Saturday, August 23, 2014

When Hooton's away, a Crampton will play

I filled in for Matthew Hooton in the NBR's Opening Salvo this week. It's only in the print edition; here's a taste.
We can count the costs of apartment stories left unbuilt. In a well-functioning market, developers will build upwards until the cost of an additional storey roughly equals the extra revenue the developer gets from selling the extra floor space, unless we think that property developers do not really like money all that much. We have pretty good data on what it costs to build a five-storey apartment building as compared to a four-storey one. If a fifth storey left unbuilt because of height limits, whether due to viewshed protection or for other regulation, could have sold for two to three times its construction cost, as the presented study found, the effective regulatory tax imposed by height limits is pretty high. If you add up the value of all the missing apartments, the total figure is going to be massive.
While urban planners often take a lot of stick for wishing to force people into compact city forms, and sometimes rightly so, urban height limits that artificially prevent density impose a regulatory tax that either pushes prices up or pushes cities out. Auckland’s metropolitan urban limit has been pretty binding and artificially restricts building out; regulations barring development upwards need at least as much attention.
The economists at these sessions used similar method to estimate the regulatory tax implicit in zoning regulations in places like Epsom, Remuera, Point Chevalier and Grey Lynn. Add up the construction costs of a new house and the per-square-metre land cost. According to the study presented, which remains in the final polishing stages, mean house prices exceed those real costs by at least twelve percent in places like Epsom: it’s a regulatory zoning tax. The Greens’ Julie-Anne Genter was exactly on point when she excoriated ACT’s David Seymour in the Epsom candidates’ debate for opposing denisification. What kind of free-marketer thinks it right and proper to give neighbours several houses over a veto right over what I might wish to do with my house? One that needs to win votes in Epsom.
Do get a copy that you might read the whole thing. For the Genter-Seymour debate in question, hit the 8:50 - 9:16 mark here.

Friday, August 22, 2014

Real decline?

Nolan rightly hits on a bit of chicanery in reporting on BERL's policy costings for the Greens:
Investing to maintain real spending
This one is genuinely disappointing as it seems to be an almost explicit misinterpretation of Budget forecast figures.
The numbers for claiming falling real expenditure come straight from the Treasury forecasts here, but are then deflated.  This sounds good on the face of it, and people do this all the time.  However, it ignores that there is both unallocated spending, and allowances for additional spending in future Budgets – both which largely get allocated to Health and Education on the day.
It is an “open” secret that the Health and Education numbers work this way – as both Labour and National want to announce increases in spending on these items on the day. [Note: It is just like "tax cuts to get rid of fiscal drag" - political marketing all the parties do].
Now BERL is likely aware that the Budget Economic and Fiscal Update leaves out that unallocated spending. It's right there in the darned table. Here:
So what do we have here? For each line, we have the expenditures by spending area. For example, health rises from $12,368m in 2009(actual) to $15,274 in the 2018 forecast. BERL then goes and deflates that by expected inflation; the Greens then claim that there's a real cut in spending.

Now take a look at the line reading "Forecast for future new spending". That's the line where Treasury makes its best wink-wink-nudge-nudge guess as to future operating spending announcements, some of which it's possibly already had to cost for future government policy announcements, and some of which will be based on expectations of future inflation adjustments.

When BERL runs its inflation adjusted accounting on Core Crown Expenditures, it finds a 9.9% nominal and 2.8% real spending increase over the next three years. That total Core Crown Expenditures category includes the future spending increases. Those future spending increases have not been allocated across spending categories. If it were allocated proportionately across all categories, the weighted average of the different categories' increases would wind up being 2.8% real. But BERL doesn't assume that. It just takes each line from the BEFU and inflation adjusts it while ignoring the forecast future new spending.


Nolan is right. And it's worse than that. Nolan points to the 2013 Note 8 adjustments to BEFU. The 2014 table above has the forecast increases right there in the same table where BERL would most likely have pulled its data. It would be really hard to miss it. And if you didn't miss it, it would be really hard not to know that it would be really misleading to run a deflation adjustment without incorporating future expected spending increases where some of those increases would be to offset future inflation! 

The forecast new capital spending and unallocated contingencies are in the 2014 Note 8 adjustments; there's another $2.5 billion in forecast new capital spending by 2018. None of that's included in BERL's accounting.

