First up is Tim Marshall’s Prisoners of Geography: Ten Maps that Tell You Everything You Need to Know About Global Politics (10th anniversary edition, Elliott & Thompson, 2025). The book’s central thesis is that the geography of a country is a determining factor shaping its political and economic evolution and, above all, its international relations. For example, Russia’s lack of a warm-water port and the narrow window to the west across the northern European plain are key elements that underpin subsequent events.

Whenever presented with a seemingly simple hypothesis that is claimed to have wide predictive powers, the reader has a right to be, initially at least, a tad sceptical. Is the supporting evidence drawn from selected examples that happens to fit the argument, or is it closer to a “universal truth”? The Democratic Republic of the Congo (DRC) is richly endowed with natural resources, has navigable rivers and access to the Atlantic. Landlocked Botswana has none of these. Today the DRC is amongst the ten poorest countries in the world. Botswana, a stable democracy with solid macroeconomic policies, has a GDP per capita more than 10 times that of the DRC. This does lead one to suspect that there is more than just geography at play.

But do not let that detract from a fascinating book which manages in the space of a chapter each to take the major countries or regions of the world and build a compelling case that geography matters and can provide a perspective on many historical, political and economic events. The tenth anniversary edition updates the original 2015 publication and brings the narrative right up to current events such as the invasion of Ukraine and the latest Israeli-Palestinian conflict.

Tim Marshall has also written Prisoners of Geography: Our World Explained in 12 Simple Maps, an illustrated and simplified version of his book suitable for younger audiences. I’m told it’s terrific.

Will globalism trump geography?

Thomas Friedman’s “Golden Arches Theory of Conflict Prevention,” in his 2000 book The Lexus and the Olive Tree: Understanding Globalization (Random House, 2000), argued that countries with enough economic development to support a McDonald’s franchise would not engage in war, as they are too focused on economic growth and global integration.

Robert D. Kaplan debunks the argument that globalism will trump geography in The Revenge of Geography: What the Map Tells Us About Coming Conflicts and the Battle Against Fate (Random House Group, 2013). He traces the history of the world’s hot spots by examining their climates, topographies, and proximities to other embattled lands. These historical insights are then applied to the present crises in Europe, Russia, China, the Indian subcontinent, Turkey, Iran, and the Arab Middle East. Remarkably, he makes the case that the future can be understood in the context of temperature, land allotment, and other physical certainties; conflicts arise between nation states over claims to resources, water being a prime example. In short, the book is an examination of geopolitics; i.e., it views politics through the lens of geography.

China in 10 words

China is the third largest country in the world (after Russia and Canada), with the second largest population (being only a smidge behind India), and the second largest nominal GDP (behind the US). Furthermore, it was one of the top three ranked countries for most years from the 1500s to the mid-nineteenth century. The following video shows a highly effective dynamic graph of GDP rankings over time.

The “geography shapes everything” hypothesis finds some credible evidence in the case of China; in particular see the chapter on China in the book by Tim Marshall detailed above. However arguably the social, political and economic dimensions and complexities of this extraordinary country demand a broader canvas. To recognise that need, 2B RED recommends Yu Hua, China in 10 Words (Duckworth, 2023). There is no better way to summarise this highly readable volume with its exceptional insights than in the author’s own words in the closing paragraph of the Introduction:

“My goal, then, is to compress the endless chatter of China today into ten simple words; to bring together observation, analysis, and personal anecdote in a narrative that roams freely across time and space; and finally to clear a path through the social complexities and staggering contrasts of contemporary China.”

The ten simple words are the titles of the ten chapters: People, Leader, Reading, Writing, Lu Xun, Revolution, Disparity, Grassroots, Copycat, and Bamboozle. Perhaps the only one that needs a word of explanation is Lu Xun, a Chinese author whose works were among the very few books (in addition to the thoughts of Chairman Mao) permitted during the Cultural Revolution. Lu Xun’s fiction and especially his satirical essays were promoted as models of resistance, ideological combat, and proletarian service, conforming to Maoist views of class struggle.

Making maps

From 1737 to 1744 a team of French scientists trekked from Ecuador across the Andes to the Amazon River. They wanted to map the river, but their principal objective was to accurately measure the distance of one degree of latitude at the equator, and in so doing they hoped to answer questions about the curvature of the Earth and help resolve a debate between the Newtonians and Cartesians about the physics that governs the universe. Newtonians predicted the Earth would be flattened at the poles due to centrifugal force, while Cartesians believed it would be elongated at the poles like an egg.

Their scientific expedition provided evidence to support Newton’s “flat-pole” prediction, effectively ending the Cartesian dominance in European physics. By drawing on journals of members of the expedition and historical French documents, Robert Whitaker constructs a fascinating story: The Mapmaker’s Wife: A True Tale of Love, Murder and Survival in the Amazon (Bantam Books, 2005).

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There is no easy way to depict the three-dimensional spherical globe of the Earth on a flat two-dimensional surface. In order to represent all countries of the world without placing any single nation at the centre, the United Nations logo and flag use an azimuthal equidistant projection of the globe centred on the North Pole and orientated to the International Date Line. This is in contrast to the widely used Mercator projection. Nicholas Crane has written a rewarding biography of Gerard Mercator — Mercator: The Man who Mapped the Planet (Phoenix, 2003). This is a story of a cobbler’s son born in 1512 on a muddy plain in Northern Europe. What is truly remarkable is that Mercator’s projection is widely used today in the exact form he developed. He survived the plague and was imprisoned by the Inquisition but emerged as the world’s first scientific mapmaker and instrument maker to an emperor. He is also remembered for coining the term “atlas”.

On the Map: Why the world looks the way it does (Profile Books, 2012) by Simon Garfield is a comprehensive, colourful history of mapmaking from the ancient philosophers to Google Maps. On the Map is peppered with compelling and bizarre anecdotes, some to do with recurring cartographic howlers (because mapmakers, like cookery writers, copy one another). In 1622, a Spanish map depicted California as a big island off the west coast of North America. The mistake was repeated for decades, on maps entitled things like “A New and Most Exact Map of America”.

For those readers who enjoy historical fiction, The Mapmaker’s Daughter (Avon, 2022) by Clare Marchant would be a good choice. The plot involves the lives of two women from different times and alternates between 1569 and 2022. One finds a map and traces its origins, while the other uses her mapmaking skills including in the service of Queen Elizabeth I during England’s wars with Spain.

Coda

Trade wars, like military conflicts, are never just lines on a spreadsheet; they redraw the economic map.

Given the state of the world economy and the associated crumbling of global institutions, it is almost obligatory for 2B RED to include at least one “Trumpian” entry; and so this edition concludes with Richard Baldwin’s The Great Trade Hack: How Trump’s Trade War Fails and the World Moves On (CEPR Press, 2025). Baldwin has had a distinguished academic career in international economics. His PhD was supervised by Nobel laureate Paul Krugman.

Baldwin debunks any notion that the 2025 tariffs were a rational element of trade policy; rather he claims they were based simply on grievance and revenge against countries which had “benefited” at the expense of the US by running trade surpluses. He argues that tariffs fail on all counts. They can’t correct the US trade deficit (which mainly reflects government fiscal deficits); they cannot boost the manufacturing sector (they have the opposite effect through uncertainty, disrupted supply chains and raised input costs); and they cannot make workers better off (only about 8% of employees are in the protected goods sector — the rest are in service sectors and face higher tariff-induced living costs).

Baldwin argues that eventually tariffs will collapse as the costs rise both domestically and internationally, but in the meantime they persist as they provide symbolic relief, project toughness and shift the blame to other countries.

By Grant Scobie

»»»» Previous issues of 2B RED.

Lew was one of New Zealand’s finest academic economists and was widely published in prestigious international academic journals. The citation for his NZAE Distinguished Fellow award in 2005 noted that his contribution spanned the fields of agricultural economics, econometrics, economic organisation and the effects of competition law and regulation on the performance of firms and markets.

Lew’s research had public policy relevance for New Zealand firms and markets and for our laws and public institutions. His work was influential in competition policy, contract design and organisational form and ownership in the electricity and gas industries and the telecommunications, transport, dairy and health sectors.

Lew grew up on his family’s high country farm in Marlborough. Like notable New Zealand economists Bryan Philpott and Bruce Ross, Lew’s route to economics came through agriculture. Lew worked for five years as a farm adviser with the Department of Agriculture following his BAgrSc degree at Lincoln College. After completing his master’s degree at Lincoln, he departed New Zealand to study at the University of Wisconsin, where he undertook an MA in Agricultural Economics, followed by an MS and PhD in Economics.

Back in New Zealand, he took up a position at Victoria University of Wellington, where he was appointed Professor of Economics in 1988. Lew did not however give up on farming. Home for Lew and Sharon was their 300-hectare property near Pāuatahanui, north of Wellington, where they farmed deer, sheep, cattle and trees. Lew and Sharon’s generosity in hosting colleagues, graduate students and visiting academics at their farm was legendary. One such visitor was Kansas-born Nobel prize winner Vernon Smith who visited New Zealand in 2000. Smith, like Lew, had also spent his childhood on a family farm and wore his trademark string bolo tie and cowboy boots.

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In 2011 Lew was appointed an Officer of the New Zealand Order of Merit for services to education. Lew was a committed and dedicated researcher, and sometimes he was a little grumpy about the time teaching took away from his work. Yet perhaps his most enduring legacy is the number of students and colleagues whom he mentored over the years, and his ability to make economics understandable to policy makers, lawyers and regulators. In 1998 he established the New Zealand Institute for the Study of Competition and Regulation (ISCR), which undertook high-quality academic research targeted at public policy issues. Its newsletter, Competition and Regulation Times, published between 2000 and 2014 contained articles accessible to business, legal and public policy audiences. Many of those articles remain relevant and informative today. ISCR also took on summer interns and research students, springboarding their careers in economics, law and public policy.

Lew became Professor Emeritus in 2014 and continued providing advice and guidance on New Zealand’s most important market, competition and regulatory questions. He was a Senior Consultant to economics consulting firm NERA through to 2022 and a Ministerial Appointment to the Access Panel of the New Zealand Core Dairy Database through to 2025.

In later years Lew and Sharon returned to live in his beloved Marlborough. Lew died in Blenheim on 27 May 2026, aged 82 years. Those of us who knew Lew and his work offer our deep condolences to his family and friends. We remember him with great fondness and know that he will be sorely missed. NZAE and Asymmetric Information invite readers to share memories of Lew on this page.

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By Judy Kavanagh

[A personal note from the Editor: Lew introduced me to economics, delivering the first economics course I attended, and gave me my first economics job — as a Research Fellow at the ISCR. Under his direction, my initial task was studying rail in New Zealand — a topic that has followed me doggedly ever since! You’ll be missed, Lew — Dave.]

Published since 1966, NZEP is a B-ranked journal in the Australian Business Deans Council (ABDC) journal rankings. The journal is published by Taylor & Francis, under Routledge, with an online submission system.

Aims and scope

NZEP publishes research of the highest quality from leading international scholars in all areas of economics. The journal also serves as an outlet for world-class research on important economic and policy issues relevant to New Zealand and the Asia-Pacific region.

Responsibilities

• Edit and produce three issues per year, with a minimum of six papers per issue.

• Maintain the established tradition of economic scholarship while developing your own editorial policy. Any written policy must be approved by the NZAE Council.

• Demonstrate commitment to the NZAE, including attendance at Council meetings and the annual conference. The Editor-in-Chief will report to the NZAE Council twice a year on editorial duties and key journal statistics.

• Ensure NZEP includes original research, notes, surveys, and policy analyses.

• Maintain a fair, efficient, and rigorous refereeing process.

Appointment

• The appointment is for three volumes (nine issues).

• The successful applicant is expected to commence in mid-2026 (negotiable).

• The appointment may be ended by either party with six months’ written notice.

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Stipend

• The Editor-in-chief receives a stipend of NZ$4,675 per year.

Search process

A search committee appointed by the NZAE Council will oversee the selection process. The committee will include the current NZAE President, Evelyn Truong, and at least one former NZEP Editor-in-Chief.

Applicants should submit:

• a statement of interest, and

• a current CV.

Please email applications or nominations to evelyn.truong@rbnz.govt.nz by 18 May 2026.

Economist on the world stage

If we were conducting a poll for the economist who made the most significant contribution on the global stage in 2025, Mark Carney would have to be the frontrunner. His career has taken him a long way from the remote town of Fort Smith (population some 2,000) in the Northwest Territories of Canada. With degrees from Harvard and Oxford, he then spent 13 years in the finance sector with Goldman Sachs. Following a period as a deputy minister in the Canadian Department of Finance, he was appointed Governor of the Bank of Canada. He followed that a little later by serving as Governor of the Bank of England, the first foreigner to serve in that position in the Bank’s long history.

In 2025 he became Prime Minister of Canada, a position bringing with it some significant challenges in managing economic and political relations with Canada’s neighbour on its southern border. (Former prime minister Pierre Trudeau when asked about Canada’s relationship with the US, said it was like sleeping in bed with an elephant; however kind and well behaved, every time the elephant moved even slightly, you could be crushed). Carney’s speech at Davos could well be a turning point in international relations; he called for the medium sized countries to act together to counter the power of the mega countries (Russia, China and the US), signalling a new direction for international trade and cooperation.

In Mark Carney’s book, Values: An Economist’s Guide to Everything that Matters (William Collins, 2021) one can see ideas and analysis that underpinned the Davos speech. He paints a somewhat grim picture of the world, but then sketches a roadmap for a way forward. Unsurprisingly given his background, he views markets as an essential element in society, but we must “channel the value of the market back into the service of the values of humanity.”

Trade policy by whim

The breakdown of multilateralism and global trade is highlighted by Philip Coggan, The Economic Consequences of Mr Trump: What the trade war means for the world (Profile Books, 2025). If ever US economic policy was driven by the whims of one person and based on mistaken premises, Liberation Day would have to be the epitome. What every Economics 101 student understands is trade deficits reflect an excess of domestic investment over savings; this apparently escaped Trump and his economic advisers. The surpluses of other countries against which he rallied were, in large part, nothing more than the consequences of the US government’s massive and ongoing deficits. In a well-known quip, Milton Friedman responded to a question about US trade deficits: If foreigners are happy to provide us with nice shiny goods in exchange for bits of green paper that cost us next to nothing to print, then this surely has to be a great deal.

Trump’s lack of understanding of international trade is enough cause for concern; but the real damage has come through the uncertainty created by a lack of a strategy, constant reversals, and the use of tariffs to “punish” countries whose leaders or policies are not to Trump’s liking. The chaos in the global system brought about by Mr Trump and its wide-ranging consequences, including for the US itself, are clearly stated in this highly accessible, jargon-free little volume of 144 pages.

Guide for the perplexed

Philip Coggan is also the author of our next entry: Economics: The Economist Guide (Profile Books, 2025). He is a British business journalist and news correspondent, who has written for The Economist newspaper since 2006 after 20 years at the Financial Times. After a brief opening synopsis of the history of economic thought, each subsequent short chapter covers a standard menu of fiscal and monetary policy, trade, productivity and the labour market.

In his concluding chapter, Coggan addresses issues that critics feel are inadequately dealt with by “mainstream” economics. In each case, he lays out the basis for concerns and provides a cogent analysis of how economics has responded (but still comes up short). Topics covered in this chapter are the environment, climate change, inequality, anti-globalisation and behavioural economics. The book finishes with a most useful and extensive glossary of economic terms from arbitrage to zero lower bound. A comprehensive index follows.

This book would be an ideal starting point for anyone wishing to get an introduction to economics in an accessible and highly readable form: nary a graph nor an equation!

Economic puzzles and parables

Tom Standage (ed.) The Economist Quiz Book: 60 brain teasers for inquisitive minds (Profile Books, 2025) is not about economics per se; it has its origins in The Economist newspaper. It comprises four sections, each with a particular theme; e.g. “Answer the questions to reveal a common theme”; or “Spot the myths.” A good one to challenge the brain.

