Morning roundup

The morning's worthies:

• NZ alcohol policy basically gives a veto over licensing to the Medical Officer of Health and to the Police. Sucks when you get a prohibitionist in charge of either. And why are so many NZ prohibitionists named Palmer anyway?
• Josh Gans on copyright status of AI-created works. 
• Grimes set up an AI trained on her own work. It tweets. Grimes notes, "The degree to which this bot has mastered my internal monologue is terrifying to me"
• Michael Reddell on RBNZ forecasting. I think it's a damned shame we didn't get NGDP markets for NZ; Simon Bridges murdering iPredict may have cost us considerably. Thanks again Simon. 
• A reminder that it was Don Lavoie who coined the term "knowledge problem" for Hayek's fundamental insight, not Hayek himself. Even if you think you're familiar with the term, please read this. 
• Immigration NZ continues to be an absolute mess. It's only partially the bureaucracy's fault. They'll have had whipsawing policy directives from the Ministers. First it's clamp down and don't process visas because Labour hates immigrants. Then the inevitable bad consequences from blocking migration, so they get told to stick every employer into the high-trust accredited employer visa programme to speed up processing - which pushes actually trustworthy employers into the same queue with a bunch that really really aren't. And the inevitable consequence of that. Absolute mess. Herald, Stuff. The Stuff piece is particularly good. 
• RBNZ figures that migration might now be reducing inflationary pressure rather than adding to it - easing labour supply bottlenecks.
• In today's edition of "China is actually a more stable and reliable trade partner than the US," Trump promises 10% across-the-board tariffs if elected. Shouldn't US foreign policy aim at encouraging deeper trade links with the US and reduced reliance on China?
• Action on Smoking and Health is getting fed up with BS coming from Health Coalition Aotearoa.

Test test test

This week's Newsroom column made the case for freeing up rapid antigen testing for use at essential workplaces during outbreaks and Level 3/4 restrictions. 

There's something like half a million essential workers and perhaps a hundred thousand in Auckland. The government maintains no register of them, and it would be impossible to run daily testing of a hundred thousand essential workers during Level 4 through current testing systems anyway. The PCR swab regime has been buckling under demand and is providing very slow results. Saliva-based PCR testing is far better and far more scalable, but may not be able to get to a hundred thousand tests a day - and may not be cost-effective for broad surveillance testing in lower-risk essential workplaces.

Rapid antigen tests give results in about fifteen minutes. They are not likely to catch cases with low viral loads but are decent at high viral loads - the people who would wind up being infectious. Having workers run a self-test before starting shifts would add an additional layer of protection. But no rapid antigen test has been authorised for use in New Zealand. It is unclear whether MedSafe has even considered any - I have a request in with them for more information. 

The Newsroom column is also available on our website, where all my links to sources are preserved. 

A snippet:

Antigen tests are not as sensitive as PCR tests overall but are reliable when a person is infectious. For high viral loads, the Abbott BinaxNOW test proved as accurate as PCR tests in one assessment but missed one person whose low viral load was only caught by PCR. The test costs about $5 (more in the United States) and gives results in about fifteen minutes. Other antigen tests are broadly available in Europe, at less than a dollar per test. The Canadian government has been distributing packs of tests to small businesses for employee testing, for free.

These kinds of tests make more sense for broad population screening. If there is no reason to suspect someone has the virus, but you want to prevent infectious people from boarding an airplane, a rapid and low-cost test that can be administered in the departure lounge before boarding makes a lot of sense.

The New Zealand government’s testing regime is almost exclusively swab-based PCR tests. The system very obviously cannot keep up with the amount of testing required in major outbreaks. It takes too long to collect samples; samples must be collected by a limited number of trained professionals; it takes too long to process tests; it takes too long to return results to those who have been tested; and, it is rather expensive.

The University of Illinois’s saliva-based PCR test has been available in New Zealand on a private basis since January, thanks to the University’s New Zealand partner, Rako Science. Rako has advertised that it can test up to ten thousand people per day. Its collection method does not require scarce nurses for sample collection and can be scaled up much more readily. Depending how long it takes to get samples to the lab, it can provide results in about four hours. The Ministry of Health, for months, inexplicably refused to consider adding this option to the government’s testing regime.

But the real testing job is an order of magnitude larger still, if we want to turn Delta into Iota.

The Ministry of Health has reported transmission among essential workers in Auckland. This type of transmission has made it difficult for New South Wales to control its outbreak.

The government could, today, order a couple million rapid antigen tests. They are broadly available. It could distribute those test kits to every essential workplace in Auckland and require that every essential worker be tested every day before starting work.

It could be a condition of a Level 4 modified to suit Delta.

Within about fifteen minutes, each worker’s result would be available. Infectious workers could be sent to government testing stations for confirmation. And workplace transmission would be sharply reduced.

