Good news for broccoli lovers

The New Zealand Herald reported yesterday:

New Zealand broccoli lovers are in for a treat, as a “phenomenal” season has resulted in great prices for consumers.

According to the latest Stats NZ Food Price Index, the price of broccoli dropped 32.3 per cent in April compared to the same month last year.

Foodstuffs North Island’s head of butchery and produce Brigit Corson said this time a year ago, fresh produce was at the mercy of extreme weather events which wreaked havoc for many growers, but good weather had since turned this around.

“Right now, we’re seeing great supply for produce like broccoli because we’ve had months of fantastic weather, making for near-perfect growing and planting conditions.”

Corson said the price of fresh produce depended on a few different factors, including if it was in season, the growing conditions and whether it was in abundance.

“If there’s been a bumper crop and great supply, that’s when the prices go down.”

It is easy to see why the price of broccoli has decreased, using the model of supply and demand, as shown in the diagram below. Last year, when the conditions for growing broccoli were not good, the supply was S0, and demand was D0. The equilibrium price of broccoli was P0, and the equilibrium quantity of broccoli traded was Q0. This year, with better growing conditions, the supply of broccoli has increased to S1. Another way of thinking about this is that, at each and every price, more broccoli would be supplied, shifting the supply curve out to the right (to S1). The result is that the equilibrium price of broccoli decreases to P1, and the equilibrium quantity of broccoli traded increases to Q1.

Overall, good news for broccoli lovers, and easily anticipated using the model of supply and demand.

Flapjacks, jaffa cakes, and the quiet simplicity of GST

Tim Harford wrote in the Financial Times back in March (and re-posted to his blog last month):

Earlier this year, two distinguished gentlemen, Judge Hyde and his adviser Julian Stafford, sampled a mineral-enriched flapjack — alas, a year past its sell-by date — and pondered its qualities. (Flapjacks are slabs of oats stuck together with a glue made of butter, sugar and syrup.) The question: was this unconventional flapjack, designed as a pre-exercise snack, “of a standard to be served to guests as a treat with afternoon tea”?

Much turns on the answer, since the enriched flapjack hovers in the liminal space between a muesli bar, which, in the UK, attracts value added tax at 20 per cent, and an ordinary flapjack, which, by long-hallowed British tradition, is a cake and, therefore, zero rated for VAT purposes.

I am serious about the long-hallowed tradition. His Majesty’s Revenue & Customs notes that “at the inception of VAT, traditional flapjacks were widely accepted as cakes of common perception”. When HMRC drew the line between cake and confectionery, it nodded through the idea of flapjacks-as-cakes because to insist otherwise would be to incite a revolution. Is it absurd that a British judge found himself pondering the qualities of a flapjack and the “slightly unpleasant mouth feel” of the protein-enriched brownie with which it was packaged? Of course, it is absurd. But it is an inevitable consequence of the way the UK’s VAT rules try to draw distinctions that cannot sensibly be sustained.

FT Alphaville rightly lavished 5,000 words on the flapjack tribunal, which we can add to the infamous Jaffa Cake controversy — in which what is self-evidently a fancy chocolate biscuit was ruled to be a cake for tax purposes, and to the more recent case of the giant marshmallows, which were ruled to be an ingredient for toasted-marshmallow-and-cookie sandwiches (zero rated) rather than a standalone sweet (20 per cent rated).

That post, and various other writings (including my own) should be required reading for any politician looking to carve out exceptions to GST. It should be required reading for journalists writing on the subject, and for academics writing 'expert opinion' for media, such as this one:

While economists have argued that removing GST from foods is an expensive and complex exercise in terms of administration, and public health experts have argued that the approach is inequitable because it is not targeted to lower-income households (both arguments raised by parties opposing the bill), we need to start somewhere and focus on the changes we can make now to relieve families of the burden of high food costs.

New Zealand’s approach to taxing food differs from that of comparable countries including Australia, Canada, and the UK, where most basic foods purchased at the supermarket are exempt from GST (or VAT, as it is known in the UK). In these countries, basic foods are viewed as essentials and are therefore not subject to a consumption tax, to keep the foods more affordable for consumers.

Yes, New Zealand's approach to GST is different to those other countries. Our approach is better. Do we really want resources being tied up in court cases deciding whether flapjacks are a muesli bar, jaffa cakes are a biscuit, or giant marshmallows are a sweet? That's what we would get as soon as we start to carve out exceptions to the comprehensive GST that we currently have.

