New Zealand extinguished native title twice in its history with the 2nd of these takings of Māori land by the last Labour government with the foreshore and seabed legislation. In her op-ed today, has Jacinda Ardern forgotten why the Māori party came into being?
Unlike New Zealand, Australia welcomed migrants from a wide range of ethnicities after the Second World War. It abolished the White Australia policy in the 1960s along with any discrimination in its Constitution against aboriginals.
This redress of indigenous grievances was done out of the generosity of the Australian heart. Aboriginals are a tiny minority in Australia with little independent political pull.
What a splendid opportunity! In an Australian election year, Kevin Rudd will be back in the Australian news, frequently front page.
This re-emergence of Kevin747 will remind Australian voters of how dysfunctional he was and how dysfunctional the last Labour government was.
Most of the reporting of Kevin Rudd in the Australian media be about how that control freak and social cripple will bring his dysfunctionality to United Nations and international relations generally.
Bill Shorten must hate the idea. The last thing he wants as an unpopular opposition leader is for the last Labour Prime Minister, who he stabbed in the back as prime minister first time round, to be back in the news.
Mark Latham uses to say that the only reason Kevin Rudd was popular with the Australian people was that never met him.
Back in the day, I was having a beer in Bob Hawke’s office along with the rest of the economic division staff from his department. We were told to avoid discussing racing as Hawke would never stop talking about it.
Somehow the conversation got on to Malcolm Fraser becoming secretary general of the Commonwealth Secretariat. He had recently lost the race.
Bob Hawke told us a story about a conversation he had with Margaret Thatcher on the candidature of Malcolm Fraser.
Hawke said that Thatcher said do you really want Malcolm Fraser beating down your door every day about apartheid. She had a point.
I took that remark by Hawke to mean that Fraser had independent stature as a former prime minister. He could annoy powerful people because he had nothing to lose and everything to gain.
The Nigerian chief who got the job will be so grateful for the appointment that he would not upset his sponsors. That is why Helen Clark will not become UN Secretary General. She is overqualified.
UN Secretary General is not the best job Clark has ever had. She has independent gravitas and everything to gain and nothing to lose by being an activist secretary general.
All previous Secretary Generals were obscure foreign ministers who will be just so grateful for the big promotion. They did not have independent gravitas.
If you look at positions such as president of the European commission, managing director of the IMF or president of the World Bank and other international appointments, they do not go to statesman.
Agricultural support is defined as the annual monetary value of gross transfers to agriculture from consumers and taxpayers arising from government policies that support agriculture, regardless of their objectives and economic impacts.
A lot of jobs depend upon action to fight climate change and global warming. Perhaps they should be little bit easier about accusing others of being on the payroll to criticise or advocate for a particular position in those debates.
There has been a recession in the climate change and global warming industry in the last few years. Then there was a bit of a rebound after the Paris climate talks and subsequent agreement to promise to do something but whatever that was is up to you and your domestic political constituencies.
The rise of Jeremy Corbyn has reminded me of how lazy political activists happen to be. For all their lifelong agitating, they think that as soon as they get a degree of prominent, their work is done. Suddenly, everyone who has disagreed with accidentally prominent activists for all that life will flock to their side and they will win the next election.
The thing about being a political fringe dwelling is you are a political fringe dweller. Only a tiny percentage of the population support you. To get anything above that requires hard work and a considerable amount of compromise to expand your base.
Those that already agree with you already agree with you. If you want more to agree with you, you have to start agreeing with those that disagree with you rather than they agree with you. It is a slow laborious process of compromise.
Occasionally, parties rush to prominence. Left-wing and right-wing populists are examples of these as are the anti-immigration parties. Their support is soft and can quickly disappear. Trump, Corbyn and Sanders should remember this.
Most of all, political activists who slip into prominence forget that voters tend to vote retrospectively: on past performance and out of anger than voting for a particular agenda of the alternative parties.
