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20p tax on sugary drinks propsed.

Tuesday, December 16, 2014

Here's one of those stories that help illustrate the point about de-merit goods really well.  The Children's Food Campaign are calling for a specific tax on sugary drinks to help combat obesity in children.  Key points:

  • Sugary drinks is the example of a de-merit good
  • Tax is the proposed strategy for reducing consumption
  • Costs of obesity given here (in terms of number of illnesses that could be reduced)
  • Article gives a counter argument from British Soft Drinks Association using evidence from France

Click here to read the article from The Grocer website

    What TYPES of capital should we be accumulating?

    Sunday, December 07, 2014

    I like to read Jeff Sachs for his alternative viewpoints. He often writes about investment and has recently argued that the problem with both free-market and Keynesian economics is that they misunderstand the nature of modern investment. Both schools believe that investment is led by the private sector, either because taxes and regulations are low (in the free-market model) or because aggregate demand is high (in the Keynesian model).

    In Sachs’ alternative view, private-sector investment today depends on investment by the public sector. But investment into what? What types of capital should we be accumulating?

    read more...»

    Rail fares rise pegged to inflation

    Friday, December 05, 2014

    Every so often I read an article and start to tot up the number of economic concepts being covered in just a few words.  This occurred to me again this morning when reading this BBC news article on train fare rises.  Train fares are pegged to July's inflation rate and, as inflation is quite low at the moment, this means that the average rise of 2.2% is also relatively low (although regular train users may still feel aggrieved).

    Have a read yourself and see how many concepts crop up or give them same exercise to your A2 students.  My thoughts are below:

    read more...»

    The Angry Economist is back - with an Autumn Statement special edition

    Wednesday, December 03, 2014

    He's back!  Sort of by popular demand!  If you're looking for a quickfire activity for your Economics lessons this week then download the latest edition of the Angry Economist.  Ask your students to choose one of the 8 policies announced in today's Autumn Statement by George Osborne and our favourite curmudgeonly economist randomly chooses an objective to analyse.

    How does the proposed funding for new roads impact on equality for instance?  How does the change in Stamp Duty application affect economic growth.  A fun and quick way to get your students analyzing first thing in your lesson.

    Download the Angry Economist Autumn Statement Edition here.

    Teaching resource to introduce budget cuts to Local Government Spending

    Monday, December 01, 2014

    If you're looking at government intervention to correct market failure then you may find this 5 minute resource of value.  Using statistics compiled from Professor Tony Travers of the LSE, highlighted in this article, it asks students to predict which local government budget areas will see the largest cuts by 2018.

    read more...»

    Jeff Sachs calls for government to set an investment agenda

    Monday, October 27, 2014

    The world seems to want, and need, plenty of advice on ways to boost macroeconomic performance. I was drawn to one piece on Project Syndicate that was especially interesting because the author, Jeff Sachs (one of the most famous development economists) introduces his comments by saying:

    “I am a macroeconomist, but I dissent from the profession’s two main schools of thought … the neo-Keynesians, who focus on boosting aggregate demand, and the supply-siders, who focus on cutting taxes.  Both schools have tried and failed to overcome the high-income economies’ persistently weak performance in recent years. It is time for a new strategy, one based on sustainable, investment-led growth”.

    read more...»

    Local Government Association calls for change in rules on allowing term-time holidays

    Friday, October 24, 2014

    The Local Government Association (which represents local councils in the UK) have joined the debate about term time holidays for pupils this week.  They argue that current rules banning term time holidays or imposing fines on those families who take such breaks do not recognise the complexities of modern families and also prevent poorer families from affording vacations that are invariably dearer during the holiday period.

    It struck me whilst reading one of the reports that the suggested policy is to allow head teachers that most quantifiable of options, 'common sense', to make decisions on a case-by-case basis would be the sort of argument that would make me scream if a student wrote it in an assessment answer.  Economics students, unlike Local Government officials, need to take a much more analytic approach to this question!

    read more...»

    Free nursery places for 3 year olds appears to have no impact - an example of Government Failure?

    Wednesday, October 22, 2014

    Reports out over the last couple of days suggest that government spending on free nursery places for 3 year olds since 1998 has not produced any valuable educational or economic outcome. The policy was introduced as part of a series of reforms introduced by Tony Blair when he came to power in 1997. The Blair Government saw it as a method of reducing the differentials between educational attainment of poorer and wealthier sections of society and promoting a speedier return to work for some mothers.

