Eric Crampton

Dr Eric Crampton joined the New Zealand Initiative as Head of Research in August, 2014. He served as Lecturer and Senior Lecturer in Economics at the Department of Economics & Finance at the University of Canterbury from November 2003 until July 2014. The Dismal Science syndicates some of his blog posts from Offsetting Behaviour. Eric is on Twitter @ericcrampton

Getting to Net Zero - The Dismal Science

Apr 12, 2021

We have not been fans of the Climate Change Commission’s draft report. New Zealand has an Emissions Trading Scheme with a binding cap, and a declining path for net emissions in the covered sector. Measures taken within the covered sector cannot reduce net emissions. NZU not purchased by one sector get purchased and used by another. Regulatory measures around coal boilers or electric cars can affect the price of NZU, and will affect which sectors move earlier or later in reducing emissions, but they cannot affect the quantum of emissions. Like, imagine you have a crate of 12 beers and 12 thirsty people, each of whom would be pretty happy to drink 2 or 3. They run an auction to decide who gets the scarce beers. The thirstiest folks drink two, others cut back to a half or none. The money … Read More

Important vaccination stats to keep in mind - The Dismal Science

Mar 13, 2021

Thomas Lumley runs the numbers on herd immunity and vaccination: Cutting transmission by 90% would need nearly everyone to be vaccinated. What if only 50% were vaccinated? Well, suppose someone with the virus would have passed it on to two people, but one of them is vaccinated. Instead of two new cases, we get one new case. Or, in a super-spreader event, suppose they would have passed it on to 10 people, but half of them of them are vaccinated. Instead of 10 cases, we get maybe four or five or six cases. If infected and vaccinated people were spread evenly throughout the country, 50% vaccination would reduce transmission by 50%x90%=45%. For every 100 cases before vaccination we would average only 55 cases after vaccination. Is that enough? Unfortunately not. Under the same approximation about even spread, the R … Read More

Vaccination priorities - The Dismal Science

Mar 10, 2021

Chris Hipkins announced some of the government’s prioritisation for the coming vaccination campaign.  I don’t quite get it, given the situation here differs considerably from the situation abroad. Here and abroad, there’s been priority on those at most risk. But who’s at most risk differs. Here, it’s people working in the border system, and the government has been entirely correct to prioritise those workers and their families. That absolutely makes sense. They’re also prioritising South Auckland, where we have had outbreaks because that’s where leakages from the border system turns up. But the rest of it is sounding way too much like prioritisation for MIQ. They’re looking at having a national significance category which will let them vaccinate anyone who the government wants to be able to travel abroad, like for representing NZ in sport. And then they’re having another … Read More

Border Costs - The Dismal Science

Mar 02, 2021

Cecile Meier walks us through some of the costs of a border system that has neither been able to safely scale up to meet need, nor able to find any reasonable way of prioritising entry into those scarce MIQ spaces. When Zane Gillbee hugged his family goodbye in South Africa before moving to Wellington, his daughter Lyla was still a baby and his son Callum a happy seven-year-old. Lyla is now a potty-trained, walking, talking two-and-a-half-year-old and Gillbee has missed it all. Callum, who is about to turn 9, has been diagnosed with separation anxiety and is on medication for it. Zane Gillbee is one of the hundreds of skilled migrants who moved to New Zealand for a better life before Covid-19 hit, expecting his family to follow. There are a lot of people in this situation, but not … Read More

Blessed are they that have not seen the model, and yet have believed - The Dismal Science

Mar 02, 2021

The Climate Change Commission’s recommendations span the breadth of the economy. They are required to come up with sector-by-sector climate budgets consistent with getting New Zealand with net zero emissions under the Zero Carbon Act. The sector-by-sector budgets rest on underlying models. The models build predictions about what will happen as ETS prices rise, and what will happen when some additional constraints are put into the system. Some of the CCC’s recommendations then mandate what they think are their best guesses about what a carbon price would do, subject to those constraints. The scope is vast. The entire economy, really. And the Government has already signaled that it will just do whatever the Commission says to do. So getting things right seems to matter and is rather high stakes. In that kind of situation, you’d think that the underlying models … Read More

