Tuesday, 15 August 2017

Labour's water policy

Previously on this blog, I used the Greens policy proposal of a 10c/litre royalty on water bottlers as an excuse to witter on about how water is currently managed and describe some of the relevant economics.

Labour has now released its water policy, headlined "clean rivers for future generations". It talks about the need for "more sophisticated farming methods that rely less on ever higher stocking levels and are more focused on value-add". I strongly support these objectives.

The bit attracting most attention though is that "a royalty on commercial consumption of water will assist with the cost of keeping our water clean". Farmers are grumpy, as you can imagine. One Canterbury dairy farmer estimated that at 1c/cubic metre, his water royalty for the year would be $26,000. To put that in perspective, he is currently paying $90,000 per annum for the electricity to pump his irrigation water.

Anyway, as a farmer and an economist, I'm also a bit grumpy. Not because I object to water royalties as such, but because I think the proposed policy, as it affects agriculture, misses the mark in an important way.

A future Labour-led government would want to spend public money cleaning up waterways, and there is a logic in raising the funds for that clean-up from polluters. However cleaning-up is not a long-term solution if the polluters continue their current behaviour, and the policy is clear that it seeks different (more sophisticated) farming methods.

If we want to change farmer behaviour, new environmental taxes on farming should be designed to be (more or less) equal to the cost farmers impose on society as a whole. This is known as a Pigouvian tax. It'd be extremely difficult to argue against taxes set on this basis, because they are simply telling farmers: pay your own bills. Notice that Labour is already almost selling its policy on this basis ("assist with the cost of keeping water clean").

My concern is that water royalties are a poor proxy for the environmental cost of intensive farming (including horticulture, cropping, orchards etc). Dairying is a huge water user but that doesn't really matter in places where there is plenty of water. Nitrates are the main problem with intensive dairying, so that is what should be taxed.

Some examples might help understand this point.

  • In our area, we are blessed with pretty decent rainfall (too much right now!) so irrigation is used far less than in Canterbury. Many of our neighbours are serious urea addicts though, because that's how high stocking rates & production are maintained in the standard dairying model. 
  • Wine growers in Marlborough have very modest water needs compared with dairying. Pesticides and fertilisers used by wine growers are having a serious impact on the health of local waterways.


Tuesday, 25 July 2017

Irony overload at the NBR

Please have read of this piece, posted on the NBR website yesterday (I believe it's ungated, but if not NBR has a free 30day trial).

The article starts & finishes with quotes from Peter Gluckman and unobjectionable statements about the role of science in a post-truth world. You'd think this would be fertile ground for the author, who is EPA's chief scientist.

But between those bookends, what do we have?
  • an argument that neonicotinoids do not harm bees, supported by information supplied by
    • USA beekeeper, blogger and information analyst Randy Oliver.
That's it. No reference to any of the recent scientific or regulatory information about neonicotinoids which you might think would be relevant. [several irrelevant straw-persons are brutally murdered though]

This might be excusable if it were from a junior reporter who stumbled across a single source, though even then I'd have expected an editor to notice. No such excuses for the actual author though, who is the EPA's chief scientist. Jacqueline Rowarth must be aware of the science that weighs against Mr Randy Oliver's opinion but chose to not disclose any of that, much less to discuss the evidence herself, or even point us to someone that had.

Worse, Rowarth assumes the cloak of an honest-broker scientist while promoting an obviously partial theory and strongly implying that there is no contrary evidence. I tried to comment but failed. The NBR later explained why on twitter.
So it's not just me. Readers at the "meeting place of intelligent business" have spoken. I don't condone personal abuse, but can understand how anger at this article might either spill-over into personal abuse, or be interpreted as such. Especially since Rowarth has a history of getting science wrong and attacking people without due cause.

Sunday, 23 July 2017

Water allocation & pricing in NZ

The Greens water policy proposes a 10c/litre royalty on the "sale and export of water, including bottled water", and cracks open the debate over water allocation & pricing policies by signalling that further measures are under consideration.

This post outlines the main economic issues arising from water-using industries in NZ: bottling, hydro-power, and farming particularly dairy. I'm going to start by assuming that most people would support policies that:

  • don't cause undue depletion of the water resource;
  • don't strand capital investments; and
  • ensure that water polluters pay fair prices. 
After discussing these points, I'll return briefly to the water bottling issue.

Depletion
Depletion is generally managed by setting minimum flows for rivers and maximum off-takes for groundwater (from aquifers). In a river setting, rights to pump water are typically shut-off when the river level falls to some trigger point. Minimum flow levels are set by Councils in consultation with freshwater scientists, anglers and other interested parties. This works best when the flow is measured downstream from the off-takes: otherwise you need to predict how a low flow at an upstream point will affect the river below the off-takes. Ground water (in aquifers) is much more difficult to measure. The raw data comes from water levels in monitored wells but its not easy to map the aquifers or their connections with rivers and other aquifers.

This issue is not completely sorted out, but the 2014 National Policy Statement obliged Councils to get cracking to ensure that water resources are not over-allocated, and to claw back over-allocations where they exist. My impression is that it has been effective in getting Councils to focus on these issues.

In some cases over-allocations have been notional rather than real: e.g. Marlborough wine growers have collectively been allocated more water than the aquifers can stand, but they're not using their full allocations. The proposed solution is to regulate allocations so that wine growers have enough water in almost all years, which frees up water for allocation to other people at the times of year that wine growers don't need it.