Nolan's evaluation, noting that he's an Infometrics economist who hadn't worked on the report:
One thing I will point out, after reading the Infometrics report for the first time, is that they don’t say the things in the Green’s summary – but if you do a costing for a party, that is the way they will sell it.  The BERL tables on the other hand do imply what the Greens take from them – and that is very disappointing as they are misleading.
So the Greens put the best spin they could on the Infometrics numbers, as would any other party. But they could have been misled by the BERL tables. And that turned into some very erroneous headlines for the Greens, and some embarrassment when the Minister of Finance used a yellow highlighter to point them to what BERL failed to notice:
I love that our Minister of Finance will come in and correct these kinds of things, or at least somebody in his office on his behalf (who knows whether he runs his own Twitter account).

It looks like Russell Norman honestly believed that there was no provision for future spending. I wonder whether he's satisfied with the advice he received.

Thursday, August 21, 2014

Hagar and the Horrible

I haven't yet read Hager's book. But reporting on the book tells me, of things relevant to my interests:
  • WhaleOil often posted pieces written by corporates (or their intermediaries) attacking their enemies, without attribution, and for pay. 
  • Some of Whale's attacks on Doug Sellman's nanny-state anti-alcohol advocacy (and assorted other food, beverage and tobacco health lobbyists/researchers), and Whale's own nanny-state anti-RTD advocacy, were paid pieces commissioned via Carrick Graham.
James Dann quipped:
Indeed.

Assuming that all of the stuff that Hager put up about Whale's "Infomercial" posts, as summarised by others, is correct, the most damning is the one on RTDs. Whale had had a bit of a reputation for not liking nanny-state interventions or those academics who spend a lot of time pushing policies restricting our access to those substances - and especially where they're doing it on government grants. The anti-RTD posts were off-key. Either Slater was less consistent than I'd have expected, or something else was up.

I expect that the other bits were inframarginal, in that they were consistent with what I'd have expected Whale would have said anyway if he'd written them himself. The payments there perhaps don't reflect well on some of the sponsors, but I doubt they changed what Whale was going to say anyway on those kinds of topics.

Whale apparently had to be paid to note that Doug Sellman's blaming of excessive alcohol advertising for drunks' stealing alcohol-based hand-sanitizer was batty. I'll say it for free: it's a bit nuts to blame alcohol advertising for drunks stealing and drinking alcohol-based hand-sanitizer. We occasionally hear stories about folks stealing a lamb or two for home slaughter and consumption. Should we blame BBQ Culture? NZ Beef & Lamb advertising? No. It's also a bit odd to cast Sellman's blaming of excessive advertising as "evidence-based", as I cannot imagine any study exists looking at theft of and consumption of hand sanitizer as it varies with the intensity of alcohol advertising. It's assertion. I'm also asserting that it is really rather implausible that ads for Woodstock or whatever else are to blame for kids' stealing hand sanitizer. I've previously asserted that, contra Sellman, Woodstock ads are hardly likely to cause middle-aged women to think it's ok to have affairs with their sons' friends. While Sellman does do some evidence-based work, he also engages in a lot of advocacy that's not nearly as rigorous.

