The oil bust is exposing weaknesses in the Norwegian model | Hacker News Reader

The oil bust is exposing weaknesses in the Norwegian model

economist.com

46 pointslivatlantis47 comments

I found it interesting how they praise the privatisation route for schools and hospitals etc. We clearly see this doesn't benifit the masses from the US model.

And to criticise Norway for paying out more in benifit to the lower end of society compared to other OECD, why is this bad? It simply means they are paying out less in other areas but what are these and why is it a negative?

Personally I found this a weak article. I expect better fact driven discussion from the economist rather than a piece that seems to want to find a reason to bash a country for popular reading.

Private school choice fails because most parents are not rational agents on their children's behalf, but rather on their own behalf - parents prefer convenient logistics to quality education. The end result is that bad schools have no pressure to perform, neither from the government nor from parents.

I don't think that is true at all. Many parents undertake difficult logistics to ensure good education.

Those parents who choose convenience over education quality are not interested in education quality - therefore no change in the school apart from location will matter to them.

Some parentes care about education, but a surprising share of parents don't. School privatization experiments show that good schools become a little bit better, but the bad ones become a lot worse because the parents that choose bad schools just don't care.

“don't care” is a value judgement for which you lack evidence. I'm sure there are a few who truly don't but you're also lumping in e.g. the parent working 3 jobs who cannot entertain the possibility of taking their kids to a school which is further away, not close to the grandparents who will be watching the kid until a parent finishes work, etc.

Study after study has shown that most of the differences in student performance are caused by poverty. Some of that manifests in e.g. challenges having clean clothing, sufficient food, etc. but many of the effects aren't as obvious – high levels of stress, very limited amounts of time, difficulty having things like Internet access to even review the options, etc.

If you look at the causes of poverty, those also tend to be related: e.g. a recent immigrant with very limited English proficiency is likely to be working crazy hours and poorly equipped to read the forms the school district is sending, much less spend time talking with other parents about how the local charter schools are working.

Yeah, sorry. Poor choice of words.

School privatization (charter schools) has shown a lot of success over traditional public schools. Im not really sure what hospital privatization refers to. Now prison privatization has come under recent scrutiny but that's more of a failure of oversight by the governing bodies employing private administration than of the concept of privatization itself.

Private prisons have the perverse incentives that private companies will push for policies that incarcerate more people:

https://www.muckrock.com/news/archives/2015/sep/18/justice-s...

Do private schools have similar incentives to keep children from passing to extract more fees?

If they are paid per graduating student, are they incentivized to pass (or ignore plagiarism, etc) for under-performing students?

If they are paid based on standardized test results, are they incentivized to teach to the test only?

If they are paid based on average grade score, are they incentivized to expel students for poor academic performance?

(I've seen the last one happen, but I don't think the cause was quite as direct - possibly high average scores => high first year enrolments)

Private schools are normally paid for by the parents, who have the most direct interest in a successful outcome, however they define that.

That's the theory. The practice as I can observe at my state school is that the administration asks "how many students did we graduate this year" when they should be asking "how rigorously were the students taught". It would be in the students' best interest if there was presssure for the faculty to do an acceptable job, but since tuition constitutes a substantial part of the university's operating income the focus is on recruitment and retention, where it really doesn't belong.

There are some Young Turks protesting the status quo amongst the faculty, but none amongst the administration, the students or their parents.

On the other hand, if the university was tax-funded, then the interests of faculty, administration and well-performing students would be aligned. At the moment they are not.

Yes, if the incentives are structured by the employing government as such. Governments shouldn't do that though. Nor should governments entertain the proposals pushed by these firms.

Public prisons have the same problem. Where I live the prison guards donate enough to politicians new prisons are always built in lieu of sentencing reform.

To me the only sensible way to judge privatization is to look at the incentives that are created.

Prisons - If we assume the corporation profit comes from prisoner rent, the private corporation is incentivized to encourage more prisoners and longer sentences.

Im not convinced that is a healthy incentive, and the evidence seems to show it is not.

School privatization - Where does the profit come? if it is based on children/hour then the corporation is incentivized to have more people attending school for longer periods.

that again sounds like a problem to me - you COULD achieve it in positive ways, but you could also achieve it by not teaching anyone anything....or by teaching at a slower rate...

Hospital privatization - This just sounds like a total cluster fuck to me, assuming the corporation makes its profit from rent/medical treatment then the incentives are there to keep patients as long as possible and undergoing as much treatment as possible, while actually curing as few problem as possible...

Some things, are just not meant to be privatized IMO.

