Overcome your Repugnance

John McCall is one of those anointed to decide whether things are ethical; the National Ethics Advisory Council, on which he sits, advises the Minister of Health on the ethical implications of things.

Here's what he told Critic, the University of Otago student newspaper, about organ transplants.

First, commenting on LifeSharers:

McCall strongly opposes the idea behind LifeSharers, describing it as “absolutely abhorrent. We don’t discriminate on what treatment is offered to people based on their beliefs or what they may or may not have been willing to do under different circumstances.”

But he'd be willing to discriminate against those donors who prefer that their organs go to organ donors. He finds organ markets even worse:

“I find the idea of organ markets abhorrent. Where commerce has had things to do with organ donation, terrible things happen. If you make it legal it’s still open to exploitation, and I think trading organs for money is fundamentally ethically untenable. The people who are most exploited by that tend to be the poor.”

Here are some of the terrible, abhorrent things that happen when we trade organs for money or allow that priority access to organs be given to those willing to be organ donors. The first link takes you to Cato's study of Iran's system in which donors are compensated; the second tells you about recent Israeli successes in prioritizing willing donors for access to organs.

Do read the whole Critic piece. And the extensive prior thread here.

I wouldn't much care if he found LifeSharers repugnant if it were just his personal opinion; I find it repugnant that some folks are willing to accept donor organs but refuse to be donors themselves, but that's a value judgment. But it puzzles me a bit what set of ethics gets used to decide that his ethics should trump mine. His abhorrence gets to set policy. Lovely.

Repugnance is an awful basis for policy.

No political events derivatives for the US [updated]

The CFTC has barred real money political event derivatives in the US.

Among the reasons given for the CFTC not allowing such contracts under their jurisdiction is this howler:

WHEREAS, the Political Event Contracts can potentially be used in ways that would have an adverse effect on the integrity of  elections, for example by creating monetary incentives to vote for particular candidates even when such a vote may be contrary to the voter's political views of such candidates; 

Yup. And allowing lotteries might have people choose favourite numbers that are contrary to their actual views about the merits of numbers.

The actual chances of your vote changing an election are infinitesimal. Voting to make your contract more likely to pay out makes as much sense, in the limit, as thinking you can improve your odds when you've bet against your favourite team by yelling at the television.

The CFTC highlights the importance of an economic purpose test in determining whether the contracts are contrary to the public interest. What determines lack of economic purpose? Nothing more than assertion.

WHEREAS, the unpredictability of  the specific economic consequences of  an election
means that the Political Event Contracts cannot reasonably be expected to be used for hedging purposes;

That's an interesting conjecture, but the evidence points pretty strongly against it. Here's Brian Knight in the Journal of Public Economics.

This paper tests for the capitalization of policy platforms into equity prices using a sample of 70 firms favored under Bush or Gore platforms during the 2000 U.S. Presidential Election. Two sources of daily data during the six months leading up to the election are incorporated: firm-specific equity returns and the probability of a Bush victory as implied by prices from the Iowa Electronic Market. For this group of politically sensitive firms, the daily baseline estimates demonstrate that platforms are capitalized into equity prices: under a Bush administration, relative to a counterfactual Gore administration, Bush-favored firms are worth 3% more and Gore-favored firms are worth 6% less, implying a statistically significant differential return of 9%. Estimates based on weekly returns are even stronger, suggesting a differential return of 16%. The most sensitive sectors include tobacco, worth 13% more under a favorable Bush administration, Microsoft competitors, worth 15% less under an unfavorable Bush administration, and alternative energy companies, worth 16% less under an unfavorable Bush administration. A corresponding analysis of campaign contributions, which allows for heterogeneity in the importance of policy platforms to the firms, supports the baseline estimates.

And see too Snowberg, Wolfers and Zitzewitz.

So we have decent evidence that political events markets tell us something important about price movements for politically sensitive stocks. But the CFTC says:

WHEREAS, there is no situation in which the Political Event Contracts' prices could form the basis for the pricing of a commercial transaction involving a physical commodity, financial asset or service, which demonstrates that the Political Event Contracts have no price basing utility

Really? No situation? That's pretty harsh. I can imagine some. The Knight article reasonably suggests a pile of commercial transactions whose pricing could depend on prices in political event contracts.

