Friday, 13 July 2018

Kiwibuild lotteries

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

Anyway, back to Kiwibuild.

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

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

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

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

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

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

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

Wednesday, 11 July 2018

Hate the game - Sale & Supply of Alcohol edition

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

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

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

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

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

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

Monday, 9 July 2018

Sugar messes with your brain

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

Here's the key table.


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

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

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

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

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

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

Friday, 6 July 2018

Paying for more hostages

Ok, here's a fun one.

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

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

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

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

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

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

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

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

Thursday, 5 July 2018

Winning hearts and minds

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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





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

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

Just look at this hot mess.

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


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

Wednesday, 4 July 2018

Around the traps...

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

Interesting take on evidence-based policy

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

This bit was particularly interesting:
RESISTANCE FROM INDUSTRY TO BE EXPECTED 

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

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

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

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

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

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

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

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

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

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

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

Tuesday, 3 July 2018

Tax Working Group Tea Leaves

The group, chaired by Sir Michael Cullen, has been advised by officials not to recommend cutting company tax or offering a specially discounted tax rate to small businesses.

However, it has been encouraged to consider dangling a couple of other lollies in front of investors and businesses.

In particular, Inland Revenue and Treasury officials advising the working group said there was a case for inflation-adjusting the tax system – even though they acknowledged that would be a "significant change".

That would be a boon for people with money in bank savings accounts and term deposits.

They would then only pay income tax on interest on their savings after interest payments were adjusted for inflation, rather than on the whole sum.

Age Concern, Consumer NZ, the Financial Services Council and the Taxpayers' Union lobby group argued for the change in their "Fair Tax for Savers" campaign in 2014.

It had already been raised as a possibility by Cullen in March.

Inflation-adjusting the tax base would remove "one of the biggest distortions" in the tax system and would also have implications for business tax, the officials said.

But in less positive news for some taxpayers, the officials advised against cutting New Zealand's 28 per cent company tax rate.

They said the rate was "relatively high by international standards" and looked at the implications of cutting it to 23 per cent.

But they concluded a cut would not be in the country's best interests, mainly because a lot of the benefits would go to foreign investors.
I like inflation-adjusting interest earnings. The current setup means that during times of higher inflation, the real tax on interest earnings is very high. This builds a wedge between returns from investing in real assets and investing in interest-bearing assets.

It would also mean there would be little case for a capital gains tax where getting rid of the interest distortion would get you most of the way towards what capital gains tax fans want anyway.

On company tax, you're always balancing a few margins. Too high a company tax rate relative to other countries and you scare away foreign investment. But too big a wedge between the top personal tax rate and the company rate and you encourage sheltering income in companies. So, all else equal, if international company tax rates are dropping, then New Zealand's should also drop somewhat, but if top personal tax rates are increasing, then the company tax could go up a bit.

Recommending a hold-steady on company taxes despite declining international rates then could be a signal of income tax increases at the top end. Or a recognition that the current government has shifted scaring away foreign investors to the benefit side of the ledger.

Wednesday, 27 June 2018

Land costs and labour costs

The New York Times has a great piece on what happens in high cost cities. Land use regulation has made San Francisco incredibly expensive. Consequently, there are some tasks there that are on the way out: the value of the task is not high enough to meet the cost of getting a worker to perform the task.

San Francisco's $15 minimum wage certainly isn't helping, but wages would be being pushed up anyway because you have to meet a participation constraint: it would be difficult to find somebody willing to perform any task in San Francisco at a low hourly rate because the cost of living is too high, and there aren't easy commute-in options from less expensive bedroom communities. In that environment, the least-valuable tasks are priced-out first, and it ratchets up from there.

And so even up-market restaurants are shifting from having table service to counter service.
Restaurateurs here have taken a model familiar to taquerias and fast-casual, cafeteria-style places like Sweetgreen and Chipotle Mexican Grill, and pushed it further up the fine-dining food chain. Call it fast-fine, they suggest, or fine-casual. Or counter service “in a full service environment” that includes $11 cocktails and $22 pan-roasted salmon.

...

Enrico Moretti, an economist at the University of California, Berkeley, estimates that when housing prices rise by 10 percent, the price of local services, including restaurants, rises by about 6 percent. (The median home price in San Francisco has doubled since 2012.)

So burgers get more expensive as houses do. But even wealthy tech workers will pay only so much to eat one. “If we were to pay what we need to pay people to make a living in San Francisco, a $10 hamburger would be a $20 hamburger, and it wouldn’t make sense anymore,” said Anjan Mitra, who owns two high-end Indian restaurants in the city, both named Dosa. “Something has to give.”

...

Innovations in farming machinery or microwave meals, for instance, freed up people to be more productive, and better paid. But that is not entirely what is happening here. Restaurants haven’t developed a way to serve meals with less labor. They’ve gotten customers to do the labor they had been paying employees to do.

There is something innovative in reprogramming diners to decouple fine food from full service. But the fact that restaurants have to do this speaks to deep fears here of what the Bay Area will look like if certain classes of workers can’t afford to live here.
It'll be interesting to see what happens with New Zealand's coming higher minimum wages, and what happens if Auckland's housing affordability issues aren't sorted. 


Tuesday, 26 June 2018

Getting to 5

The NZ government might be targeting housing affordability, with a median house price to income multiple measure of 5. From Hickey's Newsroom Pro newsletter:
Acting Prime Minister Winston Peters effectively committed the Government to targeting a house price to income multiple for first home buyers of five times income, which is well below current levels in the biggest cities.