Why are employers not doing this on their own as part of normal health and safety prudence? The tests are currently prohibited in New Zealand. In April 2020, the government banned all point-of-care tests unless they are approved by MedSafe, and MedSafe has not seen fit to approve any tests. Pedants might argue that this does not constitute a ban, but banning anything that has not been approved while deciding not to approve any options sounds an awful lot like a ban. It is unclear whether MedSafe has even evaluated any options.

The Grand Deal

Josh Gans explains how getting vaccines developed and delivered is supposed to work, and how Australia (and NZ, though he doesn't mention us) have failed. 

I worry that NZ is set to repeat this particular kind of failure. We need to be getting orders in right now for the delta-variant shot that Pfizer's developing. Pay a pile for it up front. Order twice as much as we need, for rush delivery at the actual front of the queue. Give the doses we don't need to whichever other country looks like they most need it. It's still a bargain, and it's the right thing to do. 

Here's Josh:

Let me explain the grand deal because I don’t think it is commonly thought about and it is certainly not explicitly written down. But it goes like this. If we were to think purely ethically, we would want every person in the world to have an equal chance of being the first to be vaccinated. That is we would take scarce supply and randomly allocate doses.

That doesn’t happen for lots of reasons. First of all, it is cheaper to surge vaccine doses in particular regions — aka countries — rather than send them out willy nilly. Second, some countries can actually get doses to people quicker than others which tips the balance. But the final consideration is: someone needs to pay for all of this. We don’t have a world government etc and so we have individual governments. Every single one of those has opted for some version of the ethical distribution (with adjustments) locally so it isn’t like this isn’t understand. But it is also understood that there were some billions of dollars to be paid for all of this and not just the vaccines we ended up using but the ones that didn’t work out.

When you have this type of problem — how to allocate fixed costs — you then move from ethics to economics. The social planner facing a budget constraint is going to allocate the funding of most of those costs to the groups most willing and able to pay for them. That means that everyone is happy to participate but also that if you happen to be poorer you are not obliged to pay more than you can afford. Now we could do this the fully ethical way world-wide if we just had a global tax system to sort out the allocation of costs but, as I mentioned, we don’t. So we just make do with what we have.

The thing you do then is the same thing many businesses do. You price discriminate. In this case, if you are a drug company, you set the prices of earlier deliveries many times higher than of later ones. Then you approach the groups you think might (a) afford to pay for those early deliveries and (b) might want to. This is what Pfizer and every other vaccine developer did. (Yes, even the ones from China and Russia).

The idea was that those countries would lock in deals and then the companies would go down the list with lower prices until the market cleared. From a global perspective, the rich countries get the doses sooner which means that it doesn’t look like the ethical outcome but hidden away there is the fact that the rich countries are, in effect, paying for the main costs of this. None of the companies is doing this as a charity. Ultimately bills need to be paid. So that must be happening.

Canada was a great example of a country that went with this deal. It bought country sufficient doses from many comers and then, when so many vaccines worked out, looked like it had embarrassingly ordered 10 times more than it needed. But the folks in Ottawa could actually add and they knew what they were doing. The doses they didn’t need would be gifted to other countries. This is the most transparent kind of way of dealing with the grand deal.

Australia’s cut and run

Australia didn’t do that. They won’t even reveal what they did do citing “national security” which is odd. Did they low-ball? It looks that way. Did they fail to diversify? Absolutely. Was that a crazy thing to do? To anyone who has thought for two seconds about the costs and benefits of any pandemic expenditures, it would seem so.

Assorted updates

Blogging has been light. These are the bits I've missed telling you about.

• Matt Burgess, Oliver Hartwich, Bryce Wilkinson and I had a short podcast on the government's proposed feebate scheme. It's an incoherent mess given that it's running up against an ETS with a binding cap. 
• I had a chat with RNZ's The Panel on congestion charging on Friday. I'd had a column in the Dom Post on it a bit earlier. 
• My column at Newsroom last week went through the changes coming for local councils when water utilities get stripped from them and amalgamated into new entities. 
• My column in our Insights newsletter looked at the government's sclerotic approach to border management. Better, safer, and even cheaper testing options for border workers are available, and they aren't being used. 
• I had a chat with Newshub about America's Cup funding, and how the government should politely wish Team New Zealand all the best in its coming race, wherever in the world that might well wind up being. 
• And I had a chat with Josh Gans about the Covid response and some of the worrying numbers on risks with border openings. 
• Motu had a panel session on some minimum wage work by Dean Hyslop and Dave Maré; Bill Rosenberg and I were discussants. Their paper is here. I expect I'll be referring to it often. 

Self-recommending. Meaning, I'm in them, and I'm recommending them. Likely not in the better way that Tyler Cowen uses the term. 

Mismanagement of the highest order

Josh Gans's newsletter on Covid, testing, and vaccination continues to be excellent. 

Here's the latest from Josh, on failures in the Australian system that led to the most recent outbreak there.

However, let’s look at the testing. First of all, quarantined travellers are tested just twice (usually a few days after they arrive and a few days before they leave). Why aren’t they screened daily using rapid antigen screens? It costs very little and can ensure that cases are picked up quickly and extra precautions are put in place so the workers aren’t exposed.

