20/6/20: COVID19 Impact on Learning & Education

McKinsey's handy graphic summarizing expected and actual outcomes of the racial inequality in terms of access to learning and education during the lockdowns phase of the pandemic:

Pretty self-explanatory.

6/5/20: H1B Visas and Local Wages: Undercutting Human Capital Returns

The Economic Policy Institute published an interesting piece of research on the links between H1B visas and lower wages paid by the U.S. employers for key skills: https://www.epi.org/publication/h-1b-visas-and-prevailing-wage-levels/. As far as I can see, the report does not cover academic faculty employment, but it does cover data from universities and other non-profits.

The report is worth reading.

8/6/18: Human Capital, Twin Secular Stagnations and Education Investments

I have written a lot about the twin secular stagnations hypothesis that I defined few years ago as a combination of two separate secular stagnation propositions. According to my running definition:

“The Twin Secular Stagnations Hypothesis combines two sources of the statistically significant reduction in the potential growth in the economy as:

1. Supply-side Secular Stagnation: a proposition that future growth is likely to be slower amongst the advanced economies due to the decline in returns to innovation and lower growth rate in the labour force; and
2. Demand-side Secular Stagnation: a proposition that future growth is being pushed down by the adverse demographics (ageing population) and the legacy of the Global Financial Crisis, the Great Recession and the Euro Area Sovereign Debt Crisis, which result in lower potential investment, slower growth in demand, and the rising cost of social services, pensions and healthcare provisions.”

An interesting piece of evidence, supporting the ‘productivity-labour force’ nexus of the Twin Secular Stagnations Hypothesis has been recently presented by Mary Daly, the executive vice president and Director of Research in the Economic Research Department of the Federal Reserve Bank of San Francisco (full article here: https://www.frbsf.org/economic-research/publications/economic-letter/2018/april/raising-speed-limit-on-future-growth/).

First, on evidence of secular stagnation: "Average GDP growth over the 60 years preceding the Great Recession, was just under 3.5%. But if we look ahead, economists forecast numbers closer to 2%." In other words, we are looking at long term growth rate or potential growth rate that is almost 43 percent below the empirical rates of growth experienced over the last 60 years.

Next: the evidence of nexus. Per Daly, to "account for the dramatic change in prospects" for future growth in the U.S. "To explain that, we need to look at the fundamental drivers of economic growth: growth in productivity and the labor force."

Figure 1 shows the extent to which the labor force-productivity nexus drove growth over the last 7 decades, and is expected/forecast to do so in 2017-2025 period:

Daly notes that "productivity growth has varied over time, but since the 1980s has contributed on average about 1.5% to growth and is forecast to do the same going forward." This is, at best, incomplete. In reality, as the chart shows, productivity growth penciled in for 2017-2025 is slower than in the 1980s, 1990s, and 2000-2007. In fact, labour productivity growth in 2017-2025 is forecast to run roughly at an average rate of the 1970s, 1980s and 2008-2016. This is set against the technological revolution we are allegedly experiencing which should, all thing equal, be driving up labour productivity growth in 2017-2025 over and above the 1980s-1990s period. But, in fact, labour productivity growth contribution to GDP growth has shrunk in 2000-2007, and then again in 2008-2016 (the Great Recovery) and now set to be below the 1990s over the period 2017-2025. So all is NOT well with productivity growth.

The second point, well-argued by Daly is that labour force contribution to GDP growth is shrinking and shrinking catastrophically. That is clear from the Figure above.

On the latter point, Daly shows that labour force participation rates (also a subject of frequent coverage on this blog), have fallen off the cliff in recent years: "We’ve also seen a drop in the level of labor force participation among workers in their prime employment years, a pattern that does look quite a bit different from other countries. Labor force participation in the United States for prime-age workers reached a peak in the late 1990s and then took a steep dive in the 2001 recession. In the 2007 recession, it took an even steeper tumble, reaching a low point in 2015... While we have seen improvements since, they have been modest. So today, the share of men and women in their prime working years who are employed or actively searching for a job is far lower than it was in the 1990s."

So, Daly asks a very important question: "Why aren’t American workers working?" And proceeds to give an interesting explanation: "research by a colleague from the San Francisco Fed and others suggests that some of the drop owes to wealthier families choosing to have only one person engaging in the paid labor market (Hall and Petrosky-Nadeau 2016)."

Why is it interesting? Because those who can afford single-earner households today are a vast minority. The original research from the Fed cited by Daly is here: https://www.frbsf.org/economic-research/publications/economic-letter/2016/february/labor-force-participation-and-household-income/. And here is the chart that shows the key findings from the research:

 Note: Numbers to right of lines show percentage point changes to total and quartile contributions, 2004–13

Observe that the deepest reduction in labour force participation is for the 3rd quartile of income earners. How much do these families earn? "In 2013, households in the lowest 25% of the income distribution, or the first quartile, had an average monthly income of less than $1,770. The median total household monthly income was $3,430. At the top of the distribution, the lower bound for being in the highest 25% of households, or the fourth quartile, was a monthly income of $5,993." Now, can you imagine in these modern days a household earning less that $5,993 per month in pre-tax income being able to afford not to engage the second partner in work? Personally, I can't. Unless these households benefit from huge transfers via inheritance or within-family housing subsidies, etc. But... per same paper, "On average in 2013, the upper-level households derived about 96% of their monthly income from working. For households in the poorest quartile, earnings made up about 62% of monthly income, while another 23% came from unemployment compensation, social security, supplemental social security, and food stamps." Which means that these very same households that, apparently, voluntarily withdrawing labour force participation, are not gaining much from non-labour income transfers.

