Tuesday, 21 April 2015

A new eating disorder

Paul Henry's show this morning highlighted Orthorexia Nervosa: an eating disorder characterised by an obsession with healthy eating.

I'd not heard of it before.

I'm far more familiar with its hitherto unnamed, and more serious, cousin. I'll call it XenoOrthrexia Nervosa: an obsession with other people's healthy eating.

It seems endemic in the Anglosphere countries. Can't we get these poor souls the help they need to relax about other peoples' diets? In its extreme form, it's even been associated (in film) with starting nuclear wars.

Empty houses?

Metro Mag ran a feature on empty houses in Auckland, pointing a finger at empty houses with overseas owners as a cause of Auckland's skyrocketing housing cost.
In Auckland, more than 33,000 houses were registered as unoccupied in the most recent data from 2013. A breakdown shows about a third had residents away. The remaining 22,152 properties are listed as empty.

Who owns them and why no one lives there is information that’s not readily apparent, although ask around and you’ll hear all sorts of theories – from land banking by foreign investors who see New Zealand as a bargain-priced bolt hole to families future-proofing their children’s education by buying a second house in a desirable school zone.

Whatever the real story, it’s not that the owners (or tenants) just happened to be out when the collectors knocked at the door. Census workers are given clear criteria on the various definitions of an “unoccupied” house and need evidence no one lives there (the appearance of the property, talking to neighbours) before it’s officially classified.
The rest of the article is pretty heavy on anecdote. Little of it made sense to me: why would you forgo rental earnings in a house you'd decided to buy as an investment or bolt-hole? Maybe legislation being too tenant-friendly could do it, but it seemed odd.

So I checked the figures. From Auckland Council's report on the 2013 census.
2.3 Very small increase in number of unoccupied dwellings 

There was almost no change in the number of unoccupied dwellings in Auckland between 2006 and 2013 – the number increased by only 30 to a total of 33,360 across the region. This was a significantly smaller increase than the previous inter-censal period, when the number of unoccupied dwellings had increased 3,744, or 12.7 per cent, and was also significantly smaller than other regions across New Zealand.

This could be a reflection of the housing shortage in Auckland at a time of economic slow-down and a contraction in the construction sector.

In 2013, the local board areas with the highest number of unoccupied dwellings were:

• Rodney - 4,185 unoccupied dwellings
• Waitematā – 3,696
• Hibiscus and Bays – 2,274
• Franklin – 2,055
• Orākei – 1,929

A third of unoccupied dwellings in Auckland (33.6%) were due to the residents being away, while two thirds (66.4%) were empty. The five local board areas with the highest proportions of empty dwellings were:

• Great Barrier – 87.4 per cent of unoccupied dwellings were empty (396 empty dwellings)
• Rodney - 80.6 per cent (3,375 empty dwellings)
• Waiheke – 73.4 per cent (1,323 empty dwellings)
• Ōtara-Papatoetoe – 73.0 per cent (615 empty dwellings)
• Franklin – 72.8 per cent (1,497 empty dwellings)
If the number of unoccupied houses increased by 30 from 2006 to 2013, the proportion of unoccupied houses would have dropped significantly. Further, if there are about 470,000 dwellings in Auckland and about 22,000 were unoccupied at the time of census, that's under 5%. That's not really inconsistent with houses being empty during sale or between tenancies, is it?

How can a decreasing proportion of empty-on-census-night houses be the cause of increasing housing costs in Auckland?

Monday, 20 April 2015

Theories about Conspiracy theories

Four nationally representative survey samples collected in 2006, 2010, and 2011 indicate that over half of the American population consistently endorse some kind of conspiratorial narrative about a current political event or phenomenon and that these attitudes are predicted by supernatural, paranormal, and Manichean sentiments. These findings suggest that conspiracism is not only an important element in American political culture, but also is expressive of some latent and powerful organizing principles behind American mass opinion.
So say J. Eric Oliver and Thomas Wood in the AJPS, in an article I missed when it came out last October.

