Wednesday, 21 November 2012

History and GIS

This week I am at an ERSA organised workshop on the use of geographical information systems (GIS) in the analysis of economic history. For the occasion Johan Fourie brought out Alex Moradi of Sussex University and after the first afternoon there are already some interesting points to write about.

Alex explained that historical GIS is about structuring, mapping and analysing geographies of the past. It is a way of interrelating information from different sources - some of it spatial. GIS software can be used as a database management tool (layers are key), for analysing data (clustering, spatial autocorrelation) and visualising finished products (make your own maps). We will be learning more about that tomorrow.

For someone who is interested in geographical economics I found Alex's borders example interesting. Geography, like altitude or latitude variables are not really used as an explanatory variables, but rather as a way to help identify differences or discontinuities. I look forward to his inputs on our research ideas.

Sunday, 18 November 2012

If you have a moment to spare

November has turned out to be quite busy with lots of meetings about the campus plan and admission of next year's post grads. And some marking of exam scripts. The result is that I have not written about the labour unrest in the Western Cape and missed the best part of the last two issues of The Economist. To add some excitement to this mix, this weeks has a Scholarship of Teaching and Learning conference and an ERSA workshop on history and GIS! If you have a moment to spare I highly recommend this short video: Werner Herzog reads Where's Waldo. Enjoy.

Sunday, 4 November 2012

More on lecturer evaluation

In August I wrote a post on lecturer evaluation, having used factor analysis to narrow down the characteristics that our students think make for a good lecturer. The questionnaire has 25 items that students score on a 4-point scale from strongly disagree to strongly agree. The items include things like: The lecturer plans thoroughly and prepares thoroughly for contact sessions. Or, the lecturer makes use of multimedia in support of learning. The lecturer may also explain the relevance of concepts and theories, or explain the relationship between theory and practice. The result was the following:

Component 1 seemed like the baseline characteristics of a good lecturer – being friendly, accessible, fair, offering support, an all-round professional that can explain the work. It accounted for 19% of the variance in the data. Component 2 looked like the things that you have to learn to become a good lecturer. It is not only about knowing your field, you also need to know a bit about formulating outcomes, action verbs, putting it into a study guide and using it. This explained 15% of the variance. Component 3 looked like it was about the enthusiasm and adding value – engaging with the students. And it explained another 15% of the variance. The other 50% of the variance was not explained by these three constructs.

Now, students don't really like doing these lecturer evaluations for all their courses. After the second or third one they realise that it takes up valuable beer-drinking time. And as with many of these "customer satisfaction" type surveys, they don't really see their inputs making a difference. Unless you are repeating the course next year, you would not know if the lecturer took the low score for providing quick feedback to heart.

On the lecturers' side, the process does not seem to provide that much useful information or action. If it is going badly in a course, the School director knows about it long before the lecturer evaluation is done. Low scores on a few items might get a mention at the meeting where next year's teaching load is assigned. If you are really keen, scoring low on "basing assesment on learning outcomes" might get you to enroll in the next assessment training course on campus, but then you also do have some articles to write. At best (and worst) the aggregate lecturer evaluation score matters for the top-20% bonus at the end of the year.

Which brings me to my point, if we are capturing half of what makes for a good lecturer and the result is not particularly useful to students or lecturers, shouldn't we replace the whole system with a simple vote by text message: rate your lecturer with score out of 100.

This has some support in what has been written about so-called "thin slicing": In his book Blink, Malcolm Gladwell writes about people’s ability to 'thin slice' – to judge what is good or important from a narrow period of experience. He goes on to argue that having too much information can interfere with the accuracy of a judgement.

To get an idea of the difference between our questionnaire score and a 'thin-sliced' score we asked our students for both this semester and the results are as follows. For the analysis I have 869 usable responses from undergraduates in 5 modules for 9 lecturers.

The average score from the questionnaire was 85.7% and the standard deviation 13.3. The figure shows the distribution between the courses.

The average of the 'thin slice' scores out of 100 was 82% with a standard deviation of 17. The correlation coefficient between the two sets of scores was .741 and it was significant at the 5% level. Controlling for the different modules the partial correlation is slightly lower at .731. A paired samplest-test showed that the differences between the means is statistically significant.

