London School of Economics EOPP: Economic Organisation and Public Policy Programme LSE
EOPP: Economic Organisation and Public Policy Programme

EOPP Happy Hour

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Readings this term

In general, there should be no planning restrictions regarding the height, size and location of new buildings in central London.

Presenter: Abel Schumann
Date: 13/1/12

House prices in London are among the highest in World. Nevertheless, large parts of the city are dominated by fairly low-rise developments. This is arguably due to planning regulations that limit height, size and location of new developments. By keeping the supply of housing and office space artificially low, these regulations inflate house prices and cause welfare losses for a majority of Londoners.

What are the intentions of the existing regulations?

What are the upsides, what are the downsides of increasing population density in central areas of London?

How to deal with the externalities of new high-rise developments?

Which part of existing regulations makes sense from a welfare perspective and which is due to the NIMBY (not-in-my-backyard) effect?

Some stylized facts:

-          Construction costs for residential high-rises of medium to high standard  are about £1300-£2000  per square meter, but average house prices in central London exceed £5000 per square metre.

-          Usually, planning permissions will only be granted if new developments adhere to size and appearance of existing buildings in the neighbourhood.

-          The height of buildings in large parts of London is restricted to ensure unobstructed views of Westminster, St. Paul’s and other landmarks from distant viewpoints such as Richmond Park, Greenwich Observatory and Hampstead Heath.

-          More than 90 percent of Westminster and roughly 50 percent of Camden, Islington, Hackney, City and Tower Hamlets are conservation areas in which essentially no new construction is possible.

-          There is a general height limit of 1000 feet for all buildings in London.


Glaeser et al. (2004): Why is Manhattan so Expensive? Regulation and the Rise in House Prices (

The London Plan (general planning guidelines for London) (

The Camden Planning Guidance as an example for existing planning regulations (see especially points 2.10, 2.13, 2.14 and 2.15 for the dimensions of new buildings) (
A good education

Date: 2/12/11
How far should government interfere in influencing the course choices of students (in particular those studying in a publicly funded system)?

Vocational qualifications were given a big push by the last Labour government, they were intended to provide students with work-related skills and spanned subjects in health, hair and beauty, construction or catering.

Since then, the numbers of children being entered for traditional academic subjects has declined, while the numbers taking vocational qualifications have soared. One concern is that schools might be pushing students into “easier” subjects (e.g. leisure and tourism) to improve theirresults.

In an effort to reverse this trend the Coalition are stripping vocational subjects from schools league tables and will start measuring schools by the proportion of their pupils achieving at least a C grade in “English Baccalaureate” subjects (English, maths, a science, a foreign language and either history or geography)

Another complication is that, as the Coalition pursues an expansion in charter schools, it stands to lose control over the curriculum in such schools while it continues to fund them.

The questions I would like to discuss are:
-          What arguments might there be for such interference of the government in student’s choices of courses? (e.g. externalities, behavioural constraints…)
-          Even if education is free, can we not trust market forces to ensure students make the best choices considering the effect on their future prospects?
-          If we think there is an argument for interfering, do we think it should be towards encouraging practical/narrow skillsets or promoting a more well-rounded education?
-          Given that systems differ substantially between countries, which countries do we think have got it right?
All the MP3s I download are paid for, just not by me

Presenter: Jon Colmer
Date: 23/11/11
Should Intellectual property rights for music be maintained?

With the rise of the internet, and increases in technology (faster broadband) the costs of sharing music have dramatically declined. Is this a good thing? Should more resources be spent on monitoring and enforcing file sharing or should intellectual property for music be abandoned?

Who does current copyright protection benefit?  The consumers and creators of music, or record companies and music publishers?

Would reductions in copyright protection reduce the incentive to create good music in the future? 

If copyright protection was to be reduced, to what degree should this apply to other forms of media, i.e. television, film, literature? 
Should doctors be allowed to prescribe placebos?

Presenter: Laura Derksen
Date: 18/11/11

Placebos (sugar pills) have been shown to be effective in treating a range of diseases and symptoms, including pain, depression, anxiety, Parkinson's disease, gastric ulcers, and chronic fatigue syndrome. They seem to work not only by causing a patient to feel better psychologically but also by actually improving certain conditions. 

Given this strange effect, should doctors prescribe placebos, and under what circumstances? 

