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I’m always on the lookout for GDP stories – what is GDP, how is it measured, and what are the problems of using GDP to measure social progress, standard of living and sustainability.
Big changes coming to the national accounts next month, which means that GDP will be calculated slightly differently.read more...»
Each year the Human Development Report published by the United Nations gives a special focus on a particular issue related to development. In 2014 that issue is vulnerability.
To quote from the opening of the report:
"Real progress on human development, then, is not only a matter of enlarging people’s critical choices and their ability to be educated, be healthy, have a reasonable standard of living and feel safe. It is also a matter of how secure these achievements are and whether conditions are sufficient for sustained human development. An account of progress in human development is incomplete without exploring and assessing vulnerability."read more...»
I am often writing blogs on the debate over the limitations of GDP as a measure of economic and social progress, most recently with coverage of the Social Progress Index. Here’s another approach, the Good Country Index. It's a deceptively simple concept, yet quite powerful.read more...»
Although Indonesia has experienced significant growth and development, not everyone has benefitted. This short video from the World Bank offers a personal story. Followed by up a July 2014 blog from BBC Global Business on the rise of the wealth elite in Indonesia.read more...»
Drawing on data from the 2013 Human Development Report, here are the 24 countries in the 2014 World Cup ranked according to the Human Development Scoresread more...»
The Office for National Statistics (ONS) has just increased the size of the British economy by nearly £10 billion, a figure equivalent to around 0.7 per cent of the economy as a whole. George Osborn has not waved a magic wand. We have not suddenly become more productive. The reason is that, for the first time, estimates of the value added by drugs and prostitution have been included. These activities are included in an economic sector called ‘miscellaneous goods and services’, which, as an indicator of its diversity, already contains things like life assurance and post office charges.read more...»
The Office for National Statistics has, for the first time, included estimates of the impact of prostitution and illegal drugs in the national accounts. By the ONS’ reckoning they add about £10bn to the British economy. The assumptions used in making the calculations have been the subject of some criticism. I have summarised below the assumptions behind the estimated spending / income and output effects of including prostitution:read more...»
If you are like me, teaching unemployment starts with explanation of its causes and then moves on to its impact (before discussing possible solutions). I've always found the 'impact' aspect relatively straight-forward; it would seem students find the concept of loss of output and its consequences fairly logical. Discussing the long-term effects can be more difficult as young adults in full-time education may not be wholly empathetic towards the outcomes of job loss.
An interesting report came out from the Nuffield Trust recently (a copy is available from this link) about the increase in the prescription of antidepressants. The increase from 15 million items prescribed in 1995 to 40 million items in 2012 is quite large but the report shows that the biggest jump has come during the economic downturn since 2008. The report hypothesizes on a number of causes of this increase but does suggest a link between unemployment and the increase in prescription of antidepressants. Perhaps it isn't a quantum leap to illustrate that there is a relationship between unemployment and depression but evidence of this nature may be valuable when making a point about the impact of unemployment (and its cost to society as a whole) in the class or as part of an exam answer.
May 2014 marks the tenth anniversary of Poland's accession to the European Union. Poland was easily the largest of the ten countries that came into the EU single market a decade ago. It was an important economic and geo-political moment for a country of just under forty million inhabitants.
The country has always traded heavily with the EU and that trade dependency has deepened over the last ten years. According to economists at HSBC, Poland is well placed to sustain strong export growth even though much of Western Europe as a whole is struggling to escape from below trend growth.
Poland has had the most stable growth of any economy in Europe in recent years. It avoided a recession in the aftermath of the Global Financial crisis - helped in part by the depreciation of the Polish Zloty. The economy is the sixth biggest in Europe and in the top twenty five countries ranked by GDP. Steady progress in lifting relative incomes per capita towards the EU28 average has helped to grow the size of the middle-class consumer sector - a big opportunity for British businesses looking to invest in the country.read more...»
This short World Bank info-video looks at what $1 buys in China. In China, over 98 million people live on less than 6.3 yuan ($1) per day.read more...»
There has been huge interest in the new book by Thomas Piketty entitled "Capital in the 21st Century". This blog entry will link to some reviews, news articles and short videos on Piketty's ideas and policy prescriptions. In "Capital," French economist Thomas Piketty explores how wealth and the income derived from it magnifies the problems of inequality. At the heart of it is a simple equation R > G - the rate of return on capital is higher than the rate of economic growth. Naturally there is a fierce debate about the data and his methodology!
Recent news articles:
Are we living in the second gilded age? (Linda Yueh, BBC)
Review of "Capitalism in the Twenty First Century"(The Independent)read more...»
