Motu on Budget winners and losers, getting the 50s out of economics, poverty as a disease, the new Silk Road, smiling as a proxy for diversity, and the problem with ‘and’

Today's Top 10 is a guest post from Kate Preston, Sally Owen, Loïc Henry, Hannah Tuahine, Edmund Lou, and Nathan Chappell of the Motu public policy and research institute

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1) Budget 2017 analysis of real per person spending shows real winners and losers, Victoria University of Wellington and the New Zealand Initiative.

What changes to government spending in the 2017 Budget look like after adjusting for inflation and population changes. 

2) Seven ways to transform 21st century economics and economists.

Every economics student has, at some point, bemoaned old-school economic foundations. Universities using textbooks of the 1950s, with theories from the 1850s, don’t help matters. Kate Raworth went ten steps further and wrote a book about it. In this article, Raworth puts forward the seven major lessons she would like economists to adopt to modernise their thinking. These range from moving from rational economic man to socially adaptable creatures; embracing complexity; and markets needing to become ecologically regenerative by design. 

3) Why poverty is like a disease.

The author, Christian H. Cooper, rose from rags to riches, but is here to tell us the great American meritocracy is a great myth. Outlining recent research into epigenetics, he highlights the ways in which poverty mentally cripples people, and how this can be passed along to their children. Some point to Cooper’s life story as evidence that the hardworking will succeed. He responds that his is a story of luck, and that until we banish the myth of the bootstrap we are condemning millions to undeserved suffering.

4) Basic income versus targeted transfers.

Current social policies may not be adequate for achieving the universal basic income goals of redistributing the gains from automation and globalisation, providing efficient buffers against economic shocks, and advancing the reallocation of jobs and skills. There is considerable doubt about whether a truly universal income can be implemented, and these five straw men show that the lines between basic income and targeted assistance are blurred in practice. However, considering a basic income has the merit of guiding the debate towards refining targeted transfers and creating a more cost-effective anti-poverty policy.  

5) The Paris Agreement: As Trump pulls out, governors jump in.

Even as President Trump announces a US withdrawal from the Paris Agreement, governors from states representing almost 15% of the countries emissions banded together to continue working towards meeting the targets of the global accord. Many businesses are also stepping forward to help lead the charge, including Dow Chemical, Dupont, Goldman Sachs and Procter and Gamble. 

6) Letter in support of the nomination of Kevin Hassett to be chairman of the Council of Economic Advisers.

A group of economists has written an open letter supporting Donald Trump's nomination of Kevin Hassett to be Chairman of the Council of Economic Advisers. The group includes every living CEA chair, except Janet Yellen and Joseph Stiglitz. Hassett is known for his research on tax policy. If Hassett is successfully confirmed, his knowledge would greatly help the tax reform proposed by the Trump administration. Hassett may also advise Trump against pulling out of the Paris climate agreement. 

7) Will China’s new Silk Road be green?

At a time when the US is turning inwards, through the Belt and Road Initiative China is poised to launch “globalisation 2.0”, a self-proclaimed inclusive mode of development. From the outset, BRI was in part designed to absorb China’s overcapacity in steel and cement production to boost the domestic economy. Whether the new Silk Road brings environmental devastation or a new era of Chinese global resource stewardship and sustainable development will depend heavily on how China approaches this initiative.  

8) Why Americans smile so much, Olga Khazan.

According to this article, research shows that countries with relatively high levels of immigration have had to use more nonverbal communication, and therefore smile more. Inhabitants of more ethnically diverse countries are more likely to feel that their emotions should be expressed. In more diverse countries, people are more likely to think that smiles indicate the desire to be your friend. On the other hand, people from relatively homogeneous countries are more likely to think smiles represent superiority. 

9) Researcher rebellion at the World Bank.

The World Bank’s chief economist, Paul Romer, has ruffled feathers by requesting clearer writing by researchers. In particular, he refused to approve publications that use the word ‘and’ too often, which can emerge from unfocused and empty writing. The amusing consequence: he has been stripped of management duties, though remains chief economist. 

10) Is truncating the y-axis dishonest?

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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17 Comments

Aussies pivoting to beef and lamb.

"The state’s biggest grain farmer has made a bold move into sheep, increasing his flock to 40,000 head this year.

Eastern Wheatbelt farming giant John Nicoletti said he hoped to turn off 32,000 lambs and take advantage of the booming sheep market, paying as high as $6.50/kg for cross-breeds in some local offerings.

At the same time he has pulled up his seeders because of a lack of rain, cutting back his massive 78,000ha cropping program by 18,000ha."

