Government make-work

One way America can work to solve its unemployment crisis: Hire one group to hand out free condoms for sex workers; hire another to consider those condoms as evidence that the bearer is a prostitute, arrest the bearer, and confiscate the condoms. It's win-win. Jobs for public health workers, police, judges, lawyers, condom-makers, the prison-industrial complex; hard to see any fault with it, really.

With the prostitution-free zones, prostitution is understood to be a crime of intent. No one is actually arrested in the act of having or agreeing to have sex for compensation; only for appearing as if they might do so. In the same vein, arresting officers in DC and throughout the US routinely search people suspected of prostitution for condoms, confiscating them as evidence of a crime. For some cops, condoms serve the function that marijuana does in a stop-and-frisk encounter (only there's no actual law against possessing or using condoms), unless a cop thinks you might be a sex worker or otherwise wants to move you along and into custody. 

Sex workers and health and human rights advocates have pointed out that it makes absolutely no sense for publicly funded police departments to confiscate condoms that publicly funded health departments make so widely available.

Washington DC confiscates condoms from sex workers; LA tries to make them mandatory for actors in pornographic videos (previous critique). I'd thought that optimal policy was "Condoms for some, miniature American flags for others!" Or combine the two (markets in everything, egads).

HT: @dr_alexpadilla

$139,000?

Ah, the lazy summer season, when lobby groups can sneak pretty much any kind of rubbish into Radio New Zealand's Inbox and have it be treated as news. Here's the latest:

Cigarettes rose in price on 1 January, for the third time in 21 months.

The price of a packet of 20 cigarettes is now about $14 and a pouch of loose tobacco is about $31.

The Quit Group estimates each smoker costs the economy $139,000 per year in health and other costs.

Chief executive Paula Snowden says the group returns $38 to the economy for every $1 it is funded, but has had no increase since 2007.

She expects the price increase to save the economy up to $73 million.

Let's start with what's right about the piece. I have no reason to believe that they've lied about the price of a packet of cigarettes. The rest isn't so good.

Recall that GDP per capita in New Zealand is somewhere around $45,000*. So Snowden is claiming that a smoker costs "the economy" three times per capita GDP. And recall that median income is less than per capita GDP, which also includes payments to capital. Snowden's number is three times that. It's utterly implausible.

Next, she expects the price increase to save the economy up to $73 million. If flipping a smoker from smoking to non-smoking saves those costs, then she's expecting about 525 people to quit. If only a fifth of costs are avoidable and the rest are sunk, the price increase results in around 2600 people quitting smoking. But the last survey numbers I'd seen have about 22% of the population aged 16-65 smoking. Again, see asterisk below, but there are about 4.5 million people in the country. Let's be conservative and say 300,000 smokers; 2,600 quit. This is all ballpark, but it suggests maybe one percent of smokers are expected to quit with the price hike. And, that's with me granting the $73 million. I'd really need to see the workings to figure out what they're doing here.

Finally, let's aggregate up for a final plausibility check. Say there are 300,000 smokers in the country. If they each cost $139k, that's about $41 billion that Paula Snowden claims smokers are costing the country. And even the ridiculously high Collins & Lapsley numbers have smoking costing all of Australia only $32 billion. And there are just a few more people in Australia than in New Zealand.

Every decent journalist should have a few of these numbers just rattling around in the back of his head to give numbers like Snowden's a rough plausibility check. It's not plausible that a smoker costs the country three times per capita GDP. That's the first bit of stink. If the implied participation elasticities are as suggested by a quick ballparking, then we'd wonder about the costs imposed on poor people who continue to smoke even if everything else is right. That's the second bit of stink that should have been queried.

But the biggest howler is that Snowden claims a 38:1 benefit to cost ratio for her organization's work.

When did they stop teaching scepticism in journalism school? Radio NZ, you've been pwned by The Quit Group. You can do better.

*Please note that I'm working off memory for a lot of these figures. No Internet at the guest house in Nelson where we've been avoiding earthquakes for the last week, so I'm burning through Vodafone Pay-As-You-Go data. Back in quakeland tomorrow.

Previously: Bogus MoH figures on smoking costs.

Update: Sarah Woods of The Quit Group advises that the $139,000 figure is the present discounted value of costs, with the estimate based on Des O'Dea's prior figure (which included a raft of costs borne by smokers that don't really count as costs to "the economy") and with ROI calculations undertaken by BERL. I'll have a look through their report. But Radio NZ has inflated The Quit Group's figure by an order of magnitude by transforming a present discounted value figure into an annual cost figure. At an 8% discount rate, the PDV of $139k is about $1.7 million. And let's remember exactly what the O'Dea report concluded about the costs smokers impose on "the economy":

Leaving aside these difficulties, it is certainly reasonable to assume that most of the additional health-care costs caused by smoking are borne by non-smokers through additional taxes (smokers do pay some share of these taxes). Also it is reasonable to assume that most of the 'lost  production' costs of premature mortality and increased morbidity are borne by smokers and their households (though there is some loss of profits also, and of tax revenue to government). A considerable amount of work would, however, be needed to get precision on these matters.