Tim Harford is a British economist, journalist and author of several “economicsy” books, including The Undercover Economist Strikes Back: How to Run or Ruin an Economy (Little Brown, 2013).

New Zealand readers will enjoy the opening chapter , as it starts with recounting the story of New Zealander Bill Phillips and his seminar at the London School of Economics in which, to the utter astonishment of the crusty academics, he demonstrated his hydraulic machine, the MONIAC (Monetary National Income Analogue Computer). Their disbelief turned to amazement when they realised this machine could simulate a complex set of equations to analyse the impact on national income of macroeconomic policy changes, a task which hitherto had been beyond any computational solution.

The book employs an unusual but captivating literary style in which a sceptic poses challenging questions to which an economist responds. For example:

Sceptic: “So you’re saying if I want to solve economic problems, I should fire up the printing presses after all?”

Economist: “Yes, sometimes. But before we get any further into the topic of creating money, I think we need to take a step back and get our heads around what money is.”

In short, a readable, clever, entertaining and informative volume.

Harford is a great story teller; some readers will recall his keynote presentation to an NZAE conference when he told the story of Thomas Thwaites, a British designer who gained recognition for his 2009 project The Toaster Project: Or a Heroic Attempt to Build a Simple Electric Appliance from Scratch. Fans of Harford regularly listen to his podcast Cautionary Tales.

Milton Friedman revisited

Jennifer Burns, a Stanford University historian, has produced the first comprehensive biography of the life and ideas of Milton Friedman: Milton Friedman: The Last Conservative (Farrar, Straus and Giroux, 2023). Friedman was a classical liberal, and one of the most influential, and at times controversial, economists of the 20^th century. His work on money and inflation was fundamental to shaping our understanding of the role of monetary policy. He had an ability to communicate complex economic concepts to a wide audience, always underscoring the importance of individual freedoms and the role of markets. That is amply demonstrated in the TV series Freedom to Choose. A Nobel laureate, he was a major figure in the Chicago School of Economics and arguably his libertarian views contributed to “the conservative shift in American political ideology” in the 1970s and 1980s, associated with the Reagan years.

Jennifer Burns’ biography portrays Milton Friedman as a principled but evolving thinker, who was more complex than his ideological reputation suggests.

Rational rationing

Let me end this edition of 2B RED with an interesting bit of New Zealand’s economic history. The monograph by Lynley Stone, Rationing in New Zealand: September 1939 – June 1950 (Mt Albert Historical Society, 2025), is a comprehensive, well-researched piece that details the history of rationing in New Zealand during and after WWII. It highlights the challenges of implementing and monitoring a complex set of government regulations. For anyone interested in following up on this topic, Stone provides an extensive bibliography.

Rationing had an enormous impact on private households for more than a decade. The range of items covered included petrol, tobacco, butter, tea, sugar, meat, clothing, hosiery, fabrics, eggs, cream, footwear, household linen, blankets, paper and rubber. In the latter case, gumboots were only available to farmers with 12 or more cows.

There were two principal mechanisms for rationing. One was the the Government, voa the Post Office, issued individuals with ration books containing coupons which could be “spent” at shops (e.g. sugar, butter, clothing). (At this point your 2B RED columnist should declare his own experience: as a young boy I was sent to Mr Dalgano’s grocery store around the corner on Grey Street, Invercargill with the requisite number of coupons to buy tea, butter, sugar etc.)

The second mechanism was the Government restricted the supply of goods (e.g. eggs, bacon, fruit) to registered retailers . In that case, the shopkeepers had to be relied on to “equitably allocate” the limited supply amongst their customers.

Given the complexity and detail of the ration book system, one can only imagine the extent of the bureaucracy needed to design and implement the system. To illustrate: petrol was rationed to 2-4 gallons a month, depending on the horsepower of the vehicle; foodstuffs were rationed by weight (e.g. 2oz of tea per week, or 8oz of butter) and different amounts were set for adults, children from ages 5-10, and those under 5. In some cases extra allowances were granted to pregnant and lactating mothers. In some years extra allowances were granted over the Christmas period. Ration books had to be constantly updated as prices and regulations changed.

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Doubtless, there were incidents of cheating and fraud, but given the universal nature of the schemes and a heightened level of patriotism during wartime, one suspects it may not have been very extensive. Coupon trading was permitted, and those with coupons in excess of their needs could trade those for other coupons to supplement their holdings.

There were significant social and cultural consequences, many of which carried over for many years after the war. Shortages of almost everything fostered both a culture of frugality and an emphasis on home skills. Clothing was expensive and hard to obtain so many clothes were sewn at home; old woollen sweaters were unravelled and the wool used to knit a new one. Prime cuts of meat were a rare item, but offal was not rationed. Dishes involving kidneys, liver, tripe and brains were common in my household. We were required to use dripping (lard or bacon fat) on the first piece of bread or toast, and then allowed butter on the second piece. “Making do” became very much part of wartime life. And the practices, skills and attitudes developed in those years, were to varying degrees reflected in the lifestyles of the next two generations.

New Zealand made huge sacrifices in WWII; the history of rationing highlights that some of the costs fell on households which by and large would seem to have “done their bit” for the war effort.

By Grant Scobie

»»»» Previous issues of 2B RED.

Retail price caps help … or do they?

I’ll start with a small island — Tasmania.1 It has passed a law to allow it to set a maximum retail price of fuel. Tasmania has no oil of its own, so it is completely reliant on imports. Let’s say the cost of imported fuel corresponds to a retail price of A$5.00 per litre. The Tasmanian Government, in its wisdom, decides that’s too high, and imposes a price cap of A$4.00. What happens? Well, no distributor or retailer wants to lose money selling petrol. So, they are likely to withhold what stocks they have, hoping for a change of heart (or at least of the price cap) from government. Shortages can be expected.

What’s worse for Tasmania is that no ship is likely to deliver fuel to the island if the owners of the fuel expect to lose money. Nor can the Tasmanian Government compel them to deliver, as the state’s jurisdiction ends three nautical miles offshore. So expect shortfalls in deliveries of oil to the state. Even the possibility that a shipment may be subject to retail price caps may encourage tankers to dock at a more supplier-friendly island.

Under these circumstances, price ceilings make shortages more likely. Any economist can tell you that shortages are worse than high prices. At least people have the option to buy at the high price, and will do so if their purpose is sufficiently valuable to them. They have no corresponding option if nothing’s for sale.2

Free public transport sounds nice, but …

In response to rising fuel prices, Tasmania’s Liberal government3 has announced three months of free public transport. Demonstrating that such policies cross political divides, Victoria’s Labour government has announced that public transport will be free in April.

Over in South Australia, the Liberal Party, the Greens, the Business Chamber, and the Rail, Tram and Bus Union have all called for free public transport amid high fuel prices. The state Treasurer of the recently re-elected Labor Government, Tom Koutsantonis, responded:

"Yes, it would be lovely to give everyone free public transport and free car parking and a puppy".

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Koutsantonis further said that it was not responsible budget-wise to offer free public transport, even if it would be popular.

To date, the governments of other Australian states have declined to introduce free public transport.

Back to the economics. If fuel is expensive, then those who can will be likely to substitute public transport (PT) for private vehicle transport. This reduces overall fuel demand and makes shortages less likely. It only works, however, up to the point where PT services become congested.4

Importantly, this substitution will happen with current PT pricing. But what happens if you zero-price PT services at the same time? Well, other people will use PT (or make more use of it) who aren’t substituting away from private vehicle transport. These “non-substituters” will also contribute to congestion. A “free” PT service with zero empty seats isn’t really that useful, hence lowering the price of PT will send at least some potential substituters back to private vehicles. Relative to leaving PT prices unchanged, free PT could plausibly increase fuel use and make shortages more likely.

Tax cuts are always popular

The logic of taxes is straightforward. Higher taxes discourage consumption, and lower taxes encourage it. So, the Australian Labor government’s decision to halve fuel excise for three months to lower the retail price of petrol and diesel will, of itself, increase fuel consumption. And that, perversely, will make fuel shortages more likely; the same fuel shortages the Government claims it is trying to prevent.

A sting in the tail

So far, New Zealand has sensibly avoided policies like these. I remain hopeful that it will continue to do so.

I’ll leave the last word to economist Chris Richardson:

“I entirely understand why the [Australian] government is doing this because the punters are seeing that they are being helped. Chances are they’re not actually being helped, it just looks like they’re being helped.

“Families will understand that, they’ll love it, but they perhaps won’t recognise that it comes with a sting in the tail. And that sting in the tail will be the same as last time: that it keeps inflation higher for longer than it otherwise would have been.”

By Dave Heatley

Dennis was a graduate of Canterbury when economics was dominated by Weststrate, Danks and Rosenberg, and the combination of institutional economics, rigorous marginal analysis, and social concerns left an enduring mark. So did the influence of historians Neville Phillips and David Fieldhouse, especially the latter’s interest in the human and social impact of the British Industrial Revolution.

Dennis’s first employment was with the then Department of Statistics. Typically, it owed a lot to chance. Dennis, a student at Canterbury, sought vacation employment in Wellington to be near Lisa, whom he later married. Statistics, then on the Terrace, was the closest of the departments to which he was referred. Even more typically, Dennis used the opportunity to secure a deep knowledge not only of the range of official statistics available but also of their strengths and weaknesses, and of the knowledge to which they gave access. “The quality of information and the meaning of data – have always been issues for me.”1

While working at Statistics, Dennis both laid the foundation for his career at the intersection of economics and public policy and began building connections with all others engaged in the same endeavour. Discovering the origins of the government accounts, the national accounts, and official statistics more generally laid the basis for a continuing emphasis on empirical measurement, but this was quickly joined by an interest in using data to inform policy debate and decisions. Dennis was introduced to the then dominant processes of economic policymaking: Cabinet Committees supported by officials committees and working groups. The Cabinet Committee was then chaired by Marshall with Holyoake as a member, and Government Statistician J.V.T. Baker, Ted Greensmith and Henry Lang from Treasury, and Jack Lewin and Harry Holden from the then Department of Industries and Commerce were key officials. Dennis lived New Zealand economic history from Nash and Nordmeyer onwards, with Muldoon coming later and giving way to David Lange and Roger Douglas, followed by all more recent figures. He contributed to a substantial slice of economic history.

At first, the big issue of the time was the future of import licensing and the development of the New Zealand economy beyond specialised production of primary produce. Dennis’s interest in this led him to accept an invitation to move to Industries and Commerce from where he learned a lesson in public administration. An officials’ committee debated a proposal to achieve import-substitution through a cotton mill in Nelson and with his committee skills, Jack Lewin converted all but the representatives of Treasury and Agriculture to support of the proposal. But politicians took a different view. Decision-making was complex. Ironically, the proposed Nelson cotton mill gave way to motor vehicle assembly, which also attracted Dennis’s attention.

Dennis shifted to NZIER in 1966 and edited Quarterly Predictions. He succeeded Jim Rowe as director and served for five years. He continued to work on manufacturing production and production, including a study of the motor assembly industry that searched for a mechanism that could reconcile small size with economies of scale, and generated a suggestion that the level of effective protection should be related to the proportion of local content. It substituted for a thesis in earning Dennis an M.Com., but the motor assembly industry did not recognise its potential. Nor was it generalised. The idea that it was sensible “to accord the same level of assistance to a manufacturing exporter as we would, on the other side, be prepared to give to import substitution” was lost when subsidies were extended to the agricultural sector. Always with an open mind, Dennis sought to reconcile theory with experience. He always saw full employment as a worthwhile objective, but wishful thinking was never enough:

“real product wages in the different sectors were being driven apart by sector-specific movements in input and product prices. This seemed to me to caution against thinking that it’s an easy thing to do. You cannot simply adjust real wages. There isn’t a real wage out there; what is there reflects the summation of a whole lot of sectors undergoing radically different experiences right before our eyes. Looking back over the previous ten years, there had been huge differential movements in sectoral output and input prices. This created a dilemma for workers coming up to the bargaining table. What should be done? One needed to take account of industry circumstances, but equally there are strong pressures towards equality of occupational rates across industry.”

Dennis directed NZIER for five years and then became a self-employed consultant. As well as working for the local public sector, unions and corporates, he had international clients, including the United Nations Industrial Development Organization, and he did projects for several Pacific islands and for Asian economies. The South Pacific Regional Trade and Co-operation Agreement of 1980, which evolved into the Pacific Agreement on Closer Economic Relations (PACER) in 2001 and became PACER Plus in 2020, was one of the projects to which he contributed. He also contributed to policy development of NAFTA, including Article 3.7, which sought to find some balance between reduced tariffs and continued New Zealand manufacturing output. Dennis was attracted by the idea of balance, but complicated and somewhat artificial constructs are not durable.

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When he returned to paid employment, Dennis was recruited to the staff of the NZ Planning Council, where he continued to be a highly effective conversationalist, congenial company, but tenacious in argument. He was a leader in the Council’s effort to define how to achieve a “high income, high employment, high productivity economy”. Dennis pursued a longstanding interest in “the drawing of a balance, as I saw it then, between manufacturing and other emerging sectors on the one hand, as against the natural advantage of pastoral sectors”, working especially with Bryan Philpott, Eric Haywood and Bob Cavana. It was always a local effort rather than the international idea of import-substitution industrialisation, although there was obvious overlap. These issues ran through Dennis’s career as he interacted at NZIER with Peter Elkan, who wrote Meaning of Protection. Dennis struggled with

“a dilemma at the heart of the case for protection. There was a need to get a big enough manufacturing sector to start to pick up some of the economies of scale, but he also saw economies of scale as coming from integration with the international economy, so that was actually an argument for high levels of imports as well.”

Dennis saw the core of his work at the Planning Council as being that “the high-demand protected economy had a limited shelf life and that we would benefit from managing the transition out as well as we could.”

Dennis never ceased seeking the best possible management of the transition, participating in NZAE activities throughout his retirement. His interests extended beyond economics and public policy. For several years, he chaired the Council of Civil Liberties. He never disclaimed his childhood influences – his schoolteacher father was Labour candidate in 1946 and 1949 for Ashburton, and Dennis recalled forlorn canvassing in that conservative electorate. He was a leading member in Wellington of the Socialist Forum, which labour historian and archivist, Bert Roth, once quipped “was a meeting place for ex-communists who couldn’t get out of the habit of going to meetings”. The membership was actually much wider than “ex-communists”, but it was dominated by those who did not entirely disclaim youthful radicalism and who maintained sceptical questioning. Dennis saw an enduring truth:

“Accepting that the economy that I work in is essentially capitalist and is, to some degree, open for change, for better or worse, the challenge is to identify issues on which I can make a difference. Right across the political spectrum and in every type of social system, the balance has to be struck between the atomistic, usually market-moderated, system that gives us our daily bread and the need for central coordination and decision in pursuit of collective goals.”

Dennis Rose died on February 6, 2026, aged 92.

By Gary Hawke

In this factory, the pear packers were paid per box packed. But since each pear took the same energy to pick up, wrap and place regardless of size, the boxes of bigger pears could be packed with less effort than the boxes of smaller pears. To ensure equal access to the bigger pears, the workers were stationed at each pear size for fifteen minutes before rotating up a size.

Quasi-exogenously varying piece rates

I know about the floor arrangement of this unnamed pear packing factory because economists Tom Chang and Tal Gross detail its intricacies in their research paper: How many pears would a pear packer pack if a pear packer could pack pears at quasi-exogenously varying piece rates?, published in the Journal of Economic Behavior & Organization in 2014.

I first read the paper in a labour economics class in Wellington in 2017, and was gripped. The neutral tone demanded by academic writing could not buff out the physicality of the factory, nor could the complex economic analysis dissuade me from the sheer interestingness of the subject matter. I could almost hear the conveyor belts, smell the fresh, firm pears, feel their lumpy form through crinkling paper. My back recoiled at the thought of so many hours standing. My wrists protested at the strain that would surely build up over the season. Like Chang and Gross, I wanted to know.

