Reader mailbag: censorship edition

Loyal reader Lliam Munro sends me the following:

Hi, Eric.
I know you periodically blog about censorship so I thought I’d alert you to this in case you’d not seen it.

http://www.stuff.co.nz/business/industries/9018880/Retailer-fined-over-banned-movies 

I wondered what sort of movie would get banned in NZ so checked IMDB for the two films that generated the fine, which were Megan Is Missing and I Spit on Your Grave.

Without debating the artistic merits of the films, neither of which score very well on IMDB, I did think it noteworthy that one of the banned films Megan Is Missing, which is apparently a found footage film about two girls being murdered by a psycho they meet online, is endorsed by a father whose daughter was murdered by someone she met online and who has become an advocate for online safety.  He thinking it should be required viewing for teenage girls.

So, I thought it was interesting that in New Zealand, Fishpond are being fined $4,200 for providing access to a film that the father of a murdered daughter thinks could raise awareness of safe online behaviour.  Admittedly, by the sound of it, you’d be just as likely to scar your daughter for life, but I still found it noteworthy.

Cheers,
Lliam Munro

I'm not likely to watch either. But I hate that I can't watch either. This is entirely inside-the-asylum kind of stuff. How much better are we really than parts of Alabama that ban sex toys?

The Tiwai Point Subsidy

Matt and Paul have both covered the subsidy to Rio Tinto that facilitated a new contract between RT and Meridian Power. There is not a lot to say about the actual policy; Matt's "Urg" pretty much sums it up. But a few points about the politics of this are worth noting. 

1. There was nothing inherently wrong about the a long-term contract between Meridian and Rio Tinto at favourable rates. I believe that in the past transmission constraints meant that the opportunity cost of power delivered to Rio Tinto was not necessarily the wholesale price elsewhere on the grid. And I also understand that the smelter was drawing power fairly evenly throughout the day rather than mostly at times of peak demand. I stand to be corrected on both those points, and maybe Meridian negotiated poorly in the past, but, absent government subsidies in the past, these were normal commercial transactions that should not colour our opinion about the subsidy announced yesterday. That subsidy should be criticised on its own merits. 
2. It is hard to believe that the decision was not affected by the political capital the government has tied up in its asset sales programme. Again, however, that should not colour our opinions about the policy. The policy would not be any better if it were motivated by different objectives. 
3. Labour are totally on the right side on this one, but it is notable that Clatyon Cosgrove's reaction reported in this Stuff article, framed things entirely in terms of it using taxpayer's money to facilitate the partial sale of Meridian. It would be good to hear a clear statement from Labour that they are opposed to corporate welfare of any kind, and, if it were them, they would have just let Rio Tinto close down the smelter. As it stands, they might be saying that National paid a subsidy for the wrong reasons, but they would have done the same in order to protect jobs in Southland. I haven't seen the news coverage. Has anyone seen if a journalist has put this question to Labour? 

Earthquake-prone buildings

Owners of earthquake-prone buildings now have a bit more time to bring them up to spec. The owners are mad because they say it isn't long enough; people who experienced Christchurch are mad because buildings will still fall on people and kill them in another quake. They could both be right.

It is perfectly plausible that there are buildings that need never be compelled to be brought up to 33% of new building code. Imagine a building in the middle of nowhere, with no nearby pedestrian traffic, and occupied only by those who know about the risk or who are well-advised about it by a sign at the doorway. There is no reason for the government there to get involved, or at least no reason that comes from economics. People can trade off cost and beauty against risk - that's allowed. And so a national rule that forces the owner of such a building to make costly investments to bring it up to code imposes cost in excess of benefit. The owner either will sink money into the building where it isn't warranted, or he will demolish the building that he otherwise would prefer to keep.

