Monthly Archives: October 2014

Is (teaching) Economics doing more harm than good?

evil_genius_economics_teacher_mousepad-rd83ec59497fd4d20a63447e4726107af_x74vi_8byvr_324Every September thousands of students enter into universities and institutes of higher education. A large number of these take some economics courses. Some 23% of all undergraduates are enrolled in social science/business/Law courses, where at least some introductory economics is very common. Economists also typically teach courses such as statistics, or introductory mathematics for social scientists. And yet, we have no idea whether or not this does any good. Much worse, we have no idea whether or not this does harm. Maybe we should find out?

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Irish Water : time to flush it away, refill later.

There is a classic syndrome in much organizational strategy which is called “escalation of prior commitment” . This is also known as ‘throwing good money (or political capital) after bad’. Sometimes the thing to do is – stop. The government should now pause the Irish Water omnishambolic clowncar, rethink and regroup.
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When did we let economics become the totality of society and culture?

The Irish economic crisis was as much a socio-political event as it was an economic crisis. Given that, it is surprising that we have had so little analysis from outside the realm of economics. Economists and economics took or were given a central role in transmitting what was a social phenomena. This book ( “From Prosperity to Austerity : A Sociocultural Critique of the Celtic Tiger” edited by Eamon Maher and Eugene O’Brien and published by Manchester University Press) is therefore extremely welcome, focusing as it does on whole different set of areas and interlocutors. In particular, it looks at how (some aspects of) what might be termed as high culture has reflected the fall.

I want in this review to concentrate on three aspects. First, it’s always useful in a book review to have some idea of what the reviewer thinks about the actual book, its contents, writing etc. Second, no book on the Irish financial crisis can ever be complete, and it is no criticism of this book to say that there are aspects left uncovered. Third, the existence of this book, a relatively rare examination of an economic crisis from a noneconomic perspective, should force us to ask questions about economists and how they are seen in the media.

Trockhe book’s organisation is pretty conventional. Over 14 chapters a variety of socio-cultural perspectives are deployed on a variety of areas. We have amongst others an analysis of religion as a market, a perspective on women’s fiction and how it has reflected the crisis, how Paul Howard’s beautiful monster Ross O’Carroll Kelly has evolved over Tiger and its crash, a discussion of popular music with Jedward as the empty anti-heroes, the role (limited) of poetry in addressing the crisis, and a wonderful discussion on the monsters of post Celtic Tiger Ireland. The book is full of wonderful insights, too many to pick out here. Let me concentrate on a few chapters, monsters , religion and plays.

father-jack-traditionalIn the chapter on religion we are reminded of how swiftly and how completely has been the shift from religious to ‘real’ capital, with a long discussion on how real this capital is or may be. This discussion, based in the notions of capitals from Bordieau, is reflected later in the discussion on food and wine and to a lesser extent in the chapter on cinema, where the moral capital of the church is replaced by other forms of capital, no less valid but unusual in the context of conventional religion. Religion here is, to a greater or lesser extent, assumed to be observant conventional roman Catholicism. The discussion on how the moral force of the church has become muted while the sacramental and ceremonial remains much more intact resonates with the discussion in a later chapter of how the cinema of the celtic tiger and its fall allowed for a ceremonial depiction of a moral change. Capital is mutable, ceremony less so.

dracula_book_cover_1902_doubleday_89The monsters chapter is excellent, reminding us that Dracula is actually an Irish word, bad blood, droch fholla, and that there is plenty of bad blood generated in the crash. The Renfield as gombeen man identification is one that should have resonance. In the same way as Dracula is essentially undying unless killed in a particular manner, Renfield Gombeens seem to be a persistent feature of the Irish economic landscape. No great effort at structural reform to eliminate these creatures has been put in place, structural reform tending to instead mean cutting wages. The discussion on popular music takes a fierce swipe at Jedward, seeing them as essentially hollow. One gets the impression reading this chapter, which starts with the (what else would it be) impassioned plea by Roy Keane that the Irish soccer team and fans not simply go along to a championship for a singsong, that the authors are rather despairing of popular music as a reflection of anything other than a cynical marketing exercise. The chapter on theatre is powerful, reminding us that they have in fact been quite a number of performances which punctured the smug bubble of the Tiger and cast an unflattering light on its aftermath. Live theatre is something that when done well is amongst the most powerful cultural expressions. Irish theatre has not thrived in the recession, but nor has it stagnated as much as one might have feared. There is a deep well of local theatrical experience, increasingly professional, which has helped perhaps sustain. We are not back to the days of the fitups, but it is possible now for Metropolitan theatre companies, if they wish, to venture beyond the pale and bring their works and analysis. It is startling to read an account of the play Site: Builder’s Tale, performed in 1999 in Galway, which seems damningly prescient. Hinterland, in 2002, reminded us of the rotten heart of the Irish body politic. The chapter necessarily confined itself to an analysis of some of the theatrical presentations, but one that is missing which should in my view have been examined is guaranteed, but Colin Murphy. While the previous plays looked at the run-up to the Tiger, Guaranteed examined the apocalyptic night of the bank guarantee Again we see an echo of Bordieau, where political capital is expended, irrevocably, in protection of financial capital. Its strength lies in the fact that, like Outsiders, David McWilliam solo production, it relied more on factual than dramatised elements. Art imitates life, and life imitates art.