Without trying to calculate a precise estimate of 'external costs' it does seem reasonably apparent that the tax contribution of approximately $1 billion annually by smokers exceeds substantially the external costs of smoking which fall on non-smokers. If savings on pension costs from premature mortality of smokers were added as well the net fiscal contribution of smokers, to the fiscal gain of non-smokers, would be further increased. [emphasis added]

GST and the price of meth

New Zealand's drug warriors laud their successes in the war on meth. Evidence of success? The price of a  gram of P is up from $723 last year to $768 this year.

Year on year CPI increase in the September quarter is 4.6%. But a big chunk of that is the GST increase.

If meth had followed the CPI, the price of a gram would have increased to $756, not $768, so maybe enforcement action pushed the price up a bit (although we ought to be pretty sceptical) . But the more interesting question is whether we should have expected price inflation in illegal markets to incorporate the GST increase.

Obviously, drug dealers don't charge GST on meth. But they do pay GST on a pile of their inputs where those inputs are bought in legal markets. And, they don't get to claim that GST back on quarterly returns either. So they'll have had a GST-related increase in their production costs. Since a smaller proportion of their inputs will be GST-affected, the CPI index for illegal sector goods should be lower than for other goods if we don't net out GST effects from either. So the real price increase is likely a bit bigger than a straight CPI-adjustment would have it.

It's worth noting the large disconnect between Key's rhetoric in the press release and the actual report's findings. Here's Key:

The fourth Indicators and Progress report for the Government's Tackling Methamphetamine Action Plan shows government agencies' work is continuing to contain the growth of methamphetamine ('P') supply networks, Prime Minister John Key announced today.

"This initiative has been in place for two-and-a-half years, and we can see that efforts to crack down on those who are importing, manufacturing and selling P and its precursors are working," says Mr Key.

"Six months ago, there were signs that supply chains were being disrupted, due to the efforts both at the border and domestically. We're now able to see that the dedicated resources on the frontline are continuing to squeeze the P trade."

..."The coordinated action against P by a number of government agencies is producing results," says Mr Key. "This report shows that, over time, the work to contain the methamphetamine trade is achieving the right results. All indicators suggest 'containment' and this should be seen as success.

"Any softening in our hard-line stance against P could undo several years of good work. Those who profit from the misery caused by P should realise we are committed to stamping out the harm this drug is causing New Zealand communities."

Here's the report (prior reports). Relevant findings:

• Purity is down a bit, decline "close to being statistically significant".
• What about availability?

  NZ-ADUM data shows a similar trend as IDMS, in that availability has remained stable/easier over the past two years. (p. 10)

  And, 60% of frequent users report no change in difficulty of getting P; rest split evenly between "easier" and "more difficult". (p. 14)
• Convictions for possession/use up from 1327 in October 2010 data to 1557 in October 2011 data; convictions for supply and dealing more than doubled. But still availability has either not changed or has increased.
• Customs is seizing less pseudoephedrine at the border and is instead seizing more P.
• But, the price of a "set" of ContacNT (pseudoephedrine precursor) hasn't changed since September 2009 (p. 13). Recall that the government only announced plans to make pseudoephedrine prescription-only in October 2009. So despite that none of us can get anything that works for a runny nose, the black market price of pseudoephedrine is unchanged. John Key and Peter Dunne have screwed over every New Zealander with a cold for absolutely no benefit.

Keep digging up, guys. You'll get out of that hole someday.

Dairy population

Canada has roughly thirty million people and about a million dairy cattle [update: 1.4m including replacement heifers]. Its dairy markets are completely controlled by the government through supply management which works to make poor people pay too much for milk and inflate the capital value of dairy quota owned by relatively wealthy dairy farmers.

New Zealand has roughly four million people and about six million dairy cattle. It has the world's most free dairy markets and relatively rich dairy farmers; rents capitalize not via quota but rather via the relatively small proportion of land suitable for irrigated pastoral systems (most of the country isn't green pastures; rather, it's mostly mountains and dry steppes).

But isn't supply management wonderful?

And let's bat down a few defences I've heard of supply management.

First: without it, Canada wouldn't have a dairy sector any more; they'd just be swamped by American dairy imports because shipping costs are so low from the States. Interesting. Note that it's as cheap to ship milk powder from the US to New Zealand as vice versa. We have 1.5 cows per capita and ship large volumes of milk to the US every year. And NOTHING stops the Americans from selling us milk other than the basic economics of our being better at it. Our free markets have not resulted in our being swamped by foreign milk. Not that I'd particularly complain if that were the result; I don't mind that we export milk and import cars rather than the other way round, but either one's fine by me. Keith Ng's post of a few years back was great fun on this point.

