Jane Kelsey oppose handcuffs on the democratic choices of future governments! Does she opposes labour and environmental standards in trade agreements too?
06 Oct 2015 Leave a comment
in development economics, international economic law, international economics, International law, politics - New Zealand, politics - USA Tags: colonialism, GATT, Leftover Left, preferential trading agreements, TPA, TPPA
What's in the #TPP? Robust enforceable environmental protections. Get the facts ustr.gov/tpp #LeadOnTrade http://t.co/hzapJwGaCa—
USTR (@USTradeRep) October 05, 2015What's in the #TPP? Protections for American workers. Get the facts: ustr.gov/tpp #MadeInAmerica http://t.co/VPeV70zaPT—
USTR (@USTradeRep) October 05, 2015https://twitter.com/JimRose69872629/status/651230008875220992
One of my policy essays for my Masters of Public Policy Degree in Japan was on the social clauses of the GATT. I described the labour and environmental clauses is a new form of colonialism.
My classmates were government officials from all around Asia, more than 20 countries. As they spoke English as a second language, they were pleased to learn of a new way of describing social clauses in trade agreements in English.
A Filipino friend had a blunter way of referring to social clauses in trade agreements: “the whites are back, telling us what to do”.
Environmentalists are praising wildlife measures in the Trans-Pacific Partnership trade deal nyti.ms/1hlu7hS http://t.co/ZLYarL9QE7—
The New York Times (@nytimes) October 05, 2015
Jane Kelsey in a television interview said she opposes the reductions in sovereignty in trade agreements that result from investor-state dispute settlement (ISDS) provisions because they limit the democratic choices of future governments.
If so, she must oppose environmental and labour standards in trade agreements and, more importantly, binding the hands of future governments with climate treaties. All international treaties are about restrictions on sovereignty.
Environmental and labour clauses in trade agreements and climate treaties all limit the powers of governments to legislate on environmental and employment law in accordance with the will of the people as expressed in the most recent election and change of government. Power to the people.
https://twitter.com/rorymccourt/status/625540621457960960
Jane Kelsey would do better focusing on those parts of the TPPA deal that lowers the net value of the deal such as those extending the term of patents over the drugs. All international treaties are about trade-offs.
View original post 212 more words
@jamespeshaw nails the #TPPA policy trade-off @NZGreens
06 Oct 2015 1 Comment
in applied price theory, applied welfare economics, comparative institutional analysis, economics of regulation, international economic law, international economics, International law, law and economics, politics - Australia, politics - New Zealand, politics - USA, property rights Tags: conspiracy theories, David Friedman, foreign direct investment, free trade agreements, FTI, international investment law, Leftover Left, New Zealand Greens, preferential trading agreements, TPPA, Twitter left
About 1% more GDP but higher drug prices.
Source: No increased medicine costs under TPPA | Stuff.co.nz
.@MSF: Patients and treatment providers in developing countries the big losers of the #TPP bit.ly/TPPconcludes http://t.co/cbikANleyA—
MSF Access Campaign (@MSF_access) October 05, 2015
The next best arguments James Shaw made were xenophobia about foreign investment in land and some vast conspiracy theory regarding endangered dolphins.
When your next best argument is foreigners are coming to buy up all our land, you are playing from a weak populist hand. About half of million New Zealand born live in other countries.
About 80% of these live in Australia, the great majority as residents rather than as citizens. These New Zealanders living in Australia and elsewhere need protection under international agreements to ensure they are not the victim of populist outbreaks against the sale of land to foreigners.
Source: Statistics New Zealand.
In addition, if a foreigner wants to pay over the odds for my house I am glad to separate a fool from his money.
Source: Statistics New Zealand.
New Zealand has a strong interest in protecting the rights of its own expatriates as well as New Zealand foreign investors to buy land in other countries. As David Friedman explains:
Much more commonly, [economic imperialism] is used by Marxists to describe–and attack–foreign investment in “developing” (i.e., poor) nations. The implication of the term is that such investment is only a subtler equivalent of military imperialism–a way by which capitalists in rich and powerful countries control and exploit the inhabitants of poor and weak countries.
There is one interesting feature of such “economic imperialism” that seems to have escaped the notice of most of those who use the term. Developing countries are generally labour rich and capital poor; developed countries are, relatively, capital rich and labour poor. One result is that in developing countries, the return on labour is low and the return on capital is high–wages are low and profits high. That is why they are attractive to foreign investors.
