New Zealand’s interest-free student loan scheme has not achieved its policy objectives and fails ... more New Zealand’s interest-free student loan scheme has not achieved its policy objectives and fails to help students from poorer backgrounds access tertiary education, according to this report from The New Zealand Initiative. Eliminating interest-charges on all student loans was a superb decision in political expediency; politicians compete for votes and people will naturally vote for policies that most benefit themselves. Lowering or deferring the financial burden of tertiary education gains the vote of many tertiary students – and the votes of their parents. But it has not improved access to university. The policy is best described as a costly failure. Key Facts: Despite tuition increases, subsidies provided by the interest-free loan system mean students bear less than 20% of the cost of their education. While government-backed student loan schemes are common around the world, loans elsewhere typically carry interest charges. It is entirely possible to run an equitable student loan s...
Abstract: We review methods and assess the policy influence of a series of publiclyfunded Cost of... more Abstract: We review methods and assess the policy influence of a series of publiclyfunded Cost of Illness studies, mostly published since 1990. Our analysis shows that headline cost estimates, including the influential paper by Collins and Lapsley (2008), depend on an incorrect procedure for incorporating real world imperfections in consumer information and rationality, producing a substantial over-estimate of costs. Other errors further inflate these estimates, resulting in headline costs that are unrelated to either total economic welfare or GDP and therefore of no policy relevance. Counting only external, policy-relevant costs not only deflates overall figures substantially but also results in rank order changes among cost categories. Despite this, Cost of Illness studies appear effective in mobilizing public opinion towards increased regulation and taxation that is not justified by an expected increase in economic welfare: this is the cost of cost studies. Keywords: costs and be...
Large proportions of the electorate can best be described as politically ignorant. If casting a c... more Large proportions of the electorate can best be described as politically ignorant. If casting a competent vote requires some basic knowledge of the incumbent’s identity, the workings of the political system, one’s own policy preferences and the policy preferences of the main candidates, many voters cannot vote competently. Wittman (1989) suggests that, if ignorance is unbiased, overall results will be determined by informed voters as the ignorant cancel each other out. Lupia and McCubbins (1998) provides a mechanism whereby voters with little information can take cues from more informed colleagues in order to vote as if they had the requisite information. Using data from a uniquely useful dataset, the 2005 New Zealand Election Survey, I show that both mechanisms fail. Political ignorance is not unbiased: rather, it strongly predicts policy and political party preferences after correcting for the demographic correlates of ignorance. Moreover, membership in the kinds of organizations ...
While several cross-sectional studies (La Porta et. al. 2002, Norton 2002) examine institutional ... more While several cross-sectional studies (La Porta et. al. 2002, Norton 2002) examine institutional and cultural determinants of economic freedom, changes in economic freedom remain unexamined. I construct a measure of median voter preferences and find changes in voter preferences for economic freedom to be a significant determinant of changes in economic freedom in a panel of 25 OECD countries. The voter preference measure is robust to several alternative specifications, including the addition of institutional variables.
We review methods and assess the policy influence of a series of publiclyfunded Cost of Illness s... more We review methods and assess the policy influence of a series of publiclyfunded Cost of Illness studies, mostly published since 1990. Our analysis shows that headline cost estimates, including the influential paper by Collins and Lapsley (2008), depend on an incorrect procedure for incorporating real world imperfections in consumer information and rationality, producing a substantial over-estimate of costs. Other errors further inflate these estimates, resulting in headline costs that are unrelated to either total economic welfare or GDP and therefore of no policy relevance. Counting only external, policy-relevant costs not only deflates overall figures substantially but also results in rank order changes among cost categories. Despite this, Cost of Illness studies appear effective in mobilizing public opinion towards increased regulation and taxation that is not justified by an expected increase in economic welfare: this is the cost of cost studies.
Recovery in the central business district (CBD) has lagged and faltered for several reasons. The ... more Recovery in the central business district (CBD) has lagged and faltered for several reasons. The over-riding Canterbury Earthquake Recovery Act 2011 had more virtues than weaknesses, but the latter damaged recovery. The virtues included setting up the Canterbury Earthquake Recovery Authority (CERA), a time-limited special purpose recovery agent, to oversee and lead the recovery. It conferred it with special powers to set aside undue red tape ‘business as usual’ impediments. It set clear timetables and accountabilities for preparing rebuild plans.
