Petrol, tax, and the downward sloping demand curve.
Nearly every country has a tax on petrol, although the amount varies widely. And given that the landed price of petrol is quite similar (see the graph below), it can be seen what effect the tax has on quantity demanded. The results are very much in line what economic theory would predict and there are also clear implications for countries that want to reduce petrol consumption.
read more...»Unit1 Micro: Can a minimum wage create jobs?
Tim Harford has a piece in his regular column in the Financial Times which discusses some of the issues surrounding the minimum wage and whether a legal pay floor can actually create jobs. Here is the link
Unit 3 Micro: World’s Largest Solar Plant Opens
This autumn the world’s biggest solar plant power station opened in Spain. Comprising 600,000 parabolic mirrors, the Andasol 3 CSP plant is the size of 70 soccer fields and has 88km of piping. The economies of scale are huge and if solar power is going to work and be viable anywhere it is probably here or in North Africa.
read more...»Newsnight on rebalancing the UK economy
Last night’s edition of Newsnight should be required viewing for all AS and A level economists - and it is a huge shame that it is only available on i-player for another 7 days. Introduced on the shock news that even Tesco is vulnerable to the downturn, it included reports from Andrew Verity looking at whether the British economy will ever wean itself off shopping and the City, and an excellent (and all-female!) discussion including Deborah Meaden and the FT’s Gillian Tett. Try challenging your students to watch and listen to this while noting down every aspect of the syllabus which is mentioned or referred to - that will keep them busy!
There was also a debate between Employment Minister Chris Grayling and disability campaigner Sue Marsh about the government’s welfare reforms, defeated in the House of Lords the night before, and finally Tokyo correspondent Roland Buerk looking at Japanese economic stagnation of the late 1980s and 90s, to consider whether it was a “lost decade” and what could be learnt from it.
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 4 Macro: Natural Disasters and their Economic Impact
From tsunamis to tornadoes, from droughts to floods, 2011 was a particularly nasty year for natural disasters in many parts of the world. These natural disasters inevitably have demand and supply side effects affecting not just those countries affected but ripple impact across regions and in the broader global economy.
The Al Jazeera news video report below provides a clear overview of some of the major natural climatic shocks of 2011 and could easily be used as an introductory resource to discuss what are some of the micro and macroeconomic effects in both the short and medium term.
These include:
* Effects on the stock of physical capital / infrastructure
* Impact on a country’s human capital
* Effects on commodity prices, export revenues
* Effects on agricultural output, profits, investment, productivity
* Ripple effects on manufacturing industries and energy supply/cost
* Impact on state tax revenues and the costs of re-building and providing emergency financial support
* Effect on the movement of population following extreme climatic events
* Natural disasters and changes in the distribution of income / risk of poverty
This Economist graphic (published in Jan 2012) looks at the human cost of natural disasters and claims that “the world has succeeded in making natural disasters less deadly.”
read more...»Unit 1 Micro: Prezi on the Economics of Negative Externalities
This blog provides a link to a constantly updated revision Prezi on negative externalities and market failure - designed for students taking AS Microeconomics Unit 1 and those studying externalities for the IB Diploma. The Prezi contains lots of short news videos on examples of externalities. Click on the link below to access the Prezi.
read more...»Unit 1 Micro: Externalities from Metal Theft
If a criminal steals metal from a building yard or a jewellers the impact is relatively isolated but when metal theft extends to lifitng metal from roofs, railway lines and many other public buildings, thousands are inconvenienced and left to pay the cost - negative externalities are clear.
This news report from Al Jazeera looks at the growing economic and social problem of metal theft in London and a second video report from Channel 4 news looks at the external costs of copper theft from cables on the rail network that delays services and puts lives at risk. What are the best options for dealing with this crime epidemic? The Met Police has set up a specialist metal theft unit as part of their response.
read more...»Unit 1 Micro: Biomass Subsidies and Timber Prices
If you are a fan of laminate flooring, wood panelled walls or neat wood-based fencing for the garden, the chances are that you will be paying higher prices in the years ahead. Despite the Britain offering a temperate climate for a plentiful supply of wood and a well organised system of land registry and plantation management, the UK market price of different types of timber has shot up over the last two years.
read more...»European Economics: Resources on the CAP
This blog entry will provide a regularly updated set of links to resources to the European Union’s Common Agricultural Policy and attempts to reform this contentious and complex system of farm support.
Check below for suggested links
read more...»What is the socially optimal level of concerts in Hyde Park?
It seems those fortunate enough to live next to Hyde Park are increasingly bothered by the negative externalities arising from the concerts put on there. This BBC article is a good illustration of the difficulties involved at arriving at a socially-optimal level of production.
Regulatory Capture at HMRC?
