Holes in the MIQ bucket

Thomas Coughlin reports that the reason the government cannot expand MIQ capacity is that they can't source enough nurses and haven't enough testing capacity. 

Now documents released to the Herald under the Official Information Act show officials have been considering long-term purpose-built MIQs since July last year.

But each time a new idea was floated, it hit a brick wall: the country does not have the health or security staff to sustain more MIQ places and building new purpose-built MIQ spots could create as many problems as it would solve.

...

Ironically, MIQ, which is often held responsible for restricting the flow of labour into the country, was itself a victim of the labour shortage.

A "key constraint for increasing capacity for MIQ is the availability of workforce to provide wrap-around services, such as health care workers and security guards.

"Appropriate health workforce, and laboratory testing capacity needs to be available to MIQ facilities without undermining the provision of broader health and disability services," officials said.

"Even if additional new types of accommodation can be found, these workforce constraints remain and are likely to place an absolute limit on the supply of MIQ spaces unless they can be addressed," they said.

It's impossible to believe that security guards would be the binding constraint; training more can't be that hard. They may have to offer higher pay to attract more people but that's fine. 

I've heard the worries about bidding nurses away from the rest of the health system before; it had been raised when we'd suggested some of the kinds of options Coughlin canvasses. 

But there are two big problems with this. 

First, and most obviously, the government is acting as a monopsonist. The government is the largest employer of nurses. It is worried that MIQ facilities offering higher pay to attract nurses would bid nurses away from the rest of the health sector, and then force the government to pay nurses more to avoid that happening. For all the government's push for Fair Pay Agreements and utterly implausible arguments about 'monopsonistic' employment conditions requiring a benevolent state to come in and force new pay relations under an Awards system, the only parts of the labour market that work like that are the ones where the government is the monopsonist: teaching and nursing. And in those sectors, the government behaves exactly as you would expect a monopsonist to behave. Maybe that's why the government sees monopsonists everywhere - it extrapolates from its own conduct.

But second, and more currently important, you can scale up MIQ without massive increases in nurse demand. MIQ puts a lot of demand on nursing and testing because the government has chosen to keep going with massively resource intensive swab testing. Rako has been ready to deliver swab testing at scale since January. It doesn't require nurses to take the samples, and the test capacity can scale up to whatever is needed. 

BusinessDesk reports on the latest in that saga. It looks to me like the government ran a near-corrupt tendering process resulting in contracting with a provider who doesn't even have a validated test, because the Ministry of Health was embarrassed that Rako showed them up. It hasn't been deployed at anything like scale, and nobody knows whether the test would actually work. 

This article all on its own is worth the BusinessDesk subscription. Please subscribe and read it. 

I have a short snippet here but the whole thing is damning. 

The covid-19 saliva test being rolled out under a health ministry contract constitutes “a risky strategy” in which “border workers must pay the price” if it fails, says one of the country’s top saliva testing experts.  

In a June 21 email obtained by BusinessDesk to Sue Gordon, the health ministry’s deputy chief executive for covid-19 health response at the time, Victoria University’s associate professor of biological sciences, Janet Pitman, claims health officials “actually have no idea whether the test(s) will indeed work accurately". 

Pitman is the principal academic adviser to Rako Science, an unsuccessful bidder for the national saliva testing contract let by the ministry in late May to Asia Pacific Healthcare Group (APHG). 

“The saliva tests to be rolled out by the MoH are not diagnostically validated and the accuracy of these tests are completely unknown,” wrote Pitman (her emphasis) on June 21. “I remain at a complete loss to understand why these unvalidated tests are being used on our most vulnerable people at the border.” 

Anyway. 

We can't expand MIQ capacity because the government doesn't want MIQ to be pushing up the cost of nurses for the rest of the health system - and again the Commerce Commission can't go after this kind of anticompetitive practice, because State protects State. 

And we can't have better testing methods that won't put pressure on nursing and current testing capacity because the Ministry of Health is embarrassed that Rako could do something that ESR couldn't manage, and because demonstrating competence in delivery just isn't the way things are done in New Zealand.  

