Make your list

So it turns out that the NSA has been scooping up rather a bit of information about Version Verizon customers in the States. It hasn't been entirely a secret prior to now; it would be a bit surprising if the other phone companies didn't have other similar systems in place.

JD Tuccille notes that Americans travelling within America, but within 100 miles of the border, are getting stopped at checkpoints on the interstate for citizenship checks.

A couple of months ago, when Alex Tabarrok complained of his son's school being turned into a police camp, I noted some of the differences between American schools and the ones here, concluding:

You can choose to live like this too. Sure, New Zealand is getting worse, and it's definitely worse than some parts of the US if marijuana freedom is an important part of your bundle of liberties. But NZ is starting from a much better spot than the US, and it seems to be getting worse slower than other places.

Things aren't bad enough to leave yet? Fine. Freedom's a value, but so too are other things like distance from family and wealth differentials and access to Ethiopean restaurants. But write down today some bright-line rules that you think should trigger your future exit; it's easy to acclimatize to gradual changes for the worse.

If you really want to live free, write down your list of things that would actually be sufficient to trigger your emigration, then think about the places you might go that offer the best deal on the bundle of freedoms that matters most to you.

If you're instead happy getting consumption benefits from ranting about the deterioration of freedom in America, or from imagining that you'll be able to change things there, carry on.

Here in New Zealand, we should be especially vigilant against importing American spy regs. It's awfully tempting for some folks in Wellington to be seen to be team players by signing onto things the Americans want. I hope we're especially careful with the Telecommunications Interception Capability & Security Bill. New Zealand can become relatively more attractive simply by standing still.

Update: Emigration won't help you against this one. It might make things worse.

The National Security Agency has obtained direct access to the systems of Google, Facebook, Apple and other US internet giants, according to a top secret document obtained by the Guardian.

The NSA access is part of a previously undisclosed program called PRISM, which allows them to collect material including search history, the content of emails, file transfers and live chats, the document says.

The Guardian has verified the authenticity of the document, a 41-slide Powerpoint presentation – classified as Top Secret with no distribution to foreign allies – which was apparently used to train intelligence operatives on the capabilities of the program. The document claims "collection directly from the servers" of major US service providers.

Although the presentation claims the program is run with the assistance of the companies, all those who responded to a Guardian request for comment on Thursday denied any knowledge of any such program. ...

The PRISM program allows the NSA, the world's largest surveillance organisation, to obtain targeted communications without having to request them from the service providers and without having to obtain individual court orders.

With this program, the NSA is able to reach directly into the servers of the participating companies and obtain both stored communications as well as perform real-time collection on targeted users.

The presentation claims PRISM was introduced to overcome what the NSA regarded as shortcomings of Fisa warrants in tracking suspected foreign terrorists. It noted that the US has a "home field advantage" due to housing much of the internet's architecture. But the presentation claimed "Fisa constraints restricted our 'home field advantage'" because Fisa required individual warrants and confirmations that both the sender and receiver of a communication were outside the US.

I expect we instead need a Bruce Schneier guide on secure internet use.

Is there some Chinese version of Google I can flip everything over to? If somebody's going to be sniffing through all my email, family photos, chat sessions and the like, I'd sooner it be them. At least they're honest about it.

Two unrelated stories

Item the First: The WHO seeks a comprehensive ban on tobacco advertising in the Western Pacific region that includes New Zealand.*

Before Item the Second, recall anti-tobacco campaigner Jack Banzhaf's 1991 dismissal of slippery slope arguments:

"They use the 'slippery slope' argument. 'My God, if they can do this to smokers today they can do this to people who eat Haagen-Dazs ice cream or whatever.'"

Item the Second: The University of Otago's Janet Hoek wants New Zealand to implement plain packaging for soft drinks. The anti-tobacco industry used to warn that there was no slippery slope from anti-tobacco proposals to other products; tobacco just wasn't like other commodities. Hoek writes:

Tobacco is a very unambiguous product because it is uniquely harmful - some foods are closely analogous to tobacco as they offer no nutritional benefit and the research evidence suggests changes in food supply, particularly the widespread availability of inexpensive, palatable, energy dense food have contributed to, if not at least partly caused, the rising prevalence of obesity.

Hoek warns about a different kind of slippery slope: she says the food industry has been adopting tobacco-industry style tactics to delay government regulation.