Is the story of HMRCs failure to collect the right amount of tax from some big businesses an example of regulatory capture? In the current example, the Public Accounts Committee has said that HM Revenue and Customs enjoyed an “unduly cosy” relationship with major companies, and their procedures have allowed rules to be ‘bent’ so that up to £25bn tax has been underpaid. Regulatory capture (an example of government failure) is what happens when regulated industries are able to gain influence over their regulator, so that instead of serving the public interest, the regulator actually supports the interest of the industry concerned. In this case, there does not seem to be one specific industry concerned (although Goldman Sachs’s underpayment of something between £8mn and £20mn comes in for particular criticism); however the situation does seem to meet the requirements defined by the Economist as “Gamekeeper turns poacher or, at least, helps poacher”.
More on the story here:
Taxman slammed over ‘cosy’ business relations
Goldman Sachs tax deal faces UK legal challenge
Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry
British Petroleum has decided to exit the solar energy energy industry claiming that the business has become unprofitable because of excess supply and falling prices. In 2011 a number of solar firms have gone out of business including California’s Solyndra and Germany’s Solon. BP will focus instead on investing in other renewable energy sectors including wind power and biofuels.
Whilst the decision by BP to exit the industry appears significant, infact total global investment in solar power continues to rise. MidAmerican Energy Holdings owned by Warren Buffett have agreed to purchase a $2 billion solar project under development in California and a 49 percent stake in a $1.8 billion plant in Arizona.
Google Inc. and KKR & Co have announced a joint venture to pump money in four California solar power plants with total capacity of 88 megawatts. The powerful search engine business uses a huge anount of energy every year and has committed itself to large scale investment in renewable energy supplies to help power their server farms.
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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.
Prezi on Information Failures
Click below to open a new Prezi on aspects of information failures / gaps and market failure together with some of the interventions that might be used to address imfornation imperfections in many markets.
read more...»Unit 3 Micro: Patent Wars- A Touchy Subject for Apple
This excellent news piece from Ben Cohen at Channel 4 looks at the increasingly aggressive patent war being fought by the manufacturers of the world’s leading mobile phone and tablet devices - the most profitable products in the digital economy. “Where once the giants (Google and Apple) competed on features, they now compete on patents.”
The news feature looks in particular at the intellectual property surrounding the slide-screen technology used by millions to unlock a device. Apple claims the IP to this but a video tracked back to twenty years ago suggests that developers were already thinking of something remarkably similar long before the iPhone came into existence. Can the makers of Android defend legal claims from Apple that their IP has been infringed? And who will end up paying for the enormous legal fees and possible extra licencing costs?
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Unit 1 Micro: Empty Housing and Economic Efficiency
Channel 4 recently focused on the causes and effects of the hundreds of thousands of empty homes in the United Kingdom. Why is it given persistent shortages of affordable housing that perhaps a million homes lie empty and unused whilst an estimated two million families are in severe housing needs. New housebuilding has collapsed and in Britain we are building 100,000 fewer new houses every year than we need just to keep up with the changing mix of households and demographic change.
An interesting exercise is to show students some of the Channel 4 Campaign videos and then get them to put together policy ideas as to how to reduce the volume of empty homes and reduce the length of housing waiting lists.
Links to some of the Channel 4 videos can be accessed below:
read more...»Unit 2 Macro: Will a Youth Jobs Subsidy Work?
The Coalition Government recently heralded a new scheme designed to address the structural problem of high youth unemployment in the UK economy. Under their “youth contract” plan, employers will be given “wage incentives” worth £2,275 to take on some 160,000 18-to-24-year-olds. But will it have much impact on the problem? The independent Office for Budgetary Responsibility says that the net effect on overall unemployment will be close to zero, because the subsidy incentive will lead to a switch in employment away from older workers.
read more...»Unit 1 Micro: 50 Years since the end of the Max Wage in Football
Around this time of my micro course my students look at maximum prices (price ceilings) in different markets. There are still plenty of contemporary examples to consider, for example salary caps for executives, caps on the cost of mobile phone texts and roaming charges, rent ceilings etc. But here is a resource that will be of special interest to football-loving economists, namely the 50th anniversary of the ending of the maximum wage in football. The Independent has this nifty set of graphics looking at landmarks in wages of top footballers over the years. Click on: The maximum wage and football’s money trail
Government Plans to boost the Housing Market
The Government has announced today a scheme to help first time buyers on to the property ladder. It has been reported widely in the press with mixed reactions. The BBC article outlines the main proposals (here is the link to The Daily Telegraph). It is interesting from a political point of view that this government should chose to intervene in this market, though perhaps we should not be too surprised as it was the Conservatives that brought in the ‘Right to Buy’ legislation in 1980.
read more...»Unit 2 Macro: Should the EU introduce a Tobin Tax?