Because of this political ignorance and apathy, Richard Posner championed Schumpeter’s view of democracy. Schumpeter disputed the widely held view that democracy was a process by which the electorate identified the common good, and that politicians carried this out:
The people’s ignorance and superficiality meant that they were manipulated by politicians who set the agenda.
Although periodic votes legitimise governments and keep them accountable, their policy programmes are very much seen as their own and not that of the people, and the participatory role for individuals is limited.
Schumpeter’s theory of democratic participation is that voters have the ability to replace political leaders through periodic elections. Citizens do have sufficient knowledge and sophistication to vote out leaders who are performing poorly or contrary to their wishes.
The power of the electorate to turn elected officials out of office at the next election gives elected officials an incentive to adopt policies that do not outrage public opinion and administer the policies with some minimum honesty and competence.
That lack of competence and judgement are what will bring Trump, Corbyn and Sanders down. They are just not up to the job. There are better left-wing and right-wing populists and firebrands about.
The outcome of Schumpeterian democracy in the 20th century, where governments are voted out rather than voted in, is most of modern public spending is income transfers that grew to the levels they are because of support from the average voter.
Political parties on the Left and Right that delivered efficient increments and stream-linings in the size and shape of government were elected, and then thrown out from time to time, in turn, because they became tired and flabby or just plain out of touch.
If Americans at different income levels agree on a policy, they are equally likely to get what they want. But what about the other half of the time? What happens when preferences across income levels diverge?
When preferences diverge, the views of the affluent make a big difference, while support among the middle class and the poor has almost no relationship to policy outcomes. Policies favored by 20 percent of affluent Americans, for example, have about a one-in-five chance of being adopted, while policies favored by 80 percent of affluent Americans are adopted about half the time. In contrast, the support or opposition of the poor or the middle class has no impact on a policy’s prospects of being adopted.
These patterns play out across numerous policy issues. American trade policy, for example, has become far less protectionist since the 1970s, in line with the positions of the affluent but in opposition to those of the poor. Similarly, income taxes have become less progressive over the past decades and corporate regulations have been loosened in a wide range of industries.
This is a dewy eyed view of democracy that would make HL Mencken proud. The notion of a democracy is governed by the rule of law, checks and balances and the protection of minority rights is lost in these dewy eyed conception is a democracy. As Matthew Yglesias said:
…the idea that the point of democracy is to implement legislative outcomes that are supported by broad-based surveys seems almost like a straw man dreamed up by an eighteenth-century monarchist.
Gilens concedes that other values—the protection of minority rights, for example—may also be important, but this misses the forest for the trees. The purpose of a political system is to resolve political questions in a satisfactory way….
The watchword of democracy should not be responsiveness but rather accountability.
In a well-functioning system, voters should elect a team of politicians and then fire them if their performance is seen as unsatisfactory. Seen in this light, the problem with American democracy today is that the intersection of counter-majoritarian legislative procedures and increased partisan polarization has blurred the lines of responsibility.
My confidence in the median voter theorem returned when Bryan Caplan and Sam Peltzman pointed out that it is difficult to point to a major government program in the 20th century that does not have majority support.
Director’s law is the bulk of public programmes are designed primarily to benefit the middle classes but are financed by taxes paid primarily by the upper and lower classes. Based on the size of its population and its aggregate wealth, the middle class will always be the dominant interest group in a modern democracy.
Within this framework of accountability and voting on the basis of performance rather than promise, there is considerable rotation of power. The fact that this particular activist or populists stumbled onto the treasury benches does not mean much. They usually got there because the previous administration was no longer seen as competent. Nothing more than that.
Both the elites and ordinary people are prospering tremendously from the rise of capitalism in China, Vietnam and other places. A move away from this liberalisation to a more authoritarian setting would cost too many people too much money.
In the course of these economic liberalisations, China and Vietnam, for example, changed from totalitarian dictatorships to tin-pot dictatorships. As long as you keep out of politics in these countries, there is a fair degree of freedom and much more freedom compared to the days of communism.
