Sunday, May 30, 2010

Hyperbolic Smoking

Smoking is a feminist issue. Or at least it should be in Ireland. Ireland is one of only two countries in the European Union with more female than male smokers. The other is Sweden: as the chart shows. I've derived the ratios from the latest Eurobarometer survey on smoking. This is strange: in every other country men outnumber women in the smoking league tables - doing their bit to exacerbate the gender death gap. But not in Ireland.

We are bucking the trend in several other regards. The incidence of smoking in Ireland is rising: from 29% of adults in 2006 to 31% last year. In 2006 we were below the EU average (32%), by 2009 we were above the EU average (29%). The main driver is the incidence of smoking among women in Ireland versus the EU female average (32% vs 25% respectively) - Irish men are less likely than their EU counterparts to smoke (30% vs 35%). The Office of Tobacco Control has also recorded periods when more women than men smoked in Ireland in the past.

What's going on? Perhaps it's a classic case of what behavioural economists call hyperbolic discounting: future pain seems so far away it just doesn't seem to matter relative to contemporary pleasures. Or perhaps Irish women are 'overly optimistic' about the future, hence their low levels of depression in comparison to women in other EU nations.

But it does pose a challenge for policy makers. We've tried smoking bans, ad campaigns and straightforward prohibition in relation to cigarette vending machines etc. Without a lot of success it seems. Given the pressures on government communications budgets, perhaps now is the time to unleash the insights of behavioural economics as discussed at last week's seminar organised by the UCD Geary Institute? It might be more 'economical'.

Friday, May 28, 2010

Middle Aged Debt Analysis

Yesterday's news from the Financial Regulator tells us that 1 in 25 mortgages are in arrears. Or, if you prefer, 24 in 25 are not. Admittedly the former makes for a more 'exciting' headline.

What the Regulator doesn't tell us is who is in arrears. I've had an indirect stab at it, by asking a quota sample of 1,000 adults* earlier this month the question:

Q. Do you currently have any borrowings including personal loans, mortgage, credit cards, car loans?

It was a simple yes/no response, and here are the results:













At the moment in Ireland roughly two thirds of adults have some form of debt - one third don't. Not surprisingly (from an economics of the lifecycle perspective) the middle aged are more likely to have debts than younger or older adults. No surprise there. The key question, of course, is whether the debt levels of those with borrowings are manageable or not - clearly not in the case of mortgage accounts in arrears. So we asked the question of those with borrowings:

Q. Thinking about all borrowings you have, such as loans, credit cards and your mortgage if applicable, would you say that?

- your level of borrowings are easily manageable at present
- your level of borrowings are easily manageable at present
- your level of borrowings are causing you some concern
- your level of borrowings are a real problem for you

The answers are shown in the chart below:


The chart tells us that right now just over one in four adults with borrowings has no difficulty managing their debts (including mortgages). Another two in five are doing okay so long as they are careful. However, over one in five are concerned about their debt problems (but just about managing), and one in ten believe their levels of borrowings are now a real problem. The debt burden is most difficult for those aged 25-34 and 35-44. The latter, as we saw in the first chart, are also the group most likely to have borrowings.

All of which goes to explain why we haven't 'gone Greek' here in Ireland. The middle aged don't do street protests. At least not yet anyway. But they do vote - more than the younger age groups relatively unaffected by debt problems.

Woe betide the government that takes away the future from the middle aged and the middle class...


* Amárach Research omnibus: 850 online plus 150 over 55 year olds face-to-face

Wednesday, May 26, 2010

Wish We Were Iceland

It isn't just a letter that differentiates us from Iceland, it's a digit. The latest OECD economic forecasts for Ireland show double digit rates for unemployment and fiscal deficits - whereas Iceland's projected to have single digit rates.

Even by 2025 Iceland is forecast to be in better shape than Ireland in terms of its net financial liabilities. Makes you wonder where we went wrong...

Still, at least we don't have any volcanoes.

Tuesday, May 25, 2010

Stop Blaming the Weather

It's probably a seasonal thing, but I am once again struck by the incidence of obesity in Ireland. Something I've noted once or twice before. It probably has something to do with the good weather and more people exposing more flesh to the all too rare Irish sunshine.

And so it struck me again this weekend, as I spent a delightful day in Killarney National Park - an extraordinary amenity I really should visit more often. But maybe that's the problem: our weather obliges us to spend more time indoors than is healthy. With all the consequences - including weight gain - that go with it.

On the other hand, it could be because we just prefer to spend time indoors? A case in point are the findings from a fascinating IKEA study of children and their parents around the world about 'play' (the Play Report is available through a very useful Facebook page they have set up - ht PSFK).

Here's one finding that struck me - Irish parents say their children spend more time in front of the TV or using games consoles than children from any other country in the world except the United States (and we know what a problem the US has with obesity):



Okay, it's only one factor among many: but maybe it's time to stop blaming the weather?

Sunday, May 23, 2010

Strategic Optimism

This puts things in perspective:
The fundamental drivers of growth are stronger than they have been at any point in human history. These include the increasing number of highly educated and capable people in the world, the breathtaking speed of technological breakthroughs, globalization, the inclusion of ‘the next billion’ into the world economy, and relative political stability. Hans-Paul Buerkner
Buerkner is talking about Strategic Optimism. It's also applies to Ireland: lousy as our present economic circumstances are, we've never been better placed in terms of people, skills, experience and resources to solve the problems we face. The recession will end in recovery, and we will face new opportunities - and challenges.

