National and Tariffs

National seems set today to vote down Roger Douglas's bill eliminating New Zealand's few remaining tariffs. While our tariffs are relatively low by international standards, they do result in lots of barefoot Kiwis.

Getting rid of the remaining tariffs would be the right thing to do, but wouldn't have very large effects on the overall economy. Prices on clothes, shoes, and some industrial goods would drop, but probably not by enough for voters to notice come the next election. However, they would remember the news stories about the next clothing plant that closes claiming it was due to tariff protection reduction (whether any tariff changes were marginal or inframarginal would not be discussed, of course). Gains to the winners outweigh losses to the losers, but the winners are dispersed and wouldn't much notice it. Logic of Collective Action meets the Myth of the Rational Voter.

So National could be right not to spend political capital on this one if they were saving up for moves that would earn them as much opposition but that would generate greater efficiency gains. Let's hope to see some of those moves in the budget....

Treasury on tobacco

The Regulatory Impact Statement for the recent tobacoo excise changes makes interesting reading (aren't Google searches wonderful?). Note especially that Treasury's less than impressed with thie RIS.

ADEQUACY STATEMENT
Treasury’s Regulatory Impact Analysis Team has reviewed this Regulatory Impact Statement and considers that the level of analysis presented is not commensurate with the significance of the proposals, which represent a significant increase of 33 per cent on manufactured cigarettes and 51 per cent on loose tobacco as a proportion of the price.

Information gaps include:
• The problem of equalisation is based on an assumed consumer switch from manufactured to loose tobacco due to an excise differential arising from changes to tobacco content in manufactured cigarettes. As this change does not trickle through in observed prices, it is not clear consumers are aware of the change in tobacco content (and be a reason for any behavioural changes) or that consumers readily switch between the two types of tobacco products;
• On equalisation, no alternative options have been considered. For example, the excise could be changed to directly link to tobacco content instead of product packaging;
• The problem of setting the rate of the excise, it is not clear that the rate will be set at the level that achieves the highest net benefit to society; 

Highest net benefit would weight consumption benefits appropriately; I see no attempt to quantify those forgone befits in the RIS.

As for the costs of smoking on the health system, according to the less than adequate RIS:

A 2007 estimate put the cost of smoking to the health system at $300 to $350 million per annum; however current work within the Ministry of Health suggests that figure may be as high as $1 to $1.6 billion per annum2.

FN2: Please note that this analysis is work in progress and methodological issues are currently being addressed.

Oh, it will be interesting to read whatever MoH finally produces here. I wish more of the press corps here would have noticed something odd with the "costs to the health system" jumping by more than a billion dollars since the last estimate; I've only seen blogs worrying about it.

Transfusions and operating room ethics

So I was chatting with the anaesthesiologist during Susan's caesarean section this morning (while peering over the shield to boggle at what all was going on over on the other side). There was some risk that Sue might wind up needing a transfusion as things got a bit complicated.

[Note: Stress and nervous tension are now serious social problems in all parts of the Galaxy, and it is in order that this situation should not be in any way exacerbated that the following facts will now be revealed in advance. Susan and the wee girl are fine. While the caesarean took a while, all wound up all right in the end. In order that some sense of mystery should still be preserved, no revelation will yet be made concerning the second decimal place of the girl's weight, the first digits of which were 4.3 kilograms. The second decimal place may safely be made the subject of suspense since it is of no significance whatsoever given measurement error.]

As I'm O negative, I noted that should Sue only need a small top-up, I'd happily provide. The anaesthesiologist said that would not be possible. The rest of the conversation went roughly as follows:

Me: Why not?
Her: Well, we'd need to do the blood tests to make sure it was all clean for transfusion.
Me: So, that would take too long then?
Her: No, that's not the problem. Rather, if we ever found something that the other partner might find cause for concern, we'd then face an ethical problem. So there's a rule banning these kinds of husband-wife transfusions.
Me: Ethical problem?
Her: Imagine the case where we find the one partner has an STD which the other partner would find out about because we wouldn't be using the blood.
Me: So if Susan needed a kidney and I were a match, I'd be banned from giving it then?
Her: No, we'd just make sure there were proper pre-counselling available so everyone were ready in case such a thing were found.
Me: Is there anything that ethicists don't completely screw up?
Her: Well, it's a complicated issue. I suppose if someone jumped up and down a lot and got a lawyer in...

