Get Summer 2014 Right First Time with tutor2u Exam Coaching & Revision Workshops
Here is a revision presentation on the economics of producer and consumer subsidies as forms of government intervention in markets. There are a number of up to date examples highlighted together with an evaluation of the benefits and costs of subsidy payments. This is designed as a revision aid for unit 1 students taking their microeconomics papers.read more...»
Long term youth unemployment is a persistent structural problem for the British economy - this BBC news article provides a ray of hope as Nestle announces extra investment in their training / apprenticeships schemes for younger workers. A more pro-active approach from larger businesses would be welcome - offering paid experience to help break the catch-22 of no job without experience, no experience without a job. Nearly one million young people (16-24) are unemployed in the UK, while youth unemployment in Ireland is 28 per cent with more than 65,000 young people out of work.read more...»
A currently fashionable pessimistic topic is the lifetime prospects of children born into the middle class. Graduate debt, lack of finance to buy homes and job insecurity after they graduate, the list goes on. Alan Milburn, the government’s ‘social mobility tsar’, put the seal of approval on this prevailing angst last month. His Social Mobility and Child Poverty Commission pronounced that children from families with above-average incomes are now set to enjoy a worse standard of living as adults than their mothers and fathers.read more...»
Here is an example of direct intervention in markets to address some of the information failures associated with the obesity epidemic. US food authorities have taken the first step towards banning artificial transfats, substances that are found in processed foods. They say it is a move that could prevent 20,000 heart attacks and 7,000 deaths a year. According to the BBC website
"Artificial trans fats are used both in processed food and in restaurants as a way to improve the shelf life or flavour of foods. The fats are created when hydrogen is added to vegetable oil, making it a solid."read more...»
The FT video clip below provides a short interview with Dame Ellen MacArthur - the former ocean yachtswoman - and her idea of building a circular economy - this idea might be a fruitful area for student exploration when studying environmental economics. To quote from the web site:L
"The linear ‘take, make, dispose’ model relies on large quantities of easily accessible resources and energy, and as such is increasingly unfit for the reality in which it operates. Working towards efficiency—a reduction of resources and fossil energy consumed per unit of manufacturing output—will not alter the finite nature of their stocks but can only delay the inevitable. A change of the entire operating system seems necessary"read more...»
Suyash Raj Bhandari profiles the Founder of the Grameen Bank, Mohammad Yunusread more...»
Here is an updated revision presentation covering aspects of the growth of microfinance and the role that it can play in driving developmentread more...»
An autumnal hat tip to Jonathan Portes, Director of the National Institute of Economic and Social Research for spotting this textbook example culled from the Daily Mail of the problem of social cost and how application of the Coase theorem might be a solution! Click here for the article.
If you would like to know more about the Coase Theorem and the work of Ronald Coase who died earlier in 2013 at the ripe old age of 102 then click here for a superb blog entry from Mo Tanweer.
Energy prices are in the news. The recent actions of some of the energy companies can plausibly be described as provocative, no matter how well founded their decisions might be. They run the risk of provoking the ire of both the Opposition and the Government.
One interesting aspect of the debate is that it has become even clearer that decisions taken by Ed Miliband himself in the Brown government are partly to blame for our high energy bills. The plethora of green taxes and subsidies has become very expensive for consumers.
But how effective have such policies been? Not very much, seems to be the answer.read more...»
UK nuclear energy is painfully burdened by regulation. Energy prices are at an all time high, so much so that politicians are desperately trying to find policy solutions to utilise this dissatisfaction for votes. There are widespread complaints that energy companies' profits are too large. The Prime Minister encourages us to look for a cheaper energy deal. Surely there could not be any clearer signals from the market and society that now is the time for suppliers to enter the energy market. But unfortunately this is not the case; a detriment to us all.
Air pollution is widely regarded as a negative externality arising from consumption and production. New research from the World Health Organisation finds that exposure to air pollution increases the risk of cancer - this 2 minute news report looks at their findings. You can find extensive revision notes on externalities and market failure by clicking this link.read more...»
I just love the phrase ‘irrational exuberance’. It’s the title of book by Robert Shiller who has just won a Nobel Prize in Economics. But the phrase was coined by the US Federal Reserve Board Chairman, Alan Greenspan, in a speech given at the American Enterprise Institute during the Dot-com bubble of the 1990s.
I will make no attempt to tackle the complex issues that these top Economists were articulating, and instead give a few examples to convey the basics: it’s just not safe to assume economic agents are always making rational choices based on transparent, accurate information.read more...»