To the extent that foreign investment occurs, it raises the amount of capital in the country, driving wages up and profits down. The effect is exactly analogous to the effect of free migration. If people move from labour-rich countries to labour-poor ones, they drive wages down and rents and profits up in the countries they go to, while having the opposite effect in the countries they come from.
If capital moves from capital-rich countries to capital-poor ones, it drives profits down and wages up in the countries it goes to and has the opposite effect in the countries it comes from. The people who attack “economic imperialism” generally regard themselves as champions of the poor and oppressed.
To the extent that they succeed in preventing foreign investment in poor countries, they are benefiting the capitalists of those countries by holding up profits and injuring the workers by holding down wages. It would be interesting to know how much of the clamour against foreign investment in such countries is due to Marxist ideologues who do not understand this and how much is financed by local capitalists who do.
@nzlabour @NZGreens @jamespeshaw cannot tell the crims from the injustice in the tough new Australian laws on deporting criminals
05 Oct 2015 Leave a comment
in economics of crime, International law, politics - Australia, politics - New Zealand
Australia is introduced tough new deportation laws for noncitizens of bad character that sweep up New Zealanders who may have lived in Australia since childhood.
The new laws provide for automatic deportation of noncitizen criminals. The Immigration Minister used to decide if a criminal who was not an Australian resident was to be deported. Deportations are now automatic, although there are some exemptions and the opportunity for the Minister to intervene in special cases.
Anyone sentenced to more than a year in prison, or for a child-sex related offence automatically loses their visa and is detained to await deportation. This can include cumulative sentences over decades. Anyone spends a total of more one year in a prison is not a petty offender.
If you are a guest in another country, that is not a citizen, you do not go around messing up the place and making a nuisance of yourself. Sooner or later your host will lose patience and send you on your way.
There are injustices in these deportation laws because of a quirk of the New Zealand citizenship law. Some New Zealanders living in Australia cannot pass on their New Zealand citizenship to their children through decent. You cannot become an Australian citizen simply by being born there.
The injustice therefore is some of these New Zealanders who are Samoans whose children spend most of their lives in Australia will be deported back to Samoa because they have Samoan citizenship. They have neither New Zealand nor Australian citizenship.
It is one thing for a criminal to be deported from Australia to New Zealand – both are developed countries. It is another to be deported to a backward Pacific island.
If the New Zealand Labor Party and the New Zealand Greens would take time out for standing up for New Zealand criminals at home and abroad, they might be able to plead with greater success for a deal for these children of New Zealanders who find themselves in a quirky citizenship status. For these children of New Zealanders, their deportation is unusually harsh because they end up back in Samoa, not New Zealand.
dodgy @OECD paper on inequality & growth doing the Twitter Left rounds again
05 Oct 2015 1 Comment
in economic growth, economic history, economics of education, human capital, politics - New Zealand, politics - USA, population economics, poverty and inequality Tags: economics of personality traits, economics of schools, education premium, endogenous growth theory, IMF, James Heckman, Leftover Left, OECD, student loans, top 1%, Twitter left
Rick Noack did a great job in the Washington Post today to concisely summarise the hypothesis behind the OECD’s claim that inequality holds back growth. In the case of New Zealand 15 ½ percentage points of economic growth was lost due to rising equality since the late 1980s.
Source: How inequality made these Western countries poorer – The Washington Post.
According to the OECD, it is all about the ability to lower middle class and working class families to finance the human capital investments of their children. The OECD theory of inequality and lower growth is there is a financing constraint because of inequality that reduces economic growth because of less human capital accumulation by lower income families.
Source: How inequality made these Western countries poorer – The Washington Post.
In an age of interest-free student loans or cheap student loans everywhere for several decades now at least, the OECD is nonetheless hanging its head on the notion that not enough has been done to ensure there is enough graduates from the lower middle class and working class families making it to university. Taylor also has the same problem as me with the OECD’s human capital and inequality nexus:
There are a few common patterns in economic growth. All high-income countries have near-universal K-12 public education to build up human capital, along with encouragement of higher education. All high-income countries have economies where most jobs are interrelated with private and public capital investment, thus leading to higher productivity and wages. All high-income economies are relatively open to foreign trade.
In addition, high-growth economies are societies that are willing to allow and even encourage a reasonable amount of disruption to existing patterns of jobs, consumption, and ownership. After all, economic growth means change.
