Alcohol amendments

Simon Power has released Cabinet's proposed legislative response to the Law Commission's review of alcohol legislation. Lots of folks have provided decent commentary; AntiDismal links through to most of them.

It's not as bad as it could have been.

• Excise tax increases have been ruled out, but minimum price regulation hasn't been. It would be interesting to see to which margin competition moves under that regime. In the first instance there will be rents for folks making low-end product, but rents like that can't last. If a product costs $5 to produce but faces a minimum price of $10, something's gotta give. Some of the worst quality product would be pushed off the market, leaving the stuff that actually costs more to produce. But there'll be some folks who are fairly indifferent on the quality side in that range. Does low-end product then get bundled with other ancillaries?
  
  On the demand side, I'd expect this to be the kind of rule that would start seriously pushing folks into home distillation. If the price floor is set too far above current equilibrium. It would also be interesting to test the effects of this kind of rule on different qualities of alcohol. Low range, undrinkable, beer costs about $1/bottle (330 mL). Bottom of my drinkable range is about $2/bottle. Good beer starts around $4/bottle. Do folks start pushing farther up the quality spectrum when good beer becomes relatively less expensive, or do income effects dominate?
• There likely won't be a blanket increase in the purchase age, but 18-19 year olds may be unable to buy alcohol except at bars. Congratulations to HANZ for that one, I suppose. This is, of course, almost useless as it remains legal for 18-19 year olds to possess alcohol. I'd seen somebody call this an excise tax applied to 18-19 year olds who'll have to pay a small premium when off-licence; that seems about right.
  
  Do note this, though:

  119. Either
  a) Agree that the alcohol purchase age be set at 18 years for on-licence sale and supply and 20 years for off-licence sale and supply;
  OR [supported by the Treasury]
  b) Invite the Minister of Justice to report back to Cabinet with quantified analysis of the costs and benefits of the different options for changes to purchase age;

  I'd love to see Treasury's notes. I'll have to make the request, I suppose.
• They broaden the objective of alcohol legislation:

  Agree that the objective of sale of alcohol legislation be broadened from a focus on reducing alcohol abuse to a focus on minimising alcohol-related harm, including crime, disorder and public health problems;

  Power notes elsewhere in the document the intention to curb harms while protecting the enjoyment of moderate drinkers. I wish that some note of such benefits were made explicit in the objective statement here. The marginal harm avoided by a tightening of legislation ought be no greater than the marginal harm imposed on moderate drinkers.
• A default national bar closing time, around which localities can set different rules. A few folks have worried about local wowsers running wild - not an unreasonable concern. I'm not sure this gives them powers they didn't already have though, and I like that locales can also adopt more liberal policies if they want. But again note that there's an option B, supported by Treasury, asking the Minister to report back with costs and benefits of various proposals.
• Regulatory takings. A bunch of folks running small shoppes that sell alcohol are going to have a hard time getting their liquor licences renewed under the new legislation.

  45. Agree that no compensation will be payable for licensees who are not eligible to have their current off-licence renewed under the proposed criteria;

  There are a lot of immigrant families whose businesses will be destroyed by this legislation.
• They make provision for the Minister of Justice to ban particular alcoholic products or classes of products deemed particularly unhealthy or harmful. I'm guessing this is pointed at RTDs mixing alcohol and caffeine or other energy drinks. RTDs are subject to other rules mandating maximum alcohol content. I remain confused about the worries about RTDs. The production technology isn't exactly all that difficult. Get a bottle of spirits, get a bottle of mix, pour....

iPredict had most of this right early on. No increase in excise taxes, check. No increase in the on-licence age, check. No increase in the off-licence age before 1 July 2011, check - if third reading is scheduled for June 2010, it's unlikely to be in effect in July. There was a very large temporary spike up in this contract 'till folks figured out the dates. I would have done very well on the set of these contracts as a whole but I didn't work out the dates quickly enough either. Ah, well.

The good, the bad...

The National Business Review's "Plays of the Week" is always rather good. This week's is particularly nice. First, slamming National over its continued propping up of Kiwibank:

National’s decision to use taxpayer funds to prop up Kiwibank’s credit rating ensures not only will this dog remain on the government’s books but also the liability will continue to grow.

Only a few months after considering at least a partial sell-down of Xenophobiabank, the government has decided to give it a credit facility, allowing it to borrow about half a billion dollars more to try to keep the housing bubble inflated.

Massey University banking studies lecturer David Tripe told media the facility was basically a government guarantee that gave Kiwibank an unfair competitive advantage over the other main banks.