    Researchers studying the impact of the policy during the 2002 to 2007 time period, where spending on the policy amounted to more than £7bn found that the education received at age 3 had some impact on attainment at age 5 but any improvements were lost by age 11. The research suggested that the policy had only a minor impact on enabling more women to return to work earlier. Also, there is evidence that 5 out of 6 users of the free place would have gone to a paid-for equivalent at age 3 anyway.

    So, does this offer us a good example of government failure in economic and social policy?

    read more...»

    Local Schools policy drives inequality in the UK

    Tuesday, October 07, 2014

    I love a story that really can resonate with students and get them 'irked'.  It struck me yesterday that reading about a recent Bristol University research paper that claims that school admission policies lead to greater inequality might strike a chord with some young people.

    The study suggests that the common policy in the UK of prioritizing admission places in primary and secondary schools based upon how close a student lives to that school continues a cycle of inequality.  The argument is that, wealthier people are more able to afford to move to areas with higher performing schools and so are more inclined to do so.  People without that facility have less choice in where to send their children and may have to stick with local schools despite their relative poor performance.  So the cycle continues ..... poorer people receive a poorer quality education and are therefore less equipped to get the necessary qualifications to earn higher wages.

    read more...»

    Contrasting approaches to managing road traffic

    Thursday, September 11, 2014

    The transport economists amongst you will be giving considerable thought to the question of tackling road traffic congestion. I’ve picked up on two stories here because they take contrasting approaches. The first is to use technology and regulation to tackle the problem – the so-called command and control approach. The other relies on price signals, so might be described as a market led approach.

    read more...»

    Perfect weather and a bumper wheat crop – impact on the market

    Sunday, September 07, 2014

    A great example to start you off looking at how economists understand markets: after a run of rain-wrecked years, British farmers are bringing in the last of what looks like a bumper cereals harvest. 2014 could be the biggest yield ever for wheat. Good news. But for whom?

    read more...»

    Externalities: Health Benefits of Low Emissions Zones

    Friday, August 15, 2014

    A new study finds that incentives to switch to green vehicles produce big health benefits

    read more...»

    Should there be a maximum wage?

    Tuesday, July 29, 2014

    In this blog, Professor Simon Wren-Lewis from Oxford University bemoans the absence of debate over the notion of a maximum wage - with specific reference to the pay of senior executives. 

    read more...»

    Reduction in UK consumption of drugs, alcohol and cigarettes by young people - numerical example

    Friday, July 25, 2014

    A report out yesterday from the Health and Social Care Information Centre shows a dramatic fall in the consumption by young people (aged 11 to 15) of our favourite demerit goods – alcohol, cigarettes and drugs. The report suggests that over the last decade regular smoking fell from 9% to 3% of 11- to 15-year-olds. Regular alcohol drinking dropped from 25% to 9%. Drug use has halved from 12% to 6% over this 10 year period.

    This, of course, is very good news with regards to the relative health of our youth. As an economics teacher the first question I would ask my students is how this downturn has been achieved? What has happened either within the market or with government intervention to shift consumption in this way? It could be argued that this represents the most successful example of government intervention into markets to change behaviour and can be attributed to regulation, restriction of use and good old education! Information failure does not appear to have had an impact and the political will to succeed has been fairly uniform among the major parties in power.

    For me, of course, it also offers the opportunity to do the next in my series of numerical activities in preparation for the arrival of the new specifications in 2015!

    read more...»

    Open Data:  Britain leads the world

    Wednesday, July 23, 2014

    The UK economy is doing well. Even so, it is not often that we are placed unequivocally at the top of a world ranking of any kind. But a team of economists led by Nicholas Gruen of Lateral Economics in Melbourne has done just that. In their recent report on the economic potential created by the concept of open data, it turns out that the UK government has been leading the world. On the Open Data Index, we score 100 compared to America’s 93. There is then a big gap to the next group, Australia, Canada and Germany, placed in the high 60s.

    read more...»

    Price Cap introduced for the UK Payday Loans Market

    Friday, July 18, 2014

    The UK Financial Conduct Authority has announced direct interventions in the market for payday loans - the high cost short term loans market which has expanded rapidly in recent years led by businesses such as Wonga. The decision is the result of a detailed assessment of the industry which had flagged up a number of market failures.

    read more...»

