Skills Deficits

One of the things underpinning a lot of posts, notably Karl’s last one, is that there is an elephant in the living room here around the human capital available to deal with economic issues within the core Government Departments.  We know the tales of how there are no economists in the civil service.   What is badly needed is something like the Government Economic Service in the UK. This ensures two things – the presence of a cadre of professional economists within the sector, but also the harmonisation of the training across Departments giving a unity of approach regardless of the topic. Of course the development of PhD capacity in Ireland will help but that takes time – wondering aloud, should we as a body of economists not begin to work with the Government to develop a GES model for Ireland and also develop the training structures?

ADDENDUM

Thanks folks, for the comments.  I am going to stay out of the debate around constitutional crisis this would cause…..and just pick up some threads.  Cormac’s comment hits it well and he would know well from working at IFS in London what I mean.   The GES is NOT an new body accountable or otherwise – it is a training infrastructure for the civil service that ensures that economists are trained in a way that is consistent across the service regardless of their posting.  It also ensures that economists can move between Departments, be redeployed etc very easily and that economics has a core platform within the service.   Secondly, the issue is not creating new degrees etc but rather to work with the civil service to ensure that platform is in place.  Thirdly, there is both an immediate need for a small, highly skilled cohort now – perhaps this is the 10 or so that Brian L discusses – but the idea that we can continue with the lamentable lack of economics as a core discipline across all government departments needs to be tackled.   In effect health, education, environment and employment have no structured economics unit and to revert briefly to constitutional issues, to be relying on external ministerial advisors is worrying.   Finally, for sure this would need a change in how things work – the economics unit in the UK looks at EVERY piece of policy and proofs it against standard metrics.

Thanks again, folks, for the comments.

Colm

39 thoughts on “Skills Deficits”

  1. a basic thing that could be done would be to run a course in economics and law in universities.

    it is possible to do economics and business, law and german, economics and psychology… in effect every combination except economics and law, the very combination that would best prepare those seeking careers in public service.

    there are many things that those on this website call to rectify, which are not within their power. but this is one that clearly is within the power of those in academia.

  2. Hmm. One can take fair chunks of law within say BESS, and I am sure within the Horizons issue. In any case, that would seem to be at the less specialised entry level when what Colm is alluding to, I think, is at the masters and doctroal level?
    TBH there are a myriad of courses in the world on economics; why we would develop a streaming for the 10 people per annum which would be needed as a strong analytical core is not immediatly clear.

  3. I don’t think a GES would solve many problems. The Central Bank and the ESRI serve as such in some respects, but the ESRI is only listened to when that is expedient. A GES would have the same problem unless it would have a veto over decisions by departments.

    It is not true that there are no qualified economists in the civil service. There could be more, for sure, but a bigger problem is that civil servants, and particularly the brighter ones, do not stay in their post for very long. Typically, just after acquiring the necessary expertise to do their job properly, civil servants are shifted to another position.

    And then, even if the civil service were economically literate, the real power lies in the cabinet and the Dail. Ireland’s constitution is such that only generalists and populists can be elected to the Dail, while only TDs can be minister.

    Without changing all that, a GES would just be another government body that would have to be paid by tax money.

  4. @Richard, On a point of order.

    It is possible for a non-elected ‘expert’ to become a minister.

    The taoiseach of the day can appoint a chosen expert to the senate, and then they can, as a senator be appointed as a minister.

    This has been done before, when Garret Fitzgerald appointed senator James Dooge as minister for Foreign Affairs, as part of the short lived 1981/82 FG government.

  5. LorcanRK,

    True, though not true for the Min of Finance IIRC.

    I saw somewhere in reference to the pending reshuffle of junior ministers mention of the need for geographical balance. Unfortunately a concept so finely honed by Bertie Aherne remains a driving force in how ministers are selected.

    Do we need to move to a list system of some type.

    Similar to that used in the Netherlands or maybe similar to that used in Scotland which is a mix of systems.

  6. Colm H’s initial post strikes me as an implicit recognition that national economic policy – insofar as it may be described as such – slipped its moorings over the last 10 years from any basis in rational economic analysis. Ireland is not alone in this. Most other OECD economies demonstrate this drift as the Washington Consensus crumbles.

    Colm’s post is also timely. The Supplementary Budget – however ineptly – has set the principal fiscal, financial and economic parameters and focus for the rest of this year. It makes sense to begin to look at Ireland’s prospects from a longer term and more strategic perspective – and to consider how the economics profession may contribute effectively.

    In this context, Richard, I accept the validity of your comments. Constututional and governance arrangements should be in the mix as well, but I don’t detect any popular appetite for a major overhaul. (In passing, it is constitutionally possible for a Taoiseach to appoint as Minister one (or more) of his/her 11 Senate nominations.)

    Yes. We do have too many TDs, but there seems to be a deep-seated and continuing popular desire to have any and every “parish pump” issue raised in the Dail and Ministers required to respond verbally or in writing.

    It probably makes sense to work with the grain of the current constitutional and governance arrangements and to see how they their application may be improved in the economic sphere.

