Stats' Philip Walker led off, talking about some of the results from the 2012 General Social Survey (you can find the main results in Stats' August press release). His main point (for me) was the cumulative or multi-factor nature of both happiness and unhappiness: Stats has provided (and Philip bravely demonstrated live) an interactive tool where you can see how people's life satisfaction is linked to their health, income, relationship and housing, and you can see the cumulative impact of being okay across all four dimensions. Virtually nobody is dissatisfied with their lives if they're okay across all four factors.
Then we had lawyer Mai Chen, who talked mainly about the importance of social capital to a society's happy and productive functioning. One interesting idea was that social capital (things like trust) aren't fixed in stone: she wondered, for example, whether people's collective expectations around what governments ought to do, and how they do it, mightn't be changing, instancing the issue of potential compensation for the Pike River victims' families. It mightn't be a strict obligation on the government to pay out, and there are also ongoing social expectations that governments ought to be prudent managers of the public purse and not scatter cash to the four winds, but she sensed that there may well be a growing sense of moral (as opposed to strict legal) obligation developing in the community around both the substance and process of government behaviour.
Shamubeel Eaqub from the NZIER was up next, and his main points were that, first, the impact and benefits of the recent economic recovery have been unevenly spread, with higher-skill occupations in Auckland in particular, and the construction trades in Christchurch, streets ahead of other areas, and, second, that there is generally not enough attention paid to the distribution dimension of aggregate macroeconomic data.
And finally we heard from Major Campbell Roberts from the Salvation Army, who echoed Philip's earlier point about the crippling effect of struggling with multiple disadvantages at once, which he illustrated with a description of the Salvation Army's typical clientele in South Auckland (female with children, Polynesian, poor, no-one in the household in full-time work, in growing debt, pressured by housing costs, and with mental health or substance abuse issues in the family). And he wondered why we couldn't get a clearer statistical view of this group, saying that "what is important to important people" tends to get covered in the official statistics, and that they don't cover enough of what is important to "unimportant" people.
At our table (economists mostly) we wondered about Major Roberts' point in particular: why isn't there a regularly published, in depth, longitudinal study of a large cross-section of the poorer end of the community? And could the Census form the basis of one? I'm told by Someone Who Tends To Know These Things that there is, indeed, a project underway to match data from one Census to the next to see what happened to individuals and households: more than that I don't know at this stage, but it'll make interesting reading if it ever gets done.
In the meantime Stats is publishing more about our social fabric: Liz MacPherson, the Government Statistician, announced that Stats has just put up a new web page showing the latest data across a wide range of social indicators. Editor's note: Originally published at EconomicsNZ 26 November 2013.
Try this three-question quiz Dec 03No Comments
What happened to income inequality across the OECD between the mid-1990s and 2010?
A. Inequality increased
B. Inequality stayed the same
C. Inequality decreased
What happened to income inequality in New Zealand between the mid 1990s and 2010?
A. Inequality increased
B. Inequality stayed the same
C. Inequality decreased
Income inequality in New Zealand between the mid 1990s and 2010...
A. Started lower than in the OECD as a whole, and increased to higher than in the OECD as a whole
B. Started lower than in the OECD as a whole, and increased to much the same as in the OECD as a whole
C. Started higher than in the OECD as a whole, and increased to even higher than in the OECD as a whole
D. Started higher than in the OECD as a whole, and decreased to much the same as in the OECD as a whole
E. Followed some track other than A, B, C or D
How'd you go?
I'm guessing that many folks would pick A, A, and A. Especially as it's almost taken for granted that (a) internationally, inequality must have increased due to ever more grotesque remuneration at the top end of the income scale, and to pressure on lower-wage jobs from competition from Third World non-OECD countries at the lower end of the income scale, and (b) in New Zealand, all of the above, plus the Employment Contracts Act was getting into full swing.
The actual answers, however, are B, C and D.
Here's my source.
Editor's note: and with this post, we welcome Donal Curtin of EconomicsNZ to the Dismal Science SciBlogs feed. At EconomicsNZ, Donal highlights the intricacies of regulation and competition policy.
Wage gaps and maternity Dec 03No Comments
We ﬁnd that each of the ﬁrst children has a large impact on female earnings, which on average are reduced by 16%. The largest decrease in earnings are driven by women with average earnings reducing their labor supply and thereby earn less. There are small effects on earnings for those who are marginally employed or women in the higher end of the earnings distribution. Labor force participation is not affected much by having children, indicating that in the Norwegian context, the combination of market work and family obligations is clearly feasible. The intensity of market work is however reduced. Women work on average 2 hours less per week per child, and the effect does not decrease (much) when the child grows older. Motherhood therefore plays a signiﬁcant role in explaining female part-time work. We ﬁnd no evidence of an adverse health effect of having children as neither sickness absence not disability seem to increase due to motherhood.
