Blair for president

So it looks like Tony Blair’s chances of becoming EU president are sinking fast. Good! I don’t care that he is dynamic, driven, and has a strong world presence. The UK is by many metrics a worse place to live in now than it was before he became Prime Minister, and the Iraq war – as far as I’m concerned – is completely indefensible. My memory of those days is that there were plenty of very sensible people saying that attacking Iraq was not only a bad idea, but that the evidence for WMDs was weak. To argue that he was acting on strong evidence that noone realised was wrong is a fallacy. He should never be forgiven for starting the Iraq war and should never again hold any form of high office. If the EU is to succeed it not only needs a strong and dynamic president, but also one with integrity. That person is clearly not Tony Blair.

Research funding in the UK

I’ve spent a number of years working in the UK, but have also worked for a number of years in the US. One thing I liked about doing research in the UK was that there was less explicit emphasis on money. What was somewhat disappointing was just a year or so after returning to work in the UK, the research funding model was changed. Now when a grant is funded it not only pays part of the academic’s salary (which it didn’t use to in the past), it also pays a large amount of indirect costs to the university. The idea is that grant funding now covers the full economic costs of the research, known – not surprisingly – as Full Economic Costing (FEC).

The idea behind this is – I believe – that in the past the level of funding was such that to cover the additional costs of doing research, universities had to spend money that should really have been spent on other things, or they did not actually spend enough money maintaining buildings and research space. The new costs that can be included in research grants are meant to cover – in general – the indirect costs of doing research. In theory this is perfectly reasonable. An issue I have with this is that it changes the fundamental philosophy of how research is done in the UK. For example, individual researchers are now expected to bring in a certain fraction of their salary. This may sound alright to most, but the inherent randomness of grant successes means that good researchers could be judged as having failed not because they didn’t publish good papers (or did good research), but because they weren’t sufficiently successful at bringing in money.

What is more, it doesn’t seem to me that the costs that universities are including on research grants are particularly realistic or reasonable. Most universities – from what I understand – are now claiming that it costs about £150000 per year to support junior researchers who will earn less than £30000 per year. My university also doesn’t seem to be able to spend all the indirect costs that it receives – or at least can’t spent it all on what I would regard as indirect costs. It returns some to the departments to support existing research. As far as I understand it, this is legitimate since it can essentially only be used to support ongoing research and cannot be used to generate new research. The existence of indirect costs on research grants does, however, mean that fewer grants are funded. Researchers who are funded can then also get extra money through the return of some of the indirect costs back to departments. Some of those who are unfunded may still benefit, but it is probably harder for them than for those who are directly funded.

Now I should be slightly careful here, because universities having money that they can return to departments to help with unforeseen or unpredicted research costs is probably a good thing. What I think I object to is that this new Full Economic Costing model of funding was meant to be a cleaner more transparent way to fund research. In truth, however, it seems like it only reflects the true cost in some kind of average sense – the amount requested on each grant proposal is not what it will actually cost to carry out this research project, but the average cost of carrying out research projects. As illustrated above, the amounts that universities are requesting also seems considerably higher than what I would regard as reasonable. This model is also likely to make money a much more important factor in determining how successful a researcher is, rather than judging them by the quality of their research (I’m implying here that although there must be a correlation between success at getting research grants and success at doing research, it may be not be particularly good).

Why do I worry about money becoming overly important in academic research here in the UK. It’s because I think the reason the UK has generally punched above its weight in the past is precisely because there wasn’t as much focus on money here as there has been, for example, in the US. This FEC model is probably also only correct on average in the sense that the amount universities are likely to request per grant is probably determined more by the total they would like to get, rather than by the actual cost of that particular research project. If making individual researchers responsible for getting the full cost of their research will damage what was a very positive research environment in the UK, and if this full cost is not a true cost anyway, why do it this way. Why not make individual researchers responsible for getting the direct costs of their research and let institutions bid for lump sums that will cover the additional, indirect costs of carrying out the research. The end will in general be the same, and it is less likely that money will become the prime factor in determining if a researcher is successful or not.

