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uh thanks very much um so i tend to wander and so i won't um stand there um and i've got quite a lot of content and so i won't give you my history and other things and i'm quite happy to chat with people afterwards if you wanted to know that so they organizers thanks for coming along thanks to the organizers they gave me the broad topic and the slightly smaller font the three doses of healthy healthy skepticism is what i added without them asking for it and so we'll see how successful that is so i'm going to go through three things and then actually in the third i'm going to go through another three so if i said six it would already scare you off and so the the three things are pre-covered and performance was mediocre it wasn't disastrous disastrous was argentina and uruguay who were our peers 120 years ago but it was mediocre the covert shock is especially to economies who specialize in services and despite export education and despite tourism that's not us okay we specialize in agriculture and so all else the same er respect of policy responses we would have expected an economy like new zealand to not do as badly as many other economies did okay um it's i i tend not to focus on policy makers i focus on policy because sometimes things get you know the policy maker as hero or the policy maker is naive if someone doesn't like trump and so forth and it misses the deeper fundamentals uh and so that's what i want to be able to focus on here and then the three reasons for skepticism are and without being too ungreen i'm going to twist the fern which is just blocking my screen it's plastic i think so i wouldn't have broken it anyway and so the first thing and it seems a bit of a strange thing to say from ganesha's talk and a lot of people said well you know is zoom going to save us and i'd actually put that into my slides before i knew that we were a part part on zoom and i would say no we've seen this about 20 years ago a lot of work on economic distance the world is flat according to thomas friedman of the new york times and the deaf of distance he called it francis ken cross of the economist daughter of sir the very very famous scottish economist surya kin cross and it was actually a former colleague here phil mccain who pointed out that actually it's not the world is curved it's not flat distance matters more than ever and so it wasn't such a big puzzle for why new zealand wasn't doing so badly despite having quite good policies at the time because face-to-face communication sort of things which occur in cities became more important not less and so i'll spend a little bit of time on that but not too much because not my my work i'll then talk about human capital and we've got particularly large intergenerational but also inter-ethnic issues i won't say problems but i'll say issues here and so the particular response that new zealand took is putting burdens on to particular generations and particularly ethnic groups and i'm not sure that that's a an ideal one and i'll also talk at the end and this will get um you know the pr people will start to shift uneasily on their seats because i'll talk about one of the two inevitabilities of life and i'm not going to talk about taxes okay so i'm going to be talking about death okay and i'm going to point out that our response to risk was probably inefficient probably inequitable and what i should have added here as well is it seemed fairly arbitrary and so it increases the uncertainty going forward it's a deterrent to people's investment from the way we've done things now okay so go very quickly and grant scoby i'm very pleased to see grant here 30 years ago when i first came to waikato we had exactly this diagram and it's about the competition for resources and an economy and at that stage the issue was that new zealand was still supporting the importable sector the reserve bank also did work on this so roughly for every 10 percentage point protection given to the importable sector about 70 of that flowed back into the non-traded goods sector and the characteristic of non-traded goods is that their prices are set domestically they have captive consumers and so if there's a demand increase for there then they can simply increase the price the tradable sector which is exportables plus inputables have their prices set on the world market and what has been the structure i should say too these even though i've used black lines here it's a bit fuzzy so technology back office operation zoom remote medicine all sorts of things move the line things that used to be not tradable can be tradable and so the tradable sector seems to get a bit bigger but the bigger effect is the green arrow the demand effect as we get richer we do we demand more services and we demand more non-traded things like property and so the non-traded sector is much bigger and richer countries and so the dominant effect is going to be the green rather than red now as many people know in new zealand almost all of our growth over the last two decades has occurred in the non-traded part of the economy and the problem for that from a product point of view point of view is that the non-traded part of the economy can operate by and large with captive consumers wellington's going to put its rates up for 10 percent or whatever because they didn't look after the pipes you can't do anything about it unless you move to auckland and then you're going to have high rates there or unless you move overseas you can't import from amazon or from someone else a substitute for non-traded goods and services but you can if your local bookseller is selling the prices for too high you just go on to amazon and onto you shop right and so there's a fundamental difficulty in getting productivity growth in the non-traded