On the other hand, imagine a building in downtown Wellington with an unreinforced masonry facade. Everyone in the building knows about the risk and accepts it in exchange for lower rental rates or enhanced amenities on other margins. And that's all fine. But passers-by on the sidewalk and buses driving by on the street have uncompensated risk forced upon them. While the owner will there rightly claim that it does not pass his cost-benefit analysis quickly to bring the building up to 33% of code, he is not accounting for the costs he is imposing, probabilistically, on every passer by. It can easily be the case that, when accounting for the risk of death he is imposing on each person walking past his building, upgrading the building or demolishing it would pass cost-benefit. But he does not care about the costs imposed on others. The new rule is too lax in this case.

What then is an optimal rule? We'd need some way of accounting for the true risk that a building imposes. That risk depends not only on structural features of the building but also on the building's surroundings. And it would be pretty hard for central government to be able to come up with a clean rule. As we saw in Christchurch after the September quake, City Council had a rule in place requiring the closure of footpaths adjacent to risky buildings; Council interpreted the rule in perverse ways. Instead of blocking busy Colombo Street, Council decided that the engineers must have meant that 605-613 Colombo imposed risk instead on tiny alleyway beside the building. And then the building fell on a bus and killed a bunch of people and left Ann Brower to work out the series of spectacular regulatory failures that led to her being the only survivor on that bus.

There's an easier way. Honestly, we do not know when another quake will come or which buildings will collapse. Engineers can put up widely varying assessments of the true structural risk imposed by a building. What do we do when faced with this kind of uncertainty? Impose a liability rule. Instead of giving building owners 15-20 years to get their buildings up to 33% of the new building code, give them five years to get an engineering assessment, to put a safety letter grade prominently at the door, and to get liability insurance. At the end of the five year period, have every building owner liable for damages for every person killed or injured if their building falls down on passers-by. There should not be liability for deaths and injuries incurred by persons inside the building: we can and do voluntarily assume some risks, and we should not prevent people from taking on those kinds of risks. But if your building falls down and squishes a bus, you should be liable for the deaths of each of the people inside of that bus.

The Ministry of Transport currently sets the Value of a Statistical Life in New Zealand at $3.77 million. That's arguably too low, but it's a great benchmark: arguing about $3.77 million versus the $5 million or so you'd get from a back-of-the-envelope application of revealed-preference measures from the United States to New Zealand, accounting for the income elasticity of safety preferences and differences in income across the two countries is second order. First order is getting a consistent benchmark across different regulatory and liability sectors.

A building owner potentially liable for $3.77 million in damages paid to the estates of those who his building kills will adequately take their interests into account in deciding whether to fix up his building. It would not be that hard to require that building owners carry insurance sufficient for paying such liability claims, or to prove assets sufficient for covering the potential liability. If you've got a building in the middle of nowhere with no passers-by, your insurance premiums will be very small. You then will make the optimal choice and not upgrade your building. If you've got a brick-facade building in downtown Wellington, you'll have to weigh up the costs of insurance against the cost of fixing the place up.

Right now, we are in the worst of all possible worlds. Building owners face neither liability for the risk their buildings impose on those outside their buildings, nor any sufficient regulatory regime to ensure that owners are making appropriate investments in ensuring that their buildings do not impose excessive risk on passers-by. This is why Wellington scares the hell out of me. It's pretty, and I love seeing the old buildings that we no longer have, but they terrify me. I have absolutely no confidence that even really rather dodgy buildings are getting the attention they deserve.

Were the Government to have any interest in implementing a regime such as that described above, I'd recommend one further change. Flip the heritage building regulations around such that heritage boards have zero regulatory power but instead get an annual budget. Owners of risky heritage buildings should be free to demolish them if that's what make sense, given the risk they impose and the cost of upgrading them. Heritage boards' main role should be the payment of annual stipends to owners of heritage buildings for the provision of heritage amenities. Give them a generous budget, funded partially by local Council, partially by central government, and with ample provision for voluntary donation from the public. Let them decide, within that budget, where they can do best by spending money. And then just let go of the rest.

I will absolutely hate saying "I freaking told you so" after Wellington gets a big quake in which unreinforced masonry winds up killing a bunch of people needlessly.

And, in anticipation of the likely critique: yes, I am here absolving building owners from liability for those who chose to be inside their buildings. But current policy absolves them of that liability for those both inside and outside.