However, he stopped short of calling for lower house prices or suggesting it would happen within the next six years. He said the Government aimed to significantly increase wages.

Peters told his post-cabinet news conference he looked forward to the day when a young couple can “prospect no higher than five times their annual income.”

"This is the Government’s “long-term objective,” he said, adding he did not expect it in the Government's first or second terms.
It's not a bad target. I talk about some of the infrastructure financing lessons on how to get there in my column at Interest.co.nz:
Think about a council like Auckland or Hamilton, where debt-to-revenue limits of 250% are close to binding. Under those limits, a Council wanting to fund a new infrastructure project cannot borrow more than 2.5 times the annual revenue expected from the project. But Infrastructure lasts for decades.

Revenue bonds and special tax districts enable borrowing that is not guaranteed by the general ratings base and can then fall outside of the Council’s debt limit. American revenue bonds enable borrowing of five or six times the annual revenue associated with an infrastructure project.

When a developer wants to build a new subdivision or co-fund a mass transit project to service a new brownfield terraced housing development, the trunk infrastructure can be funded through levies on the future residents of the development to repay the revenue bond.
But if we really want to get to 5, here's a way of committing to it:
  • Set annual median multiple targets providing a path to 5
  • Set automatic policy levers that trigger for being too far from the path. These triggers can include:
    • Overriding some or all of the city's plan, providing for increased density and abolition of rural-urban boundaries until the city is back onto the path. National Default Urban Plans that could apply during the emergency period could do things like:
      • Abolish minimum apartment sizes;
      • Abolish apartment balcony requirements;
      • Abolish viewshed restrictions;
      • Impose a land tax on property owned by local government, rated as though it were in appropriately dense residential use. So Auckland's peppercorn-rental golf courses would start costing Council a lot of money every year directly, rather than just as opportunity cost;
      • Automatic upzonings of everything to next next higher allowed density;
      • Abolishing heritage overlays, or capping the proportion of potential dwellings covered under heritage overlays. So if a neighbourhood, absent the heritage overlay, would be likely to have a hundred dwellings and currently has 10 heritage-listed houses, that would count as a hundred houses towards a new  Council quota;
      • Abolishing any mandatory parking provision;
      • Central government overriding Council viewshafts and heritage restrictions to allow increased density;
      • Abolishing any rural-urban boundary
      • Switch Council's rating base from land plus capital value to land value only, to encourage more efficient land use. 
  • Provide Councils with positive incentives to pursue growth. That includes enabling innovative infrastructure financing options to remove a disincentive to allow growth. But why not also allow Council to share in some of the benefits of enabled growth?
Update - we'd covered some of these kinds of ideas when we'd punted the idea of trialing urban-friendly policy reform in Auckland. See section 4.5 here

Friday, 22 June 2018

Alcohol healthwatch - again

"One-third of NZ's hazardous drinkers are now aged 35-54," says Alcohol Healthwatch executive director Dr Nicki Jackson.

"For the older groups, hazardous drinking is now higher than it was back in 2006/07. It feels like we have a new 'peak booze' among parts of our population."

The Ministry of Health estimates that over 780,000 adults are hazardous drinkers. Statistics NZ figures show the drinking habits for more than a third of people aged 18-24 could be potentially hazardous - regularly consuming six more drinks in a single session.

Dr Jackson warns there's been an increase in hazardous drinking every year since 2011, and says it's increased by more than 50 percent among those aged 45 to 64 years.

As well as this, hazardous drinking in the 66-74-year age group more than doubled from 2011/12 to 2015/16.

"Our older drinkers are some of the heaviest drinkers in the world," she says.
Let's go back to the stats.

The 2015/16 New Zealand Health Survey does have an increased prevalence of harmful drinking (AUDIT score 8 or higher) for total population in each year from 2011/12 through 2015/16. But that came after a substantial drop from 2006/07. So the 2015/16 figure is now a bit higher than it was in 06/07. The rise from 11/12 to 15/16 is statistically significant, but there is no significant difference between 05/06 and 11/12.

While 32.6% of those aged 18-24 were considered hazardous drinkers by that standard in 2015/16, 43.2% were considered hazardous drinkers in 2006/07. It's been flat on "about a third" since 2011/12. The drop from 06/07 to present is significant; there's been no significant change though since 2011/12.

There were statistically and real-world significant drops in the prevalence of hazardous drinking from 06/07 to 15/16 for cohorts under the age of 24. Prevalence among 15-17 year olds roughly halved (19.5% to 11.5%); among those aged 18-24, it dropped by about a quarter (43.2% to 32.6%).

There was no statistically significant change over the period for those aged 25-34 (though higher now than before, with a large rise from 14/15 to 15/16), or for the 75+ cohort (which dropped from 3.6% to 2.9%).

There were statistically significant increases in prevalence from 06/07 through 15/16 for 35-44 year olds (16.6% to 22.3%), for 45-54 year olds (12.2% to 18.5%), and for 65-74 year olds (7.3% to 10%).

So if you want to tell a story about big increases in rates, you can pull out the 06/07 data and start from 11/12, which seems the bottom of a trough, or ignore what's been happening for younger cohorts, or both. The Ministry of Health data only goes back to 06/07, but overall per capita consumption data has a massive drop from 1987 to 1997, a mild rise through 2010, then a fall through present. If overall hazardous drinking is up 2011/12 through 2014/15 despite a drop in per capita consumption, then maybe whatever the government's doing on alcohol policy is doing more to deter moderate drinkers than it is doing to affect heavier drinkers.

