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Insights 8: 16 March 2018
Dr Eric Crampton talks to Radio Ngati Porou about our latest research report, Score!
 
Latest report: Score! Transforming NCEA data
 
There is no good reason for a sugar tax, writes Dr Eric Crampton in the Dominion Post
Trump and other hypocrites
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
US President Donald Trump’s new protectionism is populist, wrong and dangerous. Sadly, that does not mean that his loudest opponents can automatically claim the moral high ground.

Since David Ricardo explained in 1817 why countries trading with each other are always better off without trade restrictions, the economics profession has been in favour of free trade.

History has since provided plenty of examples to support Ricardo’s theory.

Neither theory nor practice prevented Trump’s attack on trade over the past weeks. First, he imposed steel and aluminium tariffs. Now, he has threatened European carmakers with high import duties.

Ironically, as a politician President Trump behaves differently from the property entrepreneur he once was. When his own company once needed aluminium for the façade of a new hotel in Chicago, he was all too happy to accept a bargain price and imported the materials from China.

Trump is hypocritical as he now opposes the same trade practices he personally benefitted from.

But Trump’s opponents do not lack in hypocrisy, either. The same people now crying the loudest about Trump’s war on free trade could do with a look in the mirror.

For a start, the European Union has been vocal in its opposition to Trump’s new tariffs. How dare Trump threaten Mercedes and BMW with new import duties, they complain.

Well, the Europeans’ own track record on car imports is not that impressive either. Tariffs on imported cars are 2.5 percent in the US – but 10 percent in the EU.

If the Europeans cared for their credibility and economic efficiency, they should slash their own car import duties to 2.5 percent (or, better still, to zero).

Trump’s attack on steel and aluminium imports should also sound familiar to the Europeans. Their own anti-dumping department has been busy shielding the European market from allegedly unfair competition for more than a decade.

On most measures, the EU is more protectionist than the US, with an average weighted tariff of 3 percent compared with the US’ 2.4 percent.

Even here in New Zealand, we should be careful with critiquing Trump’s protectionism. Though generally free-trading, we still charge duties on items such as shoes, accessories and clothing for no good reason.

When discussing free trade, most governments sit in their own glasshouses.

Trump’s protectionism deserves a response. But it should be an even greater commitment to free trade, not retaliation.

NCEA and subprime credit
Anonymous Teacher | insights@nzinitiative.org.nz
When concerned parents ask me why kids all seem to pass NCEA with little or no effort, I sometimes use the subprime mortgage crisis as an analogy. This is how it goes.
 
In the early-noughties, American banks ran out of credit-worthy customers. This lack stunted growth and profit, particularly in the market for mortgage-backed securities (i.e. bundles of mortgage debt). So the banks changed the rules. Under the new rules, even a ninja—someone with no income and no job—could get mortgage credit. Everyone was happy: the banks, the markets, the ninjas.
 
Around the same time, New Zealand’s education establishment decided that having only half the population get credit for their schooling was limiting the country’s growth. NCEA was the answer. All kinds of new, fun subjects were introduced, and teachers were instructed to only assess a student once sure they would pass. Helped by government-mandated targets, the number of credit-worthy students exploded. Everyone was happy: parents, principals, politicians, and, I guess, the newly credit-worthy.
 
Subprime mortgage credit took longer than expected to ruin the global economy because the ratings agencies spent years rating junk credit as AAA and the regulatory bodies turned a blind eye. Burying the junk in bundles of “good” credit, the banks created financial instruments so complex that almost no one understood them. Anyone who bought a bundle of credit had no way of knowing its exact contents. When the system could no longer bury the junk deep enough, it wasn’t just a few million ninjas who lost their homes.
 
When concerned parents ask me what this has to do with NCEA, I tell them that while NCEA results have enjoyed an impressive bull run our results in international league tables have slid constantly backwards. I tell them that we know that 40 percent of school leavers with NCEA Level 2 are functionally illiterate and innumerate. And I tell them that the easy targets — mostly the brown and poor — on whom NCEA foists the easiest credit, suffer most from what, in almost any other circumstance, would be called fraud.
 
I close by admitting that I don’t know how NCEA’s subprime credit crisis is going to play out, or how long it will take for public confidence to falter and support to be withdrawn. But I do warn parents to keep their children away from the peddlers of easy credit. Because today’s children will end up paying.

Less really is more
Richard Baker | Research Director | richard.baker@nzinitiative.org.nz
An Auckland apartment complex has just taken advantage of the new Unitary plan and opened without any carparks.

The developers point out the proximity of public transport.

This is a genuinely excellent example of bold thinking which appeals to, and can reveal, consumer preferences. Bravo!

But, in a flight of fancy perhaps, why stop at car parks?

I have always had a problem with kitchens. They are places that vegetables come from. They are also where dishes have to be rinsed, stacked and washed. All those cold, hard surfaces have to be wiped and cleaned and there are few places to hide. There is no sound system or TV and no comfortable sofa.

While beer resides in the fridge, one typically has to run a gauntlet to get there, and back. Eagle eyed and omnipresent cleaning compliance persons run regular patrols. These are people not to be trifled with and they hold the authority to seriously disrupt viewing times and chill any atmosphere.

So let’s build kitchen-less apartments. Beer fridges can be placed in viewing areas alongside dedicated WIFI connections to the local pizza, sushi, fish and chip, kebab, burger or Chinese food supply facilities.

Recycling chutes can connect all apartments and efficiently handle all food waste, cartons, tubs, straws, bottles, wraps, sauce containers and napkins. Think of it as a communal digestive tract.

Next up must be the bedrooms. If the viewing sofa is sufficiently long and comfortable it can serve perfectly as a place to get the minimum 12 hours a night repose. All that is required is a remote control to turn off appliances and lights.

Combining the eating, watching and sleeping spaces into one sofa neatly avoids the cleaning compliance persons who are known to patrol bedrooms as well as kitchens. No more is one compelled to disinfect fetid old piles of clothes.

Getting rid of bathrooms must be the ultimate nirvana. Why not an apartment complex with one communal cubicle. Seats can be left up or down, toothpaste wherever and a professional cleaning service comes in once every few months. What could be simpler.

The savings in floorspace are mind boggling when one thinks about it, and believe me I have. A modest 6 level complex could accommodate over 7,623 people.

The possibilities are legion. It is comforting to know that in this less restrictive unitary plan environment the market, consumer preference and price signalling can really come into their own, especially with a beer fridge.

 
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