Letter from France - Les Universités Françaises

In his own look at the financial crisis Alan Kirman paints a rather unflattering picture of orthodox macreconomics in France and calls for some humility before reporting on the latest attempts to reform the funding of research.

La crise
I thought when I had to write this piece that the subject was evident. Last year, I mentioned the fact that France was far from immune to the subprime phenomenon and that things were not looking good. I have to confess also that I sold the few shares that I had in August 2007 when the CAC 40 was at 6200 and that today it is at 3100. Until I sat down to write this piece I was convinced that I was going to write about how French macro-economists had, in the light of the developing crisis started to seriously rethink their models. I was under the illusion that they might move to the sort of position that I sympathise with and would suggest that the economy should be viewed as a complex adaptive system. In particular, the central feature of such systems is that the aggregate does not simply mirror the average behaviour of the agents who make up the system and who interact directly with each other. In these systems phase transitions and the associated ‘crises’ are intrinsic and not to be treated as something due to external shocks. Such a view would lead us to have a very different position concerning regulation. The latter is not there to try to force the behaviour of the system back to the path that might have been predicted by our macro-economic models but rather to mediate the consequences of the more subtle feed-backs inherent in the system. What we have to be concerned with is out of equilibrium dynamics and the behaviour of systems in which interaction is the central feature and not something which we can ‘incorporate’ into our existing models as an extra bell or whistle. David Hendry is someone who has long and outspokenly made arguments of this sort for econometric modelling and I hoped that I might see a shift in his direction on the French scene.

Pas du tout! What we have observed here is a systematic abandoning of both theoretical reasoning and ideology and a move towards purely pragmatic reasoning. As one economist in Paris said, you should not worry about the design of the boat when it is sinking, although he was referring to the financial system rather than the economy! The other thing that we hear constantly is ‘exceptional measures for exceptional circumstances’. What exceptional means in this context is an interesting question, though one interpretation is that it means something that would not occur in our models.

My sad conclusion is that French macroeconomists have happily taken up the role that Bob Solow has described as that of a plumber, somebody who knows little about how it works but knows, or believes he knows, how to fix it! There seems to be no sense of shame that the forecasts made a year ago should turn out to be so utterly wrong. This is, in part, because people pay little heed to what macroeconomists say and thus forget very rapidly what was said. There are, however, a number of journalists who do not let the economists off so lightly. A recent article in the Canard Enchainé, cited in detail the statements made by a prominent macro-economist who not only teaches in a major French institution but is also the chief economist of a large bank. As the article points out, the economist in question, published a piece in the house journal of his bank in March 2007 entitled, ‘financial markets are capable of believing anything’. His list of these foolish beliefs was :

• There will be a liquidity shortage
• The Chinese economy will experience a significant reduction in its growth rate
• There may be a recession in the US
• Firms’ profits will decline
• The subprime crisis will trigger off a crisis in the banking and finance sector in the US

He dismissed these fears with a wave of the hand, asserting that ‘all these assertions are totally unfounded, the credulity and the absence of sang froid on the part of financial markets are remarkable.’ The Canard goes on, unkindly, to note that in the period since his piece was published the shares of the bank that employs this economist have fallen by 85 per cent and that, nevertheless, he is still a member of the French President’s economic advisory council! What is more he still gives firm and uncompromising advice on how the government should act. As somebody said, economics is one of the few disciplines where intimidation is an accepted way of convincing one’s audience. An appeal to mathematical sophistication and a certain arrogance seem to be thought of as an adequate way to conceal the conceptual inadequacy of the underlying models, though to be fair the economist in question is not much in the habit of referring to models. So, on the subject of heart-searching by French macro-economists, I have little to say, economic models and the economy pursue their independent ways here. The only glimmer of hope is that there is an evident public dissatisfaction with the macroeconomists whom they have to put up daily on the television and the radio and these authorities have recently been referred to as ‘guignols’, clowns, a reference to a popular satirical television puppet show which mocks the mighty ferociously.