One of the findings of the Coleman report in the 1960s, which is been pretty much backed up since then such as by top labour economists such as James Heckman, is family background is the key to skills development in children, not the quality of their schools or their access to finance for higher education.
Schools work with what families present to them in terms of innate ability, and personality traits such as to pay attention and work. There is not much difference between an average bad public school and an average good public school when it comes to getting on in life. Going to really bad public school is different from just going to an average bad public school in terms of the chaos imposes on a child’s education and upbringing. What matters is the home environment rather than the ability to access good schools and families of ordinary means to finance higher education for their teenagers.
Most of the skill gaps that are present at the age of 18 – skill gaps which substantially explain gaps in adult earnings and employment in all groups – are also present at the age of five (Cunha and Heckman 2007). There is much evidence to show that disadvantaged children have lower levels of soft skills (non-cognitive skills): motivation, persistence, self-discipline, the ability to work with others, the ability to defer gratification and plan ahead, etc. (Heckman 2008). Most of the skills that are acquired at school build on these soft skills that are moulded and reinforced within the family.
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.
Only a small percentage of young people are in any way constrained from going on to higher education because of the lack of money. This is not surprising in any society with student loans freely available at low or zero rates without any need to post collateral. Heavily subsidised tuition fees and cheap student loans have been around for several generations.
Source: James Heckman.
The biggest problem with the OECD hypothesis linking a lack of skill development within lower income and working class families is it is such an easy problem to solve for the ambitious politician of either the left or the right by throwing money at the problem. Schooling until the age of 16 has been free for a century and universities have been virtually free for at least two generations. Lack of access to a good education does not cut it as the explanation for large disparities in growth rates.
The OECD and more recently the IMF have placed a lot of weight in access to human capital as a driver of inequality because human capital accumulation is hypothesised to be a major driver of economic growth.
The evidence that human capital is a key contributor to higher economic growth is weakening rather than strengthening. If human capital accumulation is not a major driver of productivity growth and productivity disparities, the inequality and growth hypothesis of the OECD and the IMF based on access to finance for human capital accumulation does not get out of the gate. Moreover, 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.
Cross-country differences in total factor productivity are due to differences in the technologies that are actually used by a country and the degree in the efficiency with which these technologies are used. Differences in total factor productivity, rather than differences in the amount of human capital or physical capital per worker explain the majority of cross-country differences in per capita real incomes (Lucas 1990; Caselli 2005; Prescott 1998; Hall and Jones 1999; Jones and Romer 2010).
Differences in the skills of the individual worker or in the total stock of human capital of all workers in a country cannot explain cross national differences in value added per worker at the industry level.
- The USA competes with Japan for productivity leadership in many manufacturing industries.
- The Japanese services sector productivity can be as little as a one-third of that of the USA.
- Japanese labour productivity is almost twice Germany’s in producing automobiles and is better that Germany by a large margin for many other manufactured goods.
- The USA is uniformly more productive in services sector labour productivity. For example, British, French and German telecom workers were 38 to 56 per cent as productive as their American counter-parts.
The USA, Japan, France, the UK and Germany all have relatively well-educated, experienced and tested labour forces. For example, the 1993 McKinsey’s study inquired into the education and skills levels of Japanese and German steel workers. Comparably skilled German steel workers were half as productive as their Japanese counterparts (Prescott and Parente 2000, 2005).
The ability to finance human capital accumulation and go to good schools is a weak theory of inequality. Human capital accumulation itself is a weak theory of growth unless linked to sophisticated theories of the institutions fostering innovation and technology absorption which it now is.
To be fair, I will not point out that this period of rising inequality since 1980s so damned by the OECD and the Twitter Left in the Washington Post today coincided with the return of real wages growth in New Zealand after 20 years of wage stagnation. That would be kicking the Twitter Left when they are down. I was a sneak in a graph instead.
Data source: New Zealand Council of Trade Unions.
I will leave it for your own imagination to think of what happened to female labour force participation, the gender wage gap and female participation in higher education since the late 1980s and the onset of this horrific inequality which was mainly for men.
The failure of the Twitter Left to undertake a gender analysis of any labour force or income statistic they use is a major analytical shortcoming. Hardly any labour force statistics make any sense unless broken down by male and female outcomes.
