Celebrating humanity's flourishing through the spread of capitalism and the rule of law
05 Feb 2016 Leave a comment
in applied price theory, economic history, labour economics, labour supply, politics - New Zealand, public economics
Up until the early 1990s, New Zealand had a universal old age pension that was paid from the age of 60. There was no means test or assets test. The eligibility age for this old age pension was increased to age 65 over the course of the 1990s and early 2000s. It obviously showed up in the labour supply of workers aged 60 to 64 in New Zealand both before and after the change in the eligibility age.
Data extracted on 05 Feb 2016 04:49 UTC (GMT) from OECD.Stat.
05 Feb 2016 Leave a comment
in labour economics, labour supply, politics - New Zealand, poverty and inequality, public economics
05 Feb 2016 Leave a comment
in labour economics, labour supply, politics - Australia, politics - New Zealand, politics - USA Tags: economics of immigration
04 Feb 2016 Leave a comment
in constitutional political economy, economics of regulation, international economic law, international economics, International law, labour economics, law and economics, politics - New Zealand, unions Tags: employment law, employment protection, employment regulation, ILO, labour market regulation, social clauses, TPPA
New Zealand has signed and ratified dozens of International Labour Organisation Conventions dating back to 1921. They all fetter the sovereignty of New Zealand. As a member of the ILO, New Zealand is required to report on its application of ILO Conventions.
That limitation on the sovereignty of New Zealand is no more and no less than in an international trade agreement. New Zealand can renounce an international trade agreement and has renounced nine International Labour Organisation conventions.
Jane Kelsey makes the following points about the legal implications of the Trans-Pacific Partnership agreement:
The 30 chapter Trans-Pacific Partnership Agreement (TPPA) constrains domestic law and policy at central government level, and in places by local government and SOEs, in diverse areas beyond traditional aspects of international trade.
…The TPP provides cumulative opportunities for foreign states and corporations to influence domestic decisions which may be burdensome and intrusive.
The exact same objections apply to the ILO conventions. The union movement does not hesitate to argue that the democratic process in New Zealand should be overridden because the proposal at hand purportedly conflicts with an ILO convention.
For example, when the government was choosing to deregulate collective bargaining, the sovereignty of Parliament was questioned because of an ILO convention. Helen Kelly, CTU President said:
in Parliament on 4 June, the Minister was asked if he agreed with advice from officials that the ability for employers to opt out of multi-employer bargaining may breach our obligations under ILO Convention 98 on the right to organise and collective bargaining.
…There is no point attending such an important UN ILO conference at the time your Government is being advised it is breaching its undertakings to that very organisation…
The CTU President also referred to the regulatory impact statement prepared for that collective bargaining legislation:
The paper also points out that these changes open NZ up to international examination by the International Labour Organisation (ILO) for non-compliance with Convention 98 – on the Right to Organise and Collectively Bargain, which New Zealand has signed up to.
Helen Kelly says “at least four of the proposals are deemed to be inconsistent with our international obligations, and two of them are classified as uncertain. Why the Government wants law changes that damage our international obligations is unclear.”
Council of Trade Unions submissions to minimum wage reviews have at least a dozen references to ILO conventions and the requirement to honour their provisions.
Posner and Goldsmith rightly argue that international law is a product of states pursuing their interests on the international stage. It does not induce states to comply contrary to their interests. The possibilities for what it can achieve are limited.
Government sign-up to various international agreements depending on their political priorities. You cannot complain that governments that you did not vote do what government you voted for also did, which was sign up to international agreements that suited their political agendas. The solution is to work harder to win the next general election.
As for opposing trade agreements on sovereignty grounds, it is rank hypocrisy for the union movement to do so given the number of times it cites international labour agreements when it suits them and seeks their inclusion in trade agreements to raise labour costs in developing countries.
