Wednesday 31 January 2018

Rental rationing revisited

Sometimes, first-principles theorising gets you a long way. 

I'd written a couple of weeks ago on rental rationing: when rental housing markets clear by queuing rather than by prices. I'd suggested it was because landlords might be suspicious about high bidders being bad types, that landlords might like having a pool of applicants to select from when it's tough to monitor and police what actually goes on in the flat, and that non-price rationing would be more common where it's harder to kick out a bad tenant. I'd also suggested that tenants of the type that landlords were likely to prefer should make sure to send the signal.

That was all first-principles stuff. Here's some supporting anecdotes from yesterday's Dominion Post:
Some turn up to flat viewings in suits, others arrive with professionally designed rental CVs, all in the hope of standing out from the crowds that gather for flat viewings.

It's worth being careful with how much you offer - efforts to outbid other tenants could be a red flag, according to property manager Lydia Deakin, with such tenants often trying to hide a bad rental history, or expecting additional services because they are paying top dollar.

Jeffries said hopeful tenants should treat a viewing like a job interview by dressing well, and introducing themselves. ...

"It's also a good idea to create a cover letter explaining a little more about yourself and the other tenants."

Tuesday 30 January 2018

Inter-provincial rivalries

When I was at Canterbury, the mainlanders would joke about cutting the Cook Strait cable and letting the North Island float away so the North Islanders couldn't bother them any longer.

Interprovincial rivalries in Canada are a bit less jokey, given the crazy trade barriers between provinces and the barriers to labour mobility caused by provincial licensing schemes.

But this one is fun. The National Post's Tristin Hopper runs the "What if the Alberta/Saskatchewan cold trade war turns hot?" scenario.
Peace has returned to the Canadian prairies. After Saskatchewan suddenly banned Alberta license plates at provincial construction sites, an escalating interprovincial trade war has been averted at the 11th hour thanks to a climbdown by Regina.

Despite this welcome détente, what would happen if Saskatchewan and Alberta ever reach a future impasse so great that it led to armed conflict?

The notion is too horrible to consider: Brother against brother, Lloydminster divided, countless great works of Saskatchewan architecture destroyed by shellfire. Nevertheless, below is our embarrassingly thorough assessment of what The Great Prairie War might look like.
Read the whole thing; it's pretty comprehensive. Alberta takes the Cold Lake CF-18s; Saskatchewan's CT-144 trainers are no match. Saskatchewan's geography makes things simple for Albertan snipers, but presumably also makes it easier to see the incoming Albertan tanks. But the British Army training base in Ralston, Alberta could prove decisive.

Anyway, glad to be Outside the Asylum, where nobody could imagine banning an Otago tradie from working on an Auckland construction site. As they say, when goods don't cross borders, armies will. Canadian provincial protectionists take heed.

Monday 29 January 2018

Marijuana optimism

Here's former Prime Minister Helen Clark:
New Zealand's slow consideration of medical marijuana feels distinctly unambitious. Good to see our former Prime Minister pointing to this work; I'd expect the Labour caucus follows her on Twitter.

Liquor Vogons

An Italian-born restaurateur living in Wellington is upset the law is preventing him from continuing to offer Kiwis a little slice of his home.

Antonio Cacace​ owns two hospitality and grocer businesses in Wellington: La Bella Italia in Petone, which he opened 17 years ago, and Bel Mondo in Rongotai, which he opened in 2016.

Both his businesses were designed to offer an authentic Italian environment, allowing patrons to dine while sipping on a glass of wine, and then shop in the food store for Italian food and wine to take home afterwards.

However, when Cacace applied to renew his liquor licences last year, he was told he was operating outside of the law by holding an on-licence and off-licence under the same roof.
High end shop, good restaurant, not causing anybody any problems. Except the Vogons don't like that. Vogons like process for the sake of process, sitting on elegant and beautiful gazelle-like creatures on Vogsphere with the express purpose of snapping their backs, smashing beautiful jewel-backed scuttling crabs for the pleasure of killing things, and ruining perfectly good restaurant shops that aren't hurting anyone, precisely because they are beautiful.

