Richard Tol and the ESRI

It has been a strange few days for Richard Tol and the ESRI. A working paper co-written by Richard and released by the ESRI was later withdrawn, because there were “serious concerns about the methodologies used in the paper“.

Brian Lucey has a useful summary of all of the back and forth on his blog, including some rebuttals of Tol’s paper.

This episode is unfortunate for everybody, but in a lot of the coverage it is clear the ‘working paper’ status of the document is not well understood. Working papers exist to facilitate discussion and dissemination of ideas. Just about every working paper series carries a disclaimer to the effect that any paper within the series has not been peer reviewed and so the conclusions are not to be taken as read. In fact a disclaimer is at the bottom of the first page of the working paper.

Really what the author is saying to their colleagues in the scientific community when they publish a working paper is “here, have a look, tell me what you think.” The working paper status of the document is overlooked in several pieces I’ve read, with many calling it an ‘ESRI Report’, as if Tol et al’s working paper was like the Quarterly Reports which do, in fact, speak for the ESRI.

In my opinion, the correct thing to do now is to organize a half day talk around these issues with contributions invited from interested participants. Rather than stifling the debate around what is obviously an important topic, explore the idea properly and with the minimum of drama.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

82 replies on “Richard Tol and the ESRI”

A conference or seminar would be a very worthwhile outcome from this debacle. There seems to be an oversupply of polemic opinion on this issue, and not enough fact-based research.

On a side note, if by Quarterly Report you mean the Quarterly Economic Commentary, I would like to highlight that they do all come with the following disclaimer:

“The Commentary, Special Articles and Research Bulletin contained within have been accepted for publication by the Institute, which is not responsible for either the content or the views expressed.”

In my opinion, the correct thing to do now is to organize a half day talk around these issues with contributions invited from interested participants. Rather than stifling the debate around what is obviously an important topic, explore the idea properly and with the minimum of drama.

Well, it’s better than a conspiracy of silence after the ERSI’s so bluntly wiped the working paper from its website. However, if you’d prefer not to have things erupt into the usual Internet cat fight over the content of the paper, I’d recommend keeping a close eye on the comments.

There’s no doubt that the ERSI acted in a blatantly political manner in withdrawing the paper. This personally doesn’t surprise me, but maybe others would have had different expectations. However, given Tol’s previous criticisms of the ESRI, I tend to think that probably had an idea of what was going to happen when he uploaded it.

On a more general note, there are only two places that academic papers can be published without fear of censorship: Russian language Internet boards and bittorrent.

In general I belong to the “cockup, not conspiracy” school of politics and would normally shrug this event off as heralding the start of the silly season, but a couple of issues have been mulling over in my head. Something about this issue just doesn’t make sense.

The first issue which suggests there’s more going on here is the relationship between the ESRI and the media. The ESRI has never been a shadowy organisation of media-shy academics whose instinct is to shun the glare of publicity. It is a sophisticated research institute with an equally sophisticated publicity machine attached to it. During the Celtic Tiger years, reports on the economy were published at press conferences rather than academic conferences, and the authors were equally visible on the news as they were at seminars.

It has always seemed to me that the Institute has positively welcomed the media’s interest in their reports. It therefore seems strange that this report could be uploaded onto the ESRI website and find its way onto the front pages of the newspapers through the initiative of the newspapers, without some prompting by the ESRI or its staff. Was there really nobody in a press office overseeing how reports are presented on the ESRI website? Does nobody ensure that reports are clearly differentiated from working papers?

The second issue which makes me question the official story is the relationship between Tol and the ESRI. I have not, to my knowledge, met Richard Tol although I know his work well, and I follow him on twitter. His departure from the ESRI and Ireland was public, nasty, and long-lasting. Indeed, the comment attributed to him today suggests that all is still not well between them:

“I have absolutely no problem with my professionalism here. You may say something about the ESRI’s professionalism, but not mine,” he [Tol] told RTÉ. I don’t understand what this means? Why does this call the ESRI’s professionalism into question? Why did Tol upload the article to the ESRI website and not think to inform his colleagues? Presumably in the past, he would have worked with his colleagues to brief the press and line-up media interviews. He is now going to upload the article onto his new department’s website. Why didn’t he do that in the first place if he had questions about the ESRI’s professionalism?

Richard Tol’s public departure from the ESRI suggests he is not adverse to generating some self-publicity. If this was a cockup rather than a conspiracy, his ego must be relishing the attention.

The third, and most worrying question is about the relationship between the ESRI and government. The ESRI sits uncomfortably between a State agency and a private research institute. I do not know how much, if at all, the government uses the ESRI as a research institute but it does, I understand, fund it. The ESRI is a think tank and one of its roles is to produce reports to create a public debate about the future direction of policy.

If you were, for example, the Minister for social welfare who wanted to start a public engagement on the issue of getting people on welfare back to work, putting out a report which was semi-independent while being semi-credible but semi-discredited would surely be the best way of starting a debate without being seen to lead it.

The Irish Times article on the report which was published this afternoon has 31 comments. The blogs and forums have been busy for the last couple of days on this topic. Even Brian Lucey found space in his oh-so-hectic timetable to blog and tweet about it today.

Today, the issue of the relationship between wages and social welfare is top of the agenda. Job done.

I don’t get it; you mean have a conference on the meaning of what is research and the research process?

Surely the issue is that if an organisation questions the professionalism of an economist they should have to explain it in some detail given that our reputation is all we have as academics.

If there are serious concerns about the methodology that have been identified then why not explain these immediately rather than leaving a slur to be cast over three fellow academics.

From the report (which I read)

“Some companies like their employees to keep up a certain standard of appearance which necessitates the buying of professional clothing from impressive jewelry and watches, the correct shoes, bags and even to the correct hair style.”

And you probably thought Professor Tol just threw on whatever was to hand before being dragged backwards through a hedge to get that bohemian hairstyle, and all before he set out for work each day!

Actually the report is fairly straightforward and I am curious about the hullabaloo. Professor Tol is drawing attention to the very high costs of childcare and transport in Ireland which, when deducted from some salaries .makes employment less financially attractive than the dole.

What’s controversial about that? If anything, we should be focussing on childcare and transport costs so as to make employment – particularly on lower salaries – more attractive than the dole. But those who didn’t even bother to read the report took it to be an attack on social welfare levels.

In summary the report concludes that 15% of childless households would be better off on the dole and 44% of those with young children would be better off on the dole.

Now what are we going to do about childcare costs?

BTW the ESRI report is available here now that the ESRI has taken it down from its website:

http://namawinelake.files.wordpress.com/2012/06/esri_report.pdf

Thanks Stephen

This came at a very awkward moment as I was on holiday Monday & Tuesday and in workshops Wednesday & Thursday.

I agree that we should just open this whole thing up for extended peer-review. Will be next week, though, when things have calmed down.

More mud will be slung tomorrow.

It seems that the Indo and other media outlets tried to use this to bash people on the dole. This study highlighs the actual cost incurred by someone taking on a job, the amount that they would need to earn for that job to cover the cost of actually just getting to work. What about all the people that have a mortgage on a property thats lost massive value and any job that they take on needs to cover the monthly payment on the mortgage. While the government is trying to make the economy competitive through ‘internal devaluation’, i.e. reducing wages, this shows that working people need to earn a reasonable amount of money just to cover the cost of working let alone just surviving. What a great and fair society we are (re)building.

@Jagdip

Being daily dragged backwards through a hedge doesn’t come cheap either. It is generallt at least two men together with liability cover for potential injuries plus their travelling time. Hiring a tractor with a winch is also costly.

I for one learnt a bit about the social welfare system as a result of the furore.

For example, the D of Social Protection “said a working married person with four children earning €28,000 per year had a net annual income, after benefits but excluding rent, of €43,092.”

I think it’s Family Income Supplement that makes up the difference. Anyway, this struck me as more generous than I had expected. Probably a single private sector worker would need to earn €65k to have the same net income (maybe an €80k salary in the public sector?).

http://www.irishtimes.com/newspaper/breaking/2012/0612/breaking49.html

@richard tol

As a bit of joke Latin might have it: Illegitimi non carborundum.

Joking apart, it appears that the paper’s conclusions are something that body politic in Ireland feels obliged to repel, as if suddenly in the grip of unsuspected illness.

The illness has been known for a long time however, multiplying at all levels. But nothing will be done about it. The Gentry are not disposed to stepping down from their High Horse. Too grand a view.

Who knows how many councillors (and even TDs), their family members, friends and just plain everymen are benefiting from a rent supplement regime that I would guess is among the most generous in Europe. Several if not many councillors may have ‘inadvertently’ entered into long term rental agreements with their own local authorities.

No need for an inquiry however as conflict of interest doesn’t exist in Official Ireland luckily enough.

O tempora. o mores…

Given the Irish record of squashing dissent, and self censorship, the reaction of the ESRI is a serious error.

It should have been sufficient to explain what a ‘working paper’ means.
Presumably over the past half century, there have been papers sanctioned for issue at some level but where later, methodology etc was questioned?

Richard Tol did say in a RTÉ interview that the CSO data had to be derived from two datasets. He is not the only author of the paper.

Coincidentally on Wednesday, a government agency issued a report on a related area, that I think could be termed ‘seriously flawed.’ It nevertheless received a ministerial imprimatur.

I refer to the Croke Park agreement implementation body report – – ‘savings’ from a staff embargo and out of control boomtime spending are not hard to conjure up. The headline target is pay not pay & pensions and if the benchmark year was 2006 — the peak year of the boom — not 2008, there would be NO actual savings by 2015.

http://www.finfacts.ie/irishfinancenews/article_1024483.shtml

The ESRI should be concerned about ‘seriously flawed’ data and I have noted in the past comments on for example changes in ‘computer services’ exports in the quarterly commentaries.

We didn’t need Facebook’s IPO filing disclosure that most ex-US revenue will be routed through Ireland and thus become Irish ‘exports’ to realise that the mantra of rising up the value chain as evidence by services export data, is partly an illusion – – up to 40% of the value of services exports is overstated.