Should placebo treatments receive NHS funding?

What if the placebo in question is quite expensive?

What if the therapy is administered by someone who believes the treatment to be genuine? 

What if a more effective medicine exists but a patient continues to seek the placebo treatment?


Placebos can work even if a patient doesn't believe in them:

Sanctions: hurting the citizens or destabilizing the government?

Presenter: Mohammad Vesal
Date: 11/11/11
The use of UN resolutions to impose sanction on countries not respecting the international rules has been an old age device. Countries ratifying sanctions argue they will impose a cost on the government and will convince the authorities (if harsh enough) to obey the international rules. They usually argue the sanctions are for the good of the citizens of the countries and it hold up authorities accountable to the international rules of human rights, ….

Despite these there is no sign about the effectiveness of sanctions in the past and it is not clear how we distinguish between the costs on the government and costs on normal citizens. If anything  the government under sanctions can blame the foreigners for economic failures and raise the sense of unity (and hence authority) in the populace.

In this week discussion let’s consider the example of UN backed and unilateral sanctions against Iran. In the past 4 years the West has imposed new rounds of sanctions to convince the Iranian government to stop its nuclear program. The sanctions prohibit any export of items related to nuclear or military purposes or those that might have dual usage.

The citizens are clearly feeling the pain of the sanctions along various dimensions. The financial transactions with the rest of the world are getting extremely difficult. The civil aviation, shipping industry, oil and gas industry and other industries are affected.

As an example in the past six year, more than 700 Iranians are killed in 13 aircraft crashes and accidents. This is claimed to be mainly because sanctions prevent Iran access to buy new aircrafts or spare parts directly from the suppliers. As another example, many major contractors in Iran oil and gas industry dropped out because of the recent rounds of sanctions and the sector is suffering from underinvestment.

Thinking about the suffering of the citizens and no sign of change in government policies one might wonder about the effectiveness of sanctions and whether this is the right way to go.

How could one possibly justify sanctions on moral grounds?

Is it possible that sanctions stabilize rather than destabilize the government?

What are the costs of the sanctions on those who impose them?!

References: good overview of the impact of sanctions on Iran on the recent structural reforms in Iran Aviation Industry and Sanctions sanctions helping the regime (interview)
7 billion and counting: Do we have an overpopulation problem?

Presenter: Oliver Pardo
Date: 4/11/10

This year we reached the astonishing number of 7 billion people living in this planet (around 7% of the number of people who have ever lived). Whenever this type of threshold is reached, concerns about our sustainability usually arise.

Is the current population trend sustainable?
Has been Malthus undoubtedly been refuted?
Does having a child have a negative externality on others?
Should the state constrain individuals' fertility choices, like China does?
Is there actually any overpopulation problem?
Is there any bound on the number of people the planet can sustain?

Some background readings:
On China's one child policy:
On scepticism of overpopulation:
A voice from the other side:
The Limits of the Right to Protest

Presenter: Sam Marden
Date: 28/10/11

Recently the ‘occupy something’ movement has engaged in high profile acts of low-level ‘civil disobedience’ around the world. Most notably in London, where the future of the tent city outside of St. Pauls hangs in the balance, in Oakland California, where protestors were forcibly dispersed, and in New York where protestors crossing the Brooklyn Bridge were arrested.
The right to protest is considered an important element of liberal democracy, and protestors and commentators have compared the occupy movement to the various pro-democracy movements that comprised the Arab spring, it is however not clear the extent to which the protestors enjoy widespread support. Furthermore, many of the protests potentially impose large costs on others. Closure of one of Manhattan’s bridges is extremely costly even if only temporarily, the closure of St. Pauls is said to cost the church £16,000 per day, and adjacent businesses have claimed that revenues are down 80% compared to normal. Unlike more traditional demonstrations, protest camps can continue for long periods of time with St. Pauls protestors vowing to stay for ‘years’. Recent British examples of long running protests include Brian Haws anti-Iraq war camp was in Parliament Square for the best part of a decade, while the anti-Nuclear weapons protest at Greenham Common RAF lasted 20 years.
Questions for debate:
If non-disruptive forms of protest are available should protestors be allowed to protest in a disruptive fashion? To what extent should protestors be allowed to impose costs on others for political gain?
How much does the support of the general movement or specific protest matter? Should intensity of feeling count?
In order to be legitimate should a movement have a cause?
Should legislation strictly define what is and what isn’t an acceptable form of protest, or should the response be determined by public (and political) will, with all the messier legal implications that entails.
Should the fertility industry be regulated?