sector of the economy because they don't have the spur of international competition which applies in the traded sector of the economy and so as i said down here many people are many other people may have pointed this out this is going back to 1991 indexing there and this is in per capita terms and this is production gdp and so through until the late 90s the non-traded the the red hopefully no colorblind people here i know illinois at victoria is and so i shouldn't use colors and things the traded part has basically been static for for 20 years the non-traded part has increased by about 70 okay so that's using stats nz data if we use oecd data then export volumes in new zealand over the last 20 or so years have grown by less than two percent per annum we often compare ourselves to australia michael cullen used to point out while australia can dig itself up and export the the iron ore and so forth australia's exports are growing much faster than as at the same rate as the oecd the more sensible comparison in many ways is to small oecd countries because small countries need to trade much more because they can't produce everything locally and the small oecd countries have export growth of 5 per year and so these are countries between 1 million and 8 million so it excludes iceland it excludes sweden but it's got the baltics it's got the other scandinavians it's got slovenia slovak slovak republic and so forth okay doesn't have singapore because again that's a special case this is using world bank data because i'm not a mercantilist the point of exporting is so that we can buy imports and so this is exports plus imports relative to gdp from the world bank and so we're always the black line here the the right color choice to to choose from new zealand so we went from basically one and a half times the oecd average slightly more relative to australia to now being below the oecd average and the comparative group of countries the small oecd countries increased their tradables share in ports plus x border walls imports plus exports to gdp sorry by about 20 percentage points so you might say well of course we're not going to have as much trade as them because they're in northern europe or in the northern hemisphere so that would be the level effect that you see on the vertical axis but that shouldn't account for the change in the trends is fundamentally different trend going on here okay all right okay so that was the the the mediocre performance and and sorry because there's obviously a lot of people here who have been involved in economic policy over this period it's not a criticism of individuals but we need to point out that we haven't actually done as well as we sometimes think now in order to think about how we would respond to a shock like covet it helps to go back to first principles and so if we think of how the economy is organized into sectors agriculture industry and services while agriculture the key part of production for almost all forms of agriculture except for um intensive glass houses and except for horticulture and vertical farming in cities is space okay space is a key input into production workers are dispersed and buyers and sellers are normally also spatially dispersed apart from going to a farmer's market most people eating their food never know the person who grows grew their food industry is a bit harder and so at the beginning of the pandemic because wuhan is central to automobile supply chains and there was actually quite a lot of disruption to supply change in other countries um and often the assembly line production takes some additional changes and so ppp put in place plastic shields robots sanitizing robots etc but by and large industry also is coped pretty well again when is the last time any of us ever went to the factory to buy something we never do so buyers and sellers for industrial goods and goods are again separated by a long distance services is totally different services traditionally requires face-to-face and so when we look for example at agglomeration economies which is the amount by which bigger places are more productive or pay higher wages that almost always comes through the services sector it doesn't come through manufacturing it certainly doesn't come through through agriculture indeed one of the main explanations we have for the existence of cities why put up with the congestion in wellington or in in auckland is because of the productivity advantage of having more direct face-to-face communication with your input suppliers your colleagues your collaborators and also the direct matching of buyers and sellers because most services require you experience and they take time to do it so all else the same we would expect economies to be who rely on services to do pretty badly and this is from the january it's the most recent world economic out look of the imf it doesn't include new zealand because it only includes the 30 countries which contribute their biggest share of world gdp which is 83 but you see very clearly that for every additional five percent increase in the share of services and gdp in 2019 the real gdp growth rate in 2020 dropped one percentage point okay and you'll say okay well look us uk spain those are rich indonesia india egypt china those are poor is it being driven by income you get exactly the same relationship if you condition on gdp of these countries as well for agriculture it's exactly the opposite for every five percentage point increase in the share of agriculture and gdp then gdp growth in 2020 was one percent higher than it otherwise was so the shock was not as as big as it would be so where's new zealand while new zealand has gdp as six percent of coming from the agricultural sector versus the oecd average of one percent so we've already got a five percentage point gap which would