A battle with Treasury

My objection to Treasury

For me, this started on 13th June – when I learned of a speech given at the National Fielddays by Gabriel Makhlouf (Secretary of the Treasury and CEO).
It was so incorrect.
I wrote a letter:

[my letter]

Gabriel Makhlouf gave a speech at Mystery Creek a couple of days ago in which he said “As we saw with the establishment of the Kaikoura marine protected areas, the transaction costs of making decisions on how to manage our resources can be extremely high.”

Can I please have a copy of the analysis of how that conclusion was arrived at, and how the costs of making (and not making) decisions at Kaikoura and at other places was measured.

I would like to see the detailed workings.

I have been deeply involved in the setup of three marine reserves, including the first at Goat Island, and it is my clear impression that the Kaikoura experience was the least cost model, in terms of overall social costs, including social disruptions, and likelihood of major non-compliance. I am somewhat shocked to read Makhlouf’s assertion to the contrary.

If the evidence behind the assertion does not stand up to scrutiny, then I will be calling for a formal apology and published retraction.




On 1st July I got a reply saying that they had given themselves a further 20 days to respond to my Official Information Act request.


Yesterday – 5th August, I got a response.

They didn’t have any workings, no one had done any work to estimate the cost.

The secretary of the treasury, at a major speech at the largest single gathering of our country’s primary production sector, made a statement about the costs of a way of reaching social agreement that was based purely in the fact that it took a few years to reach the decision. Time was the only variable considered – everything else was simply assumed.

To say I was unhappy is something of an understatement.

So I wrote a reply:


To – Ministerial Services
Copied directly to: Mark Vink & Gabriel Makhlouf

Thank you Mark for your reply.

I strongly suspect that the most telling paragraph in your reply is:

“The treasury did not carry out analysis of the costs of establishing the Kaikoura marine protected areas in preparation for this speech. We considered the fact that the area took more than 8 years to establish and required bespoke legislation, shows that there is scope to significantly improve the processes required to establish marine protected areas.”

I agree with that last statement.

And I strongly suspect we would not at all agree about what those improvements would be.

Having been in that process, it was definitely rushed at the end, and the result diminished accordingly.

I would say that to be effective, a change of this magnitude in the allocation of commons resources should take at least 15 years to develop a community consensus that will enable ongoing alignment of outcomes (without incurring the cost of significant loss of social cohesion, with all the risk profiles entailed in that).

The fact that it required bespoke legislation to implement points to a major failing in the structure of existing legislation, that the processes are so tightly defined, and so independently siloed that there was no way to implement the community consensus through the existing legislative framework without said bespoke legislation. The framework needs work.

To me, that points to major systemic issues at many levels. (And to be clear, these views are mine personally, and have not gone through the Te Korowai consensus process.)

1/ At one level, it demonstrated that money as a measure of value is coming to the end of its societal utility. Money, being a market based measure of value, is a function of scarcity. Anything that has universal abundance has zero market value (if you doubt that, consider oxygen in the air, arguably the single most important thing for any human being, yet of zero market value due to its universal abundance).

We have now a significant and exponentially growing set of technologies that are capable of delivering universal abundance of a large and exponentially growing set of goods and services, yet there is zero economic incentive to implement any of them universally, because to do so destroys all economic value (which value requires scarcity).

Thus poverty for some is the logical necessity of all market based systems that rely purely on market incentives. And given the rate of advances in robotics and AI there is no employment area free of this risk.

2/ All human beings are extremely complex, and demand respect at all levels. All human beings have complex responses to real world situations that defy rule based systems (the physics, biochemistry, logic and mathematics of that are beyond a short paper such as this).
I really like David Snowden’s Cynefin framework for understanding and responding to different types of complexity. It breaks down the logic of people like Turing, Goedel, Mandelbrot and Wolfram into a framework that is available to most people.
You don’t need to have my 50 years of deep interest in ecology, behaviour, systems, logic, biochemistry, economics, politics and artificial intelligence to understand what is going on. It can be approximated to a useful level of utility in a simple diagram.

3/ Developing community consensus is a process of generating understanding and respect. It is a process that demands an acceptance of diversity that is beyond any dogma or understanding or set of rules. It is what happens when the exploration of possible domains of awareness goes exponential.

What happened at Kaikoura was a process that generated community understanding that is extremely rare at present. People learned to trust each other, to speak openly and plainly, and to listen to others, and to begin to understand what others valued, and why, and to accept those values as having value.

What happened in Kaikoura was an open process, one that took the time required to generate real understanding and consensus, between wildly divergent paradigms of understanding.
It was a process of respect, of mana.
It acknowledged responsibility (kaitiakitanga) at all levels.
That cannot be rushed, not in the domain of commons management.

Elinor Ostrom disproved Garret Harden’s tragedy of the commons as a general theorem, and showed it to be simply one of a large set of possible classes of response to particular sets of commons strategies.

I have real issues with what has been done in the Hauraki Gulf, where a large part of the productivity of that system has been privatised by stealth (in allocating vast areas of water to companies like Sanford for the growing and harvesting of mussels), without specific and open public engagement in a conversation of the realities of that redistribution of that commons productivity, and the necessary impact on the long term availability of fish.

The concepts of stock units and carrying capacity are standard conversation within MPI when it comes to managing farms and terrestrial ecosystems, yet they somehow fail to acknowledge that the same concept set is every bit as valid in marine ecosystems, and continue to treat all stocks as independent entities, independent of the overall system productivity. A complete logical and systems nonsense.