    In addition to the development of a coherent economic strategy at the macro level I believe there is considerable scope to reform and develop the application of competition policy and regulation. A large body of procedural and economic literature exists (much originating in the US, but with a growing body in the EU and in the other larger OECD countries) which deals with the application of competition and regulation across a broad range of economic activities. (Despite this, it could be contended that the origins of the current international financial crisis stemmed in large measure from a failure to apply financial regulation effectively.)

    One lesson which emerges from US experience across a broad range of utility services (electricity, water and waste water, natural gas, aviation, telecomunications, broadcasting, railways, etc.) is that sensible regulatory determinations on pricing, access and investment emerge from adversarial disputation before a regulator operating in a quasi-judicial manner with clear proecedural rules guiding the decsion-making process. In contrast, the UK model (which is being used increasingly throughout the EU) relies on “principles”, a “light-handed” approach and “consultation”.

    Final consumers – who, ultimately, pay for everything – are largely absent from these deliberations. The single most effective change to improve transparency, accountability and the quality of economic decision-making would be the empowering and resourcing of consumer representative bodies (either on a statutory or voluntary basis) to participate effectively in the regulatory decision-making process. These bodies could also engage in the application of competition policy and thereby cover almost the full range of economic activities at the micro level.

    This is one area where, I beleive, the economics profession could add considerable value.

  7. @Paul, LorcanRK
    Thanks for correcting me on the constitutional issues.

    I would think that, for starters, the Taoiseach should more frequently exercise the right to appoint technocrats to technical ministries — that is, people who understand the matter and are able to run a large department.

    Without naming names, I can think of a few professors in economics who would do a better job at Finance.

    (I leave for later the matter why ministers are in the Oireachtas, the body that supposedly oversees them, and why the Taoiseach appoints 11 of those overseers.)

  8. Richard,

    Interesting and all as these constitutional and governance issues may be, we seem to be deviating from the thrust of Colm’s original post which is consideration of a more effective engagement of economists in the economic and policy decision-making processes. (Irish people seem to cling very strongly to their ultimate right to decide who governs them – irrespective of how ineptly those elected may perform. In the public mind, appointed technocrats – however competent and capable they might be – will always lack democratic legitimacy.)

    Despite the apparently strong macroeconomic representation on this site, I realise I am trying to steer the debate a bit more towards the “micro” level, but I remain convinced that there is much good work that economists can do at this level as well.

    Are there any microeconomists out there?

  9. there is a role for expert economists too. but if politicians and general civil servants do not have a grasp of the issues, they won’t be able to engage with them properly.

    BESS does not offer sufficient law courses.

    in other countries, people are specifically educated to go into public administration. that means undrestanding the constitution, human rights, administrative law – all public law issues essentially; as well as understanding economics. in ireland they is no equivalent that i am aware of.

  10. Richard,

    I don’t think the Central Bank and the ESRI fulfull the role that the GES plays in the UK. The GES is not a seperate reasearch unit such as the CB or the ESRI (or their couterparts in the UK). It hires, trains, and then places economists in government departments and agencies. There is no such body in Ireland.

  11. I would be inclined to go further than simply suggesting training more economists for the civil service. The Swedes have a [url=http://www.finanspolitiskaradet.se/english/swedishfiscalpolicycouncil.4.6f04e222115f0dd09ea80001437.html]Fiscal Policy Council[/url] whose job it is “to provide an independent evaluation of the Swedish Government´s fiscal policy.” How useful that could have been over the past decade.

    The ESRI performs this function on a non-statutory level, but unfortunately appears to be largely ignored. Perhaps legally requiring the Dept of Finance to respond to critiques by statutory agencies could lower the ineptitude. I believe policy recommendations by the UK’s Office of Fair Trading require a formal response, though I do not know how much of an impact this makes re: implementation.

    Though given what our TDs [url=http://www.irishtimes.com/newspaper/ireland/2009/0402/1224243862580.html]think of advice from the Competition Authority[/url], perhaps change could only be implemented if such a fiscal council had some teeth.

  12. Paul – “Are there any microeconomists out there” – agree with Paul that debate on the micro side has been very weak compared to the strong work being done by people like Karl, Philip and Patrick on highlighting the macro issues. Partly understandable given the immediacy and size of the banking crisis. But issues like graduate unemployment, innovation and so on, need more debate and focus.

    Cormac – agree fully with this. The GES is a good model and should not be costly if implemented properly.

    Richard – I think assuming that Irish policy cannot develop a better interaction with economics because of the nature of the election process is destructive thinking. Accountable policymaking in micro-areas driven by rigorous published economic advice is not too much to hope for in a country with such advanced institutions as Ireland. We do not need Economics Professors as finance ministers to get that far. I agree with your (implicit) point that people who advance this agenda by bashing civil servants are overlooking the fact that there are several extremely bright people in the civil service who are constrained by their employment structures. It would be interesting to see someone develop your point by proposing a more worthwhile civil service track with respect to economic policy.

  13. I was not trying to sidetrack the discussion. I think that creating a body called the Government Economic Service would not do much good unless there is a wider reform, or at least change in attitude in the civil service and in politics.