It seems that the questionnaire is useful to the extent that it ammeliorates a general dislike of the lecturer. For 'thin slice' scores between 0 and 50%, the average questionnaire score was 63%. Having considered all 25 elements of the evaluation it turns out the that lecturer is not so bad as the initial 'thin slice' score out of 100 indicated. This effect gets smaller at higher scores: For 'thin slice' scores between 71 and 80%, the average questionnaire score was 83%.

Thus, for all its shortcomings, it does seem that the questionnaire serves a purpose. Next we'll have to try a five-point scale and see if we can measure more accurately! 

Sunday, 28 October 2012

A few links and thoughts for managers

Now that I am School director I'm spending more time in meetings, listening to senior managers' ideas about the campus plan for 2013 and I'm reading more posts in The Chronicle and Inside Higher Ed. In many ways our NWU, or South African challenges are more universal than we think. Here are three quick perspectives.

Last week Higher Education Research Institute at the University of California at Los Angeles released their survey of faculty (academic staff members') activities and attitudes. The survey reached more than 23 000 faculty members at four-year colleges and universities in the US. The table below shows activities and time spent:

How Faculty Members Report Spending Time, in Hours per Week, 2010-11
  0 1-4 5-8 9-12 13-16 17-20 21+
Schedule teaching 5.8 15.8 34.6 28.6 9.2 3.7 2.1
Preparing for teaching (including grading) 4.9 11.5 24.4 22.4 13.9 12.1 10.7
Advising and counselling students 4.4 56.7 27.1 7.8 2.2 1.1 0.7
Committee work and meetings 7.6 58.0 23.7 6.8 2.2 1.3 0.4
Other administration 30.6 39.7 13.8 6.6 3.4 2.7 3.2
Research 13.1 30.3 19.2 12.9 6.9 6.0 11.7

The report shows that time spent on teaching is less than the years before, but time spent on research is not notably up. Many faculty members spend small but regular chunks of time each week on committee work, advising, research and other activities. I am keen to compare this to our School where most of the staff would fall in the 5-8 hours of teaching per week bracket. It is clear that the faculty members in the survey do not get close the the NWU's idea of splitting their time 40:40:20 between teaching, research and community / commercialisation.

Another interesting table shows what is happening in class:

Men, Women and Teaching Methods in Used in All or Most Courses
Method Men, 2001-2 Women, 2001-2 Men, 2010-11 Women, 2010-11
Extensive lecturing 54.6% 34.1% 52.7% 33.8%
Class discussions 68.3% 78.9% 78.3% 88.0%
Cooperative learning 32.6% 55.8% 48.5% 68.8%
Student presentations 30.4% 45.2% 36.9% 53.8%

Faculty members seem to be moving to more student-centered approaches, but the men still seem to prefer more lecturing. This is specifically the case in the so-called STEM fields (Science, Technology, Engineering, Mathematics). This week our campus is hosting a conference on teaching excellence and I am excited to go and have a look at what the top lectures are doing in their courses.

Finally, the report shows that these academics are stressed. The challenge for a manager though is that "teaching load" or "committee work" are not the big stressors. Items like self-imposed high expectations, working with under-prepared students and research or publishing demands rank much higher. Empowering staff to take their teaching or research to the next level will require more than just giving them more time. I think that training is one part, but I also like the idea of nudging. Maybe exposing people to that next level quality will inspire their own efforts.

This brings me to two other interesting posts. Margaret Wente writes in the Globe and Mail that Canadian Universities will have to choose between access and quality. The problem starts with government's goals of access and mass participation. But:
Academics insist that universities must not become job factories. Their mission is to guide students to cultivate the life of the mind. But there’s a big disconnect between what academics want and what students want. For students, higher education is all about the job. Yet, they get virtually no counselling about what returns they can expect for their investment, or what their job prospects might be.
She goes on to argue that changing this will be difficult and outlines a number of points that sound familiar in SA as well: Big classes, more teaching done by part-time staff (adjuncts), all the incentives for research. Her solution is a bold one:
Give more research money to the most productive researchers, and far less to the rest. Let’s abandon our cherished egalitarianism and fund our leading research universities properly, so they can compete on the world stage. Let’s develop a tier of teaching universities that are excellent at what they do. The result would be smaller classes and lower tuition, a win-win all around.
I also do not think that universities should become job factories, and I disagree with the article's idea that there should be greater government intervention, but I agree that the system as it is set up, is a danger to undergraduate teaching and in the end post-grads and research will suffer for it as well.

