Where are the food carts?

I still don't get why there aren't more food carts on Wellington's waterfront. On a good sunny day, you might find, along a stretch of gorgeous waterfront more than two kilometres long, all of it close to downtown, 2-3 food carts. 

Meanwhile, downtown Christchurch restaurants are worried about the Arts Centre's plan to host around 30 carts not just on weekends: every day. They point to the rates bills they pay and consenting hassles they deal with that food carts avoid; they want Council to cut its subsidy to the Arts Centre if it doesn't abandon its food trucks plan. 

My column for this week's Post, Christchurch Press, Waikato Times etc:

Assessing council rates on land value alone, while abolishing the punitive ratings differential assessed on businesses, would be a better way of levelling that part of the playing field. The piece of land would pay the same amount in rates regardless of whether a restaurant, a shop, or some carts sat on it.

Similarly, radically easing consenting burdens would level the playing field while improving outcomes more generally. This week, results from the UK Growth Survey were released. Forty-four top UK economists were asked what their government should do to pursue growth. They overwhelmingly pointed to planning reform. We have the same problem.

Building a restaurant should be a simple by-right activity.

And letting food carts serve beer would remove a distortion that currently works in restaurants’ favour.

Christchurch council should only reduce the subsidy it provides to the Arts Centre to the extent that having food carts reduces the value of the public amenity that the centre provides. And really, food carts seem more likely to improve that amenity than impede it.

Christchurch’s problem then brings us back to Wellington’s puzzle. Food carts do not have to deal with resource and building consents, though they do need a food registration certificate. They enjoy a ratings advantage, and Wellington’s business ratings differential is even worse than Christchurch’s. And everywhere in Wellington’s downtown is a short walk from the waterfront. Christchurch is more dispersed.

So, on a good day, to steal a line from an old Australian tourism commercial, where the hell are the waterfront food carts?

Better to level playing fields by removing shackles rather than by adding them. But if food carts do have such an advantage, why are there so few on Wellington's waterfront? 

An ungated version of the column will eventually turn up here.

Food waste

There are some areas where it's hard to get a solution without government intervention. Carbon prices, for example. Not saying it's impossible, it's just hard.

There are also plenty of areas where policy is probably wrong and could use advice from a Chief Science Advisor. For example, setting an air quality standard for schools that balances cost of cleaner air against benefits from fewer teachers and kids out sick. Seems important. Naomi Wu's put up interesting stuff on far-UV light. Does the science stack up? What would it cost to put those in schools, if government ordered at scale for every school in the country? Would doing so bend the cost curve and set an example for others to follow?

Little things like that. Might matter. There have been a lot of illness-related school absences, and the government has claimed to be keen on reducing school absences.

The Prime Minister's Chief Science Advisor just put out a report on the critical issue of... food waste.

Normally you want to start with whether there's a potential policy problem. 

But every part of the system has strong incentive to avoid food waste.

A cabbage that doesn't make it onto the truck to get to market is money that the farmer doesn't get. Farmers like having money. They will invest in getting food to market up to the point at which getting the next cabbage onto the truck costs more than it's worth. Reducing spoilage isn't free. Farmers have to balance things. They are best placed to do so on their end. Who could know better than they do?

Transport companies that can't get their act together to deliver food in good condition wind up losing customers to those who can. That also means money. Transport companies prefer having money to not having money. They will invest in reducing spoilage up to the point at which the expected costs of doing so are greater than the benefits. Reducing spoilage isn't free. Shipping companies have to balance things. They are best placed to do so for their part of the production chain. Who could know better than they do?

Grocers that throw out a lot of spoiled food are throwing away money. They paid for the goods, and get no revenue from the ones they throw out. Grocers like having money. Didn't we just have an inquiry into whether grocers like having money too much? Spoiled food is wasted money. Grocers will invest in reducing spoilage up to the point at which the next dollar invested in it saves less than a dollar's worth of food. Reducing spoilage isn't free. Grocers have to balance things. They are best placed to do so for their part of the production chain. Who could know better than they do?

Households that throw away spoiled food are throwing away money. They paid for the food, and don't get to eat it. Households like having edible food and like having money. Don't we regularly hear news stories about people not being able to afford enough food? Spoiled food is wasted money. Households will invest in reducing spoilage and avoiding waste up to the point at which the next dollar's worth of effort in doing so saves less than a dollar's worth of food, as the household values things. Reducing spoilage and waste isn't free. Households have to balance things. They are best placed to do so for their part of the production chain. Who could know better than they do?

Spoiled food winds up in a few places. If it's in a household's compost bin, it can result in GHG emissions that aren't priced. But government seems to like composting. If it goes down the waste disposal, it winds up in the city's sludge plant along with human waste. I'm pretty sure those plants are in the ETS. If it goes into the trash can, it winds up at landfill. Landfills pay for their emissions, and have every incentive to reduce those emissions. Some capture and use the captured methane. If it winds up being fed to pets or to livestock, it displaces other feed and needn't be worried about.

And then we get the press release on the PMCSA's report from NZ Food Waste Champions. Where do you even start? 

They want a national food waste strategy with Targets! and Structures! and Systems! and Mechanisms!. 

The recommendations delivered to the Government include the need for a national food loss and waste strategic action plan, a reduction target, and structures and systems to empower stakeholders to act on them; mechanisms for ensuring more New Zealand-specific reliable and comprehensive food waste data; better strategies aimed at preventing food loss at  source; and enabling conditions that promote food rescue and upcycling to ensure edible food is never treated as waste.

The report gives a bullet-point list of first steps in preventing food losses in production. One of them was "exploring the potential of cooperative business models to improve farmers' market power." 