Presenter: Patrick Blanchenay
Date: 21/10/2011
In Europe, egg donors cannot be paid, but only compensated for their donation. In the UK, the maximum compensation has recently been raised from £250 to £750 for female donors of ovum.
In Europe there is also a limit on how many fertilised embryos can be implanted at once in the womb of the mother; no such restriction exists in the US. In some countries, law restricts conditions of anonymity for sperm donors.

It seems that there are wide discrepancies among developed countries in the realm of assisted fertility.

Should the fertility industry be regulated at all? If so, should we regulate pay/compensation, and the question of anonymity? Has the Coase theorem finally met its limit?

Some suggested readings:
- Compensation for ova donors raised to £750 in the UK:
- The US fertility industry is Wild West:
Assessing Titmuss (11970) suggestion that the introduction of monetary incentives can *reduce* blood donation.
Are we cheering for China?

Presenter: Jason Garred
Date: 14/10/11

China is growing. Millions upon millions of people are seeing their economic lives improve. We're wearing some very fashionable clothes and using cool electronic instruments (I just bought a brand new cassette player!) in whose production Chinese people played a major role. So why do so many people in the West appear to worry about the economic threat posed by China rather than unambiguously cheering its economic rise?

Consider, for example, this poll of a sample of Americans (, along with this sample of one American who might end up being quite influential (

What worries them (and possibly us)?

Are there negative spillovers?
Are jobs at risk?
Are input markets becoming overly tight?

Or is it something more subtle than this? Perhaps a worry that a relative decline in Western political power might lead to Western economic decline for political economy reasons? If so, what are these?

In this week's happy hour, why not come and tell us what you think? It's time to decide whether we're shouting 'Hey hey! Ho ho! China's rise has got to go!' or cheering 'Jia you!'

See you there!

Greece and the Future of the European Experiment

Presenter: Dan Stein
Date: 7/10/11

One again, Greece is teetering on the edge. What will/should happen,
and what does it mean for the Euro and European unity? Do we have any
macroeconomists in the crowd who can actually speak knowledgeably
about these issues? Well, you're just going to have to come and find
out.  Some possible sub-topics:

1. Should Greece default? Should it leave the Euro?
2. If Greece leaves the Euro will the euro collapse?
3. Is it in the best interest of France/Germany/ECB to bail out Greece?
4. Is Italy next?
5. Does it make any sense to have a currency union without a fiscal union?
6. Should inter-country bailouts be approved by voters?


The economist has a nice overview of the greek crisis (a bit old) and
its proposed solution:

Here's a current article about how the sovereign crisis is affecting the banks:

The WSJ weighs in:

As far as I know, Ken Rogoff is the man when it comes to sovereign
debt issues. I'm not sure which of his million papers on the issue is
best, but this is a good survey overview on different approaches to
dealing with sovereign bankruptcy:
Friday 18 March

Today, Mohammad presents “Nuclear Energy: Revisited”

Japan’s quake and tsunami have shaken the world. One side is the current unbelievable misery of many and the other is the unfolding nuclear crisis. The impact of the latter on other countries and the way public perceives nuclear energy is getting clearer as the news is getting out of pipeline:

Germany has already put on hold its politically tricky decision to extend the life of its nuclear plants. Recently China has announced a pause in its ambitious plans for nuclear growth (27 reactors under construction). (The Economist)

Probably these countries are asking: if even Japan—so well-organized and disciplined, so well prepared for disaster and so experienced in nuclear power—can come so close to catastrophe, what nuclear risks are their own countries running?

We all know the virtues of nuclear energy: very low co2 emissions and cheap energy. But what do we know about the costs of nuclear energy? Have Japanese disaster taught us something we didn’t know? Are we going to see a more cautious expansion of nuclear energy or this is just a bleep? After all, what are the alternative energy sources for Japan?

In a broader perspective, how do individuals take into account low-probability but catastrophic events? There are a few papers in Economics trying to explain asset market puzzles by incorporating rare catastrophes (e.g. Barro (2009) AER).

