Sunday, 23 October 2016

Secondary kitchens, again

During the earthquake recovery, my Canterbury colleague John Fountain wanted to build a secondary flat into his house to help meet the demand for housing.

The planning czars stopped him.* 

John's since moved to Nelson. Nelson also isn't keen on secondary flats. John's on the case. Here's his piece at the Nelson Mail.
Tourism in the Nelson-Tasman area is booming, but residential households are excluded from sharing in the gains by a prohibitive regional tax. The same tax also inhibits the development of affordable rental housing in decent residential areas in our region.
The tax in question masquerades as a "development contribution" on second kitchens : $25,000 in Tasman and $10,000 or more in Nelson. A second kitchen in one residential dwelling is "deemed to be" an actual second dwelling in each region's District Plan, and therefore subject to a full, second development contribution.
Homeowners can and do choose to have as many bedrooms, bathrooms, toilets, living rooms, study spaces, recreation rooms, garages and workshop spaces, as they want and can afford. But try to have a second kitchen and you'll have to pay an extortionary tax, if you meet all other requirements for a second dwelling on your property. Since a renovated/new second kitchen might cost anywhere between $10,000 to $25,000 homeowners effectively pay a sales tax well over 100 per cent of actual costs. Naturally, few homes with second kitchens are ever built (at least legally).
* The only sense I've been able to make of it is that the Grand Pooh-Bah of Christchurch planning at the time couldn't be bothered to change the rules that pre-dated the earthquakes - and especially not if some of the relatively undamaged houses around the University might turn into student flats and annoy rich privileged old homeowners near the university who loved to walk their silly little dogs around campus but would be happier to see the university burn for want of student housing than to ever have a student live anywhere near themselves.

Saturday, 22 October 2016

I, Pencil, I Whisky

I've loved Leonard Read's I, Pencil. It's a classic.

Reed slowly explains how nobody in the world knows how to make a pencil. Knowing how to make a pencil means knowing how to get the wood, which means knowing how to make the axes and transport vehicles, which means knowing how to mine and smelt iron, which means knowing how to make the machines to do all that, and how to feed and clothe and house all of the people involved at every step in the process. It's a beautiful exposition of what the market coordinates voluntarily, automatically, without anybody much thinking about it.

There's an excellent kids' book version of it now out. My kids have enjoyed; yours might too.

But for the grownups, consider I, Whisky.

Friday, 21 October 2016

The Rise of the Vogons

Matt Ridley doesn't call a Vogon a Vogon, but that's what he's talking about at The Times. The UK has a process-based nightmare in planning. New Zealand is in the same boat, but Peter Dunne will not allow the government to fix the Resource Management Act to solve it.

Here's Ridley:
At last, the government is about to decide on a third runway at Heathrow airport — by the end of this month, I hear. It’s only been ten years since Tony Blair’s government first proposed the plan. Yet it will be three years until planning permission is granted and another six before the runway is finished. That’s two decades. Heathrow’s original three runways in 1946 took less than two years to build from scratch in a war-ravaged country depleted of funds and fuel. Why do such projects now take so inordinately long?

Land-use planning in Britain is not a joke; it’s a disgrace. The present system is grotesquely biased, not so much in favour of opponents or proponents of development, but in favour of delay and cost. I happen to think HS2 and Hinkley Point C are mistakes, but if I’ve lost those battles — and I probably have — then at least let’s get on and build them quickly, rather than spend the next decade paying lawyers and consultants to slow them down and inflate their costs.
Ridley points to a new iron triangle. Lobbyist charities do well in fundraising and point to blocking things as evidence of success. Politicians take astroturfed complaints from the lobbyist campaigns as evidence of popular opposition and so insulate themselves through lengthy processes - which also suit the bureaus. And lawyers intermediate, with complicated processes both providing avenues for suits and for regulatory consulting work.

Ridley concludes:
As C Northcote Parkinson might have put it (as an example of his eponymous law), the civil servant who delays a decision because he is inundated with protests, then pleads a backlog of work as a reason for needing a bigger budget and expanded team, is not being irrational; far from it. But nor is he taking decisions solely in the public interest. The protester whose actions lead to a goldmine of publicity and the besieged public servant who thereby gets a budget increase, and the lawyer who interrogates both in court — are all benefiting from delay.

If this government wants to govern it must grasp how this process works. The risk is not just that the state is ineffective but that it gets consumed. Like a caterpillar full of parasitic wasp larvae that will eat its vital organs last, Britain can still inch forward in the world economy despite its ridiculous planning system and its powerful protest industry. But not for ever. Somehow we have to rebalance the incentives in favour of faster and cheaper decision-making.

Thursday, 20 October 2016

Threatening data

AUT's Rhema Vaithianathan sees the potential for big data in the public service.
The age of Big Data has come to consumers rapidly, reinventing how we shop, socialise, bank and get from A to B. And a Big Data revolution is slowly rolling through the public sector too.

If we do this right, in 20 years or so the government ministries that currently employ thousands, and sprawl across central Wellington should each fit into a small Thorndon villa.

The vast bureaucracies of Wellington serve two main purposes.

First, they monitor. For example, ensuring that schools are open the requisite days, that police are on the beat and other taxpayer-funded services are working as they are supposed to.

Second, they collect information about these services useful for planning and policy advice. This helps the government to decide how best to spend our money. Is the existing service working? Should it get more, less or no funding? Is a new intervention needed, and how much funding should it get?

Fortunately, when it comes to monitoring and informing, Big Data can really deliver. So once our data is up to the task, these jobs won't need to be done the old-fashioned way by armies of civil servants.
It sounds great. But the power implications within government make it all a bit tricky.