Teach the Debate! Dec 02No Comments
The Guardian has been running a series of half-baked critiques of economics. While economists of left and right recognize them as humbug, demand for humbug remains as strong as ever.
Chris Auld responds by recasting an essay by biologists critical of the idea that schools should "teach the controversy" about intelligent design:
What is wrong with the notion that students should acquire the skills of critical thinking by grappling with the controversies surrounding mainstream economic theory? I argue, first, that materials offered by opponents of mainstream economics are actually designed to misinform and obfuscate the real controversies in economics. Educational materials offered to encourage “critical thinking” consist mainly of “evidence against” mainstream economics — a “catalogue” of specific cases for which economic theory has presumably failed to provide a complete or compelling explanation.He continues, but you can head there to read the whole thing. Auld concludes:
Second, I argue that opponents of mainstream economics confuse the source of economic controversies in two important ways. The first is semantic; Mainstream economics is incorrectly equated with Neoclassical economics, which in turn is incorrectly equated with all modern economic theory. Materials from the Guardian, for example, typically trumpet the shortcomings of neoclassical theory—conveniently ignoring more than a century of research that has expanded, modified, and some cases, even replaced strictly “neoclassical” ideas about economics.
The gist of the article is that creationists commonly attack introductory biology textbooks on highly questionable and ideologically-motivated grounds, pounce on errors or outdated information in such textbooks, and demand that the obscure and/or scientifically invalid theories which conform to their religious ideology be taught along with mainstream biology.I note the difference between academic and professional degrees: it is increasingly difficult to provide academic training in economics in New Zealand. We've been holding the line at Canterbury, keeping the core math theory in our three year undergraduate degree so we can focus on more interesting applications at Honours level rather than using the Honours year to teach the math they missed at undergrad.
I do not mean to imply that economic theory is as well-understood as the fact that evolution occurred (although evolutionary theory—modeling how evolution actually occurred—is subject to many of the same limitations as economic theory, and is often based on strikingly similar formalisms). But I do think that the criticism of undergraduate education in economics offered by the Guardian parallels in form and intent attacks by creationists on introductory education in biology: they are thinly-veiled attacks on the discipline itself rather than course content, and they are offered by people with no real understanding of the actual scientific issues on misguided ideological grounds. The only substantive difference is in one case the ideology is religious and in the other it’s political.
There are actually problems with undergraduate education in economics. The point of an academic, as opposed to a professional, degree is to train students to understand and perhaps, if they continue their studies, to contribute to the research literature. Judged relative to that goal, the current curriculum is not sufficiently mathematical and places far too much emphasis on theory relative to empirics, amongst other problems. Some long-standing core material (e.g, the Marshallian theory of the firm) could be ditched to make space to cover more recent theoretical developments and empirical results and methods. This will happen over time, and hopefully we can prompt it along.
But the Guardian and its fellow travellers have quite a different set of reform criteria. Their criteria are political, not scientific. No, we don’t need more courses in Marxian economics, for example. Marxian economics comprises zero percent (give or take) of the academic literature, and thus under the criterion above for academic degrees, even if one thought Marxian approaches superior it would be irresponsible to replace large portions of the curriculum with Marxian theory. It would also be infeasible, as there are zero Marxian economists in the vast majority of economics departments.
I'll further note Auld's rather trenchant critique of "teach the controversy" in case there's suggestion that we need to re-do our undergraduate programmes to take account of the Guardian/Manchester critique.
Social Bonds Dec 02No Comments
In short, NGOs and private providers interested in delivering projects they think will achieve objectives sought by the government, whether initiatives to reduce criminals' recidivism rates or to help drug addicts get clean, can pursue funding for their initiatives through a bond issue. If they beat the programme's target expectations, the investors get a nice return scaling with the project's success. If they don't the investors lose out.
The project certainly looks worth trialing.
KPMG provided a case study based on alcohol intervention programmes. I rather like the idea: projects then are targeted at truly harmful use rather than broader interventions. Unfortunately, they illustrated some of the potential savings from such initiatives by pulling in social cost figures from the BERL report. However, they do provide a nice caveat in Appendix 3:
The Berl analysis has been independently critiqued and it is likely the social costs have been overestimated.22 The analysis is referred to in this business case to illustrate the social cost, not provide evidence of the social cost. The scale of total costs and the comparative proportions of the cost components should not be relied on for the Social Bonds pilot, however the work does provide an illustration of the different types of social costs that should be considered for alcohol and drugs.They do correctly note that there are large potential benefits in reductions in costs to the health and justice sectors from targeted interventions for harmful drug and alcohol use, even if these are overestimated in the Berl report.
