Markets for lemons and ticket scalping

The past week's hooplah over ticket scalping missed what I think's the most fun problem in the whole mess.

How do you, as a third party, run a resale market for event tickets that are issued digitally by another agency that wants to see you fail?

There are real problems facing buyers. How can you tell that the ticket you purchase on Viagogo is authentic rather than fraudulent, and how can you tell that that same ticket has not previously been sold?

The problem is easy if you think about an integrated ticket issuer/reseller. The issuer can cancel the initial ticket if the person who initially bought it wants to sell it back to the issuer or to the issuer's reseller, then sell the new ticket.

In that setup, you don't have to worry about whether the person who sold the ticket to the reseller had previously sold a different digital copy of it to someone else. The ticket is cancelled, so any prior versions using that ticket's QR code would be void and simply wouldn't work if it showed up at the venue.

But a third-party on-seller cannot do that. And neither can anyone who bought a ticket and honestly wants to on-sell it once and once only. The sale then requires trust, because there is no way of verifying whether there were any prior sales. Even Viagogo can't do it because while it could check that it isn't selling multiple tickets for the same seat, it can't check whether that seat was previously or simultaneously sold on other platforms or privately.

So what's a solution?

One solution relies on the initial purchaser's reputation, and the buyer's reputation. If I buy a ticket for a concert and then offer that ticket on Twitter, from my real-name account, noting that I can't make the concert and that I'm taking offers - I know that I bought a legitimate ticket, and anyone buying from me knows that I would be publicly shamed if caught selling a ticket that didn't wind up working because it had been on-sold multiple times.

But that also makes me something of a hostage: if that buyer sells the ticket to someone else, whether once or repeatedly, then claims that the ticket didn't work - that buyer could attempt to extort me for a refund.

TradeMe has a lot of experience in making markets that work based on reputational feedback mechanisms, but they don't allow ticket on-sales on their platforms.

Another potential solution would have the payment held in escrow by a third-party platform pending verification that the ticket worked, but without the venue being willing to confirm whether a ticket worked, that too would have problems if a buyer went to the show then claimed to have been bilked.

And all the way through it, the initial ticket vendor absolutely does not want any of the secondary markets to work, in part because it would prefer to establish its own secondary market to be able to take some of the uplift in price for events it had initially underpriced relative to revealed demand.

Like I said - fun problem. Everybody's moralising about the rights and wrongs of buying something at a low price and selling it later at a high price (or losing your shirt because the venue had not underpriced the tickets relative to demand in the first place); it's far more fun to think about how these kinds of markets could work, and what happens when important players don't want them to work.

More census woes

Continued census problems hit the Dom's front page today, and the other papers too, as we hit the one-year anniversary of the start of the 2018 census. 

Bryce Edwards has the roundup of all of them at the Herald

A number of newspaper stories have been published today about the anniversary of the 2018 census debacle. The most important is Thomas Manch's 365 days and still counting: Census 2018 results nowhere to be seen. In this, he explains that "The 2018 census data release has been delayed three times due to low response rate" and "Statistics New Zealand remains tight-lipped about when the long-delayed results will be available".

...

One specialist is cited as saying that although the 2018 census participation rate is estimated to be about 90 per cent for the general population, "the response rate of Māori may be as low as 80 or 70 per cent in some corners of New Zealand". In addition, "more than 20 new iwi won't be properly counted" in the census, and this is a problem because "census data was particularly important for smaller iwi trying to do good with fewer resources".

...

For a very in-depth and interesting account of the census debacle, see the Otago Daily Times feature story, And then there were nine, by Bruce Munro, which was published in the weekend. This is, so far, the ultimate exploration of what went wrong.

Kathy Connolly, Stats NZ's census general manager, answers questions put to her about whether the debacle was a result of the previous National Government running down the public service and replies "no comment". Was the debacle due to Stats NZ being asked to "Go do a cheap census"? Again: "No further comment".

There is also great debate in the article between Labour and National politicians about underfunding and oversight. They both blame each other, of course.

Munro also reports: "What exactly happened is hotly debated, but not loudly. Most of those close to the action will not talk on the record. At an operational level, when it came to rolling out New Zealand's first largely online census, several wheels fell off, they say. There wasn't enough publicity. Statistics New Zealand relied on the diminished postal system to get initial information to people. There were not enough forms. Fewer people were employed to follow up on those who had not filled out their form."