"Gina Rinehart signs cooperation agreement to export as many as 300,000 live cattle a year to China"

https://thewest.com.au/business/agriculture/was-biggest-grain-farmer-joh...
https://thewest.com.au/business/agriculture/was-biggest-grain-farmer-joh...

Let's address the real elephant in the room, shall we?
While NZ grapples with the 19th century dilemma between diesel locomotives and electric-powered trains, China unveils a range of trackless trains for testing. This is the worst we can do, we are so afraid of infrastructure investment that our cities will soon be lagging behind their counterparts in China, Malaysia and Thailand in technology and infrastructure.
Also, while China launches new plans to introduce a line of commercial planes and other heavy machinery, we are engaged in coming up with ways to sell more whole milk powder to developing countries. Am I the only one who sees a disturbing irony in this role-reversal?

China has become a tech giant from behind a raft of state protected manufacturing industries that could produce the goods for the world at better prices, while our Governments (definitely Labour and National) saw no harm in our manufacturing industries being sold overseas. Now with almost a total loss of manufacturing that has an export capability, our economy is virtually crippled, reliant on things like tourism. Agrioculture will come under pressure as other countries ramp up their production, and population pressures here force expansion of our cities out on to once highly productive farm land.

Most countries who have developed manufacturing have at some time sheltered and nurtured their local industry. Japanese car companies are a great example. When they're new and young they're vulnerable.

NZ politicians may have oversubscribed to liberalism as an ideology, ignoring the practical examples of success around the world.

Good point.
Governments giving handouts to domestic companies are as recent as the post-GFC recovery period with the US and Irish bailout of major banks and other corporations and Germany's subsidy program on domestically-manufactured cars. The latter led to a major automotive manufacturing activity being repatriated back to Germany from Eastern Europe. There is nothing sinister about providing political favours to your own over others.

As India and Africa ramp up productivity and output through investment in technology and infrastructure, be prepared for even stiffer competition and lower prices in agriculture and mined commodities. I wonder how New Zealand and Australia will ride out this new wave of global supply glut.

Soooo agree. We could make our cities world leading for not a huge amount of money, but instead we are pumping all our money into more roads. Do we really think a city based on 1960's ideals can compete for the best employees over other countries in the world that are all modernising their cities?

>The author, Christian H. Cooper, rose from rags to riches, but is here to tell us the great American meritocracy is a great myth

I was talking to a professional director recently. The director noted that 20 years ago board appointments in NZ were basically entirely on the basis of mates being shoulder tapped, not merit. Reckons this has changed over time but it's still 75-80% on this basis.

How was this never self evident to anyone who cared to look? This is and always has been the glass ceiling and plainly obvious for anyone who has ever reached it. All the ranting about gender, race, or anything other feature is a simple incorrect identification of the problem. If you can get into the family that is all that is required. Hence the reason specific schools are popular, not for their acumen, just the opportunity to rub shoulders with the priveleged and be accepted into the clique.

It is well known. However, it's worth a mention given the insistence you meet elsewhere if ever advocating for a level of diversity on boards. The typical response is "harrumph, it should only be on the basis of merit, like it always has been"...forgetting that it's never been only on the basis of merit.

Re 4 - redistributing the gains of automation - what if the gains are already shared via lower prices? Noone ever seems to consider that prices will be lower than they otherwise would thanks to automation.

3) Why poverty is like a disease.

Quite an interesting read that although I'm not sure I entirely buy the story. I wonder if you could cure poverty with a pill? It seems to me that pills are the problem!
I read the comments on the article and there the author recommended watching a documentary called Oxyana which I found on YouTube. The people are ruined by drugs and many can barely speak understandable English. They have chosen nothingness over being. They seem to be victims of modern, narcissistic and nihilistic culture. They have far more than most of humanity has ever had in the entire history of the planet and yet live in mess and misery.

Wasted lives Zach, interesting article though with an inside perspective on how poverty can become deeply entrenched.

Yes it "does" become deeply entrenched - it's contagious

I watched this NZ National Film Unit documentary the other day. Quite a contrast. We actually looked after our young people quite well back then or maybe it was just propaganda. The kids in this film are about my age - it would be interesting to follow up and find out how they turned out:

To Live In The City (1967)

Analysis of the English election, just in

https://www.youtube.com/watch?v=ScRo7g32r5A

If we are going to accept that the life of the precariat, our children and grandchildren, is really precarious with its zero hours contracts, temporary employment and uber like jobs then we have to accept that a UBI's time has come. It must be similar to universal super with annual indexation to wages and inflation.