Unit 1 Micro: Public Goods News Clips
A selection of recent news clips linked to the concept of public goods
Unit 1 Micro: Illegal logging and the human cost
This news report looks at the human cost of an example of the tragedy of the commons - illegal logging in the south Philippines which contributed to tens of deaths from the effects of flash flooding. Ecosystems and economic prospects are damaged at the same time because of failures in environmental management.
read more...»Unit 3 Micro: Prezi on Environmental Economics
This term I am teaching some environmental economics to my A2 groups. The link below provides access to a Prezi on aspects of environmental issues such as the Tragedy of the Commons and the economics of waste and pollution. I will be updating and extending the Prezi as I develop the lessons. I hope that it is useful. I will try to include as many examples as I can on European and Global issues to do with environmental issues - the beauty of a Prezi of course is the flexibility of ordering course materials and the chance to embed lots of vivid You Tube clips and images into the resource.
read more...»Unit 1 Micro: Revision MC Questions on Public and Private Goods
Here is a quick revision multiple choice quiz on public and private goods created using Zondle
read more...»Economics of Deforestation
The Human Development Report 2011 reported that deforestation is a severe problem. In the last two decades, Latin American and Sub-Saharan Africa have experienced severe forest losses, especially when compared to the rest of the world.
For economists the economic and social costs of rapid deforestation represent a telling example of the tragedy of the commons where the pursuit of individual self-interest can risk a permanent destruction of natural resources that undermines the sustainability of communities and societies for current and future generations. The United Nations calculates that deforestation and degradation is responsible for nearly 20 per cent of global greenhouse gas emissions.
Will the REDD programme make a difference?
REDD stands for Reducing Emissions from Deforestation and Forest Degradation in Developing Countries and is designed to provide financial incentives funded by advanced nations for developing countries to preserve their forests and instead invest in low-carbon paths to sustainable development.
The UN estimates financial flows of up to $30bn could come from REDD and related initiatives - the scheme effectively allows rich countries to offset their carbon emissions from domestic industries and consumers by funding clean low-carbon development projects in developing countries. But it is highly controversial and opposed by many organisations such as Friends of the Earth and the World Rainforest Movement.
In this blog we have put together some web resources on the issue of deforestation - focusing on causation, consequences and also on some of the policy approaches that might work to bring about behavioural change.
Unit 1 Micro: Costs and Benefits of a Super Sewer for London
Thames Water has plans for a super sewer running 20 miles from Hammersmith to Beckton but the plan has come up against intense opposition from many local resident groups. It is a good example to use of cost-benefit analysis in action with a project that will directly affect millions of people living and working in the capital. There is an almost unending list of stakeholders involved in the debate.
read more...»Unit 1 Micro: Coast Guard Protection and Moral Hazard
A hat tip to Mark Seccombe for spotting this fine piece of economics writing from the New York Times economics blog.
Casey Mulligan explores the question of whether the US coast guard should enforce that boats install safety beacons as a way of cutting the number of incidents they are required to attend. Does providing a safety-net regardless of whether participants have covered the cost of providing themselves with basic safety equipment lead to a problem of moral hazard? Has mandatory safety belts in cars led to a reduction in the quality of driving? Would compulsory air bags do the same? When is the state justified in applying and enforcing stringent safety requirements on people and businesses as they go about their daily lives?
Some light relief from revision - this week’s economics TV
Here is a selection of this week’s TV (and a bit of radio) that seems to have some good economics content and might provide a welcome, yet useful, break from revision.
Sunday 15th May: BBC4 8pm, ‘The Secret Life of the National Grid’ - could be worth a look in terms of economies of scale, network externalities, economic growth and the importance of infrastructure
Sunday 15th May: Radio 4 8pm, ‘The Bankers and the Bottom Billion’ - possibly some useful bits in terms of development economics
Monday 16th May: BBC1 8.30pm, ‘Panorama’ - this week’s investigative documentary looks at the illegal trade in waste electronic products following the introduction of regulations governing how we can dispose of such things - probably very good in terms of analysing a type of government failure
Monday 16th May: BBC1 9pm, ‘The Street That Cut Everything’ - looks rather entertaining as well as providing a bit of an insight into topics such as government spending on public goods and goods that generate positive externalities
Monday 16th May: BBC4 9pm, ‘The Golden Age of Canals’ - whilst at first glance this may not seem too appealing, I suspect there are some interesting nuggets in terms of networks and infrastructure spending, as well as a look at why canals fell into obsolence due to the invention of the combustion engine (some creative destruction here!)