account already for one percentage point more growth in new zealand than we expected irrespective of whether we had good or bad policy responses right just due to our economic structure and so we luckily in this period specialized in the sector which can most easily cope with social distancing that's exactly what life on the farm is it's a lot of real estate to go and and and do things and the sector which can least easily cope is services and despite export education and despite tourism we're not a services intensive economy compared with most other rich countries okay so does this herald a new dawn and quite a lot of writing has come out in the covet era saying well you know there's all sorts of other problems climate change and so on and so forth we need to reshape the economy reset the economy and so forth as i said here we'll zoom save us because we'll have ongoing social distancing we'll have some decline in face-to-face services will remoteness become an advantage if we could ever get the border properly managed my view no okay skeptically my view is no okay and so our pre-covered mediocrity will return but in addition our covert response has opened up new vulnerabilities which weren't there precovered okay and so we've got new problems to grapple with because of our particular response to this shock okay so let me go um through and just two slides on this before i go to the two in a little bit more detail so as i said 20 years ago there was this belief that the world was becoming flat because ikea and amazon and everyone else who's got a really efficient supply chain could send goods and serve goods and some services back office operations around the world really cheaply um how am i doing for time matt cool okays and i'll give a little my current house is made out of an entire container load of building material which i imported from british columbia um for four thousand bucks not for buying the materials shipping it from from british columbia from vancouver to busan to tauranga it cost me almost as much to get it from tauranga to clear to mirror edge and to get to hamilton and then to my rental property so things that are relatively standardized containerization information and so forth become really really cheap okay and really efficient and so the argument is well the cost of engaging in activities across space so trying to build your house across space or buying materials across space in my case has fallen so remote places should be less disadvantaged and this is what then caused puzzles for people and phil mccann when he was here wrote a lot on those people people were puzzled well we should be becoming closer now and we've got good policies and so why aren't we doing why is our productivity so badly why is our tradable sector shrinking so much and so phil's answer and i think it's the right one is that it ignores complementarities this story is all about substitution and the way i'm going to explain it is it's akin to the lump of labor fallacy and those of you many of you will know the lump of labor fallacy is the idea there's a given stock of jobs to do something threatens those jobs such as the machine so blood and the other ludwites go and smash the machine or something threatens those jobs because there's more productive workers such as rse workers coming from the pacific to pick horticultural crops who are about 30 to 40 more productive than the new zealand workers and so the dominant story is about substitution the reality is the machine comes we become more productive when we're more productive we're richer when we're richer we demand more goods and services and so in the long run both the machine and the more efficient labor from abroad are complements rather than substitutes and the reason why over two centuries we got much richer isn't because we kept on looking for better and better substitution possibilities but doing fundamentally the same thing it's because of the opportunities provided by complementarity now so keep that story in mind and let me go to the next slide and there's the triple asterisks because it's so important here this is phil mccann's answer okay despite the fact that shipping a package with amazon or from ikea or me shipping my building materials across the oceans has got much cheaper spatial transactions costs have actually risen because with better information technologies we demand more the quantity variety and complexity of the knowledge that is communicated rises and much of this is non-standard and tacit so it requires face to face and so there is a premium on location there's not a penalty for central location there's a penalty remaining for remoteness and this is the sam issue and so yes zoom will make us more productive because we're more productive we'll be richer because we're richer we're going to demand more of everything and one of the things we like is travel and meeting people and so on and so forth so i don't see this as a fundamental reset i don't see this as a substitution it's the complementarity which is going to be the key thing here okay so others may disagree but um but that's that's my take or not okay so the vulnerabilities we've opened ourselves up to so so just as a little uh primer and the expert on this is sitting in the middle of the room so human capital in new zealand is worth about three times the value of physical capital and it's risen over time and human capital when these calculations are made is simply the expected discounted value of lifetime earnings allowing for the risk of death and the risk of unemployment and also allowing for the age cohort earnings growth which we would expect to occur so you can immediately see that a pandemic is going to affect human capital because increases the risk of death this particular pandemic is not going to have much effect