Monthly Archives: August 2013

The eurozone bill will eventually be paid by Germany in part

This is a version of a column in the Irish Examiner

The Eurozone crisis has not gone away. It has been temporarily muted by a combination of a more assertive ECB and a remarkable if sullen acquiescence by Eurozone voters that debt fueled growth is unsustainable and the path to a more sustainable growth future involves significant pain.

But quiescence is not cure. Across the Eurozone unemployment, in particular amongst the younger cohorts, is high and in some cases on the rise. There is a realization that in some countries (Greece, Cyprus) debt is unpayable; in other countries (Ireland, Italy) it may become so under even mildly worse than planned economic conditions. Eurozone banks remain fragile

In the medium term then there will have to be a more definitive solution. In my reading every possible solution leads to German taxpayers picking up a tab. German politicians have for the last 18 months asserted that nothing can be done in terms of implementing lasting solutions until after the German elections. These now loom so the time is coming when either Germany accepts its role as the economic leader and with it the costs, or it continues its policies of ‘Economically, im all right Jack” . Either lead to outcomes that are costly for them, and none of these it seems are being discussed by the contenders for Dr Merkels job.

Breakup of the euro has receded as a possibility but that is merely due to the fact that it has already in part happened. We have now two parallel euros – one that is stuck within Cyprus and the other outside. Cyprus operates capital controls. This is the first step to withdrawal from a currency. The problem from the perspective of Europe as a whole is that while Cyprus is containable a Cypriot withdrawal from the currency acts as a demonstration effect. It shows what is possible. In a breakup we end up, I think, not  with two currency blocks of a weak and strong euro but with a central core of Germany plus perhaps Austria and Finland and a plethora of weaker currencies all seeking competitive devaluations along with a international banking system so ruptured as to be irreparably damaged. In that context Germany will find itself slowly drifting back into the problems that a high currency generates- lets not forget that in the early years of the last decade it was being seen as the sick man of Europe with stratospheric wage costs and a sclerotic banking system.

To retain the euro in the longterm as a viable currency requires at the barest minimum a functioning banking union, which requires as a prerequisite that there be a functioning regulator and that there be agreed loss sharing and winddown protocols. At present this is not in sight; Germany has rejected a number of proposals that would have enabled this. There is a persistent and pervasive policy expressed by some in Germany that sees German law as superseding European law, and this constitutional wrangle emerges time and again as a delaying tactic.  In addition Germany is desperately seeking to have special status granted to its politicized Landesbanks, ideally to exclude these from the banking union. Germany has granted too big to fail status to all its banks, and the consequence is that they enjoy a competitive advantage over all other states banks. This translates into a lower cost of capital for german borrowers. A properly functioning banking union will cover all banks, and so a cost is there to be borne when a banking union emerges.

Alternative approaches to dealing with debt also result in a cost to the German taxpayer. Mutualisation of debt or Eurobonds will result in the cost of borrowing for high yield countries (Such as Ireland or Italy) falling while it rises for the core. To be sure if this were to come to pass there would be massive conditionality. We have already seen that the Bundestag gets to run its eyes over the Irish budget before the Irish parliament. This would become the norm. German taxpayers would have it no other way, quite understandably. But there would be a cost. Debt writeoffs would be similar.

The final approach to dealing with unpayable debts is to inflate their nominal value away. For cultural and historical reasons inflation is anathema to Germans. And yet, outside Germany, this is probably seen as the most feasible and economically least dislocative way of dealing with these debts.

So, whatever path is taken Germany ends up picking up a tab, sooner or later. This is not politics, it’s the inevitable outworking of the economics of the union. German taxpayers are ill served by anyone pretending to them that they will not, in some fashion at some stage, be presented with a bill for the design flaws of the Euro. Every other country has paid. Germany is not immune.


Mirror Mirror on the (Clara) wall, who is the sorriest of all?

‘No one more sorry than I about what happened,’ says Cowen – Political News | Irish & International Politics | The Irish Times – Fri, Aug 30, 2013.

I have never met Brian Cowen. The closest I came was twice, once when I saw him and some others in a hotel near the Dail the other time when a mutual acquaintance with whom he had been in school stood me up for a beer in favour of the then Deputy. I am sure and am assured that he is a decent chap, and one who has as much empathy as any other. This can only be highlighted witnessing the shambles that society has entered into. I believe him when he says that the actions, ultimately disastrous as they were and serially incredible as they seemed even at the time, were taken by him and his cabinet for the best of intentions. Alas, not just the road to Clara and political ignominy is paved with good intentions.

