Offsetting Behaviour

The Kiwi Conspiracy

2012-01-28T07:00:00.000+13:00

It's common knowledge that Canada controls the US through manipulation of its cultural elites.

But how many know that New Zealand really controls Canada?

First, remember that New Zealand's reforms of the 80s helped provide the policy impetus for the excellent Liberal reforms of the 1990s that brought fiscal sanity under Paul Martin (finance minister) and paved the way for Canada to pass the United States in economic freedom despite the less-than-stellar Paul Martin (Prime Minister) and Stephen Harper regimes.

Next, recognize that Canada's Frontier Centre for Public Policy, run by Peter Holle, pulls a lot of policy strings* behind the scenes. Peter has a house up on New Zealand's North Island. And, he regularly employs Kiwis. When David Seymour left his position as policy analyst for Frontier to run for ACT, the Kiwi Conspiracy was a man short. And so they drafted the excellent Peter McCaffrey.

Best of luck in the Great White North! Rather a shame that New Zealand hasn't a think tank environment that can help keep folks like Peter around, but we can celebrate Canada's gain.

* Ok, I might be overstating things somewhat.

Observing externalities

2012-01-27T07:00:00.000+13:00

The existence of an externality isn't sufficient basis for declaring market failure; indeed, optimal Coasean internalization pretty often will involve what looks, to the outside observer, like one party imposing harms on another - the implicit side-payment is harder to see.

This isn't new news, or at least it shouldn't be, but Eli Dourado presents the logic pretty nicely in a Mercatus working paper. I'm likely to pick this one up for the week on externality in my Economics and Current Policy Issues class; the first section gives a lucid and tractable exposition of the basic theory I try to get through to students in lecture. We're both fans of Buchanan and Stubblebine's approach. Here's Eli:

Once again, when externalities are internalized in a complex fashion through firms and other transaction-cost-reducing arrangements, the visible external harm or benefit will often persist. We still observe external benefits from lighthouses and, at least in jurisdictions that still allow smoking in bars, we still observe nuisance externalities generated by smokers. But these are not market failures; these are problems that the market has solved despite the high transaction costs that plague the primary actors.

Market failure results from gains from trade that fail to obtain due to some impediment; alert entrepreneurs view such impediments as profit opportunities for those who are able to innovate around the blockage.

And Eli's extension to cybersecurity makes points that get missed by cybersecurity experts.

Creative hedonism

2012-01-26T09:56:00.000+13:00

The rapacity of the creative can know no satiety.

Back in November, Bill Kaye-Blake was bored by a SciFi story that found the end of scarcity: what's then left to do? I suggested the protagonists could find ever more creative forms of hedonism.

Turns out, this isn't a new suggestion. Arts & Letters Daily points to a nice bit of history:

Petronius, if the historical record is any guide, had every reason to be a snob. In a court full of decadents, he was the most refined of all. This is how Tacitus paints him: "He spent his days in sleep, his nights in attending to his official duties or in amusement, that by his dissolute life he had become as famous as other men by a life of energy, and that he was regarded as no ordinary profligate, but as an accomplished voluptuary [erudito luxu]."

It's the two most incongruous words in that passage that point us toward Petronius' chief insight into pleasure and abundance: "accomplished voluptuary." How can anyone be accomplished at taking pleasure? Isn't that something anyone can do? Yes, under most circumstances. But under decadent circumstances, such as Trimalchio's feast or Nero's court, pleasure becomes cheap. It must, at first, be exhilarating to find exquisite versions of the things we most want—food, sleep, sex—right at hand. But then comes the revelation that even with unlimited means, our capacity to take pleasure is itself limited. The usual enjoyments become repetitious and dull, until we can barely taste them at all, or remember how they once tasted. And it's at that point that Trimalchio and Petronius part ways: One flails to enjoy himself while the other becomes a scientist of pleasure. Under decadent circumstances, Petronius devises ever-more-original varieties of hedonism. [emphasis added]

Infovores follow Petronius in taking delight from the now decadent information environment; Trimalchio gets bored after uploading the millionth YouTube cat video.

A last Nobel run?

2012-01-26T07:00:00.000+13:00

Two new papers help make the case for Tullock's Nobel.

Charles Rowley traces Tullock's intellectual legacy. Rowley teams up with Dan Houser to provide a Tullock biography. The latter especially makes for fascinating reading if you're already well familiar with Tullock's contributions to the discipline.

It's a shame that Tullock wasn't awarded the Nobel with Buchanan in 1986. But it's a mistake that still can be rectified, so long as Stockholm doesn't keep dragging its feet.

Trans-Tasman

2012-01-25T07:00:00.000+13:00

Heritage ranked New Zealand below Australia on economic freedom; I was a bit surprised. Now they have a nice graph letting us see why.

The subcomponents don't seem far out except in two cases.

Heritage ranks Australia slightly ahead of New Zealand in labour market freedom. I'm pretty sure that doesn't accurately reflect things. New Zealand likely had the world's most free labour market subsequent to the Employment Contracts Act; we slid back a bit with the Employment Relations Act but things here remain remarkably clean. Contrast with the Australia's Fair Pay Commission.

Here's Heritage:

The labor freedom component is a quantitative measure that looks into various aspects of the legal and regulatory framework of a country’s labor market. It provides cross-country data on regulations concerning minimum wages; laws inhibiting layoffs; severance requirements; and measurable regulatory burdens on hiring, hours, and so on.

I'm not sure that many NZ union leaders would reckon that New Zealand offers unions a more hospitable environment than Oz; Australian minimum wages are higher and more complicated; the general labour market approach seems far more prescriptive.

Heritage also puts Australia a bit ahead of New Zealand on trade freedom. Australia last year suffered a banana crisis when its banana-growing regions suffered crop failure and Australian "we'll pretend it's phytosanitary but it's really protectionism [see also apples]" regs bit hard; banana prices hit $13/kg.

NZ takes a deserved hit for having allowed the size of government to ratchet upwards substantially under Helen Clark, but we ought to have been credited for our rather better performance on these two measures.

Cassandra

2012-01-24T16:29:00.000+13:00

Monday's Otago Daily Times tells us that the Forsyth Barr Stadium has no ability to pay its $2 million rates bill. And the Council's debating how best to handle the $140 million debt they incurred in building it.