    A Video Introduction to Behavioural Insights

    Tuesday, July 15, 2014

    For students and teachers interested in behavioural insights this short video from the behavioural insights team in New South Wales provides a good introduction to some of the behavioural nudges employed to influence choices. 

    Behavioural insights draws on research into behavioural economics and psychology to influence choices in decision-making. By focusing on the social, cognitive and emotional behaviour of individuals and institutions.

    read more...»

    RES Essay: Should childcare costs be deductible against tax for working mothers?

    Saturday, June 07, 2014

    This is the second essay of six available for students researching an entry for the 2014 RES competition. There has been some discussion about the choice of phrase "working mothers" in the question. We will expect to see some students challenge this in their answer to broaden the discussion to "working parents" but any approach is fine as long as the economics is interesting, relevant, evidence-based and has a strong narrative running through it!

    read more...»

    Unit 3 Micro: Ban on Eurotunnel ferry service confirmed by CMA

    Friday, May 30, 2014

    An important judgement from the newly established Competition and Markets Authority (CMA). They believe that competition is best served by having three major cross-channel service operators - namely EuroTunnel (rail) and two ferry operators.

    The CMA has ruled against EuroTunnel being able to cross-subsidise the loss-making MyFerryLink on the Dover to Calais service because in doing so, it is likely to lead to the market exit of a rival provider and ultimately cause higher prices for consumers.

    read more...»

    Obama allies lead the way on a positive approach to climate change

    Wednesday, May 28, 2014

    The fracking debate continues apace, with the announcement by the British Geological Survey that there are over 4 billion barrels of oil in the shale rocks of the South of England. The government has proposed new rules of access to land in order to speed up the exploitation of this oil, with payments of £20,000 being made to those living above the land where fracking takes place.

    read more...»

    Unit 1 Micro: Key Diagrams and Glossary

    Friday, May 09, 2014

    A document containing the key diagrams and terms for Unit 1 Micro is streamed below. 

    You can also download this pdf document for free from our online store here

    For more revision support for AS Micro, visit our dedicated AS Micro blog channel. We also have a free AS Micro revision class on our sister site Zondle and a wide collection of revision notes for AS Micro here on the tutor2u website. 

    read more...»

    Unit 1 Micro: Housing Market Failure

    Tuesday, May 06, 2014

    Here is an updated revision presentation covering aspects of market imperfections / market failure in the UK housing industry. 

    I have also linked to a recent presentation on the economics of rent controls.

    read more...»

    UK Housing Industry: Turning Houses into Gold!

    Thursday, May 01, 2014

    Britain’s crisis of housing affordability is nothing to do with foreign speculators, according to Paul Cheshire writing in the Spring 2014 issue of CentrePiece magazine. Rather, it is a result of decades of misguided planning policies that constrain the supply of land and turn houses into something like gold or artworks. Houses have been converted from places in which to live into people’s most important financial asset.

    read more...»

    UK Income and Wealth Inequality - A New Film

    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...»

    Unit 3 Micro: Revision on the Private Finance Initiative

    Thursday, April 24, 2014

    Here is a short revision presentation covering aspects of the Private Finance Initiative - which figures on unit 3 for EdExcel micro economics

    read more...»

    Revision on Labour Market Failure

    Sunday, April 20, 2014

    Here are some revision resources on the topic of labour market failure.

    read more...»

    Unit 4 Macro: Brazil’s Unfinished Mega Railroad

    Saturday, April 19, 2014

    Government failure and the harm it can wreak on local communities is evident in this short piece from the New York Times

    read more...»

    Policies to reduce collusion

    Friday, April 18, 2014

    Investigating and understanding price fixing and collusion are an important part of analysing behaviour in oligopolistic markets. Not all of these corrupt practices are headline grabbers: most are in such unglamorous areas as ball-bearings and cargo rates, which go on unnoticed for years, quietly bumping up the end cost to consumers of all manner of goods and services.

    What steps can be taken to undermine the incentives for business to engage in these illegal activities?

    read more...»

    Unit 1 Micro: AS Micro Revision Quiz 4

    Wednesday, April 16, 2014

    Here are twelve more questions covering markets and market failure - test your understanding with this zondle-powered quiz!

    read more...»

    Unit 1 Micro: Revision on Market Failure

    Here are some revision quizzes for students to check their understanding of market failure

    read more...»