Error of judgment by ESRI leadership to ‘take down’ a working paper: “working papers” are there to be open to critique and comment from those interested.

I emailed R Tol earlier today … and commented on earlier thread as below after I linked the ‘Sussex’ copy on the thread.

http://www.irisheconomy.ie/index.php/2012/06/12/the-wisdom-of-charles-kindleberger/#comment-296553

Far too much of this upper_echleon welfare around at the mo – pretty sure I can identify >€100 billion if I can find an hour or so later on …. and after I give the Crilly, Pentecost & Tol paper the benefit of a critical review.

@What goes UP

Don’t forget the 44 Economists who agreed with Del Monte & Indekon and said YES – when not a single one of the 44 deemed themselves capable of writing a Working Paper in support of the social scientific validity of the key constraints within the Fiscal Korset [0.5%; 60.00%; 1/20] with the usual ol rigor and relevance, some basic empirical evidence, and some anyway halfbaked if anyway possibly reasonably plausible economic theory. NOT ONE.

As my claim to its being Economic NONSENSE has yet to be falsified, The Edward Lear school of Economic Nonsense stands over its findings* [ the author wishes to acknowledge financial support from the Blind Biddy Hedge Fund on sourcing an original first edition of the Owl and the Pussycat]

There seems to be a massive confusion about what a working paper actually is. Its a preliminary but complete work. In economics and so on IDEAS and SSRN are full of literally millions of them.

It is not my area, but I wholeheartedly agree that a short conference/seminar/panel discussion on the paper’s topic is a great response. If you need seminar space I would be happy to arrange it at Maynooth. Again, it is not strictly my area so I could not add much of substance. In any case, seems a great idea if you can pull it off.

Despite political rhetoric to the contrary, what the furore over this ‘blip on the screen’ working paper illustrates is that unemployment is very far from the centre of the current government’s agenda. If unemployment was the core concern of this government then research papers of this kind would be welcomed, further research and analysis encouraged and commitments made to re-examine existing Departmental data which, as the Minister for Social Protection assured the media yesterday, contradicts the findings by Tol et al, eventhough a report in today’s Independent notes the Department was unable to produce figures of its own to contradict the research findings.

Since the original ESRI research team sought to draw in a wider range of costs involved in taking up employment than are usually taken into account in compiling data on disincentives to moving from welfare to employment, it’s hardly surprising that their research should yield different results to the ‘conventional’ model. It would be nice to see what the Department’s data actually says, though. Otherwise there has to be a question mark over the quality of advice and data that informs government policy.

In the fullness of time, if it is shown that the conclusions of the research paper are well based, then it further begs the question regarding the validity of current received wisdom in other areas of social welfare policy and how related costs of living issues affect access to employment. If no attempt is made to confront this, then the real losers are the unemployed themselves.

Instead the system, which in this case includes the ESRI management, has responded as the system always does : suppress the message and shoot the messenger. Nothing new about this; anyone remember Morgan Kelly?

@Stephen Kinsella. Is this sort of post really appropriate for the Irisheconomy?

The report by Richard Tol and his colleagues no doubt confirms what many of us believe to be true, especially for certain demographic groups, on the basis of anecdote.

It is hard to deny that significant traps are created by the social welfare system, especially in situations where there are plenty of opportunities for ‘nixers’, as in rural Ireland during the summer months. An old conundrum is the failure of the Live Register to fall significantly in tourist areas during the high season.

However, there is a wider issue.

Our unemployment rate has risen from just over 4% in 2007/8 to just under 15% now. While the social welfare system has become a little less generous, the burden of tax on those in employment has risen somewhat, the balance between the rewards from working and the ‘entitlements’ under social welfare did not change much over this period So we cannot attribute much of the present high level of unemployment to the factors identified by Tol et al.

Commentary on this issue should bear in mind that neither the fall in unemployment during the early years of this century nor its rise over the past four year has due to any substantial changes of the social welfare system.

JMK
Of course it is. It goes to two major issues: how research is conducted in ireland and the welfare traps. Why would it not be appropriate?

@Michael Dowling, I’d have a half day conference on the topic Richard is researching rather than explaining working papers.

@JMK, I think it is-it’s about the dissemination of ideas and research on the broad topic of public policy in Ireland, and I think it worth a short discussion in this forum. As I said, I’m keen to reduce any drama and get on with the work of examining this issue. Not to worry though, I’m sure we’ll be back to macro stuff sooner rather than later.

By Post Author

@Veronica

“Despite political rhetoric to the contrary, what the furore over this ‘blip on the screen’ working paper illustrates is that unemployment is very far from the centre of the current government’s agenda. If unemployment was the core concern of this government then research papers of this kind would be welcomed..”

As a matter of interest what do you in fact believe is the Govts core concern really is ? Just interested in getting opinions becauase it seems to me that the Govt doesn’t in fact have a ‘core concern’ I think it continues to fire fight on many fronts and with the loss of sovereignty I can only presume this is to be expected.

