Afternoon roundup

A closing of the browser tabs

• Dave Frame batting back the usual (often older) arguments from those who don't like climate science. 
• Alice Evans on the origins of 'Dayooth'
• Ben Kepes on the Māori parallel to the Jewish experience
• Consumer NZ figures that if one of our grocers lowers its back-end costs, there could be zero passing-on of savings to consumers. Even a standard monopoly model would have a reduction in price. It would be a fun microeconomics problem set question: come up with conditions under which Jon Duffy could be right (if any), and provide an answer simple enough for him to understand. Consumer NZ just keeps getting more absurd. 
• I like that NZ's Accident Compensation Commission is hiring a Lead Advisor, Econometrics.
• Pharmac's posted its final decision about pulling 27 drugs from funding consideration, 24 of which were proposed to be pulled because there was no apparent prospect of Medsafe registration. They've decided to pull 24 drugs, 22 of which are because there's no prospect of Medsafe registration. Tafamidis and Cefuroximine might get onto Medsafe's radar. This system is so stupid. 
• But the new stadium would really put Christchurch on the map, just like Ogdenville and New Haverbrook. 
• Interesting proposal around investment in buying out IP rights to make lower-carbon tech more affordable in developing countries. Loyal readers may remember that I've long argued that NZ could do something similar as moonshot on ag biotech. If AgResearch figures out low-emission pastoral systems, GE or otherwise, with government funding, don't try to earn money on any patent. Release it globally on a royalty-free licence that simply requires that a small fraction of the resulting global emission reduction credits to NZ's account. Lowish chance it pans out, but if it did, it would have high return. 

A Rule of Two for new drug approvals

Requiring Medsafe to automatically approve any drug that had already been approved by at least two trustworthy overseas regulators would sharply hasten new drug approvals without adding particular risk. 

Giving Medsafe an emergency handbrake for use in exceptional circumstances, subject to ongoing review to make sure they were using it appropriately, would reduce what minimal risk might otherwise result. 

I call it a Rule of Two. 

It's my column in Newsroom this week, and a report we put out on Thursday last week. 

The FDA spends hundreds of millions of dollars more on drug approvals than Pharmac spends buying drugs. It is exceedingly unlikely that Medsafe would ever find anything that the FDA missed. It is even more exceedingly unlikely that they'd catch something that both the FDA and the European Medicines Agency had missed. Or the EMA and Australia. Or the FDA and Canada. Or Canada and the UK. 

Medsafe has about 60 staff. Take this job off them and let them focus on areas where they might add real value. 

It isn't just that Medsafe pulls stunts like taking fifteen months to approve Ozempic after it had already been approved by everybody else and after it had already been on the market overseas for four freaking years. It's that Novo Nordisk didn't bother to even apply here until December 2021, because what's the point? Medsafe is too much hassle relative to the size of our market. They haven't submitted Wegovy for approval here yet, for obvious reasons. 

The full delay isn't the fifteen months Medsafe spent evaluating. The full delay is the over five years from the drug's second overseas approval until its approval here. 

Government here, and especially during Covid, loved blaming pharmaceutical companies for not getting their paperwork into Medsafe early. 

It would be like requiring Ferrari to send six of their latest and most expensive models to NZ for destructive crash testing, rather than relying on overseas approvals, and then blaming Ferrari for that there are zero Ferraris on the market in New Zealand. In that case it would be the stupid rule that would be the problem, not Ferrari. It's crazy that we seem able to (sensibly) rely on foreign approvals for cars but not for medicines. I'd think relying on just one would be fine, but a Rule of Two would be sufficiently better than what we have that that's fine too. 

Our report draws on the work of a couple of teams of Canterbury econ students who checked whether Medsafe approval ever really actively protects Kiwis. Turns out there's basically no cases where Medsafe long-term declined drugs that would have been approved by a Rule of Two, and Medsafe withdrawals of drugs from the market tends to follow foreign leads anyway. 

So. Set a Rule of Two. 

Policy doesn't have to be stupid. 

Daycare socialism

Maybe it wasn't a good idea to try running a central planning model for daycare?

Susan Edmunds points to some of the really rather serious consequences, and their cause.

Centres in Cromwell, to which she and her partner moved to be able to buy their own house, are full. She was told they would not have space until the end of 2024 or 2025. She was also on waitlists for home-based care.

...The Early Childhood Council said it was a problem in several parts of the country.