For the record, here at Offsetting:
  • You will never find a post written by somebody other than the post's listed author. I'll sometimes blockquote from anonymous correspondents, or from named correspondents, but I don't put others' copy up on my name. 
  • I have never taken pay for a post. I've not been offered pay for posts either, other than the spam ones everybody gets for link-exchange things. So I guess I can't say I've successfully resisted serious temptation either. Anybody willing to offer me a million bucks for a post is welcome to try though; I would require payment in advance of discussions.
  • I sometimes get tips for material for posts, or for things I should OIA, from all kinds of places. Ministries, industry, NGOs. I don't want to out what are sometimes whistleblowers and sometimes other insiders. If the topic looks fun I'll have a look at it and will post something on it if I think it's blogworthy and if I have time to get around to it. Those often have "A correspondent points me to...". I recognize that every single one of these correspondents has his or her own game going on and treat things accordingly.
  • I disclose where relevant. As summary of past and current things, little of which should be any kind of surprise:
    • I wrote a report on the social costs of alcohol for NABIC, the Australian alcohol industry group;
    • I presented some of that report's findings for NABIC in Oz;
    • After I'd done a similar report for free in NZ in 2009, the Brewers flew me up to Beervana to talk about my results and gave me a free ticket to the event. It was really pretty fun. More fun than insinuations from the antis that I'd been secretly paid to write that report.
    • The Brewers Association of Australia and New Zealand supported my work at Canterbury from December 2013-June 2014 through a deal with the University where I spent about a day a week providing them advice on reports and articles about which they wanted analysis, doing a bit more work on alcohol's social costs for a one-day workshop in Oz, and laying the groundwork for some longer-term projects that, alas, ended with my leaving Canterbury.
    • Because I felt bad that I hadn't gotten as much done as I'd hoped to with the project's truncation, and partially because the topic's inherently interesting, I did a bit of analysis on advertising and sponsorship regs to present at the Ministerial Forum on Alcohol Advertising and Sponsorship, mostly pointing to and explaining Jon Nelson's very nice metastudy on advertising. I wasn't paid to do that work, but I wasn't out of pocket for the same-day flight to Auckland to present. The "I felt bad about it" only covered that I spent time on it, not the content of the analysis.
    • In the interregnum between finishing at Canterbury and starting at NZI (and evenings for a bit before finishing at Canty), I did some expert witness work on the effects of on-licence closing times for the local alcohol hearings at Tasman; I'm likely to present at the Wellington LAP hearings as well in a month or so. The Hospitality Industry Association had me do that work, but it's expert witness stuff under court guidelines: my assessment of the evidence, rather than advocacy. I think that the evidence being put up by the police in favour of heavily restricted closing times is pretty biased and missing any of the lit that suggests closing times has very little or no effect on bad outcomes; some of the evidence put up in favour of there being substantial benefits from early closing times also has some ...issues. But I've not been blogging about it because it seems unwise to put up all my findings here when the Police lawyer's been trawling the blog for ad hominem attacks; putting up all the bits of analysis while the hearings haven't yet finished seems ill-advised. I don't think the overall body of evidence is consistent with strong reliable benefits from reduced closing times: there's way too many findings of no effect. I'll post on it when it's all done, but with disclosure that it was part of that expert witness work. I tweeted from the hearings but haven't posted on them. I'd also provided a bit of advice to Independent Liquor on evidence around RTDs.
    • I might pick up other side consultancy work from time to time where time constraints permit and where a project looks fun, but if I blog on that topic, I'll note that I've done funded work on it. 
    • I think that's it. Other minor bits and pieces like getting a bottle of wine as honorarium for giving a talk here and there aren't really worth going through.
    • Oh, I now work for the New Zealand Initiative, a Wellington think-tank whose members are listed on their website. I don't have to clear blog posts here with them or anything like that though. The most you might notice would be that I start bugging you to attend NZI functions here in Wellington, or blogging more on the research coming from NZI as I'll have far more of a hand in it.
I think that's about it. Feel free to hate my views, conclusions, and methods if you like, but know that they're my views, conclusions, and methods.

I likely need to get around to reading Hager's book. I'm curious whether we'll get an iPredict contract on whether Collins survives to the election. The covariance between that stock and PM.National would be interesting, as would some Granger causality tests.

Tuesday, August 19, 2014

More refugees?

It looks like New Zealand won't be taking any more refugees despite the ongoing messes in Iraq and Syria.
"We want from the New Zealand government to accept refugees from Syria and Iraq, especially who have relatives here," says Assyrian community spokesman Khaled Tomas.
But Prime Minister John Key won't budge on New Zealand's annual refugee quota of 750, even though reports in Australia say the Abbott government is considering taking 4000 Syrian and Iraqi Christians.
"I think we took a group of 150 Syrian refugees as part of our UNHCR quota, and we're always looking to see on a humanitarian basis what we could do," says Mr Key.
It's little comfort for Kiwi Assyrians desperately trying to protect their loved ones and one of the oldest Christian communities in the world.
"We had churches in Mosul for 1800 years, and they're all destroyed," says Iraqi priest Father Kanon Toma.
Now the terrified Christians and Yazidis are prepared to leave their ancient cultures behind and start again.
The community in New Zealand has only one wish – for them to have a better life.
I'm not sure what's underlying Key's decision. Maybe it's the case that none of the refugees from there can get to any airport or seaport that could convey them to New Zealand anyway. Maybe NZ has no capacity to sort refugees from ISIS fighters who might wish to come visit.

