Category: Fiscal Policy

Save the Date: September 30 Conference on Higher Education Funding in Maynooth

On Wednesday, September 30, we are holding a one-day conference on ‘Higher Education Funding: Drawing on the International Experience’ in Maynooth.

The context for this conference is the debate on how to fund higher education in Ireland. In 2014, the Minister for Education established an Expert Group on Future Funding for Higher Education, and the motivation for the conference is to inform the discussion about the choice of funding options available; we have a particular interest in the interaction between funding mechanisms and differential access to higher education along socioeconomic lines.

International speakers include Sara Goldrick-Rab of the University of Wisconsin-Madison, who has written extensively on the issue of higher education funding in the US; Claire Crawford of Warwick University and the IFS, who has written several detailed analyses of the UK system; and Bruce Chapman of the Australian National University, whose name is particularly associated with income-contingent student loans, both in terms of his academic research and his role as policy advisor to many governments.

Local speakers include Rory O’Donnell of NESC and Delma Byrne of Maynooth University.

The conference will be open to all. I’ll post further details here in the coming weeks.

Update: Full details are now available here.

When does a housing bubble start?

Yesterday, former Minister for Finance Charlie McCreevy appeared before the Oireachtas banking enquiry. His refusal to answer whether or not he believed Ireland suffered a property bubble that burst in 2007 was not only great TV, it also brings up some important issues. For example, the Irish Independent reports:

The conflict arose when Mr Doherty asked the former minister if he believed there had been a property bubble in the previous 15 years before the financial crisis. Mr McCreevy insisted he would only answer for his time in office and there had been no property bubble during that time… [after legal advice] Mr McCreevy said from 2003 to 2007 house prices grew at an extraordinary rate. He supposed that was a bubble. But he said: “I don’t believe the policies I pursued helped to create that bubble.”

The clear implication is that Mr McCreevy believes that, if there was any housing bubble at all, its roots do not lie in decisions made in the period 1997-2004, and that in reality there was no bubble at all. Given the title of my doctorate at Oxford was called “The Economics of Ireland’s Housing Market Bubble”, you might not be surprised to learn that I disagree.

First, I think it is important to note that there are two ways of diagnosing bubbles. They can be thought of as statistical bubbles and economic bubbles. A statistical bubble is one where the growth rate in the price of an asset, such as housing, grows at a rate that is unsustainable for any reasonable period of time. Between 1995 and 2007, house prices in Dublin increased by 300% in real terms (i.e. stripping out inflation), or 12.2% a year. Between 1997 and 2004, McCreevy’s term in office, the increase was 136%, or 13.1% a year. (Nationwide figures are comparable, although slightly lower for the period as a whole, although not necessarily in every year.) Thus, by any statisticians metric, it was a bubble – put another way, if 12% growth had continued for 25 years, a house costing €100,000 in 1995 would have cost €1.7m by 2020.

Continue reading “When does a housing bubble start?”

Fiscal Assessment Report

The June 2015 Fiscal Assessment Report from IFAC is here.

Irish virtue, Irish (or should that be FG?) interests

There has been some talk recently about how Greece should take its medicine the way Ireland has. So here is a chart, taken from the IMF’s WEO database, showing the two countries’ structural budget balances as a percentage of GDP:

 

Even if you start the clock in 2008, there is a sizeable difference. And if you start in 2010, when the programmes started, there is no comparison in terms of the “fiscal effort” made. (And yes, I know, it would be much better to look at ex ante measures of austerity, but this is what was to hand.) On top of that, the multiplier in Greece is presumably larger than in very small and very open Ireland. The EC estimates that it is almost twice as large in this paper, not that I take their Greek multiplier estimate particularly seriously. And finally, there is this chart which a friend sends me.

So, to summarise: the Greeks have done more “reform” than we have, have endured a lot more austerity, and live in a country where the costs of austerity are likely to be higher than here. Perhaps the Irish government might want to tone down its assertions of relative virtue, and display a bit of solidarity with Greece. Is a less deflationary and less creditor-friendly Eurozone  not in Ireland’s long term interests, assuming that we remain a member of the single currency?

Except of course that it won’t, for party political reasons. And you can see why. Expect to see more ad hominem attacks on dangerous ex-IMF radicals and other fellow travellers in the months ahead (despite the fact that the government is expecting the electorate’s gratitude for…implementing the programme that the self-same IMF and its fellow-Troika members designed! You couldn’t make it up.).

Yanis Varoufakis

Yanis Varoufakis will be confirmed as the new Greek finance minister later today.  He “is no extremist.” [EDIT: The Guardian think “radical”.]

Here is a recent interview with him and ‘A modest proposal for resolving the eurozone crisis’ is here.  Back in September a document on ‘What the Syriza government will do’ was published.