Friday, 27 May 2011

Notes from a workshop: 7 miscellaneous ideas for the financing sector market

1. Finance has outgrown national governance; banking reform beyond deposit-taking must be multi-national to be effective. For European countries the EU's "normative power" provides an available and important space to do this.

2. Remember competition policy. We have to manage economic entities so that:
- their failure doesn't threaten the whole system (that means smaller banks, whether split between investment and retail or not)
- their power doesn't create imbalances in our political system (i.e. threaten government's capacity to make decisions in the interests of the whole). Overly dominant institutions use lobbying, funding and PR to drive policy in their interests (e.g. oil companies in the US)

3. The last three years has seen the extent to which banks operate with the implicit backing of governments. We need to make more explicit the conditions of licences to operate. Review, publicise and retool.

4. Introduce a better risk reporting matrix for pension funds. In the light of the huge impact of systemic volatility on pension finds over the past three years, pension funds need to better understand that fiduciary duty means addressing systemic as well as stock risks. Governments need to make explicit their requirement that funds do this (as distinct from telling them how to do this). Requiring reporting on a matrix of risk areas would force them to analyse and exposes long-term issues.

5. The achieve a rapid shift an economy governments need to use Government preferencing tools to better align political policy with financial priorities
- tax credits
- guarantees
- on-lend to local banks (i.e. use their distribution) for targeted programmes (e.g. green businesses)
- regulatory support (e.g. outlaw high-carbon investments)

That applies most urgently to green economy transitions.

6. Improve consumer protection. In the UK for example consumer protections have lagged behind other countries. This has the benefit of limiting opportunities to un-sustainably gouge consumers (it protects financial institutions from their worst tendencies).

The most urgent in the UK is to cap usurious interest rates. Many countries have a cap; Australia has around 50% for example. "", with interest rates in the thousands, should not be allowed in any market.

Equally, mortgage market regulation should mandate maximum lending ratios, capping them at 80% or 90%. This mitigates against practices dependent on upward market valuations.

7. The most important thing we could to encourage more productive capital allocation in anglo countries would be to tax income spent on mortgage payments just as we tax income spent on rent. It would reduce speculative pressure, even up the financial equivalence of renting and home-buying and push capital to other investment options where it's more urgently needed, such as the transition to a green economy.

Great article on teaching methods - how we should run Climate Bonds conferences when the time comes

An alternative vote

Applying science to the teaching of science

May 12th 2011 |

AS DOES much else in the universe, education moves in cycles. The 1960s and 1970s saw a swell of interest in teaching styles that were less authoritarian and hierarchical than the traditional watching of a teacher scribbling on a blackboard. Today, tastes have swung back, and it is fashionable to denigrate those alternatives as so much hippy nonsense.

But evidence trumps fashion—at least, it ought to. And a paper just published in Science by Louis Deslauriers and his colleagues at the University of British Columbia suggests that at least one of the newfangled styles is indeed superior to the traditional chalk-and-talk approach.

Dr Deslauriers's lab rats were a group of 850 undergraduate engineering students taking a compulsory physics course. The students were split into groups at the start of their course, and for the first 11 weeks all went to traditionally run lectures given by well-regarded and experienced teachers. In the 12th week, one of the groups was switched to a style of teaching known as deliberate practice, which inverts the traditional university model. Class time is spent on problem-solving, discussion and group work, while the absorption of facts and formulae is left for homework. Students were given reading assignments before classes. Once in the classroom they spent their time in small groups, discussing specific problems, with the teacher roaming between groups to offer advice and respond to questions.

At the end of the test week, Dr Deslauriers surveyed the students and gave them a voluntary test (sold as useful exam practice, and marked on a 12-point scale) to see how much they had learned in that week and what they thought of the new teaching method. The results were striking (see chart). The traditionally taught group's average score was 41%, compared with 74% for the experimental group—even though the experimental group did not manage to cover all the material it was supposed to, whereas the traditional group did.

According to Dr Deslauriers and his team, their result is the biggest performance boost ever documented in educational research, making the new teaching style more effective even than personal, one-to-one tuition—although measuring the effect immediately after the experiment, rather than waiting for end-of-term exam results (as other research often has), may have inflated the number somewhat. The results are especially impressive given that the deliberate-practice method was applied by teachers with little prior experience of using it, whereas the traditionally taught students had the benefit of a seasoned lecturer with a long record of good ratings from pupils.

One frequent criticism of these sorts of studies concerns something called the Hawthorne effect, an idea which emerged from post-war work on productivity. This is that change of any sort will boost people's performance simply because of the novelty value it offers. But the exact nature of the Hawthorne effect, and even whether it exists at all, is controversial. Moreover, if it is real, it would be unlikely to apply in this case, because it is supposed to occur mainly among people doing routine jobs, for whom any change in working practices is welcome. That is not a description of a typical undergraduate's life.

A more serious objection is that the study's participants may be an atypical group. The sort of people who study engineering may react better (or, indeed, worse) to the deliberate-practice method than, say, those reading fine art or history.

Still, Dr Deslauriers and his team are bullish about the wider implications of their work, which adds to the evidence that it may be possible to improve on the long-established chalk-and-talk method. And the students seemed to enjoy the experience, too. Attendance in the experimental group rose by 20% over the course of the week that deliberate practice was used, and three-quarters of its members said that they would have learned more had the entire course been taught in the same way. In this case, then, the educational hippies may have been right.

Tuesday, 10 May 2011

Renewable Energy Can Power the World, Says Landmark IPCC Study

"Renewable sources could provide a majority of the world’s energy supplies by 2050, but only if governments dramatically increase financial and political support for technologies like wind and solar power, experts from a United Nations panel said Monday...."