Sugar taxes and expressive politics

The sugar tax championed by among others the Morgan Foundation is the latest manifestation of do-gooding that dates back to sumptuary laws of mediaeval times. Black’s Law Dictionary defines them as

Laws made for the purpose of restraining luxury or extravagance, particularly against inordinate expenditures in the matter of apparel, food, furniture, etc.

These early attempts through sumptuary laws to regulate how people live their lives to make sure that they did not dress above their social rank as well as risk hellfire and damnation has been critically applied include alcohol prohibition, drug prohibition, gun control laws, bans, and restrictions on dog fighting.

The sugar tax attempts to save us from a bad diet because others know how to run our lives better than we do despite having never met us, much less lived our lives and dreamed our dreams. The calling of the do-gooder is a busy vocation.

The do-gooders want to stop smoking, overeating, and the partaking of too much sugar but undoubtedly support the decriminalisation of marijuana because of the futility of prohibition.

The right to get stoned is a civil liberties issue but sugar is a legitimate topic of public health regulation. Those who do not want to save people from sugar are ignorant or steeped in moral turpitude, preferably both.

We live in an age of obesity. When I was a kid, the poor were thin, they are now fat. I can still remember the names of the 2 boys in my high school class who were in any way overweight. Now the majority of school kids are overweight.

Sugar taxes are also when the Left stage a temporary conversion to supply-side economics. When you tax something, less will be supplied. The Left are surprisingly unwilling to admit that unless it suits their agenda of the day.

The Morgan Foundation is a curious position of advocating a great big new tax: a comprehensive capital taxation. It is also arguing that sugar taxes will cut consumption. I wonder what it estimates to be the response of saving and investment in its capital tax. Does it take the conservative estimates, or the liberal estimates of the responsiveness of savings, investment and labour supply to higher taxes?

Sugar taxes are a blunt instrument. They tax fat people, thin people and the potentially fat of tomorrow. They are not like alcohol and tobacco taxes which are narrowly tailored to taxing sin. Richard Posner said that

People who crave sugar will find no dearth of substitutes for sugar-sweetened sodas. Moreover, most consumers of these sodas are not and never will be obese. They may well be overweight, but all that that means is that they are heavier than the “ideal” weight calculated by physicians; if they are only slightly or even moderately heavier, the consequences for health or social or professional success are apparently slight. To the extent that a soda tax would cause substitution of equally sugared foods, it would not only have no effect on obesity; it would yield no revenue…

Last time I looked, people enjoy food. Some enjoy food quite a lot.

We are in a free society where some people are just simply like eating while others have a bad draw of the genes. Others like to exercise. As Richard Posner said:

The obese are people who by dietary choice and preference for a sedentary style of life have traded off the costs of obesity against the costs of being thin and have decided (at least in a “revealed preference” sense–they may not have consciously chosen a style of life that predisposes them to obesity) that the costs of thinness preponderate over the benefits. And in general we do not try to prevent people from making such trade-offs.

But there are two situations in which preventing people from choosing the style of life that maximizes their utility can be defended (provided certain assumptions are made about cost and efficacy) on economic grounds.

One is where consumers are unable to evaluate a product or to act upon their evaluation; another is where a voluntary transaction imposes costs on other people which the transactors do not take into account.

The fact that car unhealthy lifestyles may impact on the public health budget is not much of an argument for intervention. Private insurers are quite capable of working out whether they need information on people’s lifestyle and diet or not.


If you are to provide people with universal health insurance at the expense of the long-suffering taxpayer, you should at least have the decency not to try and take over their entire lives so that you can be a social justice warrior on the cheap.

As for children seeing advertising for sugar, the sugar tax and a ban on advertising is a token gesture. You trying to take over from their parents. As Gary Becker noted:

Many doctors and others who advocate taxing sugared beverages and fast foods at heart do not believe that consumer taste for sugar and fast foods should be taken into account in devising public policy.

Until the nanny state brigade and sugar tax advocates address that simple question, they have no standing in a public debate. Like all the prohibitionists who came before them, they are simply unwilling to admit the people like food, drink and sugary things.