BTW I notice the report has opened many media debates on the issue of childcare costs which surely is a good thing. In relation to childcare costs the overiding cost driver is the child to minder ratios. I don’t have any idea on what international comparisons are but surely this should form the basis of any cost review before tax reliefs etc are considered.

Our child minder could have had up to 10 children at one time across all ages from 6 months to 12 years of age. All extremely well cared for and all children enjoyed their days there greatly, at a fraction of the cost of the so called ‘regulated’ sector. Its a bit like the banking sector very little in fact to do with capital ratios all to do with the cop on with the lender behind the desk.

This is just the tip of a huge iceberg that Official Ireland dearly hopes people will stop looking at – and the smokescreen is being constructed to obscure the view, the red herrings flung in to cause distraction and the standard ‘shoot the messenger’ routine is being pursued. Let’s have a seminar involving the usual suspects and with the usual hushed, polite, deferential academic murmers. That should take a bit of time to organise. In the meantime, the media, with their usual gnat-like attention span and inability to investigate any issue properly, will get bored and move on. Nothing to see here, folks.

Official Ireland sails sedately on, but, with such hubris, nemesis will not be kept at bay indefinitely. In their efforts to avoid being snagged by this iceberg – as they fully deserve to be – they are likely to sail full steam in to another much bigger one. I’ll bide my time.

A report like that is politically incendiary and could prejudice our negotations with the Troika and our negotiations with the rest of the EU for a deal on bank debt. The author has left the ESRI so the report will not be completed.

I can see why it was removed. I don’t understand why a statement was made by the ESRI. They may also wish to reconsider publishing working papers which have not been peer reviewed on such sensitive issues.

@YoBust

All governments ‘firefight’ on a range of issues on a daily basis. That’s how politics works. But it rapidly becomes a ‘hand to mouth’ effort if there is no core political objective driving government policy and strategy. The government consistently claims that employment is at the heart of its strategy for recovery. That’s why we’ve had those so-called Action Plans for Jobs, and other employment related initiatives, over the past twelve months – not that they’ve been particularly successful by the looks of things. My point simply is that if they were serious about this ‘commitment to jobs’ , then research papers such as the by now infamous ‘436’ would be welcomed rather than summarily dismissed.

So what do I think the Government’s core concern actually is? I have no idea any more. Best to ask those in government or their overpaid spokespersons. The replies might be entertaining!

The irony is of course that Tol’s paper has now been much more widely read, thanks to the ESRI trying to delete it, than it would have been otherwise.
Serves them right, for valuing political correctness above academic freedom.

Who needs a bleed1n seminar? This is a most serious topic wrt to policy and particularly its regressive nature recently with outsiders being far more direct in noting such regressives. We are in the drifts of an EZ maelstrom …. and Joe and Joan Citizen, The European Commission, and the IMF are also busy.

Humble suggestion: Allow Crilly, Pentecost and Tol to place thier paper [as is or revised] on this blog and allow anyone who goes to the bother of seriously reading it to agree, disagree, or suggest improvements, errors or ommissions, and indeed any latently strategic idological bent.

Put it up tomorrow – review over the weekend and close on Monday. Crilly, Pentecost and Tol to publish a revised Working Paper by close of business next Friday week in time for Sunday Papers. DONE.

@zhou_enlai

Strongly disagree. Apart from its place in building an academic career, “peer review” doesn’t mean a fat lot. In fact I think Stephen strays a little from the path of righteousness when he writes “the series has not been peer reviewed and so the conclusions are not to be taken as read.” AFAIAC, the conclusions of a study can never really be taken as read, in economics at any rate. If a leading physics journal says the great string-theory debate is now over I’m willing to accept it, given that (a) I have no idea what the debate is about in the first place, (b) those guys seem to know how to do experiments, and (c) it probably won’t affect me greatly anyway. But just as Spain is not Uganda, economics is not physics.

@ zhou_enlai

Having those in authority deciding on what are ‘sensitive issues’ would surely be endorsing a failed system of limited if any accountability.

Wasn’t that the attitude that brought the Catholic Church to its knees?

These are challenging times and an example of the trading world not linked with austerity, is the struggle of Nokia, Europe’s only significant high tech hardware success, to survive.

It’s to close the main factory in its home country Finland with the loss of 3,700 jobs.

No country is guaranteed a high standard of living and the old conservative ways haven’t worked for Ireland nor Nokia.

Why not follow David O’Donnell’s suggestion and put the paper up on this site. That might help to steer the comments back to the substance of the issues raised by Crilly, Pentecost and Tol.

@Veronica,

“So what do I think the Government’s core concern actually is? I have no idea any more.”

Oh come now, please. You’re are being far too coy. Their ‘core concern’ is to stick it out for 5 years, to avoid prejudicing unnecessarily the possibility of re-election and to max ministerial and Dail service pensions for those who are unlikely to stand at the next election.