Asset Stranding
The basic point is that if we want revenue from water users then any pricing will need to be at a level that allows them to remain in business. Otherwise we get no revenue. My guess is that a royalty of 10c/litre on the "sale and export of water, including bottled water" would not kill off the bottled water exporting business. If so, people who've sunk capital into wells, pumps, filters, and bottling plants will continue to earn profits that help recoup the capital invested, just at a slower rate. This particular goose would then remain healthy enough for ongoing plucking.

However the same royalty rate would probably stop all hydro-power generation, and agricultural/horticultural irrigation over-night. Any firms owning un-depreciated assets used for this stuff would have to just write them off: those assets would be "stranded", unable to earn because of the water price. End result: dead goose = no revenue & much less productive capacity.

So if you're after revenue, don't set tax/royalty rates so high that they strand assets. More generally, remember these wise words from Jean-Baptiste Colbert 
The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing

Polluters Pay
The Greens are targeting the export of bottled water and seeking a contribution to the public purse from these firms. A different motive for tax is to send a price signal to polluters. Ideally, these Pigouvian taxes would be set at a level that recouped just enough cash to compensate for the damage costs that polluters impose on the broader community. Farming is where this issue bites, because the way we farm pollutes our water, imposing a cost on everyone else.

Basic welfare economics suggests we should investigate taxes on bagged nitrogen (urea). If dairy farmers used much less urea, our rivers would be much cleaner and we'd also stand a much better chance of sequestering carbon in our soils rather than emitting it.

Like tobacco, the urea business is highly profitable, so urea suppliers will probably absorb a fairly high percentage of any tax. This means that a relatively small % of any tax will be passed-through into retail prices. And since farmers are addicted, they won't be very price sensitive. So, ironically, even if our aim in imposing a urea tax was to send socially efficient price signals, it would end up raising a fair bit of revenue.

Conclusion
All of the above is very mainstream economics, meaning it is based on the pursuit of (social) efficiency. The water bottling royalty/tax is clearly not aimed at efficiency objectives. I expect it will get some support as a political move, but it's not ideal as a leading measure to address our broader issues around water allocation and quality.

Wednesday, 12 July 2017

GMO Hypocrites

Previously on this blog, I argued that David Runciman failed to convert his excellent analysis of the role of scientific consensus in the climate change debate into a useful tactical recommendation: you can't credibly accuse anyone of hypocrisy if your only evidence is stuff that you think they think.

Before that post, my old friend Grant Jacobs had already taken to the electric twitter machine to:

endorse exactly this tactical error in Runciman's piece
and lodge a very strong claim
Note the sudden shift of topic from climate change to GMOs.

Before the NZ skeptics expelled me for heresy, they emphasised their maxim that strong claims require evidential support. The onus of proof is on the alligitor.

As a leading skeptic, Grant subscribes to this maxim. Having made a strong claim in public he is now obliged to back it up.

Monday, 10 July 2017

Science, skepticism and humility

David Runciman's recent Guardian piece carefully examines how and why a political constituency emerged for skepticism about human-induced climate change, and then drops the ball right at the end with the try-line in reach.

The main thrust is that the oil majors and other large firms have commercial incentives to cast doubt on human-induced climate change, so funds are available to influence public opinion, which demand is met by various scientists, lobbyists and politicians.
 ExxonMobil alone has spent more than $240m on public relations in this area in the past two decades. Many of the leading Republican candidates for president in 2016 (though not Trump) took campaign funding from the Koch brothers, who have been at the forefront of the fight against the scientific consensus on climate change.
Runciman does a good job of exploring the way commercial incentives affect the supply of perception-management services. Absent a commercial motive, there would be less doubt conveyed to the voting public and the apparently quality of the doubt would be lower. So on the supply side of the doubt market, climate change looks a lot like tobacco: in both cases, substantial and well-established commercial interests purchased scepticism from scientists.

Motives matter, but so do methods. Runciman argues that it can be easier and more effective to label your opponent as a hypocrite than a liar. Some tobacco science shills smoked their own product but you can almost always accuse a climate change activist of not doing enough...
Hypocrisy is hard to avoid when it comes to the politics of climate change, since it is a collective-action problem. It’s far from clear what difference any individual action will make. What matters is what we do together. This makes it practically impossible for any one individual to match words to deeds. Yet the failure to do so provides the perfect stick for the climate cynics to beat their opponents with.
We're all familiar with these cheap cynical jibes: oh you have a plastic bag / flew here / own a flat-screen TV, so you don't personally really care about climate change. Runciman reckons this kind of bullshit is effective at shifting public opinion against climate change scientists, and that climate-change-deniers have converted skepticism for their own commercial ends.
Twitter is a vast hypocrisy-generating machine that is corroding democratic politics. Scepticism, which is a democratic virtue, is giving way to cynicism, which is a democratic vice, across the board.
I think many people would broadly accept most of the above and, notwithstanding the odd complaint, be broadly on board with Runciman right up to his last couple of paragraphs, reproduced below.
We live in an age when mistrust of politics has spilled over into mistrust of expertise, and vice versa. To respond with ever-greater certainty in the name of science is a big mistake. Expertise doesn’t just need humility. It also needs to reclaim the idea of scepticism from the people who have abused it. Experts need to find a way of expressing uncertainty without feeling it undermines their expertise. Voicing doubt has been allowed to become a synonym for admitting you were wrong. The way out is to stop insisting that you were right in the first place. 
Lots to agree with here. We definitely need humble scientists rather than arrogant ones, so uncertainty needs to be honestly appraised and clearly communicated. I'm also keen on reclaiming skepticism from those who have abused it, but the skeptics and I have very different opinions about the scope of this problem and the culprits, so lets just set that aside for now so we can focus on the ball-dropping final paragraph.
The scientific consensus on climate change is real. But by insisting on its merits for the purposes of politics, its champions have exposed it to ridicule. Political arguments for climate science – indeed, for any science – in the age of Trump should not keep saying that the populists are lying about the consensus. They should say that they are hypocrites about the doubt: they do not practise what they preach because they think they know the answers already. Climate change deniers argue they are only trying to discover the truth. We should all be sceptical about that.
Where did that come from?  Even though the other side is lying about the consensus on climate change, and has strong commercial incentives and the ability to generate doubt, Runciman wants us to ignore all that and instead argue that they are hypocrites. Which they can easily deny by simply claiming to be open-minded.

