Massive violence - the solution to 'Inequality'

It's worth slogging yer way through Scheidel's 'The Great Leveller'. Contra to the simplistic strain running through so many comments on economics, which boils down to a Utopian wish for 'policies to reverse inequality', Scheidel's magisterial survey of inequality across several millennia shows two aspects clearly:

1. Inequality is baked into agrarian (and its later variants including industrial and post-industrial) existence. The need to harvest, store, allocate and secure grains means, even in simple societal arrangements, that there is great opportunity to clip tickets and enrich elites at every step of the chain. So and invariably, societies develop priestly, ruling, military and other top-of-the-tree layers which then and equally invariably, oppress all beneath them. Millennia of histories, in his scholarly account, attest to this.
2. The only episodes which stop or significantly reverse this trend, are inherently violent. Mass-mobilisation wars, catastrophic pandemics, transformative revolutions, and state collapse are the Four Horsemen - the Great Levellers. Period.
   Finally, and if one was to take seriously the 'population overshoot' espoused by some commenters as the Root of our current Condition, it really just depends on one's tolerance for high body counts.......which Horse to back....
   From the blurb:

   Are mass violence and catastrophes the only forces that can seriously decrease economic inequality? To judge by thousands of years of history, the answer is yes. Tracing the global history of inequality from the Stone Age to today, Walter Scheidel shows that it never dies peacefully. The Great Leveler is the first book to chart the crucial role of violent shocks in reducing inequality over the full sweep of human history around the world. The “Four Horsemen” of leveling―mass-mobilization warfare, transformative revolutions, state collapse, and catastrophic plagues―have repeatedly destroyed the fortunes of the rich. Today, the violence that reduced inequality in the past seems to have diminished, and that is a good thing. But it casts serious doubt on the prospects for a more equal future.

Pike River - a fatally flawed design mandated by Gubmint

Pike River was at base a Gubmint-enforced faulty design, and any regulatory 'failure' was well downstream of that.

1. The seam at PRCC sloped upwards, through known-to-be-gassy coal (it's substantially the same as coal found at Brunner and Strongman - both famous historic disasters).
2. This should have placed a very high design emphasis on excellent mine ventilation.
3. DoC controls both the surface over the seam (Conservation land) and the outcropping face of the seam (the escarpment is in Paparoa National Park).
4. A sensible ventilation plan would have been to allow either or both of vertical vents up to surface through overburden, and vents right along the top of the seam straight out to the escarpment. Both would be natural ventilation (methane is lighter than air, and both sets of vents would vent up). As mine roads were driven, they could have been vented up and out, with less mechanical assistance needed and much greater margins of safety.
5. DoC would allow only one vent hole in its precious Conservation Estate, and would not even consider a vent on the escarpment above the seam.
6. The one vent allowed was at the lowest point of the coal seam (the least likely place to accumulate and vent methane without yuge mechanical assistance).
7. This was an inherently flawed design (the Royal Commission could find only one other similar design across the globe, and IIRC That went Boom, too)
8. It was, in short, an accident waiting to happen, from a design forced by Gubmint intransigence to be fatally deficient.
9. To be sure, mine management failures were also there. But managing a lemon tends to produce a bitter result regardless.

Old-style Gubmint versus the current risk-averse, high-cost model

An Interest commenter avers that in the olden days, if the Gubmint got involved, Things got Done, referring to my exploits on the Cat D7 in Invercargill..

My rejoinder:
- No TLA DC's or Modest Fees. 
- No Worksafe (the old D7 was sans muffler, hearing protection unknown). 
- No Traffic Management (I walked the D7 all over public roads on planks and traffic had to take its chance). 
- No site inspectors (I once had the scraper fall sideways off of a 7m high stockpile because some eejit on a loader had excavated the side of the thing unbeknownst to me, and had an exciting hour maneuvering dozer and scraper to the point where I could back the entire rig straight down the side and off the heap). 

It was a much less regulation-mad, low-key Gubmint. Zero comparison with the risk-averse, safety-mad, high-cost model one sees everywhere now. And then folks gape in wonderment at plot prices that are in Buzz Lightyear territory....

We should always demand that local government runs the ruler across all spending - article rejoinder

As a former (pre-1989, so old-world, prudent-rural-Council) LG Treasurer (no fancy CFO titles back then) I have been quietly appalled at the way in which staff have usurped Councillors.

Part is structural: Councils employ a CEO, who then employs all other staff. So there's an instant disconnect. Councillors tend to be actively discouraged from interacting with staff ('Policy, not execution', 'Governance, not Management' tend to be the shibboleths).

Part is the 'argument from authority' - a fallacy which nevertheless traps many a Councillor into a place whence no real push-back against even plainly loopy staff initiatives is possible.

Part is Council groupthink, especially when essentially tribal voting blocks have propelled 'their' councillors into the fray and proceed as if the 'others' are anathematized.

And part is the huge information and power disparity between staff, and the councillors, committees and especially the public. Taking on City Hall is a losing proposition, so most simply don't bother.