New Zealand's GST has a quiet simplicity. There are no arguments to be had about whether a good or service attracts GST or not. The exceptions (financial services, residential rents) are for the most part clear and obvious. If government is concerned about the cost of food for low-income families, they should provide targeted assistance to low-income families, and leave GST alone. On the other hand, I am very much looking forward to starting up SpudCars (see here).

Read more:

• Judge rules that snuggies are blankets, not clothes
• Stephen Hickson on why we shouldn't remove GST from food
• We also shouldn't be debating removing GST from food

Mike Masnick on the social media-mental health debate

There's an ongoing debate about whether social media has a causal negative impact on mental health. The latest iteration of this debate was triggered by the release of Jonathan Haidt's  book The Anxious Generation. I wrote briefly about the debate between Haidt and Candice Odgers last month. Around the same time, Mike Masnick wrote a long article on the Daily Beast clearly against Haidt's perspective. Here's one important part of the article:

Reading Haidt’s book, you might think the evidence supports his viewpoint, as he presents a lot of it. The problem is that he’s cherry-picking his evidence and often relying on flawed studies. Many other studies by those who have studied this field for many years (unlike Haidt), find little to no support for Haidt’s analysis. The American Psychological Association, which is often quick to blame new technologies for harms (it did this with video games), admitted recently that in a review of all the research, social media could not be deemed as “inherently beneficial or harmful to young people.”

Two recent studies from the Internet Institute at Oxford used access it had obtained to huge amounts of data that showed no direct connection between screen time and mental health or social media and mental health. The latter study there involved data on nearly 1 million people across 72 countries, comparing the introduction of Facebook with widely collected data on mental health, finding little to support a claim that social media diminishes mental health.

To get around this unfortunate situation, Haidt seems to carefully pick which data he uses to support his argument. For example, Haidt mentions the increase in depression and suicide among teen girls from 2000 to the present. The numbers started rising around 2010, though they are still relatively low.

What’s left out if you start in 2000 is what happened earlier. Prior to 2000, the numbers were on par with what they were today in the late 1980s and early 1990s, when no social media existed. Across the decades, we see that the late ’90s and early 2000s were a time when depression and suicide rates significantly dipped from previous highs, before returning recently to similar levels from the ’80s and ’90s.

It’s worth studying why it dropped and then why it went up again, but by starting the data in 2000, Haidt ignores that story, focusing only on the increase, and leading readers to the false conclusion that we are in a unique and therefore alarming period that can only be blamed on social media.

Masnick also highlights that suicide rates (which are indicative of extreme negative mental health) have not seen an uptick in all countries since 2010, or even in all Western countries, pointing to these data:

I felt a bit obliged to include the figure, since it shown the overall downward trend in youth suicide rates in New Zealand. It doesn't break the data down by gender, and part of Haidt's argument is that the negative effects are concentrated among young women. However, if you look at data for young women for those same countries, you would have to squint really hard to see any uptick in suicide rates starting around 2010:

Masnick concludes that:

In the end, neither the data nor reality support his position, and neither should you. Kids and mental health is a very complex issue, and Haidt’s solution appears to be, in the words of H.L. Mencken: clear, simple, and wrong.

Clearly, there is more to come in this debate. I remain agnostic, but very cautious about claims on both sides that are not supported by clearly causal evidence.

[HT: Marginal Revolution]

Read more:

• Quitting Facebook might make you happier
• The more you use Facebook, the worse you feel
• Does the Internet make people happier?
• What happens when you disconnect from Facebook?
• The latest NZ research on social media and mental health is nothing special
• Online social networks, social capital, and wellbeing
• Jonathan Haidt and Candice Odgers debate the relationship between social media and mental health

More impatient people are more likely to commit crime

Gary Becker's famous model of rational crime suggests that criminals weigh up the costs and benefits of crime (and engage in a criminal act if the benefits outweigh the costs). Time preferences matter in this model, because the benefits of a criminal act are usually realised immediately, whereas the greatest costs (including the penalties of being caught occur in the future. So, someone with a higher discount rate (a greater preference for the present over the future) will be more likely to commit crime, because the costs will be more heavily discounted. In other words, people who are more impatient (and therefore have a greater preference for the present) will be more likely to commit crime.

