New Zealand has an excellent Emissions Trading Scheme covering everything except agriculture – a non-trivial exclusion, but we can come back to that later.The ETS has a cap. Net emissions from the covered sector cannot exceed the cap. So any other regulations that affect sectors covered by the cap only shift things around within the cap and affect the ETS price. They do not affect the quantum of net emissions. The Climate Commission has been proposing a lot of things that look a bit nuts when we recognise that the sectors they’re hitting are encompassed by the cap. The Climate Commission has been advancing what seem untenable justifications for things like banning new houses from having gas heating systems – they claim to be protecting consumers against having stranded assets when ETS

This morning’s Inbox comes with a plea that I advocate for self-isolation, rather than MIQ, for visitors coming in from Australia – doing so would vastly increase MIQ capacity, enabling a lot of visitors from actually-risky places to take up scarce slots in MIQ, and enabling more family reunification. My correspondent is in that latter situation. I’ve copied my reply below, lightly edited. I’m getting more than a little frustrated by the state of the border. Thanks for your kind words. You are absolutely right that taking Australia out of MIQ would free up a lot of space for others to enter.We have been working on and advocating for a far more risk-sensitive approach since this whole thing started. Our views on it have been in line with the public health researchers at Otago as well, for

Cecile Meier walks us through some of the costs of a border system that has neither been able to safely scale up to meet need, nor able to find any reasonable way of prioritising entry into those scarce MIQ spaces.When Zane Gillbee hugged his family goodbye in South Africa before moving to Wellington, his daughter Lyla was still a baby and his son Callum a happy seven-year-old.Lyla is now a potty-trained, walking, talking two-and-a-half-year-old and Gillbee has missed it all.Callum, who is about to turn 9, has been diagnosed with separation anxiety and is on medication for it.Zane Gillbee is one of the hundreds of skilled migrants who moved to New Zealand for a better life before Covid-19 hit, expecting his family to follow.There are a lot of people in this situation, but not so many that

The Climate Change Commission’s recommendations span the breadth of the economy. They are required to come up with sector-by-sector climate budgets consistent with getting New Zealand with net zero emissions under the Zero Carbon Act. The sector-by-sector budgets rest on underlying models. The models build predictions about what will happen as ETS prices rise, and what will happen when some additional constraints are put into the system. Some of the CCC’s recommendations then mandate what they think are their best guesses about what a carbon price would do, subject to those constraints.The scope is vast. The entire economy, really. And the Government has already signaled that it will just do whatever the Commission says to do. So getting things right seems to matter and is rather high

The excellent Richard Meade makes the case for Covid loans instead of wage subsidies. You can read the journal article on it, or his column over at The Conversation. Richard and I independently came up with the idea way back in March/April. I’d included it in our first comprehensive pandemic response policy paper, 26 March, with a bit more detail in a second short policy piece on 27 March. and he emailed me his two-pager on it about a week later. He’d not seen my version of it beforehand; his was better worked-up than mine was. Richard cites our version in his journal article. I’d liked it as a complement to the wage subsidy programme. We’d pitched a slightly different version of the wage subsidy scheme, based on Germany’s short-time work scheme (see our short piece of 27 March), but

I was curious how many spaces in New Zealand’s Managed Isolation and Quarantine system were taken up by folks coming in for the America’s Cup.It looks to be unknowable, at least for now.Immigration NZ has a list of people who were invited to apply for entry visas for the Cup, and another list of people who subsequently applied, and another list of those who were approved. There were 753 people whose entry visas were approved as of late January, with another 16 applications then under consideration. But we don’t know how many rooms that takes up. A lot of those 753 will have been dependents of arriving America’s Cup workers. Sometimes dependents travel with the worker. Sometimes they arrive at a different time. If they come in together, that would be one room. If they come in separately,

