Shouting about immigration?

I agree with James Kirkup that the economic benefits of immigration are unlikely to be decisive in convincing anybody about the merits of immigration.

It is a logical fallacy to conclude that because some people feel uncomfortable with the social consequences of European immigration, the only way to address that discomfort it to expel or ban European immigrants. But it is also mistaken to think that shouting louder about abstract concepts like the public finances people like me can ever persuade our country to relax about immigration. Economics isn’t everything

But where we hear endless populist appeals to the economic costs of immigrants, and where those stories are convincing for some, isn't a little shouting warranted?

The economic benefits of immigration are only part of the case for a liberal immigration regime. But they're important where we otherwise hear a lot about how immigrants impose net costs.

HT: @jenesajeram

Connecting dots

If the government makes company directors personally liable for criminal charges if they've not exercised sufficient due diligence around employee health and safety risk, should we act all surprised when companies start deciding that a lot of things are too risky?

Earlier this year, MBIE sent around the draft guidelines. It's not law yet, but it's coming. Here's one precis:

Having already released a Guideline document for Directors on managing health and safety risks [Good Governance Practices Guideline for Managing Health and Safety Risks ] the government has now released an Exposure Draft for the proposed new legislation, expected to replace the Health and Safety in Employment Act 1992 sometime in 2014.  The Exposure Draft contains a raft of wide-ranging reforms.  However, the purpose of this article is narrow; to look at the new Directors’ obligations under the proposed legislation. 

What is changing?

The new Health and Safety at Work Act will impose an active duty on those in a governance role to proactively manage workplace health and safety.  Under the present legislation, the Directors of a company can only be held liable for a breach of the Act where they have participated in, contributed to, or acquiesced in their company’s failure.  The new laws will impose a due diligence role on Directors with regard to health and safety. 

...

What happens if an Officer doesn’t meet the obligations?

An Officer of a PCBU can be convicted of a failure to meet the due diligence requirements whether or not the PCBU has also been convicted of an offence.  However, if an Officer hasn’t met his or her specific duty, chances are pretty good that the PCBU itself has also fallen down somewhere along the line.  Consequently, a Director of a business could be facing liability in respect of his or her Officers’ duties, as well as the business facing liability as a PCBU in relation to the same event.

There are three tiers of liability under the proposed legislation:

	Reckless conduct (where a duty-holder engages in conduct that exposes any individual to a risk of death or serious injury or illness, and is reckless as to that risk):	Failing to comply with duties and exposing individual to risk of death or serious illness or injury:	Failing to comply with any duty (including the due diligence requirements for Officers):
Individual but not a PCBU or Officer	Up to $300,000 fine and/or up to 5 years’ imprisonment	Up to $150,000 fine	Up to $50,000 fine
Individual who is a PCBU or Officer	Up to $600,000 fine and/or up to 5 years’ imprisonment	Up to $300,000 fine	Up to $100,000 fine
Body Corporate	Up to $3m fine	Up to $1.5m fine	Up to $500,000 fine

Is it any surprise that Solid Energy reckons that Pike River still isn't safe enough to enter?

Kevin Hague is likely right to point to personal liability as a potential issue; I wouldn't follow him in characterising this as putting commercial interests ahead of grieving families though.

It is heroic to require corporate directors to assume heavy personal liability including up to five years' imprisonment if their due diligence on entry risk wasn't 100% up to spec, under a new incoming legal liability regime with great uncertainty about potential application.

One wonders what other risky, but efficient, actions might be deterred under the new regime.

For more Cramptony goodness....

I've not been good about copying over to the blog the bits I contribute to the NZ Initiative's weekly Insights newsletter. Here's my piece from last week's newsletter. You can subscribe here. Enjoy!

We moved to New Zealand over a decade ago because I reckoned it the world’s least mad country: the Outside of the Asylum. It tops my informal ranking on this important metric.

It’s been a week of many alternative rankings and a couple of judicial decisions that threaten our coveted “Outside of the Asylum” status.

Expats rank New Zealand as the best place to raise a family, albeit with more constrained economic opportunities than elsewhere. The HSBC’s “Expat Explorer” is well worth checking out.

