather than commencing reconstruction immediately under emergency powers allowing me to strike down any legislation that stands in my way.
For context, see DimPost, Graeme Edgeler, NoRightTurn, Andrew Geddis, Kiwipolitico, NotPC, and Attack of the Clones.

1% chance or less that this leads to the abandoning of the Republic and the formation of the First Southern Oceanic Empire. But would the extra day's delay to craft sound legislation actually have been all that bad? My best guess is that the government actually really doesn't know what bits of legislation would get in the way of rebuilding so it's given itself the power to void all of it. Which kinda points out that it might just have been a bit too complicated for us regular folks to get building consents prior to the Quake.