Year of the spat, by all accounts

Sat, Dec 29, 2012, 00:00

In June, economist Richard Tol had a public spat with his former employers at the Economic and Social Research Institute. Prof Tol co-authored an ESRI working paper on the work-welfare gap, saying many Irish people with children would be financially better off on the dole.

The ESRI later claimed Tol overstated the costs of working and withdrew the paper because of what it called “inaccuracies”. Having left Ireland almost a year ago – he is professor of economics at the University of Sussex and professor of the economics of climate change at Vrije Universiteit, Amsterdam – Tol looks back on the year philosophically, although the ESRI episode still clearly rankles. He says the story was picked up on a “slow news day” and before he knew it, he was making headlines.

“In the paper, we made two points: one that it is wrong to neglect the fact that working costs, and if you don’t take that into account, you are miscalculating. Secondly, we explored how would you calculate the cost of working? The numbers didn’t matter so much: the points and the methods matter. So, I still stand by the work.”

Tol remains critical of the ESRI, claiming it is difficult to be truly independent given it is partly funded by the State. He says the saga also taught him some lessons about Ireland. “Definitely in policy circles it is best not to rock the boat. People who come up with unpopular messages, whether or not they are true, are often sacrificed. Sometimes the truth hurts and the only way to make it hurt less is to acknowledge there is a problem and try to solve it. That is difficult in the Irish political culture.”

Having said that, Tol is open to the idea of returning to Ireland one day, perhaps when his children have left university.

What then of the country’s prospects of economic recovery by the time he decides to settle here? “It is dangerous, what is going on there at the moment. There has been very little reform of the political system. So there is still a high probability the next government will be as irresponsible as the previous one. There has been no structural change in economic policy, so the sheltered sectors, such as the lawyers, are still as sheltered. Transport and energy are still dominated by State-owned companies that work for their workers rather than for owners or clients. The markets seem to have regained confidence in Ireland, relative to Portugal or Greece, but national debt is enormous, and the country is still building up debt. So if, in a few years’ time, you get a finance minister as dumb as McCreevy or Cowen, then you are back with the IMF and the ECB. If they don’t reform politics or the economy, there is a good chance Ireland will be back in a bailout in 10 to 20 years’ time.”

I ask Tol if there’s a chance he’ll appear at the ESRI Christmas party. “I’ve never been to the Christmas party. I am persona non grata at the ESRI at the moment. The problem is the people who lead the ESRI are from a narrow circle. They may have some academic credibility or managerial experience and they probably have good political contacts. In my view, it would be better if the ESRI found the best international talent they can get, but that is not the case. I do look back on my time in Ireland, and on my work, with a certain pride.”