Ani O’Brien writes – On Friday night, having imbibed a few wines I strayed onto X to unwisely engage in some (slightly drunk) opinion sharing. I tweeted:
Propping up the film sector or stimulating growth?
Propping up the film sector or stimulating growth?
19 May 2025 Leave a comment
in economics of media and culture, entrepreneurship, industrial organisation, movies, politics - New Zealand, Public Choice, rentseeking, survivor principle, television Tags: corporate welfare
$50 million of taxpayer money on a ski field
01 Mar 2025 Leave a comment
in applied price theory, fiscal policy, industrial organisation, macroeconomics, politics - New Zealand, Public Choice, public economics, rentseeking, survivor principle Tags: corporate welfare
Newsroom has a summary of taxpayer money spent on Mt Ruapehu: How often have we been told this is the final assistance. We are now deep into the sunk cost fallacy.
$50 million of taxpayer money on a ski field
Why do taxpayers pay billions for football stadiums? @TaxpayersUnion @EricCrampton
05 Feb 2018 Leave a comment
in applied price theory, industrial organisation, Public Choice, rentseeking, sports economics Tags: corporate welfare
Here Comes Supersonic Flight: The Rebirth of a Former White Elephant
14 Apr 2017 Leave a comment
in applied price theory, economic history, industrial organisation, politics - USA, rentseeking, survivor principle, transport economics Tags: corporate welfare, picking winners
Yes Prime Minister on a minister of manufacturing @jamespeshaw @julieannegenter
21 Jul 2016 Leave a comment
in comparative institutional analysis, economics, economics of bureaucracy, economics of media and culture, industrial organisation, international economics, politics - New Zealand, Public Choice, rentseeking, survivor principle, television Tags: corporate welfare, industry policy, New Zealand Greens, picking losers, picking winners, Yes Prime Minister
#Corporatewelfare since 2008 @JordNZ @MatthewHootonNZ @GrantRobertson1 @stevenljoyce
02 Jul 2016 Leave a comment
in applied price theory, economics of bureaucracy, entrepreneurship, industrial organisation, politics - New Zealand, Public Choice, rentseeking, survivor principle Tags: corporate welfare, industry policy, picking losers, picking winners, The pretense to knowledge
My latest corporate welfare report is out at the Taxpayers Union website. The company tax could be 6 percentage points lower but for this generosity of politicians picking winners.
Source: New Zealand Budget Papers, various years.
It is not as bad as you think under the last Labour government budget. $700 million of those hand-outs to business was seed capital for agricultural research institute. That institute to be run out of the investment income on that $700 million one-off injection which the incoming National Party-led government cancelled.
Another $675 million in that last Labour budget was to KiwiRail and OnTrack. Other than that, the Labour Party ran a pretty tight ship on business subsidies. There are no particular record of picking winners. Labour did buy a real loser in KiwiRail. You heard it here first.
Picking winners and @stevenljoyce’s repayable grants to 11 more tech start-ups @JordNZ
13 Apr 2016 Leave a comment
in applied price theory, entrepreneurship, industrial organisation, politics - New Zealand, Public Choice, rentseeking, survivor principle Tags: corporate welfare, creative destruction, entrepreneurial alertness, Hollywood economics, industry policy, picking losers, picking winners
Minister for Science and Innovation Steven Joyce picked a few more winners today. Eleven more start-up technology companies are to be funded $450,000 each in repayable loans to commercialise their technology. The loans are from Callaghan Innovation’s incubator network.
To cut a long diatribe short, I find these sums of money rather piddling. I have encountered this corporate welfare program before at a presentation.
My reaction then as is now: by handing out such small grants, some will succeed, some will fail. Importantly, there will never be one big disaster to bring the whole show down. There is political safety in diversification.
This is not the case with, for example, film subsidies. If Sir Peter Jackson and others finally produce a box office bomb, it will be all too glaring that the taxpayers backed a Hollywood loser with hundreds of millions of dollars. $500 million in subsidies in the case of Avatar.
