Why not a teal coalition?

After the Green's described themselves as more pro-market than National last week, I tweeted:

Norman is over-stating a bit, but a Green-National coalition does have some appeal if it merged the best of both. http://t.co/uFEc1kyNkK
— Seamus Hogan (@seamus_hogan) August 27, 2014

Will Taylor replied that he and Matt feel that NZ needs a real blue-green party.

@seamus_hogan as @TVHE and I often discuss,NZ needs a real blue-green party.
— Will Taylor (@WillTaylorNZ) August 27, 2014

I think they were thinking of a new party. But I don't see why it would not be feasible for the current Green party to enter into a governing coalition with National after the election this year. If National get enough seats to govern alone, the minor parties will have no bargaining power (although, I still think the Greens should try to form a coalition, for the reasons below). But if National falls short of that mark, they would likely be very open to a partnership with a single, stable, reasonably-non-crazy minor party. The Greens would just need to decide what are the one or two key issues that are really important to them and that are not unthinkable for a pragmatic centre-right party--e.g. 1. clean waterways and a serious policy on carbon emissions, and 2 funding for child-poverty initiatives--and then agree to throw away some of the minor stuff like their positions on monetary policy. The long-term advantages to the Greens would be enormous:

• The alternative is likely to be not being in government at all, or being in government with a coalition with Mana, Internet, NZ First, and Labour, which is probably a brush a principled party would not want to get tarred with.
• It would make credible for a long-time that the Greens are prepared to work with either major party to further environmental issues, and so give them much more bargaining power with Labour after future elections.
• Any move on environmental policy achieved in a coalition with National, even if not as strong as could be agreed to by Labour, would be sustainable beyond the next election and could be strengthened then. In contrast, a strong ETS negotiated with Labour might not survive beyond the 2017 election. 
• Where there policies are more market oriented than National's (pricing water appropriately for dairy farmers, not discouraging high-density living in Auckland), having the push come from the Greens would enable National to implement those policies without fear of a backlash from the left. 

I am deadly serious about this. Why not? 

Jobs for Everyone

It has been more than a week since Internet-Mana had their official launch promising nationwide full employment. Their policy platform got overshadowed a bit by the strange comments of Kim Dotcom and the outburst by Pam Corkery, but it is still surprising to me that the policy itself has been met with almost complete silence. This I take to be a comment on the seriousness with which Internet-Mana is being taken, but there is one aspect of their jobs policy that deserves a further look.

First, here are the highlights as reported in the Stuff story linked to above:

• a plan to create 50,000 permanent jobs and 50,000 shorter-term jobs a year over the next five years at a cost of $1.3b; and 
• funding to come from redirecting a fifth of ACC current reserves and future employer and earner ACC levies.

There are some obvious questions to ask about the first bullet:

• What is the process by which a flow of spending each year generates an on going stock of jobs?
• How exactly is the spending going to create the jobs?
• What is the model of labour-market interactions, wage determination, etc. that currently has the economy generating jobs for a bit more than 94% of those working or actively seeking work, that will not continue to have a 94% success rate after the new policies are put in place? 

But it is the second bullet that struck me. Steven Landsburg would have loved this one. (See his posts on the man who can't be taxed, here, and Scrooge as a great philanthropist, here.) The joint leaders of Internet-Mana, Hone Harawira and Laila Harre  are quoted as saying that "it was widely accepted that ACC reserves and levies were excessive and redirecting some of these would allow them to pay for their policies without increasing taxes". This may be true, but that doesn't mean that this is a free lunch. If ACC are investing their reserves in New Zealand, then redirecting those reserves to the employment policy will pull money out of New Zealand capital markets, making less available to investors or inducing more capital inflow with the resulting pressure on the exchange rate and export earnings. If they are investing the reserves in overseas markets, then redirecting them to the employment policy will put pressure on the New Zealand exchange rate and exporters directly. 

Now one might want to take the view that our savings rate in New Zealand is too high, and consequently that the exchange rate is too low and exporters having too easy a time. If so, redirecting ACC reserves would be consistent with that view. But the fact that the reserves might be excessive in terms of future ACC payouts does not imply the policy comes with no opportunity cost. Further, the leaders need to explain why they think that aggregate savings rates are excessive in New Zealand. 

Are ODI Scores Increasing? UPDATED

I had a conversation with a sports blogger, John Rogers, on Twitter last week. John Rogers had tweeted a link to a blog post he had written on why the WASP projection being used in BSkyB's coverage of limited overs cricket this English summer is necessarily inaccurate. His point is that ODI cricket is evolving quickly, both in the equipment and the style of batting, so that historical data is a poor guide to how many runs you can expect a team to score.

There is always a tradeoff in statistical work between using only the most recent data to capture trends, and using a longer time period to get more statistical significance. Now, in principle, since WASP is calibrated to a par score set by the broadcast commentators, any trend in scoring that has occurred within the period of the data used to estimate the model could be adjusted for in the par score. The setting of a par score is both a strength and weakness of WASP. The strength is that it allows game-specific information to be factored into the projections such as using local knowledge to assess how the pitch is likely to play. The weakness, however, is that the commentators might suffer from the common human biases of seeing patterns in essentially random data, and I wonder if the view that batting power is increasing is an example of that.

So I was interested to see if John's perception of a recent increase in scoring rates due to teams having more "lower-order hitters", better bats, etc. is borne out in the data. There is no doubt that there has been an increase in scoring over time. For example, all of the 16 ODI matches (all involving top-8 countries) where the team batting second has scored 330 or more have occurred this century. Only 5 of those 16, however, occurred this decade, suggesting that maybe the changes are not so recent.

Extreme scores like these are not necessarily indicative of a general trend, so some regression analysis is called for. John's hypothesis seems to be mainly based on increased rates of scoring by lower-order power hitters near the end of the innings. I don't have the full ball-by-ball database to hand, just a record of scores and results, but if the theory is correct, it should show up in total scores. Now WASP is currently based on ODI data from 2006 involving the top-8 teams, so I had a look at all non-rain-shortened games involving those teams from May 1 2006, using a dummy variable for each year starting May 1. First, I looked at the evolution of first innings scores over that time. To control for different abilities across countries, I ran an OLS regression of first-innings score on dummy variables for the team batting first and for the team bowling first, as well as a dummy variable for each of the 8 years in the database. To further control for differences across grounds, I restricted the data set to games played at grounds where there were at least 10 matches played in this period, and included a dummy variable for each ground. This left me with 245 games. The results are shown in by the blue line in the graph below, with the line showing (left axis) the average first innings score for the average team against the average team at the average ground. There clearly has been very little change over these 8 years.



John's blog post, however, seemed to refer specifically to the ability of teams to chase down large scores, so I separately looked at whether there has been a change in the the probability of the team batting second winning using a probit regression. Because differences in grounds largely affect ease of scoring in both innings, and because probabilistic models require more data to get precise estimates, I used the full dataset without dummy variables for the ground, but again controlled for team ability and included dummy variables for each year. The results are shown in red on the same graph (right axis). Probabilistic models typically require a lot more data, and so I wouldn't put too much faith in the estimates for any one year. But there doesn't seem to be a clear recent trend to it being easier to chase down scores than in previous years, although there was a strange dip in the period 2007-2009 that has since been reversed.

