Thursday, 31 March 2016

Strangling the UBI at birth

Labour's proposal for a UBI debate was swiftly scorned by Eric Crampton whose pithy summary runs like this:
There's a lot to like about a guaranteed annual income. Or, at least, there would be if it were feasible and affordable. I don't think it can be both.
This sounds both reasonable and devastating, right?  The claim is based on an "impossible trinity", which is that you can only pick two of:
* low phaseout rate
* Big basic benefit
* same cost as current system
.
From which, just as the man said: a UBI can't be both feasible and affordable. Don't bother yourself with defining these terms: just focus on the fact they sound like clear & reasonable hurdles: you either pass or fail. Much the same story is told by Jim Rose in his Taxpayers Union report, the Herald and Liam Hehir who deserves special mention for arguing we shouldn't even talk about it: the whole thing is impossible madness.

These are brave attempts to shut down the debate: strangle the whole idea at birth while demonising those with the temerity to suggest it. If that was your goal, you'd make your strawperson as extreme and narrow as possible.

So let's review the approach of Eric and his mates. At present, some people are net taxpayers and some are net recipients of welfare. Line up all these people in order from the person with the biggest net tax bill on the left of the following diagram, through to the largest net recipient of welfare at the right end.
To keep it simple, lets just focus on tax & welfare and pretend the red line shows the net position for each resident. In this case, the government's books are in balance for a year if the area A is the same size as the area B: all of the tax revenue is paid out in welfare. Because of mumble mumble, we need to make sure none of these residents is worse off, so the UBI has to be set at the net amount received by the biggest recipient, so under a UBI the total payout is equal to the combined area of B and C. Any twit can see that B + C > A, so there you go: utter lunacy that could only have been dreamed up by deluded fools who can't count.

Here are a few things they're missing.

  1. A more modest UBI might in fact take a lot of people out of the poverty trap created by targeting multiple welfare payments all of which abate as you earn extra income. Not the people at the far right of the diagram, but some.
  2. The government would save money by not paying people to monitor, grill, and generally hassle these citizens.
  3. Contrary to Eric's view, NZ's tax code does in fact have "have free lunches baked into it" and removing these would add to government revenue. The two most obvious opportunities are clawing back some of the Apple/Google/Facebook/... avoidance and taxing capital tied up in residential property.
My point is that there is actually a debate to be had, and it is very poor form indeed to deny that using strawpeople that do not withstand even casual scrutiny.

Sunday, 20 March 2016

How do you calculate organic milk value?

Grass-fed organic milk - NYC, 2016
That was the headline for page 26 of NZ's Rural News this week and it's a perfectly good question.

Consumer willingness to pay is the obvious starting point. If consumers didn't value organic as a separate form of milk, there would be no difference in the wholesale price of organic and non-organic milk powder. The recent 520% premium shows there is extra value and tracking this differential over time would be the basis for a pretty reasonable method of calculating organic milk value. There you go: 64 words. 

Jacqueline Rowarth's piece in the Rural News is nothing like that. It starts off admitting industry projections of 12% cumulative annual growth rates over the next five years, while omitting the "cumulative annual" bit and so leaving readers free to think of 12% growth in total over five years. Then we quickly settle into the main task: sledging Fonterra's organic business. 

Recognising the two-sided nature of this business, Jacqueline has two black hats: one for farmers and the other for Fonterra. 

For farmers, well, it seems that the science of "comparing farm management systems" is really difficult, but these clever people at Massey reckon organic is less profitable per hectare and exposed to greater climate risk. Not only that, but your livestock values will fall because homeopathics don't work. Plus all your soil will deteriorate in fertility which will cost heaps to replenish later once you come to your senses. So, y'know, don't even think of it. Oh and don't forget that Fonterra cancelled organic contracts abruptly back in 2009. Its all super risky, everywhere you look.

