Economics CPD Courses in June 2014 - Book Your Places Now!
Welcome to the merry month of May! Our email inbox is filling up nicely with essays submitted for the RES competition.
Who to blame? Who to target in the search for the culprits behind the great banking crisis which has mutated from a calamity in private sector credit and derivatives markets into a broader, damaging economic and social disaster. Playing the blame game is easier armed with the benefit of hindsight. But with each passing day it becomes clear that what we have seen is a multi-tiered case study in market and governing failure. Ordinary citizens — whose pensions and living standards are now threatened and blighted by the folly of financiers blinded by their own hubris and greed — will not easily accept that the current generation of leaders are the people to lead us out of this mess.read more...»
If you thought that the UK recession was bad enough, take a look at this new BBC news report on the economic decline of Russia. The lines for the soup kitchens are growing by the day, in the face of a forecast 6% decline in GDP during 2009.
Here is a timely interview with the person charged with finding buyers (both home and abroad) for the tsunami of government debt that will have to be issued in the coming years,
“As head of the DMO, Mr Stheeman, 49, is the gatekeeper of Britain’s ballooning public debt – all £1.4 trillion of it under the Treasury’s forecasts for 2013. It is his responsibility to make sure the money is raised both successfully and at the lowest possible price. He has never been so busy.”
Here is a great example of business diversification and growth through joint venture. HMV is entering into a joint venture with cinema chain Curzon Artificial Eye to open a cinema called hmvcurzon above its Wimbledon store.read more...»
The Lex column in the FT today considers the outlook for the news wire services run by Thomson-Reuters and Bloomberg. I couldn’t function without my EcoWin service - it is invaluable to be able to call up data on virtually anything when teaching in the classroom or when preparing an article or student handout. The market for news wire services is basically an oliogpoly. And economies of scale really matter in this industry given the dominance of fixed costs in providing real time information services to subscribers. How will Bloomberg and Thomson-Reuters be affected by the downturn in the financial services industry?
Bloomberg has reported a fall in the number of Bloomberg terminal subscriptions - they are down by 2.5% from a subscriber base estimated at 300,000. Terminal sales account for about 85 per cent of Bloomberg’s revenues and each can be rented for $1600 a month!
In a world of great financial and economic uncertainty and incredibly heavy newsflow one might expect the demand for news wire services to be fairly recession resistant. But the collapse of many hedge funds and steep cutbacks in employment in other areas of financial services is having a negative effect on both news information companies. Is a price war in the cost of renting a terminal imminent? Or will the two giants continue to compete in non-price terms? The latter is more likely - just recently Bloomberg announced it has added Associated Press to its service - offering yet more breaking news for subscribers!
Many thanks to Tim Mason for providing this helpful guide for students ahead of their papers. Tim welcomes all comments especially from centres who are experienced hands at the OCR course! Please leave your comments below.read more...»
A student posts this question:
Sectoral contribution to the national income and employment have changed over a period. Explain in context of structural changes in economy.
Thanks for just posting an exam question! How imaginative! Briefly here are my thoughts:read more...»
“I am here today to set this goal: we will devote more than 3% of our GDP to research and development,”
If Obama succeeds in his aim, the US economy will raise investment in research and development as a share of national income - AS students might consider some of the likely demand and supply-side effects of such an aim. A good article to use when teaching supply-side policies.
The UK of course is some distance below the US levels when it comes to research and development spending.
Some strong language…..read more...»
What have you rented in the last year? A holiday cottage or perhaps an after dinner suit? Perhaps a marquee for a family event or an item of equipment for some landscape gardening. Renting rather than owning outright is an important economic choice - each decision requires a calibration of the private costs and benefits.
This BBC news video brings back memories - in the 1970s renting televisions was all the rage and a quick pop down to the Rediffusion store was as common as a trip for your weekly groceries.
In this harsh economic climate, there seems to be generalised shift towards renting rather than ownership - from televisions and power tools to personal accessories, from dvds to property. Demand for rented goods is growing and the choice of products available to lease is surprisingly wide! The Erento web site is mentioned - here is the link.
