Truly, it was the greatest century

DeLong on the Greatest Completed Century So Far: 

Briefly: very very roughly, approximately, and inadequately, on average what twenty workers were needed to do in 1870 with their eyes, fingers, thighs, brains, mouths, and ears, 1 worker was able to do in 2010.

It is also true that what one worker could do in 1870 required 20 in -6000. But that 20-fold amplification was an 8000-year creep rather than a 140-year sprint: a proportional growth rate of 0.04%/year rather than 2.1%/year. And from -6000 to 1870 the overwhelming bulk of the potential benefits for humans from that twentyfold upward creep of technological knowledge had been eaten up by growing resource scarcity: the land and other natural resources available to support 1 person in -6000 had to support 400 by 1870.

By contrast, the twentyfold post-1870 technological-progress wave had to deal not with a 200- but only a 6-fold multiplication of human numbers, leaving lots to be devoted to bringing about much higher average productivity.

Productivity increases really really matter. 

If there is one single nugget of insight that I want readers of my book Slouching Towards Utopia to permanently engrave on their brains, this is it: around 1870 the rate of technological progress and thus of potential wealth creation went into much higher gear. After 1870, humanity's deployed technological capabilities and thus potential prosperity doubled every thirty-five years—and with it came economic creative destruction that reduced old economic structures to rubble and built new ones, and did it again, and again, and again, every single generation. Before 1870? From 1770-1870 humanity's globally-deployed technological prowess had a doubling time of about 150 years—not 35. From 1500-1770 it had a doubling time of 500 years. And before 1500, we are looking at a doubling time of 2000 years. The difference between our world, in which technological progress creatively destroys and revolutionizes the economy every 35 years, and the world of Agrarian-Age antiquity in which the same proportional changes in technology and economy, and thus in polity and society, take not 35 but 2000 years is, I think, a master force shaping human history.

I want to hammer home the obvious to those who don't have exponential growth magnitudes in their immediate intellectual panoply: a twentyfold amplification of human technological prowess in 140 years is a REALLY BIG F---ING DEAL. To get an equivalent proportional jump in the other direction, you have to go back from 1870 to the Bronze Age— to the year -2000 or so. We are, proportionately, as separate in technology from the railroad's Golden Spike and the first transoceanic cables as those were from the earliest chariots and the sculptor of the dancing girl of Mohenjo-Daro:

A clarification on sugar taxes

A few weeks ago, Rachel Thomas at Stuff included a short bit from me on sugar taxes and a new WHO metastudy. 

The Spinoff provided a perhaps too short a summary of that in its daily newsletter. I'd sent them a brief note of clarification, figuring that it was too late to change anything since it's an emailed newsletter. But it's online, here. 

The question of a sugar tax cropped up again earlier this month. Rob Beaglehole from the NZ Dental Association argues we need to be proactive with a sugar reduction strategy because of the woeful state of water fluoridation in New Zealand. The New Zealand Initiative’s Eric Crampton says the evidence doesn’t support the argument that a tax would reduce consumption.

I'd sent a note through to them, in case the issue came up again. I'll copy it here, mildly edited:

Thanks for the mention in today’s bulletin.

No need to do anything about it, but more for any future ones.

The problem with a ton of sugar-tax studies is that they assume that any drop in spending on soda (often the only data they have – they know spend shares, but they don’t know consumption) means a drop in consumption. Some of the drop could be a drop in consumption, but some of it could be a shift to downmarket product or product that’s lower cost-per-unit.

Again – this problem comes in when researchers are using household spend data that surveys people about how much they spent on various things over the past period, then combines that spend data with some measure of average prices to try to estimate consumption. 

If you see that someone shifted from spending $20/week on soda before a tax to spending, say, $18 in total after a tax, is it because:

a) They had been spending $1/can before the tax and bought 20 of them per week, and reduced that to 9 cans at $2/can after the tax – huge decrease in consumption!

b) They had been spending $1/can before the tax and bought 20 of them, and shifted to buying four 2-litre bottles of home-brand soda at $4.50 after the tax – small increase in consumption!

c) Some unknown combination of the two?

The studies that have only spending data effectively assume that (a) is the only thing that’s happening. (c) is the most likely thing, but the studies can’t see it. 