In another international ranking this week, the World Economic Forum ranked New Zealand 13th in the world on a Gender Gap Index. Checking the index sub-components, it is a bit odd that New Zealand ranks below Belize, Ecuador, Guyana and Mongolia on women’s “health and survival” and below Rwanda and Bangladesh on women’s “political empowerment”. Further, New Zealand ranked second in Asia-Pacific to the Philippines. Statistics New Zealand reports that 233 people left here for the Philippines in the year ended September 2014 and 3646 moved in the opposite direction; perhaps migration choices provide us a somewhat more informative ranking.

Finally, UNICEF notes that New Zealand is roughly middle-of-the-pack when it comes to changes in child poverty rates. Child poverty rose in 23 of 41 countries and fell in 18. New Zealand’s 0.4 percentage point drop in child poverty rates places it 16th out of 41, despite national headlines here suggesting the country has done terribly. If the government is successful in encouraging increased housing supply, our ranking on this measure should rise: poor families will have more to spend on food when the rent goes down.

Most important for me remains our world-leading “Outside of the Asylum” ranking. As the rest of the world goes mad, we generally don’t follow along. Two court rulings this week might jeopardise that status.

First, as Rodney Hide noted in last week’s National Business Review, the courts decided that if you choose a religion that precludes you from doing your job, your employer just has to deal with it. I’m still pondering what new religion I might develop to best take advantage of the new legal situation while Oliver considers the modifications to his beliefs that might counter such opportunism. 

Second, the courts have decided that normal supply, demand, and marginal productivity should not determine wage rates but rather some judicial assessment of which jobs, across wildly different industries, require comparable skills. We will have gone utterly mad if this ruling stands on appeal.

Ultimately, the metric that matters most is whether you’d be happier living anywhere else. In a world with freer immigration, it would be easier for everyone to say, as I do, that they couldn’t be happier anywhere else.

Trouble in Paradise

In The Matrix, the robots stuck humans in a synthetic 1990s. They could have given us paradise, but they found we rejected it: we couldn't deal with things being too good. And so the 90s it was: Pretty good, but not quite paradise.

Nathan Smith's excellent NBR editorial today reminded me of that [$]. He writes:

New Zealand is as close to the concept of paradise as any human culture in history has ever dreamed of living.

...Like the proverbial dog chasing a car, humans want paradise but don’t know how to live when they find it, so we invent or adopt problems to keep us happy. When this mind-set is scaled up to the level of the nation state, some funny things start happening.

...This is where the prime minister’s incoherent debate about fighting in Iraq converges with the inability of New Zealanders to enjoy the fortune of living in a paradise. We go out of our way to embrace other dilemmas to fill the void of having nothing to fight against because there’s clearly something so existentially frightening about living in a society that’s as close to paradise as humans have ever come.

Go and subscribe that such editorials continue to have a platform.

Werewolf

I reprised paternalism and public health in a column at Werewolf; I'm to be contributing a column there on an ongoing basis. Read the whole thing; here's a snippet.

In the absence of strong evidence to the contrary, economists, myself included, generally expect that, on average and in most cases, people make the best decisions they can given the information available to them and the goals they have. For this we’re sometimes criticised as rationalistic and for expecting too much of humanity’s crooked timber. The criticism does not generally stand: economists’ conclusions do not rely so heavily on fragile rationality assumptions. All we really need is that people do the best they can with what they have, and that the costs of errors from presupposing others’ ends and dictating to them their means outweigh the costs of errors individuals might make on their own. The alternative view holds that individuals generally cannot be expected to find their own paths and walk them; instead, they need nudges and constraints against harmful choices and encouragement of better ones.

British essayist Thomas Carlyle made the case for such constraints in his 1850 pamphlet when he wrote, in opposition to the political economists of his day,

“The true liberty of man, you [economists] would say, consisted in his finding out, or being forced to find out the right path, and walk thereon. To learn, or to be taught, what work he actually was able for; and then, by permission, persuasion, and even compulsion, to set about doing of the same! … If you do know better than I what is good and right, I conjure thee in the name of God, force me to do it, were it by never such brass collars, whips and handcuffs, leave me not to walk over precipices!”

Carlyle’s discussion of collars, whips and handcuffs was not metaphorical: his pamphlet urged America not to abandon slavery, which he viewed as an enlightened paternalistic intervention that furthered the best interest of black American slaves who, in his view, otherwise would never learn the discipline of work and consequently could never become fully human. John Stuart Mill’s opposition to Carlyle’s views on slavery led Carlyle to name economics the Dismal Science.