AS Economics student Freddie Bickford-Smith looks at some of the argument surrounding proposals to introduce a financial transactions tax in the EU. I will post another essay on this topic from a fellow student, offering an alternative perspective from that developed here!
Following the financial crisis of the past few years, and the amassing of blame on the financial sector for it, it has come to the attention of many - including the European Commission - that there must be a way of rectifying the situation, and promoting greater economic stability.
One popular suggestion is the ‘Tobin Tax’, an idea proposed by Professor James Tobin (the Nobel prize-winning American economist) for a tax on worldwide financial transactions
read more...»International Approaches to Congestion on Zoom.it
Zoom.it is one of my favourite finds and this zooming and panning map outlines international approaches to dealing with traffic congestion.
read more...»Unit 1 Micro: Asymmetric Information - Buying a Used Car
An autumnal hat tip to Kevin Hinde at Durham Business School for spotting a new report from the Office of Fair Trading which finds that the market for second-hand, used cars remains the biggest source of complaints from customers. Nationally over 56,000 people have complained to the OFT-managed Consumer Direct in the year to date with 70 per cent of the complaints relating to faults with the cars and over 13 per cent about misleading claims or omissions by the seller. The used car market is a classic example of asymmetric information and the risks of consumer welfare being damaged by fraudulent selling and sub-standard service. The OFT have released a short film on customer rights that might be a good teaching resource to use when covering this topic.
Unit 1 Micro: Has the time come for a Tobin Tax?
This week I am setting my AS micro students a question on proposals for a Tobin Tax - partly because it is hugely topical and also as a way of developing their evaluation skills on paper and coming to a reasoned final conclusion. Here are some of the links to suggested reading and some video shorts on this topic:
read more...»Unit 3 Micro: UK Executive Pay - All in it Together?
At a time when millions of people are taking nominal or real pay cuts, the news that chief executives of FTSE-100 companies have seen their earnings rise by 43% in the last year is particularly difficult to stomach.
read more...»Unit 1 Micro: Is the Sun Dipping on Solar Subsidies?
To promote the expansion of renewable energy sources, many governments have introduced subsidies for consumers who install solar panels.
In April 2010, the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Anyone spending £13,000 up front to fit a system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills. The big six energy companies are required by law to pay householders who generate their own energy.
It looks like the days of generous subsidies for solar panels are coming to an end and there is a rush on to install them before the feed-in-tariff system is changed.
read more...»Unit 1 Micro: Economists attack food price speculation
Food prices are now rising by up to 10% a year in Britain and Europe and a new forecast from the United Nations predicts that prices can be expected to rise at least 40% in the next decade. Whilst conventional theories of changes in supply and demand conditions can be used to explain some of the increase in food prices, many economists are concerned that speculation by hedge funds and other investors has amplified the natural volatility of prices driving food prices away from fair values and contributing to a huge rise in global food poverty and hunger. These days, cocoa, fruit juices, sugar, staples, meat and coffee are all now global commodities, along with oil, gold and metals.
Is this the moment to legislate to limit the scope for speculative activity in food markets? The video below provides an excellent introduction to speculation in food markets - it features Neil Kellard, Professor in Finance at the University of Essex
read more...»Unit 3 Micro: Ofcom gives stamp of approval for flexible pricing in mail
Changes are afoot for the UK household mail industry - a sector that is often used by teachers as an example of a near monopoly in the UK. In 2010, 16bn letters were delivered to 28.2m addresses. Royal Mail was responsible for delivering over 99% of these. The total UK household and business mail market comprises around 16bn items and £6bn to £7bn per annum of revenue. Royal Mail has a market share by revenue of over 90%.
Just a few years after deregulation of the sector, the industry regulator Ofcom has produced a consultation document that is likely to give the Royal Mail more freedom in setting the prices of stamps. At present, the Royal Mail loses more than £2 million a week operating its letters business. Increasing competition from new entrants for bulk mail sorting allied to a shift towards email and text have contributed to a 25% decline in postal volumes since 2006. Household spending in Britain on postal services has fallen to just 40p a week. The 2010 Hooper Report on the postal sector, mail volumes are expected to continue to decline globally by between 25% and 40% in the next five years
read more...»Unit 4 Macro: World Food Day
Here is one of the short information videos launched by the World Bank on the occasion of World Food Day - excellent as an introduction to the economics of high and volatile world food prices. Every night, 1 billion people go to bed hungry because food is too expensive.
read more...»Can the “invisible hand” solve Africa’s poverty?
At last night’s Senior Economics Society at Oundle we had a riveting talk by Hywel Rees-Jones, Managing Director of CDC, which covered so many areas of the issues of development economics. The talk was entitled “Can the invisible hand solve poverty in Africa?” Whilst conceding that some of the statements were broad generalisations across a variegated continent, Hywel discussed some of the key issues facing Africa.
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