U [AND UR DOG] CAN HAZ DEGREE!

Remember my recent post on the findings of the Greek Higher Education Quality agency?

Back then I argued on the basis of academic research that degrees are a substitute for ability in the public sector, and the subsidised "demand" for degrees in whatever from would-be civil servants drives a good deal of our higher education system.

It's just occurred to me that there's a way to test this. Suppose the public sector could not hire more people, causing demand for degrees to collapse, but had to keep up supplying university places in order to disguise unemployment. This is our predicament now. If this were a market, you'd expect prices to collapse.

In the Stalinist sudoku puzzle that is Greek higher education admissions, students' formula-determined aggregate admission scores, (βάσεις) act like prices in the sense that students are admitted into the highest-ranked institution (based on the candidate's preferences) whose minimum requirements they meet.

Right on cue, the results of our first post-troika admissions process have been released and the minimum requirements for most institutions has plummeted, with 28 of the less popular departments admitting students with an average score of 1/20 or less. 1/20 being the score awarded to a student for signing their name on a blank sheet of paper.

Some of the worst culprits were:

• Dept of Geotechnology and Environmental Engineering - Technical Educational Institute of Western Macedonia in Kozani
• Dept of Industrial Design - Technical Educational Institute of Western Macedonia in Kozani
• Dept of Aquaculture and Fisheries - Technical Educational Institute of Epirus at Igoumenitsa
• Dept of Animal Production - Technical Educational Institute of Epirus at Arta
• Dept of Organic Greenhouse Crops and Floriculture - Technical Educational Institute of Kalamata 
• Dept of Finance and Auditing - Technical Educational Institute of Kalamata
• Dept of Organic Crops and Food - Technical Educational Institute of the Ionian Islands in Argostoli

Amazingly, some of these departments look fairly decent - I don't doubt that they employ some pretty committed academics.  But that's beside the point. Demand for their degrees is not driven by the huge interest in organic farming, or fisheries or auditing in Greece. It is a government-sponsored bubble that has finally popped.

Good riddance.

WE HAZ (REAL) HERO

More news my friends: it's not just over-hyped tosspots like Stiglitz that misguidedly stick up for Greece.

A letter has arrived at the FT, signed by four London and Athens - based academics, which claims that the case for expecting a Greek default is seriously overstated. This actually came to my attention through one of the many Troktiko clones that have started since the assassination of S. Giolias, one admirably true to its predecessor's ideals of giving a voice to the semi-literate.

This letter is signed among others by one of my best ever professors, Dimitri Vayanos of LSE. This man is a real hero and a real gem, which is why despite his own best efforts he is still not teaching in Greece. He is such a fantastic lecturer he managed to make the Greek/Cypriot contingent of my course sit through a pretty robust  lecture on options after this night.


Vayanos et al do not make a Keynesian defence - if anything theirs is a libertarian one. Their argument (developed in detail here) is that Greece is so far damaged by over-regulation and statism that any material departure from this tradition will yield enormous returns if we can just muster the courage to drive reform. I know this argument very well because that was my own argument too, right up to April 2010.

The evidence is in plentiful supply, but I recommend the following:

• The OECD indicators of product market regulation (source)
• The World Bank's Doing Business indicators (source)
• The World Economic Forums' World Competitiveness Report (source) 

Unfortunately, that window of opportunity is now closed, as I argue here. And even this good man is wrong. Sorry Prof!

The gist of my response to Vayanos et al. would be that as formidable as the gains from de-regulation would be, they are simply not large or quick enought to buy back the country's independence. For a taste, consider this paper, which demonstrates that even if one of the 25% most regulated countries in the world were to become one of the 25% least regulated countries in the world, it would on average only gain 2.3 percentage points of annual growth. Given a bit of time, of course, this is an amazing thing and I do wish we could achieve this. If we could do this within 3 years the benefits would vindicate Vayanos et al.

But of course, we cannot. The benefits of regulatory reform are, like most supply-side things, not quite as strong during depressions. And besides, we burn people alive for lesser reasons, remember?