Read this table and weep.
TABLE 1 Percentage of Americans Agreeing with Various Conspiracy Theories, 2011
Conspiratorial NarrativeHeard Before?Strongly AgreeAgreeNeitherDisagreeStrongly Disagree
The U.S. invasion of Iraq was not part of a campaign to fight terrorism, but was driven by oil companies and Jews in the U.S. and Israel (Iraq War)44 6 13 33 22 27
Certain U.S. government officials planned the attacks of September 11, 2001, because they wanted the United States to go to war in the Middle East (Truther)67 7 12 22 1841
President Barack Obama was not really born in the United States and does not have an authentic Hawaiian birth certificate (Birther)94 11 13 241438
The current financial crisis was secretly orchestrated by a small group of Wall Street bankers to extend the power of the Federal Reserve and further their control of the world’s economy (Financial Crisis)478 17382017
Vapor trails left by aircraft are actually chemical agents deliberately sprayed in a clandestine program directed by government officials (Chem Trails)17 45 282142
Billionaire George Soros is behind a hidden plot to destabilize the American government, take control of the media, and put the world under his control (Soros)31 9104416 21
The U.S. government is mandating the switch to compact fluorescent light bulbs because such lights make people more obedient and easier to control (CFLB)174 7 2424 41
Note: N = 1,935 cases.
Source: Modules of the 2011 Cooperative Congressional Election Surveys.

Table 3 is even worse: 27% believe we're in End Times; 33% believe in ESP.

All that's left is figuring out how to do away with Manichean dualism and superstition; education seems to be the strongest preventative measure, along with having political knowledge.

Or maybe that's just what they want us to believe.

Really, all the voting boxes are rigged and that the Illuminati are not only making sure your vote won't count but also keeping track of how you vote? Haven't you noticed that the chemtrail planes are concentrated in areas where your preferred party's support is undercounted because of the Illuminati? Think about it. Voting's dangerous. Chemtrails.


Sunday, 19 April 2015

Harden up, Auckland Uni

Ok. So an Auckland University security expert, Bridgette Sullivan-Taylor, thinks we need bag checks at shopping malls and basically wants to import to New Zealand every dumb knee-jerk bit of the security state I moved here to avoid. She writes:
So how might this affect New Zealand consumers? Hardening or toughening soft targets could mean that if you are going to the mall, you might have your bag checked at the entrances, and there might be restrictions on how long you can stay in the carpark. Employees might require security passes, and purchases might be checked on leaving the mall.
If you're going to the cinema, there could be more security screening, including bag-checking machines. You might see more CCTV or facial recognition software being used inside the mall and in carparks that are watching all your movements. Security or police staff might ask for proof of identification, carparks might be occasionally restricted directly under or on top of the mall, and we might see more information in the media informing customers about raised security threats at particular locations.
I have a proposal.

The real soft underbelly in New Zealand isn't the shopping mall, it's Auckland University itself.

Think about it. Universities have been targeted by extremists in Africa, and American universities keep being targets for shooters. You have tons of people walking around with backpacks all the time, many of whom seem to make a point of looking suspicious just for the sake of it. It would be really easy for a terrorist to blend in, plant backpack bombs all over campus, then watch the mayhem. Plus, there's all those risky international students from suspicious places.

And so I propose that we completely lock-down Auckland University. Every person going into or out of the campus should pass through a metal detector, those "see you naked" scanners, the TSA air-puff sniffer things, and have thorough backpack checks. If it takes an hour to clear security to go to class, that's not really that big a deal as compared to the huge losses we'd suffer without that kind of security, in some folks' fevered imaginings. Lots of cameras too, everywhere, on the Auckland Uni campus. And every car parking on campus should have to have extra checks to make sure it isn't a bomb too.

Plus, the Auckland Uni chemistry building should have extra hardened security in case anybody decides it's easier to build a bomb on campus using standard chem kit than to bring one in.

Everything that Bridgette Sullivan-Taylor wants to impose on Auckland shoppers should be imposed on Auckland University staff and students, double-hard.

I further propose that we only do this at the University of Auckland as a test. If we find that there are then terrorist attacks at the other universities, that will be evidence that we need to roll out protections more broadly to the other universities. Why roll it out everywhere until we know?

