Weekend roundup

A few of the worthies on a closing of the browser tabs.

• American schools might start letting the kids have access to sunblock. HT: RoyalAlbertRoss in comments, here.
• Henry Cooke goes the consequences of New Zealand's dumb panic over meth-contaminated houses. 
• John McCrone covers the merits of allowing urban expansion around Christchurch. The towns around Christchurch are booming. 
• I'm sure there are lots of different economics blog rankings around, but this one counts Offsetting Behaviour in the top 100. As it did last year and the year before as well. 
• Treasury has the 2018 version of its essay contest up for those tertiary students so-inclined. Whether it reinforces or mitigates the bad separating equilibrium they've had going on over there I suppose is an empirical question. 

Value of a New Zealander's life

Ages back, I'd run the usual income elasticity of the value of a statistical life drill to get a reckon on what Viscusi might say about the value of a statistical life in New Zealand. It looked like about $5m was the right figure.

But, time passes. And Viscusi last year put up an actual figure. The updated figure for America is now $9.6m (where the figure I keep in my head is $7m) and the value for New Zealand is now $6.885m (where the figure I'd kept in my head was $5m). They also use a better income elasticity measure. I'd been using the 0.5 figure that had come out of American work; they use 1.0 because it's more elastic in the international sample.

And so let us all update. VSL for New Zealand is about $6.9m. Conduct yourself accordingly. You're worth it.

And thanks to the student in my public economics course at Vic who wanted the Viscusi work I'd been talking about. That prompted me to find the much fresher estimates. I'll have to let the kids all know in next week's lecture that they're all more valuable than I'd previously thought.

The international VSL figures range from $45,000 to $18.3 million. Remember that when folks push for international harmonisation of safety rules and the like.

The Ministry of Transport survey-derived, inflation-adjusted VSL measures are getting increasingly out of date. I think it's pretty second-order whether the VSL figure used is $4.2m or the new figure since the main gains are using a standard number across policy areas, but it's probably getting to be time to update it.

Update: Ryan Murphy points me to some robustness worries on the VSL figures. Ionnidis, Stanley and Doucouliagos hit on power problems across a range of economic studies, and hit VSL here:

To understand the practical consequences of accounting for power in economic research better, it might be instructive to consider some specific areas. For example, of the 1,474 reported estimates of the employment elasticity of a US minimum wage increase (Doucouliagos and Stanley, 2009), 96% are underpowered and the median power is 8.5%. The weighted average elasticity of the 60 adequately powered estimates is -0.0113, less than one-tenth (6.5%) of the reported average (-0.19) across all of these 1,474 estimates. As a second example, consider the 39 estimates of the value of a statistical life (Doucouliagos et al., 2012), 74% are underpowered. The WAAP estimate of the 10 adequately powered studies is $1.47 million compared to the simple average of $9.5 million across all 39. Of the 110 reported price elasticities of residential water demand (Dalhuisen et al., 2003), 84% are underpowered. The weighted average elasticity of the 10 estimates that have adequate power is -0.1025, while the average across all 110 is -0.378. This means that for these three research areas, 94%, 84.5% and 72.9%, or more, of the average reported effects are likely to be biased.

Their critique is not particular to the areas here quoted. They looked at over 6700 studies across a range of areas and found substantial problems with underpowered studies.

Update 2: Another excellent econometrician, very well versed in metastudy work and who I trust, warns me not to rely on the power estimates in the above-cited metastudy. So I can go back to relying more heavily on the Viscusi numbers.

Snus heroes

I love these guys. They're celebrating World SmokeFree Day by launching a new business selling Swedish snus in New Zealand.

Jenesa went through the literature on snus in her report earlier this year. It's far safer than smoking, and it's ridiculous that it's been considered illegal, and that the Ministry continues to view it as banned.

The world has far too few people who are willing to give it a go despite the Ministry*.

It was always odd to interpret the SmokeFree Environments Act as banning snus, but you can kinda see how they took it that way if you ignore that the purpose of the Act is to reduce harm. The Act banned the sale of "any tobacco product labelled or otherwise described as suitable for chewing, or for any other oral use." The Court in March, in MoH v Philip Morris, reminded us about the importance of the harm reduction purposes of the act in s3A1(a), and said that the "other oral uses" part had to mean an activity like chewing.

Snus isn't chewed, but that seems a more minor point. The major point is that it's massively less harmful than smoking. People flipping from smoking to using snus reduce harm for themselves and, if you worry about second-hand smoke effects on others, there's none of that.

We still need changes to the rules. Snus shouldn't be banned for retail sale in New Zealand. We've known this for at least a decade. The NZ Smokeless Tobacco Company providing snus is remitting excise on the product, but the excise rates are well out of proportion to any risk - the product probably shouldn't draw any excise at all. And it is absurd that they're having to sell it under plain packaging with graphic warnings about the health risks of smoking - that may bring an interesting conflict-of-laws case where they're mandated to put on labels that are misleading, and misleading labeling can be illegal.

