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Insights 5: 21 February 2020
Chief Economist Eric Crampton talks to Newstalk ZB about free speech following the cancellation of Peter Singer's speaking event.
On this week's podcast, Eric Crampton talks about the joys of thinking like an economist.
Submission: Better protections for contractors.

Where do we go from here?
Dr Eric Crampton | Chief Economist |
The government this week extended the COVID-19 (coronavirus) travel ban barring foreign nationals from arriving in New Zealand from mainland China and suggesting self-quarantine for Kiwis returning.

The continued ban feels like the right decision for a highly contagious disease with mortality rates that appear to be around twenty times higher than the seasonal flu. But feels are a poor basis for policy.

The disease has some very worrying features.

Oral swab testing can miss cases detected by a blood test. And while the virus can be detected in most people within three to seven days, it takes up to 24 days for others. Quarantine for those who have been in contact with anyone who has been infected will be long.

Where about 5% of similar patients in Singapore wind up in intensive care, Wellington’s 29 ICU beds are start looking just a bit inadequate. The health system will very likely quickly be overwhelmed if there is any serious outbreak.

So, preventing an outbreak seems important, if it is possible.

As more cases emerge internationally, any travel-ban strategy would have to expand rapidly but would become far less effective. And, as NZIER pointed out this week, delaying COVID-19’s arrival to coincide with the local flu season could make things worse rather than better.

We need to be thinking beyond the ban.

The government is contemplating support for exporters. But that seems only the start of the problem. How many businesses depend on timely deliveries of critical parts, tools and materials from China? Inventories will be running low and China’s shutdown will not end soon. Will everyone get a bailout?

There may be a case for compensating workers and firms affected by quarantine requirements for workers who have been exposed. Not providing that compensation makes it far too tempting for firms to tell workers to come into the office regardless of quarantine requirements, as a SkyCity manager reportedly did with an employee under quarantine after returning from Wuhan.

Singapore compensates firms for quarantined workers while applying sharp penalties to firms and workers who break quarantine. It is managing to keep something of a handle on its outbreak. The government should be considering that kind of model.

Businesses should be preparing to deal with short-notice work-from-home arrangements in addition to supply chain disruption.

The travel ban has bought us a bit of time, nothing more. Use it wisely.

Nowhere to live
Dr Oliver Hartwich | Executive Director |
Solving New Zealand’s housing crisis is hard. Writing good policy reports is too.

Last week, a paper by the Helen Clark Foundation garnered much media attention. Somewhere to live presented the Foundation’s views on housing policy.

I read the document with an open mind and personal curiosity. Since the start of my journey in think tank land, housing has been my pet interest. In 2005/06, I co-authored my first trilogy of housing reports for British think tank Policy Exchange.

The topic has never left me since. The Initiative produced many in-depth reports on housing, local government and infrastructure over the past eight years.

To begin with the positive regarding Somewhere to live, I agree with its starting point. There is a severe housing crisis in New Zealand, which has profound social impacts. Ending this crisis must be a political priority.

Unfortunately, this is where my agreement with Somewhere to live ends. The rest of the document is disappointing. And that is not only because I do not share its policy prescriptions.

On a formal level, for a report dealing with such a difficult and complex issue it is short: just about 5,000 words. Were it not for large pictures, it would not have needed 28 pages.

The document is light on research content and heavy on recommendations. With no analysis, it jumps straight to policy prescriptions on page two (“Sustained government intervention is needed”). A “case study” on planning in Greater London has a mere 150 words and not a single reference. There are only 28 footnotes in the entire document.

What the report lacks in research complexity, it makes up for in language. A readability analysis of the document reveals that 91 percent of its paragraphs are very difficult to read. The Foundation’s subeditor must have been on leave.

Regarding its content, the document shows no understanding of urban economics. Relevant publications from (among many others) the Productivity Commission, Motu and NZIER exist. They are just not mentioned anywhere in Somewhere to live.

Economic Development Minister Phil Twyford has given many excellent speeches on urban economics, competitive land markets and unlocking housing supply. However, the report rejects such ‘supply and demand’ discussions. Housing, we are told, does not work according to Economics 101 principles.

Perhaps it was an ambivalent editorial decision at the NZ Herald to say the report was from a “leading think tank.” And maybe the Foundation’s future reports will be of a higher quality.

But for now, at least, the public will get wrong impression of what a robust, well-researched policy report should look like.

A handy guide to political foundations
Luke Redward | Research Intern |
Are you a leader of a political party? Do you spend countless hours fundraising while looking after important portfolios? Well, we have you covered.

New Zealand’s hottest trend is ready to knock your socks off: political foundations.
The first question when setting up a foundation is: why do I need one? There are a range of reasons including hiding political donations investing in the future of the party or pretending to be a grassroots movement protecting the privacy of your donors. Your options are endless.
Next you need a snazzy name. Our research interns worked tirelessly to find the magic formula: “The [your organisation here] Foundation.” This keeps it both recognisable and in line with every other foundation. It also supplies plausible deniability. Sure, the political party carries the same name, but one of them is a “foundation.”
Add in few more fine details and you’ll soon be ready to go. But what exactly can this creation do now? Consider the tiered system, recently introduced by some ride-sharing apps, which rewards customers for spending different amounts of money. Why can’t political parties do this as well?
Some political parties have, for the comedic bargain price of $15,000, granted their donors direct access to party leaders (and policy). I recommend, however, a more reasonable tiered donation system. Donors offering over $100,000 could be granted “platinum” status, with direct access to policy development and a nice shiny plaque in some old city building. After all, if someone is so dedicated to the party, it should be that person’s right to write policy development … right?
(Just make sure to split the donations into ten tranches of bite-sized amounts so the pesky Electoral Commission doesn’t get on your tail. Remember, the privacy of donors is more important than any implications for the health of democracy.)
You may be asking if all this is legal. Well, independent advisors confirmed it is indeed “pretty legal.” That’s a quote. Foundations and disguised donations are not technically illegal in New Zealand. And why should they be?
Anonymous donations are a permanent fixture in politics. And solutions like public funding for campaigns or legislation will always be countered by parties looking for new loopholes. Ultimately, this is not about legality, it is an electoral issue. It is up to voters to cease supporting any party they think is behaving reprehensibly.
Yet, with the system of political foundations, isn’t the devil you know a hell of a lot better than the one you don’t?

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