I told Rebecca:
Social bonds let investors bet on the interventions they think will work in reducing social problems. This provides rather a few advantages, not the least of which is forcing the use of measurable and achievable performance indicators. While I hope the business cases for particular bond issues will be a bit more robust than the case study provided by KPMG, and that Treasury will be keeping an eye on things to ensure realistic estimates of potential social benefits, the initiative seems well worthwhile.
Olympics don’t pay Nov 291 Comment
Kay writes that the principal relevant facts are these:
The first detailed specification of what was needed for London to host the games was drawn up in 2002 by Arup. The report by the engineering and planning consultancy put the cost at £1.8bn, much of it to be privately financed. An extended assessment was then commissioned by the Department of Culture, Media and Sport from PwC. The financial consultancy’s 2003 report estimated the total cost at £3.1bn, requiring a public subsidy of £1.3bn. The balance would be recovered from the private sector and from asset sales after the games. According to PwC’s risk assessment, the probability that the taxpayer would need to provide as much as £2bn was less than 5 per cent.and
The budget had by 2007 increased to about £6.5bn. At Treasury insistence, a contingency allowance, mostly unspecific, of £2.8bn – more than the total original projected cost – was added. The costs of land acquisition and of the Olympic Village were mostly excluded in the belief that they would be recovered from property sales after the event.But what, you may ask, of the claims that the games “within budget”?
The basis of the claim that the games came in “within budget” seems to be that a small part – currently £300m-£400m – of that £2.8bn contingency remains unspent. That was achieved, however, by excluding a number of additional unbudgeted expenditures from the calculation, as the National Audit Office has highlighted. There is likely to be little, if any, net recovery of the further costs of land and housing, which were due to be recouped from property sales.Kay continues,
The costs were grossly and persistently underestimated, and the financial contributions anticipated from private sources overestimated by very large amounts. Every year, to the present day, the expected cost rose and the likely revenues diminished. The cost of the games to public funds has proved to be about 10 times the original estimate.
There is a halo effect; the sporting success of the Olympics fosters the mistaken belief that they were an economic success. Papers recently produced by government on the “economic benefits” must be an embarrassment to the many good people of the Government Economic Service, conflating incommensurable monetary amounts and confusing costs with benefits. At the same time, a curious puritanism requires politicians to pretend activities intended to make us feel good about ourselves are justified by their contribution to “the economy”. The Olympiad was a good party, which cost the British population about £200 per head.Kay then makes the important point that false accounts of the past prevent us learning lessons for the future, of which, he argues, there are many.
The Olympics remind us that enthusiasts typically understate costs and overstate benefits. Consultants win work by pleasing clients, and they rarely please clients by pouring cold water on their pet schemes. We should waste no more public money on risk simulations such as those in the PwC report; the outcome in this case was one of these supposedly statistically impossible events that seem nevertheless to occur on a daily basis. Establishing an allowance for “optimism bias” is realistic, but offers little incentive to make careful projections in the first place. Money put in a budget for general contingencies is not money you are likely to see again.Just when will governments, and taxpayers, learn that big sporting events, be it the Olympics or the rugby world cup or the America's cup, don't make economic sense. And thus taxpayer money spent on them is taxpayer money wasted.
Duty Free Nov 29No Comments
First, recall that excise is imposed not for the purpose of revenue generation, but rather (ideally) as a quasi-Pigovean charge to internalise external costs of consumption, noting however that current tobacco excise is roughly three times any cost smokers impose on the government through the public health system. "Lost revenue" matters a lot less than whether we've messed up relative prices.
Visitors to New Zealand bringing tobacco or alcohol products with them for their own consumption while here should not be subject to excise taxation on those imports where excise is intended to defray the costs to the public health system involved with the consumption of those products. Tourists will go home and eventually potentially impose costs on their own public health systems for tobacco consumed while here, but are not likely to impose costs in New Zealand. Alcohol could potentially lead to the imposition of social cost if someone flies here, gets drunk, and does silly things. We then need a balancing between the expected social cost per unit import and the cost of collecting duties and tariffs at point of import. Excise on spirits is $50 per litre of pure alcohol; the duty-free concession is three bottles of spirits that would likely contain about 1.35 litres of pure alcohol, or $67.50 in tariff. A very small portion of that would represent potential expected costs that could be imposed on the New Zealand government through the consumption of the imported product by foreign tourists. But note too that we make many other concessions to foreign visitors because the cost of charging them would be a hassle. Tourists are given free coverage for minimal accident treatment by ACC without paying premiums despite that a small ACC levy imposed at the border would be pretty straightforward. Any of these measures that slow down processing at the border and annoy tourists risk imposing cost rather in excess of the potential benefit.