Staff attitudes to councillors can be summed up as 'vote-hungry show ponies around a very distant table'. Who can be and thus all too often are ignored. Calling for 'a staff report' is a recipe for getting handed 'what the staff always wanted', but suitably obfuscated so as to survive the limp surveillance of Der Public, and the occasional inquisition from the latest unpaid intern reporter in a local tabloid.

Against this background, and the 'four well-beings' power of general competence (Sec 10(2) LG Act 2002) it is only to be expected that there is little to no hope of effectively managing increases in Council spend, let alone reducing it. Bureaucracies are remunerated by numbers of staff managed - a built-in growth incentive. It simply hasn't occurred to any of them that there might be Limits to Growth. Or that (as in the older models) significant pools of expertise lie outside the staff echelons, can be tapped for free via committees and co-options, and can thus serve the dual purposes of keeping community connections, and deepening the intellectual horsepower brought to discussions.

So the article's fond hope that "We should always demand that local government runs the ruler across all spending" is quite impracticable, and has been increasingly so for three decades. We are all strapped to the Rates Rocket, every year the uplift increases, and few of us have any trust left in the edifice it's funding.

Maybe the WuHuFlu might be a circuit-breaker in this dismal progression. Maybe the engineers and other unexcitable types on staff might club together and persuade the Event Managers, Tourism Promoters, Community Engagement Fluffballs, and all the rest of the 'Social and Cultural Well-being' parasites, to gracefully yield their comfortable, secure and marginally useful positions in order to fund the unexciting requirements like sewer replacements, well-head securing, bridge strengthening, and public building earthquake-hardening.

But I wouldn't bet the rating tax base on That happening in my remaining lifetime.....

As with the DHB's I think there may well be a Great Reset of the number and distribution of authorities - Councils, Regional's etc. It's simply nuts to have small authorities, each with their own fiercely guarded C-suite, systems, Plans etc - all somewhat inconsistent with each other (District Plans....) - all claiming to be Diffrunt, Speshull, and thus entitled to defend their fiefdoms until Kingdom Come. Whereas in the commercial space, large verticals and franchises tend to have a single shared or multi-tenanted set of systems, extensive supply-chain links via EDI, superb logistics etc. I did some work for a well-known retailer a decade ago, and at that stage, they were doing a weekly forecast of sales for every SKU (around 10,000) in every product category across 100 stores, 3 countries and 3 currencies, complete with expected delivery dates from logistics, landed costs, margin, and local RRP. Councils and DHB's may be able to approach this sort of performance in the best examples, but I suspect the majority are still emailing Excel workbooks around.

One of the saddest aspects of the post-1989 TLA environment is the complete shutting-out of ordinary folks from the business of maintaining their own tiny pieces of the puzzle. In a former life, as well as being a Councillor on the Otautau (pop 3,000) Town Council, I was on the roster of volunteers who ran the local swimming pool. As a County Treasurer, I attended numerous meetings of committees for Water Races, Reserves, Halls as well as the usual Council committees and sub-committees. These all served the dual purpose I outlined above: keeping strong roots in the communities they served, and adding on-the-ground expertise and voices. Nothing like this now exists, and one obvious result is the complete disconnect between the behemoth Councils and the populations they serve. It doesn't take degrees in horticulture to maintain a local garden, keep a local reserve mowed, trees trimmed etc. 

Time for a re-connection.

Green's High-Speed Rail dreams

Well, the Greens have come up with a $9 billion plan to electrify the main trunks (NI plus SI) at least around the major cities and get high-speed (160km/hr), high-frequency-of-service trains running.

At an electrification cost per km of around $USD10m/km, that $NZD9B will extend electrification for 450 km at a USD/NZD rate of 0.50.

But I suspect the proposal has at least five deep flaws:

1. 1 - To let pax rail run in two directions, double-tracking is needed. That's probably north of $50m/km. Christchurch is the testbed here: there's no double-tracking, few passing sidings, no stations, no pax-capable signalling, and so on. Even if a slew of passing sidings is posited, that's gonna reduce that 160km/hr max speed to maybe a 60-80km/hr average. Not that much different to a bus or car. Suppose (say) a 15min frequency for three hours twice a day, over a 70km single trip at 70km/hr, and assuming instant turnarounds, that needs four trains per direction per hour on that trip. That's three or four crossings if single-track for the returning units.
2. 
   
3. 2 - Stations, signalling, ticketing, and meshing with last-mile services. No use turning up at the nearest station to your workplace (like Christchurch Airport freight ops) and finding you have 8-10km still to go and no last-mile PT. All this stuff is expensive, and uncosted, I suspect.
4. 
   

3 - Electrification is absent in the middle third of the NI, and absent from the SI except for heritage stuff through the Arthur's Pass tunnel. By no coincidence, these are the very parts that are toughest to electrify at all: tunnels, bridges, tight curves, high (for rail) gradients). The cost/km is likely to be an order of magnitude higher in these areas.

1. 
   
2. 4 - Where is the power to come from? A single source of power (overhead catenaries, substations) is vulnerable to outages which stop the entire block section - er- in its tracks. And, especially in the NI, there just isn't the spare capacity to impose significantly higher loads: most daytime top-up power comes from SI hydro. Perhaps Tiwai closure is part of the Green's assumptions. But there's still no way to get That power from the deep south to Auckland without expensive line duplication or upgrades (last estimate was north of 0.5B and that was some time ago).
3. 
   
