Terry Baker

A few weeks ago I informed readers of the passing away of Terry baker, formerly of the ESRI.  Joe Durkan has asked me to post this personal tribute to Terry.

It was a great shock for me when I heard of Terry Baker’s death.  He was someone I had known for over 40 years, had worked with as his research assistant on the Quarterly Economic Commentary, and had also enjoyed a good friendship.  I met him first when I was interviewed for the job of Research Assistant in the ESRI in January 1969.  We had more points of contact than is probably usual in these circumstances, as we had a shared, but not overlapping  history, in Tanzania – Terry as a civil servant and me as a teacher.  For both of us the experience convinced us that we wanted to stay in economics, and that economics could make a difference.  We differed in approach, as Terry believed in calm persuasion offered over time, while I was ready to do battle.  In the end we were both disappointed to see the mess the country is in now.

 

Terry and the then ESRI Director (Michael Fogarty) encouraged me to go to Nigeria. His judgement about the merits of the move was, as with so much of what he did, inspired.  It was a tough physical environment, but the work was fantastic. When I returned he threw me into the Quarterly straight away.  When I took over the Quarterly finally, Terry could always be relied upon to talk about the forecasts, to offer a different perspective and simply to bounce ideas with.  Writing came easy to him and he would simply rewrite cumbersome sentences without comment.  When I, very reluctantly, decided to leave the Institute in 1983, I persuaded him to go back doing the Quarterly and I think this was a good move for him. 

 

Within the Institute Terry did an extraordinary amount of internal referring.  His comments were incisive, but always took a positive bent.  He also ran a team in the management game, which the ESRI won on many occasions.  Terry well knew the value of the game, as it forced people to put numbers on the usual waffle about company strategy.  This benefited generations of research assistants.  He was also very generous.  When I ran a team separately he kept a place for me on his when I finally bit the dust as he had well anticipated.  I suspect he enjoyed the experience, but he made me feel welcome.

 

We met about twice a year after I left the Institute, most recently last autumn, when we agreed to get together after Christmas.  His later years were sad, following the death of his wife, Pirjo, in 2007.  Sadly, when I returned from a short break after Christmas, I learned of his death.  His death, the more recent death of Mrs. Dempsey (the first ESRI Secretary), and now the death a colleague, Todor Gradev, just knocks the heart out of one.  Terry was a very nice person, and will be missed by those who knew him.  (Joe Durkan).

Municipal Waste Management Policy

The ESRI has published “An Economic Approach to Municipal Waste Management Policy in Ireland“. The Report provides a roadmap for managing municipal waste in an efficient way that minimises the costs to society.

The Report states that Ireland is at an important junction in municipal waste management policy. Significant progress has been made in encouraging the use of recycling as an alternative to landfill. Ireland has to meet legally binding EU Landfill Directive targets that will become increasingly difficult to meet in 2013 and 2016.

The Report argues that markets do not always work well in waste management so government intervention is merited and should be directed at improving the way markets work. If successful, this will enhance Ireland’s economic development and competiveness. It suggests two ways in which waste markets do not work well:

– in handling greenhouse gas emissions such as methane and disamenities such as dust & noise; and,
– in addressing the potential for market power, particularly in household waste collection.

Since geographical markets for waste services such as collection are local or regional, policy making should allow for local variations as well as co-operation for where markets are wider.

The roadmap for municipal waste policy developed in the Report recommends:

(i) a cap and trade system be introduced to meet the EU Landfill Directive targets for 2013 and 2016;

(ii) the imposition of levies per tonne of municipal waste, depending on the method of waste disposal:

– Landfill: €44.24 to €54.89 per tonne
– Urban Incineration: €4.22 to €5.07 per tonne
– Rural Incineration: €0.42 to €0.50 per tonne
– Mechanical Biological Treatment (MBT): €0.92 to €1.45 per tonne.

The levies are based on the unpriced environmental and disamenity impact of the particular waste disposal method; and,

(iii) competitive tendering for household waste collection, which would address any market power problems.

The Department of the Environment, Heritage and Local Government is also proposing a new waste management policy. Two vital ingredients in that policy are:

– the proposed Section 60 policy direction to cap incineration and other matters; and,
– the international review of waste management policy, which contains twenty-five recommendations.

