Giving the Game Away: The Economics of Corruption at FIFA

By

June 7th, 2015

FIFA, the governing body of world football, has been a byword for corruption for decades, stretching back to the presidency of Sepp Blatter’s predecessor, the Brazilian Joao Havelange, when Blatter was number two in the organisation. Under the Havelange presidency millions of dollars went walkabout in murky transactions between FIFA and a company which marketed its TV rights. More recently the World Cup of 2022 was awarded to oil-rich Qatar, to be played in high Summer in temperatures of 40 degrees Centigrade. The Sunday Times has documented wholesale vote-buying on behalf of Qatar. US Attorney General Loretta Lynch has made it clear that the FBI investigations, which have yielded criminal indictments against FIFA officials, cover offences stretching back to 1991.

Sepp Blatter has been a senior FIFA official for forty years and president since 1998. How can his serial re-elections be explained, the most recent two weeks ago after the announcement of FBI action? FIFA is a most unusual organisation and its governance and economic structures make corruption almost inevitable.

Governance: Every national association, in even the tiniest country, has one vote in FIFA elections. Some tiny palm-fringed idyll in the South Pacific, where soccer was unheard of until recently, can form a football association and expect instant recognition from FIFA. It will then have one vote at FIFA congresses, same as Germany and Brazil, the regular world champions. FIFA has 209 members. There are not 209 countries in the world (the United Nations has just 193 members, for example). ‘Countries’ such as Andorra, San Marino, the Faroe Islands and numerous others are FIFA members. The smallest member in population terms is Montserrat, home to 5000 souls. These ‘countries’ are not regarded as eligible for membership in any serious international organisation, since they are not fully-fledged states but remnants of the Dutch, British and French empires. FIFA member Liechtenstein is a remnant of the Holy Roman Empire. It is not difficult, or costly in the overall scheme of things, to re-distribute rents to these minnows to ensure their loyalty. This is the first part of the explanation for Blatter’s repeated majorities.

Economics: The second part is the simple fact that FIFA has had, for the last four decades, quite a lot of rents to dish out. Without economic rent there is no pot of graft. The rent source is a monopoly, the World Cup: it has become, through TV rights and sponsorship, a huge money-spinner. The players, who tend to take the lion’s share of the earnings available in all other major sports, get paid very little for national team appearances. If they wish to play international football at all, they have little bargaining power. Once committed to a national team, usually the country of their birth, they cannot threaten to desert to someone who pays better. If they could, Saudi Arabia would win the World Cup. Most professional football clubs do not make profits: the players, and their industrious agents, make sure that most of the revenues flow through to the performers, which is what happens in every other branch of the entertainment business. In football the World Cup revenues flow to FIFA, an opaque and unaccountable organisation whose leadership is free to perpetuate itself through buying the small national associations around the world. These national bodies in turn have weak, or no, corporate governance. With one brave bound, the money is free.

It is the combination of equal votes for all with billions of unearned revenue dished out behind the curtain which has created the FIFA monster. This is corruption by design.

Fiscal Assessment Report

By

June 4th, 2015

The June 2015 Fiscal Assessment Report from IFAC is here.

Hidden Message from the Banking Inquiry: A First-Rate Economist Should Head the Central Bank

By

June 1st, 2015

Some commentators wrongly claim there is little value in the long and (moderately) expensive banking inquiry. There is much to learn from the inquiry. One important message can be gleaned from the testimony of Central Bank and Financial Regulator executives this past two weeks: the coalition needs to appoint a first-rate economist (like Honohan) as his successor as central bank governor. The coalition should scour the globe and not compromise on analytical firepower.

Brian Lenihan pushed through the appointment of Honohan against the tradition of promoting someone from the senior ranks of the civil service. If the tradition had been followed, the Irish economy might still be wallowing in financial instability. A central bank governor without first-rate economic expertise could have made a total hash of the financial restructuring and recovery programme of the last five years. For example, a former senior civil servant would not have made the phone call to RTE Morning Ireland in November, 2010, getting the Troika programme quickly started. Other painful actions taken in recent years, such as the PCAR and PLAR exercises, and the time-consuming and expensive improvements to the financial sector database, might have never started or been botched. The job requires a highly-competent, well-trained and experienced economist. Read the rest of this entry »

Irish Financial Regulation: Guidelines Rather Than Rules

By

May 28th, 2015

In his testimony this morning, Patrick Neary explained that the mandated bank lending sectoral concentration limits, which were seriously breached by the Irish banks during the credit bubble, could not actually be enforced since they were guidelines rather than rules. This distinction between guidelines and rules has eerie similarities to a classic scene in The Pirates of the Caribbean, where pirate captain Hector Barbossa (Geoffrey Rush) explains to Elizabeth Swann (Keira Knightley) the flexibility of The Pirates Code.

