Thursday, 15 March 2018

The deregulated interregnum

E-cigarettes in New Zealand are in a really interesting spot right now.

Last year, the then National-government signaled that a new legal regime for vaping was on its way. At the time, importation of nicotine-containing vaping liquids for personal consumption was allowed, but retail sale within New Zealand was not. That wasn't to say it didn't happen, but you kinda had to be a Wellington hipster to know where to get the stuff.

I'm not sure that the de jure ban on retail sales was ever really enforced, but it was all on the down-low because retailers feared enforcement.

That's all changed. Here's what was on the counter at a local dairy just a couple weeks ago.

They're still operating in the shadow of regulation. They're restricting sales to those over the age of eighteen. 

But whatever regime winds up coming up will have a hard time being more liberal than the current de facto liberalisation. I don't know whether suppliers are currently holding back from advertising for fear of getting in trouble for it; allowing advertising would then be a step forward. Otherwise, the current de facto regime has sales at dairies and at specialty shops; some of the public health people would want to restrict access to pharmacies and only after a doctor's prescription. 

Peter Huber's work on regulation emphasised the difference in incentives facing agencies that seek to regulate against new risks, and those that seek to regulate existing risks. The FDA is a good example of the former. Because it would take stick for being too quick to approve an unsafe drug, and nobody would much protest if they killed a hundred thousand people by being too slow to approve a drug that was actually safe, the FDA will be too restrictive. There isn't an established constituency arguing for the release of the new drug because most of the would-be consumers of it don't know that they could be helped by it. He contrasted that with the EPA, which often goes after chemicals that are found to be more dangerous than previously thought. In those cases, there's a more careful balancing because the thing that's being regulated has a substantial group of users whose interests have to be considered - or they will raise heck about it. So there's then less likely to be excessively cautious regulation.

The upshot of all of that is that the longer this current de-facto legalisation runs, the more liberal will be the resulting regulation. Why? The more people who switch from smoked tobacco to vaping while the rules are easy, the more users who will be absolutely furious if the Otago public health people make them get a doctor's note for their next batch of nicotine e-liquid. Instead of a Select Committee process with the Otago restrictionists on the one side up against a few hipster vapers on the other, you'll have one with the Otago people up against thousands of rather more sympathetic community of users on the other.   

The vaping advocates wanting to hurry-up MoH on this stuff might think it through a bit more. 

We still don't know what will happen. If Parliament is determined to be stupid despite a huge existing set of users, like it did when it banned access to pseudoephedrine cold medications, it'll do it. But the longer the wait, the more likely we'll be to get something reasonable because the underlying balance shifts. 

Friday, 9 March 2018

Does a housing crisis have heritage value?

Ryman Healthcare wants to put up a retirement village in Karori, along with a pile of related services. They've bought the old Karori teachers' college.

It's a great site - easy land to build on, right on bus routes, an easy walk to Karori village and right next door to the Karori Swimming Pool.

But there's a problem. The old Karori teacher's college is apparently a great example of 1970 brutalist architecture, and New Zealand has a rather low threshold for applying heritage designations to buildings. Heritage New Zealand wants to impose a Category 1 listing on it.

Meanwhile, in Auckland, View West wants to tear down an old unreinforced soft concrete church in Epsom that is at risk of falling down onto passers-by and replace it with terraced housing - the kind of dense inner-suburb housing that Auckland is missing. Heritage New Zealand opposes that, noting "unacceptable adverse historic heritage effects."

I have a small proposal. Until the housing crisis ends, no new heritage designations. If a building or site is of sufficient value, Heritage New Zealand should solicit donations so that it might purchase the site. The good people at Architecture Centre might chip in to buy the Karori teacher's college as they seem rather fond of it. As owner of the building, Heritage New Zealand would then be able develop the site as it deems best.

For buildings with existing heritage designations, a Council refusal to grant consent to develop for housing should be treated as a Council offer to purchase the site at its rateable value. Submissions opposing the development should be treated as offers to contribute towards Council's purchase of the building. Submissions opposing development that do not include a pledged amount to contribute towards the site's purchase should have no standing. Council then can decide whether the weight of opposition, along with its own willingness to contribute towards buying the site, is sufficient to warrant purchase of the site.