    There are plenty of economists in the civil service and in the closer and farther satellites of government. In my mind, the problem is not that these people are unskilled, untalented or give bad advice. The problem is that advice is ignored, and knowledge dissipated.

    Liam D is perfectly right when he argues that there should be an impact assessment before decisions are made. When I first arrived in Ireland, I thought that my colleagues were nuts when they spoke about “evidence-based policy advice” — what other kind is there? I now know better.

    As long as the attitude of our dear leaders is to decide first and ask questions later, you can create any amount of government services to no avail.

    A good example is the government policy to have 230,000 all-electric cars on the Irish roads by 2020. This plan is feasible if car companies build all factories as announced before the credit crunch, if Ireland buys 50% of the total world production of such vehicles for the next decade, and if we convince the European Commission to weaken current regulations on road safety. The plan is ludicrous to anyone with A-levels and one hour of googling. Yet, it is official government policy.

  14. As a guy who did BESS but went to the business side and accountancy what they need is a few private sector business accountants (as opposed to those in practice) with decent experience and we’ll cut public expenditure!!!!

    PS At least we had one accountant as Finance Minister in the recent past.

  15. As an non-economist who looks on and sometimes comments on here my reaction was ‘ye would say that wouldn’t ye’ – jobs for the boys and such like…. ye might as well, everybody else knows what the government needs to be told to do.

    I seem to recall that persons not a million miles from this blog have been mentioned in despatches as advising DoF, am I wrong??

  16. The issue that Colm raises is a straightforward one & one that has nothing to do with the constitution, cabinet appointments and all that jazz. How should a government best get technical advice on economics? I don’t know of a government in the developed world that makes less use of economics than Ireland. Indeed many developing country governments have greater economics capacity that the Irish government. Governments in Sub-Saharan Africa will snap up PhD’s if they can. In fact there is a specific PhD program to address this need (AERC). So there are plenty of models that one could look to; the GES in the UK is one possibility. If you are worried about the cost of a GES think about the cost of not having one. The ESRI & Central Bank in no way act as the equivalent here. The Central Bank has a particular, fairly limited, mandate policy wise. While most governments will go to outside agencies, whether consultants or academics, there is no substitute for having one’s own expertise. Outside consultants, of course, are pricy. Garret Fitzgerald, virtually alone, has been pointing out the decline of economics expertise in the Department of Finance. It depends on how one defines economist of course. At the DEW crisis conference Karl Whelan suggested setting the “bar” at PhD and I am inclined to agree. But one shouldn’t get too hung up about it: a typical GES person will be a very bright Master’s graduate but they will be interacting with academics quite a bit also through places like the IFS, the CEP and so on.
    The problems with the civil service in formulating, as opposed to implementing, policies are old & well known. This is what the Devlin Report was about (if my memories of Intermediate Cert history are correct). Progress has been glacial.
    In any event, if you think that Finance is lacking in economics expertise try looking at the spending departments where there is probably no economics at all. For example, the Department of Education in Northern Ireland, which is not a big outfit, has a brace of economists: here there is none. This means that virtually no expenditure in education, health, social protection, environment etc has been put to anything like a proper cost-benefit test. Ironically, quite a few based Irish economists have worked for foreign governments and agencies who seem to think they are useful.
    None of this should be taken as denigrating the officials working in this area: they probably don’t know what they are missing. But somebody should.
    A small & inexpensive step forward would be the establishment of something like a Council of Economic Advisors. There is lots of expertise & a huge willingness to get involved – witness this blog- the challenge is to harness it intelligently.

  17. The first step towards achieving this end could be put in place right now in the universities. As suggested, the mix of law and economics is the crucial blend needed in moving from analysis to decision-making and implementation. Virtually every incoming undergraduate over the last few years who has over 580 points and doesn’t like the sight of blood is now studying law, with no near-term hope of a job as a lawyer in Ireland or elsewhere, and this is a resource to be drawn on.

    Meanwhile, studying economics is all the rage. Surely some economics modules could be provided for law students keen to improve their employment prospects, probably from existing economics courses? While I accept that there are existing joint options, there would now seem to be a unique opportunity to refocus some superbright kids from law to economics. I can’t believe that a bunch of academic economists wouldn’t be be able to design the right set of incentives to make sure that the law students are encouraged to participate, and I’m sure that their legal colleagues would be able to devise a scheme to award recognition for the students’ additional effort, while not undermining any established standards.

    BTW as the site becomes more popular is it possible to avoid not just Christian names as previously discussed, but also initials? For us lay readers who think of “the two Brians” in political terms, Colm Harmon’s reference above to “Brian L” discussing the need for a cadre of 10 government economists is confusing at first sight, notwithstanding the ever-increasing prominence of the economics profession!

  18. @David Lowe
    No this is no the gap at all.The civil service may need law & it may need economics but it will do that by hiring lawyers & economists who have good post graduate training in their fields. Law is only relevant to certain areas of economic policy like competition & regulation in any event.