How many pears would a pear packer pack, when the effort needed to fill a box changed every fifteen minutes? At which stations would the pear packers pack the fastest? Fundamentally, are pear packers income maximisers, packing more at the bigger pear stations, or are they something else?

Anything pear-related takes me back

When I see the screenprint, I immediately think of the pear packers. It is 2024 and despite seven years having passed since my first encounter, anything vaguely pear-related still brings me back to the Northern Californian factory. Rather than fading, my enthusiasm for the pear packing research has instead leaked into my identity. I have presented the paper not just in my workplaces, but to my housemates, gathered around a laptop on the coffee table after dinner as I explain the operational procedure of the pear packing factory. I find ways to shoehorn it into conversation, even when there is the wispiest of links. A friend tells me she is considering a promotion; more money, but harder work. “Did I ever tell you about the pear packers?” I ask. “Yes, you told me,” she replies.

On this occasion, I am in London at the Design Museum’s retrospective of Enzo Mari, an Italian designer, artist and theorist, looking at a screenprint of a pear that is more pear-like than a real-life pear. Mari’s design career took as many turns as a Microsoft screensaver; his best known designs include a children’s toy of interlocking animals cut from a single piece of wood, a fruit bowl formed from a bent iron beam, and the stumpy Panettone bollards which organise traffic in Milan as well as offering a seat to the passer-by. The exhibition I attend was organised in collaboration with the Triennale Milano, where it opened in 2020 — two days before Mari died from Covid-related causes.

The exhibition’s tour to the Design Museum in London, planned before Mari’s death, was to be the last outing for the collection until 2060; Mari left his entire archive to the city of Milan on condition that it would be sealed for forty years. According to Mari’s “most optimistic” forecasts, this was the time needed to allow for “a new generation that is not as spoiled as today’s generation and that will be capable of using it in an informed manner”, who could “take back control of the profound meaning of things”.

Looking at the two enormous screenprints, I am unaware of my spoiled status, my perspective dulled by rigid education, my body polluted by those hard, toxic dots that filled ‘exfoliating’ shower gels during my adolescence. The prints are of an apple and a pear; the apple, a block of stop-sign red, rounded edges indented at the top and bottom, a thick, black stalk at the top. The pear, a bulbous, traffic light green, with a matching, reflected black stalk. These fruits are no. 1 (apple) and 2 (pear) in Mari’s ‘Nature Series’. The forms are the result of intensive research, as Mari sought not ‘an apple, but rather the apple. It must be the concept of the apple’.

There is a child-friendly quality to the simple shapes, their colour and easy curves engaging for young eyes. Enzo and his then-wife Iela Mari, an illustrator, developed the fruit forms into children’s books, designed to draw the attention of youth away from television.

Enzo Mari hated television

He hated a lot of things. Journalists and academics have variously noted that Mari despaired of: consumerism, capitalism, the design industry, mass production, manufacturers, galleries, fairs, advertising, the media, academia, the digital, fame. Mari was born in 1932, the tenth anniversary of Mussolini’s March on Rome which was celebrated by the regime as it transitioned into totalitarianism. He left school aged fifteen as his father Luigi fell ill and the family needed extra financial support. Without a high school diploma, Mari was excluded from most further education, but jumped at the one opportunity available: the Brera Academy in Milan, where he studied painting and sculpture before switching to stage design.

Post-war Italy saw intense industrialisation and growth, particularly in Milan, which transformed over the subsequent decades from a war-torn city into Italy’s commercial capital. Throughout this transition, Mari was aware of the increasing social divide, with the boom in mass production generating profits for factory owners, while workers endured poor working conditions and housing. Mari saw design as a political act, and his lifelong commitment to communism imbued his work, his designs centring the factory worker who produced them. Mari agreed with Marxist theory that work is fundamentally alienating, with the exception of transformative work which causes change in the world. Intending to improve the experience of factory workers, Mari designed away the need for the most alienating, repetitive tasks involved in his creations. Having identified the hinge as “the obsessive repetition of the same action by the worker”, he designed his Java bowl without one, the container and lid creating a hinge when fitted together. This, he believed, removed the need for the alienating linchpin.

Mari sought to empower the people and unleash a creative utopia, but his attempts did not go to plan. In his 1973 project ‘Proposals for the hand craftsmanship of porcelain’, he created template designs for bowls and vases to inspire artisans and industrial workers to fashion their own designs. Instead, the artisans carefully replicated his examples. The following year saw the publication of his flagship project, a proposal for autoprogettazione, or self-design. The manual gave instructions for building nineteen pieces of furniture using only pine and nails, and Mari sent the manual to anyone who wrote to him, asking that they cover only the cost of postage. The designs were popular, but Mari was again disappointed, saying that ‘only one percent understood what the project was about’. He was particularly repulsed at those who simply paid others to produce the furniture. Today, Mari would likely still be disappointed if he knew that his interlocking animals, intended as a children’s toy, currently cost NZ$733 at the Design Museum shop.

Worker-pay elasticity is important but hard to measure

The question of whether workers want to work more or fewer hours when their hourly wage changes is important for major policy issues (including minimum wage, unemployment benefits, parental paid leave, pension ages) but nearly impossible to get good data for, because hours are often fixed in contracts. With a pay rise, there is a bigger reward for working, so some may want to increase their work hours. For others, a pay rise means they can earn enough in fewer hours, so they would rather work less and spend more time growing fruit, or making their own furniture. In many jobs this flexibility is not possible, so labour economists peer at the question through a niche of workers who do get to choose; so far these roles include stadium vendors, taxi drivers, bike couriers, and pear packers.

The pear packer’s situation is unique because unlike the other roles, they do not change their hours worked; the pear packer’s shift lasts until all the pears are safely in boxes. Their only choice is packing speed. If acting according to a ‘neoclassical model of labour supply’, a packer would work faster when at the large pear stations than when at the small pear stations, because the implicit wage is higher. Yet Chang and Gross find the average pear packer had the reverse pattern, packing more pears at the small pear stations.

This superficial finding was not the whole story: when analysed by average packing speed, which Chang and Gross label “skill level”, it is only the less skilled who pack the smaller pears faster, while the more skilled did pack the larger pears faster. Chang and Gross hypothesise that the less skilled packer may be trying to hit their own target amount of boxes within each fifteen minute block, despite the pay penalty this incurs, since they could earn more by maximising the number of boxes of large pears packed.

Chang and Gross write that more skilled workers may be better at adapting their packing speed to the implicit wage change, “but we cannot distinguish this… from the alternative hypothesis that more skilled workers are simply more rational than their less-skilled peers.” To me, these results instead show two different strategies for coping with alienating work; the method of the “skilled” packer is a strategy to make the most money, while the method of the “unskilled” packer is a strategy designed to exercise personal autonomy. Two ways for a factory worker to remove the lynchpin. Yet one of them does come at a price; if the average worker were to pack at a constant rate across sizes instead of packing small pears faster, they could earn 7.3% more per hour. With other strategies they could earn even more.

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Pear-packer productivity

The authors do not name the pear packing factory, but their later work, on particulate pollution and pear packing productivity, says that the factory has since closed.1 I search online for a different pear packing factory in the same region. I watch a video tour. The enthusiastic guide is drowned out by the grating and churning of the belts and slides that jiggle the pears into place. I can see the pear packers stationed at bins, wrapping at ferocious speed. Eight years on from when Chang and Gross collected their data, pear packing is still a manual process, although I spot evidence of efficiency gains; a close-up shot of one pear packer, from behind her left shoulder, shows her moving with sniper precision, her body completely stationary as her arms synchronise to summon the tissue paper, grasp the pear, combine the two in a single twisting motion and put the result in the box, all in under a second. Far quicker than the average speed Gross and Chang report, at 2.4 seconds per pear. I suspect she is a skilled pear packer, but I do not know if she is paid per box, or per hour.

A Mari pear packing factory

How would Mari reconfigure the pear packing factory? Could he use his intimate knowledge of both the pear form and interlocking objects to create a system that offers the worker a more enriching experience? I offer my interpretation safe in the knowledge that it is wrong; as part of the spoiled generation, I am incapable of using Mari’s work in an informed manner. The serious task of taking back control of the profound meaning of things belongs to the next generation.

I think Mari would empathise with the average pear packer’s box targeting as a costly way to pass a day of alienating work. Mari would appreciate the need for pear packing in order to distribute pears, but be troubled by the profit maximising setup which disadvantages the workers, some of whom react to the alienating system by adopting a lower paid strategy. Mari would seek to decentralise the pear packing process, encouraging the farms to innovate their own packing methods, with pear workers involved across the whole process. He would once again be disappointed when his creative contribution was misunderstood.

By Olivia Wills

Selected sources

Chang, Tom, and Tal Gross. “How Many Pears Would a Pear Packer Pack If a Pear Packer Could Pack Pears at Quasi-Exogenously Varying Piece Rates?” Journal of Economic Behavior & Organization, vol. 99, 2014, pp. 1–17.

Enzo Mari. Curated by Hans Ulrich Obrist with Francesca Giacomelli, Design Museum, n.d., https://www.electa.it/en/product/enzo-mari-curated-by-hans-hulrich-obrist/

“Enzo Mari, the Designer Who Hated the Design Industry” Financial Times, 2024 ($).

“Enzo Mari at the Design Museum Explores How the Giant of Italian Design Saw His Work as a Political Act”, The Conversation, 2023.

“Enzo Mari Review – Political Art and Craft at the Design Museum”. The Guardian, 27 March 2024.

We have some great keynote speakers for you.

Andy Summers — London School of Economics — Tax (virtual keynote)

Andy Summers is Associate Professor of Law at the London School of Economics and Political Science and Director of the Centre for the Analysis of Taxation (CenTax). His research focuses on tax policy, particularly the taxation of wealth, capital gains, and high-income individuals, with technical expertise in quantitative methods and data science. Summers was a commissioner on the UK Wealth Tax Commission and works extensively with administrative tax data to evaluate reforms aimed at improving equity and efficiency in tax systems.

Leonora Risse — Queensland University of Technology — Gender and labour

Leonora Risse is Associate Professor of Economics at Queensland University of Technology and a leading researcher on gender equality in labour markets. Her work examines gender gaps in pay, promotion, and leadership, combining labour economics with behavioural insights to inform policy on economic participation and workplace equality. She is also a co-founder of the Australian Women in Economics Network.

Olga Filippova — University of Auckland — Property and natural disasters

Olga Filippova is Associate Professor in the Department of Property at the University of Auckland. Her research focuses on the economics of natural disasters and resilience in the built environment, including the impacts of earthquakes and the benefits of resilient building design for urban economies and property markets. Her work has also examined post-quake recovery in Christchurch and the impacts of climate change on housing.

Arthur Grimes — Victoria University of Wellington — Public economics and policy

Arthur Grimes is Professor of Wellbeing and Public Policy at Victoria University of Wellington and a Senior Fellow at Motu Economic and Public Policy Research. A leading New Zealand economist, his research covers wellbeing, housing, urban development, and macroeconomic policy. He previously served as Chairman of the Reserve Bank of New Zealand.

Join us for discussion and networking, and to keep up to date with the latest developments in economics.

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If you would like to submit a paper or poster for presentation at the conference, please submit an abstract by Friday 3 April. Submissions are eligible for a number of prizes, including student awards. Abstracts, of no more than 250 words, should be submitted here.

So get cracking on those abstracts. And please put the following dates, as appropriate, in your diary.

• Wednesday 25 March: Conference registration opens

• Friday 3 April: Abstracts due

• By Friday 24 April: Abstract acceptance notifications

• Friday 15 May: Registration deadline for presenters

• Friday 15 May: Deadline for early-bird registration

• Friday 29 May: Full papers due for entries to prizes

• Wednesday 1 July: Conference start

• Friday 3 July: Conference closes

More details can be found at https://www.nzaeconference.co.nz/. I look forward to seeing you there!

By John Saunders
NZAE Conference Committee

This column will address at least some of these questions, but its aim is more to guide the interested reader towards some significant works that delve much further into the murky field of dictatorships.

There are now some 52 countries with dictators, which is actually down somewhat from the numbers in the 1970s. However, an estimated 72% of the world’s population currently lives under some form of dictatorship. But like all statistics, we need to be clear about what is being measured.

Dictatorship? Or merely authoritarian rule …

Authoritarian rule and dictatorship are sometimes used interchangeably. This is understandable, as typically both imply government by a single ruler who has unbridled power and whose decisions are not subject to the rule of law. Unlike many (perhaps most) dictators, authoritarian rulers are not necessarily malevolent; they might genuinely strive for what they believe is in the interests of their subjects. However, typically the freedoms of those subjects are severely constrained, and they have little or no say in government decision-making. Singapore’s Prime Minister Lee Kuan Yew and the Sultan of Oman are seen as fitting that model.

Because of the challenges of defining “dictatorship”, the data can give only approximate estimates. In round numbers, since 1900 there have been 200 military or violent coups and some 100 “legal” takeovers. The highest number of dictator leaders has been in Sub-Saharan Africa (e.g. Amin in Uganda, Mobutu in the Congo) and Latin America (Pinochet in Chile, Castro in Cuba).

Are dictators always male? No: there are numerous examples throughout history of female dictators: Empress Wu Zetian of China; Queen Ranavalona I of Madagascar; Indira Gandhi in India (during her State of Emergency); Catherine the Great of Russia; Queen Mary I of England; and Isabel Peron of Argentina.

The type of dictatorship a country is ruled by typically comes down to the methods the dictator used to obtain power and how they maintain it. Natasha M. Ezrow and Erica Frantz, Dictators and Dictatorships: Understanding Authoritarian Regimes and Their Leaders (Bloomsbury Publishing, 2011), identify five types:

• Military dictatorship — power is obtained and maintained through military might.

• Monarchy — power is obtained and passed on through family connections.

• Personal dictatorship — a leader who may be supported by a party or military, but still retains the overwhelming majority of power, and places those loyal to the leader in positions of power (whether or not qualified).

• Single-party dictatorship — a one-party state which makes all the rules and controls elections, so they win every time.

• Hybrid dictatorship — involving elements of some of the above, e.g. a single-party dictatorship with a powerful leader.

Economic Origins of Dictatorship and Democracy, by Daron Acemoglu and James A. Robinson (Cambridge University Press, 2005), is arguably still one of the most significant contributions — a blend of political science, economics and development. They employ the standard tools of economics and rely on incentives and game theory to analyse the path to democratic or non-democratic political systems (along with a good dose of mathematics, which generally simply restates the obvious).

They build their analysis on the premise that society can be divided into the “elite” and the “people”, and each struggle for power and control of resources. They illustrate four pathways with selected examples.

• From non-democracy gradually but inexorably leading to a sustainable democracy (e.g. Britain)

• Where democracy is created but soon collapses (e.g. Argentina)

• Where non-democracy is sustained and stable because society is relatively egalitarian and prosperous (e.g. Singapore)

• A society so highly unequal and exploitative that any prospect of democracy is so threatening to the elite that they employ repressive means and violence to avoid it (e.g. South Africa prior to the collapse of the apartheid regime).

The characteristics of dictators

So what are some of the characteristics of dictators? John Gartner, a US psychologist, identifies them as malignant narcissists.

He attributes this term to the psychologist Erich Fromm, a German Jew who escaped from the Nazis. In his book Escape from Freedom (Farrar and Rinehart, 1941), Fromm developed the theory that people accept authoritarian rule as it provides structure and certainty in their lives, in contrast to a world of individual freedoms. Fromm used this concept to explain (in part) the rise of Hitler after the chaotic period in Germany following World War I.

A similar period of unrest and political instability occurred in Italy, and together with a fear of communism proved fertile ground for the rise of Mussolini, a fascist dictator. The account by Donald Sassoon, Mussolini and the Rise of Fascism (HarperCollins, 2007), is consistent with Fromm’s thesis that the calm, order, and structure of society under authoritarian rule was preferable to the previous chaos, even at the cost of loss of some freedoms.

