The NIMBY Problem

Standard drill in a lot of the urban econ lit is that governments need to pull planning up to higher levels to get around local NIMBYs. The small number of loud people with infinite time to stall local planning just don't get the same hearing if planning's decided at a regional or state-level rather than at town council. 

And there's some decent evidence for that. Auckland's Unitary Plan is more enabling than the prior underlying plans were. A pile of apartments were built because of it. 

David Foster and Joseph Warren go through a countervailing force in the Journal of Theoretical Politics.

Nimbyism is widely thought to arise from an inherent tradeoff between localism and efficiency in government: because many development projects have spatially concentrated costs and diffuse benefits, local residents naturally oppose proposed projects. But why cannot project developers (with large potential profits) compensate local residents? We argue that local regulatory institutions effectively require developers to expend resources that cannot be used to compensate residents. Not being compensated for local costs, residents therefore oppose development. Using a formal model, we show that when these transaction costs are high, voters consistently oppose development regardless of compensation from developers. But when transaction costs are low, developers provide compensation to residents and local support for development increases. We conclude that nimbyism arises from a bargaining problem between developers and local residents, not the relationship between local decision-making and the spatial structure of costs and benefits. We suggest policy reforms implied by this theory.

Ben Southwood goes through it here, arguing that when NIMBYs can't be paid off at the margin, they instead aim to wreck everything: throw so much sand into every set of gears that nobody can ever build anything anywhere because building is just too hard. 

I've liked the idea of giving councils a share of the upside that central government enjoys when councils facilitate growth, so that councils can both find ways of dealing with costs they have to face in facilitating growth, and so they have the resources to provide whatever local amenity improvements are needed to overcome local opposition. 

The only thing you'll be nursing is your whisky

Either New Zealand has no shortage of nurses, or New Zealand is a fundamentally silly country. 

Look on, ye voters, and despair. 

A new nurses' training school is ready to train, but has to sit empty. Why?

Here's the bit in BusinessDesk: 

Instead, bureaucracy and an absence of pragmatism is coming before both the pressing workforce crisis and urgent patient needs.  

The delays all come down to an historic technicality requiring education providers to offer a Bachelor of Nursing programme before they can offer an Enrolled Nursing programme.  Yet enrolled nurses trained by UP Education in Australia are able to live and work in NZ using this exact diploma. 

They’re high-quality nurses who make essential contributions in hospitals, private practices and aged-care facilities. 

Let’s repeat that. This qualification is a cornerstone of the Australian healthcare system. Those who hold it can work immediately in the NZ healthcare system. Yet it is not allowed to be taught as a standalone qualification in this country.  

This outdated standard is likely why the NCNZ, the nurse training regulator, originally agreed to consult with its members on the removal of this standard.  

However, the NCNZ has since decided to bundle this specific review of a single technical clause into a much wider review of sector-wide nursing competencies across the country’s entire nurse training sector – for enrolled and registered nurses. A technical standard that could have been reviewed and removed in a matter of weeks has snowballed into a review requiring consultation across the whole health sector beginning late this year or early 2024, potentially delaying our nursing programme a further 12 to 18 months. 

Newsroom covers it too:

Rivera said she had been told the registered and enrolled nursing scopes would be wrapped together from early 2024.

“Then there’s the consultation on what the actual education standards might look like, so I said to [Nursing Council chief executive Catherine Byrne] that this sounds to me like a 12-18-month delay.

“I didn’t get a reply, but that is my assumption given how consultation processes work with the Nursing Council.”

At the extreme end, Rivera’s estimated timeline could push the opening schedule to early 2025.

The facility, which got $370,000 in taxpayer funding through the Tertiary Education Committee, will sit empty until the consultation comes to an end.

“I have staff hired and ready to go, but luckily we're quite nimble and I've got them working on other health qualifications, so they are doing other things.

“The broader issue is we thought we could be part of a solution to a problem, and the bureaucracy around it is astonishing. There's just no movement.”

Rivera accepted the scope of practice needed to be looked at. “But it shouldn't mean that when there's a crisis, everything grinds to a halt and no new player is allowed in the market.”

 

...and make the platforms pay for it

I still hope that NZ looks over in horror at Canada and pulls back from making it risky for platforms to link to news.

Facebook's clearly decided that being in news just isn't worth the aggro. Look at this. Facebook referrals to top global news sites dropped from 120 million per month to about 20 million per month. 

News turns into outclicks rather than more scrolling for updates from family (and ads on Facebook's platform). 