4. 5 - Patronage in those shiny new commuter trains. It's all very well creating them, but who is actually going to use (say) a Hamilton-Auckland route, and in sufficient numbers? The sectors that can't or won't include tradies, the elderly, the very young, the WuFluFearFull, the poor and the unemployed. That's a big chunk of potential patrons.

Can't see it going anywhere but Off the Rails......

Councils, CEO and Staff - once again, I wearily explain their relationships

This was a response to a comment which confessed that 'As voters we are failing'.  My reply:  No, don't be too hard on yourself (and by extension, on the rest of us Ratepayers strapped to this Rates Rocket).

• Voters only vote for Councillors.
• Councillors have only one Employee - the CEO.
• The CEO employs everyone else.

So all staff under the CEO actually are insulated totally from the Councillors. To staff, Councillors are a set of buffoons around a very distant table.

So staff are perfectly free to pursue their own aims and objectives and higher budgets, to the extent that these fly under the CEO's radar. And render 'reports' up through the CEO to the Council which lead to largely pre-determined policy positions which, quelle surprise, support those very same aims, objectives, and those safe and comfortable staff lives......

Autarky - flavour of the 2020's?

Let's draw out some Consequences of the 'all for it' themes - all varieties of autarky - a common characteristic of medieval economies:

1. No more foreign idiots = between 50 and 75% of the tourism industry, employing 400K workers, is toast. Add 'em to the welfare rolls or retrain 'em - all Gubmint cost, paid for by You Know Who.
2. No Importing Australian produce = no metals (Li, Cu, Fe, and the rare earths being prospected at Dubbo), so kiss goodbye to solar panels, EV's and Big Batteries. As for wheat, well, Oz grows most of the hard wheat used in our bread.
3. No more Foreign-owned firms.  But these include every Car, Machinery, Household Appliance manufacturer, amongst many others, so good luck when your tractor goes into Limp Mode in the middle of harvest and the firms have Departed our fair isles.
4. Foreign minimum wage temporary work visa workers go home - and are replaced by automation, manufactured either offshore, by foreign-owned firms here, or local firms using fairly much exclusively foreign-made parts. We seem, unaccountably, not to have chip fabs or bearing factories....
5. Dairy pays for its alleged externalities - via the plethora of New Taxes sure to come our way, and what does that do to the prices of dairy products locally? So who pays? Check a mirror. And who is Excluded because of high prices? The poor and children.

Autarky seems to be flavour of the month. Especially to commenters who clearly haven't Thought it Through.....

A Tale of Two Gabbys

Gabby Hakoops, esteemed slack-key guitarist to the King of Diamonds, stood before the Witchsmeller Pursuivant, accused of playing Gabby Faure's 'After the Dream' instead of the programmed 'Ride of the Valkyries' at a recent State Banquet for the Queen of Hearts.

Hakoops averred that the sheet music was, in his words, 'Pukaroo', that it had been safely stored in a Music Shack with a locked, strong - albeit somewhat rusty yet still impressive - iron front door with many Big Bolts, that Dark Forces in the Land were to blame, and then referred the matter to the Grand Inquisitor.

The latter had returned after a fifteen-second Conflab with his minions, stated that no Dark Forces were involved, and that he 'does not appreciate Frivolous Litigation and can he please have another Inquisition Chamber, as he is perennially Under-Resourced'. He was also heard, sotto voce, to complain that he had not been invited to the State Banquet.

The MinionQuisitors have revealed that, after failing to open the Music Shack's front door despite many repeated attempts to hammer out the weakest-looking Rusty Bolt, they thought to try the Back door. This was not only wide open, but seemed never to have had locks or, indeed, Hinges. They concluded that Starveling Waifs, who may have included a noted Cellist in their number - or perhaps all were wearing Stillettos - to judge by the marks on the floor, may have conducted a rehearsal for a Symphony, which included Gabby Faure's piece, and had left behind the 'After the Dream' music. This was, in their summation, then picked up by the esteemed, but perhaps short-sighted, Hakoops, who then faithfully rendered it in mellifluous slack-key fingerings, to the assembled multitudes at the State Banquet.

As the theme of the Banquet was to have been 'Victory and Livery' - hence the Wagner on the playlist - the rendition of 'After the Dream' completely spoiled the occasion. Not only was the King of Diamonds mortified, but the Queen of Hearts had to endure a mild Inquisition after the Witchsmeller Pursuivant was summoned and immediately smelt Something Fishy. She, we are informed, was Not Amused.

Hakoops has been sentenced to a long gig in a Folk Band in a far-off land over the Edge of the Earth. He departs on the morrow. The Music Shack is currently the subject of demolition and re-build, hopefully, this time, with only one entry, and with code-compliant, non-rusty, Big Bolts. But, being as how it's being rebuilt by the very Minions who assembled the Last Shack, and despite including the very Latest Technology, we are reliably informed that Dark Forces, via the Afeared Five-Eyed Raven, are this very minute Watching and Waiting.....