Until they put forward a way of balancing that common preference to enjoy life including food and risk against their meddlesome preferences in their role as the great central planner of our lives, they are just having us on. As Richard McKenzie said recently

The people most concerned with the country’s weight gain—self-appointed “fat police”—have favoured supposedly easy and direct policy solutions: tax and ban high-sugar and high-fat products.

Such policy courses are a snare and delusion, especially if Americans’ cherished freedoms of choice, which are at the heart of the country’s economic engine, are to be preserved.

The great driver of obesity is prosperity, not sugar. People can simply afford to buy more and enjoy the food they have more.


John Rawls argued that people should have every right to live their lives according to their own lights. In nanny state brigade just do not accept that point of view.

Rawls believed the most distinctive feature of human nature is our ability freely to choose our own ends. The state’s first duty with its citizens is to respect this capacity for autonomy.

Instead, the fat police and the do-gooders want to engage in the futile gesture of pestering you and taxing you when you buy a sugary drink even though there are almost unlimited alternative supplies of sugar laden products.


The fat police are far too busy feeling good about themselves in the expressive politics of public health. They cheer for sugar taxes, boo obesity and feel good about themselves for having told other people how to live their lives better. A good number of them then celebrate by lighting-up a joint. Many of the rest have a wine, not beer.

The particularly annoying ones ride a bike, which is a dangerous activity, or are so boorish as to exercise in a public place, much to the annoyance of the rest of us who are getting on with having a good time.

@LivingWageUK documents the Achilles heel of the #livingwage

Research publicised by a Living Wage UK highlighted the Achilles heel of any living wage proposal. This Achilles heel applies to the voluntary adoption of the living wage and a living wage mandated through minimum wage laws.

The critique to follow accepts pretty much everything claimed by the living wage movement about the benefits of the living wage but simply traces out the consequence of this one promised benefit.

Source: New evidence of business case for adopting Living Wage   Living Wage Foundation.

The living wage is substantially above the minimum wage. Offering the living wage will change the composition of the recruitment pool of low-wage employers. This is the Achilles heel of the living wage which Living Wage UK documents in its study it tweeted about and from which I have taken the above snapshot.

Jobseekers would not have considered vacancies by these employers will now apply because of the living wage increase. These better calibre applicants will win those jobs ahead of the jobseekers whose current productivity levels are less than that to justify the cost of the living wage.

Central to the living wage rhetoric is that somehow employees will be more productive because of the adoption of the living wage.

The simplest way of doing that for an employer is to hire more qualified, more productive employers are no longer a hire the type of people you currently hire. They will be unemployed or pushed into the non-living wage sector of the low-wage market.

A living wage is an exclusionary policy where ordinary workers, often with families who are not productive enough to produce $19.25 per hour living wage plus overheads will never be interviewed.

The workers with the type of skills that currently win those jobs covered by a living wage increase will not be shortlisted because the quality of the recruitment pool will increase because of the living wage.

There will be an influx of more skilled workers attracted by the higher wages for living wage jobs. They will go to the head of the queue and displaced workers who currently apply for and win these jobs before the adoption of the living wage.

Any extra labour productivity from paying a living wage increase is in doubt because low skilled service sectors are notorious for their low potential for productivity gains. They are the bread-and-butter of Baumol’s disease.

The modern theories of the firm focus, in part or in full on reducing opportunistic behaviour, cheating and fraud in employment relationships. The cost of discovering prices and making and enforcing contracts and getting what you pay for are central to Coase’s theory of the firm put forward in 1937.

The profits of entrepreneurs for running a firm is directly linked from their successful policing of the efforts of employees and sub-contractors to ensure the team and each member perform as promised and individual rewards matched individual contributions (Alchian and Demsetz 1972; Barzel 1987). Alchian and Demsetz’s (1972) theory of the firm focused on moral hazard in team production. As they explain:

Two key demands are placed on an economic organization-metering input productivity and metering rewards.

The main rationale in personnel economics from everything ranging from employer funding of retirement pensions to the structure of promotions and executive pay including stock options is around better rewarding self-motivating employees who strive harder and reducing the costs of monitoring employee effort.