Teachers are well-paid in #NewZealand
05 Oct 2015 Leave a comment
in economics of education, politics - Australia, politics - New Zealand, politics - USA Tags: economics of teaching, teachers pay, teachers tenure
@JosephEStiglitz talks sense on flaws of the #TPPA @ItsOurFutureNZ @greencatherine @RusselNorman
04 Oct 2015 1 Comment
in economics of regulation, international economic law, politics - New Zealand, politics - USA, rentseeking Tags: drug lags, free trade agreements, Leftover Left, preferential trading agreements, TPPA, Trade Blocs
Joe Stiglitz occasionally gets it right such as this week when he spoke about the downside of the Trans-Pacific Partnership Agreement. As he said:
The reality is that this is an agreement to manage its members’ trade and investment relations – and to do so on behalf of each country’s most powerful business lobbies.
Make no mistake: It is evident from the main outstanding issues, over which negotiators are still haggling, that the TPP is not about “free” trade.
Because of all the haggling over the trade-offs where you do something stupid in return for the other side doing something sensible in terms of liberalisation or something equally stupid in additional regulation, the gains in the agreement can be quite small. Again as Joe Stiglitz explains:
New Zealand has threatened to walk away from the agreement over the way Canada and the US manage trade in dairy products. Australia is not happy with how the US and Mexico manage trade in sugar.
And the US is not happy with how Japan manages trade in rice. These industries are backed by significant voting blocs in their respective countries. And they represent just the tip of the iceberg in terms of how the TPP would advance an agenda that actually runs counter to free trade.
The case for intellectual property rights over drugs is complicated but no one seems to be suggesting that patents should be lengthened.
Far more can be gained in terms of drug availability through regulatory reforms that streamline the drug safety approval process which is currently costing many people their lives.
Barriers to entry – costs ($s) of bringing new drugs to the market have risen manyfold #econ3 http://t.co/MFHTFhTLrj—
Geoff Riley (@tutor2u_econ) November 30, 2014
Sam Peltzman showed in a famous paper in 1973 that the 1962 amendments to US Federal drug approval laws reduced the introduction of effective new drugs in the USA from an average of forty-three annually in the decade before the 1962 amendments to sixteen annually in the ten years afterwards. No increase in drug safety was identified.
The most bizarre part of drug approval processes is they go beyond the checking whether the new drug is safe. What is even more bizarre in New Zealand is the New Zealand drug safety agency duplicates safety processes already performed overseas. This is instead of automatically approving any drug or medical device approved in the USA, UK, Canada or Australia.
Drug safety regulators in the USA also check to see if the drug works – that the drug has its predicted effects. Drug safety is a health policy concern but whether the investors developed a useful drug is something between them and those interested in buying it. Drugs became available years after they were on the market outside the USA because of drug lags at the FDA. To quote David Friedman:
In 1981… the FDA published a press release confessing to mass murder. That was not, of course, the way in which the release was worded; it was simply an announcement that the FDA had approved the use of timolol, a ß-blocker, to prevent recurrences of heart attacks.
At the time timolol was approved, ß-blockers had been widely used outside the U.S. for over ten years. It was estimated that the use of timolol would save from seven thousand to ten thousand lives a year in the U.S.
So the FDA, by forbidding the use of ß-blockers before 1981, was responsible for something close to a hundred thousand unnecessary deaths.
It is a pity that the far left movement ranted against the TPP focused on conspiratorial theories about investor state dispute settlement rather than the risks of this trade deal to the cost of drugs to the health sector. Only late in the game did the far left start talking about drug availability and the costs of drugs to the health budget of the government if patent lives were extended under the TPPA.
@amplifyonly @TaurangaTPPA @actionstation @ActivistsNZ @Keyweekat @endarken #ExposeTPP @gregfullmoon http://t.co/JyG5wQ2MX7—
ItsOurFuture (@ItsOurFutureNZ) July 22, 2015
A campaign against the TPPA on the basis of its impact on drug availability because of longer patent terms running up against the limited budgets of pharmaceutical purchasing agencies would have appealed across the entire political spectrum. As Joe Stiglitz explains:
The TPP would manage trade in pharmaceuticals through a variety of seemingly arcane rule changes on issues such as “patent linkage,” “data exclusivity,” and “biologics.”
The upshot is that pharmaceutical companies would effectively be allowed to extend – sometimes almost indefinitely – their monopolies on patented medicines, keep cheaper generics off the market, and block “biosimilar” competitors from introducing new medicines for years. That is how the TPP will manage trade for the pharmaceutical industry if the US gets its way.
The health sector can only so much to buy drugs. If drug patents last longer, there is less money to go around because the generics become available later than otherwise.