on human capital because the mortality is so skewed to the woods the elderly i used australian data because we don't present point data for the deaths in new zealand that i've seen but it's going to be very much the same so in australia 93 percent of the covert deaths are aged 70 year old and so there's very little direct effect on human capital jeffrey rice's book black november tells us about 6 000 people dying in in the novel on the spanish flu and the median age was 30 to 35 that affects human capital okay covert directly doesn't affect human capital indirectly it has a huge effect because of the response to covert not because of covert per se and so the indirect effect comes from closing schools and replacing in-person learning with what is a very imperfect substitute which is remote learning so in the us the san francisco fed calculated just last month that in 25 years time us output will be half of a percentage point lower because of the impairment human capital that's occurred during this period and it's not an even impairment mckinsey calculated that by june 2021 so u.s schools by and large shut march last year so they've gone 15 months without school they have pretty big summer holidays over there um for students of color and this is predominantly black students they will have lost 12 up to 12 months of learning okay so over there is 15 months i've only had about three months native learning there's a loss also for white students but it's only about half as large and so the loss is disproportionately born by poorer browner blacker migrant students than by our white richer students okay and there's all sorts of reasons why we expect this to occur now in new zealand we had earlier return to face-to-face learning we had lots of innovative things we had i think susie cato and that back on tv talking to children through this all sorts of educational things the university pulled out all the stops as did all the other institutions but there is no denying the fact that it is an imperfect substitute because it was better we would already have been doing it okay it's because we were forced to do remote learning that we did it so in new zealand we already had big issues in human capital between ethnic groups and so normally when we see the correlation between people who've got more education and higher wages or higher earnings we don't know is it because the educators have actually caused that we've given them more human capital we hope that's true that's what we comfort ourselves with uh when we look back on our careers or instead is it simply the fact that there are already pre-existing differences in productivity which couldn't be known unless you had some way to signal it by accumulating a credential and so that's more of a bleak story because all we're doing is giving a piece of paper to certify that this person was productive and this was not it turns out there is a remarkable difference between european pakeha and maori pacific in these relationships and so normally in new zealand because the census and the surveys only ask about highest qualification we can't unpack this difference but there was a survey a few years ago which asked both about the number of years and also the pieces of paper the credentials collected along the way so this is for people like me this is for european pakia and so if it's not very clear this is years of education so below nine is is the omitted category that's pre-high school basically and it goes all the way up to 21 plus if you've got a phd it's more like 25 or 26 it's probably bending over ah they've got earnings which are 50 greater conditional long qualifications if we didn't condition on qualifications would be 100 greater which is why i said it's about half and half for european pakia for the returns to human capital versus the returns to signaling or credentialing for maori and pacific just check i haven't gone backwards before this might end in disaster not good it didn't for mario and pacific the return is entirely the credentials and particularly it's to credentials with postgraduate and so if you're marion pacific and you've got postgraduate then you've got a far bigger percentage increase in earnings than would be the case for pacquiao but the labor market for whatever reason whether it be because there was not in fact human capital going on in the schooling system or it wasn't being recognized for whatever reason the labor market for maori and pacific looks like that it's totally flat now this is survey data hopefully someone will go into the integrated data infrastructure and do a million observations and the standard errors which are the brown bars will get smaller but it's a fundamentally different pattern okay and it's obviously an individual tragedy it's a community tragedy but it's an aggregate tragedy because by 2038 the pacific share of the population grows 40 the maori share grows by 25 pacquiao shares down 12. about 40 percent of children in school in 2038 are in pacific and if it is truly the case that their human capital wasn't being recognized or wasn't actually being formed in the usual circumstances then how much worse is it going to be in the remote learning circumstances where the resources available to them typically were much worse right so that's a really big problem and we've pushed a lot of adjustment onto this onto this generation okay so um last one okay anyone here ever been to the world bank headquarters in washington you know what's carved on the stone in the front a dream a world free of poverty it's the world bank mission statement right writing this should be carved in the front of the ministry of health building in wellington right if we misperceive risk and we invest excessively in reducing some risks then what we do and this is viscusi who's the grandfather of all