Another reason that Canada has just been incredibly stupid in guessing that Facebook was just bluffing. 

Axios says:

Traffic referrals to the top global news sites from Meta's Facebook and X, formerly Twitter, has collapsed over the past year, according to data from Similarweb.

Why it matters: Website business models that depended on clicks from social media are now broken.

What's happening: Regulatory pressure and free speech concerns have pushed tech giants to abandon efforts to elevate quality information, leaving the public more susceptible to misinformation ahead of the 2024 election.

• Meanwhile, news companies are scrambling to find business solutions while simultaneously fighting to protect their work in the AI era.

Morning roundup

The morning's clearing of the tabs...

• Price theory is the core of everything that's good in economics. Albrecht and Hendrickson explain the basics. Price theory emphasises exchange and emergent outcomes. Public choice studies politics as exchange. It's fun to think about what would happen if an incoming government required Ministry Chief Economists to pass a test based on workouts in the old Alchian & Allen textbook.  
• Like the idea of government paying a bonus to people for having kids? Robin Hanson has a neat way of doing that. But I doubt that proponents of baby bonuses will like it. 
• This came out a while back but I'd missed it. Surprisingly enough, hydrogen deposits seem to form underground in spots where olivine is prevalent in the presence of heat and water. NZ has a lot of olivine, and heat, and wet. I wonder if anyone's gone looking for hydrogen - geological deposits hadn't previously been thought possible. If we have some, stick a pipe in it to power a boiler and generator above the deposit, and you'd have electricity that generates water rather than CO2. Seems a longshot, but would be pretty sweet.
• Chris Trotter is nostalgic for a joyous left. Excellent piece. 
• This kind of thing pushes electricity toward a global law-of-one-price, doesn't it?
• Henry Thompson on the Industrial Organisation of the Mafia, forthcoming in the JLE.  
  

  This paper uses economic reasoning to analyze the organization of one of the most successful criminal groups in modern U.S. history: La Cosa Nostra (LCN). Drawing on recently declassified FBI reports and a hand-collected dataset, I argue that the costs of violent disputes are key for an economic understanding of LCN’s core institutions. Violent disputes were costly for LCN as they consumed resources to produce and were destructive. However, violent disputes were especially costly to LCN because of its need to keep a low profile. As a member did not bear the full costs of a profile-raising police investigation, each had a perverse incentive to resolve a dispute with violence. Hierarchical firms and a sophisticated court system were LCN’s solution. They gave bosses the authority and incentive to limit violent disputes and to use violence judiciously. LCN’s longevity and success are, in part, a testament to the institutions’ efficacy.

   

The problems of a tax-free threshold

Jim Rose details the problems with a tax-free threshold for the NZ Taxpayers Union. 

Running one that's revenue-neutral means you have to increase marginal rates further up. Increasing marginal rates to fund inframarginal transfers mightn't make the most sense. And there are better ways of targeting support, if that's what you want to do. 

He writes:

The introduction of a tax-free threshold is poorly targeted with many of the intended beneficiaries of the policy already receiving other Government support such as benefits, superannuation and tax credits, which could be increased without spillovers to other higher income groups.

The more important tax threshold that needs to be adjusted is the $48,000 income tax threshold that when crossed sees individuals paying a 30% marginal tax rate. Given that a full-time minimum wage worker earns $47,216 annually, they only need to work one additional hour a week or get a 40 cent per hour pay rise in order to be pushed into the higher tax rate. This, combined with the 27% abatement of Working for Families tax credits, can create punishing effective tax rates well above 50%, which has significant impacts on incentives to work.

Most of those in incomes low enough to substantially benefit from a tax-free threshold are either in groups where more targeted support can be provided (such as those listed above), are students working part time, or are second earners, again working part-time.

The tax-free thresholds proposed by the Greens and Te Pāti Māori, along with the one considered earlier in the year by Labour, would cost more than what is currently spent on Working for Families but spills over to many taxpayers who do not need it, rather than just those the policy intends to help.

 

Certified

If a drug or medical device has already gone through the regulatory gauntlet at the FDA and Australia, or in the UK and Canada, or the EU and Taiwan, or Switzerland and Singapore, does it seem all that likely that Medsafe's going to find anything that everyone else missed?

Sure, Medsafe has 'expedited' processes for drugs already approved elsewhere. But those processes still impose cost - particularly time cost on pharmaceutical companies' regulatory affairs teams. 

And five million middling-income people at the far end of the world just don't hit the priority queue.