Military dictators typically impose strict order (ever noticed that the rocks on the roadsides in the base are painted white!) and the result is often a greatly improved level of public safety. When I lived in Colombia, a Chilean colleague and his family would return to Pinochet’s Chile on leave, and on return report how much safer and freer they were in Santiago than in Cali, Colombia.

The dictator personality type

Let me return to Fromm’s defining characteristics of the personality type of dictators:

There is perhaps no better case that embodies virtually every one of those characteristics than Rafael Leónidas Trujillo Molina, who took over the presidency of the Dominican Republic in a military coup in 1930 and ruled until his assassination in 1961, as documented in Robert D. Crassweller, Trujillo: The Life and Times of a Caribbean Dictator (Plunkett Lake Press, 2023).

Trujillo came to power by overthrowing a corrupt and incompetent President, Horacio Vásquez. There began one of the most violent and brutal regimes inflicted on a small island nation. He was called “the goat” by his enemies because it symbolised his gluttony and insatiable sexual appetite.

He hated Black people and immigrants — these were mostly Haitian farm workers who came to work on sugar plantations. He accused them (falsely) of being criminals and rapists, and he ordered the mass slaughter of some 20,000. The event is known as the Parsley Massacre. Dominican soldiers would (supposedly?) hold up two sprigs of parsley and ask a suspect to pronounce the name of it. Should they answer in French (persil) rather than in Spanish (perejil) they were shot instantly.

Trujillo demanded total loyalty, and any courtier suspected of the slightest disloyalty was summarily executed; as were Dominican nationals in exile in Cuba and the USA suspected of organising rebellion against the Trujillo government. He was exceedingly vain: always impeccably dressed — he had over 2,000 military dress uniforms. He renamed Santo Domingo, the capital city, as Ciudad Trujillo, he also renamed a province and the Republic’s highest mountain after himself. He built an extravagant palace and owned several mansions. He had some 2,000 statues of himself erected throughout the country. He required the priests to insert the following into any prayer used in the churches: “You are requested to pray for the health of Generalissimo Trujillo, the benefactor of the country.”

The country was turned into a total kleptocracy. Trujillo expropriated plantations, mines, cattle farms, and endless businesses. At his death, 111 companies were in his name or that of his family members, and it is estimated he controlled or owned 60% of the national GDP.

Perhaps surprisingly, even in the case of Trujillo, there were some positive aspects. He invested in education, health services and infrastructure, perhaps (cynically) as a way to build popular support and defuse any potential rebellions.

Can dictators do good?

This brings us to a question: do dictators ever do any good? A comprehensive analysis of the economic data has been undertaken by Stephanie M. Rizio and Ahmed Skali in How often do dictators have positive economic effects? Global evidence 1858-2010.1

Supposedly well-intentioned dictators are often cited as drivers of economic growth. We examine this claim in a panel of 133 countries from 1858 to 2010. Using annual data on economic growth, political regimes, and political leaders, we document a robust asymmetric pattern: growth-positive autocrats (autocrats whose countries experience larger-than-average growth) are found only as frequently as would be predicted by chance. In contrast, growth-negative autocrats are found significantly more frequently.

These results are not surprising. Expropriation and nationalisation of enterprises create uncertainty and discourage investment, both domestic and foreign; they remove competitive forces and lead to inefficiency; they misallocate resources away from their most efficient uses; and they encourage rent seeking by sycophants.

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Life after dictatorship

The removal of a dictator is not necessarily accompanied by a return to economic order and efficiency. In fact, removal is typically followed by civil unrest, political instability, and chaos rather than sunshine and roses, to varying degrees. No better illustration exists than the case of the Congo. In the later part of the nineteenth century, King Leopold II of Belgium was the founder and sole owner of the so-called Congo Free State. He plundered the Congo and around 10 million of its people died of murder, mutilation, torture, and slavery — as explained by Adam Hochschild in King Leopold’s Ghost: A Story of Greed, Terror and Heroism in Colonial Africa (Mariner Books Classics, 2020).

Under the dictatorship of King Leopold, the rule of law and respect for property rights were absent; institutions were weakened or eliminated, and investment in human capital was virtually nil. By the end of his rule, the Congo had 60 university graduates, mostly in exile. This is amply documented in David van Reybrouck, Congo: The Epic History of a People (Ecco, 2015). The consequence was that even well-intentioned post-colonial leaders faced an almost impossible task. Civil unrest resulted in the country’s Prime Minister, Patrice Lumumba, being assassinated within a year of taking office, as detailed in Patrice Lumumba: The Life and Legacy of the Pan-African Politician who became Congo’s First Prime Minister (Charles River Editors, 2019).

Anne Applebaum introduces a new form of autocracy in Autocracy, Inc.: The Dictators Who Want to Run the World (Penguin, 2024). Rather than the stereotype bad guy, she argues that in today’s world a consortium of corporations and financial institutions dominate and control much of society. Applebaum’s thesis is reminiscent of the argument made in 1967 by John Kenneth Galbraith in The New Industrial State (Princeton University Press, 2015). He argued that the United States was no longer a competitive free-market economy (was it ever?) but one dominated by large corporations, who controlled both the supply side and “created a need” for new products among consumers. A permissive regulatory environment allowed them to flourish.

And on a lighter note

Victoria Clark and Melissa Scott, Dictators’ Dinners: A Bad Taste Guide to Entertaining Tyrants (Gilgamesh Pr Ltd, 2014), explore the food eaten by dictators from the gluttonous to the frugal.

In a similar vein, Witold Szabłowski covers much of the history of modern Russia as seen through interviews with chefs in What’s Cooking in the Kremlin: From Rasputin to Putin, How Russia Built an Empire with a Knife and Fork (Penguin, 2023).

Finally, Peter York has two books: Dictator Style: Lifestyles of the World’s Most Colorful Despots, and Dictators’ Homes. Both highlight the almost universal appalling lack of taste displayed in the palaces (ballrooms?) they built and the furnishings therein.

All your favourite dictators are here: Hitler, Lenin, Stalin, Tito, Mussolini, Mobutu, Idi Amin, Ferdinand and Imelda Marcos, each with their own uniquely frightful chic.

By Grant Scobie

»»»» Previous issues of 2B RED.

Editor’s note: My sincere apologies for the break in service over the summer months. Work and other commitments got the better of me. This post marks a resumption of normal service — Dave.

In a terrible accident, Derek suffers fatal injuries to his body while his brain is unharmed. His two brothers are also involved in the accident, but suffer different consequences; they are brain-dead with healthy bodies. Faced with the aftermath of the accident, surgeons split Derek’s healthy brain in half, and put each half in the body of his siblings. When they wake up, the two resulting people believe they are Derek, remember living his life, and have his personality. Their bodies are similar to Derek’s before the accident.

One identity, two instances

What became of Derek? Did he die, or did he double? Is one brother him and not the other? For whom does his family hold a funeral? This thought experiment is one of several by philosopher Derek Parfit, compiled in his epic tome Reasons and Persons (1984).

Parfit concludes there would be no one identical to him after the surgery. “There will be two future people, each of whom will have the body of one of my brothers, and will be fully psychologically continuous with me, because he has half of my brain,” he writes. If identity mattered, he argues, then this result would be just as bad as death. But the result cannot be as bad as death, since he has two psychologically continuous selves. “Since I cannot be one and the same person as the two resulting people, but my relation to each of these people contains what fundamentally matters in ordinary survival, the case shows that identity is not what matters.”

Over the course of several chapters, Parfit methodically explores the ramifications of this conclusion. He argues that what matters is psychological continuity and connectedness, which is a relation of degree; you might feel strong psychological connectedness between yourself today and tomorrow, but weak or non-existent connection with yourself in ten years’ time.1 Given that, over sufficient time, psychological connection with ourselves can cease, connectedness can be stronger with other people in the present than with yourself in the distant future.

Parfit acknowledges there is a difference between logic-ing your way to a conclusion and actually feeling within yourself that it holds truth, but he encourages us to stick with it:

When I believed [that personal identity is what matters], I seemed imprisoned in myself. My life seemed like a glass tunnel, through which I was moving faster every year, and at the end of which there was darkness. When I changed my view, the walls of my glass tunnel disappeared. I now live in the open air. There is still a difference between my life and the lives of other people. But the difference is less. Other people are closer. I am less concerned about the rest of my own life, and more concerned about the lives of others.

One identity, one unique identifier

On the third floor of Victoria University of Wellington’s Rutherford House, there’s a swipe-card-protected door which only opens to those who have been granted approval for their research by Stats NZ, hold good-enough coding skills, have undergone online training in confidentiality, and have signed a legally binding lifetime commitment to keep the data they encounter confidential.

The privileged room in Rutherford House is one of many datalabs across New Zealand, which quietly capture space in government offices, universities and research institutions. Each datalab has its own quirks, some with desks so close together that researchers knot themselves up to slot in the empty chair, while others have carefully placed blinkers between desks as a constant reminder of the sanctity of the space.

When aerial window cleaners set up ropes around Rutherford House and began bungeeing past the third floor, datalab use was only permitted with the blackout blinds fully extended, to prevent curious eyes outside from spotting a morsel of confidential information. On that specific occasion, the risk was very, very small. The chance of someone being able to see and interpret information on a computer screen several metres away through glass glistening with soap suds, while researchers, sitting inches from the screen, strained to make sense of spreadsheet cells, red error messages, data dictionaries and metadata, was small. But it was not zero, and it could be reduced to zero, and so it was.

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The Integrated Data Infrastructure (IDI) is a web of data on the people of New Zealand, which can only be accessed in these locked rooms. I first used the IDI in 2017 as a PhD student and have since used it in fits and starts, as and when my workplaces needed it. Administrative data, the residue left behind from every interaction with the state, is collected by government departments and sent to Stats NZ, which strip the names and replace them with that person’s unique identifier, a stream of numbers about eight to ten digits long. Correctly managed, a person’s number is assigned to them each time their data arrives at Stats NZ, so the information from each source can be linked at the person level.

When I think about myself-as-administrative-data, I can easily imagine my information; my university course enrolment and grades, each time I left and entered the country, every medicine I picked up from the pharmacy, my visas, monthly earnings, ACC reimbursements, my census responses, and my state-recognised partnership, which links me to my anonymised partner and all his data too.

I get excited about the potential this data holds, for really saying something; to reveal some kind of truth which holds for a group of people at a specific point in time. But when it comes to actually carrying out research, administrative data drags significant challenges along with it. I have to constantly remind myself that this data is subjective, an abstraction. The variables recorded are not conceived of by a divine, omnipotent statistical overlord, but iteratively, sometimes accidentally, for operational purposes.

The one part I never thought to question was the unique personal identifier.2 A person is a person is a person; one of the few essential truths the IDI can stake a solid claim to. That is, until I read Derek Parfit’s Reasons and Persons. If I am, psychologically speaking, closer to other people now than I am to myself in the future, why are individual people set in individual grooves for our entire administrative lives, as if our continuities are defined by national health identifiers (NHIs), passport or IRD numbers? What would happen to Derek’s unique identifier in the event of the accident and surgery? Is there a person who decides?

I’m not arguing for the removal of the person-level unique identifier; the IDI is not for making metaphysical claims about the nature of self, but for research, and for research purposes it’s helpful to simplify a person down to their bodily boundaries. I actually think Parfit would have loved the IDI. He was fundamentally concerned with representation, always asking if he was looking at the thing itself or a copy, and to what extent they are the same.

The IDI is a fantastically big representation of ourselves and it does matter, in that it offers opportunity for knowledge. But it is not what matters. Just as the IDI can’t fulsomely capture what matters from a research perspective — happiness, safety, social connection, purpose — neither can it capture what mattered to Derek Parfit; overlapping chains of memories, beliefs, intentions and characteristics, and the strength of those links.

While waiting for my inelegant code to process, I imagine what Parfit would do if he got a research project approved, passed confidentiality training and learned SQL,3 and was on the desk next to me in the datalab. Would he combine the unique identifier and time variables to create a scale for each person, indicating how different any record in the past is from their present? Would he have an alternative to the individual fixed effect I’ve been using all these years under the assumption that a person is consistent over time? What research questions would he answer with his alternative coding of the individual, and would his results improve the wellbeing of New Zealanders?4

One identifier, zero instances

Derek Parfit died in 2017, in London, aged 74. His death would have been confirmed by a health professional, and entered into a spreadsheet; his UK National Health Service identifying number would have been deactivated and never issued again; the death of an administrative identity. For Parfit, his death was more a question of degrees.

When I believed [that personal identity is what matters], I also cared more about my inevitable death. After my death, there will be no one living who will be me. I can now redescribe this fact. Though there will later be many experiences, none of these experiences will be connected to my present experiences by chains of such direct connections as those involved in experience-memory, or in the carrying out of an earlier intention. Some of these future experiences may be related to my present experiences in less direct ways. There will later be some memories about my life. And there may later be thoughts that are influenced by mine, or things done as the result of my advice. My death will break the more direct relations between my present experiences and future experiences, but it will not break various other relations. This is all there is to the fact that there will be no one living who will be me. Now that I have seen this, my death seems to me less bad.

Administrative systems require fixed identity, but Parfit reminds us that what morally matters may not map onto those fixed units.

By Olivia Wills

This implies that people who own assets generating tax-free capital gains have an advantage over others. Many tax experts share this view. For example, Burman and White argued that taxing capital gains enhances equity because they are a form of income and other forms of income are taxed, while the Tax Working Group argued that “…taxing capital gains would improve the fairness of the tax system by reducing inconsistency in the treatment of income, no matter how it is earned.”2 These views suffer from three fundamental problems, which I outline in this post.3

Problem 1: Double taxation

Take a capital gain that arises solely from the retention of earnings that have already been taxed as company profits. Taxing this gain would be double taxation of the retained earnings — once as profit, and again as a capital gain.

For example, suppose that a person A pays $10m to purchase all the shares in company B. Over the next year B earns a pre-tax profit of $1m, which is taxed at 30%,4 leaving $0.7m, which B retains as cash. B’s total value is now $10.7 million. Next, A sells the shares to C for $10.7m. A has made a capital gain of $0.7m, which attracts a CGT (at the 30% rate) of $0.21m. The $1m was only earned once, yet it has been double-taxed, first as profit of B and then a second time as capital gains of A, for an effective tax rate of 51%.

Problem 2: Semi-strong market efficiency

Even if capital gains on an asset do not arise from retained earnings and therefore the absence of CGT constitutes favourable tax treatment of the asset, this favourable tax treatment is impounded into the price paid for the asset. Therefore the recipient of the capital gains does not benefit from the absence of CGT. For example, suppose that a person purchases farmland and leases it out for grazing, and this currently generates revenue of $10m per year, and none of these lease revenues are retained for further investment into the property. Suppose also that there is no CPI inflation, and therefore all capital gains or losses are real.5 Since real GDP is expected to grow, and land is in fixed supply, its value and the grazing revenue are expected to grow, at a rate of 2% per year. Real capital gains are therefore expected, but they do not arise from retention of some of the asset’s earnings.6

Suppose further that investors are risk neutral, i.e., they require no compensation for risk. In addition, the government borrowing rate (the “risk-free” rate) is 5% per year and the personal tax rate is 30% for all investors. These assumptions imply that all assets must be priced so that their expected rate of return after all taxes is equal to that on government bonds, and the latter rate is 5% (1 – 0.3) = 3.5%. In addition, suppose that the farmland in question is owned via a company, whose lease revenues are taxed at the corporate rate of 30% and the after-tax revenues are paid as dividends to the landowner. Furthermore, dividend imputation operates, with the result that the company taxes that are paid generate imputation credits that fully offset any personal tax on the dividends.7 So, the discount rate on the after-company tax cash flows from the land is 3.5% per year. The value of this land would then be $467m as follows:

A person buying the land at this price then expects to receive a cash yield (after company tax) on their investment of $10m(1 – 0.3)/$467m = 1.5% in the first year, and a tax-free capital gain of 2%, for a total of 3.5%. Their after-tax expected rate of return therefore matches that on the risk-free asset (and every other asset) despite part of it being tax free. So, the fact that part of their return is tax free gives no benefit to them because the price they pay for the asset is higher to reflect that tax feature.

