The Hungarian Sense of Beauty: Snapshots from Budapest

Some stunning examples of modern design in Budapest can be found below the surface. To get from the National University of Public Service to the City Center you will have to take Metro line 3. You might then iInterchange to Line 4, which was completed only in 2014, to see the stations Fövám ter and Kálvin ter – which have a more than impressive architecture (pictured below).




If you climb up to Buda Castle (or use the funicular) you will get an overview of the more classical must-sees that Budapest offers its visitors (pictured below). A good chance to see visit Budapest will be the IRSPM conference in 2017.



Co-production in Public Safety and Elderly Care: Empirical evidence from the US and Denmark

Pictured above: Kalvin tér Metro station, Budapest, October 15, 2015.

Day Two of the conference on Public Service Innovation and the Delivery of Effective Public Services at the National University of Public Service in Budapest (15-16 Oct 2015).

In the Plenary on Oct 15 Stephen Osborne provided an insightful conceptual framework for the study of co-production in Service Delivery (see my last post). In the Paper Sessions throughout the conference several researchers presented concrete empirical evidence on what co-production actually is and what its antecedents are.

Metro_70iesMetro station Nagyvárad tér, where the University is located next to; October 14, 2015.

In their paper Megan LePere-Schloop, Brian N. Williams from the University of Georgia in Athens, GA, and their co-authors are studying co-production of safety and security in the residential campus environment of their university.

It’s a quantitative paper. The relevance of the topic requires no long explanation: Since 2013 there have been two dozen campus mass shootings in the US. So the implicit rational behind including students in creating safety and security on the campus, is not to cut costs but to improve effectiveness of service delivery. It is not that easy: In Athens, where UGA is located in, there is an elected sheriff, a chief of policy elected by the local council, and campus police. The resulting overlap of competencies adds a level of complexity.

Using survey data from 1130 undergraduate UGA students Megan and co-authors investigate the determinants of students’ role perceptions in co-production. Using (ordered) probit models they find that civic engagement and the perception of hometown police positively impact student’s role perception. This suggests that co-production becomes difficult when negative perceptions are transferred to the campus environment.


National University of Public Service, October 15, 2015.

Luise Langergaard from Roskilde University in Denmark and her co-author  presented their findings from an innovation project in elderly care in Copenhagen. I like this presentation because I gained helpful insights about the daily life problems and processes in Danish elderly care.

The municipality of Copenhagen initiated a project called Life Quality in Nursing Homes. The intention was to identify best-practices in nursing homes and to spread them across the sector. The project was driven by a shift from the flawed cost-efficiency focused New Public Management approach to a more trust oriented reform that give nursing homes the operational leeway that is required to improve quality of service delivery. So yet another innovation, benchlarning, you name it-project? I don’t think so.

The findings from qualitative interviews in 5 municipal nursing homes in Copenhagen suggest that performance improvement can come at almost cost-free. Resident’s perception of homeliness and self-determination heavily contributes to their level of satisfaction and thus their well-being. One female resident highlighted in an interview that she wants to be “the host in her home”, she just wants to able to invite her family to a cup of tea in the nursing home in a way as she would have done it when she lived on her own. The wish came true easily in this particular case since both the nursing staff and the facility manager supported innovative behavior.

Luise and her co-authors pointed to the changing role of relatives in elderly care in recent years. Relatives became more powerful and are more engaged in taking decisions-nowadays there are more conflicts with relatives which poses an obstacle to innovation and meaningful co-production. Or in the words on George Tsebelis: As the number of potential vetoplayers increases a change in the status quo become less likely.


Co-production and Innovation in Service Delivery

If there was a buzzword these days in Budapest – apart from ‘innovation’ – it was co-production. Co-production is everywhere – it is day one of the IRSPM conference on Public Service Innovation and the Delivery of Effective Services, which took part 15-16 October at the National University of Public Service (pictured, the afternoon before the conference actually started).


