SciBlogs

Bubbles no, resilence sure, market failure yes Matt Nolan May 16

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Hmmm, it looks like no-one wants to dissuade people from viewing the new RBNZ tools as ways to “stop bubbles”.  I think this is a dangerous mistake.

The focus on financial stability, and system risk in the banking system, is due to concerns that a sudden shift in asset prices could lead to a breakdown in the financial system – due to concentration, bank-runs, or some concern about fragility.

This is all well and good.  I think we need to be careful with these arguments.  I think we also need to identify why and what the failures are.  But, overall this is a way forward.

And it does nothing to truly “prevent bubbles”.  If someone wants to “overpay” for something, they can, and will – and as a society we shouldn’t give two hoots about someone pissing their own money against the wall.  True story.

If we tell people the RBNZ is “stopping bubbles” they will just assume that whatever is happening isn’t a bubble.  Does this actually seem like it will help anyone?  The RBNZ can’t really control asset prices, and it definitely can’t control them in the face of “irrational exuberance” (protip, the RBNZ doesn’t control people’s expectations of future house price appreciation).  The goal is to prevent the popping of a bubble having enormous spillover effects onto the broader economy.  If the RBNZ is doing its job right we will STILL HAVE BUBBLES – and people who took on the risk will still HURT THEMSELVES.

As a result, I hate the current description.  I hate the focus on asset prices themselves, rather than the direct stability of the banking system.  And I hate that we aren’t more focused on trying to identify where the risks and failures and and how to quantify them.



Can tax and subsidy incidence really be negative? Seamus Hogan May 16

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Imagine a country where shoes cannot be imported and furthermore the elasticity of supply of shoes is very low. Imagine that the government in this country subsidises shoes. The person on the street who doesn't understand tax incidence might think that this policy lowers the price of shoes by the amount of the subsidy. An economist, however, would be likely to point out that, because supply is fairly unresponsive to price, the subsidy mostly results in an increase in the before-subsidy price to the seller.    In our jargon, he would be saying that most of the incidence of the subsidy would be on sellers and only a bit on buyers.

So far so good, but what if that economist now explained that removing the subsidy would make shoes cheaper to consumers, by stopping buyers from bidding up the price. This would seem to now be claiming that the incidence of the subsidy on buyers would be negative. Sure removing the subsidy would reduce the price to sellers but it would be a very strange model that would have the price falling by more than the reduced subsidy. In fact, it would seem to require that the supply curve be downward-sloping. 

And now, imagine that the economist further claimed that removing the subsidy would be good, as it would result in investors switching from investing in shoe production to investing in productive assets. This would go beyond strange. Sure the subsidy might have been diverting assets to having too much shoe production and not enough other stuff, but in what sense would we say that producing shoes is unproductive? And, how is it consistent to argue at the same time that removing the subsidy would lead to less investment in shoe production at the same time as arguing that it would result in lower shoe prices for consumers? 

O.K. this country, this policy, and this economist are fictitious. But if we change "country" to "New Zealand", "shoes" to "housing", "subsidy" to "tax exemption", and "economist" to "Gareth Morgan", you pretty much get this blog piece from Gareth on Tuesday. 

Gareth argues, correctly, that owner-occupied housing receives a favourable tax treatment relative to other investment since we are not charged income tax on the implicit rental payments we receive from ourselves. But he then goes on to argue that removing this exemption would "bring affordability within reach of many more families". This is an argument I have commented on before; it really looks like arguing that tax incidence can be negative: If housing is effectively subsidised by the tax system, we can't expect removing the subsidy to make it more affordable. 

And he then says that our tax treatment of housing has "discriminated against productive investment in favour of property speculation". Now if he means that we have invested too much in building houses and other kinds of investment, then we have to ask: In what sense is it unproductive to build houses that provide housing services to people that they value enough to pay for? And, how is it possible that curtailing such investment would "bring affordability within reach of many more families"? If, in contrast, he means diverting investment resources from building new equipment to buying existing houses as speculation, I have my perennial concern that this line or argument fails to note that buying existing houses for speculation or other reasons is not "investment" at all, and the assumptions you have to make to conclude that such behaviour diverts resources away from productive investment are a stretch to say the least.  