Millenarial Movements

The Historian Norman Cohn, in his 1957 book, The Pursuit of the Millennium: Revolutionary Millenarians and Mystical Anarchists of the Middle Ages, found that Millenarian movements always picture salvation as:

• Collective, in the sense that it is to be enjoyed by the faithful as a collectivity.
• Terrestrial, in the sense that it is to be realized on this earth and not in some other-worldly heaven.
• Imminent, in the sense that it is to come both soon and suddenly.
• Total, in the sense that it is utterly to transform life on earth, so that the new dispensation will be no mere improvement on the present but perfection itself.
• Miraculous, in the sense that it is to be accomplished by, or with the help of, supernatural agencies.

It might have been expected that millenarian thinking would disappear with the Enlightenment and the Age of Reason. But Cohn found that these ideas and the manias they inspired reemerged in the twentieth century’s secular totalitarian and revolutionary movements.

In what could be a description of the Green New Deal (USA), Cohn argued that these movements felt themselves to be engaged in a struggle of unique importance, “different in kind from all other struggles known to history, a cataclysm from which the world is to emerge totally transformed and redeemed…this is the essence of the recurrent phenomenon of revolutionary millenarianism.”

Now tell me that this does not largely describe those young, easily-led, desperate-to-be-Liked Youf who recently lay about various places to draw attention to Weather in 2100.....

The mathematical futility of long-term climate projections

The entire climate-prediction edifice as currently promoted, is founded on quicksand, as time-series research at LSE demonstrates - the Hawkmoth Effect rules. The issue comes down to several Inconvenient Modelling Facts:

• Complex systems do not generally have the mathematical property of Structural stability. This leads to quite different projections, using the same initial conditions, even if two models differ to a minute degree - the poster at the link graphically illustrates this.
• Models used for projections simplify real phyical processes (for tractability) and make assumptions (for tuning) - both of which cause structural inadequacy by incomplete description of the phenomena being modeled.
• Turbulent/chaotic systems are pointless to model over long time series if accurate projections are expected: each time-slice depends on the output of the former slice as initial conditions and projections thus rapidly depart from sensible physical-result boundaries as model-time progresses
• The real physical world, as best can be gleaned from observation of history, has close-to-absolute boundaries on temperature = +/- 2-3 degrees Centigrade, and two dominant Attractors: Ice Age and InterGlacial. There have been more than enough long-tail (extremely low- probability) perturbations in the past (vulcanism, comet strikes) to supply a record of any vast excursions from these boundaries. The bounds seem to hold, regardless
• The 'Escape from Model-land' LSE paper suggests that consistency with the past, use of long-tail (very low probability) inputs and expert judgement as to model applicability and utility in the first place, is the only way out of Model-Land
• "The utility and decision-relevance of these model simulations must be judged based on consistency with the past, and out-of-sample predictive performance and expert judgement, never based solely on the plausibility of their underlying principles or on the visual “realism” of outputs."

The two turbulent/chaotic systems which climateers attempt to model are, of course, Atmosphere and Ocean. 

Essentially, they are trying to predict the weather on 27 March, 2119, when predicting the weather on 27 April 2019 is clearly a nonsense: a coin-toss or a dartboard are more useful Models. Next weekend's weather - a reasonable prediction is likely. Tomorrow - the prediction will be close to spot-on. 

Models are always wrong, but mostly they are Useful.....except for the Far Future.  Mathematics rules.

Zoning Causes Commutes

 "We must strive to provide employment close to where people live” Parfitt (of Auckland Council) says. “Long commutes place a huge, unproductive strain on both people's quality of life and our transport infrastructure."

Well, the Plannerz insist on separating all sorts of uses by zonerating to the nth degree. No longer can the shopkeeper live in the flat above the store, the temporary construction crew live in a donga at the latest site, the mechanic trade from a three-bay garage at home, or the budding fashion designer sew and trade from the spare bedroom.

Well, at least not legally. In practice, good neighbours, high fences and quiet work habits mean that all this and more activity is happening anyway: people simply can't be arsed dealing with the Clueless Councils and their minionz.

Planning which enforces separation of uses causes Commuting. It's as sad and as simple as that. The RMA was designed to handle incompatible uses by examination of Effects. This doesn't need spatial Zoning to be present, but the Town and Country Planning Actorz simply could not conceive of a future without squiggles on maps.

So here we sit, locked into spatial use-mandates created by unelected bureaucrats, in our cars, mostly at idle, as we transport ourselves, slowly and expensively, to our Place of Work......

A Fly on the Wall of the 9th floor...

An imagined Fly-on-the-wall conversation:  The PM and the FM.

PM:  Granters, I've just come back from talking to those Teachers.  Can't we shake that Money Tree you have, and give them a few raises?  I mean, who's gonna edumicate little Neve if the teachers cannot afford houses in Auckland?  And I'm sure as heck not gonna Buy in Wellers....

