The Irish Economy

The annual Conference of the Economic and Social History Society of Ireland 2013 will take place in NUI Galway, on Friday 22nd and Saturday 23rd November. Cormac Ó Gráda will give the Connell Memorial Lecture. The deadline for paper proposals is 31st July.

Details of the call for papers downloadable from www.eshsi.org

The annual Irish Quantitative History group meeting will take place in TCD, in the IIIS seminar room, 6th Floor, Arts Building, on Friday 25th January 2013, 2pm-6 pm.

As numbers are limited, please email iqhistory@gmail.com if you intend to go along, and/or if you wish to be added to the IQH group mailing list. The workshop page (hosted by the Centre for Economic History at QUB) is here. The convenor of IQH is Eoin McLaughlin (University of Edinburgh).

Here.

Moritz Schularick and Alan Taylor have a useful piece on the topic, informed by economic history, here.

I am delivering a public lecture on this topic in TCD this coming Friday night.  (The date is significant).  The subtitle is “A Tale of Two Liberalisations”.  Details available here.  The talk is open to all but prior registration of interest is encouraged.

In this paper - part of a series on the institutional innovations of the 1950s, and related to my paper of last year on the 1956 introduction of export profits tax relief - historian Mícheál Ó Fathartaigh and I describe the circumstances surrounding the establishment of the Industrial Development Authority in 1949 and chart its evolution and expansion of influence over the following decade.

Mauricio Drelichman reviews Regina Grafe’s new book here.

Bob Gordon on long run economic growth prospects on the technological frontier.

Alan Taylor on the ‘great leveraging’.

Brad DeLong and Barry Eichengreen have a really nice piece on the lessons today’s policy makers might usefully draw from the work of the great Charles Kindleberger.

It prompted the following two thoughts on my part, neither of which is perhaps relevant to Kindleberger.

Barry Eichengreen and I provide an update to our original Vox column here.

Back in 2010, as the world turned austerian, people like Adam Posen started to worry about the political consequences. Alan de Bromhead, Barry Eichengreen and I have a new working paper which looks at the political consequences of economic hard times in the 1920s and 1930s, which you can read here.

Rui Esteves discusses nineteenth century Greek debt crises here.

… happy!

So I thought I would share my thoughts on how the Irish are faring on this front.

Kevin O’Rourke delivered a hugely insightful talk on the crisis and the global situation at a conference in Dublin last week. His presentation is here.

I was asked to write this chapter for a forthcoming RIA volume on Irish foreign policy. A summary:

A country’s foreign policy is largely driven by what it perceives to be in its economic interests. That this does not provide a complete picture is evidenced by the fact that Irish development assistance has never taken the form of tied aid. Nor can the influence of powerful vested interests be discounted. A case can be made that Ireland turned protectionist again once membership of the European Union had been achieved. Agricultural and sheltered-sector interests have sought to stymie the liberalisation efforts of the WTO and the European Commission respectively. A further complicating factor is that a society’s own economic interests can occasionally be miscalculated. Joseph Lee has noted that “while the ‘political’ skills of Irish representatives in negotiating positions are widely acknowledged… there seems to be no comparable criterion for assessing the calibre of conceptualisation of the Irish case.” Irish foreign policy through the years has nevertheless recorded many successes in defending the economic interests of the citizens of the state.

The paper considers the political and economic determinants of Irish trade policy, the evolution of its inward foreign direct investment strategy, and the country’s position on international migration and on the broadening and deepening of European integration. A separate case study focuses on how successive governments have sought to defend and exploit the advantages of Ireland’s low corporation-tax regime in international negotiations.

Paul Krugman is upset about some pretty fanciful accounts of what supposedly happened during the Great Depression, and I don’t blame him. He also wonders whether economics is a progressive science (I am using the word ’science’ in its German sense). Well, one of the things that philosophers of science have argued about in the past is whether, when you have a paradigm shift, you end up losing knowledge, and it’s pretty clear what has happened in this instance.