Tuesday 17th May: BBC3 9pm, ‘Secrets of the Superbrands: Technology’ - a good look at how monopolies put up strategic barriers to entry in terms of branding and smart use of technology to achieve consumer loyalty
Thursday 19th May: ITV1 7.30pm, ‘The True Cost of a Car’ - a look at the impact on motorists of rising fuel prices and insurance premiums, which will bring in cross-elasticity of demand in a roundabout way
Thursday 19th May: Radio 4, 8pm, ‘The Report’ - a closer look at the operation of supermarkets and why there is opposition to their expansion (useful for looking at the impact of rising market power)
Friday 20th May: BBC2 7pm, ‘Wind Farm Wars’ - probably very useful for those sitting AS Unit 1 this summer in terms of negative and positive externalities of production, and the ins and outs of cost-benefit analysis
Hopefully there’s some light relief in there for everyone! All of the BBC programmes will be available on iPlayer for several days after they’ve been broadcast.
AS Micro Revision: Public and Private Goods
What should the state sector of the economy provide? How much should be left to the private sector allocating scarce resources through the incentives of the price mechanism? Is the provision of public goods the most important reason for accepting the existence of government involvement in the economy? These questions revolve around the idea of public and private goods – please understand the key characteristics of public goods and why they might not be provided optimally by the private sector – giving government a role in financing them for our collective (social) benefit. A one page revision note on public and private goods designed for AS (Unit 1) micro economics can be downloaded here. Revision_Public_Private_Goods.doc
Theory Thursdays! Public goods
This week’s Theory Thursday extension topic focuses on the provision of public goods, questioning whether public goods in the true sense of the term really exist, and whether governments really are the only possible providers. I’ve included a student worksheet and a detailed teacher guidance sheet for download. If you happen to have very keen and able students that cope well with the extension worksheets, you could always suggest that as further extension material they find out about Clarke taxes (the level of tax that corresponds to an individuals willingness to pay for their share in a particular public good). Public_Goods_student_sheet1.pdfPublic_goods_teacher_sheet1.pdf
Brisbane before and after the floods
A brilliantly conceived way of showing the impact of the floods that have afflicted many areas of Brisbane can be found here. Some stunning images here perhaps when thinking about the damage that floods create and flood defences as a public good.
Economics Q&A: How can the tragedy of the commons lead to environmental market failure?
‘The tragedy of the commons’, although created by Garrett Hardin, is a famous concept which can be traced back to Adam Smith. It refers to a situation where individuals or private economic agents exploit scarce and rival common environmental resources for their own rational, self-interested aims, leading to over-production and the possible permanent depletion of the resource for all.
The essence of this problem stems from insufficient and poorly protected property rights. In other words, as consumers do not own these common goods, they have little incentive to take care of and maintain it, but rather an incentive to extract as much personal utility or benefit from it as possible at that particular time. Therefore, the provision of property rights over some grazing land may help to prevent it being permanently destroyed – instead allowing utility to be extracted from it at a sustainable rate. However, as the tragedy of the commons is a problem where one’s actions affect the benefits of others in the future, concerns for intergenerational equity usually end up being dominated by concerns for personal benefits.
read more...»Trees as private and public goods
Nancy Folbre an economics professor at the University of Massachusetts Amherst provides in this short article from the New York Times a beautifully clear explanation of the economics of deforestation and the tragedy of the commons. A superb article to print out and use when studying the motives of individuals within society and ideas for how social norms and local institutions really do matter when putting together policies to reduce global deforestation. Read Tree-economics
The unkindest cut of all?
Opportunity costs – can a local authority afford to spend £21,000 a year on keeping 3 public toilets open, when their budget has already been cut by £220,000 and they are expecting a further 27% cut, already announced in the spending review? My local council, Epsom and Ewell, has decided not, as they need the money in order to maintain other services, particularly personal care services to the elderly in the borough. But, in order to avoid the negative externalities that could be associated with removal of a quasi-public good like public conveniences, they are seeking some alternative provision for the ‘emergency needs’ that they were there for – they are negotiating with local businesses to allow the public use of their facilities. Now that sounds like an excellent example of improving capacity utilisation, combined with David Cameron’s Big Society!