A Finance Minister Fit for a Greek Tragedy?

By

May 20th, 2015

NYT profile here.

Resolution of the Irish banking crisis: Hard-earned lessons for Europe’

By

May 19th, 2015

Speech by Lars Frisell here.

QUB public policy blog

By

May 14th, 2015

Queen’s University Belfast have just launched a new blog at http://qpol.qub.ac.uk/ (via Muiris MacCarthaigh).

QPol is the ‘front door’ for public policy engagement at Queen’s University Belfast, supporting academics and policymakers in sharing evidence-based research and ideas on the major social, cultural and economic challenges facing us regionally, nationally and beyond.

Our over-arching vision is to share the University’s independent expertise with policymakers so they can make informed decisions about the most effective and sustainable ways to tackle these challenges, now and in the future.

Our mission is to:

Facilitate the provision of independent evidence-based advice, guidance and information to policymakers, ensuring that policy formulation and law-making are informed by world-class research emerging from the University
Ensure Queen’s as it the heart of the public policy discourse, shaping and driving the debate on emerging challenges, helping policymakers to think ‘longer term’ and more strategically about the challenges facing us today
Cultivate and encourage engagement between the academic and the policymaker through effective methods of communication and mutually understandable language
Accelerate the socio-economic impact of research relating to public policy issues at Queen’s and raise awareness of the influence of the University’s research on government policy and legislation
We want to inspire intelligent debate between democratic institutions, academia and wider society in a vast array of policy areas including the economy, public health, social justice and more.

Submission from Department of Finance to the Low Pay Commission on the National Minimum Wage

By

May 13th, 2015

here.

TCD Policy Institute event on mortgage arrears

By

May 13th, 2015

The topic of mortgage arrears remains close to the top of the political agenda, with the Government set to announce measures today on the issue. Next week, we are very fortunate to have in Dublin one of the world’s leading experts on housing markets, arrears and foreclosure, Fernando Ferreira of Wharton Business School at the University of Pennsylvania.

The Policy Institute, based at Trinity College Dublin, has organised a mini-conference on mortgage arrears for the morning (9am to 11.30am), next Monday 18th May in Trinity College Dublin (JM Synge Theatre, Room 2039, Arts Building). The mini-conference centres on factors influencing mortgage arrears and repossession and focuses in particular on the US and Irish experiences. Speakers include Fernando Ferreira (Wharton & NBER) and Yvonne McCarthy (Central Bank of Ireland). There will also be a panel discussion and time for questions/comments from participants.

All welcome with no need to register.

At Last, Eurozone Culprits Identified!

By

May 6th, 2015

It is Dark Forces, after all.

Jean-Claude Juncker, the European Commission president, has finally terminated the endless speculation as to the source of the Eurozone’s travails. In a speech yesterday he has fingered the likely source of any threats to the survival of the common currency subsequent to a Greek exit.

Speaking to an audience at the Catholic University of Leuven in Belgium, Jean-Claude Juncker said a “Grexit” would leave the euro prey to forces who “would do everything to try to decompose” what remained of the monetary union.

“Grexit is not an option,” said Mr Juncker.

“If we were to accept, if Greece were to accept, if others were to accept that Greece could leave the area of solidarity and prosperity that is the Eurozone, we would put ourselves at risk because some, notably in the Anglo Saxon world, would try everything to deconstruct the euro area piece by piece, little by little.”

His spokeswoman clarified that the reference to the Anglo Saxon world was not aimed at Britain but was to be construed as a reference to ‘markets and speculators’.

It should be a great relief to all, especially Greeks, to learn that the Eurozone is an ‘area of solidarity and prosperity’. The news that the dystopia of ‘markets and speculators’ is confined to the Anglo Saxon world is a further comfort.

Most importantly if the Great Experiment ends in tears there will be no need for an inquest. It was the Anglo Saxons!

Anyone remember Harold Wilson and the Gnomes of Zurich?

Launch of Archive for Economic and Social Review

By

May 5th, 2015

The Economic and Social review has been working over the last number of years to make the full archive of published ESR papers freely available to the public. The archive is hosted by the TARA digital repository at TCD and all papers published in the ESR beginning with the first paper by R.C. Geary in 1969 up to and including forthcoming papers are freely available for download. We believe the archive is an important resource for Irish economists.

The archive can be found here.

