Matt Nolan

A note on delaying the ETS

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Over at Kiwiblog and at the Herald, the idea of delaying the implementation of the ETS is raised.

No matter what Aussie is doing, we shouldn’t do this.  Why?  Delaying the ETS doesn’t delay our Kyoto liability – it just means that we will have higher taxes to pay for the pollution caused in industries that produce pollution.  The point of the ETS is to:

  1. Raise the funds to pay our Kyoto liability,
  2. Set the relative price of carbon production such that it incorporates the full social costs incurred (in this case, this is because we have a liability overseas – so the truth of “global warming” is irrelevant).

So although it might upset some businesses if we don’t delay implementation (in the same way it would upset anyone if you taxed them or took a subsidy off them), we have to look at the other side as well – delaying implementation implies higher income taxes.  Lets not ignore this.

Matt Nolan

And a side note on addiction

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With alcohol regulation we decided to remember that it is the external cost that matters.  Now one reason private costs might matter in terms of regulation is internalities.  There is a discussion of this with regards to boozing here.

This brings me to the idea of “addiction” I discovered from this article.  What is addiction, and why are we so scared of it.  Looking at a search of TVHE, I can tell that the authors here are not scared of addiction, we view it a little differently to the black and white box often given by (say) health professionals (ht Dim Post).

For me, all addiction tells us is that the consumption of the good CHANGES the costs and/or benefits of the consumption of the good in the future.  As a result, what is important is:

  1. Information with regards to how addiction functions (and the costs and benefits of consumption) for people,
  2. Having mechanisms available so people can “pre-commit” to consumption patterns in the face of an addictive good.

When we have these two pieces of the puzzle we can figure out what tax and what institutional policies can be established to improve outcomes with regard to the consumption of this specific good.

There is NOTHING wrong with addiction per see.  If we banned things on the basis of addiction we would ban pretty much everything.

Personally I think of addiction as follows:  A good is addictive if consuming it increases the marginal benefit of consuming it in the future and/or it increases the marginal cost of NOT consuming it in the future.  The first type of addiction is unambiguously good, the second type is not – but it is internalised as long as people know about it, and people are able to deal with issues of time inconsistency.

Matt Nolan

With alcohol regulation remember

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Remember the simple fact that, as long as we believe people are responsible, have better information on themselves, and are better able to make choices regarding themselves then arbitrary regulation (or some lesser combination of these points), then we shouldn’t focus on the entire “social cost (private + external costs)” associated with alcohol when regulating.

The focus should only be on the external cost – the cost placed on other individuals from the choice of one individual.  The private costs are already being taken account of when the choice is made.

As a result, if the calls of a 50% increase in excise tax are not based just on true external costs, but also broader private costs, they are asking for “too much tax” in a strict “efficiency” sense.  They may be doing this as they genuinely dislike alcohol (although the risk of unintended consequences spring to mind here – namely people drinking more alcohol beverages if the cost per alcohol unit is lower, and also people brewing their own), or because they think people are inherently stupid.  However, neither of these reasons seems like a good justification for policy.

For more discussion on this sort of stuff, see Offsetting Behaviour on the policy applications for an earlier BERL report, the search of “alcohol” on his site, our post on policy relevance, and the search of “alcohol” on our site 😉

Update:  Offsetting behaviour (Eric in more detail here), Kiwiblog, and Not PC discuss.

I love this quote from Kiwiblog, “He even went out to Courtenay Place with a Police escort, and said he saw scenes that “no civilized society can relish”.” – if I was behind these scenes Geoff, I’m sorry 😉

Update 2: A facebook group based on Geoff’s quote.

Matt Nolan

Unashamed advertising …

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In the interest of providing more timely information regarding economic information, or at least our view, the firm I work for (Infometrics) has made a Twitter page and a Facebook page.

The purpose of the Twitter page is to put down our first thoughts on data, and links to articles.  The purpose of the Facebook page is to put down links to articles, and provide a medium where people can ask us questions – which we can in turn respond about.  As a result, if you join the Facebook page I suggest going to discussion and starting a new one – it will be like here, except with other economists from Infometrics, and with less ranting from me 😉

Given that one of our authors is from NZIER (and also because they seem like geniunely nice blokes/blokettes) I feel bound to state that they also have a Facebook page and a Twitter account which I follow.

Other economic analysis Facebook pages of note are CIS (Australasian) and Reform (UK)

Finally, and most importantly, don’t forget that TVHE has a Twitter account – where we post links to our sporadic blog posts.  There is no blog Facebook page as that would be intensely pointless given our lack of any fans 😉 .  However, I would gladly join an NZ economics society style page if it is out there somewhere *wink* *wink*

Matt Nolan

The unit of taxation

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While having a quick look of “Failbook” I found this enlightening status update:

Source.

This is one of the reasons why taxing on the basis of a “family” unit instead of an “individual” unit doesn’t make sense to me.  By setting up an arbitrary idea of what a family is you ensure that people arrange their affairs to take advantage of that, and you ensure that people that are either unwilling or unable to enter these arrangements struggle.

People pool resources and work together by forming a family unit if they want to.  Lets just stick to taxing people as individuals, and let individuals in society make the decision on what type of family unit to set up given this equal treatment – after all it is the individuals that make choices.

Matt Nolan

If you are on Facebook …

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Support the Freedom to choose, support more choice, support a known cure for hangovers.  Become a fan of the group “Bring KFC Double Down to New Zealand“.

I don’t particularly want a Double Down, I’m not a big fan of cheese and I like to have a bun.  But I do support more choice.

Update:  Do you think it is called Double Down because it has two pieces of chicken, or because persistent consumption is likely to make you double over with a heart attack – I suspect they are rolling with the double meaning …