That’s one opinion.

Some economists like to profess on what will happen to the climate:
http://www.irisheconomy.ie/index.php/2009/05/28/is-dublin-missing-out-on-climate-change/

If other advice that had been given by the ESRI (and others) had been followed we would not have ended in the kind of mess we are now in. By running a budget surplus we would have built up reserves (or reduced the level of our debt) that we could use now to cushion the blow to the economy and the property bubble would not have grown to the size it did, thereby reducing the size of the problem (including the banking problem).

@Derek Brawn - in relation to annual housing demand it is important to remember that the forecasts are for a 10-15 year period over whish they would be expected to be fairly accurate. Such forecasts are contingent on demographics (size of population, household size etc.) and income. If we expected net-emmigration for a prolonged period then housing demand will change substantially. There is a huge difference between short-, medium- and long-term forecasts, a fact that seems to have passed a lot of people (including the Dept. of Finance) by!!

Evening

‘In the boom many of us economists said and wrote silly things (myself included) now it is better if we collectively stop flinging mud at each other, not least because we should all be on the same side’

If economics is a science, then the measure of success is scientific progress. The historical record shows that scientific progress is not always rewarded by social success. Gallileo was lucky, as many great scientists have been sent to a gulag, or worse. Lets remember them.

The ESRI became, or always was, part of our little establishment. Lots of talent and hard work, but saying and doing the Right Thing. Even when it was wrong. The dog that didn’t bark.

Now that the establishment is in crisis , and the future of our state is in question, the ’sides’ you mention remain to be defined. Economic growth or stable economy ? Free market or regulation ? Eurozone or floating currency ?

As you say, this blog is the business. Hat tip KW. The best way to ensure that this never happens again is to work our way towards consensus on what in the name of Jaysus hit us ?

Last October in Kenmare, I put it to Prof. john Fitzgerald that their latest housing demand model (incidentally predicting 45,000 new homes needed by consumers p.a.) was too ‘esoteric’ for the public to understand i.e. the assumptions underlying it and so on. The media takes the ‘conclusion’ not the model parameters or input assumptions, then that becomes de facto ‘Gospel’.

Anyone who has ever engaged in econometric times series modelling knows that it is more Art than Science (model choice, parameter selection, time series data set start/end and so on). Over-reliance upon models, focusing on Statistical Robustness as opposed to predictive power, not to mention choosing the right independent variables (a priori), leads to forecasters being Wed to their Models - such was likely the case with the ESRI HERMES Macroeconomic forecasting model.

The ESRI has been put on a pedestal by punditry in this country, so they must suffer the criticism when they get it horribly wrong, so they must then adapt, change their models & hopefully get it right in the future.

I think that an ESRI with Ahearne, Honohan, Lane, Lucey and Whelan on its staff would have made essentially the same forecasts until Lehman Brothers collapsed; but we would have been quicker on our feet making sense of the ensuing turmoil. Then again, these individuals and others stepped up to provide an excellent service to the public anyway.

In the boom many of us economists said and wrote silly things (myself included) now it is better if we collectively stop flinging mud at each other, not least because we should all be on the same side.

That side, as I see it, is explaining to the citizens (and each other) what is going on as best we can, in order to educate and inform so that this never happens again. I realize that there are various ways of doing this and my own chosen method is not to everyone’s taste. But thats hardly matters.

For example, this website is the best thing to have happened economics in Ireland in a long time and but when it descends into a slagging match, its currency becomes devalued.

The ESRI made mistakes, who hasn’t?

So let’s be generous not petty.

Kind regards, and keep informing me and others with the quality on this site.

David

I commented on some of the ESRI advice on construction and the macroeconomy before.
http://www.irisheconomy.ie/index.php/2010/06/17/economic-policy-advice-to-the-government-prior-to-the-financial-crisis/#comment-56777
http://www.irisheconomy.ie/index.php/2010/06/17/economic-policy-advice-to-the-government-prior-to-the-financial-crisis/#comment-56979

In relation to hiring macro/banking specialists, this goes back to a time before Frances Ruane became director of the ESRI (and before Richard Tol joined the ESRI). Colm Kearney joined the ESRI in 1998 as a replacement for Patrick Honohan, but left about a year later. An effort was made to hire on a number of occasions but as we know the position was not filled. I know that one offer was turned down on the basis that housing in Ireland was too expensive (@Brian Lucey - you are right salaries in Ireland are high but costs have also been high and depending on family circumstances the disposable income after housing and transport was/is higher in other countries).

(It didn’t all stem from Anglo either. If BoI, AIB and PTSB weren’t feeding bigger and more unsustanable mortgages to individual buyers then Anglo couldn’t have fed the money to developers.)

The ESRI had a tangential role as a watch-dog and was an independent body which politicians could use to make their fiscal policy look reasonable (and they probably thought it was reasonable). However, the bankers broke the country by feeding unsustainable mortgages to financially illiterate customers. Don’t forget it.

‘The key error was to fail to make the connection between a construction bust and a banking bust.’

I would add to this the on-going uncritical view of the need for high levels of immigration creating an unsustainable demand for housing.

