jamesz

Alcohol regulation: economists would do it better

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The NZ Law Commission is on the way to cutting back on the availability of alcohol. Their justification is twofold:

  1. The contribution that excessive use of alcohol led to law and order problems in the country.
  2. The serious health and injury effects from alcohol consumption, as well as a list of other social harms.

And the principle they used to weigh these issues: harm minimisation. What, you say: What about weighing the benefits? What indeed! Eric Crampton takes to the second point of the report thoroughly:

The study counts as costs reduced labour productivity. … If we only count costs, then these get included: costs to society via lost output and costs to the government via reduced tax revenues. But if we worry about NET costs rather than gross costs, these have to disappear. Why? Because if I decide to drink and be less productive at work, I’m less likely to get a promotion or a salary increase. My productivity affects my wages. If I decide to be less productive and have a lower expected salary path, that’s between me and my employer: I’m bearing the costs. If I decide to do it, that’s prima facie evidence that I weigh the benefits as greater than the costs.

Not only do they miscount costs, but they also fail to take into account any net benefits: the enjoyment of drinking, or the higher salaries that come with it. Read more

Matt Nolan

More quality quotes from the civil service

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As if they were inspired by yesterday’s post – some civil servants from Housing New Zealand dropped this train of thought:

The submission said listing housing projects as nationally significant would help prevent the delays and extra costs caused by objections from neighbours – “a situation commonly referred to as NIMBY [not in my backyard] opposition”.

So the government should be able to force projects through without regards to the impacts on individuals they aren’t interested in – doesn’t sound like social welfare maximising policy to me.

At least National came out and said this was a bridge too far. Seriously though – where the hell do some of these people get off talking like this. Do they not listen to what they say …

Matt Nolan

Caricature of the libertarian, economist, statist divide

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In my mind there is a simple distinction between the broad brush strokes of libertarianism, the underpinning beliefs of economics, and statism as statements for the scope of government. It goes like this:

Libertarian:

  • Market prices are a good allocation mechanism – therefore market prices make sense.
  • Initial endowment of resources is fair – therefore no need to redistribute initial endowments.

Economist:

  • Market prices are a good allocation mechanism – therefore market prices make sense,
  • Initial endowment of resources is unfair – need a democratic state to define what is fair and redistribute endowments.

Statism:

  • Market prices are a poor allocation mechanism – therefore market prices are not necessarily any good and pragmatic government shifts to prices make sense,
  • Initial endowment of resources is unfair – need a democratic state to define what is fair and redistribute endowments.
Matt Nolan

Raising the drinking age: Not a lifesaver

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Just saw this article courtesy of Greg Mankiw. In the article the authors talk about the impact of rising the drinking age from 18 to 21 in the US. There were two parts – a voluntary lift in some states, and later on a legislated increase for the whole country.

The key bit for me is this (highlighting by me):

The results are striking. Virtually all the life-saving impact of the MLDA21 comes from the few early-adopting states, not from the larger number that resulted from federal pressure. Further, any life-saving effect in those states that first raised the drinking age was only temporary, occurring largely in the first year or two after switching to the MLDA21.

So this isn’t saying that lifting the drinking age is necessarily a bad idea – but that it isn’t necessarily going to save lives either. In the end only the states which did it voluntarily (where it was more of a community effort) had any impact – and even that was only temporary.
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Matt Nolan

Susan Boyle: Revealing institutional settings

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Like pretty much everyone I enjoyed the performance of Susan Boyle on Britain’s got talent.  I love Les Miserables and she did a great performance of an incredibly difficult song from the show.

However, what stirred me up the most was the behaviour of the crowd and judges.  Both were very dismissive to start with – undoubtably a product of the format of the social situation they were in.  Unlike many commentators, I do not believe that the crowd and judges were strictly representative of “most” of reality.

We could argue that this type of social situation represented an extremely concentrated version of reality – so that the implicit biases and signals used in society were amplified, and therefore easier to spot.  If this is the case, the dismissive nature of the crowd illustrates something quite uncomfortable about all of us.

But I disgress – following the judgments, once Miss Boyle illustrated her talent the behaviour of the crowd changed, and changed remarkably.

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jamesz

Does money buy power?

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Dani Rodrik has interesting stuff to say about the way policy is formed. He discusses whether government policy is driven more by the prevailing ideology or by the interests of powerful lobby groups. There are two key ponts he makes:

  1. There are a lot of ways to make the lobbyists happy and many of them also help others, or fit in with the government’s ideology. Therefore it’s often hard to infer the motive from the action. I would add that the inference is often made on the basis of the observer’s personal political views.
  2. So far as he can tell, ideology is usually more important than lobbyists:

    isn’t it the case that the reason trade unions, say, have lost power in recent decades is the ideology of deregulation which swept Washington, D.C.? Or that U.S. auto makers have been unable to get large-scale import protection because this was a no-no in the prevailing ideological climate?… The fact that the U.S. wants fiscal stimulus and Germany doesn’t cannot be explained by the relative power of different groups within those countries. It has much more to do with the way in which their respective governments have defined the problem and the “lessons” of history they have drawn. Similarly, France wants more global regulation in large part because, well, France believes in regulation. Sure, Britain and the U.S. prefer a lighter touch in part because their financial sectors are more powerful–which in turn is due in part to the Reagan-Thatcher ideological revolution.

If we accept Rodrik’s argument then we must ask where these ideologies come from. In a democratic system there is no avoiding the fact that the prevailing views of the government are usually the ones voted for by a plurality of the citizenry. I’d like to think that this is the case because it would disturb me to believe that money can buy power that a democratic majority cannot achieve.