* I think it's inframarginal for NZ.

Christchurch Housing

I'd missed the Ministry of Business, Innovation and Employment's summary report on Christchurch housing when it came out a couple of months ago.*

The highlights:

• Total housing stock dropped by a net 11,500, or 6.2% of the ex ante housing stock, from 2010Q4 to 2012Q4.


• The number of private rentals as measured by tenancy bond remained constant at 39,000 during 2011 and 2012; the prior trend had increases of 1500 per year prior to 2010. 
  Demand for rentals would have increased sharply with destruction of owner-occupied homes, temporary moves by those getting repairs, and incoming construction workers. The largest drops were in tenancies of 2 to 3 bedroom homes.


• House prices in Christchurch are well above their prior 2007 peak, though Auckland's prices have ramped up by even more. But Christchurch rental prices have increased by more than Auckland. From August 2010 through February 2013, the average Christchurch weekly rent measured by new bonds lodged** increased by 31%, from $293 to $384. Auckland rental prices increased by 13% over the same period. 
• While average weekly rents remain higher in Auckland and in Wellington, the 2012 Household Income Survey has household income in Auckland at $94k, Wellington at $93k, and Canterbury at $82k.


• Rental accommodation at the bottom end of the market have been particularly hit. MBIE notes that MSD reckons $180/week about what beneficiaries can pay in rent; the proportion of private new bonds lodged in that range has halved since the quake. 
• I'm following up with MBIE for a bit more data on the overall distribution.


• Social housing units, whether provided privately as bedsits and boarding houses or publicly as Council housing or Housing NZ units, have also dropped substantially. Housing NZ was down 6% as of December 2012; I understand that the government pushed pretty hard to get the Housing NZ units sorted despite some thorny insurance issues. Christchurch Council is down 17%. The low-income tenants here served would not have an easy time finding alternative accommodation. They're being outbid for private rentals by incoming construction workers and by people seeking temporary accommodation during earthquake repairs. 
• I note that measures that could increase supply at the lower end of the market, like making it legal for private homeowners to build secondary flats into their homes, would result in fewer vulnerable tenants being displaced. 


• Holiday parks, which sometimes provide overflow temporary accommodation rather than just catering to tourists, are also overflowing. 
• I note that Council staff came close to shutting down the South Brighton holiday park when its toilet block failed an engineering code assessment; they backed down when it hit the press and instead are letting it be strengthened.  

The report also warns of a huge increase in accommodation demand set to come in 2014-2016 when an estimated 15,000-25,000 construction workers will be looking for housing at the same time as tens of thousands of home repairs create demand for short-term accommodation.

There's no way that allowing secondary flats within peoples' houses would come close to meeting the demand that's yet to come. But neither is there any reasonable reason to continue banning one of the easiest ways of getting quick temporary accommodation to market.

It will be interesting to see what will happen in 2014-2016.

* I'd linked the report here, but hadn't gone through it in depth.

 ** This will provide a better indicator of current market prices than would a measure of all existing rents: it shows what prices are faced by those coming to market.

Social Costs and HPV

I've seen the light.*

Here's the New York Times on recent findings about HPV.

In the 1980s, only a small number of throat cancers were linked to HPV infection. Historically, patients who developed the disease were in their 70s and were heavy smokers and drinkers.

Now, about 70 percent of all throat cancers are caused by HPV, up from roughly 15 percent three decades ago. Patients are now more frequently middle-aged husbands and fathers who are economically well off, nonsmokers and not particularly heavy drinkers. Men are three times more likely to be diagnosed than women with HPV-related throat cancer.

In short, 70% of throat cancer is caused by HPV transmitted during oral sex. And we know that when private actions impose costs on others through the public health system, there's a prima facie case for government intervention.

Let's run the drill. What are the social costs of risky sex? And why haven't we taxed it yet?

First, any risky act undertaken with imperfect knowledge about possible consequences cannot, by assumption, yield any benefit for the person bearing the risk. It's all market failure. We will consequently assume that hazardous oral sex of this sort is not pleasurable for anyone involved, so there are no offsetting benefits that must be counted when we go about regulating and taxing. Recall that sex addiction is very real and that there is no known safe level of sex; every sex addict began with a single sex act. There's no possible reason that anybody could be engaging in risky sex other than irrationality or addiction, given that we've assumed that there's zero benefit from doing it. Why else would somebody do something that has zero benefit?

