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Insights 27: 24 July 2020
NZ Herald: Oliver Hartwich on why there is no return to normal
 
Podcast: Eric Crampton on why a safer border system will help rural NZ
 
Research Note: Safe Arrivals

Safe Arrivals
Dr Eric Crampton | Chief Economist | eric.crampton@nzinitiative.org.nz
An old Australian tourism ad highlighted empty gorgeous beaches, wide-open spaces and asked viewers, “So where the bloody hell are you?”

The ad was top-of-mind as our family toured the South Island over school holidays.

Up to a million Kiwis live overseas. They all have the right to come home, and many desperately want to do so.

And it is not just Kiwis who might want to be in New Zealand, even with quarantine.

Millions of students in US universities face not only a year of online classes but also riots in the streets rather than normal student life. They could spend a fortnight in managed isolation at their own expense while doing online orientation. It would be fairly short holdup relative to the time they’d spend in the country.

Half of the US workforce shifted to remote work in May. If even one in ten thousand were able and willing to bring their job with them, their numbers would equal about a fifth of the nights spent in New Zealand by foreign visitors in pre-Covid times.

During the family’s school holiday tiki tour of the South Island, more than a few places were full of domestic tourists – like Tekapo and the surrounding ski slopes. But there were a lot of empty places as well where returning Kiwis, and others who might arrive safely, would be more than welcome.

So, where the bloody hell are they?

On the one hand, there are empty hotels and quiet hospitality venues. On the other, many Kiwis and non-Kiwis who would love to come to this country. What is blocking them is a managed isolation system struggling to scale up to meet demand.

Of course, it is critically important to ensure public safety. But that should not prevent the government from scaling up its quarantine system safely.

The New Zealand Initiative’s latest report suggests a few ways to do that.

Arrivals from places that are effectively Covid-free, like the Pacific Islands and Taiwan, are about as safe as arrivals from other parts of New Zealand. Opening the border to travellers from these locations would not only ease a looming humanitarian crisis in the Islands, it would also reduce the burden on New Zealand’s managed isolation system.

People coming from riskier places must and can be made safe. The government must properly oversee and administer managed isolation. But the report suggests ways of enabling that system to safely scale up. It would also provide far more certainty for Kiwis wanting to return home.

Enabling the system to meet increased demand would not only do right by the Kiwis abroad desperate to return. It would help those who continue to bear the pandemic’s burden through family separation and economic hardship.

Read Eric Crampton's report Safe Arrivals here.

Pharmac The Right Prescription?
Dr Bryce Wilkinson | Senior Fellow | bryce.wilkinson@nzinitiative.org.nz
The Pharmaceutical Management Agency, Pharmac, attracts plenty of praise and criticism.

It has achieved notably low prices for many pharmaceutical medicines but is widely criticised for not subsidising a wider range of medicines and being slow to subsidise new medicines. Does this mean the Pharmac model is flawed?

The Initiative will shortly publish the research report Pharmac: the right prescription? to answer this question.

Pharmac’s statutory objective is to “secure for eligible people in need of pharmaceuticals, the best health outcomes that are reasonably achievable from pharmaceutical treatment and from within the amount of funding provided.”

The amount of funding for the agency to do its job is determined by the government’s annual Combined Pharmaceutical Budget (CPB). For 2020/21 that amount totalled just over $1 billion, or about $220 for each Kiwi.

Why $1 billion? Why not a higher or lower amount? Pharmac is incessantly criticised for not subsidising medicines that some people would like it to subsidise. But the critics rarely identify what medicines they think it should not be subsidising.

Implicitly they are criticising the government for not providing more funding. It is a big stretch then to blame Pharmac for the government’s funding decisions.

So, what is the optimal amount of funding? The answer to that question depends on why all people need to be subsidised rather than just those in financial need. The upcoming report examines this central aspect.

It also highlights that the best health outcomes are not necessarily the best wellbeing outcomes. People with poor health usually have other needs and must make trade-offs to deal with an illness. The report explains why it would be difficult to give the Pharmac scheme a real wellbeing focus.

The report addresses the common claim that failing to subsidise a medicine is to deprive New Zealanders of access to it. It examines whether there are undue barriers to the importation of unsubsidised medicines and to the provision of private health insurance cover for them. Such barriers could create problems for those not in financial need.

The report also examines Pharmac’s performance in administering its subsidies. Dissatisfied with Pharmac’s ‘before and after’ price comparisons, it compares the agency’s price performance with the corresponding scheme across the Tasman.

The report’s findings and opinions on these matters will be published next week.

Burkean democracy
Nathan Smith | Chief Editor | nathan.smith@nzinitiative.org.nz
The white doors opened gently and in strode the great Irish statesman Edmund Burke. He was five minutes late for the interview, but given that he’d just been reincarnated, I let him off.

We shook hands and made small talk about the “crazy” New Zealand politics. For someone who had missed the last 223 years, he was less curious about the lapel microphone being placed on his shirt than he should have been.

The cameraman flicked off the lens cover. Explaining the last 14 days in New Zealand politics to a 18th century gentleman was a bit more difficult. He muttered about how the lofty goals for democracy always collide with the foibles of the humans involved.

“There is no safety for honest men except by believing all possible evil of evil men,” the philosopher quipped. “Among a people generally corrupt, liberty cannot long exist.”

Corruption? Evil? Democracy can’t be all that bad, can it? I responded.

“But that’s the point. When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle,” Burke shot back.

Shifting to make myself more comfortable, I mentioned that he was against the French Revolution precisely because its proponents didn’t take into account the complexities of human nature and society. Does he now feel vindicated?

“I am no stranger to the faults and defects of the subverted government of France. Of this I am certain, that in a democracy, the majority of its citizens is capable of exercising the most cruel oppressions upon the minority, whenever strong divisions prevail in that kind of policy, as they often must.”

Burke began waving his hands like a rational madman and the lapel mic slipped down into his cravat. The cameraman sighed.

“So, you’re saying democracy means we get the leaders we deserve and it is silly to expect them to be saints since subversion is true of all humans and governments?” I asked, proud that I’d remembered some of Burke’s own quotes.

“Listen here, you scrubby gollumpus, rudeness is the weak man’s imitation of strength.

“I’m saying politics ought to be adjusted not to human reasonings but to human nature, of which reason is but a part and by no means the greatest part. Sounds like your democracy is working out just as I expected,” he said.

And in a puff of Whiggish smoke, Burke disappeared, leaving behind a stray cigar butt and lapel mic.
 
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