economic approaches to risk analysis we pay more than we should for health gains that are less than we could achieve right if we get the balance wrong we pay more than we should for health gains that are less than we can achieve right i'm going to argue that's probably what we've done on covert i know not everyone here is going to agree on it the larger problem is that the sort of analyses to work out whether we paid more than we should haven't been done the decisions have been made without going back to a framework for decision making for risk under uncertainty and that seems to be a huge risk going forward because that's where the arbitrariness can come in okay so there's to put it bluntly three broad ways we can respond to a new risk to human health some people are gonna get sick and some people gonna die so there's a morbidity and a mortality response we can forego current output in order to increase safety okay shelter at home uh spend a lot of money which we didn't used to spend on hand sanitizer and on ppp and things like that and the third one which is less commonly discussed in literature is we can kick the can down the road because we can borrow and so our descendants will have some call on their future output in order that we buffer our consumption while we reduce output okay so we're going to push some of the adjustment potentially onto the onto the future okay so this is the the def output dit um triangle and we've got a scale here because we actually have well-established things um for working out how much weight to put on this and so for death versus output we've got the value of statistical life and we've got quality adjusted life years for output debt it's not quite right it's more output now or consumption now consumption in the future the interest rate on the rate of time preference the third leg is not really talked about very much and so i'll be welcomed for people to suggest better but i would suggest the following the debt service ratio how much of the future output is not available to the future generation because it's repaying the debt that we use to keep our consumption high multiplied by the income elasticity of life expectancy okay and i'll talk about the income elasticity of life expectancy a little bit it's basically the idea that in richer time periods in richer societies and within societies for richer groups life expectancy is higher and the reason we don't spend all of the output in making things totally safe is that is perverse because we destroy so much output that we actually increase mortality rather than decreasing it and there's lots of papers on there okay so new zealand's approach of the bottom trade-off sorry of the death output trade-off and it's not quite value of statistical life in most cases it's been quality of life years martin lally formerly at victoria has done the most on this he's done it ex-post and ex-ante in all sorts of different ways and finds that the implied value of live saved or life years saved from the response to covert were about 40 times existing benchmarks used by pharmac or used by ministry of transport okay heatley at the productivity commission which really was done as a primer for treasury and for others as to how we could do this but it's now published in new zealand economic papers um looked at the level four extension of five days last april looked at the quality adjusted life years that were saved by that under epidemiological models versus those that were cost and the cost were 100 times the benefits and then in harrison who looked only at construction uh which again this is where a small scale building actually would have been a help because not a whole bunch of people in a factory it's two guys typically two guys holding up some pre-cut stuff so they're distanced by about four or five meters and in calculated that the costs were about 300 times the benefits right the particular values are not super important the fact that these sorts of analyses were by and large entirely absent from the public sector the ministry of health the treasury didn't do them or certainly didn't publicize them and people have put in oias and haven't found them is the bigger a worry because it means that we can do these same sorts of decisions again in the next crisis and we don't have any framework for for making difficult choices okay so this is a bit small from the back i apologize this is from the short-term mortality forecast database fluctuation database not forecast this is total deaths this is not covert deaths this is total deaths week by week and so from week one of the year to week 52 of the year blue is periods where in 2020 total deaths in that week or the total death rate was below the long run average which was the average from 2010 to 2019 and normally in new zealand deaths peak in july and i show you the 2017 flu season where the death rate peaked at around about 950 per hundred thousand the remarkable thing about the top diagram is that new zealand overall for 2020 has no excess mortality at all and so faced facing this difficult trade-off here there is no work at all going on in this leg over here all of the work is going to go on to the output and the debt legs but not onto the diff and mortality leak we're not the only country norway has the exact same pattern as well but most countries around the world and i use finland as an example show either somewhat higher excess mortality which is the orange and so the mortality rate in 2020 was above the average for the last 10 years in that particular week or so considerable peaks and so the uk scotland shows up in this and so a big peak in april slovenia shows a big peak towards the end of the year for example so we have no excess mortality uh last year and so instead what did we do we went big on debt so this is from the imf