    The ‘Gentleman in Whitehall’ does not know best

    Friday, April 11, 2014

    The government is relaxed about people cashing in their pension schemes to buy a Lamborghini. But the left-leaning liberal commentariat is certainly not. Abuse has been heaped onto George Osborne’s Budget measure of removing the requirement for people to buy an annuity. The main thrust of the attacks is that individuals may act irresponsibly. They may take financial decisions that are not in their best interests.

    read more...»

    The changing face of Government Spending - a teacher resource

    Wednesday, April 09, 2014

    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.

    Unit 1 Micro: Smoking Bans and Obesity

    Tuesday, April 08, 2014

    Anti-smoking measures, such as taxes and bans, eventually lead people to eat better and lose weight. That is the central conclusion of research by Luca Savorelli, Francesco Manaresi and Davide Dragone, to be presented at the Royal Economic Society’s 2014 annual conference. The three economists overturn the conventional wisdom that kicking the smoking habit is healthy but results in weight gain.

    read more...»

    Labour Market: UK Minimum Wage does not Cost Jobs

    The introduction of a national minimum wage does not lead to job losses. That is the central finding of research by Peter Dolton and
    Michael Stops, to be presented at the Royal Economic Society’s 2014 conference.

    read more...»

    UK carbon taxes in a mess

    Wednesday, April 02, 2014

    Climate change is back in the news, and continues to stir up heat, but not much light. It’s proving fantastically difficult to come up with consistent and efficient policies to reduce CO2 emissions.

    read more...»

    Unit 3 Micro: Energy firms face competition inquiry

    Friday, March 28, 2014

    The big six energy firms in the UK - who account for more than ninety per cent of suppliers to UK household, commercial and industrial consumers - will be subject to another investigation by the competition authorities.  

    A report by regulator Ofgem has called for an investigation by the Competition and Markets Authority (CMA) which could take nearly two years to complete - effectively pushing the issue into the long grass well beyond the date of the next election. 

    read more...»

    Unit 1 Micro: Smoking Bans Improve Health

    In 2007 a ban on smoking in enclosed public places was introduced in England - Scotland had introduced a similar measure a year earlier. Fresh evidence published in the medical journal The Lancet finds that enforced bans on smoking are now having a discernible effect on measures of public health.

    read more...»

    Why are rich countries democracies?

    Thursday, March 27, 2014

    You may be asking why what sounds like a politics question finds a place on the economics blog. The answer of course is that the issue of governance crops up a lot in economics. Governments have to address the challenges thrown up by market failure, and offer a fiscal framework that helps tackle macroeconomic problems. Regulators intervene in uncompetitive markets. Those of you looking at development economics don’t get far before asking if poor quality government holds back the weakest economies.

    Hence the question (above). All rich, developed, mature economies are democracies. Ricardo Hausmann offers and insight into why this might be so on the pages of Project Syndicate.

    read more...»

    F585 Pre-Release Resources (and F583, F582 & F581 too)

    Sunday, March 23, 2014

    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:

    http://www.scoop.it/u/economics-kcsf

    read more...»

    Unit 2 Macro: Hurdle Rates and New Housebuilding

    Tuesday, March 18, 2014

    The government wants more new homes to be built, so too do hard-pressed home-buyers facing a continued problem of low property affordability. But cautious construction companies are reluctant to press ahead favouring share buy-backs (returning money to their shareholders) and only a limited expansion of new building.

    read more...»

    Unit 4 Macro: Oxfam and IMF Focus on Inequality

    Monday, March 17, 2014

    Inequality is an issue that remains firmly in the spotlight of the news media and also of policy makers in different countries.

    read more...»

    Unit 2 Macro: UK R&D Spending Remains Low

    Thursday, March 13, 2014

    For years the government has tried to lift research and development spending as a share of national income - but seemingly to no avail. The latest data finds that the UK is spending less on R&D than any other EU country. What might this mean for the supply-side competitiveness of the economy? 

    The data finds that

    read more...»

    Unit 1 Micro: Information Failure and Coca Cola

    Monday, March 10, 2014

    In this memorable Newsnight interview, Jeremy Paxman quizzes / interrogates a senior Coca Cola executive about the amount of sugar in Coca Cola drinks. Coca Cola wants to "make sure that the information is available" but if they did would students, cinema goers and millions of other consumers change their preferences?

    read more...»

