The slippery slope is real

July 11th, 2014 at 1:00 pm by David Farrar

Eric Crampton blogs:

So, the playbook over the last 30-40 years or so: set minor policy changes every few years that work incrementally to de-normalise smoking and tobacco. Restrict use in some public places that seem like protection of non-smokers at first, then extend it outwards not to protect non-smokers, but to stigmatise smokers. Eventually smokers are so marginalised that a full ban becomes politically palatable. First you de-normalise, then further regulate, then ban. And, at every step, deny that the next step’s already planned. Until it’s too late to matter.

Now, if you follow alcohol policy, how often have you heard this one: “Alcohol is no ordinary commodity”? Or, that advertising, availability at some event, shops with visible signage, or brand sponsorship normalise alcohol consumption and so should be restricted or banned? There’s a lot of focus on making normal alcohol consumption not seem normal. There might be a reason for that.

A lot of these policy documents will draw the parallel to tobacco before claiming that, unlike in the case of tobacco, they’re just trying to hit heavy or harmful consumption and so full-on tobacco-style restrictions aren’t needed. But every year, we move further through the list of tobacco controls that the anti-alcohol folks want applied to alcohol too.

Richard Edwards’s post helps show that we’re not building strawmen when we warn about slippery slopes. There’s a direct mechanism in which each regulation makes the marginal political cost of the next one a bit smaller, helping to facilitate it. And there’s pretty clearly a planned effort to push through the incremental steps on the way to the end goals: each makes the next seem less radical. Slippery slopes are only logical fallacies if there aren’t these kinds of mechanisms. 

They want to ban smoking, ban sugar and inevitably ban alcohol. It is a slippery slope, and we ignore it at our peril.

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Crampton on alcohol prices

April 30th, 2014 at 12:00 pm by David Farrar

Eric Crampton blogs:

Imagine that hazardous drinkers really really cared about the price of alcohol. If you increased the price of alcohol just a little bit, they’d stop drinking harmfully. Imagine further that moderate drinkers didn’t respond very much to prices: what does it matter to the rich Chardonnay-sipping set if a bottle is $8 or $40? If that were the true state of the world, we would have a very simple solution to alcohol problems: hike excise taxes. Harmful drinkers would stop drinking and would stop doing alcohol-related harmful things; moderate drinkers would pay more but that would just be tax revenue for the government. Since they wouldn’t change their consumption by very much, deadweight costs would be pretty small relative to the harms avoided. Yay taxes!

But is the assumption that heavy drinkers are more price response true?

Unfortunately, the world don’t quite look like that. Our best evidence on it remains Wagenaar’s metastudyshowing that heavy drinkers respond to a 10% price hike by reducing consumption by 2.8%; average consumption drops by 4.4% with the same price increase. Moderate drinkers respond more to price increases than do heavy drinkers.

The answer is no.

Enter the NZ Government report on excise and minimum pricing. Fortunately, the Minister has more sense than her Ministry and hasn’t gone ahead with minimum pricing; hopefully, she’s not looking at excise. What’s the problem with the report? They started by assuming that heavy drinkers are more responsive to prices than are moderate drinkers.

So why would you assume something that is not backed by the evidence?

And they know it’s wrong. Here, at Table 5, they show the general consensus of the international literature: heavy drinkers don’t respond to prices nearly as strongly as do moderate drinkers. …

Bottom line: heavy drinkers are roughly half as responsive to prices as are moderate drinkers. That’s page 20. And they cite Byrnes accurately at page 21.

So they know their assumptions are wrong, yet they still used them?

But then what do they go and do? They started by trying to get SHORE to estimate NZ elasticities, but something went wrong there: the elasticities were completely out of whack with reality. Reading between the lines at page 25, it looks like SHORE was using the increase in purchases of products on special at supermarkets as part of its price elasticity estimation, and that just ain’t right. If you switch brands because something’s on special and buy more of it than you otherwise would have, that isn’t the same effect as you’d expect for across-the-board price changes you get with excise or minimum pricing.

Way different things. I might buy more Coke rather than Pepsi when Coke is on sale. But that doesn’t mean if the price of both Coke and Pepsi increases that I’ll buy less overall.

The report agrees the NZ figures are wrong:

“It was decided that the significant reductions in consumption estimated using NZ elasticity estimates are not a realistic representation of what is likely to happen in reality and are contrary to all international evidence of the responsiveness of alcohol consumers to changes in price.”

Yet …

Rather than discard the completely nuts NZ numbers, they let those figures stand and added alternative numbers as robustness checks. Those big headline estimates you’ve been seeing in the papers about just how awesome excise is? They’re based on the numbers that, according to the report, “are not a realistic representation in reality and are contrary to all international evidence of the responsiveness of alcohol consumers to changes in price.

Example? A 133% excise hike means about a 40% increase in the cost of low-priced beer, a 44% increase in the cost of low-priced wine, a 45% increase in the cost of low-priced RTDs, and a 103% increase in the price of low-cost spirits. The heavy drinkers SHORE estimated a 61% reduction in harmful consumers’ consumption with that tax hike. So they’re saying that harmful consumers are more than unit elastic. That’s just not right.

I’m glad we have someone who can analyse these reports, and point out the errors in them. we run the risk of flawed decisions being made on the basis of flawed analysis.

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Competition helps all

January 10th, 2014 at 4:00 pm by David Farrar

Eric Crampton writes:

A few years ago, Jerry Hausman showed that Wal-Mart does a lot to benefit even consumers who don’t shop there. When a Wal-Mart opens, competitor local supermarkets cut their prices to keep customers. And poor customers reap most of the benefits

Figlio and Hart, in the latest AEJ: Applied Economics, show a similar effect with school vouchersAn ungated version is here.

Suppose your worry about school vouchers is that low social capital parents’ stick with a local underperforming school while kids whose parents have better social capital all flee with their vouchers to the better private schools. And suppose further that you care way more about the potential losses to the former than about the gains for the latter. You might then oppose voucher systems.

Figlio and Hart show that public schools facing competitive pressure from private schools under a new voucher system provided stronger student score improvements. All that concern about kids left behind as the private schools cream off the best voucher kids? Not much of an issue if the public schools facing the competitive pressures perform better as consequence. They find the biggest positive effects in public schools facing strong financial incentives to retain low-income students.

There has also been studies showing that charter schools not only improve the performance of students at those schools, but neighbouring public schools improve their performance also.

For some strange reason, this is seen as a bad thing because it clashes with an ideology that competition is bad.