Brian Easton's suggestion of a 2021 Census looks reasonable if it's feasible.

Pharma $20-sidewalk-bills

This one's been puzzling me since I saw it reported first last week. The underlying study got a lot of press when it was first published in 2013. Here's the original press release; it's easy to find lots of follow-up stories based on it. It's resurfaced with Jezebel figuring the patriarchy was to blame. Siouxie Wills takes it up again in today's Dom.

Long story short, one study suggested Viagra is effective in mitigating menstrual pain - but nobody seems to have known about it or prescribed if for that purpose. And nobody seems to have replicated the initial trial.

So what's up? Nobody typically complains that Big Pharma isn't quick to jump on any profit-making opportunity. The usual complaint goes the other way.

First potential explanation - maybe it isn't nearly as effective as the first published study suggested. There were 25 subjects in the 2013 trial. The trial showed efficacy against a placebo, but didn't test against existing treatments. This 2019 metastudy does not include any follow-up tests of Viagra. Why wouldn't there be follow-up trials or use?

My next instinct's to look at regulation.

The FDA rules say that once something's been proven safe and effective for one use, it can be prescribed for other uses. So there's no particular legal barrier to doctors prescribing Viagra for menstrual pain. But a lot of them might not know about it. It has been legally difficult to market pharmaceuticals for off-label uses, but I'm not sure on the current state of play on that. And doctors might reasonably be reluctant to prescribe based on a single study of 25 subjects.

Efficacy trials aren't the cheapest things in the world, and might be necessary to market Viagra for a novel use - or to convince doctors to prescribe it. But we aren't talking about some rare disease thing where there'd be a small number of customers. So why mightn't they have gone for it?

One potential reason: you can get a patent extension by registering an older drug for a novel use.

In addition to patent protection for the original compound and method of use, patents directed to new uses and treatment indications can be obtained. Developing new methods of use for identified compounds can be a successful strategy for maximizing research dollars and for increasing the commercial life.

Several pharmaceutical companies have successfully obtained patent protection for new methods of use. For example, Merck originally developed, patented, and marketed finasteride as a treatment for benign prostate enlargement under the brand name Proscar. Additional patent protection and FDA approval were sought when a new use for finasteride — treating male pattern baldness — was identified. Finasteride for the treatment of hair loss is marketed under the brand name Propecia. Similarly, the compound atomoxetine was patented in the early 1980s by Lilly and initially investigated as a treatment for depression. Further research and development of atomoxetine led to the identification of a new use for this compound in the treatment of attention deficit hyperactivity disorder. Lilly has obtained patent protection and FDA approval for this new use, marketing it as Strattera. More than two million prescriptions for Strattera were written in its first nine months on the market.7

Ideally, more than one of these approaches should be employed to extend patent protection. For example, in addition to developing a once-weekly formulation, Lilly sought to minimize its losses from the expiration of the Prozac patent by obtaining a patent and FDA approval for a new medical use of fluoxetine in the treatment of premenstrual dysphoric disorder (PMDD). Lilly markets fluoxetine for PMDD as Sarafem and has secured patent protection until 2007 for this new indication.

But that doesn't seem to work here - the patents on Viagra are up, and the research work on the alternative use is from 2013. If it were patent extension, it should have been filed a couple years ago and available by now.

The most plausible candidate explanations then, in descending order of plausibility, although my priors are fairly flat:

• Unpublished follow-up trials showed the first study to have been a fluke;
• The costs of proving efficacy for the novel use are high relative to the likelihood of being granted a patent extension based on the novel use - I don't know enough about practice here;
• Maybe the Phase I trials only included men, so the costs of a new trial are much higher than I'd thought;
• There's some other regulatory barrier in here I don't know about;
• Pharma executives are idiots, and all potential entrants are idiots too. They're leaving a pile of money on the table.

If I had to give odds - at least 2 chance in 3 that the first one's the right explanation. But I've wide confidence intervals here. Anyone have better information?

Oh Canada

Time flies in politics. Wasn't it just yesterday that Justin Trudeau heralded a new approach to politics?