AS micro students grappling with their revision on government intervention will come across the issue of who ends up paying for an indirect tax. The conventional view is that a supplier faced with an excise duty or other tax can consider passing it on by raising the final price to the consumer. Price elasticity of demand and supply come into play in deciding who eventually bears the burden of an indirect tax.
Here is a slight twist. Sainsbury’s has written an email to their suppliers of alcholic refreshment more or less insisting that they aborb the recent hike in duty announced in Darling’s budget. According to a report in the Daily Telegraph:
“Duty – April 2009” sent to its beer and cider suppliers prior to the Budget, J Sainsbury said that it would be “replacing” any lines on June 1 “that we cannot maintain margin on” following the announcement of an increase.”
In effect - they are telling them to aborb the tax or risk being delisted by the supermarket. Given Sainsbury’s monopsony power it is clear where the balance of influence lies in the relationship. Is Sainsbury’s decision asymmetric? Did they pass on the 2,5% decrease in VAT to their drinks department customers last Autumn?
I have Dani Rodrik’s weblog to my list of regularly visited sites and his most recent post provides a super example of how a country can accumulate a fiscal surplus when macroeconomic conditions are favourable giving the government scope for an appropriate and sustainable fiscal stimulus in the face of global economic uncertainty and a downturn in commodity markets.
Notice from the chart above just how dependent is Chile on exports of copper
“Until the current crisis hit, Chile’s economy was booming, fueled in part by high world prices for copper, its leading export. The government’s coffers were flush with cash. (Chile’s main copper company is state-owned, which may be a surprise to those who think Chile runs on a free-market model!) Students demanded more money for education, civil servants higher salaries, and politicians clamored for more spending on all kinds of social programs. Being fully aware of Latin America’s commodity boom-and-bust-cycles and recognizing that high copper prices were temporary, Velasco stood his ground and decided to do what any good macroeconomist would do: smooth intertemporal consumption by saving most of the copper surplus. He ran up the largest fiscal surpluses Chile has seen in modern times.”
There has been a remarkable turnaround in the size of the monthly trade deficit in goods for the US economy. This prompted plenty of useful discussion in our AS macro class today when we revised government policies towards the balance of payments.
I have put together my recent series of posts on exam technique for the AQA AS economics papers into a single word file - available for download by clicking the link below.
Part (c) explanation questions in the new AQA AS papers score 12 marks. For example in the January 2009 macro paper students were faced with this question:
“Extract B suggests that international studies ‘provide explanations for differences in labour productivity’. Explain two determinants of labour productivity.”
On the other question
“Explain two determinants of saving by households”
The examiners’report gives some important clues as to how to approach these questions and achieve high marks with the mimimum of fuss.read more...»
The second question on the AQA units 1 and 2 papers asks students to identify features of selected economic data - usually in the form of a chart and/or table. The question carries 8 marks. I produced a quick revision exercise on this aspect of the new paper a few weeks ago and it is available for download here.
The January 2009 Examiners’ reports make for important reading once againread more...»
The government’s decision to increase the top rate of income tax from 40% to 50% is pure political opportunism from a party that has given up any realistic hope of power at the next election. Cue a chance to stick a few poorly aimed knives into the body of up and coming entrepreneurs for a measure that will raise a little extra revenue but which will also do huge long term damage to enterprise in the British economy. From next year anyone earning more than £150,000 a year will pay 50% income tax. The move replaced the 45% tax bracket threatened in the pre-budget report last November. Here are the first signs of a brain drain effect taking hold. And even more worrying is the threat of a brain blockade - as highly skilled people in industries such as technology, medicine, industrial research and so son may now shun coming to the UK in favour of competing locations. Those with a cushion of wealth are best placed to relocate, in a digital age the barriers to conducting business off-shore are so much lower. The Telegraph provides a handy guide for those searching for an atlas and airline timetable this weekend.
There is an excellent graphic available on The Times website that would be well worth down loading, printing out and sticking in your folder or study wall. It is a summary of the budget given by Alistair Darling last Wednesday and the differences between the government’s economic outlook and the outlook put forward by city economists. Remember examiners love to see exam answers which are packed with current economic data.
The pdf of the graphic can be found here.
Just a brief piece on some sales data which highlights an interesting feature of the current recession in the UK. You might think the analysis is pants, but still possibly of interest…read more...»
