All entries for July 2009

The Social Work Taskforce: Why Not Just Pay Them More?

Writing about web page http://publications.dcsf.gov.uk/eOrderingDownload/DCSF-00752-2009.pdf

The British government's Social Work Task Force was set up to review "frontline" social work practice and to recommend improvements and reforms of the social work profession. Its interim report, out today, is entitled Facing Up to the Task.

Everyone can see that social work in our country is in a mess. If social workers fall down on the job they are treated like murderers; if they try to do it properly they get treated like the Gestapo. If they spend all their time on the "front line" they have no time left to talk to each other and to other agencies; if they talk to each other the way the government requires, they spend all their time doing paperwork and have no time for their clients. In the words of the report (page 12):

Widespread staffing shortages mean that social work is struggling to hold its own as a durable, attractive public sector profession, compromising its ability to deliver consistent quality on the frontline. There is no robust, standing system for collecting information on local and national levels of vacancies, turnover and sickness, and for forecasting future supply and demand. Local authorities are finding it hard to identify effective methods for managing the workloads of frontline staff. Staff shortages and financial pressures are making these challenges harder still.

In other words, a big problem facing social work managers today is that demand exceeds supply. That sounded to me like an economic problem. As an economist, without a background in social work, I thought about the Economics 101 solution: if demand exceeds supply the price should rise. Maybe social work would become more manageable if we paid our social workers more?

Sounds simple -- maybe too simple. How would it work? Well, in several mutually reinforcing ways:

• With higher salaries, more people with better qualifications would be attracted into training for the profession. (In today's Guardian, David Brindle quotes Sue Berelowitz, deputy children's commissioner for England, as saying some universities accept students on social work courses with E grades at A-level; some courses have pass rates for essays and exams of just 30%.)
• There would be fewer unfilled vacancies.
• A larger number of better qualified and more competent social workers would share out the work, so workloads would become more manageable.
• Properly managed, with higher salaries and lower workloads, even existing social workers ought to become more effective.

Given higher salaries, it is true, social service departments would probably have to reduce their social work staff complements. But this would be a price worth paying. With fewer posts unfilled, the number of social workers actually in post ought to increase. Departments would be spared the expense of frequent resort to expensive agency workers and consultants to make up for staffing shortfalls. And at least some social work catastrophes would be avoided, sparing everyone those other sorts of costs that then arise: deaths and injuries, investigations and trials, commissions of inquiry, imprisonments and sackings.

Given higher salaries, why would the existing social workers perform better? There are two reasons. First, the existing workers would have more, better people around them with whom to share the work. The other reason is that, the higher your salary, the greater is the cost of losing your job. Assume that bad social workers eventually lose their jobs. If so, then a higher salary would increase the cost of being a bad social worker, and so make existing social workers work harder to avoid being seen as bad. Of course, this depends on good performance management being in place so that bad social workers are actually let go.

All this is first-year economics. I wondered what the Social Work Task Force would make of the first-year answer. I note that the report emphasised the need to achieve "a much more sophisticated understanding of supply and demand." I looked for what this might involve. I found two things (both on page 18):

First, numbers of workers supplied and demanded:

A better future for social work depends on an appropriate supply of suitably qualified applicants into stable teams with the right mix of experience. The supply, recruitment and retention of social workers is therefore a central issue for reform. As a prerequisite for improvement, there need to be robust and durable arrangements for understanding and forecasting supply and demand across training and the job market.

I think what this means is that, in the view of the task force, one of the main instruments for bringing supply and demand into balance in the long term is forecasting demand and then increasing training places to match. The reference to retention, however, suggests an important role for pay, the factor that an economist would see as bringing supply and demand into balance. This brings us to the second thing I found (which actually came before the first one):

Social worker pay has also been raised in a number of different ways with the Task Force.

• Levels of pay are felt by some to be too low and not reflective of the importance of what social workers do and the pressures they currently work under. However, others have argued that levels of pay in themselves are not necessarily a decisive issue but assume importance because of wider problems with status, recognition and investment in training, support and the working environment.

• Pay differences within local authority teams between permanent staff and agency staff who may not be handling the same complexity of cases) are a source of some frustration and disillusionment.