Some related articles on this:

Some statistics about nuclear dependence and also a more technical account of what happened in Fukushima:

Friday 11 March

This week, Prakarsh will ask us to think about the implications of the LSE’s recent “Gaddafigate” scandal.

It has been quite an eventful week for LSE and it would be great to know where we stand in today's happy hour.

Some questions to think about:

- Has LSE's reputation actually been hit by its links to the Gaddafi family?

- If yes, was Howard Davies right in stepping down to salvage it (after all, he was popular with students and staff)?

- Which of the following reasons is the most instrumental or was it their combination that led to the resignation?

1. PhD being awarded to Saif Gaddafi and accusations of it being plagiarized

2. Davies being an advisor to the Libya Sovereign Wealth Fund

3. Accepting charity from the Gaddafi foundation

- More generally, should universities not take money from dictatorial regimes (even if there are no strings attached)?

- Where do we go from here: should universities also look into sources of dubious tuition funding or if relatives of students are engaged in any wrongdoing?

- Are universities increasingly sacrificing academic independence through donations (or has it always or never happened)?

Some links:

Friday 4 March

This Friday, Jon presents “The Great Stagnation”

This week's happy hour discussion will focus on the central thesis of the new book/essay by GMU Professor and well-known economics blogger Tyler Cowen, titled "The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better."

You can get it as an ebook on Amazon (or Barnes & Noble) for $4, and if you don't have a device with e-reader capabilities (Kindle, iPad, smartphone) you can read it on your computer using the Amazon Kindle application. It is only 15,000 words long. Alternatively, there are plenty of good reviews out there, try the Economist for example.

I've summarised a few thoughts on the book below, more at the end.


The central claim of the book is that the US, (perhaps even the "West") have been undergoing a slowing in technological progress and growth of material well-being since the early 1970s. Cowen presents anecdotal support for the slowing of "game-changer" innovation (iPhones vs telephones; cars vs better cars), as well as data on the stagnation of median income (which also applies to the UK), slowing in patent registration, R&D output and productivity. It is well established that there have been few medical breakthroughs for many years. Apparently, "a lot of our recent innovations are private goods rather than public goods."

In Cowen's own words: "One way of summing up TGS is to cite local diminishing returns and yet longer-run increasing returns, though right now we're on the diminishing segment of that curve."

Points for discussion:

1. Do we agree with the notion of a "great stagnation"?

2. What do we think is the role for the internet? Does information technology and globalisation tip the balance in favour of "superstars"?

3. Do we think that the recent shift in UK education policy will exacerbate the problems?


Cowen argues that the primary cause for this slowing of progress is that we have exhausted a lot of the "low-hanging fruit" available to us. We no longer have vast amounts of unexploited land; educational enrolment is now sufficiently high that the marginal returns to just educating more people are much lower; major technological innovation is harder than it was; growing governments experience diminishing returns. Large parts of the economy are not subject to productivity-enhancing competitive pressure.

The book should not necessarily be interpreted as pessimistic. Cowen repeatedly mentions that technological plateaus are to be expected and are not likely to be permanent. The internet is one innovation that has improved the standard of living of many - the problem is it doesn't influence GDP all that much yet (Facebook only employs about 2,000, Twitter 300 and eBay about 17,000). In a low growth world we must learn to live within our means, which we've not yet managed. The financial crisis happened because "we thought we were richer than we were."

By the way, some think 3D printing may just be one of the game-changers we need.

In the Aghion and Howitt Schumpeterian framework, we can interpret the book's claims as a slowing of the expansion of the frontier, hence why China and India - currently in catch-up mode - have not yet been affected.

Friday 25 February

This evening, Dimitri presents “more news is bad news?

Last week the Home Office launched the website. It has is a detailed map with monthly figures on violent crime on every street of England and Wales. The website had 18m hits within an hour.

The launch and was somewhat controversial. The Home Office sees it as a tool of empowerment, which will make policing more transparent and accountable. It gives more information to the public, it argues, and that will make police more responsive.

Criticism however comes from many sides. One argument says that this could have distributional consequences, as home owners might end up being losers. Others contest the policy, arguing that it is just a gimmick, and that it detracts people from the main issues. For example, since the general elections the police force has lost 2,000 officers. Finally, there's some concern around the quality of the information.

In a more general level, critics say that this will actually increase the fear of crime, and that this is undesirable, as such fear is commonly seen as unjustified. Indeed, the CEP published a report

( from just before the UK general elections showing that crime in the UK today is nearly half of what it was in 1997, and still people think that crime is rising.

