Immigrants and their children across the OECD
14 Jul 2015 Leave a comment
in labour economics, labour supply, politics - Australia, politics - New Zealand, politics - USA, population economics Tags: Australia, economics of identity, economics of immigration
Why is Labour so staunch on its left-wing policies – the voters must come to them – but opportunistic on race?
11 Jul 2015 Leave a comment
in constitutional political economy, international economics, law and economics, politics - New Zealand, property rights, Public Choice, rentseeking Tags: antiforeign bias, antimarket bias, left-wing populists, New Zealand First, New Zealand Labour Party, political opportunism, racism, rational ignorance, rational irrationality, right-wing populists, traditional labour voter, working class Tory
Figure 1: who won the electorate vote of New Zealand First party voters, 2014 New Zealand election
Source: Electoral Commission.
New Zealand First vote splitting data in Figure 1 suggests many more Labour voters vote New Zealand First than for the National Party with their electorate votes.
1/3rd of voters who gave their party vote to New Zealand First voted Labour with their electorate vote. This compares to one in five New Zealand First voters who gave their electorate vote to the National Party.
The Labour Party can win back some traditional Labour voters by borrowing populist policies from New Zealand First and its ageing leader such as prohibiting foreigners from buying New Zealand land.
Who mentioned Shane Jones?
In politics we don't pull our punches, unless you've got one of the world's best in town! http://t.co/Xiz2l36btg—
Winston Peters (@winstonpeters) August 08, 2013
Voter turnout among voting age people
11 Jul 2015 Leave a comment
Under the shy Labour voter theory, countries with low turnouts should have right-wing governments and countries with high turnouts should have left-wing governments. Do they?
Voter turnout among voting age people
Turkey 86%
Sweden 83
France 71
Mexico 65
UK 61
US 54pewresearch.org/fact-tank/2015… http://t.co/lmMcqqM4JD—
Conrad Hackett (@conradhackett) June 01, 2015
A living wage helps well-off households more!
10 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, econometerics, income redistribution, politics - Australia, politics - New Zealand, politics - USA, Public Choice, rentseeking Tags: activists, British economy, British politics, do gooders, expressive voting, living wage, rational ignorance, rational irrationality, The fatal conceit, The pretence to knowledge, unintended consequences
Do Living Wage advocates realise it helps richer households more than poorer ones? My take: telegraph.co.uk/finance/budget… … http://t.co/YPTB6v7tSB—
Fraser Nelson (@FraserNelson) July 10, 2015
Hopeless KiwiRail bailout reporting by Radio New Zealand
10 Jul 2015 Leave a comment
in applied welfare economics, economics of bureaucracy, economics of media and culture, politics - New Zealand, rentseeking, transport economics Tags: corporate welfare, KiwiRail, media bias, privatisation, public ownership, Radio New Zealand, state owned enterprises
This morning on 9 to noon on Radio New Zealand, Kathryn Ryan, the compere of the program, repeatedly claimed that the government pumped $1 billion into the KiwiRail Turnaround Plan between 2010 and 2014. I was so annoyed by this that I made a broadcasting standards complaint while the program was still being broadcast on my mobile as a one finger typist.
The report on 9 to Noon was in response to the government putting KiwiRail on notice, giving it two years to identify savings and reduce Crown funding required or risk the possibility of closure. Since KiwiRail was acquired in 2008 for $665 million as a commercial investment, Crown investments (taxpayers bailout) totalled $3.4 billion – see Figure 1.
Figure 1: State-owned enterprise welfare, Vote Transport and Vote Finance (KiwiRail), Budgets 08/09 to 15/16
Source: New Zealand budget papers, various years.
Table 1 shows that the KiwiRail Turnaround plan of $1.272 billion since the 2009-10 Budget is only a small part of the bailout of KiwiRail. 9 to Noon simply ignored the $210 million in the 2015 budget for KiwiRail for no explicable reason and instead talked about a $1 billion Turnaround plan rather than the $1.272 billion Turnaround plan.
