Monday 31 March 2014

Two buildings

Rebecca Macfie explains the sequence of failures that led to the CTV building collapse in February, 2011. Here's the start of the mess.
And it appears that the council’s deputy buildings engineer, Graeme Tapper – a capable and experienced structural engineer with little tolerance for consulting engineers who failed to submit adequate design details – sought to do exactly that. The commission heard evidence that Tapper had periodically come into conflict with Reay over his building designs. On this occasion, he wrote to Reay’s firm, in fountain pen, asking to see the calculations behind the design and calling for further information, including regarding the connection between the shear walls and floor slabs.
However, the commission accepted the evidence of witnesses that Reay went over Tapper’s head to his boss, city engineer Bryan Bluck. “This was despite the fact that on his own evidence Dr Reay knew very little about the structural details of the building, having not reviewed any of the structural drawings prior to a permit being issued,” the commission’s report on the CTV Building noted. Reay convinced Bluck – whose approach was to rely on the “recognised expertise” of the designer – that Tapper’s concerns were unfounded.

Tapper subsequently signed off on the structural design. The commission concluded that he was either persuaded that his concerns were without foundation or, more likely, was directed by Bluck to approve it.
Rather a few subsequent opportunities to fix things were missed. Read the whole thing. I was pretty lucky to have turned down a CTV request for a 1 PM interview at their studio that day.

It's hard not to have stories like this in the back of one's mind when reading The National Business Review on the Wellington Harcourts Building (paid). The Heritage-1 listed Harcourts building is earthquake prone; the developer wants to tear it down as he does not believe it can economically be fixed up. He also would prefer to have a much higher modern tower on the site. So the heritage-buffs will reckon that he just wants to be rid of it to earn better returns on a new building; they want to block any demolition. Image below lifted from The NBR.

The Harcourts building

If the government moves quickly enough to sort out the mess that happens when unsafe buildings are under heritage protection and owners and heritage fans disagree about the feasibility of making them safe, we won't have to have a Royal Commission to sort out who's responsible for the dozens of bodies that could well wind up crushed under masonry falling from the Harcourts Building onto the busy sidewalk below in any large Wellington quake. Wouldn't that be better? Please? Somebody? I really don't want to be Cassandra here.

Ellipses matter: North & South

On my hopelessly out-of-date University homepage, I have a little .js that puts a random-draw fun quote at the bottom of the page. A few years ago, the usual sorts got real angry about some fast food joint offering a bacon sundae. So I added this:*
Death to all food and wine rules. Down with the health establishment. Bacon is the ultimate expression of freedom...  Bacon is sex in a skillet... It's the ultimate aphrodisiac for all living things. Except pigs, of course. - Dan Philips.
It's fun. It's as over-the-top pro-bacon as you can get, which I figured was about right. It's obviously tongue-in-cheek, if you read the whole thing.

After Donna Chisholm interviewed me for North & South Magazine about my work with the Brewers Association, wondering whether it was evil, corrupt, or both that the University might countenance industry support of research, she included this:
He [Crampton] says those findings could be unfavourable to the industry, but a quote he referenced on his internet homepage - "Death to all food and wine rules. Down with the health establishment..." - seems to point to his own stance.
A fun obviously over-the-top quote on the merits of bacon and the good life instead looked like part of the manifesto of a jihadist. And the quote was primarily about bacon, not alcohol! There are 28 quotes that come up on random draw. I wonder which public health aficionado sat there hitting F5 over and over to see what would come up. I doubt Chisholm did it and rather expect that one of her public health interviewees passed it along to her. I wonder whether he or she sent it to Chisholm in full, or just as except. As the excerpting substantially changes the tone and meaning of the quote, I would be surprised if a journalist of her calibre had done the excerpting: it is just a little bit misleading.

And, it's a bit annoying, especially as there are many other things she would better have used. Here I strongly endorsed Jason Sorens's call for a Coalition for Fun, for example.

Chisholm also cites my December disclosures post as a blog post "justifying his contract." I wrote it primarily as disclosure, not apologia. I think disclosure is important.

But Chisholm seems to see alcohol conspiracies. She writes:
For a time in the 1990s, Auckland epidemiologist Rod Jackson was at the top of the invitation lists to speak at international meetings on alcohol and disease. He had written around a dozen papers, based on evidence from his own and other studies, saying that light-to-moderate alcohol consumption reduced the risk of heart disease. 
In the early 2000s, however, new papers emerged which proved that the design of these trials was flawed, and in a paper in the Lancet in 2005, Jackson admitted he'd got it wrong: any coronary protection from drinking was unlikely to outweigh its known harms.
Almost overnight, the invitations dried up. In the nine years since, he's had just one. Suddenly, Jackson asked himself, were all those conferences as independent as he thought they were at the time? "I'd believed I had been careful. It was scary."
We might note that the Jackson 2005 Lancet piece wasn't an article, or at least not as we normally understand such things. It was a two-page note published in their "Comment" section where Jackson and coauthors worried that uncontrolled confounding might have contaminated results: the protective effect among lighter drinkers could be an artefact of former heavy drinkers' inclusion among non-drinkers, while protective effects among heavy drinkers could be underestimated.

It's definitely something worth worrying about, and indeed had been noted as early as 1988 by Shaper et al. And so, Di Castelnuovo and Donati's 2006 metastudy carefully separated studies that had excluded former drinkers from the "abstainer" category from those studies that hadn't been so careful. The protective effect among light drinkers on total mortality risk was a bit smaller in the careful studies, but was hardly non-existent. Further, Rimm and Moats 2007 directly assessed whether uncontrolled confounding either through sick-quitters or through other healthy behaviours could be responsible for measured cardioprotective effects among light-to-moderate drinkers. They find strong evidence that alcohol provides a substantial cardioprotective effect that is not due to residual confounding.

I'd summarised the literature here.

Jackson's question was worth asking. But it's been entirely answered since then.

So, is it then more likely that any decline in conference invitations is due to some big conspiracy at these conferences to blackball him, or to that Jackson seems to have latched onto one dismissal of a line of research that has moved on substantially since his op-ed critique? I think about parallels in economics, like the small part of the Austrian movement** that hasn't figured out that the mainstream has largely incorporated Hayekian insights about information and who want to keep fighting a version of economics that existed circa 1970. They don't get much play at mainstream conferences either, and I don't think it's because of any conspiracy.

I'll copy below what I'd sent Donna by email after our phone conversation.
If it helps, here are some more clearly phrased thoughts on the things we discussed this morning.

“I suggested the funding arrangement to the Brewers because it seemed a useful way to let me continue doing work I enjoy on alcohol policy despite a constrained budgetary environment at the University. External funding of 20% of my position was also one way I saw that I could help while things were tight. Finally, the University has been wanting more connections with industry and other external stakeholders. I’m really glad that the University and the Brewers Association were able to agree on a set of terms that let me continue my work with full academic freedom.”

“While I agree that the Brewers would have been unlikely to have helped fund my work if I had spent the last decade loudly advocating the prohibition of alcohol, I also doubt that the Brewers would have been interested in helping me if I lacked academic rigour.”