That said, it seems to me to degrade language for him, in his present circumstances of a 140k per annum pension, to say he is the sorriest of all. A partial list of people whom one might think are more sorry than he for the economic collapse might include

  • the nearly 400,000 people who have emigrated since the start of 2009
  • the nearly 200,000 people who have not emigrated but who as of July 2013 were more than one year on the live register.
  • the residents of priory hall left in the lurch by state, court and society but who are being hounded for payment by the banks they saved
  • the residents of poxy pyrite mansions dotted round the country who have been left in the lurch by insurers, homebond, the state and the legal system
  • the 77000 people who saw their respite care grant cut.
  • economists in banks who ramped the system
  • economists in universities who could have, but didnt, shout stop earlier or at all
  • the 50 or so FF TDs who lost their jobs in 2011
  • The 30 plus Labour TDs not in cabinet who now face the electoral whirlwind in 2014

one could go on.

This is not an Anti FF post. It is anti a style of political rhetoric which thinks a halfbaked apology en grudge served on a bed of selfjustification with a glass of crocodile tears is enough. Far better to respond to all media with ” I am retired from politics. What we did we did for what we thought then were the right decisions. Of course I regret any pain and suffering my and others actions caused. Thank you”. Simple, dignified, and accurate. Engaging in competitive misery from a well paid retirement is none of the above.

A New Journal – Journal of Behavioral and Experimental Finance

JBEF FINAL Cover Design Aug32012

A New Journal

Journals, for good or ill, represent the preeminent mode of scholarly communication. Publications count, in tenure, research evaluations and as a metric of research activity. Despite alternatives emerging such as post hoc refereeing, the double blind reviewed journal retains its gold standard, and will do for many many years.  Although there are  many journals, the scope, breadth and depth of finance continues to expand. So today we see a new journal.

The Journal of Behavioral and Experimental Finance is aimed at providing authors in these fields with a high quality outlet. There is at present no state of art high-level publication where one can go to obtain up to date examples of quality work in the areas of experimental and behavioral finance. The field is scattered. Bringing it together will, we can hope, act as a  useful resource for scholars, both those active in the field and those interested in how the area impacts.  There are many high quality existing journals that cover experimental economics or behavioral finance but none that act as a natural locus for both.

Experimental finance in particular is growing, with the Society for Experimental Finance having been established in the last number of years.  We believe that creating a journal that is open to experimental treatments of finance subjects will, we hope, generate interest in carrying out such.  At this juncture we  see behavioral and experimental approaches as lenses or methodologies through which to view issues and as such the journal will allow a broad perspective on an increasingly fragmented field. At the limit I agree wholeheartedly with Thaler.

I predict that in the not-too-distant future, the term “behavioral finance” will be correctly viewed as a redundant phrase. What other kind of finance is there? In their enlightenment, economists will routinely incorporate as much “behavior” into their models as they observe in the real world. After all, to do otherwise would be irrational.

We might add to this that finance, as a cognate discipline to economics and accounting, must adopt more scientific approaches to its investigations and must adopt a broader methodological perspective. Economics has seen major advances in adopting experimental approaches and finance is fast doing so. This can only assist in the rigor of our researchers. We are not yet at that shining city on the hill which Thaler saw in 1999, but in the interim I hope that this journal will aid in moving us towards it.

Some may well suggest that we have enough journals, and why start one especially as the top papers will always go to the top journals. A number of points need to be made. First, the existence of better (whatever that means in this context) journals does not make redundant the existence of others. That we have the Sistine Chapel does not make further paintings irrelevant. There is scope for quality product which for whatever reason does not get into or fit the top journals. Second, no journal is born ‘top’. Establishing  a journal is an act of calculated business and hope. The business is that there is a market, the hope is that the board and the authors will drive forward the reputation of the journal to everyone’s advantage. That I intend to do to the best of my ability. Third, in this case there is a clear gap in particular in the experimental area, and that gap deserves to be filled. Also, while there are excellent journals in the behavioral finance area there is none from Elsevier, who have a stable of already top-flight finance journals and the publishing, publication and editorial network to support this new venture.

The Process

The idea for this journal had been discussed amongst a number of persons, both in Elsevier and in the academic community, for about 18m. In February I was asked to put a formal proposal to Elsevier, which I did. This contained the usual things one would expect – details of existing complementary or competing journals, papers published that might perhaps fit the journal, learned societies and conferences in the area, main loci of research etc. The initial response was good therefore we proceeded to get together a draft editorial board (see below) and a more complete proposal was put to Elsevier in April. This was approved in June and we have spent the summer refining the details of the guide for authors, the peculiarities of how we want papers submitted etc. This is and will always be a work in process – as an Editor I have come to understand that there is no right way to guide a paper other than to say “highest quality possible please”. Submission minutiae are important but are secondary to that. In short, expect changes as we engage with the process of generating papers from submissions.

