Sugar tax

I was on the CBC's The 180 on Sunday, discussing sugar taxes, fat taxes and paternalism. The audio's at the CBC site.

While lots of people can point to expanding waistlines as something they find undesirable, just not liking how other people look isn't a sound basis for public policy.

To the extent that costs are borne by the public health system, it's not even obvious whether sugar-linked obesity increases or decreases overall health care costs: there's higher cost at every age, but earlier death. Which effect dominates really isn't clear.

Further, much of the effect is what economists call a transfer. Sure, there will be some effect on total consumption when the cost of the medical bill is externalised, but that's different from the costs of being unhealthy. Most of the costs of being unhealthy are borne by the person who's sick. Maybe you'll consume a bit less exercise and a bit more unhealthy stuff, at the margin, when your health insurance bill doesn't vary with your decisions, but you still have to live with the consequences. People would take less care when driving if their insurance premiums weren't affected by the number of speeding tickets they get, but they'd hardly start rolling their cars on purpose.

For the part of the effect that is due to changes in behaviour under a public health system, implementing a full tax-and-subsidy mechanism to make people behave as they would if they were under an insurance system winds up undoing much of the benefit of a public health system: it replicates insurance premiums, but at a higher administrative cost.

Finally, there's just something wrong with telling people not only that they have to be signed up for a compulsory insurance system that they might not want, but also that because they're signed up for it, they're going to be subject to a pile of taxes and subsidies and regulations to make sure that the overall system isn't too expensive.

And even if all of that could be swept aside, there isn't particularly good evidence that soda taxes even work. Instead, there's just substitution over to calories from non-soda drinks. A comprehensive, and very high, sugar tax would change behaviour. Tobacco taxes have reduced smoking considerably. But recall that, at least in New Zealand, you're paying $0.55 in tax per cigarette. If the average price of a pack of 20 cigarettes is about $17.20, then tax is 63% of the cost of a pack. A comprehensive tax on all sugars that resulted in a $0.50 increase in the cost of a can of Coke might also reduce sugar consumption. There's no particularly good reason for doing such a thing, or at least not one motivated in things other than your aesthetic preferences over how other people should behave, but that high a tax could have effects.

Paternalistic regulations on consumption are insulting. They're classist in application. When they're based on "costs through the public health system", they are unlimited in potential range. And when they're packaged up as "let's tax soda and subsidise healthy foods", you empower an army of rent-seekers to argue over the edge cases.

The value of outreach

I enjoyed the CBC's radio show, The Invisible Hand. Rather than take a Freakonomics-style "wow, isn't this counterintuitive" take, they instead simply presented standard economic theory as it is understood by professional academic economists.

• Episode 1 covered price gouging, with a nice contribution from Mike Munger. (audio)
• Episode 2 takes on value theory. In the event of a zombie apocalypse, chickens rise in value relative to gold (as the Lannisters may yet discover when winter comes). (audio)
• Episode 3 explains why profit isn't a bad word and shows that rather a few capitalists - people who make their living from investments - look rather more like our parents and grandparents than like Mr Scrooge. (audio)
• Episode 4 covers love, marriage and economics. (audio)
• Episode 5 explains moral hazard and insurance. (audio)
• Episode 6, on sweatshops, includes Ben Powell along with a former sweatshop worker. (audio)
• Episode 7 demonstrates that David Suzuki knows absolutely nothing about economics: we have ways of dealing with externalities. (audio)
• Episode 8 explains a bit of macroeconomics: the old Paradox of Thrift. (audio)
• Episode 9 walks through one of my favourite topics: perverse incentives (see the masthead). Frances Woolley helps out. (audio)
• And Episode 10 explores some of the behavioural economics literature. (audio)
• [Update: the audio at the CBC link isn't working, but the (audio) link should take you to the podcast version. Thanks to Wobbly in the comments!]

Worthwhile Canadian Initiative's Stephen Gordon provided academic assistance for the project.