If capital gains were taxed, the cost of capital would be higher to reflect that fact. In particular, it would be higher by the product of the CGT rate and the expected rate of capital gain (2%).8 So, if capital gains were taxed at 30%, the cost of equity would be:

Using this in substitution for the earlier cost of equity, the value of the land would then be $333m:

A person buying the land at this price then expects to receive a cash yield (after company tax) on their investment of $10m(1 – 0.3)/$333m = 2.1% in the first year, and an after-tax capital gain of 2%(1 – 0.3) = 1.4%, for a total of 3.5%. Again, their expected rate of return matches that on the risk-free asset (and every other asset). So, asset owners gain no advantage nor suffer any disadvantage from the tax treatment of their assets, so long as the tax treatment predates their purchase.9

This analysis assumes that market prices already reflect all public information, including tax rules. Economists call this the semi-strong form of the efficient markets hypothesis. It is supported by an immense body of empirical work.10

Problem 3: Transitional unfairness

Consider the example above, with no CGT and therefore a value for the asset of $467m. If a CGT were introduced, the asset value would immediately fall to $333m, causing a capital loss for whoever owns the asset at that moment.11 Subsequent owners of the asset would not be affected by the introduction of the tax, despite them also paying it, because the lower price they paid for the asset would compensate them for these taxes. Thus, the only owners who would be adversely affected by the tax are those holding the asset at the time the tax is introduced. This is highly inequitable, and especially so since those holding the asset at this time never benefited from the earlier absence of the tax.12 So, introduction of the tax creates a new inequity, and without eliminating any existing unfairness.

One might then wonder who has benefited from the absence of CGT on farmland. Most land purchases in NZ ultimately derive from settlers purchasing it from the Government, who in turn acquired it from Māori. The prices in these transactions between settlers and the government reflected the absence of CGT, i.e., higher than they would otherwise have been. So it was actually the Government that benefited from the absence of a CGT.

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Conclusion

Many capital gains simply reflect profits that have already been taxed once and retained. Charging CGT on these would amount to taxing the same earnings twice — first as company profits, then again as capital gains. Even when capital gains arise from other factors, their tax treatment is already built into the price of the asset. Buyers pay more for tax-favoured assets, so they don’t actually enjoy any benefit from the favorable tax treatment. Introducing a CGT would therefore hurt only current owners, whose asset values would drop overnight. New buyers wouldn’t be worse off. A CGT would create new inequities without fixing old ones.

By Martin Lally

With private investment in generative AI rocketing to $33.9 billion globally, and 78% of surveyed organisations reporting the use of AI in at least one business function in 20241, it’s clear AI is transforming the way we do business.

Join us online for an evening of fresh ideas and meaningful conversation. You'll hear insights from our keynote speaker Professor Sir Ashley Bloomfield on leading through change and uncertainty, followed by our multidisciplinary panel on Thriving in tomorrow’s workforce, featuring the Business School’s own Dr. Deepika Jindal and Professor Alexandra Andhov speaking with other UoA thought leaders about how AI is transforming industries, careers and society - and how we can adapt to thrive.

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Whether you're interested in the future of work, AI ethics, or staying resilient in a fast-moving world, this event offers insights worth sharing.

Please register here.

By Hannah Taniwha

1

Stanford University Human-Centered Artificial Intelligence (2025). AI Index Report 2025.

The view from Canada

My first three selections are about New Zealand, but written by John C. Weaver, a Canadian professor of history at McMaster University, Hamilton, Ontario.

Adam Smith's Islands: New Zealand's Incomparable Restructuring, 1980-1995 (McGill-Queens University Press, 2025) is the product of a seven-year research project supported by McMaster University, Victoria University of Wellington, and the Deane Family Foundation. It is a massive work, providing a highly detailed account of the economic reforms in New Zealand. It sets those reforms in an international context of changes in economic and social policies that were already underway in other countries (recall Reagan and Thatcher).

The chapter on the currency crisis — with the intriguing subtitle “Forex Frenzy: A Freeze, A Run, A Cut, and a Float" — takes the reader through every step of the political drama, draws out the relationships between the key personalities, and highlights the erratic behaviour of Prime Minister Muldoon. His rejection of the advice of Roderick Deane, then acting Governor of the Reserve Bank, merely added to the chaos. Muldoon twice overrode the recommendation of the Bank's Board that Deane should be appointed Governor.

The book's undoubted strength is the careful and detailed recounting of the narrative. However, the author does not really provide the reader with an overall assessment. A critical evaluation of the reforms arguably might have been a more prominent theme of the concluding chapter. (Incidentally, the book ends on a depressing note about our lacklustre productivity growth.)

To say the book is well referenced would be a gross understatement. Following 435 pages of text, there are 163 pages of notes, 26 pages of bibliography, and a detailed index of 32 pages. Don't be put off by the sheer magnitude of the book; it is an important contribution to New Zealand's economic history. Though one does tend to pine for a 10-page executive summary!

This was not Weaver's first book about New Zealand. An earlier book is on an altogether different theme. Suicide is a human tragedy; a ghastly social reality from which we can’t escape. The chances are you knew someone who died by suicide. Weaver’s A Sadly Troubled History: The Meanings of Suicide in the Modern Age (McGill-Queen’s Associated Medical Services of Medicine, Health, and Society, 2009) tackles this difficult and emotional topic in a sensitive manner. His database is 7,000 suicide cases between 1900 and 1950 in New Zealand and Queensland. He documents thousands of suicide inquests, and draws on witnesses' testimony, death-bed statements, and suicide notes. Without any pretence at offering "solutions," his work surely leads to an enhanced understanding of major social problem.

And finally, another book by John C. Weaver contributes to our understanding of our colonial era, warts and all. The Great Land Rush and the Making of the Modern World, 1650-1900 (McGill-Queens University Press, 2003) documents

how the landscapes of North America, Australia, New Zealand, and South Africa were transformed by the pursuit of resources. He underscores the tragic history of the indigenous peoples of these regions and shows how they lost "possession" of their land to newly formed governments made up of Europeans with European interests at heart.1

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Colonial history from a Māori viewpoint

In the May edition of 2B RED we met Lauren Keenan (Ngāti te Whiti o Te Ātiawa), a rising New Zealand author who, in an award-winning historical novel, portrayed and analysed the cultural interfaces between European migrants and the indigenous Māori population.

Keenan has followed up with Toitū Te Whenua: Places and People of the New Zealand Wars (Penguin Books, 2025). This non-fiction work looks at key points in New Zealand's colonial history by presenting significant events and individuals from a Māori perspective.

Complete with detailed maps and easy-to-follow driving directions, Toitū te Whenua: Places and People of the New Zealand Wars is the perfect companion for exploring these historic sites. As the only guide of its kind written from a Māori viewpoint, it is an invaluable resource for anyone looking to deepen their understanding of Aotearoa New Zealand history.2

And forthcoming …

At this point I will interject with a forthcoming book. The author was a former international consultant on employee benefits, and later co-founder and director of the Retirement Policy and Research Centre at the University of Auckland. His great-great-great grandfather William Cook arrived abandoned and injured in Paihia in 1823. He was nursed by Tiraha, the daughter of the Ngapuhi chief Tamaki Waka Nene. Michael Littlewood’s William and Tiraha: A Biographical Novel (Quentin Wilson Publishing, 2025) is a blend of historical evidence and fiction writing. 2B RED looks forward to reading it.

The Oxford Five

Sir James McNeish was a novelist, playwright and biographer, author of some 25 books. He died in Wellington in 2016, aged 85, several days after submitting his final manuscript, Breaking Ranks, to HarperCollins. In 1999 he was awarded a Fellowship which allowed him to spent time at Oxford University. This led to the publication of Dance of the Peacocks: New Zealanders in Exile in the Time of Hitler and Mao Tse-Tung (Penguin Books, 2003). It is a multi-biography of five prominent New Zealanders James Bertram, Geoffrey Cox, Dan Davin, Ian Milner and John Mulgan. They all studied at Oxford in the 1930s, four of them as Rhodes scholars. Given their inclination toward socialist systems one might view them as the (Kiwi) Oxford Five, drawing a possible parallel with the infamous Cambridge Five of the same era (Philby, Burgess, Blunt, Maclean and Cairncross) although the latter group, convinced of the superiority of the Soviet communist system, were active spies.

Dance of the Peacocks traces the lives of the five scholars from their studies at Oxford, their friendships, to their various involvements in the turmoil of the times: the Spanish civil war, Hitler's Germany, North Africa, Eastern Europe and China. Altogether they knew five wars and three revolutions. Additionally, Ian Milner was accused (wrongly) of being a Cold-War spy.

New Zealand must have seemed increasingly small and parochial after spending decades based in England, and only Bertram returned to live here, taking a Senior Lectureship in English at Victoria University. Some of the others had, from time to time, expressed interest in returning to New Zealand, but despite their illustrious careers and worldly experiences, were never offered a position they considered satisfactory. So they remained in "exile" as the subtitle rather oddly states, given that they left voluntarily and faced no barriers to returning had they been willing to compromise professionally.

Female spies in WWII

The Last Secret Agent: The untold story of my life as a spy behind Nazi enemy lines (Allen & Unwin, 2024), by Pippa Latour with Jude Dobson, is the astounding true story of one of the last female special operations agents in France to get out alive after its liberation in WWII.

Women played a critical role in many aspects of WWII. Of particular note were their contributions to the French resistance under the auspices of Churchill's Special Operations Executive (SOE). Notable among them was Wellington-born nurse and journalist, Nancy Wake (named by the Gestapo as The White Mouse).

But another New Zealander was among the 39 women recruited for the SOE: Phyllis (Pippa) Latour. (I confess to stretching it a bit: Pippa Latour was born in South Africa, but she moved to Auckland after WWII and died there at the age of 102 in 2023, the last remaining survivor of the 39. The Kiwi connection is strengthened by the fact that Jude Dobson, her co-writer, is a New Zealander.)

Born in 1921, Pippa Latour became a covert special operations agent who parachuted into a field in Nazi-occupied Normandy. Trained by the British, Pippa was lauded for her fluency with languages (her father was French physician) and her coding ability – attributes she put to remarkable use when she posed as a teenage soap-seller, often selling her wares to the German soldiers and sending back information via code to England. She kept her codes on a piece of silk concealed in a shoelace which she used as hair tie. During her time in Normandy, Pippa sent 135 secret messages conveying crucial information on German troop positions in the lead-up to D-Day. Pippa continued her mission until the liberation of Paris in August 1944. For decades, Pippa told no one — not even her family — of her incredible feats during WWII. It was not until recently, when her children encountered information about their mother on the internet, that the story emerged.

Our next entry in this vein is a novel by New Zealand author Soraya M. Lane. The central character of The Last Correspondent (Lake Union Publishing, 2020) is a journalist who was denied access as a war correspondent; the authorities simply stated the front lines were no place for a woman. Unwilling to accept this ruling, she disguised herself as a nurse and stowed away on a hospital ship to Normandy. This resulted in her being the first journalist to report on the landing. The story is closely modelled on the true story of a female journalist who did exactly that to reach the front lines as a war correspondent, one Martha Gelhorn (who incidentally also married Ernest Hemingway).

Ageing is an inescapable fact …

It is now a well documented and an inescapable fact that our ageing population will bring with it wide-reaching economic (and political) ramifications. The rising dependency ratio (i.e. retirees per worker) would result in a massive rise in net public debt if current superannuation policies were to be sustained. This is but one aspect of a "New" New Zealand explored by Paul Spoonley, a leading New Zealand social scientist. His The New New Zealand: Facing demographic disruption (Massey University Press, 2020) is an excellent place to start for anyone wanting an overview of what demographic changes hold in store.

Economists in wartime

Our final two entries are by Alan Bollard, a leading New Zealand economist who, in addition to having held a number of the most senior positions in the public sector both here and overseas, and holding a professorship at Victoria University of Wellington, somehow finds time to write books – some 17 in total covering fiction, non-fiction and economic matters. Bollard’s Economists at War: How a Handful of Economists Helped Win and Lose the World Wars (Oxford University Press, 2020) is a blend of biography of seven economists and economic history, set in the years leading up to and encompassing WWII.

Each chapter could be a standalone biography for each one of the seven economists. Bollard links their stories so as to make a coherent whole. The economists were:

• Takahashi Korekiyo, the Japanese Minister of Finance (whose ideas eventually led to his assassination);

• H.H. Kung, the Chinese Minister of Finance (who became inordinately wealthy by dubious means);

• Hjalmar Schacht, a top German advisor (who ended his career opposing Hitler's policies and who was acquitted at the Nuremberg trials);

• J.M. Keynes, economist, academic, investor, philanthropist (whose work laid the foundation for modern views of fiscal policy);

• Leonid Kantorovich (whose programming skills tried to improve efficiency in the USSR);

• Wassily Leontief (whose Russian language and mathematical skills contributed to US intelligence in WWII); and

• John von Neumann (a mathematical genius who helped make US bombing raids more accurate).

The author enriches each of their stories with captivating and often amusing anecdotes about their lives.

Bollard followed Economists at War with another "handful of economists" book: Economists in the Cold War: How a Handful of Economists Fought the Battle of Ideas (Oxford University Press, 2023). The Cold War, starting after the end of WWII and lasting for 45 years, was characterised by conflicting political and economic ideas, rather than military confrontation. Any reader with an interest in economic history, global politics, the Cold War, or the history of economic thought, will benefit from this book. The central theme is that the work of these economists led to significant advances in economic theory and policies. The book describes the complex positions these economists found themselves in and how they used their economic discipline and their personal abilities to change things.

The seven central chapters analyse the context, the life and the work of seven chosen economists. But an outstanding feature of the book is the fact that the views of each are juxtaposed with those of other prominent economists who held alternative views. The central figures with their alternates (in parentheses) are: Harry Dexter White (J.M. Keynes); Oskar Lange (Friedrich von Hayek); John von Neumann (L. Kantorovich); Ludwig Erhard (Jean Monnet); Joan Robinson (Paul Samuelson); Saburo Okita (Zhou En-lai); and Raul Prebisch (W. Rostow). So really one is geeing fourteen economists for the price of seven! And as each chapter evolves, the work and views of yet others are woven into the narrative.

The author again manages to inject into the narrative little sidelights, often entertaining, that reveal the character and human side of each economist. A very extensive bibliography and a comprehensive index will also make this a most useful reference work.

By Grant Scobie

»»»» Previous issues of 2B RED.

Principles such as these reflect basic economic analysis. Property rights and competitive prices are essential elements in the bedrock of a successful economy that supports higher living standards by rewarding enterprise and innovation.

Consequently, economists should respond when Parliament considers legislation that will restrict the property rights of a group in the general population or will impose a price control in one of New Zealand’s most competitive markets. Below we discuss a current example of each.

A restriction on property rights

The Marine and Coastal Area (Takutai Moana) (Customary Marine Title) Amendment Bill is concerned with customary rights that Māori hold in the management and use of certain coastline resources.

These rights go back well before 1840, when tikanga (Māori customary law) managed access to coastal resources in each tribal area. Common law is clear on the validity of these property rights under the rule of first possession. Professor R. A. Epstein explained this in a lecture he gave in Wellington in 1999:1

Thus in any conflict between a first possessor and somebody who acquires the land later through force or machination, the law will regard prior in time as higher in right.

Consistent with the rule of first possession, the Court of Appeal in 2003 suggested the Māori Land Court might have authority to assess Māori customary title to some coastline areas. Parliament intervened with the Foreshore and Seabed Act 2004, which vested ownership in the Crown. This led to widespread protest and a new political party in Parliament.