Journal Aims and Scope

The aim of the journal is to publish high quality research in the fields of corporate finance, asset pricing, financial econometrics, international finance, personal financial decision-making, macro-finance, banking and financial intermediation, capital markets, risk management and insurance, derivatives, quantitative finance, corporate governance and compensation, investments, market mechanisms, SME and microfinance and entrepreneurial finance, where such research is carried out with a behavioral perspective and/or is carried out via experimental methods.

The area of behavioral finance and the related area of experimental finance are now fully accepted as mainstream approaches within finance. Behavioral and experimental finance therefore represent lenses and approaches through which we can view financial decision-making. The journal aims to provide a single source for the latest research in these areas. It is open to but not limited to papers which cover investigations of biases, the role of various neurological markers in decision-making, national and organizational culture as it impacts on those organizations financial decision-making, sentiment and asset pricing, the design and implementation of experiments to investigate financial decision-making and trading, methodological experiments,  and natural experiments. Although primarily empirical, we will be more than open to theoretical and methodological papers which cast light on behavioral and experimental topics, as well as to meta analyses, surveys and overviews.

Where is it and who is involved?

The journal site is here  at and papers can be submitted here. The Editorial Board at present consists of the following, but we are actively seeking other persons.

  • Ackert, Lucy  Kennesaw State University, Coles College of Business, USA
  • Aggarwal, Raj The University of Akron, Ohio, USA
  • Asparouhova Elena N, University of Utah,  USA
  • Davies, Greg Head of Behavioral Finance and Investment Philosophy,  Barclays
  • Delaney, Liam   Stirling Management School, University of Stirling, UK
  • Dowling, Michael  Dublin City University Business School, Ireland
  • Goodell, John The University of Akron, Ohio, USA
  • Harmon, Colm  University of Sydney, School of Economics, Australia
  • Henker, Julie Bond University, Queensland, Australia
  • Holm, Håkan Jerker School of Economics and Management, Lund University, Sweden
  • Huber, Jürgen. The University of Innsbruck, Austria
  • Innocenti, Allesandro Experimental Economics Laboratory, University of Siena, Italy
  • Kim, Kenneth, Renmin University, Beijin, China.
  • Kirchler, Michael, The University of Innsbruck, Austria
  • Kramer, Lisa A. Rotman School of Management, University of Toronto, Canada
  • Lau, Morten, Copenhagen Business School Copenhagen Denmark
  • Leoni, Patrick L.  KEDGE, Marseille, France
  • Loncarski, Igor, Faculty of Economics Universty of Ljubjanja, Slovenia
  • Pompian, Michael Mercer Wealth Management, St Louis USA
  • Nawrocki, David, Villanova Univeristy, USA
  • Noussair, Charles, Tilburg University, Netherlands
  • Lunn, Pete  Economic and Social Research Institute Dublin, Ireland
  • Rabin, Matthew Brunel University, London UK
  • Pownall, Rachael , Maastricht University, Netherlands
  • Ricciardi, Victor.  Goucher College, Maryland, USA
  • Santoni, Alessandro, Banca Monte dei Paschi di Siena, Siena, Italy
  • Statman, Meir.  Santa Clara University, Santa Clara USA
  • Viole, Fred OVVO Financial Systems, Holmed, NJ USA
  • Wang, Mei. WHU – Otto Beisheim School of Management , Berlin, Germany
  • Weitzel, Utz. Radboud University Nijmegen, the Netherlands
  •  Zhu, Ning. UC Davis and Shanghai Advanced Institute for Finance, China