It's amazing that a police department that makes so many noises about under-resourcing has so much time to lodge objections to liquor permits.
"Before the law, people, customers were trying something different, and if they liked it they could walk over to the shelf and buy the bottle," Cacace said.

"Now they can't do that anymore."

Wellington City Council spokesman Richard MacLean said the Sale and Supply of Alcohol Act had "some quite specific limitations about what a grocery store with an off-licence can and can't do".

"Running a cafe and a grocery store in a single operation didn't fit within those limitations.

"The end result was that in order for Bel Mondo to hold both an off-licence for the grocery business and an on-licence for the cafe, the two businesses needed to be physically separated and the takings from the two parts of the business to be kept separate," MacLean said.

"Antonio achieved this by placing permanent shelving to ensure that it isn't possible to move directly between the cafe and the grocery store."

When Bel Mondo applied to renew the grocery store off-licence, the licensing inspector and police raised concerns about how the two businesses had been separated, he said.

"[This included] whether the situation could be considered as a 'store within a store'. The application is still in progress."
Resistance is futile. 

HT: Louis Houlbrooke

Friday 26 January 2018

Reader mailbag: bureaucratic constraints edition

From the bowels of another Ministry comes this response to my wondering how a truth-seeking Minister might extract non-pandering advice from the Ministry:

  • Ministers typically work 14 hour plus a day, 6 to 7 days a week. My impression is that most are genuine in their beliefs but that is not the same as looking for the truth...
  • A typical meeting with a civil servant will be based on a paper or detailed presentation of the evidence, plus 5 to 10 minutes of discussion on a topic.
  • Minister spend most of their time talking to people with a special interest who will not hesitate to lie to them (it is difficult for those outside the system to conceive just how endemic various degrees of lying are to every conversation a politician has), so even the minister you describe will have to spend a lot of their time dealing with that context.
  • Further, every interaction is basically a bargaining situation. In bargaining the truth is usually not the most important constraint.
When you put this all together, what is miraculous is that there are any ministers in the scenario you describe! 
Given that, my correspondent suggests that, most of the time, putting effort into solid evidence is either pointless or potentially counterproductive as the Ministry may just be seen as another special interest group.

I think it's important regardless. Sure, a Minister might not be listening. But others might appreciate seeing an honest, non-pandering RIS.

And hoisted from the comments on that prior post, because Disqus isn't synching with the mobile version of the site:
"How can you credibly signal to your incredibly risk averse Ministry that you actually want frank advice?" Easy: this is a repeated game so you can go about it one play at a time. From day 1 I demand that my officials provide two competing sets of advice on every single matter. When they meet with me I listen respectfully to both presentations and ask questions that demonstrate that I'm engaging with the issues raised in both. After enough iterations have occurred to build some trust, I start asking people at the meeting directly what they think. To maintain the social capital I've earned, I'll have to be seen occasionally accepting, or at least seriously considering, an option that was known not to be my original preference. It's time consuming and takes effect, yes, but so does any job done properly. 

Thursday 25 January 2018

Recipe for Disaster

I didn't enjoy the Christchurch earthquakes. But at least as bad as the earthquakes were the depressing policy failures that followed. Policy moves stoked regime uncertainty and stymied recovery.

When I started in at the Initiative, I'd asked Oliver if we'd be able to take on earthquake policy as part of the deal. Wellington's earthquake-prone, and I wanted us to at least try to help make it less likely I'd have to live through another Christchurch-style policy mess if Wellington got its quake.

Jason Krupp started the work for us before he moved on to the Minister of Finance's office last year; Bryce Wilkinson and I finished things up. The report came out today. 

The biggest upshot: government needs to plan ahead for the next earthquake to avoid causing the kind of regime uncertainty that stymied recovery in Christchurch. 

If you set the legislative and governance framework now for a recovery agency, it won't have to be creating itself while dealing with earthquake recovery. 