The ruling is a pretty big disappointment. It would have been one thing if they'd had a reasonably argued case against allowing political event markets under CFTC jurisdiction. Instead they're using assertions of no utility as justification for a ban, when the evidence isn't really on their side.

HT: Chris Masse

[Update: wording clarifications, economic purpose test noted]

Fishy

Not taking fish oil apparently costs Australia $4 billion per year.

The Deloitte study was commissioned by the Complementary Healthcare Council of Australia (CHC), a body which appears to be funded by the likes of Pfizer, Swisse Vitamins and Blackmores.
The press release which accompanied the research, and dutifully reported by the press, quoted CHC executive director, Dr Wendy Morrow, thus: "The report has found that the Australian community could be saving up to $4.19 billion, in terms of costs related to disease burden and premature life loss, through the preventive use of fish oils in Australians with heart disease. This research is of major significance to the industry, government and to the health and wellbeing of the Australian population."

Deloittes reckons that giving fish oil to every person with coronary heart disease would cost about $40 million per year. But a reasonable portion of the consequent benefits are in disability years avoided rather than costs avoided by the health system; it looks on a first cut that the measure passes cost-benefit on the basis of private benefits accruing to heart disease patients rather than from savings to the health system.

If the analysis hinges on benefits accruing to heart disease patients, then it's harder to make the case for that failure to take fish oil costs the country substantially. First, the people most likely to enjoy benefits from taking the supplement are likely already being advised to do so by their doctors; extending treatment to more people reduces the average efficacy of treatment. Second, while we can build a case for provision based on the private gains in monetized statistical life years, we also have to wonder why those who could benefit aren't already taking supplements. Is it because they can't afford it, or because doctors are less convinced than are Deloittes about the potential health benefits? If the former, don't we need to be sure that giving money to poor heart patients in form of subsidized fish oil does more good than giving money to other people in other forms?

I'm always a bit skeptical about studies claiming benefit to cost ratios of 39:1 - their base case result where net benefits are a billion dollars rather than the headlined $4 billion.

But if the Australian government had twenty seven million dollars to spend (the gross tallied cost in the baseline case), it probably does better buying fish oil on competitive markets and giving it to sick people rather than, purely hypothetically, throwing it at a company best known for making the kind of cars that increase Australia's need for a carbon tax.* So long as the fish is harvested sustainably I suppose.

* Update: It's actually unclear whether they do; cars that are more expensive to drive because they're worse on gas will emit more CO2 per mile but will be driven fewer miles. Net results then are ambiguous.

The New Zealand Initiative

New Zealand has suffered from a lack of a rich think tank environment. That looks like it's about to change. The New Zealand Business Roundtable's merger with the New Zealand Institute has been in the works for a while, but now we know what the new organization will look like. Oliver is a great guy; I expect really good things from the New Zealand Initiative.

Here's the Press release. It is going to be great having Oliver back from the East Island.

---

Embargoed to 6.00pm Tuesday 3 April 2012

A Name to Start New Conversations

A new independent, non-partisan public policy think tank was launched today by Business Roundtable chair Roger Partridge and New Zealand Institute chair Tony Carter, following the merger of the two organisations on 1 April.

The new think tank has been named The New Zealand Initiative. It will build on the legacies of its two founding organisations and will focus on raising debate on public policy and contributing bold, rigorously-researched ideas to achieve a more prosperous future for New Zealand.

Roger Partridge and Tony Carter, who will co-chair the new organisation, also today announced the appointment of Dr Oliver Hartwich as executive director.

Dr Hartwich is a German-born economist and former chief economist of the highly-regarded British think tank Policy Exchange.  His work and publications have covered a wide range of public policy topics, including housing affordability, transport, local government, infrastructure, welfare reform and global economic issues.