I had the privilege of taking part in a round-table organised by the Association Française de Sciences Economiques recently, on how to improve the teaching of economics in France and the discussion was essentially of an ideological nature, with the defenders of the thought of various illustrious predecessors trying to defend their point of view. There was also some discussion of previous crises and, in particular of the Great Depression and how we got out of it. One line of argument advanced was that we have experienced this sort of turmoil in the past and we shall undoubtedly come out of this crisis with all flags flying. My simplistic conclusions were that it is useful for students to study both the history of thought and economic history although this is far from a fashionable view. Secondly, they have to have a good training in, what is often referred to here, as mainstream economics, since otherwise they will have no idea what economists are saying or why. Max Planck once said, ‘physics is not about discovering the laws that govern the universe, it is what physicists do’. The same thing could be said about economics. However, my last point was that we might want to indulge in some thinking about how to develop models in which crises are endemic. It is not enough to say that we have seen all this before without saying why. French academic audiences are quite polite but it is not at all clear that they were convinced by this.

In any event, it is not obvious that any progress on the theoretical front is likely in France in the near future. Just to give one example, there was no research project on the crisis submitted, in response to a very recent call for proposals on any subject in economics, put out by the Agence Nationale de Recherche. The closing date was in November so, by then, many potential candidates must have had a good idea of what was happening.

Les Universités Françaises
Given all this, I will turn to one of my favourite themes that of the French University system. As I have mentioned already, one of the aims of Sarkozy’s presidency was to make the system function better. Two things have happened this year, in an effort to make a movement in that direction for both the university and research systems. Firstly there has been a ‘reform’ of the university system, which grants autonomy, or rather more autonomy to the universities. Secondly the French Science Foundation, (the CNRS) is in the process of being overhauled and possibly quietly dismantled. What I will try to do in rest of this year’s letter is to explain why the system desperately needs reform, what has motivated the reforms that are being proposed and how much progress has been made.

The French University system is based on two fundamental principles. Firstly, anyone who has a baccalaureat can get a place at the university of his choice, and secondly all universities are the same. Before going any further I should make two obvious comments. The fact that one can choose where to go but without any accompanying aid, unless you are extremely poorly off, means that only the better off move to universities far from home. Why should they want to do this since all universities are equal? Obviously because they are not. La Sorbonne, even though it has fallen on hard times, is not the equivalent of the Université de Clochemerle. Thus, at the risk of boring the reader who read last year’s letter, I have to repeat that the whole system is hypocritical.

A timid move to improve things was the university reform embodied in a law promulgated last year. This put a great deal of power in the hands of university presidents who now choose the committees that will decide on the attribution of posts and give the universities a certain degree of financial autonomy. The problem here is that there is little or no guarantee that the university presidents will be other than local barons ruling their fiefdom and handing out presents to the faithful. An ex-president of my own university is now in Africa where he fled after having been sentenced to jail for ‘detournement de fonds’ and other criminal offences. This does not reinforce my confidence in the idea that universities will move in the right direction by reinforcing the powers of university presidents.

The first move has to be to differentiate universities. Students have different needs and desires and universities have to be able to choose which of those they want to cater to and to choose the appropriate students. On the other hand students should be able to choose which establishment suits their needs. The idea that what is needed is an adequate matching mechanism seems to be to too obvous to need further explanation. One can have a long debate about whether a kind of open market is appropriate or some central clearing mechanism such as the UK’s UCCA would be better. In any event nothing could be much worse than the current system in France, where the selection is done by failing the majority of students in the first year.

To quote the statistics for 2007 from the OECD, of 100 students who enter the university, 21 end up with no diploma of any sort and 15 turn towards some more technical form of training. This is a very poor way of selecting, it is costly, unsatisfactory for those who teach and humiliating for many students who see their initial university experience as a disaster. It is interesting to note that France spends less on each university student than most OECD countries but more on each university degree awarded

Differentiating universities would certainly make sense in making real choices available to students. It would also enable one to dispense with the notion that institutions that focus on teaching rather than research are necessarily inferior. It is worth bearing in mind that among the most expensive establishments in the US are the liberal arts colleges where research is not a priority. Suppose that one did create an academic landscape with very different institutions. Perhaps, one could think of the Californian system as a reasonable model. The immediate objection in France would be that it would not be possible for students who reveal their talent late to transfer to a more demanding establishment. In the French context, the transfer to the Grandes Ecoles from the university is virtually impossible and nobody objects to this. Secondly, in the Californian system, for example, there are real possibilities for such transfers. Just to give one example, in 2006 Berkeley accepted nearly 2000 students who transferred from other universities which suggest that inter-university mobility is possible and that the doors to the best research oriented universities do not need to remain closed.

