Author: Liam Delaney

The Irish Times reported recently that over 4,000 people on job seekers benefit had a penalty cut imposed from January up to July this year. The culture of using penalties or sanctions in benefit contexts needs to be debated a lot more. They have become a normalised feature of the UK benefit system (blogpost I wrote on this here and lengthy and somewhat eclectic reading list here; see David Webster for detailed analyses of how sanctions evolved from 2010 onwards). There is a substantial body of evidence documenting substantially elevated levels of psychological distress and mental health problems among people who are long-term unemployed. There is also substantial controlled correlational evidence that sanctions at the levels imposed in the UK are associated with a range of negative outcomes  (including here, here) though the causal impact is one that still is for debate.

Furthermore, there have been dramatic problems with implementing an albeit far more extensive system of sanctions in the UK (e.g see the Oakley report which points out what look like very large flaws in the system of administering sanctions). One of the most lucid accounts of this is given by Professor Michael Adler here.  Adler examines UK benefit sanctions from the perspective of eight legal principles below, and argues that they fail most of these criteria and should either be remedied or better yet replaced with non-punitive methods.

The law must be accessible and, so far as possible, intelligible, clear and predictable.
Questions of legal right and liability should ordinarily be resolved by application of the law and not of discretion.
The laws of the land should apply equally to all, save to the extent that objective differences justify differentiation.
Ministers and public officials at all levels must exercise the powers conferred on them in good faith, fairly for the purpose for which the powers were conferred, without exceeding the limits of such powers and not unreasonably.
The law must offer adequate protection of fundamental human rights.
Means must be provided for resolving, without prohibitive cost or inordinate delay, bona fide civil disputes which the parties themselves are unable to resolve.
Adjudicative procedures provided by the state should be fair.
The rule of law requires compliance by the state with its obligations in international law as in national law.

The extent to which the type of things being envisioned under Job Path are susceptible to these criticisms is something that should be discussed more. It is also worth thinking about the direction of this policy in Ireland and whether it represents a move toward the more widespread and normalised use of these methods across a wide range of policy areas and whether it will be ramped up to a greater degree in the employment area itself. At the very least, it would be good if the responsible politicians were asked to articulate the reasoning behind and direction of these policies, and the extent to which they are legal and ethical. There are some empirical papers pointing to a potential role for such sanctions in motivating employment uptake in the short-run (key paper here) but it is reasonable to think that this relationship will depend on the state of the economy, the degree of skills mismatch, and other features of the participant pool and quality of implementation. It is also not an argument for ignoring legal and ethical aspects of roll-out.

The ninth annual one day conference on Economics and Psychology will be held on November 25th in Belfast, jointly organised by researchers in QUB, ESRI, Stirling and UCD. The purpose of these sessions is to develop the link between Economics, Psychology, and cognate disciplines throughout Ireland. A special theme of these events is the implications of behavioural economics for public policy. If you would like to present at this event please send a 200 word abstract to Liam.Delaney@stir.ac.uk before Friday 9th September.

As well as the annual workshop we have developed a broader network to meet more regularly to discuss work at the intersection of economics, psychology, and policy. This has had five meet-ups so far, as well as some offshoot sessions. Anyone interested in this area is welcome to attend. A website with more details and a mailing list to sign up to is available here. There are currently over 200 people signed up to the network and the events have been, at least in my view, very lively and interesting. There are several more planned for throughout 2016/2017 and we welcome suggestions.

An interesting article in the Irish Times on the Irish government’s approach to dealing with potential issues arising from yesterday’s news from the UK. It includes a link to an 8-page pdf summarising the main actions by different areas of government policy.

The ESRI published a report on Friday entitled “An Investigation of Consumers’ Capabilities with Complex Products“. The authors are Pete Lunn, Marek Bohacek, Jason Somerville, Aine Ni Choisdealbha and Féidhlim McGowan. It contains a fascinating range of experimental findings demonstrating the pronounced difficulties experienced by consumers in valuing and making decisions with complex, multi-attribute products.

Below is from the ESRI press release. This has been a long-run research programme and the work is worth wide-spread debate in terms of implications for consumer protection, regulation and related policy areas.

PRICE Lab is a research programme in behavioural economics, jointly funded by the Central Bank of Ireland, the Commission for Communications Regulation, the Commission for Energy Regulation and the Competition and Consumer Protection Commission. The lab uses computerised experiments to study what consumers are capable of and what they are not.

The experiments described in the report systematically tested how accurately consumers could distinguish good deals from bad deals. The results showed that once consumers had to take into account more than two or three factors at the same time, they struggled to spot good deals and often made mistakes.

The findings also revealed systematic biases in consumers’ choices. Across multiple experiments, consumers tended to think that deals closer to the top of the product range were good value while deals closer to the bottom were bad, even when the high-end products were expensive for what they were and the low-end products were good value at the price listed.

The report discusses implications of the results for consumer protection. The findings suggest that consumers can benefit if product ranges and descriptions are kept simple. Where companies instead market products in an unnecessarily complex fashion, with multiple characteristics and price components, consumers will be more likely to make mistakes. In markets where consumers struggle with the volume or complexity of product information, comprehensive, independent price comparison sites can play an important role, by helping consumers to integrate the information or by drawing consumers’ attention to the most important product features.

I posted before about David Bell’s analysis of the Scottish referendum bookies odds. The bookmakers seemed to do a good job not overreacting to the late poll numbers showing a marked swing to Yes. The days before the referendum were throwing up some dramatic poll results but the odds did not adjust as dramatically, implying the bookies were either temporally averaging across polls, had some priors about the quality of the polls, or were doing a degree of Bayesian updating or something similar. David has provided a nice piece here for those looking to keep track of bookies odds for Brexit. For now, it looks like Stay is the favorite by quite a margin and more than one would think just by looking at opinion polls.