The Marine and Coastal Area (Takutai Moana) Act 2011 replaced that Act. Although it was a compromise that attracted criticism, including from the Waitangi Tribunal, the Act created a framework for Māori customary titles that can be recognised through the Courts.

Case law is still developing under this Act, including a recent decision in the Supreme Court. Nevertheless, the new Amendment Bill increases the threshold that must be met before the Courts can recognise a customary marine title. This will reduce property rights, as currently understood by the courts, held by Māori groups for centuries.

This is an example of interference with private property rights that the Regulatory Standards Bill wants to constrain. Section 5 of that Bill, however, specifically excludes the Marine and Coastal Area (Takutai Moana) Act 2011 from its coverage. On this point, Māori are not being treated equally before the law.

Imposing a price control

The interference with competitive prices comes from the proposal to prevent retailers from adding a monetary surcharge when customers use certain payment methods to complete a purchase.

EFTPOS technology has transformed the retail experience, paying for itself in reduced cash handling and other costs. Inserting a card into a machine and typing a four-digit PIN allows a customer to immediately transfer money to the retailer’s bank account.

A further service provided by most retailers allows credit or contactless payments. Using this technology incurs extra costs; for example, a greater risk of fraud when a PIN is not required. The retailer pays a merchant fee to cover these extra costs.

Consequently, retailers often add a surcharge for customers who choose to use this service. The Commerce Commission advises a surcharge might be justified up to 0.7% for contactless debit payments and no more than 2% for credit payments.2

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Parliament is being asked to fix the surcharge at zero, below the marginal cost of the merchant fee paid by the retailer. Although this interference may seem relatively trivial, there are several reasons to be concerned.

First, any ECON101 graduate should know that a price cap unambiguously lowers social welfare. Managers know their businesses, competitors, and customers far better than Parliament. Competitive prices mean they also know the marginal benefit and marginal cost of their services. A price cap set by Parliament can add nothing except an inferior outcome.

Second, the proposal departs from the acceptance on both sides of the House since 1984 that Parliament should promote market competition. Even if a subsidy or tax might be justified, business managers in competitive industries should be free to set prices their customers are willing to pay.

Third, once this principle is breached, the risks of escalation are high. If one side of the House imposes a price control on retailers, the other side will be tempted to impose price controls that benefit their own political supporters, all at the expense of total social welfare.

Further, it feeds a culture where citizens come to feel entitled to receive personal benefits while shifting the associated costs to the general population or to future generations. In our view, this is already evident in some current debates about local government and rates.

Damage to the economic bedrock

The doctrine of Parliamentary sovereignty means Parliament can pass any law it chooses. Nevertheless, our representatives should understand that these two proposals undermine foundational principles for a flourishing economy.

By Paul Dalziel and Caroline Saunders

Paul Dalziel is Research Economist at Wellbeing Economy Alliance Aotearoa. Caroline Saunders is Professor Emeritus at Lincoln University.

  Doing the garden, digging the weeds,
  Who could ask for more?
  Will you still need me, will you still feed me,
  When I'm sixty four?

I’ve recently had a birthday — and yes, it’s the one in the Beatles’ celebrated song. It’s a somewhat unwelcome reminder of changes to come, many unavoidable.

I thought I’d share an economic perspective on ageing, and what that can mean for some of the ways we think about inequality.

Perhaps unsurprisingly, I have changed my mind on a few things over the past 40 years. At age 24, my total financial wealth might just have scraped into four figures. I’m sure that I would have said then that I would never need (or want) to be a millionaire, and further than nobody else would (or should) ever need that much money.

Inflation means that being a millionaire1 today is much easier than it was in 1985.2 Even so, a million dollars remains a lot of money — around 15 years’ income at today’s average after-tax wage of $66,210.3

The retirement savings game

Retirement (i.e. permanently leaving the workforce) is an event for some people, and a drawn-out process for others. (I expect to be in the latter camp.) From a financial perspective, retirement is the changeover point from accumulating financial wealth to running it down.

The tricky question in the decades leading to retirement is how much to save. Then, as one gets close to retirement age, it becomes too late to start saving in earnest. So, the
tricky question morphs to: given your previous savings choices, at what age can you afford to retire?

That, it turns out, depends crucially on two questions:

• how long do you expect to live?

• how much income do you need/want each year in retirement?4

For illustration, let’s take a fictitious couple, both of whom turn 65 next year.

How long can a 65-year-old couple expect to live?

According to the New Zealand cohort life tables, the female can expect to live a further 23.4 years and the male 21.0 years, living until 88 and 86 respectively.

Those expectations are medians, so there is a 50% chance of living beyond those ages. But, and likely more importantly, the life tables are based on today’s mortality rates. This implicitly assumes a plateau in improvements for treating the ailments of age, and in living standards more generally. That’s a big assumption! Life expectancy at 65 has been rising for at least a century, and shows no sign of letting up.

To be on the safe side, our couple should plan to live into their 90s.

How much income will they need?

That’s a hard question. (My experience doesn’t help here — I haven’t tried retirement yet! My prediction track record for what I’ll be doing a few years’ hence is poor — knowing what I’ll be doing over the coming decades, and how much that will cost, seems near impossible.)

The 2024 New Zealand Retirement Expenditure Guidelines say that a two-person household in a metro area need around $90,000 on a “choices” budget. (The amount is lower for provincial areas and for a “no frills” budget.) This assumes that the couple own a house without a mortgage.

For illustration, I’ll take $90,000 per year as a target income.

What assets will they need at retirement to generate that income?

There is plenty of advice out there on retirement savings. (Sorted.org is a suitable place to start.) The general view is that it is good to aim to own a house (without a mortgage), collect NZ Super5, and have a pot of savings (financial assets) from which you can draw down between 4 and 6% each year.6

The average NZ house is now around $900,000 — I’ll round that to $1m. (It’s more like $1.2m in Auckland.)7 A 65-year-old couple owning a $1m house and $1m in financial assets are both millionaires, by definition.8 If they receive NZ Super and draw down 5% of their financial assets each year, they will have a combined pre-tax income of roughly $100,000 per year, around $85,000 after tax.9

Depending on the pre-retirement income you’ve become used to, $85-90,000 might seem like a lot — or not much at all. But even the mere idea that one might need to be a millionaire to have a comfortable retirement would likely have startled my 24-year-old self.

The tax-and-transfer system moves money across our life cycles

Whether or not you retire on the dot of 65, your financial relationship with other New Zealanders will likely change. As you can see in this chart, New Zealanders aged between 25 and 64 make a net contribution (on average) to the state’s coffers.10 The reverse applies to those aged below 25 and above 65.

The big change between the 60-64 group and the 65-69 group is the jump in income support (in orange; mostly attributable to NZ Super). In-kind benefits (in blue; mostly public healthcare and education) also jump up at this boundary.

Direct taxes (in grey; mostly income tax) drops a little, but perhaps not as much as I might have expected. A plausible explanation is a combination of late retirements and taxable earnings from investments, the latter peaking in one’s 60s.

Indirect taxes (in gold) are dominated by GST, which is proportional to consumption (i.e. personal expenditure). This doesn’t change much between ages 40 and 74, after which it declines slowly. The decline is associated with a lower income and higher health costs; so it is plausible that people are running out of savings, and/or having their activities curtailed by health problems. (It is also likely that consumption preferences change in one’s 70s.)

There’s also a lesson here for me: my past 10 years’ expenditure may be a good guide for my next 10 years.

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Two cheers for wealth inequality!

Wealth inequality indicators are cross-sectional, that is, they compare every adult’s wealth measured (or estimated) as at one date.

From time-to-time, wealth inequality hits the headlines. This doesn’t seem to be driven by substantive changes in the data; wealth shares have barely moved over the past 30 years, as can be seen in this chart.11

Wealth inequality indicators combine between-person inequality (my wealth is different from that of my same-aged neighbour) with across-time inequality (my wealth is different from that of my past and future selves.)

Taking myself as an example, I’m pleased to be much wealthier — in financial terms — than my 24-year-old self. Offsetting that, at 24 I had better health, and 40+ years of income-earning potential ahead of me — factors that are not included in these wealth-inequality measures.

On a moral dimension, across-time inequality is not necessarily bad. It may even be good. I personally find the idea of a millionaire aged 24 rather uncomfortable (how did they earn so much, so quick?), whereas being a millionaire at age 64 so as to fund one’s retirement seems more like prudent financial management than sin.

One downside of wealth taxes

Wealth taxes are often proposed as a revenue source, and sometimes as a way of punishing the “sin” of being rich. (Of course, no single tax can efficiently serve both purposes.)

However, following the logic in this post, most people’s wealth will peak at their retirement age. A wealth tax that does not adjust for age will likely reduce the amount saved before retirement, and increase the drawdown rate after retirement. Post-retirement incomes will take a substantial hit. And that, in turn, may create its own drag on public finances.

One million over 65s

Retirement is a big topic; one I’ve only touched the surface of here. Will a shrinking number of taxpayers gladly support a growing number of retirees? What is the outlook for those with fewer assets than the fictitious millionaire couple? And what if lifespans in the 100s become normal in coming decades? There is lots to explore in forthcoming posts.

One thing I can be sure of — my ageing self will have plenty of company. New Zealand is ageing — its over-65 population is expected to reach one million in 2028.

By Dave Heatley

The spirit level

Richard Wilkinson and Kate Pickett published The Spirit Level in 2009. This book reframed inequality as a driver of public health and social dysfunction. Their argument was simple: countries that are more unequal fared worse across a range of social indicators, from mental health and education to social trust and violence.

One striking observation from Wilkinson and Pickett was that more unequal countries treat lawbreakers more punitively. While their work was confined to OECD countries, we have replicated this finding globally. Income inequality is closely tied to higher rates of incarceration (per 100,000 people). The relationship is particularly pronounced for high-income nations.

The chart below presents the relationship between income inequality (on the x-axis) as measured by the Gini Index, the standard measure for inequality1; and the incarceration rate (on the y-axis), which indicates the number of people imprisoned per 100,000 population.2 Each dot represents a country.

Take the United States: it imprisons over 650 people per 100,000, the highest in the developed world. It also has one of the highest Gini coefficients among wealthy countries. South Africa, similarly, combines high inequality with a high prison rate of approximately 280 per 100,000. By contrast, countries with lower inequality see far fewer people behind bars; Norway and Germany, for example, have just 56 and 68 per 100,000, respectively.

Wilkinson and Pickett argued that inequality leads societies to punish more harshly. Our recent work suggests that the direction of causality may be in the opposite direction; punishment, especially when based on noisy information, can lead to greater inequality.

In recent times, New Zealand’s coalition government has been arguing strongly in favour of more punitive measures for lawbreakers, such as limiting how much judges are allowed to reduce sentences and reinstating “three strikes” sentencing rules. We argue that in the presence of unreliable information, punitiveness exacerbates inequalities.

Who gets punished, and how?

Consider the following cases:

• Caroline Ellison, a 30-year-old Stanford graduate and daughter of eminent scholars and professors at MIT, was found guilty of helping her then boyfriend, Sam Bankman-Fried, misappropriate around US $8 billion of investor money through the cryptocurrency trading platform FTX. In October, she was sentenced to 2 years in a minimum-security prison. The decision was surprising to many, who expected Ellison to walk free in return for cooperating with the prosecution and testifying against Bankman-Fried.3

• By contrast, 21-year-old Ta’Kiya Young, an African American woman pregnant with her third child was shot dead in Columbus, Ohio after an altercation with police officers who had accused Young of shoplifting. As she tried to drive away, one officer shot and killed her.

• David Coulson was locked up for life for stealing $14 under one of the more extreme “tough on crime” laws in the US.

While blue-collar crimes are often more directly violent than white-collar ones, the harm caused by large-scale financial misconduct is far from negligible. Billions in lost investments can ruin thousands of lives and wipe out life savings, directly and via destabilising entire markets. The harm is real, even if no weapon is drawn.

In a perfect world, authorities would punish every crime accurately and proportionally. But real-world monitoring is uneven. Lower-level crimes are more visible, easier to prosecute, and harder to defend against. White-collar offences, by contrast, are often obscured by complexity, resources, and legal firepower. Our system doesn’t just punish wrongdoing; it punishes visibility.

A recent investigation by the New York Times highlights how offenders accumulate significant, often overwhelming debts during their time in the prison system. Bail fees, and a host of other charges such as court costs and administration fees, quickly add up.

Proponents of tougher sentencing argue that they target real offenders – true positives. Any practical criminal justice system will have both false positives (non-offenders get punished) and false negatives (offenders escape punishment). Reasonable people can take different views as to how to trade off these risks. Generally, however, harsher punishments make false positives more costly.

Simulating society in the lab

To explore how imperfect information affects cooperation and punishment, we designed a laboratory experiment as part of ongoing, unpublished research. The study incorporates a classic social dilemma problem, where there is tension between cooperating for the common good and free-riding to maximise individual self-interest. Cooperation is measured by how participants contribute to a public pot. Everyone contributing maximises the public good returns. But self-interest suggests zero contribution.

Our game was dynamic with earnings accumulating over multiple rounds – mimicking how real-world wealth builds over time. Just like in real life, where a small advantage early on can compound over time, early cooperation allowed participants to build up wealth that they could reinvest in later rounds. Groups that contributed generously from the outset saw their wealth grow. Those that didn’t began to fall behind. Before long, inequalities began to emerge, both within and between groups.

Then we added two features: punishment and imperfect monitoring.

Instead of modelling a state-sanctioned centralised punishment mechanism, we implemented decentralised peer-to-peer punishment. This situation fits well in the absence of a powerful state actor or where the social dilemma is of a localised nature limiting the degree of state intervention. Peer enforcement differs from judicial sanctioning, but it helps us isolate key mechanisms that underlie real-world dynamics: what happens when punishment decisions are made under imperfect information?

In some groups, participants could punish others at a small cost, a proxy for social sanctions. Participant contributions could be clearly seen by the potential punishers, i.e. information was perfect.

In other groups, monitoring was imperfect. Participants observe others’ contribution imperfectly, as the information about those contributions was displayed with introduced noise. Sometimes cooperative members appeared to hold back under these conditions, raising the risk of false positives.

Finally, in a third treatment, we combined punishment with imperfect information, a situation that reflects the reality of our justice system, where decisions are made under uncertainty.

What did we find?

We found that peer punishments under perfect monitoring did boost average contributions. When participants knew they could be sanctioned, they were more likely to cooperate. But the averages tell only part of the story. Beneath the surface, there was significant gap between groups. A few groups cooperated early, stayed on track, and built substantial wealth – enough to pull the average up. But many groups struggled. Cooperation broke down, and by the end, they were left with little to nothing.

Imperfect monitoring on its own had little effect. But when combined with punishment, the picture changed drastically. Contributions fell. Wealth declined. And inequality within groups rose sharply. The reason? When you can’t reliably tell who’s cooperating, people start punishing the wrong targets. This kind of “antisocial punishment” – directed at those who were actually playing fairly – became common. As misdirected punishment increased, cooperation collapsed.

While our experiment relied on peer punishment – not formal, state-led sanctions – it still points to a familiar risk: when information is unreliable, punishment often misses its mark. Even well-intentioned enforcement can deepen inequality and erode cooperative norms. As seen in real-world justice systems, imperfect monitoring and unequal visibility often distort who gets punished and how.

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What does this mean for the justice system?

The prevailing view, advanced by Wilkinson and Pickett, is that unequal societies punish more harshly. But our findings suggest the relationship may also run the other way: when punishment is applied under conditions of imperfect information, it can itself become a source of inequality. Our experiment showed that when enforcement relies on noisy or unreliable signals, even well-intentioned punishment risks doing more harm than good – reducing cooperation and widening inequality.

Injustice often stems not from intent, but from imperfect monitoring and unequal visibility, which shape who is punished and how. Blanket calls for tougher sentencing tend to overlook these subtleties. Yet it is precisely such details that determine whether justice policies reduce harm – or quietly entrench it.