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A way to reduce housing costs

October 24th, 2013 at 7:00 am by David Farrar

The Government is keen to reduce housing costs. Eric Crampton has a way they can do this:

Donal Curtin pointed to some less-than-helpful government action that helps increase construction costs. New Zealand initiated anti-dumping action against Chinese wire nails, Malaysian galvanised wire, and Thai plasterboard, among other things. And so we have a specific tariff helping to keep prices up for plasterboard. While we’re trying to rebuild after an earthquake.

So one part of central government is all mad about excessive construction costs. Another part of central government penalises foreigners for selling us construction materials cheaply.

It’s a fair point. If foreigners want to dump cheap materials on us, let’s take advantage of it!

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Sky and copyright and Netflix

October 3rd, 2013 at 10:00 am by David Farrar

Eric Crampton blogs:

It seems that the lawyers at Sky didn’t like my post on Netflix. They’ve not been in touch with me about it, nor did they get in touch with the folks at SciBlogs about it when I syndicated it there.

But late last week, the National Business Review asked if they could run it as part of their Weekend Edition. I agreed, as I always do. Shortly after it went up at NBR, I received an email from NBR’s Head of Digital saying that they’d had to pull the piece after a legal threat from Sky TV. Sky’s lawyer wanted excised from the article the instructions on how to access Netflix from New Zealand. In my piece, I linked to an Australian website providing instructions on how to access Netflix. I also included a postscript noting that Hola seemed to work very well.

So it is there anything wrong with telling people how to get around geoblocking?

First, note that New Zealand generally allows “parallel importation”. The New Zealand Government, in general, does not think that it is its job to enforce whatever exclusive dealing arrangements that some overseas manufacturer wants to enter into with a domestic distributor. There is a minor exemption on DVDs and films where you cannot import films for commercial distribution for a period of five months from the date that the film is first made available to the public. This lets the theatres get a run where international windowing delays release here relative to the US. However, the ban specifically allows import of legitimate copies for personal non-commercial use. It would be reasonable to read accessing Netflix for personal use as falling into this category, though note that I am not a lawyer. I discussed the temporary ban here. …

But, by my read of 226b, the variety of mechanisms described at this Australian site simply work to circumvent a system controlling geographic market segmentation by preventing playback in New Zealand of a non-infringing copy of a work. Netflix’s catalogue of films and TV shows in the US is non-infringing in exactly the same way that a DVD on sale in the US is non-infringing. And buying a DVD there, bringing it here, and watching it on a region-free DVD player should be as protected as subscribing to Netflix via something like Hola or Unblock-us. Maybe it violates the Netflix terms of service in the US, and Netflix could be justified in cancelling somebody’s account if they deemed such use to be in violation of their Terms of Service. I expect that bringing a Region 1 DVD here and watching it on a region-free player might violate the DVD’s Terms of Service as well. But a take-down notice based simply on the use of the word Hola or a simple description stating that installing Hola was really easy? Again, I’m not a lawyer; hopefully I won’t have to consult one. I’ll rattle a tip-jar if I do and if it winds up being at all pricey.

Getting around geoblocking actually allows you to pay for a copyrighted work. I think we should resist all geoblocking. If you want less piracy, then allow us to buy the content we want.

Any lawyers have a view on whether Eric’s original blog post does fall foul of the Copyright Act?

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Russel Norman thinks tax is not a burden!

September 19th, 2013 at 11:00 am by David Farrar

This is incredible and should ring warning bells about the attitude of a Government with the Greens in it to taxation.

 

Its horrific that Dr Norman thinks tax is not a burden, and even worse calling it so is right wing.

When the state takes a large proportion of your income, of course it is a fucking burden.  If they didn’t do it, you’d have less more money.

If tax wasn’t a burden, then hundreds of thousands of people would pay extra tax voluntarily. Does Dr Norman wake up every morning and send a donation in to the IRD?

Plus the stupidity of Norman’s comments are highlighted by the fact that he got owned on Twitter by Gareth Richards who pointed out that Dr Norman himself had in the past used the term himself. So in fact Dr Norman was just attacking poor civil servants for using the same term as he had used. He should apologise to the Treasury officials he maligned.

Norman tried to defend his new found view that tax is not a burden on the basis the Government spends tax revenues on some good things. Eric Crampton points out:

Taxes are a bad, public services are a good. Saying the first doesn’t mean denying the second.

Again I’m horrified that we may have a senior economic minister in a future government who does not think taxation is a burden on hard working New Zealanders who fund the tax system. It reflects a neo-marxist view I guess that all income is really the property of the state’s, and we should be grateful they allow us to keep some of it.

Also Eric schools Dr Norman on some basic economics:

More importantly, economists use the word ‘burden’ in a particular way. A few useful notes about Principles-level (maybe intermediate) economics for someone who thinks himself qualified to be finance minister:

‘Burden’ measures the total cost of a tax. The ‘excess burden’ is the amount by which the cost of a tax exceeds the amount collected. Treasury tends to reckon that excess burden is around 20%: it costs us about $1.20 to raise $1.00 in tax. The $1.00 raised is a transfer from the public to the government; the $0.20 is pure loss due to distortions in economic activity consequent to increases in our current mix of taxes.

Also:

Russel Norman suggests only “right wing” economists talk about tax burden. Here is a JSTOR search on “tax burden”. There are 61 pages of search results with 100 results per page. Item number 177 on a date-sorted list is famous Right Wing Economist John Maynard Keynes discussing the Colwyn Report on Natinoal Debt and Taxation. Item 398 is rabid right-winger Nicholas Kaldor’s call for wage subsidies to reduce unemployment (1936).

Burden is just the term used by economists to describe the cost of the tax and to help sort out the difference between statutory and economic incidence. Like “While X writes the cheque to IRD, the burden of the tax falls on Y and Z.” That’s it. It’s the standard term used in the main texts to describe this thing. Richard Musgrave (centre, maybe centre-left) uses it. James Buchanan (right) uses it. Pick a random public finance text, you’ll find “tax burden” or “excess burden” somewhere in it.

Then on Twitter Dr Norman goes further rejecting both the labels burden and distortionary for taxes!

My challenge to all those who agree with Dr Norman that tax is not a burden, to write out larges voluntary cheques today to the IRD. That means it is no extra burden on you, and reduces the burden on the rest of us.

UPDATE: Russel has actually referred to the tax burden in Parliament, as has Metiria Turei. This reinforces that Dr Norman should apologise to the Treasury officials for his attack on them for using the exact same language both Green co-leaders have used in the past.

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Testable hypotheses

June 7th, 2013 at 11:00 am by David Farrar

Eric Crampton blogs:

In the futile hope that maybe, just maybe, folks’ views about welfare policy might just stand to be informed by data, here are a few testable hypotheses I’ve seen floating around. They posit things that are knowable, and I’m sure data exists to resolve things. Let’s walk through a few of them.