“I think industry and academia need to come together more often. I gave a talk for Strategic Link, an agriculture industry group, a couple of years ago. The speaker before me spent a lot of time complaining that academics don’t focus on the kinds of research he thought would be valuable for his industry. The audience, including some prominent ag industry CEOs, seemed very surprised when I suggested that they could fund Chairs or otherwise part-fund academic positions, with a condition of funding being that the academic do some work in the area; they hadn’t thought it was even possible. There hasn’t been much tradition of private funding in New Zealand. In North America, industry and philanthropically-funded Chairs are very common; universities typically also enjoy very strong financial support from alumni. As public funding becomes more constrained, I think New Zealand will have to do more on both fronts.”

“The public health sector and economists focus on different things. Researchers in public health care a lot about reducing the harms that come from substance use, whether it be alcohol, tobacco, or soda. And, in a world where policies addressing those kinds of concerns were costless, we’d be on the same page. Harms are bad. Unfortunately, a lot of the policies targeting the harms of harmful consumption also have substantial effects on those who consume those products harmlessly. Economists want to weigh the benefits of policies addressing harmful consumption against the costs imposed on those who aren’t really doing anybody any harm. The two approaches then tend to lead to pretty different recommendations. Public health advocates lean heavily towards price-based measures for reducing consumption. Economists worry that prices have rather less effect on the heaviest harmful drinkers than they have on moderate and light drinkers. We then need to balance the harms avoided against the harms imposed. It isn’t enough just to show that heavy drinkers show some responsiveness to prices – we have to weigh that against the losses we impose on moderate drinkers.”

“The Law Commission’s review of the evidence around alcohol policy was, in my view, inadequate. In our submission to the Law Commission, Matt Burgess and I pointed out that the Law Commission entirely misread the evidence around drinkers’ price responsiveness and were too quick to draw causal inferences from correlations between alcohol use and social ills.” [Please note that our submission is available here and that we revised the NZ social cost figure upwards in our 2011 report.]
I later followed up with this, after she'd sent along some of the particular critiques mentioned about industry funding in academia:
It might be worth your looking at North American precedents though. I modelled my disclosure statement on that of Andrew Leach, an economist at the University of Alberta who holds the Enbridge Professorship. He’s an energy economist; Enbridge is a big energy company.  

When I was a graduate student, I was taught by Professors holding a number of externally funded chairs, some philanthropically supported, others with industry support. My dissertation advisor, Tyler Cowen, held (and still holds) the Holbert Harris Chair in Economics; that one was funded by a charitable trust established in memory of businessman Holbert Harris. BB&T Bank funds Chairs in Economics at a pretty large number of Universities; I’ve not heard that this has made the holders and more or less supportive of banking regulation. It definitely seems less common in New Zealand. I could speculate about the reasons for that, but it would really only be speculation.

With any kind of industry support, there will be some group that sees it as the end of the world. Environmental activists would reckon energy-industry funding to be contrary to the public good and the wellbeing of the population, because they define both of those things in ways particular to themselves. Certain sectors would view bank funding as unethical because they view banks as unethical; the Bank of New Zealand has funded Chairs in Finance. Funding from the food industry would be opposed by obesity activists. It’s hard to think of any potential funding source that wouldn’t be viewed as unethical by at least some people. For many in the activist sector, the only legitimate source of research funding is the taxpayer, routed through the Ministries. While that’s certainly one view of ethics, it isn’t the only one, and it isn’t mine. One could just as easily say that Ministry of Health funding fosters dependency and builds a reluctance for criticism of the Ministry of Health and for questioning of government policy goals. I think it’s important that academia benefit from a diversity of funding sources. In all of this, I speak only for myself and do not purport to represent the University’s views.

* At least that's when I think I added it. It could have been earlier, during some other anti-bacon hysteria.

** Most Austrians well recognise this.

Thursday 27 March 2014

RFP constraints

The Health Promotion Agency has issued a Request for Proposals for research on the effects of the Sale and Supply of Alcohol Act. Appendix 1 is interesting.

When I set out my contract with the Brewers' Association, I made sure to specify that I owned any documents produced. This both ensured that they wouldn't seek to bury anything they didn't like, which I really doubt they'd ever have done, but more importantly that it would very well be seen to be the case that they could not.

Here's Appendix 1 to the RFP, as copied from the PDF emailed to me by a loyal reader with access to the GETS system. For those with access to the system, it is RFP RSC0203/13-14/03.
Government Model Contract (GMC) Form 2 SERVICES (2nd Edition)
HPA intends to include the following additional clauses to the Form of Contract:
Publication of Deliverables12.7 The Supplier will not publish the results of the Services undertaken pursuant to this Contract.
12.8 The Supplier acknowledges and agrees that the Buyer may publish information about this Contract, the Services, and the Supplier. The Buyer agrees to acknowledge the Supplier’s role in delivering the Services in any published information.
There could be good reasons for this. Suppose that folks previously contracted by the HPA had produced really terrible work that didn't pass internal peer review but that the supplier published it anyway, advertising it as an HPA-funded project. I have no clue whether this has ever happened as I know nothing about their internal review processes. Avoiding that kind of outcome seems a plausible good reason for gagging any contracted suppliers.

It remains the case that I have rather more academic freedom than those doing government-funded work.

Tuesday 25 March 2014


Trading on the Kim Dotcom Internet Party stocks over at iPredict, complicated enough ex ante, has gotten even more complicated.

Prior to this weekend's rumours of an alliance with the Mana Party, the so-simple contract paying out $0.10 for every 1% earned by the Internet Party was really this mess:
Here's what you're trading on, if you're buying this contract. 

So, what the hell should you pay for a contract that pays $0.10 for every 1% of the vote earned by the yet-to-be-formed Kim DotCom Internet Party?

Let's label a few terms and make a few guesses. 
  • Pp is the probability that there is a Party, say 0.8.
  • Ps is the probability that DotCom really would kill the party if it doesn't poll 5% prior to the election, say 0.75
  • Vh is the expected vote share conditional on a poll result of 5% prior to the deadline
    • This one's hard to ballpark. You could make an argument for pegging it lower than 5% because a single outlier poll could be sufficient for his going ahead. But I expect that the state of the world in which he can get a single >5% figure is the state of the world in which we've had substantial GCSB revelations affecting NZ; in that state of the world, I'd put even odds on 5%. And so I'll stick it at 5, or $0.50 in iPredict prices.
  • Vl is the expected vote share conditional on no polling result of 5% prior to the deadline.
    • I'll peg this at 0.5%. If he goes ahead despite no polling result above 5%, credibility's shot. And it's also the state of the world in which there's no substantial GCSB revelations. So $0.05 in iPredict prices.
  • Pt is the probability that the Internet Party polls at least 5% prior to the deadline.
    • I'll peg this at at even odds IF we get substantial GCSB revelations during the election campaign, and nil otherwise. Supposing even odds on substantial revelations, that gives us 25%.
The expected value of the contract is then:


Using my rough ballpark estimates, that's then:

= 0.8*($0.09375+.25*$0.04375)
= 0.8*$0.1375
= $0.11

Denote as Pm the likelihood of a merger with Mana. Denote as Ph the likelihood that Hone Harawira wins his seat in a world in which he's merged with DotCom. If there's a merger AND if Hone's seen as very likely to win his seat, I expect DotCom would void his promise to kill the party were it short of 5% - every vote would count for the Internet Party if it had a seat under MMP.