It is ...not obvious... why a coop would be preferable or how market power enters into any of this. The report seems to worry that buyers with market power can insist on high standards for delivered food, resulting in diversion of 'nutritious food' (ie potentially unpalatable to their customers, but still edible, and could be on-sold to Wonky Box) away from tables. There seems little consideration of that high standards by grocers might encourage producer practices that avoid bruised fruit that has a shorter shelf-life. 

There was one sensible bit in the press release.  

Dawson cites food packaging decisions as an example. “Moving to more sustainable packaging solutions is important, but what if that packaging means the food inside has a shorter shelf-life, which leads to higher levels of waste with greater levels of emissions?”

If grocers have chosen those options because consumers want them, they've made the balancing. If consumers want dumb-forms of packaging because they falsely believe those versions are somehow better for the environment, then maybe government could decide to run fewer anti-plastics campaigns. If grocers have chosen those options either because compelled by regulation or under threat of regulation if they do not, or because of misguided government-sponsored messaging around sustainability, then government has skewed the balance and done harm. Regulation doesn't do the comprehensive balancing that grocers would otherwise do. 

Similarly, the report recommends evaluating the Grocery Supply Code on "trade term driven food loss and waste." If the regulator sets supply terms that aren't what willing parties would contract to on their own, there's again the risk that government has skewed the balance and done harm. Regulation doesn't do the comprehensive balancing that grocers and suppliers discover through negotiation. 

Highlighting how regulatory mandates can inadvertently create waste is great. It's the kind of thing a new Ministry for Regulation could be doing. 

Another potential area for investigation - not sure whether it's in the report, though - would be the darned restrictions against building things on Precious Agricultural Land. Where those things can include restrictions against putting processing facilities on that land, they wind up requiring that food be trucked farther away before processing, which increases damage and waste. It's one of the things that National promised to look into; the restrictions on use of agricultural land are entirely a government-caused problem.  

The rest seems madness.

They apparently wrote four reports on this stuff. In this government budget situation. And with rather more important areas where scientific advice could improve government policy where there is an actual policy problem. With 500 "experts and stakeholders across the motu" having had to spend time on it. 

It all does make one wonder about waste-reduction.

We need a weighted Big Mac Index

The Economist's Big Mac Index has been a fun way of comparing currencies' purchasing power relative to one standard ubiquitous good: the Big Mac.

Turns out standard isn't as standard as I'd have expected.

Americans get a lot more for their money than folks in the UK.

It looks like the NZ Big Mac gives you a bit more than the UK version, but a bit less than the US. 

Kiwis get 96.1% of a proper Big Mac, and Brits get only 83.6%. 

Update your Big Mac Index values accordingly. 

Paris got fed, without a national food strategy

In Economic Harmonies, Bastiat marveled at the system of voluntary social order that resulted in a standard of living incomprehensibly above that which obtained in the state of nature, without direction or coordination. 

Every day, when he gets up, he dresses; and he has not himself made any of the numerous articles he puts on. Now, for all these articles of clothing, simple as they are, to be available to him, an enormous amount of labor, industry, transportation, and ingenious invention has been necessary. Americans have had to produce the cotton; Indians, the dye; Frenchmen, the wool and the flax; Brazilians, the leather; and all these materials have had to be shipped to various cities to be processed, spun, woven, dyed, etc.

Next, he breakfasts. For his bread to arrive every morning, farm lands have had to be cleared, fenced in, ploughed, fertilized, planted; the crops have had to be protected from theft; a certain degree of law and order has had to reign over a vast multitude of people; wheat has had to be harvested, ground, kneaded, and prepared; iron, steel, wood, stone have had to be converted by industry into tools of production; certain men have had to exploit the strength of animals, others the power of a waterfall, etc.—all things of which each one by itself alone presupposes an incalculable output of labor not only in space, but in time as well.

In the course of the day this man consumes a little sugar and a little olive oil, and uses a few utensils.

...

It is impossible not to be struck by the disproportion, truly incommensurable, that exists between the satisfactions this man derives from society and the satisfactions that he could provide for himself if he were reduced to his own resources. I make bold to say that in one day he consumes more things than he could produce himself in ten centuries.

What makes the phenomenon stranger still is that the same thing holds true for all other men. Every one of the members of society has consumed a million times more than he could have produced; yet no one has robbed anyone else. If we examine matters closely, we perceive that our cabinetmaker has paid in services for all the services he has received. He has, in fact, received nothing that he did not pay for out of his modest industry; all those ever employed in serving him, at any time or in any place, have received or will receive their remuneration.

So ingenious, so powerful, then, is the social mechanism that every man, even the humblest, obtains in one day more satisfactions than he could produce for himself in several centuries.

Without direction from any, Paris is fed.

I wonder whether any of the directors of the National Science Challenges have ever read Bastiat.

The directors of six National Science Challenges call on the government to develop a National Food Strategy for Aotearoa New Zealand.

“Food is essential to our health and wellbeing but it can be a major cause of ill-health and disease,” said Professor Sir Jim Mann, director of the Healthier Lives challenge. “The food we produce also has profound effects on the environment and on climate change, and is vitally important to our economy. A healthy and environmentally sustainable food supply is essential for human and planetary health.”

As the National Science Challenges enter their final year, the six science leaders today announce their intention to bring key findings from their research together to support a future National Food Strategy.

A strategic, science-informed plan is needed to both reduce food production’s contribution to climate change, and adapt to future challenges.

I'd bin all of this. There is zero need for any national food strategy. Set a carbon price on agriculture. Set cap-and-trade markets on nutrients and sediment, or deal with them through regulation in catchments too small for cap-and-trade. 

The rest takes care of itself.  

Dining out as cultural trade

Joel Waldfogel combines TripAdvisor data with gravity models of trade to figure out which cuisines reign supreme.