At bottom, the efficiency wage hypothesis is entrepreneurs are unaware of the higher quality and greater self-motivation of better paid recruits for vacancies but wise bureaucrats and farsighted politicians notice these gaps in the market. Bureaucrats and politicians notice these gaps in the market before those who gain from superior entrepreneur alertness to hitherto untapped opportunities for profit do so and instead leave that money on the table.

It’s kicking the living wage movement when it is down to mention that low paid workers with families will lose a considerable part of the living wage increase because of reductions in family tax credits and in-kind assistance from the government that are linked to their pay.

Their jobs are put at risk because of a large increase in the cost of employing them to their employers. Their take-home pay after taxes, family tax credits and other government assistance increases by much less. This is a pointless gamble with job security because of the much small increase in the take-home pay of many breadwinners on the living wage.

If you love nature, stay away from it – Ed Glaeser

It is hard to imagine any merchant who harmed the environment as much as Henry David Thoreau…

We are a destructive species, and if you love nature, stay away from it. The best means of protecting the environment is to live in the heart of a city.

Ed Glaeser

Source: If you love nature, move to the city – The Boston Globe.

New Zealand male labour force participation, ages 50 to 74, 5 year age bands, 1986 – 2014

Older workers in the past was defined by a drop-off in labour force participation at the age of 55 such as there was in the 1990s. Not only that is no more, New Zealand workers aged 60 to 64 participate in the labour force to the same extent as workers in their 50s, more or less.

image

Source: OECD Stat.

Workers aged 65 to 69 and aged 70 to 74 also rapidly increased their labour force participation. Nonetheless, in New Zealand they still get an old age pension in these age brackets without an income test or an asset test.

Social justice objections to free tuition at university and polytech

The desire of the recipients to receive the money is the leading motivation for income redistribution according to Gordon Tullock. That particularly applies to university and Polytech students and their desire not to pay tuition fees. There is no case in either economics or social justice for them not to pay.

Free tuition at University is a handout to those already had a good start in life. It will be paid for by those who will never go because they do not have an above average IQ.

An investment in further education, be it at University or Polytechnic, is an investment. It should have some payoff to those that make it rather than just a good thing to do because of a subsidy.

The wage premium for a tertiary degree was low and stable in New Zealand in the 1990s (Hylsop and Maré 2009) and 2000s (OECD 2013). This stability in the returns to education suggests that supply has tended to kept up with the demand for skills at least over the longer term at the national level. There were no spikes and drops that would be the evidence of a lack of foresight among teenagers in choosing what to study. Whatever rationale may be put forward for free tuition, an undersupply of graduates is not among them.

In 2002, with Pedro Carneiro, James Heckman showed that lack of access to credit is not a major constraint on the ability of young Americans to attend college. Short-term factors such as the ability to borrow to fund higher education has been found to be seriously wanting as an explanation for who and who does not go on to higher education. This has great relevance to New Zealand because the levels of student debt in the USA are much higher than here.

If you have been prevented from going on to university or otherwise studying after completing high school because of financial constraints, there is no social justice nor efficiency reason for free tuition fees. Any problems regarding borrowing against the human capital investment can be solved through student run loans.

The evidence that human capital is a key contributor to higher economic growth is weakening rather than strengthening. As Aghion said:

Economists and others have proposed many channels through which education may affect growth–not merely the private returns to individuals’ greater human capital but also a variety of externalities.

For highly developed countries, the most frequently discussed externality is education investments’ fostering technological innovation, thereby making capital and labour more productive, generating income growth. Despite the enormous interest in the relationship between education and growth, the evidence is fragile at best.

The trend rate of productivity growth did not accelerate over the 20th century despite a massive rise in investments in human capital and R&D because of the rising cost of discovering and adapting new technological knowledge.

The number of both R&D workers and highly educated workers increased many-fold over the 20th century in New Zealand and other OECD member countries including the global industrial leaders such as the USA, Japan and major EU member states.

Gough Whitlam abolished tuition fees at Australian universities in 1972. His idea was to reduce inequality. He instead gave a flying start to those of already above-average talents.

