TVHE

….that is the justification offered by a Chinese journalist in this article related to the Google vs China row (blow by blow at Ars technica here). This quote is shocking:

The Chinese society has generally less information bearing capacity than developed countries such as the U.S., which is an objective reality that no one can deny. Chinese intellectuals living in China should show understanding to the motherland’s weakness.

Seriously, so the UK is going to arbitrarily tax bonuses at 50% because they are not “generating real wealth” they are just “rent seeking” (Will Hutton and Paul Krugman feel this way).  Wow.

The decision to pay a wage, or a bonus, is voluntary.  Given that these bankers are creating sufficient value through their work to extract these wages/bonuses why shouldn’t they get their wage/bonus.  They are generating sufficient “wealth” through their activities – or else they would i) get undercut by other labour, ii) not get paid by clients.

Yes the organisations that got bailed out should have to pay back their bailouts.  Yes, we should try to avoid the current moral hazard problem that could exist in the industry (on the basis of the bailouts mind you – which is government intervention). However, shouldn’t the solutions to these issues be focused on the actual issues – rather than arbitrarily attacking bonuses (which will simply be delayed to avoid the tax for those that can afford it).

If we think that the price paid for the financial labour service is out of whack because of some sort of direct market failure then tax it.  If we are trying to work out optimal tax and we find that the supply and demand for these services is perfectly inelastic, potentially shift the tax burden.  But that isn’t what the authors are doing.  They are accusing bankers of being the equivalent of organised crime and then stating that we should punitively attack.  I’m sorry but I find this attitude simply abhorrent.

Seriously, if you have something specifically against bankers, lets apply the logic somewhere else:

UK is going to arbitrarily tax teachers at 50% because they are not “generating real wealth” they are just “rent seeking”

After all, teachers don’t build physical things they just provide a service like the bankers.  If we are going to attack bankers for there being a credit crisis, why don’t we just start taxing teachers more because we “feel like educational standards are too low”.

Update:  Stumbling and mumbling also believes bank bonuses should be hammered.  However, he at least paints his argument out in full and so deserves to be heard.  I don’t agree, but that isn’t really the point

Late last week the Government announced that they were running a public consultation on the emissions target for 2020.

The Government already have a long term goal of reducing carbon emissions to 50% of 1990 levels by 2050. Long term goals tend to work quite well for Governments as it gives the public the idea that they are proactively doing something but realistically they will never be held to account if and when they don’t meet the target, as they don’t align all that well with the three year election cycle. But I digress.

This consultation process is part of setting the ‘interim’ goal for the year 2020. Environment Minister Nick Smith has quite correctly identified that setting this target requires a trade-off between our economy, our international reputation and, obviously, the environment.

Ultimately this 2020 goal will be presented in international climate change conferences at the end of the year, including the post-Kyoto Copenhagen Conference. I’m sure we will all be waiting with bated breath to see what the outcome of this Conference will be.

Of far more interest are recent ‘cap and trade’ developments around the world. Obama *just* got his bill passed by the House of Representatives while in Australia the proposed Carbon Pollution Reduction Scheme (CPRS) is very much struggling to gain legs.

New Zealand’s version of cap and trade, which will aim to reduce emissions to the 2020 (and subsequently 2050) goal looks set to be determined sometime later this year, although early indications are that it will be somewhat like the Aussie model. To blatantly oversimplify things, the Aussie model is a more politically palatable version of cap and trade, with lots of pressure-group exemptions and handouts to favoured sectors, as compared with the version NZ originally had planned for under the previous Government, which was more of an economically pure ‘you pollute, you pay’ model.

The final design of New Zealand’s scheme will be very interesting indeed…

Public servants are always frantic at this time of the year. I hear you collectively asking why? It’s nearing 30 June, the end of the government’s financial year. As such the various departments/ministries/commissions are very *busy*, throwing money around like they were the leader of the free world.

The perverse incentives on government officials to make sure they spend all of their allocated budget in the financial year, while nothing new, always amuses me. They are strongly incentivised to make sure that the kitty is empty come June 30, otherwise they risk having money taken away from them in the following year. You have to ask about the importance of the projects that are only taking place in order to empty the coffers.

As a result of these incentives it’s a very lucrative time to be consulting, even if the gravy train is about as efficient as KiwiRail.

Lant Pritchett comes out strongly in favour of aid agencies that promote economic development on Aid Watch:

There are many ways of providing assistance to people in poor countries that do little or nothing to produce development. While we might all whole-heartedly agree that de-worming is demonstrated to be cost-effective assistance, its impact on development is, at best, tiny.
…
[A]ddressing a series of important problems for well-being like vaccinations, schools for girls, HIV/AIDS prevention or malaria does not add up to a development agenda.
…
Development, as accelerated modernization… is the only demonstrated and sustained way to achieve the objectives of increased well-being.