this is the fiscal monitor of january 2021 we have the largest response of any advanced country so that makes it likely we have the largest response of any country because the lower income countries generally are not going to have the ability to take on debt and in particular if you compare to a small oecd comparison group we're about four times as large response to taking on debt okay and so we can then do a triangle and so this is one of these diagrams where you want to be close to the origin getting to point one everything scaled to one and the three legs is being worst in class and these are the codes for the small oecd countries from denmark through to slovenia again new zealand is always black because of the all blacks and so our triangle is right on the origin for death only norway had a smaller mortality change in 2020 than we did amongst this group of countries we have the third biggest output decline and we have easily the biggest increase in debt okay so there's trade-offs involved we can find a country for example norway dominates us totally it's got a smaller small it's closer to the ax to the origin in all three dimensions and so it's sometimes there's a lot of you know best in class didn't we do well etcetera etcetera i think that revolves around people simply not looking broadly enough at the information out there so our response is really skewed to death and it's somewhat skewed towards mortality okay so what are the implications of this well again we were faced with a brand new risk there's three broad ways we could respond we only used two of them this raises the possibility in future well what happens when the next brand new risk comes along will we do the same will we do this for flu season every winter right we already go back my students hate it when i go forward and back but you see the 2017 flu season peak was about 30 percent higher than the 2020 covert peak right is that the right response to risk because in 2017 we weren't doing any of these particular things and no i'm not a just the flu person but these are what the the data show us here right so that's the first thing the second one actually i need to go back again sorry i should think more clearly look at the blue so we're below average in 2020 we can't stay below average every year averages don't work that way most other countries who are contemplating opening up had above average mortality in 2020 and so they are likely to have a below average mortality in 2021 and 2022 irrespective of whether it's due to the vaccine or due to the cruel fact that some people who might otherwise have died in 2022 died in 2020. in contrast we've got people who didn't die in 2020 and i can imagine the newspaper hitting headline economist says more people should have died in 2020. that's not at all what i'm saying i'm simply pointing out that an implication of our approach is that we had below average with mortality below our own average we cannot keep that up forever and a day it must become above average at some stage and it's highly likely that that will be coincident with tentative steps to open up the economy to the rest of the world and one could imagine a considerable amount of backtracking and backsliding because of that whereas other countries even if their steps are not super successful even if the vaccines are not as good as advertised they will not risk they will not have that problem because unfortunately and it seems harsh to say it but people died in 2020 who otherwise woul have died in 2021 2022. okay just as i know i know i can't take too much of your patience by giving another aside but some of you will have seen last week that the cdc in the us announced that covert had reduced life expectancy by one year well they assume that the pattern of mortality in 2020 applies every year for 60 70 years into the future for a hypothetical cohort born in 2020 so in their case you can be above average every year by that reasoning if we do the more reasonable thing of looking at people alive at the start of 2020 how many years of life did the whole u.s population expect to live how many years were lost take the ratio of those it's five days okay so the average impact on life expectancy of covert in the united states was five days spread across everyone right and so again an understanding of relative risk seems to have been lost here okay so our debt intensive response is going to burden the next generation and potentially creates perverse impacts on life expectancy actions to save lives can end up costing lives okay and so this relies on the fact that across space across time within countries there's a very very strong relationship between income in this case gdp and life expectancy in the new zealand case it's 50 larger than most other rich countries and so this is a general example of us doing a lot with a little we have a really high human development index ranking even though our gdp ranking is pretty low but the problem is that that means that reductions in future output are going to have particularly large impacts on life expectancy here which they weren't in other places and so last year at the time of the preview i ran the calculations based on the forecast path of output i know things have recovered a bit since then and we would have 10 more than 10 times reduction in life expectancy from lower future output than would have occurred from a reasonable mitigation strategy again it's it's a trade-off right it may be a trade-off that everyone's happy about but it's a trade-off which hasn't been terribly widely brought out so i know i've gone past 20 minutes um so let me finish with just the last bullet point which is that from my point of view the discussion in new zealand has been remarkably free of consideration of these sorts of trade-offs okay my hope is that this uh