FM:  Jace, Jace, Jace.  I'm none too sure it was a brilliant move to munge your schedule and go talk to them in the first place.  Neve, teaching, you've been reading those Signs, haven't you.  You know a good chunk of them were painted by Children at Art period - I've already had Ian LG chewing my ear about Child Labour.  And as for schoolkids being paraded about the streets with signs - I know it is supported by a few Parents but the optics - oh, dear, it really does seem like Child Abuse...You of all people have gotta parrot the Party Line - we cannot fix Nine Long Years of Neglect in a single term oops I mean year.  And I've just had to spend a quarter of a billion on more freakin' Trees, to keep He Who Must Not Be Named away from our throats (golly, that man makes me Quake).

PM:  But Granty-poo, if there's that much in kitty that we can shell out scads of it out to Vol - I mean, you know who - then everyone in the queue - Teachers, Tertiary, Police, Defence, and I'm told MBIE and IRD although I must confess not to have noticed - they went Out too, or something? - where was I, oh yes, everyone in the queue, which seems to be growing daily, can See the dosh getting spread around and I sense that they are getting that FOMO thing - they are worried that the cupboard might be bare soon, and so they wanna get in Now, and with Big Percentages.  Oh, Grant, what are we gonna do?

FM:  Well, we have got the Cullen Tax Grab - I mean, the TWG - working away in the background, and perhaps we could advance the pace a little there.  Don't let this get outside the room, but the TWG is basically a Rich Prick's Squeeze, and all he, I mean They - haveta do is to get the definition of the RP's down low enough that we'll have a few more tens of billions.  Let me have a quiet word.  But please, for Financial Prudence' sake, don't go addressing howling mobs of tax-funded employees.  That's what Unions are for....

Gubmint tax-funded balm tor spiritual cancer

Contra to Jason's article wherein a weary acceptance of MMP is argued for,  it needs to be recalled that Godzone has no Constitution (unlike the US and Britain), no Upper House to allow measured reflection on legislation, and a tendency (shown all too clearly in the case of the Taranaki Hari-kiri re Oil/Gas) to sweeping, precipitate and (so it seems) completely reflexive action.  This is to be sure, occasional.  But it is nonetheless extremely unsettling, especially for the targeted groups.  This sort of action is fairly much what is behind the continued slide in business confidence:  the question that all think but few say out loud is simply 'what will these clowns do next?'.

It can fairly be advanced that the sort of populism we see now in NZ is an attempt to substitute State action of one sort or another for a fractured sense of national culture and the sacred.  Feelz, the faith-based Green initiatives, the raw narcissim of the Winstone Ganders of our Parliament, the inchoate visions of Maori resurgence, the general retreat into solipsism have become the standard fare, and a thin gruel it is.

The results:  a plethora of mindless acts (especially by youth, who feel all this anomie most intensely), suicides and self-harm, a deep series of fractures and the start of the demonisations we though were behind us - boomers vs Millenials, rural vs urban, Greens vs our present level of comfort, renters vs landlords, Awkland vs the rest of the country, cities vs provinces, makers vs takers, vegans vs omnivores, and on and on ad infinitum.  There is nothing here to unite us if these chasms widen.  And attempts by Gubmints to rub Statist balm, using our own extorted money,  into these essentially spiritual communal wounds, miss the mark so completely as to be farcical.

David Goldman argues that a sense of the sacred is needed to give purpose to life:

These all are manifestations of what is commonly called the identity crisis of the West, but might better be termed the West’s struggle with the sacred. By “sacred”, I mean that which endures beyond our lifetime and beyond the lifetime of our children, the enduring characteristics that make us unique and will continue to distinguish us from the other peoples of the world, and which cannot be violated without destroying our sense of who we are. The sacred is what a country’s soldiers are willing to die to protect; unless there is something for which we are willing to die, we will find nothing for which we are willing to live.
Tradition surely is part of this, but not every part of our tradition is sacred to us: we find within tradition elements that have prevailed through the ages and which we expect to prevail, if our present existence is to have a purpose, beyond our lifetimes. These elements of tradition cannot exist except through a nation: contrary to Hillary Clinton, it takes not a village but a nation to embody the language, customs and ethos that found our identity. The invariant feature of the various expressions of nationalism on both sides of the Atlantic is an attempt to recapture the past in order to envision a future. “Identity” as a concept is meaningless, except as it is rooted in the past and pointed toward the future. Who we are at the moment depends on where we came from and where we expect to go. Our present, as Augustine argued in Confessions XI, is a composite of memory and anticipation.
Augustine (in City of God XXIV) famously took issue with Cicero’s definition of a res publica as an association founded on common interest, arguing instead that it was founded on a common love. It might be more accurate to say that it is founded on a common sense of the sacred, for the sacred embodies not only love but also awe and fear, specifically the fear that by violating the elements of tradition that define us we will lose ourselves.

"..by violating the elements of tradition that define us we will lose ourselves" - but what, any more, Defines Us in the here and now?

Politicians, whatever their personal characteristics, do reflect something of the zeitgeist.  And it is not a pretty image that we see in that dim mirror.  After all, just ponder the various comment threads here on Interest, for confirmation......

Government cluelessness about the Time Value of Money

The issue with Gubmint large-scale anything which has to be built physically (as opposed to redistributed with a hefty ticket-clip) is that the entire public service has not Clue One about the Time Value of Munny.