Yesterday, Jody Wilson-Raybould, who served as Trudeau's Attorney-General until very recently, testified that the Liberal Party apparatus, from Trudeau on down, pressured her to pursue leniency when it came to SNC-Lavalan - a politically well connected Montreal-headquartered firm. The firm threatened to move its headquarters if prosecuted, in the middle of a provincial election.

Here's Andrew Coyne

It was clear from the first line of Jody Wilson-Raybould’s testimony: the Trudeau government is now officially in crisis, the jobs of several of its top officials hanging by a thread.

The former attorney general did not merely offer her “perspective” with regard to the SNC-Lavalin affair, as the prime minister had airily suggested beforehand. She presented damning evidence, based on verbatim texts, contemporaneous notes, and detailed personal recollections, of “a consistent and sustained effort by many people within the government to seek to politically interfere in the exercise of prosecutorial discretion in my role as the attorney general of Canada in an inappropriate effort to secure a Deferred Prosecution Agreement with SNC-Lavalin.”

This was not just inappropriate pressure by this official or that minister. It appears to have been a whole-of-government effort to wear down her resistance, if not intimidate her into submission, involving 11 different people, 10 phone calls, multiple meetings, emails, text messages, the works.

It was not just a one-time event, but continued for months, long after the decision had been made — after the director of public prosecutions, Kathleen Roussel, had decided against offering SNC-Lavalin a DPA, after Wilson-Raybould had decided against overruling her, indeed even after the matter had become the subject of judicial proceedings, SNC-Lavalin having challenged the DPP’s decision in court.

Here's Paul Wells

The dangerous files are never the obscure ones. Scandals don’t happen in the weird little corners of government, in amateur sport or in crop science. They happen on the issues a prime minister cares most about, because everyone gets the message that the rules matter less than the result.

It’s a constant in politics. In 2016 I took one look at Bill Morneau’s first budget and wrote this: “The sponsorship scandal of the late Chrétien years was possible because it was obvious to every scoundrel with Liberal friends that spending on national unity would not receive close scrutiny from a government that was desperate to be seen doing something on the file. A government that considers the scale of its spending to be proof of its virtue is an easy mark for hucksters and worse.”

It wasn’t a perfect prediction. I kind of expected the hucksters and worse to be outside government. Unless the Trudeau Liberals can produce persuasive evidence that Jody Wilson-Raybould is an utter fabulist (and frankly, I now expect several to try), her testimony before the Commons Justice Committee establishes pretty clearly that the hucksters and worse were running the show. Led by the grinning legatee who taints the Prime Ministers’ office.

When I was a kid in Manitoba, it really felt like the country was run by a corrupt aristocracy along the Ottawa-Montreal corridor, with a handful of family and company names always showing up in anything that mattered. That was part of what fuelled Preston Manning's Reform Party.

Wilson-Raybould's testimony is pretty consistent with how we thought the place really ran.

Wells has another lesson relevant well beyond Canada's borders:

I’ve never met a Liberal yet who doesn’t reliably confuse his electoral skin with the national interest. So much of what Trudeau and his minions have done in the last year stems from that instinct. Take the ludicrous half-billion-dollar bailout for people in my line of work, never explained, sprung out of nowhere in Morneau’s fall economic update—or as I now like to think of it, between Trudeau advisor Mathieu Bouchard’s meeting (yet another one) with Prince and Michael Wernick’s chat with Wilson-Raybould. You can get a lot of op-eds written with that kind of dough. Take the cool billion the Canada Infrastructure Bank coughed up to pay for a politically popular and impeccably well-connected transit project around Montreal. That money appeared, from a brand-new bank that has not funded a single other project and did not then yet have a CEO [Update, Thursday: Wrong! It had had a CEO since last May – pw], on the day before Philippe Couillard launched the Quebec election campaign. It is now impossible to believe on faith that the Canada Infrastructure Bank is not a wholly-owned subsidiary of Ben Chin, Mathieu Bouchard, Katie Telford and Justin Trudeau.

