Resource consents

Shades of the Discount Brands case from a few years back, reported in today's Christchurch Press:

Resource consent for a planned Christchurch supermarket should be declined, a city council planner says.
...
Senior council planner Clare Revell said traffic volumes, noise and other issues could affect neighbours, while one of the supermarket’s competitors, Avonhead Fresh Choice, could lose $10 million in the first year.

"While the proposal will allow for more convenient access to a supermarket for some members of the community close to the proposed New World, it is my opinion that this may be at the expense of a number of others who currently utilise and rely on the Avonhead Mall as their existing district centre."

Recall that in Discount Brands, the Court decided that the amenity value of a proposed mall's competitors counted as a resource that needed to be protected under the Resource Management Act. Chapman Tripp noted:

When irrelevant trade competition effects become relevant amenity effects

Section 104(3)(a) of the RMA (previously section 104(8)) provides that a consent authority cannot have regard to trade competition effects when considering a resource consent application. However, the definition of “environment” in the Act specifically includes social and economic considerations affecting people and communities. So when do trade competition effects, which are irrelevant under the Act, become relevant social, economic or amenity effects?

The principle that the Courts have generally applied is that while they may not have regard to the direct effects of trade competition, it is legitimate to take into account flow-on effects that may be consequent on a down-turn in business in a particular centre. It is the consequential social and economic effects on people and communities served by the existing shopping centres that are relevant.

However in the Discount Brands case, the Court of Appeal considered that there would only be a relevant environmental impact which was more than minor if there was a “ruinous” or “major commercial and economic impact on existing centres”. The Supreme Court did not accept that such a high threshold was necessary or appropriate. Justice Blanchard considered that:

“...in equating major effects with those which were “ruinous” the Court went too far.A better balance would seem to be achieved in the statement of the Environment Court, …that social or economic effects must be “significant” before they can properly be regarded as beyond the effects ordinarily associated with trade competition on trade competitors.”

Chief Justice Elias provided further comment, stating:

“The effects on the environment in issue were adverse effects on the amenities provided by the existing centres. There is no basis in the plan for suggesting that any such adverse effect, which could be social as well as economic, must threaten the viability of the existing centres in order to be more than minor.”

The Supreme Court also gave a useful reminder that even the “significant” effects test is not necessary for amenity effects to be established. Justice Blanchard noted that it would be “necessary for a consent authority first to consider how trading patterns may be affected by a proposed activity in order that it can make an informed prediction about whether amenity values may consequentially be affected.”

The Supreme Court’s decision clarifies the position under the Act as to when trade competition effects will be considered relevant economic, social or amenity effects.

I wonder when and if National will get around to fixing this part of the RMA....

Base rates?

Kiwiblog nicely punches holes in ALAC's latest push for reduced drink driving blood alcohol limits.

I fear, though, that the stats are a bit of a nonsense without some measure of base rate. Let's take ALAC's numbers for the time being and ignore all of Farrar's very legitimate concerns. They say adult drivers with BAC between 0.05 and 0.08 are responsible for 7 of some 366 total road fatalities and some injuries. But we don't know what proportion of the overall driving population drives with blood alcohol between 0.05 and 0.08. If it's about two percent, then 7 of 366 doesn't seem all that out of line. If it's about half a percent, then 7 of 366 might be high, but we'd also have to adjust for time of day. All it would take would be to get aggregate data from the random police breath checks. If ten percent of the drivers on the road between midnight and 4 am have blood alcohol in the 0.05 to 0.08 range and if they're responsible for about ten percent of the accidents in that time, then we might be a bit overoptimistic if we figure we could cut down the road toll substantially by reducing the drink driving limit to 0.05: stone sober drivers also have accidents.

I still figure a reasonable move would be to combine any reduction in the blood alcohol limit with an opt-out procedure. Get a random sample of drivers and put them, sober, in a driving simulator. Tell them that the high scores get reduced licence fees so they take it seriously. Get an average score and the dispersion. Then, let anybody try for a drinking endorsement on the license. Anybody who sits the test while at 0.08 or higher and posts a score higher than a standard deviation below the sober mean gets to drive at that level of inebriation - a special endorsement on the licence. If that isn't good enough, why are we letting the bottom third or so of the distribution drive at all?

Previous posts:

• Even if 0.05 is consistent with a reasonable night out, risk aversion will cut things down disproportionately.
• The police seem exempt from drink driving legislation in NZ
• And the rest of the stuff from the drink driving tag, below...

Fiesty comments on organs [updated]

Last week I posted a note on Israel moving to give priority to registered organ donors and on Andy Tookey's work here in New Zealand to improve our system. If you didn't follow the thread thereafter, jump back and flip through the comments.