 

Patrick Honohan  will formally launch the new archive at a short event immediately following the ESR lecture which will be held on May 7th at the Irish Economics Association conference in the Institute of Bankers in Dublin

The ESR lecture will begin at 3.30 and will be given by the distinguished development economist Professor Christopher Udry from Yale. The launch will be at 5pm.

We hope all those attending the conference can join us for for both  the lecture and the launch.

New Director of ESRI

By

May 5th, 2015

Congratulations to Alan Barrett  -  details here.

How Paternalistic Should Policymakers be?

By

May 3rd, 2015

The literature on behavioural economics has set off a very interesting debate on the extent to which policy-makers should intervene to improve outcomes in cases where individuals are potentially harming themselves but not others.

A paper by Camerer et al in 2003 put forward the case for asymmetric paternalism whereby policy could potentially help individuals who are not making rational decisions, while not infringing on others. An example is pension auto-enrolment whereby individuals procrastinating on pensions decisions are helped in the process of saving while those who genuinely do not want to take out a pension are not forced to.

Sunstein and Thaler added the idea of Libertarian Paternalism to the literature whereby policy-makers strive to improve outcomes (paternalism) while also placing a high weight on freedom to choose (libertarianism). The now-famous book Nudge is an expression of this philosophy and has had a dramatic impact on policy-makers in the US, UK and to some extent Australia and is being discussed at least in the Irish policy environment.

A big debate is ensuing around Nudge with some claiming the philosophy is too interventionist (see Sunstein’s Storr lectures for a list of these critiques and also his responses – see also a reading list I put together here).

Another line of argument is that Nudge artificially restricts the application of behavioural economics to non-mandated policy interventions. A recent Harvard Law Review piece by Bubb and Pildes examines three areas of policy (financial regulation, fuel pollution and consumer credit regulation) and makes the case that the behavioural evidence does not support soft-paternalist policies but rather a more interventionist approach. In particular they argue that there is a large tension between the evidence provided by behavioural economics and the political position being advocated by many of its adherents. In their view, the bounded rationality displayed by citizens leaves them far more open to exploitation and also far less likely to respond to soft-policies to improve their welfare. They cite an extremely interesting article by Lauren Willis in the University of Chicago Law Review, who argues that Nudges are insufficient in cases where large corporations have incentives to counteract them and she gives a detailed case-study from US financial regulation where financial companies quite easily ran around various default options embedded in consumer protection regulation. She argues that mandates and generally more active regulation is needed in many cases due to the degree of control that the regulated firms have over how to implement “nudges”.

Sunstein’s response to this is available here where he argues that it is important to respect people’s freedom of choice and that it is unclear yet that nudges are ineffective in the face of counteracting moves by vested interests. He argues that, while in some cases mandates may turn out to be neccesary and more effective, this should at least partly be an empirical question and should not ignore the importance of autonomy.

This debate is important in the Irish context. There are many areas of policy where policy objectives lead to tensions between implementation of effective policies and the autonomy of individuals to choose. In cases where individual actions lead to costs to others then traditional economics and regulation is on more solid ground. But when there is active debate about how to reduce health-damaging diet and consumption patterns, promote greater pension coverage and other policies effectively aimed at improving individual welfare through changing their behaviour then this debate is very important and interesting. It also hits against the idea that behavioural economics is an attempt to individualise wider social and economic problems. In this debate, there is a clearly interesting tussle between the interests of large companies, the decisions of boundedly rational households and the political factors that lead to the mandates of regulators. It provides an interesting and realistic way of debating policy and regulation.

Podcast on Spring Statement

By

April 29th, 2015

I discuss the government’s Spring Statement with Cliff Taylor and Arthur Beesley in this Irish Times podcast.

Iceland’s Crisis and Recovery: facts, comparisons, and the lessons learned

By

April 28th, 2015

Audio and slides from IIEA presentation by Icelandic Central Bank Governor Már Gudmundsson are available here.

Stability Programme Update

By

April 28th, 2015

Available here.

Reminder: Tuesday event (A New Start for the Eurozone: Dealing with Debt)

By

April 26th, 2015

I will present the CEPR Report on April 28th, 9am-10am

A New Start for the Eurozone: Dealing with Debt

Thomas Davis Theatre ( Room 2043), Arts Building , 9.00am – 10.00am on Tuesday 28th April 2015 . All welcome

New DCU MSc in Public Policy

By

April 25th, 2015

DCU School of Law and Government have launched a new MSc in Public Policy:

The global financial crisis has exposed flaws in the policy making system in Ireland and elsewhere. Part of this relates to the technical capacity of policy makers to do effective public policy analysis. This is something recognised by the Irish state and the European Union as well as other international bodies as they attempt to increase the number of professionally qualified policy specialists working for them.