Like the 12 events that will change everything between now and 2050: according to Scientific American, that is. Here's Next Big Future's take on the big 12, including a link to Robin Hanson's post about one of the events: AI (which he thinks is the only big event that matters to our future - of a man made nature anyway). See also NBF's Seven Technology Horizon's post in a similar vein.

And if you don't have a subscription to Scientific American (me neither), then check out the very clever interactive guide to the 12 events over at the Richard Dawkin's Foundation.

Go ahead - it'll take your mind of NAMA, Greece and the euro for a while...

Friday, May 21, 2010

The Evolving Family

I enjoy watching Modern Family: it's funny, clever, avoids most of the cliches (yes, dad can be dumb, but mum falls of her pedestal from time-to-time too), and it's imbued with a gentle compassion for all the challenges life throws at families these days. I also have no doubts that it will date terribly in the years ahead. The family lives portrayed in the series will inevitably appear as bizarre as the 1960s domestic lives portrayed in the Mad Men series appear to us now.

I believe we are living through a moment of profound change in family life - an evolution if you will - that will have far reaching social, cultural and economic implications. Change is happening and still has some way to go. Many of the forces driving these changes are already familiar:
  • Legislation (from women's suffrage to gay marriage)
  • Technology (from reliable contraception, especially the pill, to paternity DNA tests)
  • Economy (from female participation in the workforce to the consumer credit explosion)
  • Demography (from the fall in birth rates to rising longevity)
  • Culture (from births outside marriage to multiculturalism)
The list is by no means exhaustive, and so far so familiar. What is interesting, however, is to anticipate the trajectory of not just these trends but others that are emerging right now. For example:
  • An emerging men's liberation movement which is increasingly aware that the 'equality' demanded by gender feminists (in the workforce, in courts and in government spending priorities) has resulted in extreme inequality for men (the gender death gap remains as broad as ever, and as ignored as ever).
  • A growing push back by women who are tired of being treated as second class simply because they want to be mothers to their children.
  • Increasing alarm at a 'slut culture' that often locks young teenagers - female and male - into a culture of hypergamy that cripples their capacity to form stable relationships, and families, in later life.
  • A dawning realisation that innovations such as the pill and wider cultural changes have had unforeseen consequences that have been to the disadvantage of women, and have contributed to a culture of one-up-womanship that leaves everyone, especially children, worse off.
Enter the behavioural sciences. What can the growing number of insights from evolutionary psychology and behavioural economics tell us about the present and future trajectory of the modern family in all its manifestations? This is where it gets interesting. A study of The Economic Value of Virtue finds that:
...the prevalence of female virginity can be affected by economic variables. Using a very parsimonious mating model, where preserving her virtue helps a woman to improve her chances of marrying a husband of higher social status, we have obtained results that are fairly consistent with cross-cultural and historical evidence. In particular, economic development, increased female labor force participation, lower male inequality, stronger social stratification and higher social status may all weaken the incentive for women to preserve their virtue, thus explaining a lower prevalence of virginity. This is a further example of how the incentives to adhere to cultural and moral values can be shaped by economic factors.
Of course much of this will seem quaint: virginity and pre-marital sex have long ceased to warrant the attention they got in earlier times. But the issue of how economic factors influence the choices women make about the men they choose to be fathers to their children (the old adage that 'men chase and women choose' is still as true as ever) is still a pertinent one. And many of the economic forces that drove women's choices (participation in third level education, rising wages, expanding job opportunities especially in the public sector, easy access to debt) will likely go into reverse in the years ahead (if they haven't already) given the medium to long term outlook for most developed countries right now. The same goes for men as well of course.

So much for behavioural economics - what about evolutionary psychology? Again there are some intriguing insights emerging from new research. Take Maslow's hierarchy of human needs: a standard feature in every undergraduate psychology student's education. But what if he got it wrong? As Douglas Kenrick explains:

But the modern integration of ideas from neuroscience, developmental biology, and evolutionary psychology suggests that Maslow had a few things wrong. For one thing, he never gave much thought to reproduction. He conceived of “higher needs” as completely personal strivings, unconnected from other people, and totally divorced from biological needs. Parental motivations were completely missing from his hierarchy, and he placed “sexual needs” down at the bottom – along with hunger and thirst. Presumably, sexual urges were biological annoyances that could be as well dispatched by masturbation as by having intercourse, before one moved back to higher pursuits like playing the guitar or writing poetry.

From a modern evolutionary perspective, that is a curious set of assumptions. For one thing, all living organisms, including you and I, inherited a set of motivational mechanisms that inspired us to reproduce. Like other mammals, humans also have strong attachments to the offspring they produce, and unlike most mammals, both sexes develop attachments to their mates and their offspring. In the renovated pyramid, reproductive goals are at the top, not the bottom.
In a brilliant and fascinating paper, Kenrick and his co-authors propose a different hierarchy, as illustrated below:



The authors conclude:
A consideration of ultimate function of behaviors and of life history development counsels the explicit inclusion of motivational levels linked to mating and reproduction. Reproduction for humans is not ultimately about self-gratification, but involves a considerable diversion of resources away from selfish goals and toward other human beings in our social networks. A consideration of life history trade-offs also implies that later developing motive systems never fully replace earlier ones, but continue to coexist, ready to be activated depending on current opportunities and threats in the environment, in interaction with individual differences. Thus, a key point of this revised perspective is the focus on the ongoing dynamic interaction between internal motives and their functional links to ongoing environmental threats and opportunities.
It might all seem obvious - and yet it wasn't to Abraham Maslow himself, even though he was married (to his first cousin) and had two daughters. His humanistic theories of self actualisation became the predominant psychological paradigm for cultural change in the 1960s and 1970s. The reconfiguration of his hierarchy to something closer to the lived human experience - in which mating and parenting are key drivers behaviour throughout most of our lives - may well herald a new evaluation of the evolving family in combination with the other forces for change I have referred to above.