But innovation first: In the Introductory Plenary Session Stephen Osborne from the University of Edinburgh, and co-chair of the event started from a very broad definition that innovation is the creation of knowledge. An important feature in this knowledge-creation process is creativity, that is, divergent thinking and the ability to create multiple solutions to a similar problem.

Innovation is a buzzword, as is co-production. The moniker innovation is commonly used as a proxy for “change for the good”. Stephen’s – somewhat rhetoric, somewhat serious question – was ‘But is it really better to be innovative?’ He pointed out that previous research had shown that innovation involves risks – (and I add) which comes as no surprise since riskless choice is an outdated concept from the 1960ies – and about 3 out of 4 so-called innovations fail. So innovation, in the very broad terms of Stephen, is seemingly not a cost-efficient way to reform and change public service delivery.

Turning to the issue of co-production Stephen argued that a service perspective is needed to understand public service delivery and to design and change it properly. Because public service delivery is not just production of goods, and e.g. tax management, parks, and health care are not just manufactured goods innovation and co-production must not just be about reducing costs in times of austerity.

At this point I have to add Stephens’s definition of the term “Co-production”: co-production is “voluntary or involuntary involvement of a service user in any of the design, management, delivery and/or evaluation of public services in order to add value”. From that follows that co-production is part of the nature of public service delivery, because production and consumption occur at the same time. Taking on Stephen’s perspective co-production is just everywhere. He introduced 4 Quadrants of co-production: pure co-production, co-design, and co-construction (I missed the fourth one, but I can be found in two recent articles, one in the 2013 volume of the American Public Administration Review, and another one in 2015 in the British Journal of Public Management).

Budapest_Kalvin_ter_designIs this alreay co-production? Customers at Kalvin tér metro station in Budapest, Oct 15.

Comments from the audience pointed on two major issues: Stephen delivered a series of good and also entertaining arguments why co-production is a relevant issue. But are there any examples of successful co-production? Stephen gave a negative example of co-production effects from mental health care in Scotland. Children had a say there in the co-design of new residential homes. And what they wanted was to have the door handle at the bottom of the door – so they could leave themselves. But this is not what social workers really want.

The second issue is a lack of quantitative measures to co-production intensity and its potential impacts on organizational performance. Stephen argued that qualitative research is the only approach because service delivery and thus co-production is about processes. But in fact there is work going on to address this issue: The next day Marco Meneguzzo from London Open University presented a set of potential indicators to capture the extent of co-production activities.

And there is (even more) good news. Per Skalen from Karlstad University gave an example of successful co-production from Swedish health care. The inclusion of patients in designing the treatment increases clinical outcomes. So co-production to the innovation forefront!


The magic of Nizhny Novogorod

Don’t call it just Novgorod, our guide advised me. You can say Nizhny, but just Novgorod is wrong. Nizhny has always been ‘the city’. The meaning is that, founded in 1211, it has always meant to be a city; it was not created just as a settlement. In 1932 Stalin decided to rename the City into Gorky, i.e. it was given the name of the famous Russian writer. Gorky himself, still alive at that time strictly opposed the idea. And believe it or not, soon after the city turned from Nizhny Novgorod into Gorky, Gorky started to fell ill. Bad Karma. Eventually the city was renamed again in 1991. (So Nizhny Novgorod = Gorky = Nizhny Novgorod; I will use both terms interchangeably).















In the Great Patriotic War 1941-1945 Gorky made highly significant contributions to the production of military equipment. One out of 2 submarines, every third tank, including famous T-34, and one out of four airplanes were produced in the cities’ numerous factories. German Wehrmacht never reached the City (Plan Barbarossa to capture Moscow in a Blitzkrieg failed already in 1941 as a result of the battle of Moscow), but military planes did; the city was bombarded 43 times.

Eternal Flame

A large chunk of the magic of Nizhny derives from the fact that the city is located on the mighty Volga River, which is the largest river in Europe, some 3,500 km long. And Volga River meets with the river Oka, some 1,500 km long. The location where they meet is a must see. You can easily do so by visiting the Kremlin.



