Sunday, 11 December 2016

Funding Hard News

The previous post defined hard news (someone wants to kill it off) and argued that it is a public good so we should consider public funding to top-up what the providers might get from other sources.

Before we get into the details of how this might be achieved, let's start with a bit more background. Firstly, "we, the NZ public" do already provide public funds for some kinds of broadcast (not print) media, through NZOnAir which does a great job of promoting local content in that middle space between hard news and PR fluff. To get an idea of the numbers involved, the following chart shows public funding of NZOnAir over the last 15 years (in $NZm): steady on almost $130m since 2009.


This is not a solution to the problem of funding hard news: it helps to build local culture and support local artists, but there is nothing in NZOnAir's strategic framework that even hints at funding hard news. Moreover, international researchers looking at how to fund democracy-supporting journalism tend to cite New Zealand as a serious laggard. For example, this 2011 report from Free Press (pdf) opens it's NZ section with the following statement
New Zealand’s recent history in some ways offers a cautionary tale of how not to structure and fund public media. 
Media researchers NiemanLab also called out New Zealand in their reporting of the Free Press work, sounding a tad incredulous:
In New Zealand, in 1989, the public broadcaster TVNZ lost all its funding and was actually required to produce dividends to pay back to the national treasury.
So we're international laggards on hard news at a time when all journalism worldwide (but particularly hard journalism) is really struggling to be funded. That's the problem, and its a public policy problem.

There are all manner of ways that journalism can seek funding, but if we want to bake in a reliable counterweight to the PR spin of governments and firms, for example because we think it's essential for democracy to function properly, then this activity needs public funding.

How?

There are three parts to the how question: we need to consider the source and destination of the funds, and how much cash to allocate. My initial thoughts on these topics follow - feel free to add/criticise in the comments section!

Source
The default option for sourcing funds is general taxation, but that might not be the best option. We may be able to do better by raising new taxes on particular activities. For example, it is often argued that we should seek ways of un-doing the international tax manipulations of  Google & Facebook. This would help to restore credibility to our tax system, and is worth doing anyway, but then we'd be back to looking for some way of funding hard journalism from (a slightly larger pot of) general taxation revenue.

Given that we have come to this point by massive productivity gains in advertising, an obvious alternative is to raise a specific excise tax on the $2bn spent annually on advertising in Aoteoroa.
Advertisers would hate this of course, and standard economic analysis would predict that there would be less advertising as a result. However there are also sound economic reasons to believe that some industries have far too much advertising, and we could allow tax exemptions for adverts that were obviously in the public interest (e.g. promotion of voting in elections and public health messages).

There could also be a case for other ways to provide fiscal support. For example, in France, everyone with an official press card gets a discount off their tax bill.

I have no strong views on these options but others will have.

Destination
In allocating funds to hard news providers there are two objectives. One is to design a system that promotes good coverage across all of the fields in which hard news is valued. The other is to keep the hard news providers on their toes.

To support both of these objectives, I'd favour using competitive processes to allocate funding, monitoring of outputs, and some kind of feedback loop should be developed so that providers can build a reputation for being effective users of public funding.

Structurally, there would be a case for splitting the funds between the longer term (3 - 5yrs) support of one or two dedicated teams and specific grants for individuals. Ideally, this would allow the incumbent team(s) to build strength, cultivate a competitive fringe and provide performance benchmarking data to keep everyone on their toes.

Volume
How much should we spend on this? The NZOnAir funding is my only real benchmark here, so my starting point is that we should spend at least as much on supporting hard news as we do on the culture-building outputs funded by NZOnAir. That's about $130m/year. Oh, and both funds (NZOnAir and HardNews) should increase at the relevant rate of cost inflation instead of being fixed in nominal terms as has been the case for NZOnAir recently.

Why?

I think we need this for the same reason we need the Reserve Bank Act and the Ombudsmen Act and Public Finance Act. We should require that all governments submit to external scrutiny in ways that ordinary people can understand. Just having these laws helps "keep the bastards honest" but we also need an empowered fourth estate to support our democracy by publicly holding their feet to the fire.

And if that doesn't convince you, spare a couple of minutes for this. Scroll through to 1:35 and then listen to Guyon...






Saturday, 10 December 2016

Hard Journalism as a Public Good

Earlier this week the Commerce Commission held a conference on the proposed merger between Fairfax and NZME. Most of the discussion involved the applicants responding to questions from the Commission. The transcripts will be available here. This post is not about the proposed merger but was provoked by the discussion at the hearings.

There is no doubt that journalism as a profession is facing serious economic challenges. Advertising revenue is moving away from printed newspapers as readership declines, and the online versions of newspapers aren't gaining as much revenue as their hard copy versions are losing. Google & Facebook (G&F) are scooping up the rest of the cash because they have better ways of matching adverts to eyeballs.