Perceptions of Anglo-American dominance in movie and music trade motivate restrictions on cultural trade. Yet, the market for another cultural good, food at restaurants, is roughly ten times larger than the markets for music and film. Using TripAdvisor data on restaurant cuisines, along with Euromonitor data on overall and fast-food expenditure, this paper calculates implicit trade patterns in global cuisines for 52 destination countries. We obtain four results. First, the pattern of cuisine trade resembles the “gravity” patterns in physically traded products. Second, after accounting gravity factors, the most popular cuisines are Italian, Japanese, Chinese, Indian, and American. Third, excluding fast food, the largest net exporters of their cuisines are the Italians and the Japanese, while the largest net importers are the USA—with a 2015 deficit of over $140 billion—followed by Brazil, China, and the UK. With fast food included, the US deficit shrinks to $55 billion but remains the largest net importer along with China and, to a lesser extent, the UK and Brazil. Fourth, cuisine trade patterns more closely resemble migration patterns than patterns of food trade or patterns arising from the extent of arable land in origin countries. Cuisine trade patterns run starkly counter to the audiovisual patterns that have motivated concern about Anglo-American cultural dominance.

The Economist does a prettier version of Waldfogel's tables:

The paper finds that migration matters, reinforcing my view that New Zealand needs to provide immigration preference to migrants from countries whose cuisines are underrepresented in New Zealand. 

Afternoon roundup

Today's closing of the browser tabs brings a greater share of stupid New Zealand policy than I'd like.

• The SuperGold Card scheme was always stupid. Why? It's badly targeted. If you want to alleviate poverty, give money to poor people. Giving free transport to old people doesn't make a lot of sense. And as Duncan Greive over at the Spinoff points out, there's a big subsidy to rich retired (or just old and still working) people who live up on Waiheke Island - and who can get a free 23km ferry ride any time after 9am. Greive shows that this is just under $2m of the $28m government travel subsidy provided to old people. One upshot from Andrew Leigh's visit to New Zealand earlier this month: where Australia's government tries to give money mostly to poor people, New Zealand's government tries to give money mostly to old people. 
• Biddy Fraser-Davies is a hero. It takes a hero to fight MPI, year after year, to be able to make cheese despite MPI's regulatory efforts. It shouldn't take a hero to do this, and yet here we are. .
• The Public Health People are trying to ban schools from getting special alcohol licenses for school events. It's not like anybody's giving booze to kids. Sometimes there'll be parent events and fundraisers at which they want to be able to serve wine. It's harmless. But the nannies just can't help themselves. At least they've not been as successful as they'd like.

And one bit of news from outside of New Zealand: dictators lie about their GDP figures. And we can tell by the night sky. 

I study the manipulation of GDP statistics in weak and non-democracies. I show that the elasticity of official GDP figures to nighttime lights is systematically larger in more authoritarian regimes. This autocracy gradient in the night-lights elasticity of GDP cannot be explained by differences in a wide range of factors that may affect the mapping of night lights to GDP, such as economic structure, statistical capacity, rates of urbanization or electrification. The gradient is larger when there is a stronger incentive to exaggerate economic performance (years of low growth, before elections or after becoming ineligible for foreign aid) and is only present for GDP sub-components that rely on government information and have low third-party verification. The results indicate that yearly GDP growth rates are inflated by a factor of between 1.15 and 1.3 in the most authoritarian regimes. Correcting for manipulation substantially changes our understanding of comparative economic performance at the turn of the XXI century.

I do like this bit from the conclusion. Is GDP too 'hard' a measure as proxy for how well things are going? Looks like things go the other way:

These results provide additional justification for the use of innovative and ‘harder’ measures of economic performance, such as nighttime lights, in the study of economic development.

Thursday roundup

The closing of the browser tabs brings these gems.

• Nikki Mandow at Newsroom has an excellent summary of just how bad the foreign buyer ban is.
• Sydney is no fit place for young people to live. 
• Fast food outlet density doesn't cause obesity.
• I am torn between my hatred of Easter trading bans and my abhorrence of everything involved in this article. 
• If you're using Stata to run lots of levels of fixed effects, this could be useful.
• A blockchain trade-tech solution for shipping the data along with a product and smoothing international trade. 

My column in this week's Insights newsletter will be out today instead of Friday because of Easter. It'll be up here after lunch today; find it there if you haven't already subscribed (the subscription link is waaay at the bottom of that page).

I there suggest that, just as we celebrate the Queen's birthday on a date that makes a convenient fixed long weekend, we should have the statutory celebration of Easter on a fixed date rather than letting it move around all the time and mess up school calendars. It's in our third spot in the newsletter, which is generally reserved for more lighthearted takes on things. This one's written up fun, but I would totally push the button to implement a policy that would simultaneously:

• Make Easter Sunday a statutory holiday on a fixed date (it currently isn't a stat);
• Fix the dates of Easter Friday and Easter Monday to the same fixed Easter Sunday date;
• Abolish the trading bans around Easter;
• Let people take their regular annual leave if they don't want to work on whatever day the Pope and Archbishop of Canterbury say is Easter or Good Friday this year, in the same way that we currently let people use annual leave if they follow the Eastern Orthodox calendar for Easter which diverges from the Roman one a lot of the time - and in the same way that we let hard core royalists take the day off on whatever day is the Queen's actual birthday if they don't think the stat holiday is quite good enough.

What's the product? Locavore edition

I've wondered how much locavore, or GMO-free, or other strong expressed ethical-preference consumers' demand is real as compared to notional. Do people really want the product they're buying to satisfy all the constraints, or do they just want the warm glow that comes from thinking that it might and that they're good people for affiliating with that kind of product?

We can think about what the two different worlds would look like and reason from there. Suppose there really were very strong effective demand for locavore products. A restaurant, or boutique grocer, catering to locavores would do a lot to demonstrate to their customers that their products meet the constraints. They'd make verifiable claims about their supply chains. If a product couldn't be sourced locally, there'd be explanations about how that product weren't local and why - like that bananas just don't grow here. And if a store or restaurant were found to have cheated, customers just wouldn't trust it any more and it would go under.