So, these volunatry exits from the labour force are, apparently, impacting households more dependent on labour income AND not the highest income quartile households. Something is fishy.

Second piece of evidence from the paper cited by Daly is age cohorts of 'leavers':

This too shows that something is fishy in the data. Households in 55+ age group are more likely to have higher incomes. They are increasing labour force participation despite the fact that it is harder for them to gain quality jobs due to age effects. Households in 25-54 age bracket are exiting the workforce, just at the time when their earnings from work should be rising and just in time when they need to service student loans, mortgages, schooling for kids, pensions etc.

Again, the evidence presented simply contradicts the arguments made: both age cohorts and income cohorts analysis does not appear to support the proposition that families are voluntarily exiting the labour force, reducing their labour income to single source provision.

I am not buying this. The fact that the 3rd quartile of families are exiting the workforce is not a sign of preferences for leisure or household employment. It is, rather, a sign that the jobs market is no longer promising for the upper-middle classes, especially for the younger workers. It is a sign that families are increasingly reliant on familial transfers for housing and contingent workforce employment, both under-reported to the official stats gatherers.

Daly hints at this in her reference to the 'second factor' driving decline in labour force participation: the disappearance of the mid-level skills jobs, including the decline due to automation: "A growing body of research finds that these pressures on middle-skilled jobs leave a big swath of workers on the sidelines, wanting work but not having the skills to keep pace with the ever-changing economy". Now, that hits the target far better than the argument that people are just exiting workforce to have good times and home-school their kids.

And worse, Daly is also on the money when she points out that the U.S. system is woefully inadequate when it comes to provisions for investing in human capital: "Like in most advanced economies, job creation in the United States is being tilted toward jobs that require a college degree (OECD 2017). Even if high school-educated workers can find jobs today, their future job security is in jeopardy. Indeed by 2020, for the first time in our history, more jobs will require a bachelor’s degree than a high school diploma (Carnevale, Smith, and Strohl 2013)." Yet, "although the share of young people with four-year college degrees is rising, in 2016 only 37% of 25- to 29-year-olds had a college diploma (Snyder, de Brey, and Dillow 2018). This falls short of the progress in many of our international competitors (OECD 2018), but also means that many of our young people are underprepared for the jobs in our economy."

There are added dimensions / nuances to this. Some of the U.S. college education is of questionable quality, compared to more evenly-distributed quality of college education in Europe, Japan and Australia. Top Universities deliver top tier output. But for-profit colleges and some lower-end school deliver nothing worth talking about. A 4-year system of undergraduate education is effectively a correction on already poor quality high schools output, requiring the first year of college to be a remediation year to compensate for the lack of proper standards in secondary education. Two-year masters programs are, then, designed to take the first year to correct for the shortfalls in education quality in undergraduate levels. And so on. In effect, the U.S. higher education system is designed to inflict maximum financial damage (via costs and debt of year 1 education in undergraduate and post-graduate systems), while taking a cut of two years from the graduates careers. This is similar to what Italian system delivers, except in the case of Italians, it delivers also higher quality content in secondary and undergraduate education, taking longer time to learn more.

And so on. In simple terms, as Daly tacitly acknowledges, the U.S. economy is racing toward higher degree of automation and greater skills intensity, while running low on human capital investments. The solution to this historical problem has been to import younger, smarter foreigners via a range of schemes - from graduate schools admissions to H1Bs. But this solution is not sufficient to correct for the rate of acceleration in skills intensity. And it is not functioning in redressing training and skills gaps that already exist in the economy.

Daly notes that one important aspect of change must touch upon the need to "equalize educational attainment across students of different races and ethnicities." This, undoubtedly, is one key factor in attempting to address the human capital investment gaps. The problem, of course, is how does one achieve this? Historically, the U.S. States have gone about the problem by lowering standards and quality of secondary education curriculum for all students. They also increased quotas-based admissions for minorities. The former does nothing for actually stimulating investment in human capital. The latter creates a zero-sum game out of education system, unless new investments go into college education provision. Which is not happening, despite rampant price inflation in higher education.

Daly makes a strong case for more investment in college education. But she does not make the equally important case that such investment must start at pre-primary level and work through a combination of increased resources and higher standards across all grades and for all students. She correctly states that "In the parlance of economics, education is incentive compatible, good for everyone involved", when it comes to students, taxpayers and the economy.

But she does not recognise that better education is not incentive-compatible for one key set of participants in the market: teachers and schools administartors. In fact, in primary and secondary education systems, in the U.S., incentives for teachers are aligned toward delivering more standardised, less rigorous, less-transparent in quality, outcomes, such as rota learning and teaching-to-test. Daly says nothing as to how this problem can be addressed, despite the fact that all past reforms of the U.S. education system were led by teachers and their Unions, not by parents or other economic agents.

Finally, there is a problem of generational cohorts. Any investment in education system today will hold promise of altering the status quo of human capital investments for the cohorts of those under the age 30 (given the levels of debt accumulated by the recent graduates, probably for those under the age of 25). Which leaves the rest of the households - the vast majority of them, in fact - just where we have them today: under-skilled, facing the risk of their existent human capital depreciation to automation, etc. Formal education cannot address these problems systemically. Take an argument ad absurdum as an illustration. Suppose we invest enough funding into the current higher education system to provide 100% college graduation for those current under 25 years of age. Suppose we even fix the quality vs quantity problem in the U.S. education system. This will improve the productivity and jobs prospects for the very young. But it will make the older generations of workers (older = 25 years of and above) even less competitive, leading to further reductions in their incomes, career prospects and labor force participation rates.