Percentage employed in agriculture in the world's major economies over the last 50 years. https://t.co/UbaDnaE8Lr— Robert Wilson (@CountCarbon) January 08, 2016
Economists do not know how to accurately measure the growth effects of most policies
Dynamic scoring relies on less-than-accurate, theory-based macro models
The macro models undergirding dynamic scoring have numerous controversial and unproven built-in assumptions
The assumptions embedded in the macro models are not always carefully empirically based
Macro models exclude theoretically and empirically supported evidence of supply-side effects of public investment
Macro models exclude evidence-based effects of economic inequality
Macro models exclude evidence-based effects of numerous policies
Macro models provide different estimates of growth impacts of policy depending on guesses of how the policy may be finance
Against that is dynamic scoringremoves the biasagainst pro-growth policies in current budgetary scoring:
[A] theoretical advantage of accurate dynamic scoring is that it is not biased against pro-growth policies compared to the current conventional scoring method. By ignoring macroeconomic effects, the conventional method overstates the true budgetary cost of pro-growth policies, such as infrastructure investments, and understates the cost of anti-growth policies.
The bigger problem is something I learnt when costing a tax proposal for an election campaign. There was an error because I did the costing on a spreadsheet while I had a bad head cold.
The advantage of the error was the policy, as a result of this minor error in the tabulations attracted considerable attention from the major parties.
I was advised by a very wise head that this tabulation error in the dynamic scoring was not so bad a problem. This was because the tabulation error gave our side a chance to have a go at them again in the media. The policy announcement stayed in the new cycles for longer than otherwise and attracted attention from the big parties.
If a policy is too good, too perfect, the other parties will kill it with silence. You get only one bite in the news cycle and that is it.
If your policy announcement is killed by silence, at least you are guaranteed a chance to go at it again when the proposed independent costings unit a week or so later in the election campaign. You might disagree of those costings just to attract attention in the next new cycle.
Given the size, ambition and nebulous externality content of Green party proposals, they will benefit considerably from getting another go by questioning the Parliamentary budget office costings. That guarantees at least two new cycles to every one of their budgetary and regulatory announcements. No wonder they have proposed this independent costings unit.
If the New Zealand Greens do not like the costing from their proposed independent costings unit, they can just rage against neoliberalism and the conservative bias of economists. They cannot lose in terms of another bite of the 24-hour news cycle.
As a starter to feigning disagreement with any independent costings of their tax, spending and regulation proposals, Milton Friedman argued that people agree on most social objectives, but they differ often on the predicted outcomes of different policies and institutions. This leads us to Robert and Zeckhauser’s taxonomy of disagreement:
Positive disagreements can be over questions of: 1. Scope: what elements of the world one is trying to understand? 2. Model: what mechanisms explain the behaviour of the world? 3. Estimate: what estimates of the model’s parameters are thought to obtain in particular contexts?
Values disagreements can be over questions of: 1. Standing: who counts? 2. Criteria: what counts? 3. Weights: how much different individuals and criteria count?
Any positive analysis tends to include elements of scope, model, and estimation, though often these elements intertwine; they frequently feature in debates in an implicit or undifferentiated manner. Likewise, normative analysis will also include elements of standing, criteria, and weights, whether or not these distinctions are recognised. There is a rich harvest for nit-picking to keep the story going.
New Zealand filmmakers have used trade treaties to pry open access to foreign markets by challenging failures to honour promises of nondiscrimination in trade and investment in the Federal Court of Australia.
This should please the Twitter Left because they are also a film going left as are most members of the educated middle class as a point of identity and snobbery.
Back in the day, New Zealand television programming was sold cheaply into the Australian market. Many cultural and other products are exported into foreign markets and sold for whatever they can get above the price of shipping or digital transmission. What else explains all that rubbish on cable TV?