Such an evaluation will - I suspect - lead us to a very different future for the family in the years ahead. Not so much modern family as 'actualised family', with perhaps an economic dash or two of pre-modern family for good measure.

Wednesday, May 19, 2010

A United Ulster

I had a fascinating conversation the other day with a man of impeccable Unionist pedigree: Southern Unionist. His father and uncles had been actively involved in the struggle against Home Rule, active in the arms importation and training sense. What surprised me was his description of their deep and bitter anger at the decision by Edward Carson (a Dublin man, to his shame!) and others to so readily agree to the partition of Ireland. Leaving thousands of Southern Unionists to their fate.

But why were they angry? Hadn't the thousands who signed Ulster's Solemn League and Covenant less than ten years before partition at least saved (most of) Ulster for the Empire? That's what annoyed them: since when had Unionists become Separatists? The same Covenant began by stating that:
Being convinced in our consciences that Home Rule would be disastrous to the material well-being of Ulster as well as of the whole of Ireland... (my emphasis)
The essence of Unionism back then surely meant the union of the British Isles - as certain as the Irish Republic declared in 1916 meant the whole of Ireland. Partition, of course, left neither Unionists nor Republicans with what they had originally wanted.

But my conversation got me thinking. The decimation of the Ulster Unionist party in the recent UK general election points to a sea-change in the political configuration of unionism in Northern Ireland. Many within the broader unionist community are engaged in re-imagining a future direction for unionism in light of these changes. It's time for unionism to look outward, as it has been put recently.

So here's my proposal. Why don't unionists take the opportunity to begin negotiating a new political configuration for these islands, starting now? They have the double advantage of retaining a veto on any referendum on a United Ireland, and a conservative government - their natural ally - in power in Westminster (albeit in coalition). They could negotiate from a position of relative strength (i.e.: relative, say, to ten years time when they might comprise a minority of voters in Northern Ireland).

What would they negotiate? In no particular order, here are some suggestions:
  • a United Ireland on their terms: including quotas for unionist TDs
  • a separate Ulster Authority - comprising the nine counties perhaps, and thereby atoning for the 'sin' against so many unionists in Monaghan and Donegal - with separate spending and taxation powers
  • the re-entry of the Republic of Ireland into the Commonwealth
  • a permanent inter-governmental secretariat between the new Irish (32 county) and British governments with guaranteed Unionist representation to co-ordinate relevant policy issues (especially vis-a-vis the European Union)
  • Membership of NATO for the Republic of Ireland with closer cooperation between defence forces on these islands
  • The recognition of unionist culture - including the Orange Order - for the purposes of equality legislation etc
  • the rotation of the presidency of Ireland between former Republic of Ireland and former Northern Ireland representatives (though we sort of have that now, come to think of it...)
These are just my thoughts for starters - I'm sure I've left off a few key aspirations on the part of Unionists - but it's an indication of the type of negotiated package I believe they could demand if they were of a mind to do so.

And who knows: it might even be feasible to have it all sorted by Friday, 28th September 2012 - the centenary of the Ulster Solemn League and Covenant. Queen Elizabeth might even pop over to give the new arrangement her blessings. Even Sir Edward would approve I'm sure.

Tuesday, May 18, 2010

The Politics of Debt

Public debt crises are always and everywhere a political phenomenon. They are consequences of political weakness, excessive expenditure and insufficient taxation, and failures to make decisions about unsustainable fiscal policies are political. They are not the result of profound economic processes. Niall Ferguson
The quote is from a recent presentation by Niall Ferguson to the Peterson Institute. Delivered in his usual smooth, intelligent, urbane and downright terrifying style. If you can't watch it all join him at 26 minutes and watch it to the end. The quote comes about the 37th minute as he's explaining the real causes of debt crises. The big takeaway: when your government's spending more on interest repayments than regular expenditures like health and education then default isn't too far away. He forecasts that the United States will reach the stage in the next six years when US government spending on debt interest and repayments will exceed its military expenditure. The definitive milestone marking the decline phase in America's history in Ferguson's take on things. Though it's nice to see from the recent BIS analyses (referred to recently) that Ireland will be far from the worst in terms of projected debt repayments to GDP ratios. It's my straw and I'm going to cling to it...

And for something a little less smooth but even more terrifying (and for brilliant use of Agitprop type graphics, images and music) see Meltup from the National Inflation Association. The big takeaway: America will response to the crisis Ferguson foresees by speeding up the dollar printing presses. Politicians again. The statistics 43 minutes into the video about current food price inflation in the USA are quite astounding - I had no idea.