Shame nobody warned folks that stadiums are generally bad public investments.

The funniest bit: some Council folks want to adjust downwards the stadium's rates because a large contribution from the Stadium would mean lower rates contributions from commercial firms who are benefited by the stadium's existence. Ahem.

Update: more folks who provided no warning at all that the stadium was a seriously bad idea.

Dog days of summer... this time with data

2012-01-24T10:34:00.000+13:00

Two nice bits of data came of the last round of dog panic.

Here's ACC:

There were 3,435 dog attacks reported to 72 New Zealand councils in 2001/2. From 1989 to 2001, there were 3119 hospitalizations and one fatality due to dog bites. In the year ending 2003, ACC received 8,677 claims for dog bites requiring medical attention. [1]

A recent New Zealand study of adults who made claims to ACC for dog bites found that 26 per cent of the bites occurred in a public place and 21 per cent occurred at home, with the remainder divided between other types of private property. [2] In this study, only 11.6 per cent of dogs were loose and unsupervised in a public place, although other studies have found higher levels than this. Territory defence was the most common reason for a dog to bite, followed by accidental bites due to pain or fear. Pure-bred dogs were responsible for 40 per cent of bites, mixed breeds for 27 per cent and the remainder unknown. The top ﬁ ve pure-bred categories were German Shepherds (8%), Pit Bull Terriers (7%), Rottweillers (6%), Jack Russell Terriers (4%) and Labrador Retrievers (3%).

Here's the underlying survey data, though note that this is just on adult survey respondents; folks seem most outraged about attacks on kids.

As pit bull terriers are pretty uncommon and labs are very common, the conditional risk presented by pit bulls is pretty high, although that could easily be due to that scary people who like to abuse dogs and to intimidate people choose that breed; if that breed were banned, scary people would likely converge on another breed pretty quickly. Note also that a reasonable proportion of mixed breed attacks will likely involve Staffie-crosses.

If less than 12% of dog attacks involved dogs running loose, where ownership would be most difficult to pin down under a liability regime, that increases the likely feasibility of a strict liability plus insurance regime over alternatives.

More data: the Department of Internal Affairs's Dog Safety and Control Report:

Looking at dogs by breed and considering only those with more than 500 in the NDD, the highest rate of dangerous dog classifications are for the pure-bred American Pitbull Terrier with 1.9% of 3,469 classified as dangerous. Next are the cross-bred American Pitbull Terrier (1.4% of 3,258) and the Dogue de Bordeaux (1.2% of 599 dogs). All the remaining 126 breeds with 500 or more dogs in the NDD have a dangerous rate less than 1%.

In terms of actual numbers, the American Pit Bull Terrier pure-bred has the largest number (67) of dangerous dogs in the NDD, followed by the Staffordshire Bull Terrier (48), the American Pit Bull Terrier cross (46), the Labrador Retriever (43) and the German Shepherd (42). Some 352 breeds did not have any dogs classified as dangerous.

This all makes me more confident in my current heuristic: upweight the chances that a dog and its owner are dangerous if the dog is a Pit Bull. That gives no argument for banning Pit Bulls, as scary owners would shift into other dogs - a determined psycho could turn a German Shepherd into a scary attack dog fairly easily.

And in response to a couple of comments on a prior post: the point of a strict liability regime isn't to ensure compensation to those bitten. It's to ensure that an actuarily fair premium is assessed on owners who are compelled to buy liability insurance as part of dog ownership so that owners who pose too great a risk are priced out of the market. But as liability insurance isn't even mandatory for car ownership, I'm less than optimistic about the chances for it in dog ownership.

HT on all of this: Wayne Heerdegen, who spent a bit of time at Treasury working on dog policy.

Dogs

2012-01-23T10:32:00.000+13:00

...and the availability heuristic kicks in again. Dogs have random draw chance of mauling a kid, with some breeds having somewhat higher chance than others and some owners having much higher chances than others. When a couple of kids get bitten within a short period of time, debate on dog regulation heats up.

Local Government Minister Nick Smith promised yesterday to kick-start a stalled pledge to investigate laws governing dangerous dogs.

The inquiry was supposed to take place last year.

Former local government minister Rodney Hide had pledged to reform dog control laws before the November election but that review had been delayed following the Christchurch earthquakes.

The new minister, Smith, said last night he was concerned about the seriousness of the latest attacks.

His office would investigate the incidents and identify whether there were any issues that had implications on dog control legislation in relation to public safety

Were I dog czar, and if it were possible to enforce dog-owner registration links, I'd probably push towards a liability and insurance regime. Get rid of current breed-specific regulations but mandate that dog owners get liability insurance. An old lady with a corgi or normal person with a golden lab would likely pay $2/year; a skinhead with a pitbull would likely find dog ownership beyond his means and might be invited to buy a menacing-looking breed of cat. Owners without insurance and whose dogs bit kids would be bankrupted and put into the workhouse to pay off their debts.

That's likely outside of the set of the politically feasible. And, if linking dogs to owners is too difficult, it's also impracticable. But I like it otherwise. A decent proportion of dog-bite events are just random-draw bad luck, but a similarly decent proportion likely comes from "redneck owning a mean-looking dog because he likes scaring his neighbours and looking tough." Insurers would have reasonable incentive to get the premiums right. Keep it with strict liability regime; the only fights in the courts would be determining who owned the dog. Some of that could be helped by police routinely asking folks walking pitbulls to show registration and insurance certificates.

Meanwhile, a few simple rules for reducing your kid's risk of being bitten - almost certainly redundant for anybody reading this blog:

If you're already a redneck, don't get a pitbull-cross dog;
Don't associate with rednecks with pitbull-cross dogs;

Most rednecks are good people. But a pitbull is usually evidence that the owner is trying to induce a separating equilibrium; take the hint.

Let your kids pat friendly-looking dogs whose middle-class owners are nearby and give permission;
Give rednecks with pitbulls a wide berth. And, when the owner's well out of earshot, explain to your kids why you've done so, so they know what to do in your absence.

I wonder if anybody's ever done a New Zealand edition of this one...