Second: without it, Canada would be swamped by GE-modified, chemical-additive-ridden milk. Free markets would only supply adulterated awful product. This is utterly insane. Complete madness. First, it isn't the case here in NZ. Second, it only would happen to the extent that consumers value a price reduction over a quality reduction. Third, even if most consumers want lower quality product at lower price, the granola folks can still pay extra to get higher quality product. On the grocery shelves here, I can pay a bit more to get certified organic whole milk; I also can get raw milk, but not from the supermarket. I don't attach pejorative weight to granola here: I often get raw milk and buy the organic milk when the supermarket's out of whole (silver-top) milk. Free markets generally mean product diversification and market segmentation, not homogenization. The most reasonable, but still repugnant, form of this argument would be that the current system lets granola people satisfy their preferences at the expense of poor people who'd prefer cheaper product; economies of scale get granola folks product a bit cheaper than they otherwise would if everyone's forced into buying the no-hormones version. Why not ban cheap cars on similar argument?

Third: without it, Canadian farmers would be beaten down by some kind of big multinational to which they'd be forced to sell their milk. Again, this is utterly insane. First, here in NZ, Fonterra is a cooperative owned by its farmer-members and has the vast majority of dairy production. Nothing stops Canadian farmers from setting up their own cooperatives. Co-ops have a long history in Canada; my grandfather was on the board of one for decades. Second, nothing would stop any dairy farmer who has a tiny bit of nous from branding himself and taking his own product to market. Third, dairy companies have to compete with each other for milk.

I really don't get the status quo bias among otherwise sane Canadians about dairy. I've heard these arguments from reasonable people whose rationality flies out the window when thinking about cows.

Do hit the dairy and "transitional gains trap" tabs below for prior posts in the series...

Election gags and efficient markets

New Zealand's election stock market has to suspend trading from midnight Saturday 'till polls close that evening. Why? The election gag law:

Between 12am and 7pm on Election Day, trading on all NZ political contracts will be suspended. This is to comply with s197 of the Electoral Act, which very roughly says that it is illegal for people to speak to each other on Election Day, and following advice from the Electoral Commission. Between those times:

• Trading on all contracts under Election 2011 and Politics NZ will be suspended. It being perfectly legal to influence voters with not-quite current data, visitors to the site will be able to view the contracts but not trade them. Trading on contracts in other categories will continue.
• The commenting on the forum will also be disabled in this period.
• A banner will alert visitors to the fact that they are looking at data that is not current.

... Contracts not listed in NZ Politics and Elections 2011 will generally remain open, although we reserve the right to suspend trading on contracts in other categories which we discover pose a threat to democracy.

Any pre-suspension price manipulation will be backed out and traders responsible may find their iPredict accounts suspended until after Official Results Declared on 10 December.

Read that last paragraph again. Recall that manipulators typically increase market efficiency by providing liquidity and subsidizing other traders. But that doesn't work where the Electoral Commission bans trading at 12:00 Friday night. And so Matt's going to have to be up late figuring out which trades are attempts at jerking the prices around and then unwinding them rather than letting the distributed set of traders do it for him. The Electoral Commissioner's rule makes it more rather than less likely that somebody tries to use iPredict prices to affect folks' voting intentions.

I'm totally swamped. But here's a mission for somebody. Get the price series on some of the electoral contracts at iPredict. Run some correlations with NZX stocks that will continue trading on Saturday and whose price movements are likely correlated with election outcomes - try Contact, Chorus, Fletcher Building for starters. Ag stocks will also take a hit of Labour/Green are in as they'd then come under the ETS more quickly. If there's any reasonable correlation between those contracts and changes in the likelihood of a National victory, publish the method and results on Friday, with instructions on how anybody could pull up the Saturday prices and plug them into the algorithm. Then, on Saturday, just post the NZX prices of those contracts without mentioning the election. Ta-dah! You've just created a noisy proxy for the iPredict prices that's easily updated on election day without risking a spanking from the electoral commissioner.*

I wonder whether CentreBet will update prices during the day.

*Don't take legal advice from me; I'm likely wrong.

Treasury on minimum wages [updated]

Patrick Gower says:

Everyone knows it’s got bloody hard to live on the minimum wage - even John Key admits that. His defence is that a rise from $13 to $15 an hour will cost jobs. Key has used this defence in a televised debate, and he's used it to workers on the shop floor at McDonald's as seen in my story last night. But what Key doesn't want to admit, is that this claim is not the full picture and may just be fear-mongering - a rise may not cost jobs at all. That's what Treasury says in this advice from March 2010 obtained by 3 News under the Official Information Act.

