Counter-UAS Regulation

The malicious or negligent use of drones gives rise to significant risks. While the risky behaviours are subject to existing legal sanctions, the apprehension of perpetrators can be difficult.

Licensing is sometimes proposed as a means of controlling drone operations. However, licensing, even when coupled with surveillance and enforcement, does not prevent unlicensed individuals from engaging in the activity, or licensed individuals from undertaking the activity in an unsafe manner. Notwithstanding the prohibition on using a hand-held cellphone while driving, in the 2017 calendar year the New Zealand Police recorded 23,412 offences of using a hand held device for calling or texting while driving (New Zealand Police, 2018).

Application of New Zealand Privacy Law to Drones

An Australian woman discovered that real estate advertisements,
including a large billboard, carried an image of her sunbathing in her
backyard. Would New Zealand privacy law provide adequate
protection?
Source: “Mt Martha woman snapped sunbaking in g-string by real
estate drone”, Herald Sun, 17 November 2014.

New Zealand privacy law encompasses the torts of wrongful publication of private facts and intrusion on seclusion, the Privacy Act 1993, and various provisions in the Crimes Act 1961 and the Summary Offences Act 1981. The privacy torts set a high threshold, requiring a privacy violation to be “highly offensive”, a test that is highly dependent on the circumstances of the individual case. There is considerable uncertainty over whether the privacy torts provide any effective cause of action against privacy violations by drone.

The Privacy Act creates an offence of an “interference with privacy”. One of the most likely causes of an interference with privacy involving drones is that personal information has been “collected by means that, in the circumstances of the case … intrude to an unreasonable extent upon the personal affairs of the individual concerned”.

The Privacy Act appears to provide an avenue for redress for a person who believes that they have suffered a privacy violation, but there are significant hurdles to overcome. Two particular problems are:

• The victim may not be able to see the pilot, and there are unlikely to be any identifying characteristics on the drone, meaning that it will be very difficult to hold a specific individual accountable.
• In a test case in 2015, the Privacy Commissioner held that if a drone is not recording then there is no information collected, so no information privacy principle can be violated and there is no interference with privacy.

There are sufficient uncertainties in the application of the current body of tort and statute that a person upset by unwelcome surveillance cannot be sure of an acceptable resolution, even when that surveillance takes place in a location where they have a reasonable expectation of privacy.

New Zealand’s current privacy framework requires clarification to better accommodate the challenges posed by drones. Some of the modifications could potentially be achieved by way of a code of practice issued under the Privacy Act, which may provide a relatively low-cost means of setting the standard of acceptable behaviour. Challenges will still remain because the characteristics of drone technology make it difficult to identify the operator, which in turn makes it difficult to obtain any legal remedy. Such challenges may mean that in some instances an alternative, more direct means of intervening to protect one’s right to privacy would be efficient.

Source:
This article summarises key aspects of the recent paper:

Shelley, Andrew (2016) “Application of New Zealand Privacy Law to Drones”, Policy Quarterly, 12(2):73-79, May.

A copy of the full paper can be downloaded from the Policy Quarterly website or Andrew’s author page on SSRN.

The Social Discount Rate

When calculating the value of an investment, or determining whether to undertake a certain project or action, future costs and benefits are reduced (or "discounted") into an equivalent value today. The reason for discounting is that a dollar received in a year's time is worth less than a dollar received today: over the course of the year inflation will degrade the purchasing power of that dollar, delayed consumption intrinsically has less value to us than consumption now, and a dollar received today could also be invested and earn a return over that year.

Discounting and the Importance of the Right Discount Rate

The discount rate is the percentage rate that is used to convert future values to present values. A discount rate of 4% (0.04) means that one dollar received in one year is worth $1/1.04 = 96 cents today. A discount rate of 10% (0.10) means that one dollar received in one year is worth $1/1.10 = 91 cents per day. Due to the geometric nature of discounting, the difference in present values becomes increasingly significant the further into the future that the dollar is received. For example, one dollar received in 15 years' time is worth $1/1.04¹⁵ = 56 cents with a discount rate of 4%, but only $1/1.10¹⁵ = 24 cents with a discount rate of 10%. The choice of discount rate clearly makes a very significant difference to the present value of future costs and benefits.

The Perils of Price Fixing

Business is subject to cut-throat competition and margins are tight. Except, that is, when competitors are tempted to agree on prices or the division of customers so that profits are maintained or expanded. Either way, this is a price fixing arrangement or cartel and is illegal under the Commerce Act 1986.

This Paper sets out:

• the prohibition against price fixing in the Commerce Act;
• the enforcement actions available to the Commerce Commission, with examples of both high-level and low-level enforcement actions;
• some practical advice on how to avoid price-fixing.

Of Consumer Ownership and Regulatory Intervention

Introduction

This Paper considers the potential rationale for regulatory intervention in an industry and the alternatives that are available. The concept of pareto-efficiency is introduced, and then some of the real world conditions which prevent this optimal state from being achieved are discussed. Alternatives for overcoming problems of consumer bargaining power are discussed, focussing on consumer ownership options and regulatory intervention.

Pareto-Efficiency

The gold standard of welfare economics is the pareto-efficient allocation of resources. Pareto efficiency occurs when it is impossible to make any one individual better off without making at least one other individual worse off. This may require that anyone who is made worse off is compensated by those who are made better off: if the loss is less than the gain then an improvement in pareto efficiency will occur.

Physics, Financial Models, and Predicting the Unpredictable

This essay is principally a review of the book The Physics of Wall Street: A Brief History of Predicting the Unpredictable, 2012, James Owen Weatherall. The first part of the review summarises the key individuals from physics that have made a contribution to financial economics. I then touch briefly on a negative review of Weatherall’s book, noting the complete omission of the important contributions made by non-physicists. The review then turns to a controversial topic – whether models can or should be used when there are extreme and seemingly unpredictable events (“Black Swans”). The thesis of the book is that the assumptions underlying models need to be understood, the models need to be regularly tested, and that better models can be built. Rupture models have been empirically shown to predict when crises will occur, turning the unpredictable Black Swans into predictable “Dragon Kings”). I conclude with some personal comments.

Selected Contributions by Physicists to Financial Economics

In The Physics of Wall Street: A Brief History of Predicting the Unpredictable, 2012, James Owen Weatherall provides a very interesting, if selective, history of the contribution of physicists to quantitative finance. Key contributors covered in the book are: