Tuesday 22 February 2022

The Monetary Policy Committee

The Reserve Bank seems actively hostile towards actual expertise in monetary policy. 

Dennis Wesselbaum and I polled NZ's macroeconomists about who should be appointed to the Monetary Policy Committee. The respondents said reappoint Bob Buckle. 13th down the queue was reappointing Peter Harris.

The Bank today announced the MPC.

Buckle has been reappointed. 

But so has Peter Harris.

Karen Silk has been appointed to a five-year term as an internal member of the Committee. She has a B.Comm in marketing and accounting. 

In the tagline on my Herald piece, I said I was unqualified to be on the MPC because I'm a microeconomist. But at least I got a full pass on my macro prelims two decades ago - which is an awful lot more than some of the folks on the committee. 

It'll be fun to see where this all leads. 

Friday 18 February 2022

Pooled failure

I called this one in January, and I think I was the first one in NZ to write about it.

The country’s Covid testing system is likely to fall apart, quickly, when case numbers rise.

Testing labs can bundle five to ten samples together for testing. If none are positive, all is fine.

If the pooled sample is positive, individual samples need separate re-testing. When positivity rates are low, the system works well. But when positivity rates are high, pooled sampling stops working. Testing capacity drops to a small fraction of what it had been, just when it is most needed.

Headline figures on testing capacity may be more than a little optimistic. Contracting now for greater capacity, focusing on the saliva-based PCR testing (which identifies genetic material from the virus) that catches Omicron cases earlier, matters.

Today's NZ Herald:

Earlier this week, director general of health Dr Ashley Bloomfield said the seven-day testing average was sitting at around 22,000 or 23,000 per day.

Bloomfield said daily PCR test capacity could be surged up to 60,000 to 70,000 – but also noted that, in the outbreak's centre of Auckland, the present capacity was only 20,000.

Even with local positivity rates of 3 to 5 per cent, Auckland labs weren't able to pool samples, which reduced capacity.

Without being able to pool samples, Bloomfield said national capacity would be around 30,000 samples per day.

It wasn't clear what extra impact a just-announced strike of 10,000 DHB staff - laboratory workers among them - would have.

Prognostication's a curse. You can see the train wreck coming, you can shout about it, but you just can't convince an utterly useless government to do a damned thing about it. 

Bit of a shame that the Herald piece didn't mention that all of this was entirely predictable, was predicted, and could have been avoided by contracting for more capacity with a testing lab that wasn't running pooled samples. 

If it comes to a strike, Bloomfield and Hipkins will do the predictable thing. 

They'll throw their hands up about how none of it is their fault. They'll forget that they could have contracted with more than one supplier for testing. Instead of running everything through a single point of failure, APHG, they could have contracted with Rako, which uses different labs.

At what point is MoH criminally negligent?

Thursday 17 February 2022

For a better Monetary Policy Committee

The terms of two of the three external members of the Monetary Policy Committee are due for renewal this year. 

My column in yesterday's New Zealand Herald (ungated here) suggests that the Board of the Reserve Bank of New Zealand might want to make sure that subject experts are welcomed, this time through.

A snippet:

In 2019, the Bank appointed its first Monetary Policy Committee. Previously, decisions were made by the Governor. The move to a committee structure made sense. Appointments to the Committee are made by the Minister of Finance on the recommendation of the Board of the Reserve Bank.

But Treasury warned at the time that the Bank’s view on conflicts of interest could have some strange effects. The Bank viewed an active research interest in monetary policy or macroeconomics as being a conflict of interest. That view meant that every serious macroeconomist and monetary policy specialist working at the country’s universities was excluded from consideration.

It was a bizarre view.

The United States Federal Reserve has some of the country’s most eminent macroeconomic researchers helping in setting monetary policy. The RBNZ considered them to be too conflicted to be appointed.

Monetary policy, to the standard necessary for high stakes monetary policy decisions, is a highly specialised discipline. Even a doctorate in economics is not sufficient on its own. Macroeconomics is its own specialised field. Few microeconomists are able to stay current in the latest research in macroeconomics. And macroeconomics has its own specialised domains.

Being able to keep up to date with the latest research papers in macroeconomics and monetary policy requires staying on top of the latest methods. It requires people who are active in the field.

The Committee currently includes three Reserve Bank officials: Governor Adrian Orr, Deputy Governor Christian Hawkesby, and outgoing Chief Economist Yuong Ha.

It also includes three external members, the terms of two of which come due this year.

Treasury recommended that, “in future appointments to the MPC, looser criteria could be adopted that would allow for a broader field of potential nominees from the Board, if desired.”

It seems a good idea.

Dennis Wesselbaum and I surveyed the country's academic macroeconomists and asked them to rank-order each other for the impending vacancies; the two MPC members whose terms are coming due were also surveyed. Our response rate was a bit less than half; not too bad. I set each candidate in a pairwise race against each other candidate in a Condorcet process. 

