Monday, 19 September 2016

About that Elephant / Where's my Money?

Ganesh, the Way-Clearing Man-Elephant
We get several "free" newspapers each week, as do all farmers in NZ. They're entirely sponsored by advertisers, with bits of farmer-friendly content around the ads to attract our eyeballs.

My impression is that for most of the year, these papers have carried a steady trickle opinions that appear to favour NZ farmers growing genetically modified organisms (GMOs). A classic of the genre is this piece (see p10, but note the front page promo) by Ian Proudfoot of KPMG. Ian reckons that we must stop ignoring the GMO elephant in the room, because people keep talking to him about it, though he has "no clear view on what the right course of action is".

Less than three years earlier, he was much more confident, arguing that NZ "should be creating a premium market around being GE-free and charging a premium for GE-free product". This raises a few questions about what's changed since November 2013 and, as an economist, my questions concern both sides of our agricultural markets.

  1. Has the demand for NZ's agricultural products become more accepting of GMOs?
  2. Has the potential supply cost of NZ's agricultural products been reduced by GMOs?

I've looked but found no evidence to support either of these propositions, so I'm still firmly in the camp of the November 2013 Ian Proudfoot: we should play to our GMO-free strengths.

But I agree with Ian that there is an elephant and that we should talk about it. That elephant is the millions of taxpayer dollars are still being poured into engineering GMOs for NZ farmers, even after many many years of failure by the scientists, not to mention that our customer don't want it (as 2013 Ian Proudfoot noted).

I've been asking William Rolleston about this on Twitter for some time without any response. He keeps arguing that case-by-case evaluation of GMOs is the way to go (a point I agree with) but ignoring the supply-side question about where are these great new GMOs in which we taxpayers are investing all this cash. Here's what happened over the weekend.

Today I received what could have been a response but was instead designed to exclude the above thread and funnily enough it again ignored that exact same elephant.

So, now I'm feeling like Caspa: Where's My Money?

Saturday, 17 September 2016

The New Liberal Economics

Vox has a new broad-canvas piece by Mike Konckzal on the tectonic plates of economic research. You really should read the whole thing, even though it is (inevitably) bound up in the horrors of the US election cycle.

Every now and then, groups of economists develop new ways of understanding the world that are sufficiently distinct that they need a label. For example, there is a "new institutional economics" and a "new economic geography", both of which offered valuable new insights into how the world works and how economic policy, including regulatory policy, should react to the problems that the world throws up. These new paradigms are now widely accepted, because they added to our understanding of how the world works, to the point where the "new" part looks like the historical relic that it is. only emerged.

Mike's piece is suggesting that there is now a sufficiently distinct body of liberal economic thought that we should call it the "new liberal economics". He identifies and provides evidence for three claims in particular:

  • Inequality is a choice. It is not a regrettable but inevitable byproduct of an efficient economy, nor a temporary, self-correcting trend. Different policy choices can reduce inequality, and need not compromise growth (pdf).
  • There are structural barriers to full employment, including a global savings glut and a reluctance by private firms to invest, and these are not self-correcting.
  • Direct government supply is a useful option. There is only so much that can be done by "nudging" the private market. 

Down here in NZ, our mainstream does not yet accept any of these points, though we are dabbling around the edges of this new liberal economics.

Obviously, we don't accept the fact that inequality is a choice (give us another five years I reckon). We are somewhat into job-creating infrastructure spending, but ours is often low quality spending(pdf) and at the end of the day we're mainly about government budget surpluses. And we are of course still madly in love with nudging the private market rather than making sure the public option works well.

I hope we start facing some of these facts sooner rather than later. 

Monday, 12 September 2016

Captured Politicians - Thugby Edition

Rugby is not just a game in New Zealand, it's definitely a religion.

Face it: there are gods like Richie, reincarnation allows gods to beget other gods, plus there are rituals, dressing up, arcane rules, and of course priests are involved. So all the trappings are present.

I think this is why conservative politicians are so captured by it. Rugby is a big and popular business in New Zealand, which is why aligning with rugby brings in the votes. I get that.

