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Insights 1: 20 January 2017
Dr Eric Crampton on Oxfam's latest report
 
Dr Bryce Wilkinson on house prices
 
National Portrait: Eric Crampton: economist and original thinker
From good to great
Roger Partridge | Chairman | roger.partridge@nzinitiative.org.nz
At the beginning of 2017, New Zealand finds itself probably in the best position it has been in for decades.

Key figures like economic growth, unemployment and inflation show a country in great shape. The government’s finances are in good shape, and a majority of New Zealanders believe the country is broadly going in the right direction.

Compared internationally, New Zealand fares well. On many international rankings, we appear at or near the top. These rankings show a country in which it is easy to do business, which is getting more competitive and which is delivering a great deal of prosperity to its people.

So we have every reason to be optimistic about New Zealand. Having said that, we have no reason for complacency. In some areas, our country does not deliver prosperity to all our people. In others, we are just performing poorly.

Most obviously, house prices are out of control. Next week, we are expecting the release of Demographia’s new report on housing affordability and we can already guess what it will tell us once again: that we need to get serious about housing reform (whether we have a Housing Minister or not).

In education, we no longer feature on the leaderboard in the international education league tables. The real tragedy is that our education system, though working well for many, is failing children from the least prosperous backgrounds. In this sense, education has become an obstacle to social mobility. We need to work together as a country – parents, teachers, unions and politicians – to improve this situation.

We also need to address productivity growth. As Paul Krugman famously said, productivity is not everything but in the long run it is almost everything. New Zealand is not doing well on productivity, and as a consequence, our GDP-per-capita languishes in the bottom half of the OECD’s rankings. We need to discuss how to do better.

These are the issues that we need to talk about in this election year. Yes, let’s celebrate what is good about New Zealand. But let’s make it even better.  And let’s challenge our politicians to confront the big issues and come up with solutions.

You can count on the team at the Initiative to play our part. We have big plans for 2017, and we look forward to sharing them with you.

Fishing just for the halibut
Dr Randall Bess | Research Fellow | randall.bess@nzinitiative.org.nz
Fisheries management in New Zealand has been resting on its laurels for too long. The Quota Management System was once world-leading. But misreporting catches and illegal discarding have been troublesome. And the split between recreational and commercial shares of a total allowable catch (TAC) remains a political fight.

I travelled to British Columbia (BC) last year to see how fisheries management is approached there. What was of particular interest was that BC has integrated a recreational fishery into a quota-based management system more than anywhere else in the world.

In theory, that kind of integration is something of a Holy Grail. If a recreational fisher gets more value from going out and catching a fish than a commercial fisher gets from catching it, letting recreational fishers bid quota away from the commercial sector just makes sense. But is it feasible in practice?

This integration applies to the BC halibut fishery. The recreational fishing sector is allocated 15 percent of the halibut TAC. The recreational fishing licence restricts fishing to a 1-halibut daily bag limit, a 2-halibut possession limit, a 6-halibut annual limit, a maximum legal size, and the season generally lasts ten months.

Under the BC system, if a recreational fisher wants to fish for halibut beyond the limits and times available under the recreational fishing licence, any excess catch must be covered by leasing commercial halibut quota. Recreational fishers lease quota at market rates, and the lease transaction is easily done online with a credit card.

This solution has proved of most interest to fishers from the land-locked provinces or BC residents who live inland, who then can catch beyond the licence limits during the few days they spend marine fishing. But it is not without controversy. The Sport Fishing Institute of BC objects to it in principle, and strongly prefers the recreational sector instead gains a bigger share of the TAC. Commercial halibut fishers, of course, object to any TAC reallocation without compensation.

Integrating the management of these two fishing sectors has proved pretty expensive on the small trial basis currently underway, but a lot of those costs would be reduced with broader application. If recreational quota leasing proves successful, the political fight over who gets how much fish might well get resolved by letting people trade.

Our upcoming report will walk through what works and doesn’t work in BC and in other overseas locations. Stay tuned.

Pretty people to blame for inequality
Jenesa Jeram | Policy Analyst | jenesa.jeram@nzinitiative.org.nz
Over summer, I’ve been disturbed with how many people shamelessly flaunt their inherited assets. These people are born with a certain privilege. They didn’t work for it, they just have it.

Yes, I know The New Zealand Initiative has previously written about how inequality has barely changed for decades. We’ve argued that many reports on inequality trends, and the likely causes and consequences are often overblown. Those conclusions remain.

But there is one aspect of inequality that frankly, I think we dropped the ball on: beauty inequality.

Visit any well-populated beach in New Zealand and you’ll see it. Those blessed with good genes frolic around with their abs and tans without a care in the world. One cannot help but feel for those less genetically-favoured, who might never enjoy the self-confidence to wear togs in public. The warm weather really does bring out the gap between the haves and have-nots.

For people like me who used to take comfort in the mantra that beauty is on the inside, think again. Studies have shown that the Beauty Premium is a real thing. Good looking people are likely to be paid more, enjoy greater social influence, and can even sway some voters at the ballot box. Pretty people are also more likely to be right-wing. These effects could end up entrenching inequality over generations.

It is time for the government to fix beauty inequality.

There will inevitably be issues in measurement and definitions. Looking at inequality at any point in time is also deceptive. Some people grow into their looks, while some peoples’ looks depreciate over time. The net present value of future assets ought to count. Some might even hide their assets or invest in other things (like education) if there are associated government benefits or tax cuts.

International comparisons of inequality are also hard. What matters more: the levels of inequality across countries, or overall levels of national attractiveness?

An obvious solution to intergenerational inequality would be to ban attractive people procreating with each other. Alternatively, unattractive people should receive some government assistance to mate with better-looking people. Shorter term solutions could include subsidising plastic surgery, and taxing harmful products like Crocs and fleecy trackpants.

Sure, there might be some who have worked hard at the gym, eaten responsibly, and invested much in beauty products to get to the level they are today. Good on them.

But since when did celebrations of success ever make it into an inequality article?

 
On The Record
 
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