Charles Murray points out that succeeding at college requires an IQ of at least 115, but 84% of the population don’t have this:

Historically, an IQ of 115 or higher was deemed to make someone “prime college material.” That range comprises about 16 per cent of the population. Since 28 per cent of all adults have BAs, the IQ required to get a degree these days is obviously a lot lower than 115.

Those on the margins of this IQ are getting poor advice to go to college. Free tuition makes the likelihood of this poor investment in university in further education more likely.

Murray argues that other occupational and educational choices would serve them better in light of their abilities and likelihood of succeeding at college.Murray believes a lot of students make poor investments by going on to College, in part, because many of them don’t complete their degrees:

…even though college has been dumbed down, it is still too intellectually demanding for a large majority of students, in an age when about 50 per cent of all high school graduates are heading to four-year colleges the next fall. The result is lots of failure. Of those who entered a four-year college in 1995, only 58 per cent had gotten their BA five academic years later.

David Autor in a recent paper has illustrated how the gap between the highly educated and the less educated is growing at a far faster rate than the gap between the top 1% in the bottom 99% in the USA. David Autor argues that

a single minded focus on the top 1% can be counterproductive given that the changes to the other 99% have been more economically significant.

Autor found that in the USA since the early 1980s, the earnings gap between workers with a high school degree and a college education became four times greater that the shift in income during the same period to the very top from the 99%; Between 1979 and 2012, the gap in median annual earnings of households of high-school educated workers and households with college-educated ones expanded from $30,298 to $58,249, or by roughly $28,000.

If social justice is to mean anything, it does not involve giving freebies to those who have a head start in life. The standard policy response to growing inequality is to send people on a course. Trouble is that just makes smart people wealthier without helping the not so smart and increases the chances of smart men and women marrying off together. This increases the inequality between power couples and the rest.

Why Do Politicians All Sound the Same? @BernieSanders

@jacindaardern wrong to say Australia is last place to follow in race relations

From 1965 onwards, 1/3rd of terrestrial Australia – 2.5 million sq kms of land – was returned to indigenous owners, with half of that since the Native Title decision in 1993. Tasmania pioneered aboriginal land rights with the Cape Barron Island Act 1912.

Source: Jon Altman, The political ecology and political economy of the Indigenous land titling ‘revolution’ in Australia, March 2014 Māori Law Review.

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.

Australia takes 8 times as many refugees as New Zealand on a per capita basis.

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.

Female labour force participation rate, workers aged 65 to 69, US, UK, Australia and New Zealand since 1960

The phased increase in the eligibility age for the New Zealand old pension from 60 to 65 from the mid-1990s obviously carried through to the labour force participation of women over 65 as well.

image

Data extracted on 05 Feb 2016 05:13 UTC (GMT) from OECD.Stat.

Gender wage gap myths and realities

https://twitter.com/AndyG244/status/694979494969475072

Female labour force participation rate, workers aged 60 to 64, USA, UK, Australia and New Zealand since 1960

The increase in the eligibility age from the age of 60 to the age of 65 for the old age pension in New Zealand clearly sparked an explosion in female labour force participation between these ages.

image

Data extracted on 05 Feb 2016 04:49 UTC (GMT) from OECD.Stat.

US, Danish, British, Canadian, Australian and New Zealand tax and social security burden net of cash benefits as a % of labour costs, one-earner married couple with two children since 2000

For some reason the Labour government in New Zealand in the mid-2000s could not bring itself to admit it was introducing a huge tax cut for families. To avoid admitting it ever gave a tax cut, that Labour government called the huge family tax credit introduced in 2004 and 2005 Working for Families.

image

Source: Taxing Wages 2015 – OECD 2015

The above data does not include the effects of GST and VAT.

Labour force participation rates of US, UK, Australian and New Zealand male workers aged 65 to 69 since 1960

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 66 and over in New Zealand after the change in the eligibility age.

Data extracted on 05 Feb 2016 04:49 UTC (GMT) from OECD.Stat.

Labour force participation rates of US, UK, Australian and New Zealand workers aged 60 to 64 since 1960

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.

#Employment rate for workers aged 60-64

1st and 2nd generation immigrants as percentage of the population

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