Wednesday, 23 May 2018

Otago no-fun

Otago University once had a bit of a reputation as a party school, despite its public health department. 

Times change. The Spinoff reprints a piece by Chelle Fitzgerald from Otago student magazine Critic going through the bars they've lost:
The Gardies was the crown jewel of Castle Street. It hosted International Nude Day, the beloved holiday instituted by former All Black, Highlander and Sports Café presenter Marc Ellis. Ellis also judged the regular Beerable Arts competition there, usually streaking during the competition. Students would flock there specifically to see him nude. The 2010 closure of the Gardies, now a sleek university study centre, heralded a turning point in Otago scarfie culture.

I caught up with Marc Ellis to chat about how things have changed in Dunedin. He was at the Satay Noodle House, “a happy place” for him, tucking into a seafood deluxe. Famously, he once tried to purchase his former happy place, the Gardies. However the university swooped in and snatched it, he claims. “The pub had an evaluation at $1.1 million, and when the university heard we were trying to buy it, [with] the breweries’ backing, they paid $1.6 million for it – and that’s in the middle of a global financial crisis.”

Interestingly, the university found this stack of money at a time when they apparently could not even muster the funds to keep various departments fully staffed.

Critic uncovered emails using the Official Information Act which showed the university purchased Gardies with no plan of how they were going to use the property (while some believe this was simply to stop Ellis getting his hands on it, official evidence to support this has never surfaced).

Ellis had hoped to keep the Gardies as a pub owned by students, for students. “We were going to sell shares for $1000 to students. So if it cost $1.2 million, you’d get 1200 shareholders – we don’t own it anymore by that stage, it’s owned by the students. So you’ve got 1200 people who have a vested interest in ensuring it goes well, so they come down and have a beer, it’s actually a really simple strategy. But the university runs Dunedin, so the council would be on your back, and then you’ve got the legislators making it difficult, they can red tape you and make your life an absolute misery.

“It’s sad, isn’t it, university now is so different because you’ve got a board of grey-headed old white men making decisions which are just totally off pace with the evolving world. And they get it wrong – they’ve just ripped the heart and soul out of the university.”

Ellis has a point. With the elimination or reimagining of student pubs like the Gardies, the Bowler and the Cook, our neighbourhood has really changed. North Dunedin used to be a special place to blow off steam during uni. “It was a really beautiful melting pot and focal point for people from different courses, and different lifestyles and backgrounds, to meet, and to bond,” Ellis says. “And to remove that, and force them to try and hope to meet like-minded souls in the Octagon, with everyone else, and the general punters wanting a beer after work, it just doesn’t work.”
I love this bit from Ellis too:
“What’s the logic of the university, seriously? Trying to get rid of the pubs so there are a thousand people at ten flat parties, which is harder to control than a thousand people at one pub.”

“There are a lot of things conspiring against the survival of the student pub. You could bring it back, but you’d be fighting battles with all these bloody puritans and board members. Congratulations to the grey-headed old fuckwits who’ve sanitised university. Well done!” 
If only Otago constrained themselves to their own campus rather than having more imperialistic ambitions....

Update: the Proctor's confiscated all the issues of the student magazine's special issue on menstruation. How long until they're basically New Zealand's bible college, except secular?

Tuesday, 22 May 2018

Reader mailbag: Caveats on policy costings

This morning's inbox came with excellent comment from an informed reader about the difficulties in getting reasonable independent policy costings. The email reads (and is shared with permission):

  • Do not underestimate how effective agencies can be at blocking information they do not want others to know. One reason the costings will be poor is because all kinds of information will not be unavailable because the agency, not the minister, do not want to be challenged. You will find "privacy" and "computer systems" becomes big issues...
  • The main advantage of a single separate agency is consistency in the assumptions. At the moment they change depending on the whim of the needs of a budget bid. If agencies have to write down and be long term accountable for the assumptions, that will be a big step forward in like for like comparison. Even if the costings themselves are no more accurate, they comparison between policy costs (bigger, smaller, etc) will be more robust
  • My experience of independent agencies is not good: stats NZ, Office of the Auditor General, Ministry for Women, SuPERU, etc They are all small agencies with some kind of "advocacy" role that they use to justify pursuing their own agenda. Ministerial accountability has its limits, but it is at least real accountability.

I agree with most of this. Privacy seems to be the default "Computer says no" reason for not doing things. Also agree that on the advantages of having a single consistent, if biased, ruler over having multiple different rules with different biases. 

