Morning roundup

A few of the worthies as I close out the browser tabs before Chrome eats every last bit of my system's resources:

• Thomas Lumley's travel guide for Auckland visitors for a statistical computing conference may be useful beyond that conference's attendees.
• The Washington State Institute for Public Policy's evaluation of boot camps suggests that they're very effective. I had previously thought there was a typo in their tally: they had a negative cost listed for the things, which had me thinking they had a spreadsheet error. But it's correct - confirmed by email. Boot camps are cheaper than other juvenile detention facilities in Washington State, and so they're of negative cost relative to the counterfactual. And they also seem effective: 100% chance of providing net benefits. 
• Vlad Tarko's take on apparent deregulatory trends: you can reconcile survey measures of declining regulatory burden with other data on increased staffing and budgets for regulatory agencies in a model in which competing regulators offer the regulated opportunities to select the one that sucks least. He says regulatory capitalism is a better term than neoliberalism for the current state of play. 
• Where the state is weak, others can be strong. In Nigeria, churches are building what look like private cities. Attention Charter Cities fans. 
• Great piece by Andrew Sullivan on tribalism in American democracy. I don't share his optimism about Trump yet being able to come around to solve all this, but the diagnosis in the first three quarters of the piece seems right. 

And hopefully on closing Chrome, there will no longer be a long lag between moving the mouse and seeing the cursor move. It's really annoying. 

Standards shopping

Small jurisdictions have a hard time covering all the bases. Developing regulations is expensive. If you're determined to have "My Jurisdiction" versions of each and every regulation that could be out there, you're either going to have a ridiculously expensive regulatory regime or you're going to stymie development in niche markets.

Yesterday I pointed to the problems facing Manitoba's Harborside Farms. They want to develop traditional Italian cured meats in small artisanal batches for sale in Manitoba. But they're forbidden from doing it because, unless you can prove your product meets Manitoba regulations, you can't sell it. And it's a sufficiently small market that Manitoba never got around to writing any regulations that would allow them to operate.

Leaving aside for now the very sensible alternative of simply allowing standard consumer protection legislation and liability solve this kind of issue, there's an obvious alternative. Let them produce their product under the Italian regulations, then have Manitoba inspectors verify that they've met the Italian standard.

The problem is very similar to one facing importers of niche-market DVDs in New Zealand. How? You can't sell DVDs here unless you get them rated by the Censor's Office. And they don't rate DVDs for free. If you make a buck a piece on the sale, you'd still need to ship a thousand units in a country of four million people (and change) to cover just the ratings cost.

The solution there is the same as that which should obtain for Harborside. Allow import of films that have been rated by the Australians, or the Canadians, or the Brits, or the Americans, or some other set of trusted countries, and simply require that the ratings sticker note the country which issued the rating.

This kind of solution can be applied across rather a few thin-market small-jurisdiction scenarios. Why does every small area have to reinvent every wheel?

Take it a step further. If Manitobans can import Italian-made products meeting Italian standards, why shouldn't they be able to produce things in Manitoba to Italian specifications, even if a Manitoba regulation does exist? Simply require that the product be labelled as meeting Italy's standards.

Maybe it wouldn't work for everything. A building that meets Canadian building standards instead of New Zealand standards would be better than a New Zealand standard building, unless there's an earthquake. But again, it isn't hard to imagine strange niche construction areas where there might not be domestic specifications, but where the Japanese standards would work a treat.

The fixed costs of developing regulations aren't trivial. Why not allow a bit of forum shopping to spread the burden?

Ban the bottle

I'm a fan of Charles Tibout's arguments about local government competition: lots of small local governments competing with each other for residents and cooperating with each other for provision of services that are more efficiently provided on a wider scale.

I was surprised when Rodney Hide led the charge for Auckland's amalgamation. The best case I could make for amalgamation would be that the small scale of local government means it has a very hard time attracting talented people to make reasonable decisions; Council policies can be stuck on the stupid setting for rather a while. A merged Auckland encompassing a million or so people ought to be big enough to attract more talented bureaucrats able to make more sensible decisions.