Here is an updated presentation on aspects of the natural resource trap or natural resource curse issue facing low (and also high) income countriesread more...»
There are lots of resources out there for students and teachers wanting to cover the debate about HS2 - here is a brief selection of video clips on the debateread more...»
As soon as students encounter the idea of GDP they are guided towards thinking about the possible drawbacks to growth, especially for the environment.read more...»
Few places come close to matching the revenues from gambling generated by casino-led Macau as this Economist graphic illustrates! Macau is a special administrative region of China on the other side of the Pearl River Delta from Hong Kong. Jobs in casinos are easy to come by and unemployment is said to be little more than 2% of the labour force. But what are the economic risks and social costs of having a local economy chronically dependent on gambling for the bulk of jobs and incomes?read more...»
It occurred to me recently that the way the government tries to control the population, by encouraging and discouraging certain activities, is rather like the way in which I, as a parent, try to control my child.
Legislation – Setting rules
Imprisonment – Grounding
Fines – Reducing pocket money
Providing information – Using examples from experience, educating
Subsidising – Helping towards payment
State Provision – Buying things for my children
For example, I don’t want my daughter to smoke, drink or take drugs, so what do I do to prevent this? I will provide her with plenty of information as to why she shouldn’t partake in these activities, should she do it anyway, I’ll probably ban these products from my house and also reduce her pocket money in order to prevent her from buying them.
How does the Government try to prevent its citizens from smoking drinking and taking drugs? Well, it provides us with information, legislates against it, setting age limits and laws to try to prevent excessive consumption, and places large levies on alcohol and tobacco products to try to discourage consumption, something akin to what I am putting into place.
Will it work?
In some cases, yes, in others, no and the combination of controls will probably vary for each individual, but as a parent I only really get one chance to get it right for each child, the Government, however, can play the percentage game.
Bringing up children is not all about steering your child away from negativity, much as the Government also wants us to do positive things with our lives. For example:
I see education as quite important in a child’s life and as such, I will try my best to ensure that my daughter takes advantage of the best education available to her and embraces it. How will I do that? I will insist that she goes to school, as will the Government. I will monitor her progress carefully, as will her schools. I will encourage her to work hard, as will her teachers, and I will provide information as to the positive future that will ensue from her hard work, as will Government initiatives.
So, all in all, I am my daughter’s Government, trying to persuade her to make the correct decisions, in her own best interests. I’m sure that along the way, I’ll make some horrendous mistakes, as I’m sure most students would agree, parents don’t always know the best way to deal with situations, much as Governments don’t, largely down to information failure! I’m sure Sophie will make some choices that I won’t necessarily agree with, but as long as I look at the long term and have a clear direction, hopefully I’ll raise a happy, positive individual, much as the Government wants to do with all of us.read more...»
As part of our introduction to micro economics we have been looking at the shortage of housing in the UK. The chronic shortage of affordable and suitable housing raises many micro (and macro) issues and I find it a good example of an issue where different policy measures can be looked at in a non-technical way as a path into supply and demand analysis. It also covers the ground with topics such as scarcity, changing needs and wants, affordability, cost-benefit principles, opportunity cost and production possibilities.read more...»
With a deep recession and persistently high rates of unemployment among younger people. fears are growing about a brain drain in Portugal as highly qualified university graduates leave the country in search of a better life. Peter Wise, Financial Times Lisbon correspondent, reports on what the trend means for the troubled Portuguese economy. Losing "the best of a generation" poses important long-term threats to the competitiveness of the Portuguese economy. Some are moving to Angola and Brazil, the UK has also attracted skilled workers in health care, banking and IT.read more...»
Channel 4 news investigates the impact of persistent and deep poverty on the lives and hopes of children in thousands of households. A potent and stark report that reminds us of the gulf in living standards and the challenges of meeting basic needs such as a decent diet that meets minimum nutritional standards.read more...»
One of the greatest economists of the last 100 years has died at the ripe old age of 102. This blog entry will feature an updated listing of obituaries and other resources on Coase's work. Coase was awarded the 1991 Nobel in economics “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy." His final book, 'How China Became Capitalist,' was published last year, when he was 101.read more...»
In the United States many thousands of workers employed by fast-food businesses on low pay have launched a strike complaining against endemic low pay in their jobs. Workers want to be paid $15 (£10) an hour, the median wage [for service workers] is $9.08 an hour and the minimum wage is just $7.25 an hour - unchanged since 2009.