I'm not going to put up the equation this time. It's going to be just too messy. But the following will matter:
  • Pp, the probability that there will be a party, is now 0.98 (I expect)
  • The party's expected vote share varies substantially based on whether they're allied with Mana.
    • With Mana:
      • On the upside, people may have fewer worries about throwing away their vote, but they shouldn't have had that worry anyway given the promise to kill the party were it not polling less than 5%. So maybe they get a bit of an up-tick from the expectation that there won't be a wasted vote.
      • On the downside, you get an internet freedom, anti-surveillance party that's merged with some fairly non-standard economic ideas, conspiracy theories, and assorted random-draw oddities. The Green Party already combines internet freedom, anti-surveillance, non-standard economic ideas, and a slightly different set of random-draw oddities. I'm not sure what niche the DotMana Party then seeks to fill. Maybe it has a bit more "stick it to the Man" appeal than do the establishment Greens, but are there really many voters in that space? 
      • So, the whole Ps argument is going to change then: the Party goes ahead conditional on polling above 5% or on Hone's being likely to win Te Tai Tokerau. Note that his odds there dropped from 90% to 83% over the past week. So we then have a 17% chance that Hone loses his seat. 
      • In this world, the contract is really trading on the vote share for the combined party, and not simply on the likelihood of the party's reaching 5%. 
    • Without Mana:
      • On the upside, we're mostly back to status-quo ex ante;
      • On the downside, there's the substantial WTF?! effect on those who would have been supporters of the Internet Party. I'd expected that an Internet Party could do well by staying well out of stuff other than internet issues: they'd then provide a landing spot for anti-surveillance or pro-internet voters who weren't comfortable with the Greens and who didn't trust ACT's commitment to freedom on this issue.* An alliance with Hone Harawira doesn't particularly make him more appealing to folks in that group, or at least I'd bet against it. 
      • In this state of the world, and absent his buying some other MP, we're back to the calculation I'd run before, albeit around a lower mean due to the WTF effect.
    • I have no idea how to start assessing the likelihood of a merger with Mana. My priors on what Hone Harawira might do on any margin are pretty flat. And Pm will matter.
I'm not going to peg new fair odds lines here. The initial market reaction had Internet Party dropping from 0.9% to 0.7%, spiking up to 1.5%, dropping back to 0.7%, then rising again to 1%. But it's a very thin market. I would be setting some buy orders at $0.05 (0.5%) and some sell orders at $0.15 (1.5%). But I've low confidence in either estimate and, more importantly, the market's going to move a lot when a final announcement comes on the Mana merger. Such announcements seem to like to happen when I'm driving and unable to trade. And so I'm staying the heck out of the order book for now.

* Jaime Whyte is very much against the expansion in surveillance that came with the GCSB and TICS legislation. His predecessor, John Banks, or at least Banks's office, very much favoured it. Some in the ACT Party come from the Sensible Sentencing Trust wing; I'm not sure they've ever seen an expansion in the police or security apparatus that they didn't heartily endorse. They trust that the GCSB will Do The Right Thing; they view the current surveillance arrangements as fully consistent with liberalism. Whyte doesn't. But that all does make it harder for ACT to commit to what I'd view as a liberal policy on these issues.

Left and Right united against Behavioural Economic Policy

Chris Dillow is my second favourite Marxist after Jon Elster. He here critiques Tim Harford on behavioural economics and economic policy.
Tim Harford's brilliant essay on behavioural economics highlights an ideological bias in the way the subject is used.
What I mean is that he presents it as "a hot idea for policy makers". This underplays two things.
One is that politicians themselves might be as prone to cognitive biases as the public. Indeed, it's possible that they are selected for such biases - because the overconfident are disproportionately likely to enter politics and because irrational consumers are likely to make irrational voters. The image promoted by behavioural economics (or its users) - of rational policy-makers operating upon irrational subjects - is therefore questionable.
The other is that there's an alternative use of behavioural economics. It could serve an educational function - of telling consumers what errors people commonly make, and of warning them against them. A lot of my day job is just this.
I made much the same suggestion in my review of Dan Ariely's book for the Christchurch Press. As a self-help guide, behavioural economics is really valuable. As a guide for policy, a bit less so.
Behavioural economics gives economists the chance to live up to Keynes' ideal of them, as dentists giving humble competent advice. And it's a chance they are blowing.
Now, you might reply here that it has always been so, Economics has long been pompous white men in suits speaking to other pompous white men in suits, rather than a dialogue with the public. That's true. But there's a big difference between telling politicians "people are rational maximizers so leave them alone" and telling them "people are stupid and here's how you can manipulate them."
In this context, there's both similarity and contrast between users of behavioural economics and Marxists. Both believe that ideology or cognitive biases (they're much the same) stop people pursuing their best interests. Where they differ is in how they respond to this. Marxists think people should be educated out of ideology and therefore empowered: "theemancipation of the working class must be the work of the working class itself”. Most users of behavioural economics, by contrast, see cognitive biases as just more policy tools, and thus ways of empowering rulers. But it needn't be so.
Strongly endorsed.

Monday 24 March 2014

Planning failures

After the Christchurch earthquakes, downtown was locked down by military cordon: hazards posed by buildings were deemed too perilous even for those willing to front the costs of their own SAR teams. The military cordon shrank, and finally disappeared, but the lockdown continued: a succession of master plans for the downtown prevented anybody from doing anything. At the same time, the government decided to make downtown be expensive by mandating a green frame: they'd buy up land on the southern and eastern fringe of downtown and take it out of use, though subsequent revisions have the land more sensibly incorporating residential development.

Because nobody could do anything downtown while the planners argued about which master plan would be enacted (Council's, the CCDU's), where the master-planned precincts all got to be situated, and whether or not hotels could be rebuilt in a newly designated Arts precinct, development moved out of the planned zone. Victoria Street, Sydenham, Addington: the fringes of downtown, plus industrial parks near the airport.

While Council and CCDU's lock-down approach to downtown planning was pretty destructive, at least businesses could move to the fringes. The alternative would have been to leave Christchurch: the planners made it impossible to do anything downtown.

The Press reports that Council's not happy. The headline: "Suburban development killing CBD".
The Christchurch City Council wants to stem the haemorrhage of business from the central city by clamping down on commercial growth in the suburbs.
However, it could be another year until the changes takes effect. Central city landowners have welcomed the plan, but say it comes far too late.
The new rules are in the city's draft district plan review, and would ban new office, retail and hospitality buildings in light industrial (business 4) zones.
This would halt construction in most parts of Addington, Lincoln Rd, Blenheim Rd and much of Moorhouse Ave, where new buildings have sprung up since the earthquakes. It would also affect many suburbs and land near the airport.
The plan, open for public feedback now, comes as developers complain of insufficient tenants to start rebuilding in the central city.
Where to start.