And we also know that oral sex is like a gateway drug: I'm sure that the Dunedin Longitudinal Survey people could really easily show that teenagers engaging in oral sex were more likely to go on to try other sex acts at younger ages and with more partners than those who showed more restraint. I bet they're also more likely to try marijuana.**

So what then are the costs? Well, let's apply sex attributable fractions to a whole host of disorders. 70% of throat cancers are due to HPV, which is by definition a consequence of undertaking a risky sex act. And there's all the other STD costs. Add up all the treatment costs, add up all the costs of premature mortality, double-count the costs of productivity losses, add in some estimates of intangible costs falling on friends and families of those suffering. Then add in all of the costs that men and women incur in finding partners for engaging in sexual activity: all the costs of attractive clothing, the opportunity costs of time spent trying to attract a partner, the direct costs of buying drinks for a potential partner, subscription fees at dating websites... it's all pure loss because dangerous sex has no offsetting benefit by our assumption at page 173 in the appendix to the report. Pretty clearly, the social costs of oral sex exceed the excise tax revenues. And that by itself of evidence of market failure.***

So why haven't we taxed oral sex? Well, it would be almost impossible to enforce. In a perfect world, the panopticon would see and tax all. But we're not there. Instead, we have only imperfect regulatory instruments. What should we then do?

For starters, we need studies by the University of Otago's School of Public Health demonstrating how not only movies and television glorify oral sex, but also how social media affects things. Doesn't Durex have a Twitter account? It's also worth noting the timing on the HPV rise here. I blame Desperate Housewives:

Bree: Excuse me. Did you lose something?
Orson: No. I just thought... for you.
Bree: Oh, um. I don't do that.
Orson: Why not?
Bree: I'm a republican.
Orson: I'm a libertarian. I believe in minimizing the role of the state and maximizing individual rights.
Bree: But Orson?!
Orson: Trust me. I know what I'm doing.

Is it any surprise that the libertarians would be the ones again to blame? 

Otago could also recruit a dozen people via Facebook and interview them about whether drinking makes them more likely to consider oral sex. If it does, then anti-alcohol and anti-oral-sex policies could be complementary. And if people are more likely to smoke after sex, then that also increases the benefits of anti-sex policies. We also need to think about how alcohol advertising also promotes sex: Woodstock commercials could lead young men to have sex with their friends' mothers. It's so obvious that we need a trifecta of policies to simultaneously address alcohol, tobacco and oral sex because of their costs to the public health system. Actually, that misses one: I'm pretty sure that this all somehow makes fat taxes even more important, I just haven't figured out how yet. But I'm sure that Otago's public health people will figure it out.

Now a couple of people on Twitter last night, likely secretly in the pockets of Big Sex, suggested that all of this might be misguided. There's a vaccine for HPV that removes the HPV-risk of oral sex while maintaining the supposed benefits. But, that's cheating. Just like it is cheating to use e-cigarettes to get a nicotine hit while avoiding lung cancer. If we cannot use e-cigarettes as part of anti-smoking policy, we can't use the HPV vaccine a way of avoiding the social costs of oral sex. Deep down, it's the sin that's the problem. If people could enjoy sinful hedons without consequence, where would we be? We have to teach them to avoid the sin, not to mitigate sin's consequence.



* No I haven't. Everything in this post, except for **** below, is simply applying consistently the methods used in the bogus shonky cost of illness studies used to justify alcohol and tobacco regulation.

** And if Ole Rogeborg wants to claim that they haven't proven causality and that much of it is due to underlying type, remember that because Dunedin refuses to share their data with anybody, we just have to take Dunedin at their word even if Ole has some fancy simulations.

*** Especially as there is no excise tax that here applies. Note that we shouldn't count GST revenues from professional transactions of this sort as offsetting things because the money would be spent on other GST-applicable transactions in the alternative.****

**** This is about the only part that isn't tongue-in-cheek. GST really wouldn't and shouldn't count in this case. Everything else here is rubbish.

Against capital gains taxes

The OECD having recommended that NZ adopt a capital gains tax, it's worth reviewing the case against them.