I now want to move on to the second point, that which is missing. This is a truly excellent book, but the all-encompassing nature of both the boom and bust are such that no perspective can truly give justice. At some stage an encyclopaedia of the great Irish crisis 2008-? will need to be undertaken. Let me concentrate on three areas, entirely subjective, which I feel could give a perspective that is lacking in the book.

dark timesThe first is crime fiction. Although not typically seen as part of “high culture” crime fiction is enormously popular. Ireland is lucky in having some extremely good, world-class, writers of crime fiction. Perhaps the best-known Irish crime writer isJohn Connolly, but his perspective is what business professors might call it a “born global”, that is to say he has started from a local base to a global audience and reach. More typically we have authors such as Tanya French, or Graham Masterson, or Rob Kitchen and Gene Kerrigan, who while achieving global sales take a more local perspective. In a sociocultural critique of the Celtic Tiger which contains a well justified analysis of Paul Howard the lack of an analysis of crime fiction was somewhat surprising. We lack in the Republic a writer such as Colin Bateman, able to combine comedy and crime in a delicious hodgepodge. If you can write about the still raw wounds of Northern Ireland with a rapier wit one wonders why a Paul Howard of post-Celtic Tiger crime has not emerged. The post-Tiger Cork of Graham Masterson, not a native Irish born writer, is one that is easily recognisable. His heroine, a Garda superintendent, struggles with the effect of the Tiger and its crash both of herself, her husband having gone bankrupt, her colleagues, some of whom have become susceptible to the blandishments of the criminal class due to their new-found relative poverty, and the city itself, poised uneasily between success and failure. The dark underbelly of Dublin reflected in the works of Kerrigan, and the methodical police procedural of French, with their dramas rooted in even longer traumas than the Tiger, all these provide a window into our fall.

10561694_675999772482672_6757804091546323022_nA further gap, perhaps reflecting the demographic of the authors and also perhaps the intended audience, is in the area of popular music. As noted there is a chapter on popular music, and its excellent insofar as what it covers. U2, Jedward and The Script aside there is much more to popular music. Amongst the hardest hit of the crisis have been the urban male proletariat, and more generally young men. There is a thriving Irish hip-hop and rap scene, and this gets scant attention. The themes of acts such as represented by Bloodshed Records reflect the raw reality and anger in a way that acts such as U2 have long since left behind. We may not yet have an Irish version of “Straight Out Of Compton”, the rage against the system of early hip-hop is one which has echoes in recent Irish music. It started just hip-hop that is missing, there is a comedict trend in Irish music which is often very subversive. Ding Dong Denny O’Reilly, the Hairy Bowsies, Richie Kavenagh and Patt Shortt had all composed and performed songs which poke sometimes not so gentle fun at aspects of the Tiger and its fall.

8-must-have-traits-of-tomorrow-s-journalist-5454316084Third, The words “blog” or “twitter” do not appear at all in the book. Throughout the crisis and afterwards mainstream Irish media has been, to put it mildly, compliant. The old adage of Horace Greeley, that newspapers were there to afflict the comfortable and comforted the afflicted, has with some brave exceptions being jettisoned. An almost and ending diet of compliantly reheated press releases, shallow analytics, and a drumbeat of opeds advocating pulling on the green jersey, that has been the fodder which the media has presented to the Irish public. There are of course exceptions, even in such elite friendly ynewspapers as the Sunday Independent where Gene Kerrigan has ploughed a lonely furrow. The Sunday business Post has continued its rather eclectic perspective, combined with strong analytics. In TV3 we have seen Vincent Browne performing heroic work late in the night trying to provide a variety of voices. But for the most part mass media has fallen into line. Much of the critique of how the government, permanent and elected, has responded to the crisis has come from new media. It is surely a sociocultural phenomena, the growth of Irish new media analysing the crisis, and yet it is not reflected here. Reading this book we woul never know the emergence of blogs such as the Cedar Lounge Review, True Economics, the much missed Namawinelake, The Irish Economy, my own modest effort, Notes on the Front, Ireland after Nama; new online newspapers such as The Journal, Broadsheet; and an explosion of analysis on Twitter and Facebook. This is a pity, as the emergence media landscape, blending new media and old will shape the sociocultural landscape of the next decade.