Neil Miller points to one less-than-sensible decision coming out of amalgamated Auckland Council [HT: Nolan @ TVHE]. They're pushing bottle shops to ban single-bottle sales. Neil writes:

Craft beer plays little or no part in the problems around heavy drinking, particularly among younger people.  The streets on a Saturday morning are not awash with bottles of Emerson’s Pilsner ($6.10) nor the car park studded with empty magnums of Liberty C!tra IIPA ($22.10).  The Council has simply made a series of assumptions and come up with a one-size-fits-all “solution” so it can say it is “doing something.”  I doubt any thought was given to the sales of craft beer or the people who want to purchase them responsibly in central Auckland. 

"Something must be done" is a rather persistent problem. And, with a merged Council, craft-beer lovers will have a harder time driving to an outlet that can help them out. I hope that the bottle shops are able to get around it by requiring that people buy at least two bottles and sticking a rubber band around them to make a package when the customer comes to the till.* At least there are mail order options.

Neil again:

However, at this stage the Government is looking to avoid the single container issue saying people with problems should contact the Council as it is their policy.  It seems yet another drift net policy with unintended consequences, something we will probably see a lot more of as Parliament considers the key provisions of the new Alcohol Reform legislation. 

This kind of local nonsense is one of my bigger worries in the proposed Alcohol Reform Bill, which will provide a fair bit more scope to local Councils for alcohol regulation. Compliance costs are higher when retailers face a patchwork of regulations across the country; I would expect local activists with time on their hands have more influence over policy at the local level. I consequently expect the equilibrium to turn rather more meddlesome in most places.

* My local dairy, for a while, sold cans of Coke labelled "Not for individual resale." Above the cans he had a small sign saying "Buy two!". I liked that.

Auckland and migration

Ask and ye shall receive: within two hours of my request to Stats NZ, I had an Excel sheet showing internal migration breakdowns by territorial authority. Thanks Ronald Mair!

I'm still puzzling out whether clean Tiebout hypotheses can be built given the rather strong confound of huge migration to Auckland from overseas. 17% of Auckland City's 2006 population resided overseas at the time of the 2001 Census; Auckland City drew 38% of all overseas migration to the greater Auckland region. So despite losing net 12,700 residents to other parts of greater Auckland, Auckland City still tied for top overall population growth in the Auckland region.

So, does Tiebout say Auckland City did poorly for on net losing so many prior residents to other parts of the region, or that it rocks for gaining so many from overseas? I suppose the answer will depend partially on whether housing prices went up or down relative to the region's average over the period as well. I have a couple years to ponder how to build the test though given that the next census isn't out 'till 2011.

Other fun facts:

• On average across territorial authorities (districts and cities), 23% of folks resident moved to another district/city between the 2001 and 2006 censuses.


• Only 13% of folks resident in Christchurch in 2001 left as of 2006, the smallest rate of out-migration of any of the regions. 36000 individuals left.


• 31,407 people moved to Christchurch from overseas: 9.6% of the 2006 population. Susan and I were two of them!


• A further 48,831 people moved to Christchurch from other parts of NZ. So a quarter of Christchurch's 2006 population did not live in Christchurch in 2001.


• Paul Walker will be dismayed to find that 14,079 folks moved to Christchurch from the North Island (which he tends to view as being far worse than any other kind of foreigner). 12,027 left Christchurch for the North Island.

Texas vs California

BK Drinkwater usefully points to a City Journal piece by William Voegeli comparing Californian dysfunction to Texan sensibility. Voice in California provides no check on government:

James Madison would have to revise—or possibly burn—Federalist No. 10 if he were forced to account for the new phenomenon of the government itself becoming the faction decisively shaping its own policy and conduct. (See “Madison’s Nightmare” in City Journal’s 2009 special issue, “New York’s Tomorrow.”) This faction dominates because it’s playing a much longer game than the politicians who come and go, not to mention the citizens who rarely read the enormous owner’s manual for the Rube Goldberg machine they feed with their dollars. They rarely stay outraged long enough to make a difference.

Consequently, exit works. California sees out-migration and folks move to Texas. Tiebout says it's fine for some jurisdictions to be high tax / high service with others low tax / low service -- you then have preference-based sortition. But California is now high tax / low service, and for that bundle of services, you're better off in Texas.

