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Apologies, but I can't resist the prospect of using this story about a new solution to the market failure of pollution: an eco-friendly bus which has just gone into service to transport people between Bath and Bristol Airport.read more...»
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...»
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...»
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...»
London's New Year's Eve fireworks display is to be limited to a viewing area of 100,000 ticketed spectators for the first time. The event's popularity made it "untenable" to strain the transport and safety infrastructure with a larger number, the Mayor's office says. Hence the decision to charge £10. This poses a question about the nature of public goods.read more...»
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...»
Nobel Laureate Alvin Roth (2012) gives his view on Repugnant Marketsread more...»
A new study finds that incentives to switch to green vehicles produce big health benefitsread more...»
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!read more...»
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...»
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?read more...»
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...»
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...»
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.read more...»
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:read more...»
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?read more...»
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 Portugalread more...»
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.read more...»
There has been huge interest in the new book by Thomas Piketty entitled "Capital in the 21st Century". This blog entry will link to some reviews, news articles and short videos on Piketty's ideas and policy prescriptions. In "Capital," French economist Thomas Piketty explores how wealth and the income derived from it magnifies the problems of inequality. At the heart of it is a simple equation R > G - the rate of return on capital is higher than the rate of economic growth. Naturally there is a fierce debate about the data and his methodology!
Recent news articles:
Are we living in the second gilded age? (Linda Yueh, BBC)
Review of "Capitalism in the Twenty First Century"(The Independent)read more...»
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.read more...»
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.read more...»
Metropolitan liberals love to be able to criticise Western society. Recently, their lives have been brightened by the extensive discussion on the rise in inequality since the 1970s, especially in the Anglo-Saxon economies. There is a danger that this essentially anti-capitalist narrative will come to dominate the media, paving the way for increased regulation and the sorts of failed statist interventions in the economy which were a consistent theme in British political economy for nearly four decades after the Second World War.read more...»
A document containing the key diagrams and terms for Unit 1 Micro is streamed below.
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...»
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...»
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.read more...»
Here are some revision resources on the topic of labour market failure.read more...»
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.read more...»
Here are twelve more questions covering markets and market failure - test your understanding with this zondle-powered quiz!read more...»
Here are some revision quizzes for students to check their understanding of market failureread more...»
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).read more...»
Here are some notes taken from the recent RES panel event on the African economyread more...»
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.
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.read more...»
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.read more...»
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!read more...»
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...»
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?read more...»
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...»
I thought it worthwhile sharing my resources which I have been collecting for students (and teachers alike). I have been promoting them on Twitter (@Economics_KSF) through scoop.it but for those of you not on there, the link for the scoop.it boards are here:read more...»
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.
Why are people finding it hard to move across the UK in search of work?read more...»
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.read more...»
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.read more...»
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."read more...»
Inequality is an issue that remains firmly in the spotlight of the news media and also of policy makers in different countries.read more...»
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’.read more...»
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...»
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 failureread more...»
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...»
This will be an excellent case study to use when you're discussing the issues around minimum prices to solve the problem of externalities.read more...»