What are the main reasons why workers in these jobs are low paid? One contributory factor is the frequent absence of trade union representation when negotiating pay and conditions. Virtually all private sector fast food jobs in the United States are non-union.
To what extent might a higher minimum pay floor cost jobs? Or could it have the reverse effect and bring about higher productivity and employment? Would the profits of businesses such as McDonald's suffer if they were required to pay more? McDonald's profits totaled $5.47 billion in 2012 and the US fast-food industry each year generates revenues in excess of $200 billion.read more...»
The Office of Fair Trading is investigating potentially illegal pricing activities by six furniture retailers. It all relates to the use of price discounts.read more...»
Some useful data here on the depth of cigarette taxes by countryread more...»
As of today, any employee wishing to take their employer to an unfair dismissal, unequal pay or sexual discrimination tribunal will have to pay a fee. This fee will not be automatically refunded on a successful tribunal outcome meaning that employees who are making choices about such an action have to be aware of the potential financial cost of such an action.
The government argue that this removes some of the burden of tribunal costs away from tax payers and should also reduce the number of frivolous claims made (and thus reduce a further burden on businesses). As such, you could claim that the tribunal fee represents a supply-side policy by the government - an attempt to improve the efficiency of the operation of businesses by reducing some of the red-tape that can stop a business working effectively (particularly small businesses).
Trade Unions are unhappy about the fee introduction. They argue that it reduces the opportunity for poorer workers (or unemployed people who have lost a job) to seek justice for what may have been unfair treatment. An evaluative argument here, therefore, might suggest that the tribunal fee acts as a barrier to fair pay, particularly in cases of discrimination.
Follow this link for some details as illustrated by the New Statesman.
A major news story this week has been the attack made on the pay-day lending industry by the Archbishop of Canterbury Justin Welby. He claimed that he wanted to compete the likes of Wonga out of existence by encouraging the Church of England to offer more support for credit unions. Whether this is likely is open to question.
The commercial pay day loans businesses have grown rapidly in recent years but concerns over some of their practices has led to an investigation into the industry by the Office of Fair Trading. Payday lenders have been accused of a variety of poor practices, including aggressive debt collection and failing to work out whether repayments are affordable.
Pay day loans industry by numbers (Telegraph)read more...»
Frustrated by the noise of trans-Atlantic airplanes flying low overhead, a school near London's Heathrow airport has come up with an innovative solution - superadobe structures originally designed for use in earthquake zones. This short news video from Reuters is a vivid reminder of the negative externalities created from jet aircraft - in this case disrupting lessons and playground activities.read more...»
Okay, hands up, how many of you economics teachers use cigarettes as one of your primary examples of a demerit good? Well, it does fit the bill and it gives you the opportunity to give teenagers a bit of a lecture about healthy living (if only the Ofsted inspector was there for that lesson).
The government's announcement today that they are to postpone the introduction of standardised packaging for cigarettes is bound to meet with some criticism - many will claim that they are giving in to pressure from a tobacco industry which feels that it is already heavily regulated. The concept is that a standard, plain package will put some people off from purchasing cigarettes as there is some research that says that people are attracted to the branding. Personally, until they put the phrase 'don't listen to your peers, they smell' on the box I'm not convinced the plan would have much impact anyway.
What intrigued me more about this story, is the fact that the government have postponed the plan until the impact of standardised packaging has been more closely studied in Australia (where the policy already exists). So there you go, not only is this a story about cigarettes as a demerit good but it is also an example of the government attempting to avoid policy failure. The government argues that it shouldn't spend money on implementing policies and then policing the tobacco firms and retailers if the impact of the programme is minimal. In a sense, the government are arguing that taking its time over this plan may save money in the long run or enable it to spend its scarce resources on a policy that has more impact.
If this research is accurate the results are truly shocking. Coal related air pollutants have been shown to reduce lifespans in China by over five years, according to a new study conducted by researchers at Massachusetts Institute of Technology and three other universities.
It is a compelling example of the human consequences of the externalities created by intense air pollution in one of the world's fastest-growing countries. Almost half of the world's coal is burnt in China - rapid development in the north of the country has increased the incidence of strokes and lung cancer, in part connected to the distribution of free coal for burning in millions of homes.
The Chinese government has announced plans for a new carbon emissions trading scheme as part of a strategy to lower pollution and achieve more sustainable development. It has ordered firms in heavy-polluting industries to cut emissions by 30% by 2017read more...»
The Competition Commission is to launch a full-scale inquiry into the operation of payday loan companies. In the past three years, the payday loan industry has expanded rapidly from £90m to around £2.2bn - a reflection of the increasing financialisation of the British economy. The review will take over a year to complete and a range of actions are possible including caps on the sky-high interest rates that are charged on loans.