My column over at Newsroom this week points out the fairly obvious.The government can add daily saliva testing for everyone at the border to the existing testing regimen. If daily testing winds up proving the swab tests to be redundant, ditch the swab tests when we find that out. If it turns out they’re both useful, keep both.And in the very unlikely chance that the saliva tests wind up being redundant, they won’t have cost much.From the column:Saliva-based PCR testing is a game-changer. It is at least as accurate as the swab tests currently used, but has several advantages over the swab test.Because it relies only on saliva collection, it does not need scarce medical professionals to gather the samples. Availability of nursing staff is a substantial constraint in the system – and

I’m a bit of an ETS-absolutist. Or at least a carbon-pricing absolutist, in a place the size of NZ. I think the Weitzman reasons for preferring a carbon tax to an ETS are second-order relative to political economy considerations, and any weight at all put on switching costs makes it ludicrous to want NZ to flip from an ETS to a carbon tax. But if a carbon tax were already in place, I’d be an absolutist about supporting the carbon tax.There are fun and interesting arguments around tech-forcing, but NZ’s not at the scale where that even really comes into play except maybe around ag biotech. So, prices are the way to go. One of the big things I hear from non-economists pushing back on it is around future generations. Here’s my version of what I get a lot on Twitter, and as pushback from

Josh Gans’s newsletter on Covid, testing, and vaccination continues to be excellent. Here’s the latest from Josh, on failures in the Australian system that led to the most recent outbreak there.However, let’s look at the testing. First of all, quarantined travellers are tested just twice (usually a few days after they arrive and a few days before they leave). Why aren’t they screened daily using rapid antigen screens? It costs very little and can ensure that cases are picked up quickly and extra precautions are put in place so the workers aren’t exposed.Second, what about the employees? The workers are tested but not often. This one had symptoms before he got a test. From here the plot thickens. From WA Today:Daily testing of hotel quarantine workers, which could have identified WA’s

The afternoon’s closing of the browser tabs brings the following worthies:Superb news! The police have taken an operational decision not to waste resource sending helicopters out looking for cannabis plants. Or at least National Headquarters isn’t going to resource it any longer. Lots of things are illegal; police (rightly) have limited budgets and so have to make decisions about where to focus their efforts. Flying around in helicopters on gardening operations makes far less sense than putting resource into preventing crimes that actually have victims. 
Audrey Young on the slow pace of getting the vaccine out.
In any other circumstance, I’d be a bit nervous about Otago Public Health recommendations around smoking policy. But I’m in complete agreement with Baker/Wilson on this one.

Getting to Browser Tab Zero so I can reboot the computer is awfully hard when the one open tab is a Table of Contents for the Journal of Environmental Economics and Management, and every issue has more stuff I want to read.A few highlights:Gugler et al demonstrating the effectiveness of British carbon pricing over German regulatory interventions in the electricity market. Carbon prices were far more effective in getting to a cleaner power grid. Steven Smith on prior appropriation versus proportional division in allocating water rights, leveraging a neat natural experiment (the formation of Colorado forcing a change in water rights). They suggest proportional rights (think: NZ’s way of divvying up fishing rights within a total allowable catch) can get you to higher yields and higher-valued

Israel chose to pay a bit over the odds for the Pfizer vaccine to get earlier access. Here’s The Times of Israel from 16 November.American government will be charged $39 for each two-shot dose, and the European bloc even less, but Jerusalem said to agree to pay $56.Israel has now vaccinated more than 80% of their elderly population and is getting the second doses into arms. I do not know what New Zealand is paying. But suppose we’re paying the same as the US. For only $85 million USD more, or just under $120m NZD more, we might have also had early access. $120m sounds like a lot in normal times. But if it meant that we could have everyone vaccinated from mid-year, instead of starting to roll-out vaccination from mid-year, we’d be able to open the border, right? Surely being able to open

RNZ reports on continued arbitrariness on decisions at the border. British comedian Russell Howard is about to tour New Zealand and other acts allowed in through managed isolation this summer include drag queen RuPaul and musicians at Northern Bass in Mangawhai and the Bay Dreams festival.The vice-president of the Promoters Association, Gray Bartlett, said despite being an approved promoter with Immigration New Zealand, he was offered no explanation on why acts such as the Music of Cream and American speaker Michael Franzese were turned down.No-one had spelt out what the criteria were for approval nor who was making the decisions."What I really don’t like is where governments begin to start with favouritism and choosing who they like, or getting people to choose who they like to come in.