Amazon UK released some pretty strong sales, revenue and profit figures yesterday suggesting that the internet retailer continues to enjoy a purple patch despite the recession at home. Clearly the weaker pound is helping as customers sat in their villas in southern Europe or across in recession-hit Ireland take advantage of improved purchasing power to order their DVDs, flat-screen TVs, Nexpresso machines, Apple accessories and digital cameras from the UK website. This story from the Telegraph also reveals the battle that Amazon has had with the EU Commission over the directive on the disposal of consumer durables when they reach the end of their life.
“Until last month Amazon had banned European customers from purchasing electronic items from Amazon.co.uk because it refused to sign-up to the European Commission Waste Electrical and Electronic Equipment (WEEE) directive, which imposes a levy on all retailers for recycling electronic products.”
Amazon continues to expand and achieve internal economies of scale and scope. The business now has four huge warehouses in Glasgow, Fife, Bedfordshire and most recently Swansea, where it opened its largest centre to date last year, at more than 800,000 square feet of storage space with some 1,000 staff.
Spanish unemployment has more than doubled in the last year and is now surging above the 4 million mark and heading for 5 million and an average of more than 20% of the labour force. Over 700,000 jobs have been lost in construction alone as the fall out continues from the collapse in the once-booming residential property market. As the FT reports today ““Spain and Ireland together have accounted for 75 per cent of the eurozone’s unemployment increase in the 12 months to February, even though they make up only 14 per cent of gross domestic product,” he said. “That tells you a lot about how bad their performance has been. Spanish employers are pleading for a reform of Spanish labour laws, saying it is too expensive to hire and fire permanent workers.” More here from the Independent.
If you can get to the RSA on a lunchtime, this looks like a stunning opportunity. Thursday 21st May at 1pm
“Acclaimed economist Robert Shiller challenges the economic wisdom that got us into the current financial mess, and puts forward a bold new vision to transform economics and restore prosperity. The global financial crisis has made it clear that powerful psychological forces are imperilling the wealth of nations today. From blind faith in ever-rising housing prices to plummeting confidence in capital markets, ‘animal spirits’ are driving financial events worldwide.”
A new report from the European Commission finds that further sizeable reductions are needed in the size of the EU fishing fleet in order to bring about a more sustainable future for the deep sea fishing industry. The long term and possibly permanent and irreversible decline in fish stocks is an example of the tragedy of the commons - a form of market failure. The Common Fisheries Policy has been wildy condemned for failing to address the issue of over-fishing - not least the stupidity of fishing quotas that prompt many fishing vessels to dump unwanted fish overboard before reaching port. This new report argues that the capacity of the industry needs to be culled and this raises important issues about resource allocation andjobs and living standards in regions dependent on fishing.
“Across the EU, fleet capacity has come down, the commission says, but only about 2-3% per year. Meanwhile, technological improvements are making boats 2-3% more efficient every year - so the capacity reductions are having little effect.”
It has been a long time coming. However, a part of the UK mainland has now informally joined the Euro Zone by adopting the Euro, sitting alongside the British Pound as an acceptable currency in which to trade.read more...»
Editor of the Economist John Micklethwait has recorded a super series of short interviews for The Independent’s Big Think which are ideal background watching for Economics and Business teachers, as well as potentially useful for gifted and talented students…read more...»
Should obese people be charged extra for their excess weight? Ryanair’s passengers think so…read more...»
Budget day tomorrow and we prepare ourselves for another Treasury macroeconomic forecast that continues the a long series of back of the envelope calculations that turn out to be wildy optimistic. Stephen King throws a much needed bucket of cold water on the Treasury and Bank of England forecasts in his weekly column in the Independent:
“A sensible fiscal rule might be “the good times won’t last”, thereby emphasising the need to run healthy fiscal surpluses during periods of apparent economic good fortune. Yet few governments have been wise enough to deliver such outcomes (they’re mostly too focused on the next election). So when the economy suddenly and unexpectedly collapses, the fiscal situation is often not strong enough to offer sufficient cushioning…....Governments and central bankers like to give the impression that, somehow, they are in control. They can certainly make a difference but, ultimately, the UK economy is at the mercy of changes in the global economic weather conditions. Weather forecasters know that developments elsewhere have a huge impact on conditions in the UK. Economic forecasters, on the other hand, seem to think the UK is, economically, an island.”