It's a bad idea tactically because nothing can be proven, which makes it a very bad idea strategically for the non-shills.

Friday, 7 July 2017

NZ Initiative on Competition Law

Previously on this blog, views were expressed about the NZ government's recent announcements regarding competition law. Two decisions have been made:

  • to give proactive "market studies" investigation powers to the Commerce Commission, and 
  • to punt debate over s36 as far into the future as possible. 
Today, Roger Partridge published the NZ Initiative's view in the NBR. It is the exact opposite of my position: Roger supports the punting of s36 issues and opposes the new "market studies" power. I know, like and respect Roger, so I'm explaining below why I disagree with these views.

Preamble
While I agee with Roger that "New Zealand's small size means that many markets have only two or three participants", these market structures have only occurred because the Commerce Commission has waved through many mergers on the basis that they will reduce costs. We've operated a permissive merger-screening regime for many years now. Our highly concentrated markets are a consequence of this approach.

This is not necessarily a bad thing. Rock solid economics has exposed the concept of a sustainable industry structure, crudely summarised as the number of firms that can be supported by the size of the market, assuming each is operating at cost-minimising scale. We have smaller markets (demand) than more densely populated countries, so fewer firms can achieve the scale/size needed to minimise costs.

But if we only cared about minimising production cost, why would we ever have regulated natural monopolies such as power line companies? Why didn't we just let them enjoy the quiet life, the best of all monopoly profits? After all, this is the cost-minimising sustainable industry structure for power lines: a monopoly. What was our rationale, as a society, for imposing upon these firms the compulsory burden of complying with costly demands for information, and then, after about three years of careful deliberation actually properly regulating them?

I have no real insight into the provenance of the balls grown by the government that pulled this trigger. It definitely was the Clark/Cullen crew though, aided by Paula Rebstock as Commerce Commission chair, that finally put a stop to further extensions of the shameful revaluation rort that is embedded in consumer power bills, now and forever.

So this is our history on monopoly regulation: only in the last decade have we even started to regulate natural monopolies, and even then we respected the property rights of the earlier bandits by baking-in all the billions of dollars of super-profits banked by Eric Watson and his mates.

Against this background, lets now shift the focus a bit further up the scale, to the natural oligopolies that are so prevalent in NZ. In some cases (mobile phones) these market structures have emerged from entry. In others (grocery retailing, general insurance) the Commission has allowed oligopolies to form, at the eager behest of Roger's firm and its rivals up there on Shortland St.

The policy questions are about how to constrain this market power, having allowed it to be formed. Or indeed whether to constrain it at all. So we're talking about firms that have substantial market power (SMP) either individually (s36) or jointly (market studies).

Section 36
As noted previously, before it became defunct, s36 was the only legal constraint on the use of substatial market power (SMP). The only reason we're talking about s36 is that it is defunct. So the question is whether to ignore this "problem" or to fix it somehow.

The debate seems to be boiling down to "purpose vs effect". The current defunct test is based on "purpose": a firm with substantial market power (SMP) is not allowed to use that SMP for the purpose of restricting competition. However, rather than inquiring directly into whether this was a purpose of the conduct, our courts have been persuaded to focus on a contentious and unrealistic "counterfactual" test, the weaknesses of which approach have been known for 4 years at least.

This is why ComCom has basically given up trying to prosecute under s36. No one fancies the prospect of arguing that firm X did this thing for the purpose of lessening competition.

The situation has seemed unsustainable to me for several years. If the police are on strike because the law doesn't work: sack the police or change the law.

Roger's view is that we shouldn't change the law, because it would cost the big guys, the ones with SMP. Read his statement carefully and tell me if you see any discussion of the "long-term benefit of consumers" which underpin the purpose of the Commerce Act. It's not there.

I'm not certain that an effects test is best for NZ, but I am certain that Roger is dodging the core question, as is the government.

Market Studies
New Zealand has a productivity problem and insufficient domestic competition is a major driver of our weak productivity outcomes.

We've allowed firms to merge to concentration levels that are internationally unusual, partly because the merging firms expect enough cost savings, and partly because its easier to predict cost savings than to quantify the value of foregone competition.

