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Insights Issue 4/2014 - 14 February 2014

Insights Issue 4/2014 - 14 February 2014

In this issue:
Defeating the trickle-down straw man | Jenesa Jeram
Why is New Zealand the road congestion king? | Jason Krupp
Madam Ong and the haircut hullabaloo | Rose Patterson
All things considered ...
On the record

Defeating the trickle-down straw man
Jenesa Jeram | Research Assistant | jenesa.jeram@nzinitiative.org.nz
In debating, speakers are not rewarded for having a superior argument per se. They are rewarded for convincing the audience that they do. The easiest – but ultimately dishonest – way to do this is to caricature the opponent, portraying their argument as ridiculous beyond belief.

Trickle-down economics is an example of a “ridiculous beyond belief” idea; that giving money to the rich will eventually trickle down to the rest of the economy to benefit all. Indeed, the refutation of this theory of trickle-down economics dominates the discourse.

Recently, opposition leader David Cunliffe cited the theory’s failure in his State of the Nation speech, arguing that “The rich are getting much richer, the middle is struggling and the poor are going backwards. It’s the human face of “trickle-down economics”, the idea that if we give more to those at the top, eventually things will get better for the rest of us.”

The problem is, there is no such thing as trickle-down economics. In fact, it is an oxymoron: it has no “economics” in it whatsoever. Thomas Sowell, senior fellow at the Hoover Institution argues convincingly that the theory is a straw man argument – a flimsy invention of those arguing against it so they can easily knock it down. Sowell writes that the idea cannot be found in “even the most voluminous scholarly studies of economic theories”.

Trickle-down economics is a complete caricature of the original arguments supporting economic growth. No economist has ever argued that in order to make a poor person richer you should make a rich person richer first. Economists have, however, argued that economic growth can make us all better off, whether we are rich or poor.

So why has this trickle-down nonsense persisted for so long? Perhaps because it sets the parameters of debate around redistribution, focussing solely on inequalities in wealth, rather than inequalities in capabilities. If wealth is not trickling down naturally through voluntary processes, then it is up to the government to intervene to ensure it does.

However, there is a much better way to deal with inequalities. Instead of trying to correct inequalities through redistribution, we should ensure that everybody has a chance to participate in our growing economy. First and foremost, this means making sure people acquire the right capabilities and education.

Rather than waiting for wealth to trickle-down from the top, the focus should be on ensuring everyone has the ability to swim with the economic tide.


Why is New Zealand the road congestion king?
Jason Krupp | Research Fellow | jason.krupp@nzinitiative.org.nz
Let us play a game of spot the odd one out. Which of the following has the highest level of traffic congestion: New Zealand, Australia, Canada, Western Europe or the United States?

The answer, surprisingly, is New Zealand according to an article on the New Geography blog. Quoting the latest Tom Tom Traffic Index figures, the story claims the average urban road journey in New Zealand takes 31.3 per cent longer than it should. Expressed in real terms, that means a 30 minute car ride will take 40 minutes.

Auckland’s traffic issues rank it in the top 10 most congested Western cities. Christchurch and Wellington do not fare much better, coming in 12th and 24th respectively. That is staggering when you consider that New Zealand is far less developed, and has a lower urban density, than almost all of the countries examined.

Looking at these figures, some might say they justify a move to reduce car usage, and steer development towards public transport options. However, the Tom Tom data should be read with caution.

Firstly, looking at Tom Tom’s list of most congested metros, it is noticeable many of the gridlocked cities (Marseille, Palermo, Vancouver, Rome, Paris, Stockholm, Los Angeles) have invested heavily in public transit infrastructure, some even for decades. So, why are they so congested?

One explanation is that the personal utility of private vehicle travel is so great that rail and other forms of transit are poor substitutes. This was demonstrated in Portland, Oregon, where light rail usage failed to achieve its stated targets, and three out of every four passengers were cannibalised from bus routes.

A better fit is that New Zealand has underinvested in its roading infrastructure. As far back as the 1960s it was identified that Auckland needed three bypasses. To date the city is only serviced by one major bypass. Plans to construct the Eastern bypass were scrapped a few years ago, and the Western bypass, State Highway 20, is only now being constructed.

The shape of our cities plays a major role. Auckland’s hub and spoke model means you have to virtually travel into the CBD to get through or around the city, and it is similar in Wellington. Still, at least both these cities have major highways. Christchurch’s southern highway only services a tiny fraction of the city.