@veronica

During the referendum campaign The Taoiseach responded to one man who badgered him: you look like you could do with a day’s work. I don’t underestimate how edgy the canvass must have been at the time but the response spoke volumes about Establishment attitudes. My recollection is that the media didn’t make much of it. So that’s unemployment wrapped up.

Unemployment cannot be discussed seriously because that raises the whole tiresome business of government policy failures – ranging from the Smart Economy, Fas (whatever it is called now), jobs initiative, credit support for small businesses and of course the terrible cost borne everyday arising from resistance to reform. The government demonstrate no understanding of the importance of retail.

Commonsense dictates that single people on the minimum wage commuting any distance into Dublin (for example) will be left only slightly better off than a peer on the dole. Moreover, how on earth can any welfare system be deemed reasonable value for money when applicants can ‘earn’ on it more than the industrial wage? Some five years into a property crash, the country awash with vacant property and rent supplement is still way off the mark.

No wonder Draghi is dismissive of government pleas for debt relief.

@Paul Hunt

The Gentry’s ad hominem spray gun allows easier branding of an offender as a dissident. Better to hurl along the ground that actually get the ball in the air and make decent match of it. Official Ireland still cannot accommodate contrarian opinion. A parochial mindset is dominant.

@Michael Hennigan / Kevin Donoghue

I take your points. However the ESRI has status and this brings responsibilities. It is fine to issue reports on any matter if you are willing to stand over them. However, one should be cautious about publishing research which one will not stand over and which is clearly open to misinterpretation and misuse.

Furthermore, if insufficient feedback is received on a working paper and/or the authors are not avialable or willing to complete it or there is no funding for same then clearly that paper is no longer “working” and should be removed or archived.

(Whatever about anyone else, this paper is certaily doing better on the dole than it did when it was working!!)

In the meantime, I think Sceptic is right that it is likely that this hasn’t landed all over the newspapers by accident.

@Stephen Kinsella

ahh – I misunderstood. Half-day conference on the underlying topic sounds great. Nice idea.

Think there’s a separate issue about how we treat potential mistreatment of academic research e.g. is it okay for an organisation to question methodology so aggressively as to withdraw a paper and yet not discuss the actual problems given the possible reputational damage. Obviously this is not something that is going to affect Professor Tol given his background, but would severely damage the reputation of a newer researcher.

Sounds like the meeja need to learn to read also. The clear and unambigious statement : this is not official ; that is on the WP site. Why can they not simply report it as “ESRI preliminary research suggests that X may …”

@Alchemist,

I think you’ve hit the nail on the head – the issue is really about unwillingness to undertake any meaningful reform of tax, social welfare, political institutions or the way in which we generally conduct public policy.

Thus, in the run up to 2012, the Taoiseach, for the benefit of FG middle-income supporters, gave a solemn undertaking that there would be no increase in basic income tax. The Tanaiste, just as eager to appeal to Labour’s electorate, gave an equally solemn undertaking that there would be no cuts to social welfare rates. With these commitments the leaders of the parties in a government with the biggest Dail majority in the history of the state cut off any possibility of system reform.

Research papers like 436 risk pushing the social welfare brick out of the wall and bringing the rest of it tumbling down. Throwing millions at Action Plans, and smart economy initiatives and Jobsbridge schemes, and the like, doesn’t make much sense if the costs of taking up employment in terms of transport, child care infrastructure and ancillary items like personal grooming, take away lunches etc. make it impossible for people to take up jobs they would otherwise want to do. Since the registered unemployed will also likely be exempt from the new property tax, water charges etc., the disincentives are piling up.

@Paul Hunt,

No, I’m not being coy. I would genuinely like to hear from the respective horses’ mouths, exactly what their purpose in government is supposed to be.

This whole notion that rent supplement is over priced, well from my personal experience my rent basically hasn’t dropped. Each reduction in the ceiling just further eats into
my dole. As an exercise ,find out what the ceiling is in your area and then try and find a place in the classifies that comes in under that limit. It’s pretty impossible .
Maybe the argument is that RA sets the floor on rent, well maybe but again just from my personal experience rents have barely budged through several successive cut backs and since people aren’t buying anymore surely the pressure on rent is upward if anything.

Three Cheers for Professor Tol for highlighting what most employers know to be the case in respect of childcare and transport and also standing over it. The ESRI have lost credibility as it is clear they withdrew the document because Professor Tol had dared to criticise the ESRI and was now no longer employed by them.However, there are other co-authors of the Report who do not seem to count.

Between Tolgate and Wallacegate you would really believe that this little country had no problems. Listening to an employer yesterday on radio relating how he couldn’t secure staff because people were better off on welfare demonstrated that Richard is on the right track. As for Wallace ,the article in the IT yesterday by VB said it all.
Peculiar how we tend to ignore the bigger picture!