The whole debate around the new website brings a number of questions for discussion.

The first one relates to a recurrent theme in our happy hour

discussions: Can more information hurt, and if it can, what are the possible channels? Can we think here that some cognitive constrains might people lead to misread and misuse this information? If so, should we protect voters (or, more generally, agents) of information overflow?

Or can we think that the release of such information is of a strategic nature, and therefore we shouldn't give it too much credibility? If this government's platform is tackling crime, then don't they want us to believe that crime is a problem? Should we believe them? Do we expect this policy to elucidate the fact that crime has been falling--or will it just reinforce people's beliefs that, yes, there's a lot of violent crime going on? Then the ultimate question becomes, should we protect voters from such strategic release of information, and if so, how?

And finally, don't we know that the news media over reports crime?

Shouldn't the government try to correct such biases, instead of reinforcing them?

I'm a Guardian reader, so unfortunately most of the links (appart from the website and the CEP report are from there). By the way, there's a piece by a LSE PhD student:

One of the few pieces in favour of the policy:

Simon Jenkins:

The LSE PhD:

One more:

And another one:

Friday 11 February

This evening, Can presents “Is Democracy the Fate of All Nations?”

The civil unrest in many middle eastern and north African countries is under the spotlight. Particular attention is drawn to Egypt and constant battle of the demonstrators to oust Husni Mubarak. These events could motivate one to ask 3 questions below (among many):

1) Why did the protests spread in the region?

2) Why are they happening right now but did not happen years ago?

3) What will be the outcome of these protests?

I would like to center the discussion on the following basis:

1) Is democratization fate of all nations?

One may argue that all societies inevitably converge to democratic paths, but just follow different trajectories.

Another may argue that each society has their own convergent states, so every trajectory is different from another.

2) Can we install democracy (call it top-to-bottom exercise)? Even if we could, are institutions more robust in societies where path to democracy started from bottom and worked up?

Think of evolution vs. revolution type arguments.

3) Assuming one type of democracy is best for all societies, regardless race, culture, geography etc. what happens when the very foundations of democracy create conflict of interests among nations?

West wants democracy to spread to other parts of the world. But in middle-east it implies anti-west parties being ``elected''. Would west really want democracy for the region regardless the consequences? (Opinion piece on food prices and linkage to civil unrest) (Timeline of Egypt Unrest) (Robert Fisk on Arab World's revolt) (Parallels between riots of Egypt now and Iran in 1979)
Friday 4 February

This week, Janne will introduce our discussion on “The role journalists, markets and researchers in science journalism”

1. We often encounter more or less serious mistakes when our own research or research in general is discussed in media. Is scientific journalism that bad? Are there differences between different media and countries?

(One example:

2. What are the mechanisms that result in bad (if that is the case) reporting practices? Does competitive pressure lead to too little preparation time per story? Is the demand for high quality journalism low? Are media markets in bad equilibrium?

(I am sure there are numerous economics papers on these subjects but I am also sure you won’t be reading them today)

3. Do legal and cultural institutions lead to bad journalism? Need to hear "both sides" (this is law is some countries) grants almost as much voice to proponents of things such as homeopathy or global warming scepticism, in which consensus among scientific community is much more clear than what media coverage implies. If you are against the flow and willing to talk, you always get media coverage. This also gives business opportunities, for example to “smoking is not the cause of cancer and even if it was the smokers knew it was” lobbyists. There is a trade-off between making things look more controversial than they are (therefore delaying the obvious policies) and risk of getting the wrong answer to be the only "truth". How to solve this dilemma?


4. Should we as scientists make compromises to get our results into media? Given that part of our job is to make an impact beyond academy, and someone else will probably say something less useful about a given economic topic if we say nothing. Should we take stands outside our narrow fields of expertise? Should we go out with results that are mere correlations? Should we highlight the less important result is that will get us media coverage? What are the possible short run (e.g. better knowledge of the current topic in public) and long run (e.g. loss of credibility of the scientific community) effects of making such compromises and how should we weight these?