I suspect what is happening is a perception bias. There probably has been a recent increase in power hitting as a result of batsmen taking more risks, but that has been balanced by an increase in the rate of dismissals. And this leads to the reality being different from common perceptions. 20-20 has conditioned us to thinking that it is easy to score 8-9 runs an over on small grounds with flattish pitches. And it is. But it requires aerial shots, unlike 5-6 an over, which can be achieved entirely along the ground with 1s and 2s and the occasional bad ball cut or driven for 4 along the ground too fast for the cover sweeper to collect. With modern bats and batting, it is not difficult to sustain 8-9 an over through regular sixes and lofted 4s, but it is hard to do so without losing regular wickets. But wickets arrive randomly. Now think of the commentators bias. If a batsman hits a clean six, he is lauded for his good shot. If he mistimes it and is caught, as often as not he will be criticised for "taking unnecessary risk" or "not waiting for the right ball". (Have you ever heard a commentator criticise a batsman for taking unnecessary risk after making a clean hit for 6?) This creates an impression that the good shots are normal, and the wickets are just an avoidable failure rather than both being natural consequences of a particular level of aggression. Combine that with our recollections of past matches. Sometimes a team chasing 120 off 72 balls will have a randomly good passage scoring at that rate without any lofted shots going to hand, and it will make it look like such fast scoring is easy. At other times, we will see a procession of wickets and we will be thinking how the batsmen threw the game away. It is the first case that sticks in our mind when we make our own assessment of probabilities, and so we inflate in our own minds what the probabilities of winning are when a team is chasing a large total.

Data (even historical data that may become out of date) is a good antitdote to these perception biases.

UPDATE: Chris Smith, of the wonderful cricket blog, Declaration Game, asks by tweet if the results would have been very different had I not restricted to top-8 countries, and controlled for team ability and ground. That is, would we observe a general increase in scoring, but one attributable to having more games with weak teams, and more smaller grounds. Rerunning the numbers on the first-innings scores, if we include Bangladesh, Zimbabwe, Ireland and Afghanistan in the data (I don't have other countries in my database), and don't control for team ability, and don't control for grounds, we see a 10-run increase between the periods 2002-2007 to 2008-2013. Removing the four weaker teams and controlling for team ability only reduces that change by 2 runs. The big change comes when we restrict the data to grounds with at least 10 games in the dataset  (still 540 games) and control for the ground. This reduces the change down to 2 runs.

Implausible counterfactuals

Imagine that Winston Peters had a more clever web team and came up with a nifty infographic. The infographic asked you to input your race. Then it showed how many more jobs each race got in New Zealand in the period 1980 to present. If you'd selected "Asian" at the start, the infographic would tell you that your group got tens of thousands more jobs over the period than your group would have gotten if job growth had been distributed "evenly" instead. If you'd selected "White" or "Maori", you'd see how many fewer jobs your group had gotten, with calls of They Took His Job to follow. A parallel one would show Kiwis how many more houses they'd have if growth in the number of houses owned, by race, had been evened out.

It would be pretty obvious that the infographic was nonsense. Immigration from Asia over the period meant that we had more growth in the number of employed Asians. If those migrants hadn't come, it's not like we'd have had more jobs left for everybody else: that's the lump of labour fallacy. The counterfactual is implausible. 

Well, the NZ Herald's nifty new infographic asks you to input your household income and some basics on your household composition. It then tells you which decile you're in. That's all fine. But when you then hit "Next", you get this. I'd inputted $5000 per week as an arbitrarily large income to get a top-decile household. 

Over the last 30 years, all incomes have grown, but not at the same rate. A household like yours is now 29% – or $23621 a year –better off than it would be if all incomes had grown evenly.

If you choose a lower-income household, it tells you how much worse off you are than you would have been if growth had been equal across deciles. So the counterfactual is a New Zealand that had the same overall growth over the period, but where all deciles experienced even growth. The problem here is that there is no way of evening out those growth rates without affecting growth rates. Higher income taxes for more redistribution can even things out, but they also reduce total growth. People can take whatever values-based position they want on how much the state should redistribute. But we ought to at least start by recognizing that it's not a free policy. 

Here's Treasury on deadweight costs:

The recommended approach is to consider whether or not to include deadweight losses on a case-by-case basis. As a general rule, deadweight losses should be included if they are of sufficient size relative to the overall costs and benefits of the proposal that they are capable of altering the decision as to whether or not to proceed with the proposal.  

Having said this, deadweight losses are notoriously difficult to quantify. Estimates vary from 14%³¹ up to 50%³² of the revenue collected. Treasury suggests a rate of 20% as a default deadweight loss value in the absence of an alternative evidence based value. Thus public expenditures should be multiplied by a factor of 1.2 prior to discounting to incorporate the effects of deadweight loss. 

If you want to get one dollar from a high decile person to a lower decile person, you should reckon on its costing $1.20. If you want to even out growth entirely, well, those costs are going to be much higher. I'd believe the 1.2 for top income tax ranges from 30% to 40%. It would be an interesting exercise to work out just how much higher the top marginal tax rate would have needed to be to even out growth entirely over the last three decades. I expect that the rate would be really rather high, and that the associated deadweight losses would be rather large as well.

The Herald infographic invites the reader to assume that those deadweight costs don't exist. Dey Turk Er Income, except for that most of that income wouldn't have existed for anybody in the counterfactual.

There are a few policies around that can improve outcomes in lower income cohorts at relatively low cost. Improving education and training is one. But there are no policies that would equalise income growth across deciles without simultaneously substantially affecting total growth.

Train sets

There's one good thing we can say about Labour's $100m light rail plan for Christchurch: at least it isn't a $1b light rail plan. Otherwise, it's not so hot. 

I'm blogging from Hong Kong, where I'm attending the Mont Pelerin Society's meetings and greatly enjoying their fantastic rail service. Commuter rail and an extensive and efficient bus network are pretty critical to this place's working: there's no way this many people could move around without it. The city is dense and compact. Christchurch is, well, the opposite of that.

Liberty Scott provides a few bullet points on Labour's current plan:

• Christchurch last had the remnant of a local rail service in 1976 when a once daily, yes once daily, service between Rangiora and Christchurch was scrapped because of lack of patronage.  The last regular service (as in all day service like in Wellington) was between Lyttelton and Christchurch, which ended when the road tunnel was opened in 1972 (the rail service only had an advantage over driving over the Port Hills).  Before that, other services were discontinued during the 1960s as bus services proved more cost effective and car ownership rose.  Christchurch's population grew by over 50% in the period between the end of these services and the earthquake.

• It won't unclog Christchurch's roads.  The Press report says Labour intends the system to accommodate 10% of commuters from the north to central Christchurch.  Phil Twyford says there are 5000 - yes 5000 commuters making this trip (10,000 trips), so it is $100 million for 500 commuters.  That comes to $200,000 per commuter, before any operating subsidies are considered.  In other words, the price of a Porsche 911 for each commuter.  Taking about 400 cars off of Christchurch's roads every morning isn't going to "unclog" them,  it hardly makes a difference.

• However, what it might do is encourage more people to live further away from the surrounding suburbs closer to the city, because it subsidises living well outside Christchurch.  That's hardly conducive to reducing congestion, nor environmentally sustainable.  It would be far more preferable to focus on finishing renewing the local road network including marking out cycle lanes, than to incentivise living well out of the city.

• A commuter rail service to central Christchurch can't even go there, as the station is 4km from Cathedral Square, in Addington.

• The $100 million is to double track the line to Rangiora, and rebuild some railways stations, but not a new central station (which can't be anymore "central" than the old one on Moorhouse Avenue), nor new trains, although the ex. Auckland ones could be relocated, if a depot could be built, and sidings to put them on.

• The rail service would replace commercially viable and some subsidised bus services, but politicians don't find buses sexy.