Now, which one of my euro bank notes are the ones with the German serial numbers, hmmm...

Name Your Bias

Just when you thought it was safe to express an opinion...

A beautiful visual guide to the 105 ways in which you may be biased.

From the Royal Society of Account Planning (ht PSFK).

Monday, May 17, 2010

Mná na hÉireann

Or should that be máithreacha na hÉireann? I recently came across a poem by David Eagleman (mentioned before), called The Founding Mothers. Delightful.

In a similar vein - and I don't usually plug movie trailers - I had to mention this (ht The Story):

Sunday, May 16, 2010

Batman and Dylan

I went to university in the last century, so I appreciate I'm out of touch with the present day realities of our third level institutions. Indeed, when I read that Harvard's Steven Pinker is campaigning for the defence of academic freedom in Ireland I realise that I am way, way out of touch. The case involves Dr Dylan Evans in University College Cork. You can read about Steven Pinker's campaign here - and the back story is here. Warning: contains themes of an adolescent nature.

Something is awry in our universities, and it has nothing to do with the sex lives of fruit bats. Critics from within academia such as Tom Garvin argue that universities are now being run by grey bureaucrats obsessed with targets rather than the pursuit of knowledge. Others argue that the return on investment in a third level education is in danger of turning negative. Add in the growing cost to increasingly cash-strapped governments around the world of providing third level education and its hard to be optimistic about the medium term outlook for universities as they are currently structured.

But the problem goes deeper still. The problem may well lie in the eclipsing of the humanities (and their traditional focus on ethics and moral behaviour) in our universities by the sciences over the course of the twentieth century. As Patrick Deneen puts it in a powerful, conservative critique of the 21st century university:

Contemporary circumstances have only accelerated the demise of the humanities. In the absence of forceful defenses of their existence on today’s campuses, a combination of demands for “usefulness” and “relevance,” along with the reality of shrinking budgets, are likely to make the humanities an ever smaller part of the university. They will persist in some form as a “boutique” showcase, an ornament that indicates respect for high learning, but the trajectory of the humanities continues to be one of decline.

...At colleges across the land, panel discussions organized on the economic crisis have bemoaned such things as the absence of oversight, a lax regulatory regime, failures of public and private entities to exercise diligence in dispensing credit or expanding complex financial products. But what university president or leader has admitted that there was some culpability on the part of his own institution for failing to well-educate its students? After all, it was the leading graduates of the elite institutions of the nation who occupied places of esteem in financial and political institutions throughout the land that helped to precipitate this crisis. Our universities readily take credit for their Rhodes scholars and Fulbright award winners. What of those graduates who helped foster an environment of avarice and get-rich-quick schemes? Are we so assured that they did not learn exceedingly well the lessons that were taught them in college?

I'm not sure if Patrick considers the social sciences - including economics - to be fellow victims of the decline of the humanities: though I would have thought they had fared comparatively better than, say, philosophy departments. But there's only one problem with all of this in the context of the UCC debacle: Dr. Dylan Evans is a Lecturer in Behavioural Science in UCC's School of Medicine.

That's bats.

Friday, May 14, 2010

Foreign Direct Entrepreneurs

Unemployment lags recovery. So even a stronger than expected return to growth will not lead to an immediate, sharp fall in the live register (though there will be some reduction in the numbers unemployed). Moreover, as Will Hutton recently pointed out, Ireland will have to embark on an Innovation Revolution in order to secure the job and wealth creation that a future rise in our standard of living will require. Hutton's recipe makes a lot of sense (building an innovation 'eco-system', coupled with 'flexicurity' in the job market). But all that will take time (and face considerable resistance from the usual vested interests).

So I have a modest proposal. Speed the process up by importing entrepreneurs. A recent Kauffman Foundation report on High-Growth Firms notes that:
Immigrants have been hugely important to the United States for its entire history, but their role in new-firm creation has only recently come into specific focus. Research led by Vivek Wadhwa has found that, from 1995 to 2006, immigrants founded or co-founded roughly one quarter of all technology and engineering companies in the United States—in Silicon Valley, it was a remarkable 50 percent. These companies have created thousands of jobs for Americans—by one very rough calculation, in fact, these immigrant founded technology companies comprised only 0.3 percent of companies founded during this period but generated nearly 10 percent of jobs among existing companies.
As the authors point out, immigrant entrepreneurs are job makers rather than job takers, and cost practically nothing compared to most job creation schemes. They also recognise that immigration is a highly sensitive political issue. So they have a simple proposal: create a special category of 'entrepreneur's visa' whereby an applicant intending to set up a business in a country like Ireland - with, say, €250,000 in capital to do so - can get a 5-10 year visa, renewable thereafter.

I'd go further: I'd target Israeli entrepreneurs - especially given their success to date. Moreover, with the prospect of sharply rising taxes in Israel to fund their increasingly dysfunctional social welfare system, there might be a growing number of ambitious Israeli entrepreneurs interested in starting anew in Ireland.

Whatever it takes to spare yet another generation of Irish men and women the cruel choice of lifetime under-employment or emigration.

Nudged into Recovery

I was at the IAPI talk by Rory Sutherland earlier in the week. He describes himself as an 'Advertarian': or, as he put it, he would get rid of all the police and put out lots of posters and advertisements saying 'Behave'! Clearly a man who values the 'libertarian' in 'libertarian paternalism'.