Warren Brookbanks’ lecture “Three strikes, five years on” in New Zealand
03 Oct 2015 Leave a comment
in applied price theory, economics of crime, health economics, Jan van Ours, politics - New Zealand, politics - USA Tags: 3-strikes, addiction, crime and punishment, criminal deterrence, economics of personality traits
Warren Brookbanks’ inaugural Greg King Memorial lecture earlier in the week was on “Three strikes, five years on”. Brookbanks is a law lecturer at Auckland Law School who specialises in mental illness.
Blackstone’s ratio and three strikes
The essence of his position was the same as he had when the bill was before Parliament. His reservations were a law designed to give lengthy prison terms to the worst of the worst violent offenders would catch in the net some lower-level offenders.
Brookbanks’ objection is a variation of Blackstone’s ratio. Just as the legal system is premised on let 10 guilty go free rather than one innocent be convicted, to what extent does the criminal justice system weigh the risk of occasionally punishing an offender who is convicted of violent or sexual offences who is not one of the worst of the worst.
Brookebanks’ objections are the classic perfect justice as the enemy of adequate justice. It is doubtful that low-level offenders will be caught up in the three strikes regime simply because anyone who repeatedly commits a serious violent or sexual offence, an offence carrying a sentence of seven years or more, is the worst of the worst. They are repeat violent or sexual offenders designed to be caught by the legislation.
All of the 41 offences included in the three strikes legislation in New Zealand of violent or sexual offences carrying a maximum prison sentence of seven years or more. On the first strike you were warned of the consequences of further offending. On the second strike you receive the same sentence as usual but are not eligible for parole. On the third strike there is a mandatory maximum sentence for the offence concerned. There is also a mandatory life without parole sentence for murder if it is a second strike. Slightly over 90% of all first strike warnings are for assault, robbery or sexual offences.
Three strikes is about the incapacitation of repeat violent offenders
In the Q&A session after the lecture I put my principal objection to his lecture:
- Brookebanks did not address the main rationale for three strikes legislation both abroad and in New Zealand;
- The rationale for three strikes was not criminal deterrence, which was the exclusive focus of his lecture;
- The rationale for three strikes both originally in California and elsewhere is incapacitation of serious violent offenders; and
- If you lock up serious violent offenders you reduce the crime rate simply threw the fact that these serious violent offenders off the streets.
Obviously the Californian legislation got off to a false start when it threw away the key on pathetic men who stole pizzas and videotapes as their third strikes. That law was drafted through a citizen initiated referenda rather than the more circumspect process of the state legislature. But there is a lesson there. If parliaments do not act on violent crime, the people will vote in people who are less temperate.
The primary purpose of three strikes legislation and other repeat offender legislation is the incapacitation of repeat serious offenders as Justice Rehnquist explained long ago:
The purpose of a recidivist statute such as that involved here is not to simplify the task of prosecutors, judges, or juries. Its primary goals are to deter repeat offenders and, at some point in the life of one who repeatedly commits criminal offenses serious enough to be punished as felonies, to segregate that person from the rest of society for an extended period of time.
This segregation and its duration are based not merely on that person’s most recent offense but also on the propensities he has demonstrated over a period of time during which he has been convicted of and sentenced for other crimes…. Like the line dividing felony theft from petty larceny, the point at which a recidivist will be deemed to have demonstrated the necessary propensities and the amount of time that the recidivist will be isolated from society are matters largely within the discretion of the punishing jurisdiction.
The purpose of repeat offender laws is to put behind bars people have shown a propensity to commit violent serious crimes frequently. By putting them behind bars for a long time, there are fewer crimes by the simple fact that those hardened violent criminals locked up on their third strike are not in the position to offend against the general public.
The rational for recidivist laws is different from say harsh laws against drug trafficking which is a more opportunistic, business motivated crime. If the current drug traffickers are put behind bars for an extended time, there is usually a good supply of other criminals willing to take their place because of the lucrative rewards.
In the case of serious violent offenders, their crimes of violence and depravity are something to do with personality traits that dispose them towards harming others because they like doing so. The hope behind three strikes laws is that these dangerous people are in limited supply because of the genetic and psychopathic origins of their offending.
There are not that many other petty criminals willing to step into their shoes to commit the same violent offences because these other petty criminals simply do not have the necessary traits in their personalities that dispose them toward such cruelty and abominations. There is not a good supply of petty criminals to take the place of intractable often psychopathic violent offenders covered by three strikes laws.