Under the Closer Economic Relations agreement that creates a single market between Australia and New Zealand, New Zealand made television programming content must be treated the same way as Australian content so it was included in their 50% local content rules for commercial television back from whenever I remember this story from.
There was a Federal Court of Australia case that ruled that New Zealand television programming was Australian content programming for the purposes of the relevant media regulations because of Closer Economic Relations.
From the late 1990s, with revival of the New Zealand film and television industry, New Zealand content was starting to flood the Australian market, especially in the off-season in the summer when stations were looking for cheap content to fill a low ratings period.
Naturally, this Kiwi invasion did not please the rent seeking Australian television programme production industry and many a mendicant actor, writer and producer
Where there is a will, where there is a way: minimum quality standards are introduced into the Australian content rules defined by price – a price that happen to be above what the television stations used to pay for New Zealand made programming in the off-season.
This court victory in favour of various New Zealand film industry in enforcing a trade and investment treaty puts the Twitter left in a bit of a conundrum. Which is more important? The New Zealand film industry or their hatred of globalisation and the rule of law.
Today the Treasury advised that it no longer calculates an annual rate of return on the portfolio of state owned enterprises as a whole. It no longer publishes an annual portfolio report (APR).
Source: Treasury response to Official Information Act request by Jim Rose, 14 January 2016.
The Treasury regards the crown portfolio report which contains performance indicators on the state owned enterprises portfolio as a whole as too resource intensive.
The Treasury prefers to be more forward-looking in their reporting on a quarterly basis to the Minister of Finance. Unfortunately, the Treasury refused to my requests for access to this forward-looking reporting to the Minister of Finance on commercial-in-confidence grounds.
The forward-looking approach to state-owned enterprise performance is now only by the Treasury and the Minister of Finance. No one else has access to this financial performance information.
It is no longer possible to say using a figure calculated by the Treasury whether the portfolio of state owned enterprises as a whole are a good return to the taxpayer or not. Individual annual reports of the state owned enterprises can be reviewed but the portfolio wide rate of return is no longer available from the Treasury with the associated credibility of the same.
A common argument against state ownership is that as a whole government ownership is a bad investment. Specifically, the portfolio of state owned enterprises struggle to pay a return in excess of the long-term bond rate.
A common argument for continued state ownership is the loss of the dividends from privatisation. The vulgar argument such as by the New Zealand Labor Party and New Zealand Greens is if a state owned enterprise is privatised either partially or fully, the taxpayers no longer receive dividends. The fact that the sale price reflects the present value of future dividends is simply ignored.
Governments are so bad as business owners and so incapable of running a commercial process free of politics that governments cannot even sell a state-owned enterprise for a good price under the full glare of the media and public.
A reply to the loss of dividends argument is the dividends from the portfolio as a whole do not repay the government debt incurred to fund capital infusions into state-owned enterprises both when initially established and through time. In that case, it is better to leave your money in the bank than in the state of enterprise.
John Quiggin often criticises privatisation on the grounds that state owned enterprises can invest at a cheaper rate because they are financed at the long-term bond rate:
In general, even after allowing for default risk, governments can borrow more cheaply than private firms. This cost saving may or may not outweigh the operational efficiency gains usually associated with private ownership.
It is not possible to scrutinise that argument without an annual rate of return on the portfolio of state owned enterprises as a whole to see if it is true at first pass at least. As the Treasury no longer calculates a rate of return on the portfolio and taxpayers’ equity, that debate comes to something of a crashing halt in New Zealand.
If these state owned enterprises were privately owned and listed on the share market, investors would just look at trends in share prices for daily measure of expected future profitability.
The fiscal case for privatisation must be assessed on a case by case basis. It will always be true for example that if a public enterprise is operating at a loss, and can be sold off for a positive price with no strings attached, the government’s fiscal position will benefit from privatisation.
Various early ventures in public ownership, such as the state butcher shops operated in Queensland in the 1920s (apparently a response to concerns about thumbs on scales) met this criterion, and there doesn’t seem to be much interest in repeating this experiment.