Rory argues that marketing and advertising should align itself with behavioural economics in order to gain more credibility with the financial folk who run businesses these days. All that economics, science and quantitative analysis is just the sort of thing to impress the bean counters. And it might even make for more effective advertising. He makes a great case (see his TED talk here), though I think his idea falls into the category of 'necessary but not sufficient' if the task is to credibly reposition marketing and advertising within corporate hierarchies. I'd combine Rory's ideas with the insights from Larry Light - such as that the core strategic task of marketing is to build and maintain trust between companies and their customers - in order to map the way forward for the marketing profession.

But it wasn't the future of marketing that Rory got me thinking about. Rather it was the potential to use the insights from behavioural economics to facilitate a faster and more sustainable economic recovery. One of the interesting points in Rory's talk was that people are highly influenced by the predominant or majority pattern of behaviour in their society. People save a lot if saving is something most people publicly state to be a good thing (the Chinese experience), and people stay in 'opt out' organ-donor schemes if most people don't opt out. Right now, the majority of people in Ireland believe we are through the worst in terms of the recession, but are still holding tight to their purses and wallets.

It has been proposed that recovery policy should be focused on what George Katona called the "better-better" group: people who feel they are better off than they were a year ago, and who believe they will be even better off in a year's time - and who therefore have a high propensity to spend. As economic psychologist Stephen Lea puts it:

Where are we going to find them in the present climate? The answer is that the great majority of people are not directly affected by the crisis. A recession makes us all less well off on average, but its impact is very unevenly distributed. Some people suffer major effects, losing their jobs or their businesses. But the majority of us suffer only marginal effects - a small increase in taxation, perhaps - and some are virtually immune, including many pensioners.

However, a much larger number of us are affected indirectly, either by the fear that we will be among those hit by the recession or through its effects on friends and family. We are all influenced by the "recession atmosphere" created by the media and policy-makers, with the result that people who are objectively unaffected nonetheless make cautious, conservative economic decisions. People whose circumstances place them in the better-better group nevertheless do not feel part of it.

What we need to do is build realistic confidence among those who can afford to act confidently. There is no economy without psychology, so there can be no economic recovery without psychological recovery. Economic policy needs to encourage people to recognise that they are in the better-better group.

It's an interesting idea: remind people that they are doing okay and it's all right to start spending again. Remember, nine out of ten people who had a job at the start of the recession two years ago still have a job. But there's more: George Katona found that one significant feature of people who were 'better-betters' was that they believed they were very much in control of their own lives; that their future depended on 'what I do myself' (from Katona's pioneering research back in 1974 - truly there's nothing new under the sun.)

So there's a task for behavioural economics: to enable people to feel better off and more in control of their destiny, and thereby nudge the economy into recovery. Who knows, it might even require some advertising...

BTW: I'm participating in a Geary Institute event on behavioural economics for businesses later this month.

Wednesday, May 12, 2010

Nerdvana

Good news for geeks, nerds and dorks everywhere: IT makes you happy! That's the finding from a fascinating study - The Information Dividend: Can IT make you ‘happier’? - from the Chartered Institute for IT published today. My former colleague Michael Willmott is the author and has this to say:

‘Our analysis suggests that IT has an enabling and empowering role in people’s lives by increasing their sense of freedom and control, which has a positive impact on well-being or happiness,’ he continued.

Women and those on lower incomes or with fewer educational qualifications benefit most from access to and use of IT and appear to benefit more than those on higher incomes or with more qualifications.

The study also suggests that women in developing nations benefit even more than those in the developed world.

All good stuff. It even suggests that the folks in the Movement for Happiness might be on the right track using a website to launch a campaign for a greater focus on happiness in government policy.

And the message for the Irish government? Better access to broadband isn't just good for the economy, it's good for the nation's soul...

Tuesday, May 11, 2010

Fairest City

So much for Ireland's Dublin-centric media. A recent report comparing the quality of life in Dublin with 74 other cities didn't get a mention in any of them, as far as I can tell. Maybe it's because it contains mostly good news: our capital city isn't a bad place to live by comparison with the rest of Europe. I'd say we got a B+: not quite up there with Oviedo in Spain (which scored very well on many measures), but definitely not down there with Athens in Greece (and that was before the riots).

The charts I've taken from the report shows Dublin scoring well in terms of citizen satisfaction with cultural and sports facilities. We don't do so well on health services and public transport (but at least we're starting to manage private transport more effectively).

Another pleasant surprise: Dublin and Belfast score similarly on quite a few measures - nice to see the two biggest cities on the island doing so well.

Sunday, May 9, 2010

Germany's Day

Yesterday was the 65th anniversary of VE Day - Victory in Europe. Or the end of the Emergency, if you were living in Ireland at the time. Today also happens to be Europe Day, the 60th anniversary of the Schuman Declaration - a speech by French Foreign Minister Robert Schuman which declared there should be "a coming together of Europe" and a pooling of resources which would make war "not only unthinkable but materially impossible". It instigated the changes that ultimately lead to the European Union and, indeed, to the eurozone. These two historical events were, of course, intimately linked, and both should be a cause for commemoration and celebration because of the peace, freedom and prosperity that they heralded.