Bob Buckle lost to no one. Good pick for a reappointment, if he'd be willing to serve. 

Arthur Grimes, John McDermott, Prasanna Gai, Viv Hall, Dennis Wesselbaum and Mark Holmes came in next. 

Peter Harris came in 13th, losing a pairwise contest to each of Bob Buckle, Arthur Grimes, John McDermott, Prasanna Gai, Viv Hall, Dennis Wesselbaum, Mark Holmes, and five others.

Good appointments will matter where there are worries about in-house capabilities. 

Wednesday 16 February 2022

Broken Data Pipes

This week's column in Newsroom went through the burst data pipe at Statistics New Zealand. NZ.Stat was shut down, abruptly, on 4 February. It's the only way of accessing some core statistics, other than the interim measure now in place of filling in a form and waiting for someone to send you the spreadsheet you were after.

It's the culmination of years of neglect of core systems. 

A few of us are looking at setting up an external mirror of Infoshare, in case SNZ decides they have to kill that even-more-archaic system too. 

After the front fell off of NZ.Stat, one informed data analyst, David Friggens, reported that the system was running on software that was five versions out of date. NZ.Stat is built on OECD.Stat. The Australian Bureau of Statistics, by his report, has version 9 of OECD.Stat in beta. And while Statistics NZ had recently started a project to upgrade to Version 10, the version of NZ.Stat that failed was Version 5.

I asked Statistics NZ whether Friggens was correct. Statistics NZ confirmed, via email, that they have been running “a legacy version of OECD.Stat software, with a project underway to upgrade this”, but did not specify which version had been in use.

To its credit, Statistics NZ had recognised some of the risk it faced. The Agency’s Statement of Strategic Intentions 2021-25 set workstreams aimed at ensuring “core information technology systems are at less risk of failing”. It sought to “identify risks to core systems and track the effectiveness of mitigating actions to ensure the stability of these systems.”

Unfortunately, it came a bit too late.

For years Statistics NZ has, like the proverbial local government, chased after shiny new objectives while largely ignoring the critical infrastructure that is necessary to keep the whole ship running.

The problem is not just budgets.

The problem is also priorities. 

Friday 11 February 2022

Afternoon roundup

The afternoon's closing of the browser tabs:

Monday 7 February 2022

The Spirit of Service

Public Service Commissioner Peter Hughes has already told off Kate Hawkesby for criticising his Director General of Health

I wonder what admonishment he'll provide Thomas Coughlan for this piece.

The Ministry of Health has backtracked on a claim by director general of health Dr Ashley Bloomfield that tests requisitioned from private businesses were not already in New Zealand when the Ministry took them.

Last month, when news broke that the Ministry was requisitioning tests ordered by private companies for its own stocks, Bloomfield said private and public orders of the tests were being "consolidated" into one order for the Government.

Bloomfield twice assured the public that tests taken by the Ministry were "forward orders" from overseas, not tests already in New Zealand.

"Many businesses already have tests onshore and we're not requisitioning those or doing anything like that," Bloomfield said.

This was only partly correct. While tests from one of the manufacturers, Abbott, were not being requisitioned, tests from another manufacturer, Roche, very much were.

He added, "we have discussed with our three main suppliers which are Abbott, Roche and Siemens, that forward orders of tests that haven't arrived in the country be consolidated into the Government's stock so that it is there for the whole country including private businesses".

While no stocks of Abbott tests that are already in the country have been requisitioned, a substantial stock of Roche tests have been, a fact the Ministry now admits.


 Instead of answering what had happened to the missing Roche tests, Bloomfield answered questions relating to Abbott tests - tests which no one had reported as being stolen.

Bloomfield used the press conference to allege that the requisitioning of testing stock had only begun as recently as Sunday, January 23.

"The conversation I had which was Sunday morning with Abbott when we were discussing our forward orders and trying to get as much certainty as possible about how much of those forward orders would be delivered and the timing of those orders between now and February," Bloomfield said.

"During that conversation I was asked about the orders that other New Zealand-based companies had and I was asked about whether they should prioritise delivery to that All-of-Government order," Bloomfield said.

So the government stole consolidated a pile of private companies' orders of Roche RATs, then Bloomfield either obfuscated or lied about it from the Podium of Truth. 

Not the best as we move into the next phase of the pandemic. Having a public service that provides demonstrable falsehoods from the public health lectern may not be the best way of keeping everyone on-side with necessary public health measures. 

The rorts to come

It is just too easy to think up potential rorts under the government's proposed Unemployment Insurance scheme. 

This week's column in the Stuff papers:

Or consider maternity benefits.

Parental leave provides payments of up to $621.76 per week. But if a parent-to-be were to be made redundant, just consider the benefits for those on higher incomes!