one day forum will at least make up for a late start in bringing us somewhat more into the trade-off space so thank you very much we're good brilliant thank you john um i'll just stand here so um i'll just check first we'll go to the room first are there any questions yes we've got a mic for eric at the front of the room and then i'll go online superb job as usual john that is great a couple quick questions if i might one reason that we might think this time is different around remote stuff a lot of changes got bedded in this time around ability to work remotely and have some of those complementarities at a distance that would have been really difficult to achieve otherwise they were forced to take on some of these fixed costs that could potentially sustain itself now you're never going to get the new connections being built that way but you should be able to maintain existing ones a lot better so you'd think that there'd be opportunities for people to remote work from new zealand getting paid by their american employers and you could start thinking about that as a potential new growth area for us if we look a bit attractive the second so i was wondering whether you think that there's any chance of that is it like a one chance and three one chance and a million what kind of where on the scale would you be betting on that second question is on on your death and gdp stuff one of the problems that i've had with some of the analysis that had been done previously is around the counter factuals and you made a really good point about the share of the services economy as mattering substantially in this have you seen anybody put out a reasonable counter counter-factual forecast of what new zealand's gdp would have been if we had been as covet impaired as everywhere else taking into account that different industrial structure okay shout out to each one okay so so for the first one short answer i think it's entirely possible that people could remote work from new zealand overseas the problem is and and you know i was tempted to add a fourth vulnerability is we've moved from an area of price-based to non-price based so we don't know what the shadow value of an extra spot in miq is right and the the idea that prices convey information has either been never learned and if so then my colleagues and i and the university sector just like deserve a good kicking or else has been unlearned because before i came here 30 years ago i was working at lincoln with tony rainer and ralph lettermore and what we were looking at was the terrification of the import licensing regime because we had protection from input licensing which we had no idea how much it was because it was non-um non-price-based and one of muldoon's small dipping hysto into the liberalization waters was starting to auction those off in 1982 which led to the syntek report and this huge protective we are basically in exactly the same setting now eric is that we don't know what value to place on miq spaces we don't know what value should be expanding them or not and who's got the highest value for them and again this is just seems to be a natural one for for using price-based systems and so i know that's not answering your question because i don't know the forecast but it's making it allowed me to subtly bring in the fourth point i would have made and i didn't collude with eric to do it either thanks thank you um one from the uh the phones or the live stream see any empirical work been done around the developed world measuring the impact of enforced time away from school during lockdown and then there was another question about comparing a new zealand experience obviously we went through a different experience over the last years versus say the us yeah so yeah there's a lot of work coming out of the u.s where um i would for people unfamiliar uh emily oster uh has done a particularly large amount of work in the u.s and arguing that schools should be reopened as soon as possible and shouldn't have closed um the very sad story just came out of sweden i think yesterday or the day before a pediatrician working at the karolinska institute who was also studying the impact of schools being closed and was arguing for schools being opened and even though we think of sweden as this uber rational place which adopted this cold heartless approach and that that chap has been so vilified online that he's moved his research away from doing this okay and so just just just saw it yesterday right so this has become the problem with this particular virus has become incredibly politicized right and so rational discussion about some of these things is you know is is just been impossible in ways which for example the 57 or the 68 pandemics didn't occur in in the same sort of environments and yet in aggregate probably are more of this is much more like them than it is ever like 28 um 1918 so yeah so so so i'd say look first to emily oster thank you um you touched a little bit about replacement of skills and so on there's a question came through what's your view on the ideal immigration settings in order for us to grow productivity wellbeing in a post-covered world so i sort of alluded when talking about the lump of labor idea um i i do quite a lot of work with um or historically over the first 10 years of the rse those of you who don't know the abbreviation the seasonal work scheme that brings in people from the pacific islands to pick and prune and and pack and so forth um and what we see there and and that was a scheme that was up to about 14 000 workers per year by 2019 so about 0.4 of a percent of the new zealand workforce was was an rsc worker it's actually non-non-trivial amount um the evidence of that is that by and large it led to complementarity effects the growers expanded their outcomes and they hired more new zealand