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Pseudo-productivity with Dr Eric Crampton

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The Productivity Commission’s report on state sector productivity makes for dismal reading.

We all could be enjoying either more of the benefits that government programmes can provide, or lower taxes, or a combination of the two if the state sector had a greater focus on productivity.

Our Executive Director’s column in this week’s National Business Review walks through the grim details.

But it gets even worse.

Not included in the Commission’s remit was the government’s role in regulation.

Good regulation can improve wellbeing and productivity. It helps coordinate standards and expectations. It can help improve environmental quality where tort law and property rights are insufficient. And it can help to protect the vulnerable in cases where government expects that business reputational incentives are not enough.

Regulation too often does not work well. Regulation impact statements detailing costs and benefits are meant to accompany every regulatory proposal. But they are too often drafted in haste, seeking to justify a Minister’s preferred policy rather than solve any real problem. And too little work goes into post-implementation reviews.

This week’s case-in-point: the 2010 amendments to the Misuse of Drugs Act that blocked Kiwis from accessing the only cold medication that seems to work: pseudoephedrine. The government sought to reduce the supply of methamphetamine, or ‘P’, by making it harder for people in New Zealand to cook meth using cold medicine.

Did it work?

For a couple of years, the reported availability of methamphetamine decreased. But drug users now report that it is easier to get methamphetamine than it was prior to the ban. The price of methamphetamine dropped to pre-ban levels by 2012, and by 2016 was lower than it had been at any time since 2006 – even without accounting for inflation.

By any reasonable standard, the ban on pseudoephedrine has failed to achieve its objective. But it has made life worse for every single person who has caught a cold. And that too has productivity costs. Instead of being able to work productively from home while munching on Contac NT, I’m about to head home today with a head full of cotton and a hand full of phenylephrine placebos.

It would be great if Labour could reverse National’s failed ban on pseudoephedrine-based cold medicines. It would be even better if we could fix the regulatory system to stop giving us these kinds of productivity-wrecking rules in the first place.

  • Source: A NZIniative release