That was the fundamental flaw are the recent lecture by Brookebanks on the three strikes law in New Zealand. He did not address the incapacitation of criminal psychopaths of various ilks.
That said, it would be good if three strikes delivered on criminal deterrence because it is cheaper than incapacitation. Better that the hardened criminal be deterred in the first instance rather than a third strike be committed and he is locked away for a long time as a way of stopping further crimes. Deterrence is great, but I am happy to live with incapacitation as the main benefit of three strikes.
What is the evidence on three strikes?
There have been a range of studies of sentencing enhancements to see if they deliver on incapacitation and criminal deterrence. As Levitt explains:
Becker’s well-known economic model of crime is based on deterrence: potential criminals alter their behaviour in response to changing incentives.
Empirically, however, it is often difficult to distinguish between deterrence (which is a behavioural response) and incapacitation (in which reductions in crime are attributable solely to criminals being unable to commit crimes because they are locked up). Virtually all of the empirical work that purportedly supports the economic model of crime is equally consistent with incapacitation.
Levitt and Kessler exploited a unique feature of sentence enhancements to isolate deterrence. Proposition 8 in California selectively instituted sentence enhancements for some crimes. If deterrence works, the incidence of these crimes should drop straightaway. If it is only incapacitation that works, crime will not drop until after the base sentence expires and these would-be criminals are kept locked up for longer and therefore not able to commit crimes but for their sentence enhancement. They found an immediate, sharp decline in eligible crimes relative to those that are unaffected by the sentencing enhancement law in Proposition 8 suggesting the importance of deterrence.
There is good evidence to suggest that criminals do not enjoy the prison experience. Levitt investigated this through the impact on prison overcrowding litigation on criminal deterrence. These Civil Liberties union lawsuits reduced state prison populations, but they were otherwise unrelated to crime rates. One reason for this is the cases often take a decade or more to resolve.
In the three years after a final decision was handed down by the courts in those cases, prison populations fell by 14.3 percent compared to the population of the nation as a whole, whereas violent and property crime rates increased 10.2 percent and 5.5 percent respectively… A one-prisoner reduction is associated with an increase of fifteen Index I crimes per year.
Helland and Tabarrok looked at post-sentencing crimes of criminals who were convicted of a strikeable offense with those who were tried for a strikeable offense but convicted of a non-strikeable offense. They found that California’s three-strike legislation significantly reduces felony arrest rates among the class of criminals with two strikes by 17–20 percent. This is a clever strategy because it is based on the assumption that many of the criminals convicted of a non-strike offence but charged with a strikeable offence were not convicted because of a lack of good evidence of their guilt rather than sheer innocence. Helland and Tabarrok found that
California’s three-strike legislation significantly reduces felony arrest rates among the class of criminals with two strikes by 17–20 percent.
Brookbanks’ preferred a 2012 study that showed that three strikes had no impact on criminal offending in California:
Declining crime rates in California and nationwide reflect declines in alcohol consumption, not tough-on-crime policies such as three-strikes laws… Three-strikes has had nothing whatsoever to do with the drop in violent crime.
The paper makes a very definitive conclusion despite ignoring most of the economic literature up until 2012 bar Shepherd (2002). The paper also had a cartoon version of the economic model of crime as perfectly informed rational calculators instead of the proper one as explained by David Friedman.
The economic analysis of crime starts with one simple assumption: Criminals are rational. A mugger is a mugger for the same reason I am a professor-because that profession makes him better off, by his own standards, than any other alternative available to him. Here, as elsewhere in economics, the assumption of rationality does not imply that muggers (or economics professors) calculate the costs and benefits of available alternatives to seventeen decimal places-merely that they tend to choose the one that best achieves their objectives.
If muggers are rational, we do not have to make mugging impossible in order to prevent it, merely unprofitable. If the benefits of a profession decrease or its costs increase, fewer people will enter it-whether the profession is plumbing or burglary. If little old ladies start carrying pistols in their purses, so that one mugging in ten puts the mugger in the hospital or the morgue, the number of muggers will decrease drastically-not because they have all been shot but because most will have switched to safer ways of making a living. If mugging becomes sufficiently unprofitable, nobody will do it.
Criminals respond to incentives in the same way as the rest of us with the same degree of success. Everyone agrees with that as long as you put them on a turf where they have to show their true colours.
Do hardened lifers respond to incentives?