Gower should spend less time reading single analysts' emails and more looking at what Treasury's actually said. He's citing a 2010 email released under the Official Information Act (don't the italics make it all seem secret and hidden and stuff?); here's Treasury in 2010 recommending that Key keep the minimum wage at $12.75 instead of raising it to $13. It's in the regulatory impact statement [ht: Greg Dwyer]. What does Treasury give as reason for recommending keeping the minimum wage at $12.75?

The economic recovery is slow and the labour market remains volatile

Overheating in China and commodity prices in Australia may increase vulnerabilities for New Zealand over the next 12 months

Increasing the minimum wage in this environment could create wage pressures (both directly through increased wage costs and indirectly through pressure on wage relativities) for employers who retained their workforce during the recession, and employers who are expanding their workforce as the economy is recovering

The Department of Labour estimates that keeping the minimum wage at $12.75 may lead to an employment gain of between 1360 and 1960 jobs

Treasury further comments:

As a proportion of the median wage, New Zealand’s minimum wage is the second highest in the OECD (in 2008)

The minimum wage has increased significantly since the late 1990s. In real terms by 63% for adults and 128% for 16 and 17 year olds since 1999 (the latter is largely likely to be due to the abolition of the youth minimum wage in 2008)

Let's recap. Gower paints Treasury as supporting a two dollar increase in the minimum wage when in fact they fought against a twenty-five cent increase in 2010.

I weep for journalism in this country. [Part one of Gower nonsense on minimum wages] Update: Here's Treasury in the Cabinet Papers from the 2010 review.

Treasury has some concerns that increasing the minimum wage may constrain employment growth and impose costs on businesses, particularly given the subdued labour market recovery, minimum wage increases over the last decade, and the level of the minimum wage relative to the average wage. There are also fiscal costs associated with an increase in the minimum wage.

While unemployment is decreasing, New Zealand’s labour market has been volatile in recent quarters. Treasury considers that increasing the minimum wage in the current economic environment would create wage pressures for employers (both directly through increased wage costs and indirectly through pressure on wage relativities) who have retained their workforce during the recession, and limit the opportunity of employers to expand their workforce as the labour market recovers.

There is also a risk that increasing the minimum wage could exacerbate New Zealand’s high youth unemployment. The unemployment rate for 15-19 year olds was 23.3 per cent in the September 2010 quarter. (New Zealand’s youth unemployment rate is four times as high as the adult unemployment rate, and the ratio is high compared to other OECD countries). International evidence indicates that increases in the minimum wage leads to employers substituting non-skilled workers (such as youth) for low or semi skilled workers, as non-skilled workers become relatively more expensive. Youth unemployment is of particular concern because it can have long-term consequences in terms of lower income and poor labour market outcomes. Ministers may wish to ask the Department of Labour to carry out more analysis on the impact of the minimum wage on youth unemployment.

New Zealand’s minimum wage has increased substantially in the last decade, increasing in real terms by 36.6 per cent for adults and 128 per cent for 16 and 17 year olds since 1999 (the latter rise is largely due to the abolition of the youth wage in 2008), compared to a 35 per cent increase in the average wage. New Zealand’s minimum wage is also high compared to other OECD countries. In 2008 New Zealand’s minimum wage as a proportion of gross median wages was the second highest in the OECD (see minimum wage review 2010 Regulatory Impact Statement, page 30, figure 4).

Treasury considers that the total fiscal costs are likely to exceed estimates provided in the paper. Other agencies are likely to be impacted by increases in the minimum wage, and bargaining by state sector employees to retain wage relativities could contribute to the fiscal cost of a minimum wage increase. ...

Odds Gower will have any shame and retract his slur on Treasury?

Canadian idiots - power price edition

Seamus notes the ridiculousness of exempting electricity and home heating from GST. But it's worse than he's letting on.

Why?

Canadian electricity is already massively subsidized.

Take Manitoba. The current residential power rate is $0.062/kWh. They can export that power to the States. Here's what Manitoba Hydro has to say:

We export electricity into a wholesale market, where customers are largely other utilities. The electricity is delivered at a very high voltage and the utility is responsible for any additional costs associated with supplying that energy to their own retail customers.

A comparison can be made with rates paid by large industrial customers here in Manitoba who, like our export customers, take delivery of electricity at a high voltage and then are responsible for any internal distribution costs.

Wholesale electricity sold to U.S. customers at fixed rates is currently priced 50 per cent higher than what large industrial customers in Manitoba pay.

If Manitoba Hydro can get an export price that's fifty percent higher than the domestic price, then the prices in Manitoba are massively subsidized. This isn't price discrimination that leaves Manitoba Hydro better off; this is just political constraint stupidity.

In a sane state of the world, Manitoba Hydro would charge the same price in the States as in Canada, return a larger dividend to the government, and the government would give bigger transfers to low income households that would leave them better off than under the (cheap power plus lower transfers) equilibrium.

