Labor Productivity in G7 /OECD countries

How Irish Colleges have modified their grading in response to AI

By Katherine Donnelly

Fri 15 Sep 2023 at 03:30

Radical changes in how students are assessed are on the way in a move to combat the threat of artificial intelligence (AI) platforms such as ChatGPT.

The initial focus is on third level, but the Department of Education is keeping abreast of developments.

It is early days, but new guidelines are intended to lead to a complete reimagining of how students’ knowledge and skills are measured.

Already, higher education colleges are being told to abandon certain forms of assessment because they are “no longer be considered to be sufficiently robust to award scores which count towards official grades”.

These include do-at-home essays or similar assignments focused on subject knowledge, with a submission by a single deadline and where marks are based on structure, style, and information.

Third-level colleges are also advised to avoid unsupervised online assessments, such as multiple choice question (MCQ) exams, which count toward grades. There will be a greater reliance on oral assessments to check students’ understanding of a topic and to identify if they have cheated by using AI in an assignment without declaring it.

As third-level colleges return, guidelines have issued on how to tackle the threat posed by Generative AI (GenAI) platforms, which can mimic the work of humans and may encourage difficult-to-detect cheating by some students.

The same principles will also apply to the further education sector.

The guidelines have been drawn up under the auspices of the academic standards watchdog, Quality and Qualifications Ireland (QQI), and have recommendations for both educators and students. Crucially, QQI has also been sharing its expertise with Department of Education officials in the recent months.

While the QQI remit does not extend to second level, the agency is leading the way in Ireland in dealing with the AI challenge to education, leading to these discussions.

As post-primary school leaders consider the implications for their pupil assessments, a QQI representative briefed the Association of Community and Comprehensive Schools (ACCS) annual education conference yesterday.

The new GenAI guidelines take on a particular relevance as detailed work gets under way on reform of the Leaving Certificate, including plans to change the way school-leavers are assessed.

The guidelines set out what students and lecturers need to know and do in a world where GenAI can produce plausible written texts, images and graphics, computer code and mathematical solutions, and more on demand.

AI can have a legitimate educational use and students may even be encouraged to use such tools in their work, once they declare that they have done so.

But the way GenAI platforms such as ChatGPT and Bard are trained runs the risk of increasing intentional and unintentional academic misconduct by students.

The guidelines – called Generative Artificial Intelligence: Guidelines for Educators – have been drafted by QQI’s National Academic Integrity Network (NAIN) as a response to the swiftly evolving and developing field of GenAI.

Colleges are advised to act quickly and take short-term measures while also working toward a reimagination of student assessment in the longer term.

NAIN has advised an early review of all assessments at the level of individual programmes, the range of assessment types and the overall volume of assessment, to identify vulnerabilities.

Then, any assessment that may be completed satisfactorily by someone using AI without an appropriate level of understanding of the subject, or which is vulnerable to breaches of integrity, should be replaced or modified, the guidelines state.

However, colleges are told to resist any temptation to switch back to traditional end-of semester formal exams as the easiest way to ensure the integrity of assessment. The guidelines say that this would run counter to the strength of more authentic assessment, which aims to develop skills, knowledge in context and other professional and graduate attributes

Instead, they suggest a short term reweighting of assessments may be necessary to respond quickly, with a longer-term goal of a more holistic approach with a range of assessment types.

Colleges are also urged to be alert to the danger of over-assessment, including overlapping assessments, which can cause undue stress and pressure for students and can lead to cheating.

NAIN suggests lecturers agree a schedule of assessments and deadlines to address workload issues.

Rather than switching one assessment type for another, NAIN is urging some fresh approaches, such as focussing on the “process rather than the product” and giving credit for the stages that a student goes through in completing an assessment.

Other suggestions include in-class writing assignments or problem-solving tasks, or the inclusion of an oral component in which the students are asked to answer questions around a topic.

The guidelines will be fully aired at the Academic and research Integrity Conference Ireland 2023 , jointly hosted by NAIN and the University of Galway next month.

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Why there is a Gender Gap in South Korea and Japan ?

All East Asian tigers have converged economically with rich industrialised democracies, but only some have converged culturally, in terms of gender equality.

Singapore, Hong Kong and Taiwan are closing gender gaps in pay, seniority and parliamentary representation. Japan and South Korea, meanwhile, have the largest gender pay gaps in the OECD. Management remains 85% male. Female graduates are treated like secretaries, expected to pour the tea and run errands.

The Great Gender Divergence is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

In Europe, women are penalised by motherhood, but in Japan and Korea, motherhood is simply irrelevant: they are penalised whether they are mothers, or not. In Japan, a female graduate earns the same as a man who has only completed school.

Japanese businesses have lobbied again legislative change, even refusing sexual harassment training. Courts routinely deny systematic discrimination. Employers cannot even be sued for sexual harassment. Employees can only ask the Ministry of Labour for mediation. Accusations of abuse are mostly ignored.

Many hypotheses have been offered for Japan and South Korea’s gender pay gaps: Sexist norms

Firms demand long hours, so discriminate against mothers

Large firms train workers in-house, so never ran out of skilled labour

Spousal benefits (tax and health care) in Japan create perverse incentives.

All are unconvincing.

In 1900, East Asian women were generally unfree and oppressed, yet Singapore, Taiwan and Hong Kong have since become much more gender equal (achieving near parity in pay, seniority, and political representation)

Singaporean and Chinese women work much longer hours. Moreover, South Korea’s gender pay gap is unrelated to motherhood. All East Asian economies have experienced low unemployment. Japanese firms complain of labour shortages. Japanese and Korean firms are no longer especially large. Korea’s gender pay gap is larger than Japan’s, but it has no policy of spousal benefits.

What explains this discrepancy?

Japan and South Korea’s jobs for life Lifetime employment is the major, structural difference between East Asia’s tigers. During Japan’s economic miracle, company managers soothed labour unrest by rewarding both white collar and blue collar workers with career paths and job protection. This same system was adopted in Korea.

Given soaring productivity and double digit growth, large firms were confident in continued labour demand. Workers were hired, trained, then stayed till retirement. To maximise output, employees are expected to work extremely long hours, while also accepting re-assignment to new locations.

Commitment is rewarded by seniority pay - for years of service rather than productivity. Quid pro quo: work hard and you’ll be rewarded later. The wage premium for continued work in the same company is highest in Korea and Japan.

As one immigrant observes, "The salaryman/employer relationship is best characterized as “You swear yourself to us, body and soul, and in return we will isolate you from all risks”’.

Singapore, Hong Kong and Taiwan (SHKT) never developed this system of lifetime employment. Small and Medium-sized Enterprises (SMEs) - the main employers - could not afford long-term promises. Singapore has a flexi-wage system: most workers are paid a basic monthly wage and a variable performance bonus.

Sexist firms keep women subordinate Initially, some Japanese firms prohibited women from taking their entrance exams. From the mid-1980s, they experienced labour shortages, so increasingly incorporated women - but only as menial underlings.

Companies created distinct career paths. Men are on the career track (sōgōshoku); women are assigned the ‘dead-end clerical track’ (ippan shoku in Japanese). Destined to servitude, women are largely denied positions of responsibility. Personnel officers openly say that women are uncommitted or incapable.