Dan Hamermesh always takes on the fun projects. A decade ago, he did a pile of work looking at returns to beauty. Now, he’s looking at time-diary data. Here’s the abstract from his latest at NBER. Using time-diary data from the U.S. and six wealthy European countries, I demonstrate that non-partnered mothers spend slightly less time performing childcare, but much less time in other household activities than partnered mothers. Unpartnered mothers’ total work time—paid work and household production—is slightly less than partnered women’s. In the U.S. but not elsewhere they watch more television and engage in fewer other leisure activities. These differences are independent of any differences in age, race/ethnicity, ages and numbers of children, and household incomes. Non-partnered mothers

I’m less than convinced by arguments that platforms like Twitter should be subject to common carrier regulation preventing them from being able to decide who to keep on as clients of their free services, and who they would not like to serve. It’s much easier to create competition for the network in this case than it was for Telecom in the 1950s. There has been some concern about the coordinated action by a lot of platforms against a set of conservative platform users in the US. It has been taken as suggesting some leftist conspiracy against right-wing views. There are, of course, multiple hypotheses consistent with the available data.Here are some of them, with some very thumb-suck probabilities.The terms of service always barred what Trump et al have been up to. But the platforms have

A few months ago, I was curious about how many scarce spaces in MIQ were being taken up by people coming in for the boat race. So I made an OIA request. Now, months later, it looks like the answer is that MBIE officially has no clue how many boat race people from the boat race overseen by MBIE were put by MBIE into the MIQ facilities overseen by MBIE.Here’s the trail so far. From: Eric
Crampton
Sent: Tuesday, 29 September 2020 12:05 PMTo: *OIA Subject: [RELEASED FROM QUARANTINE][SUSPECT SPAM]America’s Cup managed
isolation

Dear MBIE,

I’ve a short OIA request.

I’d like to know how many people have sought border
exceptions for accommodation in the MIQ system in relation to the America’s
Cup, how many have been granted those exceptions, and how many more are
expected.

Many thanks!

Eric

The government has announced a strengthening of the Covid-leave scheme. From early 2021, presumably once they have the mechanics worked out, businesses will be eligible for support if workers need to self-isolate after a Covid test, while waiting on a result, and are unable to work from home.From the Beehive’s release:A new Short-Term Absence Payment will be available to
eligible employers to support eligible workers who cannot
work from home to follow public health guidance and stay
home while waiting for a COVID-19 test result. It is also
available to eligible self-employed workers, and to parents
or caregivers of dependents who are required to stay at
home awaiting a test result where they need support to do
so. This will help businesses to continue to pay people who
can’t work from

The National Business Review ($) has a roundup of reactions to Ganesh Nana’s appointment as head of the Productivity Commission. It includes some minor comment from me, and you can probably guess what I think about it.But it also includes this somewhat intriguing bit from Sam Warburton:Former Treasury Economist Sam Warburton said he could not name an economist in the public realm that would be suitable for the commissioner role at the moment – a comment that spoke to the credibility of the profession, which he said had not been high for the past few years.Imagine that you’re the recruiter tasked by Grant Robertson with finding the right candidate. You want a Commissioner who is a credible economist, who is respected by the profession, who has some profile beyond other economists, who is

