Month: March 2012

More on Government Economic and Evaluation Service

The announcement of an economic and evaluation capacity for the public sector has the potential to be a transformative venture and should be welcomed in my opinion.

I think this is far more than just filling the public sector with economists as a matter of optics – at least I hope so.  It is worth noting that this is just one initiative pointing in the right direction – for example, the D-PER recently convened a working group that brings expertise (academic, commercial etc) into the room to review major policy domains including nitty gritty things like how major capital projects are valued (Disclosure – I was asked to participate in this and was glad to).

Some things I hope will happen:

  • I hope the service evolves as an identifiable entity within the public service and not just buried in one Department – from what we can tell so far spreading the economists to wherever demand and skills are matched is the plan.
  • I hope to see a ‘Chief Economist’ role evolve – a visible, public facing role who is an advocate for what the service produces and is strong on communication.   Someone needs to be seen in public!!
  • It is very important to see ‘evaluation’ flagged explicitly and this is again a positive move – it suggests microeconomic policy will evolve as a domain and rightly so.
  • We don’t need to reinvent the wheel in a costly fashion with respect to training and ongoing development of the recruited economists – I hope to see routine movement between academic institutions and the service, and between the services and major policy research groups like the ESRI.
What would perhaps be the most exciting thing from this announcement is that it has the ability to empower public administration on issues of economic policy.  This is more than just about expertise and answering Dail questions on how many staff have economics degrees   For example, one of the less appealing aspects of policy, particularly microeconomic policy, has been the tendency to bury good initiatives in layers of – for want of a better phrase – spin.   The initiatives on job creation (which rightly are about halting the drift into LT unemployment) get announced in terms of ‘X numbers of jobs will be created’ which any sensible economist should drive a cart-and-horses through.    I hope a government service would push against this sort of instinct within the decision making processes.
Update – a link to the service announcement by D-PER is http://per.gov.ie/2012/03/06/minister-howlin-announces-establishment-of-new-government-economic-and-evaluation-service/

New Government Economic Service Announced

Details here.

Comments Policy

We are debating a tighter comments policy to cut down on irrelevant comments and also offensive comments. Comments?

Fiscal Compact Resources for the Public

Let’s try something. We have a lot of information on the fiscal compact between the moderators and the readers of this site. The public at large would like to know more about the fiscal compact-what it is, what is it supposed to do, how it is supposed to work, and its potential ramifications.

So let’s put something together. I volunteer to edit and typeset a booklet (type thing) for free download here on the Irisheconomy blog as an Irisheconomy note. Let’s set ourselves a deadline for perhaps 2 weeks’ time.

What I’m looking for are short pieces of text, links, illustrative examples, and source documents, contributed by commenters.

Obvious links are the treaty itself, and Seamus’ Oireachtas briefing document.

The Fiscal Compact – Views Differ

Peter Sutherland and Fintan O’Toole disagree.  Peter Sutherland’s FT article is here; Fintan O’Toole’s IT article is here.  [Reminder – my own op-ed from a while back is here; while my DEW slides are here.]

Fintan O’Toole argues that the Fiscal Compact is anti-Keynesian.  The treaty has to be read in conjunction with the “six pack” regulations, which allows considerable latitude for Keynesian fiscal policy:

The Council and the Commission shall take into account whether a higher adjustment effort is made in economic good times, whereas the effort might be more limited in economic bad times. In particular, revenue windfalls
and shortfalls shall be taken into account.

So long as Keynesian principles are followed in good times (pro-active tightening to guard against overheating), activism during downturns is possible.

Fintan O’Toole (along with others such as Colm McCarthy) criticises the insertion of the structural balance concept in the treaty.  Since the intention is to avoid the pro-cyclical dangers of using the overall balance (which would anti-Keynesian for sure), the structural balance concept is preferable.  Since there will be inevitably a wide range of plausible estimates for the structural balance in any given situation, the Compact will only rule out extreme fiscal mis-behaviour.

The Fiscal Compact Treaty has been accepted by many social democratic parties across Europe. For example, Sweden was among the early adopters of fiscal rules, since its political system recognised the importance of fiscal sustainability in preserving the government’s ability to manage the economy.

Of course,  it is obvious that the Fiscal Compact is only one of the required reforms in Europe, with the European-isation of banking policies, the introduction of risk-sharing mechanisms and the adoption of pro-growth strategies also important.  In a sequential process, the Fiscal Compact increases the likelihood of other reforms down the line.

(I am offline the rest of today but will try to respond tonight.)