Second, what about the employees? The workers are tested but not often. This one had symptoms before he got a test. From here the plot thickens. From WA Today:

Daily testing of hotel quarantine workers, which could have identified WA’s first community transmission case of COVID-19 in nearly 10 months several days earlier, was only rolled out on Friday, Premier Mark McGowan has revealed.

Following a National Cabinet meeting on January 8 all states and territories agreed to roll out daily tests of hotel quarantine workers after a Brisbane hotel worker was infected with the highly transmissible UK COVID-19 variant.

Victoria had already been doing daily saliva testing and Queensland enacted their testing regime three days later but Mr McGowan said on Sunday that WA had only just finished testing its new regime at the Novotel hotel last week.

“We put in place the saliva testing as quickly as we could using the health department and appropriate protocols, unfortunately, it didn’t start until late this week,” he said.

“It’s not easy, it is a big exercise to roll out.”

Well, that really cheeses me off. Yes, it is hard to get screening in place (I know it more than anyone). But it is not hard to do it in a rough and ready way while you work out best practices. So in WA’s case, they missed it by that much. But if this is your weakest link why did the Australian government wait until this year to decide to roll out daily testing? It boggles the mind. It is mismanagement of the highest order.

If it's mismanagement of the highest order that Australia only just recently started daily testing of workers in the border system, how should we describe a country that hasn't even considered implementing it yet?

Rapid antigen tests would be a fine addition, but the University of Illinois has had a saliva-based PCR solution in place for months, and it's at least as accurate as the nasal swab tests. 

It would be entirely feasible to add daily testing here for everyone in the border system, including those in MIQ. 

Back to Josh on Australia:

Nonetheless, this time around, you might be tempted to say, “it is what it is.” But it is February. A vaccine has been available since December. The Australian government has not rushed to procure vaccines. Nor should they necessarily do so as Australia is at Covid-Zero and doesn’t need mass vaccination as urgently as other places. However, Covid-Zero is a tough policy to maintain. You cannot tell me that it wouldn’t be possible to pay top dollar and procure vaccines for quarantine workers who, despite doing all you can, can still get infected and pass it through to the community. To be sure, if you have regular screening of everyone, there is a good chance leakages can be caught. But, there is a vaccine. The Australian government has sensibly placed these workers at the very front of the queue to get vaccines when they eventually arrive. But these workers and the country need them to have the best vaccines right now! The Australian government needs to be held to account for lockdowns and restrictions that occur that could have been mitigated by obvious, economically sensible actions.

Rather similar here.

New Zealand should have used advance market commitment orders to help secure an earlier spot in the queue while providing the funding that helps vaccine manufacturers scale up for everyone. But from where we are now, whatever your arguments around holding off on mass population vaccination in a spot where the virus is not prevalent, surely there should have been provision for enough early doses for workers in the border system. 

Even the best case is bad

I'd worried that there's not been nearly enough worst-case thinking around Covid, vaccines, and immunity. 

Josh Gans points out that even the best case around vaccine development is pretty worrying. Deploying a successful vaccine will take a long time. If you haven't subscribed to his substack newsletter, you're really missing out. 

This week I will look at vaccines and explain why the awaited for ‘miracle’ won’t be so simple. The reason I want to highlight this is not to get everyone down. If I wanted to do that, there are easier paths for me — I’m an economist after all; being a downer is a character requirement. Instead, the longer we think a vaccine will be a miracle outcome that stamps an end date on the crisis, the less time we spend doing things to end the crisis that doesn’t involve a vaccine.

Simple history is enough to give us pause. Vaccines have wiped out viruses and diseases like measles, polio and, most successfully, smallpox, which itself had millennia of history. No vaccine has ever put an end to a pandemic. In recent memory, both SARS and Ebola had vaccine candidates incredibly quickly as these things go (in a manner of years rather than decades) but by the time they were available, the outbreaks had been crushed and there was no reason to vaccinate widely. TB, HIV, MERS and Zika never had one. Thus, to think that Covid-19 will end with the prick of a needle is to ignore history and believe that this time it would be different.

To be sure, there is enormous energy and resources going into vaccine development. And, on a historical scale, progress seems extremely rapid. Indeed, everything I want to talk about this week will be predicated on the optimistic scenario that we have at least one vaccine candidate, approved safe by credible regulators, in early 2021. What I want to discuss are the details. Once that happens, then what? I am going to argue that we will be far from done and there are scenarios in which we are not done at all.

Things get pretty worrying pretty fast. Vaccine supply chains have crazy bottlenecks around getting oddball components you might not have considered necessary, like horseshoe crab blood and shark liver oil (or synthetic alternatives that would also take time to scale up - if those would be required for any vaccine, surely they'd be being scaled up now in anticipation, right?).

Then there's the problem of distributing doses.

This thing could have rather some time to run. And policy settings here are more consistent with a short-term stopgap than with something that could have to stand for a longer period. 

