Potential deregulations

Cato's Handbook on Affordability provides a set of policy recommendations for reducing unnecessary government-imposed costs. 

There's the usual stuff you'd expect, much of which is US-focused.

But a few bits are worth thinking about here too.

In the chapter on healthcare, Cato suggests automatic removal of prescription-only requirements from medicines. They write:

• Eliminate prescription regulation. The FDA makes medicines less affordable by requiring patients to obtain unnecessary and costly prescriptions. Adults can safely self-medicate with many medicines—including birth control pills, HIV prophylaxis, and GLP-1s—for which the FDA currently requires a prescription. Overall, prescription regulation increases prices, increases the nonprice costs of obtaining medicines, reduces access, and ironically reduces patient safety. While direct-to-consumer platforms such as TrumpRx, Cost Plus Drugs, Amazon Pharmacy, and GoodRx can theoretically reduce prices by injecting transparency and competition, the more effective reform would be to strip the FDA of its power to require prescriptions. 
• Remove unnecessary prescription requirements. If Congress cannot take prescription regulation power from the FDA, then Congress should enact rules that automatically remove prescription requirements after a certain period of time, which would allow consumers to purchase more medicines directly. Greater over-the-counter access would reduce the price and nonprice costs of medicines. 

John Key made pseudoephedrine-based cold medicines prescription-only. It seemed unlikely to substantially affect access to methamphetamine. Within about four years it was very clear that the policy failed. But it took about a decade more before that prescription-only status was removed. 

New Zealand could schedule review of longstanding prescription-only classifications, with a presumption favouring equivalent access where trustworthy overseas jurisdictions allow non-prescription access. Maintaining prescription-only status would require published justification that takes into account the added cost and burden imposed by prescription requirements.

In the chapter on childcare, Cato recommends expanding the supply of au pairs on the J-1 visa, simplifying the administrative burden facing households employing in-home care, broadening visas for childcare more generally (noting that a 10 percent increase in low-skilled immigration may reduce childcare costs by 2 percent), easing degree requirements for childcare workers, and subjecting car seat mandates to cost-benefit review.

A lot of those recommendations could carry over to here. 

The benefits of car seats for older kids aren't that big, and the costs are real. 

Immigration NZ guidance says that a niece or cousin visiting for six months to help with childcare is likely to count as working, with consequent need for a work visa. And if that work tallies to more than 30 hours per week, the relatively-simple IR56 isn't available. Surely a simplified visa and tax process could apply. 

The rest of the report's worth looking at - but mainly focuses on US issues or things that I've already covered otherwise. 

Afternoon roundup

The worthies, as I try to stop Chrome from crashing and crashing and crashing...

• The 9th Edition of Cato's Handbook for Policymakers is up. The things that can happen in bigger countries with much larger thinktanks...
• Simply amazing. A Korean provincial government backed the bonds for building Legoland Korea. Then an incoming provincial government wanted to change the terms. And the entire Korean bond market exploded. Remember kids: using the government's balance sheet to back bonds and bring down interest costs doesn't reduce the real cost. It just shifts risk onto the government's books. And sometimes that all goes ridiculously badly. 
• Some parts of NZ policy are frustrating because obvious ways of fixing things are ignored. Other parts are frustrating because they seem to be unfixable. Consider the current messes in immigration policy. 
• The folk economics of housing is folked up. "As Larry Summer said, "There are idiots. Look around.""
• It is illegal to access the updated vaccines in New Zealand and the government is ignoring advice around masks. 
• One potential conclusion from the latest from Arthur Grimes: allow unlimited inbound migration of happy people.
• Environmentalists oppose NZ biofuel mandates. Biofuel mandates never make sense, but they especially don't make sense when the sector's covered by an ETS with a binding cap. 
• Piles of detail on fights over consenting on the Waiau River.
• Government just doesn't seem all that good at managing pay structures. Also, if the government wants more nurses, requiring unpaid hospital placements like this as part of the training for new nurses might not be helping. 
• Matt Levine's rollercoaster ride through FTX.

Kiwi Freedom

New Zealand is the best country in the world if you weigh up a bundle of economic and personal liberties. I've argued this more than a few times, and I've teased American libertarians about their commitment to liberty if they're unwilling to consider emigrating here because of the drop in income or difficulty in convincing relatives to come along. This is no problem for a pluralist who weighs liberty up among other values, but it is a problem for folks who claim to put a very strong weight on freedom and who wear Live Free Or Die t-shirts.

For rather a while, we've had world economic freedom rankings that have placed New Zealand at or near the top. The Fraser Institute, the Cato Institute, and the Liberales Institut have today released an aggregate Human Freedom Index.

Using indicators consistent with the concept of negative liberty—the absence of coercive constraint—we have tried to capture the degree to which people are free to enjoy classic liberties in each country: freedom of speech, religion, individual economic choice, and association and assembly. The freedom index is composed of 76 distinct variables including measures of safety and security, freedom of movement, and relationship freedoms such as assembly or legal discrimination against gays. In this preliminary index New Zealand ranks as the most free country in the world, followed by the Netherlands and then Hong Kong. Australia, Canada, and Ireland follow, with the United States ranking in 7th place.

I have a few quibbles with the index (here is the full index), but I expect that they're all things that would be tough to incorporate with data for any large number of countries.

The index of government threats to individuals rightly includes extrajudicial killings, torture, political imprisonment and disappearances. But it doesn't include the number of individuals imprisoned for victimless crimes like prostitution and drug use. The US would fare poorly here, but New Zealand wouldn't do well on the drugs side either. Potential variables here could include an indicator for whether sex work is legal or illegal; an indicator for whether drug possession is legal or illegal; annual expenditures on drug enforcement; proportion of the prison muster whose offending relates to drug use or drug trafficking.