But if it's just worries about the potential cost of accepting refugees, well, there is perhaps a solution to that. Get a number on the marginal cost to the government of providing assistance to a refugee for the refugee's first couple of years. Set up a PledgeMe drive so those who'd be happy to help support bringing people over can do so. If the cost of an additional refugee is x, and the drive raises 50x, let in 50 more refugees.

Monday, August 18, 2014

The Greens' tax and child poverty policy

I spoke briefly on Morning Report this morning on the topic of the Green's proposed policy to increase the income-tax rate to 40% for incomes over $140,000 and use the revenue raised to fight child poverty. Our brief pre-recorded interview covered a number of different aspects of the policy, of which they used my comment on the income-tax hike. The main points I made were as follows:

  • On the expenditure side, it is a laudable goal to seek to reduce child policy, but I have a couple of concerns with the proposed mechanisms for achieving this:
    • I would like to see more details on how replacing the In-Work Tax Credit with a general tax credit that doesn't require 20+ hours worked each week would affect the incentives to work. I take Susan St John's point (from the same Morning Report piece linked to above) that it is unfair to separate children in poor families into the deserving and undeserving poor based on the employment status of their parents, but the potential unintended consequences of creating new poverty traps needs to be acknowledged. 
    • I wonder about the evidence base to backup the suggestion that problems with child poverty eliminated by providing parents with more income support. More income may well be a necessary condition, but I am mindful that we live in a country with a shockingly low immunisation rate for children from impoverished backgrounds even though immunisation is free. 
    • To be fair, there are other aspects to the proposed policy than increased benefits (or reduced taxes) to poor families with children, and these may well be worthwhile, and I am not sure that the proposed income supplements wouldn't be effective; I just feel that this is a hugely difficult area that is not well understood. I would feel a lot more confident in these proposals if the proposal were to experiment with a few different things and to collect good data on effectiveness before committing a massive expenditure that will be hard to reverse if the policies turn out to be ineffective or counter-productive. 
  • It is on the revenue side that I can't take the policy seriously at all:
    • By all means seek to raise revenue by cracking down on tax avoidance, but this is a bit like trying to save money by eliminating inefficiency in the public service. In reality the revenue gains are probably small; realistic budgeting should assume gains of zero until the revenue actually materialises. After all, one of the reasons that it is possible for people to structure their affairs to avoid paying tax is that the tax system has complexities that have been put in place to achieve specific objectives; removing the complexities also implies abandoning those objectives. 
    • But this is just a detail. The kicker for me is the proposal to increase the tax rate to 40%, only for incomes above $140,000. This smacks heavily of offering the other kid's bat--that is, asking people to feel good about alleviating child poverty without asking them to make any sacrifice themselves. Seriously, there is very little income earned above $140,000. Why not start the income threshold for the top rate at a much lower income level. That way, you would raise more revenue from the very rich (they pay tax on their first $140,000 of income, not just the incomes above that level), and you would be asking the comfortable middle class to contribute to the laudable goal of reducing child poverty as well. A politics that boasts that only 3% of tax payers will see their tax bill rise is a politics that assumes the average New Zealander doesn't care at all (other than rhetorically) about child poverty. Greens' co-leader, Metiria Turei was asked about this in a different segment of Morning Report this morning, but she evaded the question. 
Note: Matt at TVHE has posted on this policy as well and makes many of the same points and some others. In particular, his final bullet is spot on. 

