Friday, 27 February 2015

Charting the Minimum Wage

It's never enough, is it?

As reply to those clamouring for a higher minimum wage, after the National government just hiked it by $0.50 to $14.75, some charts from MBIE's advice on the minimum wage hike.

The minimum wage is 64.9% of the median wage and will rise to about 65-66% of the median wage depending on what comes out in the next Income Survey release. 

Keyhole solutions: alcohol edition

One of the main real external costs of alcohol use comes via alcohol-associated crimes. And so it's good to see the government attempting a more finely tuned intervention on this than using excise tax.

David Farrar points to the Drug and Alcohol Testing of Community-based Offenders and Bailees Legislation Bill coming up. In short, it allows drug and alcohol testing to be a condition of bail.

Why is this a good idea? Something similar seems to have done a lot of good in Hawaii. Here's Heritage on the Hawaii Opportunity Probation with Enforcement (HOPE) project, which targeted methamphetamine users, and here's an evaluation of South Dakota's programme that targeted alcohol use.

To be very clear: I only support this kind of thing for offenders who have committed real violent or property crimes, and not those caught simply for drug possession.

But for those offenders who go out and do bad things to people while drunk or high, well, they've probably well signalled that they should be kept away from the stuff for a while.

Please review the ethics of human ethics review

Human ethics review panels are the worst. Designed to prevent atrocities like Tuskegee, they then metastasised: any time your research could possibly involve a human subject, there are a billion forms to fill in. So it's usually easiest just to avoid doing field research.

U Queensland's Paul Frijters didn't avoid doing field research. He sent actors out onto Brisbane buses with not quite enough money on their fare cards to see whether drivers were more likely to give white passengers a pass.

Adam Creighton and Julie Hare write in The Australian on what happened next.
Following national media interest arising from a media release published by the university in March 2013, Professor Frijters was told his research was “banned”.

“The university then proceeded to pursue charges of research misconduct against me, eventually (demoting) me from professor to associate professor in March 2014 and threatening me with dismissal if I did more research like this,” he said.

The demotion was later overturned following an independent inquiry showing the university’s own processes had failed and that punishment meted out was “overly harsh and inappropriately punitive”.

Vice-chancellor Peter Hoj yesterday said the university would not comment.

A spokeswoman for Brisbane City Council, which owns the Brisbane bus company, said the research was not “authorised” by it and it was published without the council’s knowledge.
Here's the original paper.

Here's the Guardian, whose story makes it a bit clearer why human ethics review panels are the worst - simply the worst bunch of Vogons ever to be imposed on academics working in the social sciences.
The university then banned further publication or promotion of the study on suspicion that Frijters not sought the necessary approval from the university ethics committee.
The university was concerned there was no “voluntary informed consent” from the bus drivers or “gatekeeper approval from the Brisbane city council”.
You cannot test whether a bunch of Brisbane bus drivers are racist by first asking them for permission to test whether they are racists.

Here's the kind of ethicist from whom Frijters would have needed to have sought permission:
Clinical ethics expert Dr Andrew Crowden told Guardian Australia that Frijters had made a “common mistake” by underestimating the ethical risks of his own research.
But the university had “shared the mistake” when his department signed off on the study, which showed a “systemic failure” that UQ had chosen not to address despite Crowden’s recommendations in response to the case.
Nicholas Gruen is dead right:
Economist Nicholas Gruen said the case was a “terrible” example of how universities dealt with ethics considerations as “a matter of bureaucratic arse covering and the avoidance of any kind of discomfort for anyone”.
“This sorry saga illustrates the way ethics approvals [are] genuinely strangling all kinds of research initiatives,” he said.
“Essentially the entire ethics procedure is an attempt to avoid anything that might make anyone squeamish or uncomfortable. Of course good research, certainly in social sciences will often do that.”