5. Are there differences in researchers that make the thresholds to go public differ from optimal, in a sense that research quality and importance should drive the decision (e.g. gender, field, seniority, political views)? Are there conventions in the profession of economics that cause suboptimal dissemination of information to the public? For example one attitude could be that junior researchers should concentrate on getting their tenures and senior researchers may participate in media activities. Should we design better practices and institutions on how knowledge is transmitted to media? For example, should one talk publicly only about work published in good enough journals.

Friday 28 January

This week, Mohammad Presents

Bankers’ Bonuses: How should bankers be paid? How much should they be paid?

It is now three years in a row that the bankers’ remuneration packages have received a lot of attention in the public and political sphere. For the past two years the heads of Britain’s five big firms have tried to be seen to exercise pay restraint, for instance waiving their bonuses or donating them to charity. That ceasefire will end this year1. This season promises to be as gory as ever. An expected £7 billion ($11 billion) bonus round in the City of London will be paid just as a wave of public-spending cuts are about to bite2.

I usually tend to think performance pay is essential for incentivizing workers in order to exert unobservable effort. In the case of financiers the unobservable effort may not be single dimensional meaning that they are choosing both the returns on investment and levels of risk3. Looking at bonuses this way raises some specific questions:

  1. Who is responsible for the decision of how much to be paid to bankers?

Some would say the government since bonuses are paid from profits buoyed by public subsidies (direct bailouts, bailout guarantee and implicit zero interest subsidy)4.

Others would argue it is in our interest to let the banks decide this because good managers must be paid to clean up the mess and maximize the value of public share and also tightening rules domestically leads to outflow of capital5.

  1. How should the optimal compensation package look like?

Some argue that bonuses are essential but they should be paid as shares of the company or should be based on long term performance measures. Thinking in favor of this argument we should bear in mind that managers at Lehman Brothers and Bear Stearns owned lots of shares yet ran their firms aground6.

Other might argue that maybe we don’t need this much of innovation in the banking sector and caps and taxes on the bankers are in the public interest even if they lead to a shrinking of the talents in the sector.




3. This idea is originally from Tim and Maitreesh recent working paper on the optimal structure of bonuses.



6. Ibid.

Other sources:

Friday 21 January

This week, Francisco presents

“Get rich or die tryin’“: Are we addicted to risk?

“Get rich or die tryin’“ is the title of debut album of rapper 50 Cent and it seems to be the motto of more and more people. Using a revealed preference argument, this make us believe that a significant number of people have preferences where the only satisfactory outcome is the maximum.

And it may be that this kind of behavior/preference is not restricted to a few individuals. We can think that the society as a whole have the same kind of behavior in several different situations:

· We take high risks to find new energy sources (e.g., risky oil drills and nuclear plants);

· We create new financial instruments, sometimes without careful thinking;

· Firms use high-risky/predatory strategies in litigations;

· War.

Are we addicted to risk?

Based on:'_(album)

Friday 13th of January

This week, Jason will introduce our discussion on “How should you have been educated?“

What children should be doing with their time is a topic on which many people, including children themselves, hold strong views, and the same has doubtless been the case for many centuries. Most adults believe that much or all of this time should involve 'education', which many (though surely not everyone!) would define as 'preparation for adult life'. But what is actually seen by the majority of people to constitute an appropriate education seems to vary widely across space and time.

One current trend in many places is towards more regimented activities and more time on academic subjects (and examinations on these) for young children, and away from unstructured play, as discussed for the US in this New York Times article. (link: In the UK, the new Education Secretary apparently believes (link: that one should look to the past for the appropriate way to educate children: "Most parents would rather their children had a traditional education, with children sitting in rows, learning the kings and queens of England, the great works of literature, proper mental arithmetic, algebra by the age of 11, modern foreign languages. That’s the best training of the mind and that’s how children will be able to compete."

Meanwhile, Boris Johnson, the mayor of London, bemoans (link: the decline of Latin teaching in the UK's state schools. Time for you to introspect – given your current place in society and life, look back on the various elements of your childhood education (from before school through the end of high school, both inside and outside school – so this also includes ‘play’ and ‘extracurricular activities’ of various kinds). Which elements did and didn’t constitute a ‘good’ education for you, given what you know about your adult life now?

Friday 26th of November

This week, Anne will present Does the quest for randomization make us lose sight of interesting research questions?

Does the quest for randomization make us lose sight of interesting research questions?