images (14)This latter lack, the lack of the new media perspective, is also reflective of the change that has occurred in the last three years in relation to how economists are treated. We saw in the run-up to the crash, and in the immediate aftermath, the emergence of the Economist as commentator on a scale never before seen, and hopefully never to be seen again. As things have stabilised, and recovered, the wide variety of voices has been replaced by select few, and we have seen the re-emergence of the financial market commentator as the authority. This reflects back on the notion of capitals, with intellectual capital now being subsumed by financial capital once more. You will wait a long time to hear a philosopher, a poet, a historian even on the radio or TV discussing the economy. This monocular shoehorning seems to happen only in the economic area – we are happy to have celibate men discuss obstetrics ad nauseum, to have the heads of self-professed institutes discuss moral philosophy, to have ex terrorists discuss policing, and so on. And , they have a voice and a right to be heard, even if we dont like what they say.  We seem to be unable to grasp that it is as vital for a longterm healthy economy as part of society to be discussed by a wide variety of observers of society.

wrong-tool-by-jerome-awThere is a great deal to be said for the argument that (macro) economics exists in order to make astrology look good. This is especially the case if we consider economics to be primarily about forecasting the components of GDP. Economics is of course much more than that, a systemic way of thinking about costs and benefits which can be applied to much of human activity. In the run-up to the Tiger for the most part the profession, myself included, took our eye off the ball, were unsure as to the kind of ball we were playing with, or in some cases were playing an entirely different game. There are fantastically talented economic analysts in Irish banks, stockbrokers, and government service. They are not however in the game of truthiness. In financial services their role is ultimately to act as part of a capitalist enterprise dedicated to the pursuit of profit. Nobody has to act in a manner which is unprofessional in order to present an analysis which is aligned more towards selling the that suit the bottom line of the institution than might be the case were they to be working elsewhere. A big part of the problem has been that economists have tended to become more and more, the macro ones especially, concerned with the elegance of and internal consistency of the models rather than the appicability and realism of same. Macro is immune, so far, to mere issues of scientific method and progress – the comparison with physics, an envy of which suffuses modern macro, is stunning.

CP00224-2This is not to argue that only pure hearted academics, with no axe to grind, should be allowed on the radio. It is to suggest that when somebody turns up for stockbroking house they have an agenda. Too often that agenda is neither acknowledged, surfaced, nor accepted as even existing. Bonds gotta sell, product gotta move, assets must be mobilised. Unfortunately academics can also have an agenda. For some that agenda might be to look good for possible future government preference, for others it might be to unconsciously herd towards the line of the majority, in order not to be seen to be wrong. Ideological perspectives yet may motivate others. A desire for fame, a need for self promotion, a chance to showcase to potential consulting clients, all these and more can and are and have been rampant. In other words economics is far too important an issue to be merely left to economists as the sole commentator.

economist abductedThe phenomenon of economists as the only commentators on the crisis is one that deserves analysis. More generally however, if we are to afford economists a sociocultural role as the high priests of distress, we need to understand better what it is they actually do. Economics is more than just macro. A sociocultural analysis of why we have not heard from more varieties of economists, who undoubtedly have valuable and insightful points to make on the nature of the crash and the nature of the economy, that would be a valuable exercise. By ceding the ground to macroeconomic analysis, micro-economists, labour market economists, specialists in public choice theory, experts in a whole variety of areas affected by the crash have rendered themselves mute. Mainstream media feeds now on new media. It is easy to set up a blog, easy to set up a Twitter Facebook feed. The experience of many with something to say, grounded in analytical rigour, is that if you blog it the media will come.

This book is invaluable, if only for the fact that represents the first serious attempt to cast a wide sociocultural net across what has happened. It’s not always easy reading, nor is it always comfortable reading. It is dense, rewarding, valuable. As we move towards the upswing, with the inevitable consequence that that also shall end, we need to reflect in broad about what happened, and how we responded to it. This book helps us to do that.

This is a longer version of a book review published in the Irish Times 25 October 2014 of “From Prosperity to Austerity : A Sociocultural Critique of the Celtic Tiger”  a book on the Irish economy and society edited by Eamon Maher (IT Tallaght) and Eugene O’Brien and published by Manchester University Press.