Blaming the suburbs for killing downtown, when the planners made it impossible to build anything downtown and figured everybody would be real happy to just hit a pause button for 3 years after the quakes, is more than a bit rich. If they'd also clamped down on the suburbs at the same time, they'd have thoroughly destroyed any chance of recovery. Fortunately they didn't. I wonder whether Council's hired Diana Moon Glampers as chief planner.

Downtown property owners worried about tenant flight to the suburbs, and who helped convince the planners about the need to maintain high property values downtown by constraining supply, have only themselves to blame for that part. That developers now cannot put up properties downtown at prices tenants are willing to pay is a signal that property prices downtown have to fall. The price of land downtown should be the present discounted value of expected rental flows. If the rent that the market can bear is lower, property prices have to drop.

Now, suppose that you're a developer who's still a bit iffy about Central City. You're sitting on a bit of insurance money and trying to decide whether to build downtown, build in the suburbs, or leave. You'd been holding off in hopes that the planners would start easing up downtown and making things there easier. Council's just told you that, as of a year from now, you won't have the option to build in the suburbs. Were I in that spot, I'd now be rushing through to get things consented in the suburbs ahead of the ban on new developments.

A Council concerned about the pace and nature of the recovery downtown would be implementing measures to make downtown more attractive: easing zoning restrictions, easing building regulations other than those affecting structural strength, reducing development contributions, getting faster consenting, and getting some certainty around the darned anchor projects. But, Council's constrained by that they don't have much say in the downtown; it's CCDU's baby. Confusopoly reigns.

The latest news on the Christchurch Central Development Unit's website about the Convention Centre was a 2 October update saying that they're seeking an operator for the facility.

Friday 21 March 2014

Service provision, service advocacy

New Zealand has a generalised problem where service providers spend a lot of time on policy advocacy. Service providers are not supposed to engage in lobbying on the public dime. David Farrar summarised the state of play a couple of years ago:
This [taxpayer-funded lobbying] is an issue that should be investigated by the Government or the Auditor-General. Yet again we have evidence of taxpayer-funded groups using their funding to lobby the Government for specific law and policy changes.

This is an extremely bad thing. The Government should not be effectively paying people to lobby Parliament and the Government a specific way. Just as Ministries are forbidden to lobby, it is equally wrong for them to contract other groups to lobby.

This was first exposed in 2003. Then ACT MP Rodney Hide revealed that Action on Smoking and Health (ASH) and five other NGOs were receiving taxpayer money from the Ministry of Health to help lobby MPs on the Smoke-free Environments Amendment Bill (the one that banned smoking in bars and cafes).

The Director-General of Health then ordered a State Services Commission investigation into the matter (the Hunn/Brazier inquiry). Hunn and Brazier considered that the advocacy and lobbying clauses in six contracts were unacceptable under public service standards and in their view could compromise the political neutrality of the Ministry of Health. They recommended that future agreements with NGOs explicitly exclude lobbying activities.

The Treasury’s most recent guidelines (2009) for contracts with non-governmental organisations also make it clear: “Government agencies should also be careful to ensure that contracts do not breach public service standards of political neutrality”.

However, the Health Ministry is still funding the “advocacy” and “awareness raising” that these organisations engage in. The Ministry still funds ASH and other organisations like the Public Health Association – it is just more careful about what it puts in the contracts.
It's hard to avoid that service providers in this area engage in some lobbying. The people who care most about helping those who are negatively affected by some issue are the ones who are both most likely to get involved in helping and who are most likely to want to spend a lot of time pushing for policies reducing those harms.

Suppose that you're the Minister. You want to contract with providers of social services to help people: drug addicts, alcoholics, problem gamblers, people who want to quit smoking, compulsive eaters - there's a wide range. And you know that a lot of these services are best outsourced to groups who are really passionate about helping others.

At the same time, these groups will often be more than a bit one-eyed about it: they'll see the problem they're helping to address as being far worse than it might be on a broader view, and they might also forget that they're only seeing the worst cases - there might well be plenty of folks out there who engage in these activities recreationally and without substantial harm to themselves or others. So these groups will be convinced that the best thing for everybody would be just to abolish whatever substance or activity they think is responsible for the problems experienced by the people they're helping. And so they'll want to advocate for policies substantially restricting things.

Anything you do, as Minister, short of complete bans, will never ever be enough for them. Any policy you undertake will be criticised as either not going far enough (with allegations that it's because you're beholden to industry) or as being a step backwards (with even stronger allegations that it's because you're beholden to industry). Even if it's the case that you've been entirely working in the public interest, weighing up the effects of any policy both on the problem cases who experience harms and on other consumers, nothing will ever be enough for them.

Suppose further that it's effectively impossible to sort out how much of any contract you provide is used for service provision and how much is used for lobbying. Suppose you pay some organisation a million dollars to provide services for individuals in some area. They also collect $20,000 in private donations. They say that all of their lobbying activities come out of the $20,000. But it's done on computers you funded, in office space you paid for, and with staff you've largely paid for too. Maybe it's true (and maybe it isn't) that the marginal cost of the lobbying, given the fixed costs you've covered for them already, is only $20,000. It would also be true that they're leveraging substantially on the fixed costs you've fronted.

The government today cut funding for the Problem Gambling Foundation. They did a lot of good work in helping problem gamblers. Their most recent available annual report, 2010's, had $4.6 million in government grants and contracts, $3,143 in private donations and koha, and $405,044 in "all other income", sources unspecified but likely to include fees for their various conventions and seminars. Their 2010 report celebrated Gamblefree Day, a highlight of which, in their view, was a
"stunt carried out by a group of students from AUT who dumped $5 million of fake money under the Sky Tower to demonstrate how much money is lost every day through gambling. There was extensive media coverage including an article in the NZ Herald."
They also included, as part of "supporting communities", their work in encouraging people to "make submissions to their local councils advocating for maintaining or introducing a sinking lid policy." They this month tweeted that allowing a supermarket to sell lotto tickets at the checkout rather than via a separate queue constituted having "lotteries products rammed down our throat."

In my view, it is entirely reasonable for groups like the Problem Gambling Foundation to make submissions to Councils or to Government outlining, based on their particular expertise, what problems might arise due to proposed policies. Councils and governments then weigh these considerations against the effects of regulations on non-problem users and come to a decision. Encouraging and facilitating other submissions, though, seems a lot more like astroturfing.

You fund a group to help problem gamblers, and you get both help for problem gamblers and facilitation of this kind of thing.

I know absolutely nothing about the decision to de-fund the Problem Gambling Foundation and whether it was due to their lobbying activity or for other reasons. I also know nothing about the relative proportion of time PGF spent on public advocacy stunts like the above relative to their work with problem gamblers; I expect that the latter dominated the former by a substantial margin. I also would have had a string of other groups well ahead of PGF in the queue for de-funding if we're going to start de-funding health lobby groups. PGF at least provided a really valuable service along with its other activities. Others don't.

It would be useful were the Government to establish a clear set of guidelines and to require their enforcement throughout their service contracting. Organisations providing contracted social services should feel very comfortable in providing expert advice to government through the submissions process. But they should also be barred from astroturfing or other public advocacy stunts as condition of receiving funding.

