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EricCrampton
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RSJ: Where bond/tax financing achieves a similar objective to tolling (albeit not quite as nicely), but tolling proves too difficult, can revert to bond/tax. I can see problems in that world if population growth means you have to bring forward needed infrastructure refreshes and that comes at real cost (because the infrastructure was planned for a smaller population than obtained), but I'm not seeing a capital per capita problem. Am familiar with the Swiss example - I liked that one. Nick: I take your public choice point. But that depends on when the spending must obtain for the nonrival stuff. Like, does a country expecting larger population growth have to invest substantially more *prior to that growth* in setting strong institutions? Or can it simply bolster its investment as population grows? I think all of this is suggesting that the capital per capita point is likely minor. But it's one that's been bugging me a lot, because it gets a lot of traction in NZ. Here, the argument goes that expanding the capital stock to accommodate migrants crowds out other productive investment. And while I could see that if NZ were a closed economy, we're a tiny drop in a global sea of capital. I just don't buy the posited mechanism here that it can substantially bid up interest rates.
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Thanks Nick. Let's split public assets into two broad categories. In the first one, there's the ephemeral stuff that's nonrivalrous - rule of law and the like. That's part of what makes a country lovely. Since the value of that isn't diminished by population, it seems odd to worry about per capita values. You could rather say that where there's a per capita value for it and the capitas have increased, the total value of it has just increased. I'd put parks in here too. The total value of parkland owned by the government doesn't change (except to the extent that a proper valuation would be derived from use or opportunity cost, which should increase anyway with population), and it would similarly seem odd to charge people for the per capita change in value in that stuff. It's not like it costs any more to maintain or run it. And if it did, it's better solved with user fees, right? In the second camp, there's the stuff that costs more to maintain or that needs upgrading with population growth. The three waters for councils; roads; schools; hospitals. All the horizontal infrastructure stuff plus those potentially congested public buildings. I don't have any particular reason to think that the net value of those public assets should be positive. You can easily imagine PPP arrangements where they're privately provided and funded out of an annual charge to government, or you run 100% debt financing on them and time the debt to the life cycle of the building so the debt goes away at the same pace as the capital depreciates and then you just build a new one when the debt's finished, again debt-financed on similar terms. There'll be some capital value to the land under the buildings, but that seems neither here nor there except where you have to buy more land for expansions - but so long as you time the expansion for the next debt round, it's all good. RSJ: The timing question I think enters in more as a matter of political perception on the debt versus lump-sum question, but as a real issue on asset lifespan. If the infrastructure's paid off over time on the bonds, then it's obvious that the new people are paying taxes towards those annual payments. If the infrastructure was paid as a lump sum 20 years ago and new people show up, people get mad about how the new people are using infrastructure that the existing people's parents paid for and whatnot. In either case, the only real issue is whether the arrival of new people increases maintenance costs in ways that are difficult to apportion to new people, or requires bringing forward of infrastructure refresh that was only going to happen down the track - and how to apportion the costs of that bringing forward.
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I'd reckoned 9 was most likely, 7 somewhat likely, and 8 unlikely where you are (but very likely in some other places). Here in Christchurch, I mostly avoided recycling because of 7 & 9 - albeit by putting nominal recyclables into the regular trash rather than by screwing up the green bin. That is, until they switched us over to having three bins. A smallish green bin for compostables that's collected weekly, and a mid-sized red bin for trash and big yellow bin for recyclables that are collected on alternative weeks. Your red bin fills up way too quickly if you don't put all the newspaper and cardboard and glass into the yellow bin. The trucks also have cameras, so folks putting styrofoam into the yellow bin stop having their trash picked up. Seems to work reasonably well.
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It's really kind of touching that you can't imagine folks' motives here. You couldn't imagine anything other than that "don't they know?!" could be responsible. Signals a purity of spirit. Alas, I haven't got that.
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7. Bloodymindedness. Imagine somebody whose base premise is that glass should be in the landfill anyway, and likely winds up there regardless of which bin you put things in, because the market value of glass just doesn't justify recycling it. Styrofoam in the blue bin signals disdain for the system. 8. Uber-Bloodymindedness. Recycling is a communist plot and putting styrofoam into the blue bin helps to jam up the works. 9. Indifference. If the blue bin is handier to put garbage in, and if nobody fines you for doing it, why not? [Economists care about externalities because individuals don't; should we be surprised where individuals take selfish actions with public cost?]