• Shifts and variations in pay between local authorities are causing some dissatisfaction and may be contributing to movement and turnover in the workforce, with authorities competing to attract staff and address shortfalls through localised improvements in pay and conditions. This has led some to suggest that the profession needs a single national framework for pay and other conditions of employment in the statutory sector

Now, I understand very well that pay is not everything. If it were, I wouldn't be an academic. People come to many jobs, especially those involving education, health, and social care, because they are drawn to the work itself rather than the pay packet. In fact, people who care only about money would make bad academics and probably bad social workers too. Because of this, not offering very high pay can be a way of screening out people that care only about money (at this point we've moved from first-year economics to the second year).

However, it does not look to me as if the main problem in British social work today is that the profession is being invaded by money grubbers. On the contrary, there is an equal risk from offering relatively low pay: it can be felt as society's way of saying that the job is unimportant and a professional motivation is rubbish.

Because of this, for the sake of their motivation, it is important to pay people in proportion to their responsibilities -- and frontline social work is a very responsible job. If social workers are to match up to their responsibilities, commitment alone is not enough. The profession also needs to attract people that, in addition to being committed, are organized, fair-minded, team-oriented, competent, knowledgeable, and decisive, qualities that are valued highly -- and often highly rewarded -- in business. All this suggests that raising salaries could be part of the solution.

Raising salaries would seem to be a much more promising line of advance for the profession than the failed route of responding to crisis through frequent and costly reorganizations, reforms, and commissions of inquiry and task forces.

To give an example, every time there is a disaster, we are told that social workers failed to talk to each other and to other agencies. But competent, organized, knowledgeable, motivated social workers who are not crushed by overwork will talk to each other and to doctors and teachers without being told to do so. It is necessary to try to force social workers to do these things and to create artificial channels for them to do so, only because social workers are underpaid, underskilled, and overloaded.

To return to the report, if local authorities are being forced to raise salaries in order to compete for scarce social workers, isn't that a good thing? To judge from the tone of the task force report, "authorities competing to attract staff and address shortfalls through localised improvements" is being presented as a negative; "a single national framework for pay and other conditions" is put forward as the alternative to employer competition. When employer competition is pushing up pay, it looks like there are those that would prefer to hold it down.

A final thought on good and bad uses of money. One of the task force's headline recommendations is "The creation of a national college for social work" (page 40):

We are therefore exploring the case for a new organisation to support social work, which can play a role similar to that of the Royal Colleges that support the medical and allied professions. This might take the form of a national college for social work in England. ... In particular, the Task Force is interested in the potential for the national college to have a key role in driving learning and best practice in social work and provide a strong voice which speaks to the media about the profession. We are also considering the roles it might play bringing coherence to the professional and occupational standards which underpin different aspects of social work training and practice, and in relation to regulation of professional practice, training and education.

This Royal College of Social Work (say) would be in addition to the bodies that already exist: the General Social Care Council (GSCC), the relevant sector skills councils, the Social Care Institute for Excellence (SCIE), and the British Association of Social Workers (BASW).)

How much would this cost? In 2007/08 the Royal College of Nursing had 400,000 members and an annual budget of around £80 million, so around £200 per head of the profession it serves. In the same year the GSCC spent about £42m and the SCIE another £8m, so £50m for these two bodies to cover around 100,000 registered social workers and social work students. In other words, social workers were already paying around £500 per head for their own statutory regulation. (I'm not sure why it already costs so much more to regulate and support social workers than nurses.)

My question: wouldn't we all be better off if, instead of creating yet another expensive statutory professional body, we abolished them all and used the money saved to pay social workers more? Maybe there's a lesson in Economics 101 after all.

Mark Harrison : 29 Jul 2009 16:08 |  Tags: Economics Politics Social-Work |  Comments (3) |  Close comments |  Report a problem

Rationalising the Macroeconomy

Writing about web page http://www.ft.com/cms/s/0/478de136-762b-11de-9e59-00144feabdc0.html

In The Financial Times on July 21, Paul de Grauwe published the best comment I have read so far about the crisis in macroeconomic policy. If your time is scarce, don't read on; click the link and read him.

De Grauwe makes a fundamental argument, which I will summarize in four steps.