It is thoroughly feasible for NGOs to ask the government to run evaluations on their own effectiveness. They can provide the government with the details on the people they're serving and what outcomes they're targeting. The government can then set a control group of people matched to the NGO's clients in IDI, or to do one better and help the NGO randomise treatment and control where the NGO can't afford to help everyone they'd like to help. Then any outcome measure they want can be tracked and evaluated: future interactions with CYF, prison recidivism, workforce attachment, child doctor visits, child immunisations - anything on which there's administrative data. And, even better, the NGO can then tell the government what their cost of outcome delivery has been.

Once that's in place, interesting things happen. Rhema notes the massive potential disemployment in the Wellington bureaucracies. One of the big advantages Ministries have over their Ministers is information. They're the ones who know things, and who can tell the Ministers things when Ministers want to know things - or refrain from providing useful information. There's a whole public choice literature on bureaucracy, agencies' information advantage over Ministers, and equilibria when Ministers can implement costly legislative control devices to help them better monitor agencies' true costs and output. Big Data, done right, can help route around it all that.

And if that can be combined with real information on the real costs of not just delivering services but of providing the outcomes that the Minister wants - that's a game changer.

In our report on Social Impact Bonds, we looked forward to a world in which any NGO or community group could pitch an outcomes project to Treasury, Treasury would tell them the current going price for improving that outcome, and the NGO would then seek investor funding to deliver the service. Whether you see the resulting data on real outcomes and real costs of providing outcomes as a bug or a feature may depend on whether you're part of a monolithic Ministry with a big information monopoly that's under threat.

Wednesday, 19 October 2016

Mason is a special place

The Chronicle has a great feature piece on GMU's Robin Hanson. A snippet:
A few times a week, Hanson has lunch with a group of George Mason economists. One brisk Thursday, Tyler Cowen, John Nye, Bryan Caplan, Alex Tabarrok, and Hanson drive over to China Star, a Sichuan-style Chinese restaurant near the campus.
The atmosphere is collegial; they talk about bets they’re making with one another, what they’ve already won and lost (also painstakingly detailed online, as several of them are prominent bloggers), and tease Hanson for his grandiose visions of immortality. Cowen, author of An Economist Gets Lunch (Dutton, 2012), orders for the table, and over spicy dishes passed around they dig in.
"Robin is so fond of generalizations that he’ll often ignore varying details," Nye says. "It leads to good ideas, but it also leads to, in my view, crazy ones."
"That comes from physics," replies Hanson.
"There’s a reductionism that comes from physics," Cowen says. "Reductionism, monism, trying to recreate the problems of theology, moralizing, ‘meta,’ and hating hypocrisy — that’s Robin in 10 words. He’s a modern gnostic."
Later, after digressions into The Lord of the Rings, futarchy, and the relative innovativeness of the iPhone, Hanson wonders aloud why his ideas aren’t more widely circulated or accepted in academe. His colleagues don’t hesitate to offer theories.
"Robin’s work would be much more accepted if he just did one weird thing and everything else was normal," says Caplan. "If everything was normal but he did the future, that’d be OK. But he has seven or more weird things."
"I’m rolling more dice, so there’s more of a chance one of them will come out right," Hanson says.
"But," replies Nye, "there’s also more of a chance it’s crazy."

Tuesday, 18 October 2016

Police priorities

In today's Dominion Post we learn that Wellington area police have an ongoing investigation against a euthanasia group.

They've arrested an elderly woman who'd imported drugs that could be useful in euthanasia, and confiscated another elderly woman's helium balloon kit.
It is understood a second elderly woman was also involved in the October 7 raid, part of what police are calling Operation Painter, and that one of the women spent the night in a police cell. 
I wonder if they took any lessons from Arlo Guthrie's Officer Obie in making sure that the cell was safe.

Meanwhile, some of the War on Meth has become self-financing courtesy of New Zealand's asset forfeiture legislation.
A $15 million boost for anti-drug initiatives is not an admission that the Government is losing the war on P, Prime Minister John Key says.

However, Key acknowledges methamphetamine has become "the drug of choice" for some Kiwis, while police must do more to stop P coming into the country through remote areas like Northland.

The Government has announced the funding for 15 anti-drug initiatives, coming from money and assets seized from criminals, as part of its Tackling Methamphetamine Action Plan.
The war may be lost, though.

Earlier this month, Radio NZ had the Police Association telling us that meth is now purer and cheaper than ever before. Remember that half-billion dollars' worth of meth seized on 90 Mile Beach? No apparent effect on the price of meth. There is so much meth out there that the biggest seizure ever in New Zealand has had zero effect on prices.

And I still need to stock up on working pseudoephedrine-based cold medicines whenever I go back home to Canada - all in the futile fight against meth.

The police actions on meth will be futile, but help build a pool of seized assets. I don't know what the police think they're achieving in raids on elderly people who want to be able to end their lives painlessly should need to.

Coasean neighbours

Brendon Harre spells out the case for formalising neighbours' Coasean bargains. He argues we should all be able to build up to three stories by right, with provisions against encroaching on neighbours' sun, but with better ways of mutually waiving those provisions.

Neighbours can always agree to not object to each others' encroachments into recession planes. But you then can have a sequencing issue. If I agree today to allow you to go up to three stories and block my backyard sun because you're agreeing to let me build up in the back yard anyway, that's great. But if you then sell the house, your agreement doesn't move with the property. And so I might be reluctant to agree in the first place - unless I can get things lined up to build quickly as well.

I think this idea came originally from Stephen Franks. I touched on it in my piece at The Spinoff; it's great to see Brendon laying out more of the details.