That seems a perfectly reasonable position to take, just as reasonable as disagreeing with it does. There is a strong whiff of McCarthyism in the attitude of some environmentalists to Tol and Lomborg. If, “establishing priorities for advancing global welfare using methodologies based on the theory of welfare economics,” reminds you of Holocaust Denial then the problem isn’t them - it’s you.

And where exactly have I referred to Holocaust Denial…? If you expect to be replied to, then I suggest holding to at least some standard of truthfulness.

@ RTol

Adherents of the Church of Gaia aim to impose their Green Dogma on the entire population by a relentless pursuit of Heretics like me and you.

You are not a scientist (and thus have nothing much to say on the issue), you continue to associate with the hardcore of anti-scientific denialist and industry lobbyists (Lomborg, the GWPF etc.) and your so-called ‘contributions’ to the debate have consistently furthered the agenda of this well-funded fringe of the mad and the bad, particularly through your eagerness to throw mud at anyone of the non-denialist side of the fence.

Lomborg is a professional polemicist, but his core message is that we should consider pros, cons and alternatives. It’s an appeal to reason.

Lomborg is a con-artist, pure and simple (his ‘honest mistakes’ excuse when challenged on his supposed methodologies wore thin years ago). I’ll refrain from commenting on what that makes you.

Is it a supply-side shortage or is it just a historical lack of demand in this country that’s put off young academics?

I now understand that you suggested to include things that were included already.

A blank stare was the polite response.

This was replaced by what I call “cargo-cult economics”, which worked until about 2000. The possessors thought they had a new paradigm and reverted to type, putting alll our eggs into one very badly-designed basket ie. property.

We have seen the beginnings of a new paradigm with the appointment of Honohan and Elderfield - a break with “normal” patterns.
It remains to be seen whether this continues. Similar breaks with previous ways of doings things started well but were diluted and continue to be so over time eg. the limitations on the Freedom of Information Act.

@Oliver
“People will read about Ireland and say, “How could they have been so DUMB?” ”

Some people have been saying that for a few years.
Faced as we are with institutional corruption, the same questions will be asked about us, unless we change how we do things here, including how we govern ourselves.
As Ivor Kenny put it furing the 1980s crisis “How do we construct a state that provides its people with the power of adapting to the changes that the constantly descend upon it?”

Apart from the appointment of competent game-keepers and more effective enforcement of banking supervision and financial regulation, nothing has really changed in the formulation of economic policy. This continues to emerge almost fully formed in draft legislative terms for rubber-stamping by the Oireachtas from the hidden crucible formed by the Minister, special advisers and senior DoF officials - presumably subject to some EC and ECB oversight.

Until some light is shone on this process and it is subject to effective scrutiny, we are at nothing.

Failure (economists) to convince or failure (government) to listen?

Your comment is mistaken.

The OECD applies the Taylor Rule to component (and small) parts of EMU here … http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1302789

The graphs on page 18 and 19 show very clearly the link between monetary policy, credit and property for individual members of the Eurozone. The graphs show Ireland, Greece and Spain the outliers (within the Euro) in terms of cheap credit and rampant property booms. Is it a coincidence that these are the EMU components now suffering the greatest economic distress?

Honohan and Leddin “Ireland in EMU: More Shocks, Less Insulation?” also applied a Taylor Rule analysis to Ireland within EMU.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=922071

Bottom Line I
The Taylor Rule can be applied WITHIN currency zones. You can also apply it within countries.

If you were to apply it to eastern Germany where I worked in the immediate wake of German reunification, you would see that eastern Germany has a much too restrictive monetary policy since that time. This partly explains why the population in the small city where I worked, Weissenfels, has fallen by a stunning 23% since 1990.

Bottom Line II
Monetary policy explains and predicts much better what goes on in economies than fiscal policy. But Irish economic debate overly focusses - to its immense detriment - on fiscal policy.

The facts that M3 is falling in the Eurozone and in the US signal renewed economic softness in those areas. But these facts have attracted minimal public attention to date.

Lomborg is a professional polemicist, but his core message is that we should consider pros, cons and alternatives. It’s an appeal to reason.

It’s more difficult to tell what is happening at lower levels of qualification. Numbers qualified to primary, lower secondary and higher secondary levels are falling quite rapidly, but it is difficult to be certain to what extent this reflects emigration and to what extent it reflects people who would once have entered the workforce directly on leaving school continuing their education. My guess would be that it’s a bit of both, and that nationals of other countries who had previously migrated into Ireland may be disproprtionately represented among the relatively low qualified people who are leaving.

Institutions which fully acknowledge their errors and confront them will earn an end to the brickbats but not until they do so. I fear Opus DoF and much of the establishment will never learn. I hope the ESRI and our next government do.

So the employment of Richard Tol not only led to the current spectacle of a one-man war against climate science and policy being waged from within the ESRI, but was also a contributory factor to the banking collapse in this country? Someone should update Richard’s Wikipedia page with this information…

I know of some highly educated young people deciding to start their careers/adult lives elsewhere not because they cant get jobs here but because they have lost faith in this country. I cant say I blaim them.