Brian Lucey

Founding Editor

For : Journal of Behavioral and Experimental Finance


Longlist – not exhaustive – of possible  topics

  • Adaptive Market Hypothesis
  • Adjustment
  • Agent-Based Modeling
  • Altruism
  • Ambiguity
  • Ambiguity Aversion
  • Ambiguity Bias
  • Anchoring
  • Anchoring And Adjustment
  • Anomalies
  • Appropriation
  • Asset Market
  • Asset Market Experiments
  • Assimilation Error
  • Asymmetric Information
  • Asymmetry
  • Attachment Bias
  • Attention
  • Attribution Theory
  • Auctions
  • Availability
  • Bargaining Power
  • Behavioral Biases
  • Behavioral Corporate Finance
  • Behavioral Finance
  • Beliefs
  • Benchmarking
  • Betrayal Aversion
  • Between-Subjects Design
  • Bidding
  • Bounded Rationality
  • Break-Even Effect
  • Bubble
  • Calendar Effects
  • Certainty Effect
  • Charitable Giving
  • Circle Network
  • Classification Game
  • Cognitive Abilities
  • Cognitive Dissonance
  • Cognitive Heuristic
  • Communication
  • Compatibility
  • Competitive Behavior
  • Competitiveness
  • Conditional Cooperation
  • Confirmation Bias/Confirmatory Bias
  • Conservatism Bias
  • Context Dependence
  • Contrarian
  • Cooperation
  • Coordination
  • Coordination Game
  • Corporate Governance
  • Corporate Social Responsibility
  • Cournot Oligopoly
  • Credence Goods
  • Crowding-Out Effect
  • Culture
  • Day Of The Week Effect
  • Decision Making Under Risk
  • Dictator Game
  • Digit Ratio
  • Disjunction
  • Disposition Effect
  • Downside Risk
  • Dynamic Choice
  • Electronic Markets
  • Emotion Regulation
  • Emotions
  • Endowment Effect
  • Equity
  • Expected Utility Theory
  • Experience
  • Experimental Design
  • Experimental Design
  • Experimental Market
  • Experimental Measurement
  • Experimental Methodology
  • Experimental Methods
  • Experimentation
  • Experiments
  • False Discovery Rate
  • False-Consensus Effect
  • Familiarity
  • Field Experiment
  • Financial Decision Making
  • Financial Literacy
  • Flexibility
  • Framing
  • Free-Riding
  • Group Behavior
  • Guessing Game
  • Halloween Effect
  • Happiness
  • Health
  • Heterogeneity
  • Heuristic
  • Hidden Information
  • Hindsight Bias
  • Home Bias
  • Hormones
  • House Money Effect
  • House-Money Effect
  • Household Finance
  • Idiosyncratic Risk Premium
  • Illusion Of Control
  • Illusion Of Knowledge
  • Incentives
  • Incomplete Contracts
  • Individual Behavior
  • Individual Choice
  • Individual Investors
  • Individual Preferences
  • Inequality Aversion
  • Information Quality
  • Information Sharing
  • Information Uncertainty
  • Insurance
  • Intelligence
  • Interdependent Preferences
  • Investment Horizon
  • Investor Characteristics
  • Investor Sentiment
  • Knowledge Attitudes
  • Knowledge Of Economics And Finance
  • Laboratory Experiments
  • Learning
  • Learning From Peers
  • Leniency
  • Level K Model
  • Loss Aversion
  • Loss Aversion
  • Lottery Choice Experiment
  • Magical Thinking
  • Managerial Biases
  • Manipulation
  • Market Composition
  • Market Design
  • Market Efficiency
  • Market Efficiency
  • Matching Market
  • Matching Procedure
  • Meme
  • Mental Accounting
  • Mental Accounting
  • Mental Compartments
  • Mental Health
  • Meta-Study
  • Model Uncertainty
  • Momentum
  • Monetary Incentive
  • Monetary Punishments
  • Monitoring
  • Month-Of-The-Year Effect
  • Moral Suasion
  • Motivation
  • Multiple Equilibria
  • National Culture
  • Natural Experiment
  • Natural Language
  • Neurofinance
  • Newspaper Experiment
  • Non-Cognitive Skills
  • Non-Monetary Punishments
  • Optimism
  • Optimism
  • Over-Optimism
  • Overconfidence
  • Overconfident Behaviour
  • Overreaction
  • Parameter Uncertainty
  • Payoff Tables
  • Peer Groups
  • Persistence
  • Personality
  • Persuasion Effect
  • Plasticity
  • Political Equilibrium
  • Portfolio Choice
  • Portfolio Optimization
  • Portfolio Selection
  • Post-Earnings-Announcement Drift
  • Price Bubbles
  • Pricing Rules
  • Prisoner’s Dilemma
  • Procedural Fairness
  • Prospect Theory
  • Public Goods Experiments
  • Punishment
  • Race
  • Random Incentive System
  • Rationality
  • Real-Time Experiment
  • Real-Time Monitoring
  • Reciprocity
  • Redistribution
  • Reference Point
  • Regret Theory
  • Religion
  • Repeated Games
  • Representiveness
  • Reputation
  • Return Seasonality
  • Risk Aversion
  • Risk Awareness
  • Risk Diversification
  • Risk-Return Tradeoff
  • Salience
  • Sanctions
  • Seasonal Affective Disorder
  • Seasonality
  • Selection Into Experiments
  • Self-Interest
  • Self-Serving Bias
  • Sentiment
  • Session-Effects
  • Shorting
  • Simple And Compound Events
  • Sleep
  • Social Connections
  • Social Distance
  • Social Effects
  • Social Interaction
  • Social Networks
  • Social Networks
  • Social Norms
  • Social Preferences
  • Social Welfare Maximizing
  • Socially Responsible Investing
  • Somatic
  • Sorting
  • Stakeholder Theory
  • Status
  • Status Quo Bias
  • Strategic Behavior
  • Sunk-Cost Effect
  • Technical Trading
  • Tournament Incentives
  • Trading Behavior
  • Trading Performance
  • Trend Chasing
  • Trust Game
  • Ultimatum Game
  • Underreaction
  • Week-Of-The-Month Effect
  • Week-Of-The-Year Effect
  • Well-Being
  • Willingness To Compete
  • Willingness To Pay
  • Within-Subjects Design
  • Yes-No Game