Rather than see their pay drop to a meagre $621.76 per week, they could receive up to about $2000 per week – if they earned $130,000 or more before taking parental redundancy.

It really is brilliant. Labour has come up with a mechanism ensuring higher-earning women face fewer costs when having children, while doing fairly little for women on lower wages.

If a right-wing government had come up with the scheme, it would be accused of doing it deliberately, and possibly with eugenic intentions.

What employer would be so mean as to decline their employee’s request to be made redundant before the birth of their child?

And while parental leave is only available to one parent at a time, both parents in a two-income family could take redundancy. They could enjoy a full year with one parent at home with the new baby, or six months of family togetherness. On an “insurance” payment.

The only tragedy in the scheme is that it was not available when we had our children. Alas.

Read the whole thing. If you can come up with better and more interesting rorts, list 'em in the comments. Or keep them to yourself until the government uses its majority to pass this mess, then try them out. 

Update: On thinking on this more, and chatting with a few people about it, I wonder whether one of the big problems here is civil servants just not understanding the difference between an adversarial kind of employment law case and a collusive one. If an employer makes someone redundant, the employee will have incentive to take it to court if the employer has done so improperly. If an employer and employee collude to make an employee redundant, providing a 28-day golden handshake instead of going through a costly employment process (and a further several months on the government's dime), that's fundamentally different. 

Thursday 3 February 2022

Spider Robinson as prophet

Under sane versions of copyright, it was considered homage. Musicians would grab snippets of each others' work and play with them, building new interpretations. 

That's harder nowadays. And it's being counted among the reasons that new music just isn't as interesting any longer.

In the olden days, talent scouts spent many late nights in smokey bars looking for new acts, wooing them, signing them, and then shepherding them through their first recordings. Such record people still exist, but there are precious few of them. Instead, labels employ people to troll YouTube, Instagram, and TikTok, looking for trends.

Acts still send in demos directly to labels, but some are wary of listening to them. What if another act on the label writes a song that happens to have sonic similarities to something on one of those demos? There have been a number of legal actions where an artist who sent in the demo claims that their song was subsequently stolen by an act already on the label. Perhaps it’s best not to listen to any demos in order to maintain plausible deniability. How many great talents are being missed because no one listened to the music they sent to a label?

I keep being reminded of Spider Robinson's warning forty years ago about the perils of infinite copyright, and automated searches that prevent melodies from being remixed and recycled:

She paused to gather her thoughts, sipped her juice. A part of her mind noted that it harmonized with the recurrent cinnamon motif of Bulachevski's scent-symphony, which was still in progress.

"Artists have been deluding themselves for centuries with the notion that they create. In fact they do nothing of the sort. They discover. Inherent in the nature of reality are a number of combinations of musical tones that will be perceived as pleasing by a human central nervous system. For millennia we have been discovering them, implicit in the universe—and telling ourselves that we `created' them. To create implies infinite possibility, to discover implies finite possibility. As a species I think we will react poorly to having our noses rubbed in the fact that we are discoverers and not creators."

She stopped speaking and sat very straight. Unaccountably her feet hurt. She closed her eyes, and continued speaking.

"My husband wrote a song for me, on the occasion of our fortieth wedding anniversary. It was our love in music, unique and special and intimate, the most beautiful melody I ever heard in my live. It made him so happy to have written it. Of his last ten compositions he had burned five for being derivative, and the others had all failed copyright clearance. But this was fresh, special—he joked that my love for him had inspired him. The next day he submitted it for clearance, and learned that it had been a popular air during his early childhood, and had already been unsuccessfully submitted fourteen times since its original registration. A week later he burned all his manuscripts and working tapes and killed himself."

She was silent for a long time, and the senator did not speak.

" `Ars longa, vita brevis est,' " she said at last. "There's been comfort of a kind in that for thousands of years. But art is long, not infinite. `The Magic goes away.' One day we will use it up—unless we can learn to recycle it like any other finite resource." Her voice gained strength. "Senator, that bill has to fail, if I have to take you on to do it. Perhaps I can't win—but I'm going to fight you! A copyright must not be allowed to last more than fifty years—after which it should be flushed from the memory banks of the Copyright Office. We need selective voluntary amnesia if Discoverers of Art are to continue to work without psychic damage. Fact should be remembered—but dreams?" She shivered. ". . . Dreams should be forgotten when we wake. Or one day we will find ourselves unable to sleep. Given eight billion artists with effective working lifetimes in excess of a century, we can no longer allow individuals to own their discoveries in perpetuity. We must do it the way the human race did it for a million years—by forgetting, and rediscovering. Because one day the infinite number of monkeys will have nothing else to write except the complete works of Shakespeare. And they would probably rather not know that when it happens."

I hate that New Zealand is signing on for longer copyright terms as price of a trade deal with the UK. 