Domestic extremism

A couple of interesting but potentially disturbing articles in the Guardian about how the Police monitor and investigate what is sometimes referred to as domestic extremism. The basic idea seems to be that the Police are collecting information about many activists who have been or may be involved in domestic protests or who attend political meetings. I am quite in favour of intelligence gathering as a means of determining what may happen in the future, with the caveat that the intelligence should be collected properly and interpreted correctly. The explicit goal of such intelligence gathering should be to prevent possible criminal activities.

What is concerning in the case of “domestic extremism” is the possibility that the Police are actively collecting intelligence on people who are highly unlikely to carry out any criminal activities. Even worse is the possibility that the implication that simply being a political activists makes you a potential future criminal (or even that being active in this way is implicitly criminal). I personally find this extremely disturbing. If anything I believe we should be doing exactly the opposite and encouraging people to become much politically and socially active. We’re supposed to be living in a democracy. How else are our political leaders meant to get a sense of what the general public feels if we don’t stand up for what we feel strongly about. Even if the above interpretation is wrong and the intelligence gathering is simply to identify true criminals, the impression that being an activist could lead to you being on some Police database will almost certainly discourage many.

It is slightly ironic that I’m writing this since I’m personally fairly poor at being particularly politically or socially active. Even though I am writing this anonymously, I did wonder if by writing this I could end up on such a Police database, but since noone seems to be reading my blog that seems highly unlikely.

Royal Mail strikes

So Royal Mail workers are on strike and it is likely to cause all sorts of problems. Now I don’t know if they should be striking or not or even if they are justified in striking. I must admit, though, that at some level I am quite pleased to see a group of people illustrating how important their industry is to the UK economy, although I am concerned about the damage it may do to Royal Mail itself. What I do find ironic is that yesterday the vice-chairman of Goldman Sachs suggested that if we don’t accept bankers’ enormous salaries these bankers will simply leave and take their profitable businesses overseas, while today we hear that Royal Mail workers shouldn’t strike because if they do other companies will take over Royal Mail’s business.

To a certain extent this sounds contradictory. I appreciate that there are probably fewer people capable of working in investment banks than there are capable of delivering mail, but presumably in an industry sense, the same should apply to both. If banks want to relocate, why can’t other banks simply take over what they’ve left behind. Why don’t we apply exactly the same logic to the banking sector as seems to being applied to Royal Mail. If they won’t accept a more reasonable salary scheme, then let them leave and allow other banks to take over their business. I do realise that this is probably simplistic, but it may illustrate a fundamental problem. Banks currently seem to operate in an environment in which they are given a level of protection not offered to other industries.

Arrogance personified

The Guardian has reported that the vice-chairman of Goldman Sachs, Lord Griffiths, has given a speech at St Paul’s cathedral in London about morality in the marketplace in which he argued that society (the British public) should “tolerate the inequality as a way to achieve greater prosperity for all” . Not only do I disagree with the premise that giving lots of money to a few people will make everyone else more prosperous, it also seems as though his primary argument is that if we don’t accept this, banks will relocate overseas.

I didn’t see the speech and haven’t read a transcript so don’t know if there was more to it than that suggested above, but it doesn’t seem like a particularly moral argument to me. Give us what we want or else. Personally I think we should stand up to these kind of threats. I don’t believe that there are any strong arguments in favour of the trickle-down effect. There must be some kind of conservation in the system: the more the bankers keep the less there is for the rest of us. What is more, since banks don’t really build anything or invent any new technologies, the more money they keep the less there is for industry to work with.