This is where we are. In many industries, trade is dominated by just a few firms at best. Consumer interests appear to be compromised as revealed by the petrol margin study for example. Roger says that these oligopolists, who occupy a privileged position in our society, should not be compelled to "hand over their records, and to answer questions under oath", but

  • he has no supporting argument as to why this would be unreasonable, much less any thought of the potential benefits consumers might get from a bit more focus on such a privileged sector; and
  • refusals to supply information, as hampered the petrol margin study, is kinda dodgy in itself isn't it? 


Thursday, 6 July 2017

Dictatorial Libertarians

Previously on this blog, we encountered the proposition that a "transitional dictatorship" might be a good thing. Today's argument is that
  • all economists who appeased the Pinochet regime, or support those who did, should explain themselves; 
  • exceptions for school boards in NZ show how tightly constrained any justifiable "transitional dictatorship" should be; and
  • regional government dictatorship in NZ shows how easy it is for the "transitional dictatorship" idea to break out from its natural habitat.
It is disturbingly easy to find right-libertarians bagging democracy. Most obviously, the late sainted Hayek said that "a dictatorship may be a necessary system for a transitional period".  So, yeah, if Hayek reckons its a good idea, but you plebs will never vote for it, then he'd be up for just forcing it on you. Not to mention Hayek's fellow traveller, the recently-minted but shy of being kiwi kiwi Peter Thiel, who after much consideration decided that freedom and democracy are incompatible.  

Hayek was the founder of the Mont Pelerin Society, an invitation-only club of economists (& others) formed in 1947 to oppose government involvement in the economy. I've long conjectured that Wellington has the greatest concentration of MPS members on the planet, but its a secret society so we'll never know.

What we do know is that the MPS gave intellectual and moral support to Pinochet, the CIA-backed military dictator who in 1973 deposed the overwhelming choice of voters: Salvador Allende of Chile.

Political prisoner, National Stadium in Santiago, Chile, 1973. Koen Wessing

Some say Allende was too moderate, and he might well have made economic mistakes, but that is no reason to engineer a military coup against a popularly-elected government. Fascists are pretty brutal once they get power: the 1973 coup in Chile resulted in terrible atrocities, including the extra-judicial killing of at least 3000 people. Even transitional dictatorship fans must agree that seventeen years of Pinochet was a very leisurely transition indeed.  

Pinochet's transitional dictatorship in Chile operated from 1973 - 1990. The Mont Pelerin Society met in Chile in 1981, well after Pinochet's human rights abuses were obvious. As one who fought the Springbok tour that same year, I say that every participant at that meeting gave succour to a vile and tyrannical dictator and they should all be very ashamed of themselves.

The late sainted James Buchanan was at those meetings (that's the economist, not his namesake who was one of the worst ever USA presidents). Apparently Buchanan's paper was titled "Limited or Unlimited Democracy" and explored the idea of limiting democracy to depoliticize the state so that unconstrained market forces could guide human interaction. Anyone got a link to the full paper? Key point: Buchanan was there, succouring up to Pinochet, at a time when freedom-loving economists should have been boycotting Chile.

Local Applications
There are times when transitional dictatorship is necessary & appropriate.  In NZ, schools are governed by a locally-sourced board of trustees, and sometimes people take to squabbling and the boards get so dysfunctional that the minister appoints a transitional dictator to sort things out. Fine, IMHO, and I've been happy to serve as an appointee in such cases.

Much less defensibly, transitional dictatorships are sometimes imposed with the apparent aim of delivering outcomes for a political constituency. Back in 2010, the current government effected a coup over regional government in Canterbury, citing water issues that, funnily enough, many people in Canterbury are still pretty pissed off about.

Takeaway Points
1. Libertarian apologists for dictatorships should explain themselves
2. If dead, their apologists should do it for them

Monday, 3 July 2017

Competition update: no, we still don't care

If you occasionally tire of reading those media stories about just how stretched NZ household budgets are, and end up wondering why is it like this, then the recent OECD report is a good to place to look for clues.

The OECD's three main points are perfectly crafted into a work of shit sandwich art. Someone needs their chain pulled a bit, but we want to be nice enough to retain their goodwill, so they get two nice compliments with the actual message in between. In a better world, this might cause his sponsors to say: "We all love your enthusiasm Donald. This misogyny has to stop, so we can continue to support your meteoric rise".

Anyway, here's the OECD's shit sandwich for NZ.
  • New Zealand continues to enjoy a strong, broad-based economic expansion
  • Productivity remains well below that of leading OECD countries
  • Employment has been shifting towards high-skilled occupations
Two compliments with a nasty little fact in the middle, right?. So we need to examine that nasty little fact. Here's the summary discussion of it.
Labour productivity is well below leading OECD countries, restraining living standards and well-being. Productivity is held back by a lack of international connections, agglomeration economies and scale; weak competitive pressures; low rates of capital investment; and meagre research and development activity. Opportunities to address these factors include reducing barriers to foreign direct investment, lowering the corporate tax rate, expanding infrastructure funding options to increase housing supply (preferably through densification), reviewing the insolvency regime and the current provisions for misuse of market power, and increasing support for business innovation. (emphasis added)
So we have five productivity problems. Delve deeper and you'll find that there is not much we can do about the first two: we're not going to suddenly shift from being a small open economy in a remote corner of the planet.

So now the shit in this delicious sandwich is down to just three things we might be able to deal with:  "weak competitive pressures; low rates of capital investment; and meagre research and development activity".