Is there evidence to support this idea that more impatient people are more likely to commit crime? This new article by Stefania Basiglio (Universitá degli Studi di Bari), Alessandra Foresta (University of Southampton), and Gilberto Turati (Universitá Cattolica del Sacro Cuore), published in the Journal of Economic Psychology (ungated earlier version here), provides some supporting evidence. They make use of data from the National Longitudinal Survey of Youth 1997 (NLSY97), using data from the 2008-2011 survey waves (with a sample of nearly 6000 observations), when the cohort was aged 24 to 31 years old. Their dependent variables are self-reported measures of whether the survey respondent engaged in property crimes, violent crimes, or drug crimes, in the previous twelve months.

One of the interesting aspects of this study is how Basiglio et al. chose to measure impatience. Because the NLSY doesn't include a survey measure of time preference, they instead use a variety of variables that are expected to be correlated with impatience. As they explain:

...we consider several similar observed variables 𝑋, available in the NLSY97, which represent individual behaviors for which impatience plays a role: the saving rate 𝑋1 is defined as the ratio between total savings and income; smoking 𝑋2 and drinking 𝑋3 are measured by the average number of cigarettes smoked in the past month and the average number of drinks consumed in the past month, respectively; obesity 𝑋4 is defined by a dummy which is equal to one if the Body Mass Index is equal or higher than 30; risky sexual behavior 𝑋5 is measured by the number of sexual partners that the individual had in the previous 12 months; 𝑋6 is a dummy for using hard drugs (like cocaine or meth) in the previous 12 months; 𝑋7 is a dummy for participating to a worship service at least once a month; finally, we define a dummy about marital status 𝑋8, which takes value one if the individual is married.

Basiglio et al. then use factor analysis to extract a single factor (a single variable) that best summarises the information contained in all eight of those variables. This is a useful approach to reducing the dimensionality of data, but also a handy way to proxying for a latent variable like impatience. The proxy variable seems to pick up the right correlations with each of the variables, being the same correlation that we would expect with impatience:

Factor loadings take up the expected signs: we find a negative correlation between being married, obesity, and having attended a worship service and the extracted common factor 𝐹1, while we find a positive association for all the other proxies. Consistent with our expectations, the strongest positive linkages are with drinking (0.260), smoking (0.204), and hard drug use (0.203); the strongest negative linkages are with attending a worship service (−0.267) and being married (−0.210).

Using this proxy variable as their measure of impatience, and controlling for age, ethnicity, education. occupation, and whether the individual had been jailed in the previous year, they find that:

The marginal effect for impatience is positive and significant for all types of crimes... The result suggests that being more patient is associated with a lower probability of committing crimes. The correlation of our proxy for impatience is stronger for drug crimes.

One of the main problems with the proxy variable is that it doesn't have a natural interpretation in terms of the size of the coefficients. However, taking the results as given in Table 4 of the article, a one-standard-deviation increase in the impatience measure is associated with a 5.4 percentage point higher probability of having committed any crime, a 1.8 percentage point higher probability of having committed a violent crime, a 3.1 percentage point higher probability of having committed a property crime, and a 6.4 percentage point higher probability of having committed a drug crime. Those are substantial effects, given that the baseline probability of committing those crimes are 6 percent for any crime, 2 percent for violent crime, 4 percent for property crime, and 6 percent for drug crime.

Basiglio et al. then look at differences by demographic group, and find no differences between men and women, or between people whose parents have college education compared to those whose parents have no college education. They do find some evidence that the effects of impatience are larger for non-Black/non-Hispanic men than for other men, for total crimes and drug crimes only. It is difficult to see what we can take away from the demographic analyses though - we would need some theory as to why impatience would affect different groups' crime decision-making differently.

Basiglio et al. also find that the results remain after controlling for risk preferences, which is an important robustness check, since people who are more impatient may also be those that are willing to take on more risk. Now, the results are not causal, but they do suggest that impatient people are more likely to commit crime.

If we accept these results, what are the policy implications? Basiglio et al. suggest that education may be a solution to reducing crime, to the extent that it both increases the opportunity costs of crime and makes people more patient. However, I think that there is a more immediate solution, which is to make the punishment of crime more immediate and more certain. If people who heavily discount the future are more likely to commit crimes, then the costs of committing crime (and being caught) have to be more severe, or (and this may be more effective overall) the punishment needs to come more quickly after the crime is committed. Either way, that probably means more resources devoted to policing and the criminal justice system.