One of Stephen’s regular themes is that macro-economic policymakers are groping in the dark because they have lost control - the traditional instruments of macro demand management have (perhaps for the moment) developed an annoying fault and no longer seem to work in predictable ways.
Here is a great example for the revision notes on business growth. PepsiCo which also includes the Tropicana and Gatorade brands within its business has made a $6bn cash and stock offer for the Pepsi Bottling Group and PepsiAmericas. Pepsi already owns sizeable equity stakes in both of these huge bottling businesses - but it has taken advantage of the low stock market and a handy cash mountain to make a takeover bid. It is a classic case of backward vertical integration and a report in the Financial Times says that PepsiCo expects the integration to cut costs by about $200m annually. Britvic is PepsiCo’s bottler in the UK. Keep an eye out for Britvic making a move on smaller bottling companies elsewhere in the European Union.
Will King, founder and CEO of King of Shaves is featured in today’s Sunday Times. He is to demerge the division of his company that produces shaving products under licence for other brands including Ted Baker. According to the article “this will allow King to focus on the manufacturing business, which last year expanded into making razors with the launch of the Azor. The product is designed to break up a market dominated by Gillette and Wilkinson Sword.”
Will is speaking at our National Conference for Economics Teachers and delegates will each receive a King of Shaves goody bag.
A Channel 4 programme due to air on Monday 20th April might be one for the departmental DVD library? How the Banks went Bust is due to be shown at 2000 hrs. Economist and author Will Hutton gives the definitive insider’s account of what went wrong. Talking to the key players in government, Wall Street and the City, Hutton unveils the true extent of the greed, ambition and reckless risk-taking that is now carrying the economy into the worst recession for a century. Is it really true that no one saw it coming? Or could the recession have been prevented? More details here.
Many thanks to Jon Mace (Warminster School) who has produced a series of four mock exam papers for the new OCR AS Economics specifications. There are two Mock Papers for each of:
OCR F581: Markets in Action
OCR F582: National and International Economy
Each Mock Paper comes with an outline mark scheme and some sample student answers together with comments on the exam technique demonstrated.
The collection of Mock Papers is available now via a network licence from our online store.
The evergreen “Big Question” feature in the Independent today looks at demographic economics. The number of people in the UK is growing by 1,000 a day. There are 61 million people officially resident in Britain today and this is expected to grow by 4.4 million by 2016 - Is Britain going to be able to support an ever-expanding population?
Is there a better daily source of insight and cracker-jack examples to use in the classroom than the Lex column in the Financial Times? One of today’s pieces focused on Google - described as a one-trick pony - and also the loss-making You Tube. You can dominate a market and be regarded as a huge success - but make eye wateringly large losses at the same time.read more...»
The optimist - the new member of the MPC Professor David Miles who spoke at our economics society recently and is decidedly bullish in this article in the Western Daily Mail about the impact of the huge macro policy stimulus.
“Economic history teaches us that a combination of tax cuts, running large fiscal deficits, substantial cuts in interests rates and more quantitative easing is likely, with a certain time lag, to have a substantial impact on demand in the economy and it may well be that the worst of the recession may well be behind us.”
On the other hand, the IMF - “The current recession is likely to be unusually long and severe and the recovery sluggish,” the IMF said in releasing two chapters from its twice-yearly World Economic Outlook (WEO). Have a read here
A highly relevant piece from the BBC web site - carbon markets promise to be a key player in the fight against climate change, argues Professor Michael Grubb
How to keep track, and make sense of the rapid changes in the UK economy? That is the challenge facing AS & A2 economics students this summer as they prepare for the June 2009 exams.
So here is a solution from tutor2u that should help bring your students up-to-date and give them an essential advantage when taking their exams.read more...»
During a spring clean I came across a book of hand-written teaching notes from my first two years at the chalk-face - 1987 and 1988. There were some pleasant reminders of time spent getting my hands dirty on the banda machine (do you remember the smell of those freshly printed pages?) and also numerous flashbacks to how dependent I was on getting the scissors out to cut useful articles, charts and tables to insert into student worksheets and handouts - has anything changed? Two images below take us back to the end of the Lawson Boom of the late 1980s.read more...»