It's also worth looking at the other measures in that survey.

MoH tallies the proportion of people consuming 6+ drinks on one occasion at least monthly. That figure is statistically significantly down overall from 06/07 through 15/16 (22.5% to 19.3%), massively down among 15-17 year olds (25% to 9.4%), and also down for 25-34 year olds (30.7% to 26.3%).

The only statistically significant change for any other subgroups were an increase among Maori women from 2011/12 through 2015/16 (23.4 to 27.8% but as the 2006/07 proportion was 28.0%, there was no change over the longer period), and smallish drops among European men and Europeans overall.

If you flip to the "Consumption of 6+ drinks on one occasion at least weekly" figure, you get a significant drop overall, a significant drop among men, and significant drops in the under-24 age cohorts.

It's also worth checking the most recent figures.

Again, the new ones aren't commensurable with the older ones, so we only have the change from 15/16 to 16/17. The proportion of hazardous drinkers dropped from 20.8% to 19.5% in the total population, and from 26.2% to 24.7% among past year drinkers. Heavy episodic drinking at least monthly is up by fractions of a percent, but heavy episodic drinking at least weekly is down fractions of a percent. None of those changes are worth noticing, but the drop in the most recent year contrasts with Alcohol Healthwatch's "there's been an increase in hazardous drinking every year since 2011".

Anyway, your regular health warning about relying on Alcohol Healthwatch's stats applies. It's usually worth going back and checking the original data yourself to see what's been left out.

Thursday, 21 June 2018

Morning roundup

The survivors in the browser tabs, each of which likely deserves its own post.
  • The mess at Tolaga Bay seems one where you should get the right solution by applying liability. It's impossible for you or I to tell how much value the forestry companies get from leaving slash on hillsides - it can be important for soil regeneration. And it's impossible for you or I to tell how much it would cost them to avoid landslips and mess during storms. But if companies are liable for damages caused, then they'll have incentive to weigh that all up properly. 

  • Drunk people are better at creative problem solving. Well, tipsy people (just under .08). Harvard Business Review only just wrote this up, but it looks like the underlying research by Jarosz, Colflesh and Wiley is from 2012. Or at least I think that's the underlying research. HBR doesn't link it and doesn't mention either the name, year, or journal of the study. Usual skepticism about small-n psych experiments should apply, but it does accord with fairly common experience (drink while writing, edit sober), and with a later similar study

  • Colby Cosh on the history and robustness of the Dow Jones Industrial Average.

  • The Taxpayers Union' finds a continued, and growing, public sector wage premium. The correct first response to this kind of finding is that the public sector will be more likely to draw a different skill mix than the private sector. What you really then want isn't the difference between average pay in the private sector and average pay in the public sector, but rather whether workers of similar characteristics enjoy different earnings in the private or public sector. On that one, the most recent New Zealand work I know about is John Gibson's 2009 piece showing a rising public sector pay premium from 2003-2007, adjusting for everything then observable about workers.

    From Gibson's abstract:
    This note reports propensity score matching estimates of the public sector pay premium in New Zealand for each year from 2003 until 2007. Comparing with observably similar private sector workers shows that public sector workers have received a pay premium that has grown in each year, from almost zero in 2003 to 22% in 2007. Unless there have been unmeasured changes in worker qualities or in the attributes of public sector jobs that give rise to compensating pay differentials, this rising public sector pay premium is most plausibly attributed to an increase in non-competitive rents. 
    Remember too that an employee's total compensation bundle isn't just pay - it's also conditions and job security. If public sector employment is, on average, viewed as having more security and less onerous conditions than private sector employment, we should not expect a positive wage gap. Perhaps there are other conditions in public sector employment that require paying a premium to draw in suitable staff.

  • The government's to be subsidising firms who take current beneficiaries as new apprentices. I expect wage subsidies are an appropriate solution here. I note that countries like Switzerland that have robust employer-provided training schemes don't constrain firms with a minimum wage - young trainees start on very low wages and quickly move up to wages closer to those of skilled workers as they develop those skills. If you ban firms from starting apprentices on wages that reflect productivity, you'll have to subsidise firms taking on apprentices. In this case, I expect that the subsidy would also help ensure meeting a participation constraint on the employee side. UPDATE: I've been corrected! Wages for Swiss trainees remain low during the training phase, though it varies by sector. In a lot of cases, they remain between 10% and 25% of skilled workers' wages. But it enables a sector that can train skilled workers. 

  • Katherine Rich is awesome. I don't know how many times I've seen the public health brigade shout about how industry should be denied a place at the table and should never be consulted about anything, and that the loudness of industry screams is a proxy for the benefits of a policy. Well, know what happens when you shut out industry? You wind up making stupid mistakes that you could have found out about earlier if you'd only bothered asking people who know more than you do. So instead of a referee report allowing you to fix errors before publication, you get an embarrassing letter in the journal your article was published in from Katherine Rich pointing out important problems.
    Madam
    The paper by Chepulis et al.(1) published online by this journal contains errors, inconsistencies, unsubstantiated statements and a lack of evidence to support its conclusions. The following comments refer to the different sections of the paper as published.