• The service would lose money, a 1000 trip a day railway service is a joke.  Proper commuter trains in major cities carry that number on one train.  

• If there really is demand for more public transport from the northern suburbs, it could come from commercial bus service.  Clearways could be used for bus lanes and the hard shoulder of the existing and future extended Northern Motorway could be used for peak bus lanes too, if needed.  Trains only make sense if buses are incapable of handling the volumes of demand, and that clearly isn't the case.

• Christchurch was the first major city in NZ to scrap trams, because the grid pattern street network and low density of the city meant there were few major transport corridors to support high density public transport systems, like trams (and commuter rail).  It was also the first of the big four cities to scrap commuter rail altogether (even Dunedin had commuter rail services until 1982 to Mosgiel).   In short, the geography of Christchurch is as poorly suited to commuter rail as it is well suited to cycling.

Liberty goes on further - read the whole post.

I disagree with him a bit though. He should have used a Tesla S as alternative, not a Porsche. The numbers work out about the same, and the Tesla is electric.

Back when Mayor Parker was proposing train sets, the cost was higher. I'd then written:

The draft city plan has a $400 million rail line connecting downtown to the University campus. It's unclear that there's sufficient demand to justify such investment, but there might be on the City's creation of a proposed new international precinct downtown where international students would be invited to live. Those students currently live within walking distance of campus in a vibrant international hub at Church Corner and Riccarton where I can find great Chinese, Vietnamese and Korean food; Korean butchers and grocers; a Japanese bakery; and, all kinds of other diverse amenities (Korean and Chinese churches, etc). To the extent that the city is successful in moving all the students downtown, from where they'd need public transport to get to University, and so would need the $400 million dollar (more than $3k per household) rail line (or a far far cheaper designated busway), it would be by destroying an existing international hub.

Let's work through some numbers on rail. Suppose that the $400 million is financed through a 25 year bond issue paying 8%. For an annuity paying 8% to have a present value of $400 million over 25 years (in other words, for folks to be willing to give the City $400 million today in exchange for bonds), the annual payment has to be $37.47 million. The building costs alone for the rail line are then $103k per day for the next 25 years. And, suppose further that we're willing to subsidize each rail rider by $10 per ride. We'd then need 10,000 people riding the train every day just to cover the capital cost where we're willing to pay $10 per person per ride. By way of comparison, RedBus, which services most of Christchurch, carries 5.8 million passengers per year - an average then of just under 16,000 passengers per day. If a single rail line from downtown to the University carried as much traffic as the entire RedBus network, the effective per-passenger capital cost subsidy would be $6.50. If the train were running on a cost recovery basis, it would need to charge $6.50 per trip plus running and maintenance costs. If it covered only running and maintenance costs, the government would be kicking in $6.50 per trip. If it carried as much traffic as the entire RedBus network.

I was pulling punches there a little as I had the distinct impression that the University really kinda wanted that rail line and wouldn't appreciate staff saying otherwise; I was likely just paranoid.

When February's quakes hit, the bus routes changed quickly: the main depot was knocked out, so they ran temporary bus exchanges on Bealey Street and elsewhere. Road closures for repairs meant frequent re-routings. You can't do that with trains.

I also note that Labour's plan suggests some cost-sharing with Christchurch Council. Christchurch Council has no money for cost-sharing arrangements.

Previously:

• Light rail cautionary tales.
• Light rail disease

How do you mitigate a problem like a NIMBY?

I think I might have a partial solution to NIMBY blocking of urban intensification: a way of paying them at the margin for disamenity effects.

The one-line version: if your neighbour develops, your taxes drop.

Here's how we do it. Or at least the initial sketch-outline blog version of it. I'll expand on it later and, hopefully, fix the problems with it that you'll helpfully point out.

Consider a city of 10,000 dwellings and 12,000 households. Most of these dwellings contain one household, but some contain two households because there are more households than there are dwellings. The City collects $10,000,000 in taxes, with a $1,000 per-dwelling tax, on a standard Council rates system: the Council specifies how much money it needs to collect and that amount is apportioned across dwellings based on the relative value of the dwellings. Dwellings with higher total capital valuation pay more in tax. In this case, they're all identical for simplicity of exposition but nothing requires that they be identical or pay identical taxes.

Suppose that, in this set-up, somebody wants to put up an apartment building that would contain 100 dwellings to house 100 households. The developer pays Council a development levy that covers the building's interconnection costs: the costs the building imposes on Council. Since people would move into this building from existing overcrowded dwellings, there's no additional cost on Council of additional capitation-based services. Specify for now that each of these apartments has the same capital valuation as existing dwellings for simplicity, though again, that will vary in the real world. Council still needs to collect $10,000,000 in taxes in total to cover those services, so long as it's set the development levy correctly.*

Under the existing system, the $10,000,000 in taxes will now be spread over 10,100 dwellings rather than over 10,000 dwellings. Each dwelling consequently remits $990 in taxes. If the neighbours of the apartment building get more than $10 in disamenities from the apartment building's existence, they will lobby against its construction.

Now the RMA has some mechanism for identifying neighbours who are affected by the new development. Maybe some experience more traffic, maybe some lose a bit of view, and maybe others lose a bit of neighbourhood character. Specify that these effects, for this apartment building, extend over 100 dwellings in a circle around the new apartment building. Again, in the real world, it won't be a circle, but it doesn't matter. The RMA and Councils already have some mechanism for identifying affected neighbours; whatever that mechanism is has, in this case, identified these 100 dwellings.

Council needs to raise $10,000,000 in total, but nothing says that we need to spread the abatement provided by the new apartments to the city as a whole. In fact, on thinking about it, it seems pretty silly to spread the abatement so broadly. We've identified a set of affected neighbours who bear the costs of the new development but get the same tax abatement benefits as everybody else. Why not define a Special Ratings Area by the dwellings that experience disamenities from the new development, using whatever process is already in place for defining affected neighbours?

Let's instead specify that the total rates collected from both the new development and all the affected neighbours remains constant after the new development's construction. Those 100 dwellings used to remit, in total, $100,000 in taxes: $1000 each. Dwellings in the circle paid $100,000; dwellings outside of the circle paid $9,900,000. Outside of the circle isn't affected by the apartment building. We'll say now that all of the dwellings inside the circle, including the dwellings in the apartment building, have to remit $100,000 in taxes in total. Since there are now 200 dwellings in the circle instead of 100, the per-dwelling levy is now $500 instead of $1000. The dwellings outside the circle continue to pay $9,900,000 and the necessary $10,000,000 is collected in total. Now, neighbours would need to enjoy more than $500 per year in disamenity effects in order to wish to block the development.

This doesn't solve every problem in the world. There are neighbours who would experience more than $500 per year in disamenities and would still NIMBY up. But there will be a range of neighbours in the $10 to $500 range who cease their opposition.

If we wished a stronger counter-NIMBY effect, we could say that all dwellings inside the circle remit in total the necessary $100,000, but that the new apartments are levied at the rates that obtain outside of the circle. Only the affected neighbours then enjoy the benefits of the Special Ratings Area. The total amount collected will be the same. But, in that case, and in this example, the new apartments each remit $1000 in taxes while the 100 affected neighbours each see a complete rates abatement. So we would only hear complaints from NIMBYs experiencing more than $1000 in disamenity effects.

If the apartment development were large enough, and if the number of affected neighbours were small enough, one could imagine scenarios where the neighbours received a negative rates bill: had there been 150 apartments each remitting $1000 in taxes, and the same number of affected neighbours, there would have been $50000 in surplus to distribute among the 100 affected neighbouring dwellings: a $500 cash bonus each instead of a $1000 rates bill. In that case, it would take $1500 in disamenities to trigger NIMBY activity.