Disrespect and discrimination loom large. Japanese and Korean women often feel pressured to quit upon marriage. Korean and Japanese wives typically become non-regular workers, where their earnings are 40% lower and lack benefits (like company pensions).

Hourly wages in Japan, by age, gender and employment status (Yamaguchi 2019) Most Korean and Japanese men, meanwhile, remain in regular work - on higher wages, with job security, and full benefits.

Economically, Japan and South Korea have now converged with rich industrialised countries. But culturally, there is a huge difference. Management is monopolised by men.

Share of women in management (Yamaguchi 2019) Low status men are made superior Gender income disparities are largest among low ranking and less educated workers. This fact has been totally overlooked, but it sheds light on our puzzle. Men at the bottom of the pyramid are treated like workhorses; they lack high pay, status and seniority. Company loyalty is rewarded with patriarchy. In Shintani Metals, blue-collar men are given positions of authority, then use rough language to bully junior women. This is nothing to do with work hours or pregnancy: it is patriarchy.

Low-status men are elevated above women. To summarise, Japan and South Korea have enshrined a system of lifetime employment and seniority pay for both blue collar and white collar workers. Firms are extremely sexist: men are treated as future managers, women are their subordinates. These inequalities are largest amongst low status regular workers. Fed up and frustrated, wives quit regular work to spend more time with their children and undertake non-regular, low paid work.

But why are South Korean and Japanese firms so sexist? Lifetime employment requires commitment from low-ranking men Lifetime employment generates a unique tension: employers want to heavily invest in workers’ skills, maximise working hours, while deterring exit. Seniority pay incentivises workers to stay, but promises of increments in twenty years time provide little solace to workers who are already exhausted.

Companies initially tried to rally employees by heralding them as ‘corporate warriors’ (kigyô senshi), ‘selfless devotion’, (messhi hôkô), ‘advance guard’ (senpei). But over the 1980s, many became disillusioned. New terms entered public discussions:

‘Death from overwork’ (karôshi)

‘Reluctance to go home’ (kitaku-kyohi)

‘Workers forced to live away from their families, due to job transfers (tanshin funin)

‘Window-sill tribe’ (madogiwa-zoku) referred to men who had been promoted to pointless jobs, and now simply stared to the scenery.

Headlines featured stories of men dying from exhaustion. Japan and South Korea have extraordinarily high rates of male suicide. Male discontent generates a profound problem for corporations modelled on lifetime commitment, heavy investment and seniority pay. While shorter work hours would help, this has not occurred. East Asian firms have sought to maintain global competitiveness through ultra long hours.

Now you see how this all fits together. South Korean and Japanese corporations have placated disgruntled men by entrenching patriarchy. If women were treated as equals that would be polluting, it would undermine men’s self respect and work commitment. Why give your life to a company that treats you like a mere woman?

Company men’s egos continue to be pampered after hours. Japanese firms allocated 5% of their operating budgets to nights out with charming hostesses. Masculine pleasure is corporate strategy.

Singapore, Hong Kong and Taiwan’s firms elevated women and recognised their competence Singapore, Hong Kong and Taiwan (‘SHKT’) never had these systems of seniority pay. Workers were simply rewarded with basic wages and productivity bonuses. SMEs didn’t heavily invest in their workers nor expect lifetime commitment. Firms did not need to secure unwavering loyalty. This systematic difference mediated their incorporation of women.

In the 1960s and 1970s, gender divisions of labour were broadly similar across East Asia. Women predominated in low paid work and exited upon marriage. Motherhood was central to their identities. By the 1980s, demand for skilled male labour was outpacing supply. Given high female education, low fertility and sky-high productivity, it became profitable to recruit and retain women. While SHKT firms were indubitably sexist, they didn’t face the same challenge of placating low-status men.

Lucrative job opportunities raised girls’ aspirations and status. By 1995, women comprised 50% of Taiwanese undergraduates – just like Britain. This sharply contrasts with Japan and South Korea’s much larger gender disparities. SHKT women overwhelmingly work full-time and make it to management. By 2002, 26% of Hong Kong managers were women. Even if their husbands become richer, Taiwanese women remain employed. Women want to work because they are valued. Singapore’s adjusted gender pay gap is just 6%.

Eager to engage fathers, the Government of Singapore runs a month-long campaign called “DADS for Life”.

The rise of respected, networked and wealthy women has increased their electoral competitiveness. Gender quotas were adopted in Taiwan after feminist lobbying. Women now comprise 42% of legislators. Once in power, Taiwanese women sponsor more bills and favour women’s interests. President Tsai Ing-wen was not only re-elected in 2020, but has also achieved a high approval rating (73%). She is the only female Asian head of state who is not from a political dynasty. Over in Singapore, the People’s Action Party introduced a quota to appeal to women voters. Since the 1990s, feminist coalitions have successfully overturned discriminatory laws. Attitudes are rapidly converging with Europe and North America.

South Korea and Japan have raised patriarchal expectations and now grapple with the consequences Non-elite men now struggle to secure status, social mobility and female servitude. Real wages have stagnated in Japan. Almost 30% of 50 year old Japanese men have never married. Thanks to historic sex ratios, Korean men face a skewed dating market. Low-ranking men really struggle to get girlfriends. Jilted guys jizz into women’s handbags, venting rage with ‘semen terrorism’. Frustrated Korean incels seethe with self-righteous indignation, vilifying women on 4Chan, and electing an anti-feminist president.

Throughout global history, sexists have aggressively resisted female pollution Male prestige has been preserved by banning women.

As one English unionist despaired in the early 1800s, “It was a crying evil to see women getting into the trade”. When Kidderminster women were put to work on new looms, all the male weavers went on strike, won within the week and maintained their monopoly of the trade. Working-class men also lobbied for restrictive labour legislation (such as the 1842 Mines Act). Only after labour shortages did firms eventually remove marriage bars.

Let’s not forget my former home, the University of Cambridge. When Senate House voted against women receiving degrees in 1921, male undergraduates triumphantly marched to Newnham College, grabbed a coal trolley and used it like ‘a battering-ram to smash down Clough Gate’.

Quentin Blake’s sketch of male undergraduates battering Clough Gate Early 20th century Russian men were also extremely prejudiced; unions relegated women to unskilled inferiors. But given high productivity targets and a massive shortage of workers (especially post WW2), Soviet firms reluctantly hired women. Like Japan, blue collar men often earned more than female graduates. But Russian women pressed ahead and persevered. Today, women comprise over forty percent of Russia’s published economists and business managers.

Industrialising communists and capitalists, the world over, have ultimately hired and promoted skilled women. South Korea and Japan buck the trend. Eager for the loyal commitment of low-ranking, exhausted and disgruntled men, companies have paid with patriarchy.

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Does Drug Decriminalisation work ?

Article by Anthony Faiola and Catarina Fernandes Martins

PORTO, Portugal — Addiction haunts the recesses of this ancient port city, as people with gaunt, clumsy hands lift crack pipes to lips, syringes to veins. Authorities are sealing off warren-like alleyways with iron bars and fencing in parks to halt the spread of encampments. A siege mentality is taking root in nearby enclaves of pricey condos and multimillion-euro homes.