Parentonomics

My column for next week's Newsroom will go through a bit of econo-parenting. I wanted to check my earlier review of Josh Gans's excellent "Parentonomics", but found it had disappeared down an internet memory hole; it had been in the Christchurch Press in 2008. I've dredged it up from my Google Drive archives and am posting it here.

Review of Parentonomics

As with most things in life, it comes down to a cross-price elasticity. If you're a careful parent who's made sure that sugary and fatty treats are a complement to healthy foods rather than a substitute for them, which is to say that you'll allow them as an occasional reward for good behaviour rather than as a daily staple, you should welcome every bit of advertising on the kids' morning cartoons - it increases the price that kids are willing to pay for those treats and consequently the amount of good behaviour that you can extract from them in exchange. If you can control the supply. At least according to Melbourne Business School economist Josh Gans.

Dilbert creator Scott Adams tells us that having a working knowledge of economics is like having a mild superpower: it provides a pretty useful framework to help in understanding the world. Gans's latest book, Parentonomics (University of New South Wales Press, 2008), applies the economist's mild superpower to parenting - from the delivery room to school concerts. The results? Generally hilarious and often helpful.

Parentonomics is presented as a series of chapter vignettes written primarily to appeal to an audience of non-economists. Gans avoids economic jargon like "cross-price elasticity" - the tone far more Dave Barry than textbook. The informal narrative is bolstered by reference to empirical findings from the social sciences and intuitive explanations of the relevant theories. So we find that reasonable amounts of television viewing doesn't seem to have adverse effects on kids' school performance and that car seats for kids aged 2-6 don't really seem to add much safety over and above just wearing a normal seatbelt.

Parentonomics is at its best in chapters like "Toileting" where Gans applies economic reasoning about incentives in order to provide rewards for achievement of certain ... outcomes, then watches as the subjects of his regulatory regime alter their behaviour to obtain the promised reward in ways that meet the letter of the law rather than its spirit: when the child is rewarded for having a clean nappy when he wakes up in the morning, don't be surprised to find a pile of dirty nappies hiding behind the dresser. Other highlights include negotiating with infants and optimal punishment schedules for older children.

In other sections, Gans's economic applications are more observational than prescriptive: they help us to understand why things are as they are rather than help us in doing anything much about it. So Gans argues that, at a resort complex where his family frequently vacations, the folks who wind up paying for the "kids eat free" deals at the participating resort restaurants are the childless people going to the other restaurants: keeping the cheaper restaurants full of noisy kids helps induce others to pay more to go to the higher-end venues. Gans later wonders why airlines seem unwilling to make simple moves to make flights easier for families. Perhaps, following his earlier logic, it's that frazzled families as co-passengers also help make business class travel that much more enticing to the childless. I'm not entirely convinced by that argument, but I'm not sure that the counterarguments don't also cut against Gans's restaurant story.

In another interesting application of cross-price elasticity, Gans offers a blog, that provides interesting tidbits of economic analysis of parenting. I started following the blog about a year before Parentonomics came out; Gans started offering teaser bits from the book a few months ahead of the book launch. Some of the anecdotes and analyses that made it into the book also can be found in the blog, and of course the blog updates regularly with new material while the book does not. Is the blog then a complement to the book or a substitute for it? I find them rather complementary. Not least because it's a lot harder to take the blog to bed with you at night to read to your wife when the 11 month old is letting neither of you sleep.

Risk-averse publishers and copyright chilling effects

When Sky didn't like that I'd pointed the National Business Review's readers to Hola, they sent a note to NBR threatening to get the lawyers involved. And so the NBR pulled the line mentioning Hola. Pretty minor in the grand scheme of things, but irritating. It isn't illegal to link to Hola, or to mention it. But Sky has deeper pockets than the NBR, so why take it to a court test if you don't need to?

But what happens when this kind of risk-aversion is systemic? Josh Gans reports on the case of academic publishers and estates. Joseph Thomas has been having problems in getting his biography of Shel Silverstein published. Fair use exclusions allow extensive quoting from published work for scholarly purpose. So you don't really need to seek an estate's permission to quote from published work. You'd need permission to access their proprietary archives, but not to copy a song lyric or a stanza from a poem in discussing the author's work. But that doesn't matter where a defense could prove costly for a publisher with shallow pockets. Unless they can be pretty sure that they'd win and that the court would award costs, why take the risk? Here's Gans, from whom I quote extensively:

Thomas had been researching a biography of Silverstein for which the only other treatment is a likely biased account. However, to do justice to Silverstein’s work, Thomas has to quote liberally from him and include pictures and what have you. Academic publishers don’t do the legwork on getting copyright permissions so Thomas had to do that. He was shut down by Silverstein’s estate. Basically, he could not quote anything ever. Thomas then took to the pages of Slate and mentioned the sort of things that Silverstein’s estate might be worried about revealing.