A nice send-off

Philip Matthews at The Press gave me a nice send-off in the weekend Mainlander section.
On the first day of his last week in Christchurch, economist Eric Crampton perches on a stool at Black Betty cafe, orders two espressos and passes one over to his interviewer. Then he starts to explain why he is leaving.
Is it the push of Christchurch or the pull of Wellington? Crampton arrived here in November 2003 to take up a position at the University of Canterbury. Nearly 11 years later, he and his young family are leaving.
It is not the weather. As a Canadian, he thinks Christchurch has "the world's perfect climate".
On Monday he starts as the head of research at the New Zealand Initiative think tank, which evolved out of two earlier free-market groups, the Business Roundtable and the New Zealand Institute. He has put in an offer on a house in Khandallah. His only just repaired home in South Brighton is ready to go on the market.
He will lead a research team of five. His presence will allow executive director Oliver Hartwich to get out of the office, lift the initiative's low profile and raise funds.
Hartwich must also shake off some history. The Business Roundtable was a vehicle for Roger Kerr but it was limited by an adherence to 1980s free-market reforms and close links with the ACT party.
Crampton has not seen any party affiliation at the New Zealand Initiative.
"They're trying damn hard to not have any," he says. "They're trying to go where the data takes them and I will be keeping a hard line on that."
As examples of evenhandedness, he says that both Deputy Prime Minister Bill English and Labour leader David Cunliffe have been invited to speak. And when Crampton was a guest speaker at last year's ACT conference at wealthy backer Alan Gibbs' farm?
"I gave them heck for not focusing enough on civil liberties. I talked about the mess in the Christchurch rebuild. How moving away from the state-directed planning that ACT supported could have been useful."
I think I'd there said "that the ACT-supported government supported"; I don't think that ACT was pushing the command-and-control route. It still would have been nice to have had somebody in there fighting the Brownlee faction a bit more vocally.

Christchurch couldn't have picked better weekend send-off weather. And now to work, and to nail down the house so that the family can move up. Anybody want to buy a gorgeous character 1930s weatherboard 4 bedroom (3 double, 1 single), 2 bath place in South Brighton with a solar-heated pool?

Gluten-free, but don't tell anybody

While most of the anti-gluten seems badly overhyped, there are some people for whom gluten poses substantial dietary risk. They need to know if a product has gluten in it. And producers of gluten-free products are generally pretty happy to let potential customers know about it.

Except when the government makes it illegal to tell customers about it.

When I read this, I'm less convinced that New Zealand is outside of the asylum. Here's Scott Anderson on labelling problems at Kereru Brewing.
My friend is gluten-intolerant, and the discomfort the gluten in wheat and barley bring is one of the reasons beer doesn’t feature in her preferred drinks. But she’d heard of the Auro. “I’ve heard it’s the best gluten-free beer around!” she said.
“That’s great to hear,” replied Chris, “you should get some while you can. Because this batch will be the last. Won’t be allowed to sell it soon. Or at least call it ‘gluten-free’.”
Chris explained that the Ministry of Primary Industries (MPI) has recently released new guidance for what can and can’t be used to promote or label beverages containing more 1.15% alcohol by volume, and “gluten-free” is now prohibited.
Later, I checked out MPI’s Guidance for Alcoholic Beverage Claims and Statements, published 6 May 2014, and confirmed that from 18 January 2016:
“…nutrition content claims or health claims must not be made for food containing more than 1.15% Alcohol By Volume (ABV). The exception to this is a nutrition content claim about energy content or carbohydrate content.”
Meaning, from that date, no product labelled or described by the retailer / brewer with such claims can be sold in New Zealand.
A “nutrition content claim” is defined by MPI as:
“…a claim that is made about the presence or absence of a biologically active substance, dietary fibre, energy, minerals, potassium, protein, carbohydrate, fat, salt, sodium or vitamins; glycaemic index or glycaemic load that does not refer to the presence of alcohol and is not a health claim. “Gluten free” is captured under the definition of nutrition content claim.”
It’s interesting to see “gluten free” pulled out for emphasis there by MPI there and in other passages of the Guidance; clearly this has been published to directly inform brewers that they can’t put such a statement on their beers. Because if you’re going to be really pedantic about the above statement, perhaps mentioning a particular strain of yeast might be mentioning the presence of a “biologically active substance”.
And to think, just a couple days ago, I was making fun of America for its beer label dictator.

These regs don't come in until 2016 so there should still be time to fix this. It sounds like gluten is in the unhappy spot of being something not quite serious-enough to be an allergen but probably more important than a "health claim". Were it an allergen, then everybody would be required to put on labels saying "May contain gluten". If it's not an allergen, then nobody's allowed to advertise "gluten-free", because it's bad to associate healthiness with beer, even if moderate drinking is healthy.

If that doesn't work, perhaps SOBA could produce a list of Gluten Free beers, and whatever organisation exists for the no-gluten people could link to it.