Saturday, 29 August 2015

An ABC sense of humor

I loved this exchange.
I think they used the jump to hyperspace gif deliberately to troll Star Trek fans, then trolled Potter fans. Beautiful.

Friday, 28 August 2015

Some simple maths of organ donation

We this week released Elisabeth Prasad's report running some of the numbers on whether compensating live kidney donors makes sense. She finds that the typical kidney transplant saves the Ministry of Health on net about $125,000 over the longer term: dialysis is expensive.

Chris Bishop's Member's bill passed first reading and is off to committee. It increases compensation to live donors for lost wages from the current amounts offered by Work & Income (which range to $350 per week for up to 12 weeks) to 80% of the donor's wage. The average wage in New Zealand is about $1000.

Compensating donors so that more can afford to make that gift makes sense, on a straight fiscal analysis, if it brings enough new organs into the system. If new nobody becomes a donor because of the increased payment, then we've likely still done the right thing in helping donors, but it won't save the government money.

So here's the very simple maths on it.

Suppose each new transplant saves the government $125,000 less the compensation paid to the donor. Suppose that, currently, compensation averages $300/week for donors and lasts 8 weeks. The government then is currently $122,600 better off with each transplant.

Suppose that we move to full compensation. On average, donors earn the average wage. If they also take 8 weeks at $1000/week, the government is then $117,000 better off with each transplant.

If the live donation rate doesn't change, the government is out $5600 per transplant as compared to the status quo. If there is at least one new transplant for every 21.9 existing transplants, then the move is fiscally neutral. There were 72 kidney transplants from living donors in 2014. So if three more people are able to donate a kidney thanks to the increase in compensation, the move saves lives and is fiscally neutral. If four more people are able to donate a kidney thanks to the increase in compensation, the move saves lives and saves money.

Suppose we only get one new donor. One. In that case the government pays $403,200 to donors who would have donated anyway and $8000 to a donor who wouldn't have for a total of $411,200 in compensation. The net cost to MoH is then $288,600 for that single kidney - because they've had to compensate all the other donors at a higher rate. The recipient gets, in the indicative case of a 50 year old male, an additional 7.6 quality-adjusted life-years. The cost to MoH is then just under $38,000 per QALY.

In the worst-case scenario, where zero new transplants happen, the government is out just over $400,000 and a pile of live organ donors who have helped to save others' lives enjoy better compensation for their time out of work. In the break-even scenario, for the government, three more lives are saved when three donors are able to make the gift. And each donation after that saves the government rather a bit of money - while saving lives and doing right by the donors.

And note that all of this is predicated on my preferred 100% compensation regime. The break-even point using Bishop's 80% figure will be lower. The break-even point will also be lower if people take only 4 weeks in recuperation rather than 8.

Elisabeth's report, and her Masters thesis on the topic, are here. I was on Radio NZ's Nights this week on the topic; you can listen here. And pick up a copy of this week's NBR for my article on it (a pre-pub here).

Insurance reputation

There's a new PWC report on NZ's place in the global insurance industry.

It notes that new product development and worries about insurer reputation are bigger issues here than elsewhere.

I note that I've still been unable to find an insurer who will sell me a fairly simple sounding product: in the event of a big Wellington earthquake (we work out a satisfactory definition), I get a big cheque, no questions asked. I'd pay an annual premium based on the risk of that event occurring. This shouldn't be hard. It's even easier than my earlier proposal. I'm guessing that the transactions costs of setting up a first contract in anything weigh heavily where the expected market isn't big.

Thursday, 27 August 2015

No it didn't!

The Financial Services Council's Peter Neilson says Treasury's analysis of Kiwisaver's all wrong:
Neilson said the NZIER report found the evidence for Treasury's argument was too narrow because it used data only from the global financial crisis years.

He said it did not consider that KiwiSaver attracted young and low-income people who would not usually have been involved in formal savings schemes.

"The analysis simply compared the results for the people in KiwiSaver with those who were not, as opposed to those in the target audience who joined KiwiSaver compared with those in the target audience who did not."

"We need to compare apples with apples. People on a benefit can't afford to save and are likely to receive a higher income from New Zealand superannuation than they received during their adult lives on a benefit anyway.

"At the other end of the scale, people who were saving for retirement by investing in rental property or a farm would be unlikely to use KiwiSaver other than to just pick up the KiwiSaver incentives.