Rational addiction and Naloxone

Suppose for a moment that addicts are rational and that we're really in a Becker-Murphy world.

What happens in that world if a new technology makes it safer to consume an addictive product?

If you're overdosing on opiods, Naloxone can save your life. The easier is access to Naloxone, the less likely addicts are to die if they have an overdose. Preventing death is good. 

If we're in a rational addiction framework, net effects on mortality will be lower than you might have thought though. The costs of taking up an addictive good go down, so more people will choose the addictive consumption path. The optimal quantity consumed on that path should be higher as well where the risks are somewhat abated. Addicts would have less need to build in safety margins against higher than expected potency, for example. 

Basically the A curve in the model shifts up. You then get an unstable low-consumption equilibrium at a lower amount of consumption than was previously the case, and a stable high-consumption equilibrium at a higher level than used to be the case. 

None of that says that improving access to Naloxone is a bad thing. It just says that, depending on all the relevant elasticities, you could easily see increases in consumption and increases in the number of consumers. Effects on overall mortality - hard to say. The number of overdoses will go up, but a higher fraction of overdoses will be countered by Naloxone.

What does the evidence say? Naloxone access laws vary state-by-state in the US, so we can figure it out. And Jennifer Doleac and Anita Mukherjee did. What did they find?
Policymakers have multiple levers available to fight opioid addiction, and broadening
Naloxone access aims to directly address the most dire risk of opioid overdose: death. Naloxone can save lives and provide a second chance for addicted individuals to seek treatment, but access to this lifesaving drug may unintentionally increase opioid abuse by providing a safety net that encourages riskier use. This paper shows that expanding Naloxone access increases opioid abuse and opioid-related crime, and does not reduce opioid-related mortality. In fact, in some areas, particularly the Midwest, expanding Naloxone access has increased opioid-related mortality. Opioid-related mortality also appears to have increased in the South and most of the Northeast as a result of expanding Naloxone access.

Our findings do not necessarily imply that we should stop making Naloxone available to
individuals suffering from opioid addiction, or those who are at risk of overdose. They do imply that the public health community should acknowledge and prepare for the behavioral effects we find here. Our results show that broad Naloxone access may be limited in its ability to reduce the epidemic’s death toll because not only does it not address the root causes of addiction, but it may exacerbate them. Looking forward, our results suggest that Naloxone’s effects may depend on the availability of local drug treatment: when treatment is available to people who need help overcoming their addiction, broad Naloxone access results in more beneficial effects. Increasing access to drug treatment, then, might be a necessary complement to Naloxone access in curbing the opioid overdose epidemic.
They frame their work in terms of moral hazard, and don't mention the Becker-Murphy model, but this is what we should expect out of a Becker-Murphy rational addiction model. The cost of consumption of an addictive good goes down, so consumption of it goes up. 
It may seem surprising that drug users respond to incentives in a sophisticated way. One may think that drug users are poor decision-makers or that addiction makes rational choices impossible. Addiction surely clouds judgement and makes policy in this area difficult, but there is substantial evidence that even drug users respond to incentives. A large body of empirical evidence documents that the consumption of addictive substances is sensitive to prices. For example, increasing taxes on alcohol reduces alcohol consumption (Cook and Durrance, 2013). Alcohol abuse also responds favorably to increasing the likelihood of punishment, as seen in evaluations of the 24/7 Sobriety program (Kilmer et al., 2013). Hansen, Miller and Weber (2017) show that marijuana consumption is price inelastic in the short run, but quickly becomes price elastic, with consumers reducing their consumption in the face of higher marijuana taxes. And finally, Moore and Schnepel (2017) show that a massive reduction in the heroin supply in Australia resulted in a long-term reduction in heroin consumption among those using heroin at the time, due to a spike in the price of the drug. These findings suggest that, at least on the margin, drug abuse may be sensitive to non-monetary costs such as the risk of death.
Rationality-based models. They may not be woke, but they work. Read the whole thing. Or, for Doleac's tweetstorm on the paper, check her feed here

Thursday, 8 March 2018

Dirty pool

Thanks to Newshub, we now know that the government-owned insurer Southern Response had private investigators snooping around after earthquake insurance claimants.