Remember that old "there's a hole in the bucket" song? It's that, except there's a bung for the hole sitting right there, and MoH refuses to use it and prefers to bleat endlessly about the axe not being sharp enough, the whetstone being too dry, and there being a hole in the bucket preventing getting the water to wet the stone.  

Hazeldine on the ETS

I can't disagree with anything Auckland University's Professor Tim Hazeldine has to say about climate policy.

Also mostly pointless, are the multitude of policy recommendations that pour forth from the report. If the real decision-makers in the economy (i.e. all those listed above) are getting the correct price signal from the ETS, then there is generally no justification for further government intervention. What should be done will be done.

The main exception will be in the provision of what economists call "public goods" – in particular research results that can be freely used by everyone, such as how to breed better-mannered cows.

But, in any case, with the emissions price signal sorted, all proposed programmes and policies should just go through the Treasury's standard cost-benefit analysis. The commission is no help here.

And - not so incidentally - the expensive scheme to subsidise purchases of electric vehicles that the commission has foisted on the current government will almost certainly fail the cost-benefit test. Around 90 per cent of the well-heeled beneficiaries of the scheme's largesse would have purchased an electric car anyway - we have just given them an $8000 present.

Along the same lines, but harder perhaps for non-economists to grasp: none of the large sums of money that will be raised by auctioning emission quotas or (the alternative) imposing a carbon tax should be diverted into climate-related programmes in addition to those which will be done anyway because they pass the social cost-benefit test.

These funds should be revenue-neutral. They are incurred by the team of five million, and they should be returned to them, Each billion of carbon tax or quota money would fund a $200 Christmas present for everyone on the team.

Our climate change policy should be solely about climate change. "You can't kill two birds with one stone" is a cliche but it is not trite. It is true and important in almost every policy context. Yet the Commission considers it should in future "consider broader well-being factors, like eradicating poverty, safeguarding food security and addressing other environmental outcomes". Wrong, wrong, wrong and wrong.

I wonder if Tim had my colleague Matt Burgess in mind here: 

So, what to do? The Climate Change Commission has, in just a few months, seriously outgrown its boots. The Government should step in, and with polite thanks for their efforts, de-commission the commission. It should then persuade a super-smart mid-career research-grade Kiwi economist – tough-minded but humble (they do exist) – to take the reins of a slimmed-down secretariat.

To Arms

The Janssen vaccine is now approved for use in NZ; AstraZeneca should be close behind. As best we can tell, the Pfizer vaccine slowly being rolled out is better than either, but availability of doses seems to be a binding constraint.

There's some evidence now that AZ as a first shot followed by Pfizer may be better than two shots of Pfizer, or at least no worse. If we could get AZ faster, then that could speed up the vaccination roll-out. 

There are NIH trials currently underway checking what Janssen-based combinations are like. Safety data should soon be available. If Janssen followed by Pfizer is safe, and if NZ could get doses of it, then we could think about rolling out Janssen as first doses. That too could speed up the vaccination roll-out. Adding a second dose of Pfizer later, at the time that it would have been being rolled out as first doses, would give more protection in that interval. See also the Washington Post on it.

The Conversation summed up the case a few weeks ago:

Emerging coronavirus variants are one of the most intriguing reasons to consider mixing vaccines. Administering vaccines that target different variants would provide broad collective immunity and limit emergence of new possibly more dangerous strains.

It’s possible that people who are currently fully vaccinated will need a third shot to address genetic differences in new variants. Changing platforms for this booster shot – for instance, if your first round was viral-vector based, switching to mRNA or one that is protein-based – could help bolster your immune response.

The whole public sector seems really not to see any urgency about getting doses in arms. I don't really understand why. Is it just fatalism and resignation, figuring it's impossible to get more doses so no point in thinking about it? Too much trust in that we've not had a real bad breach so far, so it'll be fine next time? 

Australia is getting a delta outbreak, and our border protocols are really not very good. 

They still haven't gotten all border workers vaccinated. They're not bothering checking Covid test results for incoming passengers. Our contact tracing system still isn't up to the job. 

