Monday, 28 December 2009

The usefulness of the "Buy Kiwi Campaign" 2

Earlier I posted on The usefulness of the "Buy Kiwi Campaign", arguing that the campaign was useless. Now over at Offsetting Behaviour Eric Crampton take me, and NotPC, to task for this view. Eric argues that while it may have had no economic impact, the campaign was not in fact useless. He writes,
The biggest problem with MMP is the costly bargains main parties have to make with support partners. The more efficient that main parties are at creating symbols to placate support parties that have zero real world effect, the better. Yes, they can cost a bit of money in the budget; NotPC says the Buy NZ campaign cost somewhere around $10 million. But that's insanely cheap compared to other anti-trade policies. I cannot imagine a better piece of policy that buys off the Greens and the nationalists while having trivial deadweight costs. Yeah, so every tax dollar has a deadweight cost somewhere around thirty cents. So the policy cost $13 million all up, pure loss. But compared to hiking tariffs or abandoning the free trade deal with China? Priceless.
I guess part of the disagreement is due to me looking at the campaign from a economic point of view, rather a political point of view. Also Eric's argument only works if the alternative buy-off of the Greens was more expensive than the "buy New Zealand campaign", and we don't know what the alternative was. If we are to assume that the campaign buy-off was the cheapest option, then we live in the (2nd) best of all possible worlds. But it seems unlikely to me that, given we are talking politics, we would be in the best of all possible worlds. Just because it is doesn't mean it's best, or even 2nd best. Political markets are not as efficient as economics markets. Politicians are spending other people's money and as Milton Friedman put it "very few people spend other people's money as carefully as they spend their own." I think Eric is, implicitly, assuming we got the best deal possible, something which for me at least seems a little too Panglossian.

6 comments:

bradtaylor said...

We'd expect to end up in the second-best solution occasionally by pure chance, though.

Crampton said...

Offsetting currently down due to GoogleFail: they think it's a spam blog. Hopefully back soon.

Crampton said...

Re your substantive argument: maybe there exist cheaper symbols that are no less effective, but I cannot think of one. They simultaneously bought off the Greens and the unions and were able to push through a free trade deal with China, which they might not have been able to get absent the buy kiwi campaign. A one-off cost of $13 million -- about $3 per person. What would have been the ongoing gains from trade forgone had we not gotten the trade deal? Much much higher methinks.

Buy NZ Made was beautiful heresthetics.

Julian said...

Eric

I understand your argument (well what I have been able to deduce from your Paul's site) but I think that a buy NZ campaign is more costly (and insidious) than merely attributing a cost of $3 per person. What it does is reinforces, perpetuates and feeds an anti-foreign racist attitude which has costs (many non-financial).

Julian

Crampton said...

Maybe, Julian, but that's a second order effect. I'd argue that it was pre-existing anti-trade sentiment that meant that Labour had to pay off the unions and the Greens with something; the campaign could have reinforced antitrade sentiment among some of those and might have flipped a few folks from being mildly pro-trade to mildly anti, but compared to the reinforcement effects of tariffs?

V said...

The second best alternative option would be far cheaper.

I know many who could supply a raised middle finger to Fitzsimons, Norman, Kedgley, Bradford and co, with minimum energy input costs.

Sadly elected politicians have no incentive to reduce this sort of dubious expenditure. 'Only' $10 million here and there soon adds up. Soon enough we will be like the USA where it's 'only' a billion here or there.