Finally, the Chronicle writes about a Michael Rizzo, a full-time lecturer in economics at the University of Rochester, and argues for two tracks for faculty - teaching, or research. The idea put forward is:
But what if the academic work force were made up primarily of two types of faculty members? One, a small proportion of tenure-track professors—those who earn doctoral degrees, do research, train graduate students, teach advanced seminars, and help administrators run the university. And two, a larger portion of full-time instructors, like Mr. Rizzo, who teach undergraduates, help advise them, keep up with developments in the field by reading and attending conferences, but do no research. Instead of earning Ph.D.'s, like those on the tenure track, instructors could stop with a master's degree, as many in the adjunct teaching pool already do.
At the NWU this idea is heresy: we recently scrapped the idea of a teaching-learning associate professorship. But then management also has this idea that we can't have all these part-time lecturers on the  school's budget. Who is supposed to do the teaching then? Or the other way around, if everyone's teaching, who's supposed to do the research then? As an economist I am in favour of the idea of the division of labour and specialisation. If everyone has to do everything, there can be limited gains from trade.

In conclusion, I don't have answers to these different questions, but I do find it interesting that there are many more people out there, thinking about them.

Thursday, 25 October 2012

More on the beloved country

Yesterday I weighed in on The Economist's "Cry, the Beloved country" article on the School blog: What if leadership matters?  The point that I try to make is that that there are many different ways of reading “the evidence”. There are indicators of progress and signs of decline. The challenge is to look for clues to the long-run path of growth and development. These clues, I argue, lie in the way that we try to implement our plans, i.e. market-lead vs developmental state. I favour the pragmatic market-lead mixed-economy approach and the post goes on to explain that it requires a working relationship between government, business, labour and civil society. This, in turn, requires some leadership. Not the speechifying, big-man type of leadership. Rather, the inclusive type that can outline a vision, build trust and get disparate groups to work together. 

If we can find evidence of this, South Africa will be fine and The Economist would be wrong. At the moment though, it seems that our political institutions are extractive and the economic institutions look set to remain so as well.

Since writing the post I have stumbled across a few interesting links:
Another example was discussions on nationalisation. At the ANC’s policy conference in June, delegates queued up to voice their support for nationalisation, not wanting to be seen to speak out against the idea. "That is policy-making by vuvuzela," Mr Manuel said.
"Sloganeering around policy" was not in the interests of either the living standards of working people or industry, which would see underinvestment or excessive profit-taking by owners if they feared that nationalisation was a real possibility.
Too true. Another example to the above is President's Zuma's new 5-step land reform plan. Analysts are calling for more detail, but they forget that he is not really speaking to the farming community - the proposals are bait for those that will end up supporting him in Mangaung. What really happens with land reform we'll only learn later. Inclusive, or extractive?

Sunday, 21 October 2012

The week's best links

This past week I stumbled across a number of links to interesting stuff on the web. Here is a quick list of some of them:
  • Marc Bellemare wrote about good documentaries on cities and development.
  • Chris Blattman celebrated a 5-year blogiversary with this image to explain why the blog keeps going. I could not agree more.
  • The Atlantic Cities has two interesting posts; one on the role of place in discovery and innovation, and another asking whether your city is innovative, productive, creative, or just populated.
  • The LSE's Impact of Social Sciences blog showed the Google search results for Roth and Shapley following the Nobel Prize announcement.
  • And the Chronicle of Higher Education ran a nice article on how academics can be unnecessarily miserable. I enjoyed the paragraph: I should take joy in the Facebook posts of far-flung colleagues who travel with their families during sabbaticals. But for some reason, they worry me, especially the pictures of smiling children on beaches building sand castles. Like the Grinch on his mountain, my inner dean splutters, "Look at them, sipping wine in Paris, sailing the Aegean, and strolling through Tuscan vineyards! I wonder how that relates to their next book project?".
This week the SA economy also featured on the front page of The Economist: You can reading the longer "Briefing" article of the Cry the beloved country issue here. There was wide-ranging response. You should read Johan Fourie's Smile the beloved country response. Against this backdrop, the Minister if Finance will deliver the so-called mini-budget this week.