    Abstract
    There is an error in the abstract and on p.4 of the paper, which reports that New Zealand had the highest percentage of beverages with added sugar while the UK had the lowest with 9%. The UK figure should have been 39%. The erroneous figure was seized upon by the New Zealand media to demonstrate how far behind New Zealand was from the UK and to highlight the potential impact of a sugar tax. ...
    It goes on from there. Katherine talks more about it here, and notes that the journal now has an updated corrected version up - which will be covered in zero of the newspapers that pointed to the original work. All of this is consistent with a model of public health research that cares far more about getting a couple days of screaming headlines with incorrect figures than about truth-seeking. 

  • Brendan Harre pulls together several of his suggestions around housing affordability. I agree with the broad thrust - we have an incentive-alignment problem where central government reaps the bulk of the benefit of growth but local councils have to find ways of funding the infrastructure to enable it. Interesting suggestions throughout.

Tuesday, 19 June 2018

The foreign buyer ban - revisited

Labour's foreign buyer ban is back from select committee.

Recall that I had a few issues with the prior draft:
  • It catches people living in New Zealand on work visas who are not yet resident, but who may intend on becoming resident. For example, a doctor coming in to work in Greymouth on a skilled migrant work visa would be banned from buying a house there until she has achieved residence. An international student graduating from Invercargill's Southern Institute of Technology and moving onto a work visa and into a job there couldn't buy a house. 
  • Permanent residents who split time overseas, or who have to spend some time abroad, can be hit by it. 
  • It would mess up financing of projects like apartment towers where funding can come from foreigners who buy off-the-plans and then rent to locals.
  • It will mess up building larger developments where the developer is considered foreign-owned because more than 25% of their shareholding is foreign. 
  • It sets hurdles before infrastructure companies needing to buy bits of residential land for cell towers, power lines, telecom cables, or water pipes. 
  • It creates confusion where a business includes residential premises for workers and the business is purchased by a foreign outfit. Would they have to tear down the houses?
And, on top of all that, it's hard even to show that there's any kind of problem. The proportion of transactions involving foreign-affiliated buyers is low, and highly variable across the country. 

  • Can the Overseas Investment Office really handle 3000% more applications? Really?
  • Why apply it across the whole country if you're just mad about Auckland?
  • If New Zealand really wants to attract skilled migrants, treating them badly isn't a great way of doing that. 
  • We look like dolts in international trade negotiations.
  • Regulatory uncertainty for investment in residential development is a stupid thing to add in when we already have big problems in getting housing developed. Don't we want the big foreign companies that can build to scale? 
  • What kind of precedent are we setting when we run policy in this shonky a process? And what should we think about a Treasury that figures it's ok to put up an RIS where the problem definition is just "Labour wants to do this; this bill solves that problem." What kind of tinpot policy process are we running here?
Ok. So, what's in the Bill back from committee? 

First up, I Am Not A Lawyer. There's bound to be stuff I'm missing and that lawyers for those directly affected will catch. I am not checking stuff like "In section 62(a), replace "section 17(2)(f)" with "section 16E(4)(f) or 17(2)(f)"." is consequential. In a better world, legislation that needs this much fixing after first reading because it had such poor pre-implementation process would have a sunset clause on it requiring fairly stringent post-implementation review for any renewal. 

First, the good stuff:
  • Anybody on residence-class visas now counts as domestic. When I moved here, it was on a skilled migrant resident visa; I became permanent resident a couple years later. Others coming in on talent visas that aren't resident will still be blocked. So we might expect people to try harder for the residence-class visas. But at least they're counting a broader class of residents as domestic. 
  • There is now a waiver available for those normally resident to buy a house if they're out of country for 183 days in the prior year - the Minister must be satisfied that the person intends to continue to reside in New Zealand. That still seems burdensome, but it's better than it was. 
  • People building apartment towers can some of the apartments off the plans to foreign investors so long as they're then not occupied by those investors. I have no clue what monitoring burden that will involve, or whether any of the appeal of funding an apartment here to be rented out was the option to live in it occasionally. They've also put in a fix for investors in hotel units. [Update: this also applies to buying off-the-plans in larger new housing developments]
  • There are exemptions for network utility operators in telecom, electricity and gas. 
  • Relationship property exemptions would let the surviving non-resident spouse or partner take on the deceased partner's house without having to seek OIA consent.
  • Conveyancing gets easier where the buyer has to attest to meeting the criteria rather than the conveyancer being liable. 
  • Foreign investors in large developments won't be required to on-sell immediately on construction if they intend on renting it out.
  • Residences on a property that are ancillary to the business purpose also have exemption: the buyer of a vineyard that comes with housing for some of the workers won't be hit as a foreign home-buyer.
And the stuff that's still a problem:
  • There remains no adequate explanation of the problem that the ban seeks to solve, nor any reason to expect the policy will improve housing affordability.
  • During the election campaign, Labour wanted to go after foreign speculators, and suggested foreigners would have to build a house here to be able to own it. The increased housing test at Clause 11 still requires eventual on-sale, or non-occupation. Someone coming in on a work visa cannot buy a piece of land and build a house on it to live in.
  • OIO's capacity for taking this on hasn't been addressed, though if the 'benefit to New Zealand' test is now simpler, that could help.
  • There were problems in there for estates where a foreign-based family member takes on the house to be passed on to minor children; I'm not sure what now happens in that case. 
  • I can see political reasons for carving out profits à prendre exemptions for forestry and not for other sectors, but I can't see good reasons for it. The government has made tree-planting a priority, and perhaps sees the exemption as a way of helping them achieve their tree-planting goals. But what of other land-based industries with their own goals?
  • The Opposition statement on the bill points out that retirement villages haven't been given exemptions allowing financing by unit sales to foreign buyers. 
  • Because the legislation was drafted quickly, and amended in response to the first round of criticisms, it seems rather likely that we will find other branches to bash our heads on as we go. 
  • NZIER's critiques remain. 
Update: John Ballingall points me to a bit that isn't in the Bill as reported back from committee, but is in Minister Parker's press release: Australian and Singapore citizens and residents are treated as New Zealand citizens and permanent residents for purposes of the ban. I had known that Australians were exempt from the ban, and had known that they were going to have to do something about Singapore because of the trade deal there. 