  19. Just bringing together a few strands from the thread and from other comments received over the day – thanks again folks for the participation:

    1. We accept that there are political issues – chief amongst them are political will. From what I know of the history of the GES, leadership [Thatcher] understood what was required, and the value associated with putting economic analysis squarely into the policy space. We can only push for that level of understanding. This blog helps greatly and the public service provided by the key drivers over the past few months proves what the supply side can do, but the demand side needs work.

    2. There has been some debate about degree mixes etc – that is not the point and ample postings have made clear that again the supply side is providing very bright folks into the labour market in economics and in economics combined in any number of ways with other cognate subjects.

    3. There are agencies – and economists – all over the place – Central Bank and ESRI but also NESF, NESC etc. Again not the point of my post – a GES puts economic analysis as a core tool in policy decisionmaking WITHIN the Departments. Perhaps agencies have been doing this work – ESRI most notably. But agencies like ESRI exist in many countries who also have a well developed core capacity in the civil service – what happens is that the sorts of questions these agencies address change from fire-extinguishing or ex-post evaluation to instead being more ‘blue sky’ if I can use that awful phrase.

    4. I note that the GES this year expects to recruit even more than normal – and normal is about 120 per annum. That will be a sizeable chunk of the graduate cohort this year in Economics in the UK. I shudder to think what we are going to do here and it would be worth thinking hard about what is going to happen here and whether there is something smart that this cohort could be turned to. The economic evidence on the impact of a period of unemployment at the beginning of your career is far greater than the impact later on – depressing you and depressing your life income far more acutely.

    5. The idea of a Council of Economic Advisors is a good one obviously – I think Kevin Denny served on the last one that we had, under John Bruton as boss. Not sure I understand what a ‘shadow’ council website means but I am game for this.

    6. Finally one thing that could actually be done is a cost-benefit analysis of an Irish GES – any volunteers!

  20. I had understood Brian Lucey’s reference to a shadow economic council to be an ironic reference to irisheconomy.ie…..

    If the GES normally recruits 120 people p.a., then adjusting downwwards for population would mean an Irish equivalent would be recruiting less tha 10 – would this be the scale envisaged and would this low number be a problem?

    I think the self-serving aspect of the proposal (jobs for the boys, as barry put it) together with its possible use for ideological ends (Colm seems to indicate that the GES was established by Thatcher?), could do with being addressed. Specifically, I think it would be interesting to hear why exactly it would be a good thing to have more economists within the policymaking process (as opposed to more sociologists, political scientists, archaeologists, engineers etc., since the suggestion is that there is a lack of economists not just in the Dept of Finance or in the formation of economic policy, but also in other departments and policy areas).

    Lest this question seem hostile or cynical I should say that I am very sympathetic to the proposal. But it would be nice to have this teased out a little. How would ye economists defend this proposal against an accusation of “disciplinary imperialism”?

  21. re. GES.
    I suggest that those contributing to this thread look at the recent OECD report on reforming the Irish public service, initiated in January 2007 and published in April 2008
    http://www.bettergov.ie/attached_files/upload/IRELAND-Towards An Integrated Public Service.pdf

    I cannot find any reference to the need for more experienced economists or accountants in that report. The November 2008 response of the Government appointed task force to implement the OECD report did not avert to this either.
    http://www.bettergov.ie/attached_files/upload/publications/PDF/TPSv2.pdf

    The Taoiseach’s response does not indicate any awareness of the need for either type of expertise.
    http://www.taoiseach.gov.ie/index.asp?locID=582&docID=3904.

    During the 1980s economic crisis here in the Republic, two friends and I published a set of ideas on how we govern ourselves which we called A Design for Democracy (Administration Vol 34 No 2 June 1986).http://193.120.95.144/politics/design-for-democracy.pdf.

    Our focus was the mechanism of government. Other non-web efforts followed in various forms – articles, a personal submission to the Joint Oireachtas Committee on the Constitution in 1996, letters to newspapers etc.

    As Philip Lane has started another thread on Looking Beyond the Crisis, I am taking the liberty of posting that complete B&F piece here, given that I do not (yet) have it on a web-site.

    I am wryly amused to find myself posting this at a time when yet another government is trying to manage a Commission on Taxation! Plus ca change, plus c’est la meme chose!

    “Guest Speaker – from Business & Finance May 1987
    “What is wrong with this country? Denis Brosnan, chief executive of Kerry Co-op, asked in his keynote address to the 1986 IMI Conference. “Was it that the democratic process and electoral system made it impossible for leaders in government to lead with vision or was it that we continually elected people who were not capable of giving leadership?” Donal O’Brolchain asks here – Need Government Fail?

    DURING THE recent election, one commentator wrote that “Since 1969, all Irish Governments, whether single party or Coalition varieties, have failed to be re-elected, principally because they were unsuccessful in their handling of the economy. All the bright rosy futures promised in a plethora of election manifestos came to nought when the heavy weight of office bore in on successive Cabinets. That eighteen-year period had seen Ireland drift towards State bankruptcy and towards ungovern¬ability.” (John Cooney, The Irish Times, February 12, 1987).