Any opinions on the paper itself, anyone? Its methodology, its quality even up to this ‘non-peer’ reviewed stage? Or its use to attack people on welfare (whether that was the authors intent or not) ?
I used to do some work for a small academic publisher with a decent reputation, and although it wasnt economics,was aimed more at a ‘mass market’ and I’m sure the peer review process was not as strict as with journals, it was still substantial – it began at the books conception and continued until publication. It seems think tanks work from a much lower base in terms of quality? – across all disciplines

One or two things that seem like common sense, but maybe not – (1) the greatest ‘disincentive’ to work is lack of jobs (2) if welfare looks more appealing than work because of high childcare costs, poor public transport, low wages etc then lets make life for those working better rather than pushing those on welfare further into poverty

Ok – this is a serious policy issue so let’s discuss it seriously. How do we reform social welfare in this country? And will the reform in itself lead to reduced unemployment?

A first step could be introducing two tier welfare. The current amount could still be paid to people who do say 15 hours work a week. A reduced rate could be paid to those who dont work. Let’s debate this properly.
Things don’t need to be personalised

@ rf

The main problem of the research is as follows:

The data used is based on what people spend their money on. Obviously people with a job spend more money on cinema, eating out, clothes, going to the pub etc. This is simply because they have more money.

To use this data source properly you would have to very strictly control for income effects of having a job. Perhaps using some sort of matching technique, where you match unemployed and unemployed people with similar incomes. However even this is not enough. An unemployed person might have a higher than normal income as they got a redundancy payment. They wont spend all this as it is not a secure income.

At best, even if income is controlled for as well as possible (I would strongly argue for a non-parametric approach), this data source will give an exaggerated estimate of the costs of work.

Simply lobbing a ln(income) variable into a regression is not nearly sufficient.

Does anyone believe that a single person with no children spends €30 a day on a bus and a sandwich?

@ rf

Also, regarding a sandwich, I bring my own delicious sandwiches to work, so no cost for me there 🙂

CET,
I recommend you read the Phoenix article on Vinny sermonising on tax. Excellent mag.
It seems to me that the only differ between Lowry and Wallace is that the former paid his dues to the Revenue while the latter is attempting to hide behind the corporate veil. You gotta love the hypocrisy of the Technos. If it was a govt backbencher or god forbid a Soldier they would be frothing at the mouth. However because he is one of their own….

H’mmm I recall in my younger days having some involvement with a rock/pop band. When they asked about promotion and how they could get more people to listen to their latest single I suggested they change a couple of words so that it would be banned. They did, it was, the media made a bit of a fuss and far more people ended up listening to it or reading about the band than would have otherwise bothered. Cynical? Probably. Effective? Most definitely.

I can see some parallels here. The question is, are people listening to Richard and the Tol’s music or are they reading about the band?

If I wanted this paper more widely read and – or more importantly – a fuss kicked up in the media (as long as it was a fuss framed how I wanted it to be framed), I would have engineered exactly what the ESRI did and have it pulled down by exerting the right pressure on them to do so and I would have briefed a couple of favoured and well read journalists/opinion columns (you only need a couple, most journalists are sheep and copy popular stories/go with the flock).

Is there some other agenda going on here? Politics is a dirty old game.

I wouldn’t be surprised if this was a stepping stone along the way to lowering social welfare rates. It doesn’t matter what the research paper actually says (God forbid a journalist should ever bother to read one) – what matters is what gets reported and therefore influences public opinion

(and I should add that I agree that the cost of actually being in work is siginificant in Ireland – I’m pretty sure I read some other research lately that demonstrated we have the highest childcare costs in Europe and some other costs involved with working. I also have a lot of sympathy with people who have lost their jobs over the past couple of years through no fault of their own and I don’t mind paying a bit more to assist genuine need… though I do object to some, a minority, who have clearly made a career out of being on the dole/SW).

Apart from incontrovertibly highlighting the ‘trahison des clercs’ comfortably enconsed in Official Ireland, there are a couple of other interesting aspects, such as, who funded or authorised the funding of this research? The demand from government and its expansive apparatus is for policy-based evidence – and the embedded academics fall over themselves seeking to provide it. Any evidence that might inform, guide, or heaven forfend, critique an existing or developing policy stance is treated like the plague. As happened in this instance. But why was this truth-seeking virus allowed to develop this far? The ESRI and the rest of academia is organised to stamp out any truth-seeking viruses of this nature.

Another observation is that, in contrast to most of our academics who are so excessively specialised that they simply can’t offer a view an any economic matter ourtside their extremely narrow bailiwicks, Richard Tol appears almost as a Renaissance polymath.

I never expected any better from the academics embedded in Official Ireland, but it is unfortunate in this instance, that the this little drama is obscuring consideration of a key question: why is the cost of living in Ireland so high that unemployment benefits at these levels are required – and that levels of pay for lower-paid employment have to be much higher?

One thing the Tol paper suggested is that this site may be too focussed on future-of-the-Euro / bailout questions (which are obviously v important of course). We could do with more discussion not of taxes!!, cuts!!, or leave the euro!! but of medium sized issues like improving the social welfare system to provide incentives for work, or identifying economically sensible medium sized tax increases or spending cuts (e.g. worth €200m a year in the first year sort of increases/cuts) of the sort that might move the policy debate forward.

@DOD
Thanks. Excellent article.

