Thursday, November 21, 2013

Jim Heckman and Tim Kautz have provided an intriguing analysis of ways in which individuals' characters influence their economic outcomes, and of how character can be changed by various interventions. They view character as something that can change over time, something that is shaped by the individual's environment, and something that can be developed by interventions.

Opportunities for such interventions exist at many points over the life cycle, but are particularly rich during the early stages of life. Non-cognitive skills are developed at this stage, but this does not mean that character is fixed thereafter - describing these soft skills as personality traits is therefore misleading, and they are better described as skills. Skills can be honed over time.

The importance of such skills in the labour market is clear. Conscientousness, extraversion, emotional stability, agreeableness and openness - in that order - are known to be positively correlated with job performance. The evidence on the ability of interventions to affect character, and thence subsequent attainment, comes from a variety of sources, but one of the most persuasive concerns the effects of the Perry preschool programme.

These are important findings. The way in which various options affect the characters of stakeholders needs to be addressed in the design and subsequent evluation of policies.

Monday, November 04, 2013

The Confederation of British Industry has estimated that the net benefit of the UK's membership of the European Union amounts to somewhere between £62 billion and £78 billion per year - that is between 4% and 5% of Gross Domestic Product. This benefit comes from access to European markets, the dismantling of tariffs and other barriers to trade, and the consequent realisation of economies of scale. Further benefits come from the improved access to sources of finance that arise from EU membership, and from increased investment from outside the EU from firms wishing to locate within the common economic area.

The figures cited by the CBI are almost completely meaningless. To evaluate the benefits of membership of the EU, it is necessary to have an idea of what non-membership would look like. Were the UK to leave the EU, for example, it would most likely do so on a basis that retained freedom of trade. So to include the impact of free trade in any calculation of the benefits of the EU seems strange.

There is, of course, a case for staying in the European Union. But exaggerating the numbers does not serve to strengthen that case.