There are potential non-horrible explanations for some of this kind of thing. I was surprised that there weren't violent incidents involving severely aggrieved insurance claimants who had been treated very badly by EQC. If an insurer had received threats, it would have not been remiss in passing those along to police - and hiring some additional help wouldn't seem amiss.

And if an insurer thought that a claimant were doing something dodgy with respect to a claim, it's good to try to knock out insurance fraud.

But this smells more like attempts to silence critics by a state-owned entity.

RNZ adds more detail.

I'll look forward to seeing what the State Services Commissioner finds out.

Wednesday, 7 March 2018

A sunset solution?

There's no way that Labour would implement this now, but it's something that the next third-term government should seriously consider.

Any incoming government has a big platform it wants to implement. Some of it will be well thought-through; some of it will be off the cuff dumb promises made in the heat of an election campaign.

And policy passed in haste as part of an incoming government's 100-day plan will never get the kind of rigorous treatment in an RIS process that it should. That would be true even if Treasury hadn't diverted all computer power over to trying to measure happiness, much like the Starship Heart of Gold's computer being fully occupied in trying to figure out how to synthesize tea while missiles from Magrathea approached at speed.

A potential solution? Sunset clauses. Something like this:
All legislation and regulation must be accompanied by an adequate Regulatory Impact Assessment. Where haste prevents the an adequate RIS from being produced, that legislation or regulation must include a sunset clause voiding the policy two years after its implementation and mandating a Post-Implementation Review to be completed within eighteen months of the the policy's initiation. That would be followed by an amendment bill to the original legislation. A successful PIR would have the amendment bill simply remove the original sunset clause. But a PIR finding deficiencies, or failure to produce a PIR, could lead either to more substantial amendment or termination - with the default in case of no legislative action being the policy's termination under the sunset clause. 
A mid-term government could be pretty confident in doing this because it will impose far greater constraint on any incoming government than it imposes on itself. Mid-term governments have plenty of time to consider their legislative proposals; incoming governments try to make a pile of big changes in a hurry.

And an incoming government abolishing a requirement for sunset clauses could reasonably be asked by voters why it thinks its policies wouldn't stand up to post-implementation review.

Tuesday, 6 March 2018

Submission time

It sounds like religious groups have been sending through a pile of submissions opposing David Seymour's end-of-life bill on assisted suicide.

Today's the last day for submissions. Hit the link here to put in yours. If you don't have your own, you could just copy mine in and say you agree. Or improve on it. Remix as seems fitting.

  1. I am a New Zealand Permanent Resident who hopes to live in New Zealand until the end of his natural life.
  2. Death is abhorrent, but some ways of dying are more abhorrent than others. This bill allows those facing truly miserable ways of dying to find a better way of ending their lives.
  3. Failing to adopt this legislation will not abolish suicide. Whatever your moral views on suicide, people facing intolerable end-of-life conditions currently have suicide as a de facto option.
  4. Current legislation forces those facing intolerable conditions to pursue suicide in worse ways. Because it is forbidden to provide assistance to someone considering suicide, a person knowing that an intolerable end awaits must either suffer that end, or commit suicide while still in sufficient bodily control to be able to effect that choice. 
  5. Allowing assisted suicide allows those facing an intolerable end to defer suicide to a later date, when life has become - in their view - no longer worth living. This point may come well after the point at which suicide would be impossible without assistance. 
  6. The legislation imposes no obligation on any physician to provide assistance. Any physician with moral objections to providing assistance can simply not provide that service, leaving it to others who are willing. 
  7. The legislation places substantial restrictions on those wishing to pursue assisted suicide; the potential for abuse of the provision seems limited.
  8. Those with moral or religious objections to suicide, and to assisting with suicide, will continue to have recourse under this legislation to not pursue suicide or to assist in suicide. Nothing in this legislation compels those opposed to assisted suicide to assist in the process. Those with moral or religious objections to assisted suicide should not have the right to impose their views on others. 
  9. A continuation of the current ban on assisted suicide is morally abhorrent. My life is my own, and the choice to end it is mine.
  10. In the absence of a provision for assisted suicide, should I face terminal illness with severe diminution in capabilities and/or intolerable pain, I would have to end my life on my own while I still were able to do so. I would have to do so secretly, to avoid imposing legal risk on my family who might otherwise be thought to have been complicit in my decision. It will be lonely, and terrible. To those Members of Parliament who think it immoral to allow me a better end-of-life choice, should I ever wind up in that situation, know that you will not be preventing a suicide but only ensuring a worse one. Is that really what your God would want?