Monday, 15 October 2012

Writing as assessment

This weekend I helped a colleague to grade some student assignments and it got me to thinking about writing as assessment. As a manager I always say that I would rather help someone move a body in the middle of the night, than to help them with marking. I know that there is quite a discussion online about student writing and I have not read enough of it to write anything sensible, but after ploughing through those "research proposals" I do want to ask some questions.

First-off, I just want to say that I do believe that it is important to have students make their thinking and reasoning visible through writing assignments. This can be short or long essays, research papers or "articles", whatever you want to call them. It is a way to demonstrate the 4C's: Creativity, Critical Thinking, Collaboration, and Communication. Being able to write simply and clearly will benefit anyone, everywhere, always.

But how can we go about this in a undergraduate Economics course? There is no shortage of topics, my questions are about practical challenges. The groups are large, ranging from 1200 first years, 450 second years and 180 third year students. Thus writing assignments present a lot of marking. How much individual-specific feedback can you give? If you don't have more than one essay, what use is the feedback? How do you deal with plagiarism?

Maybe there is someone out there who can share some ideas?

I suppose that having a writing assignment (with all its trouble and flaws) is better than having none. Maybe it is possible to use peer-evaluation for the first essay of the semester and have the lecturer grade the second one? Or you can try and get a bunch of post-grads to help read. Or the lecturers can share the load. Turn-it-in helps a bit.

I would love to hear from other academic economists on this. Are you still giving writing assignments? How do do the grading and feedback? Has anyone tried alternative approaches? Please leave a comment...

Friday, 12 October 2012

Friday afternoon reading

I'm stuck at the office on a Friday afternoon, trapped by a light hail storm and thought to do a quick round-up of links for the week.

In the geographical economics vein The Economist's Free Exchange blog has a nice post on how cities matter for growth. It also quotes research about the importance of research even for academic work: 
when a prominent researcher moves from one city to another, his peers in the origin city are less likely to cite his patents. Innovation today requires an ever-larger crowd of experts, preferably working in the same garage.  
This nicely resonated with Johan Fourie's post on the agglomeration of top restaurants in Stellenbosch.

The New Enquiry had an interesting essay about the rise of the celebrity Economist. They are not to keen on the idea and concludes:
In the online marketplace of ideas, the influence of a few celebrity economists creates an illusion of scarcity of new, heterodox voices. Yet now more than ever, to prevent costly and irreparable policy errors, economics needs its crowded-out Cassandras.
Noah Smith Asked whether econ blogging can hurt your career? He doubts it and I agree. Blogs and working papers are ever more relevant and there are many more voices out there than just the few celebrities.

Finally, I also read a good post at Inside HigherEd on technology and education. These days terms like MOOCs, BYOD, flipping the classroom are everywhere, but in fact, the ideas about technology and education have a long history:
The sort of tools that we have needed to help students learn have been around for 100 years, albeit continuously improved. It is our job to - finally - use those tools.
Finally, finally, congrats to Economist colleagues who have new NRF ratings: Andrea Saayman (NWU), Stan du Plessis (US), Servaas vd Berg (US), Steve Koch (UP) and James Blignaut (UP). These are the ones that I have heard of, but please add a comment if there is more good news to share.

Sunday, 7 October 2012

Urban farming, pimping pavements, hacking sidewalks

This weekend part of our pavement became part of a movement and the only thing that I enjoy more that writing about Economics, is an experiment.