    This drift is clearly not due to failures of analysis or democratic accountability, but stems from the bias against action in our government system. Some suggest that a Denis Brosnan or a Michael Smurfit would solve these problems; others want to eliminate political rivalry by having a period of “National Government”. The nub of the problem is that the machinery of government is adjusted in a way that prevents solutions being proposed and implemented in today’s complex world.
    Now that the Taoiseach and leaders of other political parties have shown a willingness to review the constitution, why not start by looking at the government itself?

    Our basis of government

    In our system we, the people, elect a group (Dáil deputies) which in turn, elects a Taoiseach who then picks a smaller group (Cabinet) to govern for a period not greater than five years. We. who as citizens own the authority to govern, pass this authority to successively smaller groups.
    There is only one path to government power in our system. This path must act as a route for the transfer of our democratic power which authorises the government to act. At the same time. this path must also serve to gather the actual know-how needed to carry out the tasks of government. These two aspects may be equated with the distinction between the words “may” and “can”, ie the ability to do something and permission to do it.

    Dual aspects of power — politics and governing

    Any democratic political system must be able to marshal and control both elements. Our current system cannot handle the complexity of the modern world because it cannot acquire sufficient authority and know-how at the same time.
    A hypothetical example shows why this “single pathway” causes trouble. Suppose that Denis Brosnan wanted to become a Minister in the normal way. He would join a political party. attend a convention, be selected as a candidate, get well-known in his future constituency, begin a round of canvassing and clinics and then, perhaps, be elected to the Dáil. If his party forms the government (in whole or in part), if he has the right relationship with his party and its leader, if he represents part of the country that “requires ministerial representation” and several others ifs, he will become a Minister!
    This series of steps does not quite fit our idea of a man like Denis Brosnan or any other high achiever. Why? Is it because. deep down, we regard the process of getting into the Dáil as mismatched to the skills we now require in Ministers?

    A recent Irish Times/MRBI poll (The Irish Times, February 5 1987) shed some light on this aspect of our political culture. This found that, of the key factors which voters said would “influence them a lot” in deciding how to vote
    • 75% opted for “Choosing a TD who will look after the local needs of the constituency”;
    • 53% said choosing a candidate who will perform effectively on national issues in the Dáil:
    • 45% said that party policies were important;
    • 27% identified choice of Taoiseach as a key factor.
    We use our system to select people who are good repre-sentatives — in other words, we select people to carry out the delegated authorising function. Our system is not properly shaped to select individuals who will provide the know-how which is the basis for effective and efficient government.
    As Jim Hacker said. “Here I am attempting to function as a sort of managing director of a very large and important business and I have no experience of the Department’s work or in fact of management of any kind. A career in politics is no preparation for government.” (Yes Minister, Vol- I. BBC Publications. London. 1981. p28.)

    A different approach

    Think about the way in which a large group would organise itself to solve some problem facing it, eg club members building a new premises. The usual way. and probably the only way, is to listen to proposals by individuals or very small groups. The group, as a whole, accepts or rejects the proposals. In a more sophisticated organisation. the proposal may be debated and modified. But even then, the group achieves its purpose by listening to individuals who put forward different options.
    The well-being of the whole group is crucially dependent on the special skills of these “option-makers”. It is obvious that a group which is good at finding and using such indivduals will meet the challenges of change more successfully than one which is poor at doing so.
    Ministers as “option-makers”
    If we look at our system in this light, it is clear that there is a
    serious deficiency in the role of Minister as a producer of solutions. Ministers are always members of the majority grouping in the Dáil. This means that the examining role of the Dáil (as the Representative Branch) is very closely tied to the executive role of the Minister as option-maker. It seems inevitable that one or both roles will suffer from this link as appears to be the case in our present system. For example, Ministers often comment that their reduced poll (even loss of Dáil seat) at general elections results from being too taken up with government affairs to look after their constituencies.
    Another example of the effect of this tie is the tax system — which the vast majority agrees on the need for reform. A detailed solution, good or bad, has been put forward by the Commission on Taxation, but nothing seems to be happening. Why? No one really knows and the government system resists giving any indication of the possibilities for change.
    This lack of debate is caused by the link between the Minister for Finance and the majority grouping in the Dáil. Tax reform is not easy and is fraught with pitfalls. If the Minister takes a position, he is certain to upset some party colleagues. In addition, the opposition will highlight all the disadvantages (and none of the advantages!) of any proposal. It is much easier for the Government to suppress the matter by simply side-stepping the proposals which are already on the table.
    Perhaps it was this type of situation that led Montesquieu, a pre-revolutionary French political commentator, to note that “When the legislative and executive powers are united in the same person, there can be no liberty”.
    The tax example shows the tendency to inertia, compounded by secrecy, which is built into the structure of the present government machine. It seems that the work of the elected representative has overwhelmed the executive/managerial function of the option-makers. Is this what happens to those leaders of whom Denis Brosnan spoke?
    In Britain, serious, questions are also being raised about their machinery of government which we have copied so closely. For example, Dr David Owen, the SDP leader, recently pointed out that “In 1958, France was in a similar state of economic decline to ourselves. The lesson from France is not that we should have a powerful President… The lesson is that in France, constitutional changes preceded economic recovery. Indeed it was the pre-requisite. The change from the Fourth to the Fifth Republic was an integral part of French success building up slowly over the subsequent 30 years …’” Is this what James Cawley of Atlantic Resources had in mind during the pre-election National Business Conference organised by Fianna Fail, when he drew attention to the parallels between Ireland now and France in the late 1950s?