Portugal decriminalized all drug use, including marijuana, cocaine and heroin, in an experiment that inspired similar efforts elsewhere, but now police are blaming a spike in the number of people who use drugs for a rise in crime. In one neighborhood, state-issued paraphernalia — powder-blue syringe caps, packets of citric acid for diluting heroin — litters sidewalks outside an elementary school.

Porto’s police have increased patrols to drug-plagued neighborhoods. But given existing laws, there’s only so much they can do. On a recent afternoon, an emaciated man in striped pants sleeping in front of a state-funded drug-use center awoke to a patrol of four officers. He sat up, then defiantly began assembling his crack pipe. Officers walked on, shaking their heads.

Portugal became a model for progressive jurisdictions around the world embracing drug decriminalization, such as the state of Oregon, but now there is talk of fatigue. Police are less motivated to register people who misuse drugs and there are year-long waits for state-funded rehabilitation treatment even as the number of people seeking help has fallen dramatically. The return in force of visible urban drug use, meanwhile, is leading the mayor and others here to ask an explosive question: Is it time to reconsider this country’s globally hailed drug model?

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“These days in Portugal, it is forbidden to smoke tobacco outside a school or a hospital. It is forbidden to advertise ice cream and sugar candies. And yet, it is allowed for [people] to be there, injecting drugs,” said Rui Moreira, Porto’s mayor. “We’ve normalized it.”

Reexamining drug policies

Cocaine production is at global highs. Seizures of amphetamine and methamphetamine have exploded. The multiyear pandemic deepened personal burdens and fomented an increase in use. In the United States alone, overdose deaths, fueled by opioids and deadly synthetic fentanyl, topped 100,000 in both 2021 and 2022 — or double what it was in 2015. According to the National Institutes of Health, 85 percent of the U.S. prison population has an active substance use disorder or was jailed for a crime involving drugs or drug use.

Across the Atlantic in Europe, tiny Portugal appeared to harbor an answer. In 2001, it threw out years of punishment-driven policies in favor of harm reduction by decriminalizing consumption of all drugs for personal use, including the purchase and possession of 10-day supplies. Consumption remains technically against the law, but instead of jail, people who misuse drugs are registered by police and referred to “dissuasion commissions.” For the most troubled people, authorities can impose sanctions including fines and recommend treatment. The decision to attend is voluntary.

Other countries have moved to channel drug offenses out of the penal system too. But none in Europe institutionalized that route more than Portugal. Within a few years, HIV transmission rates via syringes — one the biggest arguments for decriminalization — had plummeted. From 2000 to 2008, prison populations fell by 16.5 percent. Overdose rates dropped as public funds flowed from jails to rehabilitation. There was no evidence of a feared surge in use.

“None of the parade of horrors that decriminalization opponents in Portugal predicted, and that decriminalization opponents around the world typically invoke, has come to pass,” a landmark Cato Institute report stated in 2009.

But in the first substantial way since decriminalization passed, some Portuguese voices are now calling for a rethink of a policy that was long a proud point of national consensus. Urban visibility of the drug problem, police say, is at its worst point in decades and the state-funded nongovernmental organizations that have largely taken over responding to the people with addiction seem less concerned with treatment than affirming that lifetime drug use should be seen as a human right.

British Columbia to decriminalize small amounts of cocaine, heroin

“At the end of the day, the police have their hands tied,” said António Leitão da Silva, chief of Municipal Police of Porto, adding the situation now is comparable to the years before decriminalization was implemented.

A newly released national survey suggests the percent of adults who have used illicit drugs increased to 12.8 percent in 2022, up from 7.8 in 2001, though still below European averages. Portugal’s prevalence of high-risk opioid use is higher than Germany’s, but lower than that of France and Italy. But even proponents of decriminalization here admit that something is going wrong.

Overdose rates have hit 12-year highs and almost doubled in Lisbon from 2019 to 2023. Sewage samples in Lisbon show cocaine and ketamine detection is now among the highest in Europe, with elevated weekend rates suggesting party-heavy usage. In Porto, the collection of drug-related debris from city streets surged 24 percent between 2021 and 2022, with this year on track to far outpace the last. Crime — including robbery in public spaces — spiked 14 percent from 2021 to 2022, a rise police blame partly on increased drug use.

‘What happens when the police leave?’

On the south side of Porto, the hillside city’s sweet wine bars and medieval churches give way to rough-edged public housing complexes. Only one block from police headquarters stands a squat building. It’s a new state-funded drug use center, opened in the hopes of giving the growing ranks of street people with addictions to heroin and cocaine a place to use outside of public view.

Inside, a 47-year-old man struggled to mix ashy heroin with fragments of crystal crack, crushing both into a souped-up speedball. Observed by a nurse, he took the needle and jabbed it into a vein in his neck. “The veins on his hands have all dried up,” the nurse said matter-of-factly.

“I can’t use at home,” said another person at the center. “It causes too much trouble. So I make the drive an hour and a half here.”

In the tourist quarter in the shadow of Porto’s fortresslike cathedral, a social worker with a government-funded nonprofit, SAOM, handed out clean syringe packages to people who use heroin. When crack pipes are available, the social workers give them out. There’s no judgment, few questions, and no pressure to embrace change.

Summing up the philosophy, Luísa Neves, SAOM’s president, said: “You have to respect the user. If they want to use, it is their right.”

Elsewhere in the world, places implementing decriminalization are confronting challenges of their own. In Oregon — where the policy took effect in early 2021 openly citing Portugal as a model — attempts to funnel people with addiction from jail to rehabilitation have had a rough start. Police have shown little interest in handing out toothless citations for drug use, grants for treatment have lagged, and extremely few people are seeking voluntary rehabilitation. Meanwhile, overdoses this year in Portland, the state’s largest city, have surged 46 percent.

Oregon decriminalizes possession of hard drugs, as four other states legalize recreational marijuana

Some places that were early adopters of liberal drug policies have moved to curb permissive laws or backed away from more radical change. Amsterdam — a city long famous for its pot cafes — last month instituted a new ban on smoking marijuana in public places. In Norway, a Portugal-like plan to decriminalize drugs collapsed in 2021, and the country opted instead for a more piecemeal approach.

“When you first back off enforcement, there are not many people walking over the line that you’ve removed. And the public think it’s working really well,” said Keith Humphreys, former senior drug policy adviser in the Obama administration and a professor of psychiatry at Stanford University. “Then word gets out that there’s an open market, limits to penalties, and you start drawing in more drug users. Then you’ve got a more stable drug culture, and, frankly, it doesn’t look as good anymore.”

An eight-minute walk uphill from Porto’s safe drug-use center, in a neighborhood of elegant two-story homes with hedgerows of roses and hibiscus, neighbors talk of an “invasion” of people using drugs since the pandemic. Some gravitated here earlier, from a notorious public housing complex condemned and demolished nearly a decade ago. Others arrived more recently.

Over the last 18 months, a drug encampment sprung up below a school. More homes have been burgled. One neighbor said she found a person, naked from the waist down, shooting up outside her house gate. Another had her laundry stolen three times. Residents have launched U.S.-style neighborhood watches and hired private security guards — something exceedingly rare in Europe. Police deployed in force to the area three months ago to crack down on dealers, who can be and are being arrested. Patrol cars are now stationed in the neighborhood 24 hours a day, scattering people using drugs.