First, here's the OECD:

New Zealand belongs to a group of five OECD countries with particularly high pre-tax capital-income inequality (Figure 13). As much of this income, especially at the top levels, takes the form of capital gains, the lack of a capital gains tax in New Zealand exacerbates inequality (by reducing the redistributive power of taxation). It also reinforces a bias toward speculative housing investments and undermines housing affordability, as argued in the 2011 Survey. 

The OECD report also seems to reckon that capital gains taxes, along with other taxes and changes to Superannuation, could help debt issues when Superannuation starts getting rather expensive.

Where to begin.

First, the OECD is entirely right that NZ should be moving to increase the age of superannuation eligibility. The Productivity Commission said so, anybody economically sensible has said so, and even Labour's in favour of it. The only thing that seems to be holding it back is that Key had promised in 2008 not to do it and didn't change his mind in the last election.

Second, the OECD could be right about land taxes. As part of a revenue-neutral shift away from income taxation, it would be a really nice move. My only concern, and it is the one that would keep me from pushing the button for that particular tax shift, is that equilibrium overall tax rates are likely to wind up much higher as consequence. Open up another margin for taxation and the government will wind up getting bigger over time. Even if it's revenue neutral now, it won't be the next time a Labour/Green finance minister decides to go after the 'rich pricks' by reinstituting a 39% top marginal tax rate while keeping the land tax.

But on capital gains, well, we disagree.

First, it's hard to make the case that the absence of a capital gains tax distorts investment towards housing. Maybe you could argue that we've a distortion such that firms have incentive to avoid distributing revenues as dividends and that individuals have incentive to hold shares in firms that follow such strategies rather than interest-bearing assets, but that doesn't make a case for a housing-specific distortion - especially as the IRD has been getting more vigilant about individuals flipping houses. Buying a house, doing it up, and re-selling it at a profit will draw income tax: the gain is taxable income from your labour in fixing and marketing the house. I can't see how we get a distortion towards housing rather than towards a broad set of appreciating capital assets. We certainly have problems around housing affordability. The first order problem is Councils' restrictions on the supply of zoned land. Sort that one out, and a lot of the second order problems, like inefficiencies of scale in construction, also start going away.

Second, capital income is already taxed when it is spent: we have a 15% GST. The more we are able to shift from income to consumption taxes, with offsetting transfers to those on lower income if you like, the better.

Third, as Seamus pointed out two years ago, we need to compare the relative efficiencies of the different available tax instruments. Taxes on capital income are more distortionary than taxes on labour income, and even worse when capital gain taxes tend not to be inflation-indexed; real tax rates on capital income then easily wind up being higher than taxes on labour income. And, there's a bit of a mess in deciding how to treat realised versus unrealised gains - you're basically there choosing among rather bad consequences. Read Seamus's whole post.

Fourth, the story required for the absence of a capital-gains tax to distort choices between productive investments and some kind of unproductive investment (basically, purchasing some asset that appreciates in value over time) is especially convoluted (another Seamus post...read the whole thing....).

Fifth, Seamus noted that while you can hang a case for a capital-gains tax on an argument Samuelson made rather a while back, Samuelson's argument shows that you need a capital-gains tax to avoid the problem of distorted choices among assets whose payoffs are more than 25 years into the future; nearer-term payouts aren't affected by that kind of distortion. Seamus also hit on a couple of other potential objections.

Want to increase the redistributive potential of the tax system? Increase the GST while increasing income-based transfers to the poor. Why muck up incentives to make capital investments?

Signalling and education

U Vic's student magazine asked me for comment on signalling and degree inflation; Wilbur Townsend and Nick Cross's story is now out.

I agree with Nick that there has been degree inflation in New Zealand; most folks around the traps suggest the big push happened in the 1990s. It's largely leveled off since then. Or, at least at Canterbury, I've not seen much evidence of it since I've been here. It could pick up again once the full effects of the various Universities' new taught masters programmes start coming through.

Here they channel Bryan Caplan:

Why would people get a tertiary education if it doesn’t add value? We believe it is about sending a signal to potential employers. The ‘signalling model of education’ holds that the wage premium from having a tertiary degree comes from the signal of a person’s abilities relative to others. It’s based on the observation that most formal tertiary education is taught by professors with little experience outside the ivory tower, and that most courses are concerned with academic theory and not tailored to specific occupations. Why would these be any use in the real world? Research into the ‘transfer of learning’ suggests that education does little to actually improve intelligence or critical-thinking skills in the long run. Consider the way you approach your own education. Most of us spend weeks cramming for our final exams, but aren’t at all worried if we forget much of the material the second the exam is finished. Most of us rejoice when a class is cancelled because it means we have less to learn. But there is no proportionate reduction in fees for the cancelled class—shouldn’t we be outraged? If education is about building human capital, why isn’t our focus on accumulating as much knowledge as possible? If it’s about signalling to employers, we can understand that the most important thing to come out of our education is the piece of paper at the other end.