While it is true that those decisions were pushed through quickly with little short term cost, having done it by stealth means that the real public and political cost has simply been pushed out in time, and is yet to occur (and may in fact end up being so great as to destroy vast amounts of capital as a direct response to that deception). While such temporal distortions are standard political tools, they are actually all fundamentally forms of deception.

It is one of the very common outcomes of using market values – like the financial crisis of the failure of the so called “sub prime bubble” involved deliberate deception at many levels to create a gap in time between knowingly creating risk, and the awareness of that risk becoming common, and exploiting that temporal gap.

It started with mortgage brokers selling mortgages to people who couldn’t possibly meet the terms long term, but pretending that they could (outright lies), creating the impression of future returns that could not possibly be met (lies on paper).

It continued with bankers and the constructors of financial instruments continuing to disguise this lie at ever greater levels of abstraction, and then the final blow of shorting the market (betting that their own AA bonds were in fact junk, which they knew them to be), and then demanding billions of tax payer dollars to pay out the bets when they collapsed the system.

The system as it exists today is one giant casino.
It is based on lies and deception at every level of education, law, logic, mathematics, finance and politics.

It is unstable.
It is immoral.
It is dangerous – but until now the danger has been mostly to those at the bottom of the distribution curves, when those at the top get it wrong. That is now changing, which is our only real hope of substantive reform.

It saddens me that in Treasury we have an entire department of government devoted in practice to the perpetuation of many levels of such fundamental societal deception.

It saddens me that such otherwise intellectually capable individuals can hide such inescapable logic from their own awareness (I don’t think most are deliberately deceptive – they just don’t allow themselves to ask deep enough questions, they are too scary).

For me, the process at Kaikoura, was one small step back into a path that acknowledges both integrity and uncertainty, and accepts that a continuing part of life is negotiating boundaries at every level of existence.

It is part of a process that acknowledges the infinite diversity that must result from the exponential growth of the exploration of possibilities in all realms that we are now seeing.

That demands acceptance.
It demands respect.
It demands tolerance.

I strongly acknowledge the need for boundaries (for risk management), and also for those boundaries to be flexible. If boundaries become too hard, they become brittle and break.

It seems clear to me that we need to change the prime focus of our systems from rules to values, and the prime values need be only two:
1. the life of individual sapient entities (he tangata, he tangata, he tangata);
2. the liberty of those entities (mana).

And such values have contingent requirements, like adopting behaviours that minimise the risk to others, which include the risk from damage to natural ecosystems (kaitiakitanga). And these are not hard sets of rules, but an ongoing conversation, an ongoing process of discovery and refinement of the nature of boundaries at all levels.

And liberty does not mean freedom from consequences, it means accepting the responsibility for the reasonably foreseeable consequences of action and the requirement to take reasonable action to support the life and liberty of others.

It is a really complex system.
No hard boundaries.
No hard rules.
Just an ever expanding set of possibilities and an ever expanding awareness of probable consequences. Wolfram’s work gives no end – just an infinite set of infinities of algorithms, of strategies, of values, of any set of distinctions.

It seems that all awareness is of models, not of reality itself.

It seems that mathematics and logic are useful modelling tools, and it doesn’t pay to confuse the tool with the thing it is modeling – just try and find one single example of a circle (that retains the characteristic circle at all scales) in reality. In twenty years of searching I haven’t found one, and I strongly suspect that none exists. If such a simple mathematical construct has no direct referent in reality, how much worse for the more abstract notions? And I acknowledge their utility as modeling tools to particular scales of accuracy and in specific contexts, and no more than that.

I suspect agreement between us is unlikely at this time.

What I am saying is compatible with the Board’s goal of “higher living standards for New Zealanders”, and it requires using measures that are not market based.

Poverty (as in unmet needs), is a necessary part of a market based system. It is the fundamental driver of value. Without unment needs, the intersection of supply and demand is at or below zero price point.

There is no logical way for a market to adapt to the technological ability to meet the needs of every individual. (All such goods and services become like air, of no measurable value in a market, yet of huge value to every individual. Money is not a reasonable measure of such value, not a reasonable measure of living standard.)

The context is changing in a fundamental way.

Conservatism is not a logical response.

We need a conversation for transition.
And the pressure for such a conversation needs to come from all directions.




I hadn’t had a reply yet [9am 6th August 2015].

Was not at all certain that one will be forthcoming.

And I am starting to get really clear about alternatives to our current systems and effective transition strategies (see the last part of the previous post on this blog).

[at 3:11 pm on the 6th I did get a reply – of one line]

“Thank you for your reply Ted, your comments are thought provoking!”

I am left seriously contemplating what classes of thoughts are being provoked?
I can imagine many different classes of thought, the one class I most desire is:

“Oh dear – how are going to adapt our systems to this new reality, and actually empower the delivery of universal abundance of all necessities to everyone?”

The sorts that I most fear are:

“How can we mitigate the risk of ideas like this spreading?”
“How can we make our systems immune from this sort of idea?”
“How can we counter the idea that poverty is a necessary part of markets?”
“How can we maintain the illusion that doing more of the same will actually eliminate poverty?”
“What do we need to do to maintain a capitalist market based system at all costs (including any human cost)?”

There are so many more ways of opposing such a way forward than of supporting it.

About Ted Howard NZ

Seems like I might be a cancer survivor. Thinking about the systemic incentives within the world we find ourselves in, and how we might adjust them to provide an environment that supports everyone (no exceptions) - see www.tedhowardnz.com/money
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One Response to A battle with Treasury

  1. Pingback: Millenium Project – State of the Future | Ted Howard NZ's Blog

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