By Sanket Sen & Ananish Chaudhuri

A 2023 Australian study by EY puts the value of cycling at a staggering A$18.6b, so I thought it was worth taking a closer look at how they came up with that number, and how New Zealand might compare. About A$17.6b of that is the economic contribution of cycling and e-scooters, with another A$0.954b of health and social benefits. Let’s start with the contribution to economic activity.

Cycling’s contribution to economic activity

Like a lot of economic studies, the EY methodology is clearly designed to create an impressive number. The headline total uses an estimate of gross (total) spending as opposed to value added. In other words, this total includes money spent on importing cycling goods, despite such spending not generating value to the local economy.

The headline number calculation then uses input-output tables to multiply that spending through the economy, creating an estimate of total indirect spending as a result of cycling. In the detail the study concedes that: “direct value add is commonly put forward as the most appropriate measure of the relative contribution of an industry to the economy.” They are correct — so we’ll stick to the direct value-add figures here.

The estimate of direct value-added for Australia is A$3.525b for cycling and A$0.159b for e-scooters; a total of A$3.684b (the total direct spend was A$6.947b). This figure is mainly made of sales of cycles, cycle related purchases and tourism. Given New Zealand’s population is 19.8% of Australia’s and our GDP is 14.6%, that would put our likely value between $537-729m.

Do we have any data that could improve on this estimate?

While we don’t have detailed data on all cycling-related purchases in New Zealand, we do have cycle and e-scooter sales figures. Statistics NZ publishes both the number and value of imported bicycles and electric micro-transport devices (largely comprised of e-bikes). Of particular note here are the rapid increases in e-bike sales. Volume of sales has risen by almost 300% and spending has risen by almost 600% in the last five years. For comparison over the same time period the value of car sales rose about 30%. Given the sharp drop off in electric vehicle imports since the removal of the feebate scheme, this means that e-bikes appear to be the fastest growing category of transport in the country.

Despite being their poorer cousin, cycle sales compare favourably with Australia. In fact, we buy similar numbers per capita as they do. For the total sales value we have to add a markup; NZTA assumes this is 40%. I sense-checked this with bicycle retailers in Wellington and they thought to be a little on the high side. So, to be conservative, I’ve used a 35% markup for conventional bicycles and 25% for electric and e-scooters. This gives a total spend of $392m. Even with the more conservative mark-up, our spending per person is slightly higher than Australia, which is probably a result of our weaker currency. Australia’s total cycle-related purchases (excluding tourism which we will come to below) were about 2.7 times the spending on cycles alone. Assuming this result holds in New Zealand the gross cycling-related spend would be $1.069b.

The other major component of the Australian analysis by EY is a figure for cycle tourism. Given the relative importance of tourism to New Zealand’s economy this is less likely to follow the same per capita spending trend and is worth separating out. The MBIE work on the economic benefits of the Great Rides put the spending in regional economies as a result of cycle journeys (food, transport, accommodation) at $951m. This analysis was undertaken in 2020/21 so cycleway use was likely disrupted by Covid (when tourism was mostly domestic). Given this context there is uncertainty around these numbers but overall they are likely to be conservative as the Great Rides network covers only a portion of total cycle tourism. When updated for inflation the total spend on cycle tourism is $1.16b. As predicted, this compares favourably on a per capita basis with the Australian total of A$1.885b.

Together, this suggests a total direct spending of $2.229b on cycling and e-scooters in New Zealand. Thanks to the impact of tourism this is much higher per capita than Australia. Assuming the same ratio of value added to total spend applies here as in the Australian study, the value-added portion of this is $1.182b.

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Cycling’s contribution to health

The Australian study put the health benefit of cycling at A$954m, made up of:

• avoided healthcare costs — A$313m

• productivity benefits — A$540m

• value of life years gained — A$101m

New Zealand estimates of the health benefits are considerably higher per capita. According to the Domestic Transport Cost and Charges (DTCC) study, cycling generates an average health benefit of $1.51 per kilometre travelled. With around 436 million km of travel by bicycle every year, this adds up to a total benefit of $658m.

In large part this difference will be due to the value of a saved life that is used in each country. New Zealand’s value is over twice that used in Australia, even accounting for differences in the value of the currency. Here in New Zealand there are valid questions over how appropriate it is to use the value of a saved life more broadly than the use it was designed for; namely in reducing the road toll.1 However, there is currently no better alternative.

Even accounting for this, there are still differences in the size of figures beyond what we would expect given comparable cycling levels in the two countries. This is likely due to methodological differences. The Australian study only counts the health benefits when cycling is crucial to an individual meeting their recommended daily or weekly exercise guidelines. The New Zealand methodology applies a simple average benefit per km travelled.

It is beyond my capacity to ascertain which methodology best stands up to scrutiny. On face value we should expect declining marginal returns to exercise, which suggests the Australian approach is more valid. However, the idea that exercise only has benefits in such limited circumstances seems overly conservative. Also, New Zealand’s estimates already take some account of diminishing marginal returns to exercise: In the monetised costs and benefits manual, NZTA estimated the marginal benefit of encouraging an otherwise sedentary person to take up cycling. This estimate is even higher; $4.90 per km of cycling on a conventional bike, and $2.50 per km of cycling on an e-bike.

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Reduced costs (benefits) arising from cycling as a mode choice

The DTCC study highlights a few other benefits arising from cycling as a mode choice that the Australian study doesn’t pick up, including personal travel cost savings and benefits to other road users/ society.

These numbers are based on the long term average per km cost of travel, comparing the cost of travel by bicycle with the cost of travel in a private passenger vehicle (assuming average occupancy). This assumes that the journey has value and that the alternative – if a bicycle wasn’t used – would be to use a private car to make the same journey. Given that 90% of trip km are taken by this mode, this seems a reasonable counterfactual. However, it is worth noting that a more sophisticated analysis would take account of all modes.

The numbers are long term average costs in that the cost of asset ownership is averaged over all trips using that mode. The difference between the two is a reduced cost (or benefit) due to cycling as a mode choice. Given that these are “average” costs and bicycles are more likely to be used in congested urban environments with expensive parking, they are likely to be an underestimate of the total savings of using a bicycle.

The table below sets out the cost estimates per km for cars and bicycles, the savings per km accrued by bicycles, and the total monetary value of these savings each year.2

This is derived by multiplying the cost saving per km by the total number of km travelled by bicycles. According to the Household Travel Survey the average distance travelled by bicycle between 2020-23 was 436m km per year, made over 102m legs (or 4.27km per trip leg).

Big numbers like savings of millions of dollars can come across as hypothetical. A more tangible number for people to grasp might be the savings that each person makes by cycling. Given that the average leg is 4.27km, the average return trip by bicycle saves around $4.70. Assuming that a person working a standard five day week makes 80% of their commutes by bicycle then that person would save $855 per year. The health benefits are about triple that figure; while that might not directly save people money it could displace the need to spend between $800-1,700 on a gym membership.

Summary

As a quick recap we have the following estimates for NZ:

1. economic value-add (GDP) attributable to cycling (cycles, cycle-related spend, tourism) — $1,182m

2. health benefits from cycling — $658m

3. personal travel-cost savings (lower operating and parking costs, faster journeys) — $239m

4. Benefits to other road users/society from cycling (mostly reduced congestion) — $144m

As we have seen with the Australian EY study there is a tendency to use this sort of analysis to come up with a big, attention-grabbing number. I don’t intend to recreate that here, but I will note a couple of points for those that might wish to.

First, as I have noted, cycling has multiple benefits. Many of these are impossible to value.

Second, those that can be valued don’t always make sense to sum into one figure. This is because the values are based on different perspectives of who benefits from cycling. In particular, it is counterintuitive to combine cycling’s contribution to economic activity with the personal cost savings from cycling. This is because the benefits in one category (cycle and cycle related spending, number 1 above) become a cost in the other (personal cost savings, number 3 above).

Third, the remaining figures (health and benefits to other road users/ society, number 2 and 4 above) are externalities from cycling as a mode choice, which could conceivably be added to either number. While the health estimates may be uncertain, given that not all benefits of cycling are captured the overall figure seems unlikely to be an overestimate of the total value generated.

Concluding thoughts for future analysis

This is by no means a comprehensive analysis of the costs and benefits of cycling. Many of the benefits in particular are likely to be missing and could only be captured by, for example, sophisticated survey techniques. However, a few interesting points in the analysis could point to further work.

One is that 98.5% of cycle trail users at the time of this analysis were New Zealanders, presumably due to Covid reducing international tourism during that period. Given its tourism benefits, the value of cycling to the users must extend past the direct cost savings.

A second point is that this result is indicative of a significant “consumer surplus” from the act of cycling. For example, this could include the health benefits. An estimate of this consumer surplus could be estimated via a willingness to pay survey for cyclists (particularly when they can do so safely).

My final point is the meteoric rise in sales of e-bikes and other micro-mobility in recent years. This is a trend worth watching closely, and one that could potentially transform the way Kiwis travel.

By Geoff Simmons

This work was undertaken in my private capacity. With thanks to Caroline Shaw and Stu Donovan who offered comments and helped me navigate the murky depths of the DTCC study. All errors are my own!

Part 1 concludes that use of the SRTP can induce the wrong decision on the acceptance or rejection of a risk-free non-commercial public sector project.

Risky projects

Risk-free projects are a useful benchmark. However, risk is an inescapable feature of the real-world, so it should not be assumed away.

Consider a non-commercial project requiring an investment now of $100m and delivering an uncertain payoff in ten years’ time with $160m expected. I’ll assume that the current ten-year real government bond rate is 4%.2 If the payoff had no risk, it would be $160m for certain and would warrant discounting at 4%, giving rise to a present value for the future payoff of $108m, which exceeds the investment now of $100m and therefore the project would be socially desirable.

Suppose the uncertainty in the payoff is positively correlated with the general state of the economy at that time. This is “systematic” risk. The parties who will experience the consequences of this systematic risk are the general public, and the risk (in the form of the project’s benefits being higher or lower than their expectation of $160m) will be felt by the general public. This risk will be systematic if it is correlated with GDP at the time. An example of this is a health project whose benefits are the saving of Quality Adjusted Life Years (QALYs), which are conventionally valued at GDP per capita.3 Higher GDP means higher benefits from the project, and therefore positive systematic risk.

Furthermore, people in general are averse to risks, and especially to systematic risks because these cannot be mitigated by diversification. The expected rate of return on a typical portfolio of equities is about 6% more than the government bond yield, and this “market-risk premium” is a manifestation of the risk aversion of those who own equities, either directly or indirectly through an investment intermediary (such as a fund managing a KiwiSaver account).4 The 6% premium is a manifestation of the risk aversion of a large proportion of the general public, and therefore a good indicator of the risk aversion of the rest. So, it should be used for public-sector projects whose systematic risk matches that of a typical portfolio of equities, with a higher or lower rate used if the project’s systematic risk is higher or lower, i.e., if its beta is more or less than 1. If its beta is zero, no adjustment for systematic risk is warranted.

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However, the Ramsay model does not allow for systematic risk. This is unsurprising because it was developed in 1928, which was over 30 years before the concept of systematic risk was even recognised in the economics literature and reflected in the first (1964) version of the Capital Asset Pricing Model (CAPM). Versions of CAPM are currently the premier models for determining the premium for risk in any SOC.5 So, the Ramsay model is unsuitable for assessing a risky non-commercial project. The model does allow for annihilation risk — but this is not systematic risk and constitutes only a small fraction (about 1/40^th) of the Ramsay discount rate whilst systematic risk is the dominant component of the default rate in Treasury’s SOC model.6

In a paper accompanying The Treasury’s work, Grimes notes that under certain conditions the SOC and SRTP coincide, and therefore either could be applied to a risk-free project. He then adds that “In each case, an appropriate risk premium would be added to the risk-free rate.”7 However, The Treasury does not add an allowance for risk to its SRTP, contrary to the advice of Grimes.

Returning to my example of a risky project, suppose that the systematic risk on it is similar to that on equities in general. Its discount rate should then be raised by 6% to compensate the general public for the risk they face on that project. Doing so raises the discount rate from 4% to 10%, and the present value of the project’s payoff then falls to $62m, which is less than the investment of $100m. This signals that the project should be rejected.

Equivalently expressed in compounding terms, faced by a project costing $100m now and delivering a payoff in ten years with an expectation of $160m and subject to systematic risk comparable with equities in general, investing the $100m instead into equities with the same systematic risk (at 10% per annum compounded for ten years) would give rise to an expected payoff of $260m, which would just compensate taxpayers for the risk they would experience. This expected payoff of $260m is far higher than the expected payoff of $160m from investing in the project. Accordingly, the expected payoff of $160m on the proposed project would not adequately compensate taxpayers for the systematic risk they would experience. Adoption of the project would therefore leave society worse off, consistent with the results of the discounting exercise using a rate of 10%. Accordingly, it is not in society’s best interests to discount the project’s benefits using an SRTP of 2% when the real government borrowing rate is 4% and the compensation for systematic risk is 6%.

Conclusions

In summary, Treasury has changed it discount rate methodology for assessing non-commercial projects, from use of the SOC to a schedule of SRTP rates determined in part by the Ramsay model. Using that latter model the Treasury estimates the SRTP at 2% real for payoffs in years 1-30, and lower rates for payoffs in later years determined in accordance with the Weitzman analysis. SOC rates are market based, and designed to determine the market value of the project. The market value of a non-commercial public-sector project is not meaningful and therefore it might seem that market-based rates are irrelevant to them. However, even when not being used in discounting exercises to determine market values, market costs of capital are still project costs relevant to the assessment of non-commercial projects. This can be demonstrated through compounding exercises.

In particular, if a project with payoffs up to 30 years away has some systematic risk, the Ramsay model will not take account of it. This may lead to accepting some projects whose expected payoffs are insufficient to compensate society for the systematic risk it bears, and such projects should be rejected. Even if a project with payoffs up to 30 years away has no such risk, but the current real government bond rate is more or less than 2%, the Ramsay model will again lead to accepting some projects whose benefits do not cover the cost of borrowing to finance them (and are therefore undesirable to society), and rejecting some projects whose benefits do cover the cost of borrowing to finance them (and are therefore desirable to society).

The Ramsay model is only suitable for a project with no systematic risk and when the real government bond rate is currently about 2%. Even in these idealised conditions, it has no advantage over simply using the current real government bond rate. These comments about the Ramsay model also apply to any discount rate that does not appropriately allow for systematic risk or fails to apply the current government bond rate to risk-free projects.

By Martin Lally

Dieter Katz, in a recent Asymmetric Information post, described these changes and explored some consequences.

In this post I’ll dig deeper into how Treasury came up with the rate for the SRTP. I’ll explain how using it may induce the wrong decision on the acceptance or rejection of risk-free non-commercial public-sector projects. In part 2, I’ll explain how this conclusion extends to risky projects.

The social opportunity cost of capital approach

The SOC methodology is intended to determine the market value of a project. It accords with standard private-sector practice in relying on market costs of capital, most particularly the yield to maturity on government bonds plus a premium for risk determined from expected rates of return on listed equities. Since the private but not the public sector pays company tax, the SOC is raised to offset the tax difference and therefore match the value that the private sector would place on the project.

The SOC default rate is 8% real, but a different rate can be used if its systematic risk does not accord with the default value of 0.67. This SOC rate is applied to “commercial” projects, i.e., those that might be undertaken by both the public and private sectors.

The social rate of time preference approach

By contrast, the SRTP is a discount rate applied to the benefits and costs of public-sector projects, so as to determine those projects whose adoption would be beneficial to society. It does not use market costs of capital.

There are various ways of estimating the SRTP. The Treasury Circular’s links to relevant material suggest that it is based upon Treasury’s Working Paper 25/01, because the conclusions in that Working Paper exactly match the rates prescribed in the Treasury Circular.3 The Working Paper estimates the rate at 2% real for payoffs in years 1-30, using the Ramsay (1928) model, and lower rates for payoffs in later years in accordance with the Weitzman (1998) analysis.4

The Ramsay model involves a number of components, of which the largest is the product of the expected growth rate in real consumption per capita and the elasticity of marginal social welfare with respect to consumption. The Treasury applies these rates to “non-commercial” projects.

