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  • Robert MacCulloch

Last week, the Climate Change Commission (CCC) released its report for the NZ Government. It received nation-wide media coverage:

A large number of the world's most eminent economists recommend that the best way of dealing with the harm that pollution is causing the environment is to price that harm by implementing a carbon tax. Once that is done, then private individuals will change their behavior accordingly, substituting toward greener products and technologies that do not attract such a tax. To ensure there isn't damage to the overall economy, the proceeds from these taxes can be used to cut income and corporate taxes so the policy becomes "revenue neutral".

However, I could not find the words "carbon tax" anywhere in the entire CCC report, which is several hundred pages long and meant to cover all aspects of the best policies to reduce environmental damage, whilst at the same time not hurting overall prosperity. Yes the report discusses the Emissions Trading Scheme, but not carbon taxes, and there are differences which are the subject of important world debates.

Instead the report seems to go heavy on introducing "command and control" rules and regulations. These are frowned upon by many top economists since they rely on large numbers of bureaucrats, are prone to huge mistakes, can be very costly and hard to enforce. By the way, if you Google "Carbon Taxes Canada" you get "People also ask? Is carbon tax effective in Canada? But the carbon tax is generally the most efficient tool, which is why it has to be an important part of Canada's plan to bring emissions down by several hundred megatonnes by 2030 ... any government serious about lowering greenhouse gas emissions has to put carbon taxes at the top of the menu".

  • Robert MacCulloch

I wrote an article for the National Business Review, accessed via their website,, or you can read it below. It makes the argument that the achievement of this present government is to set an objective for NZ that strikes a chord with most Kiwis - namely high well-being supported by an ethos of respect for the other, or "kindness". However, let's not get carried way. There isn't a strategy behind how to achieve this objective. Here it is .....

In January 2019, The Prime Minister penned an extraordinary article for the Financial Times (FT) in the United Kingdom. It was titled, “New Zealand hopes the World will follow its Wellness-based Policies”. She wrote about introducing a “kindness perspective” that wasn’t “woolly” but part of a “well-rounded economic approach”. Was she claiming to invent a new way of managing nations? Was she lecturing the British on how to better run their country?

No doubt, back then, many National Party members reacted to the article with glee. Didn’t it show the PM was uncomfortable with the workings of free markets whereby competition, inspired by a self-interested quest for profits, could drive innovation, prosperity and better social outcomes? Wasn’t she aware of Adam Smith’s famous line in the Wealth of Nations that “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest”. Didn’t the FT article suggest National was the party that should be trusted on the economy? Little did the detractors of the PM’s proclamations know what was soon about to happen.

Barely over one year later the world would be mired in a brutal pandemic. The key problem in terms of its management was to ensure people did not spread the disease to others. When private actions result in external harm, economists advocate putting a price on that harm. In the case of pollution, this takes the form of a carbon tax. However, contagious diseases are different. Faced with the impossibility of taxing a person who coughs on another, governments had to resort to rules, like lockdowns, as well as rely on people to be considerate, acting with - yes - kindness, so others wouldn’t be exposed to the virus.

Suddenly, what had seemed like woolly lines in the PM’s Financial Times article had taken on a life-and-death significance. Putting consideration of other people’s wellness ahead of selfish behavior became critical to NZ’s success, not only in terms of public health, but also for the economy. In the process, the National Party became collateral damage, wiped out at the ballot box.

But had the PM actually invented anything new that didn’t already exist? There is no evidence that NZ has recently become a kinder country. Surveys like Legatum’s Prosperity Index placed NZ first in the world back in 2016 in terms of our social capital, which measures “the strength of personal relationships, social network support and civic participation”. Other surveys that also predate the Ardern government rank this country as being one of the most likely places to have your wallet returned should it be lost.

Furthermore, although economics appreciates how self-interest can lead to good social outcomes courtesy of Adam Smith’s “invisible hand”, it also has long recognized the importance of trust and altruism. An example is a much studied experiment called the Ultimatum Game, in which one person proposes to another person a division of a sum of money, let’s say $10. The latter can accept the proposal, or reject it, in which case both people get nothing. When selfish proposals are made, like wanting to keep $9 which would leave $1 for the other person, rejections are common, leaving both worse off. Better to be kind and propose a more equal division so your offer is accepted and everyone gains.

What about the novelty of the PM’s idea of replacing GDP by some notion of wellness? Politicians way before her have taken aim at GDP as being a poor measure of progress. The PM’s FT article echoes a speech Senator Robert Kennedy gave in 1968. For too long, we seemed to have surrendered … community values in the mere accumulation of material things”, he said, pointing out how GDP counts air pollution. He concluded with the line that GDP “measures neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile”. And in terms of putting such sentiments into policy, Dubai appointed a “Minister of Happiness” five years ago.

So what is the PM’s contribution to economic management? There isn’t one. There is no such thing as Jacindanomics, at least in the sense that there was a thing called Thatcherism, which was a concrete policy agenda behind the implementation of “supply side economics”. Aside from calling on people to observe last year’s lockdown and take care not to spread the virus, it is hard to find the “wellness-based policies” referred to in the FT article. The wage subsidy scheme which helped keep people in their jobs this past year may qualify, but other than that there remains only a wellness objective. No novel ways have been suggested to better manage the health and education systems, housing, poverty, the environment and welfare more generally. No framework exists that justifies the label “Jacindanomics”, containing new mechanisms and incentive systems to achieve the wellness objective which the PM has set the nation.

In spite of that limitation, this government still sits on an important achievement. It is shifting the Opposition into a realization that attempts to grow the economy at whatever cost is not regarded as being part of a pleasant vision. The aim of more GDP, but coming with congestion, a poor environment, stress, high immigration and unaffordable housing, doesn’t resonate with most Kiwis. By contrast, a quality lifestyle, wellness and living in an honest country with an absence of corruption and respect for others, does. Once the Opposition has adopted the same goals which Labour has now successfully defined for NZ but has worked out how to better achieve them, it will be on the way to re-election.




Robert MacCulloch

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