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Repugnant Markets | Alvin Roth

Sunday, August 24, 2014

Nobel Laureate Alvin Roth (2012) gives his view on Repugnant Markets

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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

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Public and Private Goods - Farmer Opens a Toll Road

Monday, August 04, 2014

Fed up with the closure of a cracked road between Bristol and Bath where repairs were likely to last several months, a farmer has invested £150,000 to build a temporary 365m toll road which saves motorists from having to make a 10 mile detour. The businessman is charging cars £2 and motor cycles £1 for each journey and is offering a £10 offer for regular users who need to use the road on twelve occasions. 

This is a lovely example of the difference between a quasi public good and a private good. The toll road has its own booth for collecting the charges and seems to have found favour with local residents. Whether or not sufficient cars make the journey to cover the operating costs remains to be seen. Repair work on the A431 at Kelston are likely to take five months and mean that 1,000 vehicles per day are needed for the project to break even.

The businessman Mike Watts has been using You Tube to provide the background to his decision to build the toll road!

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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!

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Externalities of Waste - Do we throw too much stuff away?

This is a super report from BBC Newsnight on the issue of our throwaway society and the externalities of waste. How can the link between consumption and the discarding of unwanted and broken products be weakened? What role can innovation play - for example the rise of modular phones where parts can be replaced when broken. The fundamental problem is that traditional manufacturing business models are based on mass production and sales. How are increasing world commodity prices affecting this model?

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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.

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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.

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Is Wayne Rooney an expert in rational economic theory?

Wednesday, June 25, 2014

So, farewell then England! Yet another failure by our boys at the highest levels of the game. Despite their stupendous salaries, they seem once again to be unable to exhibit the necessary skills, a point which seems to exercise many fans of the game. Tens of thousands, if not millions, of words have been written about the purely footballing aspect already. But one topic which is hiding away under this torrent is the question of incentives.

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Transport Economics: pollution costs from different modes

Thursday, June 12, 2014

If you’re starting out in transport economics, a good place to begin is by evaluating different modes of transport. One area you’re sure to look at is pollution. Here’s a statement I sometimes use to start the conversation:

Rolls-Royce says the four engines on the A380 are as clean and efficient as any jet engine, and produce “as much power as 3,500 family cars”. A simple calculation shows that the equivalent of more than six cars is needed to fly each passenger.

Take the calculation further: flying a fully laden A380 is, in terms of energy, like a nine-mile queue of traffic on the road below. And that is just one aircraft. In 20 years, Airbus reckons, 1,500 such planes will be in the air. By then, the total number of airliners is expected to have doubled, to 22,000. And whereas cars are used roughly for about an hour or so a day, long-haul jet airliners are on the move for at least 10 hours a day.

I’ve started putting together some more links below:

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RES Competition: Growth, Poverty and The Environment

Thursday, June 05, 2014

The first title in the list of six available to RES entrants is a challenging one! 

Promoting growth and fighting poverty should be the priority in the developing world, not reducing greenhouse gases.” Do you agree?

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Unit 2 Macro: Fears for Portugal’s ‘lost’ generation

Saturday, May 31, 2014

High rates of long term youth unemployment will have hugely significant economic and social costs - this short news report from Al Jazeerah news looks at the issue of youth unemployment in Portugal

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Costs, benefits and ‘discounting’ the future

Thursday, May 22, 2014

Measuring costs and benefits is a crucial part of many microeconomic models. It’s central to understanding the pricing and output decisions firms make. You can’t understand how market failure may arise from the problems presented by externalities without measuring costs and benefits.

Yet making those measurements is often tricky, especially when some of the costs or benefits arise in the future.

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Thomas Piketty on Economic Inequality

Saturday, May 17, 2014

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:

Bad maths in Piketty's capitalism critique? (BBC)

Are we living in the second gilded age? (Linda Yueh, BBC)

Articles on Thomas Piketty from the Guardian

Review of "Capitalism in the Twenty First Century"(The Independent)

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Inequality in New York - Can New York bridge the income inequality gap?