Negative Equity, Household Mobility and Job Matching – what do we know?

negative-equity-300x262One of the arguments that many (including yrs trly) has adduced for negative equity in residential housing being a problem is that it may well reduce mobility. Economists talk about matching – jobs exist and people exist who could fill them but can they be matched and what are the impediments to that. Negative Equity if it reduces mobility will act as an impediment to matching. That it has an effect on consumption seems reasonable and is I suggest agreed. But the issue of its effect on mobility is rather more complicated, from the research. People who face negative equity may be unwilling or unable to move for reasons of equity issues – the sheer financial constraint of seeking in effect an additional loan or because of the well known propensity for people to show loss aversion and unwillingness to sell an asset that has declined.

Screen shot 2013-08-18 at 11.00.57First lets look at the Irish situation. Recent central bank analyses suggest that as of 2010Q4 some 31% of mortgages are in negative equity, with this concentrated in loans originated at the peak of the bubble.  These account for some 47% by value of loans. This is a lot. Even allowing for the fact that only about 40% of households have a mortgage we still face a situation where between 10-15% of all households have loans on their homes which are greater than the value of these homes. And house prices have fallen since 2010q4 by approx 25% suggesting that we could be looking at the high teens as a percentage of all Irish homes in negative equity.

20138181221439937LRM03_122536We also face a massive unemployment crisis. One part of the solution is for people to move where the jobs are. Despite this being a small island that may well involve movement of a family home. A historically proven Irish approach is to emigrate. Again this may well involve a desire to sell and repurchase or otherwise use funds in the new locale. Neither of these are easy to say the least if there is negative equity, as in effect one is seeking an additional loan in a credit crunch. As to the extent to which Irish homeowners exhibit degrees of loss aversion, again we are in the dark. We can assume that they do as every other group and asset does so.

So might this negative equity deter mobility? Again, we simply do not know. Despite the excellent work of the Central Bank on some aspects of the housing market we are in the dark on this issue as on so many others.

From the UK in the 1990s we see very strong evidence that yes, negative equity does deter mobility (forrest and Kennet 1996, Henley 1998).

This ‘lock in’ effect is also found strongly in the USA in Chan (2001), Engelhardt (2003) , Chen and Rosenthal (2008) , Ferreira  et al (2010, 2011) , Andersson and Mayock (2012), Modestino and Dennet (2012), Andersson and Mayock (2012) and Sasser and Dennet (2012). These papers suggest that negative equity may reduce mobility propensity by between 25-40%. This is large. 

An OECD analysis by Junankar (2011) suggests that this is an issue across all countries.  No social science finding is ever unanimous and this is no exception : Coulson and Greico (2012) ,  Schulhofer-Wohl (2011) and Valetta (2013)  suggest that there is limited or no effect. Nonetheless there is a preponderance of evidence for the ‘lock in’ effect in the USA, and the UK.

so : the evidence from the USA and the UK suggests a problem. We can only very cautiously infer but if the evidence maps over to here then we too have a problem. Some solution to negative equity in so far as it deters mobility will have to be a part of the new architecture of the irish economy.

  • Andersson, Fredrik Daniel and Mayock, Tom, How Does Home Equity Affect Mobility? (November 2, 2012). Available at SSRN: or
  • Chan, S. (2001), “Spatial Lock-In: Do Falling House Prices Constrain Residential Mobility?,” Journal of Urban Economics, 49(3), 567-586.
  • Chen, Yong and Stuart S. Rosenthal, “Local Amenities and Life-Cycle Migration: Do People Move for Jobs or Fun?,” Journal of Urban Economics, 2008, 64 (3), 519–557.
  • Coulson, N.E., Grieco, P.L.E. Mobility and mortgages: Evidence from the PSID (2013) Regional Science and Urban Economics, 43 (1), pp. 1-7.
  • Engelhardt, G.V. (2003), “Nominal Loss Aversion, Housing Equity Constraints, and Household Mobility: Evidence from the United States,” Journal of Urban Economics, 53(1), 171-195.
  • Ferreira, F., Gyourko, J., Tracy, J. Housing busts and household mobility (2010) Journal of Urban Economics, 68 (1), pp. 34-45.
  • Ferreira, Fernando V., Gyourko, Joseph E. and Tracy, Joseph S., Housing Busts and Household Mobility: An Update (November 15, 2011). FRB of New York Staff Report No. 526. Available at SSRN: or
  • Forrest, R., Kennett, T. Coping strategies, housing careers and households with negative equity (1996) Journal of Social Policy, 25 (3), pp. 369-394.
  • Henley, A. Residential mobility, housing equity and the labour market (1998) Economic Journal, 108 (447), pp. 414-427.
  • Junankar, P. N. Raja, The Global Economic Crisis: Long-Term Unemployment in the OECD. IZA Discussion Paper No. 6057.  (November 1, 2011) Available at SSRN:
  • Modestino, A.S., Dennett, J. Are American homeowners locked into their houses? The impact of housing market conditions on state-to-state migration (2012) Regional Science and Urban Economics, in press
  • Sasser, Alicia and Dennett, Julia, Are American Homeowners Locked into Their Houses? The Impact of Housing Market Conditions on State-to-State Migration (February 8, 2012). FRB of Boston Working Paper No. 12-1. Available at SSRN: or
  • Schulhofer-Wohl, Sam, Negative Equity Does Not Reduce Homeowners’ Mobility (January 2011). NBER Working Paper No. w16701. Available at SSRN:

When is the time for austerity?
Powerful piece

” Fiscal contraction prolongs the pain when the state of the economy is weak, much less so when the economy is strong.

Keynes is still right, after all: “The boom, not the slump, is the right time for austerity at the Treasury.”

Anyone in Berlin or Merrion Street listening. ..?

Actually, Irish universities are really outstanding.

dataIrish universities are world class. Really. So says the Shanghai rankings, the ones that perhaps are most heavily weighted against the strengths of Irish unis. How do we know? Well the 2013  rankings season kicks off with the Shanghai Academic Rankings. Expect mutterings along the lines of “sure its terrible, we have no universities in the top 100 of the Shanghai rankings” and “bloody academics, useless, wastes of money, look no Irish university in the top 100, world class me eye” and so on. No doubt similar wailing will happen when the THES rankings come out, with slightly different metrics.

Lets leave aside the peculiarities of rankings. Lets leave aside the odd rankings methodology of Shanghai which is very very heavily skewed towards a particular set of sciences. Lets look at the big picture.

There are approx 12000 universities in the world  , defined as one that have some web presence. In the 2013 Shanghai data TCD comes in in the 200-300 region, UCD and UCC in the 300-400. Thats three universites in the “top” 3%. They have been there since 2011 so this is consistent. In the broader based Times Higher we have TCD at 110 and UCD at 187, two in the top 200 or top 2%.

Question : how many Irish institutions, public or private are consistently ranked by peers, customers, and input providers as being in the top 2% of their peers in the world?

Answers on a postcard please.

Buzzword Bingo meets Boxticking in the new Funding Compact for Irish Universities

Screen shot 2013-08-14 at 11.27.27








So remember the KPI’s that I discussed in the post on the need for business and academia to come together in a more sensible and meaningful manner? The HEA documents on the actual implementation of this are quite interesting.  For instance :

  • Every institution must form part of a regional cluster
  • IBEC will have a role in assessing universities (Key system objective 1.4)
  • Citation rankings will be mandatory (key system objective 4.3)
  • Transnational activity (branch campuses…) will be requred? encouraged? (Key system objective 5.5)
  • Groups of institutions within regional clusters will be required to demonstrate how they coordinate regional planning and engagement with enterprise within the region
  • There is going to be a compact between the institution and the powers that be. Here is the draft of same  Draft Compact  and here is how to complete it and what it means 2. Guidelines for completion
  • There is a new overview of how the system works.System  Framework 

Some initial thoughts.

there are 8 KPI’s. Each has a large number of subelements. There is no clarity as to the weighting or cross weighting of these.  There is more than a whiff of state dirigisme in many of these.

Second some of the issues proposed are quite outside the control of the institutions. For example one that jumps out is : ” Research-active institutions should demonstrate how they are attractive to overseas faculty”…. err quiet. Yes. Attractive to overseas faculty..


It’s time for business to stop free riding and start engaging with Universities

This is an expanded version of an opinion piece which I have authored in the Irish Times Wednesday 14 August 2013

gdp spend students

Troubles, they tell us, comes in threes. For Irish universities this week shows that in spades. On one day we see a number of threads which taken together should give us some significant concern. These three threads are the proposed new funding model for third level (a classic curates egg), the issue of revenue auditing research and development tax credits and the issue of how much or little businesses worldwide engage with universities.

Before we delve into these its perhaps worth reminding ourselves of a few issues.

First, Ireland has an excellent third and fourth level system, with still surprisingly low levels of graduate unemployment and with significant pockets of world-class research.

Second, we have less state involvement than is commonly thought. Of the 1.5b per annum a large part of this is a subsidy for free fees. There is little appetite in the wider population for this to be abolished.

Third, we spend, over the tertiary sector cycle, less on average than the rest of the OECD (Which includes many countries much less well off than us).