Have we fixed anything when it comes to the Twin Secular Stagnations Hypothesis? Not really. Have we addressed the polarisation gap between life-cycle earnings of the lower earners and higher earners (the dropping-out of the U.S. middle class)? Not really. Have we done anything to alleviate political disillusionment amongst the U.S. voters with the economic system that reduces their social and economic mobility? Not really. So even in ad absurdum case of Daly-proposed solution success, we have fixed little if nothing at all. We, in fact, might have made the disease more deadly.

In sum, we do need more investment in education. But we also need smarter education systems reforms. And we need a parallel investment in increasing human capital investments for those already in the labour force, and those of older age cohorts who have been dropping out of it. We need a systemic approach to addressing skills depreciation arising from automaton. And we need a systemic approach to tackling economic value-added displacement away from labour, toward pure profits and technological capital. The longer we delay these major, pivotal reforms, the bigger the problem of the secular stagnation gets.

8/4/18: U.S. economy: entrepreneurship is not 'the new thing' outside Academia

These days, every business school on every university campus is sporting a burgeoning post-graduate program in Entrepreneurship. And this trend is driven by the perceived - and often hyped up by the media and by business futurists - rise in entrepreneurship in the modern society. Apparently, allegedly, an increasing proportion of today's business students want to start their own businesses (despite the fact the vast majority have never worked in a start-up and have no expertise to run one). The new dynamism of the economy, the college-to-start up model of business education, the 'can do' attitude (or aspirations) are all part and parcel of the mythological creature that is the New Economy.

In reality, of course, brutally put, there is no evidence of rising demand for entrepreneurship. And, worse, in fact, there has been a dramatic decline in entrepreneurial rates in the U.S. economy:

Source: http://rooseveltinstitute.org/wp-content/uploads/2018/03/Powerless.pdf.

Now, consider the two data series above, together: firm entry (new firms creation) and firm exist rates. As the blue line trended down, rapidly, without a pause, the green line remained relatively flat. Which means that the ratio of entries to exits has fallen over the time, pretty dramatically. In the 1970s and 1980s, firms entries had, on average been more frequent and less likely to be associated with higher firm exits. In the 1990s,  both relationship deteriorated. In the 2000s, both literally went down the drain.

So as the rate of new businesses additions went down, the rate of old businesses exiting did not change that much. So much for dynamism and for 'entrepreneurial spirits' of the young. The start ups mythology is strong. But the reality of the U.S. economy is that of concentration, market power, monopolization and decline of entrepreneurship. Funny thing, how Silicon Valley propaganda works, right?

How do we know the bit about monopolization? Why, look at profit share of output:

Still want to build up that 'entrepreneurship program' in the University? Because students want to learn about starting their own businesses? Should you really think twice?

23/2/18: Ireland's Migration Policies are Working Well

How to do immigration policy right? Ireland's CSO has published some new data on educational attainment in Ireland, covering 2017 results. The data is available here: http://www.cso.ie/en/releasesandpublications/er/eda/educationalattainmentthematicreport2017/. One table stands out on the issue of migration:

Click on the image to enlarge

Despite the report itself focusing on 3rd level attainment as a 'catch all' category, what really matters in terms of future quality of the workforce is more advanced education. And in this area, Irish migration system shines. Both, EU15 ex-Ireland & UK and non-EU migration pathways are working to enhance the stock of human capital in the country when it comes to honours tertiary degrees and post-tertiary education.

This is amazing, because the two pathways are distinct in terms of regulations covering mobility (access for immigrants). And both seem to be working well.

Of course, other factors contribute, beyond policy / regulatory facilitation, including Ireland's amazingly open society, welcoming people and social networks that support easy integration of those who want to integrate. But Ireland's policymakers and civil servants, who often act as the early contributors to this mobility also deserve credit. While problems and bottlenecks remain and need addressing, credit should be given where credit is due.

17/4/16: Peer Effects in Classroom: The Value of Better Discipline?

In workplace, as well as in education, peer-pressure and competition, peer-linked cooperation and collaboration and other peer-linked effects of have been important contributors to work- and learning-related outcomes. Ditto for entrepreneurship, as collaborated by the effects of clusters, such as the Silicon Valley. However, we tend to think of peer effects as arising from more mature, adult-level interactions in either third level education, or career-linked workplaces.

As noted by Scott Carrell, Mark Hoekstra and Elira Kuka in their paper “The Long-Run Effects of Disruptive Peers” (February 2016 as NBER WP No. w22042: http://ssrn.com/abstract=2739567), “there is relatively little evidence on the long-run educational and labor market consequences of childhood peers.”

So the authors examined “administrative data on elementary school students” and students’ “subsequent test scores, college attendance and completion, and earnings” to identify any potential effects of childhood peers on educational outcomes.

“To distinguish the effect of peers from confounding factors, we exploit the population variation in the proportion of children from families linked to domestic violence, who were shown by Carrell and Hoekstra (2010, 2012) to disrupt contemporaneous behavior and learning.”

The end results show that “exposure to a disruptive peer in classes of 25 during elementary school reduces earnings at age 26 by 3 to 4 percent. We estimate that differential exposure to children linked to domestic violence explains 5 to 6 percent of the rich-poor earnings gap in our data, and that removing one disruptive peer from a classroom for one year would raise the present discounted value of classmates' future earnings by $100,000.”

These are striking numbers. Accumulated over life-cycle of employment, gains from reducing classroom-level disruptive behaviour of peers can lead to a significant uplift in both, economic welfare and individual financial wellbeing. It can also, potentially, help closing the income inequality gaps. The question, however, is how does one achieve such an outcome in the real world, where even disruptive students have a right to education.