My lawyer friends will tell me that copyright law actually protects Thomas and his publishers here. “Fair use” would likely have allowed pretty much anything that Thomas wanted to quote without him having to ask for permission. But the publishers wanted permission asked for regardless. The problem there was that when Thomas received a ‘no’ the publishers took that as a ‘no’ even though it was just a ‘no permission’ and not a ‘no the law says you can’t do this.’ So Thomas can’t get his book published.

In reality, while it is somewhat ‘not giving’ for Silverstein’s estate to not grant permission one can actually see why they wouldn’t be happy seeing the biography published. But that is precisely the reason we have “fair use” because we recognise that copyright holders may want to block more than just copying. I have been lucky in my books. In Parentonomics, I asked both Malcolm Gladwell and Orson Scott Card permission to use lengthy quotes and they gratefully gave it and wished me luck. The only time I was asked to pay was when I wanted to use a picture of Coke can in our chapter on product differentiation in my adaptation of Mankiw’s Principles of Economics. Coke wanted to charge us for permission. I promptly switched the picture to Pepsi and that picture has been presented to almost 100,000 Australian students now.

The problem this time around is academic publishers or publishers in general and what they are willing to do. They appear willing to let a controversial work not be published rather than feel the ire of a law suit that is likely to fail. Thomas certainly isn’t in a position to fight a legal claim but it is a shame that publishers do not see that as part of their role. I guess when it comes down to it, the returns to publishing certain books are too low to add a legal bill to costs. But all in all it points to a broken system.

Returns to publishers aren't going to be rising anytime soon. Further, that would be a specific fix to a more general copyright problem: expected penalties for bogus claims are pretty slim. And so automated bots can issue DMCA notices with high false-positive rates and impose costs on ISPs and websites without particular sanction. Were there sanctions for filing false reports, or for bringing spurious copyright claims, we might expect fewer of them. And we might expect publishers to start being willing to take the punt where they think the author is in the right.

Many years ago, I tried getting a project through Canterbury's Ethics Review Board. They wound up killing the project. Not directly, but after the almost year-long process where they agonized over that our project involved deception, followed by finding out we'd have to go through the same rigamarole at the coauthor's university, we just abandoned it. But here was the project. Imagine this circa 2005.

We identified a set of academics around the world, some at universities with law schools, some without, some public, some private, who'd be willing to host a copy of Thoreau's essay On the Duty of Civil Disobedience on their faculty website. We'd contacted some of them, but didn't see great problems in getting a decent set of these up. We then were going to send out bogus copyright take-down notices to their universities from a newly formed Henry David Thoreau Society which also was to have a website with that work, among others. The 1849 work was clearly in the public domain everywhere. We wanted to see how many universities would cave in immediately, how many would at least have their webmaster get in touch with the named academic, and whether places with law schools as repositories of free legal advice might have been more willing to bear potential legal costs by telling us to get stuffed. And all the other correlates (academic seniority of the faculty member's website, type of university, legal jurisdiction and so on) would have been pretty interesting too.

I still spit whenever somebody says Ethics Review Board. I mostly now just avoid doing anything that needs anybody's approval. Who needs the hassle? So I can get why publishers might want to avoid copyright court hassles. But the net effect is pretty cruddy.

We need more judges like Otis Wright. Explicit penalties for folks using bogus legal threats to chill protected speech could be helpful.

Bad management

Managers are strong complements to workers; with bad managers, everyone's productivity goes down the toilet.

Eli Dourado reckons the cost of managerial complements makes a case for zero marginal product workers: the worker might be producing more value than he's taking home in pay, but not enough to cover the cost of the manager that lets the worker produce positive-value products. Read the whole excellent post.

And we can see this when the managerial complement goes awry. Case in point: Mexico. 

Mexico City’s Buena Vista Walmart is the first super-market I’ve ever seen paralised by a trolley-jam. It is not more busy than any other large city supermarket, and not understaffed. No: the reason it takes ten minutes to walk from one side of the store to the other every single night is because they have no baskets—only large trolleys. To my sample of Mexican Walmarts, this is unique; most Mexican Walmarts have trolleys and baskets. And so the error must have been made by the managers of that particular outlet. Of course, this is only a small example of inept management in Mexico, but it’s sadly representative—labour productivity in Mexico is about a third of that in the US. If Mexico were as well managed as the US, it would be as rich.

This all raises a few questions: why are managers in Mexico (and the developing world in general) so terrible? why are those in the US so good? and how much of the difference is able to be affected by policy?

James Savage chalks it up to Mexico's caste system, nepotism / seniorism, and an awful school system. If your first worry is about hiring somebody who won't steal from you, you'll weight connections over competence. But again, read the whole post and despair at the morass of interlocked problems that reinforce each other and make solutions difficult. Foreign firms coming in and bringing with them stronger demand for competence has to be part of the solution, but the Walmart example suggests it might take a while.

Air Canada provides a different problem. Here's Josh Gans, lamenting just how awful Air Canada is compared to what he's been used to in Australia. Where Virgin in Oz had in-flight face painting for the kids at the back of the plane - effectively in-flight child entertainment far away from the parents - Air Canada seemed determined to make sure his family of 5 were separated throughout the plane. Josh very nicely explains the obvious points about just how terrible it is for all fliers that Air Canada made it impossible for him to sit beside his kids; it would be surprising if Air Canada's gains in forcing families to book through the Air Canada system outweighed the losses they get from ruining everybody else's flight.