I have not seen any additional detail, so do not know whether Singaporean citizens and residents would face the same encumbrances as New Zealand permanent residents, or whether Singaporean citizens would be treated as New Zealand citizens and Singaporean residents would be treated as New Zealand residents. 

But if Singaporean citizens would be treated as New Zealand citizens, then long-standing New Zealand permanent residents would face more encumbrance than Singaporean citizens because of the rules around presence in the prior year. 

Monday, 18 June 2018

Storing resources for the future

In this week's NBR, I made the case for storing materials until it proves economical to recycle them. I think that is consistent with Auckland Council's declared zero-waste mission.

Think about bauxite deposits. Some of those deposits are economical to mine now for aluminium production; some may become worth mining in the future. It would be a mistake to try and pull all of the bauxite out of the ground today just because somebody doesn't like that it's sitting down there in the ground, waiting to be pulled out later when it's profitable to pull it out. Prices do a great job in helping people figure out which deposits should be saved for later.

Some waste materials are eminently profitable to recycle now. Copper is so profitable to recycle that some folks try pulling it from live power lines. But other materials are not currently profitable to recycle.

I suggest that we should store those materials safely, in a clay-lined hole, covered up so they cannot blow away and cause issues elsewhere. That the fee for storing the materials should cover the costs of building and maintaining the storage facility. And that doing things that way minimises overall waste - just as we waste resources mining difficult bauxite deposits before their time, so too do we waste resources when trying to recycle difficult materials before technology has made that recycling profitable.

Those with a subscription can read it here.

One reader emailed me to note that if tip resource storage facility fees are too high, it can encourage illegal dumping. He's right. I like how Christchurch handled that problem when I first moved there: each household gets 26 rubbish resource storage bags free for the year, but has to pay for any extras.

The problem shouldn't be too big though where tip resource storage facility fees aren't that high. But it could be more substantial if tip resource storage facility fees were set to punish evil rather than to just recoup the costs of running a tip resource storage facility.

Sunday Star-Times on sugar

Eventually, you hit a tipping point with underresourced newsrooms where you kinda wonder whether they should just shut the thing down rather than continue.

Here's John Anthony's piece in the Sunday Star-Times on sugar.
A recruitment drive by Coca-Cola to combat the threat of sugar taxes has been slammed as "appalling" by the New Zealand Dental Association.

A Coca-Cola South Pacific advertisement on LinkedIn for a public affairs and communications manager role promises "an opportunity to make a difference in the world" working for the global drinks giant.

The successful applicant, who will work from Auckland, will manage government relationships in the Pacific Islands to ensure sugar taxes don't negatively impact the business, the job ad says.

A Coca-Cola spokesman says it does not support sugary drink taxes as they are "ineffective as a means of combating obesity".

However, that's contrary to findings reached by an international cohort of experts who have published a new paper in peer-reviewed medical journal The Lancet, highlighting "compelling evidence" that sugar taxes help improve health outcomes.
Ok, so public health people are mad that Coca-Cola doesn't like sugar taxes. The rest of the article is Valiant Saintly Public Health People against Evil Companies.

I guess that's an easy story to file.

Here's what the Ministry of Health had to say about sugar taxes:
...our current position [is] that there is insufficient evidence that a sugar tax would be effective in reducing obesity.
And the report the Ministry of Health commissioned from NZIER found the same thing.

If we go to the Lancet piece Anthony cites, we find that it is a two-page "Comment" piece. The Lancet notes that most of its Comment pieces are commissioned. I don't know whether they then go through any peer review, but this was most likely just Lancet editor Richard Horton asking Casswell's group for an oped on how great it is to tax alcohol, tobacco and sugar.

Much of the rest of the article is Casswell and Beaglehole opining on sugar, and how it's terrible that a company might have a corporate affairs rep that might ever oppose them.

Shouldn't we have expected the story to mention, somewhere, that the Ministry of Health, and the report it commissioned, found against sugar taxes? And that the Lancet piece was in their opeds section?

Friday, 15 June 2018

Australia really sucked in the 70s

Frances Woolley points to Barbara Spencer's Address to the Canadian Women Economist's Network lunch at the 2002 Canadian Economic Association meetings. I hadn't read it before.