First, how do poor people use money? I tend to say we ought to just give money to poor people if we want to make poor people better off. Other folks think that they’ll just waste it on booze and cigarettes rather than helping their kids. I don’t discount that that’s also possible; it’s an empirical question.

Now why does this matter? If you think that parents will waste money given them, you might prefer in-kind benefits provided directly to the children of poor parents rather than cash transfers. School breakfast programmes can fall into that category, despite that they’re rather ineffective and largely go towards feeding kids who would have been fed anyway. I think that some of the support for wrecking the GST by exempting merit goods also comes from this kind of view, though I think this rather misguided: vouchers for merit goods could be a rather less ruinous way of achieving the desired end.

So, the test. Get household consumption survey data, look for some shock to benefit payments, and check the effects on different consumption categories. If extra money going to poor households disproportionately increases consumption of lotto tickets and booze, then the paternalists who want to make sure that money given to the poor is used for particular things are right in wishing for more in-kind benefits; if not, then the paternalists should back down on such assertions.

I can’t imagine that this empirical test has not been done by somebody somewhere; I just don’t know the results.

It would be interesting data. I don’t know if there would be data for NZ. There hasn’t been any real change to benefit levels since 1991, and I suspect that changes to benefit levels often occur at the same time as other changes – so overall consumption data may have multiple factors changing it.

But the next one may be testable.

Second, “can’t feed ‘em, don’t breed ‘em”. Twitter and the NZ blogs have a bunch of folks yelling at each other about whether the main problem in child poverty stems from poor people’s unwillingness to engage the prudential constraint or whether it’s bad luck. Those on the right note that if poor people stopped having kids they couldn’t afford, then child poverty would be less of an issue. People on the left instead remind those on the right that birth control can fail and that people in good financial circumstances can fall on hard times for reasons outside of their control and after they’ve set their family size.

So, a test. Start with DPB numbers. What is the current fertility rate of women receiving the Domestic Purposes Benefit, and how does it compare to the fertility rate of women of similar age and marital status who are not receiving government support for the raising of children? If the fertility rate among women on the Domestic Purposes Benefit is roughly what we would expect given known rates of contraception failure, then score a point for the left. If women on government support are instead choosing to have more children while in poverty, then score a point for the right. I would bet that the data shows rather more childbearing than would be expected from contraception failure alone, but less than the fertility rates among similar-aged women not on the DPB, but I’ve not seen the data.

This data should exist, and be testable. Anyone know if it has been tested anywhere? What is the fertility rate of women on the DPB and women not on the DPB?

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Food in schools

May 17th, 2013 at 10:00 am by David Farrar

Eric Crampton blogs:

A few months ago, Social Service Providers Aotearoa asked me to review the literature on school breakfast programmes and provide an assessment of whether public funding of school breakfast programmes offered value for money. I spoke on the issue in Wellington and in Christchurch in February. As the government seems to be looking at the Mana Party’s proposals around food in schools, it seems worth posting things here as summary.

I was only looking at school breakfast programmes, and so I can’t here comment on school lunch programmes. I’m not sure why we’d expect results to vary greatly, but it’s worth having the caveat.

Anyway, on my best read of the literature, it’s hard to make a case for that we’d get any great benefit from the programmes. Rather, we often find that they don’t even increase the odds that kids eat breakfast at all. Many shift breakfast from at-home to at-school, but among those who hadn’t bothered with breakfast before the programme, not many wind up starting when schools provide it. You can then get kids reporting that they’re less hungry as consequence of the programmes, but it’s awfully hard to reject that the main thing going on is that kids are eating at 9 at school instead of at 7 at home and are consequently less hungry when asked at 11.

This is what tends to happen with any programme or subsidy that is not targeted.

If you (for example) make medical insurance tax deductible, it doesn’t tend to increase the number of people with medical insusrance. It just allows fairly well off people to pay less tax.

Very few kids don’t have breakfast because their parents can’t afford one. They cost very very little if done at home. By comparison, they cost a lot if done centrally.

A legislated requirement for the Government to provide breakfasts for all school children is a bad way to try and solve the problem of kinds turning up at school unfed.

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The alcohol crisis

February 26th, 2013 at 7:07 am by David Farrar

Eric Crampton blogs on the alcohol crisis:

The volume of alcoholic beverage available for consumption in New Zealand fell 3.3 percent in 2012, Statistics New Zealand said today. The decrease was due to a fall in the volume of beer, down 20 million litres. This fall was partly offset by a 4.3 million litre rise in the volume of wine.
“Although the volume of alcoholic beverages available was down more than 3.0 percent, the amount of pure alcohol fell only 0.6 percent,” industry and labour statistics manager Louise Holmes-Oliver said. “This was due to change in the types of beverages available.”
An increase in the volume of higher-alcohol beverages such as wine, spirits, and spirit-based drinks accounts for the smaller fall in pure alcohol available. The volume of high-alcohol beer (over 5.0 percent) also increased. In contrast, all other beer categories available for consumption have decreased.
The volume of pure alcohol available for consumption per person aged 15 years and over fell 1.7 percent, to 9.3 litres in 2012.
But all the public health lobbyists and the Opposition have been claiming we have an alcohol crisis in New Zealand, and the price of alcohol must go up to stop ever-increasing consumption levels.
Since the alcohol laws were liberalised in 1989, the average amount of alcohol available for consumption has dropped by around a litre per capita.
I note the headline in the Dom Post is:
RTD alcohol availability on the rise
This is instead of a headline about alcohol availability drops.
Although the volume of alcohol available for consumption fell 3.3 per cent last year, ready-to-drink (RTD) spirit-based drinks are still on the rise.
By how much?
Latest Statistics New Zealand figures show pre-mixed RTDs were up 78,000 litres, rising 0.1 per cent to 62 million litres.
By 0.1%!! Shock, horror. As the population grew by more than 0.1% it is in fact a per capita decrease.
The overall downturn in alcohol available for consumption was due to a fall in the volume of beer, which dropped 20 million litres, a decline partly offset by a 4.3 million litre rise in the volume of wine.
Yet no headlines about wine consumption. The media often have double standards. Wine consumption is seen as good, RTD consumption as bad. Gambling on Lotto is good and celebrated and gambling on pokies is evil and destructive.
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Coroner recommendations

February 18th, 2013 at 3:00 pm by David Farrar

Eric Crampton blogs a list of recent Coronial recommendations, including:

The problem we have is Coroners only look at how to reduce deaths. They seem to often miss any requirement for balance such as whether their recommendations are practical or affordable – or if they may have undesirable consequences.

Lucy at Cycling Auckland takes issue with the last recommendation:

The Coroner made two recommendations, both of which I feel quite strongly would not help to improve cycling safety. Irritatingly, neither of them seem very relevant to the actual accident he investigated.