I doubt you would want that this be locked in in perpetuity.** I would expect we could see this system apply in the first year. Perhaps after 10 years, the circle as a whole, including the apartment, could remit a total rates bill equal to a half-way point between the total amount remitted inside the circle prior to the development and the total amount that would be remitted had every dwelling inside the circle, apartments included, paid the same amount as those outside the circle.

The steady-state for the circle going from 100 dwellings to 100 dwellings plus 100 apartment-dwellings could then be $150,000 in total taxes rather than $200,000. Prior to the development, the 9900 dwellings outside the circle remitted $9,900,000 in total taxes; now they'd only need to cover $9,850,000, so their rates bill would drop from $1000 each to $995 each. Each of the 100 apartments would remit the same $995 in taxes, covering $99,495 of the circle's $150,000. The remaining dwellings in the special ratings area would remit $505 each in taxes. Everybody's better off. Affected neighbours get strong abatement. Other pre-existing dwellings see a small amount of abatement too. And we reduce overcrowding because we have found a way of compensating the NIMBYs.

Now real world ratings systems are more complicated than this. More valuable dwellings remit more in tax. What I'm here establishing is a new Special Rating Area within which the city could apply its standard differential progressive capital value taxation scheme, charging more valuable dwellings a greater share of the amount that needs to be collected and less valuable dwellings a smaller proportion. It's just that instead of applying it over the city as a whole, they carve out areas around new developments as defined by the affected neighbours, and re-apply the standard apportionment formula to levy a total amount of rates across dwellings within that defined area. The rates bill for those in the area has to drop relative to what they pay in the current system, and NIMBY pressure consequently drops too.

Note further that these kinds of benefits should be stackable. If your dwelling is affected by two different new developments, you should see cumulative rates decreases.

Questions for readers:

1. Does a system like this apply anywhere in the existing world?
2. Are there obvious gaping holes that I'm missing?
3. What seems like a fair and politically sustainable time path for the special ratings area?

I'm sure there are many practical implementation issues like the calculations for dwellings in overlapping special ratings areas. And maybe we'd want gradations within the Special Ratings Areas where the most affected dwellings see the most abatement. But this all looks pretty feasible.

It seems like a good idea. Surely somebody has thought of this before. And surely somebody else has explained why it can't work. I'll look forward to your pointers.


* In the real world, they could under- or over-shoot. I've heard many arguments that Councils currently have incentive to over-shoot because doing so shifts the tax burden to new residents over existing ones and to discourage development to avoid NIMBY complaints. I can deal with the latter problem here, but we'll otherwise assume that the developer levies are set correctly.

** And especially where new dwellings might cater to new residents rather than for a shuffling of existing ones: the Council's total budget then has to increase for services that have a per-capita cost, and we don't want to give those outside the circle strong reason to lobby against the new development.

Independent is an interesting word

I presented to the Ministerial Forum on Alcohol Advertising and Sponsorship a few months back with a brief submission on recent evidence on the effects of alcohol advertising on consumption behaviour.

One pretty compelling recent piece of evidence is Jon Nelson's recent meta-analysis, published in 2011. The abstract:

This paper presents a meta-analysis of prospective cohort (longitudinal) studies of alcohol marketing and adolescent drinking, which accounts for publication bias. The paper provides a summary of 12 primary studies of the marketing–drinking relationship. Each primary study surveyed a sample of youth to determine baseline drinking status and marketing exposure, and re-surveyed the youth to determine subsequent drinking outcomes. Logistic analyses provide estimates of the odds ratio for effects of baseline marketing variables on adolescent drinking at follow-up. Using meta-regression analysis, two samples are examined in this paper: 23 effect-size estimates for drinking onset (initiation); and 40 estimates for other drinking behaviours (frequency, amount, bingeing). Marketing variables include ads in mass media, promotion portrayals, brand recognition and subjective evaluations by survey respondents. Publication bias is assessed using funnel plots that account for ‘missing’ studies, bivariate regressions and multivariate meta-regressions that account for primary study heterogeneity, heteroskedasticity, data dependencies, publication bias and truncated samples. The empirical results are consistent with publication bias, omitted variable bias in some studies, and lack of a genuine effect, especially for mass media. The paper also discusses ‘dissemination bias’ in the use of research results by primary investigators and health policy interest groups.

So he picked the papers that use a baseline and exposure design and concluded that there's really nothing much there except for publication bias.

The panellists didn't seem particularly friendly or unfriendly. Tuari Potiki asked why economists' conclusions on this stuff vary so much from the public health folks who'd presented earlier in the day, and the general tone of the Forum members seemed to be "what additional restrictions should we place" rather than "do any potential restrictions do more good than harm", but maybe I misread them.

Well, the anti-alcohol advocates didn't think the Forum was independent enough so they've made their own forum.* They're calling it the Independent Expert Committee on Alcohol Advertising and Sponsorship.

Independent's an interesting word, since the IECAAS is being hosted by Alcohol Action NZ, Doug Sellman and Jennie Connor's anti-alcohol lobby group, and consists of Sellman, Connor, Janet Hoek, Mike Daube and others. They reckon the Ministerial Forum, including NZ Drug Foundation's Tuari Potiki, wasn't independent enough because the CEO of the Advertising Standards Authority is also on the Forum. Sellman et al are correct that the Forum members aren't experts in alcohol marketing, but I'm really unconvinced that that makes them less independent.

IECAAS writes:

To date IECAAS members have found no significant new research that would invalidate the recommendations made by the Law Commission in 2010. In fact the evidence supporting major reform appears to be strengthening. The recommendation to phase out alcohol advertising and sponsorship apart from objective written product information over five years is therefore as important today as it was when first reported to the government in 2010. The only difference is that New Zealand could have made several years of progress had the government responded.

I wonder how hard they've been looking. There's a reasonably important piece in the Journal of Economic Surveys that they've missed. And a few others.

* I can't stop imagining Bender setting up his own theme park. Except this one would be way less fun than Bender's.

Reader mailbag: restrictive covenants edition

If the particular character of a neighbourhood is all that important, why don't residents protect it using covenants?

A reader emails me:

I don’t think it is Nimbyism if a neighbourhood wants to protect its own character. What is Nimbyism is denying others beyond your neighbourhood the same opportunity you had.

It seems counter intuitive to think a place like Houston which has few zoning laws gives local communities greater control to enable the protection of individual property rights by allowing those individuals to collectively agree to covenant those rights (which include the protection of special character areas like Franklin Rd) and yet not to interfere with others who may wish a different way outside that zone.

High density advocates hate the idea that Houston communities that fringe CBD areas can continue to live a lifestyle that they have agreed to and also stop others (like Dhyrberg) from coming in and destroying it.

I know that many new developments come with covenants restricting future use of the property: developers expect that residents want rules binding both themselves and their neighbours. I don't want to live in that kind of place, but in a world of heterogeneous preferences, some prefer homogeneity.

Is there anything legally that would stop residents in places like Epsom, Grey Lynn, or any of the other hotbeds of development discord, from jointly agreeing to bind themselves against future development?

Under the status quo, everyone on the street seems to have been given a property right in what anybody else does with their property even though no covenant was put in place. It's an odd conception of property rights to say that, because I bought my house with certain expectations of what my neighbours might do, I therefore am allowed to veto anything they may wish to do with it.