On the recommendations part, I only said that Parliament should pass the legislation and should not impose further restrictions on access to this choice.

NZIER on the foreign buyer ban

Richard Harman's Politik newsletter points to NZIER's rather scathing submission on Labour's proposed ban on overseas buyers. NZIER's submission is here. There are some very good bits. 
We understand why this Bill has been introduced. We understand why Treasury has written a Regulatory Impact Statement (RIS) that contains very little evidence. We too would like it to be easier for first home buyers to get into their own home.

But none of these things detracts from the fact that, from an economic perspective, this Bill is a poorly-designed solution to a poorly-defined problem. As a result, NZIER opposes the Bill.

We recommend the Select Committee considers the scope for exemptions from the sweeping provisions of the Bill in terms of investment in certain regions or in certain types of residential development that would add to New Zealand’s housing supply and are less likely to be thought of as sensitive.

Given the lack of empirical evidence and poor data quality around overseas investment in existing houses or residential land, we recommend a timely and well-publicised monitoring and evaluation process to ensure the Bill does not have unintended consequences.


We have a great deal of sympathy for Treasury – it was effectively railroaded into delivering a RIS to implement a proposed legislative change with which it likely disagrees, and it would have been very difficult from a relationship perspective for Treasury to develop a RIS that explicitly advised against the new government’s proposal.

What’s the economic problem, exactly?

In a RIS, the problem definition should clearly identify the market or policy failure that needs to be addressed, what is causing the problem, and – ideally – how material the problem is. The problem definition is the foundation on which any RIS should be built, because it clearly explains why change is required at all.

The problem definition in Treasury’s OIA Bill RIS falls well short of best practice. In fact, it is almost non-existent. It contains almost no information or empirical content. It merely states that the new government has a stated policy commitment to “ban overseas speculators from buying existing houses” and the RIS is all about how to implement the political proposal.

This is effectively Treasury waving the white flag from a policy analysis perspective. It seems clear that Treasury were not asked to analyse whether the proposal makes any economic sense based on first principles.

An evidential void 

Obvious questions that have not been considered are:
  • What empirical evidence is there that overseas speculators are pushing up house prices in New Zealand? Which countries’ speculators are having the greatest influence?
  • In the absence of empirical evidence, recognising the limitations of existing LINZ data sets, how reliable is the anecdotal evidence on the role of overseas speculators in artificially inflating house prices?
  • How significant is this inflationary effect, compared to other potential drivers of house price inflation, such as supply-side constraints and land availability?
  • Why is home ownership ‘better’ for Kiwis than renting? (i.e. what is the welfare loss to Kiwis attributed to the current legislative framework?)
  • What does the desired ‘future state’ look like, and how likely is the proposal to contribute to this state?
Without at least initial answers to these questions, it is very difficult to judge whether the proposal will make any material difference to home affordability for Kiwis at all. 
I like NZIER's heading questions too:

  • "Will the OIO have the capacity to deal with 3,000% more screening applications?"
  • "Is this really how we want to be regarded in trade negotiations?"
  • Coming to New Zealand - we welcome skilled migrants (but only if you don't buy an existing house)

Heck, you've even got telecom providers like 2 Degrees submitting on how the Bill will screw up getting telecom infrastructure in. Why? Because three of the big ones are classed as overseas persons and their infrastructure often winds up being situated on residential land. So it'll push back timelines on getting 5G through because they'd have to jump through OIO hoops. Stupid stupid stupid legislation. And it'll screw up power infrastructure in Wellington because the Wellington lines company is foreign-owned.

The legislation is terrible. Aren't there cheaper ways for Labour to pander to xenophobic nationalists? Free flags or something?

I wonder how bad legislation would have to be for Treasury to produce a more honest and thorough RIS.