Thursday, August 27, 2009

My factory makes laws… no one else is allowed to…

At first it seems a spot puzzling. John Key – a guy who has sold himself on being a good listener and it seems he is, doesn’t want a bar of the 87% in the last referendum.

Down to the grit of economics. Simple. Any referendum is a challenge to the monopoly powers of politicians and their Beehive, beltway process of making the rules of coercion. They make the rules thank you. Not some spotty type gathering signatures. 

Monopolists will fight long and bitterly. Monopolies on process are defended as strongly as those on content.

So….. the better debate concerns what realm of policy we should use parliamentary versus other processes for figuring policy – especially where they involve forcing folks to do what they don’t wanna…..

The law is working well – what does “working” mean?

Even the vaguest combination of logic and economics (not to mention law) suggests to state that “the law is working well” as so many politicians have in the post referendum wriggle out on smacking, requires at least the following:

1. That the 30 or so people reported to have been charged and convicted would not have been charged and convicted under the previous law when it was indeed appropriate that they should have been charged, and,

2. that the said charging and conviction produced material progress toward the policy objectives which are behind the law in some way which the previous law would not have, and,

3. That the entire exercise taken in totality  delivered these benefits in amounts which exceeded the costs (including factors such as costs to those dobbed in but not charged)of procuring them.

Passing a law, telling the Gendarmes to “go easy” and then observing that only a small number of people were charged meets none of the minimal tests set out above and does not constitute anything “working” – quite regardless of your views on the particular piece of law in question.

Lets try to get the brain work if not the legal work right…

Monday, August 24, 2009

The supportive Australian media

"Australia die a slow Ashes death as Poms celebrate" cried Sydney's Daily Telegraph in response to Australia's 197-run defeat at The Oval.

"Ricky Ponting's Ashes career has ended in heartache as he became the first Australian skipper in over a century to lose two series in England," wrote Ben Dorries.

"The Ashes are gone. So is Australia's No 1 Test ranking and its 14-year hold on world dominance."

In the Sydney Morning Herald, Jamie Pandaram struggled to believe Australia lost to the same English side they humiliated in the fourth test in Leeds.
"The shadows will now creep over Australia's selectors, coaches and players," he said.

"Ricky Ponting's side has now lost three of its past four series, but this one will hurt most.

"How England were allowed to come back into the series following their innings and 80-run loss at Headingley is difficult to fathom."

And while the Wallabies' defeat received less coverage than their cricketing cousins, they were not spared their share of criticism.

"The All Blacks must laugh at how dumb the Wallabies are at times," wrote Greg Growden in the Sydney Morning Herald, who called for mass changes following Australia's fifth consecutive loss to the All Blacks.

Thursday, August 20, 2009

Zero or one?

The dilemma faced by Rodney Hide, his supporters, and his opponents over whether or not to have “Maori seats” on any new Auckland Council highlights a fundamental flaw in the very nature of political process as a way of allocating resources. Most people can “feel” this but often cannot put their finger on what the problem is.

Both markets and politics provide ways of allocating resources – whether the resources be a special “voice” for one race or some sugar to those wanting sweet satisfaction.

Political processes ultimately allocate according to votes – and all the manoeuvring which leads to a vote this way or that.

Markets allocate by comparing value expressed in prices for one use against another use for the resource.

The trouble with political allocation is that you can’t buy “bits” of policy. We cannot have bits of  Rodney and Rodney is having trouble buying “bits” of the National Party he is in coalition with.

In politics votes buy  all the policies or none of them. It’s all or nothing. You can’t buy increments. So people who want “a bit” of special treatment  for Maori have to either buy all of the Maori Party and its policies with a yes vote – or none. Likewise, buy all of Rodney or none of him.

With buying sugar in a market you can buy sweetness “up to a point”, one lump or two, one grain or ten. You can stop when you have had enough.

The process is much better matched to the fact that humans have all sorts of mixed, varying, constantly altering, perhaps inconsistent tastes and desires for things. Mix and match is more common than zero or one.

This helps us understand why regulation – which is allocation by political process – is hopelessly blunt.

With occupational licensing you either fit the “requirements” or you don’t. N.Z. registered and approved  surgeon - or butcher and not a lot in between – no Indian or Chinese surgeons without NZ qualifications for instance. Trying to get around this with “discretion” is simply an open invitation to corruption or anti competitive behaviour.

Ditto with land use planning and housing – and so the danger of “mansion or no house” planning rules. Trying to introduce discretion creates the same invite to bribery or competition problems.

For the record the economic concept underlying all this is that efficient allocation comes from decisions made at the margin – a little bit more and a little bit less – political processes use binary, zero one, yes no categories – with resulting inefficiencies and inequities.

This may be why we often find politicians  frequently “promising” and “threatening” but not actually doing – a poor man’s attempt at marginal decision-making.