    Towards the 21st century

    Our present system has served us well, but serious difficulties haw emerged over the past twenty years. Modernisation of company law and TB eradication are issues on which there is a consensus on the aims to be achieved, but little sign either that such achievement is near. Many attribute these delays to incompetence or even corruption at the top of our political and administrative systems. The problem is more fundamental.
    Statecraft or the management of public affairs is not easy in modern western democracies. Madison, one of those who drew up the US constitution two hundred years ago. put it as follows — “Ambition must be made to counteract ambition. In framing a government which is to be administered by men over men the great difficulty lies in this: first you must enable the government to control the governed and in the next place, you must oblige it to control itself.”

    Our present structure is like a see-saw, with the elected representative function at one end and the Minister/executive role at the other. Any rise in the effectiveness of one implies a drop in the other. A new structure is needed which would cut the tie so that each can be improved without weakening the other equally necessary activity.

    There are very few useful changes that can be made without constitutional amendment to those articles which specify the form of government. It would be a pity to waste energy by attempting to fine-tune the 1920’s-based system by, for example, changing the electoral system or restructuring the Senate. Without much more effort, we could have a completely new model that will bring us to the year 2000 and beyond, by giving our government system the means to be successful while increasing democratic accountability. Only thus can our skills and energies be mobilised to open the paths to better standards of living and greater justice for all who wish to live and work here.”

  22. The last comment reminded me of the story about philosophy in Cambridge
    Philosopher 1: “I went to Grantchester yesterday”
    Philosopher 2: “No, I didn’t”

  23. @Donal O’B
    Other countries have solved this problem by having (1) a lower chamber for the national interest and (2) a higher chamber for the regional interest. Ireland has two higher chambers, one for the regions and another for the classes.

  24. I think this whole discussion is based on a number of faulty assumptions.

    (0) Government policy is not in line with state of the art economics.
    I agree, and I guess most would.

    (1a) (0) is because there is a lack of skilled economists in the civil service
    I disagree. There are plenty economists and other smart people in the civil service. They tend to be in the wrong places.
    (1b) (0) is because there is a lack of sound economic advice to the government
    I disagree. There is plenty of advice. It tends to be ignored though.

    (2a) (1a) can be solved by increasing the number of economists in the civil service, and by increasing the economic skills of others likely to enter the civil service.
    If the system misallocates people and ignores advice, the returns to his solution are low.
    (2b) (1b) can be solved by forming another advisory body.
    If advice tends to ignored, then creating more advice will make it easier to pick and choose the politically expedient advice. Competing advisory bodies will sacrifice their independence to gain funding and influence.

    (3a) The UK Government Economic Service is a good model for (2a).
    Really? The GES means that economists in the UK civil service have a double allegiance, and thus can be seen as outsiders in their host department. Besides, the UK is not exactly a paragon of sound economic management. In the areas I am most familiar with (energy, environment, transport), UK policy is devoid of any economic sense. I understand that their banking regulation is not quite up to speed either.

  25. Consider the market for economic advice, which varies in quality, but not much in price. On which side of the market will quality get determined? If demand is quality-insensitive, what is the pay-off to quality improvements on the supply side?

    Why do economists never apply a little economic analysis to the economics industry?

  26. Donal: Thank you for your thoughtful and insightful post. It takes us back to a time when engagement on these matters did not have the hyperactivity or “stream of consciousness” style of response that internet-based communication encourages.

    I think this thread is now operating on three separate, but related, levels.

    1. Following on from Colm’s initial post, there seems to be a view emerging that there is requirement for a more structured application of economics in policy formulation, evaluation and implementation across the public service. What shape this might take is still open, but I would hope that Colm’s request for a CBA of a GES-type arrangement will be taken up.

    2. The second strand is getting us deep into political economy and is probably more appropriately linked to Philip Lane’s post on “Looking beyond the crisis”. There is an increasing recognition in Ireland that its current economic woes are largely self-inflicted. True, the global downturn is having a major impact on such a small, open, export-focused economy, but it almost completely avoided the contagion from the trade in the sliced (and re-sliced) securitised toxic assets that has brought the US, the UK and many of the other big OECD economies low. This was driven by the international glut in liquidity generated by colossal global trade imbalances and Ireland was also affected by this – in particular the recycling of German surpluses within the Eurozone – but the extent to which this was used to leverage an excessive property asset bubble was generated almost entirely within Ireland – aided and abetted by an elected collusion of ineptitude.