What I don't get is why a Minister would abdicate rather than criticise a portfolio-relevant major screw-up by the rugby industry. That's what Louise Upston is doing right now over the sordid Chiefs scandal: she's abdicating her responsibility to advocate for women. Nothing to do with Louise.

So, can we get a refund please, Louise? Nah, didn't think so, eh? Never admit, never apologise, never give an inch.

And if I might Trotter slightly, this does all very much remind me of the Springbok Tour shenanigans, when Muldoon (in the John Key role) knowingly caused a civil war over the same sport for the (successful) purpose of being re-elected. Louise Upston is effectively using this classic Muldoon fig-leaf as her guiding principle:
“In New Zealand we see sport as totally separate from any aspect of politics”.
Just to clarify, I'm not suggesting there will be a civil war against the heinous misogyny currently being swept under the carpet. Hell no. There should be, but our democracy is being run by a different management team now. They're very good.

Tuesday, 6 September 2016

The Naked Emperor

As recently mentioned, I've provided economic advice to several of NZ's local government councils on their plans to regulate outdoor cultivation of GMOs. Hastings, Auckland, Whangarei and Northland have all since decided to prohibit outdoor cultivation.

After studying the costs and benefits of their proposals, I concluded that they appeared costless because there was no commercially viable GMO that would be blocked by the councils' proposed course of action. Lots of people wanted the GMO-free branding (including some very large exporters), so the net effect seemed to be "some gain, no pain".

Not finding evidence doesn't prove it isn't out there however. Fortunately, local government processes are highly contestable, so my evidence was open to challenge, including by GMO fans who'd naturally be best placed to identify any gems I'd missed. 

There was indeed plenty of challenge, including some very unprofessional and unfounded personal attacks on my professional integrity by people employed by Scion and Federated Farmers (the Feds guy at least had the decency to apologise later). Emotions can get the better of people at times.

On the crucial evidential question though, there was complete silence. No-one ever pointed to an actual GMO, ready for commercialisation now, for which there was grower demand. Nor could those opposing these local governments even identify a GMO that is close to being ready.

This matters, because the plans only last for 10 years and there are long development horizons for new GMOs. If there was an outdoor GMO ready to go now, that local growers wanted, then there would obviously be a cost in prohibiting its use. Even if there were reasonable expectations that this would occur within a few years, it might be better to not prohibit them.

The cupboard was bare however, so the councils were not imposing any costs on their populations by proceeding as they have.   

But science is constantly advancing, so maybe new evidence has come to light in recent months? If so, the president of Federated Farmers doesn't know of it, judging from his studious avoidance of this question on Twitter today.

So at this point, the Feds' emperor looks stark naked.   

Sunday, 4 September 2016

Open Season on Local Democracy

As frustrating as local councils can be, they play a crucial role in our democracy by reflecting local preferences. Democracy is out of favour in certain circles however, and New Zealand likes to be up with the play on this kind of thing, which may be why there's so much council bashing underway at the moment.

First up, amendments to the Local Government Act that, among other things, would allow central government to create Council Controlled Organisations (CCOs) without their agreement. A bunch of Mayors turned up to Parliament to oppose this yesterday, describing it as "completely undemocratic". 

Second, genetically modified organisms (GMOs). In several parts of the country (Hastings, Auckland, Northland) councils have responded to local preferences by agreeing to control outdoor cultivation of GMOs.* Biotech producers, who have allied with Federated Farmers on this topic since biotech investor Sir William Rolleston became their president, have opposed these initiatives but lost, at council hearings, in the Environment Court, and just last week in the High Court. Interestingly, SWR wasn't too worried about being a three-time loser on this topic. Here he is on Morning Report:
"...the Court has ... said... that there are some things that the government or indeed Parliament need to do, if ah, if ah, Councils are not going to be..."  
If you think that doesn't sound like language from a High Court judgement, you're right. Sir William was getting ahead of himself. It would be another whole day before Environment Minister Nick Smith put plan B into operation, announcing that this aggression would not stand because he will change the law. Smith claimed that medical uses were being prohibited, but he must know that's a lie.