In a world where people cared about the feeling more than about the practice, stores would make unverifiable claims about supply chains. It would be ambiguous which products really were sourced locally and which had to come from elsewhere because of cost or other factors. And deception wouldn't be punished so long as the image could be maintained - customers would look for rationales for whatever had happened, and just continue eating there.

Via Thomas Lumley, here's a rather extensive story on scam-versions of buy-local in America. Most claims turn out to be wrong. Shops and restaurants that want to provide locavore alternatives find that customers are simply not willing to pay prices that are multiples of the prices that would otherwise obtain, so they fudge things. And when they're caught, and there's media coverage:

INSIDE EDITION CORRESPONDENT Lisa Guerrero wore a fitted black blazer and stilettos when she busted with her camera crew into Get Hooked, a casual seafood restaurant in Hudson that on occasion hosts micro-championship little people wrestling.

Taking co-owner John Hill by surprise, she confronted him about his “Delicious Lobster Sensation,” part of a Feb. 8 segment about the frequent fraudulence of lobster dishes.

Although the restaurant has its own fishing boats, and Hill likes to say, “Our refrigerator is the Gulf of Mexico,” its lobster roll-like sandwich is made with a commercial product that contains cheaper fish such as whiting and pollock.

After the show aired, I followed up to see how the revelation had affected the restaurant.

“We’re selling more lobster rolls now than ever, and we’re serving the same product,” co-owner Michelle Bittaker said. “What the show forgot to tell you is that the sandwich is $9.95, with french fries and coleslaw. Nobody in America could serve a real Maine lobster roll for $9.95.”

They also offer a real Maine lobster roll on their specials board, she said, 6 ounces for what she calls a more realistic $24.95.

I don't like fraud, and there's a lot of fraud in the story. But I wonder how many of the customers would really prefer knowing. Here, at least, I'd expect the Consumer Guarantees Act could have something to say. There, if customers really wanted to know, they'd make sure to buy from restaurants and shops certified externally as meeting some verified supply chain regime.

I also take it as cautionary tale about NZ agricultural imports into the US.

New Zealand has a great product story to tell: Canterbury lambs have happy lives, and even Peter Singer said it's ok to eat them so long as they're net happier existing than not and so long as their being eaten is what allows them to exist. But as for any real willingness to pay real substantial price premiums for things that are guaranteed GMO-free, or organic, or whatever else... if the restaurant next door has something with a similar label that costs half as much, well, good luck.

Rebecca Krassnoski of Nature Delivered has sold her naturally raised pork to restaurants like The Refinery and Pearl in the Grove. Here’s a little bit of her math:

Her cost to raise a pig to slaughter weight is $240 to $300, plus $50 to slaughter it and $50 to transport it. So, let’s say her total cost is $400. That whole pig, minus entrails and hair, will weigh 192 pounds. If she sells it at $3 per pound, that’s a sale price of $576.

“I make $200 if everything goes well,” she said. “That’s on a perfect day. On average, I’m lucky if I make $100 on a pig and maybe I raise 100 pigs in a year.”

Ten thousand dollars a year is not a living, she said, but “nobody wants to pay $6 per pound for pork.” Most restaurants can’t, or won’t, pay her what she needs to live.

“I can’t think of a time when my chops have been served at a restaurant on a daily basis,” she said. “I think a lot of times farmers with a good story are used as a billboard.”

Americans balk at paying $6 per pound for local natural pork. In NZ terms, that's about $20/kg plus GST.

There'll always be small niches where there are customers willing to pay a premium and who care about the authenticity of claims made. My sister's market in Winnipeg serves some of them, and she has rightly earned their trust. And I think it's great when NZ growers find ways of tapping into those kinds of North American markets.

But setting NZ policy in the expectation that there are $20 notes sitting on American sidewalks waiting to be scooped up if New Zealand could better capitalise on clean green stuff... I'm a sceptic.

(Food) Truckin'

Reader Donald emails, on Wellington Food trucks:

Cafe owners in Mirimar are upset over the intrusion of food trucks on "their patch".

So, of course, they want their privilege entrenched.

Are the predators exploiting loopholes to steal livelihood from the cafe owners? Mostly no with a little bit of yes.

For a start food truck proprietors have to play by the same food safety rules as anyone else which means they pay the same fees to their local council as the cafe owners. They have to have the same equipment and fittings (depending on their products) and, in some cases, they actually have to have an unseen "home base" for food preparation and storage that is also registered etc. Some jurisdictions also require mobile operators to pay for an extra mobile traders licence on top of food premises registration. So the legal environment is identical for both groups.

The main overhead item that differs is rent. Of course you have to factor in that food truck operators buy their trucks outright. A truck that complies with food safety regulations and has the necessary equipment in it will still start at $50K and still require all the normal operating costs. But that is nothing compared to what cafe owners are paying in monthly leases. So we get back to the meta-problem: property prices. My experience of the industry (retailing at a market and supplying cafes) suggests that high lease costs force cafe owners into a business model that they would not necessarily choose. Generally they have to generate a lot of revenue just to pay to be the lease. This usually means 7 day operation which means lots of staff and all the hassles that involves. Even then there's not much profit to be made. Cafes tend to go for the safe options in terms of food offerings; they have to sit under the bell curve to ensure the revenue to pay the lease etc.

So although some food trucks will just serve coffee and sandwiches others can afford to try something specialised and drive to the pockets of the market that prefer Peruvian deep-fried guinea-pig to a ham sandwich. And the truck operators can make a living without working 7 days a week or having the hassle of employing staff.