• Today, macroeconomists are distributed along a spectrum from "Keynesian" at one end and "Classical" at the other. They tend to clump at the extremes so there are many passionate Keynesians and passionate Classicals, as well as less passionate scholars in between.
• The Classical macroeconomists expect the macroeconomy to bounce back quickly from a major disturbance (for example, a credit crunch) on its own accord; government intervention is more likely to hinder than help. The Keynesians believe the opposite.
• For practical purposes, both schools model the behaviour of the people in the macroeconomy as follows: their behaviour is based on expectations of the future that are guided by the model, whether Keynesian or Classical. Classical macroeconomists assume that people's behaviour is based on the expectation that the outcome of the Classical model will be fulfilled, and Keynesian macroeconomists similarly.
• In both models, these expectations are self-fulfilling.

De Grauwe's punch line:

So what? Does it matter that economists disagree so much? It does. Take the issue of government deficits. If you want to forecast the long-term interest rate, it matters a great deal which of the two camps you believe. If you believe the first [Classical] one, you will fear future inflation and you will sell long-term government bonds. As a result, bond prices will drop and rates will rise. You will have made a reality of the fears of the first camp. But if you believe the story told by the second [Keynesian] camp, you will happily buy long-term government bonds, allowing the government to spend without a surge in rates, thereby contributing to a recovery that the second camp predicts will follow from high budget deficits.

In short, in a Keynesian model, the agents are assumed to expect that a credit crunch will have lasting adverse consequences. As a result they will rein in consumption (because households expect lower incomes) and investent (because firms expect depressed markets). The economy will stay depressed until government action flips the economy back to normal. But in a Classical model, the agents are assumed to expect that a credit crunch will soon be overcome, provided markets are allowed to work normally. Do nothing, and any damage to confidence will soon be restored. Unnecessary government action, however, by enlarging public spending and debt, will depress long term expectations and so inhibit the restoration of confidence.

This point is not new. I'm not sure who made it originally. It has been around a long time. I checked my notes from 1998/99, the first year I lectured to first year undergraduates at Warwick on this particular topic. I found the following passage:

We’re trying to explain a state of the world in which at least some unemployment is involuntary, money isn’t instantly neutralised by price change, and business cycles last anywhere between 5 and 9 years. The fundamental problem of the RE [rational expectations] approach is that it proves this state of the world can’t exist. Underlying this are some basic conceptual faultlines.  Learning from experience may be more difficult than RE theory assumes. Large experiments are rarely if ever repeated under controlled conditions (e.g. joining, then leaving the ERM). Large shocks (e.g. oil shocks, monetary shocks) make it hard to discern the underlying things which remain the same.  What is the true model of the macroeconomy? RE theorists tend to assume that most people adhere to a Classical philosophy. But since economists have such difficulty decided how best to model the economy, it’s not clear why rational non-economists should be different. Policy demonstrably does affect the real economy, so why should rational people believe it won’t?  This is particularly important since the outcomes of actions based on RE tend to force the world to conform to the model, not the other way round. What is created here is a "guessing the winner" problem: what’s important in forming rational expectations is not "how does the economy work?"; nor even "how does the economy work in my opinion?"; but "how does the economy work in most people’s opinion", bearing in mind that in forming their opinions they are all asking themselves the same question.

I claim absolutely no credit for this; I was not saying anything original. I got the argument from somewhere or someone else. My point is that the basic paradox in rational expectations has been understood for a long time, but the horrendous policy implications are perhaps only now fully apparent.

How bad does that make economists? Ten years ago I told my students that the idea of rational expectations, although not wrong, contained a paradox. I had no idea how to resolve it, however. One route the profession has taken has been to consider that, just as economists learn, so do non-economists. As a result, macroeconomic models have been developed that incorporate heterogeneous expectations -- when different people in the macroeconomy start out with different models of how the economy works and so different forecasts of the future -- and model how they might then learn from experience. A recent review by George W. Evans and Seppo Honkapohja is here.

This takes me well outside my comfort zone. I thought about it, however, when a friend forwarded some lines from an internet discussion including the suggestion:

Until the "science" of economics detaches itself from econometrics and unilateral modelling and realises that humans are "rationalising beings", not "rational beings", then the predictions and opinions stemming from its adherents should be treated with caution.

In the context I took the gap between "rationality" and "rationality" to reflect some falling short of cognition or computation. It wasn't that I disagreed; the suggestion seemed almost trivially true (apart from the reference to econometrics, which seemed silly). What it made me think is this: If humans are "rationalising beings," then so too, being human, are economists. All economic models have cognitive and computational limits. They model reality; they don't and can't reproduce it. 