Alternatively, I strongly recommend that National establish a set of contracted NGOs to provide issue advocacy on the right. They could provide some nominal services, but they'd really exist to lobby government for reduced regulatory burdens, reduced tax burdens, free trade, and consumer sovereignty. Perhaps it could be part of a package proposal for cross-party support: politically neutral service providers, or else neutrality ensured by establishing a bunch on the other side. I strongly prefer the former.

Update: David Farrar tweets that PGF's advocacy work had nothing to do with it. Can see lots of reasons to prefer either PGF or Salvation Army getting this contract; can't see why, given the contract's awarding to another pretty vocal anti-gambling group, folks reckoned it to be punishment for anti-gambling advocacy.

Haunted lands

Never buy the property next door to the cemetery. You'll be haunted. Not by ghosts, but by objections to any future re-development plan.
The resting place of legendary All Blacks coach Sir Fred Allen has been defended by the Environment Court, which has cancelled plans for factories next to a park-like Auckland cemetery.
Since early 2012, the unbeaten 1960s coach has been buried beside his wife, Norma, at Auckland Memorial Park in Silverdale.
He was a member of the trust for the perpetual maintenance of the 17ha park cemetery, whose managers appealed against an Auckland Council decision to rezone adjoining land for industrial buildings.
"Fred would have reacted badly to such a terrible proposal," said Alan Sayers, a friend for 65 years and fellow resident of Whangaparaoa Peninsula. "He thought it was a beautiful piece of land, gently rising, all-day sun, a lagoon and the trees being planted.
"A walk beside a lake is named in his honour. It would be such a shame if alongside this private, peaceful place there would be factories."
Any guesses what this will do to the number of objections raised for any planned new cemeteries?

I can understand zoning and externality worries about effects on those who still frequent the cemetery. I also think we should pay some heed to the wishes of the dead, at least to the extent that they paid for certain things to be done prior to their death. It would be a breach of contract for the Memorial Garden to pave over his grave. But I'm pretty sure that Allen didn't purchase an easement over all the neighbouring properties when he bought his plot.

HT: John, who will remain semi-anonymous, because he also told me that while Allen was a "damn good coach in the 1960s", he wasn't ever a great All Black. He also tells me that the ruling suggests "no one could build within 100 miles of Colin Meads' resting place." I am completely agnostic as to the relative merits of historic, current, or future All Blacks.

Wednesday 19 March 2014

Genter on cost-benefit

The Greens' Julie Anne Genter provides some helpful comments on the cost-benefit assessment cited in their cycling proposal.
This is going to be an incomplete answer and I can't promise to get fully immersed in a lengthy debate. Short answer: we used the figure in the study - which is peer reviewed, published and was the subject of a PhD thesis. It's a big research project, we could not replicate it with our limited resources. They made the decision not to discount (as I understand it) because of many of the benefits are health and longevity related, and arguably society values health in the future as much as they value health today. This is a debatable point (that most people are unlikely to be very interested in), and while not intending to take a specific position on it, we went ahead used the study because it was highly relevant to our proposal.
I sure wouldn't have expected the Greens to come up with their own full C-B on this one. But it was pretty obvious that the paper's authors had decided to eschew discounting; that made the figures incomparable with other LTNZ projects. Further, plenty of other roading project cost-benefit analyses build in health and value-of-life benefits from reduced accidents which also accrue over a longer time period. We then can't really say that the policy would take money from lower-valued projects and move it into this higher-valued one, since the basis for evaluating value differed too much across them.
Longer answer: Benefit cost analysis is in theory used to compare and prioritise projects (though it is not at the moment in NZ). I accept that it may not seem fair to compare the BCR of motorway projects that have used a discount rate with this number which has not discounted benefits. However, the vast majority of the benefits (about 80%) in the motorway BCRs are "time travel savings" (which incidentally are unlikely to measure anything in reality. See Metz, Myth of Time Travel Savings). Let's be generous and assume time travel savings did exist; one could argue that a high discount rate is more likely to apply (you value a savings of 5 minutes today more than in 20 years time) than to health benefits. Moreover, motorway evaluations do not take into account sufficiently the impact of induced traffic, which erodes time travel savings quickly in peri-urban areas. So although that is not the purpose of discounting the benefits, I think it probably gives us a more realistic picture of the relative benefits/impact of the project over time. It's hard to see how walking/cycling infrastructure benefits would decline over time in the same way.
I agree with much of this. But surely then the correct answer is to run it using standard time discounting, get a smaller but defensible number, and then point out that the benefits of other projects are overestimated. It wouldn't surprise me if the benefits for other roading projects were overstated. And even if the cost-benefit analysis were right, there are plenty of relatively low benefit-to-cost ratio projects out there; NZTA put the whole of the Roads of National Significance programme at a 1.8:1 benefit-to-cost ratio. I wouldn't be surprised if a sound version of the cycling benefit-cost study beat 1.8. Why say 20:1 when you only need to beat 1.8:1?
Having studied at length the economic evaluation manual, I can say economic evaluation of road transport projects is highly incomplete (and therefore inaccurate) in NZ, and having looked at alternative methods of evaluation, I think it's quite safe to say that the cost effectiveness of walking and cycling for short trips is easily in the magnitude of 20 times better value for money than a project that introduces new road capacity (if not more). The straight up public infrastructure cost required to move one person one kilometer in a car is at least 8 times greater than by bicycle, but that doesn't include the private ownership and running costs of the car, and the parking, which would double that again. We haven't even started talking about externalities like congestion, noise, pollution, crash risk and public health.
Julie Anne knows more about transport than I do, and I believe her to be a truth-seeker. I will make a couple of points here though.

It's entirely possible for it to simultaneously be true that the public infrastructure cost of roading is higher than for cycling, and for it to make sense to invest in roading.

Petrol excise taxes pay the majority of the bill for national roading projects and half the bill for local roading investments, though I'd assume that Genter and I would both agree that we shouldn't be spending out of general revenues for roading projects over and above that which is supported by excise and road user charging.

For some people, cycling's a great way of commuting. For others, not so much. Our family carpools together across town every day. Cycling wouldn't work well for us. I'm happy to pay more in terms of petrol (including excise), car maintenance, parking, and everything else, than to cycle that route every day. And especially since we get random-draw unpredicted rain. If you asked me, "Hey, Eric, how much would we have to pay you to use a bicycle for your commute every day with the kids," I would tell you that you would have to pay me about $30,000 per year to make me consider it. It would substantially reduce my quality of life. I imagine the horror of getting a call from daycare that the 3 year old had come down with a stomach flu, was vomiting, and that I'd have to take her bicycle. With the 6 year old tailing along behind on his bicycle because there's no way I'd have a 6 year old cycle from Ilam to Brighton on his own. Because of all that, I'm real happy to pay the costs of driving a car rather than cycling. Further, the time in the car isn't pure loss either: we play games with the kids (traffic permitting) or listen to audiobooks - we're half-way through Robinson Crusoe currently. They'll be getting much of the Canon courtesy of the commute. That counts for something.

