Trinity College Dublin
(Department of Economics and IIIS)
Dublin Economics Workshop
IRISH ECONOMIC POLICY FOR THE CRISIS: WHAT’S NEXT?
J.M. Synge Lecture Theatre (Room 2039), Arts Building,
Trinity College Dublin
Wednesday 20th May, 2009
Session 1: 1.30-3.30
Chair: Jim O’Brien, Second Secretary General, Department of Finance
John Fitz Gerald (ESRI) on Competitiveness
Karl Whelan (UCD) on Potential Output
Brian Nolan (UCD) on Inequality
Session 2: 4:00-6:00
Chair: John McHale, Queens University, Canada & NUIG
Colm McCarthy (UCD) on Pensions
Philip R. Lane (Trinity College Dublin) on Fiscal Policy
Patrick Honohan (Trinity College Dublin) on Banks
Update–let me rephrase that: Although the conference (originally announced on this site April 3) is fully subscribed, the waiting list may clear.
If you would like to be added, contact tcdconference at irisheconomy.ie
27 replies on “Crisis Policy Conference programme, 20th May”
a condensed version for those who cant make it
John Fitz Gerald (ESRI) on Competitiveness ; we have lost it
Karl Whelan (UCD) on Potential Output ; we are below it and its reduced
Brian Nolan (UCD) on Inequality ; its growing
Colm McCarthy (UCD) on Pensions ; they are submerged
Philip R. Lane (Trinity College Dublin) on Fiscal Policy ; glad he found we had one
Patrick Honohan (Trinity College Dublin) on Banks ; they are being activly zombified
Is this what The Irish Economy blog or academic economists consider as public debate?
If economists continue to exclude the public from discussions of the Irish economy, then it is certain that Ireland will face this crisis rudderless as economic policy discussions continue to ignore the absence of political imagination and public contestation from the outset. The political paralysis over the economy will not be dinted in the slightest by a roomful of economists fretting over redundant economic models and technical tinkering.
As long as economists shy away from open, frank debate with all sections of Irish society, then the Irish economy will continue its desultory path in the crisis. Leadership is key, and if economists can’t or won’t engage in economic decisions with the public then they should learn.
If the demand is actually much higher than the number of places, is there any chance that it could be streamed on the intertubes?
Steve – perhaps if more economists were involved in economic decisions we wouldn’t need a conference to discuss a crisis?
@ Steve, in fairness to the organisers, they did issue a public invitation to the debate just after the budget. The current popularity of all things economic meant that the room quickly filled (with members of the public).
Looking forward to what should be a very stimulating afternoon. John, I hope that you include a wide range of information on Ireland’s competitiveness position. I know relative prices/wages have risen faster here since 2002, but perhaps you could place this alongside:
> AMECO sectoral data which shows that industrial wages are around 15% below Northern European economies (2007 data); Services wages in line with Northern Europe, though average probably significantly raised by public sector in Ireland;
> UNCTAD data showing Ireland’s continuing impressive performance in attracting greenfield investment (available in NCC report);
> The great disappearing Current Account Deficit;
> Perhaps some discussion around the structural transformation of the decline in electronics would be worthwhile. Perhaps compare with the Scottish outcome (i.e. same decline in electronics, despite much lower pay increases over last decade). How well have the Scottish done in finding replacement industries compared to us?
Looking forward to all the presentations.
conference was open to all, and Im sure many interested members of the public will be in attendance. Though i happen to work for a bank, i’ll be there as much in a public manner as a professional one, and my attendance was not based on or attributed to where/what i work as.
Chair: Jim O’Brien, Second Secretary General, Department of Finance
err…dont they have SOME responsibility for the problems we are in? Will he be speaking? Why is nobody from DoF presenting their views?
I’m not sure if it has struck anyone else as odd that a group (not sure of the collective noun – disputation, perhaps) of distinguished economists can not come up with a better method of allocating a scarce resource (seating at this conference) than “first come, first served”. Price rationing? an auction? or even a larger venue?
Steve, irrespective of the extent to which economists seek to engage, the Government isn’t listening. And, insofar as it pays any heed, it will only extract what might support its prejudices or serve short term political advantage.
And finally, Brian, following your eloquent piece in today’s IT, do you see any validity in the contention that, among other political factors, the Government favours the “zombie” solution for the banks as it keeps them, in some way, at arm’s length and allows them to operate as a conduit for continued indirect ECB financing of Government bonds?
From recollection, the Synge Lecture Theatre is one of the smallest auditoria in Trinity. If there has been excess demand, why couldn’t an economist work out that supply constraints should be relaxed. It seems to me that it would be relatively easy in late May to find a larger theatre and allow higher attendance.
@George The involvement of economists in government policy is no magic bullet. Economic decisions should be based on popular mandate, and economists need to inform that public debate. Individual economists or cliques may well like to flatter themselves that their economic model is best suited to the crisis, but it seems they have little confidence to win the argument with the public. If economists refuse to understand that this crisis requires a re-politicisation of the economy, then they can be assured that their models will only exacerbate the slump.