“But for how long?” said Rui Carrapa, one of the founders of the residents’ association Jardim Fluvial Free of Drugs. “We have to do something with the law. We know they can’t stay here forever. What happens when the police leave?”

Porto’s mayor and other critics, including neighborhood activist groups, are not calling for a wholesale repeal of decriminalization — but rather, a limited re-criminalization in urban areas and near schools and hospitals to address rising numbers of people misusing drugs. In a country where the drug policy is seen as sacred, even that has generated pushback — with nearly 200 experts signing an opposition letter after Porto’s city commission in January passed a resolution seeking national-level changes.

Tenuous gains

Experts argue that drug policy focused on jail time is still more harmful to society than decriminalization. While the slipping results here suggest the fragility of decriminalization’s benefits, they point to how funding and encouragement into rehabilitation programs have ebbed. The number of users being funneled into drug treatment in Portugal, for instance, has sharply fallen, going from a peak of 1,150 in 2015 to 352 in 2021, the most recent year available.

João Goulão — head of Portugal’s national institute on drug use and the architect of decriminalization — admitted to the local press in December that “what we have today no longer serves as an example to anyone.” Rather than fault the policy, however, he blames a lack of funding.

After years of economic crisis, Portugal decentralized its drug oversight operation in 2012. A funding drop from 76 million euros ($82.7 million) to 16 million euros ($17.4 million) forced Portugal’s main institution to outsource work previously done by the state to nonprofit groups, including the street teams that engage with people who use drugs. The country is now moving to create a new institute aimed at reinvigorating its drug prevention programs.

Twenty years ago, “we were quite successful in dealing with the big problem, the epidemic of heroin use and all the related effects,” Goulão said in an interview with The Washington Post. “But we have had a kind of disinvestment, a freezing in our response … and we lost some efficacy.”

Of two dozen street people who use drugs and were asked by The Post, not one said they’d ever appeared before one of Portugal’s Dissuasion Commissions, envisioned as conduits to funnel people with addiction into rehab. Police were observed passing people using drugs, not bothering to cite them — a step that is supposed to lead to registration for appearances before those commissions.

“Why?” replied one officer when asked why people were not being cited and referred to commissions. The officer spoke on the condition of anonymity because of not being authorized to speak with the press. “Because we know most of them. We’ve registered them before. Nothing changes if we take them in.”

Brutal Political Truths about India

How big is your Government

How big is your government?The Index of Economic Freedom is directionally correct at best
By Pradyumna Prasad
Jun 27, 2023

The Index of Economic Freedom ignores an important measure of government size: government ownership of the economy. This distorts its measurements of two entrepots: Singapore and Hong Kong

More importantly, it also ignores land ownership and regulations which shape the economy quite strongly in these two places. Hong Kong’s high rents can in part be blamed on its poor land management policy which incentivizes the government to limit the supply of land increasing rents.

It also ignores corporate economic power which hurts economic freedom strongly in economies with high levels of concentration in a few companies. The government isn’t the only entity hurting economic freedom.

And finally, it doesn’t consider infrastructure and other positive freedoms that make an economy worthwhile to invest, work and live in.

Every year the Heritage Foundation releases its Index of Economic Freedom, and every year the results are nearly the same. Singapore, Hong Kong and Ireland are usually at the top. They are then followed by Taiwan, New Zealand, a number of Nordic countries and so on.

But the Index is a flawed indicator in many ways. One of them is that the size of government component ignores an extremely important part of any economy: the ownership of the means of production. This gives a poor impression of the size of government and its effects in the two high-scoring entrepots in the index: Hong Kong and Singapore.

Singapore from the statistics looks as if it is one of the least interventionist states in the world. Tax rates are low, and it is extremely easy to set up a business in the city-state. Government spending is low at 16% of GDP in FY2022 which is lower than any OECD country. Taxes also are low at 13.8% of GDP in FY2022 which is also lower than any OECD country. It takes just two days to start a business in Singapore which is the second-lowest in the world.

And you wouldn’t be wrong entirely. Lots of companies set up their regional headquarters in Singapore because of the regulatory environment and lots of financial firms are present here for the low tax rates and ease of incorporation. But this focus on taxes and government spending as the measure of the size of government obscures an important fact in understanding Singapore’s government: it owns several companies that are essential to the functioning of Singapore.

The government (through holding company Temasek) has a minority stake in DBS Bank which is the largest company on the Singapore Exchange. The government has a majority stake in the two largest telecom companies: Singtel and Starhub, it has a majority stake in the flag carrier Singapore Airlines and it is the owner of CapitaLand (the largest real estate company in Singapore).

Out of the 25 largest companies listed on the Singapore Exchange (as of 26th June 2023, excluding real estate investment trusts) 9 companies were started by the government. It still maintains at least a minority stake in all of them and a majority stake in Singapore Airlines and ST Engineering. For most of them, it is still the largest shareholder.

Singapore’s Government Linked Companies do not appear to get any special advantages according to this 2003 study, and some of them - like SIA, Singtel, DBS and Keppel - have achieved success out of the home market.

Along with this, the government of Singapore owns the vast majority of land in Singapore. I’m not sure of the exact number (this 2021 article says over 80% while this OECD site says 90% without citing it), but it is likely to be above 80 or 90%. Nearly 80% of Singaporeans live in government built housing.

Now both of these facts about land ownership and government linked companies in the economy paint a very different picture of Singapore than the Index of Economic Freedom would give. For academics studying Singapore relying on the Index of Economic Freedom would mean that their data would misrepresent the size of Singapore’s government, and for foreign investors trying to enter Singapore this would mean they fundamentally misunderstand the business climate they are investing in.

Yes, Singapore is a country with low tax rates and a high ease of doing business. But it is also a country where government owned and linked companies are a non-negligible part of the economy and most of the country works, travels and sleeps on government owned land. And not mentioning this devalues the information in the Index of Economic Freedom!

Another country where the Index of Economic Freedom does not show the size of government well is Hong Kong. The Government of Hong Kong owns all land in the SAR, and gains substantial amounts of revenue leasing it. 20.6% of the Hong Kong SAR’s revenue came from land premiums. And this creates perverse incentives for the Hong Kong government, where the government is incentivized to increase land prices to increase its revenue and keep taxes low. As this WSJ article explains:

How does Hong Kong pull it off? Like much else in the city, the answer is down to real estate. The government owns functionally all land in Hong Kong, with leases auctioned off over time to raise revenue. Revenues accruing to the Capital Works Reserve Fund from land sales and premiums made up more than 20% of the government’s total revenues in the past five full fiscal years, almost twice as much as taxes on salaries.

No wonder then, that the top rates of tax for salaries and corporate profit that the Heritage index prioritizes seem unusually low, and yet the government runs up little debt. The city’s residents are effectively paying additional shadow taxes to their landlords and to the city’s leviathan real-estate developers in the form of extremely high house prices and rents, propping up the government’s source of revenue. The system is no free lunch for Hong Kong.

