Latest EU GDP and industrial production statistics

The latest Eurostat data on industrial production and GDP are now available. GDP growth decelerated fairly sharply in 2010:Q3, down to 0.4% from 1% in Q2. As always the Irish data will only be available with a lag, which is unsatisfactory.

Industrial production was down 0.9% in September as compared with October, with consumer durables production leading the decline at 3%. A glance at the table shows how volatile Irish industrial production data are in comparison with the data elsewhere, implying that the monthly data are not informative for this country. The annual recovery in Irish industrial output has been quite respectable, however.

The implications of this deceleration for the Eurozone periphery are too obvious to need spelling out, although the FT does so here.

Economics and Psychology One Day Session

Economics and Psychology One Day Session: UCD Geary Institute

We will be hosting a session on Economics and Psychology in the UCD Research Building on November 23rd. Those who wish to attend should RSVP to Philippa Barrington at geary@ucd.ie. Please indicate whether you wish to attend the full-day session or the keynote lecture by Professor Laibson only. The programme is below. There is no registration fee.

Programme

10.00am – 10.30am
Martin Ryan (UCD)  “The Role of Economic Psychology and Non-Cognitive Skill in Students’ Lecture Attendance and Academic Achievement”

10.30am – 11am
Liam Delaney (UCD)  “Automatic Enrollment and the Irish Pension System”

11am – 11.20am: Coffee

11.30am – 12pm
Cormac O’Dea (IFS and UCL). “Cognitive function, numeracy and retirement saving trajectories”

12pm – 12.30pm
Marie Briguglio (University of Malta). “Voluntary Pro-Environmental Behaviour”.

1230pm – 1pm
Michael Daly(TCD) “How income relates to life satisfaction and daily emotional experience: Evidence from the American Life Panel”

LUNCH

2pm – 2.30pm
Mick O’Connell (UCD) “Variation in ‘Returns to Education’ and academic performance by country in OECD’s PISA science scores”

2.30pm to 3pm
Robert Metcalfe (Oxford) “Behavioural Economics TBA”

3pm – 3.30pm
Peter Lunn (ESRI) “What Can I Get For It? A theoretical and empirical re-analysis of the endowment effect.”

3.30pm – 4pm Coffee

4pm – 5.30pm: Keynote Speaker.

David Laibson (Harvard) “Natural Expectations and Economic Behavior”

ESRI Geary Lecture: “Is Pay-For-Performance Effective?”

The second Geary Lecture of 2010 will be given by Professor Canice Prendergast, W. Allen Wallis Professor of Economics at the University of Chicago Booth School of Business.

Venue: ESRI, Whitaker Square, Sir John Rogerson’s Quay, Dublin 2
Date: 25/11/2010
Time: 4 p.m.

For the last couple of decades, there has been a large body of work arguing for the widespread use of pay-for-performance as the appropriate means of aligning the interests of workers with those of their employers. This lecture outlines recent contributions to this body of work, and focuses on a number of general themes. First, the successes of pay-for-performance schemes are limited to a small class of agency settings that do not seem to generalise to other settings. Second, the literature has now begun to consider instruments other than pay as the most natural way to align interests. Finally, there is controversial literature in psychology that now challenges the basic assumptions of this strand of economic literature. The talk will review all these recent contributions, and likely directions for future research.

Canice Prendergast, who was a research assistant at the ESRI from 1983 to 1985, is now one of the world’s foremost researchers on workplace incentives and their impact on productivity. He is currently the W. Allen Wallis Professor of Economics at the University of Chicago Booth School of Business.

The Geary lecture is organised each year by the ESRI and honours Dr R. C. Geary (1896 –1983), the first Director of the Institute.
This is one of the special events being held during 2010 to mark the Institute’s fiftieth birthday.

Booking
Attendance at the event is free but must be pre-booked. There are a limited number of places available and early booking is encouraged. To book a place, please send details of attendee’s name, organisation and contact telephone number by email to admin@esri.ie.

Donal O’Mahony Disagrees with Morgan Kelly

His article is here.

Thomas McDermott on Climate Bill

A guest post by Thomas McDermott
Climate change is a real and significant threat to human welfare, particularly in the poorest parts of the world. While an effective ‘solution’ to this threat will require global cooperation over a sustained period of time, this is no excuse for not acting now to begin the process of reducing our dependence on carbon-intensive activities.
Ireland has a great record of leading the world in initiatives aimed at reducing global poverty. This work should be complemented and reinforced by action on climate change. Ireland could take the lead in demonstrating to other rich countries (and the rapidly developing ’emerging economies’) that reducing carbon emissions can be achieved without jeopardising economic or social welfare. In fact, these goals can be enhanced by such initiatives. This is not only the morally right thing to do, it is also in our interests. Such leadership would help to restore Ireland’s image internationally, which has been so tarnished by the excesses, greed and corruption of our recent economic boom and bust. At the same time, intelligent climate legislation could provide an additional source of revenue for government, while potentially improving our competitiveness over the long-term.
Unfortunately, the proposed Climate Change Bill produced by The Oireachtas Joint Committee on Climate Change and Energy Security (and due to be debated in the Dail today, Thursday), will not achieve any of these worthy goals. The proposed bill would legislate for ambitious emissions reduction targets, with the Taoiseach responsible for ensuring that these targets are achieved. The Taoiseach would also indicate what levels of emissions he/she expects each year. How is the Taoiseach to predict annual emissions levels or to enforce any such medium to long-term targets? This is equivalent to imposing legislation that requires the Taoiseach to predict levels of economic growth each year, or somehow to enforce medium to long-term economic targets.
Unless this legislation envisages an entirely new, centrally-planned economic system in this country, I do not see how its objectives can be achieved.
Legislation of this nature will do two things:

1) It provides a convenient sound-bite for politicians to hide behind. It is relatively easy to say “we have proposed/introduced legislation that will force emissions to fall by x% by 2050” etc. without actually specifying how such targets will be achieved (i.e. without having to stand up to various interest groups who may stand to lose from specific climate-related legislation).
2) Such a law obliges the presiding government to make various interventions to attempt to reduce greenhouse gas emissions. Crucially, however, it leaves the choice of specific interventions as a purely political decision. How will the government of the day decide how and where to reduce emissions? On what basis? We surely should be sufficiently well chastened in this country by recent experience of political interventions in the property sector (in the form of tax breaks etc.) to understand what a dangerous scenario this type of legislation will create.

We should not allow politicians the convenience of meaningless targets to hide behind, or the opportunity to use climate change legislation as a means of making themselves and their friends better off in the next round of crony-political-economy.

Setting ambitious long-term targets might sound good, but in reality this does not provide any greater certainty to businesses, investors, or consumers, simply because such targets are purely aspirational and are not credible without specific measures to achieve them.

The optimal climate change policy from both an equity and an efficiency perspective is to place a tax on carbon emissions, and allow people to choose the best way for them of reducing carbon dependency. This would obviously have revenue raising potential – revenue that is so desperately needed right now – while any potential threat to vulnerable people could be mitigated by using part of the revenue raised to provide reimbursements to those on low-incomes. Taxes are never popular, but the people of Ireland are acutely aware right now that taxes must rise. In every crisis there lies opportunity. If only we had the courage to embrace this one.