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@Kevin: Onions may vary province by province. Peak of the Market is another growers' cartel in Manitoba; they might have cartel rights over onions. http://www.buymanitobafoods.ca/mb-foods/find-food/all-products/peak-of-the-market/
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Hi Frances, Couple points. First, I'd expect that so long as any sanitary regs around milk were non-discriminatory, they'd pass muster. So if both domestic and foreign supply milk had to comply to the same regs, and the regs weren't something obvious like "Milk must be produced by cows in barns where Hockey Night in Canada is played on Saturday Night", I'd expect it's ok. But I'm not a trade lawyer. Second, the status quo has a pile of capitalized rents on which dairy farmers are sitting. If we liberalized the system, maybe the processors would take some of the rent. But how much could they really get? It's not like we have a "Cartel of Cheese Producers" who get the government to go and shoot you if you make cheese without a permit; we only have that if you want to insist on your right to milk a cow without a permit. [Overdramatic? Think through carefully what happens if you sell milk without a permit and vehemently resist efforts to stop you.] Anyway, if there were big potential rents in processing, somebody else would just set up another cheese plant until they were only getting normal returns again. I can't see how most of the gains don't wind up being passed through to consumers. Third, don't hold up US markets as free markets in dairy. The dairy compacts there mess stuff up badly too. Read the story of Hein Hettinga and weep. Come to NZ some time and see what real dairy entrepreneurship and innovation looks like. All kinds of small scale dairy processing for niche markets, along with standard supermarket cheese that just knocks the stuffing out of standard Canadian cheddar. Fourth, on Australian export quota, I put 20:1 odds that those are there because of restrictions from foreign trading partners. We have them too. The US simply will not allow us to export more than X amount of milk to them per year without high tariff. So some milk goes in under the quota, and some goes in above-quota with tariff. The carrot of access to US dairy markets is what the US is holding up for TPP negotiations; I mostly think they're lying. We're most likely to be stuck with their insane IP laws while having Fonterra barred access to US markets because our "big firms are ok so long as they help efficiency" antitrust line would be deemed by the US as being an unfair trade practice (a BS argument, but the likely first thing they'll pull after we've agreed to take on their copyright/software patent insanity).
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If it's politically feasible, Nick's proposal beats mine. Mine ignores what's right (expropriate!) and goes for what might be practicable.
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I'd put up one potential path a while back. Buy out the dairy farmers - pay them for their quota. Pay off the bonds used to buy out the quota with a new temporary tax on milk (whether domestic or foreign sourced) that's eliminated when the bonds are paid off. You are wrong when you way that it's impossible to run large dairy farms where the cows get to see pasture. NZ accounts for the majority of the world's traded milk and I've yet to hear of a dairy operation here that's other than pastoral. I'd even argue that cows here would be happier than the ones in Canada - we effectively don't have winter, so any shift in dairy production from Canada to New Zealand increases expected animal welfare. It may marginally worsen environmental amenities in NZ, though dairy practices here are improving greatly - cows have to be fenced out of streams, for example. So, hitting your questions (some of which I'd hit a few months ago, anticipating your question... : 1. Do it immediately with full compensation at quota prices that prevailed ex ante 6 months ago, or some time prior to common knowledge of anticipated buy-out. 2. Farms will have to get bigger and more efficient. 40-cow operations aren't going to cut it. You'll likely also get some shifting of production from hard-winter places to soft-winter places like BC. 3. If you don't like hormone-added milk, it can be banned for consumption in Canada without having supply management. Or, you could easily set up a certification regime for Canadian producers who want to put a "Guaranteed GM Free" label on their product. We don't require non-organic vegetables to come with big warning labels. In free-market NZ, I can buy organic milk at the supermarket any time I like. 4. Prices drop, but I don't know the price elasticity of demand. Canadians seem to be on the high demanding side for milk though. Some oddities in the international data.
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I don't get why the Lorax didn't shift from argument from ethics and argument from pathos to just making the logical point that the Onceler's capital investments were incommensurate with his resource extraction rates. Appeal to his self-interest! Too simple to conclude that both the Onceler and the Lorax were idiots? (Full disclosure: have only read the book; haven't seen the movie)
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Mar 5, 2012