You are subscribed as | Unsubscribe | View online version | Forward to a friend

Insights 37: 6 October 2023
NZ Herald, Dr Matthew Birchall on the purpose of televised leaders' debates
Podcast: Dr Michael Johnston talks to Maryanne Spurdle and Stephanie Martin about teacher education
The Post, Dr Eric Crampton on the zero-sum game holding back housing progress

The legacy of government spending
Dr Mathew Birchall | Research Fellow |
October 15 cannot come soon enough, and not just because of a potential Rugby World Cup showdown between the All Blacks and Ireland. 

Like many, I have found Election 2023 a tedious affair. Each week, another scandal or poorly conceived policy hits the headlines. And each week, we seem to be stuck in a never-ending debate about spreadsheets and fiscal holes. 

Regrettably, this political sideshow carries real consequences. With our focus diverted by shallow debates, we risk neglecting the issues that really matter. 

For example, where has there been any sustained reflection on New Zealand’s lamentable productivity? Certainly not in the televised Leaders’ Debates, as I recently pointed out in my New Zealand Herald column.      

This is one reason why Bryce Wilkinson’s latest research note on the Sixth Labour Government’s spending spree is so timely. When the policy debate narrows, stepping back and assessing the broader political landscape is important. 

Bryce points out that government spending had begun to spiral out of control well before the onset of Covid, before ramping up during the crisis and then continuing to increase. 

The parallels Bryce draws between the First Labour Government (1935-49) are especially illuminating. Like Labour today, Michael Joseph Savage’s administration spent liberally. Although venerated by some, their big spending policies helped trigger a severe foreign exchange crisis.  

What can we learn from Bryce’s history lesson?  

Perhaps the first thing to realise is the enormous changes in the size of government New Zealand has experienced over the past century. There is no ‘natural’ size of government. Indeed, it is always a political choice.

Secondly, we have seen periods of increased government spending followed by periods of relative moderation. Historically, we can interpret these as moments of economic recalibration, when governments were forced to clean up the worst excesses of their predecessors. The reforms of the Fourth Labour Government and the succeeding National administration spring immediately to mind (1984-1999). 

But thirdly, and most importantly, we can infer from Bryce’s historical overview that more government spending does not equal better government services. Governments can spend little money wisely and a lot of money foolishly.  

Especially when funds are tight, as they likely will be over the coming years, government will need to manage its purse strings with greater discipline and demand higher efficiency from the public service.  

Future historians will judge the next government on how it will deal with this challenge.

Our latest research note, ‘A historical perspective on the 2017-2023 Government's spending spree’ written by Dr Bryce Wilkinson is available here.

I'm the operator with my large language model
Dr Michael Johnston | Senior Fellow |
In 1981, the German electronic band Kraftwerk released a song called Pocket Calculator.

At the time, affordable calculators were a recent phenomenon. Kraftwerk, as dyed-in-the-wool technophiles, were clearly pleased.

Many educators were pleased too. Young children often don’t enjoy learning arithmetic. Those educators thought that calculators could free them from having to learn it. Instead, they could learn to apply mathematics to real world problems. This, they thought, would be more motivating.

Other educators were less pleased. They were concerned that, if children came to rely on calculators, they would never learn basic numeracy. Some were also worried that students might use them to cheat in exams.

More than forty years later, educators are having what is essentially the same argument all over again. Except, this time, it’s about writing. Chat GPT and its large-language compatriots can write flawless, if often pedestrian, prose.

Like pocket calculators before them, AI has mesmerised fans of technology and stimulated an important debate in educational circles. Excitable futurists imagine freeing students from the drudgery of learning to write grammatically correct sentences. Conservatives worry about falling educational standards and cheating.

So, which side has it right?

In the four decades between the first mass produced calculators and the advent of generative AI, the science of learning has advanced greatly. It can now help us to resolve these debates.

When we first encounter new knowledge or start to learn a new skill, we hold it in a short-term memory system called working memory while we consciously manipulate it. Working memory has a very small capacity. When it gets overloaded, we feel confused.

To manage this problem of cognitive overload, we must learn in stages. Knowledge must be committed to long-term memory, which has a virtually infinite capacity. That frees up working memory to take in new learning, building on what has been stored in long-term memory.

Mathematics and writing are both cases in point. To learn algebra, the rules of arithmetic must be committed to long term memory. To write thoughtfully or creatively, basic writing skills must be similarly mastered.

Just because technology can do something as well as, or better than, human beings, does not necessarily mean that children no longer benefit from learning it. Skipping the basics can close the door to rich and interesting learning.

Sure, Kraftwerk used computers to help them make music. But they learned to play well first.

Praise Canada
Dr Eric Crampton | Chief Economist |
As a proud Canadian, I am occasionally compelled to draw Kiwis’ attention to the wonderful service that my homeland provides to the world. 

The election here has been tedious. But if it has made you despair, just look North.

They’re setting up a regulatory regime for podcasters. I’m not kidding.

How has this come about?

Canada takes an utterly bizarre approach to cultural policy.

Most governments subsidise cultural industries to at least some extent. New Zealand has various subsidy schemes to support local film and television production.

But Canada does things a bit differently. Rather than burden taxpayers transparently, they do it opaquely as a requirement for broadcasters. If you want access to the airwaves, comply with Canadian content regulations. 
Canadian radio stations must play at least 35% Canadian content; broadcast television, 55% - both with some exceptions.  

Over generations, this simply became the way things are done. If the government wants more Canadian content, it imposes obligations on broadcasters. Even satellite radio wound up covered. The Wikipedia article on Canadian Content makes for darkly amusing reading. 

It isn’t costless. New Zealand has traditionally auctioned broadcast spectrum. The government can use that revenue to pay for other nice things. It would earn less at auction if it required every broadcaster to play Dave Dobbyn twice an hour.  

But people now enjoy streaming services and podcasts rather than broadcast media. How will government ensure Canadian content in that kind of context? Regulation! 

Last week, the Canadian Radio-television and Telecommunications Commission (CRTC) set a new rule under Canada’s Online Streaming Act. Streaming services that earn more than $10 million in Canadian revenue must register with the Canadian government. The requirement includes podcasts, social media services, adult content websites, and online news services.  

Why do they need to register? So the CRTC can ensure that the Broadcasting Act’s objectives, like having a balance of perspectives and sufficient Canadian content, are achieved.  

If Joe Rogan’s podcast earns enough revenue in Canada, he could be subject to Canadian content regulations. Or he could decide to block Canadian listeners.  

As for applying any of this to online pornography – well, it’s fun to laugh at from across a wide ocean. 

So, if Wellington deciding to spend hundreds of millions of dollars on a town hall rather than fixing the pipes is too depressing, just look North.  

At least we’re not Canada.  

On The Record
Initiative Activities:   
All Things Considered
Copyright © 2024 The New Zealand Initiative, All Rights Reserved

Unsubscribe me please

Brought to you by outreachcrm