Fourth, we have had no national open debate on what we want from our third and fourth level education system. The changes that are coming are led from the center, reflecting an ongoing tussle between the department of Education and Skills and the HEA. There has been little effort and perhaps exists less appetite to engage a debate amongst all stakeholders on what we want from our higher education sector.

Fifth, there is a genuine confusion in the debates, muted as they are,  about what we want from universities and what they do. Universities coproduce public and private goods. The public good is an educated reflective society and an independent critical thinking academy; the market will not provide this and so it falls to society to fund same. The private goods are the enhanced skills (over non graduates) which graduates attain. These, in principle, should give enhanced earnings which can be taxed and thus defray part of the public good cost as well as attracting some cofunding from the recipient in the form of fees.   This is rarely outlined with state funding seen as wasteful, luxurious, and profligate and tax seen as something intrinsically evil to be avoided at all costs. And therefore the debate revolves around funding – how much to whom how and at what benefit.

Sixth, we are already well on the way to a corporate led university sector – the Irish League of Credit Unions latest survey on third levle suggests that 1/2 of all third level entrants choose a place not based on what they like or feel they are competent to do but instead on the basis of current labour market vacancies. If this is the case then already universities have become training camps for the business sector.

As a state Ireland is broke and every single sector must both contract in terms of state involvement and show value for money. The promised funding model is as I state a curates egg. It suggests a series of key performance indicators that will determine the funding allocation. It is unclear from where these emerged. It is also the case that the more KPI’s one has the less each mean and the less credibility the entire set has.

These are reported to be the following : engagement in regional clusters, co-operation between individual colleges, student retention rates and inclusion of disadvantaged groups, teaching and learning excellence, research and increased commercialization, meeting regional labour market needs and enhanced internationalization, including more non-EU students.

It is not clear how these KPI’s  will be measured or even whether they can be measured. Nor is it clear why these and not others were chosen. What is also startling is the absence whatsoever of the things that students actually need : broad transferable skills. The KPIs are top down dirigisme, institutional focused rather than student focused and in many cases either liable to being gamed or to being irrelevant.

For example, what evidence is there that increased engagement in regional clusters will actually benefit either enhanced student learning or generate greater and more impactful research? Given that we don’t bother to measure research activity how will we measure research impact, or will it be the usual dreary rhetoric of commercialization patents and shortterm jobs created. How will be ensure that we deal with the output of arts, humanities and social science in that model? While it is tempting to call for a research analysis framework like the Research Assessment Exercise (now REF) in the UK, the costs of such a system need to be balanced against its beneficial effects. The REF has many rules, much paperwork and little flexibility to improve the engagement of academics with business. Similarity with cooperation – the KPI reeks of an unwillingness to accept that there will be some good and some less so institutions, departments and faculties and is a mechanism to hide failure under the carpet of excellence by merging strength and weakness to achieve adequacy.

How can we ensure that universities do not increase retention rates by dumbing down, and why is it the fault of universities and institutes of technology if students are ill prepared to cope with the academic and interpersonal demands of students emerging from the sausage factory of the second level? Today the leaving cert results come out ; tomorrow we will see the newspapers filled with adverts for grind and cram schools who will grind and cram young minds to one aim – pass the examination next year. Combined with a strong suspicion and perhaps societal desire for grade inflation in the same examination is it any surprise that even the best students falter when they are asked to engage with unbounded and freeform tasks at a high level in third level?

How does a thrust on Internationalization square with the need to be focused on regional labor market needs? And why is that a proximate and pertinent role for universities in any case? How local is local? How can we attract more non EU Students when the visa regime is archaic and our facilities poor compared to competing countries? Non EU students paying full economic cost cannot simply be lumped into already crowded lecture halls and be expected to act as goodwill ambassadors for Ireland in the future. The days when we could implicitly assume that they were lucky to get into a real university are gone, with world class facilities abounding elsewhere. We can’t charge more to deliver the same in worse conditions.

The issue on commercialization is one that goes to the second and third threads. It is often touted that we need more university-business engagement and that Irish business also needs to increase its research and development profile. To achieve that businesses have been given increasing tax breaks with long lifespans (on top of an already generous corporate tax regime) for research. In 2010 this amounted to 225m, nearly a quarter of the total state budget for third level. Revenue audits now suggest a high level of suspected abuse of this. And yet, not content with this generous tax break we also find that Irish business is amongst the least likely to engage with the third level. A survey in the times higher education on Monday suggested that Irish business invests only $8300 per annum per scholar in third level on research and innovation. This is less than 1/10 the amount spent by Korean or Singaporean, 1/9th the amount of Dutch and 1/8th the amount south African businesses invest. On the face of it this is startling.