Once the distinction between universities is accepted and research funds flow to those who focus on that activity, there would be a way open to solve the two major problems with the French higher education system. The Grandes Ecoles could be integrated into the university system and the CNRS could play a more meaningful role.

Let me then, to conclude, come to the CNRS. As it is, it recruits young researchers at the assistant professor level, immediately after completing their PhD and gives them a research job for life. It is clear that this practice will lead and has led to employing some people who do no research at all. Thus, there seems to be a good argument for moving these people into other employment. But where should they go? The obvious answer is into the university or IUTs where they could devote their energy to good teaching, (since they currently have tenured jobs it would be hard to dispense with them, though it has to be admitted that they may not make good teachers either). Currently, a major change is being made, half of the posts now opened by the CNRS will be jobs for 5 years with one third of the normal teaching load but with no guarantee of remaining in such a position. This is clearly a shift towards removing the permanent researchers and one finds it hard to quarrel with this.

What are the arguments that have been given against this start of a move towards the dismantling of the CNRS in its current form? The first is that the only place where good research is done is in the research groups recognised and funded by the CNRS. This assertion does not justify the existence of the CNRS as a body with full-time research employees. Of the top 20 economists with French affiliations in the REPEC rankings, (as questionable as any other) only one is a full time CNRS researcher, (English by the way). The others have many different French style jobs such as Ingénieur des Pont et Chausées, and there are actually more university professors than CNRS researchers.

The second argument is that these CNRS funded research groups are the only guarantee of quality in the system. But what a perverse way to obtain this result! One has research groups recognised as being of a good level, hidden in universities all of which are suppose to be identical. Much better to allow universities to be differentiated and to give funds to good research departments. This would solve another problem. The French complain bitterly that they are unfairly treated by the Shanghai rankings since the points for each article are divided between their research group and the university with which the group is associated. Getting rid of the CNRS in its current form and integrating the research groups into the universities would solve that problem at one stroke. In the current situation why should someone who works full time for the CNRS and belongs to a research group affiliated with a university have all his research attributed to that university? Again if he was temporarily given a research job by the CNRS this would be reasonable, since his real employer would be his universtiy. Once again the transformation of the CNRS from large scale employer to fund giving agency as is the case in most other countries, seems to be eminently reasonable. This transformation is gradually taking place, large amounts of research money are now given out by the ANR, the agence nationale pour la recherche, for specific projects and this money is replacing that which was previously given by the CNRS to research groups.

Another result of the reform would be to increase the number of university posts as the CNRS was merged and the government may be tempted, and indeed is being tempted to do just this. The new temporary research positions are financed by taking posts from the universities. This would result in an overall decrease in the number of higher education jobs since the number of full time CNRS posts is dwindling, which would be in contradiction to the government's claims about what it wants to do.

The last argument against dismantling the CNRS is that the universities are simply incapable of acting as research oriented institutions. The answer to that is obvious, Engage in a real reform of the universities.

The current position is that the CNRS is being reorganised into National Research Institutes in the major research areas. Computer science will disappear into an existing institution the INRIA and the life sciences will, at least in part, merge with the INSERM the national medical research organisation. The fate of the Science de l'Homme et de la Société is unclear, it seems that to keep the researchers quiet there may be some sort of second level institute but, if the universities were to be reformed, it would make no sense to maintain the CNRS as it is.

The government has, it has to be said, moved towards a reorganisation of the research system, though it has done so in a rather devious way. It negotiates with the parties concerned while pushing through its measures anyway. But this is the way the Sarkozy government acts and it is so active on all fronts that the opposition to any change never has time to organise itself. The argument is simple, ‘we were elected to reform and that's what we are going to do!’ Unfortunately, the resultant programme is not as well thought out as it might be and we have a piecemeal result depending on where is the line of least resistance rather than where is the best outcome. Still, at least we cannot say, ‘plus ça change, plus c’est la même chose.’

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