Parking fees enrage locals. Again.

Wellington City Council is considering lifting parking fees again because it thinks people are holding on to the spaces too long. The local paper disapproves, as does David Farrar. Now, I’m no expert on the local politics and they may be quite right that this is just a revenue raising measure, despite the council’s position that it’s about turning over parks more quickly. But let’s take the council seriously for a minute and consider whether it is so obviously stupid.

First, there’s nothing wrong with a local government body raising funds for the services it provides. It needs to do that but the question is how it does it. Rates are the most common revenue raising tool, but are not a particularly efficient one since they don’t correct any market problems. Now, parking obviously has an implicit price so it makes sense to raise some revenue from parking fees by setting the price optimally. That allows either lower rates or more service provision, depending upon electors’/ratepayers’/councillors’ (delete as you like) preferences.

DPF and the Dom Post contend that parking times are already optimal because they’re controlled by time limits in addition to the charges. However, there’s no reason to believe that the upper time limit is the optimal stay from a social viewpoint. Read more

A famous fallacy

Apologies for the lack of posting.  I am currently in the process of finalising forecasts at my workplace – which of course involve traveling to the farthest reaches of New Zealand and battling mythical animals.  In many ways its similar to the labours of Hercules – and as a result gives me little chance to post.

However, I do plan to write on the welfare reforms at some point, as its an issue I like to have an opinion on.  This means I have to quickly point out that a lot of commentators and politicians are making a simple error – and they should stop – they are committing the lump of labour fallacy.

Sorry but the government doesn’t actually create jobs per see, outsourcing doesn’t “reduce the stock of jobs” here, and jobs are not the be all and end all of the universe.  What matters is income, living standards, and subjective happiness – issues jobs are related too.  However, the focus on work helps us to miss the point, and convinces politicians to introduce dumb policies that make many, if not all, of us worse off.

Now, time to get back to the Waikato to make battle with their ridiculously strong quarterly retail result.

Cuts at MFAT need some context

The New Zealand Ministry of Foreign Affairs and Trade (MFAT) has today announced that over 300 jobs will be cut. As Phil Goff says, these job losses “…represent one in four Ministry employees”, so there is no doubt that they will hugely affect the Ministry’s capacity; however, the dramatic changes in capacity that will ensue have to be understood in context.

The review of policy expenditure commissioned by the government last year found that:

[Total spending] on policy advice appears to have grown by 24% between 2005/06 and 2010/11 (6% in real terms).

Most of the growth has occurred in MFAT. MFAT’s expenditure on policy advice grew by 72% in nominal terms (47% real) between 2005/06 and 2010/11. If MFAT is excluded, spending on policy advice by all other agencies is estimated to have grown by a nominal 16% (a decline of 0.6% in real terms). Growth in MFAT’s policy advice-related appropriations, which includes funding for international representation, was an estimated nominal 77% (51% real) over that period.

The report shows that, of the $380 million increase in total, nominal expenditure on policy, $180 million was due to MFAT’s expansion. No other agency’s policy expenditure grew by more than $32 million over that time (MAF, if you’re wondering). It may be that MFAT did a lot more work, too, but unless you think that MFAT was doing a terrible job under great duress prior to 2005, it is hard to argue that these cuts will “…undermine the ability of the Ministry to carry out its basic functions”, as Goff claims. Of course, the job losses will be very painful for all of the staff affected, but the growth of the Ministry over recent times makes the large cuts at MFAT no great surprise, given the government’s stated desire for spending restraint. They are also unlikely to be replicated in magnitude at other Ministries, since none have seen the growth in expenditure of MFAT.

Stats NZ smackdown?

It may just be me, but this statement by Statistics New Zealand sounds like an (appropriate) smackdown of this speech from the RBNZ (which we discussed in terms of appropriateness here).

In his speech, the Governor had said that the Reserve Bank’s very rough analysis suggested that the measurement differences could mean our GDP was understated by up to 10 percent.

“Based on Statistics NZ’s detailed knowledge of measuring the economy, I am confident that any measured rise in GDP will be significantly less than that amount,” Mr Bascand said.

I have a word that describes that statement.  BOOM!

High maintenance women?

Female prisoners are far more expensive, per head, than male prisoners. The Dom Post seems to think that’s a bad thing:

Women behind bars are more expensive than even the most dangerous offenders in maximum security, with their daily cost to the country rising by $150 in the past five years.

Only, further down the article we learn that it’s really just because there are so few female prisoners that Corrections can’t achieve the economies of scale that they can with the men.

All of the capital costs associated with the running and maintenance of the facilitates were included in calculating the costs of each prisoner.

“As the numbers of women prisoners are substantially less than that of males, women prisoners draw a larger proportion of capital costs than male prisoners,”…

The cost had increased due to capital investment needed to build additional facilities and upgrade current facilities…

OK, so to recap, very few women are in jail relative to men. They cost far less in total to house than the men. They don’t even need a maximum security women’s jail because there are so few high-risk women. But according to the Dom Post, the problem isn’t all the male offenders, it’s the cost of the women. At least they included the lines about capital costs, I guess…

Who should be discussing the comparability of statistics?

There was an excellent speech by Alan Bollard discussing why New Zealand’s GDP is difficult to compare to other countries – and if we measured things the same way we would not look as poor at all.  This is a great point, and is well made.

However, I’m not dealing with that point here – I’m dealing with the fact that I think its an inappropriate topic to be covered by the governor of the Reserve Bank given our current institutional framework.  Here is my thinking:

  1. When it comes to the idea of comparing international statistics, first responsibility for making sure things are transparent goes to Statistics New Zealand – the group that focuses on these issues, and creating the statistics we use.
  2. If there is a feeling they cannot cover the role of educator for some reason (lack of resources, institutional impediment), it falls on Treasury to make sure the point is clear – or to do research that makes the point.  Treasury is the primary adviser to government descriptive economic issues and should be covering it.
  3. Should Treasury and Statistics New Zealand both ignore the issue – then we have to hope for a strong academic/researcher community to look at these issues and make a point of it when they come up in public.
  4. The Reserve Bank involves a team of top economists focusing independently on important issues of monetary policy and financial stability.  Their success depends heavily on communications, and making the scope of what they can do and control clear.

In this environment, having the head of the Reserve Bank discuss the issue both undermines the roles of Statistics New Zealand and Treasury as researchers and educators, and in turn confuses the public about what the Reserve Bank does and what it can control.

The Bank needs to ensure it is constantly drilling home the message of what it can and can’t do – not making arbitrary statements on the structure of the economy, or issues related directly related to fiscal or government policy (like closing the gap with Australia).

I’m not going to make any friends saying this, but although the speech was excellent putting these types of issues in public through the central bank, rather than having a strong Treasury department performing this role, is a recipe for institutional failure.  You want to know why the public gets confused about what monetary policy is – because of things like this.

Note:  I am not saying that this is the fault of the Bank or the governor per see – someone needs to be saying this message, and we need to ask why Treasury or Statistics NZ aren’t resourced to do it.  For me, that is a significant issue.