Now here's a funny coincidence: firms that lack competitive pressure have less market pressure to undertake "capital investment" including in the form of "research and development activity". Injecting more competition into our economy could therefore help tackle all of the solvable problems identified by the OECD. In case it's not obvious, I am agreeing with all of this diagnosis. Now let's look at the prescription, which has two components.
Allowing the Commerce Commission to undertake market studies is currently under consideration and could help markets work better, especially when obstacles and distortions to competition are not caused by competition law violations. In addition, the legislative prohibition against misuse of market power should be reviewed to consider whether the current requirement to prove the intent or purpose of behaviour is working and examine whether a test focused instead on the effects of business conduct, as in most other OECD countries, would be more beneficial.
The first of these is a no brainer. The power to inquire through market studies should have been vested in the Commerce Commission from the start. Instead, at the instigation of Telecom, the Commission was spanked by the High Court in 1994 (pdf, see f.n.3), for daring to inquire into telecommunications competition.

The second idea concerns s36 of the Commerce Act which is our only constraint on the unilateral exercise of substantial market power. (SMP). Setting aside regulated industries, if a monopolist or a small number of oligopolists have SMP s36 is the only legal constraint on that power being used to choke off (or otherwise tame) their potential rivals.

Five years ago, it was clear that the Commerce Commission chair considered s36 broken and that the Commission would no longer be wasting its litigation budget in prosecuting such cases (example).

Think about the incentives this creates. Suppose you're an executive in a firm with SMP, or perhaps an entrepreneur with a great idea for stiffing entrants. Why wouldn't you just run riot? The police are on strike because the law is broken.

And now, five years after we gave free rein to the big guys, the government is touting market investigation powers as a bold new initiative while throwing s36 reform down a big dark hole:

The Government has also been considering changes to Section 36 of the Commerce Act, around misuse of market power.
“While the consultation process has demonstrated that Section 36 does not work perfectly for some types of conduct, it is not yet clear whether an alternative test would benefit competition or consumers.
“Officials will continue to look into this and will report back in mid-2018 before decisions are made regarding section 36,” Ms Dean says.

So there is a clear and enduring message here. Yeah, nah, go for it mate. Fill your boots.

Monday, 26 June 2017

Character, Trust and Politics

Have you ever been asked for a character reference? I've written a few, once for a firearms licence, several for tenancy agreements, and many in professional references. Verbal references are now more common in these areas, but written character references have a second life through the reputation systems baked into all those websites we use.

It can be annoying right? Please tell us about your experience at XYZ hotel. How was your meal at ABC? How does LMNOP rate against all other filums of this genre?

Constant pestering to give feedback is the markets' response to a low-trust environment. Partly this is to guard against the risk of being conned by a scam artist, but character is also seen as vital to upside potential value, as shown by the commercial success of the "attitude is everything" concept.

Our view of someone's character develops over time through repeated interaction. Many of us are pre-disposed toward trusting others, especially if the other seems like "one of us" and therefore trustworthy. Unless there are tell-tale warning signs, we generally take people at their word, giving them a chance, an opportunity. This is my general approach anyway.

But if my trust is abused then it's all on, or all off, depending on the circumstances. Abuse of trust is a trigger that deserves a response, such as outright war (I'm going to actively punish you), or maybe just a freeze-out (I'm not playing/interacting with you any more).

This strategy is known in game theory as tit-for-tat. It's simple and effective and I strongly recommend it. You might also want to describe this strategy to people who have abused your trust, to help them understand that they need to offer something constructive if the previous equilibrium is to be restored.

Recent political and economic news highlights the role of character and trust. Here are a few examples.

Monsanto is being sued for misleading consumers about the effect of its flagship product: Roundup. Apparently, it says on the label that Roundup 
kills plants by targeting an enzyme that is not found in people or pets. The lawsuit claims that assertion is false, however, and argues that research shows glyphosate can target an enzyme found in gut bacteria in people and animals, disrupting the immune system, digestion, and “even brain function.”
This is a crucial point. If true, it would show that Monsanto has successfully used the "big lie" strategy for many years.

While we await the court's judgement on Monsanto, let's take a moment to consider another big lie strategy, this one being promulgated by the US government. I refer of course to the massive tax cut disguised as health-care reform, which for some reason needs to be done very quickly and in secret, but will be terrific, believe him. Trump is the sideshow in this one, since it is now abundantly clear that he has no fucking clue whatsoever, but while his mad antics distract large sections of the media the real business is being ruthlessly pushed through by the republicans. So he's a useful tool for the people who are actually in control of this stuff.

Speaking of useful tools, have you heard the latest claims about James Buchanan? No, not the USA's worst president, the nobel-winning economist of the same name, now under a cloud, though GMU economics graduates such as Eric Crampton are still defending him. There definitely were quite strong connections between the Mont Pelerin society and the fascist Pinochet regime in Chile so it'll be interesting to see what's in the new book. Meantime, my homework is to dig further into the concept of transitional dictatorship.

Closer to home, as the Todd Barclay scandal continues to afflict the PM and his team, thanks to the superb journalism by the new-entrant newsroom. Character is becoming an issue for the news media now, as the PM keeps changing his story and the absence of his predecessor's superb lying & bullshitting skills is really being exposed. I'm hoping that this whole thing might result in fewer future stories about "consummate politicians" whose primary skill is deception, but I'm not holding my breath.