Previously:

• In praise of liability
• Worst of both worlds
• VSL and earthquakes
• Heritage preservation

Underlying factors: conscientiousness edition

Linda Gottfredson shows that IQ perhaps explains a lot of the income-health gradient. If income and IQ are correlated, and if some minimal baseline cognitive capacity is needed to follow a doctor's orders (like scheduling multiple near-conflicting prescription schedules, for example), then we'd expect an income-health gradient even if there were zero direct effect of income on health.

While intelligence is important, so too is personality. And a new metastudy suggests that conscientiousness is particularly important. The abstract:

Personality may influence the risk of death, but the evidence remains inconsistent. We examined associations between personality traits of the five-factor model (extraversion, neuroticism, agreeableness, conscientiousness, and openness to experience) and the risk of death from all causes through individual-participant meta-analysis of 76,150 participants from 7 cohorts (the British Household Panel Survey, 2006-2009; the German Socio-Economic Panel Study, 2005-2010; the Household, Income and Labour Dynamics in Australia Survey, 2006-2010; the US Health and Retirement Study, 2006-2010; the Midlife in the United States Study, 1995-2004; and the Wisconsin Longitudinal Study's graduate and sibling samples, 1993-2009). During 444,770 person-years at risk, 3,947 participants (54.4% women) died (mean age at baseline = 50.9 years; mean follow-up = 5.9 years). Only low conscientiousness-reflecting low persistence, poor self-control, and lack of long-term planning-was associated with elevated mortality risk when taking into account age, sex, ethnicity/nationality, and all 5 personality traits. Individuals in the lowest tertile of conscientiousness had a 1.4 times higher risk of death (hazard ratio = 1.37, 95% confidence interval: 1.18, 1.58) compared with individuals in the top 2 tertiles. This association remained after further adjustment for health behaviors, marital status, and education. In conclusion, of the higher-order personality traits measured by the five-factor model, only conscientiousness appears to be related to mortality risk across populations.

So poor self-control and lack of long-term planning correlates with higher mortality risk.

Add this to the list of underlying variables that likely confound a whole lot of measured correlations between engaging in risky stuff and bad outcomes.

Cashing in the chips

There comes a point when you start wondering what the point of a small-l liberal party is if it won't step up when it could really make a difference.

Politics always involves compromises and trade-offs. Usually, no small party can really achieve much. You can get some policy concessions after the election, and especially for the kinds of policies that your partner kinda likes anyway but on which it doesn't really want to lead the charge. After that, things are set. You know you don't have the leverage to do much else, and reneging on your partner spoils your chances of getting minor gains in the next coalition arrangement.

But sometimes an issue comes up that speaks to your party's core values, that wasn't anticipated at the time of the coalition arrangement, and that's coming through on a very thin majority. Thin enough where a one-vote defection from the coalition could actually change the outcome.

New Zealand is updating the legislation around its spy agency, the GCSB. At the same time, it's considering legislation around telecommunications providers that would make it harder for New Zealanders to use strong encryption and impose burdens on New Zealand internet service providers to ensure that GCSB is able to hack into any communications channel.

I do not doubt that there were problems in the 2003 legislation and that a redraft was necessary. But surely there is no crisis so pressing that we cannot take the time to get this right. And it's important that we get this one right.

Supporters of the Bill assure me that the Bill actually strengthens oversight on the GCSB relative to the status quo. The Law Society seems to disagree, and everyone who knows anything about tech seems to be screaming blue murder. I weigh those pretty heavily. If the actual deal gives more power to GCSB with more nominal oversight, I'm pretty sure that's a bad deal.