Due to its military importance the Gorky was a closed city until 1991, i.e. it was invisible to foreign tourist. It was not displayed on foreign maps. And cruisers on the Volga River passed the City at night, when most tourists were sleeping.


Nizhny consists of two parts. The Kremlin, the old city, and the Higher School of Economics are located in the first one on the one side of the River Oka. The second part, industrial part of the City on the other side of the River Oka, was only merged with Nizhny in 1920. Nizhny is the 5th largest city of Russia, with some 1.5 registered inhabitants (Gastarbeiter and sans-papier come on top of that). Though Nizhny has a Metro, the public transportation system strongly relies on public buses, and to some extent tramways. In fact the first Tramway in Russia was established in Nizhny in 1896. They proudly display this fact on the railcars of a particular line. Nizhny will host some of the matches of the Soccer World Championships in 2018. This is expected to lead to a large increase in infrastructure investment in the years to come.

Until 1917 Nizhny was famous for its international fair. Back then Moscow was usually said to be the heart of Russia, St. Petersburg was the Brain (until today, a lot of senior federal decision makers graduated from St. Petersburg, just take the President, and the Prime minister as examples) and Nizhny was the pocket or the valet (because Nizhny provide so much goods, and merchants made a lot of money there). The fair was closed in 1917, reopened again 1922-1930 during a period of economic policy experiments, and then again closed.

So Nizhny is worth a trip. You can reach the City by bullet speed train within 3 h 48 minutes from Moscow Kurskaya. Fast, clean, safe, still reasonable price. And no boarding time.

Nizhny_Frau_entspannt (c) Tim Jaekel, 2015


What’s new in econometrics? (Part 2)

Day two of the 2nd International conference on Modern Econometric Tools and Application at the Higher School of Economics in Nizhny Novgorod.

Mikhail Zitlukhin from Steklov Mathematical Institute in Moscow addresses a question which is relevant for any actor in the financial market: How to invest money optimally? The common approach is to compare scores assigned to different investment strategies. From that you choose an optimal portfolio. Now, investment decisions face a tradeoff between profit and uncertainty. The objective of financial market research has been to provide a good answer to the question how to measure the trade-off. The Sharpe Ratio is a well-known measure. The expected return, EX, is divided by standard deviation of returns (square-root of Var(X)): S(X) = EX / Var(X)^0.5. A basic assumption is that future returns are known. The Sharpe Ratio is famous because it is easy to understand, and good for practice. But it has disadvantages: not monotone, symmetric, and not flexible. And it is just one measure. Mikhail pointed out that we want to have a family of performance measures, not just one. Mikhail contributes to the literature by defining a simple monotonic profit-to-uncertainty ratio. This approach builds on Theory of coherent risk Measures, the concept of a worst scenario expectation (what is the profit in the worst case), and the logic of Average Value at Risk, among others.

Svetlana Makarova from University College London and co-authors proposed a new test for evaluating economic policy effects. The traditional approach to evaluation is to include some variables representing policy action into the equations. Svetlana and co-authors start from two assumptions which contradict the traditional logic: The time lag between policy action and impact on the economic process is not known well enough. And past decisions might not affect the mean value of the process but its stochastic, unpredictable part. An example is targeting inflation. Svetlana use ARMA-GARCH models to inform an alternative testing strategy.

Kirill Furmanov from Higher School of Economics and his co-author presented results from research on a model for mortgage survival. The response variables are timing of default (3 months without payment), pre-termination (both are modeled separately). They exploit a data set with some 280,000 observations, so large sample trap is an issue. Covariates include debtors and mortgage characteristics. The focus of the paper is on the methodology of comparing survival or life time models. However, they find no satisfactory measure of predictive accuracy of survival model.