Metropolitan liberals love to be able to criticise Western society. Recently, their lives have been brightened by the extensive discussion on the rise in inequality since the 1970s, especially in the Anglo-Saxon economies. There is a danger that this essentially anti-capitalist narrative will come to dominate the media, paving the way for increased regulation and the sorts of failed statist interventions in the economy which were a consistent theme in British political economy for nearly four decades after the Second World War.read more...»
The prospects of significant wage increases for typical UK workers are bleak, according to Professors David Blanchflower and Stephen Machin writing in the Spring 2014 issue of CentrePiece magazine from the London School of Economics.
It is quite clear that the economy is still well below full employment and there is a large amount of slack in the labour market, they say. There is little evidence of widespread skill shortages, which would push up wages; and public sector pay freezes with continuing redundancies continue to push down on workers’ bargaining power.read more...»
Income and wealth inequality in the UK are higher than most people think they are and higher than they think they should be. These are among the messages of a new online infographics film:read more...»
New data suggests that China will soon overtake the United States with the largest GDP adjusted for purchasing power parity. This short Financial Times video from Chris Giles looks at the new data which are being driven by fresh estimates of what money can buy - i.e. the volume of goods and services that are produced in different countries and what one dollar can buy in one country compared to another. The data finds that poorer countries are cheaper than economists thought they were and richer countries are more expensive.
China barely breaks into the top one hundred of the countries of the world in terms of GDP per capita (PPP) - it is a large country but not rich!
The 2011 gross domestic product (GDP) of the European Union, the United States and China together accounted for half of the world GDP in 2011. In 2011, the GDP of the 28-nations EU represented 18.6 percent of the world's GDP, expressed in Purchasing Power Standards (PPP). It was followed by the United States with a share of 17.1 percent and China with 14.9 percent.read more...»
Measuring the size of an economy is difficult on so many levels. Of course, there’s always the GDP debate, which asks about the best way to measure economic and social progress. But even measuring GDP is a huge challenge. Nigeria has just experienced a vast 89% increase in GDP having ‘rebased’ its figures.read more...»
Here's a short but fun classroom starter to stimulate discussion about how the Government Spends its money.
Based upon information from a BBC article showing how Government spending has changed since 1953, the resource asks students to separate 'blocks' representing the percentage of overall spending on each department (e.g. health, defense) into those that they think represent spending in 1953 and those that represent 2013. Having separated the blocks, students must then re-arrange the blocks into perfect squares on the printable 'mats' provided as part of the resource.
As well as stimulating discussion about how the Government spends its money and changes in its priorities, it may provide a useful hook for getting your students to remember the proportion of spending the Government places on each of its department which they can use as evidence within their exam answers.
Click on this link to download the resource.
Click on this link to go to the original BBC article.
Membership of the European Union (EU) has had a big positive effect on average incomes in all but one of its member countries. That is the central finding of research by Nauro Campos, Fabrizio Coricelli and Luigi Moretti, to be presented at the Royal Economic Society’s 2014 annual conference. They also find that the more financially developed countries have grown significantly faster after joining the EU.read more...»
Here's an interesting addition to the GDP debate, which has heated up a good deal over the last couple of years. Is GDP a reliable indicator of economic progress? The Social Progress Index is another attempt at capturing more measures of development, so as to be a better guide to policy making. It's what economist Diane Coyle calls a 'dashboard' approach to measurement.read more...»
More on the implications of the UK’s massive current account deficit. Geoff has put together almost everything you need on the topic here, and he points out that the main implication is a net leakage from the circular flow of income, reducing AD and weakening multiplier effects.
A current account deficit is not necessarily a disaster; after all, imports are good too, sustaining our standard of living and is partly a reflection of the demand for intermediate goods our economy needs to stay efficient.
I’m going to pick up on the the statement that there is nothing wrong with a trade deficit. It simply means that a country must rely on foreign direct investment or borrowed money to make up the difference.read more...»
Smaller families, improved knowledge about nutrition and hygiene, and a cleaner environment with better housing, less overcrowding and a reduction in toxic heavy industry – all of these things have contributed to the spectacular increase in the height of the average young man in Britain over the past one hundred years.read more...»
In this new RSA Short, Kate Raworth makes a powerful argument to look beyond economic growth alone for a true measure of prosperity and progress. Read more about Kate Raworth's work and her idea of doughnut economics by clicking this link http://www.kateraworth.com and follow her on twitter @KateRaworthread more...»
I thought it worthwhile sharing my resources which I have been collecting for students (and teachers alike). I have been promoting them on Twitter (@Economics_KSF) through scoop.it but for those of you not on there, the link for the scoop.it boards are here:read more...»
Concern about inequalities of income and wealth is now a fashionable topic. It featured strongly in the gathering of the world’s top brass at Davos earlier this year. Much of the popular coverage of the topic gives the impression that not only is inequality at record highs, but that it is confined to the wicked Anglo-Saxon economies.