Average loan interest rates charged by Wonga, the UK’s largest payday lender, are now 5,853 per cent (annual percentage rate). For more on this potentially important competition inquiry - Payday loans industry to face competition inquiry (BBC news)
A super resource from the Economist. KAL, The Economist's resident cartoonist and animator, explains the dangerous history of bubbles.
A bubble is said to happen when the prices of securities or other assets rise so sharply and at such a sustained rate that they exceed valuations justified by fundamentals, making a sudden collapse likely (at which point the bubble “bursts”). Typically this is seen in property markets where housing valuations can rise to unsustainable levels relative to income or long-run average prices. Speculative demand driven by positive price expectations has the effect of amplifying market demand and driving prices higher - especially when supply is restricted and unresponsive to short-term price movements.
Bubbles are common in other asset markets such as for stocks and bonds. And increasingly we find that world commodity prices exhibit bubble tendencies with high levels of volatility in the prices of foodstuffs, oil and natural gas and metals.
The bursting of a bubble - such as a collapse in property prices - can have important demand-side effects on wealth, confidence and aggregate demandread more...»
Here's a teaching resource suggested by one of our colleagues who attended the Wow Economics CPD event in Birmingham last week. We were discussing a resource called the Average Wage game (available as an individual download from this website) which asks students to categorise occupations into those jobs with pay above the national average and those below the national average (as per the latest available statistics from the Office of National Statistics, November 2012).
One delegate suggested that they had used a similar resource which starts by asking students to rank occupations in an order which reflects their relative value to society (ignoring, initially, any notion of wages or pay). Having ranked the occupations from the 'most' to the 'least' valuable, the teacher then shows the students the average wage paid to people working in those occupations and leads a discussion on how many of the most 'valued' occupations pay among the least wages.
This is a fantastic starter activity to initiate conversations about wage determination and equality of pay. You may also find this as a good discussion point over the coming weeks when introducing some A2 concepts to AS students.
Click on this link to download the Tutor2u version of this resource developed directly from our delegate's suggestion.
The Wow Economics event has its last airing this Wednesday in London. An all-new version of the resource-packed day will be advertised soon in time for the new academic year.
Miners made redundant from Maltby Colliery in Yorkshire many of whom with decades of experience faced years on the unemployment register when the mine closed earlier in 2013. But some have been thrown a lifeline with the rising demand for miners in the UK potash industry.
The emergence of a competitor product can often send shock-waves through markets of established products where profits have been more or less guaranteed for decades. Will e-cigarettes have a similar effect on the tobacco industry? And is this an emerging industry in need of greater government regulation and taxation?
As an example of collusion, this news article showing alleged price fixing by Canadian chocolate manufacturers and their wholesale distributors illustrates how highly-dominant firms can impact against the public interest.
Reading this article and admitting that chocolate is the closest product that I consume which exhibits addictive qualities (apart from coffee and salt-laden crisps that is) it struck me that this perhaps could be used as an evaluative argument when considering the case for legalisation of slightly stronger narcotics. One argument for legalising cannabis is that tax revenue can be accrued and there would be a reduction in crime given the lowering of prices (and consequential drop in burglary and stealing to pay for the relatively expensive habit). This reduction in price, it could be argued, might only occur if the newly formed legal market for cannabis is highly competitive and doesn't suffer from oligopolistic distribution conditions like chocolate does in Canada (or in the UK, for that matter).
Just a thought. Now, where's the other half of that Twirl?
A new analysis of the allocation of carbon emissions between developed and emerging economies
This morning's news stories include an implied threat to close MOSI (The Museum of Science and Industry) in Manchester, in order to keep the Science Museum in London open.
Should museums charge admissions fees or not? Is a museum a merit good or not? If entry is free, are you tempted to avoid placing money in the transparent collection box as you go in? If is free, how should the museum fund its activities - encouraging donations, marketing guidebooks, souvenirs, themed gifts, or reliance on government grants? This begs questions about how a government allocates scarce funds?
Florence's Uffizi Gallery does not charge children or pensioners, amongst others. Can you identify which museums have more price inelastic demand, and face a smaller drop in visitor numbers should charging be reintroduced? Why would visitors pay €18 to climb Pisa's famous leaning tower?
mind that AQA had set a question on this topic in 2004. "Using the data and your economic knowledge, assess the case for and against providing free entry to museums."