Studies based on a cost of illness method frequently assert large social costs from a variety of ... more Studies based on a cost of illness method frequently assert large social costs from a variety of risky activities, the harms from which most typically fall upon the risk-taker himself. Many of these costs are inadmissible in a standard economic framework; consequently, figures derived by the cost of illness method are not comparable with other economic notions of cost and are of very limited policy use.
Eric [email protected] of CanterburyDraft June 2003. Do not cite without permiss... more Eric [email protected] of CanterburyDraft June 2003. Do not cite without permission. The author thanks David Bernstein, Bryan Caplan, Ed Clarke, Tyler Cowen, FredFoldvary, Nicolas Tideman, Gordon Tullock, and participants at the 2003 Public ChoiceMeetings for useful comments and discussion. The standard disclaimer applies.
The Austrian calculation argument suggests that inability to engage in economic calculation worse... more The Austrian calculation argument suggests that inability to engage in economic calculation worsened outcomes in socialist states. We suggest that this is hardly the case. When Austrian assumptions of benevolence are relaxed, inability to engage in economic calculation prevents the non-benevolent planner from fully extracting all available surplus from the citizenry. Consequently, when planners are non-benevolent, calculation ceases to be a relevant argument against the desirability of central planning; its normative force reverses absent benevolent planners.
The most promising way of reducing water use and nutrient load in overburdened catchments builds ... more The most promising way of reducing water use and nutrient load in overburdened catchments builds on the same kind of policy New Zealand is developing to reduce greenhouse gas emissions: cap-andtrade systems that operate at the water catchment level. Because cap-and-trade approaches are more cost-effective than other regulatory approaches, they allow us to do more good at less cost than other alternatives. Developments in smart-market technology and geospatial mapping allow for smart-market solutions that overcome barriers to success in existing trading arrangements. And, if initial rights allocations respect both the existing use rights of current users and incipient iwi water claims, they build a powerful constituency in favour of environmental management institutions that can withstand changes in government.
Public economics is a broad field. Rather than taking a broad survey of the entire field, we take... more Public economics is a broad field. Rather than taking a broad survey of the entire field, we take a broad survey of a portion of that field: public choice. Public choice applies economic tools and methodology to the study of public decision-making. Why do we have government? How can we aggregate individual preferences to make social choices? How might political
Public economics is a broad field. Rather than taking a broad survey of the entire field, we take... more Public economics is a broad field. Rather than taking a broad survey of the entire field, we take a broad survey of a portion of that field: public choice. Public choice applies econo mic tools and methodology to the study of public decision-making. Why do we have government? How can we aggregate individual preferences to make social choices? How might political institutions influence such aggregation? After situating public choice within the field of public economics more generally, we'll move on to examine the emergence of government, collective choice within government, effects of legislative structures on outcomes, the role of interest groups as compared to that of the median voter, rent-seeking, bureaucracy, regulation, the size and scope of government, Wittman's efficient markets critique of public choice, Caplan's rational irrationality response, and alternative forms of governance. Course Objectives: Students will learn core principles of public choice. They will be able to analyze the merits of economic policies and understand the political processes generating policy outcomes. Assessment Weighting and Due Dates: Quizzes in-class 10% Research Paper (first draft) 25 September 25% Research Paper (final draft) 13 October (or later by general consensus) 35% Referee reports 4 Sept; 2 October 30% • No late assignments or papers are accepted. Plan your time such that you finish assignments early enough to deal with unforeseen eventualities.
Encyclopedia entry Market failure theories underlie most economic arguments for government interv... more Encyclopedia entry Market failure theories underlie most economic arguments for government intervention in the economy. When markets operate in accordance with standard economic assumptions, no person can be made better off except by making someone else worse off. The range of government activity in such a world consequently is constrained. However, when markets fail to operate in accordance with the standard model, government policy may improve economic outcomes by ameliorating the market failure.
