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Insights 47: 11 December 2020
NZ Herald: Roger Partridge says the benefits of a Trans-Tasman bubble go beyond easing the MIQ stranglehold
Newsroom: Eric Crampton on the RSE programme
Policy Essay: Effective and affordable Why the ETS is sufficient to deal with the climate emergency

Note from the Executive Director
This morning, Newsroom published a story concerning a private and anonymous blog by one of our staff, Nathan Smith.
Nathan joined us earlier this year from the National Business Review, where he had worked as a journalist for seven years.
The Newsroom story concerns his anonymous blog written outside of work and of which we had no knowledge.
Yesterday afternoon, Newsroom provided us with extracts from posts which set out views that are abhorrent to us. We immediately put Nathan on leave for the investigation; we have since accepted his resignation.

The statements he had made are diametrically opposed to the Initiative’s views. As concrete examples, our work on immigration has advocated a more open approach, enabling more migration from all parts of the world. We have been and continue to be advocates of enabling New Zealand to accept more refugees
Nathan had mainly worked subediting our writing. These edits are always checked by the respective authors and signed off by me before publication. Nevertheless, we will have an independent investigation to examine whether any of our material had been compromised.
The Initiative’s views have been the same since we started in 2012. Our mission is to help create a competitive, open and dynamic economy and a free, prosperous, fair, and cohesive society.
If you have any questions or concerns, please get in touch.

Dr Oliver Hartwich

World-leading mediocrity
Joel Hernandez | Policy Analyst |
New Zealand is now below average for all but one international education TIMSS measure.
Released this week, the 2019 Trends in Mathematics and Science Study (TIMSS) reveals Kiwi 10-year-olds are now the only group of students performing above the international average in science.
Even so, Year 5 science performance is still trending downward since its peak in 2003. Today, New Zealand is only three points (503) above the average of 500. Year 5 mathematics scores have also declined since 2003. Today, New Zealand is 40th out of 58 countries.
This decline in mathematics is not restricted to secondary school students either. In Year 9 science, New Zealand is also below the international average (499), dropping 14 points since the last survey in 2015.
Worse yet, New Zealand Year 9 students achieved their lowest ever mathematics scores (482) since the first TIMSS study in 1995.
Combining this study with last year’s dismal results from the OECD Programme for International Student Assessment (PISA) paints a worsening picture of New Zealand’s education system.
In response, the Ministry of Education’s chief science advisor Stuart McNaughton said in an RNZ article that the results “tell us that what we have been doing hasn’t been working.”
My colleague, Briar Lipson’s latest report on education, suggests one major factor for the multi-decade decline is the Ministry’s shift to embrace “child-centred” learning styles in the classroom.
But the proximate issue with the TIMSS study is that the Ministry does not collect its own data on student achievement. It should be gathering standardised national data on literacy, numeracy and content knowledge to compare with TIMSS, PISA and PIRLS (Progress in International Literacy Study).
Waiting three to five years for the next international education survey is too long an interval for steering New Zealand’s education system back on track.
The TIMSS data shows that whatever is afflicting this country’s education system, it has been ongoing for two decades, perhaps longer. Other international studies reveal similar data about the decline.
To fix our woeful education outcomes, every kid in every classroom must undergo standardised national testing. The stakes are too high not to.
These international surveys are great for objectively comparing how far New Zealand sits from being a world-leading. But if the Ministry relies on these reports for feedback on its educational approach, it will always be behind the curve.

​Please find the latest TIMSS results here.

When cutting emissions cuts no ice
Dr Oliver Hartwich | Executive Director |
As that great philosopher Homer Simpson once said, “Just because I don’t care doesn’t mean I don’t understand.”

For climate policy debates, it is a bit different. Most people do care about cutting carbon emissions, but they still do not understand how it works.

This is particularly true about New Zealand’s Emissions Trading Scheme, the ETS.

Introduced under the Clark government, the ETS is an ingenious way of reducing emissions.

As the then climate change minister David Parker said in Parliament, “it is the right thing to do and it makes basic economic sense.” That was in 2007, and Parker was right.

Still, 13 years later, the public and many politicians do not yet grasp the basic logic of the ETS’s operations.

Such ignorance has a price. New Zealand is pursuing expensive climate policies that do not reduce any emissions.

How so?

The ETS is a “cap-and-trade” scheme. That means there is a “cap” determining the total emissions. And then there is “trade” of emission certificates between polluters.

Through the cap-and-trade approach, emissions can be cut where it costs less to reduce emissions. Genius.

But because there is a cap, the total emissions amount is fixed. Once the cap is set, that will be the final emissions outcome. No regulation, tax or subsidy introduced later can logically have any further emissions effect.

This feature of cap-and-trade schemes has been known to economists for decades. The UN’s Intergovernmental Panel on Climate Change acknowledged it in its last major report.

To understand why, imagine the government paid subsidies to some polluters to renew their equipment and make it more efficient. The result will free up their emissions certificates. But these certificates will now go somewhere else. The total emissions do not change.

In this example, the government would have spent money on a subsidy while the emissions reduction is precisely zero.

Sounds crazy? Yes, but that is what is happening.

Through programmes like the Clean Powered Public Service Fund, the Low Emission Vehicles Contestable Fund or the Sustainability Contestable Fund for schools, the government pays for emissions reductions which yield no positive environmental results.

Successive climate ministers from David Parker to James Shaw have designed a sophisticated ETS for New Zealand. Yet bizarrely, the Government behaves as if the ETS did not exist.

If we care for effective emissions reductions, we need to understand how the ETS works. Otherwise, we will fail both the environment and the economy.

To read more about the ETS, read Oliver Hartwich’s policy essay Effective and affordable – Why the ETS is sufficient to deal with the climate emergency.
The abolition of scarcity the 2020 Speech from the Throne
Dr Bryce Wilkinson | Senior Fellow |
There are those who say that government can only give away the produce of the productive. There are those who say that government can spend up to national income, but not beyond.  There are those who say that a focus on wellbeing should mean balancing benefits against costs.

Such people are fossils. They do not understand “Modern Economics” or the 2020 Speech from the Throne.

Modern Economics knows that paying people to dig holes and fill them up again can be a great use of their time. It increases national income through a marvellous Keynesian multiplier. Create even more jobs by replacing shovels by toothpicks.

Modern Economics knows that money need not be scarce when the central bank owns the ATM. Even cash helicopter drops should be good.

Consequently, the fossils have not drawn the right lesson from last week’s semi-philanthropic debacle at Aotea Square in Auckland. Give-aways excite people. They raise expectations. They foster a sense of entitlement. The lesson is “do not disappoint”.

Politicians are give-away doyens. General elections are now a lolly scramble for other people’s money. The political version of a helicopter drop.

Speeches from the Throne are where the victors confirm their bountiful benevolence. Done well, they inspire people to: “ask not what you can do for your country, ask what your country can do for you”.

The 2020 Speech from the Throne handsomely answered that question. It will spend $42 billion on government infrastructure to ‘future proof the economy’. How could that be bad? It will pump up labour costs by raising the minimum wage, increasing sick leave and expanding living wage guarantees and fair pay agreements. It will assist first home buyers to pay more for our houses and expand free lunches to 200,000.

Fossils ask, “But at whose expense?”. Silly question. No one worth mentioning in the Speech. When there is no scarcity, there is no cost. Hoped-for benefits alone justify any government spending. Its all about well-being, government wellbeing.

For a shorter answer, ask “What can’t my country do for me?”
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