Neither are the British. On the contrary, in the wake of woeful mismanagement and incompetence by the Tories, there are now regular eruptions of full-throated chants in support of Jeremy Corbyn. Compare this with the "lock her up" chants during trump's campaign: Hate vs Love and orchestrated vs spontaneous.

All of which reinforces a very basic point. If you need to bullshit the masses to win political power, that's probably because you're working against their interests.

Saturday, 10 June 2017

Policies or People?

There is a strong argument that politics is not about policies, but rather about the people standing for election.

This argument clearly has some merit. Until his sudden exit, John Key was untouchable as PM of New Zealand, despite the serious scandals and his appalling memory.

But the recent UK election casts doubt on the proposition and suggests that policy can make a difference in general elections. How else can we explain a massive youth turnout for some old socialist geezer, who rides a bicycle to his allotment and has been absolutely slaughtered in the press for the last couple of years?

Theresa May is/was indeed hopeless, but Jeremy Corbyn was relentlessly portrayed in the media as far worse: a dangerous man intent on undermining the fabric of UK society. I find it difficult to believe that the feckless millennial yoof were motivated to put down their phones and take the bus to the polling booth just to stick it to her.

So what got them out to vote? Was it the admittedly slick video advertising? Or was it the fully costed manifesto setting out a plan to reverse the tide of upward redistribution of the social surplus?

My guess is both, and my further guess is that Corbyn was able to credibly sell the plan because he believed in it.







Saturday, 13 May 2017

EPA closes ranks

New Zealand's Environmental Protection Authority (EPA) has a statutory duty to function in a way that
contributes to the efficient, effective, and transparent management of New Zealand’s environment and natural and physical resources (emphasis added)

In its 2016 Annual Report (pdf), the EPA described (p.10) its new vision and how it proposed to pursue that vision.

Our new vision – An environment protected, enhancing our way of life and the economy – will guide our strategy over the next four years. Our vision is the high-level purpose behind our work. It underpins why we were established and what New Zealanders want from us. We will achieve this through four key principles, or pillars. They are: working together as One EPA, supported by evidence, science and mātauranga Māori; by taking a customer-centric approach to our work, by partnering and working collaboratively with others for success, and by harnessing the potential of our people. Our new strategy is set out in detail in our Statement of Intent 2016-2020. We have restructured our teams so that we can best deliver on the strategic goals and intentions that you will read about elsewhere in this Annual Report.
Fundamental to this approach, is the appointment of our Chief Scientist, Dr Jacqueline Rowarth, who will work with experts from across the natural resources sector.
I was surprised by this, particularly the last bit. My impression is that Dr Rowarth is far too invested in the status quo to effectively "work with experts from across the natural resources sector". So I lodged an OIA, quoted the above section of the EPA's annual report and made the following request...

I am not alone in regarding Dr Rowarth as being extremely antagonistic towards certain types of “experts from across the natural resources sector”. Many people remember her terribly mistaken claims regarding the quality of the Waikato River water, and have noted that neither she nor the EPA has admitted any error over this. Her most recent public pronouncements on Roundup suggest that she is not up with the science regarding glyphosate and the adjuvants with which it is mixed. I am therefore concerned that the EPA is not receiving balanced scientific advice from Dr Rowarth. Please advise which individuals and/or groups is Dr Rowarth working with to inform herself about the following topics relevant to the agriculture sector in New Zealand:
  1. Biological farming, meaning farming with a focus on stimulating and cultivating beneficial biological organisms in the soil.
  2. Antibiotic resistance through the avoidance of antibiotics, including glyphosate.

In response, right at the end of the response period, I got a letter from Allan Freeth (CEO) declining my request on the grounds that this information.
does not exist and cannot be made available without substantial collation or research
So the chief scientist of the EPA cannot name any individual or group she is working with on biological farming or antibiotic resistance.

And, her boss doesn't care.

Thursday, 11 May 2017

Betting on HILP Events

Organised betting markets can help to predict future outcomes if they are sufficiently popular, because well-informed people will seek to profit from their inside information and that will affect the market prices.

Less commonly, such markets might also be useful in public policy formation. For example, you could imagine that we might get a reasonable prediction of the effect that a particular well-defined change in land-use policy would have on real estate prices in Auckland, because lots of people have a financial interest in that particular market.

Notice that these markets also need time bounds though. That's why prediction/betting markets always offer time-limited contracts. It is also why they'll be useless in predicting events of the high-impact-low-probability (HILP) type such as:

  • volcanic eruptions in Auckland;
  • your house burning down;
  • workers seizing the means of production; or
  • an excursion of GMOs ruining our environment, productive capacity or export value.  

Notice that is the incidence of such events that is of main interest. Depending on your perspective, each is a disaster or an opportunity. The scale of those effects is large, but otherwise unknown. So even if you have a time-bound view on likelihood, you'll struggle to estimate an expected value, which will make it difficult to price the risk.

Betting markets are likely to be hopeless under these conditions, but fortunately there are market-makers willing to take your money if you want to hedge against such risks. Its called insurance.

Tuesday, 9 May 2017

What is a net taxpayer?

Poor old young David Seymour was on the twitter yesterday, complaining about tax


It didn't go well, to be honest. Perhaps not as badly as when his predecessor as leader of ACT endorsed incest, but its fair to say that David did struggle a bit. In the heat of battle, he divided the population into "net taxpayers" and others, but then this happened.