But even if the Bill does strengthen things relative to 2003, it also forecloses the option to come up with something better. Sometimes, the best should be the enemy of the merely ok. At the same time as New Zealand is moving to expand the powers available to the GCSB, we are getting daily updates on just how bad things are in the US with the NSA. There's growing pressure there for reform. Today we read that the NSA may have been funneling tips over to DEA about drug smugglers. It's scandalous there, but this is the exact kind of capability that John Key wants to give to our GCSB: he wants to make GCSB's spying apparatus legally available to the police and to the SIS for law enforcement purposes, supposedly to save on some duplication of capacity costs that have never anywhere been specified. There's an oversight procedure for it, but it isn't a normal limited judicial warrant for specific specified purpose and limited duration. We're also hearing reports from the UK that the NSA and the UK have been using their part of the partnership to route around each country's regulations against spying on its own citizens. The looser regs in the UK were valued by the NSA. I've been assured by someone who should know that this sort of thing doesn't happen here, but we were also assured it didn't happen in the UK.

The time pressure seems to have come from the Government's desire to retrospectively legalise the GCSB's illegal surveillance of Kim Dotcom to cleanse itself of that embarrassment. When I complain about this stuff to people I know in Wellington, they just can't see what the big deal is. We trust the government in New Zealand, the GCSB wouldn't do anything nasty, so what's the issue?

Well, we can't simply run a spy agency on trust. And we especially can't run it on trust when the Executive here seems determined to prove that they view journalists as the enemy. They've built such a culture within Parliamentary Services that folks there just automatically hand over reporters' phone records over to inquiries. I doubt that the Prime Minister's office directed them to do it, but look at the culture that our Prime Minister has encouraged within GCSB and Parliamentary Services and NZDF. They bend over backwards to do that which might please, legal or not. Those on the right who oppose this legislation like to point out that we might not like what happens when Labour gets its hands on a more powerful GCSB; I don't like it with John Key running it either!

ACT emphasizes the importance of law and order. They're often right to do so. But the rule of law requires that the agents of law enforcement also be bounded in their powers lest they become tyrants.

A few patches to the legislation via a nullity preamble seem inadequate to the task here. The whole thing needs to be re-done, ground up, with substantial input from the New Zealand tech community. Instead of aiming for a good-enough patch, set up something we can be proud of. If the 2003 legislation is flawed, we've lived with it for a decade. Another six months isn't a big deal. The lost opportunity is a big deal.

What's the lost opportunity? In the midst of the biggest and most salient crisis of confidence in American cloud computing courtesy of the NSA disclosures, we seem to determined to absolutely kill any chance that hosts could wish to relocate to New Zealand and base services here. The American tech sector seemed to have a bit of a warm spot for New Zealand. We've got a great base foundation: decent patent law without software patents, free trade, easy migration for skilled individuals, and a time zone that makes working with California pretty easy. It's a great place to live with decent civil liberties. There's a civil libertarianism among the American tech community that makes New Zealand a pretty appealing place.

When we should be throwing out the welcome mat, putting up legislation demonstrating that while we take international security concerns seriously, we also put strict controls on our spy agencies such that NSA-style "we spy on everybody, all the time" could never ever happen here, we instead push hard to make our security apparatus at least as bad as that in the US. It's nuts.

I know that ACT's leader, John Banks, is far more conservative than liberal. But parts of the party, and especially the party's youth wing, have been able to pull him in liberal directions before.

I know there are people in ACT who'd say that the legislation isn't as bad as is made out and that the critics don't understand the law. I know I don't understand the law that well, and especially the incremental changes relative to 2003. For that, I look to the Law Society and to lawyers who care about civil liberties. They don't seem to think that the legislation improves things. But even if they were wrong and the governing coalition were right that nobody except for the governing coalition understands the law, that doesn't much help things where the very strong perception is that the legislation basically is a way of letting the NSA spy on everybody in New Zealand. What's the point of a tech firm's relocating to NZ if they believe that we're basically part of the NSA? Fix it from the ground up, with substantive input from the tech community, so that the legislation both protects civil liberties and is seen to do so.

If the strategic thought within ACT is that sticking with National gets them support to come back in 2014, just look at the betting markets. ACT is already predicted to die in the next election. There's a 61% chance that ACT returns zero electorate MPs in the next election. Unless they move from an expected 1.2% vote share to a 5% vote share, the Party has greater than a 60% chance of dying in 2014.