I would assume that schools are paid by students/year and that someone other than the school gets to decide who goes there (in the real-world examples I've seen this is usually the parents and a lottery system to work out who picks first). The first criteria means the incentive is to get as many students enrolled as they can, but the second one means that no one will enroll if the school's quality falls off.

Hospitals work for care when you have enough time to decide and can look up average costs and results. Certainly not appropriate for car accidents or gunshot victims, but it works if you're getting a early-stage tumor removed and can afford to wait a week.

This does require enough extra space in the local system for people to be able to make a choice.

"The first criteria means the incentive is to get as many students enrolled as they can, "

"but the second one means that no one will enroll if the school's quality falls off."

that statement needs to be qualified, I think. something like "no one will enrol if the school's quality falls markedly below that of its (also private) competitors"

It doesn't need to be the best, just good enough that parents who live in its catchment area have no incentive to travel further to a different school.

"Hospitals work for care when you have enough time to decide and can look up average costs and results. Certainly not appropriate for car accidents or gunshot victims, but it works if you're getting a early-stage tumor removed and can afford to wait a week."

heh. thats a pretty specific use case.

On an almost entirely unrelated note, it would be interesting to see "hospitals" focused on single purpose delivery....literally birth, or early stage tumors etc....

I bet there would be savings available if certain kinds of treatments were treated along a production line.

Both of these examples do rely on the non-existence of a local monopoly, which I would expect the government to enforce. I'm not advocating a government-free environment here; there would also presumably be rules about the minimum quality of education. It's worth noting that charter schools have done very well in DC.

I think you're underestimating the amount of work done in hospitals that can be scheduled ahead of time - there really is a ton of it, especially for older folks. Not all hospital visits are to the ER.

Also, single purpose hospitals would be a bad idea - what if you're delivering a baby and the mother starts bleeding profusely? They'd all need to have their own ER (and the attendant facilities). You'd really just have specialized hospitals, which already exist.

" single purpose hospitals would be a bad idea - what if you're delivering a baby and the mother starts bleeding profusely?"

you would clearly need to provide immediate care, but then move them on as soon as possible to a general purpose hospital.

Here in NZ we already do something like that specifically for birth - mothers have the choice of using a midwife and having a home birth, and the midwives move the mothers on to the hospital only if problems present.

Your prison example just shows poor incentives and not the dangers of privatization. The Prison Union in various states lobbies heavily for more prison time for offenders of all sorts. More prisoners equals more guards equals more money and power.

Change the private contract to pay based on a set capacity and former prisoners getting employed after their sentence and see how it turns out.

* Budget cuts * Firing teachers and making the rest work longer hours

The private equity playbook is fairly consistent.

The issue is that you assume that the payment models will also encourage the behavior you pointed out.

For example, Medicare doesn't pay hospitals more money to treat patients longer. They pay them a flat rate (based on what an average stay would cost) and that's it. Patient gets better quicker? Great hospital made a big profit. Patient gets more sick and stays in the hospital longer? Well I guess the hospital takes a loss on that patient.

Or the hospitals kicks out patients who are still sick, so they either become someone else's problem, or they make money when they're readmitted.

Aligning incentives is hard.

Well, if we can make up incentives then we can come up with scenarios to make anything look bad. Let's judge public equivalents:

Prisons - the US has the biggest prison population in the world. Private prisons are becoming a more lucrative business because of the failure of public prisons to manage the prison population. It's clear that public prisons already had incentive for (or no incentive against) longer sentences.

Schools - the schools have little incentive to teach kids well. Kids in the US fall further behind of their international counterparts. Perhaps public schools are already teaching at a slower rate? In any case, public schools resist tooth and nail any attempt to have them cede kids, territory, and power to private/charter schools.

Hospitals - today in America they are facing huge liabilities due to patients' inability to pay. Keeping patients as long as possible only helps the hospital if patients are actually able to pay for all that treatment, which, seeing how health care was such a hot button issue for the past six years, does not seem to be the case.

Some things, we should question whether it's in our best interests to maintain the status quo (keep them public).

School privatization has some wicked confounds for any claims of success because it's almost impossible to do a true randomized trial. In many cases, the reported success is due to cherry-picking the best students; in others, the lead disappears over time as regression to the mean takes effect as a school's population grows large enough to average out a few stellar performers. The really positive news coverage almost universally neglects to make any attempt to do a demographically-matched comparison and in most cases the effect disappears once you control for poverty, family stability, etc.

This isn't to say that charter schools are cheating, only that something this complicated is easy to misunderstand. It's also important to look at other trade offs: perhaps a school's performance is actually due entirely to attracting students who would be successful almost anywhere – a city is almost certainly better off if they stay there rather than moving to a nearby suburb, even if that doesn't directly help with the question of how to help disadvantaged kids.

