TANSTAAFR

Ladies and gentlemen, the Owlbear song.

Geek cred to the first commenter explaining my cryptic title and the problem in Marcotte's song to which it alludes.

Marcotte's D&D works are up on Spotify (and here and here). Listen to them during your next campaign.

HT: my search on Spotify for the word "Owlbear". This is the only song that came up. If you need to ask why I'd have searched Spotify for Owlbears, you've not been reading me long enough.

Information failures and risky buildings

There's a trade-off when government agencies disclose known risks. Take, for example, AIDS disclosure laws. Some US states require that partners or others likely to be at risk from a patient testing positive for HIV;  others fear that the effect of such disclosure laws is to induce those at risk to avoid being tested. I've certainly not seen any data sufficient for running that cost-benefit analysis,* but it's plausible that either regime could be the correct one.

Wellington Council has a list of buildings sharing the same design flaw as the collapsed CTV building in Christchurch. But they won't tell anybody which buildings are on that list. Is this likely to be efficient? It depends on how Council knows and what they do with the information. If these kinds of flaws get found when Council officers dig back through the old building plans, then there's little risk that disclosure induces building owners to hide flaws. If they're found instead when owners inform Council, then disclosure could induce owners to keep quiet. So, in the former case, disclosure makes sense. In the latter case, it's a trade-off. Whether it makes sense to keep things quiet then depends on the number of owners who would likely be deterred from revealing risks in the disclosure regime and on whether Councils actually do anything to ensure that risky buildings are made safe. If buildings of that sort fall under the usual "you have 30 years to fix it" rule, then it seems unlikely that we're doing much good by keeping things quiet. If they're working towards much quicker repairs of disclosed faults, and if we think that tenants would overreact to the risk disclosure, and if we think that building owners would hide faults in a disclosure regime, then perhaps non-disclosure makes sense.

I'm inclined to agree with NoRightTurn that the case for disclosure seems strong - and especially since the justification seems to be to avoid imposing losses on the owners of risky buildings rather than to avoid that other owners notify Council of building deficiencies. But I'd reverse that call if it turned out that Council were really pushing to get this fixed and if there were substantial risk from unknown building flaws that would fail to be notified under a disclosure regime.

* This state-by-state variation seems eminent fodder for empirical work on the effects of disclosure laws on testing rates. File under "future honours projects" if it's not already been done.

Still seeing red: Blame the rules not the ref

I really, really hate 15 on 14 rugby. Three years ago, I wrote a venting post when in the space of five All Black tests we had seen 3 yellow cards and 1 red. On Saturday night in the test match between the All Blacks and South Africa, we saw that quantity in a single game, three for foul play and one for a professional foul. 

The first yellow card to Bismark Du Plessis was clearly wrong; the second to the same player was clearly correct (as were the cards to Nonu and Read) according to the rules. The problem was that the rules state that a second yellow card automatically leads to a red, and so the original error was compounded and South Africa had to play most of the second half one man short, to the detriment of the game. 

Most of the discussion in the main-stream media and social media since has focused on the error by Roman Poite in carding Du Plessis for what was a perfectly legal tackle. This misses the point. Yes, Poite made was in error*, but errors are inevitable. Rugby is played at a furious pace. Split second judgements are required from both players and referees and all of them are going to make mistakes. The rules need to be written with a view that this is going to happen. The two-yellow-equals-a-red rule is simply too draconian to a world where errors of judgement can happen. 

Part of the problem, here, is that there isn't any coherence in the incentives that the rules seek to create. Partly we want to punish individual players for behaving in a reckless way causing unnecessary endangerment to other players. Partly we want to punish teams for illegal actions of individuals that give their team an advantage. For the latter, it is appropriate that the punishment lead to an advantage for the other team in the course of the game being played. For the former, the punishment can occur after the game in the form of suspensions, fines, etc. If the point of a card is to put a team at a disadvantage to mitigate the advantage caused by some illegal act, why does it make a difference if the same player transgresses twice, or two players from the same team transgress once each? And if the point of the two-yellows-equals-a-red rule is to increase the punishment for habitual offenders, why does it make a difference if that player earns a yellow card once in two successive games or two yellows in a single game? 