The CBC more typically airs standard economic fallacies as fact, or at least it did back when I was in the country, so this was really rather nice.

What reaction did they get? Here's the show's producer Matthew Lazin-Ryder. Start listening at the 14 minute mark. At 15:55 he talks about his "honest to goodness depression" about the show's being criticized for being "brazen right-wing propaganda". He says [transcription errors mine]:

We wanted to make a show that had a completely different perspective from the things most people hear. And our probably naive anticipation was that people would take it in that way. We didn't honestly expect the angry backlash that we got. ... Our agenda was to present how mainstream economists think about things. 

He also tweeted: 

"Lightning Rod For Hatemail" was the working title for the series. RT @danieloong: A show like that'd be a lightning rod for hate mail.
— The Invisible Hand (@CBCTheHand) April 12, 2013

There is a body of things that economists know about the economy. Sure there's stuff we argue about, but especially in microeconomics, we kinda know what's going on. And the basic set of things about which economists agree diverges wildly from how the public thinks the economy works. The profession attaches perhaps too high of reward for deriving the results of some model when you change a plus to a comma in a utility function when the first order welfare gains are in just getting the voting public to appreciate principles-level economics.

I get irritated when bog-standard economics is cast as having a "right wing" agenda. Mainstream economics helps you figure out what works and what doesn't work for achieving any particular end and the trade-offs that are involved. If you want a fair bit of redistribution, that's entirely consistent with mainstream economics so long as you set up the transfers appropriately; heck, it drops out of most models where you assume diminishing marginal utility of income.* But bog-standard mainstream economics in Canada says a lot of unpalatable things: ditch supply management to reduce milk prices; get rid of barriers to both interprovincial trade and labour mobility; get rid of all the zany exemptions in the GST and adopt New Zealand's version instead.

Imagine a genie gave you a button. If you push the button, every voter in the country thoroughly and intuitively understands principles-level economics. At the same time, the most recent n issues of every academic journal in economics disappear along with all knowledge of their results: we would need to re-invent or rediscover every one of them, with some chance of never finding them at all. Up to what value of n do you leap to push the button? 5 years' worth? More?

Imagine a world where the physicists and engineers spent most of their time figuring out how to get internal combustion engines from 20 to 22 percent efficiency but where, outside of the lab, everyone else is riding horses because they think engines are evil and witchcraft and tools of capitalist oppression. Maybe it's not quite that bad in economics, but it isn't far from it.**

Update: Brennan McDonald suggests, or at least this is what I draw from his comment, that there may be little potential trade-off between high-powered theorem building and public conversion efforts since the public broadly isn't truth-seeking. In that he echoes Patri Friedman's complaint about folk activism. But we are all part of the equilibrium, and I do think that we could use to move a bit at the margin.

* But be careful! Cowen points out that utilitarian theories may be less egalitarian than you'd like. I asked a couple years ago about appropriate egalitarian policy when we start opening up the margins:

Pity the borderline Asperger's investment banker who, despite his financial success, seems at a bit of a disadvantage in dating. Reddit posted the 1600 word email that the would-be suitor sent to the woman who dumped him after the first date; it's since shown up all kinds of places. But folks snickering at it seem an awful lot like a rich one-percenter laughing at a pleading email from a starving man.

If I can play armchair psychiatrist, the same Asperger tendencies that helped this poor guy in investment banking have killed him in dating.

If you're an egalitarian, what is appropriate policy? Is this guy better or worse off than the poor musician who dates easily? With whom would you rather trade places, taking both their positions and their characteristics? If we redistribute income because the investment banker's last dollar is worth less to him than it would be to the poor musician, think too about the marginal utility of the musician's last date relative to the banker's.

 And should we compensate the beauty-challenged?

** See, for example:

• Caplan on systematically biased beliefs
• Me on economic thinking in NZ

Go Canucks!