The $1,000 permit for outdoor seating is the interesting statement. This "permit" will be one or more of three things. It may be a "licence to occupy" which is between the business and the Roading department of the council for occupying part of their street. More likely it is a resource consent (issued by Planning) for undertaking an activity in a public space. What really complicates matters is if the cafes have a liquor licence (issued by Environmental Services) as well in which case the confusalator is turned up to 11. Food trucks will never, ever get a liquor licence so that is out of the equation but many (most?) cafes do. And what is not clear from this story is where the trucks are parking and setting up their tables. If it is a private parking area then the permit/consent may be moot anyway.

Actually, operating a food truck is not a great job. Remember this is Wellington we are talking about: the weather can be atrocious and custom fickle. But they survive because they can deliver some things to their customers that static cafes generally can't. But if the regulatory environment and cost structures were more friendly to cafes food trucks might quietly disappear.

If the food trucks really are eating standing restaurants' lunches, rents in truck-friendly locales should be dropping relative to spots that aren't convenient for food trucks. Do we have any evidence on it? Do restaurants ultimately bear the incidence here, or owners of land in truck-convenient locations?

The RNZ story is here. Neat Places' listing of some Wellington food trucks is here. Here's the story of one of them. Here's the story of another.

The clean food fad

When everybody's looking for miracle diets, it's no surprise that quack gurus rise to meet the demand.

It’s not often that science intrudes into the world of ‘wellness’ fads. To become a clean eating guru, a cheery demeanour seems to matter far more than proper qualifications. Ella Woodward, Madeleine Shaw and Tess Ward all studied History of Art. The latter two then studied an online course with the Institute for Integrative Nutrition. This course, based in America, claims to be a ‘movement’ working to reverse the health crisis by promoting the concept of ‘bio–individuality’ — a concept coined by its founder Joshua Rosenthal (who eats a gluten-free diet). It hinges on the idea that one person’s food is another person’s poison.

The institute claims that the qualification it offers is ‘rooted in science’ — a claim which puzzles Dr Max Pemberton, Spectator Health editor and an eating disorders specialist. ‘The minute you scratch beneath the surface,’ he says, ‘you realise it isn’t.’

It is certainly rooted in commercial logic: the surging demand for wellness gurus means that those brandishing credentials are welcomed by an audience often mistrustful of mainstream medicine. The institute is happy to boast about this on its website, quoting a student who says that ‘with the ability to see clients before graduation, my education was paid for before it was completed’.

I wonder whether some of the Twitter angry is really hangry induced by the pursuit of ridiculous diets. I keep cookies near the computer, in case of emergency.

GST confusion

In last week's NZ Initiative "Insights" newsletter, I'd hit on public misunderstandings around GST. People think taking GST off food would be strongly progressive, because poor people spend a greater fraction of their income on food, but richer cohorts get a much larger fraction of the total benefit because they spend more in total on food. If you want to help poorer people, run the redistribution directly rather than taking GST off food.

I have never been a fan of the old prayer wishing confusion upon one’s opponents. In a real war, your enemy’s confusion helps. But in policy battles, it rather seems to me that that confusion hurts everybody.

Take GST. New Zealand is blessed with what is about the world’s cleanest value-added tax. Australia’s GST is in dire need of modernisation – their tax exemption regime around food, for one, makes ridiculous and arcane distinctions between bread and crackers and around just what gets to count as a pizza, as noted by the Australian Broadcasting Corporation this week.

Nevertheless, it is not hard to find local advocates of exempting ‘healthy’ food from GST to change peoples’ diets, or for exempting food entirely to help poorer people. Both proposals are hopelessly confused: they are very costly ways to fail to achieve the desired objectives.

To start with, so long as richer people spend more money on food than do poorer people, exempting food from GST does more to help richer people than it does to help poorer people. If your goal is to help poorer families be able to afford more food, policies that reduce the cost of housing leave more space in the budget – but we will come to that later. Food exemptions from GST are a very expensive way of helping poorer people as compared to just using our existing income transfer programmes – or making jobs easier to get.

Further, exemption regimes make a mess of GST accounting. If you think that we should tax people until they eat the way you want them to eat, it is better done with an excise regime than by wrecking GST. We will be taking on the case for and against food taxes later in the year.

I hadn't known it at the time, but John Creedy and co-authors have run the numbers on this one. Their abstract, in a forthcoming NZEP piece:

This paper investigates the welfare effects on New Zealand households of zero-rating food in a goods and services tax (GST). The detailed effects, for a range of household types, are investigated using Household Economic Survey data. Demand responses to consumer price changes are estimated and welfare changes, in terms of equivalent variations, are obtained. Comparisons are also made across clusters, consisting of groups of households with similar characteristics. A tax change is found to produce a very small amount of progressivity in the GST. Redistribution is from households without children and with high total expenditure to households with children and low total expenditure, and towards older households.

You get far more progressivity, if that's what you want, by transferring more money to poor people. Their bottom line?

The analysis supports earlier studies suggesting that the use of zero-rating in an indirect tax structure provides a poor redistributive instrument compared with direct taxes and transfers

Self-control

I read the behavioural literature as a meta form of self-help. Here are some standard ways that people can screw things up; here are some heuristics they use that work on average but can yield failures when applied to the wrong domain; here are some strategies for applying the right heuristic at the right time and for avoiding applying the wrong one; here are some common spots where people need to be extra-vigilant to avoid making errors.

Gareth Morgan tweets a link to a write-up of the standard Wansink findings around food:

Why most people don’t have control over how much they eat http://t.co/Cf6lyT1RHt
— Gareth Morgan (@garethmorgannz) February 23, 2014

Sure, in field experiments, you can induce overeating by making people think that they've eaten less than they have (for example, by surreptitiously filling the bowl from below). But does that mean that they're irrational and always subject to error? Or might it mean that people eat until one of two conditions are met: satiation, or end of current portion? If the latter typically comes before the former, people stop eating at the end of the bowl. If the former tends to come before the latter, they'll leave some behind. What interest would a restaurant have in supplying you with more food than you'd really want when doing so might make you less likely to order dessert and will make you more likely to linger longer at the table?