The less sinister explanation is that Air Canada have a very poorly executed booking and flight reservation system. Someone, somewhere forgot about families and deep in the code there is no way for Air Canada to sort out the mess. My bias is on incompetent planning rather than evil attempts at price discrimination in these matters.

This is observationally equivalent to my hypothesis, formed about a decade ago and now potentially out of date: a too-large proportion of Air Canada staff actively hate the passengers.

I don't think Josh's explanation is sufficient; Air Canada could always choose to release third-party booked seat allocations more than 24 hours ahead of flights. And my "they hate the passengers" explanation is not only more plausible than that it's profit maximizing to impose potentially massive costs on full-fare paying flyers to keep price-sensitive families from using aggregators, it's also parsimonious, explaining much of the overall Air Canada experience.

Again, like James's Mexico problem, we've got a set of interlocking issues: this time around union rules, seniority, effective domestic monopolies, and government bailout backstops making for soft budget constraints. But this one seems easier to unravel. Canada could unilaterally allow cabotage on its routes instead of waiting for a bilateral agreement with the States. Let Virgin America run intra-Canada flights, drive Air Canada into bankruptcy, sell off the planes to new entrants, and start over with new management that doesn't hate passengers.

I'll continue to be very happy with Air New Zealand (regardless of changes to its AirPoints upgrades system), and even more happy with Emirates on the Trans-Tasman.

Catching cheaters

Panos Ipeirotis notes the extreme cost to lecturers of pursuing cheaters.

By the end of the semester, 22 students admitted cheating, out of the 108 enrolled in the class.

The process of discussing all the detected cases was not only painful, it was extremely time consuming as well.

Students would come to my office and deny everything. Then I would present them the evidence. They would soften but continue to deny it. Only when I was saying “enough, I will just give the case to the honorary council who will decide” most students were admitting wrongdoing. But every case was at least 2 hours of wasted time.

With 22 cases, that was a lot of time devoted to cheating: More than 45 hours in completely unproductive discussions, when the total lecture time for the course was just 32 hours. This is simply too much time.

When 1 out of 5 students in the class being involved in a cheating case, the lectures and class discussions became awkward. For the rest of the semester there was a palpable anxiousness in class. Instead of having friendly discussions, the discussions became contentious. Not a pleasant environment.

This, of course, had a direct effect to my teaching evaluations. Instead of the usual evaluations that were in the region of 6.0 to 6.5 out of seven, this time my ratings went down by almost a point: 5.3 out of 7.0. Instead of being a teacher in the upper percentiles, I was now below average.

The Dean’s office and my chair “expressed their appreciation” for me chasing such cases (in December), but six months later, when I received my annual evaluation, my yearly salary increase was the lowest ever, and significantly lower than inflation, as my “teaching evaluations took a hit this year”. (And I publish in journals not endorsed by Business Week, but I will leave this story for another time.)

Josh Gans explains that optimal structures take enforcement out of lecturers' hands so that enforcement is more credible.

So what should the administration do to change the equilibrium? First, take the enforcement of cheating out of the Professor’s hands. Employ a policing person who is the one who receives the Turnitin results and decides what to do about it. Make it their job and you solve the free-riding problem right away. You also allow cross-course, repeat offender detection. And you change the cheating equilibrium to one where enforcement is expected. Finally, the Professor has their hands clean and so suffers no conflict over teaching evaluations.

Canterbury isn't far from this. Everything is run through TurnItIn. Anything that looks dodgy, I hand off to the Head of Department. There's still a short meeting between the student, the HoD, and me, but it's short and the HoD is the bad guy. And there's reporting within the College (and hopefully extending within the University) on proven cases of plagiarism such that track records get established; we then can apply schedules with increasing marginal penalties.

This was all getting pretty reasonably firmed up in the pre-quake world. I'll be using TurnItIn again this semester; hopefully, I won't have to haul anybody into the HoD's office. But TurnItIn has embedded itself nicely here; after a few years, most students have cottoned onto that they can't get away with the dumber forms of cheating.

Wasting Josh Gans's time

Josh Gans left Australia to take up a position at the University of Toronto. And now he gets to deal with Canadian Immigration, who've made him spend four hours proving that he can indeed function in English. Presumably he could have chosen to sit the test in French instead. Despite having more published papers than I care to count, Josh still had to sit through this kind of nonsense:

The first part was a speaking test. This is where a tester sat across from you and carried on the most unlikely conversation for someone you just met. He read a scripted piece which I filled in the other side of the conversation from. It started off standard and friendly enough with some exchange of basic information before he somewhat ominously decided to put a question to me where I would be allowed some “thinking time” before I answered. The question was to describe a job that I believed helped the world and to explain why I thought that. Of course, my first thought was “well, not your job because this is clearly a waste time in some broad sense.” But as I was the only person in our family required to take this test, I had been ordered to be on good behaviour. So I went with scientists and put in a solid discussion of the microfoundations of endogenous growth theory for a minute. I don’t think he was that intrigued because when my minute was up he cut me off mid-word — apparently more desperate to be free of this than I was. He then decided to provoke me by asking whether I thought that “industry destroyed the environment.” I said I thought that by definition all human activity, including industry, destroyed the environment, what of it? We then meandered back into whether technology was making people’s lives more enjoyable (I said, “it is me! I have an iPad”) but before I could get onto the Easterlin Paradox, my time was done.