But G&F are distributors of content, not creators, which is why they haven't really cared whether news is real or fake. And by scooping the advertising revenue, G&F are revealing the weakness that was always inside the traditional business model for news media: hard news has been cross-subsidised by soft news. The light, quirky stuff has sold papers day-to-day while journos dug into important but deeper stories that headline less frequently.

Think of the hard-soft distinction as a spectrum that runs from serious investigative journalism through to PR puff pieces. Any story that someone has a strong interest in killing off is likely to be hard journalism. Innocuous human interest stories are neutral - no-one is promoting them or trying to kill them off. And at the other end of the spectrum are PR stories deliberately planted by someone with a position or product to promote. In the traditional model, a bundle of stories is sold in a newspaper and readership of the latter two categories helped to pay for the more important stuff.

Cross-subsidies are not sustainable under competition though. In the modern online world G&F unpick the traditional bundles, allowing readers to focus on the cat-up-tree stories if they so desire. Worse, they also take advertising revenue from the harder investigative pieces.

So how do we ensure that enough hard news is reported?

The first step is to acknowledge that it meets both criteria of a public good. Once created, hard news can be consumed by an infinite number of people, so there is no rivalry for consumption as there is for a sandwich. It is also difficult and inefficient to exclude those who have not paid from the consumption of hard news. Under these conditions, commercial operators will under-provide hard news because it is difficult to monetise.

This under-provision is a serious problem because hard news is the feedback loop by which the general public are sufficiently informed to insist on changes in policy. It is crucial to the sustainable development of our society, environment and economy.

So the question is not whether we should support hard journalism, but how to do so in today's context. Apart from the rapidly evaporating cross-subsidies, there are three main options.

Crowd-funding can work but it has some obvious weaknesses. It is best suited to particular projects rather than the maintenance of an ongoing effort by a dedicated crew. It also risks tipping off the target(s) of the investigation.

Option two is for newspapers to take on G&F at their own game by using a combination of paywalls and permission-based marketing to reclaim advertising revenue. This strategy might possibly succeed, but it would still require internal cross-subsidies and it is not obvious that those seeking cat stories would subscribe in sufficient volumes to support hard news.

Public funding is the third option and more consistent with the way we ensure the provision of other public goods. The main difficulties with public funding are ensuring we get plenty of high quality outputs and finding the dosh to pay for it.

I'll have a crack at these difficulties in another post.

Friday, 9 December 2016

Radicalism is Winning

The brexit referendum and the USA presidency election have two things in common: both were unexpected (neither was predicted by the polls) and in both cases the establishment lost to radically new ideas.

The radicals won by tapping into deep seated resentment against the status quo, offering clear and simple alternatives, and refusing to get into the nitty gritty of exactly how these alternatives would be achieved. Credible subterfuge was also important: in both cases there were talented bullshitters leading the charge.

We might well weep for the quality of discourse on matters of great public interest, but that's the modern world and it has been for some time. Here in Aoteoroa we're very familiar with the set-up, having spent the last eight years with the PM (including his office) controlling the news agenda including through the use of very dirty tactics.

Many of our ministers are old established incrementalists though, so we are potentially vulnerable to the same kind of radical upheavals as have occurred in the UK and USA this year.

The situation is a bit like working in an industry that is vulnerable to disruption through digital technology. If you can see disruption coming, the best strategy is often to disrupt yourself rather than have it done to you.

All the more so on political matters where there are very different radical new directions available.

So in the spirit of the times, here are a few themes where radical initiatives are worth considering.
  1. Protect the Environment. Taken seriously, this would disrupt agriculture and transport at least. We'd be investing in electric & hydrogen vehicles and the associated infrastructure. Agricultural science funding would be re-directed towards much more benign methods and farmers would face direct taxes(pdf) & subsidies(pdf) designed to price the spillover effects of their activities.
  2. Promote the Young. Our tax & welfare system favours the old & the established over the young and precarious, partly because our political leaders tend to be old & established themselves. There are some positive signs here, notably the the tax policy just announced by TOP and the recruitment by the Greens of Chloe Swarbrick and Hayley Holt as candidates for next year's election.
  3. Provide Public Goods. I suspect there are more examples of un-recognised (and hence under-provided) public goods, but the one on my mind this week is the gathering and reporting of hard news. We have largely left this to the market, but hard news does not meet the economic standards for doing so. I will have more to say on this shortly.  

Thursday, 24 November 2016

C, E, F & P

Rachel Stewart is at it again, criticising the dairy industry. And here I am again, basically agreeing with her despite being a dairy farmer. Dairying is indeed a very powerful industry in NZ, to the point where the 'C' word (cow) just was never mentioned by officials commenting on the water contamination in Havelock North.