There's no decent roll-out of saliva testing, and what looks like a near-corrupt tendering process. Access to vaccines across the country seems haphazard, with no access in Canterbury (and see here) but easy access in parts of Auckland. [Update: oh - and border workers really do want the saliva tests.]

Getting piles of doses ordered for fast delivery gives us options. At worst, if the NIH trials don't look so hot, pass the Janssen doses on to other places. 

Pfizer is working on a new booster aimed at the Delta variant. Shouldn't we be getting a big order in right now, before the thing's approved, so we can have delivery of it as soon as it's ready rather than being back of another queue? 

Morning roundup

The morning's closing of the browser tabs:

• Customs is now seizing 125,000 cigarettes and 155kg loose tobacco per month. Why? "We have the most expensive cigarettes in the world for legal purchase."
• Wastewater testing says highest meth consumption, per capita, is in Kaitaia, Ōpōtiki, Wairoa, Kawerau, Tokoroa and Huntly. Lowest levels were in Kerikeri, Dunedin - Tahuna, Queenstown, Wellington - Karori, and Greymouth. 
• Robert MacCulloch on the mediocrity-bias in the public service. 
• Robert MacCulloch wonders why NZ didn't just pay more to get vaccines faster. Asking this on Twitter always generates a pile of replies from Labour-stans, but come on. We're continually vying with Australia for worst in the developed world. 
• Oh - and if we wanted to get vaccinated faster, first doses of AZ followed by second doses of Pfizer seem to work a treat. 
• The Industrial Revolution? Look first to the prior agricultural revolution enabling the population growth that allowed for the division of labour and for time spent in discovery. 
• Ayn Rand's worst idea: moral intolerance. Seems popular though.
• The NZ residence application queue is awful. Almost 30,000 people whose applications are "waiting to be allocated for processing". They suspended processing of Expressions of Interest under the Skilled Migrant Category because of Covid. But piles of those people are already here. They wouldn't need to come in through MIQ. Surely Immigration NZ could give them an answer. 
• MBIE and DoC have a new tourism data portal. There's a ton of stuff in there. Some of it hasn't updated since covid, like employment in tourism. 

Biofuels mandates

The government is taking submissions on its proposed biofuels mandate.

It's an interesting one.

From the consultation document:

Over the first three years, 2023–2025, the Sustainable Biofuels Mandate would reduce emissions by 1,342 kilotonnes. In 2025 annual transport emissions would reduce by over 4%.

They then provide a tallying of potential cost:

They're proposing to reduce GDP by $1,245 million over three years for a three-year cumulative emission reduction of 1,342 kilotonnes. 

There are a thousand kilos in a million. 

So the policy costs about $927 per tonne of reductions. 

The current ETS price is $43.

You could buy 20 tonnes at the next auction and shred them for less than the cost of a single tonne of reductions through this policy. 

Why is this even going out for consultation? Isn't this the kind of thing that, in academia, would get a giant desk reject? Like "Hey, this is just so stupid we don't want to waste the referees' time on it. It has no chance of being accepted for publication. It would insult the referees to ask them to provide comment. Who is the person in your team who thought this was a good idea to start with? It is just so obviously terrible that we want to pre-emptively desk-reject anything else coming from that person, so the editor doesn't even have to open the envelope next time. And we might want to give a warning to whoever gave them a grant to study this too."

We should at least give thanks that the consultation document put numbers on it. I wonder whether they will continue to do so. 

The consultation document grasps for a few straws:

The modelling shows the upper bound of the impact on GDP. In reality the impact is likely to be lower because the:

• projections assume that there is no further technological progress. It is likely that the global long-term policy commitment to biofuels will lead to higher investment in cost-reducing biofuels research and technology
• economic impact is highly dependent on the prices of biofuels and fossil fuels. The modelling’s sensitivity analysis shows that when biofuels are relatively less expensive, and/or fossil fuels are relatively more expensive the economic costs of the Sustainable Biofuels Mandate fall. Emissions reductions are also slightly higher
• Sustainable Biofuels Mandate will protect future levels of GDP. Currently, key exporters like the food and fibre sector are concerned that their businesses will lose access to some international markets if we fail to take timely action to reduce emissions18
• estimates do not include the potential positive impact on economic activity, and regional economic development, arising from any domestic biofuel production.