"For this group KiwiSaver would probably not increase their savings, it would only change the composition of their savings. Neither of these categories were in the target group for KiwiSaver and should not have been used for comparison," Neilson said.
I haven't read the NZIER piece yet. But I'm familiar with Treasury's work in the area.
  1. While the Treasury's 2011 work was based on a 2010 sample, their more recent 2014 work was based on SoFIE and IRD data covering 2002-2010. They have a panel of 10,000 individuals from 2002 through 2010. 
  2. The 2014 paper uses a difference-in-difference analysis looking at those who joined Kiwisaver as compared to those who didn't; they also ran diff-in-diff after sorting by age, gender and the like.  
  3. The point of difference-in-difference is to let you compare those who joined with those who didn't in a way that's meaningful. The differences in the savings rates for the two groups in the period before Kiwisaver forms your baseline; the differences in the savings rate afterwards forms your treatment effect. Sure, there can be plenty of differences between the two groups. But those underlying differences are caught in the first differencing in the difference-in-difference. It somewhat odd to critique a difference-in-difference analysis for just comparing two groups. 
  4. They found that KiwiSaver members accumulated less wealth than non-KiwiSaver members, correcting for other stuff. This is in the difference-in-difference: those joining KiwiSaver accumulated less wealth than those not joining, as compared to how both were doing before KiwiSaver.
  5. If you want to restrict analysis to the ones that are really targeted by Kiwisaver and evaluate it on that basis, that's way different from a standard "was this programme a good idea" analysis. Think of it this way. Suppose that there's some terrible disease. One person in a million gets it. The only cure is getting a vaccine at birth. The vaccine costs $100,000. A cost-benefit assessment looking at the programme as a whole will say it's a colossal waste of money: you don't spend a hundred billion dollars ($100,000 * 1 million people treated) to prevent one instance of a terrible disease. But if you looked at it only on a target audience perspective - the one guy who'd have gotten the disease, then it's worthwhile: $100,000 to save that life was worthwhile. It's still a pretty bad programme on the whole though.
I will have to look up the NZIER report; it has to be better than what's here reported.

Update: the NZIER report is here. On first cut, it seems very odd to hang a lot on the behavioural economics literature around people screwing up savings when recommending a programme the default products of which are often entirely wrong for the person directed into them. 

Special Licences

So, what's the deal with special licences then?

The Greens' minority view on legislation enabling extended bar hours during the Rugby World Cup noted that special licences can do the job that the legislation is meant to do, and that the committee heard no evidence of special licence applications being refused and no submissions from licensees dissatisfied with the process.

Here's the ODT from a couple weeks ago:
Hospitality Association of New Zealand Otago branch president Mark Scully said it was a ''positive move''.
''It's a great move - it's good for the community,'' he said.
''The people it will advantage will be those who can't stay at home to watch the games.''
Under existing legislation, bars could apply for a special licence to open for world cup games, but the process was ''very daunting'' and expensive, Mr Scully said.
The Dunedin City Council had received two applications by yesterday for licences to screen world cup games.
Both bids were opposed by police and a hearing was set down for a fortnight's time, council liquor licensing co-ordinator Kevin Mechen said.
Whether that hearing proceeded would depend on the nature of the legislation passed by parliament, he said.
He expected further applications for special licences to come in as the tournament advanced if Mr Seymour's Bill was unsuccessful.
The Otago Daily Times understands police had sought to impose further conditions on those wanting to open for world cup games such as ticket sale entry, bunting and that bars be forced to close before reopening for the games.
Mr Scully said measures such as those proposed and the cost of a special licence meant many bars would not bother to apply.
The Greens went on to note that while they didn't get submissions from bar owners during the short notice period for written submissions, they had a pile of submissions on that short notice from the NZ Med Association, the DHBs, Public Health folks and the Health Promotion Agency.

I suppose that an alternative explanation is that small bars can't make time to provide quick turnaround written submissions while public health lobbyists employed by the government to write on the evils of alcohol are able to, on short notice, provide written submissions on the evils of alcohol.

I agree with the Greens in one respect though. They recommend that a better approach would have Parliament encourage the District Licencing Committees that conditions on special licences be reasonable. That is the more general problem and the more general solution. But it requires having a chat with those veto players who use the power to object to impose rather onerous conditions, including ones that Parliament has already rejected.

My column in last week's Insights newsletter:
The power to say no is also the power to make the rules, or at least in part.

Parliament legislates. But it also makes rules giving other people a bit of legislative power too. Parliament does this whenever it sets policies letting someone hold up or block someone else’s otherwise lawful activities. These "veto players" can demand concessions in exchange for not vetoing.

Suppose your house has heritage features. A heritage society could threaten to make it hard for you to get consent for an addition onto the back of the house - unless you incorporate features that make them happy. Maybe they do not have the explicit right to do that, but because RMA processes let them make things hard for you, their veto power lets them extract concessions.

The Dominion Post this week reported on the police’s use of veto power around alcohol policy. The police recently have seemed to be trying to establish regulatory powers that they were never granted through the Sale and Supply of Liquor Act. Because police and medical officers of health can hold up publicans’ and bottle shops’ liquor licences, they can demand concessions. In Wellington, they are only supporting new bottle stores downtown if the shops run restricted trading hours and only sell expensive products.