First, as mentioned in the media, he recommended that the wearing of hi viz should be made mandatory for all cyclists because he saw it as a “no-brainer.” He doesn’t present any evidence to support this view.

This recommendation seems oddly unrelated to the case, given that the crash happened at 5.20 pm when it was just getting dark and Stephen Fitzgerald was wearing both reflective hi viz stripes and functioning lights.

So it is not even relevant to this case – but the Coroner just thought it was a good idea. It isn’t.

The problem with both of these recommendations, in my opinion, is that while they would probably make individual cyclists safer if they followed them (although it’s arguable in the case of hi viz, because there is some evidence that drivers give cyclists more space when they look less experienced) overall they make cycling less attractive.

This is particularly true of the hi viz recommendation. Even riders such as myself, who have very little interest in fashion, would probably be put off by a permanent requirement to wear hi viz.

Because I don’t particularly want to walk around the supermarket or go to work in hi viz, such a law would require me to permanently wear a hi viz vest over my normal clothes. This would not only be hot in summer but also would be annoying to carry around when I reached my destination.

Obviously, of course, riders who actually care about how they look while riding – such as teenage girls or the Frocks on Bikes types – would quite likely choose not to ride at all if hi viz was mandatory.

I’ve yet to see a single person support the Coroner’s recommendation.

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Value for Money: School Breakfast Programmes and Other Early Childhood Interventions

February 4th, 2013 at 7:00 am by David Farrar

The Social Service Providers Association are holding a couple of seminars on the topic “Value for Money: School Breakfast Programmes and Other Early Childhood Interventions”.

The guest speaker is Eric Crampton, who I am sure will be both rigorous and interesting.The details are:

Christchurch
Monday 11th February, 1 – 3pm
St Albans Community Centre
1047 Colombo St, St Albans

Wellington
Thursday 14th February, 3 – 5pm
Mezzanine meeting room, First floor of the City Library
65 Victoria St, Wellington Central

Just a gold coin donation to attend and you can register at SSPA.

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Benefits of alcohol

November 29th, 2012 at 2:00 pm by David Farrar

Charley Mann at The Press reports:

Those who enjoy a glass or two should ignore the ”badly overstated” warnings about alcohol over the festive season, a University of Canterbury academic says.

The flurry of alcohol warnings ahead of Christmas were overstated and incorrect, said economics lecturer Dr Eric Crampton. ”Nobody warns us about the warnings.”

“And there’s danger in that … since some of the warnings are either false or badly overstated.”

Indeed.

Crampton said health warnings on alcohol focused ”exclusively” on curbing the harm experienced by heavy drinkers but ignored the enjoyment for moderate drinkers. This risked doing more harm than good, Crampton said.

”It is hard to open the paper without finding dire warnings about alcohol’s costs to the country. But how often do we hear that drinkers earn more than non-drinkers?

“Or that light drinkers have lower mortality risk than non-drinkers? Or that light-to-moderate drinking predicts better ageing outcomes?

Fundamentally alcohol is very different to tobacco. Tobacco kills you, even in moderation. Almost everyone who smokes wants to give up smoking. Very few moderate or light drinkers want to give up alcohol.

Hence the focus should be on heavy or binge drinking, not on demonising alcohol overall.

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More good analysis

September 29th, 2012 at 8:27 am by David Farrar

Eric Crampton has also been analysing the national standards data. he finds:

Decile matters greatly. All else equal, a school one decile higher has about a four percentage point increase in pass rates. But, decile matters at a decreasing rate: moving from Decile 2 to Decile 3 correlates with a 3.3 percentage point increase in maths pass rates while moving from Decile 8 to Decile 9 only improves pass rates by one percentage point.

Class size matters: schools with more students per teacher have higher pass rates. I suspect reverse causation here: for a fixed budget, those schools that are able to run larger classes are likely those that have fewer discipline problems and so are able to put those resources to other uses.

Ethnicity matters. A standard deviation increase in the proportion of Maori students reduces aggregate pass rates by 1.3 percentage points in reading and 2.2 percentage points in math. Similar trends exist for Pacific Island student ratios. I’d be pretty cautious in interpreting this one: if you run things decile-by-decile, the effects mostly disappear. The biggest negative effect seems to hold in high decile schools, but by the time you get to Decile 10 schools, the median school has only 5.9% Maori students. Results then may be a bit sensitive to a few outliers on the right hand side. Like Luis, I’ll refrain from doing much more until the official results come out.

Single sex schools seem to do well; boarding schools seem to do poorly.

All interesting data.

There are decile 1 schools providing pass rates twenty percentage points or more above what we’d expect, given their characteristics (that’s the 0.2 number on the y-axis); there is one decile ten school providing pass rates more than twenty percentage points below what we would expect given its characteristics. Differences in school performance simply do not come down only to decile. Decile’s the most important thing. But differences in performance among schools of the same decile by definition have to be about something other than decile. I can’t tell from this data whether it’s differences in stat-juking, differences in unobserved characteristics of entering students, differences in school pedagogy, or something else. But there’s something here that bears explaining. 

And this is the potential value. Identify the schools doing best and worst, and try to emulate them and help them respectively.

Somehow the left think this is a bad thing!

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The cost of alcohol

August 26th, 2012 at 11:12 am by David Farrar

Eric Crampton inserts some facts in a Press op-ed:

I do not particularly care what the jury decides on who is or is not a wowser. But I work with and care about the numbers around alcohol policy. And the impression most readers would get from the latest reporting in The Press is a bit at odds with, well, reality.

Let us begin perhaps with Jennie Connor’s citing of “a Canadian study” on the effects of minimum pricing. Can a 10 per cent increase in the minimum price of alcohol really reduce total alcohol consumption by 16 per cent? No. …

Across-the-board increases in the minimum price of alcohol have far smaller effects: a 10 per cent price increase reduces aggregate consumption by only about 3.4 per cent, as is made reasonably clear in Auld’s paper.

But the bigger mis-use of numbers follows:

I was a bit more surprised to read of the new commissioned BERL report on the health costs of alcohol in Canterbury. …

BERL here replicated work done in Australia by Collins and Lapsley (2008). But where Collins and Lapsley added up all the costs imposed by those disorders where alcohol makes things worse and subtracted from that total all the cost savings from those disorders where alcohol reduces costs, BERL simply erased any beneficial effects of alcohol for disorders including ischaemic heart disease, cholelithiasis, heart failure, stroke and hypertension. …

I received the paper Wednesday courtesy of the CDHB. And BERL, at footnote 14, reports they’ve done the same thing again: “The Collins and Lapsley fractions indicate some alcohol use may be beneficial for some conditions. We concentrate on harmful drug use, and assume zero fractions for such conditions.”