For a bigger carbon dividend - The Dismal Science

Mar 01, 2021

New Zealand has an excellent Emissions Trading Scheme covering everything except agriculture – a non-trivial exclusion, but we can come back to that later. The ETS has a cap. Net emissions from the covered sector cannot exceed the cap. So any other regulations that affect sectors covered by the cap only shift things around within the cap and affect the ETS price. They do not affect the quantum of net emissions. The Climate Commission has been proposing a lot of things that look a bit nuts when we recognise that the sectors they’re hitting are encompassed by the cap. The Climate Commission has been advancing what seem untenable justifications for things like banning new houses from having gas heating systems – they claim to be protecting consumers against having stranded assets when ETS prices make gas too expensive to run. Read More

Test, test, test - The Dismal Science

Feb 18, 2021

My column over at Newsroom this week points out the fairly obvious. The government can add daily saliva testing for everyone at the border to the existing testing regimen. If daily testing winds up proving the swab tests to be redundant, ditch the swab tests when we find that out. If it turns out they’re both useful, keep both. And in the very unlikely chance that the saliva tests wind up being redundant, they won’t have cost much. From the column: Saliva-based PCR testing is a game-changer. It is at least as accurate as the swab tests currently used, but has several advantages over the swab test. Because it relies only on saliva collection, it does not need scarce medical professionals to gather the samples. Availability of nursing staff is a substantial constraint in the system – and especially … Read More

Forests and intertemporal equilibrium - The Dismal Science

Feb 17, 2021

I’m a bit of an ETS-absolutist. Or at least a carbon-pricing absolutist, in a place the size of NZ. I think the Weitzman reasons for preferring a carbon tax to an ETS are second-order relative to political economy considerations, and any weight at all put on switching costs makes it ludicrous to want NZ to flip from an ETS to a carbon tax.  But if a carbon tax were already in place, I’d be an absolutist about supporting the carbon tax. There are fun and interesting arguments around tech-forcing, but NZ’s not at the scale where that even really comes into play except maybe around ag biotech. So, prices are the way to go. One of the big things I hear from non-economists pushing back on it is around future generations. Here’s my version of what I get a lot … Read More

JEEM - The Dismal Science

Jan 19, 2021

Getting to Browser Tab Zero so I can reboot the computer is awfully hard when the one open tab is a Table of Contents for the Journal of Environmental Economics and Management, and every issue has more stuff I want to read. A few highlights: Gugler et al demonstrating the effectiveness of British carbon pricing over German regulatory interventions in the electricity market. Carbon prices were far more effective in getting to a cleaner power grid. Steven Smith on prior appropriation versus proportional division in allocating water rights, leveraging a neat natural experiment (the formation of Colorado forcing a change in water rights). They suggest proportional rights (think: NZ’s way of divvying up fishing rights within a total allowable catch) can get you to higher yields and higher-valued crops; water markets can work around inefficient allocations in either … Read More

Vaccines are cheap - The Dismal Science

Jan 19, 2021

Israel chose to pay a bit over the odds for the Pfizer vaccine to get earlier access. Here’s The Times of Israel from 16 November. American government will be charged $39 for each two-shot dose, and the European bloc even less, but Jerusalem said to agree to pay $56. Israel has now vaccinated more than 80% of their elderly population and is getting the second doses into arms. I do not know what New Zealand is paying. But suppose we’re paying the same as the US. For only $85 million USD more, or just under $120m NZD more, we might have also had early access. $120m sounds like a lot in normal times. But if it meant that we could have everyone vaccinated from mid-year, instead of starting to roll-out vaccination from mid-year, we’d be able to open the … Read More