As author Alice Poon noted a decade ago, the land price policy of successive Hong Kong governments is at the root of “ever-deepening economic concentration,” where real-estate developers continually make bumper profits. “Hopes for diversification into a knowledge-based economy have been constantly dashed due to the entrenched land and tax systems.”

And again, if an investor understood this about Hong Kong, she would have a more complete picture of the HK economy and the conditions for investing there. There are other things about Hong Kong that make it a less economically free place: for a long time Hong Kong had little antitrust enforcement, which allowed for monopolies and cartels back in the day. (I’m not sure of the current situation). To quote from my previous post about Asian Godfathers:

Li’s PARKnSHOP and Jardine’s Wellcome control about 70% of the groceries market in Hong Kong. When Jimmy Lai’s ecommerce AdMart tried to set up shop in Hong Kong, their trucks couldn’t enter any building residential or commercial owned by Li. Let me put that into perspective - if you ran a store in any building owned by Li’s real estate business Cheung Kong, you couldn’t get any shipments from AdMart. If you lived in a service apartment owned by Cheung Kong, you couldn’t get a delivery from AdMart

Despite having labour costs far lower than other countries with similar per capita GDP, terminal handling fees in Hong Kong are fairly high - one report estimates them to be double of that in Germany. Why does this happen? Concentration among port berth owners is the reason. Li’s Hutchison owns 14 out of 24 ports and this has remained his “core” business that funds his real estate business

Sure, Hong Kong is economically free in the sense that it doesn’t have onerous amounts of government regulation and taxes. But it isn’t free from corporate power and government land policy, both of which make it a difficult place to live and do business in.
What does the Index actually tell us?

The Index is relatively good at giving a general idea of how friendly a country is to business and investment. That is mostly because in general the indicators that it picks are directionally accurate about the outcomes they intend to measure. If the UK is ranked 28th and Honduras is ranked 94th, you can be sure that the UK has a better business environment than Honduras has.

But beyond that, it isn’t very useful as a measure for businesses or academics in studying economic freedom or understanding the ease of investment in businesses in that country. The first reason is that many of these are subjective judgements made by other people. For example in the property rights sub-component, they use the US Chamber of Commerce’s Country Risk and Insights and the World Bank’s Worldwide Governance Indicators. These indicators are in the end subjective, and their impressions would differ among people.

For example, India has an economic freedom score of just 52.9 which is below Russia’s 53.8. And yet if you saw what the market said about India’s economic freedom in terms of venture capital investments, the number of new and innovative companies coming out of the country and general investor sentiment about their respective economies, it would be far more positive about India than it is about Russia (even before the invasion). Obviously, much of this can be attributed to demographics where India is expected to have a booming population, and Russia a declining one.

But even then India has undergone massive improvements in its digital infrastructure (in large part because of the government and the entry of a new player in the market for online data), and this would be highly relevant to someone considering economic opportunity in India even though it isn’t directly about economic “freedom”. This is another problem I want to highlight about the Index of Economic Freedom: it doesn’t consider positive freedoms at all.

Negative liberties are the absence of obstacles. For example not having exorbitant taxes or laws that restrict economic activity would be an example of negative freedoms. Positive liberties on the other hand is about the possibility of acting out one’s actions. For example building an airport would increase the positive freedom of entrepreneurs in an economy because it gives them the capability to travel and sell to places they previously wouldn’t have had the ability to do so.

And this is an enormously important part of evaluating an economy. The lack of government interference is one important part. But positive actions by a government to improve infrastructure (like UPI in India, or the Singapore government’s construction of the large Changi Airport) do increase the capabilities of actors in the economy. Those are important aspects too!

What would I change?

There are some things I would add to the Index of Economic Freedom to improve its usefulness as a measure of economic freedom.

I would include restrictions on land use as part of the regulatory environment. Many countries (for example the United Kingdom) are nominally “somewhat free” but their economic potential is capped because of their restrictive land use laws. Hong Kong and Singapore too have land use laws that should make a difference in their index.

I would add a measure of government ownership of the factors of production as a measure of restricting economic freedom. In many countries governments own companies that they use for political purposes (see my article about Pakistan) which limits the economic potential of the rest of the economy by misallocating resources. This is especially true for Hong Kong as explained above, but much less true for Singapore.

They should account for corporate power which reduces economic dynamism via charging higher prices and restricting entry into new sectors. This is true for Hong Kong, but also South Korea’s chaebol run economy. The government isn’t the only thing restricting people’s economic freedom!

And while perhaps this might be out of the scope of the Index of Economic Freedom, having a “positive freedoms” index which measures what is possible given the infrastructural and financial constraints of the economy is valuable.

Geopolitical Discussion : Abhijit Iyer Mitra and Abhijit Chavda

Turkey Inflation and how was it managed

From The Economist Article

How has Turkey’s economy kept growing despite raging inflation?Many Turkish businesses are struggling to cope

Jul 21st 2022 | GAZIANTEP AND ISTANBUL

On the wall of Savas Mahsereci’s office is a black-and-white photograph of his father and grandfather making shoe soles from recycled tractor tyres. The room is upstairs from his factory on the outskirts of Gaziantep, a city of 2m people in south-eastern Turkey, close to the border with Syria. Like his forebears, Mr Mahsereci is in the recycling business. His family firm, mtm Plastik, makes refuse bags, disposable gloves and pellets for use in moulded products. The business has grown rapidly. It now occupies 20 times as much factory space as it did in 2004, and started exporting in 2016. Supply bottlenecks in China are “a big opportunity for us”, he says. Other industrial firms in Gaziantep are benefiting. The city enjoyed record exports last year, says Mr Mahsereci

than 72 hours, says Mr Mahsereci, compared with a minimum of a month from China. And supply is more reliable. Turkey can also export via the Aegean or the Black Sea.

Yet accelerating inflation poses big challenges for even the most agile business. One is pricing strategy. It is tricky to judge where to pitch prices. Too high, and you risk losing market share to rivals; too low, and you may find you do not cover replacement cost. Hard decisions seem to multiply. “You have to be ready to negotiate with all of your customers and all of your suppliers all of the time,” says a businessman. “It is very, very tiring.” Some prices are slow to adjust. A large share of mobile-phone subscribers have 12-month contracts. Many are still on last year’s prices.

Businesses must protect themselves from inflation to survive. This often means that the cost is pushed onto others. That creates tensions—between landlords and tenants, shops and customers, and firms and their suppliers. No business can afford to defer the settlement of its customers’ bills for very long. “Payment terms of three to six months are down to zero to three months,” says an Istanbul-based investor. And there are other pressure points. Turkey’s external deficit has not gone away. In principle, devaluation is a remedy. It works by stimulating exports and crushing demand for imports. The export fillip is working, but strong consumer demand has kept imports high.

Against the flow

Turkey must either attract fresh foreign capital or draw on its existing reserves of foreign currency. Both are becoming harder. The quality of capital inflows to Turkey has steadily degraded over the past 20 years. Foreign direct investment (fdi), the “stickiest” form of capital inflow, has not matched the levels of the mid-2000s, when Turkey followed more orthodox policies (see chart 5).

