What's being cut in Spain?

You may have read about budget cuts in Spain. Where do they fall? Over at nada es gratis, a great econ blog (in Spanish), FLORENTINO FELGUEROSO has a great post on "Bread and Circus". R+D is going down; this matters for the hard sciences. In the humanities and social sciences? Not sure. Research grants from the Research/Education/add renaming exercise here Ministry were always so small you needed a microscope to see them... largely independent of the merit-points in the academic evaluation, or the amount one requested. Apparently, the time-honored distribution rule was "cafe para todos" (coffee for all). You see, discrimination based on quality is inappropriate. So, to be honest, this won't make much of a difference to the quality of research that I see going on here; funding was a joke long before. All the serious money comes from the ERC anyway these days, at least in economics. Job training is also being cut, clearly part of a cunning plan in a country where unemployment is pushing towards 25%. And what's going up by 13.6%? Payments to the state's sports agency. No joke. Apparently, they are taking on some new responsibilities, too, so this is not quite comparing like with like, but it is still... pretty depressing.

All of this reminds me of an old joke by American comedian Evan Esar, who said "America believes in education: the average professor earns more money in a year than a professional athlete earns in a whole week." Let's do the numbers for Spain. The country's soccer clubs dominate the international leagues largely by paying what it takes, and buying the best, like Cristiano Ronaldo (Brazil) - current pay $17.06 million -- and Lionel Messi ($ 16 million). Average pay at Barca and Real Madrid is now $ 7 million p.a. Most professors would be hard-pressed to earn €45,000 a year. So the equivalent calculation to Esar's quip is even worse: "Spain believes in education: It pays the average professor more money in a year than a soccer player earns in three days of hard work." 

I should be more careful what I work on...

you see, first I worked on (historical) bubbles, and then NASDAQ blew up... then I did research on the sovereign debt defaults, and Greece imploded. In the fall, for a conference at the Bank of Chile, I did a paper on social and political unrest - assassinations, riots, anti-government demonstrations, violent overthrows of the government... and look what we get in the Middle East. The pejorative term for scholars changing research focus as events unfold is "intellectual ambulance chasers"... but what is this? A reverse Midas touch? At any rate, for a sample of South American countries, I looked at what drove levels of unrest. In particular, I show that budget cuts have a strong effect on the likelihood of instability - over and above the effects of an economic downturn. Here is a link and the abstract:

Efforts at fiscal consolidation are often limited because of concerns over potential social unrest. From German austerity measures during the 1930s to the violent demonstrations in Greece in 2010, hard times have tended to go hand in hand with antigovernment violence. In this paper, I assemble cross-country evidence from eleven South American countries for the period 1937 to 1995 about the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between austerity and instability. I examine the extent to which this relationship simply captures the fact that fiscal retrenchment and economic slumps are correlated, and conclude that this is not what is driving the effect. Finally, I test for interactions with various economic and political variables. While autocracies and democracies show a broadly similar response to budget cuts, countries with a history of stable institutions are less likely to see unrest as a result of austerity measures.

The paper will be out later in the year in a volume edited by Jordi Gali and Luis Felipe Céspedes. Right now, with a doctoral student from UPF, Jacopo Ponticelli, I am working on a related paper to see how much of this holds over the long run in a wider set of countries.