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| Dr Eric Crampton | Chief Economist | eric.crampton@nzinitiative.org.nz | ||||||||||||
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In early October, the race was much closer to a fair coin toss. But over the past three weeks, Trump's chances, across a range of markets, rose to about 65% before falling back to just under 60%. There have been arguments that wealthy supporters have been trying to inflate Trump’s perceived chances by betting on him. But prediction markets are self-correcting. If some traders try to skew the odds, everyone else can profit by taking the other side of their bets. It is not just a theoretical prediction. It has also been demonstrated in lab experiments. Adding these kinds of ‘manipulators’ increased the prediction market’s accuracy. Consider a simple analogy. If you are pretty good at cards, you might be more likely to show up for poker night if you know that a millionaire who is a terrible gambler will be attending. So, there are about two chances in five that America will avoid a second Trump presidency. If you think those odds are wrong, Kiwis can trade at Australia’s BetFair. The markets there are thick: you could put $100,000 into the market either for or against Trump with negligible effects on the odds. Neither election outcome is particularly appealing. Both parties’ shift toward protectionism is well-canvassed. Less appreciated is the accelerating drift away from fiscal discipline. Under current policy settings America’s debt-to-GDP ratio is on track to hit 125% by 2035. The Committee for a Responsible Federal Budget’s projections have it rising to 134% under Harris’s policies and 143% under Trump’s. Harris’s Democrats are likely to stifle technological innovation through punitive use of competition law and regulatory policy. Meanwhile, Trump says he would appoint Robert Kennedy Jr, who has argued that Wi-Fi causes cancer and ‘leaky brain’, to deal with health and food policy. But policy differences between the two parties are probably the least important aspect of this election. Gracefully conceding a lost election rather than encouraging riots should be a minimum prerequisite for winning a party’s nomination. Instead, America’s electorate has better than even odds of selecting a candidate who should never have been nominated. Whatever the coin toss result, New Zealand needs to be hedging its bets about America’s stability. |
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| Roger Partridge | Chair and Senior Fellow | roger.partridge@nzinitiative.org.nz | ||||||||||||
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In a ruling that defies both common sense and centuries of legal principle, the Supreme Court has just held that deceased tribal ancestors can satisfy the legal requirement of beneficial ownership. The decision has left lawyers wondering whether any established principle is safe from judicial invention. At the heart of the dispute was whether the Māori Land Court could intervene in a trust managing Treaty settlement assets for Tūhoe. The relevant trust operates like other discretionary trusts. Trustees manage the assets, while beneficiaries have no fixed ownership rights, only a right to be considered for distributions. The Māori Land Court's jurisdiction extends only to 'land beneficially owned by Māori.' Consequently, the Court of Appeal reached the obvious conclusion. No living person had beneficial ownership, so the Māori Land Court lacked jurisdiction. Simple. But our Supreme Court had other ideas. Rather than accept this outcome, it conjured up an extraordinary proposition: Tūhoe's deceased ancestors could count as beneficial owners. Never mind that property law has always required ownership rights to be exercisable by the living. Trust law allows for a few exceptions where trusts can exist without living beneficiaries, like charitable trusts. But the Court's invention goes well beyond these exceptions. It also creates profound practical problems: How do trustees exercise powers for the benefit of deceased owners? How can third parties assess ownership rights when dealing with trust assets? The Supreme Court attempts to justify its ancestral-ownership fiction by appealing to tikanga Māori concepts of collective tribal ownership. But however culturally significant, these concepts cannot cure fundamental contradictions in trust law. As warned in the Initiative's recent report, "Who Makes the Law? Reining in the Supreme Court", no legal rule is safe when our highest court is prepared to discard fundamental legal principles to achieve its preferred outcome. Today it is beneficial ownership by the dead. Tomorrow? The possibilities for judicial invention seem limitless. Laws developed over centuries provide certainty in commercial dealings. When courts treat these rules as optional, they threaten the very foundations of the rule of law. Parliament has the tools to rein in an overreaching Supreme Court. It should use them. |
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| Dr Michael Johnston | Senior Fellow | michael.johnston@nzinitiative.org.nz | ||||||||||||
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We found that rats really enjoy condensed milk. Once trained, they will happily do nothing but press the bar to get the milk. Psychologists call this kind of training ‘operant conditioning.’ Economists have a simpler term – ‘Incentives.’ Rats are comparatively smart animals. But even sea slugs and fruit flies are susceptible to operant conditioning. All creatures, great and small, respond to incentives. Incentives are necessary, but not sufficient, for a free economy. Open markets also require understanding of free exchange and respect for property. Rats understand neither. They do not trade but steal with no pang of conscience. You might suspect that it takes a human level of intelligence to understand free exchange. But in my recent travels in India, I discovered that this is not so. Walking through the historic town of Vrindavan with a friend, dodging the detritus that decorates the roadside, I was surprised to feel my glasses abruptly jerked from my face. The next thing I knew, a monkey was disappearing up the side of a decrepit apartment block, my glasses in hand. A small mob of children appeared, excited by the drama. That attracted the attention of the adult residents, one of whom climbed onto the roof where the monkey was perched, nonchalantly chewing the silicone nose pads off my glasses. From there, a series of free exchanges took place, which proved the subjective nature of value. The monkey was persuaded to trade my glasses for a carton of orange juice. As tasty as it apparently found the silicone, it valued the juice more highly. The intrepid resident returned my glasses, and I gave him 500 rupees (about $10) for his trouble. It was a small sum compared to the value of the glasses to me, but a princely one to him. We also purchased a packet of chocolates from a local vendor and distributed them to the children. All parties were satisfied. The monkey had orange juice, the resident had 500 rupees, the children had chocolate, and I had my glasses back, slightly worse for wear, but with a fun travel anecdote to compensate. Additionally, we learned that, unlike rats, monkeys understand the principle of free exchange. Respect for property, not so much. |
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