4/10/15: IBM: Some Tough Numbers on Higher Education Success

IBM Institute for Business Value Higher Education Survey 2015 with results published in June 2015 has been quite an interesting read. The report “Pursuit of relevance How higher education remains viable in today’s dynamic world” is available here.

Take the following Question: “To what extent do you believe the current higher education system in your country is meeting the needs of the following groups?”

Chart below plots percentages of respondents by group across three core categories of ‘customers’: students, employers and society at large.

One thing that jumps out is that corporate recruiters are relatively more positive than education providers (excluding university staff) when it comes to assessing the education system performance.

Another conclusion that jumps out is that with exception of one sub-group in one category, overall assessment of education systems is pretty grim - no >50% support for the proposition that education system meets the needs of either students, employers or society.

Third conclusion is that, on average, higher education systems serve better the needs of students, followed by society, than industry.

More damning, “Survey results also point to higher education shortfalls in other areas. In terms of economic value, only 51 percent of industry and academic leaders believe higher education is providing value for money, and just 49 percent view it as contributing to economic growth and competitiveness.”

There is also a very interesting gap across respondents categories in terms of what is perceived to be the most important metrics of success of modern education system. Chart below illustrates:

As can be glimpsed from above, educators are literally falling over themselves in pursuit of jobs placements. While corporate recruiters and learning executives are less warm about this objective.

Very interesting findings, some counter-intuitive, some potentially arising from the sample selection biases (after all,  we don't have much to go by in terms of actual corporate leaders, and data reported is limited, as for example the chart above clearly shows). Nonetheless, the questions raised are of great importance.

5/1/2015: The Value of Better Teachers

Hanushek, Eric A. and Piopiunik, Marc and Wiederhold, Simon, paper, "The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance" (December 2014, NBER Working Paper No. w20727: http://ssrn.com/abstract=2535179) looks at the differences in teacher quality and the impact of these differences on students' outcomes.

Per authors, "difference in teacher quality are commonly cited as a key determinant of the huge international student performance gaps." The authors "use unique international assessment data to investigate the role of teacher cognitive skills as one main dimension of teacher quality in explaining student outcomes. Our main identification strategy exploits exogenous variation in teacher cognitive skills attributable to international differences in relative wages of nonteacher public sector employees." The study also controls for parental inputs and other factors.

"Using student-level test score data, we find that teacher cognitive skills are an important determinant of international differences in student performance. Results are supported by fixed-effects estimation that uses within-country between-subject variation in teacher skills."

First table below shows basic estimation results highlighting the positive effects of teachers skills (in maths and reading) and parental skills on outcomes (in mathematics and zero effect in reading).

Second table above shows sample statistics. An interesting comparative in terms of Irish teachers' skills being very much average and ranked below average in the group of countries.

Third table below shows more advanced econometric controls for estimation, showing qualitatively similar results as above

And finally, chart below showing Ireland's relative position, compared to other countries in terms of the relationship between teacher skills and students' outcomes:

The above clearly shows below average link between teacher skills and student outcomes for Ireland (which are sub-standard relative to the average) in maths and slightly above average link between teacher skills and student outcomes in literacy (which are above average in terms of outcomes, but near average in terms of the teachers' skills effects).

The key, from my point of view, is that the paper shows a clear link between measurable metrics of teacher quality and measurable outcomes for students, while controlling for a number of other factors. This supports my view that pay-for-performance can and should be used to incentivise, support and promote better teachers, and that such system of compensation can be of benefit to our students.

Our education system pursuit of homogeneity and collective bargaining-set pay scales is outdated, outmoded and inefficient from social and economic point of view. Our teachers and students deserve better. Reforming education system should not be about reducing average wages and earnings, but realigning rewards with effort and outcomes.

17/5/2014: ESRI on Education & Training in Ireland

ESRI released "Further Education and Training in Ireland: Past, Present and  Future" (http://www.esri.ie/publications/latest_publications/view/index.xml?id=3943)

Lots of sharp and interesting findings, including:

1. Provision within the sector appears to have grown and national policy does not appear to have played any central role in determining the level, distribution or composition of Irish FET provision. In other words it is free-for-all.
 
2. As a result, there is a substantial amount of variation in terms of …the relative emphasis on meeting labour market needs and countering social exclusion across the sector. In other words, the programmes are not really delivering on skills shortages.
 
3. A substantial proportion of provision within the FET sector does not lead to any formal accreditation.  The lack of accreditation is more typical in programmes with a strong community or social inclusion ethos. Which might not be a problem, if real skills are delivered. Alas, this is not the case.
 
4. The distribution of major awards across field of study does not appear to reflect strongly the structure of the vocational labour market. This is evident in the fact that the majority of key stakeholders, interviewed for the study, feel that current FET provision is only aligned ‘to some extent’ with labour market needs.
 
5. From an international perspective, compared to the German, Dutch and Australian systems, Irish FET is much more fragmented and is much less focused around vocational labour market demand.  In terms of its composition and focus, Irish FET sector bears close similarities to provision in Scotland.  
 
6. Data provision on Irish FET is extremely poor by international standards.
7. The reform of provision will require that SOLAS implement a funding model that ensures that poorly performing programmes are no longer financed, with available resources directed towards areas identified as being of significant value on the basis of emerging national or regional information.  

The irony of this is that ESRI report comes out some weeks after I wrote about the deficiencies in our training programmes in the Sunday Times http://trueeconomics.blogspot.ie/2014/05/1552014-jobs-employment-lot-done-more.html and months after the OECD report covering the same.