My prior piece had looked at the ways a party might avoid having rigourous costings applied. Accountability for the costing agency would be a fun one - perhaps reinstate betting markets on whether policies wind up costing what they're advertised to cost? Ex-post assessments?

Costing policy

As the Greens' proposal for a policy costing unit looks like it'll be going ahead, here are some of the fun bits they'll have to deal with in setting it up. 

From my piece on it over in the NBR a couple years ago, when the Greens first pitched the idea:
The Greens’ proposal that election campaign promises be costed has drawn the praise it is due: it is an excellent proposal.

But it is a harder job than it might seem.

Even during the normal course of events outside of election periods, adequate costings or cost-benefit assessment of policy seems more the exception than the rule.

If the government is to build civil service capacity to cost all political party promises during the election period, why not use that opportunity to build an agency able to review policy over the course of the government’s term?

Let’s start with the difficult part on election policy costings.

Parties wanting costings on their policies can get them through the Treasury – although that potential is far more notional than real.

The State Services Commission’s Guidance for the 2014 election included guidelines for costing party political policies; the Treasury also provides a high-level guidance document.

Going through minister

But requests for costings must go through the minister of finance. This is no fault of current or previous governments – the Treasury is responsible to that minister.

A party outside of government requesting a policy costing could well worry the minister might request sensitive details. So it seems unlikely opposition parties would seek such costings under the existing guidelines.

Were an independent agency of Parliament to undertake the costings, what the agency might lose in expertise would be made up for in credibility: asking an agency responsible to a minister to undertake work that would be kept confidential from that minister does not work well. The Greens’ proposal consequently could be better housed elsewhere.

Suppose that agency provided costings on a voluntary basis. If everything were working properly, parties wanting policy costings from that kind of independent agency would request them early in the election period.

Time to do the research

The agency, and the ministries with which it might need to coordinate, would then have sufficient time to undertake the work. The parties could still time their policy releases throughout the election campaign but they would have had to have developed them early enough to have them costed.

Policies that parties would prefer not be costed would not be costed, while those that are costed have the cooperation of the party requesting it. Policies would be costed when parties expect they would fare well under evaluation.

That changes when an agency is charged with costing all policies.

Imagine you were a political consultant who came up with some policy that you, and your party, reckoned would be great politics, even if it were terrible economics.

Currently, you would never seek a sound costing on that policy – and you would hope the Taxpayers’ Union would not hire someone to run an eye over it.

Were all election promises costed by an independent agency, you would be well advised to delay submitting your policy for costing so that only a cursory take on it could be provided.

You would also be tempted to wrap the policy in enough complexity that any costing provided in a hurry would have to make simplifying assumptions. Or, conversely, you could avoid providing any of the details necessary for a costing, saying the finer points would be worked out while in office.

You could then attack any assumptions the costing unit might be forced to make as being Treasury ideological “burps” – as former Finance Minister Michael Cullen once dismissed sound Treasury advice.

An agency doing this job would need to have a fair bit of in-house expertise in costing. It would also need to have a strong reputation for down-the-line analysis. And, for it to do any good, there would have to be underlying voter demand for sound policy costings.

That last requirement is a bit of a worry. You might think that, if voter demand for policy costings were strong, parties would already be seeking independent and credible costings of their main policy planks.

Switching the default might make a difference. Currently, policies are only costed where parties want them costed. In the alternative, policies would only fail to be costed if the party had something to hide, or if the party came up with its policy proposals late in the game.

Voters who came to expect costed policies might draw the proper inference from ones that were not able to be costed.

And so while I really rather like the idea of all policies’ being costed, it will not be a small job where parties might want to throw sand into the works – for some policies.

But the attention to the costs of policy is strongly welcome.

The cost of existing policies, unfortunately, draw rather less attention. Even in the absence of independent costings, political parties have reasonably strong incentive to draw attention to the costs of their opponents’ platforms.

New policies proposed after the election at least draw cursory assessment as part of standard regulatory impact analysis – even if Sapere’s analysis last year found that 20% of regulatory impact statements completely failed to meet quality assurance guidelines and only 30% fully met them. Strengthening independent evaluation there might not go amiss.

Usual spending untested

But the bulk of the government’s spending – the big line items that do not change much from budget to budget – receive rather less attention.

Take the government’s student loan programme. Labour’s zero-percent student loan policy drew attention during the 2005 election campaign and again in 2008. But we do not often hear discussion of the $5 billion gap between the nominal value of the loan and their carrying value.