History provides perspective on the current realities in Europe. And so does distance. Take the view from China: what are Europe's options and what is the most likely outcome? In a fascinating commentary on the crisis in Greece (and the eurozone), Francesco Sisci - who is based in Beijing - provides a sobering assessment of the options facing Europe. His bottom line: Europe must let Germany take control. In other words, the historic task of German containment - beginning from German unification under Bismark in the late 19th century and continuing through two world wars to German re-unification in the late 20th century - must now be reversed.

Assessing the different options for dealing with Greece, Sisci sees only one that is viable:
Germany could decide that Greece is its problem, and thus push for a European political union that eventually would de facto politically take over Greece and the rest of Europe. Berlin, aided by other disciplined European countries, could administratively "invade" sinful countries and bring about a European economic discipline that would eventually save the continent.
Obviously, as yesterday's and today's anniversaries remind us, the idea of an ascendant Germany pushing its (albeit, economic) weight around will raise many hackles - and meet considerable resistance. So what could Germany do to allay such inevitable concerns? Sisci again:
This push could certainly start a panic, so how should that be avoided? Germany should adopt English and strengthen its financial and economic links with Britain. This is already happening, as Germany is by far more Anglicized than other European countries, and Frankfurt ceded to London the primacy of the stock exchange. It should also become more "Latin". Over a millennium ago, the invading German tribes absorbed Roman culture, dominated Europe, and brought about the new rise of civilization in the continent.

German Emperor Frederic II made Palermo his capital, stressing the Mediterranean inclination of his empire, and Frederic Barbarossa found a modus vivendi with the rising dynamic Italian cities, which were to become the cradle of capitalism and of the modern world. Present Europe should look at those examples to find a way forward to avoid disaster.
Admittedly all of this is somewhat removed from the day-to-day concerns of the Irish people. As was the Second World War come to think of it. But the euro ties us closer to Germany and its economic and political ambitions than anything else; short of electing Irish members to the Bundestag.

History hasn't ended: it has just changed direction.

Saturday, May 8, 2010

Mugged by Reality

John Kay recently provided a neat summary of the situation facing Gordon Brown and other advocates of the expanding state:
Like many on today’s political left, he is a socialist mugged by reality. Their practical socialism began from the assumption that economic activity should normally be subordinated to political control. But given the manifest fact that this system did not work very well, either in the collectivised economies of eastern Europe or the planned economies of social democracies, political control is to be watered down and applied by stealth. This is not an inspiring doctrine, and it has not inspired.
The same applies to Ireland. A permanent expansion in public sector spending on the back of temporary surges in tax revenues during the economic boom has been 'mugged' by the combined reality of a domestic banking crisis and an international credit crisis. Our recent 'spend it when you've got it' approach to fiscal policy isn't a whole lot different from Greece. Here's Dalrymple's explanation:
When the crowd tried to storm the Greek parliament, shouting, “Thieves! Thieves!,” its anger was misdirected. It was a classic case of what Freudians call projection: the attribution to others of one’s own faults. It is true that the Greek politicians are much to blame for the current situation, and no doubt many of them are thieves; but their real crime was not stealing, but offering a substantial proportion of the Greek population a standard of living that was economically unjustified, maintained for a time by borrowing, and in the long run unsustainable, in return for votes. The crime of that substantial proportion of the Greek population was to accept the bribe that the politicians offered; they were only too prepared to live well at someone else’s expense. The thieves were not principally the politicians, but the demonstrators.
Whilst we can blame greedy bankers for lending the money to profligate governments (bankers behaving irresponsibly because they thought they were on to a sure thing, imagine that), we are faced with the 'Haughey-esque' realisation that 'We have met the enemy and he is us'.

The Bank for International Settlements has recently warned about the need for drastic action if countries like Ireland are to avoid the threat of sovereign default. The chart, from a recent BIS report, shows that even after taking drastic actions, Ireland's government debt levels are set to break through levels last seen in the 1980s level. Every other EU country is projected to follow a similar path.

I fear we are at a very dangerous turning point in Europe. Not only is the euro being stress-tested to destruction, democracy is being stress-tested alongside it. When people get mugged they often turn vigilante - and cooler, more considered behaviour becomes more difficult to adopt. And that's the real danger - our politicians might decide that drastic actions entail more than just fiscal responsibility:
So here’s the question: how long before the Economist, the Murdoch press and similar give up on democracy on the grounds of its incapacity to “deliver” firm government. We’ve been here before, of course, in the 1970s, when the Economist and the Times backed the Pinochet coup in Chile. Of the PIIGS, only Ireland has escaped dictatorship in living memory and some of the southern European countries still contain contain authoritarian rumps (with special strength in the armed forces and law enforcement).
I'm less worried about the media than I am about politicians. Most are, as ever, only lukewarm supporters of democracy and democratic institutions. So all democrats must remain vigilant - against the vigilantes.

Thursday, May 6, 2010

Sleeping Through The Recession

I sleep like a baby... every two hours I wake up screaming.
Colin Powell
Recessions make you drowsy. According to barking up the wrong tree, we'll know the recession is over when more people complain about not getting enough sleep. At first glance this might seem counter-intuitive: surely the stresses and worries of recession induce less sleep rather than more? For some yes - but not for others.