It's also been fun seeing a bit of evidence of degree inflation in the data. In the main US work on political knowledge, income matters far less than education in predicting political knowledge. But, here in New Zealand, they both seem to matter. A lot of very successful people here got their start when all you needed was a high school degree, and so household income is the better proxy for intelligence for that cohort. The main bout of degree inflation in America happened decades earlier.

Here's what I sent Nick, which he of course needed to truncate to leave room for others:

“Degree inflation is real, but signalling isn’t everything that’s going on in education. The signalling model says that the value of education mostly comes from the little piece of paper certifying not that the graduate has learned anything but rather that the graduate is the kind of person who is able to put up with a few years of grinding pointless work without quitting, can complete assignments on time, and is smart enough to have made it through. While it would be easy to provide cheaper signals of intelligence, there isn’t a lower-cost way of signalling the ability to put up with years of grind-your-way-through assignments. So it isn’t implausible that much of what goes on at University is providing that signal. But that can hardly be everything: there are wide differences in salary for graduates with different degrees, and at least some of that is due to the specific things taught in those degrees.” 

“At least at Canterbury in Economics over the last decade, I have not seen great evidence of degree inflation. In a degree-inflation model, we would have a higher proportion of students progressing from the Bachelors to the Honours degree, and then more moving on from the Honours degree to a Masters, but little change in where the graduates wound up. But about the same proportion of our majoring students go on to pursue an Honours degree now as was the case a decade ago, we haven’t really changed the standards for entering Honours, and our Honours students place as well at Treasury, the Reserve Bank, the bureaus, and the trading banks as they ever have. I expect that this will have changed in a decade’s time: a lot of places are repackaging Honours degrees as Masters. If employers only pierce the credentialing veil imperfectly, then we could wind up with Masters being the new Honours. While we have substantial degree inflation in the overall population as compared to, say, fifty years ago, I don’t think there’s been much change over the last decade. When I got here, it took an Honours degree to land a decent entry position at Treasury; that’s still the case now.” 

“The problem with the signalling equilibrium is that anyone not pursuing a University degree is lumped in with everyone who would not be able to complete one if they tried. And so employers infer something about an applicant’s likely abilities from that he hasn’t gone to University. The only real way of solving the problem would be to reduce the number of funded places at University while providing ample scholarships to students of very high ability but limited means, but it’s not immediately clear that this is better than what we currently have. It’s not crazy to think that New Zealand could be better off if, say, a quarter of the students currently coming to University for business degrees went instead to the polytechs for vocational training. I’ve not seen any conclusive case for or against it, but it’s not immediately implausible.”

The introduction forms a bit of a depressing assessment of New Zealand's intellectual environment.

Canterbury University economist Eric Crampton is the closest thing New Zealand has to a ‘public intellectual’. He blogs at offsettingbehaviour.blogspot.com, and regularly appears in New Zealand media to bring an economic perspective to issues such as alcohol regulation, breakfast in schools and the Christchurch earthquake recovery.

I'm not sure that's entirely accurate. Or, rather, the NZ Herald last year reckoned there were at least a couple dozen of us. 

The provocative conclusion, for a student magazine, I'm sure will draw interesting letters to the editor.

Knowable, but not known to me

In the futile hope that maybe, just maybe, folks' views about welfare policy might just stand to be informed by data, here are a few testable hypotheses I've seen floating around. They posit things that are knowable, and I'm sure data exists to resolve things. Let's walk through a few of them.

First, how do poor people use money? I tend to say we ought to just give money to poor people if we want to make poor people better off. Other folks think that they'll just waste it on booze and cigarettes rather than helping their kids. I don't discount that that's also possible; it's an empirical question.