Government make-work

2012-01-21T07:00:00.000+13:00

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

Kreskin, again

2012-01-20T13:48:00.000+13:00

Last week I pointed to Richard Edwards' plenary address on tobacco control:

He cites increased "social smoking" among young adults - folks that might have a cigarette while out drinking, but otherwise don't smoke. I'd find it a bit surprising if that level of smoking resulted in substantial negative health effects. Says Edwards "The frequency of XS alcohol consumption, and its role in promoting uptake and maintenance of smoking and undermining quitting, suggests co-interventions may be needed and that we cannot tackle smoking in isolation." So anti-alcohol policy may be part of anti-tobacco policy...stay tuned. [emphasis added]

And today the excellent Chris Snowdon points to TV3:

"The problematic aspect is that since most smokers want to quit, and here, because of the high occurrence of hazardous drinking in the New Zealand situation, they have difficulty quitting," Associate Professor Wilson told NZ Newswire.

Smoking is estimated to cost $1.9 billion in direct costs to the health sector, but the social cost has been estimated as high as $22.5bn.

The researchers recommend lawmakers explore:

Higher alcohol taxation, given some evidence that tobacco consumption has been found to decline with higher alcohol taxes.

Raising the legal alcohol purchase age. US evidence shows this reduces adolescent smoking.

Explore policies to further decouple smoking and drinking by making the outdoor seating areas around cafes and pubs smokefree.

Consider additional funding health services to to address both heavy drinking and smoking cessation together.

Where to start. First, smoking does not cost the health system $1.9 billion. Here's the post where I summarized things. Long story short: MoH effectively assumed that smokers would live forever and never impose any end-of-life costs on the government if they weren't smokers. Surprisingly, I can no longer find the $1.9bn figure on the MoH website. The best I can now find is their 2010 submission on the proposed excise changes where they wrote:

The social costs of smoking have been estimated at 62,800 life years lost to tobacco-related premature deaths, and 19,000 quality adjusted life-years lost to tobacco-related illness [¹] . A 2007 estimate put the cost of smoking to the health system at $300 to $350 million per annum; however current work within the Ministry of Health suggests that figure may be as high as $1 to $1.6 billion per annum [²].

...

2. Please note that this analysis is work in progress and methodological issues are currently being addressed.

I'm not sure of the source on the $22.5bn figure. But there's no way you can get a number that high without including smokers' spending on tobacco and a rather long list of other costs borne by smokers, with little consideration of that at least some smokers enjoy smoking.

But last week's prediction was right. I hate being right. I hated it last time too.

Food Bill

2012-01-20T07:00:00.000+13:00

Kate Wilkinson, Minister for Food Safety, justifies proposed changes to New Zealand's food safety regime by citing the costs:

"The bill is designed to simplify 30-year-old food safety regulations and ultimately aims to reduce our high level of food-borne illness and corresponding economic cost.

"It's estimated that food-borne illness caused a $162 million loss to the New Zealand economy in 2010."

Wow. The economy lost $162 million due to food-borne illness. About $40 per capita. Seems a bit high, but not prima facie implausible. But let's have a look.

Australia's Applied Economics produced the report for the New Zealand Food Safety Authority a little over a year ago (HT: Squid expert Luis). The summary table at p. vi tallies costs of $161.9 million from foodborne disease. But $16.4 million of that is government outlays on food safety regulation. Unless the legislation specifically reduces the government's monitoring costs, which seems rather unlikely with a more onerous regime, that portion of cost cannot be saved. Similarly, cited industry costs of $12.3 million include both compliance costs and costs to business in case of outbreak; the effects of the new legislation here are then ambiguous as outbreak costs may fall but compliance costs will rise. Kate Wilkinson's citing of a total cost figure that includes enforcement and compliance costs as argument for stricter regulation is a bit of a problem; the more the government spends on food safety regulation, by that argument, the greater the argument for spending even more. Just like when the New Zealand Police include the costs of drug interdiction efforts as a benefit of drug seizures. I'm certainly not saying that the government's $16.4 million outlay was a waste; it's just not properly seen as something that can be abated by the new legislation. Fortunately, that's only about a sixth of the total.

The bulk of the remaining tabulated costs are individuals' intangible willingness to pay to avoid a foodborne illness - about $100 million in residual private costs as estimated from NZ value of statistical life estimates. We can leave aside for now problems in that we don't have good prevalence data on non-reportable illnesses like norovirus that manifests as mild gastroenteritis; Applied Economics is very up front about the limits of inadequate data here. But by far the biggest part of the cost estimates comes out of willingness to pay measures.* That's important. Why? Because people are choosing, all the time, which dining establishments to frequent.

Suppose that there's a roadside falafel place with food I adore but that comes with completely known 1% risk that I'll get mild food poisoning. I eat there a hundred times, I get food poisoning once. But I keep going back because of the taste. If new food safety regulations mean the place shuts down, Wilkinson's measure says I'm better off because I'm saved those willingness-to-pay derived figures on the costs of mild food poisoning. But I've already specified that I knew about the risk and judged it worthwhile; I'm then necessarily worse off if I can't get a falafel. You can't easily use a willingness-to-pay measure to overturn a consumer's decision when consumer decisions underlie willingness-to-pay measures. You can perhaps make an asymmetric information argument; that tends to argue for random inspections and public posting of findings on facility cleanliness rather than for big compliance regimes.

So is the new regime worth the cost? That depends on the compliance costs that will be faced by small and mid-sized traders. Wilkinson assures us that small traders won't face onerous burdens, but I'd really prefer seeing proper analysis of the Bill from someone like Otago's Andrew Geddis. And we have to keep in mind that a substantial proportion of the costs Wilkinson cites might actually be voluntary choices consumers are making that, on lucky draws, yield tasty goodness any diminution of which consequent to regulation ought be counted against the Bill's possible health benefits. Banning me and others like me from having my hamburgers medium-rare might save the health system a bit, but it'll certainly cost me some utils. Equally bad is what a big fixed-cost regime would do to food startups. I really hope that the legislation isn't as costly on those two fronts as some folks fear; I'd love to see independent legal analysis.

*Most of these costs come from more serious instances where people do go to the doctor, so the potential for being orders of magnitude out on actual instance of "treat at home" norovirus doesn't do tons to the bottom line.