    Similar to the small Scandinavian economies, Ireland has a scale and cohesion to contemplate major changes in its economic and political model. The policy changes implemented from 1987 on and that laid the foundation for subsequent growth and prosperity were simply a more intense application of what should have been done in 1977. There seems to be a belief that we can rewind the clock back to the virtuous cycle in the early and mid 1990s, but this is totally naive as the global economy has been transformed out of all recognition since then. The changes required are far more profound.

    However, I would be very reluctant to advocate, as Richard seems to suggest, changes in our system of government from and within parliament. (Apart from France – and, significantly, the EU itself – this is the entrenched model of governance for all EU member-states.) Whether we like it or not – and some atavistic Anglophobia may encourage less affection – our political and economic system is rooted in Anglo-Saxon common law. The validity of the underlying principles stands irrespective of their origin. However, in continental Europe this system of democratic governance has been bolted onto a “a system of codes constructed originally by dictators on the model of the perfected Roman law” – quote attributed to John R Commons.

    Much lip-service has been paid to “better regulation” and the “promotion of competition”, but the entire process has been captured by special interests to the detriment of consumers who, ultimately, pay for everything that is consumed domestically and rent-gouging has increased exponentially. Ironically, much of this effort has been informed by the UK model of regulation which, because it deviates from fundamental common law principles, has proved spectacularly ineffective in protecting the interests of final consumers. This model is characterised by the use of “principles” (as opposed to detailed rules and procedures), a “light-handed” approach (as opposed to detailed and rigorous scrutiny) and “consultation” (as opposed to adversarial disputations in a quasi-judicial setting). Not surprisingly, this model has been seized on with alacrity by most EU member-states.

    The body of analysis developed by Mancur Olson on collective action is probably the most insightful on this failure of regulation and competition and provides some ideas on how these issues may be addressed. For me, this is key point of departure to begin to tackle the current economic malaise and to introduce some proper accounability and transparency for the benefit of consumers.

    3. I’m not whether or not Brian Lucey had his tongue in his cheek (as suggested in one post) when he proposed a shadow economic council web-site, but, like Colm, I think the idea has much to commend it. The list of named contributors on this site is more than qualified to provide the basis, but it would need more sustained argumentation, some peer review and the determination of settled positions – with the option for minority dissenting views. And I promise to moderate the frequency and intensity of my contributions!

  27. @Paul
    This has nothing to do with the subject of this discussion, but your suggestion that continental Europe is less democratic than the British isles is neither here nor there.

  28. I think we are getting to the end of this thread – impressive and thoughtful responses but getting overloaded. Perhaps a stage 2 thread is in order. One thing I would like to suggest and will follow up is a guest post from someone largely unknown but perhaps one of the most influential Irish economist – Norman Glass. Norman was the Chief Microeconomist at the Treasury under Brown, the first health economist in the UK system (pre GES!!! – early 1970s) and perhaps someone who knows more than anybody about the cross department roles that economists can play.

    In summary from me on this thread, I thank Paul Hunt for the very smart summary – using his numbering I am going to stay with (1) and (3). I think a lot of the political economy discussions are valid etc and go hand in hand with my core suggestion.

    To wrap up on my views on Paul’s (1) – to repeat the GES is NOT a separate body to which allegiances can be split. Go look at the site – the GES is a way to recruit and train young graduates for a career in Economics within the UK civil service, and a means of ensuring that economists at all grades get to communicate, share and develop. At a senior level, Chief Economists – such beasts exist – also communicate across Departments. This is not a value judgement on how good economics is within the UK civil service, not a statement that economics is the one true faith etc etc. It is also not idealogical – Thatcher happened to be the PM but it grew greatly under Blair/Brown and anyway Thatcher famously said that economics was far too important to be left to economists.

    One thing I find interesting is Colm McCarthy’s post – supply might just create its own demand, Colm! The whole point is to put economic analysis more squarely into policy thinking to deliver a better demand side (to coin Colm’s own phrase – evidence based policy rather than policy based evidence!). One of my prompts for this post is that we rely too much on a market for economic advice – surely value for money audits should be done within Government (and I say that thanking the Lord that Colm McCarthy’s committee exists!), or surely having such beasts as Chief Economists within the service makes sense (and again I say that thanking the Lord that Alan Ahearne, Peter Clinch, and the contributors to this blog are all playing this role). But, to the extent that a ‘market’ still is necessary what I have found from the areas I work with (labour, education) is that the structured role of economics in the UK system has meant that Government have a greater sense of what external agencies and indeed academics can do – the UK Department of Children, Families and Schools for example financially support the LSE Centre for the Economics of Education, and the economists in that Centre interact a lot with the Department PLUS are involved in shaping the tendering process when the market is called on – they work on the same side as the Department in other words. Similarly our colleague, Arnaud Chevalier, spends one day a week at the Department as academic in residence, a very common sight in that system (as an aside regarding the involvement of academic researchers in policy formation in the UK it is important to note from my personal experience this is not a 2k a day nixer – the UK civil service use academics as sounding board, to stress test their ideas against the literature. They bring you over on Ryanair, sit you down, and pummel you with questions because, as academics, you produce public goods, i.e. research!). This all sounds positive to me – economics research from internal and external sources across the continuum being engaged in policy thinking.