Disclosure: I maintain an adjunct senior fellowship with the University of Canterbury. That Canterbury's Economics department would potentially benefit from any exodus of students from Auckland has not affected my analysis here. Surely, if security is as important as Bridgette Sullivan-Taylor thinks, students would be running from dangerous Canterbury to Auckland anyway, so this really probably hurts my quasi-interests. Right?

Friday, 17 April 2015

GST at the border

Bronwyn Howell kindly walked me through what seems the least hassle-ridden way of collecting GST at the border (other than Seamus's proposal): offload it onto the domestic end of the good's shipment. The mechanism, if I understand it properly, would work as follows, with all confusions being mine.

When you order something online from a foreign shipper, they have to get it to you. Whoever they're using for the international leg has arrangements with a domestic shipper to get it to your door. And there aren't that many courier companies running the domestic side of things here, plus NZ Post.

On the local delivery agent getting a heads-up that a package is on its way, it would also have to get a heads-up on the goods' stated value. The delivery agent would then be liable for GST on the shipped item.

That agent would then contact the recipient of the good seeking payment - when you order something online, you're giving them an email address anyway. When you get the email, you'd go to another website to pay the tax so that the shipment could get to you immediately on landing in NZ. If you don't get around to doing it before the product gets here, or if it gets lost in your spam filter, you'd have to pay the courier when the item gets to you or pick it up from the courier office and pay there. In a competitive shipping market, we'd expect the shippers to figure out easy ways to facilitate payment, like keeping your credit card details on file (if you agree) so that you can be automatically billed for any future GST charges without having to get an email.

So, in a best-case world, if you'd already paid GST once through that shipper and hadn't changed credit cards since, you'd just get an email noting that the shipping company was going to charge your card GST on a shipment that's coming through, with opportunity for you to object if something didn't make sense.

That would be pretty hassle-free, after the initial hassle of having to set up accounts with the different shippers.

I note, though, that UPS in Canada always managed to charge us about $40 for the service of paying the duties and tax on our behalf at the border. Note that these fees are over and above any actual taxes collected. One hopes that New Zealand's domestic shipping industry is sufficiently competitive that that wouldn't happen here, but I doubt that the shippers would agree to become tax collectors for free either.

I also wonder whether the process might provide a mechanism for griefing shippers and others, if anyone were so inclined: ship a thousand envelopes each with a very high customs valuation for a photocopied picture inside to a bunch of unwitting recipients. The automated systems would either charge them automatically for the GST on something they'd never ordered, or would trigger collection and confusions, or would require the shipper to send back the envelopes while explaining to Customs that no GST was collected on the items. Maybe there are no griefers out there who'd try it though.

We're then weighing up the transaction-deterring hassle costs (albeit perhaps smallish in this case), combined with the extra cost imposed on consumers by turning the shipping companies into tax agents, against the allocative efficiency gains from removing a tax distortion and the prevention of the erosion of a part of the tax base. And, at the same time floating around in the background, the expectation that if the system does wind up doing too much to deter consumer-led parallel importation, domestic retail prices would likely go up proportionately.

The system seems worth IRD's investigation. But assessing the benefits of it really shouldn't begin with the numbers in the ISCR report commissioned by BooksellersNZ. The report has a lot of good stuff in it - it's where I saw the scheme noted above, and why I got in touch with Bronwyn.

But the report does have a few ...issues.
  1. The report gives, as one option, requiring foreign sellers to register with IRD. While I can buy that a lot of large online retailers would find it worthwhile to sign up to the kind of multilateral system they describe, I doubt that that is also true for lots of the smaller online US retailers. For many of them, any international shipping already seems a hassle: that’s one reason YouShop was set up, right? To forward on packages from US retailers who don’t want the hassle of international shipment?

  2. The report suggests that, under the system where foreign firms would register with IRD, local firms would have to pay taxes to the US on shipment there through some OECD coordinating mechanism. But wouldn’t that kind of system, for shipping to the US, be next to impossible absent the US sorting out its mess of local sales taxes? I mean, they’ve not yet been able to sort things out for internet sales taxes within the US; there was some talk a couple years ago about having a set of states that agree to a reasonably common base also agree to collect sales taxes for each other, but I don’t think it’s gone anywhere, has it? There are thousands of local taxing jurisdictions in the US with really divergent rules over, for example, what precisely counts as an ice-cream sandwich (and what doesn’t) for sales tax purposes.