For California’s governmental-industrial complex, a new liberal administration and Congress in Washington offer plausible hope for a happy Hollywood ending. Federal aid will replace the dollars that California’s taxpayers, fed up with the state’s lousy benefits and high taxes, refuse to provide. Americans will continue to vote with their feet, either by leaving California or disdaining relocation there, but their votes won’t matter, at least in the short term. Under the coming bailout, the new 49ers—Americans in the other 49 states, that is—will be extended the privilege of paying California’s taxes. At least they won’t have to put up with its public services.

I wonder if NZ census data gives any way of tracking migration among the several cities that previously made up the new Auckland supercity. Best I can find has Auckland split into Northern, Western, Central and Southern zones. Table 11 gives us some idea of flows among those four parts, but nothing disaggregated by Mangere, Rodney, and so on. Will have to see if Stats has the data in more disaggregated form; would be fodder for an interesting honours project in a census or two's time.

Tiebout and Auckland: Sir Roger gets it

I've previously complained that nobody else seems to have noticed that Auckland's amalgamation will reduce Tiebout competition. I hadn't seen Sir Roger Douglas's submission.

On the community level, Councils should be designed to allow greater choice and competition between Community Councils, as well as providing for greater community control over expenditure.

Mechanisms that allow individuals to opt out of certain Council functions, and groups of individuals to switch Community Council, create a new Community Council, or amalgamate with an adjacent Community Council will foster greater competition between Councils. Such competition will allow more diversity and experimentation within Local Government.
...
Only when Government bodies are held responsible for setting and collecting rates and expenditure will there be adequate checks on their capacity to spend. The rates set by Community Councils could be collected on their behalf by the Greater Regional Council, but it is most important that the resident knows which portion of rates goes to the Community Council and which portion goes to the Greater Regional Council.

While the Government’s position on Community Councils – a position which departs from the Royal Commission’s absurd proposal to have only six local Councils beneath the regional authority – is generally sound, it is also important that Community Councils are held accountable for what they spend. This will only occur if they raise their own revenue.

...a group of citizens adjacent to another Community Council should be able to opt-out of their current Council, joining the neighbouring Council, if they think their mode of service delivery is more suitable to their wishes. The capacity to change Council will create competition for ratepayers, which is likely to see value for money being delivered by Local Government. Although this choice would only be able to be used by those at the edges, the capacity for others to change providers drives efficiency and therefore benefits all ratepayers.

Lots of other great suggestions in there, like having line-item council tax bills and allowing residents to opt out of certain items in favour of private providers. Hope the Local Government Minister was paying attention.

Auckland Maori seats: good idea? [updated]

The main stumbling block currently to Auckland's merger into a mega-city isn't worries about the loss of Tiebout competition - which seems to be only of concern to me, see here and here, though NotPC also agrees and I may have convinced Matt Nolan (see comments, oops) Rauparaha that this is worth worrying about.

Rather, the biggest concern seems to be whether city council will have a standard set of wards or whether it will follow the system used for national elections in having overlapping districts: one set for those voters who want to elect to be on the Maori roll, and another set of general electorates for those who don't.

Correct me if I'm wrong, but I don't think there's anywhere else in the world that uses this kind of system.

Does having these kinds of overlapping districts help Maori? I suspect not much under proportional representation except inasmuch as they help to facilitate overhang: many voters in the Maori electorates tick the Maori Party as their district Member of Parliament but give their Party vote to Labour. The Maori Party then wins more seats than those to which it is entitled by its list vote and Parliament is made bigger. In a PR system, this means that the Maori Party has a seat or two more than it otherwise would and so has a bit more clout as a minor party.

Auckland's council, though, as best I understand it, isn't planning to go PR. What are the effects of this kind of system when you have only ward-based representatives?