Imagine some street where most residents put value on the street's current character; some on the street would prefer to turn their houses to higher-density use. The current rules let the character-amenity people shout a lot and block the development; those wishing to develop have to pay off all the potential veto players in order to prevent their blocking. Shouting is cheap and, since a developer would have to pay off every potential shouter, there is incentive to pretend to care more than you really do. I'm sure much of the shouting is genuine. But we have little sense of the real dollar value of the experienced disamentiy.

An alternative framework would have those who love the neighbourhood's particular character draft up a covenant agreement and try to get all the owners to sign on. If there are neighbours who were set to re-develop instead, they'd either not sign and not be bound, or be paid by their neighbours to take on the covenant's provisions.

Coase tells us that in low transaction cost environments the two scenarios should be equivalent. Coase also tells us that all the interesting action is in the high transaction cost real world. Is it cheaper to overstate your preference against a neighbour's re-development, or to overstate your willingness to turn your house into a 3-storey set of condos to try to induce payments not to? The former is pretty easy. The latter generally takes a set of architectural and engineering drawings plus building consent applications.

I wonder whether it would be workable to do away with neighbours' ability to object to anything other than real environmental effects like shading by replacing the regime with a menu of covenant options that neighbours might wish to impose upon themselves consensually.

Thanks to my correspondent for useful discussion.

Somebody arbitrage and fix please

I've been explaining to folks 'round the office why we might wish to pay more attention to iPredict's markets on who will be Prime Minister than to the vote share markets. And I thought I might share it with you.

National's back up over 70% in the PM.National contract. If National wins, that contract pays $1; if they lose, it pays $0. It dropped into the 60s last week during the publicity around the Hager book, but it's now back up.

But, if we look at the major party vote share markets, it's hard to see how National could possibly be 73% likely to win. National's predicted to get 43% of the vote; Labour and the Greens are predicted to get 43% of the vote; minor parties get 14%. While NZ First may be more likely to go into coalition with National, Internet/Mana isn't, and Conservatives' wasted votes, if they get 4.4%, disproportionately waste votes that otherwise would have gone to National.

There's a bit of a problem in all the vote share markets though. You can only bring so much money into iPredict at a go, and folks might there be liquidity constrained. The winner-take-all markets can then just be more interesting. The VS markets, paying off at a penny for every percentage point earned by the party in the election, give little chance of large gains or losses. You can sink a whole pile of money into that market to get maybe a cent or two's return on a 43-cent investment. It's not all that great. The PM markets provide a less certain return, as there's bigger chance of large losses if your expectation of the probability is wrong or if the wrong side of the weighted coin turns up, but the 70 cent investment either gets you a dollar or it gets you nothing.

How can we tell that it's the continuous payout structure? iPredict also has a market where the National Party vote share pays out in buckets: one contract pays $1 if the vote share is over 43% (and $0 otherwise), another at $1 if the vote share is over 43.5%, another for 44% and up, and so on through 49%.

In the vote share (continuous) market, you pay $0.43 for a contract giving you $0.01 for every percentage point of the National vote. In the vote share (discrete) market, at current prices, you would pay $0.90 for a contract paying out at $1 if National gets more than 43% of the Party Vote. You'd pay $0.83 for a contract paying $1 if National gets more than 44% of the Party Vote. You'd pay $0.67 for a contract paying $1 if National gets more than 45% of the Party Vote. You'd pay $0.59 for a contract paying $1 if National gets more than 46% of the Party Vote. 46.5% is at $0.55 and 47% is at $0.48. So the market, in those bucketed contracts, expects National to get between 46.5% and 47%; the parallel Labour ones have Labour getting between 28% and 29%. That's rather more consistent with a 70% chance of National's forming government.

But watch for Winston. NZ First is at 4.8% in the standard vote share market, but he's also odds-on to take more than 5.5% of the vote. The Conservatives only have a 29% chance of topping 5%.

Somebody with time ought to go in and fix things so there isn't free money sitting between the bucketed and continuous vote share markets.

Why do all political parties hate renters so much?

There are two main ways people can meet their accommodation needs: renting and owner occupancy. Both involve making annual payments for housing services either in rental payments, interest payments on a mortgage, or to the extent that an owner occupier has paid of his or her mortgage, in the opportunity cost of forgone interest from having money tied up in the ownership of a house. A lot of people, myself included, prefer to own their own home rather than renting. For others, renting is the preferred method of meeting accommodation, and a third group would prefer to own but rent due to not being able to secure a large enough loan.

Now I can understand a desire to help those in the that third group, particularly since they are likely to be disproportionately drawn from the poorer members of society, but if the mechanism for doing so is to make buying a house cheaper while simultaneously making renting more expensive, the mechanism will actually be hurting the most vulnerable members of the group it is seeking to assist--those sufficiently liquidity constrained that even with the assistance house purchase will still be out of reach.

And yet, the three main political parties' policies on housing seek to penalise this group of renters. The reason for this is that rental accommodation and owner-occupied accommodation are pretty close substitutes on both the demand and supply side of the market, and so their prices are very closely linked. Any policy that either makes it easier to purchase a house for owner occupancy or more costly to own a house that is rented out, while not doing anything to increase the total stock of housing, must make renting more expensive.

So, for example, a policy (Labour-Greens) to level a capital gains tax on residences but exempt residents' first homes, will make it more expensive to be a landlord in a market where house prices are expected to increase in the future requiring a higher rental rate to compensate. A policy (Labour) to prevent foreign non-residents from owning domestic residences to be rented out will have the same effect. And a policy (National) to give tax breaks to first-time house buyers will similarly favour owner-occupiers at the expense of renters, operating here through the demand side.

I would love to see each of the leaders questioned in the televised debates on why they think the effect of their proposed policies on renters would be an acceptable cost.

Landslide costs

Christchurch Council and the government will buy out some Christchurch properties at high risk of landslide. Here's Chris Hutching at NBR:

The government and Christchurch City Council will buy 16 Port Hills properties.

"The latest council-commissioned GNS Science reports show 37 green-zoned homes are in areas where the risk to life from mass movement (sometimes called landslide) is considered intolerable,” according to a council media statement.

An intolerable risk is defined when “the risk to life from mass movement in any one year is equal to or greater than one in 10,000.”

Geonet identified 37 at risk properties in total.

Ok. Recall that the value of a statistical life for policy purposes in New Zealand, or at least the one used by MoT for transport planning and subsequently adopted elsewhere in policy, is $3.85 million per fatality.

Let's work out whether the policy here makes sense.

The median 4-bedroom house in Redcliffs/Sumner, where most of this kind of risk obtains, is $690 per week. Let's take that as the value of housing services over and above the value of services that would be provided by a park in the same spot: the rental costs understate the value of housing services of owner-occupied properties, but parks provide some value too. Let's be safe and call it $500/week extra value. For a year, let's round that down to $25,000 per year. We want an annual figure because the 1/10,000 risk is annualised. Alternatively, we could take the value of the house and the lifetime risk of landslide for that house's life.

If a house has an intolerable risk at a 1/10,000 risk of landslide death, and if that risk is sufficient for buying out the home-owner and taking that property out of housing use, then we're willing to forego $25,000 per year in housing services to avoid a 1/10,000 risk of landslide death.

Now let's suppose that a 4-bedroom house, our valuation basis here, has 5 people in it.

$25,000 * 10,000 = $250,000,000.

$250,000,000 / 5 = $50,000,000

The Ministry of Transport is willing to spend up to about $3.85 million to save a life by roading improvements that prevent deaths.

The government here is spending at least $50 million per (ballpark) statistical life saved.