Not quite sure what your point is.
The conference is looking at this from an economists point of view which seems perfectly sensible to me. Not all economists agree with each other as we can see from this website and yes they will look at this from various economic models.
I’m not an economist (though I did study it to a certain level in 2nd and 3rd level). Half the stuff they write about here goes right over my head. I do appreciate though that there are people debating this crisis without self interest (they are not looking to be reelected or protect their behinds) and in an intelligent manner and it has helped me in my understanding of what is going on.
If you want a conference that includes everybody these probably arn’t the people to organise it.
Along the lines of what Con suggested, why not film the presentations and then throw them onto Youtube? If there’s excess demand and a lot of interested students are likely to be absent due to exams, this would be rather a popular move 🙂
Perhaps thats the case. However, could nationalised semi-state entities not also do the same?
I accept that could be possible, but it may be that the ECB is happy to provide indirect financing of government borrowing under the guise of continuously rolling over short term liquidity for the banks. A change in the status of the banks might encourage some scrutiny of this “under-the-table” financing of Government debt and prejudice its continuation.
When economic rationality is abandoned it is necessary to see what other factors may be driving policy decisions.
Indeed….hmm. I guess that IF the ECB is covertly doing it now, they would be willing to continue after. The argument would be “well, these are just different in ownership, not actually different in business”. Good point tho…
It is important that the title of this conference is “Crisis Policy”. It is about politics!
Whether economists like it or not, economic policy is not something that can be stitched together in lecture theatres. It has to be the product of public legitimacy and support.
As it happens, I think economists have a lot to contribute to the public debate, but a rational or coherent explanation has been markedly absent. Economists need to do a lot more work simply to fully describe the real and financial structural trends of the Irish boom and bust, before prescribing “expert” policy.
I think this conference is putting the horse before the cart. How can economists offer policy responses when their economic models have clearly failed to explain what has been happening in the economy over the past decades? I’m sorry if you think that non-economic explanations such as greed, recklessness or cronyism adequately explain our current economic downturn. In the distant past (pre 1980s), economics provided more sophisticated arguments about the systemic weaknesses of the real economy and crisis. These economic schools have been discredited, but economists wish to pretend that economics still has the answers.
Let’s be honest. Lone economists were warning of the banking crisis and the global slump, but the reality is that no Irish economist has convincingly or coherently explained the developments in the Irish economy, other than to naively state that bubbles eventually burst. Hoorah for economics!
If economists wish to influence economic policy, it is worthwhile to remember that the public will have to be won over. George Lee at least has the courage of his convictions to stand before the electorate.
Sadly, many economists have become inclined to snipe at populist economic policy, as though government should not privilege democratic wishes over technical prescriptions.
If economists wish to stress test policy decisions for political debate, that’s fine. The idea that economists have some expert insight into what economic model Irish society should work towards is far more problematic. I am not advocating economists to join the fossils of Irish Politics, but I am stating that economists need to understand that economic policy may only be developed in the course of public disputation.
I am all in favour of economic conferences, but please do not flatter such events as positive contributions to the policy decisions facing Irish society.
@ Brian L
I hope Brian Nolan will discuss how inequality is falling – e.g. compression of earnings, investment returns etc….
a worthwhile paper for disuscssion , especially given the chairman of the first session and concerns regarding NAMA, would be this one
While the focus is policy, a crucial issue that gets no attention, is the lack of transparency and the archaic reporting systems in the Dept. of Finance, which pre-date the IT age.
Departments publish summary information and there is no equivalent of a detailed profit and loss.
The opaque public procurement system is part of the endemic cronyism and operates counter to public enterprise policy where the Insiders have the clear advantage.
Who are the biggest suppliers to the State?
To get categories of public expenditure, FOI requests would have to be submitted to 15 Govt Depts and to each local authority.
The existence of Bord Snip signals the extent of the existing shortcomings.
From a control viewpoint if senior management do not have modern reporting systems, how can they efficiently manage?
Besides, sunlight is the best disinfectant.
There has to be a limit to which public participation is done for this, otherwise you end up with the RDS eircom AGM before the sellout to Vodafone, with people venting their anger but with little chance of affecting the outcome. Stream the conference online, allow the public to comment on the discussions thus streamed, do a follow-up down the road to address the contributions from the public.
I think it’s great that you are having a discussion about Inequality in the context of the economic crisis here. Finally! With people losing jobs, and struggling to paydown excessive debt levels, fair and just economic and social policies are even more important than before. I look forward to this debate about the unequal pay rates between the public and private sectors. Should we reduce public sector pay to private sector levels in one step, or spread it over 2-3 years? Should we simultaneously charge an appropriate levy for the pension benefits, or even apply a discount to public sector pay for the job security enjoyed? Should the Gardai or a Tribunal investigate the Benchmarking process – probably the greatest scandal in relation to the poublic finances in the history of the State? Looking forward to the debate!