Propose a project for $100m in Year 1, with an initial cost outlay (say, for Land) of $30m, Years 2-4 at $20m each nominal, and Year 5 at $10m, a WACC of 6%, a construction cost inflation rate of 9%, and a five-year schedule. The Gubmint wallahs then gape in wonderment as the thing (without contract variations) ends up costing $143.7m. Cumulative interest carry is $20.4m, construction inflated by CCI (which to be kind is limited to years 2-5 only) is $23.3m. So 100+ 20.4 + 23.3 = 143.7. The time value of munny....

This sort of non-thinking is absolutely rife through all levels of government. They never have to sell enough on Friday to make payroll on Wednesday following, never have to chase debts, never have to juggle cash flows to make the 20th of the month payments to creditors. Their world is literally cossetted: salaries arrive with the regularity of a sunrise, revenue falls into their ledgers like Sky Food off the edge of the bench for a dog, cash-flow is non-existent, and the only exception to this happy existence is IRD, who certainly know the Time Value of Munny if that's unpaid taxes....

Imagine, (strike up the John Lennon chorus about now) that Local Gubmint had to pay consent applicants the IRD UOMI rate on project value for every day they dragged the chain on the consent. Imagine... but enough already. T'will nevah happen.

Christchurch CBD - lack of development therein

.. a lot of people financially lost businesses as business interruptions claims often are not successful.

Therein lies a tale. Folks who are Shocked, Shocked (Captain Renault?) about the state of the Old CBD are missing the local knowledge and the history of the quake sequences. A by no means complete list:

1. Businesses were locked out of the Old CBD for months, and as Speckles quite rightly notes, this led, quelle surprise, to a chain of failures as owners were unable to retrieve inventory, records, plant or equipment. It would have been possible to 'mine into' dodgy buildings to do this, had authorities been less stupid, and some smart guys immediately signed themselves onto demolition crews with precisely that retrieval in mind. But most owners did or could not.
2. The 'Precincts' idea - block-size spatial areas devoted to one purpose - Health, Justice, Innovation, yada yada, has proved a massive failure for three reasons:
   • It's hard enough to build and lease a single building on a modest plot. Trying to do that on massive floor plates on huge land areas is nigh-on impossible.
   • It took so long to aggregate titles to produce the Precincts that some - Health, Innovation - just went elsewhere. Health is now centred around Bealey Ave, Innovation is a fizzer, and the only successful Precinct in its original conception is Justice, which of course is funded by the person you can spot in any mirror.
   • Ground conditions are patchy but uniformly shocking. Justice building cost Fletchers a cool $100 milly in over-runs, and the engineering plus remediation required for foundations alone is so expensive just to get a stable platform, that rents, always subject to ECON101, have to be way higher than suburban or other centre averages, to afford to start digging.
3. Other TLA's have proven themselves far more adept at soaking up the residential and commercial munny that flowed from insurance coffers. IZone at Rolleston (Selwyn DC), a plethora of residential subdivisions in outlying but perfectly commutable areas, and the business opportunities that come with greenfield development, have, quite simply, eaten Christchurch City's lunch.
4. The immediate answer for businesses that wished to survive was to relocate. This coincided with a wave of land developments due not to quakes but to reconsideration of space requirements (e.g. Riccarton Raceway). This provided business parks and high-end plots, all outside the Old CBD. None of the new office tenants is in any hurry to relocate back into the Old CBD, because most have found that the 'doughnut city' - a ring of businesses around the Old CBD - actually suits themselves, their customers, and their staff extremely well. So the Old CBD is gonna struggle to attract anything but hospo, high-end retail, and consultancies firmly attached to the Gubmint Teat.
5. The earthquake sequence was handled so badly in business survival terms by authorities that there is considerable animus out there, about exposing businesses again to either the Old CBD, the City Council, or in general, to any development which appears to have the cold dead hands of Gubmint anywhere near it. This animus will take a generation to diffuse.

Free Tertiary Education

As a former CFO (although we had no such lofty titles in them days) of a major Polytech, I saw the effects of dragging entire cohorts of unprepared entrants into the system, and the effects of undirected (bums-on-seats) funding at first hand, because I had to corral Budgets for the hot mess:

• Foundation courses to get the worst cases literate, adequately numerate, and able to comprehend English. Pure overhead as little to no funding was directly available until well along in the piece.
• The start of a proliferation of 'soft' courses designed expressly to mop up EFTS-based funding by getting Mo' Bums.
• The realisation, very late in the piece, and I was out of it by then, that by seriously limiting Class Materials expenses and Teaching Hours, certain courses generated massive internal subsidies for Other Stuff. Because the EFTS funding took no account of Costs, only Bums, and was generous to a fault.
• Students from privileged backgrounds who constantly applied for Hardship Grants despite rocking up in cars, expensive mountain bikes, or motorbikes. I did make some of them cry (sat on the Approving or in these cases Disapproving Committee). But a nice little rort.
• It took a decade or two before the EFTS funding model (it came in in 1989/90 IIRC) started to distinguish Costly versus Costless courses. It was brought into sharp relief when one Polytech which shall remain nameless, dished out a CD to the students. That was the entire course cost....but the EFTS fundling even on the lower scales was only a little south of $10K per Bum.
• Then Degree courses started to come in (why? because the EFTS funding per Degreed Bum was much higher), so we saw Degrees in Naturopathy and Diplomas in AromaTherapy start to proliferate to take advantage. That did not last long because they were so Luminously Bonkers. But the issue was that they could Start in the first place.
• The race for funding also pitted institutions against each other, as they vied for the same student base, and duplicated, often badly, courses run better elsewhere.
• The Good Times effectively came to an end with EFTS limits per study category, directed funding for certain institutions, and incentives about Cooperation to cut out the hideous duplication and waste that was apparent. The result was TEC, which now (I understand, far away from the game now) exerts an Iron Fist over who offers What, to Whom, and at what Cost.