I'm not sure that this makes a lot of sense where there are other projects that, for the same total cost, could save more expected statistical lives.

Unless we think that dying in a landslide is about thirteen times worse than dying in a car accident. I'm really rather sure I'd rather die in a car accident than in a landslide. Suppose a genie came to me and said, "Eric, you and your family, I know with certainty, have a 10% chance of dying in a bad car accident next year. It'll be quick though. Would you like to trade that for a 0.8% chance of your family dying in a landslide? It'll be pretty terrible."

If you were given that choice, and you'd take the deal to get the landslide instead, then the government's buyout doesn't make sense. If you prefer the car accident, then the buyout can make sense.

Update: Note too that there's an important difference between houses and roading investments. The government, in the latter case, makes investments to mitigate risk of death and accident for anyone using that road. While there may be some roads that risk-averse drivers avoid because they're too terrifying, we all have reasonable expectations of safety on government-owned roads. If I choose to buy a house at the bottom of a very unstable hillside, I have demonstrated that I'm comfortable with that risk. While it's true that the earthquakes reveal more about the actual risk and that some owners may have erred, that could be an argument for an insurance payout for the amount of capital loss, not for buying the owners out and barring future residential use. All we then need is the one-time compensation, plus a great big highlighted section at the front of the property's LIM report noting the substantial landslide risk present at the property. If some prefer taking that risk for a lower-cost house, why should that be illegal?

When Hooton's away, a Crampton will play

I filled in for Matthew Hooton in the NBR's Opening Salvo this week. It's only in the print edition; here's a taste. [Update: here for subscribers]

We can count the costs of apartment stories left unbuilt. In a well-functioning market, developers will build upwards until the cost of an additional storey roughly equals the extra revenue the developer gets from selling the extra floor space, unless we think that property developers do not really like money all that much. We have pretty good data on what it costs to build a five-storey apartment building as compared to a four-storey one. If a fifth storey left unbuilt because of height limits, whether due to viewshed protection or for other regulation, could have sold for two to three times its construction cost, as the presented study found, the effective regulatory tax imposed by height limits is pretty high. If you add up the value of all the missing apartments, the total figure is going to be massive.

While urban planners often take a lot of stick for wishing to force people into compact city forms, and sometimes rightly so, urban height limits that artificially preventdensity impose a regulatory tax that either pushes prices up or pushes cities out. Auckland’s metropolitan urban limit has been pretty binding and artificially restricts building out; regulations barring development upwards need at least as much attention.

The economists at these sessions used similar method to estimate the regulatory tax implicit in zoning regulations in places like Epsom, Remuera, Point Chevalier and Grey Lynn. Add up the construction costs of a new house and the per-square-metre land cost. According to the study presented, which remains in the final polishing stages, mean house prices exceed those real costs by at least twelve percent in places like Epsom: it’s a regulatory zoning tax. The Greens’ Julie-Anne Genter was exactly on point when she excoriated ACT’s David Seymour in the Epsom candidates’ debate for opposing denisification. What kind of free-marketer thinks it right and proper to give neighbours several houses over a veto right over what I might wish to do with my house? One that needs to win votes in Epsom.

Do get a copy that you might read the whole thing. For the Genter-Seymour debate in question, hit the 8:50 - 9:16 mark here.

Real decline?

Nolan rightly hits on a bit of chicanery in reporting on BERL's policy costings for the Greens:

Investing to maintain real spending

This one is genuinely disappointing as it seems to be an almost explicit misinterpretation of Budget forecast figures.

The numbers for claiming falling real expenditure come straight from the Treasury forecasts here, but are then deflated.  This sounds good on the face of it, and people do this all the time.  However, it ignores that there is both unallocated spending, and allowances for additional spending in future Budgets – both which largely get allocated to Health and Education on the day.

It is an “open” secret that the Health and Education numbers work this way – as both Labour and National want to announce increases in spending on these items on the day. [Note: It is just like "tax cuts to get rid of fiscal drag" - political marketing all the parties do].

Now BERL is likely aware that the Budget Economic and Fiscal Update leaves out that unallocated spending. It's right there in the darned table. Here:

So what do we have here? For each line, we have the expenditures by spending area. For example, health rises from $12,368m in 2009(actual) to $15,274 in the 2018 forecast. BERL then goes and deflates that by expected inflation; the Greens then claim that there's a real cut in spending.

Now take a look at the line reading "Forecast for future new spending". That's the line where Treasury makes its best wink-wink-nudge-nudge guess as to future operating spending announcements, some of which it's possibly already had to cost for future government policy announcements, and some of which will be based on expectations of future inflation adjustments.

When BERL runs its inflation adjusted accounting on Core Crown Expenditures, it finds a 9.9% nominal and 2.8% real spending increase over the next three years. That total Core Crown Expenditures category includes the future spending increases. Those future spending increases have not been allocated across spending categories. If it were allocated proportionately across all categories, the weighted average of the different categories' increases would wind up being 2.8% real. But BERL doesn't assume that. It just takes each line from the BEFU and inflation adjusts it while ignoring the forecast future new spending.

Nolan is right. And it's worse than that. Nolan points to the 2013 Note 8 adjustments to BEFU. The 2014 table above has the forecast increases right there in the same table where BERL would most likely have pulled its data. It would be really hard to miss it. And if you didn't miss it, it would be really hard not to know that it would be really misleading to run a deflation adjustment without incorporating future expected spending increases where some of those increases would be to offset future inflation! 

The forecast new capital spending and unallocated contingencies are in the 2014 Note 8 adjustments; there's another $2.5 billion in forecast new capital spending by 2018. None of that's included in BERL's accounting.

Nolan's evaluation, noting that he's an Infometrics economist who hadn't worked on the report:

One thing I will point out, after reading the Infometrics report for the first time, is that they don’t say the things in the Green’s summary – but if you do a costing for a party, that is the way they will sell it.  The BERL tables on the other hand do imply what the Greens take from them – and that is very disappointing as they are misleading.

So the Greens put the best spin they could on the Infometrics numbers, as would any other party. But they could have been misled by the BERL tables. And that turned into some very erroneous headlines for the Greens, and some embarrassment when the Minister of Finance used a yellow highlighter to point them to what BERL failed to notice:

@RusselNorman @stevenljoyce Here it is. P119 BEFU "Forecast for future new spending" - the line BERL missed. pic.twitter.com/V2pnaYwXdq
— Bill English (@honbillenglish) August 19, 2014

I love that our Minister of Finance will come in and correct these kinds of things, or at least somebody in his office on his behalf (who knows whether he runs his own Twitter account).

It looks like Russell Norman honestly believed that there was no provision for future spending. I wonder whether he's satisfied with the advice he received.

Hagar and the Horrible

I haven't yet read Hager's book. But reporting on the book tells me, of things relevant to my interests:

• WhaleOil often posted pieces written by corporates (or their intermediaries) attacking their enemies, without attribution, and for pay. 
• Some of Whale's attacks on Doug Sellman's nanny-state anti-alcohol advocacy (and assorted other food, beverage and tobacco health lobbyists/researchers), and Whale's own nanny-state anti-RTD advocacy, were paid pieces commissioned via Carrick Graham.

James Dann quipped:

ridiculous that the alcohol lobby would pay whale oil for attacks against Doug Sellman when @EricCrampton will do it for free
— James Macbeth Dann (@edmuzik) August 18, 2014

Indeed.