And as for you Fonterra, what on earth do you think you're doing, getting back into the organic market?  Obviously it's because you haven't given due consideration to my brilliant plan, which is that "rather than taking a punt on organic [it] might be more valuable and less risky for everybody" if we instead tell everyone that NZ dairy does "not involve excessive use of pesticides, fertilisers, ionising radiation and sewer sludge, nor animal hormones and antibiotics". 

That's my summary of Jacqueline's column. She has a strong aversion to organic dairy and thinks Fonterra should market our more open air systems. Which it does already of course, including by recently giving guidance on PKE usage and announcing a testing procedure. 

More fundamentally: why is this a choice between two alternatives? Why shouldn't Fonterra pursue an organics business alongside its main strategy? Don't they reinforce one another?  

I don't usually read Jacqueline Rowarth's material. Now I remember why.

Sunday, 7 February 2016

RIP Skeptics

It's all over between me and the skeptics: they've thrown me out of their closed FB group, ending about three months of interaction.

The end was typically weird. I started the final thread, linking to this update on Golden Rice and noting that it remains a "dream product" in the sense that it is not yet ready for commercial release. Researchers have access to two types of rice: stuff that grows well and the golden rice that contains vitamin A, but they are yet to make golden rice grow well out in the paddock. So while it technically exists, no-one would want to plant it because it doesn't grow well yet. Views differ on whether and when it might be ready to sell golden rice seed to farmers: the developers refuse to name an expected date.

It's quite an important point in the public debate on GMOs because Golden Rice is used to vilify people who are skeptical on GMOs. For example, GMO campaigner Patrick Moore maintains a website called "Allow Golden Rice Now" with the tagline: preventing it is a crime against humanity. My reaction is here.

Anyway the skeptics hated hearing about the still not quite there yet status of golden rice. The first guy was irritated because he saw "dream product" as an offensive term, which strikes me as odd. What's wrong with chasing your dreams? People have a realistic chance of acquiring their dream car, dream job etc, as do these researchers of nailing the whole Golden Rice project. They just aren't there yet. Good things take time.

Next up was dear old Grant Jacobs in solidly incomprehensible form, though a yard or two short of his best on this occasion. He avoided the inconvenient facts and weighed in heavily on my "dream product" expression which he considered "loaded".

This typifies my interactions with the skeptics. I have different priors to them on GMOs and alternative health remedies and was hoping that they'd be willing to engage on the science relevant to these topics. But they won't. They have a cult-like antagonism to evidence that weighs against their priors.

They had no real argument with the golden rice factual summary, so they tried to deflect onto other issues, but all they really had was the wafer-thin reed by which "dream" could be construed as pejorative.

Then along came Nicky Drake who claims to be a PhD candidate in philosophy at Victoria University of Wellington though they list him as an MA student. Nicky's an administrator of the skeptics closed FB group and a particularly angry man, at least towards me. He succeeded in picking a fight but then promptly painted himself into a terrible corner, where I left him to stew for a bit. It was Friday night and my alarm was set for 5am. After milking on Saturday I found my access to the FB group blocked. My guess is that Nicky pulled the plug to prevent me nailing his arse to the wall for all to see.

It's all very sad but I am forced to conclude that these particular skeptics are really antagonistic to people with different prior views and prefer to demonise such people than engage constructively and to seek common ground. It is a profoundly anti-science attitude, which is quite disturbing given the active involvement of two self-proclaimed "science communicators".

Onward though. They'll rest in peace without me making inconvenient comments and I'll get back to updating my priors as new information arrives.