But there should be no surprise the spineless National Party has continued to pander to unthinking nationalism and economic illiteracy.

Just as with Kiwirail, that other capital-destroying “investment” made by the previous Labour government, National opposed Kiwibank when it was created.

However, when handed the levers of power it decided to send more funds down this giant black hole for taxpayer money, just as it did with Kiwirail.

Throwing good money after bad is a strategy only governments can get away with for any length of time, because they can continue to thieve from taxpayers to fund the stupidity.

If a private company destroyed this much wealth it would go bust faster than you can say “malinvestment.”

Then, despair over the fall of ACT:

What does Act actually stand for these days?

It’s the supposedly “liberal” party that brought us the draconian three strikes legislation, the party of small government that supports the creation of the Auckland Super Bureaucracy.

Meanwhile, Sir Roger Douglas continues to put out sensible policy proposals and alternative budgets that are ignored because he carries too much political baggage.

I wouldn't call the three-strikes legislation draconian, but it's definitely not targeted at a liberal part of the electorate. Sir Roger understood the problem with supercities. But NBR is right. It's hard to see ACT as a liberal party.

Classification costs

Australia considers requiring mobile application games be classified by its censor's office. That would cost $470-$2400 per game. Josh Gans notes the likely effects:

This would cause several things. First, literally thousands of overseas developed games would be removed from the various mobile application stores in Australia. Most of these do not cover the developer costs and even those that may have in the past may not do so in the future. Not to mention the cost of applying for classification. The effect on Australian consumers would be immediate. Second, this would have an impact on local developers. Fortunately, with regard to games, most of their sales are elsewhere. But we will see a headline within a year: “Australian teenager has hit mobile game but her friends cannot play it.” Nonetheless, there will be a disproportionately negative impact on developers who are trying to tailor games to the local market. Third, this will end up including educational games and books. For instance, Dr Seuss books on the iPad have little games in them. I assume that means they require classification. Maybe popular children’s books won’t be impacted but there will be many other educational apps that will be and this will spark further headlines. Fourth, apps that use Apple’s iAds will be impacted as these ads may include games in them. Finally, all of this will cause Australians to either pirate games in droves — indeed, they may do so just to get games that are actually free elsewhere! — or move to overseas app stores. My guess is that rules imposed internally by Apple and co that prevent purchases by Australians from say, New Zealand will be relaxed. This will alleviate the harm of all this but it will be a very bad look. Need I say, that this is as much a problem for Apple and Google as it is for developers and consumers. In other words, the doom and gloom forecasted may well occur.

Gans reckons an easier solution is to require gamemakers to self-classify but to impose harsh penalties for inaccurate classification. I expect this would have much the same effect, with most foreign providers seeing little point in exposing themselves to Australian legal risks. The Australian censor's office is known for bizarre decisions.

Previously: Classification costs keep a lot of niche films from being available in New Zealand.

They walk among us

[Tracking] Devices such as the one I wore on my leg already allow tens of thousands of convicts to walk the streets relatively freely, impeded only by the knowledge that if they loiter by a schoolyard, say, or near the house of the ex-girlfriend they threatened, or on a street corner known for its crack trade, the law will come to find them. Compared with incarceration, the cost of such surveillance is minuscule—mere dollars per day—and monitoring has few of the hardening effects of time behind bars. Nor do all the innovations being developed depend on technology. Similar efforts to control criminals in the wild are under way in pilot programs that demand adherence to onerous parole guidelines, such as frequent, random drug testing, and that provide for immediate punishment if the parolees fail. The result is the same: convicts who might once have been in prison now walk among us unrecognized—like pod people, or Canadians.

From The Atlantic's rather nice feature on having convicts under monitoring rather than in prison.

I'm of two minds on this. Conditional on no changes to the incarceration system, I favour it. It reduces costs on both the system and the offender. But, the costs of incarceration are one part of the equilibrium - if convicting lots of folks for victimless crimes winds up being really expensive for the state, then they might think about legalizing drugs, prostitution and gambling. If convicting folks imposes only costs on the convicts and few costs on the state, that push is gone.

And if you didn't get the line about Canadians at the end, ....

Jawboning

While folks in the US worry that there might not be enough inflation, the RBNZ here has started jawboning against letting inflation expectations get too high.



We have a GST increase coming through in October combined with the Emissions Trading Scheme starting to affect prices.