If Councils look through their long-term plans now for things they'd want to have in place after a natural disaster, they won't have to put downtown recovery on hold for two years while figuring out zoning changes that have far less to do with geophysical changes than they do with just general urban planning - like Christchurch's precincts. And at the same time, if they identify bits in the city plan that would be really important to change after an earthquake, like Christchurch's absurd rule against secondary kitchens, those changes can be made automatically after a disaster rather than relying on frazzled Council staff to make the fixes. 

If government evaluates the trialed (and look-to-be-excellent) Kaikoura changes to EQC and formalises them for the next one, everybody will know who has which jobs after the next one, and EQC won't have to again try scaling up to run insurance assessments better handled by private insurers.

I'm an optimist. The current Labour-led government should have little need to defend the bad parts of the prior government's response to the earthquakes. And Labour MPs represent the parts of town that were hit hardest by policy failures around insurance. 

As I wrote in the NBR ($), this is one of those really important but not urgent policies that's too easily left on the backburner. It shouldn't be left there. 
Update: bit of fun. I liked Charlie Gates's attempt to cross Christchurch's downtown without hitting empty derelict sites. 

Wednesday 24 January 2018

Wealth inequality and Oxfam, again

Every year, Credit Suisse puts out its new databook measuring global wealth. And, like clockwork, Oxfam follows it up a few months later with calls to liquidate the wealthy.

Here follow some fun facts from the Credit Suisse report that provides the data that forms the basis for the Oxfam stuff.

At the end of 2000, New Zealand had 0.1 percent of the world's adults and 0.2% of the world's wealth. Mean wealth per Kiwi adult was USD $67,275; median Kiwi wealth was $30,078. By comparison, the global median wealth per adult in 2000 was $1,867.

By mid-2017, New Zealand still had only 0.1% of the world's adults but had managed to scrounge up 0.4% of the world's wealth: wealth per NZ adult rose to USD $337,441 and median wealth per adult rose to $147,593. Meanwhile, global median wealth per adult rose to $3,582.

Mean Kiwi wealth is five times higher than it was in 2000; median Kiwi wealth is 4.9 times higher. Global average wealth grew 1.8 times over the period and global median wealth grew 1.9 times.

Pretty clearly, Kiwis are doing something to steal wealth from the rest of the world. Because that's the only plausible reason that one person's wealth grows more quickly than another's, right? If Kiwis' wealth had kept pace with international norms, which are presumably fair, New Zealand's median wealth would be $57,750, not $147,593. The median Kiwi has almost $90,000 that should rightly have been shared around to poorer people internationally. And if mean wealth had tracked international norms, average wealth per adult would be about $120,000, not $337,000. Tracked across the 3.4 million adults in New Zealand, that's $735 billion dollars of unfair Kiwi wealth. The couple billionaires that are the focus of Oxfam's Five-Minutes Hate (NZ edition) have about eleven billion between them.

Okay, enough snark, though it is fun. Back to Credit Suisse.

NZ enjoyed the world's fourth highest percentage increase in total household wealth from 2016 to 2017, and the sixth highest in per-adult terms. In total, NZ households are $132 billion dollars richer than they were last year.

As for distribution, NZ's wealth gini is reported at 72.3. The median country's gini is 71 and the mean country's gini is 69.8. If you pull the pdf into an Excel table and sort by wealth gini... actually no. Here it is in a Google Sheet so you can check for yourself.

Anyway, New Zealand winds up being the 80th most unequal country in the world, or the 92nd most equal - on the Gini measure. Pretty middling. The world's most unequal country is Venezuela. After that, and in order, it's Kazakhstan, Egypt, Namibia, Ukraine, South Africa, United Arab Emirates, Bahrain, the US, the Bahamas, Hong Kong, and Thailand. Sweden is the 17th most unequal country on this measure. Germany is 42nd, followed by China at 43th. You have to go past Canada at 71st and the UK at 72nd and the Netherlands at 75th before you get to New Zealand at 80th most unequal.