And a last snapshot, because this is the kind of topic everybody is interested in: Evgenii Gilenko from St. Petersburg State University and Elena Mironova from University of Amsterdam investigated whether items like gender, driving experience, and even car color should be reflected in future tariff formulation of Russian Motor Own Damage insurances (pictured). So far, mostly driver’s age, car brand and car age and prior claim are reflected in tariff calculation. The Russian car insurance market is a very competitive one, due to recent Rouble deprecation prices for foreign car parts have skyrocketed, while profitability of insurance products has sharply decreased accordingly. Exploiting a dataset of some 3,000 contracts they found no significant effects of driver’s gender on damage claim frequency. Nonetheless the insurance company where the data come from introduced a discount for female clients. The reasoning was that women tend to cheat less, and the claim severity is lower compared to male peers. (Footnote: In the European Union unisex nowadays triumphs over such reasonable nuances. It is not allowed anymore to (positively) discriminate insurance customers based on gender characteristics).


What’s new in econometrics?

The 2nd International Conference on Modern Econometric Tools and Applications (EC2015) is currently taking place at the Higher School of Economic Campus in Nizhny Novgorod (pictured), some 500km east of Moscow.

Svetlana Bryzgalova from Stanford University presented a quite impressive and sophisticated approach to estimate the consumption risks both of bonds and stocks. Dean Fantazzini from Moscow State University had a closer look on the reasons for the recent sharp decline in oil prices. 3 Factors are usually held to account: First of all, there was too much oil in the market. Shale oil production in US is at a peak level, although the oil companies are making losses and accumulating a lot of debt (indicating that shale oil production is just not efficient, but anyways). A short break in the civil war in Libya resulted in an unexpected additional inflow of oil on the market. And Saudi Arabia decided not to cut supply. Secondly, demand for oil turned out to be lower than expected. This was mainly due to economic slow-down in Europe and Asia. On top of that there was a strong dollar, which further put pressure on the oil price. But beyond these commonly stated factors, Dean showed that there is some variation left. He proposed a bubble detection strategy; including a decomposition of a variable into its components. He finds evidence on bubble behavior; apart from basic economics this bubble behavior puts additional pressure on the oil market.

In the spatial econometrics sessions Olga Demidova, from Higher School of Economics, and her co-authors investigated unemployment clubs in Russian Regions. This is relevant because the Federal concept of Regional Development until 2020 asks for a balanced socio-economic regional development and a reduction of interregional disparities. In the same session I present a paper on Performance Gaps, Peer Effects and Innovative Behavior in Public Sector Organizations. I develop a model in which managerial actions result from spillover due to pure learning or strategic mimicry and a cost-benefit calculus of instrumental benefits vs. reputational costs of innovation adoption. Propositions are tested against participation data in a Swedish benchmarking exercise.

Also interesting from a policy-perspective was that – using time series analysis – Rajarshi Mitra and co-authors find that foreign aid has a significantly negative effect on personal income in Bangladesh in the 1971-2001 period. Seemingly overseas development assistants (ODA) was not very effective has rather harmed than benefited Bangladesh. A “bad policy-environment” is considered to be an explanation for this finding.


Metro 2020

Today I took note of the plan for Moscow Metro in 2020 (external link: m24.ru/infographics/3428; M24 is for москва24, a broadcaster). In Russian words my response was: вот ето да, maybe something like OMG, or so. 64 new metro stations will be constructed in the 2015-2020 period; and 14 additional new ones have been finished between 2011 and 2015. Most interesting to me was that they intend to build an additional circle line which parallels the Moscow Automobile Ring Road (МКАД). MKAD once used to coincide with the administrative boundaries of the capital, but Moscow grew beyond in recent years (mainly due to an acquisition of municipalities in the South West in 2012). Anyways, it will take you about 100 kilometers to circle Moscow on the ten-lane MKAD. And the new circle line will probably have a similar radius of some 16km.

The existing circle line (each line has its color; the circle line is the brown one) is rather important within the capital’s transportation infrastructure, because all other lines together are organized like a spider web. Everything is concentrated towards the center. It is easy to get from the outer parts to the inner city. But travelling from one tail, e.g. in the South-West, to another in the South is not. The existing circle line fills this gap below the ground. Above the surface, the spider-web is complemented by public buses and trams. The existing circle line has another major advantage compared to most other lines: Air-conditioned railcars. And this is something you will adore both in summer and winter times.