Occupy occupied

2012-01-19T10:38:00.002+13:00

The #OWS settlement in Christchurch's Hagley Park has shifted from being an encampment of a few local protesters and a lot of international backpackers (from reports I'd seen back in October) to now mostly consisting of, well, I'll let them tell you:

PROTEST GROUP Occupy Christchurch has dwindled to only two genuine members and has been overtaken by ‘‘a whole lot of bludgers’’, a protester says.

The occupier, who wanted to remain anonymous for fear of retribution, said most of the people now occupying the Hagley Park village were unsavoury elements who usually stayed at the City Mission and simply wanted access to the free food and bedding.

He said they had criminal and drug-using backgrounds and their presence had scared off most of the genuine Occupy protesters.

The two remaining occupiers wanted to oust the ‘‘free-loaders’’.

‘‘There’s a whole lot of people who . . . don’t even know the background,’’ he said.

‘‘We will ask them to leave and if they don’t we will ask the police for help if necessary, because they are too rough for us to handle.’’

City Missioner Michael Gorman said he was not aware of it happening as he was out of the city, but the complaint could not be simply that the people did not meet the ideal protester image.

‘ ‘ If they are from the City Mission, as long as they are not breaking the law, they’ve got as much right to be there as anyone else does,’’ he said.

‘‘If they are breaking the law, police should be notified . . . It sounds like the solution lies in their hands.’’

Gorman's right.

Christchurch seems to be following international experience, with 99 percenters (or two guys, whatever) figuring out that they have to devise mechanisms to sort the deserving (themselves) from the undeserving (homeless) poor in handing out free food and kit. I hope they take the right lesson from all this.

Perhaps the Camp's composition will change with the advertised Ninja gig by Amanda Palmer next week. At least for the duration of the show.

‘Criminal’ element take over park site
By CATE BROUGHTON
Christchurch Mail
18 Jan 2012
PROTEST GROUP Occupy Christchurch has dwindled to only two genuine members and has been overtaken by ‘‘a whole lot of bludgers’’, a protester says. The occupier, who wanted to remain anonymous for fear of retribution, said most of the people now...read more...

Me-utilitarianism: restaurant edition

2012-01-19T07:00:00.000+13:00

If this story's right, the country now has a couple hundred fresh-off-the-boat Chinese chefs who haven't yet learned to adapt their offerings for the Kiwi palette.

Where are they? I want the list of restaurants! There are excellent Chinese restaurants in NZ (and Asian restaurants more generally), but if any foodies have heard anything about particularly good new chefs having turned up in Christchurch, I'd love to hear about it.

The National Distribution Union's upset about the whole thing, and especially by that some chefs might be taking salary offers including room and board that have cash components less than minimum wage.

I'm upset that we don't have a free trade agreement with Ethiopia bringing in a few dozen good Ethiopean chefs.

Dangers of trusting Wikipedia

2012-01-18T09:18:00.000+13:00

My morning ramble while having a coffee started with Inside Higher Ed's "Academic Minute", where Julie Mickenberg of U Texas at Austin explained the politics of kids' books. During the McCarthy era, some authors found refuge in children's lit.

My research in children's literature has focused on books written by individuals wishing to challenge the status quo. In Learning from the Left, I examined the ways in which children's literature served as a vehicle for radicals in the United States during the McCarthy period, as other avenues of expression were closed off, and as children's literature, a field largely controlled by women and aimed at children, was ignored, overlooked, or presumed safe. In fact, many of the most popular and critically acclaimed books of the 1940s and 1950s were written or illustrated by Communists or communist sympathizers, from Harold and the Purple Crayon to Danny and the Dinosaur to many little Golden Books.

Danny and the Dinosaur?! Not Danny and the Dinosaur! Had I unwittingly introduced Ira to ... Communism? So I went to Wikipedia to see what it had to say about that book. What I found shocked and horrified. But it doesn't at all correspond with my memory of the book. Although I would consider buying a copy that matched the description:

Plot

"One day Danny went to the museum," is the first sentence of this book. In the museum, Danny sees other things, but is almost immediately drawn to the dinosaur section and is delighted to find a living dinosaur. Both agree to play with each other, and Danny rides out of the museum on the dinosaur's neck.

Danny and his dinosaur buddy embark on an adventure-filled day, including...

the dinosaur confusing a building for a larger building.

attending a baseball game in his mind.

eating grass flavored ice cream instead of neighbor children

going to the zoo and eating monkey brains

playing hide and seek with other children; which result in the death of more than 9000 children.

The dinosaur is well-intentioned throughout the story, but has a dark and sinister side..for he helps a lady cross the street only to eat her for lunch. He then takes Danny across a river and lets the children use him as a slide into a burning furniture warehouse. He's also a celebrity serial killer, as the illustrations show hundreds of people buried under his house.

Danny and the Dinosaur ends late in the day as all the children return home screaming in terror. Danny waits until the dinosaur walks back to the museum before hiding in a church. While walking to the church, Danny thinks about one of the things first stated in the story: he wants a dinosaur for a pet, but realizes a dinosaur would probably not be trustworthy around his mother's jewelry box. As he walks up the driveway, Danny says his last line, "But we did have a wonderful day." Which is of course code for "Please kill me, it hurts, it hurts."

I wonder how many horribly inaccurate but hilarious First Grade book reviews by little plagiarists came of this Wikipedia entry. Go and check it out before the Wikipedia blackout starts. Screenshot below.

Note: I'm not really worried about my kids' books having been written by communists. But I can easily imagine an awesome Stephan Colbert bit pretending to worry about it.

Update: Here's the edit at Wikipedia that perhaps introduced the inaccuracies.

Prostitution and nuisance

2012-01-18T07:00:00.000+13:00

New Zealand legalized prostitution back in 2003; outcomes have been decent.

And as reminder that you don't need to outlaw prostitution to effectively regulate the actual harms from prostitution - the public nuisance aspect of street prostitution - the Christchurch police recently targeted those harms directly.

Christchurch police made 14 arrests over the weekend in an operation targeting street prostitutes, clients and their associates in the Manchester St area.

Acting central area commander Inspector Al Stewart said the operation was in response to public concerns.