Update: Helen Andrews points to some more thorough work on IRB horrors:

4 years on

The government rightly took a lot of criticism for its initial attempts to artificially restrict downtown land supply to force a compact city form and encourage higher-valued development. The planners here exhibited basic cargo-cult thinking: because successful cities have high downtown property prices, they thought they could make Christchurch successful by forcing prices to be high. Well, that doesn’t work: high prices in successful cities reflect that people get a lot of value from being located in great downtowns, not the other way around. 
In the longer term, because so much has moved on to the suburbs and to neighbouring districts, downtown land prices will have to drop. When that happens, developers will be able to bring to market properties with rental rates that could draw in tenants – if the planners don’t mandate that everything be plated in gold. Downtown will then come back but as part of a polycentric city. 
This too should not be overly lamented. While I really love the tight downtown core in my new home, Wellington, it is risky. Faultlines can open unexpectedly and in unanticipated locations. Wellington really cannot have multiple downtown cores because of geography but Christchurch can build in resilience against future events by having lots of centres of economic activity. And, fortunately, while the economic literature points strongly to the benefits of urban agglomeration and of having lots of people in a city, it is far from clear that those benefits require having a single dense centre. 
Hit the link to read the whole thing...

This is what happens when you don't read Demsetz

Way too many policy arguments take the following form.
  1. Markets in an ideal world are efficient.
  2. Here is a potential deviation of the real world from blackboard conditions, so we're in a second-best.
  3. Policy can ameliorate outcomes when there is a market failure. So, here's what we must do.
What's missing? Any evaluation of whether the policy cure is actually an improvement on the status quo. Some policies are like using tweezers to pull out an irritating splinter - great idea. Others would have you hack off the arm to avoid the splinter. 

Harold Demsetz very nicely made this point way back in 1969. He was there critiquing Arrow on information market failures, but the lesson is more general. It isn't enough to simply point out a potential market failure. Markets fail but policies don't automatically induce nirvanas. We need comparative institutional analysis to tell us which world sucks less: the world with a market failure that isn't addressed by policy, and the world in which a real-world policy involving actual tradeoffs comes in to try to solve it.

Today's lesson in "this is what happens when you don't read Demsetz" comes from Dean Baker over at Cato Unbound.

Baker's argument:
  • In a first-best world, we would have proper congestion charging and the like;
  • We don't have proper congestion charging;
  • Taxicabs can increase congestion;
  • Uber likely increases the number of cabs;
  • Therefore we need a complicated regulatory structure for Uber imposing fees by time of day and location of service.
Baker also reckons that while Uber's drivers are contractors, not employees, and despite that those drivers like the flexibility, the drivers should be treated like employees for minimum wage and overtime purposes.

Some folks just hate the idea of voluntary transactions among consenting adults that don't route through the State somehow along the way. 

A couple things to note:
  • It's eminently unclear that Uber increases congestion. In the longer term, it will reduce the amount of street space that need be devoted to parking, freeing up more road for driving. It will also reduce peoples' need to take a car for the day because of that one trip they need to make mid-day and instead let them commute in using the bus, then take an Uber for the part when they do need a car. 
  • Using charges on Uber to solve congestion instead of broad-based congestion charging is nuts. Unless Uber is a very large proportion of cars on the road, having any effect on congestion using charges on Uber would have to involve just massive variability in ultimate Uber charges on consumers, which would deter any use of the service. I favour congestion charging, but implementing it on Uber only makes as much sense as imposing congestion charging only on blue cars. 
Update: a reader points out that Uber surge pricing is already a form of congestion charging. It's a good point.

Thursday, 26 February 2015


Ok, so the Resource Management Act isn't supposed to have anything to do with blocking competition, and the Overseas Investment Act is only stopping bad stuff, right?

Somebody explain this mess in Glenorchy then.

If I'm reading the story correctly:

  • Americans resident in Glenorchy bought a general store and campground;
  • They got resource consent for some landscaping, have filed a resource consent for other rejuvenation, and ran a landswap with Council to get a right-of-way to the facility;
  • The Glenorchy Community Association withdrew support for it all when its Secretary, who runs a business in competition with the proposed campground, got mad about the process, and this somehow matters for Glenorchy Council;
  • Now they're having to get retrospective consent from the Overseas Investment Office because somehow it's a matter of national strategic importance whether an American owns a campground in Glenorchy;
  • They're now running the whole thing through a notified consent process because everybody got mad; campground competitors will then get their chance to claim that it'll hurt the town's amenity value or be bad for traffic.
Does this sound like something that should happen in the Outside of the Asylum?

Wednesday, 25 February 2015

Establishing causality: one view

Economists agonise, rightly, over causality: how can we tell whether one thing causes another thing rather than the other way round or whether both things might just both caused by some underlying third thing.

Meanwhile, here's how the debate on causality plays out in the political arena.
Mallard is far from an idiot, but this where public debate on causality is at.

Granger wept.

PS: via Lindsay Tedds - lagged variables don't cut it either.