Commenter "Anita" provides what seems the orthodox line from the New Zealand health service: that allowing directed donation through a system like LifeSharers opens the door to a horde of imaginable repugnant donor preferences and that allowing compensation would crowd out charitable donation. Of course, the Iranian experience on the latter has been entirely the opposite.

I note that, even in the worst case of horrible racists wishing only to donate to preferred-race people, that's still better than that those organs rot in the ground. And it's not just crazy economists like me who think this. Here's a nice piece from Bioethics.

Andy Tookey of GiveLifeNZ weighs in, reminding Anita that LifeSharers is open without fee to anyone who'd like to join, that current measures trying to encourage donation through moral suasion have been rather ineffective, and that LifeSharers gives folks a very strong incentive to become organ donors - donation rates ought to increase substantially as more folks join. Dave Undis from LifeSharers US also comes in.

I spend a week on organ markets in my Economics and Current Policy Issues course. Below I've copied in the reading list as well as some other fun sources. I'll particularly recommend Hippen's discussion of how organ markets work in Iran which suggests that worries about crowding out charitable donation are overblown; Becker and Elias's excellent discussion of how proper markets could work; and, the pieces by Kerry Howley, Sally Satel and Virginia Postrel.

The status quo is killing people because some ethicists would feel bad if we allowed incentives to come into the system. Perhaps the ethicists should be working for free if financial incentives are so corrupting. And the surgical teams, and the hospitals, and everybody else involved. Maybe we'd really have a few thousand transplant specialist centres in New Zealand if all the altruistic transplant teams hadn't been crowded out of the market by the ones that get paid to do their jobs. I rather doubt it though.

Required Reading:

• Winter, Harold. 2005. “Do you want to trade?” Chapter 3, pp. 21-31 in Trade-offs.

Recommended Readings:

• Barnett, Andy, Roger Blair and David Kaserman. 2002. “A market for organs.” Chapter 6, pp. 89-106 in Alexander Tabarrok, ed. 2002. Entrepreneurial Economics. Oxford University Press.
• Barnett, William, Michael Saliba and Deborah Walker. 2001. “A free market in kidneys: efficient and equitable.” The Independent Review (Winter), pp. 373-385.
• Hippen, Benjamin. 2008. “Organ sales and moral travails: lessons from the living kidney vendor program in Iran.” Cato Policy Analysis 614.

Supplemental Readings:

• Barney, Dwayne, Jr. and R. Larry Reynolds. 1989. “An economic analysis of transplant organs.” Atlantic Economic Journal 17:3 (September), pp. 12-20.
• Cohen, Lloyd. 2005. “Directions for the disposition of my (and your) vital organs.” Regulation (Fall), pp.32-38.
• Epstein, Richard. 2006. “Kidney Beancounters.” The Wall Street Journal. 15 May. Pg. A15.
• Freedman, B. 1985. “The ethical continuity of transplantation.” Transplantation Proceedings XVII:6 Suppl. 4 (December), pp. 17-23. [Note: this is the standard ethicist's objection to use of incentives]
• Howley, Kerry. 2007. “Who owns your body parts?” Reason (March).
• Kaserman, David and A. H. Barnett. 1991. “An economic analysis of transplant organs: a comment and extension.” Atlantic Economic Journal. 19:2 (June), pp. 57-63.
• Matas, Arthur J. “A gift of life deserves compensation: How to increase living kidney donation with realistic incentives.” Cato Policy Analysis 604.
• Satel, Sally. 2006. “Death’s waiting list.” The New York Times. 15 May.
• Tabarrok, Alexander. 2002. “The organ shortage: a tragedy of the commons?” Chapter 7, pp. 107-114 in Entrepreneurial Economics.
• Tookey, Andy. 2006. “Organ donation – facts, figures and other interesting snippets.” Give Life NZ.
• Wilkinson, T.M. 2007. “Racist organ donors and saving lives.” Bioethics 21:2, pp. 63-74.

And here are a few other fun sources on the economics of transplant.