In the often misquoted words of George Box and Norman Draper (from Empirical Model-Building and Response Surfaces, New York: John Wiley 1987, p. 63):

All models are wrong; the question is how wrong do they have to be to not be useful.

Mark Harrison : 27 Jul 2009 09:15 |  Tags: Economics Keynes Politics Recession |  Comments (3) |  Close comments |  Report a problem

Afghanistan's Future Lies in the Past

Writing about web page http://www.guardian.co.uk/world/2009/jul/12/paddy-ashdown-afghanistan-policy

A few days ago Nicholas Watt, chief political correspondent of The Guardian, reported Lord Ashdown in the following terms:

In remarks likely to fuel the debate about the future of the war, Ashdown accused Britain and other European countries of setting "ludicrously ambitious targets" of attempting to turn Afghanistan into a fully democratic and progressive nation.

I thought to myself: Of course, Ashdown's right. Then, I recalled a short paper that I wrote and circulated more than 7 years ago (my first draft was dated 4 December 2001), when blogs were in their infancy (and years before I started one). Anyway, no one noticed what I had to say at the time, that's for sure.

My argument was simple: For Afghanistan, real democracy (and real capitalism) was going to be a step too far. If not democratic capitalism, what should we aim for? My answer was: For a country like Afghanistan, even feudalism would be a step forward -- as long as it was of the right kind.

This is a very general argument. It is about our goals, more than the strategy or tactics required to achieve them, or the value and costs of doing so. I don't have a clue about important details like whether we should have fortified bases in Helmand or even whether we are currently winning or losing.

Still, I believe the merit of my general argument has, if anything, been strengthened in the years since 2001. If nothing else, Paddy Ashdown agrees! So, I decided to reprint it. Starting here is the full text, exactly as I revised it on 9 January 2002.

What Afghanistan Needs is the Right Kind of Feudalism

Afghan warlords have been meeting in Germany to try to agree their country’s future. This future looks bleak. Afghanistan lies ruined by decades of foreign intervention and civil war. Its territory is being redivided among heavily armed rival warlords with dreadful records of human rights abuses based on ethnic and religious factions that hate and mistrust each other. How, under these conditions, can Afghanistan’s economy be rebuilt? How can purpose and prosperity be returned to its people?

It might be thought that what Afghanistan needs is a powerful dose of democracy and liberal capitalism. This isn’t going to happen, at least not for a century or so. For a start, take democracy. We think of democracy as “majority rule”. But majority rule by itself is not enough. It’s also important that the majority doesn’t rule by exterminating minorities. In a democracy, minorities have rights that cannot be overriden: rights of free speech, criticism, and opposition. In Afghanistan there are many minorities, but there is also too much hatred and there are too many guns for any minority to be sure of these protections.

Then take capitalism. For a capitalist market economy to work ownership rights must be taken for granted most of the time. Business grinds to a halt if you have to spend all your time guarding your property with guns, or paying lawyers or bribing officials to get what you’re due. If warlords, thieves, or bureaucrats take a cut too frequently, economic life will slow down or come to a near stop. Too much of a cut and the only activity that’s left is when people grow their own food and then hide it until they can eat it. Afghanistan has already come to this.

Feudalism is the best that Afghans can hope for right now. Feudalism emerged in Europe from the Dark Ages, when the costs of fighting became so heavy that warlords got together and chose rulers to keep order among them. The result was a more stable form of society in which everyone had prescribed rights and responsibilities and everyone knew their place. In fact, everyone was fixed in place: peasants in their villages, squires in their manors, monks in their monasteries, kings in their courts. The farmer served the noble by providing him with food and labour. The noble served the king by providing him with taxes and men. Kings and nobles provided justice and protected those under them. As a result, economic progress became possible. Feudalism of the right kind proved prosperous and stable, and left monuments of art and culture that are still admired and loved after many centuries.

It’s true that feudalism was an unfree society. People could not choose where to live, what to believe in, whom to serve, or with whom to trade. Peasant revolutionaries saw it as organised robbery. Women and children were subjected to domestic tyranny. Yet it was not the worst of all possible worlds. For what feudalism restricted first of all was the universal freedom of each to rob and kill all others.