Threats to private property rightly include theft, burglary and inheritance takings, but miss civil asset forfeiture. I can't easily see how this could be quantified in a big cross-section.

One of the biggest regularly experienced differences in personal freedom between New Zealand and America is airport security. There is zero risk that this kind of thing happens in New Zealand. Again, I don't know how you could quantify this for any large number of countries.

Further, our police are unarmed and remain so despite the police rather frequently asking the government that they be allowed to carry weapons. One option that might capture the overall level of "police state" impositions would be to include the total police budget as a bad while also counting experienced crime rates as a bad. I suppose that America's ranking of 5 on "Extrajudicial killing" captures some of this (NZ scores a 10).

Finally, there's no accounting for the growing scourge of paternalistic regulation around alcohol, tobacco, and the like. Sin taxes as proportion of aggregate government revenues could be a start, and should be feasible, but it would be harder to get comprehensive data on whether you're allowed to brew your own beer, ease of starting a brewery, and restrictions on smoking on private property. I love that, in New Zealand, people can move really easily from goofing around in their garage with a completely legal home still or beer-making kit to selling their product to willing customers. In America...

The index a great start though, and I'm especially glad that this data has come out in this, the "setting honours projects" time of year. I'm consequently putting this up as a potential honours project; incoming Canterbury honours students, take note, but also note that this is my working draft of the project and that I might improve it based on comments.

The weight of freedom: economic and personal liberties in a gravity model of international migration.

We typically assume that people move from country i to country j because doing so makes them better off. But what precisely proves attractive? Karemera et al (2000) show that a modified gravity model can explain a decent share of international migration: origin-country population, destination-country income, and origin-country restrictions on emigration explain much. Lewar and Van den Berg (2008) show that institutions and distance also matter. Ashby (2007) shows that, within the United States, those states with greater economic freedom draw more migrants, but only because of increased expected income rather than because of the direct effects of freedom per se.

In this project, you will start by figuring out gravity models. Your supervisor has no experience with them either, but we can likely work things out.

Next, you’ll take the Fraser Institute’s newly created Freedom Index which compiles both economic and personal liberties to develop an aggregate freedom score: note that New Zealand is the best country in the world by this measure. The index compiles 76 separate variables relating to economic and personal liberties.

You will add these personal and economic liberties as explanatory variables into a gravity model of international migration to find out:

1. Does liberty enter positively into migration decisions? 
2. What’s the elasticity of migration with respect to economic and personal liberties?
3. What is the value of freedom? A standard deviation increase in personal or economic liberty counts as much as what in a gravity model? I want you to be able to say something like “All else equal, a standard deviation increase in personal freedom [economic freedom] is the equivalent of reducing (or increasing, who knows) the distance between two countries by XXX kilometres or increasing the expected income jump from migration by $YYY.” How much less attractive would New Zealand be to international migrants were we to fall in this ranking? People deciding to emigrate often have choice among country destinations. Singapore is richer than New Zealand but ranks 39^th in overall freedom and scores only a 6.6 in personal freedoms. How much extra income does a move have to provide, in expectation, to make it worth dropping a point in personal freedom?

You’re going to have to sort out how to work with the OECD migration database, figure out what scope is feasible given that data within an honours project, and then run things. Do not select this project unless you have done reasonably well in undergraduate econometrics. But it’s going to be hellafun and I think it could be publishable if you do a decent job of it.

Initial Sources:

Ashby, N. 2007. “Economic freedom and migration flows between U.S. states”. Southern Economic Journal 73:3 (January), 677-97.
Karemera, D., V.I. Oguledo, and B. Davis. 2000. “A gravity model analysis of international migration to North America”. Applied Economics 32:13, 1745-55.
Lewer, J. and H. Van den Berg. 2008. “A gravity model of immigration”. Economic Letters 99:1 (April), 164-7.
OECD Migration Database available at http://stats.oecd.org/Index.aspx?DatasetCode=MIG [or, if you can find a better database, go for it]
Watkins, T. and B. Yandle. 2010. “Can freedom and knowledge economy indexes explain go-getter migration patterns?” Journal of Regional Analysis & Policy 40:2, 104-15.

I love setting honours projects.

Liberaltarian exit

Brink Lindsay and Will Wilkinson leave Cato.

Writes Weigel:

I asked for comment on this and was told that the institute does not typically comment on personnel matters. But you have to struggle not to see a political context to this. Lindsey and Wilkinson are among the Cato scholars who most often find common cause with liberals. In 2006, after the GOP lost Congress, Lindsey coined the term "Liberaltarians" to suggest that Libertarians and liberals could work together outside of the conservative movement. Shortly after this, he launched a dinner series where liberals and Libertarians met to discuss big ideas. (Disclosure: I attended some of these dinners.) In 2009 and 2010, as the libertarian movement moved back into the right's fold, Lindsey remained iconoclastic—just last month he penned a rare, biting criticism of The Battle, a book by AEI President Arthur Brooks which argues that economic theory is at the center of a new American culture war.

Did any of this play a role in the departure of Lindsey and Wilkinson? I've asked Lindsey and Wilkinson, and Wilkinson has declined to talk about it, which makes perfect sense. But I'm noticing Libertarians on Twitter starting to deride this move and intimate that Cato is enforcing a sort of orthodoxy. (The title of Wilkinson's kiss-off post, "The Liberaltarian Diaspora," certainly hints at something.)

I'm a fan of liberaltarianism, especially in a place like New Zealand where economic liberalism is less strong a predictor of social liberalism than in the States.

Wilkinson now blogs as W.W. over at The Economist.