The idea comes from a Social Anthropology colleague Andre Goodrich and his team (which includes more colleagues, friends and students). The basic idea is that it takes time and resources to maintain a manicured lawn or nice flower bed, but you can spend that effort on a vegetable garden. Since it is on the pavement, passersby may take some of your produce, but that is the point. I can go and do volunteer work, or keep busy with some community sponsoring agriculture. Our plot is quite small and unlikely to change the way that food is produced, or make a difference to hunger. But maybe it is a start to making people think differently about urban agriculture in Potchefstroom. I'm quite keen to be involved in the garden and to see where / with whom the produce ends up.

You can watch a short video of our gardening story here.

The whole initiative has already drawn some attention. The Daily Maverick's Ivo Vegter has called it a dumb idea. And Andre has responded on Facebook.

If you want to get involved check out the pavement pimping page on Facebook or follow @AnonymousAgri on Twitter.

Tuesday, 4 September 2012

A different take on fuel price increases

This evening the petrol price increases with 93c/l and I did not have time go and fill up the bakkie. By Thursday, when the warning light comes on, I'll be paying R11.97 per litre. We'll it is not like I ever completely fill up, but never mind. It is in the news and economists have already been giving their views:
The key drivers at this stage is the higher crude oil price and weaker rand-dollar exchange rate. I made a quick graph. The numbers only go up to August and since then the oil price has increased to $114 per barrel and the rand has weakend to R8.40 to the dollar. These recent price movements underlie the increases in the petrol price. The scary part is that the oil price is not as high as it has been and the rand is not as weak as it has been.

Now, the real economists don't really explain why the oil price and exchange rate might improve in November. The northern hemisphere's winter will be starting and I'm not sure that there will be less uncertainty in the world's hot spots, but of course, a global recession will help! As an academic economist I wondered what happens to the quantity demanded when the price is high and likely to stay high.

Work by Willem Boshoff of Stellenbosch University and Econex shows some interesting price elasticities. His own estimations covering the period 1998 to 2009 find a long-run price elasticity of -0.53. For every 10% increase in the price of petrol, the quantity demanded decreases by 5.3%.

One alwys thinks that this would be completely inelastic - there is nothing else that you can put in the tank! But people do find ways to use less fuel, whether it is driving more economically, taking fewer trips around town, or over time switching to smaller, more fuel efficient vehicles.

I'm all in favour of these adjustments. My bicycle is still only used for recreation, but getting to work a bit warm and sweaty will not be that bad at R15/l or R20/l. Which brings me to a final two points. Approximately 27% of the fuel price is made up of levies and taxes. Price increases typically go along with increases in calls for government to reduce these. Lets put aside for a moment the efficiency of the spending of government's tax income and consider that part of the levies and taxes are Pigouvian - aimed at reflecting the pollution cost to society that our driving to the mall is causing. Burning fuel pollutes and we should pay for the negative externality.

In South Africa this is not a particularly popular point of view. We face numerous serious challenges and any talk of carbon taxes are greeted with the question: Do you know what that will do to growth?

Recently I went to an interesting energy seminar. Uninformed as I was, I thought that at least, global warming will be slowed by the depletion of fossil fuels. If there is nothing left to burn, we won't completely change the climate. Turns out I was wrong. There is more than enough fossil fuels left to completely change the climate. Considering that, a higher petrol price and less driving around town might not be such a bad thing.

Wednesday, 22 August 2012

On lecturer evaluation

Moving offices and attending meetings means that I am writing fewer posts than I would like to. I really wanted to do one about the stuff I discovered when pack up the old office - notes from my PhD, the handbook for new lecturers 1999 etc. But leaving nostalgia aside, once in a while I do management work that also makes for good blog content. Here's a re-post of the one I wrote for the School blog on lecturer evaluation:

In his book Blink, Malcolm Gladwell writes about people’s ability to “thin slice’ – to judge what is good or important from a narrow period of experience. He goes on to argue that having too much information can interfere with the accuracy of a judgement.

Putting all that to one side, the NWU-Puk has for some time been asking students what makes for a good lecturer? Formally these are known as lecturers’ evaluation and normally it takes place towards the end of a semester, ideally in all courses. We don’t ask students for their gut feel on who are the good lecturers, we ask them about the characteristics of good lecturers using a questionnaire. Is there a case for thin slicing, or does our analysis approach yield results?