Most of the newly planned metro stations will be located outside of MKAD. Note that the first metro station beyond MKAD was opened only in 2002. Beside the new circle line the already existing yellow line will be heavily extended towards the west and south-west of Moscow. The light green line will also see nine new stations in the north.

Two major questions arise, the first being how to manage the underlying procurement process, and the second being what spatial economic spillover effects will result from this investment in public transportation infrastructure.

Thirdly I am looking forward to new inspiring public architecture. One of my pet stations is still Vorobyovy Gory (pictured, while the train halts, you can enjoy a beautiful view over Moscow river), but this means almost nothing in a city where each metro station is a marvelous location.


When and why public administration innovates (pt. 1)

Today I delivered a talk at HSE Open Day 2015 in Moscow Gorky Park (pictured). Here is Part I of what is said:

Moscow is an innovation-driven city, according to the Innovation Cities Index 2014 (which ranked Moscow 63 out of 445). Or as The Economist recently put it – partly jealously, partly admiring – “Russia’s great strength throughout the centuries has been that its people can seemingly adapt to any conditions”.

No doubt, innovation is a top priority in Moscow. There are seven technology parks, young researchers are awarded and the city intends to further develop its innovation and research structure.

But this is private sector innovation. Infrastructure investments result in innovation in the private sector. An example is yandex.taxi. Using geospatial information from the Open data portal of Moscow the quality and quantity of taxi services has improved significantly throughout the last four years. Good. What about innovation in the Public Sector and Public Administration?

Innovative behavior means “to seek out new and better ways of doing things” (Fernandez and Moldogaziev 2013), and some public authorities try to improve citizen’s well-being by doing so. Aforementioned Yandex.taxi application builds on open Data. Moscow’s Open data portal (data.mos.ru) and its bigger sister, the Our City website (gorod.mos.ru) are public sector innovations; e-government innovations.


Both sites have a potential to improve the public interest. Making administrative data publicly available creates transparency. It is a tool to hold people to account for their actions. Open data portal is not very popular (10,000 visits per day) so far compared to Our City Website (2,000,000). Nonetheless, it is a contribution to hold bureaucrats to account for their actions and the resulting outcomes. Even when the number of clicks is low, it sets incentives to achieve at least a baseline level of performance. Our city is the place where people complain, but also receive public services. It is a source to identify self-reported problems, and to fix them. People complain there, and monitor the implementation of requests. Posted photos show results from actions that were taken to address a reported problem (a broken skid, a pothole, a pile of rubish). A new feature is a reporting tool for excessive pricing in pharmacy. Such innovation is driven by latent demand. I experienced such excessive pricing myself. And seemingly other people did as well. The new innovative reporting tool responds to such latent demand. It makes life better a little bit. I feel better when I have the feeling that somebody takes note of daily-life problems. By doing so Our city increase my personal well-being.

Put generally, an innovation is an idea, a program or a policy, which is new to the organization adopting it, regardless of the number of prior adoptions in surrounding peer units. This is the seminal definition of Walker 1969 which has been replicated since then.

E-Government and e-services are typical examples of innovative behavior in public administration. Several municipalities and government agencies in the US have implemented such e-services. Submitting your tax declaration or booking an appointment online is getting common also in Germany. One-stop agencies (products and service innovation, Bhatti 2004) are another innovative practice. Municipalities in Denmark and England have introduced such citizen’s centers. Tewkesbury Borough Council established a one-stop agency, or customer service center (in Dec 2014). North Somerset has established a similar multi-agency citizens portal. East Riding of Yorkshire and Scarborough Borough Council has a ‚virtual customer service centre‘ since 2012. The London Borough of Croydon has a customer service center reported in Jan 2015 (‚Access Croydon‘). Customer service centers normally work like this: On arrival you will be met and shown where to go. You are able to book appointments in advance, online. All of this will reduce waiting time. The objective is twofold; to tailor public service delivery to citizen’s need; and realize efficiency savings. In England such innovative behavior is clearly driven by the deepest spending cuts in recent history. The Spending Review 2010 asks for severe budget cuts, particular in local council’s budgets. At the same time, central government restricts councils‘ autonomy to raise council taxes. For local councils that means “to seek out new and better ways of doing things”.