The linked piece also takes a self-help approach to the findings: Try using smaller bowls or smaller plates; don't go for "value" deals if that isn't what you really want to eat.

And so Matt Nolan replied to Gareth:

@garethmorgannz Control still comes from the fact that people can precommit by purchasing smaller packets/portions http://t.co/eI50VkKJdV
— TVHE (@TVHE) February 23, 2014

Morgan replied,

@TVHE You are assuming perfect information
— Gareth Morgan (@garethmorgannz) February 23, 2014

This kind of line really bugs me; it reminds me of the kind of thing that non-economists will come out with when criticising economics. Imperfect information hardly seems to be what's driving food choices. And, perfect knowledge is hardly necessary to make precommitment viable. You just need to know that you often screw up particular kinds of choices.

Odysseus didn't need perfect information about just how lovely the Sirens' call was in order to have the sailors bind him to the mast; he just needed to know that the temptation had proved too tempting for many others. I've never played World of Warcraft, but that doesn't mean that I've erred in deciding never ever to start playing multiplayer online games. I definitely don't have perfect information about it - I've never played it! But I know that I'd find it hard to avoid spending too much time playing online games if I had the added pressure of friends wanting me to come help them on a raid. So I just don't play. Imperfect information has led me to consume what's likely too little gaming relative to an ideal: you don't need to assume perfect information to get precommitment.

Informative labelling

Suppose you went to the supermarket tomorrow and half the apples had a new sticker on them. The sticker said "These apples have been treated with 1-Methylcyclopropene". The other apples had no sticker. The apple selection is identical to what it was yesterday, but today there are the stickers.

Now suppose I came up to you at the supermarket and offered you the following bet:

"1-Methylcylopropene is a gas that helps apples last longer. Here's a brochure explaining it all. It makes apples better.* But I have a bet for you. I bet that sales of the labeled apples will be lower today than yesterday and that sales of the unlabeled apples will be higher today than they were yesterday. $10, even odds."

Would you bet against me?

That's why I don't like mandatory labeling of GMO foods. A label saying "This product may contain ingredients derived from Genetically Modified Organisms" doesn't just tell people that there could be GMOs in the product. It also tells us that the government is sufficiently worried about GMOs that it thinks you should be told about it.

There's consequently a big difference between producers voluntarily labeling their products as GMO-free and the government mandating everyone label products that may contain GMOs.

Here's Mark Lynas from earlier this year. As best I can tell, the "consensus among people who know about this stuff" is as strong on GMOs as it is on climate change. Or at least I see a whole lot of people who know a whole lot about this stuff treating the GMO-worriers with about as much disdain as they treat the anti-vaccination, anti-fluoride, and "global warming doesn't exist" people. I consequently conclude that there's no scientific basis for deeming the risks of GMOs sufficiently worrying to get the hooples all riled up by mandating labels.

I also see nothing banning anybody from putting "GMO-Free" labels on their products for those who really do want to worry about that stuff. Even if their understanding of the science seems wrong, I see no reason that producers shouldn't cater to their fears. It seems very plausible that they get very real disutility from eating things that might have had GMOs in them, and that voluntary labeling of GMO-free products can make them better off. Just like people who dislike chemicals are made better off by the availability of an "Organic Food" section at the supermarket.

For an opposing view, see John Small.

* From Watkins (2006): "The rapidly ripening summer apple 'Anna' treated with 1-MCP that had less fruity, ripe and overall aromas, and were firmer, crisper, juicier and less mealy, were more preferred in sensory analysis than untreated fruit (Lurie et al, 2002; Pre-Aymard et al., 2005)."

Note however that I know basically nothing about this chemical; I just Googled for some food chemical that looked harmless.

Solving for equilibria

The Greens think that poor people can't solve for the equilibrium. Voluntary labeling of healthy foods has been proposed, with one option being "traffic light labeling". Here's Mojo Mathers:

If you are a food manufacturer of a particular product and look at the criteria and find out that your product will get a zero for health (the lowest score possible proposed in the report), would you still say “yes! Sign me up, that will help sales”?

No, you wouldn’t.

So a voluntary scheme will just end up on the healthy foods, and consumers who don’t currently read the back of labels will still not know which foods they should think twice about before purchasing."

This part of the reasoning is exactly right. Under a voluntary disclosure regime, the best label first. The first runner-up labels second to avoid being pooled with the second and third categories. In the end, everyone labels except those who would receive the worst ranking.

But we tend to expect that everyone can solve this kind of model: that the absence of a "yellow light" or "green light" label conveys as much information as the presence of a "red light" label. I suppose it's an empirical question. I prefer voluntary regimes where organic, GMO-free, dolphin-safe, or other standards-meeting manufacturers can label their products as such and customers can infer what they like from the absence of a label - and especially where some mandatory labels can wind up doing harm.

Equilibrium solution the second: the inefficient dining decision. Matt Nolan finds himself at a family dinner where, nobody wanting to be the only one to order a large dessert and nobody consequently being first-mover, everyone winds up in a sad coordination failure. Knowing the risks of such sad equilibria, and knowing that others usually feel the weight of social convention and social pressure more keenly than I do, I try to take on these first-mover costs myself by ordering the dessert and the drink. It's efficient that I do so, and I get to feel good that I relieve others of the burden of feeling bad about being the first one to order. I love the happy confluence of my interest and the social good in these kinds of cases.

Previously: Efficiency over Etiquette

Doing it right

It's great to read a story where fan-sourced content is appreciated by the original work's author instead of stomped on. I'd seen the blog for the "Game of Thrones" cookbook after one of its bloggers visited here after I'd posted on food stores in Westeros. But I hadn't read the backstory of how they moved from blog to publication. The Wall Street Journal gives the story.

