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Insights 24: 7 July 2023
Newsroom: Eric Crampton on the very good reason NZ’s farmers export the best produce
Podcast: Eric Crampton and Prof Rhema Vaithianathan on data-tools with a human touch
NZ Herald: Roger Partridge on Ireland's not-so-secret formula for economic success

The stakes are too high for this much stupidity.
Dr Eric Crampton | Chief Economist |
The New Zealand Economics Association annual meetings are a great way of keeping abreast of what the country’s economists are working on. 

And sometimes they’re downright depressing. 

At last week’s meetings, Auckland University of Technology’s Professor Rhema Vaithianathan’s keynote explained what she’s been up to over the past decade. 

Her team has been helping American child protection services to do a better job protecting kids.  

Child protection work is grim. Officials balance two terrible kinds of errors.  

Over-zealousness means a lot of families will be put through a painful wringer unnecessarily. But under-intervention means some kids who could have been helped will wind up abused, hospitalised, or killed.  

Unless you can find a way of reducing both types of errors. 

And Prof Vaithianathan’s team found a good one. 

Child protection workers have a mountain of administrative data for making decisions on whether to intervene in response to a call, but only about ten minutes to make each decision – then on to the next case.  

It is impossible to regularly make good decisions faced with that much complexity and that little time. 

Prof Vaithianathan’s team reduced complexity by turning data into a predictive score laying out the risk each case posed, to help child protection workers make the right call.  

They started the U.S. work in Allegheny County, Pennsylvania, because Allegheny wanted to use data to make better decisions. The programme’s success inspired others to try it out. 

And a later randomised control trial showed that the system reduced child hospitalisation by a third. 
It also reduced the bias that case workers otherwise bring with them in making assessments. The risk scored meant more high-risk white families received help and fewer low-risk black families had to deal with child protection services. 

It’s a great story.  

The depressing part?  

The work started here in New Zealand. It was killed by Anne Tolley as Minister, who described it as experimenting on kids. And the subsequent Labour government showed even less interest in data-based approaches.  

One third fewer hospitalisations for children in risky families. 
But not here.
In America instead.  

Thanks to Kiwi researchers, who were chased away from doing the work here.
An innovative American county can try something new and let others follow. New Zealand’s centralisation means a single bad Ministerial decision can cause a lot of harm for a very long time. 

Far better policy, and outcomes, are possible. Even here. But voters have to demand it. 

New Zealand is invited to NATO’s party
Barry Keane | Member |
In an increasingly tumultuous geopolitical landscape, New Zealand's role on the international stage is increasing in importance.

New Zealand, along with many others, has been invited to attend next week’s 2023 NATO Summit in Vilnius, Lithuania. It will be a good opportunity to re-engage with traditional partners and re-emphasise rules-based orders.

It has been some time coming.

In 1986, the USA suspended its ANZUS Treaty obligations in response to our nuclear-free policy. For the first time since 1951, New Zealand was outside any formal regional security agreement.

In 1991, Australia established a Closer Defence Relationship Agreement with New Zealand. It emphasised defence force interoperability for more effective combined operations. Combined ANZAC security operations in Bougainville, East Timor, and the Solomon Islands proved its worth.

New Zealand has continued to be a good international citizen, making contributions to UN- and NATO-sponsored operations in Somalia, Bosnia, Iraq and Afghanistan.

Emerging threats have seen the USA encourage NATO engagement in the Asia-Pacific. Those threats include China’s hardening intentions regarding Taiwan, its assertiveness in the China Seas, and North Korea’s growing nuclear and missile capabilities. 

In 2019, the US enhanced its maritime-focussed Quadrilateral Security Dialogue with Australia, India and Japan. In 2021 the US concluded a pact with the UK and Australia (AUKUS), aiming to strengthen Western military deterrence in the Asia-Pacific.

NATO has engaged on regional security matters with its Indo-Pacific partners, New Zealand, Australia, Japan and South Korea, who were invited to attend the 2022 Madrid NATO Summit. Prior to that, they agreed to cooperate as NATO partners.

Top of the agenda at next week’s summit is a pathway for Ukraine to be brought into the Euro-Atlantic Security Order.

New Zealand has committed to contributing personnel, military assets, funding and intelligence to support Ukraine to defend itself and repel the Russian invasion.

New Zealand’s exclusion from ANZUS meant banishment from the inner circles of major Western defence and security bodies. New Zealand’s participation in NATO Summits, and its strengthening relationship within the Indo-Pacific 4 forum, is important.

New Zealand is a small nation, earning much of its income from exporting its goods to distant markets. It has few credible defence assets. Partnership with militarily powerful nations to protect our trading lines is clearly in our national interests.

It’s time for New Zealand to resume its role in support of our more powerful friends, to secure those interests for the coming decades.

Productivity: Wot about Ireland?
Dr Bryce Wilkinson | Senior Fellow |
Yesterday the Treasury hosted a seminar on New Zealand’s lagging productivity growth rate. It shared the slot with the New Zealand Productivity Commission (NZPC) and Motu, a Wellington-based research institute.

Attendees could (and many did) pick up a new NZPC paper, “Productivity by the numbers”.

It was data heavy, with 54 charts, but light on solutions.

I should have asked about solutions, and lessons from Ireland – the object of a recent TNZI policy study tour.

But perhaps the Q&A would have gone something like this:

Question: What are the NZPC’s key recommendations for government?

Answer: Government should focus on ensuring “appropriate” investments in innovation and technology. It should build on its existing tax incentive for R&D. Its efforts need to be aligned and well-connected to every interest group, and well-evaluated.

Question: Great, but if that is good, why have they not been doing that already?

Answer: Well, umm, governments have other priorities. We have to hope that will change.

Question: Indeed, so have you got any ideas for how to change their incentives for the better?

Answer: As you know that is difficult. Redistribution is really important. We all want more of it.

Question: The NZPC shows in Figure 4.1 that Ireland spends fractionally less of GDP on R&D than NZ. But we know that its productivity growth has been massively faster than NZ’s, and Figure 4.3 shows its capital formation is much higher relative to GDP. So why the focus on R&D?

Answer: Oh, Ireland doesn’t really count. You will have noticed that only one of our seven-country comparisons across 11 indicators includes Ireland. Ireland has attracted a ridiculous amount of capital and know-how from foreign direct investment and its proximity to Europe. We can’t do that.

Question: So, why Ireland and not, say, Scotland?  And why not New Zealand, relative to Australia?

Answer: Look, New Zealand land is extraordinarily sensitive. Ireland is not so lucky. The trick is to attract foreign capital that will not be on or above land. Get real.

Question: So, you want us all to trust government appointees to direct NZ R&D like we trust them to run an efficient health, education, housing and welfare system?

Answer: Exactly. Trust is crucial. Figure 4.21 shows that only 13 of 39 other countries have higher trust in government than New Zealand.

Question: Yes, so why does the same figure show much higher trust in government in Ireland?

Answer: For heaven’s sake can we stop talking about Ireland? New Zealand is different.

On The Record

Initiative Activities:   
All Things Considered
  • Graph of the week: The composition of non-academic staffing at NZ unis has changed over the past couple decades
  • ChatGPT is starting to get strange
  • A better world for people vs. a world with less human impact
  • How infrastructure decisions are really made: Australia’s Utopia is now on Netflix
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