So their measure of the costs of alcohol to the Canterbury health system relies on an assumption that there can be no health benefits from alcohol – an assumption that runs contrary to the weight of international evidence. Assuming one’s conclusions is hardly proper method.

To put it more bluntly the BERL paper is useless as a public policy tool.  Measuring harm without measuring benefits is something zealots do, but we expect better in scientific papers.

Crampton concludes:

How often do you read that problem drinking among 15-24 year olds was no different in 2006/2007 than in 1996/1997 before the change in the alcohol purchase age?

Or that per capita alcohol consumption is down substantially since 1991? Othat light drinkers have about a 14%reduction in their chance of dying from any cause than people who never drink, correcting for the host of other health-related behaviours that are usually given as reasons for ignoring the health benefits of moderate drinking?

Be skeptical of the moral crisis around alcohol.

Amazing to see the comments at The Press attacking Eric personally or attacking things he never said. Very few able to engage on the actual issue.

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Crampton on minimum prices

July 11th, 2012 at 7:57 am by David Farrar

Eric Crampton blogs:

Last week, anti-alcohol advocacy group Alcohol Action NZ put out a press release where the University of Otago’s Jennie Connor was quoted:

“A recent Canadian study has shown that a 10% increase in the minimum price of alcohol reduces its consumption by 16% relative to other drinks”.

Eric did something very unusual then.

I got in touch with one of the authors of what has to be the study to which she’s referring

Chris Auld reported that the -1.6 price elasticity figure indeed only refers to a measure of own-price elasticity. Except it isn’t quite own-price elasticity. Because the estimation technique doesn’t correct for substitution effects, it combines the own-price elasticity with cross-price elasticity from other products. 

Eric then starts quoting formulas which will turn off neurones in most people, but they are there if you want to read them.

Chris also confirms that the -0.34 estimate is the one that best reflects the expected effects of an across-the-board price increase like minimum pricing

That means a 10% increase in prices would reduce consumption by 3.4%. Eric concludes:

Jennie Connor really should retract her press release or issue a correction. It leads people to believe that a minimum price will have far more effect on harmful drinkers’ consumption than can be supported by the evidence. Otherwise, how much weight should anybody place on any “fact” claimed by Jennie Connor in her press releases?

But to show he is balanced (and Eric is one of those guys who is all about the facts), he sides with Ross Bell of the Drug Foundation over John Key re the impact of minimum pricing on the quality of drink. But he also corrects Ross on a couple of things also. A post well worth reading.

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Organ donations

March 1st, 2012 at 7:00 am by David Farrar

An old but important post by Eric Crampton:

NZ’s organ donation regime is an inefficient nightmare that kills people. Donor’s wishes, expressed via their drivers’ licence, aren’t taken as binding and can be overturned by anyone claiming a connection to the potential donor. Even suggesting that folks signing up to be future organ donors get bumped up the waiting listgets folks riled up, though there were some encouraging noises two years ago about maybe allowing that Kiwi donors be compensated; similar calls for compensation came up in the UK last year. As it stands, Otago’s med school is allowed to cover funeral costs for cadaveric whole body donations, but nobody’s allowed to cover funeral costs for organ donors. There are all kinds of policies that would improve on the status quo but haven’t been explored, at least in NZ.

I think the current practice where donors wishes are not binding is a terrible thing.

Eric blogs on Israel:

Living donors are now paid 40 days’ lost wages plus a very generous expenses allowance. Folks with family members on the waiting list can request to become living donors for other people on the list and are then matched with other folks in the same circumstances: a “chain of living donors” not unlike the American MatchingDonors service. Result?

Israel experienced a dramatic increase in the number of organ transplants in 2011, totaling 384, 68 percent higher than the previous year, although the number of transplants performed in 2010 was particularly low. Kidney transplants from deceased donors were 2.37 times greater in 2011, with 123 operations, than in 2010. There were 69 liver transplants from deceased donors in the past year, 2.15 times as many the previous year, 59 lung transplants, representing an 84 percent increase, and 23 heart transplants – 2.09 times the number in 2010.

Excellent. And further:

The Priority Law, which takes effect in April, will give holders of Adi donor cards priority if they ever need a transplant.
The number of cardholders has considerably increased recently following a publicity campaign touting the new law. Anyone signing the card before April will be immediately eligible for the benefit, while those signing after the law goes into effect will need to wait three years for eligibility after signing.
The number of organ donor signatures rose 71,229 during the year to a total of 632,300 while another 20,000 requests for the cards are being processed by the National Transplant Center.
Too many NZers die waiting for organs. We should seriously look at emulating Israel and doing what we can to encourage more donors, and to have their wishes as binding.
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The lesbian pay gap

February 13th, 2012 at 11:02 am by David Farrar

Eric Crampton quotes Big Think:

The wage premium paid to lesbian workers is a bit of a mystery. Sure, lesbian women are better-educated on average, are more likely to be white, live predominantly in cities, have fewer children, and are significantly more likely to be a professional. But even when you control for these differences, the wage premium is still on the order of 6%. …

Eric offers some theories on why this might be:

First, and most importantly, maternity risk. If an employer expects a lesbian employee to be less likely to take maternity leave, and if maternity leave imposes costs on an employer, then the employer will be more likely to hire and to promote the lesbian over the straight woman. What evidence do we have? Petit’s field experimentshowing that maternity risk is responsible for a fair bit of women’s lower average salaries.

How could this be tested in the data presumably available in the original study? Test whether the wage gap between lesbian and straight women is larger for younger women than for post-menopausal women. That will confound with age cohort effects, but there may be a way around it: use state insurance mandates on assisted reproduction, or state policies with respect to same-sex adoption. If some states require that insurers cover fertility treatments as part of an employer’s insurance package and others don’t, or if some states make it easier for lesbians to adopt kids, then we’d expect the wage gap between lesbians and straights to be smallest in those states that make it easiest for lesbians to have kids.

Second, testosterone and negotiation strategies. Women, on average, are less aggressive in wage negotiations. If testosterone correlates with aggressiveness in salary negotiations, and some evidence suggests higher than average testosterone levels among lesbians as compared to heterosexual women (though that evidence iscontested), then we’ve another candidate explanation.

I’d put money on the maternity risk variable. I’d only put money on the negotiations one at decent odds.

I go the other way to Eric. I think the theory of more assertiveness in salary negotiations is most likely to explain the gap.

 

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Stop pricing young workers out of the labour force

June 13th, 2011 at 7:00 am by David Farrar

Eric Crampton’s op ed in the Dominion Post, and online at CIS is very good.

IF THE Government said that the minimum price for a new car were $50, nobody would expect it to affect sales. Neither would an increase to $65. But it would certainly start mattering if the Government applied a minimum price of $5000 to all cars, new and used.