I recently came across this quotation from Mark Blaug’s 1980 book on the methodology of economics which seems worth quoting, given when it was written:

At this point, it is helpful to note what methodological individualism strictly interpreted…would imply for economics. In effect, it would rule out all macroeconomic propositions that cannot be reduced to microeconomic ones, and since few have yet been so reduced, this amounts to saying goodbye to almost the whole of received macroeconomics. There must be something wrong with a methodological principle that has such devastating implications.*

Now, as Krugman points out, this ain’t necessarily so. (See his point 5 in the last of the three links, and see this paper for an example of how you can have all the theoretical bells and whistles these days and still make a sensible argument.) But there is no doubt that a lot of people have been more than happy to say goodbye to the whole of received macroeconomics — for example, I have been reliably informed that a well-known department stopped teaching its undergraduates IS-LM just before the crisis hit in 2008. And the result is that you had people seriously peddling the line that austerity would be expansionary in the wake of the biggest downturn since the 1930s — and these claims were influential in Europe, it seems clear, in the fateful spring and summer of 2010.

One lesson is that it is one thing to play counter-intuitive intellectual parlour games in order to get tenure at a fancy university, but another thing entirely to say something about the real world. For that you need a little common sense.

Another lesson is that economists need at least some training in economic history. No-one with the slightest feeling for historical reality could believe that the Great Depression was due to supply side forces, for example. I observe that Krugman, along with such luminaries as Maurice Obstfeld and Ken Rogoff, did his graduate work in MIT, and I surmise (without having any inside knowledge on the matter) that all three were exposed to Charlie Kindleberger and Peter Temin. They are all distinguished theorists, but also have a historical sensitivity, and this makes them better economists — if your definition of a good economist includes the ability to say sensible things about our very messy real world.

One of the most important things that a bit of history gives you is a sense of the importance of context. A model will work very well in some technological or institutional contexts, but not in others. For example, the Reverend Malthus devised a model that did a pretty decent job of describing the world up to the point that he started writing, but which soon became essentially irrelevant in the century that followed, at least in the richer countries of the world. (He had an economist’s sense of timing.) Sometimes the world is well-described by Keynesian models, and sometimes it is not. And so on.

If the only thing that economic history did was protect us from one-size-fits-all merchants, it would still be worth the price of admission.

*I am looking at the 2nd edition, published in 1992, but I am betting that this sentence dates from the 1980 edition.

I did my bit for Irish service exports the other week, organising the 9th conference of the European Historical Economics Society in the fabulous Guinness Storehouse. There were a couple of plenary sessions, one of which was a roundtable on the causes of the Industrial Revolution, featuring Bob Allen, Nick Crafts, Deirdre McCloskey, and Joel Mokyr. There was also a keynote speech by Bob Allen on the causes of wealth and poverty. Karl Deeter very kindly came along and filmed the two events, and you can find the videos here and here. My sincere thanks to Karl.

I’ve seen various explanations for the 2008 crisis: global imbalances, dodgy financial innovations, lack of proper financial supervision, the interaction of all of the above. And a few others besides.

But this is a new one to me, I must confess.

Kantoos is a German blogger who occasionally posts in English; he has a thoughtful response to an earlier piece by Ryan Avent here.

(I would add two comments. First, that when people talk about fiscal union they can mean many different things. And second, that we already have the politically noxious conditionality which Kantoos is worried about.)

Tony Wrigley has posted a short introduction to his work on the role of energy during the Industrial Revolution, here.

This post is well worth a read, if necessary using google translate. It essentially takes the well-known point that moderate inflation can be beneficial in that it helps downward real wage adjustment, in circumstances when this is necessary; and extends this to the context of real exchange rate adjustments in a diverse currency union. It also cites some supportive evidence from the history of the classical gold standard, courtesy of Flandreau, Le Chacheux and Zumer.

Kevin Myers had a piece in the Indo on Norman names the other day; here is a link to the underlying research, by Greg Clark.

One of the things that has always marked out economic history as a subfield within economics is its focus on the economics of technological change. The Habbakuk thesis held that the high wage environment of the United States helps explain the nature of that country’s technological progress in the 19th century, and Bob Allen has recently argued that high wages and cheap energy are key to understanding the British Industrial Revolution.

