1. In a recent paper in this journal (1), basic things go wrong with the economics. Economists are known for their fierce disagreements and spotty forecasting. Economists agree, however, on accounting principles. The balance of payments must be zero. Money is conserved. If you earn more than you spend, you build up savings. If you borrow money, someone has to lend it to you. If a country exports more than it imports, it builds up foreign assets. (1) violate this principle. Their capital account is zero by assumption, and their current account is balanced over time rather than at each point in time. Money disappears from Earth and reappears years later. This is bizarre. It is hard to think through the implications for their results. The optimization algorithm would shift income from the future to the present as that would increase net present welfare. Climate policy adds trade in emission permits, and so opens up a new channel to transfer money. More income is thus shifted to the present. Emission reduction costs are artificially lowered.
    Economists also agree on a few idealized states of the economy that make for useful yardsticks. (1) claim to use “Negishi weights” to balance the current account over time. Negishi weights, however, establish a mathematical equivalence between a hard-to-solve market economy and an easy-to-solve planned economy (2). (1) did not use Negishi weights. They used other weights instead. Therefore, their solution represents neither a market equilibrium nor a social optimum. It is not known what they computed. As per capita incomes are assumed to converge over time, the optimization algorithm would use international trade to transfer income – exporting below cost price – in the near future from poor to rich countries; and transfer income back in the distant future. As poor countries typically are exporters of emission permits, the costs of emission reduction are artificially inflated, and further so because the market does not clear.
    The abatement cost estimates of (1) are biased downwards because rapid technological progress is assumed for renewables but not for fossil fuels.
    Qualitatively, the main findings of (1) are not new (3): Without nuclear, baseline emissions increase and it is harder to meet any particular emissions target. There is one option less to reduce emissions. Climate policy is more expensive as result. Their quantitative results, although new, are meaningless, as argued above, and only roughly in line with previous studies because of cancelling errors.

    Reference List
       1.   Bauer, N., Brecha, R. J., and Luderer, G. (2012) The economics of nuclear power and the climate change mitigation policies. Proceedings of the National Academy of Sciences.
       2.   Negishi, T. (1960) Welfare Economics and Existence of an Equilibrium for a Competitive Economy. Metroeconomica 12, 92-97.
       3.   Weyant, John P. (1993) Costs of Reducing Global Carbon Emissions. Journal of Economic Perspectives 7, 27-46.

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  2. The latest university rankings are out. Ireland’s universities dropped a few places. Again. Cue calls for an end to austerity in third level education. Again. But the government does not have any money. The universities should learn to be excellent within their means.

    The universities are not that bad actually. Ireland used to punch well above its weight with two universities in the international sub-top plus a few third-tier institutions. The current rankings are closer to what you would expect from a small but rich country. Even with all the money in Ireland, a relative decline would be inevitable as Asian countries, from China to Saudi Arabia, are building world-class universities at a frightening pace.

    But Ireland’s universities could do better, also without extra money from the taxpayer. For that, they need to solve two core problems: scale and red tape.

    Ireland has more universities and institutes of technology than it needs. In Europe, Ireland is second only to Finland in the number of universities per head of population – and there are calls to add an eight university in Waterford. And all universities do everything. The result is many small departments. This is a waste of resources: Every department has a head, a director of undergraduate studies, a library committee, and so on. Small departments are not very visible, not to peers, not to funders, and not to international students. And small departments offer a narrow education, with few electives and little diversity.

    The remedy is simple. Rank the departments. Close the worst two. Reallocate the resources to the best two. And for the two or three departments in the middle, revoke their license to grant master’s titles and let them focus on improved undergraduate education. Tough times require tough measures. The Commission Van Vught recommends that the number of third-level institutions be cut by two-thirds.

    During the boom years, Irish universities were showered with money. Research of dubious quality was sponsored, academics with limited potential were appointed, and salaries rose to the world top. The 2010 report of the Comptroller and Auditor General revealed a shocking waste of public money and management systems that were so decrepit that some universities could not even tell how many people were on their payroll. The dons responded with their usual “we are special”. Budgetary discipline does not apply to the ivory tower! The Department of Public Expenditure (and Reform, apparently) duly placed the universities under strict controls. This has stifled innovation. It has undoubtedly stopped some daft ideas, but it has also blocked new courses and new research that covers their costs and even turn a profit. Some once-excellent departments are slowly dying as staff cannot be replaced and remaining faculty is crushed under a growing teaching and administrative burden. People are leaving for brighter shores or retiring early, further increasing pressure on those who stay. Minister Quinn yesterday announced even stricter controls.

    Instead, the universities should be set free. The government should give a subsidy for every paper published, perhaps weighted by quality or usefulness. The government should give a voucher to every student and let them take that to the university that best serves their needs. Anywhere in Europe if not the world. Recall that the aim is to give the best possible education to our kids – not to give the best education near to mummy. On top of that voucher, the government should offer student loans. After all, an education is primarily an investment in your future earnings.

    The universities should be allowed to set their fees at whatever level they think the (international) market can support. And the universities should be free to spend their budget as they see fit. Some will choose to give a large number of students a decent education at a decent price. Other universities will give excellent training to a select few. Some may even discard their undergraduates and focus on research grants, donations, and PhD programmes. And some universities will go bust. Radical? Sure (on the Ireland scale of radicalism). But the current approach is failing.

    The Irish system of higher education can no longer be propped up with money. There isn’t any. The choice is between continuing the gentle decline into mediocrity and a shake-up – along the lines I suggest above, or as recommended by the Commission Van Vught, or according to some other plan. However, the response to the Van Vught report suggest that the powers that be prefer to be forgotten as the people that did not try and did not win.

    That is a shame. Higher education in Ireland is still sound, and it would have a bright future if reformed.

    An edited version appeared in the Irish Independent of 5 October 2012. This piece was written before the release of the THE rankings.
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