But anyway, back to partisanship. Liberals and their many friends across the land will insist that all this behaviour must have no real-world repercussions because the other side cannot be permitted to gain the upper hand. And similarly, a lot of battle-hardened opponents of the Liberals will call for the jails to be opened up to welcome fresh Liberal meat. Fortunately, there is indeed an election coming up, and I’m content to let voters decide the partisan affiliation of the next government. I offer them no counsel.

But we get to draw our own conclusions as citizens. What the former attorney general described tonight is a sickeningly smug protection racket whose participants must have been astonished when she refused to play along. If a company can rewrite the Criminal Code to get out of a trial whose start date was set before the legislation was drafted, all because a doomed Quebec government has its appointment with the voter, then which excesses are not permitted, under the same justification? If a Clerk of the Privy Council can claim with a straight face that ten calls and meetings with the attorney general, during which massive job loss, an angry PM and a lost election are threatened, don’t constitute interference, then what on earth would interference look like? Tonight I talked with two former public servants whose records rival Michael Wernick’s. Both were flat astonished that he seems not to have pushed back against this deeply disturbing, and plainly widespread, behaviour.

Conflation of the party interest with the national interest is dangerous. This kind of corruption fuels populism.

Those keen on a bit more of the background should read Colby Cosh on the problems Canada gets by having the Minister of Justice also serve as Attorney General:

What does this mean? It means that if you are the prime minister’s trusted old chum who does his dirty work, it is all right for you to visit a mere minister of justice, operating in that capacity, and to tell her what the boss wants done for crude partisan reasons. But it is quite strictly forbidden to do that to an attorney general.

In matters of hiring or statute-writing, you can go ahead, kick down her door, and tell her “Orillia needs more red-headed Hungarian judges!” or “There really oughta be a law against candy.” When it comes to prosecutions — when madame has her attorney general hat on — it is very different. You, as a sunny-ways enforcer, are not even supposed to provide unsolicited advice or hints from the prime minister. The PM may be the minister of justice’s boss, but he is not in the chain of command between the attorney general and the sovereign at all.

And listen to Andrew Coyne here:

A defence of Treasury

It pains me when organisations in need of critique are hit for the things it is trying to get right. 

Thomas Coughlin's piece at Newsroom last week complained about Treasury's use of value of statistical life measures.

My column this week reminds us that those measures are hardly new, and highly necessary.

I then go on to some of the other stuff Treasury's trying to add to its CBA mix under the living standards / wellbeing agenda.

Imagine being the poor Treasury official tasked with telling the Minister that his preferred policy does not stack up under any reasonable cost-benefit assessment. You lay out all the facts and figures, showing that the policy is a colossal waste of limited funds, and that the money could be put to far better use elsewhere – only to have your analysis overturned when a Ministry official points out that the policy would improve social capital, or help neighbours make friends with each other, and that the value of those uncounted benefits should tip the scales.

It can then be understandable why Treasury would want to have standardised figures – and hope that there’s at least some rigour in estimating the effects of policy on such nebulous things as friend-making.

But we might also worry that, where Government is not always all that committed to rigour in cost-benefit assessment, even having these sorts of numbers invites creative accounting.

It is not hard to imagine the Provincial Growth Unit explaining to Minister Jones that he could justify giving $100,000 to his favourite small-town lawn bowls club if it encouraged even as few as two hundred new friendships. Increasing club membership from 35 to 41 could be enough to do it, under certain assumptions. It could then far too easily encourage a sham version of the living standards framework, rationalising political decisions rather than ensuring that every dollar of fiscal or regulatory cost does as much good as possible.

And that is where the opposition really must hold government to account. The problem is less whether having an additional friend is worth one seventeenth as much as having additional contact with your neighbours in Treasury’s CBAx assessment. The problem rather is whether the government bothers putting its bigger ticket items through the framework at all.

It would be interesting to know just how the Government manages to justify the Provincial Growth Fund, tax breaks for pretty race horses, or the Taranaki oil ban within any kind of rigorous assessment in the wellbeing framework.

Running those numbers might cost Treasury some friends – but I bet the CBAx tool would show it’s worth that cost.