There’s no question that banks do provide a valuable service, but is it quite as valuable as they seem to think. I agree that at the moment individual banks may be forced to pay ridiculous salaries in order to retain good staff, but there is no real reason why we as a society cannot push for a global change such that this is no longer the norm. It seems as though banks pay much higher salaries to a much larger percentage of their staff than other comparably sized business. Although banks may well have a larger percentage of highly-trained staff than many other industries, this still doesn’t seem to justify such huge salaries. If anything, if more of these bright people were encouraged to go into other industries that may develop technologies that can change the way we live – rather than being seduced by huge salaries in the banking sector – we may all benefit.

Although I am pleased that Alistair Darling, the Chancellor, has criticised the banks for paying huge bonuses so soon after being bailed out by the government, I have to admit that I suspect that this is more for political effect than because he truly believes it is wrong.

Goldman Sachs

It has been reported that Goldman Sachs will make a record profit in 2009 and will consequently pay record staff bonuses, setting aside as much as $18 billion. Personally I find this obscene, as do many others, and was really hoping that the banking industry would show some restraint and try to illustrate that they recognise the damage that has been done to the world economy by their risk taking.

On the other hand, some argue that this is simply capitalism working and if they choose to distribute some of their profits amongst their staff, that is entirely up to them. In principle this is fine, but I thought I would try to see if their was some reason why this argument wasn’t quite correct. In the past few years Goldman Sachs has had revenues of about $50 billion. It may be slightly higher in 2009 since there are fewer banks operating, but it probably isn’t more than $100 billion. The bonus pot is about half of their total profit, suggesting a total profit of $35 billion. This means that their profit is something like 35 % – 70 % of their revenue (depending what their actual revenue is). How does this compare with other large companies. Well, I quickly looked up Toyota and in the last few years they’ve had revenues of about $220 billion and profits of about $15 billion, about 5 % of their revenue.

The above isn’t particularly statistically significant. I thought I would try to have a slightly deeper look at this. I downloaded data for the top 100 companies (by revenue) in the world and worked out the average percentage profit. It is about 6.5 %. When I do the same for the Banking sector only, it turns out to be 9.5 % (it is the same whether I take the top 20, top 25 or top 50 banks in the world). This may not seem like a lot, but it does suggest that the banking sector operates in a way that allows it to make a larger percentage profit – in general – than most, if not all, other industries.

Maybe the above is fine, I don’t really know. Personally I have a problem with it. Although banks compete amongst themselves, unlike many other industries, there isn’t really an alternative to banking. We don’t have to buy a car, we could use public transport or ride a bike. If, however, we want to buy a house or invest some money, we need to use a bank (there may be some exceptions, but this is generally true). Is the reason that banks can attain larger percentage profits than comparable industries in other sectors because they have the brightest most capable staff, or simply because the type of competition they face is different to what other industries face. Personally I favour the latter interpretation. I don’t know how to change this, and even if there is a way to do so, but it is my opinion that our economy would be better off if more of the money remained in industries that actually build things and develop new technologies than being swallowed up by banks and divided up amongst their staff and investors.

Economic Impact

There is a lot of pressure for academic researchers to think more about what kind of economic impact their work might have. If this is just a suggestion that we should at least consider this, then it is probably fine. There is, however, a chance – a pretty good one in my view – that this pressure will ultimately force researchers to start doing more applied research that would be perceived as being more economically viable.

Presumably the reason this is happening is that there is a belief amongst those who make these kind of decisions that in an economic downturn it is more important to do research that may have economic value today than it is to do fundamental research that may have no economic value today and if it does ultimately have some impact, it will only be in the distant future. This may sound reasonable, but there could well be a strong argument that this is precisely the wrong thing to do.

It would seem – to me a to least – that most wealth in an economy simply circulates. It is pretty difficult to generate new wealth. If this is true then it doesn’t really matter if the money spent on research goes to fundamental research or to applied research. It still employs people and things will still need to be built. What is worse, if we start encouraging applied research over fundamental research we will not only lose something that is of great interest to us as a society, we will be using taxpayers money to do something that private industry should be paying for itself. It is certainly my view that we should continue using taxpayers money to do what industry cannot be expected to do and we should be encouraging industry to become less risk averse rather than the reverse.