Returning residents are a bit different. Whether a Kiwi consumes alcohol or tobacco brought with them from abroad or bought at the local shoppes, the external costs are the same. A duty free limit then should be set simply in recognition of that it can be more expensive to collect taxes at the border from returning residents than to run those taxes within the country. There are perfectly legitimate, non tax avoidance reasons for bringing in product from abroad. When I go home to Canada, I like to bring back ice wine that's otherwise here hard to get. Smokers may wish to find products that are different from those commonly available here. We also have a personal goods concession allowing the import of goods valued up to $700. This gives us a bit of a benchmark on Customs' expected hassle-cost of collecting taxes at the border. If it isn't worth hassling an incoming returning resident for $100 in GST because of collection costs, it would be surprising if it were worth hassling an incoming returning resident for $67 in excise. Presumably the import allowances are set with a recognition of that returning residents will often have a combination of personal goods, tobacco and alcohol. The threshold for imposing hassles at the border is then pretty high, because hassle costs at the border are pretty high.
Where Edwards has a reasonable point is that as excise increases, the duty-free allowance should presumably change. The higher is excise, the lower should be the duty-free allowance because it will be easier to hit the break-even point where excise matches the transaction cost of collecting it. I've not seen the time path on the personal concession for tobacco product. If it isn't lower now than it was a decade ago, there could be grounds for checking whether it should go down a bit. But were the personal limit to be lowered substantially, we'd need a separate and higher limit for incoming tourists. And that too imposes hassle costs.
Finally, it isn't hard to imagine second-best arguments where, if consumption among higher income cohorts is less likely to impose substantial external harm - they tend to have private health insurance, for starters - then duty-free imports for jet-setters is one way of having excise rates that scale appropriately.
In other news, the NBR reports that changes are afoot for low-value GST exemptions on imports. I really hope that whatever regime they come up with recognizes the potentially large fixed cost imposed on any import when you make online shoppers go through an extra hassle step to collect the goods they're buying. It would be very very easy for regulations here to turn into protectionism for local inefficient retailers.
Driving while…. Nov 29No Comments
A few "driving while" risks:“It isn’t particularly surprising that driving while hung over increases accident risk. I would expect that driving while suffering from a very bad cold and headache, or driving with the flu, or being pretty tired, would have similar effect. In all of these we have to remember that increases in relative risk can be much larger than the actual risk imposed: if I’m thousands of times more likely to be killed by an asteroid when standing outside than while hiding in a bomb shelter, I’m still not very likely to be killed by an asteroid.”“The reported risk increase here is more substantial than driving at .05. Drivers in the .05 to .08 range are about five times more likely to have an accident than someone who is sober, which is just a bit riskier than driving while having a conversation on a hands-free cellphone. I expect all of these are slightly less risky than driving with my five and three year olds in the back seat when they have conflicting views about what should be on the radio.”
- Driving while using a cell phone, whether hands-free or not, is about four times riskier than baseline.
- Driving while using a cell phone, in simulator, is about as risky as driving while at .08, whether hands-free or not.
- But note that a really rather nice regression discontinuity design shows no real effect, and a potential upper-bound risk estimate around 3 times baseline. Ungated discussion here.
- If you're getting six hours of sleep per night, you're driving at the equivalent of .05. If you've been awake for 24 hours, you're comparable to someone at .10.
- Should we ban new parents from driving on basis of likely sleep deprivation?
- Older adults with cataracts (but still allowed to drive) were 2.5 times as likely to have had a history of at-fault crashes than those without cataracts.
- Old people and young people are risky. Compared to 30-59 year olds (baseline), those over 70 have twice the risk of fatal accident involvement, as do 19 year olds. A 16 year old with passengers is 4.72 times as risky as a 30-59 year old with passengers; a 20-24 year old with passengers is 2.54 times as risky.
- Drivers over the age of 85 had 10.62 times the baseline risk of multiple-vehicle accidents at intersections and 3.74 times baseline risk elsewhere.
- Drivers in the .05-.079 range are 5.5 times baseline risk; those above .08 are much riskier (15.5 times baseline). Same study has no increased risk for cannabis, but combinations of alcohol and other drugs were very risky.
- People who are left-handed have 2.35 times baseline accident risk.