"There is always an element attached to prostitution that causes public concern, whether it is their general activity itself or the behaviour of some of their minders or clients," said Stewart.

"Most of the arrests were for people wanted on warrants, while a few were for behavioural and dishonesty matters.''

Police would continue to actively focus on the area over the next few weeks, Stewart said.

"While the services being offered on Manchester Street are legal, some of the behaviour, which can be intimidating and offensive in nature, by associates of the prostitutes is not,'' he said.

Prostitutes have been working from the northern end of Manchester St, between Bealey Ave and Edgeware Rd, since the February earthquake left their usual haunt, the street's central city blocks, in the red-zone cordon.

I'd not be particularly thrilled if somebody decided to start selling services, prostitution or otherwise, on the sidewalk in front of my house. But existing nuisance regulations suffice.

Similarly, we don't need prostitution to be illegal to stop sex workers from offering services in exchange for Chicken McNuggets at the McDonald's drive through [HT: @S8mB]; effective use of existing trespass laws ought to suffice.

Minimum wages and living wages

2012-01-17T07:00:00.000+13:00

Tim Harford argues that debates over the minimum wage are a sideshow relative to the larger problem: that some workers' output is insufficient to justify a living wage.

But if a young adult cannot produce enough of value to justify being paid a living wage, nothing we do to the minimum wage will help. He, the institutions which trained him and the society in which he lives, have far bigger problems

Harford's certainly right that the longer term solution to low pay is productivity increases; you can't mandate paying people more than their marginal product as firms will simply shift to more capital-intensive processes or to solutions through offshore outsourcing of labour-intensive components.

But not all wages need to be living wages. The 16 year old living at home working part time while going to school doesn't need one; and, his marginal product probably isn't enough to finance a real living. But the kid is learning valuable skills about workplace culture, showing up on time, dealing with customers - things that will help him be more productive in future. Note further that the minimum wage only counts pecuniary benefits; health insurance that comes bundled with many, but not all, US jobs is an increasing proportion of the overall salary package.

At least, as Harford notes, the UK Low Pay Commission, which advises on minimum wages, has let youth minimum wages stay relatively low. Workers aged 21+ are on a minimum wage of £6.08; workers aged 18-20 on £4.98; 16-17 year olds on £3.68; and, there's also an apprentice rate of £2.60.

Here in New Zealand, National's making it a bit to get younger folks onto the lower New Entrants' Wage; otherwise you have to pay the 16 year old, on his first day of work, no less than you'd pay any other minimum wage worker: $13/hour, (US $10.30 or £6.73).* Our youth unemployment rate isn't pretty, at least partially as consequence of the prior Labour government's decision to bring 16 and 17 year olds up to the adult minimum wage.

We can mandate that all wages are living wages, but we can't mandate that all the people who'd like to have work at that pay are able to find jobs.

And I worry Harford packs a bit into "market power" here when explaining Card & Krueger's results on minimum wages and employment in New Jersey:

If employers have market power in the labour market then they might actually offer a lower wage than the balance of competitive supply and demand would produce. Some workers would rather keep looking or sign up for welfare payments, and so employment is lower at this level. Introduce a minimum wage and both wages and employment increase, while profits fall.

Imagine a remote mining town with one big employer who pays the same basic wage to everybody. If you can't pay the new guy more than your existing workers, then you have incentive to abstain from hiring somebody whose output would cover his salary but wouldn't cover the amount you'd have to pay in salary increases to all your other workers. So increases in minimum wages can increase employment and wages in places with monopsonistic employers and low labour market mobility. But in low-skilled retail in suburban New Jersey where there's no way that hiring an additional student to stock shelves at the 7-11 forces you to push up your other workers' wages? Any retailer who's stuck with a labour shortage at current wage rates and the chance to hire an additional worker for a wage less than the worker's marginal product but above prevailing rates has incentive to defect from any cartel of employers. And remember that the theoretical argument works by having people enter the workforce in pursuit of the new higher minimum wage who were outside of the workforce previously; if we start with unemployment - people in the workforce who cannot get jobs at the prevailing wage - the theory can't really apply. I'm not sure that many of our current problems come from too many folks voluntarily sitting outside the labour force because prevailing wages are too low.

* At last report, median hourly earnings were $20.38 (average $24.78). Our minimum wage is 63% of the median wage or 52% of the average; at these levels, we expect reasonable disemployment effects, especially among youths.

Partial and General food equilibria

2012-01-16T07:00:00.000+13:00

I'm omnivorous, mostly because I enjoy the taste of meat. I can rationalize it ethically by looking at Cowen's argument that it's ok, so long as the eaten animal had enjoyed positive lifetime utility and wouldn't have existed but for my willingness to subsidise its existence in exchange for later being able to eat it. But I know that that argument also rationalizes baby farming to produce slaves for me*. And there are other problems in bringing animals under a utilitarian framework. And so I try not to think about it too much. Because animals are tasty. And a vegetarian diet would be a big hassle. And I am indeed made happier by thinking about lambs playing in paddocks who wouldn't get to exist but for my eating them. So I follow Cowen's rule and aim for animals I can imagine enjoyed positive lifetime utility.

Vegetarians sometimes argue** that we have to abandon meat-eating because meat is an inefficient way of generating calories: if we all scaled up to Western diets, there wouldn't be enough land to grow food for everybody unless we switched over to vegetarian diets.

That argument is wrong on two fronts.

First, some land does most efficiently generate calories by producing grass to be eaten by animals. Like New Zealand high country sheep farming. There's not enough water in the country to irrigate that land to make it suitable for cropping. But it'll support low-density pastoral agriculture. Further, some grain crops wind up being of low value for human consumption but still suitable as supplement for animals. So the optimum is unlikely to involve everyone switching to vegetarianism if the objective is maximizing total available calories for human consumption (though if the developed world's bigger problem is obesity, I'm not entirely sure why we ought to take this as maximand anyway).

Second, it's entirely a partial equilibrium story. What happens as folks in the third world get richer and start moving from inferior goods like lentils and rice to superior goods like beef and lamb? The price of the latter get bid up. And what happens when relative prices change? People change their consumption bundles. And so I find the Washington Post reporting that Americans are eating less meat as meat prices increase.