No, it doesn't make sense, and Mr Seymour was deservedly ridiculed. Then a deeper question was asked


This is a good question because Davy-boy is inviting us to consider whether we've paid more than we got back, but cash payments massively understate the value given by community volunteers, and the value received by everyone from public good institutions such as schools, hospitals, firefighting, police and the prison/rehab sector.

So, no-one can actually tell whether they're a "net taxpayer" without attaching a value to their consumption of public goods. Dean is obviously OK with being a "net taxpayer" because he feels that the broader deal is acceptable. Mr Seymour would prefer we only look at the ca$h because.....?


Wednesday, 3 May 2017

StuffME - great outcome

The long wait for the Commerce Commission's decision on whether to clear NZ's big media merger ended today, with what Tim Murphy accurately described as 345 pages of unanimous rejection.

Many journalists and media managers are clearly outraged, in a way we seldom see in this country. The ongoing erosion of social services, corporate welfare and tax fraud doesn't generate this media outrage. Nor do the evasions, dissembling and lies of the politicians on whose watch this occurs. But when an independent Commission charged with administering competition laws declines to clear their own mega-merger, well its all on.

Some of the negative comment has ignored the Commission's statutory role, which was determined by the question asked of it by the applicants. The applicants admitted that the merger would reduce competition and sought authorisation, which required them to show that the public benefits of the merger were greater than the detriments. For a media merger, this scope raises all kinds of legitimate concerns, including about the plurality of views.

The lengthy process has also been disparaged, but again, this was largely the applicants doing. Even after the official process of submissions was complete, the applicants continued to send confidential submissions (legal and economic I believe) to the Commission. One can hardly blame the Commission for taking the necessary time to consider these submissions properly, especially since there was no opportunity for merger opponents to comment on these late submissions (not to mention the ever-present threat of legal challenge).

Despite some comments, no-one is disputing that these business are facing serious commercial challenges. Certainly the Commission understands this, as any reasonable reading of the decision will show. Earlier in the process I wrote about hard news as a public good, and how it might be funded.

Industry insiders have got their thinking caps on too. Just yesterday, the NBR quoted some anonymous soul ($) suggesting collaborative models that don't need mergers, including
  • pooling editorial resources (similar to the NZPA or the AP);
  • pooling technical resources (to achieve economies of scale with technical infrastructure); and
  • the development of an innovation task force focused on evaluating and implementing new business models.


These collaborations would site nicely with another good idea floated today for a return to local ownership.

Innovation won't stop and I bet it'll be stronger as a result of this decision. After all, the applicants really did admit that they don't know how to fix their problems and just need more time and money to figure out the answer!

There is one further reason to applaud this decision. The Commission, relying largely on its own analysis has faced down a very aggressive barrage from two large and influential companies. That is a good sign for the future.

Monday, 24 April 2017

Rachel Carson - mass murderer?

The website for the recent March for Science really buries the political lede pretty deep: reading it, you'd struggle to understand why scientists suddenly feel the need to march in the streets. The answer of course is that USA's President* Trump is so ignorant/corrupt that he's appointed industry shills to control the Department of Energy and the Environmental Protection Agency, people whose views are in stark contrast with the climate science which overwhelmingly finds that, yes, we humans have actually fucked up the planet.

Scientists in NZ supported their USA colleagues last weekend, and good on them. Protest is politically effective, even though no-one admits it at the time. And as Trump is showing, science can have political ramifications because it affects power structures.

Which brings me to Rachel Carson. When I think of Rachel Carson, I think of as a pioneering and brave scientist who helped initiate a very valuable social awareness of the environmental hazards of pesticides. Others blame her for malaria deaths.

Seriously, they do. I knew this already but it's such an extremist fringe that I was really stunned to hear it from the head of research at New Zealand's wealthiest think tank.
Since the obvious apparently needs stating, this denies the free will of other individuals and societies to choose their own actions. Even if you assume that the DDT is the best/only way to control malaria, it is just nutty to suggest that Rachel Carson stopped that from happening. You might as well blame Henry Ford for road deaths.

Update
Since just a bit more context that indicates Eric d






Tuesday, 14 February 2017

Nazi Punching - View from Aoteoroa

Fascism creeps, so it can be difficult to see it rising, though it's all too obvious once established, as the Nazis showed.

The moral case for Nazi punching therefore relies on how far advanced and established is the Nazi/Fascist agenda.

If you're living in a country where Nazi views have no real traction or support base, like me & Liam, then spontaneously punching a Nazi is over-kill, anti-social and you shouldn't do it, in my opinion.

There are plenty of Nazis polluting the commons in this otherwise fine land, but they don't need punching. Robust non-violent resistance is enough to contain powerless Nazi idiots like Kyle Chapman. No need to punch Kyle in the supermarket - just keep starving him of oxygen.

USA is in a far worse position than us: their new President has Nazi-like views and appointed actual Nazis as his closest advisors. So far, the (s)hit list includes: Muslims, Hispanics, Media, and the Judiciary... and its only the start of week four.

In that context, Nazis are a clear and present danger to many groups of people. They have power and they're using it to harass and intimidate sections of the USA's community of interest (which includes entry visa holders). If I lived in the USA, I'd want to make sure that Nazis don't feel sufficiently emboldened as to march down public streets advocating for their blinkered hatred.