A hat tip to fellow twitterer Rory Cellan Jones for pointing out the next big thing - flutterread more...»
Details of a new book by the International Editor of the Financial Times Alan Beattie
“The path to prosperity is rarely obvious and the sources of success are often unexpected. Time and again, world leaders have failed to learn the lessons of economic history, and their mistakes continue to have surprising and catastrophic consequences. In False Economy, Alan Beattie uses extraordinary stories of economic triumph and disaster to explain how some countries went wrong while others went right, and why it’s so difficult to change course once you’re on the path to ruin.”
False Economy: A Surprising Economic History of the World - available now for pre-order from Amazon
Diane Coyle’s blog over at Enlightenment Economics is superb for teachers who want to keep up to speed with new books on economics. In today’s blog she casts her eye on the plehtora of new titles covering the credit crunch - over ninety are listed by Amazon .... and counting! More here
Recent business history both here in the UK and in international markets is littered with examples of cartel-behaviour by businesses that seem to have come unstuck. Just type price-fixing into Google news and see what comes up! Even on the day I am writing this blog answer, the FT reports that three cargo airlines have agreed to pay fines totalling $214m for their roles in a global conspiracy to fix prices for air freight. Bloomberg reports that a former sales executive at Hitachi Displays Ltd. has been charged with participating in a global conspiracy to fix prices for liquid crystal displays sold to Dell Inc. And in Ireland, a former director of a Dublin car company has been given a 15-month suspended prison sentence and fined €160,000 after pleading guilty to charges of price-fixing.read more...»
Last year I produced a number of revision focus articles for the AS and A2 exams - some of them are listed below and I feel they still have plenty of mileage for students especially those that are tilted towards core theory.read more...»
The simple answer is yes! Although the world economy is forecast to experience a recession this year (Deutsche Bank have pencilled in a 1.9% contraction in global GDP for 2009 and the G7 nations will see output slump by 4.5%), there will always be countries at different stages of the business cycle and those who for one reason or another manage to avoid the worst of the fall out from the global financial and economic crisis. Using forecasts for 2009 from the economics team at Deutsche Bank here are some of the countries expected to avoid a full-blown recession:read more...»
The latest edition of Deutsche Bank’s Global Economic Prospects has a fine analysis of the likely impact of the fiscal stimulus on aggregate demand, output and prices - there is some excellent evaluation points here for AS and A2 students - summarised below:read more...»
This summer you can expect many column inches devoted to searching for green shoots of economic recovery. There must come a time when the unprecedented policy stimulus applied to the UK economy will start to bear fruit and evidence emerges of a turning point in the business cycle.read more...»
Shipping has taken a major hit because of the recession and this piece to camera from Adam Mynott of the BBC taken at the port of Rotterdam is superb on the challenges facing the shipping industry and the risks of a bloodbath for some of the smaller container businesses. I used to play hockey with Adam when he played at Harrogate HC - great to see a former team mate continuing to do so well at the BBC
A super piece by Tim Harford on challenging times for macroeconomists.
“I am struck by the soul-searching that has gripped the profession in the face of the economic crisis. The worry is not so much that macroeconomists did not forecast the problem – bad forecasts are more a sign of a complex world than intellectual bankruptcy – but that macroeconomics seems unable to provide answers. Sometimes it cannot even ask the right questions.”
Today’s Observer carries some hugely encouraging news:
Economics is a must study for students in recession
A surge in sixth-formers applying to study economics at university is being attributed to the global recession awakening a public thirst for knowledge about how the financial system works. Applications for degree courses beginning this autumn or next were up by 15% this January, according to UCAS, the Universities and Colleges Admissions Service. A spokesman for the Royal Economic Society said applications to do economics at GCSE and A-level were also up
Interest in the Royal Economic Society’s annual essay competition for sixth form economists is very strong this year. There is still more than a month before the final deadline for entries to be submitted. Here are the main details.
Fasttrack History has a number of video clips covering US New Deal construction projects in the late 1930s - public information films that students will readily recognise as deeply embedded with propoganda but offering vivid video examples of the ‘shovel-ready’ jobs that remains engrained in our minds when we think of the New Deal programme. Relevant today?