If you're going to die in 2014 anyway, jump on this grenade while you're doing it. Die in a blaze of liberal glory, killing the GCSB legislation at third reading and forcing them to take the whole thing back to the drawing board. It might make it harder to get into coalition with National next time round if you do get back, but it could also start drawing in votes from that part of the electorate that cares about civil rights and tech freedom but shrinks in horror from the thought of Russel Norman being anywhere near the Treasury benches.

If you can't do that, please have the courtesy to actually die in 2014 so that a liberal party might emerge. Lead, follow, or get out of the way, they say. Absent changes, ACT does more to prevent the emergence of a liberal party than to advance liberal values. GCSB and TICS is a great place to start if you've any intentions of leading.

Previously:

• Staying outside the Asylum
• Make your list
• GCSB Redux
• Is ACT liberal?
• The depressing state of New Zealand politics
• ACT Redux

Related:

• Human Rights Commission on GCSB, TICS, and surveillance
• TechLiberty NZ on GCSB and TICS; submission on TICS.
• John Banks on the GCSB legislation. Summary: the 2003 legislation was bad, we had to do something. This is something, so we support it.
• NZ Law Society on GCSB and on TICS

Creighton on individual choice

I'm going to have to finally start paying for The Australian if Adam Crieghton keeps coming out with columns like this. 

German doctors were the first to discover a link between tobacco smoking and cancer in the 1930s. National Socialism declared cancer "the number one enemy". Along with a passion for the natural environment, the Fuhrer hated smoking -- a relic of the sort of decadent liberal lifestyle that undermined the health of the "volk".

In measures foreshadowing Australia's own "pioneering" efforts to reduce smoking, Nazi Germany cracked down on cigarette advertising, banned smoking at work, in government offices, and ultimately on buses and trains too.

The Reich itself exhorted Germans to change: "Food is not a private matter" and "You have a duty to be healthy" blared from government placards.

Today's healthy living crusaders, roused into excitement by any tax or ban that might ostensibly improve people's health, most obviously do not adhere to the other heinous tenets of National Socialism. But they do share its bizarre and sometimes shrill desire to curtail others' eating and leisure habits, supposedly in the interests of the individuals concerned and the greater public good.

"Everywhere in the West public health doctrine has drifted from public-good concerns, such as contagious diseases, toward a frontal attack on individual choices and politically incorrect lifestyles," writes Canadian economics professor Pierre Lemieux of University of Quebec.

Hitler's Institute for Tobacco Hazards Research helped calculate the "national economic cost of smoking". But its figures were probably as fraudulent as those routinely concocted today.

I know about Godwin's Law. But counting "reduced productivity" from smoking as a social cost makes most sense where the underlying model is that you belong to the State.

I'll quibble with a couple more minor points. 

First, Creighton notes that economists sometimes recommend tobacco or alcohol excise taxes because consumption is relatively insensitive to price. That's one read of the general Ramsey optimal-tax literature. But I'm pretty sure that the proper reading of Ramsey is that, because we cannot tax leisure, optimal tax policy will tax more heavily those things more complementary to leisure than to labour. It's less the absolute price elasticity of demand that matters than the cross-elasticity with labour and leisure choices. 

Second, Creighton suggests that government enthusiasm for taxing tobacco rather than alcohol despite that nasty drunks impose more costs on others than do nasty smokers stems from pure classicism and elitism. That could be the case - we tend to impose excise on products imposing fiscal externalities that also draw social disapproval. But I would note that light to moderate drinkers are most sensitive to price. They impose little to no harm on others. And they even have reduced overall mortality rates. Heavy drinkers are rather less responsive to prices. Hiking alcohol taxes does more to turn moderate drinkers into light drinkers than it does to turn heavy drinkers into moderate drinkers. If anything, the evidence suggests that heavy drinkers save up for a few binge events rather than curb consumption from the peaks: they drink less on low-drinking days rather than cutting back on their worst excesses. Prices are blunt instruments for dealing with alcohol related harm in the same way that petrol excise is a blunt instrument for dealing with speed-related car crashes.