Exactly. Only the stupidest person could argue that a mimimum price would not affect sales at certain levels. Hence the focus should be about at what level it starts to matter.

The latest youth unemployment figures are very bad. The unemployment rate for kids aged 15 to 19 is 27.5 per cent …

This isn’t just the recession. Unemployment rates for adults are higher than they were in the boom of the mid 2000s, but the recent downturn has not hit adult workers the same way that it’s hit the kids. The current adult unemployment rate of 6.6 per cent is only three points higher than its low mark in the mid 2000s. Meanwhile, youth unemployment rates are a staggering 15 points higher.

So what changed?

Both rates usually track each other, reflecting the overall strength of the labour market. Changes in the adult unemployment rate explain a high proportion of changes in the youth rate.

But in late 2008, this relationship began to break down. Compared with a previous trend, the current youth unemployment rate is eight points higher than we could have expected given the adult unemployment rate. That’s about 12,000 kids who, given the current adult unemployment rate, we would have expected to have jobs. …

Neither can they simply be due to the current downturn: when adult unemployment hit 10.2 per cent in 1992, the youth unemployment rate was 23.4 per cent – three points lower than today – and youth labour force participation rates were higher. Bear in mind that adult unemployment today is nowhere near 10.2 per cent.

The answer seems obvious. While done with good intentions, the abolition of a lower minimim wage rate for teenagers has priced them out of the labour market.

No, the sharp increase in youth unemployment from late 2008 appears to have been caused by the abolition of the youth minimum wage in early 2008. Such a result isn’t surprising. Economist Stephen Gordon summarised Pierre Fortin’s work on this effect in relation to minimum wages: when minimum wages are below about 45 per cent of the average wage, they have little effect on employment; above that, they present a danger to employment.

By contrast, New Zealand’s minimum wage of $13 an hour is about 50 per cent of the average hourly wage – well into the range in which we expect negative employment effects, particularly for young workers.

And if the minimum wage increased to $15/hr, it would impact youth even harder.

Reinstating a youth minimum wage well below the adult rate wouldn’t eliminate youth unemployment. But it would let employers start creating new jobs that young workers could productively fill while gaining experience. It’s time to stop pricing young workers out of the labour force.

I agree. What the Government should do is freeze the youth minimum wage at $13/hr and keep it there until it has hit the floor of 80% of the adult minimum wage (which happens when it hits $16.25), and then have it remain at 80%.

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Why do lesbians get paid more?

December 28th, 2010 at 1:00 pm by David Farrar

Eric Crampton blogs:

Says BoingBoing:

“Lesbians make more money than straight women (And nobody really knows why)”Really? Nobody? I can think of a couple of explanations, pretty easily testable.

And Eric’s theories:

First, and most importantly, maternity risk. If an employer expects a lesbian employee to be less likely to take maternity leave, and if maternity leave imposes costs on an employer, then the employer will be more likely to hire and to promote the lesbian over the straight woman. What evidence do we have? Petit’s field experiment showing that maternity risk is responsible for a fair bit of women’s lower average salaries.

Certainly possible.

Second, testosterone and negotiation strategies. Women, on average, are less aggressive in wage negotiations. If testosterone correlates with aggressiveness in salary negotiations, and some evidence suggests higher than average testosterone levels among lesbians as compared to heterosexual women (though that evidence is contested), then we’ve another candidate explanation.

I’d put money on the maternity risk variable. I’d only put money on the negotiations one at decent odds.

Funnily enough, my gut instinct is that a more aggressive negiotating stance would be the bigger contributor to the gap.

But really, if correcting for the observables reduces the wage gap between lesbians and heterosexual women from around 40% [the paper cites average hourly wages of $18.70 for lesbians and $13.34 for cohabiting non-lesbian females] to around 5%, odds are pretty high that there are a bunch of unobservables also correlated with job performance that aren’t captured in the wage regression.

That’s a pretty large pay gap.

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Crampton on smoking costs

November 7th, 2010 at 9:53 am by David Farrar

The Press publishes this very useful article from Eric Crampton:

You could be forgiven for thinking that the health system could save $1.9 billion if tobacco had never existed. That’s what the Ministry of Health says smoking costs the public health system.

But, you’d be wrong.

The ministry’s latest estimate of the cost of smoking has nothing to do with the costs that smokers impose on taxpayers or the costs that could be avoided if smoking were to disappear.

Rather, it’s a politically convenient number whose promotion has much to do with gaining voter support for anti-tobacco initiatives and nothing to do with real economic costs.

I was pretty surprised when this figure started being cited earlier this year. It was much higher than the previous estimate of $350 million dollars – a figure produced not by the Big Tobacco lobby but rather by Des O’Dea in a report commissioned by anti-tobacco crusaders Action on Smoking and Health.

So the costs have gone from $350, to $1.9b – how did they achieve this?

After sorting the population by age, gender, income, ethnicity and smoking status, they then compared the costs of providing health services to smokers as compared to nonsmokers for each group.

The excess costs of the smoking group were tallied up to produce the $1.9b figure.

So what’s the problem?

It’s easiest to think of smoking as bringing forward a whole lot of end-of-life costs.

Smokers die earlier than nonsmokers.

We know that.

And the costs to the health budget of somebody who is dying are rather higher than the costs of somebody who is healthy.

But everybody dies sometime and most of us will incur end-of-life costs that will be paid for by the public health system.

Suppose that a smoker will die at age 65 and a nonsmoker will die at 75. Comparing 65-year-old smokers to 65-year-old nonsmokers and calling the difference the cost of smoking then rather biases upwards the measured costs of smoking.

We ought to be comparing the health costs of a smoker dying at age 65 with the health costs of a nonsmoker dying at age 75.

Yes. This is what I assumed was done. But obviously it did not produce a big enough figure.

The figures assume that in the absence of smoking, smokers would never have imposed end-of-life costs on the health system. But for their smoking, all smokers in this scenario would have died of a sudden, and cheap, heart attack and would only have had average health costs up to that point. That’s clearly nonsense, but the $1.9b figure only makes sense if it’s true.

So the $1.9b is a useless figure. Sadly I doubt it will stop people citing it.

If smoking disappeared tomorrow, your taxes would have to go up to make up the difference. Thank the next smoker you meet for helping to keep your taxes down.

And be as sceptical of numbers coming from the Ministry of Health as you would be of numbers produced by the tobacco industry. Neither is a disinterested party.

Indeed.

