Get out of the way

Bomber Bradbury wasn't exactly kind in his review of the LibertariaNZ's opening broadcast ad. He wrote:

Libertarianz PartyWeird video outside the war zone that is Christchurch. Trying to claim Christchurch as an example of bad regulation is intellectually skanky. 

Here's Vicki Anderson on the current state of play in Christchurch.

Over eight months I have vicariously shared their rollercoaster ride with bureaucracy.

For example, one was told his venue had been demolished, then that he had been told it had been demolished in error and that it was going to be repaired.

He was upset, ecstatic and then upset again when four months later he phoned me from inside the red zone, having been allowed in after much red tape to retrieve valuable equipment from the building, saying "you're not going to believe this".

Yes, turns out the building had been demolished after all.

However, when he phoned Cera "exploding with rage", they denied that the building had been demolished, despite his offer through gritted teeth to send them photographic evidence to the contrary. They then placed him on hold for 2 hours before cutting him off.

He's a big bloke. That day I saw him cry through sheer frustration. We talked for a long time that day.

Another venue owner tried to discover what was happening with his building. He has a family member who works for the council. This family member was told to pass on the message that he should not ask any more questions.

He took the inference to be "rightly or wrongly" that her employment could be in jeopardy if he "rocked the boat". 

... On behalf of everyone who has taken the time to lob their ball into my court and share their personal stories and struggles with me over the past eight months I ask: Dear beaurucrats, our heart's gone over your fence, can we have it back now please?

Bomber, please go and read the whole thing and take off the partisan blinders for a minute.

Roger's world

Tyler pointed to an innovative agricultural sector as evidence of Roger's influence.

Here's Andrew Coyne's lauding of New Zealand's system of public administration, in contrast to Canada's.

Many of the worst political scandals of recent years, from sponsorships to the G8 mess, have stemmed in one way or another from ministers meddling in their departments’ affairs, whether to the benefit of their party, their constituents, their friends or themselves. That ministers will meddle may be thought of as a given. But ministers would be a lot less tempted to meddle if they did not actually have the power to do so: if they were removed from any role in the day-to-day management of departments, by means of a statutory separation of the two.

If that sounds like an unpardonable limit on the discretion of elected officials, recall that we already do this in many areas of government. It’s why the courts are insulated from political influence, at least after the judges have been appointed. It’s also why we set up Crown corporations, at arm’s length from their departments. So why don’t we apply the arm’s length model more broadly—making departments less the plaything of their ministers, and more organizations devoted to delivering the best service for the lowest cost?

I’m hardly the first to suggest this: in fact, I’m pretty much describing the system already in effect in New Zealand. As part of a program of reforms in the 1980s, New Zealand turned every government department into something resembling a Crown corporation. Deputy ministers became CEOs, hired on fixed five-year terms. Instead of simply issuing directives to his deputy minister, the responsible minister negotiates an annual contract with the department CEO, setting out broad policy objectives, together with benchmarks for measuring progress. Then the CEO is left to get on with the job, with broad powers to hire and fire and otherwise manage the department as he sees fit.

In effect, the minister becomes the purchaser of services on the public’s behalf, rather than the provider. He is still accountable for the mandate the department is given, and for seeing that it is met: indeed, since the terms of the contracts are public, the effect is to greatly clarify expectations and responsibilities. But he no longer has any role in how they’re delivered. So the minister of transport still sets the broad outlines of transport policy: he just doesn’t get to decide which roads go through whose ridings. Conscientious ministers ought to find this quite liberating. It frees them to focus on their proper role: setting policy for the country, rather than skulking around in their departments’ backrooms, deciding where to place gazebos and the like.

Roger Kerr

I'm very late in posting this. Where to start?

Roger Kerr died this weekend. I first met him a couple of years after coming to New Zealand. Gracious and gentle, and utterly without pretence, it was impossible on first meeting to tell just how much of the current New Zealand policy environment was due to his hard work in the 80s and beyond.