But I love this story. Casio bundled some pre-set beats into its MT-40, back in 1981, and didn't encumber them. They increased the value of the keyboards. Pay for the keyboard, use the tunes. And it helped kickstart Jamaican dancehall reggae music. 

Today, 35 years after the original song was released, the conventional version of reggae history holds that the “father” of the riddim was Wayne Smith and his producer at the Jammy’s label in Jamaica. In fact, the history of the riddim goes back further than Smith and his collaborators. It was originally a preset rhythm pattern programmed into the Casiotone MT-40, released in 1981. It was this preset that Smith and his friends used as the basic building block for their revolutionary song.

Really, read the whole thing. Excellent piece. 

Nobody needed to ask anyone's permission. They just made music.  

Casio rocks:

Some people thought that Okuda and Casio should sue for infringement of their copyright. But the company believed it was more important for people to use the keyboards in their music and create a reputation for the Casiotone keyboards around the world. Okuda wanted people to use the Casiotone to create music and hoped the keyboards would make it easier for people around the world to make their own recordings. Even today, musicians and record company representatives sometimes discover that the Sleng Teng riddim was originally an MT-40 preset and contact Casio for permission to use the file. The reply is always that the preset bassline is free for anyone to use: just credit the source and acknowledge that the tune “uses a sound file taken from a Casio MT-40.”

Wednesday 2 February 2022

Afternoon roundup

The afternoon's worthies:

Stealing tests

My column in last week's Insights Newsletter

Punishing Prudence

Prudence is a virtue. Aristotle considered it among the nine most important. Economist Dierdre McCloskey considered it the lead virtue in a commercial society.

Punishing prudence is not a good idea. It undermines the ethical underpinnings of a free society.

On Wednesday, the New Zealand Government decided prudence is a vice to be punished rather than a virtue to be celebrated.

I spent the summer as a visiting Erskine Fellow with the Economics Department at Canterbury, my old home turf. The Department wanted me to help teach Masters students about economic writing.

McCloskey’s “Economical Writing” is unsurpassed, so I spent a bit of time re-reading her.

Two decades ago, McCloskey started work on what she called the Bourgeois Virtues.

A free society needs more than the incentives provided by the rule of law and the discipline of profit and loss. Both are underpinned by and help to reinforce a set of virtues – prudence chief among them. The prudence to buy low and sell high. And the prudence “to trade rather than invade, to calculate the consequences, to pursue the good with competence.”

Prudence matters.

For the past two years, prudence required preparation for inevitable Covid outbreaks.

Business operations during outbreaks overseas required regular staff testing. Businesses here tried importing Rapid Antigen Tests, so they could be prepared. Prudent.

The Ministry of Health had banned the tests in April 2020.

Rapid tests could have complemented more-accurate PCR tests during lockdowns. Workplaces could have used them between PCR tests.

The Ministry of Health would have none of it.

But MBIE proved more accommodating. After months of frustrating work, businesses were finally allowed to start ordering rapid test kits.

On Wednesday, the Government provided the prudent with their reward.

It ‘consolidated’ their tests.

The government had been imprudently late in ordering the tests that it ultimately decided were needed for the public health effort.

But no matter. The government had set itself a call option. It could simply take the results of others’ prudential efforts.

When the prudent expect predation, expect less prudence. Expect as well that many businesses will have cancelled remaining test kit orders rather than wait for them to be stolen by a predatory state.

McCloskey emphasised the prudence of trading rather than invading and stealing; of calculating the consequences of actions; and of pursuing the good with competence.

It is hard to see much evidence of prudence in this government. Prudent and imprudent alike will bear the cost.

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Tuesday 1 February 2022

Good on Kiri

Minister Kiri Allan stomped on this when she found out about it. Good.

But what does it tell us about what our public sector thinks is important?

Do you feel "part of the web of life", asked a Department of Conservation survey that was meant to track the effectiveness of some $500 million of spending through a make-work scheme. The survey, which has since been dropped, asked workers a range of disjointed, personal questions that ranged from gauging their connectedness to the earth to estimating how safe they felt making online transactions.

In many cases, participants were asked how much they agreed or disagreed with a range of statements. Questions which focused on the natural world asked participants to consider their feelings about statements including:

• "I feel as though I belong to the Earth as equally as it belongs to me."

• "Like a tree can be part of a forest, I feel embedded within the broader natural world."

• "I often feel part of the web of life."

• "I feel that all inhabitants of Earth, human, and nonhuman, share a common 'life force."

As far as the public service was concerned, these were important benefits of the enviro-jobs make-work project, undertaken in what turned out to be a labour shortage. 

It isn't some isolated thing. Remember how StatsNZ was treating this all a couple years ago.

The eventual public sector purge of this kind of woo, come a suitable change in government, will not be a small job.