Mill began from a polar opposite point. In “On Liberty”, he wrote that the state has no business interfering in the lives of individuals except where strong risk of harm to others obtains. He argued this not because we do not care about each other, but rather because that care has to be expressed in ways other than lashes, whether physical or metaphorical. We can persuade and cajole, but we cannot force. He noted that while the drunkard may neglect his family, the harm is in the neglect, not the drunkenness; someone else who is similarly callous towards their family while sober does as much harm. Mill writes,

“No person ought to be punished simply for being drunk; but a soldier or a policeman should be punished for being drunk on duty. Whenever, in short, there is a definite case, or a definite risk of damage, either to an individual or to the public, the case is taken out of the province of liberty, and placed in that of morality or law.”

Mill later presciently argues that if we start counting as harm the distaste one feels about the actions of another, then there is little bound.

An odd argument

The Commerce Building at the University of Canterbury was heavily damaged in the February 2011 earthquakes. The three buildings making up the Commerce Building bashed against each other, requiring substantial remediation. The University then spent a long time in court with its insurer: the Council required that buildings be remediated to 66% of code, rather than the 33% that obtained pre-quake, but the insurer (not unreasonably) deemed that to be a betterment.

Newstalk ZB reports on the latest:

The University of Canterbury is going to the Supreme Court to appeal a decision on the level to which a damaged building must be repaired.

A High Court judgement earlier this year said the council had been wrong to make higher seismic strength standards part of the consent process for repairing damaged buildings.

It stated the council can't expect buildings to be repaired to anything higher than 34 percent of the New Building Standard.

Canterbury University appealed that ruling, arguing it would save more than $140 million if it could say to its insurers that the council required all of its 240 damaged buildings be repaired to 67 percent.

An appeal will be heard in the Supreme Court on November 11.

I can understand the University's argument for repairs that have already been undertaken: Council was requiring a higher standard, and the University had to make repairs under the Council's rules at that time.

The argument does get a bit strange if applied to repairs that have yet to be undertaken, like those for the Commerce Building, which I don't believe had started when I left there in July.

Coercing heritage

Wellington's scariest building remains Wellington's scariest building.

Last year, the Environment Court denied Mark Dunajtschik permission to tear down the Category 1 listed Harcourts Building. He was also under order either to make the building safe or tear it down. His planned strategy for making the building safe, which involved maintaining the look of the building but not the specific materials currently there, would have improved safety and would have been cost-effective; the heritage people said it wasn't good enough and that he consequently needed to use a repair strategy that did more to preserve specific heritage construction methods and materials. Dunajtschik said the proposed repair strategy was entirely unaffordable given the tenancies the building could attract even after strengthening.

The High Court batted it back to the Environment Court, saying that the Environment Court erred in placing too little weight on economic considerations. I, and others, read this as a bit of a rebuke to the Environment Court and that the Environment Court needed to pull its head in.

Instead, the Environment Court has affirmed its prior decision.

In a decision released this weekend, Environment Judge Jeff Smith said public safety and the risk to the neighbouring HSBC tower could be protected by measures other than demolition of the heritage building, such as strengthening.
"We have concluded that alternative [of repair] is reasonable, although we cannot compel that outcome on this appeal. However, neither will granting a demolition consent compel the owner to demolish the building."
The findings noted if local government considered a building a danger to public safety, it had powers to require that building to be repaired.

Smith's being a bit silly here as Dunajtschik very obviously wishes to bulldoze the building.

The Harcourts Building sits next to the HSBC Building, both are owned by Dunajtschik, and the Harcourts Building would do terrible damage to the HSBC Building in an earthquake: they'd thump together and knock out the HSBC Building's stairwell. 

As the neighbouring HSBC tower threatened by the un-strengthened Harcourts site was also owned by Dunajtschik, "the economic argument against strengthening the Harcourts building looks even more tenuous", the ruling said.

Because Dunajtschik risks losing tenants in the HSBC Building if he does not make safe the Harcourts Building, the Court is betting that Dunajtschik will comply with Council's order to make the building safe via a repair strategy that is uneconomical when considered only with respect to the Harcourts Building but perhaps economical if the total value at risk isn't just the Harcourts Building but rather both buildings. The Court is also betting that there won't be a big earthquake between now and this mess's being sorted out.

Council and the Court, by requiring that the building be made safe and follow gold-plated Herittage standards, can extract not the entire value of the Harcourts Building but also the entire value of adjacent affected properties that are under the same ownership.

The magnitude of potential regulatory takings in Heritage cases is non-trivial.