But at least they're giving it a go. Instead of taking the Ministry's interpretation, they'll be requiring the Ministry to prove their interpretation in Court. And if it winds up in front of the same judge who handled the heets case, it'll be interesting to see the result. Snus isn't like chewing, it isn't harmful, and banning the sale of it seems contrary to any harm reduction purpose in the Act.

Makes me wish, again, that iPredict were still going and had a market on whatever court case might come of this one.

* The Ministry of Health here is actually awesome on most dimensions of tobacco harm reduction. On vaping and heat-not-burn, they've got things dead right. I just don't get the hamfistedness around snus. [update: with caveat of course that the plain packaging rules are a nonsense for this stuff, but they're there I think pretty constrained by the legislation as written]

Minimum wages and fringe benefits

I'd suggested a couple of weeks ago that minimum wage hikes can be at the expense of other non-monetary benefits provided to workers.

Tyler Cowen points to some empirics on it from Jeffrey Clemens, Lisa B Kahn and Jonathan Meer ($):

This paper explores the relationship between the minimum wage, the structure of employee compensation, and worker welfare. We advance a conceptual framework that describes the conditions under which a minimum wage increase will alter the provision of fringe benefits, alter employment outcomes, and either increase or decrease worker welfare. Using American Community Survey data from 2011-2016, we find robust evidence that state-level minimum wage changes decreased the likelihood that individuals report having employer-sponsored health insurance. Effects are largest among workers in very low-paying occupations, for whom coverage declines offset 9 percent of the wage gains associated with minimum wage hikes. We find evidence that both insurance coverage and wage effects exhibit spillovers into occupations moderately higher up the wage distribution. For these groups, reductions in coverage offset a more substantial share of the wage gains we estimate.

Sponsoring Sponsorship

Amnesty International is testing community support for the continuation of the government's trial refugee sponsorship regime.

The pilot programme won't be completed until December 2018. Whether the programme continues will depend on experience in that trial programme, and presumably on the government's expectation that there might be sufficient community support to warrant it.

Those interested can pledge their support at Amnesty's site.

I'm not sure what will be expected of sponsors here in the final form of the programme, but the point of the programme is to let the government admit more refugees by taking costs off of the government. That implies a financial and non-financial obligation for sponsors.

Here's the Canadian model:

2.6 What are the responsibilities of the sponsoring group?Sponsoring groups agree to provide the refugees with care, lodging, settlement assistance and support for the duration of the sponsorship period. Normally, this is 12 months starting from the refugee's arrival in Canada or until the refugee becomes self-sufficient, whichever comes first. In exceptional circumstances, the visa officer may determine that the refugee requires more time to become established in Canada and will ask the sponsoring group to extend the sponsorship period to a maximum of 36 months. The sponsoring group has the option of refusing the request for an extension of the sponsorship period. However, the sponsoring group risks having the case refused as a result.

Private sponsors normally support the sponsored refugees by:

• providing the cost of food, rent and household utilities and other day-to-day living expenses;

• providing clothing, furniture and other household goods;

• locating interpreters;

• selecting a family physician and dentist;

• assisting with applying for provincial health-care coverage;

• enrolling children in school and adults in language training;

• introducing newcomers to people with similar personal interests;

• providing orientation with regard to banking services, transportation, etc.; and

• helping in the search for employment.

Sponsoring groups must reside or have representatives in the community of settlement (i.e. in the community where the sponsored refugees will live). The intent is to have a group of persons helping refugees to get established in the community and not one person acting alone.

It is not possible to sponsor only one member of a family unit. The sponsorship undertaking should name all immediate and dependent family members listed on the Application for Permanent Residence, whether they are accompanying the principal applicant to Canada or may follow later under the provisions of the One Year Window (OYW) program as described in section 2.10. The sponsoring group is obliged to provide support to all family members listed on the undertaking, regardless of the timing of their arrival in Canada. The sponsor is responsible for supporting the non-accompanying family members under the same terms as in the original settlement plan, unless the principal refugee applicant is now self-sufficient and able to provide adequately for his or her family members. De facto dependants should also be included in the sponsorship but should be named on a separate undertaking as described in section 2.11.

Previously:

• Let them help
• Learning from Canada: Refugee edition
• And now for a word for the sponsors

It's hard not to do good

Tyler Cowen points to a great question from a reader:

There was an idiotic movie in the 80’s (“Brewster’s Millions”) where Richard Pryor had to burn through $30 million in 30 days in order to inherit $300 million.  There were some conditions:  “. . . after 30 days, he may not own any assets that are not already his, and he must get value for the services of anyone he hires. He may donate only 5% to charity and lose 5% by gambling, and he may not waste the money by purchasing and destroying valuable items. Finally, he is not allowed to tell anyone. . . .” [Wikipedia].

Anyhow, I was thinking of a similar movie one could make.  Awful, but perhaps instructive to students of economics.

Similar premise, similar challenge.  But my twist is that the stipulation now is that he can do whatever he wants with the $30 million, on the condition that he NOT HELP ANYBODY with the money.

I don’t believe this is possible.  Consider:

If he were to simply keep in in the bank and not touch it, the supply of loanable funds would shift to the right, lowering the cost of borrowing money, thereby helping others to improve their lives in various ways.