Friday, May 16, 2014

A BBC news report on the widening gulf in income and wealth inequality in the United States (and New York in particular). Income inequality is now as high as it was during the worst period of the 1920s. The richest Americans now hold one fifth of all of the country's income - and the top 10% actually hold half of it.

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Labour Market: Food Industry Workers Protest Again Zero Hours and Low Pay

This Channel 4 news report looks at va growing protest movement among food industry workers campaigning against zero hours contracts and persistent low pay. Zero-hours contracts do not guarantee a minimum number of hours of employment. It has been estimated that 583,000 people, around 2% of the UK workforce, were employed on zero-hours contracts between October and December 2013. The actual figure is likely to be substantially higher than that.

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Forget the hype- Capitalism has made the world a more equal place

Thursday, May 15, 2014

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.

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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. 

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UK Income and Wealth Inequality - A New Film

Thursday, May 01, 2014

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:

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Cost Benefit Analysis - The Crossrail Project

Sunday, April 27, 2014

Here is a streamed version of a revision presentation on the Crossrail project, a good example to use when teaching transport economics and the main principles and issues governing a cost benefit analysis approach to infrastructure investment appraisal. It is designed for use with AS and A2 economics students.

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Revision on Labour Market Failure

Sunday, April 20, 2014

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

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Unit 1 Micro: Legal Highs and Information Failure

Saturday, April 19, 2014

Here is an example of a product which has important market failure implications. BBC Newsnight investigates the open sale of legal highs - not approved for human consumption - but which are a growing presence even on mainstream high streets.

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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!

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Unit 1 Micro: Revision on Market Failure

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

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Information failure and the Tamiflu saga

Thursday, April 10, 2014

Here’s a good example of overlaps between market failure, government failure and the problem of asymmetric information contributing to these problems. The UK government spent £500m stockpiling the drug Tamiflu in the hope that it would help prevent serious side-effects from a feared flu epidemic. It turns out the drug would probably be no more helpful than paracetamol. But the bigger scandal is that Roche (who make the drug) broke no law by withholding vital information on how well its drug works (or doesn’t).

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Unit 4 Macro: Africa Rising - RES Panel Event

Wednesday, April 09, 2014

Here are some notes taken from the recent RES panel event on the African economy

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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.

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Normative statements - using E-Cigarette newspaper reports to look at normative statements

Friday, April 04, 2014

I'm sure that introducing the concept of normative statements is something that most Economics' teachers introduce early in the curriculum to show the dangers of expressing opinions without evidence.  It's a tricky balancing act that we have to play - as students start to write longer, evaluative pieces we are keen for them to make reasoned arguments that don't sit on the fence but warn them of the dangers of starting to rant.

I thought that the two reports included on the document here might prove an interesting activity.  The file contains two reports into a possible plan from the Welsh Assembly to introduce a ban on the smoking of E-cigarettes in public places (akin to the current ban on smoking of 'traditional' cigarettes) in Wales.  The articles are interesting in their own right in explaining the reasons behind such a plan and as an example of Government intervention to solve a possible market failure (although one of the articles clearly identifies E Cigarettes as a solution to a market failure itself).

You could also ask students to read through the two articles and answer the following questions:

  1. Which of the two articles appears to offer more opinion-based evidence than the other?
  2. Highlight any words or phrases that indicate a value judgement rather than evidence-based reporting.
  3. Based upon your own reading and picking up on journalistic styles, have a guess which newspaper each article was published in.

The answer to this final question is in the 'read more...' section of this blog.

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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.

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Carpet, bed and sofa retailers promise ‘genuine prices’ after OFT investigation

According to the Guardian, Carpetright and four other flooring and furniture retailers have promised to clean up their pricing after reaching a settlement with the Office of Fair Trading (OFT). It looks like a good example of the potential for market failure arising out of asymmetric information.

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Unit 1 Micro: Options for Funding the BBC

Monday, March 31, 2014

How should a public service broadcaster be funded? This excellent article from the BBC looks at the financing of state broadcasters across a range of countries. The BBC is largely funded by the licence fee but as the article makes clear, there are many other options. The funding links back to the nature of broadcasting and the public good characteristics of much of the BBC's output.

