Category — Weblogs

Image of Gerard O'Neill

Gerard thinks there will be another budget in early-to-mid 2009 to cope with the worsening economic downturn. I’ve got to agree with him, and I’ve got to say he’s mostly right. Essentially the pension provisions for public sector workers are very high and represent a significant premium over those benefits enjoyed by workers in the private sector. Gerard makes three recommendations for the Minister:

 

Freeze the pensions of all public sector retirees so that we no longer have the insane situation of pensioners getting ‘productivity’ rises because they’ve been paid to those now doing the jobs they used to do.

For those public sector workers over 50 announce that their pension will be tied to their income upon retirement, but not rise thereafter (still a form of defined benefit pension).

For all public sector workers under 50 announce that their pensions will be defined contribution pensions, tied to the performance of the national pensions reserve fund.

Ensure that the pension contributions of all public sector workers are adequate to meet projected requirements.

 

I have to agree with the first two suggestions, nod slightly for the third, and disagree with the fourth—the contributions are already adequate from individual workers. What is not adequate is the provision from the government. 

I think Gerard is getting the cart before the horse here a little bit.

First, the `Public Sector’ doesn’t exist: you can’t say a clerical worker in the Department of Transport faces the same economic choices or incentives as a Consultant Pediatrician, and you can’t say either of them faces the same economic reality. Both will retire on nice pensions, yes, but really, we’re talking chalk and cheese. ‘The Public Sector’ is a rhetorical device to slam workers with state-protected jobs on relatively fixed incomes with good pension entitlements. But we never disaggregate just who the ‘Sector’ actually encompasses, and who might deserve those provisions and who might not (academics probably do deserve this tenure, academic administrators don’t. Hospital administrators do, hospital consultants don’t. I might explain that in a later post). Gerard is right that stripping some of these workers of their permanency would result in a riot, as it would take away the main benefit the job has—the guarantee of its existence in ten years’ time. No private sector worker can have that assurance. There are many workers in the Public Sector whose productivity is abysmally low. There are also workers whose productivity dwarfs that of their private sector counterparts, with no corresponding increase in salary as compensation. So we must be careful when attempting to make a distinction. 

Second, why shouldn’t every worker in the State automatically have a defined pension provision the moment they begin work at 22? The pension could be managed in any number of ways, some of which Gerard suggest, but the point would be these workers would save for their future selves in retirements. Set the benefits according to the market conditions, and work off the assumption that every worker will retire at 70 or 75 rather than 65. Why endure a `race to the bottom’ between stripping the public sector of their pension entitlements and disabusing the private sector of taking more out? In a time of increasing personal and governmental fiscal austerity, surely we should be saving more, not less, and surely we should be providing for the old ages of both the private and public sector worker equally? 

Quoting Keynes, Chapter 22, 1936 (get it here), Time’s Justin Fox writes about the importance of fiscal stimuli in keeping the economy on a more or less even tilt.

The right remedy for the trade cycle is not be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom.

Alan Greenspan, Keynesian - The Curious Capitalist - Justin Fox - Economy - Markets - Business - TIME

Ronan Lyons is one of the smartest people I know. Read his blog daily should you. Talking like Yoda I am today for some reason. Just read the blog.

Brother, Can You Bail-out my Bank, lyrics by Ronan Lyons, music by Jay Gorney (1931)Once I built a hedge fund, I made it fly, made it rise all the time.Once I built a hedge fund; now it’s gone. Trichet, can you bail-out my bank?Once I bought a bank share, at the top, lent a mortgage, sub-prime;Once I bought a bank share, watched it tank. Paulson, can you bail-out my bank?

Ronan Lyons | Blog

link

Embedded Video

Check the graphs in this presentation out to get a sense of the magnitude of the downturn:

We often imagine isolated consumers as Robinson Crusoe characters. Here’s one for real, living for 300 days on a desert island.

…paying the full cost of implementing the Kyoto Protocol for the entire world would run $716 billion.

Worldchanging.org

Last year these guys got it all wrong. They say Robert Barro, when it turned out to be Hurwicz, Myerson, and Maskin, but to take a look at who is close to Nobel potential, check out the 2008 Nominees from Thompson-Reuters.

Its about inadequate finance caused by lack of trust.

Read why, everyone. God this chap is smart.

What’s the right way to think about interconnected systems where linkages break down and need to be replaced?  Is there are theory out there to help explain trust formation? I know I could google this, but let me be guided by my trusted network on this one. Email me or leave a post in the comments.

Academic publisher sues academic for making free software which makes the publisher’s work more accessible.

D.U.M.B.

Let me elaborate.

Ireland has repeatedly rejected the construction of a nuclear power plant, for a host of reasons, most of them irrational, take this for example, or factually incorrect, see this, or just twaddle, see this. 

I think if the benefits of nuclear power were put to the Irish people in a consistent and intelligent way, they would respond with a different answer. 

The benefits of nuclear power are cheap, reliable energy which is independent of fossil fuel usage and, as we’ve seen, price changes. Not only does nuclear power have negligible CO2 (global warming) emissions, but Western nuclear power has never killed a member of the public or had any measurable impact on public health, miles of column inches to the contrary. France is the shining example of the benefits of nuclear power—78% of French electricity is generated using nuclear fuel.

The costs of nuclear power are, in this order, high level waste disposal, risk of proliferation, severe accidents, and terrorism. Obviously, Ireland would not be subject to most of these risks as it is a (largely) neutral country. 

Running out of uranium isn’t really an issue either: there are approximately 14,750,000 tonnes of the stuff on Earth. Last year we used close to 67,000 tonnes of this. With type four fast breeder reactor technology, we’d have practically unlimited energy resources into the 22nd century [2]. 