  3. They suggest a few methods for evaluating whether shifting the regime would be a good idea and argue that a social welfare maximisation approach is strongly preferable to a government-centric approach in calculating the appropriate de minimus value or in setting other parts of the collection regime. I agree, but have a couple of worries on this front.

    1. Absent a system that is able to collect these fees pretty seamlessly, from the consumer’s perspective, we need to watch for spots where we might impose fixed costs on purchases from abroad that do not obtain for shopping domestically. For example, it seems likely to be pretty distortionary and welfare-reducing if customers are deterred from buying from abroad because of a few days’ processing lag at the border, or because of a requirement to go pick up the item at a NZ Post Office across town and there pay the duties, or an additional step when shopping requiring you to go buy a customs stamp from a Customs website.

    2. There's no note of that easy ability to parallel import from abroad can serve as substantial constraint on price-setting in domestic retail markets. That magnifies that harm that could be done if we unduly deter customers from using foreign shopping options due to expected hassle-costs. Sure, it's a second-best-worlds consideration, but we'd need some accounting for it in a social-welfare-maximisation setup.
  4. I’m really not sure that the elasticities they're using from Einav et al, for example, would really apply here - they're there used to estimate how much change there would be to shopping patters with the 15% GST being applied on international low-value purchases based on tax elasticities across US states. Shipment from different US states, from the point of view of the consumer – there’s really not much difference other than price. Whether you buy in-state or from out-of-state, you’ll have whatever you ordered in 2-5 days. Here, that’s not quite so: domestic shopping is far more immediate than shipping in from abroad. Since they’re not nearly as close of substitutes for one another, the price elasticity of demand between foreign and domestic should be lower, right? Further, because the NZ market is much thinner, there are plenty of products you just can’t get here: again, this lowers the expected price elasticity and means that you might be overestimating the effects of the de minimus thresholds.

    1.  On this one, I’m really willing to put money on it with any of the authors. If a seamless collection of 15% GST at the border is implemented, I am willing to bet that the decline in demand for Book Depository in New Zealand is less than 20% (they predict 45-60%). It’s range of products and ease of getting the books that’s driving demand for Book Depository, as well as price differences well in excess of 15%; an extra 15% charge is trivial – or at least that’s my bet. But only conditional on shipment’s being seamless. I’m more than happy to bet that you could kill demand for Book Depository by making it a hassle to receive shipment.

  5. I am curious that they're counting as benefit the jobs that would be created in New Zealand subsequent to deterring imports by imposing substantial delays on importation. Mightn’t we need some modelling of whether those workers would be drawn from other actually productive sectors? It looks to me like we’d be imposing large and real costs here to effect a transfer from domestic consumers and foreign retailers to domestic retailers. Some accounting for the elasticity of domestic prices with respect to degree of foreign competition also seems likely to be relevant.

  6. I was interested in their choice of counterfactual at the end where they invite the reader to imagine the benefits of a $5k tax-free threshold if only we could lower the de minimus threshold. Do they believe that this is the relevant counterfactual? Really?
In particular, I was very surprised to see this line in a report that had either Bronwyn's or Norm Gemmell's name on it:
“This enhanced demand at domestic retailers not only results in increased producer surpluses, but firm growth leading to increased employment. Jobs created by a reduction in the de minimis threshold increase the economy’s productive capacity, clearly benefiting the rest of the country. Enhanced domestic employment results in increased consumer spending, and through the multiplier effect, enhanced growth throughout the economy.”
Emphasis added. Jeez.

Thursday, 16 April 2015

Deadweight costs and ACC

This week's Initiative column at Interest.co.nz takes on deadweight costs and ACC. A snippet:
Andrew Little is right to be worried about the deadweight costs of this tax. The extra 0.33 percent that workers and firms pay in ACC levies would be better left in employer and employee pockets.

The Infometrics analysis uses standard Treasury methods where raising a dollar in tax is assumed to cost the country $0.20 over and above the value of the raised dollar: $0.20 in ‘deadweight’ costs, as economists put it. These are not primarily the administrative costs of collecting taxes but rather the costs the economy faces when a payroll tax makes employees more expensive for employers and makes employment less rewarding for employees.