Dr Hartwich is currently Research Fellow at the Centre for Independent Studies in Sydney, and writes, among other things, a weekly column for the Australian Business Spectator.  He has been a frequent guest commentator on television and radio programmes in Australia and the UK, and his articles have been published by all the major newspapers in Britain, Germany, Switzerland, Australia and New Zealand.

Tony Carter said the joint member steering group that managed the international search process was delighted with the appointment.

“Oliver will bring a fresh face and style to the role, and an international reputation as a very sound and intellectually rigorous thinker and a strong communicator. We are very fortunate to have secured someone of such calibre.”

Dr Hartwich will take up his position on 1 May.

The New Zealand Initiative is supported by a foundation membership of major company chief executives.

Roger Partridge said the process of bringing the two organisations together had been very cordial and straightforward. Both had recognised that the New Zealand market was not big enough for two independent CEO think tanks and could see that by joining forces they could be much more effective.

“We found we had a strong sense of common purpose. We want to help shape the landscape and start a national conversation on ideas that have intellectual integrity and rigour and the potential for profound, positive long-term impact on the well-being of New Zealand”, said Mr Partridge.

A web page about the New Zealand Initiative will go live on Wednesday evening at nzinitiative.org.nz.

ENDS

For further information, contact:

Roger Partridge                                                                 Tony Carter

Co-Chairman                                                                   Co-Chairman

Phone 021 660 965                                                           Phone 021 358 326

Email roger.partridge@bellgully.com                                  Email tony@lil.co.nz

Wishing for the New Zealand tax code

It's easy to forget just how excellent the NZ tax system is relative to those in other countries. But we are the envy of the world. Two datapoints for this week:

Tim Harford wishes UK VAT reform would move to a system like New Zealand's, where everything attracts GST: we tax food. After listing the absurdities of the UK system, where Jaffa Cakes are tax advantaged over "chocolate digestives" and whether a sausage roll is taxed depends on whether it's been heated. Harford asks what should be done, then answers his own question:

The Mirrlees Review is an attempt to figure out what the UK tax system would look like in an ideal world, and I looked it up. The authors reckon that you could levy a uniform rate of VAT on almost everything, raise benefits, pensions and tax credits, increase the income tax threshold by £1,000, cut the basic rate of tax to 18 per cent and the higher rate to 38.5 per cent, and leave pretty much everyone better off – the government would have more revenue and citizens would be more likely to buy what they really wanted rather than what the tax system nudged them to buy.

Harford wants the VAT to apply to everything, not just to sausage rolls.

Other than the tax-free threshold, that sounds an awful lot like the New Zealand system, where GST applies comprehensively and where, in 2010, the National government reduced tax rates across the board while increasing the GST.

Item the second: Frances Woolley makes the case for taxing food in Canada. The only place where I'd quibble with Frances's analysis is here, and it's only a minor quibble. Frances writes:

When the case for taxing basic groceries is presented in these simple terms, the assumptions underlying the argument become apparent. The equation of choice with happiness rules out any paternalist arguments for exempting basic groceries from taxation. For example, at present soft drinks are subject to sales tax, but milk is not. A tax on milk would be expected to decrease milk consumption and increase soft drink consumption, all else being equal. Those who would argue for taxing basic groceries would respond in one of two ways: first, that we should respect people's choices whatever they are; second, so many of the basic goods exempted from sales tax at present are teeth rotting, IQ-lowering sugary junk anyways that the paternalist argument has little force.

All of this is true. But the current equilibrium also involves a government-enforced dairy cartel that forces up the price of milk relative to soft drinks. Abolish the dairy cartel while imposing GST equally across all food items and the price of milk would drop, not rise. Especially for a GST as low as Canada's, and a dairy cartel as noxious as Canada's.

Again, Frances wishes that Canada had a system that looked a lot more like New Zealand's.

It would be awfully nice if Labour and the Greens here stopped trying to score populist points by hacking on one of the world's best consumption taxes. Labour, in office, recognized the GST's advantages and refrained from wrecking it for a decade. Too much populist nonsense in Opposition might force their hand in a future government.

Do visit the GST tag for Seamus's excellent prior posts.