Right now, our CO2 emission are 24% higher than our 1990 level. Our Kyoto protocol agreement is for 13% increases, and our energy needs are set to increase by 25% by 2015 [1]. So this is not a problem which will go away, as this ESRI report shows. Ireland is contributing to climate change in much the same way as India and China, albeit on a smaller scale. 

Pollution is the price of development. 

It’s fair to say nuclear power isn’t the solution, but there is no solution in the medium term without it, as we transition away from fossil fuel power solutions. Those electric cars won’t charge themselves. 

I’m not a fan of nuclear power, but there are ways to buy this power from abroad. As Gerard reports, a 25bn pound investment in nuclear power will take place in the UK in the next 10 years, thanks to a recent takeover. This power will need buyers. If it is priced properly, Ireland might be in a position to purchase the benefits of nuclear power without incurring many of its costs. 

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To get a sense of just how big the bailout is, consider this:

1 million seconds is 11 days
 1 billion seconds is 32 years
 1 trillion seconds is 3 centuries.

So, if the bailout cost the US economy 1trillion, paying it back at a dollar a second could take centuries. Nice comparison.

The Big Picture

Three Panel Soul

Ian Wright is a researcher who combines non standard economic thinking with statistical mechanics and Mathematica simulations to draw out his points analytically. He’s my kind of chap. When I grow up, I’d like to be a bit like him. Check out his work to see why.

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Click here to find out. 

Now ask yourself: how likely is it you’ll make this much per year? What would you need to do to make this figure every year?

No comment required.

Fasted Recorded August Rate of Arctic Ice Loss, via Economist’s View

Damien Mulley has a very smart, digg.com friendly list of how blogs in Ireland can make money.

The suggestions are quite clever, but the reason I’m posting this is because I’ve been offered some advertising revenue for links and in-post text recently.

As I said to the last (very nice) person who offered the ad money to me, I plan to have the stephenkinsella.net site for my professional career, which, all going well, means I’ll check out of academia (and presumably blogging, or whatever the kids call it in 2043) at 65 or so.

So why would I put links in a site I’ll hold for that long?

Discounted back to the present, the value of the income from the advertising doesn’t really mean much.

On the other hand, my kids do enjoy the odd bit of meat with their dinner, so maybe my logic is faulty.

7 ways on how blogs in Ireland can make money

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While I wouldn’t go as far as Simon from The Dossing Times in accusing David McWilliams of coming to “plain silly” conclusions which represent an “abuse of statistics”, I do think Simon has a much simpler (and less time and data intensive) method of discovering why the increase looked so big than mine: McWilliams just compared January 2008 with August 2008, and saw a huge increase. But there are seasonal effects here, as Simon correctly points out when you look year to year, which make this increase look more than regular.

So it’s more of a slight gaffe than a deliberate abuse of statistics, and McWilliams should know better, but he has shown us (or at least to me) data source when looking back at Irish emigration patterns. A more sophisticated analysis might be in order here. Anyone interested in helping?

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• McWilliams incorrect on the Return to 1980’s levels of Emigration

Irish economists are reaching for any evidence of an economic meltdown with which to terrorize the public. Commentator David McWilliams, echoing Prof. Kelly (see my previous post), gets medieval on the return of 1980’s style emigration. He references GAA transfer figures as representing

a huge increase in young men moving from Irish clubs all around the country to clubs in London and New York.

The idea behind the piece is very good, using a Freakonomics-style capturing of economic choices (in this case, whether to stay in Ireland or go somewhere else looking for work) through an unusual data set.

(If anyone wants to work with me on it, there is an important story to be told using this data, and it goes back many years, so get in touch if you like working with this type of stuff. I’ve obtained the data back to 2000.)

David is to be congratulated for looking under this particular rock for signs of our imminent economic disaster, because even though I don’t think he found much, the fact that this data exists at all is interesting enough to warrant a head nod of gratitude.

I do have some problems with his interpretation of the data. I didn’t believe his story, so I went and got the transfer data myself. They come from two GAA pages, here and here.

The data is monthly, and shows player movement from club to club. Some of the clubs are in London, and the UK more generally, the US, Australasia, and ‘Europe’. When you take the numbers leaving for foreign soil and divide them by the numbers of people actually moving in a given month, and compare the years 2007 and 2008, you get this picture below. Click on the charts to get the data I used to construct the figures.

Each bar represents a relative group in group ratio, so in January 2007, a figure of 0.09 means only 9% of the people moving moved abroad. We see a big increase in movement over the summer months, with July 2008 being a big (but not huge) increase.

Then when you look at the absolute numbers moving, the story changes again, as the figure below shows:

Now the way to read the figure is to just count up the numbers moving anywhere, not just abroad. It’s a straight summation. And do the numbers moving go up? They do not. They go down. Way down. So not an increase, but a decrease in movement over time from 2007 to 2008.

Here is the same figure as the one above, but this time just for people traveling abroad.

Again, the way to read the figure is just to add up the columns, so 101 people transfered to a club outside Ireland in April 2007. The only huge increase is in May 2007, well before the subprime crisis hit in August 2007, and not repeated through the economic doldrums we are in now.

Even looking at the raw numbers—total foreign departures in 2007 to August (to make the data ranges the same in both years) are 723 out of 2062 people transferring, so a ratio of 35%. In 2008, total foreign departures to August are 588 out of 1346, a ratio of 0.44, but still a decrease in the absolute amounts of people moving abroad to date.

So based on this simple exercise, I’d have to say David’s conclusions are incorrect about rising levels of Emigration. The data just don’t tell that story so clearly.

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