A recent paper published by authors linked to the George Soros-funded Institute for New Economic Thinking shows very decisively that neither of these points is true.read more...»
Here’s a great topic for an economics debate. National income is still lower than before the financial crash. We have a ‘cost of living crisis’. Yet it’s possible to argue that life is better now than it was in 2005. How can that point be made without being laughed out of the room?read more...»
Here is a revision presentation for an AS Macro topic - measuring national income and the standard of livingread more...»
Sometimes it’s worth challenging a concept that is fundamental to Economics, such as specialisation or the theory of comparative advantage (video here). This crucial theory views international trade as profitable even for a country that can produce every commodity more cheaply than any other country (an absolute advantage). According to Robert Skidelsky, the textbook example is that of a town’s best lawyer who is also its best typist. Provided that she is better at law than at typing, she should specialize in law and leave her secretary to do the typing. That way, both of their earnings will be higher. The same logic applies to countries. Each country should specialize in producing those things that it produces most efficiently, rather than producing a bit of everything, because that way its income will be higher.
Why does Skidelsky go on to challenge that view?read more...»
If you attended the recent tutor2u revision conferences for up-coming micro-economic exams (look out for the macro workshops and combined micro and macro to come in March) you will have seen how fuel-pricing was used as an example of market failure, government intervention strategies and government failure.
Fortunately, the energy market is a gift that keeps giving to us in the economics world (every cloud has a silver lining) as a report out today (see this link for the BBC version of the story) indicates that Parliament is about to intervene to try and stop the energy companies charging more to customers who pay by cash rather than by direct debit (£114 per year, according to the report).read more...»
A great introduction to some global or development economics, looking at the world’s biggest problems, as measured by their cost to the world’s economy. There’s commentary and a good stimulus video. It will add a dimension to your introduction to global challenges, even if you’re already familiar with the basic Copenhagen Consensus idea: prioritise the world’s problems from biggest to smallest. That approach should lead to a more efficient response, given that resources – and political will – are limited.read more...»
As the comedian Mark Steel once said, “anybody who says we’re all middle class now obviously hasn’t been to Wigan” (I can make that joke because my dad’s from there). One huge global cause for celebration is that the scourge of absolute poverty is in retreat. Instead we hear much more about rising inequality within nations, which is progress, of a sort. In amongst these discussions is talk of a rising new middle class (see above – link here). What might this mean?read more...»
It's the time of year when many commentators are going back to basics and asking if our dominant economic model - free market capitalism - is a force for good in the world.read more...»
This resource from The Guardian could offer students an excellent way of considering the negative social consequences of civil war and internal conflict.read more...»
Here's another weather blog. It's cold and atmospheric conditions are right for exceptionally severe local air pollution; smoke, micro particulates and sulphur dioxide combine into a greasy 'smog'. The health impact is severe. People start talking about a 'killer fog' and even an 'environmental disaster'. Thousands die over the next few days and weeks, many more face serious long term consequences.
Where am I describing?read more...»
'Tis the season of making predictions about the future. What will 2014 bring? There has also been a lot a coverage of a study making predictions as far ahead as 2030.read more...»
Hopefully the UK economy will turn a corner in 2014 and return to robust growth and good health, raising living standards for some of the poorest people in the UK. It would be very odd if you hadn't reflected on the plight of the poor in the UK over the last few years, and in the build up to Christmas.
Much discussion of poverty in Economics is of a normative nature. What do we mean by poverty anyway? Isn't it all just a matter of opinion? Is poverty a lifestyle choice, picked up by people who have been given the wrong incentives by the welfare system? Perhaps it's the fault of immigrants, or greedy business, or dishonest politicians.....
Some relatively impartial data would be very welcome in this very heated debate.read more...»
Employees in the UK are not being denied their fair share of economic growth, according to research by João Paulo Pessoa and Professor John Van Reenen, director of the Centre for Economic Performance at LSE. Their investigation of claims that wage growth has become ‘decoupled’ from productivity growth finds that decoupling has been overstated and cannot be used to justify redressing the balance between wages and profits.read more...»
This is an updated revision presentation covering aspects of inequality and economic growth/development - it is designed for Year 13 A2 macro studentsread more...»
This topic is of profound importance. It gets the heart of a fundamental economic issue: the distribution of income. When national income rises, does that extra income go into the pockets of workers or capitalists?
The answer is clear cut: labour is getting a smaller slice of the pie. How and why might that be happening, and what might be done? Here are links and summary of a couple of articles, plus a great Economist video clip.read more...»