One final curious seeming contradiction in Gareth's post. At the start, he notes "When, not if, interest rates increase, this illusion that housing is `affordable' will burst....house prices will adjust". But later he suggests that if we don't remove the tax-favoured treatement of housing, he should "go out and buy another three houses now and just wait for the rest of you to bid the prices up". Why would that be good personal investment advice if, as he says, house prices are sure to fall? What am I missing?


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Series on tax: Part 2 – distortions and burden Matt Nolan May 15

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Over at Rates Blog I have put up part 2 or a 6 part series on tax (it was going to be 5 but I’ve extended it.  In part 1 we asked “why do we tax“.  In part 2 we are digging deeper into the costs of taxation.

We focus on two specific issues, the way taxes distort behaviour, and the idea of where the burden of tax falls.  As we explained in the first article these issues are really really difficult to actually work out – and the purpose of the second argument is just to give a “flavour” to the argument.  In honesty, if you wanted to figure out the true burden and distortions you’ll have to get yourselve a series of these CGE modeling economists armed with other economists who focus on normative judgments.

Last time I promised to discuss tax systmes that seem idea, that we don’t use.  And why we don’t.  Well, that is now the next article.

Also, thanks to Agnitio who helped me clear up this article.  It is a fairly wonkish one, and he came in at the last minute and helped me clarify what the hang I was doing ;)



Breakfast Eric Crampton May 15

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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.

You can get some substantial results from school breakfast programmes in third world countries. But even there we need to watch for displacement effects: the benefit of the programmes is often the implicit income subsidy provided. In those cases, we can see evidence of families cutting back on food expenditures for the kid getting breakfast at school in favour of spending on the other kids; in the link provided, there's reasonable crowding out in a UK lunch programme. And if that's the benefit, cutting a cheque to the families instead just might be better.

In all the studies, I wish that there were a control group where the parents were just given cash equivalent to the per-student cost of putting on the programme. All of these kinds of programmes should be assessed against that kind of counterfactual to establish whether we're getting benefits from the programme, or from the implicit income transfer.

Here are a few typical pieces.

Devaney and Fraker, 1989, found that school breakfast programmes did not increase the likelihood of kids' eating breakfast at all. It did increase calcium intake and reduce consumption of cholesterol and iron - breakfasts provided at school differed from those they'd be getting at home.

Gleason, 1995, similarly found that school breakfast programmes did not influence the likelihood of students' eating breakfast.

Alderman and Bundy, 2011, concluded that food in schools isn't a great investment but could complement other investments - they focused on developing countries.

Bhattacharya, Currie and Haider, 2006, seems to be the touchstone for those advocating school breakfast programmes. They found improved nutritional outcomes in blood serum tests of kids participating in school breakfast programmes compared to the same kids during school holidays when they weren't getting the school breakfasts. But they also found no effect on the likelihood of eating breakfast. And I worry a bit about their identification strategy: because it's poorer schools who got school breakfast programmes, we might expect that there could be relevant differences in how parents respond to school holidays that might affect the difference between school/not school outcomes for reasons other than the programme.

Waehrer, 2008, in an unpublished study funded by the USDA's RIDGE programme, found that school breakfast participation reduced the likelihood of eating breakfast. We could imagine this happening where the kids don't really want breakfast anyway, the parents stop making them eat it at home because there's the programme at school, and then they skip it when they get to school. The study could have similar identification issues to the Bhattacharya piece noted above; they identify on weekday-weekend differences, but cohorts might respond differently to weekends.

Shemilt, Harvey, Shepstone et al, 2004, found pretty mixed outcomes in a messy randomised control trial. They wound up abandoning the RCT part of the analysis and just going for regressions. They found some evidence of worsened outcomes of having attended school breakfast programmes on a few behavioural measures, but I'm again not convinced that they've pinned down causality. What they seemed most sure of was that school breakfast programmes had kids eating more fruit, so I guess there's that.