Stephen Joyce canvasses the usual excuses for delays in getting normal travel arrangements with Australia. He finds them wanting, as I have as well.The Prime Minister’s reasons for further delay, as reported in the Herald yesterday, are ridiculously weak. There were basically three of them. Let’s take them in turn.The PM is reportedly concerned that Australia could have a looser definition of a Covid flare-up than New Zealand. It seems like there is an easy solution to this. New Zealand retains sovereign control over its borders and the Government could reinstate a quarantine requirement at any time. Having a bubble doesn’t mean always agreeing with Australia’s definition of risk.The second problem is apparently that having fewer Australians in quarantine facilities would allow more

My Dom Post column this week makes the case for a carbon dividend. Canada imposes a carbon tax on provinces that haven’t their own carbon pricing regime, and is set to substantially hike the tax to $170/tonne. How is it politically feasible? Money collected in each province is sent back as a grant to residents in each province. Carbon prices maintain incentives at the margin to change behaviour; redistributing the revenues in lump-sum manner preserves those incentives while addressing equity concerns and making the thing politically possible. Here, the Climate Commission and government are behaving as though higher explicit carbon prices are impossible. There is no defensible explanation for carbon measures that would cost over ten times as much per tonne abated. If you want to do the

The Productivity Commission’s Dave Heatley blogged on some of his work on Covid policy.His conclusions?Cross-country data does not support a health vs. the economy framing of responses to Covid. Nor does the data support a get health right and the economy will follow.Achieving the lowest health costs over both the short and long term requires choosing policies that work in protecting citizens from Covid while minimising economic costs.New Zealand should seek to improve its policies, finding those that work at lower economic cost. It is likely that we can learn much from Taiwan, South Korea and other high-performing countries.Keeping Covid down seems necessary but not sufficient for economic recovery. That of course isn’t an argument against keeping Covid down. There is a lot that New

I’m a bit curious about logistics over on the Islands now.RNZ writes:Ten containers of watermelons were scheduled to be shipped to New Zealand on 5 December.However, the trucking companies assigned to transport the melons to the wharf in Tongatapu did not arrive to the growers’ farms to pick up the produce, as RNZ Pacific Correspondent Kalafi Moala explained."The government, in particular the Ministry of Agriculture had organised for the trucks to come pick up the melons and so the fact that it didn’t happen over the weekend, the responsibility falls back on them," he said.Why is the Ministry of Agriculture responsible for organising freight logistics there?If a grower contracts with a trucking company for critical deliveries like this, I’d have expected penalty clauses for failures. I

Last week, the government announced it would allow 2000 seasonal workers into New Zealand’s Managed Isolation and Quarantine system on Recognised Seasonal Employment (RSE) scheme, with workers to arrive from January to March 2021. There’s just so much that’s backward in all of this. The RSE scheme is open to workers from the Federated States of Micronesia, Fiji, Kiribati, Nauru, Palau, Papua New Guinea, the Republic of the Marshall Islands, Samoa, the Solomon Islands, Tonga, Tuvalu, and Vanuatu.The most recent World Health Organization COVID-19 situation report for the Western Pacific notes that the Federated States of Micronesia, Kiribati, Nauru, Palau, Samoa, Tonga and Tuvalu have not reported a case to date – as of 25 November. Since then, Samoa has had two positive cases caught at

The Initiative’s Exec Director, Oliver Hartwich, loves telling stories about German towns that did everything they could to encourage businesses to come to their area, as well as new housing, because their finances depended on having a successful local economy.New Zealand’s a bit different.In last week’s Politik newsletter, Richard Harman goes through how Environment Minister David Parker has had to signal readiness to get involved in a scrap between the Waikato District and Regional Councils. District Council wants to allow the Sleepyhead Mattress Company to build a new factory and village; the company figures they can’t have a plant if there’s nowhere for workers to live. Regional Council doesn’t want to rezone land to let it happen. Why?The Council’s submission said that by enabling an