New Zealand’s interest-free student loan scheme has not achieved its policy objectives and fails ... more New Zealand’s interest-free student loan scheme has not achieved its policy objectives and fails to help students from poorer backgrounds access tertiary education, according to this report from The New Zealand Initiative. Eliminating interest-charges on all student loans was a superb decision in political expediency; politicians compete for votes and people will naturally vote for policies that most benefit themselves. Lowering or deferring the financial burden of tertiary education gains the vote of many tertiary students – and the votes of their parents. But it has not improved access to university. The policy is best described as a costly failure. Key Facts: Despite tuition increases, subsidies provided by the interest-free loan system mean students bear less than 20% of the cost of their education. While government-backed student loan schemes are common around the world, loans elsewhere typically carry interest charges. It is entirely possible to run an equitable student loan s...
Abstract: We review methods and assess the policy influence of a series of publiclyfunded Cost of... more Abstract: We review methods and assess the policy influence of a series of publiclyfunded Cost of Illness studies, mostly published since 1990. Our analysis shows that headline cost estimates, including the influential paper by Collins and Lapsley (2008), depend on an incorrect procedure for incorporating real world imperfections in consumer information and rationality, producing a substantial over-estimate of costs. Other errors further inflate these estimates, resulting in headline costs that are unrelated to either total economic welfare or GDP and therefore of no policy relevance. Counting only external, policy-relevant costs not only deflates overall figures substantially but also results in rank order changes among cost categories. Despite this, Cost of Illness studies appear effective in mobilizing public opinion towards increased regulation and taxation that is not justified by an expected increase in economic welfare: this is the cost of cost studies. Keywords: costs and be...
Large proportions of the electorate can best be described as politically ignorant. If casting a c... more Large proportions of the electorate can best be described as politically ignorant. If casting a competent vote requires some basic knowledge of the incumbent’s identity, the workings of the political system, one’s own policy preferences and the policy preferences of the main candidates, many voters cannot vote competently. Wittman (1989) suggests that, if ignorance is unbiased, overall results will be determined by informed voters as the ignorant cancel each other out. Lupia and McCubbins (1998) provides a mechanism whereby voters with little information can take cues from more informed colleagues in order to vote as if they had the requisite information. Using data from a uniquely useful dataset, the 2005 New Zealand Election Survey, I show that both mechanisms fail. Political ignorance is not unbiased: rather, it strongly predicts policy and political party preferences after correcting for the demographic correlates of ignorance. Moreover, membership in the kinds of organizations ...
While several cross-sectional studies (La Porta et. al. 2002, Norton 2002) examine institutional ... more While several cross-sectional studies (La Porta et. al. 2002, Norton 2002) examine institutional and cultural determinants of economic freedom, changes in economic freedom remain unexamined. I construct a measure of median voter preferences and find changes in voter preferences for economic freedom to be a significant determinant of changes in economic freedom in a panel of 25 OECD countries. The voter preference measure is robust to several alternative specifications, including the addition of institutional variables.
We review methods and assess the policy influence of a series of publiclyfunded Cost of Illness s... more We review methods and assess the policy influence of a series of publiclyfunded Cost of Illness studies, mostly published since 1990. Our analysis shows that headline cost estimates, including the influential paper by Collins and Lapsley (2008), depend on an incorrect procedure for incorporating real world imperfections in consumer information and rationality, producing a substantial over-estimate of costs. Other errors further inflate these estimates, resulting in headline costs that are unrelated to either total economic welfare or GDP and therefore of no policy relevance. Counting only external, policy-relevant costs not only deflates overall figures substantially but also results in rank order changes among cost categories. Despite this, Cost of Illness studies appear effective in mobilizing public opinion towards increased regulation and taxation that is not justified by an expected increase in economic welfare: this is the cost of cost studies.
Recovery in the central business district (CBD) has lagged and faltered for several reasons. The ... more Recovery in the central business district (CBD) has lagged and faltered for several reasons. The over-riding Canterbury Earthquake Recovery Act 2011 had more virtues than weaknesses, but the latter damaged recovery. The virtues included setting up the Canterbury Earthquake Recovery Authority (CERA), a time-limited special purpose recovery agent, to oversee and lead the recovery. It conferred it with special powers to set aside undue red tape ‘business as usual’ impediments. It set clear timetables and accountabilities for preparing rebuild plans.