The power of the dairy industry & Fonterra in particular is sometimes useful. Fonterra is currently helping to repel the mad scientists who want NZ to embrace GMOs for example. It has also been strong on excluding stock from waterways (sheep & beef farmers are waay behind on this) and is ramping up efforts to limit the use of palm kernel as a feed. These are market-driven positions of course.

But you will never catch Fonterra advocating a massive reduction in dairying in NZ, which is Rachel's position.

My own view is that from long-run perspectives on the environment and the economy, the output of NZ's agriculture is less important than the inputs. As an agricultural exporter, NZ has comparative advantages in our climate, our land/population ratio and our isolation. As a country, we have never really thought strategically about how we should exploit these assets, because that way lies communism, we're told. The markets will guide efficient investments, right?

No. They won't. Markets are socially defined constructs. We make the rules that give the incentives that are acted on in the markets. John Key's first pile of do$h was made by the *government* changing the rules.

This is why, while I applaud Rachel's focus on the 'C' word, I think we also need to address the 'E' word, the 'F' word, and the 'P' word, where

E = externalities;
F = fertilisers; and
P = pesticides.

To understand the point, imagine a world in which NZ dairying was massively reduced as Rachel suggests. The replacement land-uses will still damage our environment unless we force farmers to internalise pollution and rewarded them sequestering carbon (E). Done properly, that can lead to highly efficient changes in the way we use fertilisers (F) and pesticides (P).

Tuesday, 1 November 2016

Minority Rule

Nassim Taleb has a great post on how quite small minorities can win over the majority in social matters:
It suffices for an intransigent minority –a certain type of intransigent minorities – to reach a minutely small level, say three or four percent of the total population, for the entire population to have to submit to their preferences. Further, an optical illusion comes with the dominance of the minority: a naive observer would be under the impression that the choices and preferences are those of the majority. 
Taleb's argument is not that minority rule is generally true (a plethora of oppressed minorities know differently), but rather that it can happen if the minority is intransigent, for example for religious reasons (kosher, halal), and the majority is flexible (i.e. we don't mind if its kosher and halal), and it's not much more costly. In that case, food suppliers might well find it most efficient to cater to the minority. Economic rationality, right there.

This could explain why huge food companies like Nestle and Danone are now very publicly moving away from GMOs. There is a significant minority of people who will go out of their way to avoid eating GMOs, whereas only extreme GMO fanatics could object to eating a non-GMO. So in an industrial food system, non-GMO might be the least cost means of meeting market demand.

These food examples arise in competitive markets: when competition is working well, capitalists often do the most efficient thing, even if it is a major change. These commercial outcomes seem basically efficient on the available evidence.

Taleb doesn't discuss policy issues though. It seems to me that inefficient minority rule often occurs in making social/public policy choices. It's almost inevitable really, despite the best efforts of the decision-makers. A tiny minority of officials (ministers and civil servants), are charged with acting as agents on our behalf. We put these few people up as our agents, and then they are pressured by large commercial stakeholders seeking outcomes favourable to them.

Efficient innovation works fairly well in competitive markets but is notably slower in areas where public policy needs to change, such as on climate change, agriculture and drugs. Minority rule has so-far prevailed in these areas, pushing back hard on changes that would hurt shareholders or reduce investor confidence. The lobbyists involved don't pay much attention to the huge economic and social benefits that reform could deliver.

On these policy issues, our well-meaning agents are facing the minority rule problem very directly. The majority interest is clearly in favour of major policy changes on climate change, drugs and agriculture. But Taleb's intransigence/flexibility framework is still in play, only this time intransigence shows up as the relentless pounding of really detailed/sophisticated arguments in submissions from those opposing change, against a large number of much less complete or sophisticated submissions from a diffuse group of well-intentioned, basically correct, but somewhat unprofessional individuals, each of whom has only a small stake in the outcome.

Not many of us can drop $50k on a major submission to an official inquiry about some important policy/legal/regulatory proposal. Ordinary citizens generally can't match that level of sophistication, but for a firm whose profits are threatened it is fully rational conduct. So our agents, the officials and ministers, need to supply the counterweight on our behalf. Most of our agents are smart and well-meaning and basically understand these points. But we still make no real headway on serious policy problems.*

So my conjectures are:

  1. minority rule is pretty common, and Taleb's intransigence/flexibility framework is a useful way of examining when & why it occurs;
  2. minority rule is generally efficient when it arises from competitive markets, because in those cases it reflects individual preferences; and
  3. minority rule is generally inefficient on matters of public policy (because it doesn't reflect individual preferences) and is indeed a major roadblock to beneficial policy reform.
* Economists will recognise these as "regulatory capture" ideas.


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

Forgiveness

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.

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.