Don't you just love the BBC website? Just as I am preparing my lessons on global Poverty and Inequality for my A2 Macro students, here is an article written by Hans Rosling about the enormous progress most countries have made in recent decades. He uses statistics to suggest that tremendous global progress has been made towards improving quality of lives in five key ways.
There is a quiz - How Much Do You Know About The World, or 'The Ignorance Test', which will make a great lesson starter.
And as a follow-up, BBC2 has an hour-long programme tonight at 21.00 (22.30 in Scotland) called Don't Panic - the truth about Population (which will be available on i-player) - the programme synopsis says
"Using state of the art 3D graphics and the timing of a stand-up comedian, world famous statistician Professor Hans Rosling presents a spectacular portrait of our rapidly changing world. With 7 billion people already on our planet we often look to the future with dread, but Rosling's message is surprisingly upbeat. Almost unnoticed we have actually begun to conquer the problems of rapid population growth and extreme poverty."
UK immigrants who arrived since 2000 are less likely to receive benefits and less likely to live in social housing than UK natives. What’s more, over the decade from 2001 to 2011, they made a considerable positive net contribution to the UK’s fiscal system, and thus helped to relieve the fiscal burden on UK-born workers.
The positive contribution is particularly evident for UK immigrants from the European Economic Area (EEA – the European Union plus three small neighbours): they contributed about 34% more in taxes than they received in benefits over the period 2001-11.
These are the central findings of a comprehensive analysis of the fiscal consequences of immigration to the UK, published today by the Centre for Research and Analysis of Migration (CReAM) at University College London.read more...»
Suyash Raj Bhandari considers some of the ways in which the rapid expansion and adoption of mobile technology in Africa can act as a spur to growth and development on the continent. We link also to some useful background video resources on this issue.read more...»
Economists like to talk about fallacies – arguments that fall apart when you look at them closely. One such fallacy is the ‘lump of labour’ delusion. If you assume there’s a fixed amount of work to be done, then if people retire later (or whatever) there must inevitably be less work for the younger workforce to do. It doesn’t add up, because the amount of work to be done isn’t fixed. More jobs in the economy and higher levels of productivity could easily create more employment and income.
In one light hearted example to illustrate this point, a French engineer and has American colleague are watching an interstate highway being built in the US. The Frenchman is alarmed by all the capital equipment and machinery used in the process. “Doesn’t that make workers unemployed?” asks the Frenchman. “In France we only use hand tools to preserve jobs”. The American is baffled. “If that were true, surely it would be better to equip the workforce with teaspoons”.read more...»
Here is an updated streamed presentation on overseas aid and economic development (updated October 2013)read more...»
It was a pleasure to visit the LSE earlier on this week to hear a lecture from the distinguished economist Professor Angus Deaton from Princeton University in the United States. His new book "The great escape from inequality" is on my must-read list for the half term holiday and brings into focus over 250 years of changes in health and income inequalities across the world economy.
I will blog about his book a little later on but for now this Financial Times interview provides an introduction to some of the main themes of his book. Incidentally, Professor Deaton has strong views on the efficacy of foreign aid and this chapter of his book has provoked some strong responses from the pro-aid lobby active on twitter. Click below for the full video of his lecture at the LSE.read more...»
On the World Bank twitter account, President Jim Kim is quoted as saying that "Properly managed, new minerals wealth could transform Africa’s development." Back in June 2013, a new report from the African Progress Panel looked at this important issue and set out an agenda for maximising Africa’s natural resource wealth and using it to improve well-being.
My own students have been researching the economics of natural resources and whether they can be a blessing and/or a curse to countries seeking sustained growth and development. I just wanted to share one or two of these essays with you because I was delighted with the depth of the independent research on show and the quality of evaluation in their arguments.read more...»
Inequality has been rising for 30 years. The gap between rich and poor is the widest since the second world war. If current trends continue, we will have reached Victorian levels of inequality in 20 yearsread more...»
The cost of living will be a key battleground in the next election and the main political parties seem to be coming up with offers covering utility bills, rail fares, banking charges and the cost of housing as a way of limiting increases in the living costs of "hard-working" families! One should always take promises from politicians with a huge pinch of salt - intervention to freeze bills is fraught with risks and unintended consequences. This Channel 4 news clip looks at the issue.read more...»
Mobile phones have changed how we negotiate our relationships with family, spouses and close friends. Increased levels of mobile phone subscriptions are linked with improvements in education, gender equality and political participation, particularly in developing countries. They are also associated with higher economic growth.read more...»
As soon as students encounter the idea of GDP they are guided towards thinking about the possible drawbacks to growth, especially for the environment.read more...»
This revision presentation provides an introduction to the concept of GDP as a measure of economic growth and an indicator of the standard of living.read more...»