You can read more on the topic of skills, unemployment and training here: http://trueeconomics.blogspot.ie/2014/05/1552014-innovation-employment-growth.html

15/9/2013: WLASze Part 2: Weekend Links on Arts, Sciences and zero economics

Due to time constraints of yesterday's TEDx talks (http://www.tedxdublin.com/), I had a shorter version of WLASze: Weekend Links on Arts, Sciences and zero economics. As promised, more is now following in part 2…



15 dynamic images of changes in the demographics across 15 countries around the world from today through 2100: http://www.businessinsider.com/15-countries-in-2100-2013-9
Very interesting changes. As a teaser: "The year 2020 will be a seminal one for Japan, with the country's capital home to the 31st Summer Olympiad and adult diapers set to outsell their baby counterparts." Just think about that line for a second… I will be posting tomorrow night my Sunday Times article from last Sunday which covered the figment of imagination that is our unwavering belief in some 'demographic dividend' for Ireland. The article addresses the question 'What happens when Germany get older, while Ireland stays younger?'


A superb article from The Atlantic on the effects that our education system's obsession with regurgitation of facts has on our ability to think:
http://www.theatlantic.com/education/archive/2013/09/when-memorization-gets-in-the-way-of-learning/279425/
This is a neat extension point to something I have been talking about in my TEDx Dublin talk earlier today - the fact that our education systems are innately incapable of producing the human capital that we will need for the future. I wrote about the related deficiencies in education systems here in my earlier Sunday Times column, with unedited version available here: http://trueeconomics.blogspot.ie/2013/08/2182013-irelands-potemkin-village.html


From the sciences side of things:
http://www.redorbit.com/news/video/the-daily-orbit/1112946481/moon-water-origins-hint-at-early-earth-091213/
We normally hear about extraterrestrial origins of things found on Earth. How about terrestrial origins of things found elsewhere in the solar system? Hm… And the daily Orbit  presentation style… double hmmm…


Extraterrestrial is the best way to describe some of the DesignJunction pop-ups at the London Design Week:
http://www.dezeen.com/2013/09/13/pop-ups-at-designjunction-next-week/
Need proof?

Or how about the Digital Sunrise (it appears to be a rug, but feel free to guess):

On the serious side of things: the rest of DesignJunction is corporate and boring… no, really, see for yourselves: http://thedesignjunction.co.uk/virtual-showroom/


From the series of accidental art:
IMAGE: russian-skywalking-photographers-european-skyscrapers-designboom-10
"russian photographers and daredevils vadim mahora and vitaly raskalovym travel europe with a clear purpose -- to illegally climb to the highest point of the city's main attraction, hang off its edge, and capture their extraordinary viewpoint" via http://www.designboom.com/art/russian-skywalkers-photograph-european-buildings-from-the-air/

The thing is: to be consistent the duo must take pictures from all cities visited. Problem is: once you confine yourself to such a commitment, art becomes secondary to pursuit of locations, and as such, purely accidental. As the show linked above clearly shows, not all (by far) images are even close to possessing properties of artistic inquiry or discovery, let alone aesthetic completion and compositional integrity. Hence, accidental nature of art… Still, impressive!


http://www.art-moscow.ru/ is opening on the 18th of September. The show will feature special exhibition Russian Avant-Garde 1910-1930 with some rare paintings by less-known artists: http://www.art-moscow.ru/2642.html
Whimsical and yet somehow infused with challenges and questions work of Grigori Mayofis: http://www.art-moscow.ru/2701.html will also be on show:

In the week when Harvard awarded its annual Ig Nobel Prizes - the spoof prizes for idiotic  research, it is only worth running few links on that:
http://www.cbc.ca/news/technology/shrew-eating-penis-amputation-studies-earn-ig-nobel-prize-1.1828634
http://rbth.co.uk/arts/2013/09/13/six_ig_nobel_prize_awards_received_by_russians_29823.html
And the 2013 awards summary: http://www.policymic.com/articles/63697/10-weirdest-ig-nobel-prize-winners-this-year


This weeks Part 2 is turning out to be quite a Russia-fest - not by design, just as an accident… so to conclude it - an images gallery from Kamchatka Peninsula: http://rbth.co.uk/multimedia/pictures/2013/09/11/going_to_kamchatka_to_get_a_glimpse_of_the_moon_29721.html

Enjoy the links!

3/8/2013: Humanities: Don't Just Discount the Vital Set of Skills

Over a month ago, I wrote in the Sunday Times about the topic of balance in education between the humanities and sciences and led this point toward the reforms needed. Last week, Washington Post run a story worth reading on the same subject: http://www.washingtonpost.com/blogs/innovations/wp/2013/07/30/we-need-more-humanities-majors/

My original article and few more links on the topic is here:

http://trueeconomics.blogspot.ie/2013/07/272013-sunday-times-june-30-2013-irish.html

2/7/2013: Sunday Times, June 30, 2013: Irish education system reforms

This is an unedited version of my Sunday Times article from June 30, 2013.

Note: an interesting related article on human capital and values of innovation and creativity linked to education in humanities is here: http://qz.com/98892/the-humanities-are-not-in-crisis-in-fact-theyre-doing-great/ and on the need to link various fields of inquiry in education systems: http://www.farnamstreetblog.com/2013/06/how-great-ideas-emerge/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+68131+%28Farnam+Street%29


Since times immemorial Irish political and business elites have been fascinated by technocratic ideals. From the 1990s on, the state bodies like Fas and Forfas have pushed forward the worldview in which Ireland required an ever-increasing investment in advanced specialist and technical education and training in ICT, chemical, software, and general engineering.

