Friday, 13 October 2017

A Wellington City Deal?

Newsroom's Shane Cowlishaw reported yesterday that Wellington City has been talking with central government about either a variant on the Manchester city accord, or a Special Economic Zone.

What would be in the deal isn't known - the OIA did not provide many details. It noted that Wellington would like a city deal following the UK examples, or a Special Economic Zone to allow different regulatory settings for Wellington, and a revenue-sharing mechanism for the upside gains of any such arrangement. As for the other details, it only noted the potential for a beefed up Urban Development Authority. I'm a skeptic on those as UDAs with expansive powers of compulsory acquisition are dangerous things.

But the rest is interesting; we at the Initiative were happy to see Councils taking this up. Khyaati and I suggested SEZs as a way of achieving devolution and policy trials within the context of a unitary state with Councils of vastly differing capabilities and competence. Our report on localism noted the Manchester model as another way of achieving the same thing.

I talked a bit on the radio yesterday about the proposal. I hope the incoming government is able to progress things with Wellington Council.

Thursday, 12 October 2017

Junk science

It is difficult to see what good purpose was served by this study.

The Otago people (in conjunction with Auckland's public health group) put cameras on kids that would take snapshots every six seconds. Then they poured through the footage to see how often the cameras, and presumably the kids, saw things that Otago people have long wanted to have restricted, like ads for food they don't like or alcohol. They counted the number of times things were seen. And then published the numbers in (at least) two separate studies expressing horror at the number and calling for bans on the things that they counted.

Is there any number that would have been low enough? Almost certainly not.

Is there any context for the number that might assist in anyone telling whether a number is low or high? Heck no. The news story on it talks about kids being bombarded with 27 junk food ads per day. Would there be fewer than 27 ads for candy in any 80s kid's daily bundle of comic books? I'm not the only one who remembers being bombarded with ads for Life Savers, am I?

The news story also says they got $800,000 to do the study.

They also counted the number of times the cameras saw alcohol related stuff and used the number, I kid you not, to call for a ban on alcohol sales at supermarkets.

The abstract of their paper is almost parody. Here it is.
Background and aim

Exposure to alcohol marketing within alcohol retailers has been associated with higher rates of childhood drinking, brand recognition, and marketing recall. This study aimed to objectively measure children's everyday exposure to alcohol marketing within supermarkets.

Method

Children aged 11–13 (n = 167) each wore a wearable camera and GPS device for four consecutive days. Micro-spatial analyses were used to examine exposures within supermarkets.

Results

In alcohol retailing supermarkets (n = 30), children encountered alcohol marketing on 85% of their visits (n = 78). Alcohol marketing was frequently near everyday goods (bread and milk) or entrance/exit.

Conclusion

Alcohol sales in supermarkets should be banned in order to protect children from alcohol marketing.
I wonder what number would have had them saying "Ok, maybe we don't need to call for a ban." Would it be more than zero? Was there any point to the study? I don't think the 1989 legislation that allowed sales in supermarkets said anything like "Oh, and we totally expect that parents will cover their kids' eyes as they go past the wine aisle, so it's ok, but if anybody ever shows that kids might actually see what's down the aisle, then we totally need to re-think this."

Some context that didn't make it into any of the press reporting:

  • The proportion of kids aged 15-17 who consumed alcohol in the past year dropped from 74.5% to 57.1% from 2006/7 to 2014/15.
  • Binge drinking more than halved over the same period, dropping from 25% to 10.7% of kids aged 15-17.
  • The number of hazardous drinkers among those aged 15-17 dropped from 19.5% to 10.8% from 2006/7 to 2014/15.

I don't know if this is the stupidest study in the world. Otago also had that one where they recruited 13 people, mostly from Facebook, interviewed them about their smoking, then called for a ban on smoking outside of bars on the basis of those conversations.

What would be sufficient basis for a call to ban alcohol sales at supermarkets? Strong evidence that the substantial inconvenience cost imposed on shoppers would be outweighed by reductions in external harm imposed by drinkers as result of the ban.

Being able to pick up a bottle of wine or beer with your normal shopping trip is a good thing that should count for more than nothing. It's a nice part of the Outside of the Asylum.

Wednesday, 11 October 2017

Restrictions on foreign investment - some context

Winston Peters is pushing for more controls on inbound foreign direct investment as part of his coalition negotiations with Labour and with National. Fran O'Sullivan's piece in the Herald suggested that New Zealand's regime is pretty laissez-faire.

Really?

Here's the latest OECD figures. They tally the restrictiveness of rules around foreign direct investment. New Zealand is the most restrictive country in the entire OECD. It is the seventh most restrictive country of the 62 countries they surveyed.

Here's what you get if you plot countries from most restrictive on the left to least restrictive on the right.