There is an argument of course that this undervalues the amount of money put in by industry, as many courses at postgraduate level contain significant numbers of business executives. This however is also the case for other countries. Its also the case that other critiques can be made of the survey, notably its drawing from a relatively restricted sample (again however this is the case in all countries surveyed). While we might quibble with the exact numbers it would be reasonable to assume that the relative rankings are broadly correct. In any case nothing beats cold hard cash, and this is not and has not been forthcoming from Irish business in anything like the amounts indicated is the case in other jurisdictions. While Irish business persons have been generous (but not nearly as much as is thought and not even in the same dimension as some of the exiles children) when was the last time a corporation endowed a chair or a library or a lecture hall or sports stadium? Where are the corporate sponsored buildings, the corporate sponsored symposia and doctoral programmes? They are as scarce as actual green shoots in the economy.
Look around – how many chairs, centers, institutes have been funded by Irish business? While some exist, they are in fact few and far between. Compare that to even the lower tier universities in the USA or Canada, where there is a palpable engagement of business with academia running both ways to the benefit of both sides.

Lets stand back – Business in South Africa with a GDP per capita 5 times smaller than Ireland invests 8 times more per student per annum in research and development. And somehow this is spun in all the media as “Irish universities fail to engage business” . Israel and the UK, even Hong Kong whose funding models are seen as the exemplars we should aim for, are also very low in terms of business r&d to the third level, and this includes two countries with massive military industrial complexes. It is hard to not conclude from the two issues, business involvement and the R&D tax issue, that Irish business is all too often happy to take from the state and society and is not that keen to give back. For sure universities and IoTs need to engage more with them but it is a two way street. Engagement is not simply giving a few PCs or the odd bit of a chat, it is about business proactively funding PhD and postdoctoral students, about they endowing centers and developing longterm research, about ensuring that thought is put into industrial and commercial issues and that the needs of industry as a stakeholder in society are interwoven with academia. It is not chasing after rapid commercialization of the latest whizzbang nor about accelerating the undergraduate cycle to two years to produce inputs to industry.

We also need to re-evaluate how our MNC sector knits into the Irish economy and society. As the OECD and G8 made clear the friendly, Dublin as a friendly tax port of ease is over.  While much has been made of Apple’s tax arrangements with Ireland, little was discussed of what this meant for how MNCs do business in Ireland. It begs the question, if you are only around for the taxes why get entangled with the locals beyond coffee and sandwiches? For sure you will not be that   interested in fostering longterm intellectual relationships if the main driver is a tax loophole.

We need a debate on universities a and their role in society. They are not businesses. That is not to say that they should not be run in a professional, business like fashion with transparent budgeting and meaningful and appropriate professional management. Universities in particular exist to first and foremost provide educated engaged members of society. They do not exist simply to train people for industry. Industry has been good at outsourcing its basic skills training to the state, in effect free riding. Perhaps its time to think about giving something back?

Ultimately, the THES shows that aping one country will not work. Israel is one of the powerhouses of innovation and academic excellence but does poorly in this survey. Denmark, also a powerhouse of innovation, does well. They both have strong academic, entrepreneurial and innovation backgrounds but have different approaches to how they manage. The risk is that government policy tries to pick a country to follow as a model. Ireland needs to follow a mix of models and accept that these things must progress organically. Organic means bottom up – it does not mean being kept in the dark and fed manure

Ireland – its all goood…its alll gooooodddd

keep-calm-and-drink-the-kool-aidNo, really it is apparently all good. So sez a report by Euroweek. Mind you this is sponsored by a bunch of banks with significant exposure to Irish debt/bonds/interests so they are hardly likely to say “RUN RUN FOR THE HILLS” even if that were (which it probably isnt) warranted. Still. The centerpiece is a transcript of a roundtable on ireland. Whats astounding is NOT A SINGLE contrarian voice is to be heard. The herd thunders on. Feel free to read. There are some gems.

Some I particularly like :


if you offered the Spanish or the Greeks an
unemployment rate of 13.7%, they’d bite your hand
off, wouldn’t they


Public sector pay will be further reduced.


“given  healthy nominal GDP growth of 3%-4%
and interest rates of 4%-5%, the debt
trajectory looks sustainable.” [ and a edit]


the increase in the population over the last 25 years means that as a percentage the gross number of emigrants is still down on the late 1980s. the second is ..ryanair …, which is allowing people to fly around the globe at a fraction of what it cost to do so in the 1980s.


The economic situation in Ireland  has been quite stable over the last couple of years


still, lets not be too negative. …


Realtime thoughts on the crisis 2008-10

hqYwsOver the last day or so I have posted a number of the opinion pieces which I had (mainly in the Irish Times) during the acute phase of the Irish banking crisis. For quick reference these are here. Its always interesting to look back at how one saw an issue in ‘real time’. I think the analyses stand up fairly well. I make no claim for prescience – for the most part these arose from discussions with bankers, academics, politicians and business people and represented my attempts to get to grips with what was going on.

So here they are with my ‘now/new’  titles