But I bet TEC won't have much of a Xmas Break. Because our idealistic crew, shopping for the Youf Vote as always, has perhaps taken us right back to the Old Schemozzle. I'd put a bob each way on the fact that many of the New Starry-eyed Entrants to Tertiary as a result of the massive incentives now offered, will need just as much Pastoral Care to get them Fit to Teach, as PT's Housing tenants are gonna get to sort their appalling lifestyle choices.

Allegedly.

Chasing down the BOM's

This post was prompted by a plaintive cry of vehicles which are
"manufactured almost entirely without human input, sold online with no human input, and ultimately driven without human input. They would seldom crash, and need virtually zero maintenance."  The implication is that Workers disappear and with them their Incomes and with that, their Taxes....

Lets chase the BOM down on each of these.

1. Manufacturing is the end product - metal-bashing and assembly of a plethora of components, every one of which has been: Designed, Prototyped, Materials Mined, Transported, Refined, Shipped, Cast, Moulded, Machined, Painted, Warehoused, Sold, Financed, Transported again, all before getting to the TSLA factories. Every single one of those activities has their own BOM, into which humans are an essential input. Who else Brands, creates a compelling website, decides on Finance, writes up the Contracts, Programs the CNC tools, Builds the manufactories, and passes the bills for payment. I've been involved in automating finance-related jobs out of existence for forty years, and quelle surprise, there is still wetware at the root of most of finance activities.
2. 'Online' is the visible result of literally person-centuries of clever coding, marketing ideas and entrepreneurial individuals (Jack Ma...). It's wetware all the way down for the Ideas. As to the 'automation' possible, well, Compilers, which take away the burden of writing in binary, have been around since the 1950's, yet, quelle surprise, IT in general is part of the STEM explosion in careers.
3. 'Driven with no human input' is an aspiration, not a fact. Caterpillar has had self-driving mine trucks for three decades, yet wetware is still employed to spot them for loading, and to dump them at the top of the haul road. And self-driving in winter ice, snow, fog and other very common North American road conditions is certainly gonna create work for panel-beaters: because ABS, vehicle dynamics adjustments and environment detection are useless in such conditions, as many tourists discover up our NZ ski access tracks....
4. Last I checked, TSLA vehicles have Tyres, Suspension, and other moving parts which wear. So zero maintenance is another myth. There may well be less mechanics. But then where are the buggy-whip makers and wagon wheelwrights of yesteryear? 80% of employment in developed countries 150 years ago was agricultural. Now 2% is. What happened? Yes, too many barista and aromatherapista.....

In short, we need not worry about Workers and their Income just yet. Heck, even Bicycles need Mines, Refineries, Ships, and Tyres to supply their very simple BOM's. Mines need Miners and before that Stone-gazers who can look at an outcrop and say ' yup, there's Cu, Fe, Sn or Pb in that there Rock'. I'll stop now but y'all get the drift....(mining pun right there)

Awkland housing - the Ongoing Stooory

Awkland Architects will have a perfect insider's view as all of this unfolds.

I think (despite my VRWC tendencies) that the whole Awkland Affordable Hoosing schemozzle probably cannot be even partially fixed any other way than by Gubmint intervention. But to take up a couple of points from elsewhere in the thread:

• The 'expert group' are 
• Shamubeel Eaqub - respected independent economist and commentator, and author of Generation Rent, 
• Philippa Howden-Chapman, Professor of Public Health at Otago University. She has led groundbreaking research on the health impacts of cold, damp housing, and 
• Alan Johnson, Senior Policy Analyst for the Salvation Army and author of The Salvation Army's State of the Nation report, which highlights effects of the housing crisis
• This group is anything but Expert. An economist, a Sallie SJW, and an academic are hardly a Brains Trust, particularly as the conundrums of fast, abundant, affordable housing will include the two most thorny issues of all: land costs and automated building methods. One would have expected some Builders, Engineers, Manufacturers and Overseas folks in the group. But hey, the old Labour/Greens mantra reasserts itself: 'We Know Best'.