I come back to the rule I suggested in my 2010 post: If foul play merits sending a player off, let him be replaced so the game continues to be 15 on 15, but take appropriate action at the post-match judiciary (including being open to the possibility that the on-field decision by the referee was a mistake). If the problem is professional fouls, change the incentives so that conceding a penalty does not give the infringing team an advantage in terms of possession and field possession, and instruct referees to be more liberal in awarding penalty tries. But please, no more 15-on-14; it is a blight on the game. 

* As an aside, why has the criticism all been placed on Poite rather than, George Ayoub. Poite made a call based on what he saw; he asked for guidance from Ayoub, the television match official. Ayoub instead of clearly stating that there was no foul play simply said that he couldn't make a determination and that Poite should go with the call as he saw it. Ayoub had the benefit of slow motion, multiple replays and different angles; Poite did not. Why, then, is Poite the one blamed? 

Competition in small markets

Another for the "New Zealand's Fixed Costs Matter" file: Aaron Schiff posts on the relative lack of competition in New Zealand. Where inefficient firms are driven from the market in other places, New Zealand has a long tail of pretty unproductive outfits.

Roger Procter has dug into the stats a bit deeper and found that some New Zealand firms have very high productivity but there is a very long tail of unproductive firms that are able to survive.

He notes that the ratio of the productivity of the firm at the 90th percentile (i.e. near the top) to the 10th percentile (bottom) of the productivity distribution in New Zealand industries is around nine.

In other words, a firm that is nine times less productive than the best in the same industry can survive in New Zealand. In Denmark, for example, the ratio is reported to be around 1.6 to 3.5. Danish firms that can’t achieve at least a quarter of the productivity of the best firms get killed off quickly.

Roger argues, and I agree, that lack of competition is a major reason for this. Competition forces firms to increase productivity and kills off those that don’t.

Aaron agrees with Procter's assessment that New Zealand's low level of international trade hurts things, then makes a rather interesting argument for import-led growth.

We’re stuck in a low-competition, low-productivity, low-trade equilibrium. New Zealand domestic markets are too small to support enough intense competition to get us out of this state. Exporting is hard work and not enough firms are motivated (or forced) to drag the economy up the productivity mountain.

On the other hand, if low cost imports from productive foreign firms start coming in, maybe NZ firms will be forced to improve their game, or get killed off.

I realise this is a harsh “stick” type strategy, rather than an export “carrot”. Exports create jobs and imports can destroy them, at least temporarily. Maybe I’m getting soft in my old age but there might need to be assistance for some workers during the transition. But given the dire productivity stats, maybe a strong shock to the system is required.

There's not a lot that we can do to make New Zealand even more open to imports: tariffs are very low, GST rules around imports currently make sense, and we see no need for the New Zealand government to enforce at the border any exclusive dealing arrangements that foreign manufacturers have seen fit to make with New Zealand retailers. But getting rid of our ability to run parallel importing, or doing dumb things imposing GST on low-value imports, or forcing a policy preference for New Zealand Made products, would do harm.

Taking less offence - revisited

Loyal readers will recall that New Zealand's Broadcast Standards Authority decides which words are particularly offensive by surveying New Zealanders. Alas, where they once ran face-to-face surveys asking them which of a series of pretty rude terms were particularly offensive, and in which contexts, they now run it via an internet panel survey. I had no end of fun imagining Eric Cartman volunteering to run a door-to-door version of the survey.

The BSA's 2013 list came out this week. It's called "What not to swear: the acceptability of words in broadcasting, 2013". They warn that the report contains language that some would find offensive. There hasn't been great changes in acceptability since 2009; the 2009 figures showed a fairly substantial increase in tolerance of robust language as compared to 1999.

One interesting bit from their summary:

• When comparing the different demographic groups, it is evident that
  
  • Males tend to be more accepting of the words than females
  • Younger respondents tend to be more accepting than older respondents
  • Those that state they have no religion tend to be more accepting than those of religious belief
  • Those of Māori ethnicity are generally more accepting than those of other ethnicities, while Pacific peoples are less accepting
  • Those on high household incomes tend to be more accepting

I wish they'd run some regressions rather than just comparisons of means. Pacific groups tend, in New Zealand, to be lower income and more religious. Are differences between Pacific responses to swearing based on religious differences between Pacific and Maori groups, or something else?

I try to set the dial, for lecturing, to avoid terms considered offensive to a majority in the context of "people being interviewed (TV or radio)".