But Malcolm McKinnon tells the story. Internal Economics II was the group headed by Jas McKenzie to analyse "the constraints on economic growth, the examination of alternative strategies for improving New Zealand's economic performance, the development of policies to put the preferred strategy into effect, and the promotion of a re-examination of existing policies which appear to conflict with that strategy." Graham Scott succeeded McKenzie. Economics II set about laying the groundwork for the revolution, bringing insights from American economists like Ronald Coase and James Buchanan to New Zealand policy. And here's where Kerr entered:

While Economics II did shift the Treasury's stance on policies, its impact on process was equally significant, and here too the role of individuals was crucial. Among those most frequently mentioned is Roger Kerr. he had joined Treasury as a 32-year-old in 1976 after graduating in French [Canterbury!], working in Foreign Affairs, and subsequently gaining an economics degree - for Deane, he was 'the most outstanding economics student I ever had when I was teaching'. When Graham Scott was promoted to an Assistant Secretaryship in 1981, Kerr became director of Economics II.
...
Recalls one junior officer of Kerr,

His energy to involve himself in things across the spectrum of the department's work was enormous. And he created the culture of peer review - you were encouraged to critique other pieces of work from across the agency, very widely, encouraged to create ideas, support ginger group discussions, brainstorms, analysts writing papers - he modelled huge amounts of those sorts of behavioru, sending thoughts and pieces to Muldoon and ministers and other agencies 'for your information'. He'd be reading prodigiously.

McKinnon includes this Sunday Star cartoon from 1991.

Kerr's blog has been compiling a list of some of the elegies, including Richard Epstein and Tyler Cowen. I haven't a lot to add. I only met Roger a few times, but we corresponded by email more often. He was always very generous with his time, even writing a note of support for the economics department only a few short weeks ago to help us out a bit during the University's fiscal turmoil. I wish we'd known just how high the opportunity costs of his time then were.

Roger helped introduce me to the set of people to whom a young George Mason type ought be introduced when starting out in New Zealand. When I wound up in a minor stoush with former Prime Minister Sir Geoffrey Palmer on alcohol regulation, Roger helped to show me how to craft a proper OIA request and helped make sure that the right folks got a copy of the work I'd been doing. He surely had better things to be doing and bigger fish to fry, but he always had time to help out the new kid.

Thanks Roger. The place won't be the same. And all our best to Lady Catherine. 

Damn.

Update: Seamus adds:

I would draw readers’ attentions in particular to the obit from Richard Epstein, in particular confirming the viewpoint there that, in strict contrast to the caricatured public view of the Business Roundtable and, by extension, Roger, he lived his principles on an everyday basis, making sure that “this organization would not seek to find short-term advantages for its members at the expense of the public at large.”  

His excellent talk to Andrea’s class exemplified this. I think the students were surprised that right from the outset his talk was about “human flourishing”, not about productivity, catching up with Australia, or other narrow concepts. The powerpoint slides don’t do justice to the talk he gave around them, but the final two slides are probably an apt summary of his world view.

 Here are the slides from Roger's talk with Andrea's public finance class.

What a waste

Norwegian experimental economists ran some social trust experiments on a sample of prisoners. In prison.

You'd think the first thing they'd do would be to try the Prisoner's Dilemma, right?

Alas, they run a dictator game and some variants on a trust game.

Is there no poetry left in the world?

HT: Chris Dillow

Oh, they found that prisoners weren't much different from non-prisoners. But what a let-down. I'd have wanted to see two treatments on the Prisoner's Dilemma game. One with neutral framing, the other with the complete "Two prisoners, separated..." framing.

NGDP targeting and its discontents

Scott Sumner's been leading the charge for NGDP targeting - the notion that reserve banks can best fulfil the joint goals of inflation reduction and economic stability by targeting expected nominal GDP. It's not crazy. And, it's currently supported by a reasonably broad swath of economists. It doesn't seem obviously worse than what the U.S. Fed currently runs and seems likely to be preferable, but note that I'm not a macroeconomist so please consult with a macro guy before taking any central banking advice.

Another person who's not a macroeconomist is Terence Corcoran. Here's his evaluation:

NGDP targeting: the very latest econo-fad

The first sighting of NGDP targeting in Canada landed almost two weeks ago, when Liberal MP Scott Brison brought a motion before the Commons finance committee calling for it to hold “at least one meeting before the end of November 2011 to hear from witnesses, such as, but not limited to, members of the C.D. Howe Institute Monetary Policy Council, on whether or not the government of Canada and the Bank of Canada should consider other targets, such as but not limited to, nominal GDP or full employment.”

If you blinked, you missed it: The words “but not limited to nominal GDP” contain the hottest new concept in the world of economics.
...
We will hear more of NGDP targeting in weeks and months to come. The debate also takes us all deep into the economic swamp, where creepy jargon and grotesque floating arguments and logical traps abound. One observation, though.

The idea of targeting nominal GDP has its origins, in part, in the work of some radical free-market economic theories. Prof. Sumner, for example, cites as inspiration economist George Selgin, at the University of Georgia, who wrote a book titled Less Than Zero: The Case for a Falling Price Level in a Growing Economy. The idea is that inflation could be close to zero over the long term, and that the only way to get to zero would be to allow inflation to rise and fall according to productivity changes in the economy. Putting an inflation target at, say, 3%, unnecessarily introduces inflation into the economy. Targeting nominal GDP would avoid injecting inflation into the economy. The best alternative, he said, was Free Banking and the elimination of central banks — which is so very, very far from what Ms. Romer, Goldman Sachs or Mr. Brison are thinking about.