The book began as the brainchild of Chelsea Monroe-Cassel and Sariann Lehrer, two Boston twenty-something housemates who are “pretty obsessed” with the Martin books and the HBO series, Ms. Monroe-Cassel said.  Last March, the friends decided to blog about making food inspired by Mr. Martin’s books.  In May, they emailed Mr. Martin to let him know about their blog, and were stunned when he wrote back, saying he would mention the project to his publishers.

For his part, Mr. Martin was interested, because though readers over the years had suggested he write a companion cookbook to his series—detailed food descriptions run throughout the books—“I can’t cook,” Mr. Martin admitted in his forward to the cookbook.

With a penchant for taking creative projects to the extreme, Ms. Cassel-Monroe said she “organized a conspiracy” for Mr. Martin’s “A Dance with Dragons” book tour last summer, delivering baskets of pork pies, and oat and lemon cakes and organizing fellow fans to deliver similar baskets to Mr. Martin as he traveled the country.

And so they went from blogging to writing the official Game of Thrones cookbook.

There's also an unofficial Game of Thrones cookbook.

If you read TechDirt too much*, it's easy to get a bit depressed about rights-holders who seem more interested in stomping on their fans than in encouraging projects that are complementary to their product. It's great that George R.R. Martin gets it.

I'm looking forward to feasting when the book ships end-May. I wonder if David Friedman will review it.

* Today's edition of how-not-to-do-it: Hasbro, whose toys are now less likely to wind up in my shopping basket.

Wishing for the New Zealand tax code

It's easy to forget just how excellent the NZ tax system is relative to those in other countries. But we are the envy of the world. Two datapoints for this week:

Tim Harford wishes UK VAT reform would move to a system like New Zealand's, where everything attracts GST: we tax food. After listing the absurdities of the UK system, where Jaffa Cakes are tax advantaged over "chocolate digestives" and whether a sausage roll is taxed depends on whether it's been heated. Harford asks what should be done, then answers his own question:

The Mirrlees Review is an attempt to figure out what the UK tax system would look like in an ideal world, and I looked it up. The authors reckon that you could levy a uniform rate of VAT on almost everything, raise benefits, pensions and tax credits, increase the income tax threshold by £1,000, cut the basic rate of tax to 18 per cent and the higher rate to 38.5 per cent, and leave pretty much everyone better off – the government would have more revenue and citizens would be more likely to buy what they really wanted rather than what the tax system nudged them to buy.

Harford wants the VAT to apply to everything, not just to sausage rolls.

Other than the tax-free threshold, that sounds an awful lot like the New Zealand system, where GST applies comprehensively and where, in 2010, the National government reduced tax rates across the board while increasing the GST.

Item the second: Frances Woolley makes the case for taxing food in Canada. The only place where I'd quibble with Frances's analysis is here, and it's only a minor quibble. Frances writes:

When the case for taxing basic groceries is presented in these simple terms, the assumptions underlying the argument become apparent. The equation of choice with happiness rules out any paternalist arguments for exempting basic groceries from taxation. For example, at present soft drinks are subject to sales tax, but milk is not. A tax on milk would be expected to decrease milk consumption and increase soft drink consumption, all else being equal. Those who would argue for taxing basic groceries would respond in one of two ways: first, that we should respect people's choices whatever they are; second, so many of the basic goods exempted from sales tax at present are teeth rotting, IQ-lowering sugary junk anyways that the paternalist argument has little force.

All of this is true. But the current equilibrium also involves a government-enforced dairy cartel that forces up the price of milk relative to soft drinks. Abolish the dairy cartel while imposing GST equally across all food items and the price of milk would drop, not rise. Especially for a GST as low as Canada's, and a dairy cartel as noxious as Canada's.

Again, Frances wishes that Canada had a system that looked a lot more like New Zealand's.

It would be awfully nice if Labour and the Greens here stopped trying to score populist points by hacking on one of the world's best consumption taxes. Labour, in office, recognized the GST's advantages and refrained from wrecking it for a decade. Too much populist nonsense in Opposition might force their hand in a future government.

Do visit the GST tag for Seamus's excellent prior posts.

Food Bill revisited

I wish I knew the likely effects of the upcoming food bill. NZCPR asked me for a short piece based on my prior post; here's what I gave them. One link didn't make it through there: 3 News on the Food Bill.

I wonder whether both Minister Kate Wilkinson and the bill's critics couldn't both be right. If the current de jure rules aren't strenuously enforced against small traders, or only are so irregularly, then the de jure loosening of restrictions on small traders could be a de facto toughening if enforcement is tightened.

Radio New Zealand last week featured one small cheese producer on the costs of the prior regime and her worries about the new one. Minister Wilkinson's comments there really aren't reassuring. [HT: Gonzo] She emphasizes that even small-scale cheese-makers will come under the regulatory apparatus:

The cheese that's produced from three cows or three thousand cows is still expected to be safe. ... We want the Biddies [cheese-maker Biddy Fraser-Davies] of this world to keep producing fantastic cheeses, but we also want that cheese to be safe.

But let's recall that the vast majority of costs of food-borne illness are the individually borne intangible costs of being sick. Those costs are very real and the Applied Economics study tabulating them seems pretty sound. But why oughtn't I get to choose to buy cheese from a small producer and take that individual risk without Wellington getting involved? The costs of head injuries from skiing may well be high, but if I'm the one bearing them, oughtn't I be the one who decides to wear a helmet? Wasn't this supposed to be the government of individual responsibility that defeated Helen Clark's Nanny State?