@Tull
Never mind the tax evaded…the awarding of the most lucrative contract in the history of the State is the principle issue.

My point is..with theEurozone ready to implode, the focus of the Oireachtas should be on ensuring we are protected, not debating parochial issues.
I doubt they have any contingency plan for what may become evident next Monday.
They probably haven’t even got the rubber stamps ready to convert the Euros to Punts.

@Paul Hunt

“…why is the cost of living in Ireland so high that unemployment benefits at these levels are required – and that levels of pay for lower-paid employment have to be much higher?”

What if the unemployment benefits in Ireland are simply reasonable (I’m buggered if I could live on them for long if I was forced to from tomorrow and I doubt I have an extravagent lifestyle) and lower-paid workers are simply not getting their fair share of the cake because others higher up the food chain are getting too much of the cake?

Or does that kind of thinking make me some kind of dangerous/deluded/insane pinko leftie or something?

Did I read the French are capping the top guys pay in state bodies to 20 times the lowest guy’s pay? Bloody pinko lefties. What do they think they’re doing?

@Ceterisparibus

“They probably haven’t even got the rubber stamps ready to convert the Euros to Punts.”

Please don’t say that – I haven’t moved all my savings yet.

Econometricians reading the paper will especially enjoy the reference in the Abstract to a “Hausman selection model”. D’oh.

@Stephen

“In my opinion, the correct thing to do now is to organize a half day talk around these issues with contributions invited from interested participants. Rather than stifling the debate around what is obviously an important topic, explore the idea properly and with the minimum of drama.”

+1 🙂

@PR Guy,

There are three principal areas of conflict in any advanced economy: between producers/providers and consumers/users, between owners/employers and workers and between those who perceive they are not getting sufficient value and benefits from the tax they are paying and those who perceive tax-funded payments and benefits are not sufficient – with many people on different sides of these conflicts, and to varying extents, at the same time.

The whole process of centrist, managerial, technocratic goverance tends to favour the former over the latter, but the conflicts are suppressed, smothered and managed to the greatest extent possible.

The suppression, smothering and management of the conflicts requires ‘loadsamoney’. When the money is in short supply, the job becomes very difficult. When governance is so excessively centralised, as it is in Ireland, with an expansive, and largely unaccountable, state apparatus, the job becomes more difficult still. And when the governing factions, to varying degrees, exist to protect and advance the interests of the sheltered private, public and semi-state sectors, the job becomes almost impossible. The result is a focus on political survival and the management of economic stagnation (with the fingers crossed that something will turn up) and with the focus on these primary objectives being concealed by furious activity producing plans, targets and strategies where the output is assessed by quantfying the inputs.

And se we where we are.

Greek stock exchange up 10%+
Banks up by 25%+
Did something good happen? Cannot see anything of major import anywhere!

@ Otto
Agreed
We are putting the European chessboard up front as key to our salvation, and the national chess board is being ignored.
We possibly could be on the way out of this confluence if there was a clarity of national interest and political fortitude.

The withdrawal of a working paper was a mistake that is symptomatic of a real problem with the relationship between social scientists and the public. Stephen Kinsella’s call for a half-day conference is at least taking the issue seriously but maybe we need more talk about that clarifies what the issue is, or more likely the issues are.
An important part of the issue is the managerialization of our institutions of learning. Why given the title of ‘working paper’ did the ESRI management feel obliged to withdraw this paper? Even if it was a final paper in the ESRI Quarterly have managers become such responsible, powerful and omniscient beings that “The Commentary, Special Articles and Research Bulletin contained within have been accepted for publication by the Institute, which is not responsible for either the content or the views expressed” is just an empty phrase left over when academic freedom meant individual researchers had to take responsibility for their work? Alas I don’t think this is not a problem unique to the ESRI but a general erosion of the value of individual and diverse views.
Another part of the issue is how social scientists and academics tend to hide themselves off into fairly small groups, particularly in a small country like Ireland . We all seem reluctant to ‘truck, barter and exchange’ with others studying what we might call the same objectives of study. Whatever reason this blog, irisheconomy.ie would probably more accurately called irisheconomists.ie. The different debates on An Bord Snip Nua both across the Irish web seemed at times to be differentiated more by ideology or disciplinary background than by level of sophistication.
On the issue of the paper itself – it sounds like its main finding was overblown and Tol’s confusions on this website (http://www.irisheconomy.ie/index.php/2010/10/18/assessing-business-schools-and-business-scholars/ ) on other matters do not give me great confidence in the findings of his working paper. However if the withdrawal of this paper is given the discussion it deserves and if it is not simply isolated and blamed on someone as a once-off outbreak of stupidity, Tol might be justified in claiming some credit.

The ESRI is both a think tank and a research institute. Reports that are deemed relevant to the public debate are released to the press and public. Early versions of academic work are put on the web and announced through dedicated lists such as IDEAS/RePEc.

That is the theory. In practice, there is one journalist who keeps track of the ESRI’s academic output and she occasionally writes a piece — small articles somewhere deep in the Sunday Times. She faithfully represents both the research and its early stage.