Set up a double-blind test, where there's a fake private school where the principal on down don't know that they're actually government-run. At the end of the school year, have Aston Kutcher show up to the school with a TV crew and tell everyone that they've been working at/attending a public school for the past year!

Agree with all the other comments, super light on facts and tried to apply an ideological "solution" where there is no issue. Surprised The Economist printed it.

The Norwegians are sitting pretty on top of world's largest sovereign wealth fund, which holds 1.3% of the world's listed stocks. Their oil&gas tech industry is taking a beating, yes, as are every nation and business who depend on the oil&gas industry, but I don't think the Norwegians will starve any time soon. If new revenue from their oil industry stoppe tomorrow they would still be alright.

I don't see how there is a "weakness" in their model or how this calls for privatisation of anything. If anything, their SWF's exposure to QE inflated stock markets is a bigger risk.

This also bugged me:

  The state is undermining the work ethic: most 
  people enjoy a 37-hour working week, and three-
  day weekends are common.

Sounds like a good idea to me. Why do people need to work 50 hours a week exactly? I imagine there are long term health, social and psychological benefits to a more restful and less stressful life?

While there's no doubt that there's a lot of fluff that has built up simply because we can/could afford it, this article doesn't really touch on any of them. Instead it seems to, among other things, bash state-owned corporations that are doing very well and are in no need of reform.

In general, it's a very weak article. Someone opened Wikipedia and saw some numbers that don't agree with how they think economies should be run, and then wrote about that. It's hard to fire employees who are slacking off, especially in government, but there's not a mention of it. But I guess that wasn't on Wikipedia, but the work-week was.

The turn to the left is mostly aa swinging pendulum thing, but I don't dread it, as the Labour party usually has a better grasp of economics than anyone else.

What's happening is a restructuring born of the decline in one sector with a time-delay until the others can absorb the sacked employees. It's not a crisis in government.

I think norway was super smart. They took their oil money and invested in non oil things. Now when oil prices are low they can use the reserve to help pump their economy. I think they are actually doing things right.

A lot of the Gulf states took a similar route. Just look at the rise of the region as an airline hub, location of many satellite campuses, etc.

The issue is that Norway created a social services network that was dependent on the oil money coming in. Will they starve if the oil runs out? No. Will they have to cut back on social services? Yes.

I stopped taking this article seriously when they cited a 37-hour work-week as an indicator that the state is "undermining the work ethic." After finishing the article, it really sounds more like the author is prescribing their favourite solution for something that may not even be a problem. This is one third party talking to another third party about someone else's "problem". Basically gossip and just as useless.

I particularly liked the way it just breezes over the better part of a trillion dollars in reserves. If they can't adjust to a crisis starting with that many advantages, working an extra few hours a week isn't even going to register.

And didn't Sweden just adopt a 6h work-day recently? (30 a week, so even fewer).

I think it was some companies in Sweden that had done that, not the whole country.

Sweden isn't adopting a 6-hr workday. That was some bogus news item that went viral. There are some small-scale experiments, but there is no prospect of it becoming law, or even common.

> I stopped taking this article seriously when they cited a 37-hour work-week as an indicator that the state is "undermining the work ethic.

Yeah absolutely, wtf? Sounds like someone who is trying to apply Industrial Revolution-era economics to today's world and pissed that it isn't quite working out.

They also complain about how much Norway spends on welfare, without explaining why this would be a bad thing. Okay, their neighbours spend less. So? Maybe their neighbours' welfare systems are inadequate.

Norway's neighbors are Sweden, Finland, and Denmark, whose welfare systems are generally not characterized as "inadequate".

It's weird that the article didn't mention the large tax reforms and other measures in the recently announced 2016 budget, seems like that would be obvious to include in an article like this.

What rubbish. The article talks about the welfare state as if it is inherently bad. Their solutions? Surprise, surprise! Freer markets. Obvious bias here.

Unsurprising, of course. The Economist is owned wholly by a few billionaire families.

Also referenced in the article is that despite boards needing to consist of 40% women, that all board members are still only from a single school. Like that is any different to unbounded boards where the members are generally from the same small set of schools.

Talk about the pot calling the kettle black...

Weird article.

That said, the NOK, a petrocurrency, has been hit hard relative to other petrocurrencies. Over the LTM, USD's up 24%, 18% and 15% v. NOK, AUD, and CAD, respectively[1].

[1]https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...

I'm no economist, but from what I understand a lower valued NOK will over time help Norway's export industries (who have been suffering the last years due to high costs), which in turn will help the economy during a transition from oil and gas.

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