Why is power policy stuck on stupid?

1. Equalization payments mean that the Federal government would claw back additional hydroelectric generation revenues, so the provincial government couldn't use that money to compensate Manitoba low income households;
2. Voters don't understand the first and second welfare theorems. I blame this guy.

So instead of charging Manitobans more, Manitoba Hydro has to pay Manitobans to get rid of old fridges - to do the kinds of things that prices would have induced them to do if we'd only let prices work.

What are the other costs? Manitoba and Ontario use a lot of hydroelectric power generation. In Manitoba, it's pretty much all hydro. Hydroelectric power generation is far less damaging in carbon accounts than is coal-fire generation. Every kilowatt hour that Manitoba cuts back to send to the States is a kilowatt hour that wouldn't be generated by American coal. That's in addition to the obvious screwups you get when domestic power use is subsidized.

Manitobans all smug about how their power use is clean and green need to remember that every bit of power they use means another bit of power is produced by coal south of the border. Your smugs aren't free. There's No Such Thing As A Free Smug.

Forgive student loans? [updated]

Justin Wolfers lays out the reasons why forgiving student loans is about the stupidest possible stimulus package. My condensed paraphrase:

• It gives money to relatively rich people or those more likely to become relatively rich
• You get awful bang-for-the-buck in giving money where it won't generate spending. 
• It's a lump-sum transfer to those who already have an education so doesn't affect current decisions to invest in human capital except to the extent folks bet on debt forgiveness happening again
• It induces lobbying for such forgiveness in any downturn
• The tradeoff isn't giving free money to people who have debt versus "the corporations"; it's against the next best alternative - giving money to poor people.

Wolfers' final line? "Conclusion: Worst. Idea. Ever. And I bet that the proponents can't find a single economist* to support this idiotic idea."

I hope then that Green MP Gareth Hughes' tweets (1, 2) on the policy proposal don't constitute endorsement. Gareth, you're a smart guy, your work on copyright has been top notch, and you're great on civil liberties. Why keep pushing for utterly absurd economic policies? Why does pro-environment and pro-helping poor people have to be bundled with utterly absurd economics?

Justin Wolfers is hardly a raving free market screw the poor kinda guy. His objective function - what he wants to achieve in the world - is probably very very close to yours, Gareth. There are better and worse ways of achieving economic objectives. Why do the Greens keep going for the sillier ones? [I blame David Suzuki]

As for New Zealand, I haven't recent data on loan take-up by household decile. A 2005 report has the following:

Students coming out of the highest decile schools also go on to carry the biggest student loan debt.

The 2010 report [HT: Greg Dwyer for both] shows those achieving a Bachelors have higher than median earnings a year after study (and even higher earnings three years out), with higher median earnings for the higher level degrees that also correlate with higher debt levels. And, debt repayment through the income tax system depends on income - at zero percent interest on those loans, the real present value of loan balances is lower for poorer people! Forgiving the debt of student loan holders disproportionately gives free money to high-income surgeons. Is that really what the Greens stand for?

Previously:

• Regressive free tuition 
• Obvious points on student loans
• Interest on student loans

* It would be awfully fun to have an iPredict market on which of the usual suspect economists in New Zealand would come out endorsing "Worst. Idea. Ever." I know where I'd put my money and at what prices. 

The stupidity...it burns....

Via @LewStoddart, we find this gem:

From January, vehicles that do not comply with what is known as the Japan 05 standard will not be allowed into the country.

A Ministry of Transport report from July outlines the possible effects that will have on vehicle prices.

They include consumers potentially needing to spend $2000 - $5000 more to buy a newer imported vehicle that meets the standard. Imported Motor Vehicle Industry Association chief executive David Vinsen says cheaper vehicles will not be able to come in and vehicles which do come in will be newer and therefore more expensive.

Greater demand for those newer vehicles will force up the price, he says, and as a consequence the price of vehicles already in the country will go up.

The Ministry says people will not be priced out of the market if they buy privately or at auction, or from a dealer who stocks up with imports prior to January. [emphasis added]

 A few helpful reminders for the Ministry:

• The price of all used cars on the market is affected by the supply of used cars coming in from Japan. This is true so long as, at least for some people, imported used vehicles are a substitute for domestically sourced used vehicles.
• This is true both for vehicles bought privately and at auction.
• This may, but is not necessarily, already being priced into current used car prices. If dealers can import cars more quickly in advance of the ban than used car buyers can deplete current supply, competition among dealers will keep current prices down to the cost of importing used vehicles from Japan; it's unlikely that NZ demand substantially affects the overall market for used Japanese vehicles. But if there are capacity constraints in shipping, prices could be running up. 
• After the ban, even a dealer who has stocked up is likely to increase prices - the replacement cost of each vehicle on the lot has gone up, and we expect dealers to sell at a price that covers the replacement cost of the vehicles on the lot. Just like we don't expect gas stations to wait 'till their underground tanks run empty before changing prices in response to wholesale price movements.
• I have no sense of whether Vinsen's estimate of the price effects are correct. He is undoubtedly correct about the direction of the change. I'm agnostic about magnitude.
• It is "beat you over the head with a stick" stupid to try to reduce net fleet emissions by restricting imports of cars that are, on average, cleaner and newer than the existing fleet. Please consider this post as beating you over the head with a stick. 
• If you care about net fleet emissions, put in emissions testing at the Warrant of Fitness check.