The Philippines is the world's most restrictive country, closely followed by Saudi Arabia and Myanmar. Then come China and Indonesia. Jordan is a bit more restrictive than New Zealand, but only barely. Then come India, Malaysia, Tunisia and Mexico, followed by Laos. 

If New Zealand is laissez faire on FDI, I guess Japan's a bunch of anarcho-capitalists and Luxembourg... we don't have a word for whatever that is. 

Tuesday, 10 October 2017

The Natural

Twitter is wonderful for pointing you to things you should have known, but had missed. 

I'd missed (then) Don McCloskey (now Deirdre)'s 1992 piece in the Eastern: The Natural.
Richard Bower is an economist right down to his wing tip shoes. He knows Sophocles and Shakespeare all right, but (there it is again) he believes in economics. not all economists do, of course. Bower does, as I do, and as perhaps fifteen percent of the profession does. Give the Bowers or the McCloskeys any social situation, from insider trading to an obstreperous teenage child, and they look to economics for an answer, or at least for a good running start.

People who "believe in economics" tend to agree on who the best economists are. They admire economists like Armen Alchian, Ronald Coase, Gary Becker, Gordon Tullock, Leland Yeager, economists often as not unknown to the unbelieving mainstream of the profession.

...

So Bower and I agree on economics. Our agreement makes our one disagreement about teaching it puzzling. Bower thinks that we can teach economics to undergraduates. I disagree. I have concluded reluctantly, after ruminating on it for a long time, that we can't.
Read the whole thing if you, like me, had missed it. McCloskey concludes that Bower overestimates the ability to teach economics to undergrads because he is a natural economist, who comes by the way of thinking easily, while McCloskey took a long time to learn it - and good teaching materials are hard to come by.

But teaching materials for thinking like an economist have gotten better since '92. Harold Winter's texts are excellent. So are Tim Harford's. And all of Marginal Revolution University. And blogs.

Monday, 9 October 2017

Poverty policy's terrible tradeoffs.

Susan Edmonds canvasses the state of play around poverty, along with a few bits from me on the subject. It's a good piece.

Basically, policy is a pile of terrible trade-offs.

Cash assistance makes recipients better off. But providing it requires choosing among a few poisons.

Focusing assistance on those in most need through tight eligibility requirements makes sure that aid goes to those in most need - but at the cost of demeaning questions and testing and constantly justifying yourself to WINZ.

Targeting cash assistance to those in most need means clawing back cash benefits as someone is able to earn income, and that provides disincentives to work. And it provides incentive to feign eligibility. Worry less about the lying aspect and more about how it can split up families. And targeting also requires clawing back benefits as earned income increases, which provides disincentive to work.

Shifting instead to a guaranteed annual income gets rid of the demeaning questions, if you provide it at a level high enough to avoid having to layer on a welfare system on top. But providing that much assistance blows out the budget very quickly. Treasury's 2010 analysis reckoned that a GAI paying about the average amount received by someone on benefit would require a flat income tax of about 50% to cover the costs - and remember that that will be less than what's received by those currently worst off. So you'd still need to layer a welfare system on top of that.

Kevin Milligan's impossibility still holds. You can't pay a universal benefit high enough to not leave the worst off worse off without either having a very high phase-out rate (and consequent very high EMTRs), or blowing out the budget. And layering a welfare system on top of a GAI brings back all the problems above, albeit hopefully among a smaller cohort.

And you can't pretend that trade-off doesn't exist by appealing to other taxes that aren't currently in place. Why? Because if those taxes made sense, then they make sense regardless of whether you want to run a UBI. You'd then want to put them in on a revenue-neutral basis, replacing other taxes, first. If the new tax is really more efficient, then the deadweight costs of tax are a bit lower than before so the overall size of government can go up a bit in equilibrium. But whether that next extra lump of spending should go to a UBI or to other spending - you're back in the trade-offs world. You can't just magic up a new tax and pretend the best use for it is your pet project - some other proposal might be a better use of the funds. 

Shifting from cash transfers to in-kind benefits for some kinds of in-kind benefits solves part of one of those problems. If there are benefits that are valuable to someone in need, but useless to others, then you don't have to worry about people lying to get access to that benefit. Cash benefits require monitoring systems and intrusive questions to avoid diffusing the benefits beyond where they're most needed. Some in-kind benefits are self-targeting. So things like literacy programmes for example - people who are literate won't try to get access to them, and you might have reason to expect that improving literacy might help reduce need.

Cash should always be the baseline against which other things are measured. If an in-kind benefit is less valuable to the recipient than cash is, that's a pretty big strike against it. But say that every dollar's worth of spending on an in-kind benefit is valued at $0.95 by the recipient, but providing a $1 cash transfer would require paying out and extra $0.10 in monitoring costs and in leakage to those who weren't really eligible - then some in-kind benefits can wind up being better overall.