Sunday, August 16, 2009

Five reforms that, deep down, N.Z. (and most of the West) knows have to happen

1. Capital Gains Tax

Pointless, delusionary, inequitable and inefficient to keep selectively subsidising residential investment while crowding out other investment and ramping property prices. Pick a date from which such new investment will be taxed like any other gain.

2.  Superannuation at 65

Actuarially unsound and a fiscal disaster, the age this wealth transfer starts has to increase. The supply side will ensure many unexpected benefits flow. Pick a date, sunset incumbents and start the walk toward realism in this area.

3. ACC

Unlimited no fault liability on a perpetual basis is a fiscal disaster, generates uncontrollable costs and enriches producers at the expense of patients and taxpayers. Rip it back…. starting with no ACC for alcohol related traffic accidents.

4. Co operative Ownership in Export Industries

Maximising returns to suppliers means driving dividends down. Driving dividends up means driving supply prices down. When the only owners are both at one and the same time its schizoid, destructive, and leads to capital inadequacy. Fonterra has to have outside capital, outside thinking, competition and a way for owners to be rewarded for their risk. Ditto other co ops.

5. Vouchers for Consumers Not Riches for Producers

In education and in health consumers with vouchers choosing what to spend and on whom to rely for services generate competition, prevent unjustified wealth transfers to producers and promote innovation. It’s all over for producers who don’t want to be measured on performance.

Friday, August 7, 2009

Market processes keep bubbling up…

From Tyler Cowan…

From the former Soviet Union, markets in burnt out light bulbs:

For most of us, it is hard to fathom the rationale for a market in burnt-out light bulbs. But in the scarcity-driven Soviet economy, the market was entirely reasonable. Light bulbs were rarely available to individual consumers, but were obtainable for state-sponsored activities. Thus, it would be difficult to purchase a light bulb for a new lamp in one's home, while burnt-out bulbs in state-run offices or factories were routinely replaced. So if someone purchased a new lamp and needed a bulb, he would buy a used light bulb for a small fee and replace a functioning bulb at work with the dud. He would then take the functioning bulb home for the new lamp, while the burnt-out bulb at the office/factory would be replaced with a new functioning bulb. Meanwhile, the maintenance person at the office/factory would take the used bulb and sell it on the used light bulb market.

I thank Eric W. for the pointer.

Wednesday, August 5, 2009

As silly as Australia?

Blocking school results a pointless exercise

Governance & Service Provision and Education | | Julie Novak
ABC Unleashed 3rd July, 2009

Last week the Government introduced an education amendment bill ensuring that NSW was in line with other states when it comes to reporting school academic performance.

All parties were in furious agreement that the publication of league tables ranking schools from top to bottom using raw test results could not be supported.

This position was consistent with a national protocol signed by the federal and state governments allowing each school to be compared with 'like' schools with similar student characteristics.

Despite this, the Greens forced a law that fines individuals and media outlets from publishing school rankings in the print media. The Greens upper house member John Kaye said 'this amendment calls the bluff of state and federal education ministers'.

It is most ironic that the Greens would force such a league table ban on the very same day that federal Finance Minister Lindsay Tanner introduced an online plan for more open government.

A Federal Government taskforce has been established to find ways to turn the internet from a broadcast medium to a platform for collaboration. According to Mr Tanner, governments 'have to accept that in this new world, we won't always know how information will be used. Citizens will assemble and combine it, or mash it, in ways that we can't fully appreciate'.

Indeed, it is highly doubtful if the Greens' amendment will prevent people with an interest in school performance from taking the officially published data and creating their own school rankings.

Individuals and media outlets in other states could create their own school league tables, and there would be nothing stopping them from doing so. The internet respects no borders, so parents in NSW can simply read school rankings published online by bodies outside of the state.

As the Labor member Penny Sharpe said during the parliamentary debate, the 'amendment is well intentioned and utterly futile'.

The legislative stunt by the Greens would have gotten nowhere had it not been for the Coalition supporting them.

This is arguably the most curious facet of this whole affair, as the Coalition when in government elsewhere has had a proud record of promoting an informed choice on schooling for parents.

In particular, the former Howard Coalition government published outcomes of national literacy and numeracy tests for government and non-government schools in aggregate.

This was a significant move compared to the 'information darkness' that existed previously, giving parents, schools and policymakers a guide as to where improvements could be made in education.

Even some state Labor governments have moved to fill the gap in public performance information on schools. For example, Queensland and Tasmania publish student literacy and numeracy test score results for individual schools.

While media outlets have used these to rank schools, it is an insult to the intelligence of parents to suggest that they cannot make their own judgements about published school results. After all, most parents are acutely aware that students come from various socioeconomic backgrounds, and come to school with a varied aptitude and ability mix.

Recent events in the NSW parliament show that some politicians still think that controlling the kinds of information that the taxpaying community should get, about the services they fund, is a worthy objective.

However, this ignores the fact that in a modern, information-rich world it is becoming increasingly pointless, and even counterproductive, to try.