While there will be an economic cost, New Zealand has made a commitment to decarbonise and become a net zero emission economy. Moreover, stakeholders have suggested that after electrifying light vehicles, biofuels are likely to be the next lowest cost carbon mitigation opportunity for transport.

Sure. Costs could change such that biofuels become less terrible. But if that happens, the ETS will already encourage fuel companies to pick them up. The policy is a one-way bet on failure. The status quo gets us biofuels in the states of the world in which they pan out; the proposal then only ensures that we also get them when they're really stupid.

And if the government is worried about getting emissions down to maintain access to international markets, maybe, just maybe, it might make sense to cut the ETS cap more quickly, getting you twenty times as much emission reduction as a biofuels mandate would get you for the same amount of effort? 

Heck, they could just go out to the folks who hold stockpiled credits and offer them $50/tonne for them just to get them out of the system so the government doesn't have to account for them. That's way cheaper than a biofuels mandate. 

Markets can fail. There can be spots where policy can get to better outcomes than the ETS alone, if it's addressing some other real underlying market failure that isn't addressed by a carbon price. 

Apologists for a policy-heavy approach to mitigating emissions like to cast ETS proponents as having idealised views of how markets work.

As with the overall reliance on the ETS, however, detractors say the simplicity of this policy could be its greatest weakness.

"The thing about Eric and the New Zealand Initiative is that they take an extremely purist approach. Actually, the world demonstrably just doesn't work that way," Shaw says.

Diaz-Rainey says: "It seems theoretically very, very appealing. In a very clean and idealised world, that seems very appealing, but I just don't see it happening."

That ain't it, though I can see why they'd want to paint their critics as unrealistic idealists. 

It's rather that ETS proponents are realistic both about market failure and about government failure. Both will cause different sorts of problems. 

The political world throws up policies costing >20x as much as the current ETS price, and multiples of any estimates I've seen on the social cost of carbon. 

I think it takes an extremely purist and naïve view of political processes to want to rely on Ministerial and bureaucratic discretion to solve a problem as big as getting to net zero. 

And it seems crazy to think that you can maintain political support for net zero while hell-bent on pushing policies costing twenty times as much as necessary to get there, that have no in-built mechanism for compensating those bearing the cost. At least the ETS generates revenue for the government that can be given back to people right? Biofuels mandates don't do that. 

Anyway, Kate MacNamara asked me for comment on this thing. 

Eric Crampton, chief economist at the New Zealand Initiative, said cheaper ways to achieve the same level of emissions reductions would mean less harm for those who bear the costs.

"The numbers here [in the consultation document] suggest a sustainable biofuels mandate would reduce emissions by 1.342 megatonnes at a cost of $1245 million. When I pull out my calculator, that gives me a cost per tonne of $927. The ETS price is currently $43. So if the numbers presented in the report are correct, the Government could achieve more than 20 times as much emission reduction, at the same cost, by buying ETS credits and shredding them – at current prices. Simply reducing the [ETS] cap, without the biofuels mandate, would be better."

Crampton said that as total credits are reduced the scheme naturally abates emissions in the most cost effective way; this is because carbon emitters must bid at auction for credits that allow them to emit.

The Government, however, seems determined to target emissions reduction in transportation in particular, and remains concerned that New Zealand's uptake of electric and hybrid vehicles is too slow (the transport sector contributes some 21 per cent of gross domestic greenhouse gas emissions).

If you want to submit, the forms are here. 

You might suspect that nobody in the current government is listening to anybody about anything, but submitting on it may be cathartic. 

You might as well at least enjoy yourself while telling them what you think about it. 

And buckle up to be poorer in 2025 and thereafter, to no benefit to the climate because fuel is in the ETS anyway and the binding cap on net emissions is a binding cap on net emissions. 

Credit Suisse wealth inequality data

Bob Gregory's latest rant against the evils of neoliberals inspired me to pull together the latest Credit Suisse wealth figures. The social democracies in Europe usually turn up as a lot more unequal in wealth than NZ, and I was curious where the latest numbers might put things. 