Some European bosses now see Turkey as a potential alternative to China as they seek to shorten and diversify their supply chains. Last year ikea said it would move production of some of its furniture from Asia to Turkey. Hugo Boss, a clothing firm, said it would add capacity to its factory in Izmir to reduce reliance on Asia. But Turkey’s monetary instability—and a deterioration in governance and the rule of law—is a bar to another fdi boom. Portfolio flows into Turkish bonds and shares have evaporated. That leaves Turkey ever more reliant on short-term syndicated loans extended to local banks. As interest rates go up worldwide, these are harder to come by.

The situation for reserves is also perilous. Turkey’s central bank has burned through tens of billions of dollars trying to prop up the lira. Official reserves of foreign currency are negative if swaps with local banks are taken into account. (The central bank still has holdings of gold.) Meanwhile private-sector demand for dollars and euros has risen. At their peak last year, two-thirds of bank deposits were held in foreign currency. The growing illiquidity in currency markets means exporters have every incentive to hoard dollars and euros from their overseas sales.

The authorities are striving to curb this creeping dollarisation and to stop the lira from falling further. A scheme has been in place since December which indemnifies deposits switched out of dollars or euros and into lira from exchange-rate losses. In January Turkish exporters were ordered to hand over 25% of their hard-currency earnings to the central bank. That figure was raised to 40% in April. Complaints from corporate treasurers that they needed a float of dollars and euros to pay for vital imports or to service debts had no effect.

In a sign of growing desperation, the authorities went further. On June 24th Turkey’s bank regulator said it would ban loans to firms that cling to significant hard-currency holdings. This measure was to stop companies borrowing lira on the cheap to speculate in dollars. The initial reaction in Istanbul was shock. Suddenly the main concern of corporate Turkey was not inflation but a potential credit crunch.

If the regulation is strictly enforced, says one executive, banks will be unwilling to lend and firms will be forced to cut back on non-essential spending. Some may struggle even to get enough trade credit to finance their working capital. It may not come to that. Noises from Ankara are that the banks will not bear the burden of verifying whether borrowers are complying with the new regulation.

Still, companies are turning cautious and big investments are being put on hold. “Everybody is waiting for the elections,” says an investment banker. Mr Erdogan’s ak Party is clearly behind an alliance of six opposition parties in opinion polls. He trails in polls against the plausible opposition candidates for the presidency. His defeat would probably mean a return to monetary orthodoxy.

Taming inflation would be a big and painful job, but Turkey’s experience after 2001 shows that, with the right policies, it can be done. fdi could rebound to take advantage of Turkey’s position as a low-cost manufacturing hub on Europe’s doorstep. A rally in the stockmarket is plausible, given how cheap Turkish shares have become. Yet electoral defeat for Mr Erdogan is far from certain. He has jailed political opponents, bullied the media, sought to suppress free speech and could resort to all manner of chicanery to cling to office. Many of the people interviewed for this article did not want to be named.

And before then, the exchange-rate crisis might enter a new, more combustible phase. Once the summer is gone, and the boost to hard-currency earnings from tourism starts to fade, things could get dicey. A tranche of protected lira deposits matures at the end of August. The state has $6bn of external debt payments due in the second half of this year, according to Morgan Stanley, a bank; big companies and banks have $23bn coming due. It seems unlikely that all these debts will be fully rolled over. Yet somehow the diminishing stock of foreign exchange must be augmented—or husbanded. In a worst-case scenario, limits might be placed on withdrawals of householders’ dollar deposits.

Perhaps the economy will somehow muddle through until the elections. As strange as Mr Erdogan’s approach to monetary policy has been, his fiscal policy has been quite conservative. The public debt-to-gdp ratio was 41.6% of gdp last year. This is comfortably below the debt burden of Turkey’s emerging-market peers. Given the country’s low solvency risk, perhaps its friends in the Gulf might stump up some of their petrodollars.

Turkey has withstood some remarkable strains. Now, more than ever, Turkish businesses are focused on survival. Inflation breeds uncertainty and uncertainty breeds caution. The things you must do, you keep doing, says a businessman. The rest can wait. “You live another day.” ■

This article appeared in the Briefing section of the print edition under the headline "Inflation nation"

Tourist interview with arunachal local

Higher interest rates to tackle inflation

John H Cochrane - On Interest rates as a fiscal policy

A few days ago I gave a short talk on the subject. I was partly inspired by a little comment made at a seminar, roughly "of course we all know that if prices are sticky, higher nominal rates raise higher real rates, that lowers aggregate demand and lowers inflation." Maybe we "know" that, but it's not as readily present in our models as we think. This also crystallizes some work in the ongoing "Expectations and the neutrality of interest rates" project.

The equations are the utterly standard new-Keynesian model. The last equation tracks the evolution of the real value of the debt, which is usually in the footnotes of that model.

OK, top right, the standard result. There is a positive but temporary shock to the monetary policy rule, u. Interest rates go up and then slowly revert. Inflation goes down. Hooray. (Output also goes down, as the Phillips Curve insists.)

The next graph should give you pause on just how you interpreted the first one. What if the interest rate goes up persistently? Inflation rises, suddenly and completely matching the rise in interest rate! Yet prices are quite sticky -- k = 0.1 here. Here I drove the persistence all the way to 1, but that's not crucial. With any persistence above 0.75, higher interest rates give rise to higher inflation.

What's going on? Prices are sticky, but inflation is not sticky. In the Calvo model only a few firms can change price in any instant, but they change by a large amount, so the rate of inflation can jump up instantly just as it does. I think a lot of intuition wants inflation to be sticky, so that inflation can slowly pick up after a shock. That's how it seems to work in the world, but sticky prices do not deliver that result. Hence, the real interest rate doesn't change at all in response to this persistent rise in nominal interest rates. Now maybe inflation is sticky, costs apply to the derivative not the level, but absolutely none of the immense literature on price stickiness considers that possibility or how in the world it might be true, at least as far as I know. Let me know if I'm wrong. At a minimum, I hope I have started to undermine your faith that we all have easy textbook models in which higher interest rates reliably lower inflation.

(Yes, the shock is negative. Look at the Taylor rule. This happens a lot in these models, another reason you might worry. The shock can go in a different direction from observed interest rates.)

Panel 3 lowers the persistence of the shock to a cleverly chosen 0.75. Now (with sigma=1, kappa=0.1, phi= 1.2), inflation now moves with no change in interest rate at all. The Fed merely announces the shock and inflation jumps all on its own. I call this "equilibrium selection policy" or "open mouth policy." You can regard this as a feature or a bug. If you believe this model, the Fed can move inflation just by making speeches! You can regard this as powerful "forward guidance." Or you can regard it as nuts. In any case, if you thought that the Fed's mechanism for lowering inflation is to raise nominal interest rates, inflation is sticky, real rates rise, output falls and inflation falls, well here is another case in which the standard model says something else entirely.

Panel 4 is of course my main hobby horse these days. I tee up the question in Panel 1 with the red line. In that panel, the nominal interest are is higher than the expected inflation rate. The real interest rate is positive. The costs of servicing the debt have risen. That's a serious effect nowadays. With 100% debt/GDP each 1% higher real rate is 1% of GDP more deficit, $250 billion dollars per year. Somebody has to pay that sooner or later. This "monetary policy" comes with a fiscal tightening. You'll see that in the footnotes of good new-Keynesian models: lump sum taxes come along to pay higher interest costs on the debt.