Its survey showed 50% of centres were 91% to 100% full, 15.56% of all centres had a wait list of more than a year and 15% had a waitlist of seven to 12 months.

Chief executive Simon Laube said network management rules introduced in February had made it much harder to open new centres.

“Originally the problem was too many centres springing up in the same place – you might get three centres on opposing corners which is not good for anyone because all three don't do well. That is a problem, but in that problem, the providers lose because they don't hit the occupancy level and the business fails. The solution of stopping centres opening gets rid of that problem but parents and families are losing out.”

He said the council would write to the new government to ask it to remove that regulation.

“I don’t know what you could do to tweak it, there was a real problem that led to it, but it’s not the right solution.”

Too many daycares is a problem that sorts itself out, if you let it. Regulations blocking new daycares is not a problem that sorts itself out. And then you get a pile of people who cannot return to work after having a baby. That has serious consequences too. Longer spells out of work will make it harder to return to the workforce for a lot of professions. Skills deteriorate. Experience isn't gained. 

And remember that barriers to exit (from childcare) are barriers to entry into that circumstance. Some people will delay or reduce the number of children they'd be having because government has screwed this up. 

He said research showed the average amount of time it took to establish a new service was 2.6 years, including planning and consents. Regulation meant that operators might sink a lot of time and money into a business only to find they were not allowed to open, he said. He said 200 centres had closed in the last year.

Oh and there's also this. The government also screwed up the labour market for early-childhood centres. 

He said centres were also facing disruption from the pay parity opt-in scheme, designed to address disparity in pay between teachers working in kindergarten and those in education and care centres.

Is there any part of childcare that government hasn't screwed up? All the regulations might sound well-meaning. And maybe they give some sense of meaning to the otherwise futile lives of the bureaucrats who write the rules. But the rules cause harm. 

And there's this on top of it:

Under the Building Act a single missed or unrecorded inspection in the past 12 months, for example, would prevent the issue of the warrant. 

A building would instead be issued new forms to show there had been non-compliance, and there would be no way to obtain a warrant of fitness until the next year. 

Auckland Council had previously issued a “report in lieu” to building owners if this were the case and a warrant of fitness could still be obtained.  

But last month the council stopped using the lieu reports and began using the new forms, meaning the workaround was no longer available.  

Early childhood council chief executive Simon Laube said a centre’s licence was conditional on operating out of a building that complied with the Building Act, which for a large number of Auckland centres meant having a building warrant of fitness.

He said there was concern the Ministry of Education would be heavy-handed with following the letter of the law, if centres did not technically have one. 

“The Ministry of Education are taking licenses off providers for a lot less than this, anything in the kind of grey areas they're moving in really heavy-handed, so something that's black and white like this … we just know what the Ministry of Education is like and they don't go lightly.”  

The outgoing Labour government has handed a lot of awful hospital passes to the incoming National-led government. An utter mess in ECE is one of them.  

Morning roundup

A closing of the browser tabs:

• The Economist's write-up of Barcelona's new Museum of Prohibited Art. The museum's website is here. 
• Europe considering pricing agricultural emissions.
• Bill Gates on some of the climate tech in the pipeline.
• Cass Sunstein on goods that people buy but wish did not exist. Fun as a logical exercise - this class of goods could exist in this way. But banning them would just push status-seeking onto other margins. Other margins can be worse. And what if there's an additional class of goods: ones that people loudly claim they wish didn't exist, but secretly enjoy? In that case, could you ever tell which ought to be banned?
• Stephen Jennings's Conversation with Tyler. Great stuff on building new cities in Africa, and a gloomy bit about New Zealand. 
• What happens when central government tries to centrally plan daycare. Maybe Stephen Jennings is right to be pessimistic about the place. 

Maybe spend less on stuff that isn't pipes?

If this is correct, it seems even more irresponsible for Wellington Council to be spending any substantial amount of money on anything other than the pipes for a while. 

A billion dollars a year is what it would take to fix Wellington’s water woes, but the boss of Wellington Water, Tonia Haskell, says that is a figure beyond councils to fund.

“Councils can’t afford it and a new water entity probably could not afford that either, unless the Government chips in,” Haskell said in an interview with The Post.

...She describes $1b as an “unconditional budget” and notes that it could take many years to do the work required. “I do not know at what point that tails off.”