04 Feb 2016 Leave a comment
in economic history, politics - New Zealand, transport economics, urban economics
Transport Blog was making much of some data about how a lot of people used public transport and New Zealand in the 1950s:
Take Auckland as an example. According to Paul Mees [Transport for Suburbia, p. 21], in 1954 Auckland’s public transport network “accounted for 58 per cent of trips by motorized modes, private transport only 42 per cent. When walking and cycling, which were not surveyed, are taken into account, it is likely that fewer than a third of daily trips were by car.”
… public spending to enable car travel did not respond to existing demand – it was intended to shape future demand. (And in doing so, change the shape of the city).
…
“roads first” transport policies seem less like an exercise in meeting demands, and more of a component of a large social engineering programme.
Transport Blog forgot previous data it dugout on trends in car ownership per capita in New Zealand since 1925. There is an explosive growth in car ownership from the 1950s onwards with the post-war economic boom. The roadbuilding that followed responded to this growing wealth of the New Zealand people rather than the other way round.
Source: The Infernal Combustion Engine « transportblog.co.nz.
People like owing and driving cars. Transport Blog begrudgingly admits in its post today that cars have some advantages.
Young people save up to buy a car not because they are duped by the enemies of public transport, they save because a car is a good way to get around.
Privately owned cars are more comfortable, faster, more private, more convenient in trip timing, and more flexible for multiple tasks on one trip than any form of public transit. What cannot be avoided as Anthony Downs explains is:
As household incomes rise around the world, more and more people shift from slower, less expensive modes of movement to privately owned cars and trucks.
Downs argues that it is time to settle down and accept what cities are:
…peak-hour traffic congestion is inescapable in large modern metropolitan areas the world over. Business firms want most people on the job during the same hours so that workers can interact efficiently. Many firms also want to locate in low-density establishments scattered across the landscape.
Households want a range of choices of where to live and work, and most want to live in low-density settlements that are separate from poorer households, use private vehicles for most travel and be able to carry out multiple errands on a single trip.
04 Feb 2016 2 Comments
in economics of bureaucracy, International law, personnel economics, politics - New Zealand
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.
03 Feb 2016 Leave a comment
in applied welfare economics, economics of regulation, international economic law, international economics, politics - New Zealand
The op-ed by Tim Hazledine today made a poor case against the Trans-Pacific Partnership agreement (TPPA). A much better case could be made but for his still fighting the 1990 election in New Zealand, which was about the future of economic reform.
He starts off strong by saying that the agreement is a mixed bag. I am of the same view. The TPPA is a so-so deal with small net gains.
Economic stuff the PM DIDNT mention #TPPANoWay @ItsOurFutureNZ @etangata @Mihi_Forbes @FoxMarama @grantrobertson1 https://t.co/L9rtd1dXvp—
Moana Maniapoto (@moanatribe) January 26, 2016
The TPPA and other trade agreements have dubious chapters such as the trade and environmental clauses, the intellectual property chapter and investor-state dispute settlement. Good arguments can be mounted against all of them, especially the inclusion of trade and environmental clauses into trade agreements.
Hazledine makes few of these points of mine, preferring instead to start with a rant against economic reform in New Zealand:
One of the more gormless of the 1980s “Rogernomics” economic policy experiments was to slash tariffs on imports without seeking equivalent concessions from our trading partners.
That didn’t do us much good then, but means now that matching reductions under the TPP is relatively painless for New Zealand, because our tariffs are already so low.
He wants to put tariffs back up again so that the poor pay well over the odds to import goods that are often not made in New Zealand and when they were they were very expensive.
Henry Simons argued that economics and in particular applied price theory is most useful both to the student and the political leader as a prophylactic against popular fallacies. Paul Krugman explained the twisted logic of trade negotiations well in this tradition when he said:
Anyone who has tried to make sense of international trade negotiations eventually realizes that they can only be understood by realizing that they are a game scored according to mercantilist rules, in which an increase in exports – no matter how expensive to produce in terms of other opportunities foregone – is a victory, and an increase in imports – no matter how many resources it releases for other uses – is a defeat.