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Why GST should remain simple

April 21st, 2010 at 2:00 pm by David Farrar

Eric Crampton blogs:

New Zealand is blessed with one of the cleanest value added taxes in the world, our GST. Every new good is taxed at 12.5% (likely to rise to 15%); the tax provides about a fifth of national tax revenue. …

A fun Australian case, via the Centre for Independent Studies daily email update, ideas@TheCentre:You wouldn’t usually expect to find baking recipes in court judgments, but Justice Sundberg of the Federal Court in Melbourne made an exception recently. In doing so, he demonstrated how overly complex Australia’s tax rules are.

Take 67.5% wheat flour, 20% water, 8% olive oil, 2% sea salt, 1.5% yeast, and 1% malt extract. Follow the instructions in Lansell House Pty Ltd v Commissioner of Taxation [2010] FCA 329, and what you get is either bread or a cracker.

At least that was the question Justice Sundberg had to answer. A small food importer from Melbourne had been importing Perfetto Mini Ciabatte, an oven-baked Italian flat bread that only culinary philistines – or the Australian Taxation Office – could mistake for an ordinary cracker.

Australian tax law has kept lawyers and bureaucrats busy for a long time over this mini ciabatta. Basic food stuffs are exempt from GST, but other foods are not. Thus, bread does not attract GST but crackers do.

The food importer thought he had a clear case when he claimed tax-free status for his mini ciabatta. He had even flown in Italy’s leading bread expert Giampiero Muntoni to testify in court. Signor Muntoni holds an EU certificate that entitles him to certify whether a product is a bread or a non-bread item for value added tax purposes in Italy. To this infallible bread pope it was clear that if the ingredients are that of bread, if it looks like bread, and if the Italian tax authorities classify it as bread, it must be, well, bread.

This was not good enough to convince an Australian court, though. Justice Sundberg noted that mini ciabatta cracks like a cracker; it’s sold next to crackers in Australian supermarkets; and a chemical analysis revealed similar gluten and protein content as that of crackers. In conclusion, he upheld that GST had to be paid on it.

It would be easy to find this issue ridiculous, but actually it is symptom of what is wrong with our tax law. It is incomprehensible that there should be different taxes for, arguably, very similar products.

Tax lawyers would do very well if we start introducing exemptions.

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Crampton on Copyright

April 20th, 2010 at 1:00 pm by David Farrar

Peter Cresswell discusses copyright and says copying without permission of the owner is theft:

Make no mis­take, copy­ing with­out the per­mis­sion of the owner is theft–-no mat­ter how many sappy sugar-coated dit­ties you hear to the contrary.

I don’t think theft is the best word for it, but I agree it is illegal. PC notes however:

The way ACTA proposes protecting intellectual property–by going through people’s bags, laptops and MP3 players at airports; by holding ISPs responsible for what their customers do; etc.–-is hardly in accordance with the principle of property rights they purport to be upholding.

He says this violates the very principles they want to protect.

What I found most interesting is this comment by Eric Crampton on the post:

Strength of copyright protection has never been an absolute: it’s varied in duration and scope over the years. There’s a Laffer curve that operates in copyright as well: zero protection and fewer things will be produced, but too strong of protection and nothing is produced either.

Eric is right. Copyright is not an absolute right. It is a manufactured right that is about a balance of rights. Eric explains:

Let’s take the extreme case over on the right tail of the distribution. Every musician using a chord must pay a royalty to whomever invented that chord, then must pay another royalty to whomever came up with the chord sequence they’re using. Think much music gets produced under that regime? Nope. It’s too costly to produce anything new.

Another example is the right of a newspaper to quote something. If a politician writes on their Facebook page “I think the top tax rate should be 90%” they own the copyright to that statement. Would anyone want a society where it is illegal for a newspaper to report that statement, as they do not have permission of the owner?

Take it to blogs. Suppose copyright didn’t just protect the expression of an idea, but also the idea itself. Would you ever post anything, given fear of being sued by someone who’d previously come up with some idea you’d thought was original to you? Would Landes and Posner sue me for basically restating their argument in the first paragraph?

Spot on.

If you grant those two cases, then the optimal degree of copyright isn’t infinite. The optimal degree isn’t zero either. I’m reasonably convinced that we’ve pushed too far to the right on this curve: the costs of copyright in impeding new creation, at current legal levels of protection, exceeds the benefit of higher returns for those things that are created. And, I’d argue this is mostly due to Disney who earns more off its back catalogue than out of new production. The period of protection is too long, harm is done by excessive protection on orphaned works, and insufficient scope is given to fair use.

Copyright is for a specific term. If it was not, then every school in the western world would probably have to pay royalties to the great great great great great great great great grand nephew of William Shakespeare.

Eric makes a fair point that copyright protection is for too long a period. In the UK protection is for 50 years after making a sound recording, while in the US it is 120 years after creation.

Personally, I’d sooner see copyright abolished in favour of a solution through private contract where folks use creative commons to designate the strength of protection they’d like applied to their own works, but where also we’d deem the extant corpus of common culture (Grimm fairy tales, etc) only being available for commercial use if the folks making the film, book or whatever applied a duration of protection no greater than 20 years or so, helping to rejuvenate the commons from which they drew.

I am a big fan of Creative Commons which makes it easy for creators of works, to set their own terms and conditions of use.

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Adult Community Education Benefits

February 23rd, 2010 at 2:00 pm by David Farrar

Three good posts on Adult Community Education. First Matt Nolan at TVHE fisks a PWC report:

In a report the is often used to justify ACE spending, the net benefit of adult community education (for 409,000) was stated to be between $4.8bn and $6.3bn annually – giving a total return of $54-$72 per $1 invested (see page 48).  Wow, really – if I could get that sort of return I would be investing in adult community education for sure.

A 50:1 to 70:1 return on every dollar spent is of course beyond implausible. I am surprised PWC allowed their name to be associated with such a nonsense report.

Bill English was quoted as saying that on the basis of the report “we would spend $10 billion on adult and community education and would have an economy that is twice the size it currently is”

Nolan looks at how they have mixed up public and private benefits:

Now the factors that are policy relevant are NOT private benefits – these help determine the market price.  They are benefits that stem from some third party, uninvolved in the transaction, gaining some benefit from the individual taking an adult community course.  And they are not “fiscal externalities” (ht Offsetting Behaviour).  So the policy relevant factors are:

  • Increase in direct income:  No
  • Savings in government benefits:  No
  • Marginal increase in individual income:  No
  • Increase in income from self-confidence:  No
  • Reduction in family violence:  No
  • Savings for health:  No
  • Savings from crime reduction:  Potentially, partially
  • Increased community involvement by individual:  No
  • Higher income taxes:  No

So eight of the nine benefits are private, not public. The one public benefit is a possible reduced crime rate. But PWC have assumed that anyone doing an ACE course instantly has a 50% less chance of committing a crime. Yep – attending one Moroccan cooking course, and you are 50% less crime likely.