The annual figure of $1b includes the cost of such things as a new wastewater outfall pipe for Hutt Valley, installing meters, new reservoirs, upgrading wastewater storage and treatment plants across the region and completely renewing the piping network.

I do not know whether there's gold-plating in the treatment plant upgrades that could be trimmed back. If the costs here include completely renewing the piping network, the costs of that renewing ought to be spread over decades rather than borne up-front. And note that these costs are for the whole region rather than just Wellington. 

But however you structure it all, the costs won't be small. The same set of households and businesses will be paying the combination of rates and water charges to cover the bills over the decades to come.

Spending a hundred million more than necessary on a central library, and another hundred million on town hall, and the convention centre, and who knows what bill yet to come on the Michael Fowler Centre and the Opera House and the insane-looking subsidy to a multinational movie theatre company and whatever's going on in transport... c'mon folks. Give it a rest until we know what kind of burden we're all looking at for fixing the pipes. 

Or at least quit whining to central government that you need bailouts when you're simultaneously deciding to spend a heck of a lot on projects that look pretty iffy while the pipes are falling apart. 

Forced de-banking

AML compliance in the US is imposing a lot of harm on people mistakenly suspected of moneylaundering. 

The New York Times provides a few worrying examples. The algorithm flags something, and accounts go poof. 

Bryan Delaney has owned several New York City bars over the decades, and he and his business partner and general manager, Jennifer Maslanka, have a longstanding system for handling cash: It goes to the bank on Fridays and Mondays.

As card use has increased over the years, the size of the deposits has decreased. To make the accounting easier on new staff who started working during the pandemic, Mr. Delaney and Ms. Maslanka often rounded deposits down to the nearest thousand and kept the rest of the cash on hand to make change.

This year, Chase closed the bar’s account, plus personal checking and credit-card accounts for Mr. Delaney, his wife and Ms. Maslanka, giving them a handful of weeks to make other banking arrangements.

Federal law requires depositors to fill out a form if they’re depositing or withdrawing more than $10,000 in cash. Sometimes, in an attempt to avoid the gaze of the authorities, account holders will engage in “structuring,” making a series of transactions just under $10,000. It’s one of the top reasons that banks file suspicious activity reports.

Mr. Dubrowski, the JPMorgan Chase spokesman, said the bar’s series of deposits was indeed the problem.

“We must know our customers and monitor the transactions that flow through our bank,” he said. “That includes instances where we see a pattern of cash deposits that are just below federal currency reporting thresholds.”

Mr. Delaney said he had not been engaged in structuring when depositing money in round numbers. All the cash had come from the bars, he said, and he reported his income and paid his taxes as he was supposed to.

The bank’s explanation is especially maddening, given that he and Ms. Maslanka had filled out plenty of the $10,000 forms over the years. “What’s to gain from not filling it out?” he said. “What’s the risk of filling it out? I’ve done both when deposits warranted that.”

“I’m still so confused,” Ms. Maslanka said. “Do you think I’m part of some underground Mafia, laundering money through my little beer bar?”

I wonder how common this is in NZ. 

Morning roundup

The closing of the tabs....

• Free speech used to be a US left-wing value. On American campuses, only conservative students would support allowing a controversial speaker they disagreed with to speak on campus. This is very bad. 
• There's some support for free-speech on the NZ left, mostly Chris Trotter and Josie Pagani and Bryce Edwards. The rest pretends that free speech is some American neoliberal imposition and that we need nuanced approaches in which enlightened Wellingtoneans (themselves) would get to tell everyone else what speech is allowed. I wish we had better data on broader preferences.  
• The growth of the public sector over the past six years.
• The US National Institute of Justice rated the South Dakota 24/7 sobriety project as promising. Their whole database is likely useful for those keen on approaches that have some evaluation. 
• A $1 increase in US minimum wages is associated with a 0.92 percentage point reduction in percentage of employers offering health insurance and a 1.93 p.p. increase in prevalence of plans with deductibles. Always remember that total compensation bundles are more than just wages, and that squeezing one element of that bundle may affect the others. 
• The Paul Ramsay Foundation thinks Evidence Institutes, which trawl the lit [like the US National Institute of Justice, above] are a good idea. 
• Oh, I'm going to have to come back to this one as a dedicated post or column. Luming Chen's job market paper at UW-Madison. Policy uncertainty around wind energy destroys $5.9 billion in value in the US.