Egads the browser tabs. Enough! I haven’t shut down the computer in a week in hopes of giving each of these its proper due; time to give up and move on. The worthies that each deserved a proper post:Ending the pandemic is worth between 5-15% of total wealth. For one potential sense of the gains in NZ’s having ended the pandemic, here. Trump likes to hate on immigrants. Unfortunately, there’s a lot of it in NZ as well, except the ideological positioning of it flips. In the US, everyone rightly recognizes Trump’s racism for what it is. And Kiwis recognise Trump’s racism for what it is. But NZ does love itself a bit of discussion about banning "low skilled" migration. Ilya Somin had a nice roundup of migrants’ contributions to the development of the Covid vaccines – worth 5-15% of total

Capacity constraints are building in the construction sector. Some of it is weird supply-chain issues with the global pandemic; some of it is a substantial building boom here and worker and material shortages. The Herald goes through it, noting some promising SNZ data:Stats NZ has been highlighting strong building activity lately.In the year ended September 2020, 37,725 new dwellings were consented, up 3.5 per cent from the previous year. Auckland alone had consents issued for 15,470 residences, up 5.7 per cent.This month, Stats NZ said that for the first time, the monthly value of building consents issued in Auckland exceeded $1b and accounted for about 44 per cent of the national total of $2.4b.Auckland makes up about one-third of New Zealand’s population, it noted."This is the first

Harsh stuff from Grant Wilson at the Australian Financial Review ($):Even with the RBNZ flagging macro-prudential tightening next year, via the reimposition of loan-to-value ratios, house prices are now a de facto constraint on monetary policy. The "least regrets" formulation also assumes that the RBNZ’s approach to unconventional monetary policy, which was first articulated back in 2018, holds up. While we agree that the first round of LSAP, in conjunction with other measures announced in March and April, was highly effective in lowering the local term structure of interest rates, the jury otherwise remains out. We highlight (again) that the RBNZ’s expectation of LSAP imparting downward pressure on the NZD via the portfolio balance channel is in doubt. In contrast to their pass-through

My column in today’s Dom Post:New Zealand’s Covid-19 Leave Support Scheme took a page from Singapore’s book, but needs a few tweaks to really be effective. The scheme compensates employers, including the self-employed, if they need to self-isolate and cannot work from home.It provides excellent coverage for workers who have been required to self-isolate because they have Covid or because they have been told to self-isolate as a close contact of a case.It covers you if your child has been told to self-isolate and you need to provide support.And, for a few workers in a few critical health sectors, it also provides coverage while waiting on a test result.All of that is laudable.But if you’re a hospitality worker, or a retail clerk, or a bus driver, you will not be eligible if you’ve

The price of carbon dioxide emissions in the ETS is $35/tonne. The scheme has a binding cap. If you buy a tonne of credit and then refuse to use it, you have reduced New Zealand’s net emissions by one tonne. Somebody, somewhere, will not be able to buy that tonne. That person or company will emit less. Every time the government does something through regulation or other spending that costs more than $35/tonne to abate emissions, it is forgoing the opportunity to do even more good by buying credits and running them through the shredder. The waste documented in Marc Daadler’s story is just infuriating.Cleaner boilers in government buildings have a 20 year lifespan, a cost of $80m, and an annual emission reduction of 26,000 tonnes. Assume a zero discount rate, that’s 520,000 tonnes abated at

Imagine yourself in the place of the MBIE boffin tasked with deciding which application for a scarce MIQ space is most deserving or most needed.The job isn’t easy.The government keeps a small number of spaces in MIQ for getting critical workers in. But somebody has to decide which workers are most critical. Applicants fill in forms to make their case, but that won’t help a pile. Every applicant will have incentive to present the most sympathetic case possible, and whoever is assessing the cases has to figure out how much overstatement is present in any of them.Think only about agriculture for a moment. I can easily sympathise with the horticulture folks who are looking at just horrible losses because they can’t get workers in through MIQ to do the picking. There are lots of calls for them