The ICT manufacturing is now largely the story of the past, as is the dot.com bubble. The pharma story is fizzling out on foot of expiring super-drugs patents, with last week’s patent expiration for Viagra being case in point. Biopharma is too small to replace lost exports revenues and shrinking FDI from pharma.

As the latest quarterly national accounts for Q1 2013 released this week illustrate, traditional specialist areas of exports are no longer sustaining growth in Ireland. Stripping out the contributions by the tax-optimising ICT services multinationals, our economy is in a structural decline. Seasonally-adjusted industry activity is down year on year, and goods exports have fallen 9.2%. Investment is down both year on year and quarter on quarter. All areas of activity that are linked to the real exports production in the country are down. This decline is driven by the fact that we are falling behind the innovation curve in creation of new enterprises, products, services and investment opportunities.

In line with Irish experience, this month Finnish authorities were forced to revise down their own forecasts for 2013-2014 economic growth from an average of 1.0% per annum to 0.4%. The downgrade was linked, in part, to Finland's struggle to maintain competitive edge in traditional manufacturing, which is falling behind on products and services design and innovation, despite, or may be even because Finland concentrated too much of its resources on technical ICT investments and skills.

Still, policies of fetishising technocracy roll on. From science advisory bodies and MNCs HQs, to the IDA and Enterprise Ireland, our decision makers are promoting an economy based on software codes, data analytics and cloud computing. No one seems to think that the resulting education and skills strategies alignment with the technical needs of these sectors can risk being reactive to the immediate global markets demands, instead of moving ahead of the curve.

Recent research and news flow from around the world shows that innovation is becoming more focused on increased customization, design and creativity of products and services. These require the exact opposites of the purely technocratic approach to education and training. This is a bigger and longer trend, and we are nowhere near capturing it in our education and training systems.

Ireland's policy leaders pay vast amounts of lip service to the Silicon Valley - world's largest cluster of technological innovation and investment. The development agencies, like IDA and Enterprise Ireland commonly cite it as an inspirational example in the context of Ireland’s need to promote education in maths, hard sciences and tech. Their logic is that concentrations of locally-based technological skills and research translate into Silicon Valley-styled success. Many in Ireland, contrary to the evidence from the US research, still link academic institutions clustering in the Northern California to the Silicon Valley formation and achievements.

This logic is over-simplifying the reality. Recent studies from Harvard and Duke University show that less than half of all CEOs and chief technology officers working in the Silicon Valley firms hold advanced degrees. Only 37 percent of all degrees held by the Silicon Valley executives are in the areas of engineering or ICT. Only two percent held a degree in mathematics. Vast majority of undergraduate and graduate degrees held by business leaders in the Silicon Valley are in the so-called ‘soft fields’ such as business, finance, and arts and humanities. Put simply, there are more liberal arts graduates steering Silicon Valley companies than physical sciences graduates.

What about the skills demands of the cutting edge innovation firms and start-ups? In 2011 Bill Gates and Steve Jobs publicly clashed in their views on the future needs for skills and education. In his speech to the US National Governors Association, Gates stated that education should focus limited resources on areas and disciplines that are positively correlated with jobs creation. This implies technical ICT skills. Days later, Steve Jobs identified Apple's success with "technology married with liberal arts, married with the humanities".

Jobs was not alone in this recognition. Carol Geary Schneider, president of the American Association of Colleges and Universities says that liberal arts-linked skills and knowledge are critical to the long-term employability of the workforce. Schneider called Gates’ ideas on technically-focused demand-driven education as "much too narrow and unsettlingly dated”. “The question to ask is not: which [degrees] do the best in initial job placement, but rather, which institutions are sending their graduates forth with big picture knowledge, strong intellectual skills and the demonstrated ability to integrate and apply diverse kinds of learning to new settings and challenges,” she said. Per Jobs and Schneider, and many other analysts and business leaders, arts and tech deserve shared credit in driving world's most successful and most important innovative companies since the late 1990s.

The link between humanities, arts, design and value added in business and across economies is now widely regarded as the source for future growth. The global investment community is starting to treat design-focused technologies and innovation as a new Klondike.

This month, the Pictet Report, a quarterly publication aimed at professional and institutional investors produced by one of the largest and oldest private banks in the world, is devoted in its entirety to creativity-driven disruptive innovation. The main focus, of course, is on investment opportunities linked to such innovation.

Last week, Brimingham hosted a major design expo aimed at "showcasing authentic, regionally-based brands and upcoming graduate and entrepreneurial talent". Birmingham-Made-Me Expo is an extension of the UK-wide movement and policy nexus that attempts to re-position design-driven innovation and entrepreneurship at the heart of the future economy. The UK Government is pumping significant resources behind these efforts.

In the mean time, shortages of ICT professionals, while still evident in Ireland, are becoming less acute across the broader world. Reports from India show that the country is producing an oversupply of ICT engineers and technicians, with estimated 50,000 graduates facing a prospect of underemployment in the near future. The problem is acute enough for India's Commerce and Industry Minister, Anand Sharma, to plead with London this week to relax visa caps for Indian ICT workers seeking jobs in the UK.

Even in the fields of big data and cloud computing, technical skills are a dime-a-dozen, as I noted in a recent speech at a cloud computing conference hosted by DCU. What is truly lacking in these areas is the ability to creatively enrich data insights via user-centric visualization of data, and development of applications that drive deeper into customisation of business. Being able to capture, store and process data is a mass-produced commodity. High value-added future opportunities will be found in delivering communicable and actionable insights out of this data that can enable products and services innovation and individualisation.