Table 1: State-Owned Enterprise welfare, Vote Transport and Vote Finance (KiwiRail), Budgets 2008/09 to 2015/16, $million
| 08/09 |
09/10 |
10/11 |
11/12 |
12/13 |
13/14 |
14/15 |
15/16 |
|
|
New Zealand Railways Corporation Loans |
405 |
55 |
250 |
108 |
11 |
|||
|
KiwiRail Turnaround Plan |
20 |
250 |
250 |
250 |
94 |
198 |
210 |
|
|
KiwiRail Equity Injection |
323 |
25 |
29 |
|||||
|
Rail Network and Rolling Stock Upgrade |
105 |
71 |
10 |
|||||
|
New Zealand Railways Corporation Loans |
55 |
|||||||
|
New Zealand Railways Corporation Increase in Capital for the Purchase of Crown Rail |
376 |
|||||||
|
Crown Rail Operator Loans |
140 |
|||||||
|
Crown Rail Operator Equity Injection |
7 |
|||||||
|
Total |
578 |
530 |
376 |
510 |
680 |
119 |
209 |
239 |
Source: New Zealand budget papers, various years.
Other parts of the bailout of KiwiRail include $405 million in loans to the New Zealand Railways Corporation in the 2009-10 budge – see table 1. There was a $323 million equity injection in the 2012-13 Budget – see table 1. KiwiRail has also caused write-downs in the Crown balance sheet of an incredible $9.8 billion since it was repurchased in 2008.
9 to Noon ignored at least two thirds of the cost to the taxpayer of bailing out KiwiRail by only limiting its reporting to part of the KiwiRail Turnaround Plan. It ignored the contribution in the most recent budget to that plan. That does not meet broadcasting standards of accuracy or professional responsibility.
Any reasonable listener will infer, as I did when listening, that the entire cost of the bailout of KiwiRail is represented by the Turnaround Plan of about $1 billion. If listeners were left with that impression, they were misled by 9 to Noon and Radio New Zealand.
It usually begins with the RMA – fewer warm, dry homes as an unintended consequence of regulatory restrictions on land supply
10 Jul 2015 1 Comment
in applied welfare economics, economics of regulation, industrial organisation, labour economics, law and economics, politics - New Zealand, poverty and inequality, property rights, survivor principle, urban economics Tags: consumer products standards, do gooders, economics of regulation, nanny state, offsetting behaviour, rent control, The fatal conceit, The pretence to knowledge, urban economics
The Government admits that its proposed insulation and smoke alarm standards for rental properties could push up rents by more than $3 a week. Under legislation to be introduced in October, social housing would have to be retrofitted with ceiling and underfloor insulation by next July, and all other rental homes by July 2019.
An important driver of lower quality housing in New Zealand is the restrictions on land supply. The costs of those restrictions, land makes up 60% of the cost of new houses rather than 40%. Land prices have doubled and tripled in a number of cities. As the Ministry of Business, Innovation and Employment has said:
The median price of sections has increased from $94,000 in 2003 to over $190,000 today (compared with $NZ 100,000 per section in the US), ranging from Southland ($82,000) to Auckland ($308,000)…
Section costs in Auckland account for around 60% of the cost of a new dwelling, compared with 40% in the rest of New Zealand.
The RMA is the Resource Management Act and was passed just before New Zealand housing prices started to rise rapidly.
Source: Dallas Fed; Housing prices deflated by personal consumption expenditure (PCE) deflator.
Higher land prices for new houses spill into the prices of existing houses, which are now much more expensive than they need to be but for the RMA inspired land supply restrictions in Auckland and elsewhere in New Zealand.
One way in which homeowners and landlords can keep costs down when buying a house either for their own use or as an investment property is not to invest in insulation and smoke alarms. Deposits are less, mortgages are less and rents are less. It all adds up.
$3 is not much for some but it is enough that some parents cannot find $3 or so per week to feed their children breakfast. Joe Trinder, the Mana News editor blogged about the great expense of feeding the kids for ordinary families.