CBC Vancouver interviewed me last week about prices and ticket scalping; the resulting feature aired Monday morning and is here. The CBC used a lot more of their interview with Mike Munger than they did of mine, but that was efficient.

A few bits that didn't make the cut:

• Economists are usually puzzled by scalping; why would the venue be leaving money on the table?
• In the music industry, the puzzle was largely solved by that the venue was in cahoots with the scalpers and earning a good chunk of those rents; but, I'd be surprised if the Canucks were selling blocks of tickets via StubHub.
• The Canucks are doing very well financially. Why might they be selling tickets lower than market clearing rates? To keep the loyalty of long term season ticket holders for starters: those folks might fail to renew tickets if they thought they'd been hard done by. And, the mix of fans at the game changes in ways potentially detrimental to television revenues and to merchandise sales; the Canucks have a more complicated maximization problem than just "get the highest possible ticket revenue."

We'd also talked a bit about the benefits of price gouging in Christchurch after the earthquake, but that went far too far afield for this piece.

I did chuckle that Mike was introduced as being a wacky libertarian while no such disclaimer was put on my bit.

Putting Canterbury on the map

Writes Canada's national broadcaster:

In 1984, he became a philosophy professor at Canterbury University in Wellington, New Zealand. [emphasis added]

When he launched Arts & Letters Daily, he continued to champion sprightly writing and another of his interests, freedom of information.

Dutton told Salon he hoped the site would prompt everyone to explore fresh ideas and challenge preconceived notions.

Unusual course

"A vegetarian gun-control advocate who opposes capital punishment is fine," he told Salon.com in a 2000 interview. "But what pricks my interest more is the vegetarian anti-capital punishment cowboy who carries three shotguns displayed in the back window of the cab of his truck."

Dutton's book, The Art Instinct: Beauty, Pleasure, and Human Evolution, argues that art appreciation is not a result of education and exposure, but a natural evolutionary adaptation.

He taught an unusual course at the University of Canterbury titled "Darwin's Dangerous Idea" that explores how Darwin challenged conventional thinking and the impact of his ideas on philosophy throughout the 20th century.

He was a passionate defender of public radio and served on the board of public broadcaster Radio New Zealand.

September's earthquake might have moved Christchurch a few feet closer to Wellington, but it's still pretty far away. I'd make jokes about not expecting anyone at the CBC Igloo in Iqaluit to know that, but the rest of the obit is rather nice.

There is no other academic in the whole of New Zealand whose obit would be of this kind of international interest. It would be interesting to see what New Zealand's PBRF would have done with him had he made it through to the 2012 round. My bet: they'd have entirely discounted ALD as it's not peer reviewed (doubtful they'd ever have heard of it), would have given the book about the same weight as a couple of journal articles, given him some points for peer esteem and wound up with a B. Now if he'd given up that silly website and concentrated on getting lots of refereed journal articles in second tier philosophy journals, he just might have gotten an A. I'm glad he ignored PBRF.

Rex Murphy on Climategate

Rex Murphy is about the only one at the Canadian Broadcasting Corporation who's worth anything.

Note Peter Mannsbridge's dismissive smirk at the end of Murphy's excellent summary of Climategate.

HT: Financial Post.

Moral panics of days past: D&D edition

One of the serious disadvantages of growing up in a very rural area was a paucity of D&D players. So, somewhere around age 10 or 11, when I went up to Winnipeg to spend a week at my second cousin's place and attend the University of Manitoba's MiniUniversity for kids, I brought my Original Dungeons and Dragons set with me (the old Red Box). Finally! Some potential players! My cousin's father freaked out when he saw it and banned it from the house.

Cory Doctorow points to a potential reason why: a documentary by the Canadian Broadcasting Corporation that meets every expectation I have of CBC quality. Apparently, Doctorow is one of the kids pictured playing if you watch the second follow-up part! Note that Peter Mannsbridge once had hair.



I wonder whether it's possible to quantify just how much stupider the CBC has made Canada over time.