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Insights 44: 18 November 2016
The Inequality Paradox: Why inequality matters even though it has barely changed
 
Report launch and panel discussion Monday 21 November
 
Julian Morris: Lessons from the sharing economy and the vapour revolution - 28 November
Shaky silver linings
Dr Rachel Webb | Research Fellow | rachel.webb@nzinitiative.org.nz
It was an odd sense of déjà vu this week as someone who lived in Christchurch until recently. The earthquake was hugely destructive and distressing for many. But while it would be easy to despair, there are more things than just a few rescued cows for which New Zealand can be grateful.

It is worth reflecting on the difference it makes living in a wealthy country. For an earthquake that quite literally shook the whole country, the death toll is remarkably low. Many countries could not withstand such a large quake without a toll in the thousands. As highlighted in the Initiative’s report The Case for Economic Growth, wealthier countries can afford more resilient buildings.

The timing of the earthquake was possibly the best we could hope for too. It would be hard to find a time when more people would be at home than on a Sunday night. The damage to Statistics House would have been unthinkably tragic had the earthquake happened during the work day.

Another fortunate aspect of the timing is that the Government is in a good fiscal position to respond. On the back of the robust economy, the Government had a larger than expected budget surplus. It is a relief that we know we have an expensive repair bill coming before the surplus is committed to a wish list of election promises.

It also comes at a time when large net migration numbers have been raising concerns. The ‘problem’ was New Zealand was just too darn attractive. Both foreigners and Kiwis had been increasingly reluctant to leave and more likely to want to arrive/return. The shaky isles may look less appealing now.

This will be a relief to those unhappy about the perceived and real effects of sudden increases in population. However, fixing the damage from this quake is going to be a huge job, for which New Zealand is going to need people. It is opportune that the quake happened before major policy changes have been implemented that could have hampered our ability to get people in.

All considered, things could have been much worse. It pays to keep that in mind for the future. We never know exactly what is around the corner, but by thinking ahead and being prepared, New Zealand can cope if the worst was to occur.

Property rights are human rights
Dr Eric Crampton | Head of Research | eric.crampton@nzinitiative.org.nz
The government ran roughshod over property rights in the Christchurch rebuild. The New Zealand Human Rights Commission’s report urging the government to include property rights in the Bill of Rights now seems especially timely.  

It has been fashionable to pretend that property rights are something separate from human rights. For some on the left, property rights protections seem a way of thwarting egalitarian aims and preventing socially beneficial regulations. The reality is rather different.

The Human Rights Commissioner looked at what the government did to Christchurch after the earthquakes, with a focus on those pushed from their red-zoned properties. The report’s quote from one red-zoned owner is apt: 

“I wondered what all this had to do with human rights. Now I realise that most New Zealanders own their own home so that no one can tell them what to do in it. Now everyone is telling me what to do with my own home.”

Without property rights protections, the politically weakest are most at risk when steamrollering over property rights is expedient. I doubt that the Government would have proceeded as it did if the bulk of land damage had occurred in richer parts of town. 

But others were not immune. Outside of the red zone, downtown property owners’ rights were treated as playthings by planners determined to achieve government’s ever-changing vision. 

Here in Wellington, the property rights of owners of heritage-listed buildings have been especially weak. Simultaneously required to make their buildings earthquake-safe, and prohibited from using cost-effective repair strategies, owners are left in an impossible situation. 

After the September 2010 Christchurch earthquake, the owner of one listed heritage building saw demolition as the only viable option. Council disagreed, layering on paperwork delays that resulted in the building falling on a bus and killing people. 

Last year, the Initiative jointly released a report with Deloitte recommending changes. I hope that this earthquake has not been the September to a February yet-to-come, but we cannot afford further delay. If Council wants to protect heritage buildings, it should help more in paying the extra strengthening cost – or de-list the buildings and let owners do what needs doing. 

Property rights are human rights. The right to life is also a human right. Central government must strengthen the Bill of Rights. And Council must let building owners get on with the job at hand. 

Protecting consumers from themselves (and each other)
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
Once upon a time, in a previous life it now seems, I wrote a doctoral thesis on the law and economics of advertising regulation.
 
One of the fun facts I still remember is a paradox in people’s attitudes towards advertising. 

If you ask them if advertising frequently misleads other people, a large majority will typically agree. However, if you ask the same people if they themselves are frequently misled by advertising, an equally large majority will reject this proposition.

There is no logical way of getting these two positions together. Either people overestimate their own rationality or they underestimate the capabilities of their fellow citizens. 

To put it more bluntly, people might be dumber than they think or at least not that much more intelligent than everybody else.

In any case, because most people believe that most other people are dumb, they are quick to demand all sorts of regulations. Not to protect themselves, but to save their allegedly foolish neighbours from themselves.

We are seeing such calls for government intervention all the time. In its most subtle form, it is about ‘nudging’ people towards making ‘better’ choices. In its not so subtle variety, government is asked to ban, tax or heavily restrict things.

But what if people are better able to figure out for themselves what is good for them and what is not? Especially in an age defined by social media and the ubiquity of information, aren’t there better ways for consumers to make informed choices?

An old marketing wisdom is “Nothing kills a bad product quicker than good advertising”. And indeed, try selling cheap and nasty plonk as premium wine with a glamorous campaign and you will not only burn your marketing budget but also wreck your reputation in the process.

Now imagine what modern information sharing can do to eliminate bad products and services. Think of Uber which allows users to rate their drivers. It does not even take a big budget to quickly identify problems with individual drivers – and it does not need a regulator to do it.

Such new tools could also help assure people that their fellow citizens can be safely left to themselves when it comes to consumer choices.

Professor Julian Morris, Vice President of the US think tank The Reason Foundation, has been researching these issues for many years. We look forward to hosting a lunchtime talk with him in Wellington on 28 November at which he will explore such new options for truly smart regulation. 

Please join us if you want to find out more on how consumers can be protected – from calls for more regulation.

 
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