Month: March 2013

Irish bank strikes 1966-1976

That is the title of this Wikipedia entry:

The Irish bank strikes between 1966 and 1976 were three strikes of about a years total duration which closed down all the clearing banks in the Republic of Ireland. The strikes provided economists a unique opportunity to study the functioning of a modern economy without access to bank deposits.[

The strikes affected all the associated banks which comprise of the Bank of Ireland, the Allied Irish Banks, the Northern Bank and the Ulster Bank. The strikes lasted from:

  • May 7 – July 30 1966
  • May 1 – November 17, 1970
  • June 28 – September 6, 1976

The longest strike was of six months in 1970. The Central Bank made limited facilities available to non-associated banks to issue cash. Not just financial transactions were affected, many property deals were also affected because the documents were kept in the banks. The country came through reasonably well in business terms despite the bank strike, a large firm Palgrave Murphy failed when the strike ended and settlements were made but its failure was probably inevitable anyway. The strike had little effect on the main economic concerns which were unemployment and industrial unrest caused by inflation.

Of course in contrast to current-day Cyprus, these were not banks otherwise attacked by runs and subject to insolvency.  So it is far from obvious that this Irish success (relatively speaking, that is) would be repeated.  Still, it is one example of how an economy copes once its banking system is shut down.

Here is further information about Ireland, note that “a highly personalized credit system without any definite time horizon for the eventual clearance of debits and credits substituted for the existing institutionalized banking system.”  Furthermore “Public houses and shops emerged as a substitute banking system.”

From al-Qaeda, on potential targets

The plan, which was sent to Bin Laden in March 2010, proposes attacks against large tunnels and bridges, dams, and financial centres. It also suggests attacking thinktanks, and names the Rand Corporation, a US government-funded research institute in California. The Love Parade, a dance music festival in Germany, is another proposed target.

The article is here, and for the pointer I thank Natasha.

Puzzles in search of answers: why are men losing ground?

“I think the greatest, most astonishing fact that I am aware of in social science right now is that women have been able to hear the labor market screaming out ‘You need more education’ and have been able to respond to that, and men have not,” said Michael Greenstone, an M.I.T. economics professor who was not involved in Professor Autor’s work. “And it’s very, very scary for economists because people should be responding to price signals. And men are not. It’s a fact in need of an explanation.”

Most economists agree that men have suffered disproportionately from economic changes like the decline of manufacturing. But careful analyses have found that such changes explain only a small part of the shrinking wage gap.

That is from a very excellent article by Binyamin Applebaum, on why men are (along some but not all margins) losing economic ground, especially below the ranks of the top earners.  I liked this sentence at the end:

Instead of making marriage more attractive, he [Christopher Jencks] said, it might be better for society to help make men more attractive.

As I once asked Bryan Caplan, “How many marriageable men do you think there are?  And what are the other women supposed to do?”

Sylvia Nasar is suing Columbia

A tenured professor at Columbia’s Graduate School of Journalism and co-director of that school’s business program filed a lawsuit on Tuesday accusing the university of misdirecting $4.5 million in funds over the last decade.

The professor, Sylvia Nasar, who is the John S. and James L. Knight professor of business journalism at Columbia and the author of the book “A Beautiful Mind,” which inspired the movie of the same name, charges in the suit that the university mishandled funds from a $1.5 million endowment provided by the Knight Foundation to improve the school’s teaching of business journalism.

The full story is here, but here is a bit more:

Terms of the agreement called for Columbia to pay the professorship’s salary on its own, and use foundation funds for additional salary and benefits, like research…

In 2000, the university hired Ms. Nasar…According to the lawsuit she was given a base salary, which the university paid for out of Knight Foundation funds, and was asked to pay most of her additional expenses out of her own pocket.

Ms. Nasar said in the suit that over time she spent $174,000 of her own money for research and other expenses. She is asking for punitive damages.

Ms. Nasar said in an interview that in September 2010 she had received an e-mail from the university listing more than $70,000 in what she described as “phantom I.T. charges” — expenses attributed to her that she says she never incurred.

Update on the bending of the health care cost curve

From Peter Orszag:

So is it possible to keep the trend going? On this, we have somewhat conflicting news. A recent report from the Altarum Institute found that slow growth is continuing at the national level, with total health-care spending rising slightly more than 4 percent in nominal terms from January 2012 to January 2013. On the other hand, incoming Medicare data suggest spending is speeding up a bit.

The Medicare data this year are complicated because the 2012 figures were artificially depressed by the calendar (the start of the 2012 fiscal year, on Oct. 1, 2011, fell on a weekend, so some payments were shifted back to fiscal year 2011.) Adjusting for these timing details, spending per beneficiary fell slightly in 2012. In the first five months of fiscal year 2013, by contrast, the adjusted spending per beneficiary figures show an increase of more than 2.5 percent. That is still very low by historical standards, but noticeably higher than in 2012. At this point, it is unclear what is driving the acceleration.

It seems, by the way, that if the last three years remain typical that about one-third of our long-term budget problem goes away.