This is particularly relevant in NZ now that Murray McCully wants to make NZAID promote development, rather than poverty elimination. Are his opponents just concerned about political manipulation of aid money, or do they really think that development is the wrong goal for an aid agency? Read more…

Deciding how to fund tourism is tricky: On the one hand there are a fairly well-defined group of firms who gain most of the benefits. On the other hand, a large, ill-defined group of firms benefit somewhat from tourism and promotion of New Zealand as a destination is common property. Once you’ve spent money on a promotional campaign and people decide to come to NZ, you can’t restrict access to those tourists to the firms that paid for the campaign. However, tourists’ spending is rival since each dollar can only be spent at one place. The problem with common resources is that nobody has the incentive to provide them.

Ordinarily you might ask the government to sort out the problem, but then the government is basically subsidising an advertising campaign for the tourism industry. One answer is for a tourism industry body to fund advertising campaigns for its members jointly. The problem here is that nobody has an incentive to join such a body, since they get the benefits of promoting NZ as a destination whether they’re in it or not. Furthermore, the industry rightly points out that its advertising is subsidising revenue for all businesses who have some custom from tourists.

John Key’s solution is to match industry advertising spending dollar-for-dollar. Read more…

The WHO has now declared the swine flu a global pandemic. There are 27,737 cases confirmed worldwide and the number is growing fast. However, only 141 deaths are confirmed, which gives the swine flu a mortality rate of 0.5%. Compared with the Spanish flu which killed about 10% of those infected it might be seen as a lot less severe.

However, focussing on the mortality rate would be misleading. If the swine flu were as infectious as the Spanish flu, but had a mortality rate of only 0.5%, it could still kill 6,500 New Zealanders or over 11 million people worldwide. That’s a LOT of people and really reinforces how important the spread of the disease is.

On the other hand, 18 million people die every year from poverty-related causes. Is the response to the pandemic proportionate to our response to global poverty? I guess my point is twofold: first, it’s important to put percentages and proportions in context to understand them but, secondly, once you’ve put them in proportion in throws into relief the lack of effort we put into similarly severe problems.

Is David Bain guilty of murder? No. That’s what a jury of our peers said on far better information than we now have. Did he kill people? Possibly. Does it matter? No.

Our justice system is designed to acquit people when we cannot be sure of their guilt. In its design there is an implicit judgment that errors of wrongful conviction are worse than errors of incorrect acquittal. Let’s think about that judgment. If you acquit someone who committed an offence then the cost to society is only the cost of their recidivism. Given uncertainty about their guilt, the cost is P(guilty) x P(reoffend) x (damage from reoffending). If you wrongfully convicted someone then the cost is P(not guilty) x (damage from imprisonment).

Suppose P(guilt) > P(not guilty) by a little, so the person is not convicted but we think they probably did it. Given that P(reoffend) is probably ~30%, that means that the damage from re-offending would have to be a lot higher than the damage from imprisonment to make it right to imprison the person. Most murderers do not reoffend by committing another homicide so we can class that outcome as highly unlikely. Given the cost to a person of imprisonment it does not seem unreasonable to make the value judgment that we have implicitly made in the design of our justice system.

On the basis of this approach, the question of whether Bain killed his family is only a curiousity. It has little bearing on whether he should be in jail, since any normal person’s answer to that question is based on a ‘balance of probabilities’ approach. It is commendable that the jury took their responsibilities seriously and did not fall into the trap of going with their gut.

I saw this in the Herald today and it got me thinking:

If Ms Lee wins the byelection, the next person on National’s list, Cam Calder, will enter Parliament.

Correct me if I’m wrong, but electorate seats aren’t supposed to change the total number of seats a party gets (unless you win more than your party vote like the Maori party did). Labour avoided the “Vote Twyford, get Tizard” dilemma when Phil Tyford stepped aside. But the fact that the Greens will split Labours vote and give the fresh face of Melissa Lea a chance raises an interesting possibility.

If Melissa Lea wins the seat then her title will change from list MP to MP for Mt Albert, but National won’t get any extra seats in parliament. This will leave a vacant seat that Labour will have to fill by taking the next person on their list.

So is it “vote Lea get Tizzard” after all?

Update: Seems that if National wins they do get another seat – so a byelection can change the proportionality of parliament. Seems weird!

Yesterday Nick Smith was thinking of taxing plastic bags. Today John Key threatened legislative intervention in an employment dispute. Now the government’s planning to spend $1.5b on telecommunications infrastructure. Now I’m not necessarily opposed to what they’re doing, but they do seem awfully interventionist for a right wing government.

How do people that voted for limited government and a retreat from the recent years of big government feel about all this? Is John Key living up to his promise to pull back from the days of the government ‘meddling’ in people’s lives?