Have a read of the article and then test your understanding of public and private goods using our Zondle quiz!

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Unit 1 Micro: Smoking Bans Improve Health

Friday, March 28, 2014

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.

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Unit 2 Macro: London House Prices continue to Surge

There seems little that is stopping the surge in London house prices at the moment but do you think the rapid acceleration of prices is good for either London or the wider UK economy? 

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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.

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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

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Geographical mobility of labour in the UK

Saturday, March 22, 2014

One type of market failure that contributes to inequality and unemployment is the geographical immobility of labour

If the labour market really ‘cleared’ effectively, wages would equalise across the economy. Workers would drift away from regions with low wages and/or high unemployment towards areas where wages were higher and labour was scarce. 

Instead, we see wide disparities in earnings and pockets of regional unemployment - at the same time as skills shortages and wage inflation elsewhere.

Why are people finding it hard to move across the UK in search of work?

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Macro: Unemployment Statistics - What Do They Really Show?

Wednesday, March 19, 2014

Showing critical awareness of economic statistics is an important skill for all economists.

A hat-tip to Fiona Quiddington for this article on youth unemployment from the Telegraph which analyses youth unemployment figures with a more critical eye.

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How Coal Shortages Might Impact Indian Growth

The development of India, or its non-development relative to China, is an interesting topic, and one that Bob Hindle has already been blogged about in relation to its tax system.

However, there are other aspects of the Indian economy that will also impede its ability to grow, notably its lack (or should that be 'lakh'?) of coal.

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UK Economy: Mind the Gap - Skills Shortages

Monday, March 17, 2014

Are skills shortages holding back the economic recovery? The Financial Times is running a video series looking at the problems businesses are having in recruiting people with technical skills. The apprenticeship programme is expanding but will it be enough to meet the growing gap between demand for and supply of engineers and other specialist jobs in industries surrounding precision engineering, nuclear power and many others? 

According to an article in the Financial Times:

"Migrants are filling a fifth of jobs in industries such as oil and gas extraction, aerospace manufacturing and computer, electronic and optical engineering because of a lack of skilled British graduates."

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Unit 4 Macro: Oxfam and IMF Focus on Inequality

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

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Corruption and the economy

Pub economics often explains the plight of poor countries in terms of the problems posed by corruption. That approach might have some value, and to raise the quality of your analysis of this topic, it’s helpful to say why and how it might arise, and the effects it might have. Rich countries are also vulnerable of course.

The Economist has a really helpful couple of articles on this topic, which it calls ‘crony capitalism’.

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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?

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Unit 1 Micro: Information Failures in Markets

Saturday, February 15, 2014

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

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

Friday, February 14, 2014

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.

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Alcohol Floor Price Scheme Announced for England & Wales

Tuesday, February 04, 2014

This will be an excellent case study to use when you're discussing the issues around minimum prices to solve the problem of externalities.

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Energy companies charge cash-paying customers more - market failure and Government intervention

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).

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Unit 1 Micro: Revision on Government Intervention

Wednesday, January 29, 2014

Here are somr revision resources on government intervention in markets. There are some revision notes, a streamed revision video from PJ Holden and then ten questions for students wanting to check their understanding on government intervention in markets

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Information failure in the NHS

Thursday, January 23, 2014

The NHS gives us so much value, as Economics teachers, as it serves as a great example of so many areas of theory. The story which heads up the BBC News site this morning is another useful one: NHS waiting time data for elective surgery has been found to be 'unreliable'

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The Economics of Medicine

Tuesday, January 14, 2014

The pharmaceutical (medicines) industry poses interesting questions for economists.

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Fog and filthy air

Wednesday, January 08, 2014

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?

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Energy saving tips from the Government - effective Government intervention

Proposing Government intervention strategies for dealing with externality market failure is a common enough exam question.  Many of my students will concentrate on the use of indirect taxation, subsidies, pollution permits or regulation as a method of reducing consumption - often forgetting that the Government can use good, old-fashioned advice as a way of altering purchasing patterns.

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