Put simply, you cannot argue that a few dollars is a lot of money to people on low incomes but ignore the consequences for their welfare of a $3 per week increase in their rents.
If tenants were willing to pay for insulation, landlords would provide well-insulated rental properties to service that demand. Walter Block wrote an excellent defence of slumlords in his 1971 book Defending the Undefendable:
The owner of ghetto housing differs little from any other purveyor of low-cost merchandise. In fact, he is no different from any purveyor of any kind of merchandise. They all charge as much as they can.
First consider the purveyors of cheap, inferior, and second-hand merchandise as a class. One thing above all else stands out about merchandise they buy and sell: it is cheaply built, inferior in quality, or second-hand.
A rational person would not expect high quality, exquisite workmanship, or superior new merchandise at bargain rate prices; he would not feel outraged and cheated if bargain rate merchandise proved to have only bargain rate qualities.
Our expectations from margarine are not those of butter. We are satisfied with lesser qualities from a used car than from a new car.
However, when it comes to housing, especially in the urban setting, people expect, even insist upon, quality housing at bargain prices.
Richard Posner discussed housing habitability laws in his Economic Analysis of the Law. The subsection was titled wealth distribution through liability rules. Posner concluded that habitability laws will lead to abandonment of rental property by landlords and increased rents for poor tenants.
https://twitter.com/childpovertynz/status/618985237628858368
What do-gooder would want to know that a warranty of habitability for rental housing will lead to scarcer, more expensive housing for the poor! Surprisingly few interventions in the housing market work to the advantage of the poor.
Certainly, there will be less rental housing of a habitability standard below that demanded by do-gooders in the new New Zealand legislation. In the Encyclopaedia of Law and Economics entry on renting, Werner Hirsch said:
It would be a mistake, however, to look upon a decline in substandard rental housing as an unmitigated gain.
In fact, in the absence of substandard housing, options for indigent tenants are reduced. Some tenants are likely to end up in over-crowded standard units, or even homeless.
The straightforward way to increase the quality of housing in New Zealand without increasing poverty is to increase the supply of land.
As land prices fall, both homebuyers and tenants will be able to pay for better quality fixtures and fittings because less of their limited income is paying for buying or renting the land.
It’s Time to Name a Price on KiwiRail – how much more in losses before committing to shutting it down?
09 Jul 2015 1 Comment
in economics of bureaucracy, politics - New Zealand, Public Choice, public economics, rentseeking, transport economics Tags: corporate welfare, hard budget constraints, KiwiRail, privatisation, public ownership, state owned enterprises, state-owned enterprise welfare
In the finest public service traditions of free and frank advice, the New Zealand Treasury in its budget advice this year advised ministers to contemplate shutting down KiwiRail.
Treasury recommended the Government fund KiwiRail for one more year and undertake a comprehensive public study to look into closing the company. The study is public so that people were informed of the costs of running the rail network compared with any benefits it provided. The Government rejected the idea.
Figure 1: State-owned enterprise welfare, Vote Transport and Vote Finance (KiwiRail), Budgets 08/09 to 15/16
Source: New Zealand budget papers, various years.
KiwiRail has been a constant thorn in the taxpayers’ side. Since this rail business was acquired in 2008 for $665 million as a commercial investment, Crown investments have totalled $3.4 billion – see Figure 1.
Fortunately in the 2015 budget, the Minister of Finance signalled that the government’s patience with the KiwiRail deficits is not unlimited. KiwiRail has a 10-year Turnaround Plan to make its freight business commercially viable. The current network of 4,000 km must be reduced to 2,300 km for the company to even breakeven. The Treasury advised, to no avail, that this massive and painful restructuring was required before KiwiRail was purchased. The purchase went through.
The latest developments where Treasury advised ministers to contemplate shutting the network down is an opportunity for ministers, and the opposition spokesmen on finance and transport both to say how much is too much in accumulated KiwiRail losses.
The Minister of Finance and his Cabinet colleagues must say after the public review that there is only so much more left in the cupboard to bailout KiwiRail losses. After that fiscal cap is reached, KiwiRail is on its own. If that means bankruptcy and network closure, so be it.