If you're wavering, read about the battle of Cable St and have a wee think about which side you'd've backed.

Tuesday, 10 January 2017

Soil Carbon

One of the biggest arguments for excusing agriculture from New Zealand's emissions trading scheme (ETS) is that we farmers have no real prospect for mitigating these emissions. The EPA's chief scientist has recently argued that
"turning down agricultural emissions means altering biology - or getting rid of animals" 
Dr Rowarth indicates that both of these options are doomed by economic realities. I was puzzled because the biological farming methods we and others use are largely focused on fostering and cultivating (altering) soil biology, and here was the chief EPA scientist intimating we are mad.

Our working hypothesis goes like this:
  • we can use liquid foliar feeding (alongside dry ground-spread) to stimulate pasture growth
  • the diverse (salad bar) plants will share some of the nutrients with the soil through root exudates
  • the soil critters (worms, beneficial bateria & fungi) have symbiotic relationships with the plants, supplying them with macro and micro-nutrients.
There is a critical feedback loop here: we feed the soil biota & in return those beneficial critters scavenge around, scooping up nutrients and delivering them back to the plant in an available form.

Most farmers know that P gets locked-up in the soil. That's why the fert reps say we have to keep putting moron, even when the soil tests say we have plenty. We sacked these twits years ago. Since then we've been using small amounts of slow-release organic P and like to think that our soil biota are helping to unlock the abundant P reserves we see in our soil tests.

We reckon that farming can and should be regenerative: we are trying to build the soil rather than deplete it. Traditional agricultural systems have been terrible at conserving carbon but recent science suggests that alternative grassland management systems can indeed regenerate the soil and sequester atmospheric carbon.

If you thought these soil carbon prospects might be of interest to the chief scientist for NZ's EPA, you are sadly mistaken. When I asked Dr Rowarth recently why we don't care about monitoring soil carbon she had three reasons: NZ already has lots of soil carbon, it comes & goes with drought and its very hard to measure. I don't buy any of these reasons: they sound like excuses to me.
  • The current stock of soil carbon is irrelevant except as a baseline measure: farmers should be accountable for changes in soil carbon stocks. 
  • Droughts as a source of soil carbon volatility could be easily managed in a regulatory regime - for example with a rolling average over a few years.
  • And technology is rapidly cutting the cost of measurement.
To be clear, I am not suggesting that it is particularly easy to bring soil carbon into the ETS. Those opposing the idea have no shortage of roadblocks to promote. Instead, I am arguing that New Zealand should be working actively towards surmounting those roadblocks. Those controlling the relevant public funds are actively denying that this is warranted, but seem to have no science on their side - just blind faith in the status quo.

It is particularly distressing that our Environmental Protection Agency seems more interested in excuses than in pushing for (or even admitting there might be value in) scientific effort directed towards this particular form of "environmental protection" for which we pay our taxes.

Tuesday, 3 January 2017

Rowarth as Columnist

Here's the second paragraph of a column by the EPA's chief scientist, Jacqueline Rowarth, from the Rural News on 20/12/16.
Although farm animals aren't included in New Zealand's Emissions Trading Scheme (no country has put agriculture in to any sort of GHG scheme), many people still point fingers at 'polluters' and regard the animals and their owners as free-loaders.
The rest of Rowarth's article explains why this is "odd". Basically: farmers are the backbone of the economy, NZ's emissions are globally small, and there's really nothing farmers can do anyway.

Whatever our contribution to the nation's economic spine, we farmers are actually free-loaders in respect of emissions. We emit like mad and the taxpayer picks up the tab. This is the undeniable truth - regular payments are being made by the NZ government for our agricultural emissions.

Yet the chief EPA scientist supplied an opinion piece to the Rural News, on the topic of agricultural GHG emissions, that doesn't just avoid admitting the public subsidy of agricultural emissions, but is entirely framed as a counter-argument to the 'odd' people who are rude enough to mention it in public.

The EPA administers New Zealand's ETS. The EPA said they hired Rowarth to help "New Zealanders understand the science behind EPA decisions". That's a fine role, but it does not include spouting bollocks about ETS policy in the rural press.

Call me old-fashioned, but this seems like a no-no to me. Suppose for example that Electricity Authority hired Lew Evans or Geoff Bertram as its chief economist and let them keep spouting their views in the mainstream media. Or suppose that FSANZ hired Katherine Rich or Sue Kedgely on similar terms regarding food policy. Or suppose the police hired Garth McVicar or Dakta Green as a drugs policy advisor without constraints on how that role was parlayed in the news media.

I reckon that regulators should not be public advocates for or against the laws they enforce.

Update 5 Jan
Based on FB discussion I think the above post goes a bit too far, because it doesn't mention the fact that regulators should actually promote the things they're legally charged with promoting and we should applaud regulators when they do this.

I don't think this saves Dr Rowarth however. The objective of the EPA is "to undertake its functions in a way that contributes to the efficient, effective and transparent management of New Zealand's environment and natural and physical resources".

We might disagree about whether Dr Rowarth's column was contributing to the "efficient and effective" part of this objective, and I would argue it wasn't, but there was definitely no "transparent" contribution. On the contrary, the article opened with a deliberate attempt to obscure the fact that cleaners and truck drivers pay for farmers' emissions through their taxes.