The world of innovative and high value-added economies is moving in the direction of embracing more broadly-based creativity, intelligent design, consumer-focused disruptive innovation. In this light, Irish education system must be reformed to bring it into the future, not to chase the immediate skills shortages. While we do need to maintain strong efforts in areas of education linked to software programming, design and engineering, as well as maths and sciences, we also need to develop complex aesthetic, social and design-intensive capabilities. And the former is probably less important in the longer run than the latter, especially if we can succeed in aligning ‘softer’ skills with entrepreneurial and business capabilities on the ground.

At the pre-tertiary education level, we need to focus our education on developing basic literacy skills in arts, humanities, as well as in sciences and ICT. Early exposure to web-based applications, even some coding, is a good anchor for such literacy. Alongside, we need to revise our curricula for history, literature and arts. Religious education and mandatory Irish must be absorbed into electives. Time and teaching resources freed from these should be used to give students good anchoring in world history, philosophy, logic, and art.

It is time for investing in specialization-focused schools to reflect not geographic distribution of students, but students’ talents and interests. Specialist curriculum schools focusing, differentially, on arts and humanities, as well as those focusing on sciences and ICT should be prioritized for future development in larger urban areas. Every IT school and University in the country should be required to run significant Young Scholars Academies offering regular engagement opportunities for children with talent and aptitude. These Academies can act as formal facilitators for their entry into higher education.
We also need to remove our reliance on standardized examinations for progression of students through the entire system of education.

Third level education must support the objectives of making our workforce skills and knowledge base broader. We need restore a four-year degree system. Third level degrees curriculum must explicitly require, not just encourage, students’ exposure to studies beyond their immediate major. Students in technical fields must be exposed to basics of humanities and arts. Students in arts and humanities must be literate in ICT and sciences.

Fourth level education too should be used to further enhance the above processes. We need to develop cross-collaborative MSc and PhD degrees and provide for supplementary degree programmes (joint MSc and diploma packages) for students interested in working on the boundaries of diverse disciplines, such as, for example, creative arts and technology, quantitative analytics and marketing, behavioural economics, and product and servcies design. Industry experience and achievement should form the foundation of enlarged and better-structured adjunct faculty. Subject to peer review, industry research should count as an integral part of academic and adjunct faculty evaluations.

In life-long learning, we need flexible programmes allowing for research-focused studies that can stretch over a number of years. Linked directly to work-related projects and topics, these should lead to degrees being awarded in the end, subject, again, to mature students engaging with minimum of a broader curriculum outside their field of competency.

Box-out:

This week, CSO published the latest data on new planning permissions granted in Ireland, covering Q1 2013. The publication was greeted with a chorus of 'good news' reports, as data showed increases in the Number of Dwelling Units approved. Per official statistics, these rose 31% for houses, and 3.9% for apartments. All increases reported reference quarterly rises. There are several problems with the upbeat reports, however. Number of permissions for houses actually fell year-on-year by a significant 9.31% reaching the second lowest level in history of the data series. Number of permissions for apartments also fell, by 18.4% on Q1 2012. More ominously, aggregate activity in the construction sector, as measured by the new permissions granted, shrunk across the board. Total number of planning permissions granted in the state was down 1.35% quarter-on-quarter and down 2.76% year on year, hitting absolute lowest point for any quarter since Q1 1975. Across the board, it is pretty safe to say that the Q1 2013 data does not warrant much enthusiasm, despite the aggressive spin put on it by some media reports.

13/5/2013: Work Hours, Education Years and Wages

A fascinating fact: "An average person born in the United States in the second half of the 19th century completed 7 years of schooling and spent 58 hours a week working in the market. In contrast, an average person born at the end of the 20th century completed 14 years of schooling and spent 40 hours a week working. In the span of 100 years, completed years of schooling doubled and working hours decreased by 30%."

Restuccia, Diego and Vandenbroucke, Guillaume ask "What explains these trends?"

Their paper (link below) quantitatively assessed "the contribution of exogenous variations in productivity (wage) and life expectancy in accounting for the secular trends in educational attainment and hours of work."

And the result? "We find that the observed increase in wages and life expectancy accounts for 80% of the increase in years of schooling and 88% of the reduction in hours of work. Rising wages alone account for 75% of the increase in schooling and almost all the decrease in hours in the model, whereas rising life expectancy alone accounts for 25% of the increase in schooling and almost none of the decrease in hours of work."

Restuccia, Diego and Vandenbroucke, Guillaume, A Century of Human Capital and Hours (July 2013). Economic Inquiry, Vol. 51, Issue 3, pp. 1849-1866, 2013. http://ssrn.com/abstract=2261571

Aside 1: note that higher wages (when aligned with higher productivity) imply higher human capital intensity and lower hours of wrok supplied.

Aside 2: there seem to be no control for the reporting of hours supplied. In mid-19th century and even in first half of 20th century, most of work performed was time-sheeted. Today, majority of us do not have time cards, so on the surface, our contracts say 40 hours per week, in reality this means 60 hours per week.

3/2/2012: De Kaufman Door 1

Kaufman Foundation - a research centre for studying entrepreneurship - runs quarterly reports on the panel of economics bloggers. These reports contain some brilliant insights into the cutting edge policies as well as some reaffirmations of orthodoxies.