If he were to spend the money, he would create gains from trade, a positive-sum game.  People would consider themselves better off for having sold him a good or service . . . or they wouldn’t have.  Plus multipliers.

If he gave the money away, the recipient would doubtless consider himself better off, at least initially.

If he burned the money, he would be, albeit in a small way, helping the nation’s economy as a whole, since that $30 million represents a claim on the nation’s goods and services that now will never be called in.

I guess what I’m getting at here is that I don’t believe there’s any way a rich person can avoid helping others with his money.

First up, Brewster's Millions was brilliant. I loved how he decided to waste his money with a run for office.

But the substantive question's a tough one. It's easy to come up with examples that have negative externalities and so impose some harm on others. And it's not impossible to come up with ones where the negative externalities might result in net harms. But ones where nobody is made better off?

And it's related to an older problem in preference-revelation mechanisms.

Recall that in the old Tideman-Tullock demand-revealing process, in which a Clarke tax could induce truthful preference revelation, you could only be sure that you had truthful revelation so long as the participants were neutral about the use of the collected taxes. If you gave the money to charity, people might overreveal their preferences since the collected funds would go to a cause they supported anyway. But if other people hated that particular charity, they might underreveal their preferences. Given the very flat payoff curve, these kinds of considerations might matter.

Tideman and Tullock's solution was that the collected taxes had to be spent on real resources produced in perfectly competitive markets so that no rents were conferred by having bought the resources, and then the resources had to be destroyed. That still doesn't work, though, because a lot of people have strong preferences against waste per se.

But it does hint at a solution to the question: if you want to spend money while helping nobody, buy something that is produced in a perfectly competitive industry that uses only inputs that come from perfectly competitive industries too.

I love this thought experiment. It is hard to come up with examples where trade does not benefit the people you're trading with. And yet political rhetoric often comes from the opposite starting point.

The more plausible examples in the comments over at MR have to resort to illegal activities to make them work: buy hand grenades and use them to blow up the manufacturer/vendor of the hand grenades.

Northland DHB missed the memo

Earlier this month, the Ministry of Health clarified that sale of nicotine-containing e-liquids is legal. The Smoke-Free Environment Act's prohibition on the sale of tobacco products for oral use does not apply to heat-not-burn products, or to vaping products.

Northland DHB seems to have missed the memo. We'll come back to that. Because it looks like the memo has changed.

The Internet Archive does not have a record of the Ministry of Health's original version of the page. But I definitely remember that it said nothing about snus. The lack of clarification around snus has been a matter of some interest and discussion.

But the website now has this, which I'll screenshot:

The relevant bit: 

“In Philip Morris v Ministry of Health [2018] NZDC 4478 (the decision), the District Court found that all tobacco products (except types that are absorbed through the oral mucosa eg. snus and chewing tobacco) may be lawfully imported, sold and distributed under the Smoke-free Environments Act 1990 (SFEA).”

But that isn't what the District Court said. The District Court, at Paragraph 30, said this:

The Ejusdem Generis Rule[30] This rule provides that where particular words describing a genus of things are followed by general words, the general words will be confined to things of the same class as the particular words. Thus, where the words “any tobacco product labelled or otherwise described as suitable for chewing” are followed by “or for any other oral use”, the other oral use means a tobacco product used for chewing or an activity similar to chewing.

If the Ministry is now defining absorption through the oral mucosa as being an activity similar to chewing, that's up to them - and potentially contestable in court. But it isn't the Court's definition. The Court didn't even use the term mucosa anywhere in the decision. 

The Court also noted that the ban on sale of less harmful products like heat-not-burn was inconsistent with the purposes of the Act. Snus is far less harmful than smoked tobacco. Jenesa Jeram's report on tobacco harm reduction covers snus in section 4.1.

I wonder about a few things:

1. When the change to the Ministry's webpage was made;
2. Why the editing was not noted;
3. Whether the Ministry has taken any recent advice on the risks associated with snus use;
4. What that advice might have been;
5. Whether the Ministry views a ban on snus as being consistent with the aims of the Act, and the evidential basis for that view;
6. The basis on which the Ministry decided that "an activity similar to chewing" implied a ban on anything involving absorption through oral mucosa. 

But back to where we started. The sale of e-cigarettes is totally not banned. The Ministry's clarification does very clearly say that the sale of vaping kit is fine. And yet we see this today from @WellingtonVaper

With all the efforts now encouraged around utilising #vaping by @minhealthnz to necessitate THR, there appears to be a DHB that doesn't support this message?? are you aware of this @hapaitehauora? smokers want to move forward in transitioning from their addiction not backwards. pic.twitter.com/3TXW2kSrc1

— WellingtonVapers (@WellingtonVaper) May 28, 2018

I guess Northland DHB didn't get the memo. Some of the memo seems to have changed, but not that part. The restrictions on display and advertising would apply, though, if the DHB could show that the nicotine in the products were derived from tobacco rather than synthesised. That's silly and still in need of fixing in the rules, but it's my understanding of the rules as they now are.

Previously [and as update]: Regulatory Catch-22