And it gets better from there; read the whole thing. He concludes:

Anyhow, I cannot recommend against doing this enough. There has got to be a better and quicker way to assess language — maybe some two step procedure. I’m glad it is over — assuming I pass that is. If I don’t pass, it will turn out I am not recognisably proficient in any language!

Take Josh's experience, multiply it across all the thousands of English-speaking immigrants to Canada, multiply it by the value of their time, add in the bureaucracy's cost, subtract the bureau's cost of an alternative triage method: there's a social cost for you!

At least it sets people up with proper expectations of the Canadian bureaucracy. When I was home in Manitoba, a friend was talking about somebody who was trying to get into farmed fish. They'd gotten all the permissions for the fishing operation, but hadn't realised that their meat processing facility, already certified and registered, couldn't be used also for fish without an extensive additional permitting process. Instead of anger at the bureaucracy, folks instead puzzled over why the would-be entrepreneur hadn't made sure from three potentially relevant certification agencies that everything was allowed; the default assumption is that something is forbidden unless permitted in triplicate. That's no way to live. I was reminded of how Ellis Redding, paroled after decades in prison, still couldn't stop asking for permission to use the bathroom.

Meanwhile, here's how Immigration New Zealand solves the English-language problem:

The principal applicant is the person making the application. If you are the principal applicant, you must meet our standards of English. The minimum standard of English is an International English Language Testing Systems (IELTS) certificate, with a band score of 6.5 or better in the General or Academic modules. This certificate must be less than two years old.

However, we may consider one of the following as evidence if you can show us that you:

• have a recognised qualification from a course taught entirely in English,
• have ongoing skilled employment in New Zealand, and have been in the job for at least the last 12 months, or
• have other evidence proof of competency in English. We will consider a number of factors.

When I made my application a few years ago, in the third of the page where it asked for evidence of English competence, I listed a few publications and offered a copy of my dissertation. That was good enough.

Kiwis have no clue how bad things are elsewhere.

Obstinateness is hereditary

I don't like nudge-style policies that try to shape my behaviour.

Neither does my two year old.

First attempt at toilet training: a reward for successful task completion. A stamp or sticker. Stopped working after two successes.

Second attempt: carrots and sticks. A messy filled diaper put a toy in toy jail, but a successful task completion would get a toy out of toy jail (or a treat if no toys in jail). Worked twice. Then he decided it was fun to put toys in toy jail.

Rewards for inputs rather than outputs (time attempting task rather than achievement) predictably led to lots of time on inputs with no output, followed by messy diaper ten minutes later because he just prefers producing it there. Moral suasion has been useless. High salience rewards and punishments are illegal and probably inadvisable anyway. And who makes a Taser that's safe for toddlers anyway?

I think it's time to start rewarding him for producing messy diapers. Or just follow Gans's lead and leave it to the experts.

Classification costs

Australia considers requiring mobile application games be classified by its censor's office. That would cost $470-$2400 per game. Josh Gans notes the likely effects:

This would cause several things. First, literally thousands of overseas developed games would be removed from the various mobile application stores in Australia. Most of these do not cover the developer costs and even those that may have in the past may not do so in the future. Not to mention the cost of applying for classification. The effect on Australian consumers would be immediate. Second, this would have an impact on local developers. Fortunately, with regard to games, most of their sales are elsewhere. But we will see a headline within a year: “Australian teenager has hit mobile game but her friends cannot play it.” Nonetheless, there will be a disproportionately negative impact on developers who are trying to tailor games to the local market. Third, this will end up including educational games and books. For instance, Dr Seuss books on the iPad have little games in them. I assume that means they require classification. Maybe popular children’s books won’t be impacted but there will be many other educational apps that will be and this will spark further headlines. Fourth, apps that use Apple’s iAds will be impacted as these ads may include games in them. Finally, all of this will cause Australians to either pirate games in droves — indeed, they may do so just to get games that are actually free elsewhere! — or move to overseas app stores. My guess is that rules imposed internally by Apple and co that prevent purchases by Australians from say, New Zealand will be relaxed. This will alleviate the harm of all this but it will be a very bad look. Need I say, that this is as much a problem for Apple and Google as it is for developers and consumers. In other words, the doom and gloom forecasted may well occur.