Dave Guerin at the very good Education Directions blog looks at the future of ACE:

The ACE market will be reshaped, rather than destroyed, because there is so much demand for such education. In 2008 there were 140,000 ACE students (EFTS unavailable)  in schools and 78,000 ACE students (4,000 EFTS) in TEIs (MOE). Enrolment numbers have been boosted by significant government subsidies and by the availability at schools of physical and business infrastructure to run community education programmes, but people still want this type of education. The subsidies are now largely gone and many schools have dropped their programmes, but there are new opportunities.

In the absence of nationwide coverage by subsidised school providers, I expect that private ACE co-ordinators will spring up. They won’t get the same administrative  support from schools, but equally they won’t be bound by the collective employment agreement or be treated as an add-on to the school’s main business. There are still plenty of empty school rooms at night to rent at low cost too. Prior to schools getting so involved in community education, there was a thriving private market in ACE-type courses and I would expect many of the previous school-based tutors to explore new models. There are bound to be several viable models out there for ACE delivery.

If ACE does produce such huge private benefits as 50:1, there will indeed remain great demand for ACE courses – even if one has to pay say $50 for it.

Eric Cramption looks into where the nonsense about a 50% reduction in crime rate comes from, if you do an ACE course. He finds:

So folks taking adult ed courses are assumed to have a 50% reduction in their chances of committing a crime. PWC cites a 1999 working paper as evidence; a 2004 AER piece by the same author has the crime reduction associated with high school graduation as being less than half that figure (14-26%). This latter study uses a far more cautious identification strategy: changes in minimum age of dropping out of school as instrument for completion rates. And note that the numbers cited are for HIGH SCHOOL GRADUATION, not for taking a night course in Indian cooking.

Remind me to never get PWC to do a report, if I want it taken credibly.

Thank God for the Internet where we can get some solid analysis of these ever growing number of crappy reports, justifying whatever the commissioning party has asked for.

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Youth Rates and Youth Unemployment

February 9th, 2010 at 10:00 am by David Farrar

I’ve previously blogged on my belief that the massive rise in youth unemployment is due to Labour’s decision in 2008 to abolish youth rates for the minimum wage.

Eric Crampton has gone better than mere belief, and analysed the relationship between overall unemployment and youth unemployment.

The graph has (thanks Stephen Hickson!) the unemployment rate for those aged 15-19 and the unemployment rate for everyone else (aged 19 and up). It looks to me like the proper relationship is a combination of a level shift and a multiplicative effect. When the adult rate is very low – below four percent or so – the youth rate bounces around at a point about 10 to 12 points higher than the adult rate. When the adult rate is high, the youth rate exceeds that constant by a multiple of the adult rate. …

Both the constant and the adult rate come up highly significant. So, over the period 1986 to present, we can expect the youth rate to be 1.44 times the adult rate (the multiplicative effect – about 44% above the adult rate) plus a constant of 9 percentage points. So if the adult rate is 5, the youth rate should be 16.2. We’ve ruled out the “it’s just ratios” argument – there is a constant term in there; we’ve also ruled out that it’s just a level shift because the coefficient is significantly greater than 1.

So Eric has calculated the best fit of the data is that the youth unemployment rate will 9% higher than 1.44 times the adult unemployment rate.

He then plots the “residuals”, which is how much greater or smaller the youth unemployment rate has been, compared to what the formula predicts.

So that formula looks pretty good up until, umm well 2008. Eric continues:

If we look at the top graph, we see youth unemployment rates went up a lot during the recession of the early 1990s. But over that period, youth unemployment rates were never more than a couple of points above what the very simple model predicted (residuals graph, above). In recessions, it does look like the youth rate gets hit harder than the adult rate. But look at what happens starting around fourth quarter 2008. We now have residuals that blow up the model. Something really weird starts happening to the youth unemployment rate at the end of 2008. Youth unemployment is now about 10 points higher than we’d expect using the simple model.

And if one goes for different formulas:

I tried a few different variations allowing the constant and the slope to shift for high and for low levels of adult unemployment.  But none of that made any substantial difference.

So the conclusion:

The econometrics here are very simplistic and do nothing to account for differences in labour force participation rates or the obvious problem of serial correlation in the time series data.  But the simple model is still pretty telling.  If we allow youth unemployment rates to vary both as a level shift above the adult rate and as a multiple of the adult rate, which is what we’re doing when we run the simple regression with a constant term, we still have a jump in the current youth unemployment rate that is well above that seen in prior recessions.

My first cut explanation remains the abolition of the youth minimum wage.

Now this does not prove beyond doubt it was the abolition of youth rates that pushed youth unemployment up an extra 10%. But it is the most likely explanation.

The challenge for those who think abolishing youth rates did not contribute to the increase in youth unemployment, is to put up their own data and credible explanations to explain the massive gap between youth and adult unemployment.

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US Airline Security

December 28th, 2009 at 10:31 am by David Farrar

The Herald reports:

Airline passengers to the United States will be isolated from other travellers at Auckland Airport and face a rigorous second set of security checks following the suspected terrorist attack on a Christmas Day flight to the US. …

The Aviation Security Service’s northern regional manager, Peter Pilley, said passengers should allow an extra hour before the departure time for their flight.

He advised people to take as little carry-on luggage as possible to speed the process.

The TSA directive also says passengers must remain seated for the final hour of their US-bound flight and are not allowed access to carry-on baggage or to have any items on their laps.

Eric Crampton is not impressed:

Can we reject the null hypothesis that Osama’s crew have agents inside the TSA and that their whole objective is to give these agents reasons to make travelers’ lives hell?

Heh. Not impossible. He quotes other bloggers:

Seems to me that what this, Flight 93, and the Richard Reid incident have shown us is that the best line of defense against airplane-based terrorism is us. Alert, aware, informed passengers.

TSA, on the other hand, equates hassle with safety. For all the crap they put us through, this guy still got some sort of explosive material on the plane from Amsterdam. He was stopped by law-abiding passengers. So TSA responds to all of this by . . . announcing plans to hassle law-abiding U.S. passengers even more.

9/11 did change everything. Passengers will take action now – even take on armed hostiles, rather than let them gain control of a plane. Crampton comments:

Only two things have made flying safer [since 9/11]: the reinforcement of cockpit doors, and the fact that passengers know now to resist hijackers.

He offers three theories for the new flight restrictions:

  1. The TSA are in it with the terrorists to create maximum inconvenience for travelers and augment the TSA budget
  2. The TSA are complete idiots
  3. There’s nothing the TSA can really do, but idiots demand they do something and the only something that passengers can observe is how much they’re being inconvenienced?

I agree with Eric that (3) is marginally the most likely.

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