In most sectors of the economy, the higher cost of equity capital is more than offset by the fact that private firms are run more efficiently, and therefore more profitably, than government enterprises.
But enterprises owned by governments are usually capital intensive and often have monopoly power that entails close external regulation, regardless of ownership. In these situations, the scope to increase profitability is limited, and the lower value of the asset to a private owner is reflected in the higher rate of return demanded by equity investors.
Quiggin is wrong about government enterprises have been a lower cost of capital because it contradicts the most fundamental principles of business finance as explained by Sinclair Davidson:
…it is clear that the Grant-Quiggin view violates the Modigliani-Miller theories of corporate finance. The cost of capital is a function of the riskiness of the investment projects and not a function of a firm’s ownership structure.
How the cash flows of a business are divided between owners and creditors does not matter unless that division changes the incentives they have to monitor the performance of the firm and keep it on its toes. Those lower down the pecking order if things go wrong such as owners have much more of an incentive to monitor the success of the business and lift its performance.
Capital structures of firms, the property rights structures of firms, matter precisely because they influence incentives of those with different claims on the cash flows of the firm.
Having to pay debt disciplines managerial slack and ensures that free-cash flows are used to repay debt (or pay dividends) rather than be invested in low quality new ventures. Having to borrow from strangers such as banks ensures regular scrutiny of the soundness and prospects of the company from a fresh set of eyes. Capital structures made up of both debt and equity keeps the firm on its toes.
Unfortunately, in New Zealand it is much more difficult to review the arguments for and against the current size and shape of the state owned enterprise portfolio as for example summarised by John Quiggin:
Technologies and social priorities change over time, with the result that activities suitable for public ownership at one time may be candidates for privatization in another. However, the reverse is equally true. Problems in financial markets or the emergence of new technologies may call for government intervention in activities previously undertaken by private enterprise.
In summary, privatization is valid and important as a policy tool for managing public sector assets effectively, but must be matched by a willingness to undertake new public investment where it is necessary.
As a policy program, the idea of large-scale privatization has had some important successes, but has reached its limits in many cases. Selling income-generating assets is rarely helpful as a way of reducing net debt. The central focus should always be on achieving the right balance between the public and private sectors.
This balancing of public and private ownership is more difficult in New Zealand because portfolio wide rates of return are unavailable unless you calculate them yourself. That must be labour-intensive given the Treasury thought it was too labour-intensive for it to do for itself.
An obvious motive to start a review the extent of state ownership is the portfolio is performing poorly. That warning sign is no longer available because the crown portfolio report is no longer published.
One way to fix an underperforming portfolio is to sell the dogs in the portfolio. One of the first ways owners notice dogs in their portfolio is the portfolio not returning as well as it used too because of the emergence of these dogs so further enquiries are made and explanations sought.
Taxpayers, ministers and parliamentarians are all busy people with little personal stake in the rate of return on the state owned enterprises portfolio.
Taxpayers, ministers and parliamentarians will all first look at the portfolio wide rate of return to see whether more detailed scrutiny of individual investments is required. That quick check against poor value for money and trouble ahead is no longer available on the state owned enterprises portfolio in New Zealand.
Why Evolution is True is a blog written by Jerry Coyne, centered on evolution and biology but also dealing with diverse topics like politics, culture, and cats.
In Hume’s spirit, I will attempt to serve as an ambassador from my world of economics, and help in “finding topics of conversation fit for the entertainment of rational creatures.”
“We do not believe any group of men adequate enough or wise enough to operate without scrutiny or without criticism. We know that the only way to avoid error is to detect it, that the only way to detect it is to be free to inquire. We know that in secrecy error undetected will flourish and subvert”. - J Robert Oppenheimer.
Hawke said that Thatcher said do you really want Malcolm Fraser beating down your door every day about apartheid. She had a point.
Utopia, you are standing in it! 
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