workers and so there was a report done by the productivity commission i think it was chapter five which basically was all dominated by substitution this is bringing in cheaper workers and so if we shut that off it will increase the demand for local workers this by large doesn't happen i think i saw 58 workers had been hired by some scheme to move people out there the problem is that workers come in all different shapes and sizes and locations we've got hundreds and hundreds of labor demand curves and hundreds and hundreds of labor supply curves and the fact that there are jobs over in the hawke's bay at these particular months of the year doesn't really help someone who's unemployed in hamilton or auckland or somewhere like that the great thing i think about the rsc was it built into the complementarity of a comparative advantage and so i did calculations which showed that new zealand exports were about a billion dollars a year higher because of the rsc now i can't say that's the same for all migration streams i'd be quite happy if all migration streams did have to go through a cost-benefit analysis of the kind that the rse has gone through to then work it out because you know there is a lot of belief or debate that you know too much migration has been the driving force um if we can buzz all the way backwards you know one um can we no two i can't do it i turn it off um but this divergence between the non-tradables and tradables one hypothesis is that too much migration my hypothesis would be to look at the 2002 local government act which gave general competence to local authorities and so there would be a huge expansion in the range of things they did and probably not doing some of the core things they should be doing like depreciating the pipes um and so but again that's a backward-looking thing not a forward-looking thing thank you are there any other questions in the room there's a lot coming through and i yes i can get a microphone down here uh thank you for your insights here professor gibson i'm just interested in the um you're talking about the pre-existing gaps from uh on a from an ethnic basis um i suppose i'm a little bit interested in some of the solutions that are being thrown around at the moment as to try and alleviate that issue where quite a significant portion of the workforce will be maori pacifica and there'll be a little bit of a decline from the um from the pakistan as well so are you able to give us some uh insights on some solutions perhaps in that space um solutions no it's in in truth um i'm not an educational economist i sometimes do labor economics and so finding this sort of pattern is sort of this this will sound like a cop-out i'm sure um is part of my job other people then responding to the the pathness to what was going on okay so i don't know what is the way to to deal with it i don't know is it coming entirely from the employers is it an employer bias what what i called in that article statistical discrimination or is it a fundamental problem of um the human capital production function just not working very well for whatever reason for for maori pacifica and perhaps rather for immigrant children as well i don't know we don't have them there i don't know but certainly that seems to be something which should be front of mind for people who are researching in that area thank you i think a last question then before we break um you made a critical point that you know in echoing i guess what i opened with we're one year on now from that whirlwind of activity where there just wasn't time to do a lot of the analysis i think a theme of these two days is that we have time we have to take time we have to bring that rigor in how do you and this question came through over slaughter how do you see the government agencies productivity commission treasury others bringing more rigor and more trade-off analysis what's the right way to get that into the policy discussion well we we had pre-existing i guess i'll say benchmarks rules is too strong of a word we're very we have been historically very strong in in in the area of macro rules rather than discretion so the reserve bank act the um fiscal responsibility act um we don't seem to have the same constraint in terms of either regulatory or safety or public health and perhaps if we did because we had guidelines for you know pharmac every day is having to make really difficult decisions on funding things they're people building safer roads are making difficult decisions of prioritization we had these it's the fact that these basically as i see it and i might be wrong and i apologize in advance of anyone in the room or on line was part of this and seems like a criticism they basically went out the window right they basically were not either adhered to or called up either x anti or even x post and it's not clear there doesn't seem to be justice there it doesn't seem to be a terribly clear timetable to how do we open up again nor does this seem to be a very clear time to able to how do we go back to what i'd call a rules-based order okay and again that's not saying the politicians are rule breakers but it's it's how do we go back to essentially doing things in in a rational scientific way and maybe it's impossible right maybe in in a world of twitter and pylons and so forth maybe it's simply not possible because the costs of doing things in that way are too hard that's not my specialty as to why those things happen right but that's been that seems to me to be going forward the big uncertainty if i was an entrepreneur i'd be really worried about this sort of thing happening again because there doesn't seem to be any timetable to a return to normal approaches to decision making thank you john all right we are going to wrap so another round of applause for professor john goodson [Applause]