@ericcrampton Is there any research on how people on low incomes spend their money, and what changes when get more cash per week?
— Jackson James Wood (@_jjw_) May 28, 2013

Now why does this matter? If you think that parents will waste money given them, you might prefer in-kind benefits provided directly to the children of poor parents rather than cash transfers. School breakfast programmes can fall into that category, despite that they're rather ineffective and largely go towards feeding kids who would have been fed anyway. I think that some of the support for wrecking the GST by exempting merit goods also comes from this kind of view, though I think this rather misguided: vouchers for merit goods could be a rather less ruinous way of achieving the desired end.

So, the test. Get household consumption survey data, look for some shock to benefit payments, and check the effects on different consumption categories. If extra money going to poor households disproportionately increases consumption of lotto tickets and booze, then the paternalists who want to make sure that money given to the poor is used for particular things are right in wishing for more in-kind benefits; if not, then the paternalists should back down on such assertions.

I can't imagine that this empirical test has not been done by somebody somewhere; I just don't know the results. I also don't expect that it will change many minds. Paternalists will want paternalism for its own sake, and anti-paternalists won't mind that poor people enjoy some consumption goods. I'm one of the anti-paternalists, but if the data showed little benefits to kids of cash transfers to families intended for kids, I'd shift towards preferring rather more in-kind benefits to kids. Any readers able to point to relevant NZ studies are welcome to do so in the comments.

Second, "can't feed 'em, don't breed 'em". Twitter and the NZ blogs have a bunch of folks yelling at each other about whether the main problem in child poverty stems from poor people's unwillingness to engage the prudential constraint or whether it's bad luck. Those on the right note that if poor people stopped having kids they couldn't afford, then child poverty would be less of an issue. People on the left instead remind those on the right that birth control can fail and that people in good financial circumstances can fall on hard times for reasons outside of their control and after they've set their family size.

So, a test. Start with DPB numbers. What is the current fertility rate of women receiving the Domestic Purposes Benefit, and how does it compare to the fertility rate of women of similar age and marital status who are not receiving government support for the raising of children? If the fertility rate among women on the Domestic Purposes Benefit is roughly what we would expect given known rates of contraception failure, then score a point for the left. If women on government support are instead choosing to have more children while in poverty, then score a point for the right. I would bet that the data shows rather more childbearing than would be expected from contraception failure alone, but less than the fertility rates among similar-aged women not on the DPB, but I've not seen the data.

Again, I'd be surprised if this kind of data didn't exist somewhere. I expect that the data could actually potentially make some difference here, though it depends which way it goes. If current rates of childbearing by women in poverty are consistent with failure rates of reliable and available birth control methods, I don't think many on the right would shift to demanding abstinence and abortion. But if current rates of childbearing by women in poverty are consistent with deliberate choice to bring more children into poor households, I expect that most on the left would shift to a fairness argument about that those in poverty shouldn't be constrained against choosing to have more children. And then there'd be the obvious counterargument about how it's a bit perverse that richer households deciding to have fewer children because of the costs are compelled to subsidise the fertility decisions of those happy to raise a kid in very bad circumstances; those on the right then might wish to advocate for that reliable birth control be a precondition of welfare receipt. Those are values-based arguments I can't adjudicate, though I expect that if, for many, the point of social insurance is to insure against bad outcomes, and if there were reasonable evidence of that many on the DPB were choosing to have many more children, there could be reasonable support for that birth control be among the conditions of welfare receipt.

A second test: what is the elasticity of childbearing among the poor to changes in benefit rates? Those on the right worry about paying women to have children they can't afford and think that paying more to benefit existing poor kids does a lot to bring more poor children into the world; those on the left think that the elasticity is pretty low and that we need to focus on the potential first-order benefits of higher transfers to existing poor children. I don't know if this elasticity is known, but it's definitely knowable. Find some shock to the generosity of payments to poor children and see whether it has any effect on subsequent fertility decisions. If little to no effect, score a point for the left; if things are reasonably elastic, score one for the right.*

Again, those with data or studies that might help resolve the second question are welcome to provide pointers in the comments.

If this stuff turns out to be in the "knowable, but not known to anybody" category rather than just "not known to me", file this under "future honours projects".


* I'm on some orthogonal dimension where I reckon it's good that more kids be brought into existence conditional on their enjoying their existence, even if they are poor. I worry instead about net effects when higher income people forbear from having their third child because of the income effects of the taxes taken from them to subsidise the bringing-into-being of a lower income person's third child. And then we get into the empirical question of relative elasticities and some rather thorny questions about trade-offs.