As we enter the season of university applications, and discussing the more advanced “off-syllabus” topics in Economics; here’s an “Introduction to Econometrics” presentation that I have prepared.read more...»
As expected, the UK government has announced an extension to the car scrappage scheme which will expand the consumer subsidy to another 100,000 cars.
The ‘clash for clunkers’ scheme has at least helped to stabilise domestic car production but four fifths of the new cars sold in the UK are imported from overseas. According to the Guardian “For the year to date, production has declined by 44.6%. But the slight improvement recorded last month has prompted some carmakers to hope that the slump is bottoming out.”
So the direct impact on UK car assembly plants is smaller than we might think. Factor in though the multiplier effects on the suppliers of car parts and the boost to retail and distribution businesses.
Stephanie Flanders is on excellent form in her latest Stephanomics blog. She argues that the much larger German car scrappage scheme may have had an even bigger effect on our own producers than the UK government’s modest version. The German subsidy is worth ten times that of the UK and around 40% of German car sales last year were imports. More here.
A ten question multiple choice quiz on aspects of introductory theory of the firm can be found here
We have all suffered the inconvenience of sitting on a train or bus or in the library and being distracted by the whirring sound of someone’s pop favourites blasting out of their earpieces. Quite apart form the potential long term damage to their own health, the externalities of inconsiderate people oblivious to those around them are not inconsiderable! The EU is considering intervening to set a maximum noise default setting on new portable music players.
They want manufacturers of digital music players to introduce these standards voluntarily before legislation is prompted - this is an interesting example not just of externalities but also information failure among predomianantly younger people about the long term impact of playing loud music through ear pieces for hours at a stretch.
According to EU Consumer Affairs Commissioner Meglena Kuneva.
“The evidence is that particularly young people - who are listening to music at high volumes sometimes for hours each week - have no idea they can be putting their hearing at risk. It can take years for the hearing damage to show, and then it is simply too late.”
What other interventions might be possible as alternatives? Beware the law of unintended consequences - how would consumers who want to max the volume get around such limits?
The smoking ban first came in north of the border and now we find that the Scottish government has been proactive in trying to curb the economic and social costs of high alcohol consumption and binge drinking. Establishing a minimum price per unit of alcohol seems like an obvious economic approach to the issue and this report by Colin Blane looks at the plan for a minimum price of 40p per unit - making a bottle of wine at least £3.60.If it works the number of hospital admissions could be cut by many thousands per year. Will Scotland become the first country in Europe to go down this path? This short video piece would make a good starter resource for a lesson on intervention options and an evaluation of their potential impacts.
Victor Seidel, Fellow of Trinity College, Oxford is speaking at our Management Society on Wednesday evening - if any colleague would like to come along they are more than welcome. The meeting starts at 8-45pm in Upper School, Eton and lasts for an hour.
A reminder too that Chris Coleridge, the founder of V-Water .... a business that is operating in an increasingly competitive market space with the likes of Vitamin Water and Juice Doctor - is speaking at our Entrepreneurship Society on Thursday night - again starting at 8-45pm. Teaching colleagues and their students are welcome.
We have created this PowerPoint for A2 Economics students who wish to update their understanding of external macroeconomic shocks and cyclical fluctuations.
Stephen King has a superb article on the importance of exports and a cheaper currency to prospects of recovery in today’s Independent.
“If consumer spending, government spending and investment spending are going to be weak, the only likely source of growth is exports. One way to boost exports is to adjust the relative price of goods and services produced in Britain, and an obvious way of doing this is to encourage sterling to fall. Unlike the individual eurozone members, the UK still enjoys exchange-rate flexibility.”
But he makes the point that a lower currency on its own provides little more than a quick palliative to the fragily economic situation - the UK needs to reinforce our competitive advantage in many different industries by improving non-price quality, keeping costs under control and investing in productive capacity rather than simply relying on a weaker sterling to boost the profitability of exports.
