Tuesday, November 24, 2009

Fog over the channel

Here is a paper I've just written with my LSE colleague Christa van Wijnbergen. We've called it 'Europeanization and Welfare State Change in the UK: Another Case of Fog Over the Channel?' after the famous (and fictitious, I think) newspaper headline 'Fog over the channel: continent isolated'. As part of a collective project on the impact of Europe on welfare state reforms, we've looked at the extent to which Labour's 'welfare to work' strategy might have been influenced by European-level initiatives (the European Employment Strategy and Lisbon agenda). We conclude that Labour followed policies consistent with the European agenda, but that European influences were not the reason why these policies were adopted.

Read more here.

Saturday, November 21, 2009

Main de Dieu

Well, surprise surprise, who would have thought Henry capable of such a thing? The more important question though is, why doesn't Paul MacShane play like that for Hull City?

Tuesday, November 17, 2009

Labour market rigidities...

... can be good for you.

Krugman has a piece on the advantages of less flexible labour markets, based on the observation that unemployment has grown less in Germany than in the United States. This is largely because of government subsidies and corporatist agreements to share the reduced amount of available work evenly across the existing workforce, rather than firing some workers and keeping the rest at normal speed.

Would be nice to see some comparative data across OECD countries, to see if there is any prima facie connection between levels of employment protection legislation (EPL) and changes in unemployment in the current crisis. Hard to get a handle on this empirically, because many countries with high EPL also have dualistic labour markets, in which the core workforce is protected but the 'outsiders' can be more or less sacked at will - this is certainly the case in Spain which has had a brutal contraction in the labour market. It was my understanding that Hartz IV had created such a situation in Germany. Maybe not.

Another disconfirming piece of evidence: unemployment in the UK has not spiked as much as one would expect given the big decline in GDP (we're way short of 10%, so much better than in the US). Difficult to know what to make of this - perhaps recent immigrants going home instead of signing on?

Anyway, Krugman may have a point (he usually does), and I might have to revise my enthusiasm for 'flexicurity'. It sounded too good to be true anyway...

Wednesday, November 11, 2009

Superfreakonomistic-expialidocious

Just finished Superfreakonomics. It got so much bad publicity beforehand that I started it expecting it to be awful.

I was not disappointed.

Freakonomics was fun, largely because some of Levitt's early research was fun. But there isn't any serious research in this book - just a bunch of over-egged contrarian or counter-intuitive stories, purporting to show how economics can come up with surprising and irreverent insights.

So prostitution can be studied using the tools of microeconomics. Well, well, well. Hardly surprising, since prostitutes have one thing in common - they're doing it for money. If economics had nothing to say about the dynamics of prostitution, that would be shocking. Far more shocking than a chapter in this kind of book dedicated to paid sex.

The story of Dr Semmelweis is a nice one - although rather boring if you'd already read Celine's rather better written account of it - but doesn't have much to do with economics. Oh, it does have a rather dramatic story about the use of the scientific method - Semmelweis performs an informal ANOVA with two hospital wards - but perhaps Levitt and Dubner shouldn't claim a patent on that for the moment.

The big question for me is: what is the point of Freakonomics, assuming it means anything? Well, for L & D, their approach is based on three ideas: 1) people respond to incentives, 2) behaviour change is difficult, and 3) cheap and easy solutions are often around but ignored because of people's reluctance to believe they're possible.

1) is not that worrisome, until  - you start to wonder what kind of incentives we are talking about. Writing a sequel to Freakonomics is easy to explain - the incentive is the big pile of money to be made building on a successful franchise. People sometimes respond to other kinds of incentives, which may be inconsistent with material gain - the desire to impress others, or even oneself. This is accepted by the authors, but in the end their critique of experimental economics suggests that they do not believe that altruistic behaviour is that common. The proof? People don't give up their kidneys to save complete strangers.

2) Sure, behaviour change is difficult. We know this, because we tend to get entrenched in behaviour we know we should change - in my case, never returning library books on time, thus enriching my local libraries with completely unnecessary fines (maybe that's an altruistic incentive?). But if people respond to incentives, why don't they change their behaviour when the incentives change? Mmmm.

3) People respond to incentives, but they ignore cheap and easy solutions in favour of difficult and expensive ones. Why would they do that? Maybe because we know there is no such thing as a free lunch? Or because we don't have enough faith in incredibly smart people like L & D's friends at Intellectual Ventures? Maybe responding to incentives doesn't explain everything we would like it to.

Don't take my word for it, there are plenty of critical reviews out there: the best so far is this one.

Tuesday, November 10, 2009

The Brown bounce (no, not that Brown)

Hull City 2 Stoke City 1

0-1 down at half-time, nearly 0-2 after a certain Gardner own goal miraculously averted by Matt Duke. Then, the fightback: equaliser from Stoke old boy Olofinjana, and the last minute winner from Vennegoor of Hesselink. Brown breathes again.
He has been saved by the return of Jimmy Bullard after 10 months out. Bullard bossed the park for substantial chunks of the game and made the winning goal. Another couple of weeks without him and Brown's P45 would probably have been nestling in the pocket of his Armani overcoat.