The Agreement defines the Bank’s price stability target in terms of the Consumers Price Index. However, it also instructs us to focus on the medium-term trend in inflation, and lists changes in indirect taxes and significant government policy that directly affect prices as specific reasons why inflation might vary around its medium-term trend.

As such, monetary policy will not attempt to offset the immediate direct inflation impact of the coming policy changes.

Given the staggered nature of the indirect tax increases and the progressive introduction of various sectors to the Emissions Trading Scheme, there is an additional risk that the coming spike in inflation causes consumers and businesses to reassess their expectation of medium-term inflation.

The degree to which monetary policy can “look through” temporary inflation spikes depends crucially on the extent to which New Zealander’s inflation expectations are impacted by such spikes. [emphasis added] Of late, inflation expectations have risen from the lows seen at the trough of the recession but they remain contained. Two-year-ahead inflation expectations initially lifted late last year, when there was some talk of the housing market gaining significant momentum again and the economy had clearly moved out of recession.

Subsequent to that we saw excise taxes rise, the ETS-related charges become more definite and the announced rise in GST. All of these are likely to have played some part in inflation expectations staying up, even as the housing market has eased off and the pace of the recovery has remained moderate.

However, the Reserve Bank does not expect the forthcoming price spike to have a lasting impact on inflation expectations. (In support of this, the just-released AON survey shows that longer-term inflation expectations have not moved as a result of the impending GST increase.)

...
But there are also examples of persistent price increases in sectors that have not suffered persistent cost increases, and these have an inflationary effect. The diagram shows the impact of excise tax increases on alcohol and tobacco industries, and that the energy and local authority sectors have recorded persistently high price pressures.

Given the fragility of the recovery it is important that firms base their pricing decisions on low underlying inflation, and not the forthcoming temporary spike.

Monetary policy would need to respond if inflation expectations and prices were ratcheted up significantly. The result would be higher interest rates and a dampening of the economic recovery. We are hopeful this will not need to be the case, so that monetary policy can play as full a part as possible in supporting economic growth. [emphasis added]

I've also worried that the staggered introduction of the ETS may cause revised expectations. So it's reassuring to see that RBNZ is keeping an eye on things.

I did like this line:

Inflation has been well contained recently, with consumer prices increasing 1.8 percent in the 12 months to the June quarter this year. This marks five consecutive quarters where annual consumer price inflation has been at or close to the mid-point of the Reserve Bank’s 1 to 3 percent inflation target.

Dry wit?

Charismatic megafauna: Kaikoura edition

Ok, maybe it isn't all bad to bias things towards the more charismatic megafauna. From our trip to Kaikoura this past weekend for Susan's birthday:

Our hosts at the B&B informed us that the Department of Conservation owns the land on three sides of the pool and is trying to buy the land on the last side so that they can put up barriers to keep folks away from the seals. So, go there while you can!

I love that this kind of thing is a less than a three hour drive from home.

Objectivist parenting

Surely they, like us, would instead have reminded their little Johanna that if she shared the ball with Aidan, she'd be more likely to be able to play with Aidan's toys as well, and that opening with cooperate in tit-for-tat is generally optimal?

I'd like to start by saying that I don't get into belligerent shouting matches at the playground very often. The Tot Lot, by its very nature, can be an extremely volatile place—a veritable powder keg of different and sometimes contradictory parenting styles—and this fact alone is usually enough to keep everyone, parents and tots alike, acting as courteous and deferential as possible. The argument we had earlier today didn't need to happen, and I want you to know, above all else, that I'm deeply sorry that things got so wildly, publicly out of hand.

Now let me explain why your son was wrong.

When little Aiden toddled up our daughter Johanna and asked to play with her Elmo ball, he was, admittedly, very sweet and polite. I think his exact words were, "Have a ball, peas [sic]?" And I'm sure you were very proud of him for using his manners.

To be sure, I was equally proud when Johanna yelled, "No! Looter!" right in his looter face, and then only marginally less proud when she sort of shoved him.

I've read the "No! Looter!" line three times now and am still laughing. I'll probably go back and read it again tomorrow and laugh more. I also love that the looter kid's name is Aidan. Lovely touch.

HT: Haimona's shared items. Every now and then, I check through the shared items of folks who follow my shared items or who've clicked the "like" button on my posts, on the basis that if they like my stuff, they probably have pretty good taste overall and are probably more discerning than other people.

Update: The bit quoted above is of course satire. Satire that will be having me laughing all week. Read the whole thing.

In other news, the ritual disemboweling of the ACT party is just too depressing to blog about, so I won't.