And Myanmar, where 99.3% of the population has less than $10,000 USD in wealth, is the most equal, with a Gini of only 31.

The plot below is surely too small to read, but the hover-overs might work. If not, hit the link to the Google Sheet above.

New Zealand is a wealthy place. 1,971,000 adults have over USD $100,000 in wealth. Forget per capita stuff: that puts us, in sheer numbers, as having the 26th highest number of people with wealth over $100,000. We also have 201,000 people with more than USD $1,000,000 in wealth - a lot of Auckland houses, if owned mortgage-free, would put you in that tier. 

The wealth decile tables are even more interesting. They sort the world by wealth, split it into deciles. Then they report what fraction of the world's (say) bottom decile live in each country. New Zealand has only a tiny fraction of the world's population, but we have 0.1% of those living in the global bottom decile. Why? You can borrow money for education in New Zealand, resulting in negative measured wealth, making you less wealthy, on paper, than someone living debt free on $1.90 per day - and less wealthy than any newborn. At Table 6-5, we see that New Zealand's bottom decile's share of New Zealand's wealth is negative.

At Table 6-1, we find that New Zealand has 2.1 million people who are in the global Top 10%. And remember that their data's on New Zealand's 3.4 million adults.* So the median adult in New Zealand (again - half have more, half have less) is easily in the global Top 10% by wealth. And 301,000 are also in the Global Top 1%.

If we look at the fraction of wealth held by the top 1% in New Zealand, it shows up at 23.8%. Is that high? They provide that data for a set of 39 countries. Among that set, the fraction of wealth held by New Zealand's top 1% is the world's ninth lowest. The top 1% in New Zealand have a smaller fraction of national wealth than the top 1% in the UK, Spain, Canada, Greece, Romania, Korea, Norway, Finland, Germany, Ireland, Denmark, Singapore, Israel, the US, Poland, South Africa, Sweden, India and more. Did I say Sweden? Yes. Sweden's top 1% own 41.9% of Sweden's wealth.

If you look at the top 5% instead, New Zealand's got the 9th lowest again. If you shift to the share owned by the top 10%, New Zealand's 11th lowest out of 39; Sweden is second highest. 


  • Mean and median wealth in NZ, as reported in the Credit Suisse data, have increased considerably since 2000. One measure of inequality is the mean/median ratio. If the average increases by a lot more than the median, that suggests that the gains are disproportionately at the top. Here, it's almost rounding error between the two. The mean is 5 times higher than it was in 2000; the median is 4.9 times higher. It would be... odd... to look at that and conclude that all the gains are for the rich. If that were true, growth in median wealth would have been much smaller than the growth in average wealth. 
  • If you want to rail against Top 10%ers, well, the median Kiwi adult is in the global top 10%. 
  • New Zealand is very middle-of-the-road when it comes to global wealth inequality as measured by Gini. 
  • If you want to look instead at the proportion of wealth held by the top 1%, top 5%, or top 10%, New Zealand's rich have much smaller fractions of national wealth than do the rich in Canada, Finland, Norway, Germany, Denmark, and Sweden. Among the 39 countries assessed, New Zealand's rich have between the 9th and 11th smallest wealth shares. 
I suppose I'm glad that global poverty has declined so much that charities that used to spend their time trying to help the global poor now can spend their time doing this stuff instead. 

Oh, and do note all the caveats from previous iterations on this stuff (links below). A pile of what's going on for wealth measures winds up reflecting US dollar exchange rates. That won't affect wealth shares within countries but will affect measures of global inequality and measures like "This richest billionaire has as much wealth as the world's howevermany hundred million poorest people, including a pile of people with net debt due to student loans in rich countries and another pile of people outside of the US whose measured wealth dropped because the US exchange rate went up. That'll also affect the number of Kiwis making any year's iteration of the global Top Whatever Percent. 

* I'm pretty sure that they're using an adults denominator here rather than total population. But I can't guarantee it. If they're using total population, then the median Kiwi is just shy of the global top 10%.