Now, I have been to a faculty council meeting where the questionnaire has been pulled apart and people congratulated on their results in almost the same breath. Some Schools use the “old” ones, Institutional academic support services have developed one and then there is the “new” version. A number of Faculties use their own questionnaires because they are different.

Being Economists, our School decided to bring some rigour to the debate. In the first semester of 2012 we used the e-learning platform to administer the “new” questionnaire and with that data, we now have some clues as to what students think makes for a good lecturer.The questionnaire has 25 items that students score on a 4-point scale from strongly disagree to strongly agree. The items include things like: The lecturer plans thoroughly and prepares thoroughly for contact sessions. Or, the lecturer makes use of multimedia in support of learning. The lecturer may also explain the relevance of concepts and theories, or explain the relationship between theory and practice. So what is it that the high-scoring lecturers do? I have always argued that being well-prepared and enthusiastic is more than half the battle. To see what different constructs make up that elusive “good/great” lecturer we used factor analysis to analyse our data.

We have responses from seven undergraduate courses in Economics, International Trade and Risk Management, ranging from first years through to third years, and a total of 1962 observations. There are 12 lecturers involved.

The KMO measure of sampling adequacy was .975, which shows that the data are suitable for factor analysis and the principle component analysis extracted three factors, explaining 50% of the variation in the construct “good/great” lecturer. After a Varimax rotation the items are grouped as follows:

Component 1
Component 2
Component 3
The lecturer is on time for classes The lecturer makes use of the study guide during contact sessions The lecturer encourages students to attend learning support on campus when their performance is weak
The lecturer makes use of multimedia in support of learning / makes effective use of visual aids The lecturer bases assessments on learning outcomes as stated in the study guide The lecturer encourages students to work together during contact sessions
The lecturer plans thoroughly and prepares thoroughly for contact sessions The lecturer explains how outcomes will be assessed The lecturer encourages students to participate in the class discussions
The lecturer is friendly towards students The lecturer presents study material in an organised manner as set out in the study guide The lecturer encourages students to make a greater effort in their studies
The lecturer offers support and assistance when requested to do so The lecturer states learning outcomes I have to master for every contact session The lecturer presents contact sessions that are valuable learning opportunities for me
The lecturer promotes an atmosphere of mutual respect The lecturer explains the relationship between study units The lecturer explains the relationship between theory and practice
The lecturer uses a level of language that I can understand
The lecturer refers to relevant and recent developments in the subject
The lecturer assesses assignments and projects fairly and transparently

The lecturer gives feedback on tests and assignments within a reasonable time

The lecturer explains the relevance of concepts and theories

Component 1 seems like the baseline characteristics of a good lecturer – being friendly, accessible, fair, offering support, an all-round professional that can explain the work. It accounts for 19% of the variance in the data. Component 2 looks like the things that you have to learn to become a good lecturer. It is not only about knowing your field, you also need to know a bit about formulating outcomes, action verbs, putting it into a study guide and using it. This explains 15% of the variance. Component 3 looks like it is about the enthusiasm and adding value – engaging with the students. And it explains another 15% of the variance. The other 50% of the variance is not explained by these three constructs. What describes the other half of being a great lecturer? I would love to hear how students/ lecturers think we can measure that magic. Or should we just thin slice and ask the students to score the lecturer out of a 100?

Finally, I am glad to say that my colleagues in the School did really well in these evaluations and should take a bow.

Wednesday, 8 August 2012

A post on growth slowdowns and growth plans

I wrote this post for the School's blog but also want to post it here:

With economic growth slowing down, economists everywhere are offering advice on what can and should be done. There is advice on how the ECB can stave off crisis and restore confidence, blogs argue that the Fed should be doing more and there are views on how China should respond to a global slowdown.

In South Africa we are never short of plans and strategies and recent the Democratic Alliance added their Plan for Growth and Jobs to the proposals of government’s New Growth Path and National Development Plan.

And in the academic background the Institutions versus Geography debate rages.

To provide another perspective on this story it may be useful to distinguish between the drivers of growth over the next 6 to 12 months and those of catch-up growth and deep development.