The very very best part of the report is Appendix I, where respondents were invited to fill in those terms that they personally found offensive. They make a point of reminding readers that the comments are copied verbatim. Words typed in range from "goodgracious" and "Doodoohead" and "OMG, Oh My God" to very creative spellings of other terms. Just go read it. And imagine what you'd have added in, had you had the chance. Please do not contribute suggestions in the comments though. We're not that kind of blog.

We remain impressed by the robustness of language frequently heard on broadcast television, after 8:30, in New Zealand.

Living Wages - Canadian economist(s) edition.

Simon Collins's Herald piece on living wages makes for interesting reading.

He opens with a story of a couple who both work shifts cleaning at a mix of buildings, some housing government-owned entities, some private. They both earn $14.10 per hour, less than the union's $18.40 living wage recommendation. He then points out the current version of Labor candidate pledges:

Grant Robertson pledged to set a timetable to pay the living wage to all government workers and contractors.

David Cunliffe promised to "roll out a living wage as a minimum for public servants and, as we can afford it, through the contractor process".

But the third contender, Shane Jones, refused to commit to the policy, and Prime Minister John Key said it would cost $2.5 billion and destroy 26,000 jobs.

If Labour puts in a $18.40 minimum wage for government workers, the featured family would likely only be getting this for their shift cleaning at a school unless the school contracts out facilities maintenance. And the school might shift to contracting out to keep costs down unless the government topped up its budget to make up the difference. If contractors also have to pay it, then the featured family does better in the short to medium term. But recall that if the potential benefits are large, so too are the incentives to shift to renting serviced facilities and so to have cleaners and other maintenance staff out from under the living wage mandate. So either it doesn't do much, or it gets circumvented. Collins also notes in passing that Ofa, one member of his featured family, is a delegate for the Service and Food Workers Union. I expect that the unions as a whole do well out of the measure, if it's extended to contractors, because it blunts the force of contracted outsourcing in keeping costs (and wages) down.

Collins then works through some of the costing estimates on living wage mandates, correctly noting that increasing the minimum wage to $18.40 would be very expensive. He then quotes me on the likely disemployment effects of an $18.40 minimum applied only to the government sector:

Those taxpayers would have less to spend, but low-paid state workers would have more. Even right-wing blogger Eric Crampton, a Canterbury University economist, wrote this week that the net effect would be minor: "Lots of people queue for jobs in the high-paying sector, but they'll take lower-paying jobs in the private sector."

I do expect that there wouldn't be much change in aggregate employment with a living wage mandate applied only to government workers and contractors because I expect that the government has close to a vertical labour demand curve for such workers and tasks.* There would be job rationing - in other words, more people wanting to work as cleaners in the public sector than there are available jobs - and the unions could extract higher dues as consequence. But Councils and Government would be likely, in the short term at least, just to pay more and make it up with increased taxes. In the medium to longer term, I still would expect a shift to government departments taking up tenancies in serviced buildings, but where the cleaning budget is a small part of the overall calculus, the effects mightn't be large.

Collins nicely does cite the literature on that living wage mandates are very poorly targeted and that we could do rather better by increasing targeted benefits. Then he cites U Vic's Morris Altman:

Morris Altman, a renowned Canadian economist who moved to Wellington's Victoria University in 2009, argues that a living wage is "a moral imperative situated in the natural rights of individuals".

His research suggests that a wage rise can actually pay for itself by raising productivity through motivating workers to work harder and stay in their jobs, and by inducing employers to introduce new technology and train workers to work smarter.

But that is only true, he warns, if wages are raised at a rate that productivity can keep up with. "So one has to be ultra-careful about by how much one increases. If it's a radical increase, that might be too much to deal with in the short-term," he says. "You might need a bit of an adjustment period to get productivity up."

I choose to take it as a compliment that Collins seems to have assumed that I'm Kiwi.

I haven't read Morris's work on living wages. I'd disagree pretty strongly with him on moral imperatives and natural rights, but I'm pretty sure neither of us gets to trump the other on that kind of question. And I can believe that, in some cases, salary increases can be self-financing - that's the general basis underlying efficiency wage theories (which also typically generate equilibrium unemployment). But we expect that firms choosing to increase wages on this kind of basis do so because they expect the salary increase to be worth the cost. I'm a bit curious why we'd expect those results to hold where employers are forced to pay more, but I'll perhaps have to look up his book this summer.