The implicit mercantilist theory that underlies trade negotiations does not make sense on any level, indeed is inconsistent with simple adding-up constraints; but it nonetheless governs actual policy.
The economist who wants to influence that policy, as opposed to merely jeering at its foolishness, must not forget that the economic theory underlying trade negotiations is nonsense – but he must also be willing to think as the negotiators think, accepting for the sake of argument their view of the world.
The logic of trade negotiations is they are about cutting tariffs we should have cut long ago in return to others cutting their tariffs which they too should have cut long ago if they had any concern for the welfare of their own country rather than special interests.
Tim Hazledine swallows the logic of trade negotiations hook, line and sinker with all the enthusiasm of a non-economist but he is a professional economist. Professional economists laugh at the mercantilist logic of trade negotiations.
Paul Krugman summarised the TPPA well recently from a standpoint of a professional economist, which occasional he still is:
I’ve described myself as a lukewarm opponent of the Trans-Pacific Partnership; although I don’t share the intense dislike of many progressives, I’ve seen it as an agreement not really so much about trade as about strengthening intellectual property monopolies and corporate clout in dispute settlement — both arguably bad things, not good, even from an efficiency standpoint….
What I know so far: pharma is mad because the extension of property rights in biologics is much shorter than it wanted, tobacco is mad because it has been carved out of the dispute settlement deal, and Republicans in general are mad because the labour protection stuff is stronger than expected. All of these are good things from my point of view. I’ll need to do much more homework once the details are clearer.
Krugman then reminded that a trade agreement is most politically viable when it is most socially harmful. This is the point that the opponents of the TPPA miss. They will not want to discuss how some trade agreements are good deals but others are bad. That would admit that trade agreements can be welfare enhancing, and sometimes they are but sometimes not.
Hazledine’s op-ed improves noticeably when he talks about sovereignty but this will backfire on him as I will show shortly:
what perhaps most concerns TPP doubters is possible loss of sovereignty – control by legitimate New Zealand governments over New Zealand policies and institutions: Pharmac, mining, greenhouse gases, fracking, biomedical patents, the Treaty of Waitangi and others have been raised as being at risk. TPP supporters have attempted to soothe such concerns, but I’d say they should come clean. Of course the TPP will weaken New Zealand’s sovereignty. That is what these things are supposed to do!
The fundamental idea or ideology behind the TPP is that national governments cannot be trusted to act independently on many issues, because they will inevitably succumb to local vested interests. Only the cleansing discipline of untrammelled global free-market forces will deliver efficient outcomes.
I fully understand the economic logic of this position, and could easily myself compile a long list of harmful effects of local vested interests, at the top of which would actually be those Canadian etc dairy and other agricultural policies.
But the basic premise is flawed. Most of the sovereignty we are giving up is not ceded to the invisible hand of free, competitive markets. It is not even handed over to larger sovereign states, such as the United States. It is largely to be conceded in the cause of making the world a safer place for huge, stateless multinational corporations to roam. Are we sure this is what we want?
I agree that treaties reduce sovereignty. That is what they are about. I am particularly concerned about treaties that reduce New Zealand’s sovereignty over its greenhouse gas emissions. These sovereignty arguments against trade agreements apply equally to climate treaties.
Likewise, trade agreements should not include trade and environmental standards as they limit the right of New Zealand to deregulate its labour market.
What's in the #TPP? Robust enforceable environmental protections. Get the facts ustr.gov/tpp #LeadOnTrade http://t.co/hzapJwGaCa—
USTR (@USTradeRep) October 05, 2015
What's in the #TPP? Protections for American workers. Get the facts: ustr.gov/tpp #MadeInAmerica http://t.co/VPeV70zaPT—
USTR (@USTradeRep) October 05, 2015
All too often unions point out that this or that International Labor Organisation convention signed decades ago conflicts with labour market deregulation. That undermines the sovereignty of New Zealand regarding the regulation of the economy just as much is the TPPA.