I was pleased to see John Bruton referring to this in his recent LSE speech.

Since this is the weekend, here is another example of directed technological change (or at least, such is Roger Cohen’s interpretation), this time from Denmark.

This is an addendum to John McHale’s last post and a response to JTO’s plea for more real data on this site. Below is a consistent series (based on CSO data) for the net migration rate from 1961 to 2010.  The net flow has been expressed as a rate per 1,000 average population. The years are to end-April.
We await with great interest the results of the 2011 Census, which will give us a fix on the migration trend for the year ending April 2011 and allow the estimate for 2002 to 2010 to be updated. 
Preliminary Census results should become available by the end of the summer.

Readers might be interested in this analysis of the (bureaucratic and electoral) politics of the introduction of export profits tax relief in 1956, available here. The abstract is as follows:

T. K. Whitaker and Seán Lemass are generally credited with effecting the policy shift from protectionism to outward orientation. Ireland’s low corporation tax regime, however, has its origins in the export profits tax relief (EPTR) measures introduced by the second inter-party government in 1956. EPTR was introduced at the behest of the Department of Industry and Commerce in the face of long-standing opposition from Revenue and the Department of Finance. Industry and Commerce at the same time successfully thwarted the desires of the Taoiseach, the Department of Finance and other state agencies to have restrictions on foreign ownership of industry repealed. These apparently contradictory positions were rooted in the historical legacy of protectionism. The inter-party Taoiseach, John A. Costello, downplayed the connection between EPTR and foreign investment in an apparent attempt to deprive Fianna Fáil of an opportunity for controversy. Its introduction hastened the end of Fianna Fáil prevarication on the issue of foreign ownership.

The importance of the intense electoral competition of the period is also frequently ignored in accounts of the policy shift towards outward orientation. Following sixteen years of unbroken Fianna Fáil rule, the next four general elections brought four changes of government. Along with the depth of the 1950s recession, this forced Fianna Fáil into a comprehensive reexamination of its industrial strategy. The economic thinking of the major political parties co-evolved, and many of the institutional innovations of the period, including the Capital Investment Advisory Committee, the Industrial Development Authority, the early Córas Tráchtála, and, of course, EPTR, were the result of inter-party government initiatives.

The defeat inflicted on Finance by the Department of Industry and Commerce partly motivated Finance’s work on Economic Development, the 1958 publication of which was important in providing political cover for Fianna Fáil’s U-turn on overall economic strategy.

Even the Taiwanese are making cartoons about us (HT Gideon Rachman).

This is about the 1930s!  UCD historian Mary E. Daly and I have just concluded a draft of our paper examining how the Great Depression was perceived in Ireland at the time.  The paper is purely historical and makes no attempt to draw any parallels with the current situation.  It might nevertheless be of interest to some readers.  It is available here.

The Irish State Administration Database was launched last week at an event which formed part of the Innovation Dublin festival. The Database was developed by an interdisciplinary team working in the UCD Geary Institute, led by Dr Niamh Hardiman of the UCD School of Politics and International Relations, with funding from the Irish Research Council for Humanities and Social Sciences. The searchable Database records details of births, marriages and deaths of all central stage agencies (including government departments) since the foundation of the State in 1922. Avid agency watchers can study the growth in agency numbers to their peak in 2008 and subsequent modest decline. The Database shows that there are currently 350 central state agencies. However, the rich data can be mined in other ways, enabling users to look at trends by reference to such characteristics as function (eg delivery, trading, regulation, adjudication), policy domain (eg health, education, transport), and legal form (eg statutory corporation, public company, company limited by guarantee). Some further information about the Database can be found here. Users need to register here to use this free resource. There will a be hands-on demonstration of the Database on 23 November, 3-5pm, in Room G-5, Daedalus Building, UCD Belfield Campus, with an emphasis on the range of potential applications. This event is open to all but requires advance booking with mary.shayne@ucd.ie.

I don’t agree with everything in this article, by any means, but it is thought-provoking and topical. And I definitely agree with the authors about the brilliance of Albert Hirschman.

Besides, it gives me an excuse to post a link to this piece from April.