In the interim, on the side of every KiwiRail train there should be advertising billboards with the following disclosure statements:
- KiwiRail losses adds one percentage point to the company tax rate each year;
- KiwiRail losses takes deny sick taxpayers X number of elective surgeries per year; and
- X number of doctors, nurses, and teachers could have been hired but for last year’s KiwiRail losses!
Has NZ child poverty doubled as @MaxRashbrooke said?
09 Jul 2015 1 Comment
in applied welfare economics, economic history, economics of regulation, labour economics, law and economics, politics - New Zealand, poverty and inequality, property rights Tags: Auckland urban limit, child poverty, Director's Law, expressive voting, family poverty, family tax credits, in-work tax credits, land use planning, median voter theorm, rational ignorance, rational irrationality, RMA, top 1%, working for families
Lindsay Mitchell put me onto a quote by veteran grumbler Max Rashbrooke that the child poverty rate doubled in New Zealand:
In a system where income goes disproportionately to the already well-off, ordinary workers are missing out on the rewards of their efforts, to the tune of billions of dollars a year. Welfare benefits, cut by a quarter in 1991 and increased just 8 per cent in the last budget, are far too low to meet people’s basic needs.
The result is a doubling of child poverty and the return of childhood diseases unknown in most developed countries – a national embarrassment, as one researcher described it.
Poverty, income and inequality data is collected in loving detail by Brian Perry every year for the Ministry of Social Development.
Figure 1: % child poverty in New Zealand (before and after housing costs), 60% 1998 median constant value, 1982 – 2013
Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), Tables F.6 and F.7.
The only thing noticeable in the downward trend in child poverty in New Zealand since its doubling with the sharp recession in 1990 with double-digit unemployment rates is child poverty stop falling shortly after in-work family tax credits were introduced in the form of Working for Families in 2005.
New QV figures show Auckland house prices are up a massive 16.1% on last year, now estimated to reach $1m by Aug '16. http://t.co/DwAU79ozCy—
New Zealand Labour (@nzlabour) June 09, 2015
There was a break in trend in the long decline in child poverty as soon as in-work family tax credits were introduced in New Zealand. I’m sure this is a coincidence because, as Brian Perry said when discussing the introduction of Working for Families in 2005:
The 2004 to 2007 period was the only one in the 25 years to 2007 in which the incomes of low- to middle-income households grew more quickly than those of households above the median.
The real killer in New Zealand in terms of poverty and inequality are housing costs. Housing costs are wholly under the control of government through its control of the supply of land, which is restricted at the behest of the parties of the left.
Figure 2: real equivalised household incomes (before and after housing costs): changes at the top of lowest income decile, New Zealand, 1982 to 2013
Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), tables D.2 and D.4.
Figure 2 shows that real equivalised household income after housing costs has not grown and in fact has fallen for the bottom 10% of the income distribution in New Zealand.
It is the left-wing parties who oppose measures to reduce housing costs and and increase the supply of land through reforms to the Resource Management Act and the relaxation of the Auckland metropolitan urban limit.
Labour and the Greens are in effect keeping the poor poor to win middle-class votes.
Figure 3: real equivalised household incomes (before and after housing costs): changes at the top of the top, middle and lowest lowest income deciles, New Zealand, 1982 to 2013
Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), tables D.2 in D.4.
Figure 3 shows that those in the middle and higher deciles, a political territory rich in swinging voters, are still doing well after housing costs. The parties of the left are collaborating with a middle-class home owning voter while betraying the working class and its aspirations from home ownership and quite simply affordable housing costs when they rent.
The increases for all groups may be understated by the inability of living standards measures to adequately account for new goods, product upgrades and rising life expectancies.