Assuming that all of the stuff that Hager put up about Whale's "Infomercial" posts, as summarised by others, is correct, the most damning is the one on RTDs. Whale had had a bit of a reputation for not liking nanny-state interventions or those academics who spend a lot of time pushing policies restricting our access to those substances - and especially where they're doing it on government grants. The anti-RTD posts were off-key. Either Slater was less consistent than I'd have expected, or something else was up.

I expect that the other bits were inframarginal, in that they were consistent with what I'd have expected Whale would have said anyway if he'd written them himself. The payments there perhaps don't reflect well on some of the sponsors, but I doubt they changed what Whale was going to say anyway on those kinds of topics.

Whale apparently had to be paid to note that Doug Sellman's blaming of excessive alcohol advertising for drunks' stealing alcohol-based hand-sanitizer was batty. I'll say it for free: it's a bit nuts to blame alcohol advertising for drunks stealing and drinking alcohol-based hand-sanitizer. We occasionally hear stories about folks stealing a lamb or two for home slaughter and consumption. Should we blame BBQ Culture? NZ Beef & Lamb advertising? No. It's also a bit odd to cast Sellman's blaming of excessive advertising as "evidence-based", as I cannot imagine any study exists looking at theft of and consumption of hand sanitizer as it varies with the intensity of alcohol advertising. It's assertion. I'm also asserting that it is really rather implausible that ads for Woodstock or whatever else are to blame for kids' stealing hand sanitizer. I've previously asserted that, contra Sellman, Woodstock ads are hardly likely to cause middle-aged women to think it's ok to have affairs with their sons' friends. While Sellman does do some evidence-based work, he also engages in a lot of advocacy that's not nearly as rigorous.

For the record, here at Offsetting:

• You will never find a post written by somebody other than the post's listed author. I'll sometimes blockquote from anonymous correspondents, or from named correspondents, but I don't put others' copy up on my name. 
• I have never taken pay for a post. I've not been offered pay for posts either, other than the spam ones everybody gets for link-exchange things. So I guess I can't say I've successfully resisted serious temptation either. Anybody willing to offer me a million bucks for a post is welcome to try though; I would require payment in advance of discussions.
• I sometimes get tips for material for posts, or for things I should OIA, from all kinds of places. Ministries, industry, NGOs. I don't want to out what are sometimes whistleblowers and sometimes other insiders. If the topic looks fun I'll have a look at it and will post something on it if I think it's blogworthy and if I have time to get around to it. Those often have "A correspondent points me to...". I recognize that every single one of these correspondents has his or her own game going on and treat things accordingly.
• I disclose where relevant. As summary of past and current things, little of which should be any kind of surprise:
• I wrote a report on the social costs of alcohol for NABIC, the Australian alcohol industry group;
• I presented some of that report's findings for NABIC in Oz;
• After I'd done a similar report for free in NZ in 2009, the Brewers flew me up to Beervana to talk about my results and gave me a free ticket to the event. It was really pretty fun. More fun than insinuations from the antis that I'd been secretly paid to write that report.
• The Brewers Association of Australia and New Zealand supported my work at Canterbury from December 2013-June 2014 through a deal with the University where I spent about a day a week providing them advice on reports and articles about which they wanted analysis, doing a bit more work on alcohol's social costs for a one-day workshop in Oz, and laying the groundwork for some longer-term projects that, alas, ended with my leaving Canterbury.
• Because I felt bad that I hadn't gotten as much done as I'd hoped to with the project's truncation, and partially because the topic's inherently interesting, I did a bit of analysis on advertising and sponsorship regs to present at the Ministerial Forum on Alcohol Advertising and Sponsorship, mostly pointing to and explaining Jon Nelson's very nice metastudy on advertising. I wasn't paid to do that work, but I wasn't out of pocket for the same-day flight to Auckland to present. The "I felt bad about it" only covered that I spent time on it, not the content of the analysis.
• In the interregnum between finishing at Canterbury and starting at NZI (and evenings for a bit before finishing at Canty), I did some expert witness work on the effects of on-licence closing times for the local alcohol hearings at Tasman; I'm likely to present at the Wellington LAP hearings as well in a month or so. The Hospitality Industry Association had me do that work, but it's expert witness stuff under court guidelines: my assessment of the evidence, rather than advocacy. I think that the evidence being put up by the police in favour of heavily restricted closing times is pretty biased and missing any of the lit that suggests closing times has very little or no effect on bad outcomes; some of the evidence put up in favour of there being substantial benefits from early closing times also has some ...issues. But I've not been blogging about it because it seems unwise to put up all my findings here when the Police lawyer's been trawling the blog for ad hominem attacks; putting up all the bits of analysis while the hearings haven't yet finished seems ill-advised. I don't think the overall body of evidence is consistent with strong reliable benefits from reduced closing times: there's way too many findings of no effect. I'll post on it when it's all done, but with disclosure that it was part of that expert witness work. I tweeted from the hearings but haven't posted on them. I'd also provided a bit of advice to Independent Liquor on evidence around RTDs.
• I might pick up other side consultancy work from time to time where time constraints permit and where a project looks fun, but if I blog on that topic, I'll note that I've done funded work on it. 
• I think that's it. Other minor bits and pieces like getting a bottle of wine as honorarium for giving a talk here and there aren't really worth going through.
• Oh, I now work for the New Zealand Initiative, a Wellington think-tank whose members are listed on their website. I don't have to clear blog posts here with them or anything like that though. The most you might notice would be that I start bugging you to attend NZI functions here in Wellington, or blogging more on the research coming from NZI as I'll have far more of a hand in it.

I think that's about it. Feel free to hate my views, conclusions, and methods if you like, but know that they're my views, conclusions, and methods.

I likely need to get around to reading Hager's book. I'm curious whether we'll get an iPredict contract on whether Collins survives to the election. The covariance between that stock and PM.National would be interesting, as would some Granger causality tests.

More refugees?

It looks like New Zealand won't be taking any more refugees despite the ongoing messes in Iraq and Syria.

"We want from the New Zealand government to accept refugees from Syria and Iraq, especially who have relatives here," says Assyrian community spokesman Khaled Tomas.

But Prime Minister John Key won't budge on New Zealand's annual refugee quota of 750, even though reports in Australia say the Abbott government is considering taking 4000 Syrian and Iraqi Christians.

"I think we took a group of 150 Syrian refugees as part of our UNHCR quota, and we're always looking to see on a humanitarian basis what we could do," says Mr Key.

It's little comfort for Kiwi Assyrians desperately trying to protect their loved ones and one of the oldest Christian communities in the world.

"We had churches in Mosul for 1800 years, and they're all destroyed," says Iraqi priest Father Kanon Toma.

Now the terrified Christians and Yazidis are prepared to leave their ancient cultures behind and start again.

The community in New Zealand has only one wish – for them to have a better life.

I'm not sure what's underlying Key's decision. Maybe it's the case that none of the refugees from there can get to any airport or seaport that could convey them to New Zealand anyway. Maybe NZ has no capacity to sort refugees from ISIS fighters who might wish to come visit.

But if it's just worries about the potential cost of accepting refugees, well, there is perhaps a solution to that. Get a number on the marginal cost to the government of providing assistance to a refugee for the refugee's first couple of years. Set up a PledgeMe drive so those who'd be happy to help support bringing people over can do so. If the cost of an additional refugee is x, and the drive raises 50x, let in 50 more refugees.