To my mind, there is little sense in talking about drivers of growth over the next few years. RMB economist Ettienne le Roux shows that the real growth rates expected in the EU are -0.5% in 2013, 1% growth in 2014 and 1.5% in 2015. The private sector, governments and banks need to deleverage. The slowdown in Europe will have an important contagion effect through channels like trade, investment and labour mobility. Developed economies look set to “muddle through”.

The prospects for the other 50% of the world are better. They are under-leveraged, have smaller deficits to GDP and more open credit channels, which provides for policy flexibility. Average growth rates of 5-6% per annum are forecast.

The South African economy grew by only 5.8% in total from the third quarter of 2008 up to the first quarter of 2012. The drivers of growth have been households, government consumption spending and investment by State-owned Enterprises. Exports, private fixed investment and government fixed investment have been slow to catch up or contribute to growth. Most of the work created since 2008 has been in the public sector.
Given the global outlook and the limited fiscal and monetary policy room available, one can hardly expect South African policymakers to drive growth over the next few years.

It is when one considers the drivers of catch-up growth and deep development that the story becomes interesting. There are probably as many views on what matters for growth as there are economists. “Everyone knows” that human capital, innovation and infrastructure are important. Some say these drivers are fostered by openness, agglomeration or a developmental state.

Years ago Rudolf Gouws presented two summary slides at a BER policy conference and today we can still plot most of our plans and strategies against these drivers of growth. The DA’s plan, for example, emphasises, education and training, a Youth Wage Subsidy, Job Zones, reducing the cost of doing business and encouraging entrepreneurs, and building infrastructure that crowds-in investment.

These are all sensible ideas, but unlikely to deliver a knock-out blow to a growth ceiling or to structural unemployment – least so in the next electoral cycle. One private sector economist opined: "Eight per cent is achievable, but not with this plan. They are making the right noises and politicking very well, but it’s not offering anything inherently different…”

Which brings me to the point of this post: there is nothing else. No single plan or idea will be able to deliver catch-up growth of 6% or 8% per annum. Growth is a many splendored thing. We have to get education, infrastructure and innovation right. We need institutions that nurture investment and protect the vulnerable. Most importantly, we need to get away from the idea that if we were to do only that one thing: weaken the rand, support SMMEs, invest in railways, improve competition develop tourism, curb corruption, or whatever, then we would be on our way. In fact, we need to do all that and more.

And that makes it so difficult. Politicians, bureaucrats, the public, all love a big shiny project that will change everything. Whereas we need to do many different things right and we need to start now.

Thursday, 19 July 2012

A teaching update

I am teaching again this semester and we are kicking off tomorrow, so I thought I should tell everyone!

It is the ECON621 course to the Honours (4th year-level, if you're not from SA) students in International Trade and in Risk Management. It is called International Monetary Relations, but it is not the sort of Obstfeld and Rogoff stuff that you would expect from such a name. It's more of an international macro, with focus on the issues of the day. A nice opportunity for hand-waving discussions about things that are happening now (global slowdown, policy paralysis!) and everything I'm reading all over the web.

If you like, you can check out the course blog and I will be tweeting on the topics with the tag #621. If anything interesting comes up, I'll repost here.

Sunday, 15 July 2012

The IPAP-2 and the North West Province

Last week's World Economic History Congress once more left me convinced that I should stick to the things that I love and know a bit about: what happens where and the stories of sub-national growth and development. Earlier this year I wrote about:
Today I want to take the next step and write about the IPAP-2 and its possible place in the North West province.

Government’s broad approach to industrialisation is set out in the National industrial Policy Framework. The implementation of policy is set out in the Industrial Policy Action Plan (IPAP). IPAP-2 is an action plan designed to help build South Africa’s industrial base in critical sectors of production and value-added manufacturing, which are largely labour-intensive industries. IPAP-2 is therefore designed to address the decline in industrial and manufacturing capacity and contribute to the reduction of chronic unemployment.

The IPAP-2 sets out to contribute to rural development, advanced technological capabilities, downstream minerals beneficiation, promotion of energy efficient goods and services, strengthened linkages between tourism and cultural industries, interaction between sector strategies and the creation of sustainable jobs. To make these contributions, each of the above can be related to key sectors on which the IPAP-2 will focus. These can be clustered into three groups.