The late American historian Mancur Olson put it like this: such rulers are thieves, but a thief who stays in one place and settles down is better than one who plunders and moves on. The reason is that the thief who settles and rules the territory around him has an interest in its prosperity. He protects the people under him in his own self– interest, because they are his assets. To enlarge his own revenues he gives them legal rights and provides them with services to encourage the economic activity that he can tax. Thus as European society was stabilised on feudal lines, dukes and kings built roads and towns, provided schools, and organised trade. They taxed the trade, which was bad, but they prevented others from taxing or robbing it and this at least was good. They spent heavily on armies and navies; they also patronised the arts and sciences. They provided law: the laws were biased in their favour, but at least there were laws, not just the law of the jungle. Even the hereditary character of the lords and monarchy, which now seems laughably antique, had an important function. By agreeing to the hereditary principle, the nobles gave incentives even to a dying ruler to care about the stability and prosperity of the kingdom he would bequeath to his children, and ensured that the ruler’s death would be followed by an orderly succession, not civil war.

It will be a step forward if the Afghan leaders meeting in Bonn can agree upon this kind of society. But they will only do so if their self–interest lies there, so that they recognise the alternatives of unbridled rivalry and civil war without end as worse. The thief who controls a province promotes its prosperity only while he can be sure some other thief will not invade it and drive him out. The Afghan warlords need to agree some rules of mutual self-restraint. Everything must start from this. Otherwise there will be no rules at all and Afghanistan will return to civil war; or a dictator will emerge to restrain the warlords by force, and Afghanistan will have to undergo a new tyranny.

What kind of feudalism? It was important for European countries that their feudalism was of the right kind. The ruler had to accept limits on his power in relation to both the nobility and all citizens. In England the king’s responsibilities were agreed among the nobles and written down in the Magna Charta of 1215 which also set out principles of justice, ownership, and trade. The Magna Charta stopped the king from robbing, imprisoning, and killing without lawful reason. The result was that the English monarchy became more pluralistic than tyrannical. The state and religion, although not fully separate, at least retained separate powers. Women had some rights, although fewer than men. There was a Parliament, although at first it was only for the nobles.

For England the next few centuries included a necessary civil war to cut down the ambitions of the Tudors and Stewarts, and a period in which burgeoning democracy nearly descended into wholesale corruption. There were many colonial wars in which Englishmen behaved badly to the Scots, Irish, Africans, Indians, and others. At the same time they continued to mistreat large numbers of English women and children and also each other. British history has not been a Sunday School picnic. Still today there is enough poverty and discrimination at home that we cannot afford to be complacent. But by global standards Britain has become a relatively prosperous and stable society. If you were born here or can get in, it is a freer place to live than most. Is feudalism really the best that Afghans can hope for? I do not mean that we should silence Afghan democrats when they ask for elections or Afghan women when they demand education and a visible role in society. Part of the deal should be their right to speak and be heard. But we should not blame Afghan rulers who do not deliver this immediately and in full. There are worse things they can do, such as return Afghanistan to a perpetual state of internal warfare.

There are implications for the west. The decisive step in reconstituting Afghanistan is to establish the rights of the rulers, not of the ordinary people. If ordinary Afghans are to gather more rights than they have at present, they will flow at first from the self–interest of the rulers, not from ideals of citizenship and democracy or conventions on human rights. Only a stable division of rights of the rulers will provide this. We shouldn’t expect too much from Afghanistan’s new rulers. The big rewards that the west can offer, such as dollars for reconstruction and development, should be delivered to those that show commitments to peace, to rule that is governed by law, and to separating religion gradually from the state.

As for democracy and a market economy in Afghanistan, these lie in the future. Mancur Olson also wrote that democracy had the best chance to evolve when it was hard for one ruler or group to impose their will on all the others, leading to an absolutist dictatorship. To encourage power-sharing, and make it difficult for new big or little tyrants to emerge, we should distribute aid to projects and communities that cross the boundaries of each warlord’s domain, valley by valley. Perhaps a period of enlightened, pluralistic feudalism may then permit Afghanistan to evolve over the next few centuries into a more decent place for its citizens to live.

This version:  9 January 2002. First draft: 4 December 2001

Mark Harrison : 18 Jul 2009 15:33 |  Tags: Afghanistan Politics |  Comments (1) |  Close comments |  Report a problem