Ten more questions for Economics students in our weekly interactive quiz:
The Japanese Yen has hit an eight month high vs the US Dollar according to BBC news BBC News Article. This has prompted a lot of hand wringing from the Japanese ruling party and has sent share prices in Tokyo tumbling. But why should having a strong currency against the greenback equate to economic turmoil?read more...»
Tonight’s edition of Panorama will be examining the way in which government spending might be cut after the next election. In anticipation of that, the BBC have made a three-minute extract from the programme in 1968 which looked at spending cuts in that year, reporting on prospects for abolishing prescription charges and the 20% increase in the cost of the Civil Service between 1964 and 1967 with the average civil servant costing £1537. It makes an interesting period piece, and I think that the episode to be shown at 8.30 tonight will make an interesting discussion around options for fiscal policy over the next few years.
I do recommend this 4-minute interview to help explore the reasons for the weakness of sterling and whether it is helping the UK economy. Mark Thompson , a dealer at Moneycorp, was interviewed on Radio 5’s ‘Breakfast’ programme, and explained the shocks to the economy caused by the use of Quantitative Easing and the negative bank deposit rate (which means that if banks choose to hold money on deposit with the Bank of England it actually costs them money, rather than gaining them a return as interest). He sees these as strong statements that had been deliberately used to depress the value of the pound on the currency markets, thus encouraging exports and raising the price of imports, so that there is a substitution effect towards home-produced goods, which we can see is reducing the negative trade balance and so helping to raise the level of AD.
The link here will take you to the Friday 25th September episode of the programme, and should remain live until the end of this week; I think that after that it will be unavailable. Once you have opened the i-player page, use the scroll bar below the ‘control panel’ to move forward through the programme to 1 hour 48 minutes, which is the start of the interview.
In our introductory AS macroeconomics we have discussed the differences between a cyclical recession and a depression. Much depends on the scale of the contraction in real national output from peak to trough of the cycle. This article from the Telegraph looks at a dire outlook for the Spanish economy which - not long ago - was one of the fastest growing countries in the European Union with a rising relative per capita income.
Quoting a report from Madrid research group RR de Acuña & Asociados, the peak to trough loss of GDP is likely to be more than 11%. “The group said Spain’s unemployment will peak at around 25pc, comparable to the worst chapter of the Great Depression…...The construction sector will shrink from 18pc of GDP at the peak of the boom to around 5pc, making it unlikely that there will be any significant recovery before 2012. Even then growth will be “slow, weak, and fragile”.
A huge rise in the Spanish government’s budget deficit has left them little wriggle room for a fresh fiscal stimulus.
Spain and Ireland are frequently quoted as two EU countries whose property bubbles have been well and truly smashed with huge macroeconomic consequences. The slump in property represents a very large internal demand-side shock for a country heavily dependent on construction and also tourism for value-added measures of GDP.
A big hat tip to Jason Welker for flagging up this new and growing series of You Tube videos on introductory microeconomics.
Ahead of the G20 summit, CNN money provides an overview of six countries that look on the path to recovery ... or at least are heading down the slip road…...good macro background for A2 economists wanting to understand the economic cycle.
Sorry seems to be the hardest word for politicians and for all of us who have dug ourselves into a hole. But a new study of consumers from academics at Nottingham University finds that customers are more likely to continue a commercial relationship with a business that is up front anmd apologises rather than those who resort - after a delay - to financial sweetners. More here
Over ten years at my current school I have been hugely fortunate to hear some tremendous speakers on a tremendously wide range of issues. Few have impressed me as much as Simon Henry, CFO of Shell plc in his talk to our Keynes (Economics) and the newly-formed Management Society last night. His talk was beautifully paced and considered; the responses to questions were candid and rooted in a deep understanding of energy industries where volatility has become the norm. Future shareholder value will depend largely on successfully breaking the cycle of volatility.read more...»
Our range of digital course companions for popular AS & A2 Economics units has been extended and updated over the last few weeks…read more...»