The Greens' tax and child poverty policy

I spoke briefly on Morning Report this morning on the topic of the Green's proposed policy to increase the income-tax rate to 40% for incomes over $140,000 and use the revenue raised to fight child poverty. Our brief pre-recorded interview covered a number of different aspects of the policy, of which they used my comment on the income-tax hike. The main points I made were as follows:

• On the expenditure side, it is a laudable goal to seek to reduce child policy, but I have a couple of concerns with the proposed mechanisms for achieving this:
• I would like to see more details on how replacing the In-Work Tax Credit with a general tax credit that doesn't require 20+ hours worked each week would affect the incentives to work. I take Susan St John's point (from the same Morning Report piece linked to above) that it is unfair to separate children in poor families into the deserving and undeserving poor based on the employment status of their parents, but the potential unintended consequences of creating new poverty traps needs to be acknowledged. 
• I wonder about the evidence base to backup the suggestion that problems with child poverty eliminated by providing parents with more income support. More income may well be a necessary condition, but I am mindful that we live in a country with a shockingly low immunisation rate for children from impoverished backgrounds even though immunisation is free. 
• To be fair, there are other aspects to the proposed policy than increased benefits (or reduced taxes) to poor families with children, and these may well be worthwhile, and I am not sure that the proposed income supplements wouldn't be effective; I just feel that this is a hugely difficult area that is not well understood. I would feel a lot more confident in these proposals if the proposal were to experiment with a few different things and to collect good data on effectiveness before committing a massive expenditure that will be hard to reverse if the policies turn out to be ineffective or counter-productive. 
• It is on the revenue side that I can't take the policy seriously at all:
• By all means seek to raise revenue by cracking down on tax avoidance, but this is a bit like trying to save money by eliminating inefficiency in the public service. In reality the revenue gains are probably small; realistic budgeting should assume gains of zero until the revenue actually materialises. After all, one of the reasons that it is possible for people to structure their affairs to avoid paying tax is that the tax system has complexities that have been put in place to achieve specific objectives; removing the complexities also implies abandoning those objectives. 
• But this is just a detail. The kicker for me is the proposal to increase the tax rate to 40%, only for incomes above $140,000. This smacks heavily of offering the other kid's bat--that is, asking people to feel good about alleviating child poverty without asking them to make any sacrifice themselves. Seriously, there is very little income earned above $140,000. Why not start the income threshold for the top rate at a much lower income level. That way, you would raise more revenue from the very rich (they pay tax on their first $140,000 of income, not just the incomes above that level), and you would be asking the comfortable middle class to contribute to the laudable goal of reducing child poverty as well. A politics that boasts that only 3% of tax payers will see their tax bill rise is a politics that assumes the average New Zealander doesn't care at all (other than rhetorically) about child poverty. Greens' co-leader, Metiria Turei was asked about this in a different segment of Morning Report this morning, but she evaded the question. 

Note: Matt at TVHE has posted on this policy as well and makes many of the same points and some others. In particular, his final bullet is spot on. 

A nice send-off

Philip Matthews at The Press gave me a nice send-off in the weekend Mainlander section.

On the first day of his last week in Christchurch, economist Eric Crampton perches on a stool at Black Betty cafe, orders two espressos and passes one over to his interviewer. Then he starts to explain why he is leaving.

Is it the push of Christchurch or the pull of Wellington? Crampton arrived here in November 2003 to take up a position at the University of Canterbury. Nearly 11 years later, he and his young family are leaving.

It is not the weather. As a Canadian, he thinks Christchurch has "the world's perfect climate".

On Monday he starts as the head of research at the New Zealand Initiative think tank, which evolved out of two earlier free-market groups, the Business Roundtable and the New Zealand Institute. He has put in an offer on a house in Khandallah. His only just repaired home in South Brighton is ready to go on the market.

He will lead a research team of five. His presence will allow executive director Oliver Hartwich to get out of the office, lift the initiative's low profile and raise funds.

Hartwich must also shake off some history. The Business Roundtable was a vehicle for Roger Kerr but it was limited by an adherence to 1980s free-market reforms and close links with the ACT party.

Crampton has not seen any party affiliation at the New Zealand Initiative.

"They're trying damn hard to not have any," he says. "They're trying to go where the data takes them and I will be keeping a hard line on that."

As examples of evenhandedness, he says that both Deputy Prime Minister Bill English and Labour leader David Cunliffe have been invited to speak. And when Crampton was a guest speaker at last year's ACT conference at wealthy backer Alan Gibbs' farm?

"I gave them heck for not focusing enough on civil liberties. I talked about the mess in the Christchurch rebuild. How moving away from the state-directed planning that ACT supported could have been useful."

I think I'd there said "that the ACT-supported government supported"; I don't think that ACT was pushing the command-and-control route. It still would have been nice to have had somebody in there fighting the Brownlee faction a bit more vocally.

Christchurch couldn't have picked better weekend send-off weather. And now to work, and to nail down the house so that the family can move up. Anybody want to buy a gorgeous character 1930s weatherboard 4 bedroom (3 double, 1 single), 2 bath place in South Brighton with a solar-heated pool?

Gluten-free, but don't tell anybody

While most of the anti-gluten seems badly overhyped, there are some people for whom gluten poses substantial dietary risk. They need to know if a product has gluten in it. And producers of gluten-free products are generally pretty happy to let potential customers know about it.

Except when the government makes it illegal to tell customers about it.

When I read this, I'm less convinced that New Zealand is outside of the asylum. Here's Scott Anderson on labelling problems at Kereru Brewing.

My friend is gluten-intolerant, and the discomfort the gluten in wheat and barley bring is one of the reasons beer doesn’t feature in her preferred drinks. But she’d heard of the Auro. “I’ve heard it’s the best gluten-free beer around!” she said.

“That’s great to hear,” replied Chris, “you should get some while you can. Because this batch will be the last. Won’t be allowed to sell it soon. Or at least call it ‘gluten-free’.”

Chris explained that the Ministry of Primary Industries (MPI) has recently released new guidance for what can and can’t be used to promote or label beverages containing more 1.15% alcohol by volume, and “gluten-free” is now prohibited.

Later, I checked out MPI’s Guidance for Alcoholic Beverage Claims and Statements, published 6 May 2014, and confirmed that from 18 January 2016:

“…nutrition content claims or health claims must not be made for food containing more than 1.15% Alcohol By Volume (ABV). The exception to this is a nutrition content claim about energy content or carbohydrate content.”

Meaning, from that date, no product labelled or described by the retailer / brewer with such claims can be sold in New Zealand.

A “nutrition content claim” is defined by MPI as:

“…a claim that is made about the presence or absence of a biologically active substance, dietary fibre, energy, minerals, potassium, protein, carbohydrate, fat, salt, sodium or vitamins; glycaemic index or glycaemic load that does not refer to the presence of alcohol and is not a health claim. “Gluten free” is captured under the definition of nutrition content claim.”

It’s interesting to see “gluten free” pulled out for emphasis there by MPI there and in other passages of the Guidance; clearly this has been published to directly inform brewers that they can’t put such a statement on their beers. Because if you’re going to be really pedantic about the above statement, perhaps mentioning a particular strain of yeast might be mentioning the presence of a “biologically active substance”.

And to think, just a couple days ago, I was making fun of America for its beer label dictator.

These regs don't come in until 2016 so there should still be time to fix this. It sounds like gluten is in the unhappy spot of being something not quite serious-enough to be an allergen but probably more important than a "health claim". Were it an allergen, then everybody would be required to put on labels saying "May contain gluten". If it's not an allergen, then nobody's allowed to advertise "gluten-free", because it's bad to associate healthiness with beer, even if moderate drinking is healthy.

If that doesn't work, perhaps SOBA could produce a list of Gluten Free beers, and whatever organisation exists for the no-gluten people could link to it.