Let's consider how the model the cited paper uses handles this problem. Think about the person currently on the margin between cycling and driving who currently drives. She's weighed up all of the costs of driving, all of the health benefits of cycling, and just barely prefers driving. Now suppose we made cycling easier and, because of where she lives, she now just barely favours cycling. The benefits to her of the programme should really be pretty close to zero: she just barely preferred driving before, and just barely prefers cycling now. But the simulation model would count as benefits to her all of the net reduction in health costs (reduced driving accident risk, plus bicycle accident risk, minus health benefits from exercise) and all of her reduced fuel expenditures, without counting any of the costs of the switch as she perceives it. No costs of cycling, no inconvenience in the rain, no hassles in trying to get groceries home in a mixed-purpose trip, no increased food expenditures to fuel the cycling, no time costs for her longer cycling commute.
Finally, I do have a lot of questions about the appropriateness of high discount rates, and exponential discount rates. 1) The impact of high discount rates is to bias public investment projects towards those with shorter term benefits, this is a fundamental problem for sustainability. Obviously the Greens are a party concerned with the long term. 2) It's not clear that exponential discount rates accurately reflect human behaviour.

I don't feel I've even begun to get into the logic and evidence to back up all these musings, it probably could itself be a good thesis topic.
Ok. Here's the cost and benefit time profile on the Roads of National Significance project.
Suppose that all the real benefits are only half of what's here presented, just for sake of argument. Even with that, what do you suppose that a zero discount rate would do for the cost-benefit assessment of RONS? The benefits from the RONS programme are heavily backloaded while the costs are frontloaded. Time discounting doesn't just affect bicycling projects with later health benefits. 

And the tabulated RONS benefits aren't just commuting time savings: they've got reduced congestion (and associated costs), accident reductions (health benefits), and vehicle operating costs savings. The green curve adds in a bunch of wider economic effects. They'd reckoned on $690m per annum in non-market benefits like lives saved; it isn't all "saving 5 minutes a day in RONS versus saving lives in cycling projects."

I'm not going to go to bat defending RONS or the cost-benefit study on it: I know there's been plenty of criticism of it. But if the general point is that time-discounting isn't fair for projects like cycling infrastruture that have lots of potential future health benefits, well, the "front-loaded costs, later benefits" profile also fits RONS. 

Again: it seems completely plausible to me that, if government is going to be devoting general revenues to roading projects rather than just petrol excise revenues, it could well make sense for central government to use some of that funding to top up local government expenditures on cycle paths instead. But my confidence in the proposition is reduced rather than enhanced by that Auckland study.

Finally, I worry a lot about differential cost-benefit methods being used across different kinds of projects. Suppose Genter's right and that health benefits should attract a zero discount rate rather than a standard one. We're currently applying standard discount rates on every other project out there: investments in new hospitals, various public health interventions, pretty much everything. We don't get formal cost-benefit analyses on every policy, but big ones do require an RIS that has to at least have indications of net present value. And the RIA Handbook under which the Ministries are supposed to be producing these things explicitly cites the Treasury cost-benefit analysis primer as guidance. If we're going to discount health benefits at zero, it's a dumb idea to apply it piecemeal. Get it into the Treasury guidelines. Otherwise, you risk massively privileging those health projects that get the zero discount rate over ones that don't. 

I'd argue pretty strongly against a zero discount rate for health: it's pretty strongly contrary to observed behaviour. But if you're going to do it, it has to be an across-the-board decision put formally into the Treasury guidelines, not something pulled out to weight the scales for favoured projects. 

Soda taxes revisited

Soda taxes don't do much to affect obesity. A new paper by Fletcher et al in Health Economics looks at effects of American soda taxes across U.S. states. While 'soda taxes' aren't common, differential sales taxes on soda aren't uncommon; soda is often exempted from generalised food exemptions from state-level sales taxes. Consequently, soda can have an effective tax rate of up to 12% more than other foods and non-alcoholic beverages, though the average was much lower.

They find that sales taxes have no statistically significant relationship to soda calorie intake and may increase consumption of calories from non-soda beverages. In one specification, they find that a one percentage point increase in the soda tax increases total daily caloric intake by 27.7 calories; I rather suspect that they're here picking up an endogeneity problem: governments will implement soda taxes when obesity is rising.

Supporters of soda taxes have suggested that tax hikes in the range experienced in the US will understate the potential effects of a much larger tax hike: if effects are non-linear, this is entirely possible. But Fletcher et al find zero evidence of non-linearities in tax effects within the range of US taxes. If there were some non-linearity, we'd expect there to be at least a little action in the quadratics and high-order polynomials; the linear specification fits best. But we can't rule out non-linearities that only kick in well outside of sample.

They'd previously found strong evidence of substitution effects among children and adolescents: taxes on soft drinks reduced soda consumption but induced an entirely offsetting increase in calories from other non-soda drinks. And recall that Klick et al found that relative prices of healthy and unhealthy foods didn't affect obesity either.

See also Paul Bedard at the Washington Examiner and Chris Snowdon.

Tuesday 18 March 2014

Orphaned works, missing surplus

The 'hump' in Amazon availability of books first published just before the Copyright Wall suggests a pretty big reduction in surplus associated with orphaned works. But, it could be the case that there isn't much demand for books from the 1930s and that the "me too" editions of older public domain works then don't add much value. Paul Heald investigates in a rather nice new paper.*

First, here's that "hump":

How could we tell how much value is lost from orphaned works from the 1930s and onward? 

Smith et al, 2012, matched out-of-print books that do and do not have Kindle versions and estimate $740 million in revenue were all out-of-print editions to be available as e-books. I've a few doubts about that number.**

Heald provides other evidence consistent with a reasonable loss induced by the copyright wall. First, used book markets stock a much larger proportion of books first published in the 50s through 80s than does the Amazon sample that Heald previously examined. The blue line in the graph below shows the number of books listed at Abe Books by decade of publication; the red line puts the Amazon sample onto the same scale to illustrate some of the proportionate differences.
But Heald's most compelling evidence comes from NYTimes and library data. 

He reports that 94% of the 165 best-sellers of the 1913-1922 era are currently available as eBooks and 98% are currently in print. But, only 27% of the 167 best-sellers of 1923-1932 are available as eBooks and 78% of that era's best-sellers are currently in print; only one of the copyright-walled best-sellers that has fallen out-of-print is available as an eBook. 

He also finds that a surprisingly small proportion of post 1930s NYTimes reviewed books, the set of books most likely to be of continuing relevance, are available in digital form. Popular books prior to the copyright wall are more commonly available. And, older music is even more commonly available:

The barrier for accessing out-of-print, but formerly popular, books is substantial. Chicago library data suggests only 55% of out-of-print NYT Reviewed books are available at the library, with older books especially hard to find. 

Older music seems less affected by the copyright wall, likely because it's generally simpler to produce a digital copy of a recorded work than of a print work. Heald explains that rights issues can be more complicated for books than for music: the music publisher does not need to seek permission from the artist's estate to convert old vinyls to new formats while book publishers have to; the relevant court decisions were different for books than for music. Differences in licensing and rights helps explains the difference between post-wall music and post-wall books; differences in costs of digitisation explains the difference between pre-wall music and pre-wall book availability. 