So it isn’t that a tax doesn’t decrease consumption. It is likely to decrease consumption somewhat. It’s more that the campaigners assume gigantic effects on consumption, because when many people are doing (c) and some are only doing (b), the studies assume it’s all (a).

It’s a technical issue in how the estimates are undertaken. They don’t handle things well when there’s adjustment not just in quantity but also in price-point. John Gibson over at Waikato has demonstrated the problems with it. But so much of the literature just ignores the problem. And the WHO meta-study is just a complicated average across studies that did not exclude studies known to have this problem. An average that includes overestimates is going to be an overestimate.

RBNZ's obligations?

That strange speech from RBNZ Governor Orr a couple weeks ago? 

Jenny Ruth digs a bit.

From Business Desk, last week:

Robertson said the specifics of how RBNZ’s obligations relating to Māori-crown relations “are fulfilled and embedded in the bank’s core functions is the responsibility of the board and management". “In the 2020 letter of expectations that I sent to the RBNZ in my role as minister of finance, I noted that the bank’s Te Ao Māori strategy aligned with an expectation to embody the government’s collaborative approach to the Māori-crown relationship.”

I dunno. A down-the-line central banker might have replied with something like:

"A low and stable inflation rate, in combination with supervision of the financial sector mitigate risks of bank failure, is the single best thing a central bank can do for every community, Māori included. We know that both inflation and unemployment will have more severe consequences for lower income communities. Failing to maintain expectations that inflation will be within bounds over the medium term will not improve long-term unemployment, which is set by structural features of the economy. But it will harm communities with less ability to hedge against inflation risks."

In related closing-of-the-browser-tabs:

• Former RBNZ Assistant Governor & Chief Economist John McDermott critiques RBNZ monetary policy
• How the Fed and the Biden Administration Got Inflation Wrong

Len Cook on revisions to the Stats Act

I had a chat last week with former Government Statistician Len Cook about some proposed changes to the Statistics Act. A greater reliance on administrative data will see some of the Government Statistician's powers pushed down to Ministries and Agencies that might not be well placed to handle it. 

Cook covers it here as well:

Without notice by all but a scarce few, the independence of the government statistician and the transparency of government data sharing and use in New Zealand could change after this year.

The Minister of Statistics David Clark has managed to avoid the public scrutiny of the constitutional implications of the Data and Statistics Bill despite transparency being a proper expectation for such change by citizens in a democratic society.

I've not pored over the legislation, but if Cook says there's a big problem in Clause 17, and that that Clause can just be deleted without harming the rest of the legislation, Parliament ought to have a look at it. 

You can catch my chat with Cook here:

The New Zealand Initiative · Podcast: Eric Crampton Talks With Len Cook About Changes To The Stats Act

Bootleggers and Baptists - construction waste edition

Rochester political scientist William Riker celebrated great herestheticians - those adept at manipulating policy to serve their own interests. His book is classic and should be on every public policy syllabus. 

Newsroom reports on some superb herestheticians applying Bruce Yandle's lesson about bootleggers and baptists, and about the importance of raising rivals' costs in the construction sector.

If you're a construction behemoth, you can bear regulatory compliance costs a lot more easily than smaller competitors. If you're building at scale, you're probably already doing a better job in avoiding construction waste.

Construction waste going to landfill really isn't any kind of public policy problem. Tips can set tip fees that recover costs. 

That doesn't mean you can't make it a political problem. Lots of people don't understand how landfill pricing works and just hate the idea of waste - failing to realise that, sometimes, measures to reduce waste are more wasteful than bearing the waste. It's a combination of economic illiteracy and aesthetics. 

So here's what we then get:

In a rarely-seen consensus private and public players in the building industry are calling for greater government intervention on the vexing issue of construction waste

The Environment Select Committee will today hear its last submission on the topic it has been investigating for several months - how to deal with the three million tonnes of sector waste dumped in landfills annually.

About half of this is thought to be useable or recyclable.

Fletcher Building Residential and Development chief executive Steve Evans said as the country embarked on a massive bid to address the housing shortage, change was more than just a nice-to-have.

“I've been in this industry for a long time and regulations change behaviour. So you ask people to do things voluntarily and you will, of course, get those that are socially-minded or environmentally-minded, that will do it.