The third example is a doozy, and might well be what Smith has in mind for denying local governance of outdoor GMO cultivation. It's the "Resource Legislation Amendment Bill" which is mostly about amending the Resource Management Act (RMA). Check out this little ripper of a clause which would insert two new sections into the RMA. The first clause, which would become s360D(1) of the RMA goes like this.
The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations—
(a) to permit a specified land use:
(b) to prohibit a local authority from making specified rules or specified types of rules:
(c) to specify rules or types of rules that are overridden by the regulations and must be withdrawn:
(d) to prohibit or override specified rules or types of rules that meet the description in subsection (3)(b).
Got that? Under the proposed changes, if Nick Smith, or whoever else ends up as Minister, doesn't like something a council has done, he can veto it.

We're not fascists though, so this veto needs to be dressed up with a spiffy uniform. Which in this case looks like a sound process involving much consultation and chin-stroking. The Minister has to tell affected groups of his/her plans and establish a process that
"the Minister considers gives the public, the relevant local authorities, and the relevant iwi authorities adequate time and opportunity to comment on the proposed regulations"
Do you feel much happier that the Minister needs to be satisfied that the process he/she has created to review/challenge/amend details of the veto gives "adequate time and opportunity to comment"? Me neither, and I'm reminded of this gem.

* Disclosure: I have provided economic advice to council hearings in each of these places. 

Wednesday, 31 August 2016


It's been a while between posts eh?

That's mainly because we've been having some issues locally that stole the residual time and energy I'd been putting into blogging. 

It all started back in January 2015 when we agreed to hire a manager for our dairy farm straight from prison. Being former townies, we were not quite ready to run the place ourselves. We knew this guy's family very well and we all shared an enthusiasm for biological dairying. I knew he'd been jailed for sexual offences but found out several months later that the victim was a little girl, well known to him, as are around 90% of such cases.

This was a shock, but we carried on with the plan because even this type of offender deserves the opportunity of rehabilitation into society and Corrections assured us that he was considered low risk of re-offending. Corrections turned out to be right - there was no re-offending for the 10 months he was here.

We were vetted, briefed and instructed by Corrections. We agreed to liaise with Corrections and to provide ongoing support for our new manager. Corrections decided there was no need to notify neighbours.

The full story was discovered however and three close neighbours (a small minority in the community) cooked up a plan for a co-ordinated attack, which they implemented during February and March of 2016 while we were visiting our first grandchild overseas. The plan included:

  • cutting off the gravity-based water supply to our farm;
  • making a misleading complaint to the police; and
  • agitating in the community against me serving as a trustee of the local school.
It was a complete success. Corrections decided the risk of violence against our manager was too high and ordered him to leave at 24 hours notice. I resigned as a Ministerially-appointed trustee of the school (an appointment I'd only accepted for altruistic reasons - our children are well past school age), and we constructed a new water supply line from a different location that is consistent with our easement (this was planned but I'd agreed with cutty-off-guy on a 12 month time-frame rather than 6 weeks).

Strangely enough though, despite their complete success, these three neighbours still seem extremely angry. To cite just the most recent example, the neighbour that agitated the community about my role as a trustee, who is now herself a trustee, last week threw a raucous, screaming tirade of abuse at me while I was hosing out a calf-feeder at the cowshed.

These people seem to have no capacity for forgiveness. They obviously don't trust the criminal justice system and are seeking ongoing punishment for our former manager, and us for daring to employ him.

It is therefore ironic (at least) that the partner of the school-focused, raucous, screaming neighbour, was taking advantage of the forgiveness embedded in our bankruptcy laws in the same month as she helped drive our former manager out of the district. I'm sure Jim's a nice guy and did his best, but his unsecured creditors are out of pocket by about $3.4m.

The chances of me one day conversing normally with any of these three neighbours seem low. But if they ever do stop screaming at me, I'll forgive them.

Meantime, on with the show. We're having a great season so far and now that I've got this off my chest I'll be a tad more forthcoming on farming, economics and all my usual witterings-on. 

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.