Prof Colm Harmon, UCD Geary Institute

Micropolicy Setting Professor Colm Harmon UCD Geary Institute & University of Sydney 3rd March 2011

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Overview for Today We have a lot of short term problems but this forces clear choices and a strong effort not to repeat the mistakes of the past.

A common theme is evaluation and impact - to be clear I am discussing the causal determinants of outcomes from econometric evaluation models.

Another common theme is the lack of Irish data evidence for issues.

Microeconomic policy design and evaluation falls into (roughly) 5 groups: (1) “Pre-Post” comparisons.

(2) “Cross-sectional” comparisons that “match” participants to nonparticipants.

(3) Cohort Comparisons: participants to previous groups of nonparticipants (4) Panel Data Comparisons - Combination of (1) and (2).

(5) Social experiments and control groups.

We effectively only do (1) in Ireland, perhaps (3) - more needed.

2

What I think is missing Ireland does not do THREE major things which creates scattered, poorly structured policy that fails an ‘economics litmus test’: 1. Invest in the design, implementation, evaluation and scale up/ shut down of social policy.

2. Have any guiding framework for social policy akin, say to the UK Social Mobility White Paper.

3. Have much capacity in microeconomic policy hence it is grossly undervalued.

Results: • Rising inequality that increased during boom.

• Below average investment in education.

• Bottom of OECD countries for early childhood care & education.

• Social policy seen as ‘soft’ - current economic debates show this.

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Not all cuts save money....

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Quick lesson from economics of early childhood investment:

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quality good for outcomes bad quality damaging quality investment has most impact on low SES children.

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Underpinning logic based on US evidence, often from long term follow up of a small cohort of mid-1960s children.

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‘Madoff’ like returns often quoted - 17:1

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Not clear this can be replicated in Ireland or indeed Europe but basic point remains 4

A Basic Story 5

Remember - Evaluations Measure Impact!

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Requires timely information on many outcomes of interest Data collection can take a long time.

Government must foster creation of data designed to address specific policy questions as they arise so evaluation can respond faster to demands.

• Improve range of variables on administrative data bases by combining data bases from different government agencies.

• Washington State: Combined quarterly earnings data with transcripts from community colleges.

• Illinois: Combined prison entry and exit records with records on social welfare programmes and on quarterly earnings.

• Sounds hard because we are old! Lots of computer science majors can do this! Technically easy due to common identifiers.

• Hard part - will managers share data? Data protection?

Incentives not to share.

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Evaluation is Challenging • You need to appreciate the problem fully and also have information to support that Ashenfelter’s Dip phenomena.

• No person can be in two places at the same time but techniques can get around that.

• People choose to participate in some programmes - Jobbridge is a good example.

Viewing Policy through this prism adds substance to your debate....

• Remember - we observe “outcomes” associated with policies but we need to that these policies “caused” outcomes to change.

• Define these changes in outcomes as an “impact.”

• We do not observe counterfactual outcomes.

• Must solve the “evaluation problem” - better technique • Missing data problem.

• Policy design problem - often too late to evaluate.

Some 'take home' issues from today Applied microeconomic policy in Ireland is underpowered.

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How do we get this domain taken seriously by the policymaker?

Mainstreaming evaluation remains a challenge & attentions are elsewhere now.

Data - if we can’t measure it we can’t evaluate it

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administrative data linkage explodes the possibilities. social experiments offer a compelling solution to evaluation problem.

How can we (academics) help?

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Data issues (doctoral students? masterclasses in applied data skills?)

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Training programmes for both the NGO and Policy community?

Strong efforts to improve the crosswalks between sectors.

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Real-Politik “Not for the first time, as an elected official, I envy economists. Economists can explain that a given decision was the best one that could be made...they can contrast what happened to what would have happened. No one has ever gotten reelected where the bumper sticker said, "It would have been worse without me." You probably can get tenure with that.

But you can't win office.�

US Congressman Barney Frank, 2009