Why is this happening? The Daily Livestock Report blames rising meat prices in the United States. As countries like China and India get richer, they’re eating more meat, which is helping to drive up U.S. exports and making beef, pork, and chicken more expensive here at home. Ethanol also plays a role: Nowadays, American farmers divert bushels and bushels of corn to make fuel, which drives up feed prices and, again, makes meat pricier.

There's no need for a moral imperative to reduce meat-eating. Get rid of subsidies in the agricultural sector, make sure effluent externalities are properly priced or regulated, then let relative price adjustments take care of the rest. The optimal amount of meat will be eaten, so long as we keep waving our hands about the moral questions.

* You can maybe square this by saying people get massive disutility from being slaves while animals don't know that they're slaves. But humanity has a long history of slavery, and most slaves, as best I'm aware, didn't commit suicide. So by revealed preference, lifetime utility was likely still positive. And then we're stuck again.

**This was somewhat sparked by an argument on Google Plus linked here (thanks Ryan!) ~~which I cannot figure out how to link~~.

In praise of NZ residence

2012-01-15T13:00:00.000+13:00

The Economist recommends that countries link rights and responsibilities to residence rather than citizenship and make it simple for folks to get multiple passports:

As for benefits, residency is surely the key. Live and pay your taxes in a country—and you should then be treated in the same way as any other resident, and better than a citizen who has lived overseas and not paid up.

Vote often

The thorniest problem for a residency-based system is voting—a right that has long been linked to citizenship. But there is room for compromise here. In France and Italy, for instance, citizens who live permanently abroad (often with dual nationality) have voting rights. That makes sense. Conversely, countries should give long-term resident non-citizens the right to vote, at least in local elections. European Union countries already allow that to each others’ citizens.

But looking at multiple citizenship purely on the basis of costs and problems is wrong. It also encourages links between diasporas (often wealthy and well connected) and their home countries (usually poorer), to the benefit of both. Multiple citizenship is inevitable and, at heart, rather liberal. Celebrate it.

We've not bothered getting NZ citizenship as yet; the opportunity cost of getting a pair of NZ passports is a new TV, and we have an 8-year old tiny cathode-ray tube. And NZ citizenship confers no particular benefits that aren't provided by permanent residence. And that is as it should be.

Drinkers' utility

2012-01-14T07:00:00.000+13:00

Folks measuring the social costs of alcohol are often pretty happy to assume that heavy drinkers get no utility from drinking; that lets them count private costs as socially relevant. For example, BERL wrote:

"We assume that it is irrational to drink alcohol to a harmful level and that harmful alcohol use has zero private benefit."

And now we see neurological evidence that the problem might rather be that heavy drinkers get too much enjoyment from alcohol:

Dr Jennifer Mitchell of the University of California San Francisco, who led the study, said: "This is something that we've speculated about for 30 years, based on animal studies, but haven't observed in humans until now.

"It provides the first direct evidence of how alcohol makes people feel good."

Researchers conducted positron emission tomography (PET) scans on the brains of 13 heavy drinkers and 12 non-drinkers immediately after they drank alcohol. Their findings, published in the Science Translational Medicine journal, showed that alcohol caused endorphins to be released in the nucleus accumbens and orbitofrontal cortex brain regions.

In all of the volunteers, larger quantities of endorphins released in the nucleus accumbens were linked to increased feelings of pleasure.

Increased levels of endorphins released in the orbitofrontal cortex were linked to a more pronounced feeling of intoxication in people who were heavy drinkers, but not in non drinkers, the study showed.

Dr Mitchell said: "This indicates that the brains of heavy or problem drinkers are changed in a way that makes them more likely to find alcohol pleasant, and may be a clue to how problem drinking develops in the first place.

"That greater feeling of reward might cause them to drink too much."

I'm happy to grant that heavy drinkers may experience costs in excess of benefits on the later units of consumption. But to assume away the existence of benefits runs contrary to common sense, and to the brain scan machines.

Israel as example: Organ donations

2012-01-13T10:54:00.003+13:00

NZ's organ donation regime is an inefficient nightmare that kills people. Donor's wishes, expressed via their drivers' licence, aren't taken as binding and can be overturned by anyone claiming a connection to the potential donor. Even suggesting that folks signing up to be future organ donors get bumped up the waiting list gets folks riled up, though there were some encouraging noises two years ago about maybe allowing that Kiwi donors be compensated; similar calls for compensation came up in the UK last year. As it stands, Otago's med school is allowed to cover funeral costs for cadaveric whole body donations, but nobody's allowed to cover funeral costs for organ donors. There are all kinds of policies that would improve on the status quo but haven't been explored, at least in NZ.

Israel opened things up last year. Living donors are now paid 40 days' lost wages plus a very generous expenses allowance. Folks with family members on the waiting list can request to become living donors for other people on the list and are then matched with other folks in the same circumstances: a "chain of living donors" not unlike the American MatchingDonors service. Result?

Israel experienced a dramatic increase in the number of organ transplants in 2011, totaling 384, 68 percent higher than the previous year, although the number of transplants performed in 2010 was particularly low. Kidney transplants from deceased donors were 2.37 times greater in 2011, with 123 operations, than in 2010. There were 69 liver transplants from deceased donors in the past year, 2.15 times as many the previous year, 59 lung transplants, representing an 84 percent increase, and 23 heart transplants - 2.09 times the number in 2010.

The waiting list dropped from 1117 to 1041. The waiting list for cornea transplants was almost halved. And the number of people dying on the waiting list dropped from 124 to 105.

But they're not stopping there.

The Priority Law, which takes effect in April, will give holders of Adi donor cards priority if they ever need a transplant.

The number of cardholders has considerably increased recently following a publicity campaign touting the new law. Anyone signing the card before April will be immediately eligible for the benefit, while those signing after the law goes into effect will need to wait three years for eligibility after signing.

The number of organ donor signatures rose 71,229 during the year to a total of 632,300 while another 20,000 requests for the cards are being processed by the National Transplant Center.