These pieces are widely ignored. Last Sunday’s, however, was picked by a journalist of the Independent. He tried to talk to me, but I was on holiday. So, a derivative piece was written. The working paper that was a proof of concept became a research report with a policy conclusion.

The ESRI should have explained that the paper was a working paper, trying to establish a method to answer an important question.

Instead, they withdrew the paper because of “methodological flaws” (that remain hidden from me) and claimed that the paper was revised (which it is not).

Journalists then start asking questions about relationships and political pressure.

@Paul Hunt…Why is cost of living so high?
To paraphrase your own inputs – ‘FODAR’ in all of its manifestations+the impact of greedy,deeply entrenched and hidden vested interests from all corners of Official Ireland.
But this is just the beginning….Euro collapses…back to link with Sterling….massive inflation in basics caused in great part by the same vested interests and the incompetence of FODAR…..unrest in urban areas…no reaction from the more comfortable rural areas…spiral leading to?
Same again folks!
No change which turns this Country into a moderately efffective nation state operating for the good of average citizens.
Elites prevail again.

When i first studied sociology/ economics the first thing we were told was to see who was behind the research we were evaluating and what possible agenda they might have. Six months ago Richard Tol left the ERSI and Ireland slamming the door loudly behind him. It appears that he has now come back to give the door a few more slams. With this sort of history it is very difficult to evaluate his incomplete research. By concidence Peter Bacon the architect of NAMA has just completed an evaluation of said body and concluded that it should be privatised. Suprise suprise his report has been funded by Treasury who not only have been taken over by NAMA but own the building occupied by NAMA.Is acadamia about to join the long list of institutions who have imploded and lost all credibility in the eyes of the public?

Oh this is gonna get entertaining – And no cursing on Stephen K’s threads Kevin Denny

@Kevin Denny

I challenge you to respond with a serious review of Crilly, Pentecost & Tol on this blog – you can pop a link to it somewhere.

Should you fail to respond, might I humbly suggest that you join the Mairt_een Feld_steen recovery group for f*ked up akademiks moderated by Moor_een in the middle of the pond in UCD.

The former or the latter? Great choices ain’t they!

@Richard,

Thank you for this clear description of the state of play. Just an observation and a question. I don’t think there should be any doubt that you and your colleagues were trying to identify the best way to answer an important question. It is an important question and there are many, many important questions that need answers by applying the scientific method.

But the Government has already decided on the answers to these questions. It doesn’t need answers based on facts, evidence and analysis. What it really needs is evidence to support the answers it has already decided on. There is a whole ‘industry’ seeking out, assembling and manufacturing this evidence for government – and sometimes the ESRI gets roped in.

What puzzles me is who funded or authorised your ‘truth-seeking’ research? It is extremely rare for work of this nature to be sanctioned.

@evie

When i first studied sociology/ economics the first thing we were told was to see who was behind the research we were evaluating and what possible agenda they might have.

No point judging an argument on its merits?

I remember a Roman Catholic priest telling me decades ago, he was a lecturer in psychology apparently, that he never paid much attention to Bertrand Russell’s works. After all, the man had been been an adulterer and was divorced…

Irish intellectual rigor to the fore I suppose.

Thanks, Richard. You’ve answered my question – and more. Still, it was very careless of you breaking the first rule when doing research that might impact, however tangentially, on public policy. The rule is: it is absolutely forbidden to do research, with an open mind, using facts, evidence and analysis, to seek to answer questions to which the Government already has the answers – even if it lacks supporting evidence. The subsidiary rule is that the only policy research allowed is that which seeks to find, assemble or manufacture the evidence the Government requires to justify the policy decisions it has already made.

@ Stephen Kinsella

It has been a strange few days for Richard Tol and the ESRI.

Where have you been the past few years? For both of these entities, “strange days” appear to be an unfortunate reality to be expected of them.

I wonder what Richard Tol’s new employers make of it all.

There are two problems with the port. Firstly, it includes spending that may not be as a Result of having a job, but the enjoyment of the extra money. I find it xtremely hard to believe that anybody spends 47 on takeaways specifically for work,or that 25 euro is just for work clothing. 1200 a year on clothes is quite a lot given the heavy discounting in clothing retailers over the last few years. Or, as somebody rightly put it, people in work spend more because they’ve more to spend!

But the real harm is what has been inflicted on the 56% of families and 85% who are not better off on the dole, because this has been used as hard evidence vilify them and accuse them of sloth, and there is now a baying of the mob for welfare cuts to hurt them even more. I know when I got laid off, I had to leave my pretty run down flat because it was 25% over the limit for rent allowance (which meant I would get zero) and my weekly payment was less than one third of my prior income. I was on slightly above an average wage so I would imagine that somebody on even 25k a year would still get double if not more than double what they get on the dole. Rent allowance has been cut to the bone, so that either tenants pay under the counter top ups or have to make do with a slum bedsit that’s probably substandard.

All this report has done is reinforce the myth that unemployment is high because life on welfare is cushy. That in itself does terrible damage to the great majority who are far from well off.

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