Year: 2010

The Green Budget

Many things have been and will be said and written about Budget 2011. I just want to note that income taxes, and hence labour costs, have again gone up even though export-led growth seems to be our best hope of getting out of this mess.

Much has been said too about the political astuteness of the Green Party. They did make a mark on the 2011 budget, though. There are the limited increase in university registration fees, and the rumoured preference of Metro North over Dart Underground (see the CILT review for a different opinion).

A number of exemptions, reliefs and credits were removed from the income tax code. A new one was introduced: Income tax relief for energy efficient measures in houses. Up to 10,000 euro can be deducted at the standard rate, for a tax credit of up to 2,000 euro. The cost in 2011 (to be paid in 2012) is estimated to be 30 mln euro, so at least 15,000 households are expected to avail of this.

Note that the carbon tax is still there, and the subsidies for energy efficiency improvements and renewable energy were not removed. We thus moved from triple regulation to quadruple regulation.

The capital allowance for energy efficiency equipment for firms has been extended too, at an estimated cost of 6 mln euro.

I would not have introduced those measures (+36 mln). I would have cut the subsidies for green energy (+170 mln). I would have removed the exemption of coal and peat from the carbon tax (+150 mln). 350 mln euro is not a lot, but every little helps.

Megan Greene says Ireland should consider leaving the euro

The Economist Intelligence Unit’s Ireland analyst says Ireland should consider leaving the euro, since the major costs have been or will be incurred anyway.

She also says that this would be politically beneficial for a FG-Labour government. Perhaps, but I think it’s almost inconceivable that FG would want to leave the euro, whatever about Labour.

But the political arguments will remain, and who knows: Gerry Adams could be the Leader of the Opposition. Interesting times.

Ireland to rescue world from warming

or so Frank McDonald writes

the piece is about the Open Climate Network, and you can check for yourself which Irish institutions are involved

it also remains to be seen whether the Open Climate Network has any impact

Class Sizes Revisited: Denny and Oppedisano

While we are on the subject of what really matters for human welfare, many people expressed approval of the government’s decision to not allow class sizes to increase further. Kevin Denny has been talking about this issue for several years and basically arguing that the evidence on class sizes is mixed at best and that it is more of a teacher workload issue than a pupil welfare and performance issue. He has just put out a paper with colleague Veruska Oppedisano testing the effect of classsizes on pupil performance. According to his results, bigger class sizes are associated with better performance in the PISA data, even controlling for a wide range of controls and using different estimation techniques. I think Kevin would be the first to say that you should be careful about overinterpreting any individual data analysis but it certainly points away from any simplistic assertions about the effects of class-sizes.

Ireland’s Failings

For obvious reasons, Ireland has been a prominent feature of the Marginal Revolution blog, one of the best and most widely-read economics websites in the world. Tyler Cowen offers the following summary of Chapter 5 of Fintan O’Toole’s new book.

From Marginal Revolution:

“How Rich Was Ireland Really?

Not as rich as they thought. I’ve been reading Fintan O’Toole’s excellent Enough is Enough: How to Build a New Republic. Mostly it is an expose of Ireland’s crony capitalism and bad political institutions. On economic issues, chapter five offers up the following:

1. During the boom years, property accounted for 72 percent of all assets.

2. For infrastructure, Ireland ranked 26 out of 28 OECD countries.

3. Ireland had a higher share of slow fixed internet connections than in any other comparable country.

4. In terms of R&D or patents, Ireland was well below the OECD average in per capita terms.

5. In the OECD “human and income poverty” rankings, Ireland was 23 out of 25 countries, sandwiched between the United States and Mexico.

6. The country’s health care and educational systems are considered subpar.”

The overreliance on property is now something even the government takes as given but it is worth debating whether our health and education systems are really subpar in the sense mentioned and, in general, whether the whole Celtic Tiger was an illusion or not. There are plenty of things wrong with our education system in Ireland but is it really “subpar” in the sense of being worse than comparable countries? In terms of the health system, I will let commentors weigh in with opinions.

It is worth keeping in mind the substantial gains in life expectancy that occurred even during the late Celtic Tiger period. Life expectancy for people over 65 was the same in 1986 as it was at the foundation of the state and increased dramatically through the 90s and 2000s. We do not have precise evidence on what exactly drove these increases but it would be wrong, in my opinion, to say that we did not make health gains during this time. And this is not to excuse political decisions that saw vital vaccines and treatment of people with cystic fibrosis given lower prominence than the breeding of race horses. But it is worth having an open debate about where the country stands from a developmental perspective as well as a fiscal/monetary perspective. I released a paper recently called “From Angela’s Ashes to the Celtic Tiger: Early Life Conditions and Adult Health in Ireland“. Everytime I have presented it, someone says something like “it should be the other way around” or “you should add “and back again””. I find it hard to think of the broad progress in human development in Ireland in the last 50 years and not have some sense of belief in the potential of the country and some degree of pride of where it has come, even in the face of the current mess. If you look at the health of Irish migrants to the UK over the last 50 years you see huge improvements there also with recent migrants performing as well as or, to a large extent, outperforming natives compared to the 1950s and 1960s migrants who, as an average, are in far worse physical and mental health. It is worth beginning to ask whether what we are facing is a large fiscal and monetary blip with a forseeable exit point or a genuine developmental structural break where the real and profound gains in human welfare seen in Ireland are in danger of being reversed.