To test the 'sleeping through the recession' hypothesis I asked a few questions on the Amárach Research omnibus survey of 1,000 adults last month. With regard to sleep itself, the average Irish adult in our April survey slept 7.4 hours the night before they were interviewed. Obviously the average was a little higher at the weekend and lower during the week. As you can see from the chart below, there is no significant gender difference, but a much bigger difference by age - teenagers sleep a lot, whilst their parents don't (quelle surprise!):



But is this enough sleep? Is there an army of sleep-deprived zombie-workers out there staggering their way through the recession? Maybe not an army, but about a third of adults say they don't get enough sleep (though the majority say they do get enough or even too much) - and it's our forty-somethings who seem the most deprived:



Amazingly enough, 16% of those who sleep 9 or more hours a night say they still don't get enough sleep - again mostly teenagers and young adults. Cry me a river... Though it is interesting to note the association between sleeping patterns and educational attainment: people who completed their formal education at masters degree level are twice as likely to sleep 9 or more hours compared to the total population (17% vs. 9% - n.b.: small base). Now there's an incentive for pursuing post-graduate education you don't hear about too often!

Does it matter? In terms of mental health the answer is definitely yes. In our survey we asked people whether they had experienced different emotions 'a lot yesterday'. When we plot the incidence of different emotions against average hours of sleep the contrast is quite stark - people who sleep more are generally happier and much less likely to be worried or stressed:



Worse still, a lack of sleep can make you ill and even kill you. But all this begs the question of causality. If you've nothing to worry about (job security, debts etc) then you're bound to sleep better surely? Maybe. However, when you analyse the answers to the AIB-Amárach Recovery Indicator (ARI) questions (latest results here), it isn't quite so clear cut. The next chart shows the answers given to the key ARI question on people's perceptions of the current status of the economy (getting worse, stabilising, getter better) by hours of sleep:



The people who are getting the least sleep are three times as likely to say the economic situation in Ireland is bad and getting worse as those getting the most sleep. But... even among those getting 5-6 hours sleep (below the average) the majority think the economic situation is stabilised or improving. The direction of causality isn't entirely from economic conditions to sleeping conditions.

But what if it's the other way round? What if getting people to sleep more actually improves not only their health but also their outlook on the economy? Such thoughts might lead to a very interesting experiment in behavioural economic policy making, i.e.: accelerating the recovery by increasing the number of bank holidays. Come to think of it, that's the sort of thing that gets politicians re-elected...

I started with a quote so let me finish with one - my favourite from Shakespeare - and the one that certainly provides me with a little bit of perspective during my (waking) moments of stress:
We are such stuff as dreams are made on, and our little life is rounded with a sleep.

Wednesday, May 5, 2010

Revolting Debtors

Seth Godin reminds us that we should only borrow money to buy things that go up in value. Of course the trick is knowing which things will go up in value, and which won't. But some things definitely won't go up in value: like clothes, summer holidays and cars. The same goes for borrowing by governments: borrowing might make sense to build a modern transport or energy infrastructure - but not to fund the early retirement of state employees. Just ask the Greeks (who seem to have borrowed a lot more from us than we have from them, according to the chart).

Or maybe not. Nassim Taleb - in the latest interview over at EconTalk - seems to have turned against debt entirely: he's now back to the Babylonians, arguing that debt and leverage increases complexity and therefore vulnerability. Kind of like we have now.

Here in Europe we are undoubtedly in a bad place. The barbarians aren't so much at the gate as in the trading rooms. With the eurozone at the heart of a massive, sovereign-debt bubble that could potentially end in tears (or 'debt restructuring' as it is known euphemistically). But won't Germany save us? Apparently not: if Germany's local governments were independent countries they would be in an even worse state than Greece.

Perhaps Polonius in Shakespeare's Hamlet was right: Neither a borrower nor a lender be.

Monday, May 3, 2010

Next Door to North Korea

The table is from a recent briefing paper on The State of the Nation by CEBR, a backgrounder to the UK general election now under way. The paper highlights the extraordinary increase in public expenditure as a share of UK GDP (the authors estimate that about 2/3rds of the UK's fiscal crisis has been the result of an excess rise in public spending and only 1/3rd from the recession). Of interest to us in the South is the extraordinary picture it paints of Northern Ireland. It seems we're living next door to North Korea.

Public spending accounts for £7 out of every £10 of the North's GDP (71%). When Labour first came to power the NI share stood at 57%. The problem for Northern Ireland (and at one remove, for us in the South) is that whoever wins the election on Thursday is going to have to engineer a radical reversal in the trend increase in public spending relative to GDP - and the North will feel the most pain as a result. But feel the pain it must.

I left Northern Ireland in 1981, just as the Thatcher/Reagan era was getting under way (or the Neo-Liberal revolution, if you're not a fan). The 1970s and 1980s proved a long, painful lesson in economic reality for most countries (especially the Republic of Ireland - one of the lesson's slower learners). Scott Sumner explains it thus:

The 1970s were the turning point in modern history. Statism was exposed as a flawed economic system. The more idealistic countries like Denmark and New Zealand reformed most rapidly when new information showed that markets worked better than government. You’ve heard me talk ad nauseum about Denmark, which is number one in all sorts of rankings, from free markets to happiness to equality to civic virtue. But I actually looked at all 32 economies with per capita income above $20,000/year (i.e. as rich as Portugal.) Interestingly, just as Denmark was number one in both markets and civic virtue, the same country placed dead last in both the free markets and civic virtue rankings. And what is the country with both the lowest level of civic virtue and the least reformed statist economic system among 32 developed countries on four different continents?