02 Feb 2016 1 Comment
in economic history, politics - Australia, politics - New Zealand, politics - USA, Public Choice, rentseeking Tags: agricultural subsidies, Australia, Canada, cultural economics, Japan
Source: Agricultural policy – Agricultural support – OECD Data.
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.
02 Feb 2016 Leave a comment
in constitutional political economy, development economics, economics of regulation, growth miracles, international economics, politics - New Zealand, Public Choice, rentseeking
The key reason why China joined the World Trade Organisation and other trade agreements is to bring some semblance of law to an authoritarian country. 
Source: AEAweb: AEJ: Macro (6,2) p. 29 – Free Trade Agreements and the Consolidation of Democracy via Max Roser.
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
01 Feb 2016 1 Comment
in applied welfare economics, constitutional political economy, economics of regulation, income redistribution, politics - New Zealand, public economics
I am sure there will be lots of squabbling over parameters and assumptions of any tax, spending or regulation proposal submitted to the independent costings unit proposed recently by the New Zealand Greens.
The bigger problem is static and dynamic scoring. There is some history of doing this for taxes but little for spending and that is before you consider externalities. Imagine the squabbling over roading proposals and their externalities. The practical hurdles to dynamic scoring are:
Against that is dynamic scoring removes the bias against 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.
01 Feb 2016 1 Comment
in economics of crime, politics - New Zealand
A good mate at University was a democratic socialist. After graduating in law, he joined the Director of Public Prosecutions. He is still there as a senior counsel. That is the new name for a Queens Counsel in Tasmania.
The reason he gave for his career choice, he was a top-notch graduate with a great career ahead of him, was the poor were mostly the victims of crime. The best he could do for them was to put those that victimised them in prison by being a public prosecutor. As William Julius Wilson explains:
As Leon Neyfakh points out, some people are reluctant to talk about the high murder rate in cities like Milwaukee because
(1) it might distract attention from the vital discussions about police violence against blacks, and
(2) it runs the risk of providing ammunition to those who resist criminal justice reform efforts regarding policing and sentencing policy.These are legitimate concerns, of course. On the other hand, it is vital to draw more attention to the low priority placed on solving the high murder rates in poor inner-city neighbourhoods, reflected in the woefully inadequate resources provided to homicide detectives struggling to solve killings in those areas. As Jill Leovy, a writer at Los Angeles Times asserts in her 2014 book Ghettoside, this represents one of the great moral failings of our criminal justice system and indeed of our whole society. The thousands of poor grieving African American families whose loved ones have been killed tend to be disregarded or ignored, including by the media.
The nation’s consciousness has been raised by the repeated acts of police brutality against blacks. But the problem of public space violence—seen in the extraordinary distress, trauma and pain many poor inner-city families experience following the killing of a family member or close relative—also deserves our special attention. These losses represent another social and political imperative, described to me by sociologist Loïc Wacquant in the following terms: “The Other Side of Black Lives Matter.” They do indeed.
01 Feb 2016 Leave a comment
in labour economics, labour supply, politics - New Zealand, poverty and inequality, welfare reform Tags: Maori economic development, single mothers, single parents, welfare state
01 Feb 2016 Leave a comment
in politics - Australia, politics - New Zealand, politics - USA, public economics Tags: Australia, Canada, Denmark, France, Germany, Italy, Japan, Social Security taxes, taxation and labour supply, the dish economy
31 Jan 2016 1 Comment
in applied price theory, economics of education, income redistribution, politics - New Zealand, public economics, rentseeking
31 Jan 2016 Leave a comment
in politics - Australia, politics - New Zealand, politics - USA, public economics Tags: Australia, British economy, Canada, Denmark, France, Germany, Italy, Japan, New Zealand, social insurance, Social Security taxes, taxation and labour supply
Ordinary French, Germans, Italians and Danish pay much higher marginal tax rates and that is before their high rates of GST.
Data extracted on 30 Jan 2016 03:08 UTC (GMT) from OECD.Stat.
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