Now imagine Jay Powell comes knocking to Congress in the middle of a knock-down drag-out fight over spending and the debt limit, and says "oh, we're going to raise rates 4 percentage points. We need you to raise taxes or cut spending by $1 trillion to pay those extra interest costs on the debt." A laugh might be the polite answer.

So, in the last graph, I ask, what happens if the Fed raises interest rates and fiscal policy refuses to raise taxes or cut spending? In the new-Keynesian model there is not a 1-1 mapping between the shock (u) process and interest rates. Many different u produce the same i. So, I ask the model, "choose a u process that produces exactly the same interest rate as in the top left panel, but needs no additional fiscal surpluses." Declines in interest costs of the debt (inflation above interest rates) and devaluation of debt by period 1 inflation must match rises in interest costs on the debt (inflation below interest rates). The bottom right panel gives the answer to this question.

Review: Same interest rate, no fiscal help? Inflation rises. In this very standard new-Keynesian model, higher interest rates without a concurrent fiscal tightening raise inflation, immediately and persistently.

Fans will know of the long-term debt extension that solves this problem, and I've plugged that solution before (see the "Expectations" paper above).

The point today: The statement that we have easy simple well understood textbook models, that capture the standard intuition -- higher nominal rates with sticky prices mean higher real rates, those lower output and lower inflation -- is simply not true. The standard model behaves very differently than you think it does. It's amazing how after 30 years of playing with these simple equations, verbal intuition and the equations remain so far apart.

The last two bullet points emphasize two other aspects of the intuition vs model separation. Notice that even in the top left graph, higher interest rates (and lower output) come with rising inflation. At best the higher rate causes a sudden jump down in inflation -- prices, not inflation, are sticky even in the top left graph -- but then inflation steadily rises. Not even in the top left graph do higher rates send future inflation lower than current inflation. Widespread intuition goes the other way.

In all this theorizing, the Phillips Curve strikes me as the weak link. The Fed and common intuition make the Phillips Curve causal: higher rates cause lower output cause lower inflation. The original Phillips Curve was just a correlation, and Lucas 1972 thought of causality the other way: higher inflation fools people temporarily to producing more.

Here is the Phillips curve (unemployment x axis, inflation y axis) from 2012 through last month. The dots on the lower branch are the pre-covid curve, "flat" as common wisdom proclaimed. Inflation was still 2% with unemployment 3.5% on the eve of the pandemic. The upper branch is the more recent experience.

I think this plot makes some sense of the Fed's colossal failure to see inflation coming, or to perceive it once the dragon was inside the outer wall and breathing fire at the inner gate. If you believe in a Phillips Curve, causal from unemployment (or "labor market conditions") to inflation, and you last saw 3.5% unemployment with 2% inflation in February 2021, the 6% unemployment of March 2021 is going to make you totally ignore any inflation blips that come along. Surely, until we get well past 3.5% unemployment again, there's nothing to worry about. Well, that was wrong. The curve "shifted" if there is a curve at all.

But what to put in its place? Good question.

Update:

Lots of commenters and correspondents want other Phillips Curves. I've been influenced by a number of papers, especially "New Pricing Models, Same Old Phillips Curves?" by Adrien Auclert, Rodolfo Rigato, Matthew Rognlie, and Ludwig Straub, and "Price Rigidity: Microeconomic Evidence and Macroeconomic Implications" by Emi Nakamura and Jón Steinsson, that lots of different micro foundations all end up looking about the same. Both are great papers. Adding lags seems easy, but it's not that simple unless you overturn the forward looking eigenvalues of the system; "Expectations and the neutrality of interest rates" goes on in that way. Adding a lag without changing the system eigenvalue doesn't work. John H. Cochrane at 5:17 PM

Megham Medley

Lowe Post : Bucks Collapse

Interesting to see how he listed all the mistakes that Bucks did in their playoffs against Miami despite being the far better team

Japan - Nara Park

Ireland Housing Crisis

From the substack - The Fitzwilliam written by Robert Tolan on 19 April 2023

Ireland has one of the most acute housing shortages in the world. It has the lowest number of dwellings per head in the OECD, and average house prices are now eight times mean income (compared to three times as much in 2010). The situation is so bad that 70% of young people in Ireland say that they are considering emigrating due to the cost of living, which is mainly driven by housing costs. On Daft, Ireland’s most popular property website, fewer than 1,100 properties are available to rent in Ireland, a country of over 5 million people.1 Homeownership has collapsed: the Economic and Social Research Institute estimates that one in three people will never own a home. Recent polls suggest housing is Ireland’s main political issue: the next election might well be decided on how each party proposes to fix the housing crisis.

There are many reasons for the housing shortage, but one fundamental cause is simple: construction has negative effects on neighbours (such as noise and a strain on local services) so measures to block construction are often locally popular. There is a tension between the need for new homes and local objections to development. But international experience suggests the circle can be squared. By giving locals the power to enable extra construction, and get a share of the resulting economic benefits, other countries have delivered large increases in housing supply with popular support.

For decades, the Irish planning system has not allowed enough homebuilding. The process of getting planning permission is tortuous: First, each new home needs the land to be zoned for housing. Then the homes must get planning permission from the local authority. Currently, almost all significant developments are appealed, which means further approval by An Bord Pleanála (ABP) is necessary for the project to proceed. At this stage, there is a risk of a judicial review, which can be brought by an objector living anywhere in the country. To bring a case to judicial review, applicants must argue before the High Court that a proposed development violates some part of the Planning and Development Act (2000). Judges in the High Court can block the development (or not), but their decision can, if a development is deemed to be of national importance, be appealed further to the Supreme Court. Critically, Ireland is unique in that it is the only country in the developed world with both American-style zoning and British-style local planning. This creates what Francis Fukuyama calls a ‘vetocracy’ – rule by veto.

In Ireland and abroad, development is blocked by those who may want to see building in theory, but not near them. Proposals providing desperately needed housing in Ireland’s urban areas (especially Dublin) are most at risk of these objections.

International solutions

Other countries have faced similar problems, and have had some success in solving them. South Korea pioneered bottom-up planning as a way to increase community involvement in the housing supply. Seoul’s Joint Redevelopment Projects (JRPs) give Koreans the right to redevelop their neighbourhoods at higher levels of density if at least 75% of homeowners agree. Introduced in 1983, every area of Seoul that has been designated for JRPs has opted to use the scheme, and around 50% of the new apartments built in the mid-1990s were delivered through JRPs. Over that time, living space per capita has increased by more than two and a half times.

Though the policy has been a huge success on the housing supply front — showing how communities will often opt for housing if given a choice — there has been some popular opposition. One major reason for opposition is that since only homeowners got the vote, tenants are evicted to allow homeowners to develop. The scheme also permits very tall developments that have substantial impacts on nearby areas whose residents haven’t had the chance to vote.

Similarly, the Squamish First Nation of Canada voted in 2019 to build Sen̓áḵw, a 6,000-home development on its sovereign tribal lands near Vancouver. The aim was to help address Vancouver’s housing shortage in a way that allowed the Squamish to reap the economic benefit of economic development. It is estimated that this project will generate billions of dollars for members of the tribe. Once again, this was able to go ahead where other large projects in Vancouver failed, because the Squamish residents have the power to permit development where they stand to benefit from it.