But this could only work in a country with strong support for transplantation, right? Nope. Israel started around the bottom of the pack:

But despite the optimistic figures, Israel's rate of organ donations from the deceased remains at the bottom of the list for Western countries. According to a 2010 report by the National Transplant Organization and the World Health Organization, Israel had 31 organ donations per million residents, higher than Greece with 15 and Lebanon with 18, but lower than Austria, with the highest rate of 91, the U.S. (90 ), France (72 ), Britain (64 ), Germany (62 ), and even Turkey (43 ) and Iran (35 ).

There is no good reason we couldn't replicate their success. Cultural sensitivities among Maori about tapu and organ donation? Israel managed to pass this legislation despite some pretty serious opposition from the ultra-orthodox community.

Government inaction here condemns people to death.

Update: Alex at Marginal Revolution covered this while I was on summer holidays; I'd missed it. Ah well. Truth bears repeating.

Evidence and Tobacco

2012-01-13T07:00:00.000+13:00

Action on Smoking and Health told us evidence for banning "powerwall" retail tobacco displays was overwhelming. They said legal challenges against such retail display bans in other jurisdictions failed "as the health benefits of eliminating advertising are overwhelming." Indeed, "[a] total ban of tobacco product displays, together with other measures, is required to achieve the goals and objectives set in the five-year plan of Ministry of Health for tobacco control." The evidence is overwhelming and a ban is necessary. Ok.

So it's fun to read Professor Richard Edwards's plenary address to the Oceania Tobacco Control Conference in Brisbane of last October.

[W]hen Janine Paynter and I carried out a systematic review in 2009 of the evidence on point of sale (PoS) displays, there were some obvious weaknesses and gaps. For example, all but one of the observational studies investigating links between exposure to PoS and children’s smoking were cross-sectional (and hence have limitations in determining direction of causality) and many were carried out in California, which had some important differences in the policy context limiting the application of the findings to other settings. Experimental studies are hampered in many ways e.g. by the difficulty of replicating ubiquitous and recurring exposures like PoS displays in an experimental design. Use of self-reports of the impact of PoS on smoking, purchase and quitting in a variety of study designs have some obvious possible limitations. There was no peer-reviewed evidence from the evaluation of PoS bans in jurisdictions like Canadian States, Iceland and Thailand. Even now there is only published evidence from one jurisdiction, Ireland, and then from a somewhat poorly resourced evaluation carried out after the event with funding cobbled together from sources mainly from outside of the country.

So a total ban on retail displays was required, but there wasn't really any evidence for it. As for plain packaging, which is likely on the horizon for New Zealand:

Plain packs have not been implemented, so evidence of the probable population impact must come from experimental studies, focus groups, surveys and so on; rather than rigorous controlled studies of the impact of the actual intervention in the real setting, as would be the ideal.

We can learn from those kinds of studies; we just need to be a bit cautious in extrapolating to population-level effects from them. It would be surprising if evidence coming from those studies would be sufficient to say anything like "The evidence for plain packaging is overwhelming; it's necessary, along with other measures, to achieve objectives...". So keep an eye out for ASH's eventual submissions on eventual plain packaging proposals.

Edwards' whole address is worth reading. Some highlights:

Comparing the 1996 and 2006 censuses, there's been a drop in smoking prevalence among 14-15 year olds but no change in uptake among young adults. Excise tax did rise substantially over the period. Edwards says the "evidence base" for successful interventions in the older cohort is weak, "and the ethical and moral framework to justify some interventions is less clear cut." We'll have to remember that when interventions are proposed.

He cites increased "social smoking" among young adults - folks that might have a cigarette while out drinking, but otherwise don't smoke. I'd find it a bit surprising if that level of smoking resulted in substantial negative health effects. Says Edwards "The frequency of XS alcohol consumption, and its role in promoting uptake and maintenance of smoking and undermining quitting, suggests co-interventions may be needed and that we cannot tackle smoking in isolation." So anti-alcohol policy may be part of anti-tobacco policy...stay tuned.

Edwards worries about FOREST's framing of tobacco control as an issue of freedom versus authoritarianism; he later suggests emphasizing "how tobacco control measures are pro-freedom by freeing smokers from an unwanted addiction, and by protecting our children from the risk of addiction and premature death." I can buy arguments about the conflicting freedoms of smokers and non-smokers in public spaces, but framing pure paternalism as being freedom-promoting is Orwellian.

Despite spending a fair bit of time talking about the importance of de-normalizing tobacco, he then says:
We need to be very careful that interventions do not stigmatise smokers. Once again this involves keeping in close touch with how smokers are feeling through in-depth research. These quotes show how the experience of stigma among smokers and practice of stigmatising behaviours can be very real. This reduces support among smokes (and also among non-smokers) for tobacco control and the tobacco free vision, and may drive smokers together in a sort of Dunkirk spirit against the perceived assault from a marginalising society or harden the determination of smokers to smoke, as encapsulated in this last quote. We should be anti-smoking, but never anti-smoker.
He wonders whether achieving tobacco-free goals given broader societal failings:
Can we achieve tobacco free goals among Pacific, among Māori, among aboriginal communities without wealth redistribution, without equalisation of power? The answer is uncertain, but it is certainly a strong argument that we in tobacco control need also to be at the forefront of campaigns for wider social and political justice. The additional advantage is of course that addressing the broader social and economic inequalities will also benefit a whole range of other public health issues such as excessive alcohol use, accidents and obesity and the related morbidity and mortality.
I'm reminded of Edwards' colleagues' argument for massive income redistribution in order to reduce disparities in life expectancy. But I love that he wants explicitly to link large-scale intervention in your private life in anti-tobacco policy with large-scale intervention in the economy and social justice. It helps us remember that the pro-freedom or pro-intervention framing is the right one.

Summer Fun

2012-01-12T11:59:00.000+13:00

It is the summer holidays, a time at which one’s thoughts move from idiotic economic policy and commentary, to enjoying the annual ritual of getting the garden under control while listening to live cricket.

So naturally, blogging has to go into summer mode as well. The cricinfo blog, of course, is locked permanently in summer mode. A recent post there concerns the importance of controlling for pitch quality in any statistical analysis of performance. Essentially, we are dealing with the econometric issue of misspecification in which independent variables are correlated with an error term if we cannot include a variable for pitch quality in analysis.