So everything above is terrible trade-offs. The most promising option remains what they government's been trying under the investment approach - better evaluation of what programmes can cost-effectively move people from benefit and poverty into self-sufficiency, where possible, and otherwise seeing what's most cost-effective in reducing misery. But there are still piles of problems there too - like difficulty in writing outcome-based contracts for NGOs delivering services; defining outcomes; and, need for monitoring to ensure that reductions in the government's long-term fiscal liability is a good proxy for what the government is trying to achieve. But it still looks the most promising.

Saturday, 7 October 2017

The Battle of Athens

I hadn't heard of this one before. After the Second World War, a bunch of returning veterans used force of arms in Athens, Tennessee, to break a corrupt party machine that was controlling the elections and local government.

The local police were using predatory ticketing to fund the local party machine; it reads a lot like current U.S. asset forfeiture practice.
A state law enacted in 1941 reduced local political opposition to Crump's officials by reducing the number of voting precincts from 23 to 12 and reducing the number of justices of the peace from fourteen to seven (including four "Cantrell men").[5] The sheriff and his deputies worked under a fee system whereby they received money for every person they booked, incarcerated, and released; the more arrests, the more money they made.[5]Because of this fee system, there was extensive "fee grabbing" from tourists and travelers.[7] Buses passing through the county were often pulled over and the passengers were randomly ticketed for drunkenness, whether guilty or not.[5] Between 1936 and 1946, these fees amounted to almost $300,000.[7]

...

During the war, two service men on leave were shot and killed by Cantrell thugs.[7] The servicemen of McMinn County heard of what was going on and were anxious to get home and do something about it. One veteran said he "thought a lot more about McMinn County than he did about the Japs. If democracy was good enough to put on the Germans and the Japs, it was good enough for McMinn County, too!"[7] The scene was ripe for a confrontation when McMinn County's GIs were demobilized. When they arrived home the deputies targeted the returning GIs, one reported "A lot of boys getting discharged [were] getting the mustering out pay. Well, deputies running around four or five at a time grapping up every GI they could find and trying to get that money off of them, they were fee grabbers, they wasn't on a salary back then."[10]
The Battle centers around the jail where the Sheriff has retreated, with the ballot boxes, and a pile of hired-in armed men, to rig the vote counting.

Polls Closing

As the polls closed, and counting began (sans the three boxes taken to the jail), the GI-backed candidates had a 3 to 1 lead.[5][13][20] When the GIs heard the deputies had taken the ballot boxes to the jail, Bill White exclaimed, "Boy, they doing something. I'm glad they done that. Now all we got to do is whip on the jail."[19]
The GIs recognized that they had broken the law, and that Cantrell would likely receive reinforcements in the morning, so the GIs felt the need to resolve the situation quickly.[21] The deputies knew little of military tactics, but the GIs knew them well. By taking up the second floor of a bank across the street from the jail, the GIs were able to reciprocate any shots from the jail with a barrage from above.[21]
By 9:00 PM, Paul Cantrell, Pat Mansfield, George Woods (Speaker of the State House of Representatives and Secretary of the McMinn County Election Commission), and about 50 deputies were in the jail, allegedly rummaging through the ballot boxes. Wood and Mansfield constituted a majority of the election commission and could therefore certify and validate the count from within the jail.[21]

The Battle Begins

Estimates of the number of veterans besieging the jail vary from several hundred[20] to as high as 2,000.[15] Bill White had at least 60 under his command. White split his group with Buck Landers taking up position at the bank overlooking the jail while White took the rest by the Post Office.[19]
Just as the estimates of people involved vary widely, accounts of how the Battle of Athens began and its actual course disagree.
Edgerton and Williams recall that when the men reached the jail, it was barricaded and manned by 55 deputies. The veterans demanded the ballot boxes but were refused. They then opened fire on the jail, initiating a battle that lasted several hours by some accounts,[15][20] considerably less by others.[22]
As Lones Selber, author of the 1985 American Heritage magazine article wrote: "Opinion differs on exactly how the challenge was issued." White says he was the one to call it out: "Would you damn bastards bring those damn ballot boxes out here or we are going to set siege against the jail and blow it down!" Moments later the night exploded in automatic weapons fire punctuated by shotgun blasts. "I fired the first shot," White claimed, "then everybody started shooting from our side." A deputy ran for the jail. "I shot him; he wheeled and fell inside of the jail."[5]
Read the whole thing, including the aftermath.

Friday, 6 October 2017

Business school structure and performance

Please answer this short survey if you are familiar with academic economics departments. I had a previous version of this up earlier, but have fixed a couple of errors in it - apologies to the three people who answered the prior version. This one more accurately reflects what I need to know about. More context to come.

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