There were a couple of pieces claiming reasonable benefits from school breakfast programmes too.

Powell, Walker, et al, 1998, ran a really nice randomised control trial in Jamaica. Kids in the programme got breakfast, those not in the programme were given a small piece of orange. So they're able to isolate socialisation effects from breakfast effects. They found that the treatment group saw small increases in nutritional status, achievement, and attendance; they suggested that "greater improvements may occur in more undernourished populations." I'm not convinced that we're in that category.

Murphy, Pagano et al (1998) found that moving from selective to universal school breakfast programmes had some benefits, but also had some odd results. Before intervention, "hungry and at-risk children were slightly, but not significantly, more likely to participate in the school breakfast program than nonhungry children", and that more than half of the hungry and at-risk kids rarely or never participated in voluntary school breakfast programmes. So stigma associated with voluntary programmes can substantially affect uptake. But, when the programmes were made universal, hungry and at-risk kids were only "somewhat more likely to increase their school breakfast participation than non-hungry children... although this difference was not statistically significant." So what do we then make of results showing some improved average outcomes at school but no particular increase in breakfast-eating among those who are hungry? I wonder if all the effects here point to that eating later in the morning rather than earlier is better. I'll talk more about this below.

Dotter, 2012, finds that universal in-class school breakfasts increase the number of children eating breakfast at school compared to voluntary programmes that could have stigma effects, but I couldn't see that the paper measured whether there was an effect on total breakfast consumption. And while Dotter finds increased school performance in schools with universal school breakfast programmes, I can't see how the paper distinguishes between an "eating at all" and an "eating later" effect. Why does this matter? Imagine an alternative policy where schools allow a designated morning tea break at 10:30 where kids bring in their own snacks. This would be cheaper than full school breakfast programmes and just as effective, if the main channel of effectiveness is having a fuller tummy at the time of instruction because breakfast was later.

Frisvold, 2012, found that state mandates requiring schools to provide school breakfast programmes increase availability of those programmes and consequently increase test scores: the paper reports math score increases of nine percent of a standard deviation and reading score increases of five percent of a standard deviation. Again, there is no significant effect on the total days per week that a student eats breakfast, suggesting substantial displacement of breakfasts that would otherwise have been eaten at home. The paper claims that the effect is through a nutrition channel, with kids eating healthier breakfasts. But I can't see how they're distinguishing the nutrition channel from my suggested "they're eating later in the morning and so are less hungry at 11" channel.

So, some bottom lines:

  • School breakfast programmes really don't seem to increase the likelihood of that kids eat breakfast at all;
  • To the extent that they improve outcomes in some studies, we really can't tell:
    • whether the effect is from changing the timing of breakfast, in which case we should instead have a morning tea break;
    • whether the effect is any better than just giving those families an equivalent cash transfer.
I spent an hour in Wellington and Christchurch walking through these findings. I hope we don't throw a pile of money at school breakfast programmes; the money could well be better spent. That also seemed to be the conclusion of a New Zealand study: Mhurchu et al, 2012, who found that the only effect of a randomised control trial of school free breakfast programmes here was that kids self-reported being less hungry.

Update: Lindsay Mitchell points to a presentation on the New Zealand trial. She also points to data showing child poverty rates have been dropping.
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“Rebalancing” and other morality plays Matt Nolan May 15

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On my list of future things to post on I had this post – which was intended to be a “rant about rebalancing and targeting house prices for financial stability”.

Ever since the crisis erupted I have, especially privately, called the “rebalancing” argument one of the most pathetic quasi-economic arguments imaginable.  I found it difficult when a large section of the New Zealand economics community started using it, because apart from being a close to meaningless metaphor it also has the disadvantage of misleading people – confusing macroeconomic policy ideas with “compositional” issues, leading to the typical “fallacy of composition arguments” which lead to bad bad policy.

It is with this in mind that a good friend of mine sent me this BERL report on rebalancing the macroeconomy.  And it is with the recognition that it is not just BERL – but a large section of New Zealand’s economists – who make this argument that I aim to discuss why the focus on discussing rebalancing is bad economics.