This post focuses upon the use of the Ramsay model to determine the 2% discount rate on non-commercial projects with payoffs up to 30 years hence.

As noted, the role of the SOC is to determine the market value of a project. In so far as non-commercial projects are clearly identifiable, and therefore the public sector is not competing with the private sector over these projects (now or in the future), the market value of a non-commercial project is not meaningful.

It might then seem that the public sector would be free to choose its discount rate methodology for these projects without being bound to the use of market costs of capital. This conclusion is not correct. Even when not being used in discounting exercises to determine market values, market costs of capital are still project costs relevant to the assessment of even non-commercial projects. This can be demonstrated through compounding exercises.

Assessing risk-free projects

Since the New Zealand government runs fiscal deficits, the marginal effect of the public sector undertaking a non-commercial project is to increase public-sector borrowing, which incurs the government borrowing rate.

Suppose a non-commercial project requires an investment now of $100m and generates real non-commercial benefits of $130m (for certain) in ten years. Suppose also that the current real ten-year government borrowing rate is 4%.5

Using the SRTP of 2%, the present value of the future payoff is $107m, which exceeds the investment now of $100m and therefore the project seems desirable. However, if the real ten-year government borrowing rate was 4%, the present value of the future payoff using that rate is $88m, which is less than the investment now of $100m, signalling that the project should not be adopted.

To more clearly appreciate the social undesirability of this project, suppose the government borrowing for the project was structured so that all interest and principal payments occurred in ten years. At that point, the (compounded) sum of interest and principal payments would be $148m, which exceeds the project payoff at that time of $130m. Investing in the project would therefore inflict a loss on society of $18m in ten years’ time, for certain. So, the project should be rejected.

Discounting the project’s benefits using the government borrowing rate and comparing this to the initial investment is mathematically equivalent to the compounding exercise, and therefore provides the correct signal even though the market value of the project is not meaningful here. So, discounting a risk-free non-commercial project at any rate other than the government borrowing rate may lead to a wrong decision (in this example, by accepting a project that leaves society worse off). Even if the project’s benefits arrive outside the lifetimes of those currently living (an “inter-generational project”), the generation receiving benefits of $130m will not be thankful for the accompanying need to pay $148m to the capital suppliers.

It might be argued that the benefits of a risk-free project to society are quite different to the benefits to a private-sector firm, and therefore the SRTP could differ from the government borrowing rate. For example:

“It is possible that individuals in their political roles as citizens might be more concerned about future social outcomes than is reflected in their day-to-day decisions about their own personal consumption and investment. … This would mean that the discount rate implied by a market-based SOC would be too high for certain public projects, particularly in the social sector, as it would overlook preferences that would tend to lower the discount rate. An SRTP approach is a direct way of trying to capture these preferences.”6

However, in the context of the above example, the preferences of “individuals in their political roles as citizens” are reflected in the figure of $130m ascribed to the project payoffs. By contrast, the figure of $148m is payment to capital suppliers at the prevailing government borrowing rate of 4% per year and those lenders neither know nor care how government uses the money. Since 4% is the rate paid, it must be the rate used to determine the payment in ten years (of $148m), and therefore it must also be the rate used in the mathematically equivalent discounting process. At such a rate, the payoff of $130m does not cover the payment to capital suppliers and the project therefore leaves society worse off.

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The example above is concerned with a situation in which the current real government bond rate exceeds the SRTP and the difference in rates leads to acceptance of the project when using the SRTP and rejection when using the real government bond rate. Of course, there will be occasions when the two rates match, and other occasions when they give rise to the same decision despite the rates differing. In such cases no harm would be done in using the SRTP. However, there will sometimes be times when risk-free projects that should be adopted (when properly assessed using the government bond rate) are instead rejected when using the SRTP, and therefore society would be worse off by applying the SRTP. There will also sometimes be times when risk-free projects that should be rejected (when properly assessed using the government bond rate) are instead accepted when applying the SRTP, and therefore society would again be worse off by using the SRTP.

The extent of this problem depends upon the variation over time in the real government bond rate, and it is substantial. The yields on inflation-indexed government bonds issued in November 1995 and maturing in February 2016 ranged from 1.0% to 5.9% over their life. Those issued in November 2012 for maturity in September 2025 have so far ranged from -1.0% (the minus sign is not a typo) to 2.8%.7 An SRTP of 2% is within the range but well above the lowest yield of -1.0% and well below the highest yield of 5.9%. With such variation over time in the real government bond rate, it is highly likely (in respect of risk-free projects) that use of a SRTP of 2% will frequently lead to decisions that leave society worse off.

The analysis above assumes that the government is running a deficit, and therefore finances public-sector projects by borrowing. If the government was not running deficits, and therefore financed projects from taxes, those taxes would come from taxpayers just as a firm investing in a project with equity finance acquires those funds from its shareholders. Taxpayers have alternative uses for those funds, and an alternative with the same (zero) risk would be for taxpayers to invest the $100m into government bonds (which pay the government bond rate). To benefit society, the proposed project must do at least as well as this, i.e., deliver payoffs in ten years of at least the $148m taxpayers would receive if they retained the $100m and invested it in government bonds for ten years.8 However, undertaking this project provides a payoff of only $130m in ten years, which is inferior to taxpayers retaining the funds and using them in other ways. One such way is to invest in government bonds that deliver $148m in ten years. Since the project must do at least as well as the government bond rate per year to make taxpayers better off, the present value of its benefits must be discounted using the government bond rate and this must be at least the initial investment. So, regardless of whether a risk-free non-commercial public-sector project is financed by government borrowing or taxes, the benefits must be discounted using the government borrowing rate.

The above analysis assumes that the SRTP rate of 2% is based entirely upon Treasury’s Working Paper 2025/1, and therefore upon the Ramsay model. However, Treasury has drawn my attention to an OIA request that indicates that the 2% rate places some (unspecified) weight on the estimate for the Ramsay model (using an earlier version of Treasury’s Working Paper 2025/1) and some on the prevailing real government bond rate.9 The weights are unclear because both approaches gave rise to an estimate of 2% at the time. In so far as some weight is placed upon the real government bond rate prevailing at the reset point, the resulting estimate of the SRTP will tend to be closer to the prevailing real government bond rate. This reduces errors arising from using an SRTP in assessing projects at that time. It does nothing to address errors arising from the real government bond rate changing over the following three years whilst the SRTP remains fixed.

The Ramsay model is only suitable for a project with no systematic risk and when the current real government bond rate is about 2%. Even in these idealised conditions, it has no advantage over simply using the current real government bond rate.

Risk-free projects are a useful benchmark. However, risk is an inescapable feature of most real-world projects. In part 2 of this post, I’ll extend this analysis to risky projects.

By Martin Lally

The Black Death and the rise of Europe

Our first entry The World the Plague Made: The Black Death and the Rise of Europe (Princeton University Press, 2022) is from leading New Zealand economic historian Jamie Belich, until recently at Oxford University. Perhaps he is most well-known at home for his books and TV series challenging conventional views of the Māori Wars, “New Zealand's civil wars” as he referred to them. In his recent book he challenges the "pessimists" view that the Black Death left Europe devastated and impoverished for decades after the initial pandemic in the mid fourteenth century.

(I have had a long standing interest in the plague ever since the first question on an examination paper for admission to my doctoral programme was: Analyse the economic consequences of the plague. I struggled with the answers to a couple of other questions, but a good answer to this got me through.)

The central thesis of the book is encapsulated in its title, namely that the impact of the plague had far-reaching consequences and shaped the history of Europe for centuries. In particular, the more immediate consequence (from 1350 to 1500) was an economic boom, which the author argues could be regarded as a "golden age".

This "optimists" view rests on the simple and now obvious fact that the plague killed an estimated 50% of the population; but the non-human capital of societies was untouched. The lands, the farms and their livestock, the roads, ports, ships – in short, the infrastructural capital of society — was still there. So the simple arithmetic follows that per-capita wealth doubled. The story that Belich tells stems from this fact.

The shortage of labour lead to a significant rise in real wages and disposable incomes, which benefitted a wide swath of society from landless peasants and labourers, to petty traders and merchants. Concomitant with the rise in incomes was an expansion in aggregate demand especially for "luxury" items like spices, sugar and fine textiles hitherto unattainable for all but a few. This in turn lead to innovations in labour saving technology, to greater use of waterpower, to increased international trade, to bigger and faster ships, and to institutional changes in finance and business. By the 1700s, when the population numbers eventually recovered, the expansion ran out of steam. But the aftermath of the plague had already shaped much of Europe.

In an effort to assign causality to the plague in underpinning and moulding so much of society, economies and technology, the author at times needs to draw a long bow. But he is careful to distinguish between examples where he finds solid documented evidence and those where he suspects it was the plague that "caused" what followed.

A study of this nature always demands that we consider the counterfactual; namely how, in what ways, and at what speed would Europe have developed without the plague? There are never easy answers to these questions. One might try and extrapolate from the pre-plague economic growth rates; or one might compare the performance of “similar" economies escaped the plague. Both have their challenges and limitations.

In a lecture at Balliol College in 2024 the author indirectly addressed the counterfactual, hinting that absent the plague, there would have been some expansion but "I doubt Europe would have expanded and developed so much without the Blank Death's terrible pruning."

In addition to the central theme, the book contains an enormous amount of associated history reflecting a huge amount of research (and resulting in 640 pages).

Careless people

Our next New Zealander has been making headlines of late: Sarah Wynn-Williams author of Careless People: A Cautionary Tale of Power, Greed, and Lost Idealism (Flatiron Books, 2025). Wynn-Williams was born in Christchurch and graduated with a Masters degree in Law from Victoria University.

She has had what has to be called a "stellar" career: at only 45 years old she has worked on international security, international law, and human rights at the United Nations General Assembly; served as the Chief Negotiator for the United Nations on biosafety liability; practiced law at Mallesons, Stephen, Jacques law firm in Sydney; been seconded to Niue’s Attorney General’s Office to work on counterterrorism measures and human rights issues; managed the political affairs and government relations office at the New Zealand embassy in Washington, DC; been appointed as an adjunct law lecturer at Victoria University; and most recently, Sarah been Head of Relations with the World Bank and IMF for Oxfam International.

Of particular interest here is that part of her career at Facebook (now renamed as Meta). After leaving the NZ Embassy position, she joined Facebook in 2011 (after pitching for a job which they created for her) and became the Director of Global Public Policy. In this role she made countless trips (in the CEO's private jet) to many countries "selling" Facebook, or more often than not negotiating to minimise government regulations that constrained Facebook or even in some cases threatened to shut it down. In 2017 she was fired. What happened in the intervening years is documented in a tell-all book.

The longer she worked at Facebook the more disillusioned she became. Her disillusionment has two major strands: personal and corporate. On the personal side she documents a toxic work environment, very family-unfriendly with brutal working hours, "compensated" for by many benefits from free meals at work, transport from home and even laundry service – all designed to save time from the daily chores of life and consolidate the power of Facebook over employees. She was made to work during a brief maternity leave and was sending emails from her laptop when propped up in the delivery room minutes away from the birth of her first child. Sexual harassment was ever present, including insistence by one senior manager, Sheryl Sandberg (number 2 to CEO Mark Zuckerberg) that Sarah go to bed with her (the refusal was not career enhancing).

On the corporate side, she constantly raised concerns about Facebook's disregard for potential harms the platform might create and its arrogant and superior attitudes toward governments and even heads of state. She documents how in the lead up to the 2016 US presidential election, Facebook had a team embedded in the Trump campaign. A data base named Project Alamo was created with the individual profiles of 220 million people in the USA. It encompassed such things as gun registration, voter registration, credit card and shopping histories, websites visited, type of vehicle they owned and the last time they voted. Facebook used its algorithms to send targeted messages to individuals — many of the ads contained inflammatory misinformation that drove down the price of advertising. As a voter suppression tactic, they sent dark posts as targeted at three groups of Democrats: young women, blacks, and white liberals.

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The author describes how many times over an extended period she considered resigning — sometimes arguing that she could not afford to, or to lose health insurance (a claim that did not ring very true, given the eye watering salaries they were paid).

Meta's poorly conceived attempt to gag the author and stop her promoting the book, as well as attempting to enforce a non-disparagement agreement and legal manoeuvres to shut her down (or up?) have done more to increase sales than the inherent literary quality of the book would ever have justified. But the book reveals the good, the bad and the ugly of corporate power – and that is a contribution.

A clash of cultures

Continuing the theme of New Zealand authors, but departing from the usual fare, I offer a novel (no, not economics per se!)

Lauren Keenan (Ngāti te Whiti o Te Ātiawa) has written a gripping piece of historical fiction, The Space Between (Penguin 2024). Set in Taranaki in 1860, its central theme is the clash of cultures between Māori and the settlers. There are two central characters: Frances, a 30 year old spinster who has migrated from London after her family fell on hard times; and Mataria, a Māori woman married to an Englishman, a fact which largely results in rejection by her own iwi.

Mataria is a former slave who impresses the reader with her dignity throughout the book: "Why should I swear allegiance to a queen I have never met?" and "why would I require a pass to walk on the land where my ancestors have been for generations?"

The juxtaposition of the two cultures is underscored by the literary technique of having Frances and Mataria tell their stories in alternating chapters. Neither woman feels fully comfortable and accepted by their own culture, and hence tend to fall in the space between.

This is a beautifully written book with deep insights into an aspect of New Zealand history. One can appreciate why in 2025 it has been awarded the New Zealand Booklovers' Award for the Best Adult Fiction.

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Oil is a tranquilizer

Weshah Razzak has had a distinguished career as an economist, academic and consultant. Throughout his career he has published extensively. Few "retired" economists could match his recent research output. The following are three books he has published recently since leaving full time employment.

In Inflation Dynamic: Global Positive Economic Analysis (Routledge, 2023), Razzak analyses inflation using time series data for 42 countries from 1960. The work is based on clearly specified hypotheses and careful econometric testing. The influence of monetary policy such as inflation targeting (where New Zealand was a leader) is assessed. Theory and estimation of the Phillips Curve is addressed in detail. There have been a range of "newer" theories and models of inflation. The author considers twelve such theories, including the fiscal theory of the price level and Modern Monetary Theory. Readers will find this compendium of these alternative theories a valuable guide.

Razzak spent nearly a decade as an economic adviser in the Middle East; firstly at the Arab Planning Institute in Kuwait, and later at the Central Bank of Oman. The following two books reflect the depth of his experience and understanding of the economics and politics of the region.

The (uncontroversial, but nonetheless interesting to explore) central thesis of The Future of Economic Development in the Gulf Cooperation Council States: Evidence-Based Policy Analysis is that these oil-rich countries are facing a finite non-renewable resource, and will inevitably have to adjust their fiscal policies to achieve sustainable budget and current account balances; and perhaps more importantly institute changes in the structural and institutional settings.

In the final entry, OPEC’s Dilemma and the Future of Oil: Navigating the Path to Net Zero (Routledge, 2024), Razzak highlights the challenges for OPEC of a world moving to net emissions of zero by 2050. The oil sector in each of the producing countries is a state owned monopoly with strong entrenched interests. The author makes the case for a more competitive structure which could respond more effectively to changes in world markets.

Moving toward net zero will reduce global oil demand and depress prices. OPEC may cut production to hold up prices, but reduced output means a lower GDP for those countries. OPEC countries are well aware of the need to diversify their economies, but the ongoing dependence on oil tends to kill off the incentives for faster industrialisation and improved productivity in the non-oil sectors (shades of Dutch Disease). As Razzak says, "Oil is a tranquilizer especially when the price is high". Anyone with an interest in the future of fossil fuels, emission reduction, and climate change will benefit from this book.

By Grant Scobie

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