Imagine that there are two groups, A and B. Everyone that self-identifies as group A, 10% of the population, is 90% likely to vote for Party 1 and 10% likely to vote for Party 2; everyone in group B, 90% of the population, is 47% likely to vote for Party 1 and 53% likely to vote for Party 2. Suppose every district has 100 voters and groups A and B are evenly split across all districts. In that case, every district has 9 A-group and 42 B-group voters for Party 1, 1 A-group and 48 B-group voters for Party 2, and Party 1 wins all districts. Now, suppose that you instead create special A-group electorates that comprise 10% of the seats. Now, Party 1 wins all A-group electorates but Party 2 wins all other seats. You've made sure that Group A is represented, but at the cost of vastly reducing their influence.

Indeed, this has been found to be one of the effects in the US of judicial mandates for majority-minority districts. Heck, even Wikipedia knows it:

Gerrymandering may be advocated to improve representation within the legislature among otherwise underrepresented minority groups by packing them into a single district. This can be controversial, as it may lead to those groups' remaining marginalized in the government as they become confined to a single district. Candidates outside that district no longer need to represent them to win election.

As an example, much of the redistricting conducted in the United States in the early 1990s involved the intentional creation of additional "majority-minority" districts where racial minorities such as African Americans were packed into the majority. This "maximization policy" drew support by both the Republican Party (who had limited support among African Americans and could concentrate their power elsewhere) and by minority representatives elected as Democrats from these constituencies, who then had safe seats.

Enough of Wikipedia; turn to Google Scholar. Cameron, Epstein and O'Halloran, 1996, find that there is a very real tradeoff between advancing the number of minority representatives and advancing the issues that minority voters care about. Shotts, 2001, finds that a majority-minority mandate has no effect where Republicans control redistricting (because they already would have packed minority voters into a small number of districts, by my read) but reduces Democratic seats where Democrats control the redistricting and where the majority-minority mandate requires supermajorities; in this latter case, it can cause the Democrats to lose control of the state legislature.

I can see why the Maori Party would support this kind of move: it guarantees them a couple of seats (yes, yes, city council elections aren't party-based, you get the idea though). But it may well also guarantee that no other city councilor has to care at all about Maori issues because they won't have any Maori constituents. But that's too conspiratorially-minded. Most likely, nobody involved in the process has bothered to check the empirical literature, just like nobody involved in the process has bothered to worry about Tiebout.

Careful what you wish for, folks. The Law of Unintended Consequences is a stern one.

Auckland Supercity

Central government in Wellington seems set to force Auckland's eight local councils to merge into a mega-city. Complaints thus far have centered around the potential loss of voice as constituents become more distant from their representatives.

I'm worried about something else entirely. Voice is nice, but the threat of exit is a more powerful check on local governments' activities. Tiebout explained it all back in 1956 with his pure theory of local expenditures. In short, competition among jurisdictions for residents forces them to run their operations more efficiently; mobility across jurisdictions also allows matching between consumer preferences and government service bundles. So, if the rates in one of the local councils are getting steep relative to the services provided by the council, moving to the other side of town can help.

Whatever efficiencies of scale there are from having services provided to a larger jurisdiction can also be achieved by contracting out. This happens endogenously and only where the economies of scale are substantial enough to justify it. It's then hard to see from whence come the efficiencies of amalgamation. For example, if a couple of councils find that they'd save money by jointly running their fire services, nothing stops them from setting up a joint fire service that caters to both councils.

Muriel Newman today links to a couple of nice Canadian case studies of amalgamation. In Winnipeg, where I did my undergraduate studies, amalgamation led not to efficiencies but rather to a leveling-up of union contract salaries to match those paid in the highest-paid prior city, a deterioration of service quality, and stagnation. Winnipeg community activist Nick Ternette is even giving a talk tomorrow at the Frontier Centre on the failures of Unicity!

I hope that local government minister Rodney Hide, who has lectured in economics and ought to know Tiebout, has thought this one through. I've not yet seen the case made where any serious weight is put on the loss of Tiebout competition. The Royal Commission Report makes no mention whatsoever of Tiebout. A search on "competition" finds lots of references to how well a unified Auckland could compete with other "global cities", but nothing on the loss of interdistrict competition. There's one mention at page 348 of how competition among vestigal local bodies post-Amalgamation ought be stifled. None of this fills me with confidence. Note, however, that I do not purport to have read through the Royal Commission Report in any great depth.

Update: Ilya Somin here talks about the importance of Tiebout competition among US States.