Some less-than-fun features of Oz through the early 1970s to which Spencer points:
  • Until 1966, any woman in the public service who married had to resign, unless she were a secretary and could join the typing pool;
  • Women in the public service, until 1969, were required to be on lower pay;
  • It took until 1972 for regulations restricting women's advancement in the public service to be removed;
  • Scholarships for teachers at ANU were very generous, but bonded: graduates had to go and teach in remote places for five years after graduation, unless they got married. Unsurprisingly, almost all of them got married just after completing their degrees. 
  • CSIRO, the Commonwealth Scientific Research Organisation, blocked female appointments because their scientists had to go out on field expeditions, and they didn't have toileting facilities in the field that CSIRO considered adequate for women. So while they didn't ban female appointments, all appointees had to be able to go out on field expeditions, and women were not allowed on field expeditions. This was apparently endemic through the mid-70s in sciences. 
    "A friend, who is currently a professor at the ANU in Social Welfare, was told in about 1974 by the career guidance councillor at her high school in Canberra not to do science because of the lack of appropriate bathroom facilities."
But there are also some excellent fun observations about Winnipeg and the University of Manitoba.
I knew very little about Canada except that it was rumoured to be cold and that it produced lots of logs and beavers. Arriving at Winnipeg just before Christmas in 1969 was a shock. It was so cold and desolate looking that I thought I had arrived on the moon by mistake. I had no boots, only sandals, and my feet nearly got frostbite as I got off the plane at 30 below zero on the open tarmac.

However, it may surprise you that over my years in Winnipeg, I gradually grew to appreciate the stark beauty in flatness and endless white. I remember going out into the country side and realizing that the white snowy ground stretches, basically unchanged, for hundreds of miles. I never grew to appreciate the cold.
I was an undergraduate at Manitoba, doing a double-honours in Economics and Politics, 1994-1998. The economics faculty baffled me. But there's a long history there - and one that a farm kid going to the local university would never know.

Here's how Spencer found it in the 70s.
I arrived at Manitoba with a job as a part time lecturer in the Economics Department, starting January 1970. For my first course, I took over Principles of Economics from Cy Gonick, a well known Marxist or New Left economist, as he called himself, who had recently been elected to the Legislature as part of the NDP sweep into power. Taking over from Cy Gonick was a memorable experience. His version of microeconomic theory had mostly been a diatribe against the role of U.S. multinational corporations in suppressing Canadian independence. Most of the students were taking the course solely because Cy Gonick was teaching it, including a group of about 10 Maoists, who were there to heckle him. Cy neglected to tell the students that he would not be teaching in the second term and, in addition, he promised that there would be no final examination, something that was contrary to the rules of the University. Not surprisingly, the students were quite upset and angry when they learned that I would be teaching the macroeconomics part of the course and that I would make heavy use of algebra, which would be tested on the exam. Despite being given a half eaten apple as a present by a student and no doubt receiving dreadful teaching evaluations, somehow I survived and was actually rehired by the then Chair, Clarence Barber, to teach Mathematical Economics and Intermediate Microeconomics the next year.
I remember a John Loxley seminar on the Multilateral Agreement on Investment that was very much in the Gonick tradition. 
I returned to Manitoba in January 1979 to find it in turmoil, with Cy Gonick, the leader of the left wing faction, newly appointed as Head and many of the faculty attempting to move the location of their offices to Colleges on campus, as far from the main department as possible. I did manage to get promoted to Associate Professor that year, but it was obvious that I had to leave. 
Departments that get themselves into this kind of mess do such a terrible disservice to their students. Maybe you can do that at a small teaching university somewhere, where everyone applying to the place is applying to go there because they want to see Maoists fighting Marxists and want to be right at the heart of debates within a fringe part of the discipline. But pulling this crap in the economics department at the province's flagship university - it isn't right.

Thursday, 14 June 2018

Gotta adjust for population

I know it's tempting if you want to run a scare story on how bad something is to just run totals over time and to ignore population growth.

But it's pretty poor practice.

Here's a piece over in Stuff. It's got the headline "New Zealand: Where alcohol is normalised - and that means more drinking". It doesn't have a by-line, presumably because the author is too ashamed to admit to writing it.

If you want to say more drinking, you either need to compare it to other places, or over time.

The piece has this chart on alcohol availability from Figure NZ. It gives total alcohol consumption, by quarter, from 2012 Q4 through 2017Q4.

It looks like this.

Now I don't know why they didn't go through March quarter 2018. That data's now up. Maybe Figure had an easy-to-find one that had that time range. Who knows. But that's the more minor problem. The more major one is that we've had substantial population growth since 2012.

So you'd find an upward track in total consumption of most stuff in New Zealand. More people means more consumption. Except this total track is pretty flat. I bet that means decreasing per capita consumption. Well, it's a sucker-bet because I know the data. 

Here's what the per capita data looks like, out of Infoshare, using population aged 18+ as denominator. 

Whatever hypothesis they're trying to run about normalisation leading to more drinking has to contend with the substantial decline in per capita alcohol availability since liberalisation with the 1989 Sale of Liquor Act. There was a mild rise through 2010, then it came back down again. I suppose you could base predictions of another increase on mean reversion or something 

And we're low to middling in the international per-cap consumption stats too. 9-ish litres per capita is around the middle of the OECD tables. If you want to look at overall global tables, maybe don't rank us against countries in the mid-east that will cut your head off for drinking. 

And I don't think this is just the web-person at Stuff chucking in some pretty(ish) charts. From the article: 
And alcohol sales continue to rise. In the 12 months to March, they reached $1.6 billion - a $200 million increase from last year, Statistics New Zealand figures showed.
Sales, in dollar terms, can go up for all kinds of reasons. You can spend more while drinking less by shifting up-market. You can have an increasing total dollar spend just with more people being here - and more tourists rolling through and drinking as they go. Or you could have actual increases in per capita alcohol consumption accompanied by increasing expenditure. You need to check the volume per capita stats, not the total expenditure stats. 