Studies based on a cost of illness method frequently assert large social costs from a variety of ... more Studies based on a cost of illness method frequently assert large social costs from a variety of risky activities, the harms from which most typically fall upon the risk-taker himself. Many of these costs are inadmissible in a standard economic framework; consequently, figures derived by the cost of illness method are not comparable with other economic notions of cost and are of very limited policy use.
Eric [email protected] of CanterburyDraft June 2003. Do not cite without permiss... more Eric [email protected] of CanterburyDraft June 2003. Do not cite without permission. The author thanks David Bernstein, Bryan Caplan, Ed Clarke, Tyler Cowen, FredFoldvary, Nicolas Tideman, Gordon Tullock, and participants at the 2003 Public ChoiceMeetings for useful comments and discussion. The standard disclaimer applies.
The Austrian calculation argument suggests that inability to engage in economic calculation worse... more The Austrian calculation argument suggests that inability to engage in economic calculation worsened outcomes in socialist states. We suggest that this is hardly the case. When Austrian assumptions of benevolence are relaxed, inability to engage in economic calculation prevents the non-benevolent planner from fully extracting all available surplus from the citizenry. Consequently, when planners are non-benevolent, calculation ceases to be a relevant argument against the desirability of central planning; its normative force reverses absent benevolent planners.
The most promising way of reducing water use and nutrient load in overburdened catchments builds ... more The most promising way of reducing water use and nutrient load in overburdened catchments builds on the same kind of policy New Zealand is developing to reduce greenhouse gas emissions: cap-andtrade systems that operate at the water catchment level. Because cap-and-trade approaches are more cost-effective than other regulatory approaches, they allow us to do more good at less cost than other alternatives. Developments in smart-market technology and geospatial mapping allow for smart-market solutions that overcome barriers to success in existing trading arrangements. And, if initial rights allocations respect both the existing use rights of current users and incipient iwi water claims, they build a powerful constituency in favour of environmental management institutions that can withstand changes in government.
Public economics is a broad field. Rather than taking a broad survey of the entire field, we take... more Public economics is a broad field. Rather than taking a broad survey of the entire field, we take a broad survey of a portion of that field: public choice. Public choice applies economic tools and methodology to the study of public decision-making. Why do we have government? How can we aggregate individual preferences to make social choices? How might political
Public economics is a broad field. Rather than taking a broad survey of the entire field, we take... more Public economics is a broad field. Rather than taking a broad survey of the entire field, we take a broad survey of a portion of that field: public choice. Public choice applies econo mic tools and methodology to the study of public decision-making. Why do we have government? How can we aggregate individual preferences to make social choices? How might political institutions influence such aggregation? After situating public choice within the field of public economics more generally, we'll move on to examine the emergence of government, collective choice within government, effects of legislative structures on outcomes, the role of interest groups as compared to that of the median voter, rent-seeking, bureaucracy, regulation, the size and scope of government, Wittman's efficient markets critique of public choice, Caplan's rational irrationality response, and alternative forms of governance. Course Objectives: Students will learn core principles of public choice. They will be able to analyze the merits of economic policies and understand the political processes generating policy outcomes. Assessment Weighting and Due Dates: Quizzes in-class 10% Research Paper (first draft) 25 September 25% Research Paper (final draft) 13 October (or later by general consensus) 35% Referee reports 4 Sept; 2 October 30% • No late assignments or papers are accepted. Plan your time such that you finish assignments early enough to deal with unforeseen eventualities.
Encyclopedia entry Market failure theories underlie most economic arguments for government interv... more Encyclopedia entry Market failure theories underlie most economic arguments for government intervention in the economy. When markets operate in accordance with standard economic assumptions, no person can be made better off except by making someone else worse off. The range of government activity in such a world consequently is constrained. However, when markets fail to operate in accordance with the standard model, government policy may improve economic outcomes by ameliorating the market failure.
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