MGMT offer their new album for free download
A hat tip to Fred Pilkington for spotting this example of a band MGMT offering their hotly-awaited new album for free download over the web after tracks leaked into Cyberspace. But instead of trying to plug the hole, the band is going with the flow, opting to stream the entire album for free on its Web site - Colombia Records may not be best pleased but who knows, offering tracks for free might actually boost sales of the hard copy of the album when it goes on general sale soon?
Rethinking the size of the state
Hamish McRae is on superb form in his piece in the Independent on Sunday today. His article centres on the idea that the British government has never managed to raise the tax burden to anything over 38 per cent of GDP. This in effect provides a ceiling for the pot of tax revenue available for a government to spend but with state spending commitments perennially over 42 per cent of national income (or much higher as at present), hard choices will have to be made about the range and funding of public services in the future.
“you have to question the whole structure of the public sector. Goods and services that could be supplied by the marketplace have already been shed in the great wave of privatisations, starting in the late 1970s: oil companies, airlines, telecoms, motor manufacturers, power utilities and, more controversially, railways. But these were goods and services that people pay for. They are not funded in the main by the tax system. People expect to have free schools, but they never expected free flights or free phone calls. The core problem now is that we as a society want to spend a greater proportion of our income on services that are, to a greater or lesser extent, provided by the state: health care, welfare for the elderly and education. But we are not prepared to provide the finances in the form of taxation to fund this. That leads to two conclusions. One is that we have to improve the efficiency of the public sector; the other is that we have to get people in some way or other to pay more of their own (ie, taxed) income to buy these other services, either from the state or elsewhere”
The mirage of public goods?
Thanks to Mo Tanweer for suggesting an essay title for my A2 students this week “In this day and age, public goods are a mirage… the closer you get to them, the more they fade. Discuss” I will add in an extra element asking students to consider the relative merits / de-merits of public sector provision as well as funding of public goods.
But the essence of the question is perfect - the extent to which rapid advances in technology is changing the nature of public-good style products.
Here are some related BBC news video and photo resources for this topic
read more...»Revision Presentation - Public Goods
This updated and extended revision presentation examines the core concept of public goods.
Launch interactive presentation on public goods
The end of an era for a public good - and economics textbooks?
For years, lighthouses have been given as a classic example of a public good – their beaming lights are non-rival, as one ship benefitting from them doesn’t diminish their usefulness to all other shipping, and non-excludable, as their benefits cannot be reserved only for those who have contributed to paying their costs. It would be almost impossible to avoid the free-rider problem (although enterprising students often try to come with suggestions for this). And it would be very difficult to charge each beneficiary for their use of the light, so there is little possibility of running them at a profit.
Many economics textbooks have illustrations to demonstrate this, some with delightful photographs of lighthouses and others with diagrams illustrating the non-rival and non-excludable nature of the beam of light. They have therefore been very useful to economists as well as to shipping, as good examples of pure public goods are very hard to find – but they are about to disappear.
read more...»The boy who harnessed the wind
This fantastic true story of boy’s dream to improve the standard of living in his village in Malawi is both inspiring and full of good economic examples (and therefore a winning combination!). William Kamkwamba’s family had to pull him out of school in Malawi as they could no longer afford the £50 annual fee; however, he continued to use his local library to study science and set out on a project to use items of junk and waste to build a windmill in order to bring electricity and running water to his village. There are some lovely examples here relating to development in terms of grassroots approaches, some of the problems faced by those living in developing countries, the positive externalities associated with education, alternative measures to tackling climate change as well as an inspirational entrepreneurial story. I for one will be buying the book telling the story of this young man’s vision.