Wilkinson worries about ensuring that people can be confident in the local food system. If information asymmetry is the problem, all the government needs to do is give out stickers to producers wishing to produce under regulatory guidelines so that they can advertise as such; absence of that certification then says you have to be sure you can trust the producer. And, anybody who's paranoid about food poisoning can always choose to purchase from big producers at supermarkets instead of small guys selling home-made stuff at farmers' markets. And, frankly, I'll trust Biddy Fraser-Davies, the small cheese producer interviewed, over Wilkinson's bureaucrats.

I wrote for NZCPR:

Perhaps worse than my potential loss of choice as consumer is the loss of an easy pathway to small-scale entrepreneurship. Even if the monetary costs of registration as a food producer are low, Wellington often weighs too lightly the discrete hurdle thrown in front of a potential entrepreneur who has never otherwise had to worry about compliance regimes. The dread costs of figuring out which forms to fill out, and the fear of getting something wrong, can be very real barriers to would-be new small-scale entrepreneurs. When you’re really not sure if you’ll be able to make a go of a new venture, adding a hurdle of having to seek permission can provide a burden much larger than the nominal $50 registration fee.

Muriel Newman at NZCPR (link currently here, but likely to suffer linkrot) also comments:

For a government that claims to be committed to encouraging wealth creation and reducing compliance costs on small business, the Food Bill could be a major step backwards. It appears to be being driven more by bureaucratic considerations rather than the need to encourage entrepreneurship in the food sector - within the bounds of stringent food safety imperatives. It is also not clear what the answer is to a fundamental question that should be asked of all new legislation: Is there a problem to be fixed and if so will this Bill fix it?

At least raw milk doesn't seem likely to be killed under the new bill.

Me-utilitarianism: restaurant edition

If this story's right, the country now has a couple hundred fresh-off-the-boat Chinese chefs who haven't yet learned to adapt their offerings for the Kiwi palette.

Where are they? I want the list of restaurants! There are excellent Chinese restaurants in NZ (and Asian restaurants more generally), but if any foodies have heard anything about particularly good new chefs having turned up in Christchurch, I'd love to hear about it.

The National Distribution Union's upset about the whole thing, and especially by that some chefs might be taking salary offers including room and board that have cash components less than minimum wage.

I'm upset that we don't have a free trade agreement with Ethiopia bringing in a few dozen good Ethiopean chefs.

Fun conferences I've not attended

I'd thought @adzebill was trolling us when he started livetweeting this conference. You can see how I was confused by tweets like:

Knives out already: speaker upbraided for not "addressing the sociology of the paua". #NZFoodHist

and

The Symons Touchstone Score for Biscuit/Cake Iconism peaks in the 1920s. #NZFoodHist

But here are some of the conference papers:

Aaliyeh Naqvi-Sherazee – “Food, identity and place-making: Indian settlers in 1920s New Zealand”

Donna Brien – “‘An Affaire de Stomach’: Australian and New Zealand 1920s Food Writing”

Duncan Galletly – “Iconism in cakes and biscuits”

Helen Leach – “Home Science and the arrival of the ‘modern kitchen’ in 1920s New Zealand”

Janet Lymburn & Diane Langman – “Driving Change: Imaginative Thinkers”

Janet Mitchell – “Mélanie S. Primmer, B.A. and the Up-to-date-Housewife”

Jeanette Fry – “The influence of generic cookbooks and pamphlets over the past 90 years and the role of advertising in reducing the cost of daily living; Or, how mustard saves you money on every meal.”

John Webster – "Trying to find Miss Fidler"

Nancy Pollock – “Chinese contributions to New Zealand gastronomy”

Nicola Saker – “By their menus ye shall know them: Or, if you are what you eat, what you eat is who you are”

Tui Flower – “First-hand experience of kitchens”

It all sounds ridiculous fun; I envy @adzebill's attendance.

Meanwhile, @BruceSchneier points to a U Minnesota conference on Cephalopods and Art:

Why do we make images, where do they come from and what is their primary function? Human image production and image distribution systems have made rapid growth to the level of unimaginable saturation in urban contemporary life through design, architecture, city planning, Internet, fine arts, and other media. The Origin of Image Making: Behavioral Ecology of Cephalopods and Art brings together scientific, humanistic and artistic attempts to investigate these ever critical existential questions by examining the cognitive and interpretive systems of the adoptive coloration of cuttlefish as a model to code and to re-map visual information such as paintings, photographs and video.

This conference’s primary goal is to create a discussion platform among scholars, experts, and students from different academic and non-academic fields. During the two-day conference, we will focus on cuttlefish research including neuroscience, comparative psychology, animal behaviorology, and art as conceptual, practical and/or tangible foundations to understanding our own visual communication system.

I wonder if male cuttlefish better able to make artistic displays in their patterning enjoy more reproductive opportunities. Does the Art Instinct extend to cuttlefish?

Offsetting effects: food police

According to foodservice consultancy Technomic, consumers are also being driven to excess by cultural moralizing over nutrition. That is, as expanding waistlines make more headlines (in Canada, 62 per cent of people are considered overweight, with a quarter qualifying as obese), proselytizing over healthy eating has led many folks to do the opposite.

"Most consumers, when polled, say they follow their 'own diet.' That could mean that they're good Monday through Friday, and then on Saturday and Sunday say, 'To hell with it!'" says Ron Paul, president of Technomic. "They're rejecting the food police, in effect."

Some of the more punk-rock offerings this summer include the aforementioned doughnut burger; pancake breakfast ice cream, featuring maple syrup, chunks of buttermilk pancake and bacon; deep-fried Pop Tarts; mac-and-cheese pizza; and a Monster Burger -- one kilogram of beef, half a pound (0.2 kilogram) of bacon, spiced cheddar cheese and all the fixings -- big enough to feed a family of eight.

From the Winnipeg Free Press, HT: Mom.

Sorting out causality on this one would be tough; I don't know how you'd instrument around that places with more nanny messages are likely the places with worse eating habits ex ante. But fun nevertheless.

And the deep-fried butter discussed in the article does sound tempting....