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Insights 24: 5 July 2019
Eric Crampton explains on Newsroom why the recent portfolio shift could be a win for both Twyford and housing
Media release: We welcome the Productivity Commissionís draft report on local government funding
Eric Crampton discusses on Radio NZ whether overseas film subsidies are worth it

Core learning
Dr Eric Crampton | Chief Economist |
Joel Hernandez and I have been lucky to be spending the past few days at the 60th Annual Conference of the New Zealand Association of Economists. The meetings are always a great way of keeping abreast of what other economists around the traps are working on.

If there was one overarching theme this year, it was that policy has become of more academic interest. In prior years, conference sessions would be filled with more abstract theoretical papers. This year’s sessions have taken a far stronger policy-oriented turn.

Auckland University’s Professor Prasanna Gai’s keynote address reminded us of the importance of policy uncertainty in private investment decisions. He noted the policy uncertainty caused by Brexit and by Trump, but this has obvious implications in other places as well. Not knowing whether the government might, on the spur of the moment, decide to ban an industry without any particular consultation and against the advice of officials can have rather unwanted consequences. The point is hardly new, but unfortunately seems to need repeating.

Auckland University of Technology student Livvy Mitchell masterfully demonstrated that contrary to hopes from some and fears of others, New Zealand’s shift to using home detention for some offenders has not had particular effects on recidivism, or on longer term labour market outcomes.

Meanwhile, the Ministry of Transport is revising its Value of Statistical Life figures. These numbers are important because they affect cost-benefit assessments in every area where policy has effects on safety. A lot of work is going into the project, but some economists might wonder why New Zealand does not simply pick up the figure already produced by W. Kip Viscusi. Viscusi’s international review of the evidence in 2018 suggests New Zealand’s figure should increase to US$6.9 million.

Treasury’s Matthew Bell explained the workings of the NZ Superannuation Fund. Discussion among the economists after the presentation showed worries that the Fund may be coming under political pressure to fund government priorities rather than to maximise Fund returns over the longer term. It is a difficult problem to solve: How do you stop a government from interfering with a big and tempting pot of money?

And, today, Joel Hernandez will be telling the conference about his work in estimating school performance.

The conference’s policy-oriented turn is welcome. I look forward to seeing what we might learn next year.

Health, the IDI and evidence-based policy
Joel Hernandez | Policy Analyst |
Many New Zealanders are living longer and healthier lives than at any point in history.

In the last quarter century, health outcomes in New Zealand have improved across the board. Life expectancy at birth is 81.4 years, above the OECD average of 80.5 years.

At the same time, health loss, measured in Disability Adjusted Life Years (DALYs), is declining by an estimated 1.2% per year, adjusted for population size and age structure.

However, inequalities in health outcomes persist, particularly for Maori. Life expectancy at birth for Maori is seven years less compared to non-Maori.

Moreover, cardiovascular disease mortality for Maori compared to non-Maori is two and a half times higher, stroke hospitalisation is two times higher, and mortality across all types of cancer is two times higher.

These are just a small sample of the poor health statistics highlighted in the Waitangi Tribunal report released earlier this week.

The report also highlights that since the last major health reforms in 2000, the government has pumped $220 billion into the health system with little measurable improvement for Maori. And that the Crown does not collect sufficient qualitative or quantitative data, or effectively use the collected data.

Promisingly, the empirical research presented at the New Zealand Association of Economists’ (NZAE) annual conference this week illustrates excellent use of existing data, particularly government data located in Statistics New Zealand’s Integrated Data Infrastructure (IDI) – New Zealand’s largest research database.

Motu Fellow Dr Lynn Riggs has used health data in the IDI to study the burden of disease from cold, damp and mouldy housing, of which Maori disproportionately occupy. Riggs estimated the direct cost of poor housing conditions was $145 million and more than 40,000 nights in hospital.

In another study, MBIE Research Analyst Lucas Chen estimated the accuracy of the New Zealand Index of Deprivation (NZDep), a common index used to allocate funding and plan strategic interventions. Chen found the NZDep index mismatched 14% of the 2013 population – or high socioeconomic individuals living in low socioeconomic areas, and vice versa.

By themselves, these findings will not improve the health outcomes of Maori and non-Maori. However, using the findings to inform evidence-based policy will make better use of the billions of dollars the New Zealand government spends on health care.

New Zealand has plenty left to improve in terms of the health outcomes of its citizens, particularly of Maori decent. The excellent research presented at the NZAE conference is a promising start.

A conversation in Hades
Dr Bryce Wilkinson | Senior Fellow |
We cannot vouch for the authenticity of the following conversation that mysteriously arrived in my Inbox. The sender’s name was Dante, surely a fake.

“Hands up those of you who have been killed crossing the road while text messaging.”

“OK, now keep your hands up only if you are an American. I thought so … mainly Americans.”

“It is because of the likes of you clowns that a couple of years ago Honolulu became the first major city to ban text messaging while walking across a road. Now New York City is proposing to do the same. Other cities will follow like sheep.”

“For heaven’s sake, easily distracted people like you are now are going to revert to reading newspapers or books while crossing the road, or ogling an attractive stranger. How is that going to help Facebook’s profits?”

“Now, wait a minute,” says an ageing bloke of baby-boomer vintage. “Who are you to criticise us when it is your Facebook that has done more to distract the entire world than anyone else.”

“Fair cop,” chipped in a pert millennial. “If Facebook really cared about us it would have built an app that forced buses and cars to brake hard when a pedestrian was jaywalking.”

“Well, that might be going too far,” quibbled a querulous Gen X woman. “You might not own a car, but the rest of us do not want Facebook to control it at will. Facebook or Google should have developed an app to hoot at pedestrians when it detects traffic on a collision course. Do they care about keeping us addicts alive or not?”

“Of course, we care about keeping heavy users of Facebook alive,” says the first speaker. So does Google. “Before long, computers will be controlling all buses and cars and Facebook and Google will be controlling the computers. Then it is only jaywalkers not using Facebook and Google products at the time who will need to watch out.”

“Hands up all of you who would have been happy with that? Thank you, enough said.”
On The Record
All Things Considered
  • Graph of the week: Does the news reflect what we die from?
  • Why GDP still matters.
  • Can privacy survive the next generation of satellites
  • How cities can save the planet.
  • How are people responding to nudge interventions?
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