The vast majority of government spending simply carries on, from year to year, without much notice.

Perhaps an agency established to cost new political party proposals could, between elections, spend its time running rolling reviews of existing spending programmes, ensuring they continue to deliver value for money.
Bryce's report with Khyaati goes through these kinds of fiscal councils, and some of the other tasks that they might usefully undertake. 

Monday, 21 May 2018

Legalise it already

Marijuana legalisation started in America over twenty years ago with medical marijuana in California. It's expanded considerably since then. It is hard to look at the overall experience and conclude that New Zealand should not follow suit.

Remember that we are not talking about inventing marijuana for the first time or something. Marijuana exists and is consumed regardless of whether it is legal. Arguments about how bad marijuana is are a bit stupid. However bad you think marijuana is, you should be more worried about whether those harms are better mitigated by current prohibitionism, or by legalisation.

I had a chat with Bryan Crump over on Nights at Radio NZ about it a couple weeks ago, then wrote up my notes a bit more fully for a column over at Interest. A snippet:
Next up, the children. Won’t somebody think about the children? It has never seemed plausible that prohibition particularly discourages youths from using marijuana. A dealer of illegal drugs will not care about his clients’ ages unless there are sufficiently higher penalties for selling to children than for selling to adults though licensed retailers care about keeping their licenses. But, again, it is an empirical question. Legalisation could normalise or de-stigmatise marijuana use and could consequently increase youth uptake. Did it happen?

No. Anderson, Hansen and Rees showed that medicinal marijuana laws, if anything, led to a slight decrease in youth uptake of marijuana. Sarvet et al’s later metastudy looked across eleven different studies of adolescent marijuana use and found no support for the idea that legal medicinal marijuana encourages youth uptake.

How about marijuana as a gateway drug – or as substitute for other drugs? Victoria University of Wellington’s Luke Chu showed that medical marijuana laws did increase overall marijuana consumption, but also resulted in a 20% drop in medical admissions for heroin-related treatment, with no effect on cocaine. By that measure, marijuana access reduced use of harder drugs.

And Powell et al’s recent study showed that medical marijuana laws reduced opioid mortality rates. Opioids have become a scourge in much of rural America, with abuse of Oxycontin being rampant. But access to medicinal marijuana dispensaries cut opioid overdose rates by about a quarter. And, in the earlier period when regulation around dispensaries was less tight, the reduction in opioid mortality rates was even higher.
If a couple decades of American experience plus a Labour/Green coalition here can't get us toward legalisation, I wonder what can.

Friday, 18 May 2018

Budget 2018

Yesterday, I attended my first budget lock-up.

It was less interesting than it sounds.

But egads the Treasury staffers there are good.

For three and a half hours, you can look at the budget and ask any of dozens of Treasury people floating around the room about how different numbers were established. If they don't know, they know the person in the room who does know. And if nobody in the room knows, they'll phone the person back at the office who does know and will get back to you within minutes.

It is simply amazing. If I do it again, I'm going to have to come into the room with a big long list of all the things I always wanted to know but didn't know who to ask. Because they'll sort every one of them.

The one I was particularly curious about was the tobacco excise forecast. The government earns a lot of money from tobacco excise. And the government has now legalised vaping. The prior path of tobacco excise hikes would have had total tobacco tax revenues increasing a bit further despite volume declines. But with the availability of new and safer substitutes, the prior relationship between prices and consumption wouldn't be reliable.

So I asked! The tobacco excise forecast is based on an assumption of a two percent reduction in volume per year, based on historic trends. If those trends continue, and if excise freezes after the currently scheduled round of hikes, then excise reaches $1.86 billion by 2021 and starts falling a bit thereafter. I doubt that 2% per year volumetric drop is the right forecast as vaping becomes more mainstream and legal-legal instead of just pretty legal, but I'm not sure what the right forecast is. If consumption drops by 10% per year instead of 2% per year, though, you pretty quickly wind up with half a billion less in excise revenue than you might have been banking on. What has been pretty inelastic demand can turn pretty elastic once substitutes become widely available.

I'd provided budget takes for the Dom Post, the Spinoff, and this week's edition of our Insights newsletter. I tried to hit on bits other than the usual "This is who gets what" stuff ably handled elsewhere.

I also had a bit of a chat with Andrew Dickens at Newstalk ZB, but technical meltdowns at their end meant things ended at the commercial break rather than continuing afterwards. Alas.