In response DCU is offering a bespoke, interdisciplinary course designed to suit the needs of a new generation of policy makers. It will be hosted in the School of Law and Government, but builds on links across the University and is a key part of a new Institute for Innovative Government (IIG).

This is a new type of professional degree – in many ways a parallel for those in the policy/government sector to an MBA in the commercial sector. It will have an intellectual base and methodological rigour that reflect the needs of a sector facing more nuanced and complex challenges.

Irish Economics and Psychology Annual Workshop

By

April 25th, 2015

The eight annual one day conference on Economics and Psychology will be held on November 27th at the ESRI in Dublin. The purpose of these sessions is to develop the link between Economics, Psychology and cognate disciplines in Ireland. A special theme of these events is the implications of behavioural economics for public policy (see detailed reading list on this area here) though we welcome submissions across all areas of intersection of Economics and Psychology. We welcome submissions from PhD students as well as faculty and also welcome suggestions for sessions on policy and industry relevance of behavioural economics. Abstracts (200-500 words) should be submitted before September 30th to Liam.Delaney@stir.ac.uk. Suggestions or questions please send to Liam.Delaney@stir.ac.uk and/or Pete.Lunn@esri.ie Further details of wider network activities will be added here shortly. Details of the previous seven workshops are available here.

Mody on Creditor Impunity

By

April 25th, 2015

I am surprised this has not received more attention.

http://www.bloombergview.com/articles/2015-04-21/imf-needs-to-correct-its-big-greek-bailout-mistake

The original sin of Eurozone crisis mismanagement was the May 2010 ‘bail-out’ of Greece. As Karl Otto Pohl noted at the time, the beneficiaries were German banks, even more so French banks (as always, you gotta hand it to the French!), and rich Greeks. Yanis Varoufakis agreed at the time with Pohl, for which he will not be forgiven.

If you subscribe to the view that careless lenders should face haircuts, the official lenders to Greece should take a belated bath.

All of them, including the IMF, which means its shareholders, including us.

The alternative is an international financial order built on a doctrine of official creditor impunity.

Geary Policy Peer Review Series

By

April 24th, 2015

The Geary Institute at UCD has initiated a Policy Peer Review Series.  This involves members of the Geary Institute reviewing research/evaluation reports which have significant implications for public policy.  The authors of the evaluations/reports are then invited to reply to the review.  The first two such reviews (and responses) are on (a) an evaluation of the School Support System under DEIS and (b) an evaluation of  FAS training programmes where the participants exited in 2012.  The reviews and responses are available here:

http://www.ucd.ie/geary/publications/policypeerreviews/

Dublin Economic Monitor

By

April 23rd, 2015

here.

World Happiness Report 2015

By

April 23rd, 2015

here.

The Science of Scarcity

By

April 23rd, 2015

Profile of Sendhil Mullainathan and progress in behaviourial economics (especially vis-a-vis the problems facing low-income households) here.

Miriam Hederman O’Brien Prize 2015

By

April 23rd, 2015

The Miriam Hederman O’Brien prize for 2015 is being awarded by the Foundation for Fiscal Studies to recognise outstanding contributions in the area of Irish fiscal policy. The aim of the prize is to promote the study and discussion of matters relating to fiscal, economic and social policy, and the prize will be awarded to a piece of completed research or analysis in this area.

Details of the prize, entry criteria and submission details are available here. The closing date for submissions is Friday 22nd May.

It is hoped for this year’s prize that submissions will come from a wide range of policy areas.

Expert Commission: Increasing Investment in Germany

By

April 21st, 2015

English summary here.

TCD Policy Institute Event: Philip Lane : ‘A New Start for the Eurozone: Dealing with Debt’

By

April 18th, 2015

I will present the CEPR Report on April 28th, 9am-10am

A New Start for the Eurozone: Dealing with Debt

Thomas Davis Theatre ( Room 2043), Arts Building , 9.00am – 10.00am on Tuesday 28th April 2015 . All welcome

61st Economic Policy Panel: Riga

By

April 18th, 2015

The Economic Policy Panel met this weekend at the Bank of Latvia in Riga.

Papers here.

Update on Greece

By

April 18th, 2015

FT Big Read here.

Bulow and Rogoff here.

Peter Doyle here.

Roy Geary: Father of Statistics in Ireland

By

April 18th, 2015

This radio programme looks back at the remarkable career of Roy Geary, featuring interviews with Brendan Whelan and Dermot McAleese: here.