In a rare instance of clarity, I realized that arguing medical ethics with the anaesthesiologist during the caesarean section might not be the very best idea, especially as things were starting to look very busy on the other side of the sheet and as the anaesthesiologist almost certainly wasn't the one responsible for the policy.

There is, of course, a dead simple mechanism design solution to the ethical problem here. The blood is taken, the donor and the recipient both signing a form that if any ethically troublesome problem is found in the blood, blood from the standard donor pool would instead be used without additional notice to the recipient; the donor would later confidentially be informed of the ethical problem encountered. Problem solved. The doctors don't need to tell the recipient of the donor's possible philandering while in the middle of surgery; the donor finds out about any blood problems; and, if there's a blood problem, the recipient is no worse off than would have been the case had they just gone to the standard pool in the first place. It's not that far from the solution they had a while back allowing folks from high risk groups to donate blood while ticking a box indicating that their blood really shouldn't be used.

Why the hell anybody lets ethicists ban things before they ask an economist for a mechanism design solution to the purported problem....

If we wind up finding that Sue comes up a bit anemic and tomorrow needs a transfusion, I may jump up and down a bit arguing for my solution through mechanism design.

And now we can safely reveal, without ethical dilemma about the risks of imposing stress on you our dear reader, the number in the second decimal place was 1.  4.31 kg; head circumference 39 cm, length 55 cm.

Her name, however, will not be revealed as yet. Those who care may follow my Twitter feed for updates of that sort.

Smoking costs - update

The $1.9 billion figure apparently comes from the Ministry of Health.

The total cost of smoking to the health system is difficult to calculate precisely, but is currently estimated by the Ministry of Health to be at least $1.9b out of the total Health Budget of around $12b.

I'll be curious to see what documentation they have backing that up. I do not expect that the anti-tobbac folks would have mistakenly left more than a billion dollars off of the health care costs....

Big numbers

So, the Rail and Maritime Transport Union and the City of Dunedin jointly commissioned BERL to come up with a number on just how great it would be for New Zealand if the government directed KiwiRail to ignore profitability and instead contract with New Zealand companies to build new rail rolling stock.

Any guesses if BERL came up with a suitably big number for them? Somehow they managed to, surprisingly enough.

KiwiRail has workshops in Dunedin and Lower Hutt capable of building and maintaining the rolling stock.

The report, commissioned by the Rail and Maritime Transport Union and Dunedin City Council, found 770-1270 full-time equivalent jobs would be created over the construction period, $232-$250 million would be added to gross domestic product, Crown revenue would rise by a net $65-$70 million and the trade balance would benefit by $114-$122 million.

Manufacturing the units and locomotives locally would also develop and maintain the skill base in New Zealand, opening the industry up to the $15 billion international rolling stock industry, BERL said.

It would also allow for ongoing maintenance contracts to remain domestic, and innovation and technology opportunities could spillover into other industries, the report said.

Would I trust the number? Of course not. A thousand jobs adding $240 million to GDP: $240K GDP per job? And $120K per job benefit to the trade balance? Some folks are really good at coming up with the numbers their clients want to have promoted....

Confusing "social costs" and fiscal costs [updated]

Lindsay Mitchell first pointed out massive inflation in the reported health costs of smoking. Where most measures, even coming from the anti-tobbac folks, were well south of $400 million, the Dominion Post started reporting figures of $1.9 billion as the annual health-related costs of smoking.

That number's also made it into a DomPost editorial, as pointed out by Matthew in comments here:

The Health Ministry estimates the health-related costs at $1.9 billion – much more than the $1.3b that will be raised once the new tax rates are fully in force.

