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Issue 21/2013 - 14 June 2013

In this issue:
• Are we running out of land? | Luke Malpass
• Great expectations | Rose Patterson
• Why does the public oppose privatisation? | Sinclair Davidson
• All things considered ...
• On the record

Are we running out of land?

Luke Malpass | Research Fellow | luke.malpass@nzinitiative.org.nz
If someone asked you how much of New Zealand was built upon, what would your guess be? 5% or 10%? More? Less? And to what extent would this affect your views on urban development and expansion?

There is a widespread view that too much of New Zealand is being built upon: along with cows, the main thing we are growing are houses, and that not only are there too many houses but they are also eating into valuable farmland and nature.

There are many reasons for this view, but at a popular level the main reason might be that growth and development happen in areas where people tend to move or travel. People also tend to go where other people are and then complain about there being ‘too many people’. Many folk see new development and extrapolate out to development they cannot see, which often does not exist.

A look at the numbers bears that out: less than 1% of New Zealand is built up, including landfill and highways. Clearly New Zealand is not filling up. Compared to other countries in Europe, New Zealand has very few people and very little land built upon. About 9% of the United Kingdom is built up and 15% of the Netherlands. Even the United States, with more than 300 million people, has only 5% built on land.

Of course, not all of New Zealand can be developed, but the notion that there is cause for concern at this point in time (or in the next few hundred years) is untrue.

As it is, New Zealand is both absolutely and relatively undeveloped. This is to be expected for a nation that is only 170-years-old and with a population of 4.4 million people and covering an area equivalent to the United Kingdom.

This background is important to understand as some of the key objections to so-called urban sprawl in housing policy, or the notion that New Zealand should be extremely concerned with towns taking up a bit of land, are well rehearsed.

There may be legitimate reasons why local authorities don’t like urban sprawl much, particularly around infrastructure, but abstract concerns about land being taken up should not be one.

Priced Out: How New Zealand lost its housing affordability was released by The New Zealand Initiative this week.
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Great expectations

Rose Patterson | Research Fellow | rose.patterson@nzinitiative.org.nz
I was told the story of a teacher in Ontario who reluctantly participated in a project to improve her students’ learning. After several months she found that “her students performed better than she had even expected herself.” When she told her story, she wept. She felt she had let down hundreds of students over her 20 years of teaching by not having high enough expectations.

The power of expectations was demonstrated beautifully in 1968 in a seminal piece of research. Researchers deceived teachers into thinking a group of students were ‘late bloomers’ who would see great progress over the course of the year. Those expectations became a self-fulfilling prophecy. By the end of the year, the fake late bloomers became real late bloomers, with higher levels of IQ relative to their peers.

A culture of high expectations is one of the commonalities of high-performing education systems. Jurisdictions that have a way to go, like England, are attempting to change the culture in recognising how transformative higher expectations can be for children’s lives. It’s no longer excusable to say that a student from a poor background can’t achieve at the same level as someone from a rich background.

The Canadian province of Ontario is an example of a jurisdiction that has successfully changed the culture of expectations. In combination with a series of reforms to improve student learning, it seems to have had a bearing on results. Over a 10-year period, from 2003 to 2012, high-school graduation rates have steadily climbed from 68% to 83%.

Having low expectations is not to be confused with a lack of dedication. Teachers in Ontario were as caring and dedicated 10 years ago as they are today – it’s simply that they didn’t have a culture of believing that all students had the potential to learn and achieve.

So how did they change the culture? First, they identified and shone the light on ‘lighthouse’ schools that had progressed against the expected odds to show what is possible. Second, they provided funding to each lighthouse school to connect with a school that was struggling, matching schools by the demographic profile of their students so they could share their secrets to success.

In New Zealand, socio-economic background has a larger bearing on student achievement than it does in other OECD countries, and poorer achievement among Maori and Pacific students is often lamented.

Shining the light on failure identifies the problem. Shining the light on success has the potential to transform not only the expectations but also the reality of student success.
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Why does the public oppose privatisation?

Sinclair Davidson | Visiting lecturer | sinclair.davidson@rmit.edu.au
Privatisation provides an interesting case study for free-marketeers. Almost everyone is opposed to the notion, yet those same people often buy the stock. So what is it about privatisation that everyone hates?

There are at least three arguments why voters may dislike privatisation. First, there is Bryan Caplan’s voter bias argument. Caplan has argued that voters suffer from four sources of bias – an anti-market bias, an anti-foreign bias, a make work bias, and a pessimism bias. Privatisation as a policy hits all them. Government using markets to sell assets to foreigners who will lay off workers? That couldn’t possibly work.