Can we please have Congress stop extending the duration of copyright? 

* Caveat: at page 13, Heald says that David Lee Roth's version of "Yankee Rose" is "what looks to be a heavy metal tune from the '80's." This is clearly wrong. Van Halen under Roth was hard rock. But Roth's later solo efforts, including Yankee Rose, were much closer to the hair rock offered by the likes of Poison and Warrant. It's almost a genre self-parody. To call it metal, well, the boffins at the New Zealand Ministry of Culture sure know better

** While Smith et al's propensity score matching method looks very sound on a per-book basis, I doubt that their $740 million figure is right. The per-book likely sales figures are likely correct, were we only to have a few of these books digitised. But adding more than 2 million new books into the mix, well, I expect that a lot of them are reasonably close substitutes for each other and we'd pretty quickly hit attention constraints: the total sales for all of them would be rather less than the sum of sales for each one were each one released on its own. 

PopCorn Time

Curious to see whether PopCorn Time is as easy to use as Netflix and consequently potentially ridiculously disruptive for the movie industry, I gave it a trial run. At no point did I view more than 5 seconds of any film: I just wanted to know whether it works well. I deleted the programme immediately on completion of the trial. I pay for my content.

Here is my entire experience.

I read about the programme at Music Industry Blog [HT: Duncan, who reports a satisfactory OSX experience]. I then searched around for the install files, and found only the stories from a few days ago of the programmer having pulled the programme. As it's open source and was up at GitHub, a pile of alternatives remain available. Had I simply followed the link from Music Industry Blog to the writeup at TechCrunch, I'd have found it more easily. Downloading and installing from there was simple: extract the .zips to a folder, run the .exe.

The programme has a very slick interface. I decided to run a few 5-second samples from the middle of a few films to check:

  • Does the film work?
  • Is the viewing quality reasonable, or is it some shaky camera from inside a movie theatre?
  • Sound quality, including language.
Here is my entire experience.

I started Popcorn Time. Browsed through some content. Hit the following:
  • Princess Mononoke: Was in Japanese, no English subtitles, not advertised as being the Japanese version, though non-English subtitles were advertised.
  • A set of films then failed to load: they went from the buffering notice to only a spinning circle of failure. I then restarted the programme. On second go-round, I retried some of those films. And:
  • Frozen: Buffering took twice as long as typical Netflix start. But excellent quality. Choice of 720P or 1080P.
  • Wolf of Wall Street: Buffering took four times as long as typical Netflix start. But decent quality. Worse resolution than typical Netflix, playback stopped briefly during play.
Then, I tried the search bar instead of just hitting things in the browse window. 
  • My Neighbour Totoro: no results
  • Strange Brew: no results
  • Goodbye, Pork Pie: no results
  • Rambo: the search window started hanging, had to restart the programme. Restarting it took a rather long time; was about to force-close when it came up. It came up with First Blood, which worked in 720P. 
  • Amelie: Worked fine. All in French (as it should be, but not advertised as such), no subtitles. 480p.
  • Transformers: pulled up the three new movies, didn't find the old 80s cartoon. I didn't hit the links.
I've now deleted the programme, as I pay for content and was only interested in seeing how well this works. It does seem a reasonable alternative to paid content. Compared to Netflix, it has much more new content, but also more surprises - as you'd expect from a torrent server. There are reasonable odds you'll come up with foreign-language versions of foreign-language films, you're likely to have to restart the programme a few times as you go, but I didn't catch any Russian-dubbed versions of English movies (though I didn't sample many movies at all). 

It isn't good enough, in my view, to dominate a paid version where folks wouldn't get these minor surprises and necessary re-starts, but I have a fairly high willingness to pay. The glitches were irritating rather than experience-destroying. It's dead-simple to install and run. In the absence of a paid version offering similar functionality, a lot of folks will find Popcorn Time awfully tempting.

I do not encourage you to install and run Popcorn Time. It is still stealing content. Netflix with geounblocking - at least I'm still paying for it. If you do decide to install and run it, play careful: I suspect the programme could well attract folks who wouldn't think to mask their torrenting appropriately. You'll have to do your own searches to find out how to do that.

Monday 17 March 2014

Jitney supply restrictions

Police in Dunedin helped the TaxiCab Federation enforce its entry barriers this past weekend, warning jitneys helping drunks get home.
Police have visited 46 of the 60 drivers identified as illegally offering cheap taxi rides via social media. The drivers received official warnings.

Many claimed they were unaware they were breaking the law, Dunedin road policing manager Senior Sergeant Phil McDouall said.

The Facebook page, ''Dunedin Sober Drivers'', had nearly 2500 members, and detailed those wanting or offering rides to and from destinations.

A 21-year-old female, who regularly used the service, told the Otago Daily Times members provided a safe and cheap alternative to taxis, which were expensive and not readily available in the early hours.

''They do this in other places. I just don't see what the problem is.''
Taxi cabs come under regulations requiring 24-hour dispatch and in-cab cameras; drivers of any commercial passenger vehicle, whether taxi or chartered limo, must have a passenger endorsement on the driver's licence. The passenger endorsement requires sitting an extensive local knowledge test, which is largely superseded by Google Maps, Apple phones, and dozens of models of dedicated GPS units.
Police had safety concerns for vulnerable passengers, including young women and those under the influence of alcohol who might be getting into vehicles with people they didn't know, he said.

The ongoing investigation involving police and the New Zealand Transport Agency (NZTA) comes after concerns were raised by Dunedin taxi drivers.
So it is ok for a drunk young woman to choose a free ride home with a guy she met at the bar, who may or may not be a horrible person, but it's absolutely forbidden for her to engage in an identical commercial transaction unless the driver is a licensed cabbie in a licensed cab. Yes, I know that commercial transactions generally have higher regulatory hurdles than identical 'for free' ones. But the entry barriers here seem higher than they need be.

Here's a description of the local knowledge tests. It costs about $380 for test and study guide.

I can see great reasons for airports putting up great big signs saying something like:
Drivers from the following cab companies only use licensed drivers; their licensed drivers gave passed a local knowledge test. Others cabs may rely solely on GPS.
But making it mandatory for all drivers? Sounds more like a way of restricting supply. A lot of the time, the passengers will be checking the route on their GPS anyway, and especially so in Auckland, where the absolute lack of any logical direct route from the airport to downtown always makes it feel like you're being shafted with unnecessary suburban detours even when you're not.

Or, imagine it this way. Were taxicabs a brand new thing that nobody had ever heard of before, and everybody knew about GPS, would we expect that regulations on taxi drivers would require passing a local knowledge test, or would they require instead that the driver have GPS and an internet-enabled phone allowing for address lookups? Surely this is the kind of thing best handled through brand reputation. If your cab company charges less but has clueless drivers, people will only hire you for routes they know; if your drivers know the best way to everywhere, folks needing that will pay the premium for it.

While I agree that having a knowledgeable driver is a good thing, not all good things should be mandatory. I can't see why it's necessary for drivers offering folks a ride home at the end of the night to have passed local knowledge tests that include where various churches are.