Gans reckons an easier solution is to require gamemakers to self-classify but to impose harsh penalties for inaccurate classification. I expect this would have much the same effect, with most foreign providers seeing little point in exposing themselves to Australian legal risks. The Australian censor's office is known for bizarre decisions.

Previously: Classification costs keep a lot of niche films from being available in New Zealand.

Caught in the stone age - Australia too

I'd wept a couple months ago seeing the gap between the US and NZ widening.

Josh Gans is on sabbatical at Harvard and is having the same experience:

In Australia, TV is dictated at the behest of four networks and one cable provider. There is nothing reliable on the internet and paid for services like iTunes are crippled. In contrast, in the US, I subscribe to a single provider, Comcast, for all television, internet and phone requirements at the home. The television comes over a DVR that runs Tivo and so can be programmed from anywhere. But who cares about programming? They actually have an ‘On demand’ service that has all of the main programs you may have missed. And, of course, all of this is in real 1080i HD. And you can use the same service to watch and pay for new release movies so we don’t even own a DVD (that technology lasted less than a decade in our household).

But wait, there’s more. Not satisfied with that and you can watch much of the stuff online anyway. Hulu is a well designed service that really works. Of course, you can’t skip through ads but who cares. There is just one per break and they tell you how long it will last! And add to that that I face no download caps and you have all you want. (Oh yes, if you think I am stuck with US programming and that is a minus — not from my perspective but others might think so — then think again. I got to see Doctor Who the day it aired in the UK.)

Finally, the phone on top of this costs pretty much nothing. I can call anywhere in the US and Canada for the cost of a local call — which turns out to be $0 per minute. The voice mail is accessible online so I don’t have to be at home to pick up. In any case, I use Google Voice which calls all my phones and so I don’t really have to be worried about receiving calls at home. In any case, if I’m watching TV and there is a call it will tell me who is calling on the TV. Now that is a benefit of an integrated communications service.

Australia puts up with continual crap on this front. None of the technology here is monopolised and non-transferable to Australia. I fear we will get a shiny new NBN with none of this and wonder why consumers don’t want to pay much to use it. It is like strapping a jet engine on to a horse buggy. Our persistent lagging on this suggests that we need government review to understand what is holding Australia back. At the moment, I don’t want to come home.

I still say it's mostly a problem of fixed costs. Getting the rights to air each separate item in the Hulu library outside of the US? Fixed cost. Getting the rights to distribute movies outside the US (for Netflix)? Fixed cost. Population in NZ isn't high enough to justify it; apparently it isn't for Australia either.

Measuring media bias in Oz

Andrew Leigh and Josh Gans versus Andrew Norton on measuring media slant in Australia.

Leigh and Gans bring Groseclose and Milyo's method to Oz, but use public intellectuals rather than think tanks due to the paucity of the latter. Recall that the original Groseclose and Milyo method didn't benchmark to partisanship but rather to ideology: the US has ADA scores for representatives, so each representative is rank-ordered from liberal to conservative and an imputed ideological score is then given to each think tank. Robustness checks in Leigh and Gans include expert coding of front-page newspaper articles, both political and overall, and coding of newspaper editorials.

Norton says the ranking of intellectuals lacks face validity: that their left-right positions don't correspond to casual observation; moreover, public intellectuals tend to be ideological rather than party partisan so the method may not work.

I certainly don't know enough about Australian public intellectuals to know whether there's a lack of face validity in Leigh and Gans's ordering, nor do I know whether the public intellectuals tend to be party hacks or ideological hacks. But I'm pretty sure that Groseclose and Milyo were able to drop negative or reverse mentions from their analysis (things like a National MP saying, "Even Brian Easton agrees with X", for example) while Leigh and Gans weren't able to given their initial dataset. On first thought, so long as both sides tend to do this with equal frequency, it might just add noise to their estimates rather than much bias. On the other hand, I can imagine those reverse mentions happening a lot more for the tails of the distribution, which would greatly narrow the measured range of public intellectuals' opinions and could lead to a centrist-bias in the results. Leigh and Gans say that folks don't much cite public intellectuals for the purpose of bashing them (a truly negative mention), but I can imagine a fair number of the "Even prominent Labour supporter X agrees..." mentions. In the end, their robustness checks mostly give them the same answers: most papers are largely centrist in Australia - so I'm less worried.

One thing that they can't control for over their period is whether slight evidence of slant in favour of the Coalition government reflected incumbency bias or pro-Coalition sentiment. Presumably they'll be able to test for that in a replication after the next election.

Cool that Leigh and Gans have taken this on. I've told my classes that a New Zealand replication of Groseclose and Milyo is likely impossible given:

1. Party line voting makes ADA scores impossible, so we can't benchmark against median voter ideology.
2. A paucity of think tanks makes the mapping impossible.

Folks could argue that media concentration in New Zealand makes it tougher, but even if Fairfax owns a lot of outlets, partisan or ideological market segmentation could well be profit-maximizing, so I tended not to worry so much about that one.

Measuring partisan slant rather than ideological slant seems possible using Gans and Leigh's method. Congrats guys.