• Becker, Gary and Julio Elias. 2007. "Introducing incentives in the market for live and cadaveric organ donations." Journal of Economic Perspectives 21:3 (Summer). Working paper version of the same paper.
• Abadie, Alberto and Sebastien Gay. 2004. "The Impact of Presumed Consent Legislation on Cadaveric Organ Donation: A Cross Country Study." Working paper.
• Abecassis, M.M. 2006. "Financial Outcomes in Transplantation -- A provider's perspective." American Journal of Transplantation 6:6 (June). Note that we do not have a subscription so you'll only be able to get the abstract; I was able to get a full copy, but it isn't exactly easy.
• MatchingDonors.com
• Life Sharers
• Life Sharers New Zealand
• Andy Tookey's presentation to my Econ 224 class
• Keltz, Jessica. 2005. "Unorthodox ideas for economics." University at Buffalo Reporter 37:13. An interview with Julio Elias.
• Dubner, Stephen and Steven Levitt. 2006. "Flesh Trade" New York Times Magazine 9 July.
• Virginia Postrel's blog, Dynamist. She has lots of stuff on organ markets, and if you look back through the archives to May, 2006, you'll find her story about donating a kidney. Well worth a read.
• Marginal Revolution has a nice write up on the effect of prohibitions on organ sales on the number of transplant centres in the US.
• Richard Epstein chats on EconTalk with Russ Roberts about The Economics of Organ Donations. They also have a nice reading list of other materials on the subject.

Note: Updated to add links to more of the articles. Enjoy!

Condliffe Lecture

For those local folks who don't also read AntiDismal, a reminder of Canterbury's upcoming Condliffe Memorial Lecture.

2010 Condliffe Memorial Lecture

by Professor Charles Plott

Tuesday, 13 April, 5:30 - 6:30pm

Coppertop, Commerce Building, University of Canterbury.

The lecture outlines the development and use of laboratory methods, including the key discoveries and applications. The early science focused on the basic laws of supply and demand and how they operate to create a process of price discovery.The science evolved to include how information is transmitted through prices and the possibility of bubbles and market instability. More recent evolution finds the research focused on the design of competitive institutions to solve complex resource and environmental problems. The lecture focuses on the nature of the discoveries and how they are known through the application of laboratory experimental methods.

RSVP: Please RSVP, by Friday 9th April, for this event by contacting: Glenda.Lorimer@canterbury.ac.nz.

I saw Plott's address to the Virginia Political Economy meetings back around 1999 where he gave a nice demonstration of the frequency of asset bubbles in lab auction markets. Note that in a just world, Plott would have shared the Nobel for experimental economics with Vernon Smith in 2002; instead, the committee pulled another 1974 trick, partnering someone who deserved the prize but was politically problematic with a complementary partner.

Seasteading sabbatical someday...

Seasteading nicely covered in Prospect:

How about a seastead-based university? It could start as a boarding school but quickly add undergraduate courses in, say, engineering, aquafarming and oceanography. Later it could become a fully fledged global brand—the nucleus for a Stanford-like university town, complete with high-tech spin offs and sea-related enterprises. The venture could perhaps cater to a particular developing nation and be staffed by teachers from that country, or from nations sharing a similar culture. The unapologetic intention would be to create an elite network whose members, by virtue of a shared education, could effectively lead their home country towards a better future.

So, the only question then is whether the Seastead will be running 7, 14 or 21 years from now? I'd love a Seasteading sabbatical. Patri, make it happen!

Manitoba potatoes - again! [updated 2]

Update: The comments section in this Winnipeg Free Press article is scathing.

Update 2: Links in the post below are now broken; see update here.
--

It looks like what was supposed to have been an easing of regulations to let small Manitoba potato growers sell product to small vendors (recall, the whole industry is a cartel run by three big potato farms with legislative mandate to squash anyone else) has turned instead to further cartelization of the industry.

And so my sister's having to start fighting again to be able to sell potatoes from her shoppe this summer. Check the Manitoba Potato Coalition blog.

The new legislation means that if a Manitoba grower produces as little as one acre of potatoes, they must apply to Peak of the Market for a permit. The new law states that they are permitted to sell only ‘freshly dug’ potatoes, and that these potatoes can only by sold ‘in bulk’ (in other words, not in pre-packaged bags) with specific conditions on who they can sell to. It states that any potatoes the grower has left after November 1 each year cannot be sold.

The Marketing Council and the Manitoba government have allowed Peak of the Market to concentrate the potato industry to a point where today there are only 13 registered growers with Peak of the Market – with three of their largest growers supplying more than 50% of the potatoes for Peak of the Market’s domestic quota market. When Manitobans purchase locally grown red table potatoes from a major retailer, they are purchasing potatoes through only these 13 growers because of Peak of the Market’s monopoly control.

Without a permit, a small potato producer in Manitoba is no longer allowed to sell their produce anywhere, including independent vegetable stands. Even with a permit, these producers will not be able to sell their potatoes to year-round vegetable stands, restaurant owners, or vegetable wholesalers. Under the new legislation, the only potatoes that can be supplied to these places have to come from Peak of the Market and their 13 growers.