It would be excellent fodder as case study for any of the public policy schools - in a world in which they could recognise that this sort of thing is a problem. 

Not all of the push is crazy though. Updating the Building Act so that it's easier to re-use materials makes a lot of sense.  

But just think about the difference in cost that mandates like this would impose on small players as compared to the big guys. MBIE is helping to create another cartel, and simply doesn't care. 

Ministry of Business Innovation and Employment spokesperson Antonia Reid said a range of work was underway to encourage the reduction of waste, including investigating the barriers to reusing and recycling building materials and expanding the waste infrastructure network.

“MBIE is also progressing changes which would require reporting and measurement of new buildings’ whole-of-life embodied carbon emissions - from manufacturing building materials to disposing of them at the end of a building’s life.

“We expect this focus on embodied carbon reduction will encourage greater repair and retrofit of existing buildings, smarter building design to help minimise emissions and waste within new construction, and more deconstruction of buildings at the end of their lives if they cannot be made fit for purpose.”

For those unfamiliar with Yandle's Bootleggers & Baptists: 

Afternoon roundup

A few worthies on the closing of the browser tabs:

• Christchurch council votes to impose higher rates on vacant land downtown. I'd have preferred that they simply apportion urban rates based solely on land value, rather than land plus capital. It would have the same effect, but without fights about what's vacant. 


• A better policy process than the RUC rebate: IRD was given enough time to tell Cabinet that it wouldn't be able to roll out $100 payments to every Aucklander late last year. Good to have this kind of advice before announcing the policy. 


• Decades ago, Linda Gottfredson showed that a lot of what looks like an income gradient in health (higher income people are healthier) is really an intelligence gradient in health (smarter people earn more and are healthier). More work out consistent with Gottfredson, though I suppose it's considered polite to ignore this stuff. 


• Chris Snowdon over at the IEA notes that the number of licenced alcohol premises in the UK dropped by two thirds and alcohol advertising halved during their lockdowns. Availability theory would say that this reduces alcohol harms. Chris finds instead a small decline in alcohol consumption but an increase in alcohol-related deaths. 


• Quebec offers fourth vaccine doses to anyone over the age of 17. In NZ, you have to be 50. If you're 50, it's free. If you're 49, it is absolutely forbidden and impossible because Medsafe should be abolished. 


• Stuff runs a beat-up on fast food. Remember that Rachel Webb found no effect of fast food outlet numbers on obesity. You've gotta be careful in doing this work. HT: Stephen Riden 


• Maybe we'd have a better Covid testing system if Rako showed up at Labour fundraisers. 

Ouch

Kate MacNamara reports on problems at the Productivity Commission:

The Productivity Commission delivered a new inquiry into immigration last month, at the same time that it is facing its own story of migration: an exodus. It involves a string of departures that have not yet been stemmed by an independent HR investigation and a slew of recommended remedies.

A distinct wave of resignations began in February last year, when two of the independent Crown entity's principal advisers left. In subsequent months they were followed out the door by six more staffers, including two lynchpin managers, each of whom had been directing one of the commission's two inquiries of the time. The eight departures in 2021 made up more than half the commission's 15 employees (the head count as of January 1, 2021, including one part-timer).

An HR review called late last year found problems at the commission including a troubled transition under the leadership of Ganesh Nana, who became chair on February 1, 2021. It also found an uneasy relationship between the new chair and many staff, especially senior ones. While efforts to improve staff retention are underway, at least four more employees have resigned from the commission in the first half of this year. Of the senior leadership team described in commission documents at this time last year, only one of the five remains.

It's well worth reading the whole thing. 

Kate picks up what I'd considered to be the most scathing part of the Review.

Under the heading "staff engagement with the Commissioners", the report found: "With two Commissioners being relatively new, a greater level of presence and interaction with staff, both formal and informal, would help build the relationship to support communication and the interchange of information and ideas. This is especially important for the Chair, with some staff having limited understanding of how he sees his role and what he brings, both as an economist and as a person."

Ouch.

I'd also received the Review by OIA. If you wanted to read the full report, I've put it up here. Not sure if ProdComm has it more widely available. 

I still remember when BERL was a swear-word in Treasury, for stuff like its report on alcohol costs...

MacNamara's piece is well worth the Herald subscription charge, if you want to learn more about the gutting of Wellington's institutions.