German Bad Bank Plan
The key idea of the plan is to give banks up to 20 years to cover their losses from toxic structured assets without putting much taxpayer money at risk.
Judging by the initial draft, the key elements of the plan are
* Banks can deposit toxic structured assets at 90% of the book
value in an in-house special purpose vehicle (“bad bank”).
* In return, the banks receive bonds that are guaranteed by the
government’s bank support agency (SoFFin) against a fee. The banks thus swap bad assets against good assets.
* Independent auditors will determine the “true” value of the
toxic structured assets.
* The banks then have up to 20 years to build up reserves in equal
annual instalments to cover the difference between the face value (minus the 10% haircut) and the “true” value. In the end, the banks will also have to make up for any difference between the “supposed “true” value of the toxic assets and the amount that their “bad banks” realise upon winding down the bad assets.
The problems of the Landesbanken, which go well beyond toxic structured assets, will be dealt with by a separate procedure to be unveiled within a few weeks.
We haven’t seen all details of the law yet, and it may well be changed in parliament.
For banks, participation in the scheme is voluntary. The basic idea, namely to ease bank balance sheets constraints up-front and to give them up to 20 years time to build up reserves against losses from toxic structured assets, looks sound. As usual, the devil could be in the detail. So far, German banks have accepted government support only late and reluctantly because they consider the conditions attached as too harsh. If few banks participate, the “bad bank” plan may not have much impact on lending behaviour of banks.
Sounds like a good plan to me. The plan is for structured assets which are probably as impaired if not more than our “toxic” property assets. NAMA will surely be examining this plan carefully. There is bound to be a strong backlash if the haircuts turn out to be too severe when you have a precedent like this. It avoids the problem of very large haircuts requiriing immediate recap when the Governments finances are already considerably in the red.
“….the banks receive bonds that are guaranteed by the
government’s bank support agency (SoFFin) against a fee….”
Whereas Germany might be provide a 20 year guarantee/insurance, it is hard to see how that would be a credible solution for Ireland. As things stand, nobody believes we can honour the existing Irish bank guarantee.
FWIW, the FT’s Lex coloum reckons any private bank (as opposed to the landesbanks) would be crazy to get involved with the German bad bank plan as the terms stand right now, particularly due to the ‘fee’ being charged for getting involved. Maybe there’s further amendments or side revenue streams (ie pay the banks to underwrite or manage certain aspects?) to come, but it advises against as is.
Because I’ve been asked a few times tonight, that Steve isn’t this Steve. This is going to be an excellent conference, glad to see Philip rediscovering fiscal policy Brian!
I am not certain I will be able to attend the Crisis Policy economics seminar, but I feel that it is important to propose some constructive comments on how economists can contribute to public debate.
@MichaelHennigan has created a great resource for updated information on the Irish economy through the finfacts website.
This blog has also been a positive break from the solipsism of academic economics. I have enjoyed reading the spats between economists, but feel that the irisheconomy blog is not playing to its strengths.
Is there not a possibilty of synthesising the finfacts and irisheconomy approaches (not the websites)? It is quite easy to create indexed pages/subpages on the irisheconomy blog. As I have said before, possibly the key strength of economists is their breadth of knowledge of the economy.
The title of this blog is “The Irish Economy” not “Irish Economists” and it seems to me that structured resources on the Irish economy are totally absent. As most will agree, there is a need to completely interrogate the state of the Irish economy in order for public discussions to be based on the best evidence. But where is the evidence?
I would encourage Irish economists to concentrate their energy in filling the holes in our knowledge of the Irish economy. It is simple for Irisheconomy.ie to create indexable pages based on say the chapters in “The Economy of Ireland”. These pages could easily be created to allow economists and the public to collaborate to produce a comprehensive resource for public discussion. Goosegrade is an interesting wordpress plugin that would allow the irisheconomy.ie contributors, readers to produce a peer-reveiewed “State of the Economy” resource which melds the best information from all sources.
It is important to stress that economists hold no expertise in reading the minds of the public, but they ought to have some expertise in interpreting the economic trends of the last 2 decades.
I understand that it will be difficult to synthesise ambiguous or disputed opinions, but I am sure that it possible to create a report on the Irish economy which actively engages with the circumstances we face. Irish society doesn’t want economists to prescribe policy, but it seems clear that economists are keen to flaunt their informed opinions and intellectual prejudice.
Let’s see more collaborative contributions for public debate rather than private discussions for government lobbying. Economics will be the better for it.
I should have stressed we need resources on long-term historical trends in the Irish economy. Economists need to describe and interpret the changes in the Irish economy over the past 30 years. What has changed? has to be answered before Irish society can start debating Where do we want to go? There is simply too much leaping from one quarterly update to the next in economic discussions. Let’s get some perspective.