By peppering small sums of money across the economy, there is no similar risk from this repayable grant scheme for the commercialisation of products.
It’s Time to Name a Price on KiwiRail – how much more in losses before committing to shutting it down?
30 Jul 2015 Leave a comment
in industrial organisation, international economics, politics - New Zealand Tags: bailouts, corporate welfare, KiwRail, New Zealand Greens, TPPA
If a TPPA means no more bailouts for KiwiRail, that is a major benefit from the agreement not previously brought to public attention.
New Zealand shouldn’t be signing an agreement that ties future governments’ hands. #TPPANoWay http://t.co/dawreBzLia—
Green Party NZ (@NZGreens) July 30, 2015The KiwiRail bailouts add 1 to 2 percentage points to the company tax of every New Zealand business. Cutting the company tax by 1-2% by not bailing out KiwiRail would be a major public benefit. I now have one more reason to favour the TPPA.
For all the TPP's flaws, the biggest trade deal in years is good news for the world econ.st/1SjmwS3 http://t.co/UokBxoOXgf—
The Economist (@EconBizFin) July 30, 2015A trade agreement tying the hands of future governments preventing them from bailing out failing state-owned enterprises would be a major gain that could more than offset and indeed pay for the higher drug prices that may result from longer patent lives for new drugs.
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
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…
View original post 204 more words
If bureaucrats were any good at picking winners, they would be hedge funds managers
30 Jul 2015 Leave a comment
in applied price theory, comparative institutional analysis, economics of bureaucracy, entrepreneurship, financial economics, human capital, industrial organisation, labour economics, managerial economics, occupational choice, organisational economics, rentseeking, survivor principle Tags: active investing, corporate welfare, efficient markets hypothesis, entrepreneurial alertness, hedge funds, industry policy, passive investing, picking winners, The fatal conceit, The pretence to knowledge
Page 32 of "An Illustrated Guide to Income" more economic #dataviz at: bit.ly/12SEI9p http://t.co/HYm0II2UNI—
Catherine Mulbrandon (@VisualEcon) May 08, 2013
Page 33 of "An Illustrated Guide to Income" more economic #dataviz at: bit.ly/10M7lqR http://t.co/FcmaqZWB32—
Catherine Mulbrandon (@VisualEcon) May 09, 2013
The hedge fund industry held $2.9 trillion of assets in June. Exchange-traded funds did better econ.st/1DdXgWS http://t.co/CK2foqMOpw—
The Economist (@EconEconomics) August 01, 2015
The cost of sports stadium races to the bottom and the cost of going to Pluto compared
20 Jul 2015 Leave a comment
in rentseeking, sports economics Tags: corporate welfare, expressive voting, NASA, Pluto, space, sports, sports stadiums, welfare
The Amtrak and KiwiRail bailouts compared
18 Jul 2015 1 Comment
in economic history, economics of bureaucracy, politics - New Zealand, politics - USA, Public Choice, rentseeking, transport economics Tags: Amtrak, corporate welfare, expressive voting, industry policy, KiwiRail, privatisation, rational ignorance, rational irrationality, state owned enterprises
Figure 1: Amtrak and KiwiRail bailouts, (exchange rate US$1:NZ$1.53), 2008 – 2015
Sources: Federal Funding Received by Amtrak | Mercatus and New report: Corporate welfare in the 2015 budget – Taxpayers’ Union.
New Zealand with its KiwiRail does a good job of keeping up with the Amtrak bailout especially when you look at figure 2, which computes the bailouts on a per capita basis.
Figure 2: Amtrak and KiwiRail bailouts per capita (2014 populations), (exchange rate US$1:NZ$1.53), 2008 – 2015
Sources: Federal Funding Received by Amtrak | Mercatus and New report: Corporate welfare in the 2015 budget – Taxpayers’ Union.
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’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!
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]
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Utopia, you are standing in it! 
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