Randomized control trials are often criticized for low external validity, identifying only point estimates for a heterogeneous population, and not allowing us to understand the mechanisms underlying the effect of an intervention. Another concern, less often discussed, is the fact that the quest for randomization also puts restrictions on the questions that we can answer. Conducting an RCT requires a set of well-defined, measurable outcome indicators. This has made research on health and education particularly popular among development economists. Other interesting topics, such as political accountability or the access to justice, are less suitable for randomization, as outcomes in theses fields are more difficult to measure. As RCTs are conducted in real life time, they also prevent us from answering questions about the long-term change of cultural values, or the inter-generational transmission of ideas. Given that an RCT is a large investment in time and resources, randomistas are also unlikely to experiment with interventions whose effect is uncertain. At the same time, the “new generation RCTs” now use more and more sophisticated outcome indicators and are designed to disentangle different impact channels and understand their interaction (see links below for examples).

Some of the questions we can discuss tonight are “Does the quest for randomization prevent us from answering the most interesting research questions?” “Or does randomization instead guide us to the most interesting questions, as it forces us to think about interventions with strong potential for impact?” “Is randomization in this sense any different from other empirical methods, where the availability of data and the existence of an identification strategy also restrict the questions that can be answered?” “How can we ensure that the methodological concerns do not prevent us from answering the most interesting research questions?”

Friday 19th November

This week, Patrick will present "Should firms be allowed to vote?"

Corporate legal personality seems to have emerged to enable contracting

by firms, and to limit the problems created by personal limited

liability of the owners and of the workers.

But this may have perverse effects.

In January 2010, corporate legal personality has disturbingly led in the

US to invasion of the political sphere by corporations, the free speech

of which is now protected as that of "persons" (under the First

Amendment of the American constitution). (Citizens United vs. Federal

Election Commission) It means corporations are now free to sponsor

advertisements endorsing specific campaign candidates, by ruling of the

Supreme Court. But why stop there? If they are recognized as legal

persons, corporations should also be allowed to vote.

Is this the flip of the coin to excessive limited liability?

To make the case worse, one could argue that limited liability has

largely shifted the risk-bearing of entrepreneurship on owners (vs.

workers) at the corporate level, and it has shifted risk-bearing on

society (vs. owners) at a wider level, resulting in uncontrolled moral


So have we gone too far with corporate legal personality, or should we

take it all the way and grant firms the right to vote? Or should limited

liability be relaxed?

Some readings:



* Section 4.3 of Laffont-Martimort

Friday 12th November

This week, Kara will present “You’re not the boss of me!”: How do we allocate rights between parents, children, and the state?

The relationship between parent and child is often fraught with conflicts of interest, preference and obligation. For reasons both practical and philosophical, society gives many decision rights to parents regarding their children’s education, health, and social environment, among others. When the interests of the parents and the child conflict, what criteria should we use in allocating decision rights? What is the appropriate role of the state in mediating that conflict of interest? Furthermore, the state is often not an uninterested party in matters concerning children’s upbringing. To use a gratuitous military metaphor, when the battleground for the fight between social welfare and individual liberty is a child, what should be the rules of engagement?

Some interesting issues:

Naming (e.g. the brothers named Winner and Loser)

Education (compulsory attendance, homeschooling)

Health (right to refuse treatment, notification requirements)

Removal (Type I vs. Type II errors)

A few articles just to get you thinking:




Friday 5th November:

This week, Tara will present Should the state subsidise the production and consumption of art?

“The public is wonderfully tolerant. It forgives everything except genius.” - Oscar Wilde

“The history of modern art is also the history of the progressive loss of art's audience. Art has increasingly become the concern of the artist and the bafflement of the public.” - Paul Gauguin

Art is given a special place in many societies. In addition to providing enjoyment to consumers of art, it is often considered to play an important role in challenging norms and provoking thought among the general public. But does this mean that it should be subsidised by the state? Why should markets not decide the value of art and reward artists accordingly? Who gets to decide what qualifies as ‘art’ and how much value it gives to society?

There are a number of ways in which the state chooses to subsidise art. In 1969, Ireland introduced a law which made artists exempt from paying tax. In 2006, the government made what we like to call the ‘U2 amendment’, which put a cap on the exemption at 250,000 euro, but any earnings under that amount that come from ‘creative’ work are free from taxation. The arguments behind this are as follows:
• Art brings prestige to the country.
• Art generates income in other industries such as tourism.
• Artists’ incomes are highly variable and so income in one good year may be needed to survive a number of bad years.
• Often, art is not fully appreciated at the time in which it is created.
• This policy is a signal that Ireland holds artists in high regard.