What does a Cyprus deal look like?

Felix Salmon considers some possible scenarios, some of which involve the EU giving ground.  (Sadly the “sell northern Cyprus” option won’t be seriously debated.)  Daniel Davies offers numerous complex scenarios, some of which end badly.  Zero Hedge offers options.

How much is Cyprus per capita gdp lower if the country has no future as a financial center?  That is likely the case anyway.

If this is one of those waiting/bargaining games, for whom does the situation worsen most as time passes?  For how long can the Cypriot banks stay closed?  Can they ever really reopen again without a major bailout?  Germany seems to hold most of the cards.  Maybe Cyprus wins the stare-down game only if the costs of Cypriot collapse — to the Germans — appear higher as time passes.  That’s a difficult scenario to foresee, since it seems that only by having a Cypriot collapse do we get a much better sense of what those costs would be.

The broader problem of course is that Italy, Spain, and Portugal all have their eyes on any possible renegotiations.  It is very costly for the EU to give serious ground because then further and much larger demands come out of the woodwork.  Italian voters and political parties are encouraged too and I don’t have to tell you in which direction.

Why a coach should be ambiguous

From Jeff:

Remember how Mr. Miyagi taught The Karate Kid how to fight?  Wax on/Wax off. Paint the fence. Don’t forget to breathe. A coach is the coach because he knows what the student needs to do to advance. A big problem for coaches is that the most precocious students also (naturally) think they know what they need to learn.

If Mr. Miyagi told Daniel that he needed endless repetition of certain specific hand movements to learn karate, Daniel would have rebelled and demanded to learn more and advance more quickly. Mr. Miyagi used ambiguity to evade conflict.

An artist with natural gift for expression needs to learn convention. But she may disagree with the teacher about how much time should be spent learning convention. If the teacher simply gives her exercises to do without explanation her decision to comply will be on the basis of an overall judgment of whether this teacher, on average, knows best. To instead say “You must learn conventions, here are some exercises for that” runs the risk that the student moderates the exercises in line with her own judgment about the importance of convention.

Assorted links

Australian Travel Notes from a Policy Wonk

Here are some notes on Australia, mostly from and for policy wonks.

Australia has a private pension system. In the 1990s a Labor government, with the support of the trade unions, created a system of private pension accounts to supplement the basic, means-tested state pensions that Australia has had since 1909. Employers are required to pay 9% of an employee’s wages (scheduled to increase to 12%) into the private accounts. The funds can be withdrawn at retirement (age 60 for new workers), at age 65, or in exceptional cases with disability. Workers can invest their funds with very few restrictions–workers, for example, can choose among a variety of mutual funds (such as Vanguard etc.) or invest with non-profit funds run by trade union associations or they can even self-manage. The accounts, now totaling more than 1.4 trillion, have increased savings and made Australia a shareholder society. Some issues remain including fees which are probably too high (better default rules could help) and a lack of annuitization (annuitization of some portion of the lump sum payment should be required to avoid moral hazard)–see here for one critique–but overall the system appears very favorable relative to the American system.

Australia farmers pay for water at market prices. Water rights are traded and government water suppliers have either been privatized or put on a more stand-alone basis so that subsidies are minimized or at least made transparent.

Australia has one of the largest private school sectors in the developed world with some 40% of students in privately-run schools.

Australia has a balanced-budget principle (balanced over the business cycle) which has been effective although perhaps more important has been a widely held aversion to deficits combined with an understanding of sustainability and intergenerational fairness (factors which also played a role in the decision to create private, pre-funded pensions).

Prostitution is legal in much of Australia and some of Sydney’s brothels have made significant capital investments.

The Australian civil service is of very high quality. I spoke at the Department of Prime Minister and Cabinet, the Treasury and the Department of  Industry, Innovation, Science, Research and Tertiary Education (whew) and in all cases I found the civil servants to be highly informed and sophisticated. I was not the first to bring up the term rent seeking or to laugh at the latest political shenanigans which everyone acknowledged had been done for votes and not for sound reasons of public policy. All consistent with Yes, Minister but it gave me a different perspective.

More than a quarter of the Australian population is foreign born but there is very little cultural or economic tension about immigrants within Australia (with minor exceptions over refugees (“jumping the queue”) and occasional minor flare-ups over job visas). From cab drivers to MPs the word on immigration was, “Not an issue, mate.”

I had some of the best Thai food I have ever had anywhere. Spice I Am was excellent (thanks!) and Home on Sussex was outstanding.

The Manly ferry is a great way to see Sydney’s magnificent coastline.

The world owes Sydney barristas (New Zealand also) an enormous debt for the flat white, perhaps the best form of coffee yet perfected. The flat white has made its way to London but is only now becoming available in a few high end coffee shops in New York.  I eagerly await for this trend to extend to Fairfax as I am already jonesing for another.

Australia has great natural beauty. The British should have left the convicts behind and moved everyone else.

Addendum: And here is Lars Christensen on Australian monetary policy, also very good, and Reihan Salam with more on education.