Another interesting example of innovative behavior from England is the YouChoose budget tool, a simulator to engage citizens in budget cuts; which was first applied by London Borough of Redbridge. It’s a web based simulation: Regular people, like you and I, adjust spending levels of a basket of functions, see the consequences for service delivery (example from demo: reduced frequency of street cleaning), but budget need to be balanced and council tax cannot be raised by more than 5\%- these are the rules of the simulation. If so you can submit your propositions to the local council.

However, budget cuts in England also drive innovative search activities, which have unintended side effects for local residents. This is called pay-as-you-go government. Public administrations (and elected governments) are charging higher fees for public services to fill budget gaps. By doing so they avoid raising taxes, which is associated with the political risks of losing public support and votes. In principal to charge people for a service avoids overconsumption and prevents free-riding. But in some cases the charge of a service now exceeds its costs; the charge becomes a tax (The Economist, Pay-as-you-go government, August 29th-September4th 2015). Public Administrators became too innovative.


On Migration Policy: let them learn and let them earn

On migration policy: Let them learn and let them earn

Four bits of information on migration to Europe and Germany in particular called my attention last week: An article in the latest issue of the economist (“Let them in and let them learn”, August 29th-September 4th 2015); a news header in the Frankfurter Allgemeine Zeitung (FAZ), a German Newspaper; an interview with the head of the German national office for migration broadcasted at Deutschlandfunk, the German equivalent to the BBC, and a phone call with a relative in Potsdam, a mid-sized city nearby Berlin (most famous for Park Sanssouci, the German Versailles, and the Potsdam Conference in 1945).

The FAZ-newspaper article first: The secretary of education in the German state of Thueringen intends to stop letting children of refugees families to go school. So far, there is compulsory school attendance for every infant aged 7+ on German soil. This is a bad idea. To leave the most vulnerable in society behind, is foolish for their personal well-being, but also for an aging education based society.

This is also the reason why, as “The economist” points out in the aforementioned article, a “bigger welcome mat would be in Europe’s own interest”. The United States have benefited from the continuous inflow of migrants, both skilled (Silicon Valley) and unskilled ones (farming and service sector). Seemingly there are potential payoffs for Germany, as well, but this prospect subject to some condition. The first one: Migration policy in Germany needs a migration law. There is none in Germany, yet. Setting standards is helpful in any case. The second condition: The procedure for granting the right of asylum in German has to be (i) more firm and (ii) more rapidly. As the Economist puts it, “Syria is a hellhole; Albania is not”. To say no has to be potential outcome of the procedure for granting asylum. The procedure has to be more rapid, both for the sake of the refugees and German taxpayers. In Germany it takes 5 months to arrive at a conclusion in an asylum seeking procedure, on average. In Switzerland and Norway the number is 48 hours. German decision makers should book their tickets to Oslo, or more cheap, to Bern, and identify the reasons for performance gaps. Performance Benchmarking is a good idea.

The third condition: Refugees have to become integrated in real terms. Clustering them in refugee camps first and later in suburban boroughs is another foolish policy. The city of Potsdam seeks out a better way of doing things, as my phone call informed me. As new refugee arrives, he and his family will be accommodated in an apartment in state-owned housing blocks which are common in Eastern Germany and lack any notion of run-down second class accommodation. Regular German people live next door. And the other next door. This is quite different from stuffing a dozen of families into a former casern. And the refugee’s children will have their first day at school on next Monday, as kids from the other regular peoples’ family will do. Integration triumphs over clustering and its unintended negative side-effects. Best-practice.

So let them earn, let them learn and take a decentralized approach to accommodation.