Rebalancing is a term used to hide value judgments and sell a moral argument about the “right structure of the economy” – it is not an objective way of facing the trade-offs of policy choices, and as a result is it a bastardisation of what economists should be describing for the public.

“Rebalancing is a morality play about borrowing – nothing more”

When talking about rebalancing people throw out lots of statistics and ratios, making it sound like we can be better off in some way by changing what “NZ Inc” produces.  This is popular with the left and right – with left wing and right wing think tanks both going on about this.  We need to “improve tradable GDP” and do less “non-tradable GDP” and make NZ Inc more like China Inc.

But like political discussions on productivity, or the assumption that we can redistribute income without any efficiency cost, this is entirely missing the point.

See this line in the BERL report:

We conclude that the underlying factors driving New Zealand’s macroeconomic imbalances have deteriorated considerably since 2008
Actually, they never do this.  Most of the people that talk about “rebalancing” never do this.  It is a set of value judgments hidden in technical lanuage – the very opposite of what I believe economists should be doing when they discuss issues with the public.  And like I said, BOTH the left and the right are guilty of this – economists from all over the spectrum are using the same value-laden concept to sell completely different policies.  And they can do this because none of them are asking “what are the underlying factors driving the changes in New Zealand’s macroeconomy“.

The reason the BERL report caught my ire is because it did this in a way that was worse than some of the recent examples I’ve seen (in terms of being misleading for policy).  The comment about tradable vs non-tradable inflation in their piece is incredibly out of context – the tradable-non-tradable price level will change due to rising productivity in tradable industries, the Balassa Samuleson effect.

Furthermore, we have seen MASSIVE productivity improvements overseas.  As NZ Inc (urg I hate that term) has stuck to making things that it has a comparative advantage in, the productivity improvements overseas have pushed up our terms of trade … part of the reason for this shift.  Without asking why these shifts have taken place we CANNOT interpret the figures they have in the BERL report – and for that reason the conclusions they make rely on hidden assumptions about what is going on.

Also we can go a step further if we decide we want to “rebalance”.  Did you know that suggesting that tradable sectors aren’t competitive is essentially the same as saying wages are too high in New Zealand – so if we want to “rebalance” we need to CUT the wages of New Zealand consumers and households through transfer policies.  There is a fundamental equity efficiency trade-off – and economists should be mentioning this TRANSPARENTLY … I thought this was our actual job.

So what is the problem

Issue, let’s use the word issue.

We are concerned about the size of our net foreign liabilities as a country, as we realise that if people suddenly change their willingness to lend to us we are very vulnerable.

Furthermore, when we compare ourselves to other countries the REAL EXCHANGE RATE relative to productivity and the terms of trade, and REAL INTEREST RATES, are both high.

Armed with these stylized facts about New Zealand, we need to ask “why”.

Contrary to the inference in the BERL report – we are NOT targeting a certain “structure” for the economy.  And we should not.  Instead, we are asking why New Zealand is experiencing these factors, and trying to figure out if policy can help by checking two things:

  1. Is there a market or policy failure that can be corrected.
  2. Is there an issue of systemic risk somewhere in the economy, which we may want to insure against.

How is this even different from rebalancing

Rebalancing PRESUMES we need to shift a bunch of variables somewhere.  Asking what a failure is and why tells us the TRADE-OFFS we face, so we can decide where to move forward as a society.

Even more perversely, rebalancing assumes that the structure of an economy is something that should be fixed – when anybody with a cellphone and anyone who has tried out a 3D printer will know that technology and the structure of transactions changes a lot.

Now I don’t want you to think I’m picking on BERL, they are smart guys who are just trying to make these issues “accessible” – just like other economists who use “rebalancing”.  I was genuinely writing this article when the BERL report came out – so I was able to easily use it as an example!