Split voting analysis for the Greens in the 2014 election
09 Jul 2015 Leave a comment
in politics - New Zealand, Public Choice Tags: 2014 New Zealand election, ACT, Grant Robertson, James Shaw, Labour Party, MMP, National Party, New Zealand Greens, split voting, ticket splitting
Split voting analysis suggests there are not a lot of blue green National voters. Few Green Party voters split their party vote and give their electorate vote to National with the exception of tactical voting in Epsom. The Greens and Labour fight for the left-wing vote and that’s about it.
Source: The Electoral Commission.
In the electorate of Epsom, many Green voters voted for the National candidate as a tactical ploy to defeat the ACT party candidate.
Source: The Electoral Commission.
In Wellington Central, the National Party won the party vote with 14,689 party votes. The Greens came second with 11,545. The deputy leader of the Labour Party, Grant Robertson, came a miserable third in the party vote with 9,306 party votes.
Source: The Electoral Commission.
Grant Robinson nonetheless won the seat easily on Green electorate seat votes and more than a few National Party electorate votes.
Indeed, so many of Grant Robinson’s votes came from Greens and National voters that the Greens have a good chance of winning Wellington Central if they tried. More so now that the Green Party leader stands in the seat.
The Greens need to win Wellington Central in the election after they go into a coalition with Labour in government in New Zealand because of the 40% drop in green votes every time they go into government everywhere else.
The Greens have a party vote of 10.7% at the moment. Some of that are Labour voters parking their vote with them while they’re grumpy. A significant part of the rest will be lost when they go into government. Enough of that party vote is risk to push the Greens below the 5% threshold necessary to win any list seats in Parliament.
A lot of voters want to protect themselves from the scourge of lower prices
09 Jul 2015 Leave a comment
in industrial organisation, international economics, politics - Australia, politics - New Zealand, politics - USA Tags: antiforeign bias, antimarket bias, expressive voting, free trade, rational ignorance, rational irrationality, voter demographics
Who favors free trade?
(The affluent.)
nytimes.com/2015/05/28/ups… @BrendanNyhan http://t.co/kojmUWUtH0—
Justin Wolfers (@JustinWolfers) May 27, 2015
OECD starting a business rankings (New Zealand (1st) to Germany (114th)) – World Bank Doing Business rankings
09 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, economics of regulation, industrial organisation, law and economics, politics - Australia, politics - New Zealand, politics - USA, property rights Tags: British economy, doing business, France, Germany, Italy, World Bank
Figure 1: Starting a business rankings – World Bank Doing Business rankings, OECD countries, 2014
Source: Doing Business – Measuring Business Regulations – World Bank Group.
There is surprising wide range in the World Bank Doing Business ranking of the difficulty and delays in starting a business across the OECD.
Germany is ranked 114 from the world for starting a business. New Zealand is ranked first with the USA, Italy and the UK ranked in the mid 40s in the Doing Business database.
Vote splitting for the Conservative Party and New Zealand First
08 Jul 2015 Leave a comment
in politics - New Zealand, Public Choice Tags: 2014 New Zealand election, Conservative Party, National Party, New Zealand First, New Zealand Labour Party, split voting, ticket splitting, voter demographics
At the 2014 General Election 31.64% of all voters split their vote compared to 30.70% in 2011. Slightly over 80% of Labour Party and National Party voters give both their party vote and electorate vote to the same party.
Source: The Electoral Commission.
New Zealand First vote splitting data above suggests more Labour voters vote New Zealand First than National Party voters by a noticeable margin. 1/3rd of voters who gave their party vote to New Zealand First voted Labour with their electorate vote. This compares to one in five New Zealand First voters who gave their electorate vote to the National Party.
Source: The Electoral Commission.
It’s a different story with the Conservative Party. A good 40% of Conservative Party voters give their electorate vote to National. This compares to a 10% split to the Labour Party.
The National Party has much to gain from the collapse of the Conservative Party as does fellow populist party New Zealand First. This split vote analysis does not throw much insight into how New Zealand First would benefit from a collapse in the Conservative Party.
If New Zealand First picks up a significant amount of the current party vote for the Conservative Party if the latter was to fold, New Zealand First will pick up one or two list seats in the next general election giving it the balance of power.
