The Irish Economy

How will the international community respond to the challenges of a rapidly changing world? Will we see deeper and more sustained cooperation, or a reversion to crude power politics? To answer such questions, it is natural to turn to the international relations literature. I’ve just read Dan Drezner’s little introduction to the subject in one sitting, and if there’s a funnier social science book that has been published in the last couple of decades I’d be interested to hear about it.

One of the most important economics books aimed at wider audiences to emerge in the last few years is Poor Economics by Abhijit Banerjee and Esther Duflo. Banerjee and Duflo are two of the leading economists of their generation and are particularly associated with the use of randomised controlled trials in development economics. However, this book is broader in its scope and tackles a wide range of issues in the economics of poverty, development economics and the economics of the family. The book has ten chapters and two major sections, one dealing with individual behaviour among the poor and the second dealing with the role of institutions. Like the best popular economics works, each chapter deals with very big issues backed with the recent literature but presented in a punchy and readable fashion. It is a cracking read. The first section deals with nutrition, public health interventions, education interventions and fertility. The second section looks at insurance for the poor, microcredit, savings and entrepeneurship. Chapter 10 sets their argument in the overall context of development debates raging between people like Sachs and Easterly.

The book pushes strongly for the continued development of experimental approaches to economic development that attempt to find workable solutions that large-scale philantrophic and government funding initiatives could be aimed toward. It is important reading for anyone working in microeconometrics and development economics broadly defined and also would be great reading for anyone in Ireland working around the area of foreign aid policy. I open up this thread for anyone who wants to debate aspects of the book or the surrounding issues. From an irisheconomy perspective, it is worth thinking about how the ideas in the book might influence how the Irish government directs the overseas aid budget.

The government has revised its macroeconomic and fiscal projections - the updated stability programme is available here.

Daniel Gros spoke at the IIEA on this topic today -  presentation is here.

John Bruton writes today on the downside of grievance and the upside of a positive surprise on the deficit-reduction effort: Irish Times article here.

The EU/IMF deals for Greece and Ireland assume some level of market funding for these countries: today’s WSJ carries an article on the problems with this assumption; you can read it here.

The slides from the talk by Klaus Regling at the IIEA yesterday are available here.

Save the Date – Conference Reminder

On Friday May 20^th from 4 pm – 7 pm there will be a conference on:

Bank Credit Flows and Eurozone Stability: Theory, Evidence and Policy Implications

at the Institute of Bankers, 1 North Wall Quay, Dublin. The conference is jointly hosted by the Financial Mathematics and Computation Cluster (FMCC) at UCD, the Institute of Bankers, and the Department of Economics, Finance & Accounting at NUI Maynooth. Admission is free. We encourage early enrolment to register a place. We are grateful to the Science Foundation of Ireland for their generous sponsorship via a grant to the FMCC.

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What next for Ireland? This column by CEPR President Richard Portes makes the case that the country should restructure its debt.

This article by Martin Walsh in the Irish Times has some convincing analysis (unfortunately the graphics are not shown in the on-line version), and some thought-provoking comments on the Irish government policy conundrum regarding residential house prices.  As Martin Walsh notes, to minimize expected future (state-owned) bank losses and Nama losses, policymakers must hope that prices have now fallen to their steady-state equilibrium level.  But for the purposes of restoring competitiveness, continued house price decreases would be better. 

“… it seems that there is a real dilemma at the heart of national policy. Do we prioritise competitiveness by bringing house prices back into line with incomes or keep them inflated in the hope of reducing further losses to the banks and Nama (National Asset Management Agency), as well as containing the extent of negative equity?”

Most importantly, by most long-term metrics, current house prices in Ireland still seem to be above sustainable levels.  

What actions (if any) should Irish policymakers pursue regarding stabilizing the residential housing market, and to what ends?