Our hope is that Manitobans will join us in asking our provincial government to amend the legislation to be more fair for all Manitoba producers, allowing small potato producers to grow and sell up to five acres of potatoes each year without restrictions.

This post breaks things down nicely:

Here’s what it will mean to YOU this summer.
ALL MANITOBANS:

• With the new regulations introduced on March 31, 2010, you now have less choice when it comes to picking locally grown potatoes
• When you buy Manitoba grown red potatoes from a major retailer, you are only supporting Peak of the Market’s 13 member potato growers because of their monopoly control within Manitoba

Small Potato Growers:

• If you grow even as little as one acre of potatoes, you must apply to Peak of the Market for a permit
• You are permitted to sell only ‘freshly dug’ potatoes
• Your potatoes can only be sold in bulk (no pre-packaged bags)
• Any potatoes unsold by November 1 every year ‘must be given to a food bank’

Farmers’ Markets and Seasonal Vegetable Stands:

• Farmers wishing to sell potatoes must obtain a permit
• Potatoes can no longer be sold at any market after November 1 of each year
• Potatoes can now only be sold in ‘bulk’ (ie. no pre-packaged bags)

Year-Round Vegetable Stands:

• Under these new regulations, small potato producers are no longer allowed to sell to you

Restaurant Owners:

• If you wish to feature locally grown potatoes on your menu, they must now be purchased exclusively through Peak of the Market

Vegetable Wholesalers:

• If you want to sell Manitoba grown potatoes, they must now come exclusively from Peak of the Market

Good luck in the good fight, Erin! Why the Manitoba government thinks it has any business stopping her from buying potatoes from her preferred farmers... Canadian agriculture has a lot of problems.

A wise investment

The best evidence suggests intelligence is highly heritable. So appropriate choice of spouse is the most important thing you can do for your future children.

But if fertility problems mean that you then need to turn to the gamete market, there's apparently a thickish, albeit somewhat illicit, market in high-IQ gametes.

The Harvard Crimson was one of three college newspapers that ran an identical classified ad seeking a woman who fit a narrow profile: younger than 29 with a GPA over 3.5 and an SAT score over 1,400. The lucky candidate stood to collect $35,000 if she donated her eggs for harvesting.

The ad was one of 105 college newspaper ads examined by a Georgia Institute of Technology researcher who issued a report yesterday that appeared to confirm the long-held suspicion that couples who are unable to have children of their own are willing to pay more for reproductive help from someone smart. The analysis showed that higher payments offered to egg donors correlated with higher SAT scores.

“Holding all else equal, an increase of 100 SAT points in the score of a typical incoming student increased the compensation offered to oocyte donors at that college or university by $2,350,’’ wrote researcher Aaron D. Levine.

Cheap at twice the price. But still officially discouraged by the American Society for Reproductive Medicine.

The Hastings Center Report, published six times a year, explores ethical, legal, and social issues in medicine, health care, public health, and the life sciences. The issue of the report containing Levine’s analysis also offers a counterperspective from John A. Robertson, who chaired the ethics committee of the American Society of Reproductive Medicine. He casts doubt on the notion that it is an ethical problem to pay more for eggs from a woman with a particular ethnic background or high IQ.

“After all, we allow individuals to choose their mates and sperm donors on the basis of such characteristics,’ Robertson wrote. “Why not choose egg donors similarly?’’

Indeed! Or should we move to force arranged marriages with random draw selection?

Note of course that egg extraction isn't an easy process for the donor: lots of time and hassle are involved. At fixed rate payment, what does that do to the pool of potential donors? Selects for the ones with the lowest opportunity costs of their time! Differential payments are required to bring higher quality donors into the market.

You might expect this to mean that the variance of payments for egg donors than for sperm donors. But recall of course that male donors face higher expected legal risks: there's a non-trivial chance that either legislatures or courts will make donors liable for child support payments, or that anonymity would be breached such that suasion could be used to extract resources down the line. Both of these risks increase with donor income and income is increasing in IQ. Nevertheless, price dispersion seems relatively low for male donors: a PhD donor's product retails for $40 more than the standard product; the standard product sells for $125 more than the "well, we have this stuff left over from a while back" product.

It's surprising that there's any market at all for the lower-tier male product given the very low price dispersion. I mean, who'd say "Nah, the extra $165 to go from bargain basement to PhD just seems too high; I'd sooner a slightly better iPod than a kid with an expected IQ increase of maybe 30 points." Are the lower tiers just there to make the upper tier look cheaper by comparison?

Obvious disclaimer: no involvement on any side of this market, academic interest...