- Not including any alcohol-related accidents, time of day matters a lot. Driving at 4 in the morning is 5.7 times as risky for accidents as driving at 10-11 am; they chalk it up to sleepiness. Maybe we should just have curfews.
- Children in the back seats, by age and number
- Finding a screamed-for child's toy on the floor of the back seat while driving
- Stopping child from kicking the back of the seat
- Resolving disputes about whether it's her turn for music or his turn for audiobooks
- Enforcing bargains made in the back seat by the children with respect to turns
- Driving after child in toilet training in back seat announces "I need to make a pee"
- Note that post-quake Christchurch, with portaloos everywhere, was rather good on this front.
- Indulging a five-year old's preference to dungeon master me through a scenario he's inventing on the go and trying to keep track of the rule changes he keeps making.
- Checking the speedometer every 30 seconds on windy and hilly roads to make sure that you haven't varied by more than 4kph from the speed limit.
- And, finally, Sue Ellen Mishke
- People with latent toxiplasmosis (from cats) have 2.65 times the baseline risk of car accident. That's the average. For those with high levels of toxiplasmosis antibodies, the risk is 16 times higher. People with high levels of toxiplasmosis are worse than people driving above .08. See also here.
- Some of the evidence on risks associated with having a cold, though I haven't the time today to calculate odds ratios from their presented data. See also here.
What’s okay to buy and sell? Nov 28No Comments
If the above doesn't work try this link.
23 and Me skepticism Nov 2824 Comments
Further, I would love to subscribe to a service like 23 And Me. But I haven't yet.
Let me reframe things just a bit.
We've recently found out that the NSA has basically been able to see everything that Google sees. And Google knows just about everything about me. I have zero worries about Google knowing everything about me - they just use it to better target ads, and I see that as a plus rather than a minus. They might turn ads from a nuisance to offers to sell me things I'd actually value at more than their selling price? Oh Nos! But having that big database of everything just sitting there is way too tempting for government. What they can't subpoena from it, they'll hack their way into and steal. Things that seemed kinda crazy conspiracy theory territory just a couple years ago... well, priors get updated.
23 and Me, run by Anne Wojcicki, Sergei Brin's partner, is putting together a great big database of everybody's DNA. Sure, for now, they've not run the full analysis along all base-pairs, just key markers. But we'll get there as costs drop. Eventually they'll have a great big searchable database of millions of people's DNA. And it will be great, just like Google is great. We'll find out all kinds of associations between genotype and phenotype we'd never otherwise have known about. Rare diseases will get spotted early, lives will be saved. Maybe we'll even get some kind of merger with Google profiles to make it even more accurate. And the ads I get will be even better (again, I see as a plus).
But a database like that is awfully tempting, isn't it? The first temptation will be searches for matches against samples from crime scenes. Even identifying the close kin of criminals can help pin them down. And it will be popular. Because finding and stopping criminals is popular. So warrants asking 23 and Me if they have any matches for particular samples will go down a treat.
Then we'll start seeing 23 and Me elevated risk profiles for criminal activity. Parents will want to know if their kids are at higher risk for antisociality in their teenaged years, so we'll see these start showing up in their profiles.
And my won't those profiles be tempting. And we know that Google's been way less vigilant against designing things to harden against government attacks. Where that's normally irrelevant, it's pretty hard to believe that we'd have that different a culture in a company run by Brin's wife.
The odds of all this turning into pre-crime identification are pretty low. Maybe 5%.* But downside costs seem high.
If a service like 23 and Me started up in China, I'd likely sign up. I cannot imagine the Chinese government giving two whits about the genetic profile of individuals in New Zealand, or their being at all likely to respond positively to subpoenas from America or elsewhere asking to trawl through their databases. And they at least try to keep the NSA out of their stuff.
Transactions costs to New Zealand kept us from signing up to 23 and Me a few years ago. For once, I'm kinda glad about those kinds of costs.
* I suggested a bet with Bryan Caplan on this stuff on Twitter. He reckoned 1% chance; I'd thrown up a 10% ballpark. We've settled on 5%, but need to flesh out the details. I'd expect something like "If, by 2025, mainstream media reports that government agencies are using DNA database profiling to find groups more likely to commit crimes, and uses the information to target social assistance or criminal justice agencies for crime prevention, Bryan owes Eric $20. Otherwise, Eric owes Bryan $1. If the FDA mess effectively closes down 23 and Me (substantial drops in subscriber base), bet's off: it's a conditional bet."
I'd be happy to go to one chance in four that 23 and Me is served a warrant asking them to match crime scene samples against their database by 2025 as well.