The term rebalancing, and the way it is used, is completely and utterly misleading.  It is the metaphor of lazy economists and analysts – hence its massive popularity around the world.  Productivity is not a target, inequality is not a target, rebalancing is not a target – they are intermediate factors that change DUE TO actual causes, the welfare consequences of the real causes are what we care about.  These three ideas give us an indication that this is an area that we should look at – not something we can “target” directly.  This isn’t a small point, this is an incredible important point.

There are always trade-offs here, and going on about rebalancing does more to obfuscate them than to inform people and enlighten debate.



Events capital = big returns, right? Sam Richardson May 15

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The New Zealand Herald today is reporting that Auckland is a more successful city than Sydney at attracting and hosting major events. Auckland Mayor Len Brown says:
"Major sporting events are big business and bring substantial economic benefits to the host region, so there is fierce competition globally to secure events."
There certainly is fierce competition all right - but not a whole lot in the way of compelling evidence that the economic impacts of events are as substantive as commonly thought. Nevertheless:
Auckland's annual budget for securing top sporting events has risen from $6 million five years ago to between $8 million and $12 million now, said Rachael Carroll, of Auckland Tourism, Events and Economic Development (Ateed).
and
Ateed's figures show that events in 2011/12 produced a net return of $28.9 million to the Auckland economy. The current funding year's events are on track to return $30 million.
I wonder what the term net return means? Is it returns to ratepayers? Is it returns to the Auckland Council? Or is it good old economic impact? I suspect the latter. There are all sorts of problems inherent within the calculation of economic impact when applied to a sporting event. In academic circles there is very little argument in favour of sports events generating substantial economic impacts. I've researched in this area in the New Zealand context (see here - note that this paper is presently under review for possible journal publication) and found that the major events are underwhelming in terms of what their realised impacts were on host cities. I'd really like to see an estimation of actual benefits (that are not economic impacts). What are the public good benefits? What are the consumption benefits? Who do they accrue to? What evidence is there to suggest that this is the best use of $12m of scarce Auckland City funds? If it is there, I'd love to see it. 



SkyCity revisited Eric Crampton May 15

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Auckland is to get a large new convention centre, to be built and run by Sky City, Auckland's casino.

I chatted with Radio New Zealand's panel about the plan Monday afternoon and Newstalk (Christchurch) on Tuesday morning.

Really, not a lot has changed from when this was first proposed a while back.

We should think of this as two separate deals.

First, the government is auctioning off some gambling concessions. SkyCity has bought the right to have an additional 230 pokie machines, 40 gaming tables, assorted other gambling concessions, and, possibly most importantly, a guarantee that if some future government reneges on the deal by banning gambling or otherwise eroding the benefits provided to SkyCity under the deal, they'll be compensated. Now suppose that we opened that whole thing up to a general auction. People would then bid for those rights; the highest bid would approximate the expected flow of profits from having the concession.

Second, the government took bids for the right to build and operate a big convention centre. The high bidder, or rather the company willing to do it at the lowest subsidy, gets to build and run the convention centre.

In this case, SkyCity has to reckon that losses (if any) from building and running a convention centre are less than the gains from the gambling concession [NBR subscription, sorry]. And it isn't crazy to think that the bundle provides added value: convention centres near casinos tend to lose less money than those not so-situated; there are reasonable complementarities between the kind of facilities attractive to conventioneers and those that are in place in casinos.

Conditional on the government wishing that there be a big fancy convention centre in Auckland, this is likely the least bad way of doing it. I haven't gone through the accounting on it in any depth, but the bottom line has to be that SkyCity reckons it can make a go of it, since they're bearing the risk if they can't operate it profitably. And it isn't crazy to think that there could be some economic benefits from increased tourist traffic if we host more conventions. But whether those benefits are larger than the amount SkyCity might otherwise have bid in an open auction for the gambling concessions, where the revenues went into the general fund rather than into a big convention centre, that's rather less clear. It's possible, but it's far from certain.