Fiscal policy, public sector pay and employment flexibility
Steve Bundred, Chief Executive of the government Audit Commission, has suggested that public sector workers would willingly accept a pay freeze this year, because they have done well in recent years and will recognise that a pay freeze is better than the alternative. Reports of his comments will focus particularly on education and the NHS, as two monopsony employers who provide the services used by most taxpayers (the NHS remains the world’s third largest employer, suggesting huge scope to make savings by reducing the pay bill). Those services were being given as the focus of the debate in parliament this week over public spending and investment between Gordon Brown and David Cameron. The Prime Minister’s enjoyable statement in Prime Minister’s Questions on Wednesday that there would be a ‘zero percent increase’ in public spending in 2013-4 was reflecting his determination that the way to pull the country out of recession is through continued spending on government investment and public services. Mr Bundred however is suggesting that there have to be cuts amounting to £50bn in order to begin the task of reducing national debt – that would be a cut of approximately 8% of the Treasury’s projection of £671bn managed expenditure for 2009-10.
read more...»Public Good-le
For those of you who wish to discuss whether consumption via the Internet has public good features, here’s a good example
read more...»One home in six at risk - flood defences as a public good
Flood defences provide a collective barrier against the huge damage that flooding can cause. The benefits are largely non-excludable and the costs of not having effective flood defence infrastructure are enormous. It has been found that one home in six in the UK is at risk of flooding in the years ahead as the impact of climate change becomes more apparent. This BBC news article looks at the need for extra investment in flood defences.
read more...»Fishing for a problem for the tragedy of the commons
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.”
More here from the BBC web site
The Law of Unintended Consequences at Staffordshire hospitals
Government intervention is carried out with the best of intentions, but can result in unintended consequences with resulting government failure (a deepening of the market failure or even worse a new failure which may arise). The case of the failures at the Staffordshire General Hospital reported yesterday gives a tragic example of this. A report by the Healthcare Commission, which is a regulator for the NHS, said there were deficiencies at “virtually every stage” of emergency care at the hospital, and up to 400 patients died as a result. This BBC report highlights a dreadful list of errors at the hospital’s Accident and Emergency department from the use of receptionists to carry out initial checks on patients to heart monitors being turned off on wards because nurses did not know how to use them. Various factors are identified as having led to this failure, the government’s target for patients to be seen within four hours at A&E which meant patients could be taken to “dumping grounds” to avoid breaching the target. The situation was only recognised after complaints from residents were backed up by statistics showing a high death rate.
read more...»The cost of streetlighting
Ask any student to give an example of a public good and the default answer seems to be “streelighting” - I will pass on whether streetlighting for urban roads and motorways meets precisely all of the defining characteristics of a public good (it surely comes close!) - but this BBC online magazine article provides an interesting follow up question for students - how much does it cost to provide such services on a daily basis. Perhaps a good example to use when discussing the costs and benefits of providing public goods?
Louis Theroux - Crime and Economics in Action
The Louis Theroux documentary on law and disorder in Johannesberg is a fantastic documentary to demonstrate just a few economic concepts to students as a christmas treat.
Before the lesson lead a discussion - ‘to what extent is policing a public good?’
Then another discussion leading from,‘to what extent do you think policing should be a public good, i.e. provided by governments?’
Then introduce or perhaps revise the concept of government failure and how governments may fail to provide policing to a desired quantity.
The programme demonstrates how there may be a demand for private police agencies run by the free market in South Africa, because the government fails to provide adequate policing to a desired quantity.
Other points for discussion included in the programme may include; income inequality, the costs of unemployment, external costs associated with slum housing. Also note other government failures the S.A. government are guilty of e.g. failure of information provision for AIDS HIV Virus.
A discussion on the paternal role of governments may also be considered.
The show also raises all sorts of other ethical debates which Louis questions. Try to avoid getting bogged down in these those, keep it to economics!
Marcus
My Domain?
The BBC’s technology correspondent Rory Cellan-Jones reports here on proposed changes to the internet domain registration system that are likely to swpan a new generation of popular internet addresses. This video clip could be a good resource when teaching students about the role of property rights in a market economy. If the reforms go through we might see another stampede of so-called cyber-squatters rushing to register some of the really popular domain names followed by a backlash as established online and bricks and mortar businesses look to protect their trademarked names by claiming that these domain names actually belong to them!
BBC: time to be put out to pasture?
I poke my head out from the burial ground that is Molière and Maupassant to defend “too high” wages once again. However this time, it’s the BBC stars who are under attack for being paid “above the market rate”, so I shall be less kiddie-gloved with these public sector servants.
Difficult Economics Concepts and Topics!
With the exams looming you may find that there are ideas, concepts or topics that, try as you might, you cannot quite nail! We will try to help you along using the blog. If you have a topic that you are finding especially difficult, post a suggestion here and we will try to produce a short revision note on it in good time - here is the first one on public and private goods - a common topic on the market failure papers for AS economics.
read more...»