• The other salient point is about the inherent risk involved in socialising all the moving parts of the solution. In Christchurch, f'rinstance, no construction company with any economic sense will put its hand up for the now-foobarred Metro Sports Facility, because the Gubmint has just tossed the head contractor (Leighs-Cockram) under the bus. I foresee something quite similar to this caution in the Hoosing Debacle: with such a swirling mess of Regulation, Land issues, Construction Methods and attendant risks, what CEO is gonna say to the troops - 'hey, this looks juicy, lets spend a coupla mill and get in on the action' ??

I think we all are gonna need a Contract with Popcorn suppliers, to sit comfortably on the sidelines and watch the Great Game unfold. And as Popcorn may well be GST-Free soon (being an Essential Food), perhaps a Popcorn Futures Contract of some sort to minimise tax......

Ah, GST, I hardly Knew ye....

While the Rate of GST is excluded from the ToR, Exemptions from it are evidently not. And from the loose lips of several pollies over recent days, you, dear reader, should be aware of the following candidates for Exemptions:

1.     Female sanitary products
2.     Fruit
3.     Vegetables
4.     'Essentials' (definition?)
5.     New houses

And any exemptions (from which GST is mercifully comparatively free at present) will have the following effects:

•     Decrease revenue streams from GST
•     With corresponding effects on Gubmint finances overall
•     Cause immediate compliance costs on businesses dealing with mixtures of exempt and non-exempt goods (FMCG retailers, especially)
•     With corresponding claw-back through (say it quietly) cartelised price adjustments to end consumers
•     With greatly increased scope for mis-description of goods ('Liquor', in the bad old days, was frequently sold as 'Drench' out in the back-blocks). So what's to stop yer local Baked Potato outlet selling you a $4 Raw Tater, which you promptly hand back to them for a 10c Filling and Heating fee?
•     Greatly increased non-tradeable activity in lawyers, tax accountants, and other advisory consultants
•     Increased software demands as the 'exempt product list' needs to be kept up to date and applied across all affaected businesses, to say nothing of the back-end Gubmint GST Return handling
•     Increased need for tax audits, Inspectorates and ancillary regulation to ensure that noses are being kept clean
•     Greatly increased non-tradeable activity for Gubmint to create, maintain and adjudicate over exempted categories of goods - vide the ATO's extensive guides for food-related businesses here 
•     The economic effects such as the squeeze-outs of smaller businesses in favour of franchises, big-box and corporate retailers: imagine trying to decide which of These food retailers you are.

Once a first step onto this slippery slide is taken, the basis of our current GST - free of exemptions for the most part, single or zero rate for the most part - is foobarred.

The exemptions list, being essentially political in the first place, is of course then open to pressure from identity groups for their favoured set of products. And all of them will have a justification, and some apparently sound reasons for arguing their cases. And all of them can Vote......

Which will, in short order, turn the Exemptions List into an essentially pork-barrel politics exercise. The result will be a fatal and probably irrevocable infection of a hitherto internationally recognised best-practise ad valorem tax system.

We probably have a Gubmint whose idealism, fearlessness and energy could induce them to take that first step.

I'd suggest bringing Popcorn, but am unsure as to the amount of GST it will attract in future......

How TLA Rates are arrived at

TLA's are greedy, but cunning with it. The steps to TLA budgets (I've coded the rules and relationships into a very few of the cubes that most TLA's rely on for quickly estimating the consequences of various settings) run like this:

1.     Gather all the blue-sky budgets from every nook and cranny of the whole show and bung 'em into the hopper
2.     The 'Rates Required' parent object gives the first, horrendous result. As does 'Capex Required' which feeds back into 'Rates Required' via depreciation, and also (of course) feeds 'Cashflow', and 'Financing Required'. Everyone promptly utters a few well-chosen but un-minuted Anglo-Saxon words, and the real work begins
3.     Firstly, a general paring of obviously stupidly inflated budgets and admonishments to their managers (but Promotions for the most egregious....)
4.     Secondly, a concerted effort to move the less obvious budgets into areas that can have 'Revenue from Modest Fees' (and thus, entirely coincidentally, subtract from 'Rates Required')
5.     Trim 'Capex' (which trims 'Depreciation' and hence 'Rates Required') OR (and more subtly) move it sideways into - ya guessed it - Activities with Fees Income
6.     Take another look at 'Rates Required' and see if it passes the obvious Smell Test - will Councillors pass this?
7.     Take a cursory look at the Fee-generating activities (where most of the sideways dumping has occurred) and see if They look acceptable (or are levied on such odious categories of subject that no-one cares - landlords, large businesses, car salespersons, hoteliers).
8.     It's highly likely at this point that 'Rates Required' is still way beyond the pale, so Phase 2 commences - alter the incidence of Rates via uniform charges, separate rates, more Modest Fees and so on.
9.     So 'Rates Required' is now fed by a plethora of Rates, Charges, Special Rates, Fees Income, and Differential rates. Note that the total has not altered - that is too obvious to mention at this point - the main effort is to disguise it as competently as possible
10.     The final check - are all the now-diffused sources of 'Rates Required', 'Fees and Charges' etc - sufficiently opaque as to survive public scrutiny? If Yes, carry on and levy 'em, else go back two clicks and obfuscate some more

One should never watch Laws, Sausages and Rates being made, to extend a very ancient saying....it could shake one's faith in Human Nature....