The policies outlined above clearly have to be formulated at the national level (competition, regulation, trade policy), but have particular sub-national impacts. The implications for economies at provincial and local level are closely linked to the location of the sectors identified in IPAP-2. The firms that produce the goods and services are located in specific provinces, cities and towns and while the pursuit of the different IPAP-2 polices may be driven by national government, it has implications for provincial authorities.

To link the IPAP-2 to the North West province one first needs to consider the nature of the provincial economy. First, the North West province is a relatively small player in the national economy. In terms of population the province ranks seventh out of nine provinces with approximately 7.1 per cent of the population. The population density is low at 32 people per square kilometre. The province’s Human Development Index score of 0.51 is slightly below the national average of 0.56. In terms of contribution to the national economy, the North West Province does well. The Gross Value Added per capita is approximately R46 684. It is below the national average of R49 344 in 2010, but the province ranks fourth out of the nine provinces.

The second point to consider is the unique make-up of the provincial economy that has particular implications for the interpretation of the IPAP-2. The following figure shows the primary, secondary and tertiary sectors’ contribution to gross value added in 2010.

In the North West province the primary sector plays a larger role than in any of the other provinces. Along with the Northern Cape and Limpopo provinces the secondary sector (manufacturing) makes up a small part of GVA (8.2%). The tertiary sector contributes half of the provincial GVA. When the provinces’ share of national total GVA is examined in the following figure, it is clear that the North West makes the biggest contribution to primary sector GVA. Following the Northern Cape it makes a very small contribution to secondary sector GVA. Even though the tertiary sector accounts for half of the provincial GVA, the tertiary sector in the North West contributes only 5 per cent of the national gross value added.

A detailed breakdown of GVA and employment in the North West province confirms the large contribution of the primary sector, specifically the mining sector to GVA and employment. The sectors that are grouped together as the tertiary sector, from retail to transport and communication, finance and real estate, education and health etc., make up 49 per cent of value added and almost 45 per cent of employment.

The implication for the interpretation of the IPAP-2 for the Province is that the manufacturing focus of the IPAP-2 has only a limited footprint in the province. Since the manufacturing sector is small, the gains from industrial policy are likely to be limited. For the province the challenge will be to identify linkages between the primary and secondary sector and to consider the product space and scope for down-stream beneficiation, linked to national and international opportunities for such products.

The table below shows that matching of the sectors for which data are available at provincial level and the IPAP-2 clusters of sectors. It is not possible to clearly match the IPAP-2’s green and energy saving industries, automotive components and vehicles, bio-fuels and business process servicing to the available industrial classification of sectors from the Regional Economic Explorer database. The whole of cluster 3; nuclear, advanced materials and aerospace can also not be matched at provincial level. For the other IPAP-2 sectors there are close-enough proxies in the REX database. Cultural industries and tourism is matched with hotels and restaurants, which is not a close match, but also not too unreasonable to work with.

Taken all together the match between the IPAP-2’s focus sectors and the current state of production in the North West province is limited. Cluster 1 industries represent 2.6 per cent of value added and Cluster 2 industries make up 3 per cent of value added.

It is possible to have a closer look at the component sectors of clusters 1 and 2 in terms of their contribution to the provincial economy in 2010 and growth in GVA, employment and gross operating surplus over the period 1996 to 2009.

The table confirms the fact that the sectors in the IPAP-2 clusters make small contributions to the economy of the North West province in terms of value added, employment and gross operating surplus. The cultural industries and tourism seem to be slightly more labour intensive. The table below shows the growth rates over the period 1996 to 2009.

Thus, my point is that there is only a limited match possible between the IPAP-2 and the small manufacturing sector of the North West province. National and provincial politicians have to be careful when pursuing industrial policy. Targeted support of industries, or special economic zones may fail simply because there is no viable cluster to support.  So-called localisation (import substitution by any other name) is also likely to fail without the elements that make up a successful agglomeration: a pooled labour market, specialised suppliers of intermediate inputs, knowledge spillovers, and infrastructure. In the North West province policies focus should be on the factors that drive long-term competitiveness - lots of scope for research and blog posts!