The latest iteration has NZ with the 145th most unequal wealth distribution of the 168 countries in the data set, or the 24th most equal. I've highlighted NZ in red and Sweden, Germany, Finland and Denmark in Green (from left to right). NZ is way over on the right, just to the right of France which you can't really see. 

NZ has more traditionally been toward the middle of the pack. The 2017 data had us 80th most unequal of 171, and a bit more unequal than France. This time we're a bit less unequal than France. 

Recall that Gini measures the area between the Lorenz Curve and the line of perfect equality. So a Gini of 0 means we're on the line of perfect equality. It's a measure of all against all; other inequality measures measure different things. 

In this case, I'd bet that sharp housing price increases are driving increases in wealth portfolios for middle-wealth households for whom house is the primary asset, and that the equalising effect of that is currently dominating the effect on households who don't own any house. 

So it'll come down again in due course if housing gets corrected, and presumably at that point the inequality-shouters will shout about the rise in measured inequality back to where it was a few years ago. 

Note that this is a PDF to Excel conversion by SmallPDF which looks to have done just a superb job of things - but there could be OCR errors that I hadn't caught. 

It probably highlights one of the problems in just using Gini. The more important growing inequality is between insiders and outsiders in housing markets, but Gini has wealth as having become more equal. 

I have come to expect Oxfam NZ reports shouting about the latest Credit Suisse figures, taking whatever they can from them to provide reason to worry about inequality and give them money. This year's Credit Suisse report was delayed. I wonder whether Oxfam will have noticed that NZ's wealth distribution became far more equal. 

Supply chains in illicit markets

Credibly certifying that a product's supply chain meets particular standards is not the easiest thing in the world. 

Every supplier all the way back in the chain needs to be so-certified, and there will always be fun boundary questions in how far back things need to go. For something like a t-shirt there's the factory that makes them, the factories that makes the thread and the cloth, the places that make the dyes, the sources of the raw materials and the chemical components that go into the dyes, the people who make the machines that extract the raw materials, the company that makes the fuel for the machines and the electricity suppliers. Maybe also the companies that supply morning tea for the workers and back through that chain as well? It gets messy. 

Anyway - certification is possible, but setting it all up in the first place has to have been hard. It requires that those at the end of the chain can trust that the next one back in the chain is also certified, which requires that they can trust the next steps back, and so on. Knowing that your certified supplier is legit requires either having some centralised repository of who is certified maintained by the certification provider, or the ability to see the certifications all the way through. Encouraging any one supplier to be certified requires that they all expect to see the increase in value from being able to cell through verified certified chains, so there are network issues to overcome too. 

It seems the kind of thing that would be close to impossible in cocaine markets. But:

Brits looking to ease their conscience over their involvement in bloody drug wars overseas are now being targeted by cynical dealers selling what they claim is "ethically sourced" cocaine.

Users have revealed a high demand for the so-called "woke coke" at posh dinner parties across the UK.

Drug policy expert Neil Woods told the Daily Mirror: "I have been shown ads for 'environmentally friendly sniff' but it's nothing but a very clever marketing ploy.

He revealed that users were paying through the nose for the gimmick.

The article quotes someone as saying it's impossible to produce ethical cocaine. 

That seems wrong, at least in principle. 

But imagine if you did have some perfectly ethical way of producing cocaine. How could you possibly credibly convey that through the many steps between you and the final consumer in London? At every step, someone could be mixing your product with someone else's cheaper and less ethical product. Any mechanisms you might put in place for verifying the authentic source of the delivered cocaine is a mechanism by which you might be prosecuted. Even if you ran it pseudonymously, it increases the risk you're running if the pseudonym gets tied to a real identity. 

I'd love to know how the cocaine dealers in London are trying to demonstrate that their product is actually the ethical real deal. It could be that the customers don't actually care and they just want the warm glow of feeling like they do care. But suppose there were an actual real market with people willing to pay a real premium for ethical cocaine. Could that market be supplied? Or does it just fall apart with lemons problems? 

In any case, ethical supply will be easier in legal than in illegal markets, so another case for legalisation.