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Insights 7: 9 March 2018
Latest interview: Briar Lipson discusses her new report, Spoiled by Choice
Latest report: Spoiled by Choice, How NCEA hampers education, and what it needs to succeed
Upcoming Auckland event: Dinner lecture with Katharine Birbalsingh

Sunsets are beautiful
Dr Eric Crampton | Chief Economist |
Policy analysis is like a lot of other project work. It can be good, it can be fast, and it can be cheap – but it cannot be all three. You have to pick two. And that is a problem when an incoming government wants to make a lot of policy changes on a hundred-day clock.

Policies are meant to be accompanied by impartial and rigorous assessments from the Ministries, or from Treasury.

That advice helps Parliament consider its options and helps inform voters. If the Ministry’s advice is that a policy will not solve the problem it is meant to solve, or that it will have a lot of unintended negative consequences, journalists or the Opposition will make sure that voters find out.

But that process gets short-circuited when Cabinet is in a hurry. The Impact Statements accompanying 100-day plan policies have explicit caveats written into them about the constraints under which they were produced. And a lot of them just are not up to the expected standard.

Consider the government’s proposed ban on foreign buyers of residential property.

The New Zealand Initiative’s submission identified several problems in Treasury’s assessment of costs and benefits. The New Zealand Institute for Economic Research (NZIER)’s submission was even more scathing than ours, describing parts of Treasury’s work as a flag of surrender.

Other submissions even showed the legislation will also hit lines and telecom companies needing to buy residential land to put up things like cell towers.

Even worse, the short submission period for 100-day legislation fell over the Christmas holidays. There will be plenty of other problems that will only be identified when we slam into them.

Government sometimes has to legislate in haste. When that haste is at the cost of proper assessment, the public deserves better protection through more rigorous post-implementation policy reviews.

The Ministries do not have a great record in following through with these reviews, but there may be a solution.

Sunset clauses put a time limit on policies. A sunsetted policy simply expires unless Parliament has intervened before the clause’s deadline. Imagine if policies like the ban on foreign buyers would automatically expire in two years absent a successful post-implementation review and subsequent reauthorising legislation removing the sunset clause.

If we legislate in haste, we may repent at leisure. Would it not be better to take that leisure-time to re-evaluate instead?

FDP success was no accident
David Seymour MP | Member for Epsom & ACT Party Leader |
In last week’s Insights, Oliver Hartwich argued that ACT can learn little from Germany’s FDP. As ACT’s Leader, I am grateful for the right to reply.

Oliver’s main point was that the FDP’s turnaround from 2013-2017 was driven entirely by external factors. And so, the argument goes, New Zealanders might follow the Germans in an exodus to third parties in 2020 but it won’t be caused by me studying the FDP.

In any case, let’s first look at the New Zealand scene. I believe the political environment is improving for ACT, for two reasons.

First, the end of the Key/English era helps ACT. I doubt that Simon Bridges can replicate the exceptional popularity of John Key. Second, our populist left-wing Government threatens the economic policy fundamentals ACT defends. This can only mean that ACT’s role becomes more important.

Now to Oliver’s points. I agree with him that the FDP is not a free-market party by New Zealand standards. Germany’s policy settings are about where the Greens wants us to be, and their FDP is somewhere between Labour and National. So why study them?

The relevant part of the FDP revival is the internal story. The party was broken after a tough time as a minor party in Government. It had lost its identity. Potential voters did not know what it stood for. Worse still, those who thought they knew did not like it very much.

I regret to admit that is roughly where ACT is now.

What the FDP showed is how a party can reorganise itself to succeed. They accepted that what they had done had failed. Then they started again from scratch.

The German Free Democrats sincerely asked why Germany needed them. Rather than trying to deceive the public into voting for something they did not want, the FDP set out to find its role in Germany’s future.

Ultimately, the FDP produced what ACT needs: A new purpose and identity that can be summarised on one page. It fit under the heading Mehr Chancen durch mehr Freiheit: “more chances through more freedom”.

They stuck consistently to the formula. And the Germans liked it and voted for them.

ACT is now undertaking the same process. We must shed the barnacles that have stuck to the ship over two decades. We must define a new streamlined identity and purpose for the party, then stick to it.

That’s what the FDP taught me this summer. In 2020 I plan to go back to Berlin and thank them for inspiring our success.

Towards better behaviour
Ben Craven | Project Coordinator |
Sir Michael Cullen wants to use the tax system to help us all behave better.

We have a few ideas to help build upon this noble pursuit.

Cullen’s Tax Working Group should begin by looking at the Four Capitals that Treasury knows will help enhance our wellbeing: natural capital, social capital, human capital and financial/physical capital. The tax system could be entirely redesigned to enhance those capitals.

Social capital may be the hardest nut to crack. Treasury points to the value of social connections, a “sense of unity”, pro-social norms and values, pro-social behaviour, and trust in institutions.

But how can we use the tax system to help with that?

Fortunately, China is leading the way. And we must follow - if we want to use the tax system to keep us better behaved, and to put in place Treasury’s wellbeing approach.

China is piloting a social credit system. Their approach has nothing to do with the bizarre economic theories once called Social Credit. Instead, it aligns perfectly with Treasury’s totally not-discredited wellbeing approach.

It is very simple. Everyone gets a social credit score. If you do good things, pro-social things – things that reinforce trust in President Xi’s institutions and encourage a sense of unity – your score goes up. Volunteering for a charity and separating your recycling can enhance your score. So can donating blood. These are all good things that must be rewarded.

If you instead decide to exhibit bad behaviours, your score goes down. Your score can go down for social microaggressions. Things like not turning up to a dinner reservation or leaving false product reviews. Ubiquitous facial recognition camera systems can assign demerit points for jaywalking. Soon they will be able to also assign demerit points for doing unmutual things – things that reduce the sense of unity and trust in institutions – like engaging in civil protest.

The Chinese pilot scheme so far rewards high-scoring citizens with things like shorter wait times in hospital and punishes low-scores with reduced access to public services and travel restrictions.

New Zealand can improve on that. Why tax things like income or consumption when we could instead harness the tax system to nudge us all towards better behaviour?

Touch your toes Comrade Smith. It’s worth 10 social credit points, and a small tax cut. Because we know it will be good for you, will strengthen the nation’s Four Capitals, and enhance wellbeing.

Trust us.

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