Here's the one I liked in the current Q1 2012 issue:

So let's run through these in the context of the latest conceptual reforms ideas floating in the Irish education system:

• Voucher system - 76% of bloggers are in favor and 11% opposing (remember - these responses come from the Left, Right, Libertarian, professional, academic etc economists). In Ireland, of course the idea of parental choice is anathema to the Department of Education and the rest of the crowd that is setting the education agenda.
• Charter schools (characterized by greater independence, more parental engagement in all aspects of schooling etc) - 74% of bloggers agree, 11% disagree. In Ireland - calls to shut down independent schools abound and new non-state schools are having problems getting teachers funds.
• Teacher choice - 59% in favor, 19% opposed - less decisive vote, but the idea would be a total 'No go' for Ireland.
• Flexibility for principals - 9% opposed, 81% in favor. Not the flavor of the month for the DofE or the rest of the education policy pack.
• Higher teacher pay overall gets 10% opposition and 53% support, but merit pay for teachers idea gets 9% opposition and 74% support. Which of course will never ever take hold in Ireland.
• Transparency for value-added gets 8% opposition and 71% support. Do note the emerging clear theme - accountability and independence are valued, merit to be rewarded... oh, no, these are not happening here in Ireland.
• Higher standards - 30% oppose, 33% support because, presumably, it is hard to really define or trust 'standards'. 
• Greater federal involvement gets support from 12% of respondents and is opposed by 59%, while less federal involvement gets support from 57% and opposition from 18%. Well, now, I am not exactly an education specialist, but I did notice as of late that Irish debate about the secondary education has distinctly taken an anti-private schools turn. And there are pretty powerful voices here calling for nationalization of secondary education. Hmmm...

Of course, the above policy options are not exhaustive nor comprehensive. And yes, there are big differences between the US and Irish systems. But it is pretty clear to me that the above preferences expressed by US economics bloggers for more transparency, more accountability, more independence in the education system run diametrically counter to the prevailing ideology surrounding education reforms in Ireland today.

How (not) to spin data

The latest press-release from CSO’s QNHS-based analysis of Q2 2002 – Q2 2008 data on educational attainment sounds self-congratulatory:

“In the second quarter of 2008, 29% of all persons aged 15-64 had attained a third level qualification. The proportion of people with a third level qualification increased steadily over the years since Q2 2002 when the comparable level was just over one fifth (22%). Excluding 15-24 year olds (the age group most likely to be still in education), just over one third (34%) of 25-64 year olds had a third level qualification, and this had also increased gradually annually since 2002 when the level was 25%. … The latest available figures for all EU member states showed that, in the second quarter of 2007, 30% of all 25-34 year olds had a third level qualification. The equivalent figure for Ireland was 44%, ranking the country second in the EU only to Cyprus (47%). The lowest levels of third level attainment were reported in Czech Republic (16%), Slovakia (18%), Italy (19%) and Austria (19%).”

There is more spin in these remarks than truth about the quality of our labour force. Here is why.

Based on the set of three main international rankings, Ireland’s third level education system ranks 22nd out of 38 countries, or 15th within EU27. Less than 20% of our entire crop of third level attendees and graduates come from the universities and institutes that make it into top 500 in the world rankings. Furthermore, CSO own data shows that only 18% of our 15-64 year olds have managed to actually complete a third year degree - a real measure of the ‘third-level qualification’ attainment.

This suggests that only ca 3.6% of our labour force had a real, internationally competitive educational qualification - i.e a Bachelor's degree or above. For comparison, the figure is closer to 9% in the US and 10% in the UK.

Figure 3 in the CSO report shows that Cyprus leads EU27 in the proportion of the labour force with third level qualification. Cyprus actually fails to rank amongst top 50 countries around the world for quality of its 3rd level education. Apart from Cyprus hardly constituting a worthy competitor for the 'knowledge' economy-bound Ireland Inc, virtually all of the countries named by CSO as being laggards to Ireland score better than Ireland in the university league tables. May it be the case that the CSO's (and EU's) methodology for measuring success in education is confusing quantity with quality?

A regression of the proportion of the 3rd level education attainment for 25-34 year olds on the proportion of early school dropouts shows a strongly negative relation between two variables:
For the entire set of countries (EU27): y = -0.2051x + 33.649 R2 = 0.0079
For small EU countries sub-sample: y = -0.2966x + 35.017 R2 = 0.0648
This is logical, as more drop outs should, in theory, imply fewer potential graduates. In both cases, Ireland and Cyprus come up as strong and influential outliers. Exactly the same happens when we look at the positive relationship between the proportion of the graduates with completed secondary education and those with third level qualification.

Now, considering the two equations above, two additional facts, not considered by the CSO, emerge as being of interest to the case of Ireland's education success. First note the difference in the intercepts between the two groups of countries. This suggests that an average small EU state has a higher share of the labour force with thrid level education. Second, the adverse impact of early school drop outs on educational attainment is stronger for smaller countries than for the larger states. In some ways, this again points to some problems with the CSO data, because, as it turns out, Ireland scores almost exactly the average for the smaller EU15 states in terms of the share of the population who failed to complete secondary education. So by both of these facts, Ireland is an outlier - an exception to the rule.

Hmmm… something is not quite right.

One possible explanation of this puzzle is that somehow Irish society is so polarized across the social demarcation lines that a substantial share of population has extremely poor graduation rates for secondary education, while another substantial sub-group has extremely high graduation rates for third level education. But this would not explain the case of Cyprus where income inequality is different in composition and magnitude from Ireland.

Another explanation is that Ireland, and possibly Cyprus, suffer from quality dillution in education at the third level, also known as 'dumbing down' of our universities. Much has been written and said in public about this matter, but the latest CSO numbers may be providing an indirect hint at the extent of the problem. If the vast majority of Irish Universities and third level institutions cannot reach top 500 in the world league tables, an army of the graduates (and, given the CSO methodology, an even bigger army of the 'near' graduates) they produce might just deliver the equivalent of the Chariman Mao's Great Leap Forward in education - massive boost in quantity, at a cost to quality.