This apparent under-investment needs to be seriously considered when we assess congestion in places like Auckland. Next time you are sitting in rush-hour gridlock ask yourself is it because private cars are flawed as a model, or because road construction never kept pace with the growth in population and the economy?


Madam Ong and the haircut hullabaloo
Rose Patterson | Research Fellow | rose.patterson@nzinitiative.org.nz
In 2012, Madam Ong laid a police complaint against her son’s teacher who had cut his hair prior to an exam and threatened to deduct marks for his scruffy haircut.

Singapore’s Minister of Education, Mr Heng Swee Keat, contacted the school for their story and publicly agreed with one media commentator, that Madam Ong had caused a hullabaloo. According to the school, the boy had been reminded multiple times to trim his hair and the school had sent a letter home. He’d had plenty of warnings.

Madam Ong said she wished the Minister had heard her side of the story. He did not ask for it.

Perhaps it was a little unfair for Madam and her Master that the Minister never asked for her story, but the individual case is not the point. The Minister is more strategic of mind. One of his speech writers told me during my visit to Singapore last year that he very deliberately sings the praise of teachers wherever he goes.

In a speech highlighting examples of demanding parents and sending the message that teachers are valued in society, the Minister said, “if parents do not show graciousness to others and respect for rules … good people will be deterred from joining teaching.”

In New Zealand, we would be appalled to hear stories of teachers publicly humiliating students. One of my primary school teachers was infamous for temper tantrums that were characterised by chairs being thrown around the room. That was 25 years ago and I sincerely doubt that the Minister of Education, or the public, would side with the teacher if a situation like that came to light now.

But the point is that Singapore’s Minister of Education skimmed over the details and instead used the high-profile nature of the case as a platform to drive home his message: teachers are valued.

In New Zealand, the recent career announcement for teachers sends a strong message that teachers are valued in our society. It offers financial reward, public recognition, and opportunity for progression.

But this has also come with an important change in the rhetoric about teachers. In a speech this week to the Wellington Chamber of Commerce, Minister of Education Hekia Parata reminded audience members what teachers are: nation builders.

The recent endorsement of teachers has been complemented by the launch of a new website where we can all send a message that teachers are valued, by sending a post card to a teacher who inspired you. Research clearly shows that teachers are not attracted to teaching for monetary reward (although it does help retain good teachers and this is important), but because they want to make a difference.

We often hear too much about the minority of teachers who do wrong, so it’s great to celebrate those who are great. Why not send a message to an inspiring teacher that made a difference to your life?

All things considered ...
• Graph of the week: Adding wood to the gender pay debate, this chart shows women in 2010 were a net fiscal drain on the economy while for men it was neutral. It also implies that, cumulatively, men and women received more from the government than they put in. Source: VUW.
• Some Belgians are too young to buy a beer, drive, or vote, but at least they get to decide how – and when – they die.
• There is a substantial gap between the state of humanity today and public perception thereof; a gulf the Cato Institute is looking to close with this new data-driven website.
• Being a foreigner, this correspondent suggests anyone harbouring any ill will towards those who migrate to New Zealand read this analysis from the NZIER.
• Perth has emerged as one of Australia’s costliest cities, where a litre of milk costs A$1.63. Wait, that’s still less expensive than New Zealand milk, even adjusting for the currency!
• It is well known that politics divides families, but throwing a tidy inheritance into the mix is bound to stir up a little more than hurt feelings.
• We imagine that the sexual harassment dynamics in this woman’s workplace are going to change radically after she successfully changed her name to “Sexy”.
• While mixing up Samuel L Jackson and Lawrence Fishburn is embarrassing, playing the race card deserves much opprobrium for being so utterly unimaginative.
• Are your feet too short to reach the pedals when driving? According to one Norwegian boy, it could be dwarfism.
On the record
Time for urgency not complacency, Jason Krupp, The National Business Review, 14 February 2014.
Will the euro die in the courts? Dr Oliver Hartwich, Business Spectator, 13 February 2014.
Land supply key to the economy, Jason Krupp, Stuff.co.nz, 11 February 2014.
Oliver Hartwich - why a wooden hut in Auckland is more valuable than a penthouse in Germany, New Zealand 2 Go, 6 February 2014.


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