You’ve probably guessed it by now . . . Greece.

It isn't easy for politicians to convince themselves that reducing the role of the state is a good thing - let alone for them to convince the electorate. After all, the entire purpose of politics is to secure the power to make others do what you want, and the state is the medium through which said power is exercised. But politics is the art of persuasion and eventually the survival of the state/nation/democracy requires a reduced role for the state. I think we intuitively understand this in Ireland, which is one reason we haven't gone Greek.

Persuading the people of Northern Ireland to accept a smaller role for the state in their economy will require a two-pronged approach. One prong is the lesson we learned in the 1970s: there are just some things that the private sector does better than the public sector (at least 10 things anyway). We are all Thatcherites in that regard nowadays. But we also need a second prong - and that is a philosophical argument based on freedom. Brendan O'Neill explains it brilliantly in one of a series of essays to inform the UK election debate:

The more constraints that are put on our thought and behaviour, the more difficult it becomes for people to take full and proper and satisfying responsibility for their lives and their experiences. Not a single one of the political parties in the running for our votes on 6 May understands what freedom means or why it is so important. They don’t understand that freedom is good for individuals, allowing us to live more independently and less burdensomely, and is also good for society, tying individuals together through free association, shared experience, and having to work out for ourselves what we want our society to look like.

Maybe I'm biased, but I think the people of Northern Ireland are smart enough and capable enough to create a better society, one that will allow them individually and collectively to forge a better, more secure future for themselves and future generations. Whether, of course, their politicians have the imagination to step back and let a better society emerge remains to be seen.

Sunday, May 2, 2010

Caminonomics

I'm back from the Camino de Santiago, 115km and just a few blisters later. A very different holiday experience to any I've ever had before (though calling it a 'holiday' seems a little odd for some reason: it really did feel more like a pilgrimage for our small party of 'peregrinos'). The Galician region in northern Spain that we walked through is remarkable: and not just for the scenery. I was intrigued by the local economy, during a week that saw the Spanish unemployment rate top 20%.

It's extraordinary these days to see people - often elderly couples - manually scything harvests and sowing seeds without the benefit of modern machinery (though that was obviously in use throughout the region as well). I suspect theirs are much more self-sufficient households than is the norm in rural Ireland today. It as also a reminder of the very different family structures evident across Europe (that I was first introduced to by Emmanuel Todd's brilliant 1983 book on Explanation of Ideology: Family Structure & Social System). A more recent meditation on similar themes is that in Tory MP David Willetts' new book The Pinch: How the Baby Boomers Took Their Children's Future - And Why They Should Give it Back. Steve Sailer's 'review of a review' of the book quotes the following:
The English have a private, market-based idea of property, in contrast to the familial property forms of our continental neighbours. Over a 44-year period in Leighton Buzzard, more than 900 houses changed hands. Two-thirds were sold to someone outside the family, rather than being passed down. The years in question? 1464 to 1508.
By contrast, the large familial networks of continental Europe act as the institutional anchor for property ownership and transmission, as well as for the formation of businesses and the provision of welfare. Willetts speculates that the property-managing function of French families may explain why romantic love there is more often associated with extramarital relationships. The orientation towards family-owned firms in Germany helps to explain the strength of the Mittelstand, the medium-sized, locally rooted layers of corporations...

But our [English] particular social economy has two important consequences. First, the smallness of our families puts a greater emphasis on non-familial civic institutions. Small families need civil society more. This is why medieval guilds, trade unions and churches have played such an important role in our history.
I think here in Ireland we have migrated in recent generations from a continental-style familial network to a more private-property, nuclear family type structure. The in-between phase has been problematic, and a lot of our problems of late have been due to the lack of a deeply embedded - and trusted - set of non-familial civic institutions necessary to support the newer structure. Trust seems less of an issue in Spain: as evident from the 'honesty bar' type stall I photographed, requesting passers by to donate a euro for each item taken from the stall.

The irony, however, is that we may well see a return to something like the more independent but locally networked families and households that I saw in Spain. Rising energy costs coupled with smarter, distributed grids of power generation and know-how might see some kind of return to how things used to be:
It’s only in the last half dozen decades that the home has become nothing more than a center of consumption; before then, it was a place where real wealth was produced. It costs a great deal less to buy the raw materials for meals than to pick up something from the supermarket deli on the way home from work, as so many people do these days, or to fill the pantry and the fridge with prepackaged processed food; it costs a great deal less to buy yarn than to purchase socks and afghans of anything like the quality a good knitter can make; it costs a great deal less to grow a good fraction of a family’s vegetables in a backyard garden than to buy them fresh at the grocery, if you can get them at all...

This is why, until quite recently, at least half the adult members of most families, aside from the urban poor, worked in the household economy instead of the money economy. It’s also why a grandparent or two or an unmarried aunt so often found a place in the family setting. This had very little to do with charity; an extra pair of hands that could be employed in the household economy was a significant economic asset to most families. One of the advantages of this, of course, is that elderly people continued to have a valued and productive role in their families and communities, instead of being paid to go away and do nothing until they die, as so many of them are today.

Right now, a developed household economy is a sign of economic backwardness. But another bad turn (or three) in the unfolding financial and energy crisis might see the household economy loom larger in our economic future. I just hope my blisters have healed before I have to put on the wellies...
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