Another example is Israel’s approach to urban densification. Israel increased apartment supply in Tel Aviv by around half through a rule known as ‘TAMA 38’. Under this rule, if 80% of a given apartment block’s residents agree, they can vote for redevelopment, demolish the block, and build a larger one. A 66% threshold must be reached to enable extensions of the existing structure without demolition. The latter is the most common application of the rule. From 2018-20 in Tel Aviv, TAMA 38 was responsible for an average of 31% of the new homes built.2 Like JRPs, it works because the residents are given both the power and good reason to vote for more homes. It has many lessons: an Irish scheme should take considerably more care of neighbours, and ensure that more value is captured for local government to improve local services and infrastructure. As the current density of housing is lower in Dublin than in Tel Aviv, gentle infill, building on underutilised land, would be much easier while protecting the neighbours.

Not all community-led schemes have been about local agreement or votes, as recent developments in California illustrate. Even small-scale infill development in California tends to be controversial, and localities enforce some of the strictest zoning rules in the world. This has led to California having some of the world’s highest house prices, especially in Silicon Valley suburbs and cities like San Francisco. Since 2016, however, Californians have been allowed to build Accessory Dwelling Units (ADUs): small homes added by householders in their back gardens. This has had a striking impact: by 2021, ADUs made up 22% of new homes built in Los Angeles. ADUs have succeeded where other ideas have failed for two reasons: first, they are small-scale and visually unintrusive, so by their nature, most of the negative effects are borne by the homeowner. That homeowner has a strong reason to keep harm to a minimum. Second, ADUs are seen as benefiting local residents by improving property values, rather than delivering profits to a large developer or outsiders.

Houston has also followed a decentralised approach to planning, but this time based on opt-outs, rather than opt-ins. Like essentially all American cities, Houston has long required each new home to have its own minimum area of land to prevent developers from subdividing sites.3 This ‘minimum plot size’ was 5,000 square feet until the 1990s. In 1998 the city sought to reduce the minimum plot size to 1,400 square feet, to allow more homes per acre, but it faced opposition from homeowners who feared change. To assuage concerns, Houston provided that streets or blocks could choose to opt out of these reforms. If at least 51% of residents opted out, the city granted a ‘Special Minimum Lot Size’ application, exempting the area from the new rules. As it turns out, many areas have not opted out, and Houston has seen many attractive new homes built as a result.

Applying these lessons in Ireland
Not all of these schemes should transfer naturally to Ireland without adaptation. Korea’s scheme, for example, had no height limit, meaning that one-storey shantytowns were often replaced with high-rise towers. This would probably be politically unacceptable in any society without a tradition of high-rise urbanism, and may be aesthetically unattractive. But all these schemes demonstrate that giving locals more power to permit development can result in much more of it, and some of them show how development can be popular and uncontroversial.

The challenge in learning from these examples is coming up with a scheme that works with our special historical, geographic, and cultural circumstances. Such an approach would need to respect traditional Irish development patterns, generating development that was generally low or mid-rise, made up of detached, semi-detached and terraced houses, and clothed in vernacular materials such as stucco, brick, and stone, such as on Merrion Square.

The Georgian Merrion Square is significantly denser than most of Dublin’s more modern housing stock. Source. I believe that one such idea, called street votes, checks all of these boxes, and that it could be successful here. I have been working with the help of many experts to adapt it for Ireland. Street votes have attracted considerable interest internationally, winning support from the American Planning Association and the UK’s Royal Town Planning Institute. To date, the policy has been endorsed by John Fingleton, former chair of the Competition Authority, and Andrew Montague, former Lord Mayor of Dublin. Indeed, street votes will likely become law in England and given the similarity between the Irish and English housing markets, street votes would be the simplest way of trying bottom-up planning here. The idea is simple: following the example of the international precedents, Ireland should give small local areas the power to develop more, if they wish to. In the Irish context, the most appropriate geographical unit for such decisions is the street. But, learning from the international experiments, we should restrict those powers to allow only development that is consistent with Irish history and tradition, and which imposes minimal spillover costs on neighbours on other streets. This would still add the capacity for many more homes – but in a popular way, meaning that the policy will survive over time.
This means requiring streets to achieve something like a two-thirds majority to use these powers, to ensure that there is a broad consensus for change. And it means rediscovering traditional planning tools like ‘light planes’, which rule out development that risks blocking out too much light for neighbours. Such rules were a feature of the development systems under which Georgian Dublin and Limerick were built, as well as many of the most treasured international cities, like Belle Epoque Paris and early 20th century Boston. It means having strict rules on parking and driving, ensuring congestion doesn’t increase. And, crucially, it means having a strong land value capture system so that local government, and the wider community, benefit.
If you think these contributions and restrictions would remove the scheme’s benefits, think again. The constraints on housing supply are so tight in Ireland right now that many small developments can still deliver huge financial uplift; the median price to purchase a dwelling is at a record €310,000. The constraints on construction are not primarily economic, but regulatory: local people do not capture enough of the benefits of development to win their support, and even if they did, they would have no method to create a mandate for it. It is these constraints that street votes address by providing a less bureaucratic way to gain planning permission. Additionally, Ireland’s architectural heritage will be preserved, as listed buildings will be exempt from street votes, and potentially emulated. Georgian Dublin has as much as four times more housing space per hectare than the mid-century semi-detached housing street votes are best placed to replace.

Consider an average South Dublin street consisting of two-storey detached and semi-detached houses. Street votes would allow residents to choose a street plan that allows each home to add three more storeys, adding tens of additional units. Homeowners could sell or rent out the additional units thereby realising significant returns at current property levels.
In my research, I have built a detailed model of exactly how much street votes could lower the cost of housing in Ireland. Taking a random sample of different areas, I applied building regulations, included the additional floor area required to create separate entrances for the new homes, and estimated the floor area street votes would allow Irish homeowners to add. I then used the average dwelling size in Ireland to estimate the number of additional homes that would be created. With a height limit of four storeys for urban areas and two storeys for rural areas, and assuming residents will not pass a street vote unless the benefits are large enough to make it worth the build cost of redevelopment several times over, I find that the policy would permit an additional 25,000 homes per year on top of the 30,000 delivered through the rest of the system in 2022.

To be politically workable, these proposals must be refined carefully: we need to work out precise proposals around parking, energy efficiency, biodiversity and ensuring local infrastructure can cope with higher density. I will be spending the next several months working on developing the details of the policy, working with an array of young people and experts who want better housing and planning in Ireland. Our hope is that by the end of summer, we will have the details of a scheme that is ready to be implemented.

It’s possible that I’m wrong: maybe residents won’t be interested in passing a street vote, and the policy will have little uptake. Of course, street votes should not be our only tool for tackling Ireland’s terrible and growing housing troubles. But it could hardly make things worse, and if residents grasp the enormous opportunities street votes would offer them, it could make things significantly better. Experiments from around the world have shown us that giving locals the power to say yes to extra housing can deliver more and better homes in a popular way. Let’s try street votes in Ireland too.