    Price Regulation in Industries

    Wednesday, March 05, 2014

    Regulation of prices through price capping has been a feature of regulation of the utilities in the UK for many years – although this is now being phased out as most utility markets have become more competitive.

    Price capping systems

    • Price capping is an alternative to rate-of-return regulation, in which utility businesses are allowed to achieve a given rate of return (or rate of profit) on capital.
    • In the UK, price capping has been known as "RPI-X". This takes the rate of inflation, measured by the Consumer Price Index and subtracts expected efficiency savings X. So for example, if inflation is 5% and X is 3% then an industry can raise their prices on average by only 2% per year
    • In the water industry, the formula is "RPI - X + K", where K is based on capital investment requirements designed to improve water quality and meet EU water quality standards. This has meant increases in the real cost of water bills for millions of households in the UK.

    Advantages

    Capping is an appropriate way to curtail the monopoly power of “natural monopolies” – preventing them from making excessive profits at the expense of consumers

    Cuts in the real price levels are good for household and industrial consumers (leading to an increase in consumer surplus and higher real living standards in the long run).

    Price capping helps to stimulate improvements in productive efficiency because lower costs are needed to increase a producer’s profits.

    • The price capping system is a tool for controlling consumer price inflation in the UK.

    Disadvantages

    Price caps have led to large numbers of job losses in the utility industries

    Setting different price capping regimes for each industry distorts the price mechanism

    read more...»

    Executive Pay: Shareholders have failed to curb excesses

    Wednesday, February 26, 2014

    Despite public calls for shareholders to get tough on executive pay, a new study of the UK’s highest paid company directors reveals that shareholders are overwhelmingly inclined to approve the pay packets of top directors, just as they were before the crisis

    read more...»

    Transport Economics - compensation for rail delays

    Saturday, February 22, 2014

    Did you know that most train operating companies will refund 50% of your ticket for a delay of 30 minutes or more, and will double that if the delay is for an hour or longer? And that, if you are travelling by tube, Transport for London offers refunds if your journey is delayed by 15 minutes or more (although you won't get a refund if the delay is caused by a security alert, "third party action" such as a strike or bad weather)? Most probably you didn't, as a survey by the Office of Rail Regulation has found that more than 75% of rail passengers know "not very much" or "nothing at all" about what they are entitled to when services are disrupted.

    The report also found that 74% of passengers felt that train companies do "not very much" or "nothing at all" to proactively provide information about compensation when there are delays. As Simon Gompertz found in this video report, there are plenty of ways in which the train operating companies could make the information available, whether through instructions on the back of the tickets and announcements on trains to apps.

    read more...»

    Unit 3 Micro: Economics of a £7 Minimum Wage

    Saturday, February 15, 2014

    These slides are from our January 2014 revision workshops for unit 3 microeconomics. They focus on some of the arguments surrounding the possible introduction of a £7 per hour national minimum wage in the UK

    read more...»

    Unit 1 Micro: Information Failures in Markets

    This blog brings together some of our resources on information failures in markets.

    Click below for:

    Mo Tanweer's superb revision notes on aspects of information economics

    Try our short Zondle revision quiz on information failure

    read more...»

    Boris Bikes - Do Benefits Exceed the Costs?

    Friday, February 14, 2014

    Boris Johnson, The Mayor of London, has been happy to extend the use of bicycles in London; and the pattern of use has thrown up some interesting points. There were 7.4 million cycle hire trips last year but an estimated 71% of cycling use was by men. Most of these journeys would have been made on foot (31%) or by public transport (47%). Coverage of the study published in the BMJ looked at the health effects is found here.. The notes in the article, provide good examples of the strengths and weaknesses of cost benefit analysis.

    read more...»

    Government underestimates the amount of student loans that are likely to be paid back

    According to a report published by the Parliamentary Public Accounts Committee, the Government are currently underestimating how many students will actually pay back their university loans over the coming decades.  Currently, the Government estimates that between 35 and 40% of loans to Higher Education students are never paid back - the Committee believes that the rate on non-repayment is much higher and reflects a weakness in the loan collection method.  The primary reason for non-repayment is that student details get lost over a period of time particularly if the graduate moves and works abroad or was an EU citizen who has returned to their own country.  The method of using the income tax registration process as a way of locating former students has been criticized for not being an effective method of collecting information.  It is estimated that the shortfall could be as much as £80 million by 2042.

    read more...»

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