MOSI is supposed to be one of Manchester's biggest visitor attractions, but would there be a negative multiplier effect if it closed? Should the cultural heritage be preserved? This clip from Yes Minister helps focus a debate.
Interesting article from the New York Times digging into perhaps the most worrying legacy of this Great Recession, the problem of hysteresis and structural unemployment. It looks at the causes and potential solutions as well as including some great images included below illustrating the concept.
"Unemployment is staying high despite the end of the recession because we are now in a historic transition. Because of automation, globalization, efficiency and other factors, we no longer need the share of people working that we have had in the past. With these trends moving in only one direction, it is clear that the job crisis is permanent and will not go away with better economic times."read more...»
This revision presentation looks at aspects of intervention in utility industries in the UKread more...»
This streamed revision presentation looks at the economic impact of carbon trading schemes and effects on business costs and profits. It also focuses on an evaluation question for an exam on the effectiveness of carbon trading as a way of cutting emissions.read more...»
Here's the return of not one, but two Tutor2u favourites in one blog! Many of you will have heard of the 'Better Life Index' (follow this link to go to the website) - which is an OECD compiled statistical index of the quality of living in 36 of the most economically advanced countries in the world using a varied number of categories above and beyond just economic information. Indicators include life expectancy and work-life balance alongside unemployment and average earnings.
The latest version of the index is now available and Australia has been measured as being the 'happiest' for the third year on the trot (the UK ranks as 10th in the world - you didn't realise how happy you were!). The website homepage actually allows you to create your own index - a nice exercise to give to your students if you wanted to stimulate debate on the relative importance of the different indicators (for example, is the 'environment' more important to some students than others when measuring the quality of life?).
I've taken the raw data from the index and created some 'Top Trumps'-style cards to act as a fun and engaging activity for students. The resource allows students to play a game where they attempt to 'win' their opponents cards from them by challenging them on the statistical outcomes for each country. So, for example, if I hold the card for the UK and challenge my opponent to consider the citizen's average earnings and this is higher than their card (for example, if they were holding the card for Greece) then I would win both cards. The rules are all in the file!
An interesting activity to challenge the minds of those AS students returning from exams soon.
I've created three versions on the links below - please forward the link for this blog to your sociology and politics collegues - they might find the data and activity equally useful.
Firstly, I hope the first AS exam went well, whether that was macro (OCR), micro, and whether for the first time or a retake. I also hope that in amongst the revision you’re in the market for a more random blogpost…
This one’s a topic on which Paul Ormerod would have something to say. On NPR’s Planet Money radio show/podcast, they’re launching a T-shirt, and using this as a stimulus for a whole set of reporting on its genesis, from cotton subsidies to its design. The latest podcast investigated the colour of their T-shirts. “What’s the economics in that?”, I hear you cry…
Here is a streamed (and downloadable) presentation on policies to cut unemployment in the UK economy.read more...»
Here is one of the most blatant examples of fraudulent miss-selling one might ever come across. A UK businessman has been convicted of three counts of fraud over the sale of bogus bomb detectors - their use in Iraq may have cost many lives - read this articleread more...»
This revision quiz focuses on public and merit goods.
The Rijksmuseum in Amsterdam has reopened its doors to the public after a 10 year closure for rebuilding. It's most famous exhibit is "Nachten Watchen" or "The Night Watch" by Rembrandt. This short clip Onze helden zijn terug! celebrates the rejuvenation of The Museum. read more...»
Where have all the miners gone? To judge by the rhetoric of the BBC and other Leftist media outlets, whole swathes of Britain lie devastated, plagued by rickets, unemployment and endemic poverty – nearly thirty years after the pit closures under Lady Thatcher!
The reality is different. There is indeed a small number of local authority areas where employment has never really recovered from the closures in the 1980s. But, equally, there are former mining areas which have prospered.
Another set of 10 multiple-choice revision questions on the broad topic of market failure here for you to try:
10 introductory questions on market failure here.
The European Union's carbon emissions trading scheme is under huge pressure at the moment and there are many who believe that the market-based system of carbon pricing has effectively collapsed.
- There is a fundamental over-supply of carbon permits in the market - on some estimates, an excess of supply of over 840 million permits (one permit = one tonne of CO2)
- This has caused a sharp fall in the market price of carbon to below Euro 5 per tonne
- At such low prices there is an incentive to use coal rather than cleaner natural gas for electricity generation
- Latest figures show that greenhouse gas output in Europe fell in 2012 by 1.4% - but this is largely the result of very weak economic growth in the EU
(Source: The Economist) - click here