I'm Shocked! Shocked!

The Greens' @GarethMP tweets:

Average age of Kiwi cars now 12.8 years. Means our fleet is less safe, less efficient and more polluting than many other countries

I can't help but wonder whether the aging of the NZ car fleet has anything to do with the clean green regulations put in place by Labour that came into force in 2008 mandating that imported used Japanese cars meet more stringent emissions regulations. Some folks then would have substituted into newer, cleaner used imports, but many many others would have substituted into older already-in-NZ used vehicles. Making imported used cars, on average newer than the NZ fleet, more expensive works to increase the average age of the NZ fleet.

But National wouldn't be daft enough to do anything to make this worse, would they? Oops.

From January 1, Japanese imports will have to conform to the Japan 05 emissions test, which is tougher than the Japan 02 standard. This means most cars manufactured before 2005 will be non-compliant. Richard Bateman, of Richard Bateman Motors, said it would be too costly for many to upgrade their older cars to newer, emissions-compliant vehicles in one go. Most of his customers were buying cars from the early 2000s and in the $10,000 price range, but none would be compliant under the new standards. It was good to get the older cars off the road, but it needed to be more affordable for people. A more gradual upgrade to compliant cars would make it easier for drivers, he said. Vehicles he was purchasing were already 10 to 15 per cent more expensive in the lead-up to the change, but he did not know how much prices would increase next year. "Until we start buying things in the new market, then we'll know [how much prices will increase]. As cars start to run out we're going to see those prices increase." Importers, who say the changes will hurt consumers, have published figures from a submission to Transport Minister Steven Joyce appealing for a delay.

It is just a bit odd to apply emission standards to imported vehicles where no such standards are applied to existing domestic vehicles. People will substitute from relatively cleaner used Japanese imports to the relatively dirtier older used cars that are already here. Sure, some will flip to buying newer used vehicles. But if we're effectively banning cars that are newer than the average car already on our roads, it seems pretty unlikely that the regulation will achieve its desired end.

I love how politicians support woolly feel-good policies and subsequently are shocked and outraged when outcomes don't match their good intentions.

If we care about dirty cars on the roads - which we should - then the appropriate policy is emission testing to accompany the warrant of fitness checks already held every six months. The visible smoke check seems more than a bit lax, at least judging by the number of smelly cars I observe driving around town. Applying stricter standards to imports just keeps the old smelly already-here ones on the road longer.

A number I don't believe

Another plausible BERL estimate:

Given the make-up of the Auckland and Bay of Plenty regional economies, we illustrate the overall impact at a regional economy level of fast broadband from early roll-out and uptake. We estimate the productivity benefits of fast broadband could lift GDP by 7-9 percent above its business-as-usual level by 2025 if early roll-out, adoption and uptake is achieved. 

BERL's report on the benefits of broadband for Auckland is attached to the minutes of an Auckland Council Meeting.

I haven't the time to put into fisking this one. But a few bits of interest:

• They reckon the benefits to primary industry in the Bay of Plenty region is greater: "the estimated total regional benefit of broadband applications to the dairy production industry in the Bay of Plenty region is about $71 million. This is equivalent to about 7 percent of the export value of dairy product in the Bay of Plenty." Dairy can be made more productive by moving from zero internet to half-decent internet. Just imagine the benefits to Fonterra in being able to solve the Salesman problem if they have real-time access to milk volumes in the tanks at all the farms in the area. But I can't see how that's substantially better achieved at 10 mbps than at 500 kpbs.
• They figure the Auckland region's GDP, by 2025, is 1.8 billion dollars higher if broadband rolls out in 2012 instead of 2015. For NZ as a whole, we get a $4.7b boost. That's about a thousand dollars per capita. I can't believe that there's any difference a decade on that's discernible from noise.
• I can't help but suspect that there's rather a lot packed into the last two bits of "if early roll-out, adoption and uptake is achieved."
• They spend a fair bit of time highlighting the economic benefits of future growth in a bunch of industries where broadband hardly seems the binding constraint. Efficiency benefits of Kiwifruit farmers being able to file reports online with Zespri rather than paper forms hardly requires really fast broadband. I'm also not sure that broadband access is a bigger constraint for aquaculture than are regional consenting issues.