Alex Tabarrok talks about the FDA's invisible graveyard: all the people it has killed by being too slow to approve safe and effective drugs. How should we think about New Zealand's, when New Zealand insists on running a separate process for drugs already approved elsewhere?

In August, Pharmac dropped a pile of drugs from funding evaluation. Why? In twenty-four cases, Pharmac said, "We understand there is currently no Medsafe approved product available in New Zealand. We are not aware of any supplier willing to pursue Medsafe registration."

The government here likes to say the problem is the pharmaceutical companies, and that Medsafe would be happy to process their applications if only they'd apply. The real problem is that we have this process at all for drugs already approved elsewhere.

ACT yesterday announced that it would require Medsafe to automatically approve any drug or device already approved by at least two other trustworthy regulators, unless Medsafe had extraordinary reason not to approve it. 

ACT says if a drug or medical device has been approved by any two reputable foreign regulatory bodies (such as Australia, United States, United Kingdom), it should be automatically approved in NZ as well within one week unless Medsafe can show extraordinary reason why it shouldn’t be. 

This simple change would significantly improve access to medicines that have already been subject to rigorous testing and analysis through other regulatory regimes.

The Strategy would include a working list of international regulatory regimes that have comparable or more robust systems compared with New Zealand. It will also include an analysis of areas where international analysis might not be directly relevant to the New Zealand population: for example, if there are significant differences in population makeup that would distort medical efficacy.

National's policy isn't far from that.

4.2 Faster approvals for new medicine

New Zealand’s slow approval process for medicines means Kiwis wait much longer than people in other countries to access potentially life-saving treatments. While it is essential that medicines and other treatments are subject to stringent scrutiny to ensure they are safe, there is no reason why New Zealanders should have to wait for our domestic medicines regulatory body, Medsafe, to conduct its own cumbersome process from scratch, when countries with health systems we trust have already gone through this exercise.

National will

• Legislate to require Medsafe to make decisions on approval for registration for all medicines within a maximum 255 days, to align with Australia,
• Require Medsafe to implement even faster approvals processes for any medicines for use in New Zealand that have already been approved by at least two regulatory bodies that we currently recognise, including Australia, the EU, Singapore, the UK, Switzerland and the US.

I've long wanted this kind of policy. And there's some hope that the general congruence of the two parties' policies could mean it gets done in the event of a National-ACT coalition.

Excellent.  

Afternoon roundup

The tabs...

• Earthquake strengthening costs on one Wellington performance venue have increased from $90m to $182m and now to $329m (Dom, Herald). We have no clue what strengthening the recently quake-designated Michael Fowler Centre and Opera House might cost. Would it be crazy to expect a billion dollars across all three? After $100m more than necessary on a library? All for a town of about 200,000 people where the water pipes are a century-old collapsing mess? It's a good thing Wellington's pretty...
• Mothers of underweight babies below a cut-off get substantial US government support; those just above the cut-off don't. Run the RDD and find no effects of funding on outcomes. 
• NZ's National Party promises non-finance spending two percentage points of GDP higher than Ardern promised in the 2019 Wellbeing Budget. 
• Devastating New Yorker piece on the Ariely / Gino mess. Harvard's Business School is not a serious place. 
• Admin staff at the Auckland Uni law school are substantially happier than faculty. I keep wondering when somebody might set up a union that represents only academic staff. 
• Superb BusinessDesk piece on Sean Colgan, who backed Rako in its fight with the Ministry of Health. And has leant David Seymour a plan for the election campaign. 
• My piece in this past weekend's Stuff papers covers two recent NBER working papers on zero-sum thinking. 
• California's math curriculum is nuts. Unfortunately, this kind of nuttiness is also infecting New Zealand.
• A lot of US voters are confused about whether Robert F Kennedy Jr is Bobby Kennedy. They identify the picture of Bobby Kennedy from the 1950s, the father of Robert F Kennedy Jr, as being Robert F Kennedy Jr. He's aged remarkably well if so; the father would be turning 98 later this year. Every time you learn a little bit more about voters, just be amazed that the world isn't even worse. 
• For six years, NZ had a government that expressed commitment to wellbeing as its highest goal, and yet this. 
• So Sanitarium ran into some supply issues and cut supply to The Warehouse before either Foodstuffs or Woolworths. Which seems more plausible: that the whole thing is a stitch-up by the big supermarkets to get Sanitarium to cut out a low-price potential competitor, with a new grocery regulator watching? Or that the big supermarkets have longstanding contracts where they pay a bit more to have clauses providing greater security of supply? I'd bet on the latter, but nobody else seems to have considered that possibility.