Update: In comments below, a few folks have gone a bit farther than I would in opposing tobacco control policy. Rather than get involved there, I'll just put a statement up here.

First, there is no chance that there is any slippery slope connecting tobacco control policy to eugenics or other parts of the Nazi programme.

However, I agree with DragonFly in comments below that there is an underlying mindset that is common to both movements. To view it as a cost to the State that you make choices that burden the State through lower tax revenues requires that, deep down, you think we're all kinda owned by the State. It's the view that says we have a responsibility not to ourselves, but to the State, to choose more healthy behaviours even if we would prefer to consume less health and more fun. It's the vision that says there's one right way of living, irrespective of your own hopes and dreams. To me, that's the vision of human nature that was given fullest policy fruition in Nazi Germany. I do not think that public health paternalism in any way leads us to Nazi Germany. I do think that it will continue pushing on every margin of socially disapproved behaviours that provide individuals, primarily from the lower classes, with pleasure in exchange for risk. Tobacco, alcohol, fast food, soda.

But it's not a view that started with them. You can see it in Thomas Carlyle's view that blacks could never be made fully human unless they had the benefit of slaveowners to guide them towards work with the lash. There's a right way of living, and we'll force you to it with the lash if necessary.

Economics was called the Dismal Science by Thomas Carlyle because, in his view, we would deny blacks the opportunity to become human through the use of the lash. Mill's opposition to Carlyle was grounded as much in his view that slavery was repugnant as in his view that we should all be treated as equally capable of choosing our own vision of the good life. Perhaps comprehensive public education could help us in making better choices as we ourselves see things, or for teaching us about the higher-order pleasures. But fundamentally, the good is subjective and individual. And if I, with full knowledge, choose to consume less health and more fun, then it is too great an infringement on individual liberty to compel me to choose otherwise. Economics starts here: methodological individualism. There is no good outside of what we believe to be good, no value that exists outside the system. And where we disagree on what is good, and where we are not harming any other in our personal pursuit of that good, there is nobody who can stand above us and tell us we have wrongly chosen.

Affordable Housing: Five Basic Principles

What is it about housing policy that leads to people forgetting basic economic principles? Following on from the extraordinary Labour Party policy that Matt and I jumped onat the start of the week, we had this blog post from Susan Guthrie, and thispress release from Labour. Matt has commented expertly on these here and here, and I don't want to beat a dead horse. But in all the discussion about housing in the blogsphere, a few basic principles keep being ignored, so I thought I would finish what has turned out to be housing week in the blogsphere by listing those prinicples in one place: 

1. The price of housing depends on the supply of available houses and the number of people wanting to live in houses coupled with their willingness to pay for housing. The price of houses depends on the price of housing today and the expected price in the future. Policies that affect who ownshouses and the incentive to purchase existing houses as an investment are sideshows unless they change the underlying stock or the underlying demand for housing. 
2. Speculation works by buying assets when their price is expected to rise and selling when the price is expected to fall, thus reducing price volatility. Speculative investment that increasesvolatility in house prices is investment that loses money. If such speculation were coming from overseas, it would be a source of income to New Zealand.
3. Speculation that leads to an increase in house prices and makes money, is only profitable because underlying factors are operating to push prices up even further in the future. Any policy that claims to be able to reduce house-price inflation by restricting speculative investment, is a policy that is an open admission of having no solution to the long-term problem.  
4. Policy can reduce the demand for housing or for houses by imposing taxes, but that can only lead to a reduction in the before-tax price not to the after-tax price and hence is not a route to making housing more affordable.
5. More specifically, there is a tax advantages to owner-occupied housing over renting. But to the extent that has any effect, it leads to too much investment in creating houses and hence to lower house prices than would otherwise be the case. There may be arguments for eliminating the tax preference, but affordability is not one of them. 

It would be nice if the main-stream media were to ask questions of politicians rather than just disseminating their press releases. Asking them to explain their policy proposals in light of these basic ECON-100 principles would be a good start.