Here is a study resource which will really help A2 students prepare effectively for exams in January 2010…read more...»
Newsnight’s Economics Editor Paul Mason was on fine form last week with a set of short reports on how the economic and financial crisis has affected the UK and Global economy. Both are between five and six minutes long and I showed them to my A2 students as a prompt for discussion and also to an able AS set who are still dipping their toes in the macroeconomic waters! The features allowed us to discuss (at AS level) the inter-connected nature of the world economy (for example the need to re-balance demand and trade between the USA and China) and also to consider the reasons for and consequences of the huge rise in public sector spending and borrowing.
For AS economics I have deliberately left introductory stuff on the circular flow until we have kicked around ideas and arguments about the recession - causes, effects and ways out of the downturn.
Here are the links to Paul Mason’s three video reports from last week:
Schools and colleges are invited to request tickets for the popular 2009 RES Annual Lecture series on Wed 25 November (London - Royal Institution - 3.00 p.m.) and Thursday 26 November (Bristol - Bristol Grammar School, 4.30 p.m.).read more...»
The second video looks at the wider side effects of developing an open source VLE.
A superb presentation - from a school using Moodle to deliver business and economics education. Inspirational stuff for those of us who are becoming Moodlers!
The latest edition of our weekly Economics Quiz for AS/A2 students is now available:
The Economist magazine is furious with Barack Obama for his announcement of a 35% import tax on tyres from China. The writer looks at the role of world trade in the extraordinary burst of growth that globalisation has triggered, which has “lifted hundreds of millions out of poverty over the past few decades and brought lower prices to consumers everywhere.” The effect is being threatened now though, as world trade is predicted to fall by 10% in 2009 and many countries attempt to help their domestic industries with subsidies or new tariffs on imports: the Economist quotes a report from the Geneva-based World Trade Alliance claiming that, on average, once every three days a G20 member has broken the no-protectionism pledge they made at the summit in April. Specifically, they look at the potential problems to be caused by the new import tax on Chinese tyres: either consumers will have to pay more for tyres made more expensively in the domestic economy, which will cause the motor trade to suffer, or buyers will simply switch to an alternative source of low cost imports, from India or Malaysia, in which case the US jobs will be lost anyway, and in either case there is the risk of provoking retailatory measures from China.
Does one small measure of protectionism matter? The selective steel tariffs introduced by George Bush on imports from China in 2002 had very little effect on trading relations between the two nations in the long-run. The Economist thinks that this is different, and that America has to take a leading role in resisting the temptation to protect, but also largely because they are reliant on the Chinese as major buyers of the government bonds that are financing America’s massive fiscal deficit.
Start the new term with by adding our free Economics Blog widget to your departmental VLE, blog or website. You can also add this content to a Facebook, MySpace or Bebo page. The possibilities are endless…read more...»
This useful article from the BBC looks at debt, repayments and savings for individuals in the UK. In July UK households actually paid back more debt than they took out for the first time since the Bank of England started recording this data 16 years ago in 1993. At the end of that month total household savings amounted to £1.1 trillion, and total outstanding lending to individuals stood at £1.46 trillion (which is almost a trillion more than in 1993). Of this, £1.23 trillion was mortgage debt and £231m was other forms of consumer credit. Households are now starting to get the message about repaying that debt, with the average individual paying back £10 more than they borrowed in July – but the average personal debt standing at £24,000 is going to take an awful long time to pay back at £10 a month.read more...»
Grist to the mill of those who believe that the EU carbon market is flawed - it appears that some of Europe’s biggest steelmakers have been given a huge financial windfall from the carbon trading system This article from the Guardian explores the background.
For the olive oil growers of Spain falling prices are threatening their very existence. They claim that the supermarkets - who sell 9 out of every 10 bottles - have used their market muscle to drive down the retail price and the growers are barely able to justify continuing production. This is a good short video on the workings of the price mechanism.