Thursday, 17 May 2018

Minimum wages and the margin

Michael Reddell makes a lot of sensible points about the government's intended hikes in the minimum wage. He reminds us that:

  • Improving measured average productivity by disemploying the least productive is a false economy;
  • Improving capital investment by forcing a substitution towards capital by making lower skilled labour too expensive is not the kind of productivity boost that improves overall economic performance.  
I'd add another bit. 

If a minimum wage becomes binding, firms have a few ways of responding. They can disemploy workers, change hours and rosters, and substitute towards labour-saving capital. But they can also chisel on other margins of the employment deal so that their effective labour costs go down. Every job is a bundle of tasks of varying desirability and a bundle of rewards of varying value to the worker and cost to the employer. 

Suppose that the total compensation bundle provided to an employee costs $20/hour, including money wages and on-the-job amenities like whether the air-conditioning and heating is set to comfortable temperatures, the comfort of the chairs or workstations, the ease of slotting shifts into your preferred schedule rather than the employer's preferred schedule, the degree of monitoring of on-the-job activities and breaks, and a host of other things that are part of the deal. 

If the minimum wage goes up, one of the margins on which employers can and will respond is in reducing costs on those other margins. Most of those margins are invisible to employment law, but do make work less pleasant. Among those workers who continue to be employed after a minimum wage hike, we should expect that at least some of the benefit of the higher wages is chiseled away in worse conditions. And we should expect that many workers will not prefer the resulting overall bundle - otherwise they could have contracted for fewer on-the-job amenities and higher wages in the first place. 

One margin that is visible to employment law is off-the-books hours: morning meetings before the official clock starts; clean-up after the clock stops; working lunches and the like. There's been a fair bit of press around that part lately. Off-the-clock hours make minimum wages less binding. 

As minimum wages ramp up toward 72% or 73% of the median wage under Labour's schedule, expect more of this kind of thing. If it comes with greater policing around easily monitored stuff, like unpaid hours, expect more chiseling on unmonitored things, or greater disemployment. 

Wednesday, 16 May 2018

Sweet slopes

Slippery slope arguments are only a logical fallacy if you don't have a mechanism. 

In health and lifestyle regulation, there are a couple of plausible ones. A rather plausible one is that establishing control regimes over consumption behaviours in one domain reduces the marginal cost of implementing similar control regimes over other consumption behaviours. Eugene Volokh covered rather a few mechanisms over a decade ago.

Here's Grant Schofield, the Ministry of Education's special health advisor and public health professor at AUT:
“[This Government] might not do a tax right away, but they can certainly start….with any of the points in our paper that we’ve suggested.”

Anti-tobacco laws over the years are used by Schofield and his co-authors to show the importance of Government intervention in making sugary foods less available and affordable in shops. Changes at the supermarket, ensuring sugary food and drink are not “loss-leading” and easy, end-of-aisle temptations, are among the recommendations.

Organisations providing dietary advice should also be banned from accepting money or endorsing products that market processed food, Schofield says. If they do accept or promote companies that have processed food, that should be publicly declared to show a conflict of interest. 
[Schofield] also points out that anti-sugar policies could be tacked on to current “infrastructure” restricting sale and advertising of alcohol and tobacco.

“We’ve got quite strict controls [over alcohol and tobacco sale]. I know people enjoy them, but they cause harm. It’s exactly the same with sugar and junk food.

“We already have all the infrastructure to do that with alcohol and tobacco, so let’s just chuck sugar in there as well.

Schofield also uses tobacco to rebut “industry arguments” regarding potential loss of business.

“At every point [when changes were made], there was interference. When smoking was stopped in bars and pubs, the industry… said it was going to be the end of everything and there would be people out of business. Actually the exact opposite happened. The country was just a better place.”

Overall, the public health problems stemming from excess sugar consumption are not too different from those associated with tobacco.

“You can say there is no safe level of tobacco, but there is a safe level of sugar,” Schofield admits.

“But there’s no nutritional value for sugar. I’m not saying we’ll ban it, it will still be in society, but we’ve got to change its availability - it’s pretty obvious.”
I care less about plain packaging on cigarettes per se than about the slope it puts us on. Remember what Jack Banzhaf told us about tobacco in the 90s?
"They use the 'slippery slope' argument. 'My God, if they can do this to smokers today they can do this to people who eat Haagen-Dazs ice cream or whatever.'"
Yup. They did. And they were right. Adjust your priors accordingly.

Bit depressing though. Wasn't it only a couple of months ago that NZIER and the Ministry of Health both advised that sugar taxes were a pretty bad idea?