One of the arguments against life without parole put up by those who are soft on crime is criminals sentenced to life without parole will be difficult to manage in the prison system because they have no hope of release. That is unless they have the incentive in the form of a prospective release at some time in their life, they will misbehave. That precisely is the economic model of crime. Crime is an occupational choice most attractive of those with fewer opportunities in legitimate occupations.
The role of empirical findings in criminal justice policy
The first article in my honours econometrics methodology course was the just published Edward Leamer’s Let’s Take The Con Out Of Econometrics. He used the death penalty debate to illustrate the fragile nature of empirical findings. Leamer showed that the death penalty could be shown to greatly reduce or greatly increase murder rates depending on how you did your econometric modelling and what prior beliefs you bought to the table. I remembered what Leamer said through my entire career.
The main task of econometrics is to measure proven relationships rather than to establish whether they exist at all as Bryan Caplan explains:
Being An Intelligent Consumer of Econometrics
-
Economic Significance vs. Statistical Significance
- For most of the class, we’ve checked for statistical significance – i.e., whether the results were likely to occur purely by chance.
- But it is at least as important to know if the results are economically significant – i.e., are they big?
- If you have a lot of data, almost everything will be statistically significant, but still may not be economically significant.
- If you have little data, little will be statistically significant, but it may still be economically significant.
- For most of the class, we’ve checked for statistical significance – i.e., whether the results were likely to occur purely by chance.
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Econometrics One Tool of Empirical Research
- Econometrics is only one tool of econometric research.
- More important: economic history. Econometrics may help you understand economic history better, but statistics are not a good substitute for knowing the historical facts.
- Knowing history helps you to distinguish correlation and causation.
- Econometrics is only one tool of econometric research.
-
Data-Mining
- A lot of statistical work is produced by “data-miners” who torture the facts until they confess. So whenever you see statistical results, ask yourself:
- What data was used?
- Does the data actually capture what it is supposed to measure?
- How many alternate specifications were tried? Of these, how many were shown?
- Does the study confuse causation with correlation?
- A lot of statistical work is produced by “data-miners” who torture the facts until they confess. So whenever you see statistical results, ask yourself:
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Economic Theory and Econometrics
- Sometimes, you use econometrics to test economic theories.
- However, when an economic theory is fundamental, you can reverse this: use the theory to test whether the econometrics works well.
- Example: I am convinced by all of my personal experience and historical study that demand curves slope down. If a study claims that the minimum wage increases employment, it just makes me think that econometrics is unreliable. (How come no one checks to see if the demand for asparagus is negatively sloped?)
- While some will call this dogmatic, I don’t think that it is. Econometrics is itself a sort of theory that merits testing and must be double-checked against other sources of knowledge.
- Sometimes, you use econometrics to test economic theories.
Do not just ride out on the latest empirical study which suits your prior beliefs. Say what those prior beliefs are and base them on well proven understandings of human behaviour. Incentives matter even to criminals.
Does addiction and mental illness dull responses to incentives
Brookbanks is correct that criminals have addictions and mental illness and this contributes to their offending. I found the chapter in Tullock and McKenzie’s book on token economies in mental hospitals to be most enlightening in regard to addictions and mental illness clouding judgement.
The tokens in a token economy were spending money at the hospital canteen and trips to town and other privileges. They were earned by keeping you and your area clean and helping out with chores at the mental asylum.
The first token economies were for chronic, treatment-resistant psychotic inpatients. In 1977, a major study, still considered a landmark, successfully showed the superiority of a token economy compared to the standard treatments of these type of psychotic inpatients.
Experiments which would now be unethical showed that the occupational choices and labour supply of certified lunatics responded to incentives in the normal, predictable way. For example, tokens were withdrawn for helping clean halls and common areas. The changes in occupational choice and reductions in labour supply was immediate and as predicted by standard economics.
Some patients would steal the tokens for other patients, so the tokens were individually marked. The thefts almost stopped. Crime must pay even for criminally insane inpatients. Kagel reported that:
The results have not varied with any identifiable trait or characteristic of the subjects of the token economy – age, IQ, educational level, length of hospitalization, or type of diagnosis.
Most people age out of addiction to drugs or to alcohol. By age 35, half of patients with active alcoholism or addiction diagnoses during their teens and 20s no longer take drugs or drink:
The average cocaine addiction lasts four years, the average marijuana addiction lasts six years, and the average alcohol addiction is resolved within 15 years. Heroin addictions tend to last as long as alcoholism, but prescription opioid problems, on average, last five years. In these large samples, which are drawn from the general population, only a quarter of people who recover have ever sought assistance in doing so (including via 12-step programs). This actually makes addictions the psychiatric disorder with the highest odds of recovery.