Commenters at The Panel worried about social costs of gambling associated with the expansion. A lot there depends on how Auckland proceeds with gambling regulation. The cities that existed prior to amalgamation had a mix of gambling policies, with some imposing a "sinking lid" on the total number of pokie machines allowed. If Auckland as a whole continues with that policy, then much of the concession offered to SkyCity comes at the expense of the corner pubs who will see their licences killed more quickly than they otherwise would. That's really rather bad for those pubs. Whether that increases or decreases social costs depends on your view about which is better positioned to identify and exclude problem gamblers; I'm agnostic. But I'm not agnostic about that most of the measures of gambling social cost assume away the enjoyment that gamblers get from gambling. If we're happy to assume that every dollar spent on gambling by heavy gamblers is a total loss except where it results in a win, it's pretty easy to generate large estimates of gambling's social costs.

You could even make the case that the whole deal could, on the whole, be strongly anti-gambling. Here's the case. Given the SkyCity concession AND that SkyCity has bought itself immunity from other gambling regulations, what happens to political pressure against anti-gambling regs? The immunity clause means that it's in SkyCity's interest that we have much tighter regulations against gambling in other parts of Auckland; it strengthens their position. If you think that gambling is a bad, which I don't, then this deal makes SkyCity closer to a monopoly than it was previously, and makes every future regulation on gambling a pro-SkyCity regulation. If you hate gambling, you want it provided by a monopolist so that there's less of it.

The anti-gambling folks should give their heads a shake and think about the opportunities now available to them if SkyCity can be exempted from their wildest anti-gambling fantasies. I'm glad they haven't, as I don't like monopolies and I think it's ok for people to go and enjoy a flutter at the machines or at the tables. They should consider pushing hard on sinking lids such that SkyCity winds up being the only place left with them. SkyCity will be on their side in that fight. I don't like that outcome, but that's just me.
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Interesting blog bits Paul Walker May 15

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  1. Yasuyuki Todo on Estimating the effect of the TPP on Japan’s growth
    Japan looks set to participate in the Trans-Pacific Partnership (TPP) negotiations. Reflecting the current debate in Japan, this column assesses what effect the Partnership will have on Japan’s growth. Evidence suggests that the economic effects may be far bigger than the current consensus suggests.
  2. Richard Wellings makes The case for raising speed limits
    If major roads were privately owned and freed of government regulation, the setting of speed limits would be a commercial decision. Entrepreneurs would seek to attract customers to their routes in order to maximise toll revenues, and one way of doing so would be to offer fast journey times by allowing high speeds.
  3. Jeffrey Chwieroth and Andrew Walteron on Banking crises and political survival over the long run – why Great Expectations matter
    The economic consequences of financial crises have been systematically explored. Their political consequences haven’t. This column argues that without paying attention to politics, crises will remain poorly understood. After all, politics shapes policy choices, market sentiment and, ultimately, economic outcomes. Evidence from the effects of banking crises over the past century show that crises have a dramatic impact on the survival prospects of governments.
  4. Steve Davies argues Free banking was robust and effective
    In an earlier blog post, Philip Booth discussed the likely scenarios for Scottish monetary policy in the event of Scottish independence and the difficulties, both political and economic, associated with these. What can be very useful is to add historical perspective and to see how things worked out in the past, given that Scotland has an interesting monetary and banking history which is very different from that of England.
  5. Bas van Der Vossen on Libertarian Human Rights?
    When you read about the philosophy of human rights it’s hard to not to notice the nearly complete absence of libertarian input. This post is a call for a libertarian take on human rights.
  6. Balázs Égert on France’s weak economic performance: Sick of taxation?
    France has recorded one of the lowest real per capita income growth levels in the OECD over the last 20 years or so. One of the many structural weaknesses causing this weak performance is the French tax system. This column argues that complexity, instability and non-neutrality coupled with very high effective tax rates in many areas of the French tax system put a heavy burden on the economy.
  7. Tatiana Didier and Sergio Schmukler on Finance and growth in China and India: Have firms benefited from the capital-market expansion?
    The growth of China and India’s financial sectors is hard to ignore. This column presents a new dataset on domestic and international capital raising activity and performance of the publicly listed firms in China and India. The data suggest that expanding capital markets might tend to directly benefit the largest firms – those able to reach some minimum threshold size for issuance. More widespread direct and indirect effects are more difficult to elucidate.
  8. Gary Becker on Alternatives to the War on Drugs
    The 40 year-old American “war on drugs” has been a colossal failure. No progress in dealing with drugs can be expected until that basic truth is recognized. Every conceivable approach has been tried to help the war succeed, such as long prison terms for persons convicted of selling or using drugs, trying to prevent drugs from entering the US from Mexico and other countries, and confiscating huge quantities of drugs (remember The French Connection?). At some point all wars that fail are terminated, and alternative approaches explored. The two main alternatives to the war on drugs are decriminalization and legalization of drugs. Decriminalizing drugs means that using drugs would no longer be a criminal activity, while trafficking in drugs would remain a crime. Legalization of drugs means that trafficking in drugs as well as using drugs would not be a crime.
  9. Richard Posner asks is there a Breakthough in the War on Drugs?
    The publication of a White House “National Drug Control Strategy” is an annual event, which wordily (the 2013 version is 95 pages long) heralds nonexistent progress and makes false promises of more to come. The General Accountability Office has evaluated the 2013 version and found it wanting, noting the government’s lack of progress toward achieviing the goals of diminished drug use stated in the 2010 version.