Thursday, 21 January 2016

Urban Glyphosate Rhetoric

A couple of days ago the Greens started a petition addressed to the head of the EPA which reads:
We request the urgent reassessment of glyphosate and glyphosate-based herbicides in the interests of New Zealanders’ health, and the health of our environment. 
Significant scientific evidence has shown that:
  1. Glyphosate affects bacteria’s  response to antibiotics
  2. Glyphosate damages hormones and is a probable carcinogen
  3. Glyphosate is often combined in weed killers with other active ingredients that are more toxic to animals and people than glyphosate by itself
  4. When it enters waterways, glyphosate harms fish and other aquatic animals
  5. Glyphosate negatively affects the natural behaviour of bees, causing them to forget where their hives are
  6. Glyphosate leaches into groundwater
  7. We don’t know what a safe level of glyphosate is, as it has never been assessed by regulators at sub-lethal levels.
We request that glyphosate be phased out from all uses. 
This afternoon, prominent skeptic Grant Jacobs used his SciBlog slot to hit back. Coming from a scientist it's a fascinating post because the science part of it is limited to contesting the second half of point 2 above. It is silent on all of the other points.

There's a lot of non-science padding out those almost 2000 words though and it's mostly ad-hominem, attacking the researcher and the person commissioning the research for being insufficiently saintly (scientific) and also attacking the idea as not "evidence based". This is not what I'd expect from a science journalist, but Grant isn't one of them: he's a science communicator. There is an important difference.

I'll keep my eyes open for scientific rebuttal of the above points but I have updated my prior in the light of Grant's post. If scientists have serious counterarguments to the other 6 and a half points I'd have expected Grant to cite them.

Thursday, 7 January 2016

Bt brinjal

GM developers rely heavily on aiding the developing world when promoting their wares to policy makers, the general public and investors. I'm pretty skeptical, partly because of the scientisticism that pervades this view.

I am nevertheless keen to understand the opposing views. This is the only reason I keep interacting with the skeptics despite their visceral antipathy to my skepticism on this topic: the best test of one's hypotheses are to expose them to those who most loathe them.

Which brings us to the controversy over Bt brinjal (eggplant) in India.

The first serious paper I read on this topic was this economic assessment (pdf, 2011).  It is very positive about Bt brinjal but isn't actually a complete cost benefit analysis (CBA) because it only compares Bt brinjal with pesticide-heavy methods. File it alongside this investigation (pdf, 2008) of different organic treatments for brinjal in India. Both tell you something about how to optimise within a paradigm but neither attempt a head-to-head comparison between organic/biodynamic/biological and GM systems.

Digging into the controversy a bit further led me to Ronald Heering who cites India's GM regulator, the Genetic Engineering Approval Committee (GEAC) to state that
No hazards from the insecticidal protein were found through standard safety protocols; GEAC findings conformed to the European Union's general conclusions quoted above
Ronald's paper also informs us that the Minister wasn't convinced by the regulator's report and the whole project got stopped for political reasons, which really got me interested. Here's the regulator's report - it relies on data/analysis supplied by the developer and raises no real concerns.

Given the name of the regulator ("approval committee"), the concept of regulatory capture and Ronald's view that India seeks to actively promote GMOs, there are reasonable grounds for wondering about the robustness of the GEAC's assessment.

The next layer down is this report by Jack Heinemann which digs into the scientific evidence that the Bt brinjal developer presented to the GEAC in India. Jack explains that the accepted international scientific conventions for evaluating products of genetic engineering are produced by the Codex Alimentarius Commission (Codex) and then cites (Table 1) six ways in which the GEAC's assessment fell short of these standards. He goes on to cite specific weaknesses in the developer's evidence.

So where does all this leave an objective but interested observer?

  • Hurdles for intervention in another country's policy should be pretty high, though there are different levels of intervention of course, and different levels of interest. Apartheid in South Africa was enough to make me break a few rules in 1981, but some people can't even remember which side they were on.
  • India is the worlds largest & most diverse democracy. It is consequently bogged down in bureaucracy. A few million westerners suddenly getting behind a campaign to admit a GM product is very unlikely to be effective.   
  • You need big money to change government policy. The Gates/Monsanto team is pushing on in Kenya but this is for cotton & maize. I haven't seen them caning the Indian government on Bt brinjal but I could easily have missed that.
  • There is a natural experiment underway because Bangladesh has embraced Bt brinjal while India has not. We will hopefully learn about the farming economics of the product from this experiment, at least relative to conventional pesticide-intensive methods. Noting of course that production economics is only one part of the story.
  • The science around Bt brinjal appears contested. I'd have thought that if it really is a no-brainer then the promoters would just go the whole hog on the science, not leave out bits that seem quite important.