Studies of demand elasticity normally find that consumption of hard drugs is quite sensitive to price. Addicts respond to incentives, in particular, to price rises by cutting back on their drug taking.
At the beginning of this century, the Dutch government controlled the opium market in the Dutch East Indies–nowadays Indonesia–for several decades. This state monopoly was called the opiumregie. Using information gathered during the opiumregie, this paper estimates price elasticities of opium consumption. It appears that short-term price elasticities of opium use are about -0.7. Long-term price elasticities are about -1.0.
MFAT’s Hawaian Mansion
03 Oct 2015 Leave a comment
in economics of bureaucracy, politics - New Zealand, Public Choice Tags: government waste, Taxpayers'Union
For some reason NZ has a Consul General in Hawaii. Their main job appears to be working with Palau, Micronesia and the Marshall Islands, so I wonder why they are not located on one of those island…
Source: MFAT’s Hawaii Mansion | Kiwiblog
New Zealand labour force projections by age and sex
03 Oct 2015 Leave a comment
in labour economics, labour supply, politics - New Zealand
The common theme in New Zealand labour force projections is the number of plus age 65 workers is to increase for next to nothing a mere 10 years ago, barely 65,000 plus 65 workers in all, to knock on the door of the number to population aged 15 to 24 in a mere 15 years from now.
Source: NZ.Stat.
Prime age male workers will continue to be the most predominant male worker but there will be many more +65 male workers. The retirement of baby boomer male workers is the reason why mature age working population is static for some time.
Source: NZ.Stat.
The working age female population aged 45 to 64 has already overtaken the 25 to 44 female working age population. The number of female workers aged 65 and over is also exploding.
Source: NZ.Stat.
Most labour force projections are based on the premise that we are all going to work to we drop. That is not unreasonable assumption given healthy ageing and the great number of service jobs that are available which are not physically taxing.
All population projections scenarios are for the 50th percentile projection.
@NZGreens @JulieAnneGenter are right! Government cars should go electric!
01 Oct 2015 Leave a comment
in constitutional political economy, economics of bureaucracy, politics - New Zealand, transport economics
Ministerial cars going electric is a great idea. The range limitations and range anxiety inherent to electric cars would mean ministers will find it much more difficult to do their jobs and therefore will have less time each day to mess up the economy and regulate unnecessarily.
One of the most productive things I ever saw the Green MPs do in Wellington was taking the bus to and from work.
I could not be happier when I saw Green coleaders Russel Norman and Metiria Turei waiting at a bus stop. They are just waiting, they will not working with a colleague, they were not working on their phones. They were just standing there doing nothing. That was the most productive moments of their times in parliament.
Every second a Green MP spends waiting for a bus and travelling on a bus and arranging to fit in with bus timetables is one second less spent making New Zealand a poorer country and deterring investment from coming to New Zealand through their high tax and heavy regulation policies.
Once were British
30 Sep 2015 Leave a comment
in economic history, politics - Australia, politics - New Zealand Tags: British empire, New Zealand, New Zealand Constitution, Statute of Westminster
The politics of marijuana in the USA
30 Sep 2015 Leave a comment
in comparative institutional analysis, constitutional political economy, economics of crime, law and economics, politics - Australia, politics - New Zealand, politics - USA, Public Choice Tags: economics of federalism, laboratory federalism, marijuana decriminalisation, meddlesome preferences, medical marijuana, nanny state
In representative democracy that is a unitary state such as New Zealand, the issue on marijuana decriminalisation is who will change their vote to vote against a party who advocates marijuana decriminalisation under a MMP system where all elections are close.
A plurality of Americans back marijuana reform. Another 20% don't care. Only 3 in 10 oppose.
msnbcmedia.msn.com/i/MSNBC/Sectio… http://t.co/UlvBT1D0ms—
Christopher Ingraham (@_cingraham) September 29, 2015
In a strong federal state, where some states allow citizen initiated referendums to change the law, it is possible to pioneer reform without that backlash. Then laboratory federalism takes over. Subsequent to the decriminalisation of marijuana or medical marijuana by various state governments, the Congress defunded federal marijuana drug law enforcement in states who had decriminalised marijuana. That major reform was underreported.
Utopia, you are standing in it! 
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