The Infinite Price of Free

Dr Eric Crampton
Insights Newsletter
31 July, 2020

This week, the Government announced that the real price of entering New Zealand for many returning Kiwis, for loved ones trapped abroad, and for others who might wish safely to join this lifeboat, is infinite.

No amount of money will get anyone else into the country. The Government has even told Air New Zealand to stop taking bookings because there is no space at the inn.

The lucky few who are allocated one of the scarce spaces, whether at no charge or with a user charge defraying some of the costs, will be able to enter.

Those who have not presented a sufficiently heartrending case to The Powers That Be – or a sufficiently economically compelling case – will have no other option.

The price of entry for those barred by the lack of spaces in managed isolation is neither zero nor the $3100 they might have paid under the user charge regime. It is infinity dollars.

Many of them will bear incalculably large losses, even if the Powers that Be try to accommodate those in the direst circumstances. And the overall costs to New Zealand will not be small either.

The biggest problem with the Government’s proposed user charges scheme is not who is charged and who is not. And it isn’t the amount of the charge.

Rather, it is that the fee scheme does not enable the system to scale up.

Under a better system, the Government would provide fees-free returning Kiwis with a voucher equivalent to the cost of a stay at a basic managed isolation facility. It would charge the facilities for the cost of the Government’s provided services. And it would allow facilities to set their own prices.

Such a system would encourage more costly hotels and resorts to switch into the managed isolation game, creating more spaces for those relying on vouchers to cover their costs.

About a million Kiwis live overseas with the right to return. Less well known is that over 27% of Kiwis – one and a quarter million of us – were born overseas and may wish to see families again sometime before a vaccine is available.

Safely scaling up managed isolation matters. And nothing announced this week provides grounds for optimism.

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