The only thing that could be said is the lack of Labour voters among Conservative Party voters suggest they are reluctant to support New Zealand First because in the past it has supported Labour Governments. The Conservative Party effectively promised to support a National Party Government.
A vote for the Conservative Party is a vote for a National Party government. A vote for New Zealand First is much more likely to see a Labour Government. That suggests to me that many Conservative Party voters are National Party voters at heart.
Are the rich getting richer, poor getting poorer as @MaxRashbrooke once again suggests?
08 Jul 2015 Leave a comment
in applied welfare economics, economic history, labour economics, politics - New Zealand, poverty and inequality, technological progress Tags: child poverty, family poverty, Leftover Left, Max Rashbrooke, The Great Enrichment, top 1%
Max Rashbrooke has been at it again in the paper today.
Don’t these graphs show that everyone is richer in New Zealand than 30 years ago and there has been not much change in either child poverty or inequality for coming on for 20 years? The fall in child poverty started before the introduction of Working for Families.
Technological progress in the form of new goods and product upgrades are poorly captured in measures of living standards over time as is increases in life expectancies.
1993 vs 2013: http://t.co/tdnNqmRmcS—
History Pics (@HistoryPixs) January 08, 2014
HT: Suffer the little children – Inequality and child poverty – Closer TogetherCloser Together.
Can NZ double migrant investors and entrepreneurs from $3.5 billion to $7 billion at no cost to taxpayers!?
07 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, economics of bureaucracy, entrepreneurship, income redistribution, industrial organisation, managerial economics, organisational economics, politics - New Zealand, Public Choice, public economics, rentseeking, survivor principle Tags: corporate welfare, entrepreneurial alertness, industry policy, industry targeting, The fatal conceit, The pretence to knowledge
I didn’t notice any discussion in the Cabinet paper of a government doing this before and whether their investment promotion efforts succeeded or not. This latest policy proposal cannot even count as evidence-based policy dreaming, much less a serious contribution to public policy.
Hoping to double incoming foreign investor and entrepreneur migration from $3.5 billion to $7 billion inside three years without spending any extra public money is breathless public policy making. I am sure lots of governments previously tried to get something for nothing.
It will be helpful if ministers pointed to where overseas governments have been successful in doubling foreign investment by simply reprioritising existing investment promotion efforts.
There are at least 2,500 national, provincial and city investment promotion agencies out. Some of them must have been subject to some sort of evaluation as to their success.
This overseas literature review would be in addition to the recent findings of the Ministry of Economic Development about the poor performance and perhaps futility of the foreign direct investment promotion by New Zealand Trade and Enterprise.
Imagine how much bigger a boost in foreign investor and entrepreneur migration lays before us if actual real new money was put on the table.
via beehive.govt.nz – Strategy targets international investors and Evaluation of NZTE investment support activities [929 KB PDF]
.
The political bias of psychologists
05 Jul 2015 Leave a comment
in economics of bureaucracy, economics of education, economics of media and culture, politics - Australia, politics - New Zealand, politics - USA, Public Choice, rentseeking Tags: academic bias, bureaucratic bias, expressive voting, Leftover Left, media bias, occupational choice, political bias, rational ignorance, rational irrationality, social psychology, Twitter left
Why is it that the economics profession is the only profession questioned on the grounds of its political diversity?
1) Academic psychology once had considerable political diversity, but has lost nearly all of it in the last 50 years;
2) This lack of political diversity can undermine the validity of social psychological science via mechanisms such as the embedding of liberal values into research questions and methods, steering researchers away from important but politically unpalatable research topics, and producing conclusions that mischaracterize liberals and conservatives alike;
3) Increased political diversity would improve social psychological science by reducing the impact of bias mechanisms such as confirmation bias, and by empowering dissenting minorities to improve the quality of the majority’s thinking; and
4) The underrepresentation of non-liberals in social psychology is most likely due to a combination of self-selection, hostile climate, and discrimination.
via Psychology’s Political Diversity Problem | Psychology Today.
Utopia, you are standing in it! 
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