    In terms of a cost-benefit analysis perhaps ‘An Bord Snip Nua’ will be able to tell us how much economics research is outsourced which in reality could and should be done within the system!! I do think some analysis is worth it – to pick up on themes in another thread it is worth thinking about where we are heading to, and a more streamlined, efficient, ‘Irish’ civil service delivering what we need (OECD review, anybody?!) is part of that.

    Finally – I guessed Brian Lucey was not holding his tongue in his cheek. All of the issues involved in a Council are correct – the chief one is mandate. Note also that journal such as the Economic and Social Review are initiating policy submissions and the papers there should be key examples of what the alignment of academic and policy worlds looks like.

    Actually, finally finally – to come right back to the start of the thread – where are the applied micro folks. One of Ireland’s academic strengths is in that field – get talking, folks.

  29. Richard,

    I feared I might evoke this type of response. I think it’s similar to Bishop Berkeley observing to Samuel Johnson: “Kick the stone and miss the point”. My point has nothing to do with the unchallengeable right of citizens in EU member-states to decide who governs them. It is the extent to which governments, of whatever complexion, have been captured by special interests to the detriment of the interests of all consumers. In practice, there is no fundamental distinction between governments on these islands and those in continental Europe.

    Variations of the Irish “Social Partnership” – comprising government, employers and trades unions – are common throughout Europe and they are increasingly being accompanied by a proliferation of special purpose quangos that have little purpose beyond pursuing their own interests – or those of specific special interest groups – and even less accountability.

    Common law principles should foster more effective representation of consumers’ interests than legal systems influenced by the Napoleonic Code. The key point is that neither system is proving effective at this within the EU.

  30. @Kevin Denny: “Law is only relevant to certain areas of economic policy like competition & regulation in any event.”

    Not so: law is relevant to everything a public servant does. A grounding in constitutional and in administrative law is essential.

  31. At the risk of prolonging this discussion excessively, I should draw attention to a project undertaken by the Bertelsmann Stiftung on “Policy Performance and Executive Capacity in the OECD”.
    The project started in the spring of 2008 and has now resulted in the publication “Sustainable Governance Indicators 2009”. Details are available at: http://www.sgi-network.org/
    The project was guided by a 23-member board of “renowned experts in political science and economics” (overwhelmingly German). Teams of country experts were used to construct detailed political, economic, and social indicators for 30 countries. (I was one of the three Irish country experts.) At the launch of the publication the board boasted of “100 experts, 149 indicators, and over 3500 pages of text”. These are, of course, measures of inputs. Readers can judge for themselves the value of the output, but it does represent probably the most systematic attempt yet to evaluate some of the issues discussed in this thread.
    For the record, Ireland came in seventh place on the overall Management Index, and eleventh in the overall Status Index.

  32. Thank you, Richard. No offence was intended. It is the precise nature of these deficits – and how they may be reduced – that interests me. What keeps me going in this game is the belief that, since final consumers pay for everything, they should be the ultimate beneficiaries of innovations and improvements in productivity and efficiency. There should be sufficient reward for those who generate these improvements, but not for those who simply enjoy and retain market power.

  33. I hope everyone will take the following the right way.

    Is the problem a lack of financial capability, rather than just a lack of economic capability? A lot of the stuff that is being discussed on this blog of late is relatively little to do with economics, and more to do with financial management, investment decisionmaking and corporate stewardship.

    One suggestion I have heard is that the shareholder functions of the various departments (i.e., their duties as stewards of the state shareholding in semi-state companies) should be transferred to a centralised unit, presumably in the Department of Finance. That would allow that department to build up proper competence in the general area of overseeing businesses. Really, if you had a group of people who really knew how to do this well, it would be a lot easier to deal with rescue situations. Even a company as complex as a bank is still ultimately just a company, and a state owned bank faces many of the same issues as a state owned turf company, a state owned transport company or anything else.

    I wouldn’t head down to Leinster House waving calculators and graph paper just yet, demanding to put economists in charge of government departments. It was before my time, but I believe this was tried before.

    There is a reason why we have politicians running the country, and not economists, philosophers or social workers. The reason is that the problems are political as much or more than they are economic. The biggest problem is always going to be the political problem of implementing the economic solution.

    Postscript: I remember hearing the sad story of man who worked for the UK government, for the Prices Commission. I think it broke his heart when Margaret got into power.

  34. Antoin – in the case of State holdings in companies operating commercially such as Aer Lingus, I’d rather see an analogue to the Caisse de dépôt et placement du Québec so that D of Transport and D of Finance can properly regulate such companies without being in direct conflict of interest. Too often the State attempts to be poacher and gamekeeper, as operators of private public transport bus services and those who would like the opportunity to compete with Iarnrod Eireann could attest.

    Of course, creation of NAMA opens the door to transforming it into a proper State Asset Management Agency managing not only the Big Six’s Mistakes but the portfolio of most of the State’s commercial assets, but allowing overarching guidelines of a policy nature that, say, NPRF could have difficulties reconciling with its duty to maximise fund performance.

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