The Jedi Gap Eric Crampton May 14

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Is there a growing Jedi gap? Or is the Canadian National Household Survey letting us down?

The CBC reports:
Once numbering in the vicinity of 20,000, the ranks of those in this country who claim to be Jedi Knights inspired by Star Wars movies have dwindled to fewer than half that figure, according to Statistics Canada's first release of data from the 2011 National Household Survey.
"A lot less this time. I think there's about 9,000 reporting Jedi," said Jane Badets, a senior analyst at Statistics Canada.
"And that was true elsewhere in other countries. A lot less than in other countries, too, doing censuses. Very low reporting of things like Jedi."
What started as a gag among friends on a British Columbia ski hill ballooned into something of a phenomenon on the 2001 census when thousands of Canadians told Statistics Canada they followed the Jedi religion of Star Wars lore.
But Frances Woolley shows some very large problems with the NHS. Either Canada's ethnic make-up changed radically since 2006, or ethnicity affects one's likelihood of answering voluntary surveys; the latter seems more likely. Canada abandoned the mandatory long-form census in favour of a voluntary alternative set of surveys. Alas, non=response bias seems to be pretty heavy, as was rather expected. And we can't easily measure it. So we can't tell whether Canada has fewer Jedi or whether the drop is an artefact of the change in survey method.

Recall that New Zealand had 20,000 Jedi in 2006; we have yet to see figures from the 2013 Census. Our Census remains mandatory. While we know that while Jedi will not lie, they may refrain from identifying themselves as Jedi if it's voluntary.

This has important national defence implications. While New Zealand has been able to cut defence spending down to trivial levels, trusting in its strong cohort of Jedi in case of any emergency, Canada cannot really tell whether they really need the Joint Strike Fighter because of dwindling Jedi numbers, or whether the Jedi just failed to complete the voluntary forms.

It also has implications for ongoing negotiations in the Trans-Pacific Trade talks. If Canada can no longer rely on Jedi mind tricks to defend supply management in dairy, perhaps New Zealand's Jedi will be able to push us towards free trade.

Our daughter, born on Star Wars Day three years ago, is one of the Jedi in the 2013 New Zealand Census.
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EconTalk this week Paul Walker May 14

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Austin Frakt of Boston University and blogger at The Incidental Economist talks with EconTalk host Russ Roberts about Medicaid and the recent results released from the Oregon Medicaid study, a randomized experiment that looked at individuals with and without access to Medicaid. Recent released results from that study found no significant impact of Medicaid access on basic health measures such as blood pressure and cholesterol levels, but did find reduced financial stress and better mental health. Frakt gives his interpretation of those results and the implications for the Affordable Care Act. The conversation closes with a discussion of the reliability of empirical work in general and how it might or might not affect our positions on social and economic policy.


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