Overcome your Oxtyocin

Stephen Hickson forwards this email that made it through to our undergrad economics tutors. It's a nice little scam; hopefully, none of our tutors went for it.* Here it is:

Hello,

How are you doing today? As for me I am okay and my son is doing good. I would be more than happy if you can handle Mark very well for me because his all I have left ever since his Mother died four years ago. Payment for the lessons will be made upfront like I told you and will be by cheque. In view of this I will need you to email me the information required to send the payment as I will not like to send the payment to a wrong location.

I contacted his step Mother and she made me understood that she is not in a good financial condition to help the situation and this makes me to think of an alternative because am off-shore as a petrol chemical engineer and can not be able to make any payment arrangement directly to you. I will equally want your first meeting with my son and cousin on Second week of April for proper arrangement. Further information needed about my son will be giving to you on your first day of meeting my son and my cousin. I will advice you meet in a library because of your reasons.

I discussed this with my cohort who has accepted to issue you the payment his owing me in form of cheque. Meanwhile, the cheque he will be sending you will be ($3,000) which is a bit more than the cost for the 12 weeks ($600) Right? lessons. So please, I will appreciate your focus in rendering the service. As soon as you receive the cheque, I will like you to deduct the money that accrues to the cost of lessons, also the cost of the material needed for the tutorial service and you will assist me to send the rest balance to my cousin.

The remaining balance will cover the funds for Mark and my cousin's flight expenses down to the state and also to cover his living expenses in state. I think,I should be able to trust you with the remaining balance? I will give you the details of my cousin that you will send the balance of the money to as soon as you receive the cheque. Here are some of the details I will need for final assurance of the payment to you.

1. Full Name
2. Mailing address,
3. your direct telephone number

Once you get back to me with all the above details, the payment will be issued out immediately and it will be sent to you . Hope to hear from you as soon as you can and I am sure you will find my son as a good student.

It's a classic scam: demonstrate your trust in the recipient (by sending the cheque with what's very likely an overpayment) and expect the trust to be reciprocated (by wiring the balance back) before the recipient figures out that the cheque has bounced.

It's then a variant on the kind of scam highlighted in Paul Zak's TED talk around the 9 minute mark:

   

Being trusted gives you a little oxytocin boost, making you more likely to reciprocate. So be careful of oxytocin rushes.

Zak does interesting work; here's a summary at The Guardian. But where he talks a lot about how he likes to hug people to get (and to give!) Oxytocin boosts; I have more fun wondering whether electronics retailers could make a buck by having aerosolized Oxytocin near the spot where salespeople try to convince you of the merits of long-term warranties. 

Economists giving out hugs... Folks will think the whole profession's gone soft (mutter grumble)...

* They'd get part-marks for trying to scam the scammer: though that too is not without risk.

On the value of Wikipedia

Mark Twain tells the story of a New Zealand Professor coming to call at Yale. Whether it's true or manufactured - who knows.* But it could be true.

Yale etiquette, says Twain's correspondent, required that foreign visitors be flattered by laudatory comments about their country. But nobody at Yale knew anything about New Zealand other than that it was somewhere near Australia, perhaps connected by a bridge. The visit was very short notice, so the whole of Yale wound up spending the day trying to figure out where New Zealand was and some nice things to say about it.

According to the story, highlighted below, a reasonable part of a major academic institution shut itself down for a good part of the day trying to figure out anything about New Zealand - searching the libraries for anything relevant - while their wives kept the visitor busy and distracted.

Today, we can have a 5 minute flip through Wikipedia before the seminar speaker shows up.

Here's Twain's account of the story recounted him by another, HT: @LyndonHood.