* I do hesitate a bit here though. I remember when the University set up a sustainability framing for a change in how they handled departmental waste collection. Instead of cleaning staff going into each office every night and emptying the bin, academic staff were asked to bring their trash and recycling bins to a central waste bin on each floor and those central bins would be collected every night. Maybe you could make some kind of sustainability case for it where staff who hate the cost of shuffling off doing a trash run every night might instead produce less waste. I'm not sure I believe it. But I am pretty sure they were able to cut the costs of building cleaning because of the policy change. At a minute per room for unlocking, collection, and relocking... well, it adds up. So there's often a margin, even where we don't expect there to be one.

Cupcake Freedom

Campbell Live tonight reported on Auckland Council's shutting down of some kids' cupcake stands at a local mall. Because the mall ran the kids' day once a month, according to the story, it then counted as a commercial market. And so the kids had to produce their food in a commercial kitchen.

I initially thought that the new Food Bill was to blame. It was introduced back in 2010 and got a fair bit of push-back in early 2012. But that cannot be the case. Submissions on the Bill closed only a month ago. Since I had never heard of Councils in NZ hitting kid bake stands like this, and as Auckland was blaming national regulations, I incorrectly assumed that the Food Bill had to have gone through. And so I apologise for blaming the Food Bill and its sponsor, Kate Wilkinson.

I still would very much like to know whether there is basis in existing national regulations for Auckland's rather heavyhanded actions in this case. Either the regulation has existed and hasn't been enforced elsewhere, the regulations have changed, or Auckland's interpretation is incorrect.

The original post follows below. It is based on an incorrect premise. I have run a strikethrough tag through it so that it's obvious that it ought not be relied upon.

Update: And I thank @mellopuffy for the correction.
Update 2: More detail here.

Kate Wilkinson promised us this wouldn't happen. And yet here we are.

Her op-ed of January 2012 sought to put to rest petitioner fears that the Food Safety Bill would shut down a lot of small scale entrepreneurship. She wrote:

Those behind the online petition opposing the bill claim it will seriously impede initiatives like community gardens, food co-ops, heritage seed banks, farmers' markets and roadside fruit and vegetable stalls. This is nonsense.

At most, people involved in such activity, where it presents a low risk, will be provided with information.

Events such as sausage sizzles, home bake sales, and other fundraising events will still occur as they always have.The bill is intended to protect, not harm such events, as the bill's critics would have us believe.

Bartering of food is currently included in the Food Act 1981. The proposed bill simply clarifies that those bartering with food, as part of a food business, must ensure it is safe and suitable.

Many small-scale bartering activities will only be subject to food handler guidance – for example, those bartering home-grown produce for goods and services. However, larger scale bartering of food exists and it is appropriate that those enterprises are subjected to the same risk-based measures as those selling their food products in a more conventional manner.

I wrote:

So is the new regime worth the cost? That depends on the compliance costs that will be faced by small and mid-sized traders. Wilkinson assures us that small traders won't face onerous burdens, but I'd really prefer seeing proper analysis of the Bill from someone like Otago's Andrew Geddis. And we have to keep in mind that a substantial proportion of the costs Wilkinson cites might actually be voluntary choices consumers are making that, on lucky draws, yield tasty goodness any diminution of which consequent to regulation ought be counted against the Bill's possible health benefits. Banning me and others like me from having my hamburgers medium-rare might save the health system a bit, but it'll certainly cost me some utils. Equally bad is what a big fixed-cost regime would do to food startups. I really hope that the legislation isn't as costly on those two fronts as some folks fear; I'd love to see independent legal analysis.

So: I was worried about compliance costs on small traders; Wilkinson promised there was nothing to worry about.

Tonight's Campbell Live has Auckland Council shutting down a mall's efforts to support young entrepreneurs. Once a month, they let the kiddies set up little stands selling their cupcakes. Council says that they're forced to shut it down because of Kate Wilkinson's Food Safety Bill. Hit the link to watch the video.

Kate, if you were serious about what you wrote in 2012, you will fix this, right? If your op-ed was right, Auckland shouldn't be interpreting your legislation this way. Please tell them, and tell every other Council, that they are not required to do what Auckland is doing. The problem is Auckland's interpretation, right? Because when I tweet stories from the States about Council health people knocking over kids' lemonade stands, I usually append an #emigrate tag.

Surely here in New Zealand we're not going to need a cupcake equivalent of this?