The consumption of art is also often subsidized. In the UK and Ireland, entry into many museums is free. What is the justification for this? Does it make sense? Does it increase art consumption among the general public or does it just reduce the cost for art lovers? Also, the public pay a TV licence so that public TV and radio stations don’t have to rely on revenue from advertisements. This means that they don’t have to compete with other stations for viewers and can show ‘better’ and more educational programs. Does this assume that the general public don’t know what is good for them and therefore it shouldn’t be left to market forces to decide what TV shows should be broadcast?

What makes art different from other sectors? Are some forms of art more valuable to society than others? Are there externalities to the consumption of art? Or by subsidising art are we insulting the intelligence of the general public by assuming that they are not capable of judging the true value of art?
Friday 29th October: Too Many Immigrants?

This week Oliver will present Too many immigrants? Immigration policies in times of economic crisis.

Despite some convergence on income levels across countries, the gap between rich and poor remains wide. This incentivises people in developing countries to look for better opportunities in developed countries. But in times of economic crises, restricting immigration becomes a widespread popular demand in developed countries like the UK and the US. What should be the immigration policy for developed countries both in the long run and in times of economic crises?

· Should countries like the US persist on current policies despite the huge amount of illegal immigration?

· What should be done with illegal immigrants?

· Should they be rewarded with amnesties even though they broke the law?

· Should their presence be tolerated, even though they free ride on welfare state?

· What about their children (14th Amendment)?

· Should immigration caps be implemented, as proposed by the current UK government?

· Or should we implement new radical policies, like the one suggested by Gary Becker: Except obvious exceptions, anyone who pays say $50.000, should be allowed in

· What if the increasing immigration leads to a undesirable shift of values in developed societies?

· Should illegal as opposed to legal immigration be encouraged, as suggested by some libertarian economists?

Some background links:

Gary Becker's proposal:

Samuel Hunington's controversial essay:

Pritchett and Clemens argue for immigration as development aid:

Friday 22nd October: Fighting Fees

Last Tuesday the Independent Review of Higher Education and Student Finance led by Lord Browne of Madingley recommended removing the £3,290pa cap on UK student fees. The prospect of unlimited fees has lead to student protests, including at the LSE (see image attached). But do they have anything to complain about? Any UK student who is admitted to a UK higher education institution will have their fees paid upfront by the government, and repay the loan at a fixed percentage of earnings once they are working and earning over £21,000, with breaks in repayments for those whose earnings fall below threshold. Those who don’t manage to pay off their loan after 30 years will have the rest of their loan written off.

The private benefits of higher education in the UK are over 50% higher than the public benefits – a figure which is higher than for other OECD countries – though private returns are still higher in most OECD countries. So why do only Korea, Japan, New Zealand, Australia and Canada charge fees over $2,000?

What are the implications for equity of these proposals, and for access to the most selective higher education institutions? Are students able to make accurate decisions about the returns to higher education, and is this ability to discern returns and discriminate between universities heterogeneous across student groups? In the UK, since the introduction of higher fees (and more bursaries for poorer students) in 2006, access to higher education as a whole amongst those from the poorest in society has risen, but yet the proportion of students from lower income families attending the top third of universities has remained flat since the 1990s. On the other hand, is it equitable for students at the most and least selective universities to be paying the same fee of £3,290, as is currently the case?

Will these proposals, as promised, allow Universities to access levels of funding that will allow them to compete internationally, particularly with US schools? Or do the proposals simply shift the burden of paying for higher education from the taxpayer to the students, whilst in the wake of the Comprehensive Spending Review universities struggle to retain current levels of spending per student at levels of fees that students will accept?

Suggested readings

A brief summary: The Guardian Q&A on the Browne Recommendations:

Implications of the market for fees: From the BBC

Some economic analysis: IFS briefing on Browne Review Recommendations:

Widening participation at the most selective institutions:

Link to the Comprehensive Spending Review:

Longer reports:

1) The Browne Review: (there is an executive summary included in it, but to be honest, it’s pretty idiotic – just a statement of good things about the recommendations without any analysis

2) For international comparisons: OECD Education Indicators, September 2010: