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Insights 29: 4 August 2017
Next Generation Debates: Auckland Semi-Final
The Left has won - and that's its main problem, writes Dr Oliver Hartwich
Next Generation Debates: Wellington Semi-Final

Elections, without magic
Dr Eric Crampton | Chief Economist |
For some pundits, elections are magical times in which pundits’ favourite policy hobby-horses transform into the election-winning platform for any party that might listen. I will recommend something a little different for Labour’s incoming leader.

Jacinda Ardern has received a lot of unsolicited advice in areas ranging from Labour’s Memorandum of Understanding with the Greens to the necessity of going full-Corbyn.

For those who do not believe in magic, options are a bit more constrained.

Developing new policy a few weeks out from an election is a recipe for the kind of big mistakes that let an incumbent party paint a new leader as inexperienced and not up to the task.

This is especially the case for an incoming leader that has not held senior shadow cabinet responsibilities, and whose Private Member’s Bills were light on substance.

And so Ardern might reasonably be cautious about straying from the platform that Labour has already developed. Choice should then mostly be around policy emphasis and communication.

In early July, Colmar Brunton asked about Kiwis’ greatest concern going into the election. House prices, housing affordability, housing shortages, and homelessness together were listed by just over 23 percent of the surveyed electorate. A further 14 percent listed poverty and the gap between rich and poor. We at the Initiative have argued that that concern likely reflects the obvious effects of the housing crisis.

Labour has established a credible portfolio of policies for dealing with New Zealand’s housing crisis.

Kiwibuild seems the weakest plank in that portfolio, and the one that I would most strongly argue against. If zoning and infrastructure financing are not set properly, then Kiwibuild will hit the same barriers that face any private developer. But if zoning and infrastructure financing are fixed, then Kiwibuild is not necessary as private developers could do the job. It either will not work, or is not needed.

But in a world without magic, Kiwibuild remains good politics even if I think it is a bad policy. A lot of voters have a hard time seeing the links between zoning, infrastructure, and housing shortages. For those voters, Kiwibuild would be a credible demonstration of Labour’s commitment to fix the problem that National allowed to grow over the past decade.

And it is a message credibly conveyed by a leader age-adjacent to youths locked out of the housing market.

Housing remains National’s Achilles’ Heel. Go for it.

Changing and preserving the recreational right to fish
Dr Randall Bess | Research Fellow |
You may not have read Giuseppe Tomasi di Lampedusa’s The Leopard but you probably know the novel’s most famous line, “If we want things to stay as they are, things will have to change.”
To change things so they can stay the same – that is the gist of our new fisheries report The Future Catch. We released it for consultation on Tuesday.
The report’s starting point are the things that should stay the same. We want to ensure that future generations of New Zealanders can still enjoy going out fishing just as their parents and grandparents did.
But there is a problem. If we continue to fish as we are, there will come a day when we cannot make a decent catch anymore. And this is why things need to change.
For our previous research, we visited places that have become dire for recreational fishers.
In Texas, for example, population growth and coastal development caused overfishing and depletion. It also intensified conflicts between recreational and commercial fishers. And ultimately, it led to severe restrictions on recreational fishing.
Fortunately, the situation in New Zealand is still much better. But we do not want to end up like Texas. And we do not want to see the futile blame games that often happen between recreational, commercial and customary fishers.
There is an inspirational example from a state that got its fishing policies right: Western Australia.
Western Australia’s fisheries are not too dissimilar to New Zealand’s. But the Western Australians have created a model under which competing sectors can collaborate better and reconcile their differences. This model inspired our policy recommendations.

As mentioned, The Future Catch is a draft for consultation. Over the next two months, the Initiative will hold a dozen public meetings around New Zealand. These events are where we want to discuss our findings and recommendations with anyone interested in securing the future of our recreational fisheries.
We invite all fishing sectors to join in our debate. We believe it is vital that fishers from different backgrounds come together and talk with each other rather than about each other.
At the end of this consultation process, we will gather our learnings and release a final report with recommendations to the new government.
We all want New Zealand to remain a vibrant fishing nation. But we will need to make changes to achieve this. Join our debate.
To find out more about the Initiative’s fisheries meetings, please visit our website.

The economics of cheating
Dr Oliver Hartwich | Executive Director |
We probably all remember those school exams in which we desperately tried to copy the answers from our much better neighbours.

Ahem, I meant of course we all remember those school exams in which our struggling neighbours desperately tried to copy from us.

Well, as a strategy to pass an exam such cheating might have even worked. But the cheats never do themselves any favours in the long run. Copying answers is no proper substitute for developing your own skills.

On a much larger scale, this is the problem of industrial espionage. Just check a new paper by Albrecht Glitz and Erik Meyersson titled “Industrial Espionage and Productivity”.

Their research is the economics equivalent of a James Bond movie. It is set in divided Germany over the final decades of the Cold War, between 1970 and 1988. Its plot is the systematic industrial espionage activities by East Germany’s secret service.

East Germany was an economic basket case. But at least in the Stasi it had a world-class secret service: ruthless, brutal and efficient.

The Stasi was also superb at keeping records. It maintained a massive database of its technological spying activities in West Germany. And this is the database which Glitz and Meyersson have now analysed economically.

The results are fascinating. Their first finding is that without espionage, East Germany would have been much less productive. In technical terms, the gap in total factor productivity between East and West Germany would have been 6.3 percent larger.

The second finding is that spying was good business for the East German government. The authors estimate that the benefits to their economy were worth about 7.3 billion Deutsche Mark in 1988 (more than $7 billion in today’s money). That is a lot of money considering that the Stasi’s annual espionage budget was only a paltry 13.5 million Deutsche Mark.

In other words, spying delivered a fantastic return on investment – not just by Communist standards.

But if that makes you think that organised espionage is a good idea, their final finding might still put you off.

The authors suggest that by relying on espionage, East German firms gradually lost the capacity to conduct research and development themselves. East Germany’s industry had become the equivalent of those students who copy from their neighbours.

So that’s what we should tell cheating students (and some developing economies): Don’t do it! You might end up like East Germany.
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