An extra 0.33% in payroll tax will not be a make-or-break issue for most employees or employers, but would be enough to kill just under 600 jobs in a country with just under 2.4 million employed persons. As Little warns, excess taxation by ACC “costs jobs and growth and holds New Zealand back.”

But while we are considering changes to ACC to avoid the 0.33 percent excess tax, we could perhaps consider more ambitious changes. In particular, does New Zealand really need strongly prescriptive workplace safety rules if ACC premiums are set correctly? ACC offers reasonable discounts and penalty rates based on firms’ claims histories, with additional discounts for complying with best practice standards in safety.

The New Zealand Initiative’s Dr Bryce Wilkinson provided back-of-the-envelope indicative calculations thatthe additional costs of more stringent scaffolding regulations alone could be of the order of $180 million. If ACC has its levies set correctly, construction companies (and others) would already have strong incentive to provide a safe work environment, and could tailor their safety practices to reduce accidents by whatever method is most cost-effective in their particular situations rather than having to comply with standards that might not always be fit for purpose.

If Little could ensure that ACC gets its pricing right, and uses that mechanism to help ensure worker safety rather than prescriptive standards, the benefits to the economy could be much greater than the savings from reducing the average ACC levy from 2.16 percent to 1.83 percent.

Wednesday, 15 April 2015

RBNZ on Housing

I knew that Mike Reddell's now being free to blog on monetary policy and the RBNZ was going to be good.

Here's Reddell's take on the Deputy Governor's statements on housing.
We should expect the Reserve Bank to provide in-depth analysis to back its claims around the housing market.  But in a 19 page speech, only five paragraphs are devoted to the “housing pressures are a threat to stability” section.  And if not everything can elaborated in a speech, we might expect to see links to recent Reserve Bank research in the area – but there are no such links, and not even references to the issue of the Bulletin published only a few weeks ago which cited international research suggesting that housing mortgage loans have rarely played a major role in systemic banking crises. Issues of the Bulletin are generally regarded as speaking for the Bank, so it might be useful for the Bank to clarify just where it stands, and why.  New Zealand might be different, but if so why does the Bank think this is likely?   Perhaps the Bank can point us to countries in which private sector credit growth of around 5 per cent per annum, from starting levels of PSC/GDP that are still materially below the peaks reached 7-8 years ago, have led to serious threats to financial system soundness, or even to wider economic stability.
The Deputy Governor has been consistently reluctant to engage with the proposition that any financial stability risks must have been much greater in 2007 than they are now.  In the years leading up to 2007 we had seen:
  • Very rapid nationwide growth in real house prices, on a scale not seen previously in modern New Zealand history
  • Very rapid growth in credit and credit-to-GDP, on scales consistent with some of the international indicators that have been taken as suggesting heightened risk of crisis.
  • Much lower overall bank capital ratios (actual and required)
  • A move (in the adoption of Basle II) towards lower risk weights on housing.
  • A long-running period of economic expansion and consistently high levels of optimism
  • High levels of real investment in housing
  • Rapid growth in commercial property and farm prices, and in the associated stocks of credit.
All of which was followed by one of the nastier recessions New Zealand has seen in the post-war period, and a double-dip recession in 2010.  GDP per capita (real and nominal) settled onto a much lower track than had previously been expected – so that many borrowers’ income expectations proved to be quite severely disappointed.   
Nominal house prices did fall during the recession, and by more than the Reserve Bank projected at the time.  And yet with all these factors, the soundness of our systemic institutions was never questioned (even in the midst of a global panic centred on concerns around housing) and the level of impaired housing loans rose only modestly to extremely low levels.
The current climate just does not bear comparison.  If the Reserve Bank disagrees, it would be helpful for them to lay out their arguments and evidence. 
Go read the whole thing. He also hits on whether any tax advantage lies with unleveraged owner-occupiers or those nasty investors.

The relevant RBNZ paper is here.

I wonder whether any old Lyndon Johnson quotes are being circulated over at #2 The Terrace.