For these reasons I don't advocate pressuring India to approve Bt brinjal

Wednesday, 6 January 2016

Simplistic Silos

Silos can be really useful for storing product and developing academic concepts but there can also be huge value in "breaking down the silos", which is business jargon for "bringing disciplines together for a common purpose". In the context of public policy making, the excessive simplification of silo thinking is particularly dangerous.

We expect simplistic views from simpletons but not from educated professionals. Sadly though, some people do emerge from higher education without a rounded picture of the way other disciplines add value, so they simplistically over-state the role of their own discipline and pay only lip service to others.

New words are needed to describe and counter the influence of such people and their non-specialist followers. Here are a couple to get started with.

Economists are prone to economisticism, the excessive focus on a narrow concept of economics. For me as an economist the most glaring involve tribal demarcations within the discipline, where there is plenty of contrary evidence and reason but it is ignored. Two examples will suffice.
These count as economisticism because in neither view can be supported without narrowly restricting the set of things that can and should influence public policy.  

Scientisticism is also a thing. I'm no scientist, just an interested observer and user of science outputs in our farming efforts. However I know enough to recognise scientistic thinkers: people who place excessive reliance on science. Mainstream agronomy offers lots of examples but I've flogged that enough lately, so let's return to the skeptics.
  • Alternative health remedies are scorned by skeptics to the point where they reckon one's own personal experiences should not be quoted to friends. To be fair, the NZ group is mostly into fighting the really fringe stuff which is fine by me. But they also have a broader antagonism toward traditional/natural/folk medicines and when they start down this track they sound like doctors that are thoroughly versed in pharmacology but not much else. 
  • They're really keen on GMOs, I think because they're seen as scientific outputs. That would be fine if they didn't also ignore, downplay and/or ridicule contrary views that derive from other disciplines. But they do. Consumer views, which are relevant to the economics of GMOs, are written off as ignorance, contrary science is attacked, and statistical risk assessments are criticised for lacking empirics.
When I chaired a university economics department I resisted the business school concept of breaking down silos because I was defending a really strong economics research group. I still see some merit in such silos, but when it comes to public policy making they're like lawyers: needing adult supervision. 

Tuesday, 29 December 2015

Tobacco Monopolist Auction

Competition is usually a good thing. It plays out in different ways depending on lots of factors but the general effects are that prices are suppressed and markets are expanded. Normally this is great, but there are exceptions. Sometimes societies prefer the opposite outcomes: higher prices and contracting markets.

That's one reason why tobacco is taxed heavily and why some advocate taxing sugary drinks. In the case of tobacco further effort is devoted to designing and enforcing other constraints, such as cabinets to hide the tobacco products in-store and plain packaging rules.

Here's another possibility: pass a law to create a statutory monopoly for tobacco products and then auction off the right to be the monopolist for a defined period of time (eg 5 - 10 years). I see it playing out like this.
  • Since only one firm is allowed to sell tobacco it will set monopoly prices which will burn off some demand by themselves.
  • Taxes can still be imposed on top of the monopoly prices, ideally Pigouvian taxes aimed at roughly pricing the externalities associated with smoking.
  • A large chunk of the monopoly profit will be captured by the state as tobacco companies compete to win the monopoly rights.
Comments welcome of course. I'm not aware of precedents for this approach. The most obvious objection is perhaps that it might breach international trading rules, but against this I'd note that all firms have the opportunity to be the monopolist. We'd still have competition, but it'd be competition for the market rather than in the market.