The Report questions whether these ingredients provide a coherent and feasible basis on which to develop waste policy. Arbitrary limits on incineration and consequent expansion of MBT have no place in waste management policy. The international review’s setting of residual waste levies is flawed, suffering from both double regulation and double counting, with the result that some of the proposed levies are much higher than is appropriate. It does not provide the basis for a waste management policy that will create jobs, enhance competitiveness, and meet the EU Landfill Directive targets.

Notes:

The Report was commissioned by Dublin City Council.

Municipal waste is defined as household waste as well as commercial and other waste which, because of its nature or composition, is similar to household waste. It excludes sludges and effluents.

Biodegradable municipal waste means the biodegradable component of municipal waste, which is typically composed of food and garden waste, wood, paper, cardboard and textiles.

A cap and trade system involves trading of allowances or rights to dispose of one tonne of waste into landfill, where the total allowance is strictly limited or ‘capped’. The overall cap would be set by the Landfill Directive targets.

The Minister for the Environment, Heritage and Local Government can issue a Policy Direction under Section 60 of the Waste Management Act 1996, to the Environmental Protection Agency and local authorities concerning the exercise of their relevant functions under the Act in relation to, for example, municipal waste incineration capacity.

Landfill Directive Council Directive1999/31/EC of 26 April 1999 on the landfill of waste. The aim of this directive is, by way of stringent operational and technical requirements on the waste and landfills, to provide for measures, procedures and guidance to prevent or reduce as far as possible negative effects on the environment, in particular the pollution of surface water, groundwater, soil and air, and on the global environment, including the greenhouse effect, as well as any resulting risk to human health, from landfilling of waste, during the whole life-cycle of the landfill.

Explaining Banking to Bank Directors

The Federal Reserve has announced a new initiative: A website to explain banking to new bank directors. No, really, they have. From the press release:

“Many people who are asked to serve on bank boards have little training or experience to prepare them for their new roles,” said Patrick M. Parkinson, director of the Federal Reserve Board’s Division of Banking Supervision and Regulation. “This website has been developed with new directors in mind, but there is plenty of useful information for those who have already spent time on bank boards.”

In relation to the Irish banks, one can certainly argue that bank directors with little experience of banking, finance or economics played a role in their downfall. It will be interesting to see if this is an issue touched upon by Mr. Regling in his report to the banking enquiry.

This raises a more general question: Why are bank boards so commonly made up of people with little relevant experience? Is this an issue that needs to be addressed by regulators in the future? Or is it too much to expect bank directors to have technical expertise and these issues are best left to management, with boards simply overseeing corporate governance issues?

Price Reductions on Off-Patent Drugs

The news that the government has negotiated a 40% reduction in prices with the Irish Pharmaceutical Healthcare Association for 300 off-patent drugs (announcements here and here) got the warm fuzzy feel-good treatment on last night’s RTE News at 9 (the word patent did not make its way into the two-minute report). 

This is, of course, undoubtedly good news, particularly for those with regular prescriptions for these drugs. Being a dismal scientist, however, I’m always looking for the catch: Is asking nicely for price reductions the way to tackle our budget deficit or are these cuts just an indication that we’ve been paying too much for drugs all along?

The Irish Times newspaper piece by Eithne Donnellan reports about the negotiations between the Minister and the IPHA and then poses a pointed question:

Very quickly the IPHA – which represents all the major drug firms such as Pfizer, Roche, GlaxoSmithKline and Merck Sharp & Dohme – agreed to cut prices of its off patent drugs by 40 per cent if the State didn’t touch the cost of their proprietary or branded drugs for another 18 months. The new deal takes the IPHA up to March 2012, replacing the one due to expire this September.

But if prices could be reduced this much, were the manufacturers of 90 per cent of the drugs on the Irish market just ripping us off all along?

Indeed, this deal comes after another deal struck in 2006 to reduce the prices of these drugs by 35%.  So another version of this story is that these deals expose how much money the state has been losing over the years by paying high prices for branded off-patent drugs instead of purchasing generics.

I don’t claim to be an expert in this area, so I’d like to hear from those who know it better. Is this the best we can do or could the state find further savings in this area?

Whoops

Novelist John Lanchester is giving a public lecture at the London School of Economics this coming Thursday linked to the launch of his new book, Whoops  – an anlysis of the financial crisis. The FT and the Sunday Times both carried extracts over the weekend. I was particularly struck by his comments on behavioural economics:

I have a confession to make about Kahneman and Tversky. I’d never heard of them until Kahneman won the Nobel, and when I first read about their work it seemed to me to consist of things that were surprising only to economists.

You can read the full extract here.