Joel Hernandez and I have been lucky to be spending the past few days at the 60th Annual Conference of the New Zealand Association of Economists. The meetings are always a great way of keeping abreast of what other economists around the traps are working on.
If there was one overarching theme this year, it was that policy has become of more academic interest. In prior years, conference sessions would be filled with more abstract theoretical papers. This year’s sessions have taken a far stronger policy-oriented turn.
Auckland University’s Professor Prasanna Gai’s keynote address reminded us of the importance of policy uncertainty in private investment decisions. He noted the policy uncertainty caused by Brexit and by Trump, but this has obvious implications in other places as well. Not knowing whether the government might, on the spur of the moment, decide to ban an industry without any particular consultation and against the advice of officials can have rather unwanted consequences. The point is hardly new, but unfortunately seems to need repeating.
Auckland University of Technology student Livvy Mitchell masterfully demonstrated that contrary to hopes from some and fears of others, New Zealand’s shift to using home detention for some offenders has not had particular effects on recidivism, or on longer term labour market outcomes.
Meanwhile, the Ministry of Transport is revising its Value of Statistical Life figures. These numbers are important because they affect cost-benefit assessments in every area where policy has effects on safety. A lot of work is going into the project, but some economists might wonder why New Zealand does not simply pick up the figure already produced by W. Kip Viscusi. Viscusi’s international review of the evidence in 2018 suggests New Zealand’s figure should increase to US$6.9 million.
Treasury’s Matthew Bell explained the workings of the NZ Superannuation Fund. Discussion among the economists after the presentation showed worries that the Fund may be coming under political pressure to fund government priorities rather than to maximise Fund returns over the longer term. It is a difficult problem to solve: How do you stop a government from interfering with a big and tempting pot of money?
And, today, Joel Hernandez will be telling the conference about his work in estimating school performance.
The conference’s policy-oriented turn is welcome. I look forward to seeing what we might learn next year.