The article takes the latest SHORE work by Huckle as hook.
Boozing has become normalised in New Zealand, and that means it's likely we'll drink more - and at higher risk levels, new research says.

One of the study's authors, Massey University's Docter Taisia Huckle, said: "What does normalisation look like? It looks like New Zealand.

"We have a situation where alcohol is completely normalised in society, through advertising, marketing and availability, alcohol is reasonably priced."

School children could walk past three liquor outlets on the way to school or see advertising on social media, she said.

We're a high-income country - and that means our drinking frequency is higher than middle-income nations, according to the researchers, who studied drinking patterns across 10 nations in a report published on Thursday in the journal Drug and Alcohol Review.
Ok. SHORE and Huckle have a couple pieces in Drug & Alcohol Review.

The first one is survey work asking drinkers where they purchase their alcohol, at what time they purchase it, how long it would take them to obtain alcohol and, if under-aged, how often they're asked for ID and get served. It doesn't say anything about normalisation. It does show that New Zealand kids are the most likely to report being asked for ID out of the set of places surveyed, and are third least-likely to report being served alcohol. 

I don't get the link to normalisation in any of this. The article's Table 1 reports the "percentages of drinkers purchasing alcohol at an on-premise or take-away outlets across countries at least once in the last 6 months", but we have no clue about baseline proportion of drinkers - the table just says that Kiwi drinkers are a bit less likely than Oz drinkers to buy at pubs, more likely to buy at duty-free shops and at the cinema, and more likely to buy at clubs and restaurants. For a normalisation argument, wouldn't you need to show increasing proportions of people at different venues who consume alcohol there, rather than the venue choices among current drinkers?

The second one is more survey work comparing Oz, England, Scotland, Thailand, Peru, Vietnam and NZ. 

Table 1 shows that NZ has the smallest proportion of heavier drinkers, the second-highest proportion of low-risk drinkers (Peru has 74% low risk, NZ has 62% low risk) and the second-lowest proportion of higher-risk drinkers (Peru has 2% higher risk, NZ has 15%). I also don't see anything in there about normalisation. 

Upshot:
  • Always run a population correction for this kind of thing. It's absurd to point to total spending on something or total consumption of something as being a bad thing, unless that thing is bad in a total way. Total carbon dioxide emissions can go up despite drops in per capita emissions (say) and that would be bad because the harm comes from the total. Alcohol isn't like that.
  • The research forming the hook doesn't really say anything about normalisation, and instead shows NZ to have less high risk drinking and more low risk drinking than Australia, England, Scotland, Thailand, and Vietnam - but not Peru. 
  • I expect the journalist didn't sign the article out of embarrassment, and is right to feel shame. 

Blowing a gaping hole in the Asylum Wall

America's civil asset forfeiture regime has led to evil. Because police there get to keep a good chunk of what they seize, some local governments have allowed their police to fund themselves by stealing from people. I am not exaggerating

New Zealand brought in civil asset forfeiture in 2009. It is not good. But it is not as bad as America's.

I wrote in last year's Outside of the Asylum essay:
Incentives in New Zealand are not nearly as perverse as in America. Police here do not directly profit from asset seizures. But they can apply to the pool of funds established by seizures. In 2016, Prime Minister John Key gave millions to anti-meth efforts from seized assets.

If the seized proceeds of crime are not used to compensate victims, those proceeds should be part of general government revenues. If police drug enforcement activities become self-financing because of asset forfeiture, police attention may plausibly shift towards drug crime – at the expense of less profitable lines of policing.
But it's worse than I'd thought then. I did not know that National had set police a KPI for gang asset seizures of $400m by 2021. And Stuart Nash has just increased that target to $500m.
A Cabinet paper seen by Stuff shows Police Minister Stuart Nash and Police Commissioner Mike Bush have set four new "high-level outcome targets", while also retaining most of the previous government's nine performance targets at an operational level.

The targets include $500m in cash and assets seized from gangs and criminals by 2021.

Nash said a small number of key targets would help focus police on priority areas, and since taking on the job, he has been clear about his plan to focus on gang-related crime.
KPIs on seizures can provide similar bad incentives for police, depending on what the rewards and penalties are for hitting those KPIs.

Here's the snapshot of the Cabinet paper from Stuff.


Asset seizures should never ever ever be a KPI target. At best they could be an intermediate target towards some actual KPI of, say, reducing overall criminal activity. But targeting it directly seems an exceptionally bad idea.

In case it is less than obvious why it is an exceptionally bad idea, here are some examples.

  • If gangs own less than $500m in total assets, the police have strong incentive to deem more people as being gang-affiliated so that they can steal more stuff from them. The same holds true regardless of how much gang-affiliated people own. What matters is how easy it is to seize assets from different people, and how easy it is to claim that those people are gang-affiliated. 
  • It encourages seizing the easiest-to-seize stuff, which may not be the assets that are either most directly tied to actual criminal activity or the assets most critical to continued criminal activity;
  • Police always have choices about how to spend their time. Those choices depend on the KPIs. Should police be prioritising work leading to potential seizures over other work? Shouldn't they be instead trying to minimise the overall burden of crime, and figuring out what measures work best toward those ends?
As a general rule, whenever NoRightTurn and I agree that a policy is terrible, we should have a joint veto on it. 