Morning roundup

The worthies on the closing of the broswer tabs:

• Michael Reddell on the problems in the Tax Working Group's report. I've also been worried about exempting the NZ Superannuation Fund from tax - it introduces a distortion in favour of the Fund owning things better owned by others. I also worry about what happens to the government's incentive to fix housing supply if doing so creates tax losses. 
• Robin Oliver's interview on RNZ on the impracticabilities of the TWG capital gains tax proposal is very good. Ignore the partisan fights. This is the stuff the government has to figure out how it would deal with if it wants to go ahead with this mess.
• Blanchflower and Clark find that children do not raise happiness for singles, the divorced, separated or widowed, and that financial pressure makes having children less pleasurable. I imagine only the convenient policy implications for the government's wellbeing agenda will be noticed. There are also inconvenient policy implications. Those will receive less attention. 
• Arthur Grimes on the correlates of happiness and wellbeing
• Hopefully NZ doesn't follow America into the nuttiness of the culture wars. It's not a safe place. 
• What one guy in his spare time can do with NZES data. Despair by contrast at what StatsNZ has failed to achieve with its GSS data - and has prevented anyone else from achieving by keeping the CURFs locked down. 
• It is best when dumb ideas are critiqued by those on the same ideological side. Paul Krugman goes through the problems with MMT: No more Calvinball, please. 
• Former Chief Science Advisor Sir Peter Gluckman makes the case for letting NZ farmers use the GE ryegrass that absorbs nitrates and reduces methane emissions. It's stupid that we even have to make the argument given that the current government seems to care about global warming and nitrate pollution, but here we are. 
• Netflix is killing piracy. 
• Robert Caro on power

1973 is the new black

Richard Harman's Politik newsletter is one of my few daily NZ must-reads. 

He's unlocked today's headline piece.

You should read it and subscribe.

New Zealand's top trade official is flying to Britain to be there when Britain proposes to leave the EU on March 29 to deal with any threats to New Zealand’s lamb exports.

In recent weeks British farmers and a key Cabinet Minister have called for massive tariffs to be placed on New Zealand lamb.

POLITIK understands that the Ministry of Foreign Affairs and Trade is so concerned about the threats that it wants its Deputy Secretary, Trade and Economic, Vangelis Vitalis, on the ground in London as Britain quits the EU.

Two years ago we were imagining opportunities for a UK-NZ free trade deal. Michael Gove pretended to be somebody who liked free trade, and that the EU was holding a free-trading Britain back.

NZ lamb currently enters the EU under a tariff-free quota: imports up to the quota are without tariff. The EU and UK are looking at ways of splitting up their shares of that quota. But:

But Gove, speaking six days ago at the British National Farmers’ Union conference said:” One thing I can reassure you is that it will not be the case that we will have zero rate tariffs on food products. There will be protections for sensitive sections of agriculture and food production.

“You (farmers) have argued that we need tariffs on sheep meat, beef, poultry, dairy, both milk and cheese; and pig meat in order to safeguard domestic production,” he said.

“Your concerns have been heard, and an announcement on new UK tariffs in a no-deal scenario - with specific and robust protections for farming - will be made shortly.”

Hopefully Gove's misspoken here and there won't be an end to tariff-free access to the UK.

Good thing New Zealand has pursued a very broad free trading agenda, including the Trans-Pacific Trade Agreement and the China-NZ FTA. Just in case NZ winds up getting the shaft - again - instead of a NZ-UK FTA.

Here's Gove's full speech of 19 February. It does not include the line saying there will be no zero-rate imports. But the BBC's coverage included it:

Many supporters of Brexit argue that tariffs on food and other items should be scrapped in order to lower prices for consumers. But farmers fear that cheap imports and lower standards would destroy many parts of British agriculture.

"Your concerns have absolutely been heard," Mr Gove told a conference of the National Farmers' Union (NFU). "It will not be the case that we will have zero-rate tariffs on food products.

"There will be protections for sensitive sections of agriculture and food production."

He added that an announcement on a no-deal tariff schedule "should be made later this week".

1973 was a betrayal. I hope Gove was misquoted or misspoke here. Pulling this stunt, after NZ sent negotiators to help the UK, and after May provided NZ with assurances about trade continuity...

Let's all wish Vangelis the best of luck. In a better world, he'd be heading there to negotiate the expansion of the NZ-Australia free trade and free migration area to include the UK and Canada. Not to beg that NZ be able to continue lamb exports.