There you have it: Scott Sumner, fad-creator in the economic swamps. I'll have you know that, in true hipster fashion, I was reading Sumner before it was cool. Ok, when Tyler over at Marginal Revolution started pointing to it. But that's close enough.

All in a day's trading

iPredict's seen heavy action on the Prime Ministerial contracts today. The first push looked to be from a novice trader either trying to manipulate prices to make Labour look good or who believed Labour's price to be understated. That trader pushed Labour briefly up to $0.23 without knocking the National contract back to $0.77. Novice traders will run the order book without looking to complementary markets. His run burned through a reasonable amount of my free cash as I'd seeded the order book a bit at disequilibrium prices in case of movements like this.

Here's Matt's graph of subsequent movement:

The trader succeeded in momentarily raising the price of Labour to 23 cents, up from 10 cents at the start of the manipulation attempt. The contract reached 23.2 cents at 13:09, where it remained there for exactly 26 seconds, before another trader stepped in to sell. Another 26 seconds later another trader had stepped in, and the contract price was back to 12.6 cents exactly 52 seconds after the peak. (The chart does not show the 23 cent price, what is plotted is the weighted average price of each trade, comprising multiple orders of varying prices: among the orders filled at 13:09 were some at 23.2 cents).

In all, the trader bought a total of 3000 shares in Labour to win at an average price of 14.2 cents.

Prices stabilized around the $0.13 mark for Labour and $0.87 mark for National. $0.87 isn't a crazy price point - it's the price implied by the vig-adjusted odds over at Centrebet, where you have to pay $0.926 for National and $0.135 for Labour. They've since gone back to the status-quo ex ante: 90/10.

Why today? If I had to guess, somebody wanted to create the impression of strong market movement with National's announced plans for welfare policy.

Here's my last two-days' trading (accumulated weighted averages):

October 31: + 486 National at $0.88
                   -  389 National at $0.92

November 1: +66  National at $0.87
                    -727 National at $0.91
                    -1449 Labour at $0.13

So I gained a 885 net pro National position at a total cost of $683, or $0.77 per contract. I need to clear some of that out as I'm accumulating an uncomfortably large net pro-National position. If anybody's interested in the 500-unit order on Labour at $0.09, and the subsequent 500-unit orders at $0.08 and $0.075, please help me clear some of this accumulated position.

It is worth seeding the order book at disequilibrium prices; you never know when a partisan stalwart will come in and do something stupid. I really really wish I'd had some of the orders in that were filled at the $0.23 mark. Alack, alas. But leaving standing orders does leave you vulnerable to real world events that move against you.

Weitzman at Canterbury

Coming up at the University of Canterbury:

Professor Adrian Sawyer, Acting Pro-Vice-Chancellor of the College of Business and Economics and Dean of Commerce, warmly invites you to attend the 7^th Annual Condliffe Memorial Lecture, ‘Why is the economics of climate change so difficult and controversial?  The lecture will be delivered by Martin Weitzman, Professor in Economics at Harvard University.  Event details and an outline of the seminar are provided below.

Date:            Thursday 17^th November 4.30pm – 5.30pm. Refreshments to follow

Venue:         Law 108, Ground floor, Law Building, University of Canterbury

RSVP:          by 10^th November to karen.ashby@canterbury.ac.nz  

Abstract: In this lecture Professor Weitzman will focus on the special features of the economics of climate change that make this area so very difficult to analyse by conventional economic tools.  He will discuss such topics as deep structural uncertainty, whose preferences are included, the possibility of catastrophic outcomes, discounting the distant future, and international public goods.  Professor Weitzman will speculate on how the dilemmas of climate change might play themselves out. 

Biography:Martin L. Weitzman is Professor of Economics at Harvard University. Previously he was on the faculties of MIT and Yale. He has been elected as a fellow of the Econometric Society and the American Academy of Arts and Sciences. He has published widely in many leading economic journals and written two books. Weitzman's interests in economics are broad and he has served as consultant for several well-known organisations. His current research is focused on environmental economics, including climate change, the economics of catastrophes, cost-benefit analysis, long-run discounting, green accounting, and comparison of alternative instruments for controlling pollution. We look forward to seeing you on the 17^th of November.

I'll be there and I hope to see many of you there too.