If the Auckland and Bay of Plenty Councils believe the results of the study they commissioned, I really hope that they go ahead and make the broadband investment using their own ratepayers' money rather than using the report to pressure Key into providing Auckland with what's mostly a private good.

HT: Henry Ergas, who's done great work debunking similar claims about Australia's national broadband network.

We don't know how lucky we are... (a continuing series)

Kiwis often rightly complain about bad regulations here. But they too often assume that America is better. And so I like occasionally pointing to regulatory insanity in the States.

Item the First, courtesy of Radley Balko:

A few years ago, Kris Swanberg, having been laid-off from her job as a Chicago Public School teacher, remembered she received an ice cream maker as a wedding gift. TheChicago mom fished it out of her kitchen cabinet and eventually started a new career. Today Swanberg’s Nice Cream — on offer at local Whole Foods and farmers markets — is considered a star of Chicago’s rich and beloved artisanal ice cream scene, one that could be shut down entirely by state rules, she recently learned. She says that a couple of weeks ago a representative from the Illinois Department of Public Health came to Logan Square Kitchen and informed her she’d have to shut down if she did not get something called "a dairy license." Swanberg and others in her field had operated for years now without ever hearing of such a thing and, indeed, they say, the City’s Department of Business Affairs and Consumer Protection, to whom they applied for business licenses, never informed them they would need one to operate. To get this license Swanberg wrote, in an email, she would have to:

1. "Work out of our own space. Currently we work out of the Logan Square Kitchen."
2. "Have our product tested once a month for bacterial levels."
3. "Change all of our packaging and labels to meet state standards."
4. "Purchase a pasteurizer, which from what the state tells me will be about $40,000 or use a pre-made ice cream mix."

... Although the state is focusing on Swanberg first, other artisanal ice cream makers in Chicago are concerned they might be next. "I have to be worried. I am in too deep to cut my losses now," said a fellow ice cream maker who asked that her name not be used. "This is my life and passion, so I don’t want to be shut down. "Our biggest thing is wondering whether or not there is a way, considering the organic and local food movement, to change the regulations so that small local producers are not being regulated in the same ways as massive creameries — I mean, this is what they enforce for Haagen Dazs." Indeed, IDPH confirmed that these small operations are governed by the very same rules that apply to billion dollar ice cream companies. And although Illinois recently passed the The Illinois Local Food Entrepreneur and Cottage Food Operation Act, (currently awaiting Gov. Pat Quinn's signature) which suggests that the different sets of rules should govern tiny food operations and giant corporations, the bill does not apply to ice cream. Until she gets her license, Swanberg says she must stop putting product on the shelf. She hopes to meet with her fellow ice cream makers to figure out a plan that can allow them to deliver the same quality while abiding by state rules.

Here, I can buy beer at local farmers' markets that's brewed in a guy's garage and small batch organic yogurt from guys who I really doubt had to get a freaking dairy licence to make it. And where the US sends armed police squads, guns drawn, after folks selling raw milk, here organic raw milk sales are booming (though still under constraint) and (except for the armed offenders squad) our police are unarmed.

Item the Second: US nutritional/calorie regs on chain restaurants may wind up killing consumer choice at Dominos. Because large chains have to post calorie counts for every menu item, and because Dominos allows wide variation in toppings on pies, the number of potential calorie count items gets rather high. Go back to your stats text and read the section on permutations and combinations.

As Klein points out, a lot of the big corporations that the administration targets with these regulations completely miss the mark and end up saddling small business owners like the people who own Domino's franchises. Klein quotes one franchise owner who worked his way up from his job as a pizza delivery boy in the 1980s to owning four Domino's franchises in Maryland. The franchises average about 40k a year in profit. The new menu regulations could cost as much as $4,700 a year to maintain the new menus. "There are so many different things that I have to do right now that are just completely unnecessary that take away from our profits," the franchise owner tells Klein. "When does it end? When does this stuff end? Just give a small business guy a break and let me take care of my customers and take care of my people."

We don't know how lucky we are in this country.

But Peter Thiel does (first couple minutes):



From abroad, America looks increasingly like a boot stomping on a human face.