The author of this blog post proposes a method for using information from the match to control for pitch quality, by combining the runs per wicket and balls per wicket in the match. This looks like a useful first step but I see two limitations: First, the method for combining these two statistics is ad hoc rather than resting on foundations from a theoretical model of the processes driving outcomes; and second, the method seems to overreach, by ascribing all of the variance in scores between matches to the pitch quality and none to relative performance, when in reality performance and conditions both contribute to the observed variance in scores across matches.

My former student, Scott Brooker, and I have recently put out a paper drawn from Scott’s Ph.D. thesis, in which we propose a theory-based method for estimating from historical data the pitch quality in ODI matches. It will be of interest only to cricket loving stats geeks, but if you are a member of that fairly large community, do check out our paper here. We will be drip feeding more work from this research agenda into working papers over the next few months, including a paper on how incorporating pitch information can lead to improved rules for adjusting targets in rain-affected matches.

Postscript: Needless to say, my co-blogger at Offsetting has even less interest in cricket than he does in rugby, but rest assured that is a deficit that his colleagues have been trying desperately to correct over several years!

Memory in journalism

2012-01-12T09:39:00.000+13:00

Keith Ng thoroughly documents one instance of a broader phenomenon in New Zealand journalism: very poor apparent institutional memory.

Keith notes that ACR, the Association of Community Retailers, which lobbies against regulations that impose costs on small tobacco retailers like dairies, gets PR support from Imperial Tobacco. Keith calls it astroturfing. That's possible, but I don't think it rules out that the group of represented small retailers genuinely supports the policies promoted by ACR and simply shares interests with Imperial on those issues.

Either way, it didn't take long after Keith broke the story for the NZ media to forget that ACR enjoyed industry support. Writes Keith:

It seemed like quite a problem, the idea that so much of our news comes from groups which could be hiding all kinds of interests and agendas.

Turns out, the problem isn’t “what are they hiding?”, but “does anyone give a shit?”.

What this has shown is that even when the agenda is Big Tobacco’s, even when the connection is the second result on a Google search, even when their own organisation has reported on it, even when it’s stated plainly on their website, even then, the PR industry can get their stories printed with no scrutiny.

It’s a complete and utter rout.

You know, some of my best friends are journalists. And I like to think that they are the better ones. They always complain that they’re under pressure and under-resourced, and that this sort of shit slips through the cracks.

I’m sure it’s true, but here we are, at the point where our biggest news organisations run stories without spending 10 seconds on a Google search, or asking if something makes any goddamn sense. [Emphasis added]

If Richard Green says new laws will cost him $10k for shelves, they run it. If Richard Green says new laws will cost him $27k for shelves, they run it (RNZ newswire, 14 July 2011).

SHELVES.

How many of the facts reported in our media are this dodgy? And if there is so much that we can’t trust – and we can’t distinguish between what can and cannot be trusted – at what point should we simply give up?

You could chalk it all up to that it takes time to build up experience on a file and that erosion of profits in journalism have knocked out the senior folks who remembered what happened a year ago. But that can't be it when a 10-second Google search, or simply "asking if something makes any goddamn sense" would be enough to shoot something down. But when Radio New Zealand happily reports that each smoker costs the economy three times per capita GDP, folks aren't running the simple checks.

It has to come down to demand. If your audience take stats as infotainment, why worry too much if the stats are right? In fact, you can't afford to worry about it too much. And if the customers don't care whether the stats are right, then supply will arise to fill demand for the kinds of stats for which somebody's willing to pay (BERL on alcohol, PWC on Adult and Continuing Ed, many others in the back pages of the blog, the whole InfoGraphics problem cited by Megan McArdle...).

On bad stats, at least we have StatsChat. The University of Auckland's stats department now gives a prize for picking the week's (or month's) worst stat that's appeared in NZ press outlets. I recently nominated Radio NZ's exaggeration of the costs of smoking. Hopefully, shaming news outlets and the producers of bad stats will eventually have some effect. But it's harder to think of useful interventions that fix the kind of sloppiness Keith's citing.

Keith's interview on Radio NZ's interesting; it'll likely here be archived soon.

Offsetting behaviour: vaccine edition

2012-01-12T07:00:00.000+13:00

I'm more inclined to call stupidity over risk homeostasis on this one:

Some adolescent girls who get the HPV vaccine to prevent cervical cancer wrongly think they no longer need to practice safe sex, U.S. researchers said on Monday.

The study, published in the Archives of Pediatric & Adolescent Medicine, shows the need for better education about the vaccines and their limitations.

...The authors said the study was limited in that subjects came from a single urban clinic serving low-income clients so the findings may not apply to more general populations.

I wonder if anybody's running effects of vaccination on STD and condom use rates. It would be surprising if there weren't some drop-off in condom use with vaccination; the risk has indeed gone down. But I'd love to see numbers on it. Unfortunately, the kinds of things that would predict vaccination likely also predict sexual behaviour regardless of whether vaccination has taken place. Finding an exogenous instrument could be tough.

Hubris

2012-01-11T09:42:00.002+13:00

If I told you that I'm prepared to sacrifice long-held positions on things like privatizing the police force, legalizing all drugs, and moving copyright down to a 10-year window to negotiate a National Freedom Strategy with the government, you'd rightly wonder if I were some kind of lunatic. Perhaps a lunatic for seriously considering those positions, but more likely a lunatic for thinking that the government might be happy to see me, the weirdo academic, back down from these positions if only they'd negotiate some compromise strategy with me.

Run the Nash Bargaining calculus when one player has no threat point. Heck, my three year old has a better bargaining position when he insists that he doesn't want to have a nap than I'd have on insisting that the government enter into negotiations with me on a National Freedom Strategy. At least the three year old has a threat point.

And so the news this morning on Radio New Zealand was mildly amusing:

Professor Jim Mann from Otago University says while diabetes management is a national health target, there is no overarching programme to battle its cause - obesity.

He says one of the reasons for that is the short-term mentality of politicians.

"Doing something about reducing the risk of obesity and its consequences is not something that anybody is going to see in a single electoral cycle."

Professor Mann says he would be willing to sacrifice long-held positions on things like taxes on unhealthy food and social marketing, to negotiate a national obesity strategy with the government.

How many divisions does Professor Mann have?