"Last autumn I was at work one morning at home, when a card came up - the card of a stranger. Under the name was printed a line which showed that this visitor was Professor of Theological Engineering in Wellington University, New Zealand. I was troubled - troubled, I mean, by the shortness of the notice. College etiquette required that he be at once invited to dinner by some member of the Faculty - invited to dine on that day - not, put off till a subsequent day. I did not quite know what to do. College etiquette requires, in the case of a foreign guest, that the dinner-talk shall begin with complimentary references to his country, its great men, its services to civilization, its seats of learning, and things like that; and of course the host is responsible, and must either begin this talk himself or see that it is done by some one else. I was in great difficulty; and the more I searched my memory, the more my trouble grew. I found that I knew nothing about New Zealand. I thought I knew where it was, and that was all. I had an impression that it was close to Australia, or Asia, or somewhere, and that one went over to it on a bridge. This might turn out to be incorrect; and even if correct, it would not furnish matter enough for the purpose at the dinner, and I should expose my College to shame before my guest; he would see that I, a member of the Faculty of the first University in America, was wholly ignorant of his country, and he would go away and tell this, and laugh at it. The thought of it made my face burn.

[Nobody at Yale knew anything but that New Zealand was close to Australia...]

"...Lawson must give the dinner. The Faculty must be notified by telephone to prepare. We must all get to work diligently, and at the end of eight hours and a half we must come to dinner acquainted with New Zealand; at least well enough informed to appear without discredit before this native. To seem properly intelligent we should have to know about New Zealand's population, and politics, and form of government, and commerce, and taxes, and products, and ancient history, and modern history, and varieties of religion, and nature of the laws, and their codification, and amount of revenue, and whence drawn, and methods of collection, and percentage of loss, and character of climate, and - well, a lot of things like that; we must suck the maps and cyclopedias dry. And while we posted up in this way, the Faculty's wives must flock over, one after the other, in a studiedly casual way, and help my wife keep the New Zealander quiet, and not let him get out and come interfering with our studies. The scheme worked admirably; but it stopped business, stopped it entirely.

"It is in the official log-book of Yale, to be read and wondered at by future generations - the account of the Great Blank Day - the memorable Blank Day - the day wherein the wheels of culture were stopped, a Sunday silence prevailed all about, and the whole University stood still while the Faculty read-up and qualified itself to sit at meat, "without shame, in the presence of the Professor of Theological Engineering from New Zealand:

"When we assembled at the dinner we were miserably tired and worn - but we were posted. Yes, it is fair to claim that. In fact, erudition is a pale name for it. New Zealand was the only subject; and it was just beautiful to hear us ripple it out. And with such an air of unembarrassed ease, and unostentatious familiarity with detail, and trained and seasoned mastery of the subject-and oh, the grace and fluency of it!

"Well, finally somebody happened to notice that the guest was looking dazed, and wasn't saying anything. So they stirred him up, of course. Then that man came out with a good, honest, eloquent compliment that made the Faculty blush. He said be was not worthy to sit in the company of men like these; that he had been silent from admiration; that he had been silent from another cause also - silent from shame - silent from ignorance! 'For,' said he, 'I, who have lived eighteen years in New Zealand and have served five in a professorship, and ought to know much about that country, perceive, now, that I know almost nothing about it. I say it with shame, that I have learned fifty times, yes, a hundred times more about New Zealand in these two hours at this table than I ever knew before in all the eighteen years put together. I was silent because I could not help myself. What I knew about taxes, and policies, and laws, and revenue, and products, and history, and all that multitude of things, was but general, and ordinary, and vague-unscientific, in a word - and it would have been insanity to expose it here to the searching glare of your amazingly accurate and all-comprehensive knowledge of those matters, gentlemen. I beg you to let me sit silent - as becomes me. But do not change the subject; I can at least follow you, in this one; whereas if you change to one which shall call out the full strength of your mighty erudition, I shall be as one lost. If you know all this about a remote little inconsequent patch like New Zealand, ah, what wouldn't you know about any other Subject!'"

Twain's account of his trip to Christchurch also merits reading.


* At least part of the story seems wrong: The university at Wellington was called Victoria University College - a college of the University of New Zealand. I'm not sure that there ever was a Wellington University. And "Theological Engineering" seems dubious. And the book is known to have a couple of fictional tales included among the non-fiction. How do I know all this? Wikipedia. Except for the dubiousness of "Theological Engineering". [Update: Dave Guerin notes it was indeed called Wellington University.]