And, I've seen more than a few folks on "ask the public" tv news interviews complaining about how smokers aren't paying their way and ought to be more heavily taxed.

What's the provenance of the $1.9 billion number? MacDoctor suspects they're using a "social costs" figure. Paul Walker emails me the following:

From "Cancer Society POSITION STATEMENT: TOBACCO"

"The cost of smoking in New Zealand is substantial. The cost from tobacco use to New Zealand’s publicly funded personal health care services in 1987 was estimated at $202 million in 1992 dollars. Not counted are the costs of exposure to second-hand smoke, or the costs of cigar and pipe smoking. The wider estimated costs to society far exceed the direct health care costs to Government and has been estimated at $1.9 billion in 1992 dollars^9"

9. Public Health Commission. Tobacco Products: The Public Health Commission’s Advice to the Minister of Health 1993-1994. Wellington 1994.

I was guessing the $1.9 billion was an inflation adjustment of the 2005 figure of $1.7 billion; Paul thinks it comes from this prior figure. Either way, it's a measure of "social cost" rather than costs to the health care system or to the government more generally.

I really hate these "social cost" estimates. Motivated folks can always present them as being actual costs to the government, and that affects public opinion about the appropriate level of taxation.

Update: The $1.9 billion figure is on the Ministry of Health website; my apologies to the Dom Post for thinking they'd been the source of confusion. It will be interesting to see the Ministry's supporting documentation.

On the awesomeness of Rush

Colby Cosh explains all.

It’s disorienting for a Rush fan—someone who was patronizing and defending them when it wasn’t just not cool, but the opposite of cool—to watch the bien-pensants struggle to cram them into the canon in the year 2010. Especially since it’s been twenty years since their finest work, and arguably more like thirty.

I started university at almost the exact moment Nirvana broke, and I still remember exactly where I was standing the first time I saw Kurt Cobain on the cover of a guitar magazine. I don’t play, but for years I’d been devouring the rhetoric of high-performance musical gear and modal theory as a fan, incapable of appreciating it as anything but a species of foreign-language poetry. In that world, the members of Rush were (and are) senior deities. It was instantly clear to me that Cobain, who had duct tape on his guitar neck and probably thought the Mixolydian was a brand of food processor, was going to annihilate the universe we had known. This was a lot like being Michael Corleone in Godfather II and watching that Cuban guerrilla blow himself and the cops to smithereens. “Uh-oh.”

But the last revolutionary flowering of romanticism in pop music ended up being the best possible thing for Rush’s reputation. Intellectuality and musicianship were purged from the radio, but this left the generations that followed hungry for a little classicism, a little ambition and ironic pretension. (How else do you account for Mellon Collie and the Infinite Sadness?) Grunge provided an opportunity, as punk had before, for separating the wheat from the chaff—annihilating acts that had truly been predicated on nothing but hairstyles and codpieces, and allowing reconsideration and critical filtering of arena rock, metal, and prog that might have been burdened with excessive pompousness and trippy kozmik imagery, but still possessed enduring value. (You don’t want to hear my lecture on how Iron Maiden has introduced more teenagers to literature than anybody in Britain not named J.K. Rowling.)

Granted, I’m not actually sure that “classicism vs. romanticism” is the best metaphor for thinking about the tension between artfulness and sincerity in popular music. The three-chords-and-the-truth types are arguably the real classicists, self-restrained as they are by a musical version of the Aristotelian unities. But self-imposed limitations have been part of the fun of listening to Rush, too. It’s not really natural for a band to insist on doing what Rush has: being a three-piece outfit that will, as an inflexible rule, only make music in the studio that it can eventually replicate without additional help on stage.

I wasn't aware that there was a time when Rush was the opposite of cool. Is it possible?

Cosh's whole article is excellent: there's good reason he's now on the Arts and Letters Daily blogroll.

Previously: Rush, Red Barchetta, and the anticipating of Peltzman's seminal article on offsetting behaviour...