Bar and bottle shop owners who do not want trouble with the police play along because that is the safer route. The costs to them of licence objections or of heavy handed police enforcement are too high. While the government explicitly rejected alcohol minimum pricing last year; the police are implementing it anyway, store by store.

Parliament last week had to legislate around some of these veto players. The 2012 Sale and Supply of Liquor Act provided special permits to let bars open at non-standard hours during international sporting events. The Committee Report was explicit that this was one of the points of special permits. But, the veto players have said that international rugby matches on their own do not justify a special licence. And police have objected to World Cup special license applications.

David Seymour’s bill allowing extended hours during the Rugby World Cup is great. But there is a bigger issue at play: the government needs to rein in the police lest Parliament again have to legislate around the veto player it created.

Wednesday, 26 August 2015

How many divisions does 'intent' have?

I wonder whether the government oughtn't pull its health and safety legislation and try again. 

Radio New Zealand reports on school principals' worries that they'll be subject to potentially large fines if kids are injured on school trips or on the playground. 
Workplace Relations and Safety Minister Michael Woodhouse said schools would need to ensure 'so far as is reasonably practicable' the health and safety of staff, and that its work did not endanger other people such as students and visitors.
"Schools only need to do what is reasonably practicable and what is under their control. So if something goes wrong that is beyond the school's control, or if it has taken reasonably practicable steps to reduce the risk, it will not be held accountable."
Mr Woodhouse said the maximum fines were only imposed in extreme circumstances for the most serious offences where the duty holder had been reckless.
Principals Federation president Denise Torrey agrees teachers should be safe from punishment if they follow good procedures.
But she said the mere possibility of stiff penalties could have a chilling effect.
There can be a vast gulf between legislative intent and what winds up happening in practice: just look at the idiocy around Worksafe's implementation of procedures around scaffolding.

If a Worksafe pedant thinks you, the principal, haven't been quite diligent enough in setting and documenting procedures, you could be in the hook for unspecified bad stuff. The monetary fines would be part of it, but the damning of the school's management in the Worksafe report would be at least as bad.

Maybe if you fight it through the courts, you could get back to that you were compliant with the intent of the legislation and that it's Worksafe that's proven overzealous. But the damage would already be done. And so the natural risk-averse outcome among principals is to limit the risk by wrecking much of what makes New Zealand great: a generally free-range approach to kids.

I don't know why National imagines that this won't happen.

Well, maybe it's the long-game. If Labour wins in 2017, they'll get to fulminate in 2020 against the horrible Worksafe bureaucrats who, under Labour, wrecked the playgrounds and pushed us towards a nanny-state. And pretend that none of it was their own fault.

Also, any legislation resulting in secret evidence preventing defendants from seeing the evidence against them is absolutely absurd.

Isn't it better to hold things off for a few months and get this right?

Drowning children

Jason Brennan says Singer's standard requires too much.

Recall that, in Singer's thought experiment, if you'd be willing to ruin your $500 iPhone by jumping into a pool to save a drowning child, you should also be willing to spend $500 to save a child's life. Since there are plenty of charities in the third world that can save lives at fairly low cost, people are not consistent if they would do the former but do not do the latter.

Jason ably points out a problem:
But the central problem with Singer’s thought experiment is that it is *not* analogous to the situation we find ourselves in. In Singer’s drowning child thought experiment, I save one life at some personal expense, and then move on with my life. I don’t remain in perpetual service to others.
What Singer needs, for his thought experiment to be an actual analog of our current situation, is something like this:
Many Drowning Children
You’re walking alone one day, when you come across millions of drowning children. The children you save will for the most part remain saved, though some might fall back in. However, no matter how many you save, there will always be more about to drown. You can spend your entire waking life pulling children out of pools.
Singer’s entire argument rests upon people’s moral intuitions in the One Drowning Child. But One Drowning Child doesn’t do the work he needs it to do, because One Drowning Child isn’t analogous to the situation Singer thinks we actually find ourselves in. Instead, what Singer needs to do is determine what people’s moral intuitions are in Many Drowning Children. Even if you judge you must save the one child in One Drowning Child, you might not judge that you must dedicate your life to, or even spend a huge amount of time on, saving children in Many Drowning Children.
Note that I am not claiming that Singer’s conclusions are wrong, just that his argument for those conclusions doesn’t succeed.
I'm reminded of a time I was walking our then four year old to daycare. We came upon an earthworm on the sidewalk. The rain had ended and the worm would likely die without intervention. We picked up the worm and put it onto the lawn. Then we turned the corner and saw several hundred worms on the sidewalk. She prepared to start picking them all up, and I instead brought her on to daycare. There are only so many hours in a day.