Then there is Thomas Sowell’s conflict of visions. Privatisation as a policy goes to the very core of the political debate. What is the appropriate role and function of the state in civil society and in the economy?

For those of us who suspect the answer to that question is ‘minimal, at best’, privatisation is an uncontroversial policy. For others not so much.

The thing to remember is that elite opinion holds that the state can and should do more, not less. This remains the case 30 years on from the Thatcher, Reagan, Douglas, and Hawke-Keating eras.

State ownership has many plausible theoretical arguments to support it. The theoretical arguments for privatisation seems weak. It is the empirical evidence that supports the principle of privatisation for many people. But without a clear theoretical basis for the policy, we run into the third problem that privatisation policy faces.

The promoter’s problem suggests that you can’t always trust the person trying to sell you something. Given that voters have such poor opinions of politicians, this might be especially true for a privatisation policy. It is easy to believe that past privatisations may have been successful, but that is no guarantee that future privatisations will be.

To be sure, not all privatisations are successful and some can be described as having failed after the fact. But the rate of failure is lower for all firms.

To my mind, privatisation is always a good thing. But there is a sting in the tail. Very often the proceeds of privatisation are used to buy down debt – in other words, validate past irresponsible government spending. The capacity for debt and deficit is unlimited while the stock of government assets that can be sold off is limited.

The challenge is to embed privatisation schemes into a broader reform agenda.

Sinclair Davidson is Professor of Institutional Economics at the Royal Melbourne Institute of Technology (RMIT). He will be speaking at The New Zealand Initiative on Monday, June 17. There are some spaces left. Click here to register.

All things considered ...

• Graph of the week comes from our housing affordability report Priced Out. It tracks real house prices in selected countries since the 1970s.
• Now look at your man, now back to me. Advertising is a wonderful thing that should be celebrated and The Guardian is doing just that, with its first in a series of excellent advertisements.
• London Mayor Boris Johnson has a five-point plan for London’s future, nicely summed up in The Spectator.
• Here is Boris’ actual document. It almost reads as if the mayor actually wrote it himself!
• Joshua Drummond points out that Hamilton is clearly governed by a lack of anti-science Luddites who don’t like healthy teeth. They probably also vaccinate their kids with sunflower extract and rainwater essence.
• Speaking of people concerned with additives to water and general sciency postmodernism, it seems Hamilton needs a homeopathic A&E!
• It appears that stress really might make you go prematurely grey.
• The great kiwi sausage sizzle is safe! New food safety laws are, thankfully, going to allow sausage sizzles and community food fundraisers to continue.
• Inside the Osborne Supremacy: just what has the Chancellor of the Exchequer got in store for Britain?
• Is progressivism a form of religion? That is the question asked of Nick Cater, author of The Lucky Culture and the Rise of an Australian Ruling Class and soon to be in New Zealand.

On the record
• Why the global monetary makeover is wearing off, Dr Oliver Hartwich, Business Spectator, 13 June 2013
• Housing in Auckland: Severely unaffordable, Campbell Live, 11 June 2013
• Question 7: Jami-Lee Ross to the Minister of Housing, Parliament TV, 11 June 2013
• Report 'shows need for govt leadership' on housing affordability, Voxy.co.nz, 11 June 2013
• Council fees add to house prices report, The New Zealand Herald, 11 June 2013
• Think tank blasts housing shortage, TVNZ Breakfast, 11 June 2013
• Report: How young are shut out of owning a home, The New Zealand Herald, 11 June 2013
• Urban 'environmentalist' raising urban house prices, Not PC blog, 10 June 2013
• How housing became unaffordable, Kiwiblog, 10 June 2013
• Michael Bassett and Luke Malpass argue rich and old greenies have stopped housing developments in big cities, Interest.co.nz, 10 June 2013
• Anti-development attitudes make housing unaffordable, Newstalk ZB, 10 June 2013
• Housing affordability, Newstalk ZB, Mike Hosking, 10 June 2013
• Housing crisis in New Zealand, Newstalk ZB, Leighton Smith, 10 June 2013
• Priced out, Radio Live, Duncan Garner, 10 June 2013
• 'Compact Cities Cult' blamed for high prices, TVNZ One News, 10 June 2013
• Cult of compact living blamed for high prices, The Dominion Post, 10 June 2013
• Debate on home ownership owned, Radio New Zealand, 10 June 2013
• Ordinary New Zealanders priced out of the housing market: report, Radio New Zealand, 10 June 2013
• Dreams don't need to cost a million, Sunday Star Times, 9 June 2013
• Priced Out, TVNZ Q+A, 9 June 2013

Rose Patterson - Travel diary #6

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Hon Dr Michael Bassett on Q+A

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Luke Malpass on Campbell Live

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