Wasting Josh Gans's time

Josh Gans left Australia to take up a position at the University of Toronto. And now he gets to deal with Canadian Immigration, who've made him spend four hours proving that he can indeed function in English. Presumably he could have chosen to sit the test in French instead. Despite having more published papers than I care to count, Josh still had to sit through this kind of nonsense:

The first part was a speaking test. This is where a tester sat across from you and carried on the most unlikely conversation for someone you just met. He read a scripted piece which I filled in the other side of the conversation from. It started off standard and friendly enough with some exchange of basic information before he somewhat ominously decided to put a question to me where I would be allowed some “thinking time” before I answered. The question was to describe a job that I believed helped the world and to explain why I thought that. Of course, my first thought was “well, not your job because this is clearly a waste time in some broad sense.” But as I was the only person in our family required to take this test, I had been ordered to be on good behaviour. So I went with scientists and put in a solid discussion of the microfoundations of endogenous growth theory for a minute. I don’t think he was that intrigued because when my minute was up he cut me off mid-word — apparently more desperate to be free of this than I was. He then decided to provoke me by asking whether I thought that “industry destroyed the environment.” I said I thought that by definition all human activity, including industry, destroyed the environment, what of it? We then meandered back into whether technology was making people’s lives more enjoyable (I said, “it is me! I have an iPad”) but before I could get onto the Easterlin Paradox, my time was done.

And it gets better from there; read the whole thing. He concludes:

Anyhow, I cannot recommend against doing this enough. There has got to be a better and quicker way to assess language — maybe some two step procedure. I’m glad it is over — assuming I pass that is. If I don’t pass, it will turn out I am not recognisably proficient in any language!

Take Josh's experience, multiply it across all the thousands of English-speaking immigrants to Canada, multiply it by the value of their time, add in the bureaucracy's cost, subtract the bureau's cost of an alternative triage method: there's a social cost for you!

At least it sets people up with proper expectations of the Canadian bureaucracy. When I was home in Manitoba, a friend was talking about somebody who was trying to get into farmed fish. They'd gotten all the permissions for the fishing operation, but hadn't realised that their meat processing facility, already certified and registered, couldn't be used also for fish without an extensive additional permitting process. Instead of anger at the bureaucracy, folks instead puzzled over why the would-be entrepreneur hadn't made sure from three potentially relevant certification agencies that everything was allowed; the default assumption is that something is forbidden unless permitted in triplicate. That's no way to live. I was reminded of how Ellis Redding, paroled after decades in prison, still couldn't stop asking for permission to use the bathroom.

Meanwhile, here's how Immigration New Zealand solves the English-language problem:

The principal applicant is the person making the application. If you are the principal applicant, you must meet our standards of English. The minimum standard of English is an International English Language Testing Systems (IELTS) certificate, with a band score of 6.5 or better in the General or Academic modules. This certificate must be less than two years old.

However, we may consider one of the following as evidence if you can show us that you:

• have a recognised qualification from a course taught entirely in English,
• have ongoing skilled employment in New Zealand, and have been in the job for at least the last 12 months, or
• have other evidence proof of competency in English. We will consider a number of factors.

When I made my application a few years ago, in the third of the page where it asked for evidence of English competence, I listed a few publications and offered a copy of my dissertation. That was good enough.

Kiwis have no clue how bad things are elsewhere.

And from the Silly Party...

A leading researcher on the harm caused by alcohol says the role social networking sites have in promoting a drinking culture to young people is a major problem that needs to be urgently addressed.

Sally Casswell from Massey University was speaking at a Politics of Alcohol conference in Wellington on Wednesday.
Professor Casswell says these type of issues should be covered by Government and inter-government regulation.
She says this is a classic area where there is no control over the accountability of trans-national companies in relation to alcohol.

Says Radio NZ.

It would be awfully interesting to see the specific policy proposals that would come from this approach. Are we to ban Facebook pictures showing folks drinking? Ban people from "Liking" things alcohol-related?

I follow a dozen or so NZ craft brewers on Twitter. Would Casswell expropriate their Twitter accounts? Require folks be 18+ to follow?

I'd love to see just how far the neo-prohibitionists are prepared to push against freedom of speech and freedom of association.

Oddly enough, I didn't get an invitation to their little shin-dig.

Update: I totally don't believe them on this one:

The conference will include a major session on tobacco reform to examine whether there are lessons that can be learned from this history for achieving successful alcohol law reform.

“Both Labour and National-led governments have led change in terms of tobacco reform in New Zealand and need to be congratulated for creating a better country because of their willingness to take on the tobacco industry” said Professor Jennie Connor, another medical spokesperson for Alcohol Action NZ.

“Although the end-game is different for alcohol compared to the smokefree strategy for tobacco – an end to heavy drinking rather than an end to drinking itself - the means by which harmful heavy drinking can be reduced have been demonstrated to be the same as for tobacco” she said.

Do remember that, when the anti-tobacco folks started out, their only goal was to stop folks from smoking in airplanes and closed-in public places. Not to ban all smoking. Then we got mandatory provision of non-smoking sections in restaurants. Then bans on smoking in workplaces. Then complete bans in bars and restaurants. And now they're aiming at a smoke-free NZ by 2025. If they're citing tobacco as a strategy to follow - and note that anti-alcohol has been moving to the anti-tobacco playbook not just here but internationally - do worry about slippery slopes.