Friday 14 March 2014

Alcohol entrepreneurialism

42 Below got started when a home distiller figured out that he was really pretty good at what he was doing, started selling to local bars, then scaled up. Eight years after starting distilling in the garage, he sold out to Bacardi.

The Press reports on a new craft distiller in Christchurch.
Ben and Sam Lu have adopted the Kiwi do-it-yourself attitude since arriving from Taipei in 1994. The brothers decided to brew their own Chinese liquor simply because they love drinking it. Since then, they have turned a small-scale home business into a national company.
And it's not the first time they've done it. Inspired by the Cookie Time story, the brothers, along with their parents, started Formosa Foods in their garage in 2007. In doing so, they turned what they describe as a family financial crisis into an enterprise providing most of the city's Asian restaurants and supermarkets with noodle and pastry products. The creation of New Zealand Chinese Liquor has been much the same.
"Formosa is the biggest Chinese noodle factory in the South Island ... since we've had a little bit of money, we've invested in this new business," Ben says.
A home-kit distillery quickly turned into outsourcing production to Southern Grain Distillers in Kaiapoi and bottling to Matson's Brewery in Sockburn. The company now sells its liquor through Liquor King, Liquorland, Ballantynes and a range of hotels and is negotiating with overseas distributors.
Bans on home distillation don't just protect incumbents by preventing home distillation, they also block the emergence of new competitors. And when one guy, starting in the garage, proves successful, others follow:
The Lus are not only trying to turn heads in New Zealand; their main aim is to export to China. Several trade shows there have proved people like the taste of their product and a current negotiation with a Chinese retailer could result in a deal with a possible yearly turnover of $2 million and enormous growth potential.
Motivated by the success of New Zealand vodka brand 42 Below, Sam and Ben read its story - Every Bastard says No - and thought "why can't we be like them but for Chinese liquor?" They've taken a slow and calculated approach to growing their business, starting with a cult following on Facebook of more than 25,000 fans.
I'll have to find a bottle and try it.

Here's an excerpt from Every Bastard Says No. At least, for 42 Below, the bastards were the investors who were reluctant to put up cash. You can route around that kind of bastard and find folks who share your vision. When the bastard instead is some bureaucrat who demands licensing and compliance with a pile of mutually inconsistent regulations, well, you'd have bigger problems: just try craft distillation in some US states, or either craft brewing or craft foods in Manitoba.

Fred Dagg speaks truth.


Thursday 13 March 2014

Discounting Cycling

The Greens recommend shifting some transport funding from lower value roading projects towards bike lanes near schools. It doesn't seem like a bad idea, so long as NZTA does proper modelling of effects on traffic flows and doesn't wind up putting too great of constraints on trunk routes that happen to go by schools.

But I wish they wouldn't have put up their indicative cost-benefit figures. Here's the Greens:
New research from the University of Auckland shows the kind of infrastructure the Greens will build for walking and cycling will produce up to $4 billion of benefits over 40 years for a $200 million investment - a 20 to 1 return.19
Ok. First off, 20:1 benefit-cost ratios are immediately eyebrow-raising. If something's that great, why hasn't it already been done? My first thought was that somebody's gone and rolled up forty years of estimated benefits without any time discounting. So, let's check Footnote 19. It's this.* And what do we find at page 10?
To make the findings policy relevant, we used the national transport agency’s methods (New Zealand Transport Agency 2010) to calculate indicative benefit-cost ratios in New Zealand dollars (NZD) for each scenario compared with baseline (summed net benefits divided by infrastructure costs). Infrastructure costs were not inflated and, in contrast to the transport agency’s methods, neither did we discount future benefits and harms. [emphasis added]
Where a bunch of the benefits come from estimated future health improvements and mortality reductions, choosing not to discount future benefits at standard discount rates kinda determines their results for them. How can they say that this project is higher value than other NZTA projects when standard NZTA projects discount future benefits at standard discount rates? Again from Macmillan et al paper:
Table 3 illustrates the estimated cumulative costs and benefits to 2051 of the four policy interventions compared with the business-as-usual simulation. All interventions exhibit positive benefit-cost ratios, ranging from 6 to over 20 dollars saved for every dollar spent on bicycling infrastructure. The largest savings come from reductions in all-cause mortality due to physical inactivity.
If the Greens are happy with this kind of no-discounting cost-benefit analysis, I have a proposition for them. For the low low cost of $1,000,000, I will pay them $25,000 per year for the next eighty years. If we roll up the 80-years' benefits, that's $2,000,000: a 2:1 benefit-to-cost ratio! Sure, it's not 20:1, but it's still pretty good. Two is bigger than one. Right?

It wouldn't be hard to convince me that this could be a good policy. But hanging it on this kind of analysis sure isn't convincing.

* Alexandra Macmillan, Jennie Connor, Karen Witten, Robin Kearns, David Rees, and Alistair Woodard. 2014. "The Societal Costs and Benefits of Commuter Bicycling: Simulating the Effects of Specific Policies Using System Dynamics Modeling." Forthcoming in Environmental Health Perspectives.

Wednesday 12 March 2014

Illegal leverage

Legalising prostitution wasn't enough to get the gangs out of prostitution in New Zealand. Joelle Dally's coverage of the Mellory Manning murder trial shows why:
Chilling insights into the Manchester St scene emerged during a just-concluded High Court murder trial, after which Mauha Huatahi Fawcett was found guilty of Manning's December 2008 killing.
At the time, the Mongrel Mob was vying for control of Manchester St.
The gang had set up territory at the Oxford St bridge on Manchester St, which they called "The Four Aves", where they minded their own girls.
But they also used standover tactics to "tax" working girls for $20 a job.
Fawcett, a Mongrel Mob prospect, was apparently told by senior gang members they "owned the streets".
Street workers who tout for business on Manchester St today recall the Mob presence being "full-on" right up to the February 2011 earthquake.
One, who had been working on the street for about 30 years, said when Manning was killed, "I just knew those mobsters were behind it".
"They've pulled away at the moment, the Mongrel Mob. I haven't seen them since I've been back out since after the earthquake. They used to be really intimidating," she said.
"Those boys will still creep back around here - push their drugs on to [girls], them buying their drugs. Then before you know it, you're ticked up so much, you're in debt."
All of this is well after prostitution was legalised. While legalisation means that sex workers can go to the police if they're being victimised, it does not solve the problem entirely where some sex workers are in the industry and choose street work over brothels (or aren't able to get employment in brothels) because of substance abuse issues. In general, post-legalisation outcomes have been good. But legalisation of prostitution by itself hasn't been panacea.

I doubt the Mongrel Mob could have had as much power over the Manchester Street workers if those workers were able to get drugs instead in legal and regulated markets.

I'd really like to know whether the Mongrel Mob's "standover" taxes were restricted to those girls beholden to them through debt, or whether they maintained broader intimidation despite legalisation. I can understand why addicts indebted to the Mongrel Mob might be reluctant to go to the police. I'm not sure what would have stopped workers not so beholden from going to the police. Were the police not credibly able to offer protection for those workers dobbing in Mongrel Mob members?