Krueger!


I don't know if I can make it down for the talk, but if you're able to get to Christchurch, go!!

Here's the blurb. The talk is Wednesday, 18 July, 5.30 - 6.30.
Many policy makers and academics claim that changes in the global economy make the obstacles to rapid growth of poor countries even more challenging than it was a half century ago. They cite technological change, with emphasis on automation and IT replacements of both unskilled and middle income jobs, and on the emergence of China as a formidable competitor as major reasons.

In this lecture, I shall argue that while the future is never entirely foreseeable, there are a number of considerations that point to greater ease of development now than in the past. These include: the diminishing rate of increase in populations in most low income countries; the fact that much more is understood now (albeit still imperfectly) about development (and especially how not to achieve it); that global markets are much larger; and obtaining information of all kinds is much easier.

There are also some technological advances that make development easier: mobile phones; continuing discoveries of improved technology in agriculture; advances in materials sciences; and so on.

This does not mean that development is easy. Mistakes can still be made.  There is no avoiding the need to improve health and education and bring rural residents into more productive jobs outside farming. Competitive conditions in the world economy make the adoption of an appropriate set of economic policies even more critical than it was in earlier years. Temptations to resort to excessively expansionary fiscal and monetary policies are still attractive to politicians.

Nonetheless, as the lessons from past experience are learned, those policy makers sufficiently committed to sustainable and rapid growth will be able to achieve results on a par, or better than, those that took place in the past.
Unfortunately, the Canterbury promo page says nothing about Krueger. Sure, she's self-recommending - but unless you follow econ, you wouldn't know it.

In a better world, Krueger would have received a Nobel for rent-seeking along with Gordon Tullock sometime in the 90s or early 2000s. They independently discovered the phenomenon. Tullock was first, but wasn't able to get his article on it in any journal higher than the Western (1967). Krueger gave it the catchy name, and had some data from India, and published it in the AER in '74.

She's also done great work on trade.

But her positions at the World Bank and at the IMF (in some views) were seen as a hindrance: a Nobel might then be taken as endorsement for whatever either of those organisations were then up to. Plus, awarding her a prize for rent-seeking without Tullock would have been impossible while Tullock was alive - the 1986 award to Buchanan without Tullock was bad enough. And the Swedish Academy (at least back then) demanded appropriate obeisances be paid by prospective nominees - and Tullock don't play that.

Anyway, it would be a great year for a Krueger prize - and especially as corporate America turns to lobbying Trump for special favours. Rent-seeking's back again!

Wednesday, 13 June 2018

Telling the truth about supply management

Maxime Bernier, who narrowly lost the Canadian Conservative Party leadership, has released the supply management chapter of his eventually forthcoming book on Canadian politics. 

It is excellent.

The laying out of the problems in supply management is, or should be, old hat to anybody who's been paying attention. But you almost never hear it from a Canadian politician.

But the politics - oh my. Bernier explains how the dairy cartel bought the Conservative leadership through its rotten-member structure. In short, anybody can sign up as a Conservative member the day before the leadership ballot and cast a vote. And so a cartel can run a whip-round, sign up ten thousand paper members, and tip the race.
During the final months of the campaign, as polls indicated that I had a real chance of becoming the next leader, opposition from the supply management lobby gathered speed. Radio-Canada reported on dairy farmers who were busy selling Conservative Party memberships across Quebec.33 A Facebook page called Les amis de la gestion de l’offre et des régions (Friends of supply management and regions) was set up and had gathered more than 10,500 members by early May. As members started receiving their ballots by mail from the party, its creator, Jacques Roy, asked them to vote for Andrew Scheer.34

Andrew, along with several other candidates, was then busy touring Quebec’s agricultural belt, including my own riding of Beauce, to pick up support from these fake Conservatives, only interested in blocking my candidacy and protecting their privileges. Interestingly, one year later, most of them have not renewed their memberships and are not members of the party anymore. During these last
months of the campaign, the number of members in Quebec had increased considerably, from about 6,000 to more than 16,000. In April 2018, according to my estimates, we are down to about 6,000 again.

A few days after the vote, Éric Grenier, a political analyst at the CBC, calculated that if only 66 voters in a few key ridings had voted differently, I could have won.35 The points system, by which every riding in the country represented 100 points regardless of the number of members they had, gave outsized importance in the vote to a handful of ridings with few members. Of course, a lot more than 66 supply management farmers voted, likely thousands of them in Quebec, Ontario, and the other provinces. I even lost my riding of Beauce by 51% to 49%, the same proportion as the national vote.

At the annual press gallery dinner in Ottawa a few days after the vote, a gala where personalities make fun of political events of the past year, Andrew was said to have gotten the most laughs when he declared: “I certainly don’t owe my leadership victory to anybody…”, stopping in mid-sentence to take a swig of 2% milk from the carton. “It’s a high quality drink and it’s affordable too.”36 Of course, it was so funny because everybody in the room knew that was precisely why he got elected. He did what he thought he had to do to get the most votes, and that is fair game in a democratic system. But this also helps explain why so many people are so cynical about politics, and with good reason. 
Bernier lost his shadow cabinet position for releasing the chapter. You should read it if you want a feel for Canada's politics.

If Canadian citizens resident abroad are allowed to take up a Tory membership in the next leadership campaign, and if Bernier is running again....