A field guide to Irish TD’s attitudes to Irish Water

A field guide to Irish TD’s and Irish Water

Fianna Fail “we support the idea of water charges but we don’t support these water charges. Anyhow, it wasn’t our fault. No, really..”

Fine Gael “Doesn’t Big Phil look good on the European Stage… someday that will be me”

Labour “It was Fine Gael made us do it because Fianna Fail made them do it and we wouldn’t normally do it but we did because we had to because …what was the question again?”

Sinn Fein “we don’t support water charges …unless your in the north.”

People Before Austerity Before Logic Alliance “BONDHOLDERS!!!! . All the money goes to pay BILLIONS OF BONDHOLDERS“

Irish Water : “we haven’t a clue” (at last, honesty)

I dont mind, really, paying for water. But, I cant. I dont have my “application pack”.

When the neighbours got theirs, I rang, and they said “oh, wait a few days”. I did. They didnt come. Around the start of October, I rang again “right, thats odd, I will reorder, should be there in a few days”. They werent. This week, rang again. I got an honest woman. She explained there were “thousands” looking for packs and they “hadnt a clue when they would get sent out”. She warned it could well be after the end of the month, but they “hadnt a clue”. IW then tweeted to me that I could DM them to give the information I have already given them three times. They asked me to contact them. Lads, im easy contacted. Im sick of ringing you. You ring me now.

This is small beer really, but its indicative of a huge problem. IW seems catastrophically badly organized. Rather than having to apply online with a pin sent by a pack a simple solution would be to have the following. If you havent a pack, ring this freephone number, or email this address, and we will send you one. With a pin. That would be simple. But this is not how IW do things. There is a culture of “sod the customer” already inbuilt. This is what will lose general elections.

Take the childrens PPS number. I am hugely opposed to giving this to them. I do understand that they need proof of a child. I am happy to give them that. A copy of the passport, a copy of the childrens allowance, a letter from his doctor. FFS a look to my facebook page will show the ongoing existance of Prof Jr. Why they need HIS PPS is beyond me. Perhaps they can tell me when they ring me.

Meanwhile, this on Social media. If its true, and I have no reason to doubt it isnt, given how sloppy some of the installation work is alleged to be, then lots of people will be stunned when they get the bill.


The Economic Impact of Irish Higher Education Institutions – Preliminary results

360px-Quesnay_TableauSo, what do higher education institutions add to the economy? A lot? a little? How would we know anyhow? A recent working paper suggests some answers.

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Only the tax system can save the Irish housing market…

In a country that is only 4% urbanized to have a scarcity of land for building takes quite some doing. It takes generations, generations in which the political class, and those who elect them, ignored best interests of long-term planning; The budget next week as an opportunity to begin to undo some of this, but is vanishingly unlikely that will do so. Continue reading

Corporate Jets, management entrenchment, and the lessons from Tesco

Tesco has been in the wars lately, with a major restatement of its earnings having caused carnage to its share price and reputation.

Screenshot 2014-10-04 08.49.40

Now we see the Tesco has taken delivery of a brand-new shiny executive toy, a Gulfstream jet.

To be fair  the new management have decided that they will immediately dispose of this jest, ordered under previous management.

Some 2012 research suggests that private jets, perhaps the ultimate perk for many chief executives, are a really good way to differentiate between firms that do and do not suffer from what are called “agency problems”.  In a nutshell agency problems are where managers run the company for their own benefit, rather than for the benefit of shareholders.    The paper looks at the firms which are owned by private equity companies, a pretty ruthless bunch of operators whose main role  is to squeeze much greater efficiencies out of companies, comparing them against a matched sample of publicly quoted companies.   They find that companies owned by private equity tend to have jet fleets which are 40% smaller than those which are publicly owned.   This is pretty non-linear as well, in that these results really only begin to kick in a new get into larger jet fleets, size measured by seats.   The results are in fact driven by the top 30% (of jet ownership) of companies.As a robustness check the researchers also look at companies involved in merger snack positions, and that companies going into leveraged buyouts.   Target company’s jet fleets fall, as do those of companies that are the target of leveraged buyouts.

We’ve known this for a while,  A 2006 paper looked at managers use of corporate jets.  this is a nice perk, better even than having a corporate jet for business purposes.  Companies that allow senior management to use corporate jets for personal business on average show a 4% per annum underperformance relative to a matched sample.

So,  managers might want to consider ditching the jet

Edgerton, J. (2012). Agency problems in public firms: Evidence from corporate jets in leveraged buyouts. Journal of Finance, 67(6), 2187-2213.
Yermack, D. (2006). Flights of fancy: Corporate jets, CEO perquisites, and inferior shareholder returns. Journal of Financial Economics, 80(1), 211-242.