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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...»
Eric Beinhocker and Nick Hanauer have published a thought-provoking article in McKinsey Quarterly, 'Capitalism Redefined'. Their argument is that, while it may be true to suggest that, over the last two centuries, capitalism has been responsible for our economic growth and prosperity, we do not correctly understand why and how it has done that.read more...»
One optimistic observation in economics is that poor countries should be able to catch up with the richer ones, since it’s easier to grow from a low level of GDP to a higher one. This observation was made by Nobel-winner Robert Solow in 1956, and is based on the idea that low income countries are poor because their workers have access to less capital. This capital shortage (i.e. insufficient infrastructure) implies that the return on investment should be high, so capital should flow from rich countries to poor ones, leading the two worlds to converge on similar levels of productivity and income.
Furthermore, in this theory, growth in rich countries is driven by new technology which, once developed, could be adopted by poorer economies too. Indeed, the poor could potentially learn from the mistakes made by the rich, and leapfrog directly to more productive ways of doing things.
And so it seemed. From the late 1990s to 2008, poor countries were catching up fast. But that catch up seems to have slowed down (see chart above).read more...»
The growth vrs the environment debate is great for opening a thoughtful discussion about the net benefits of economic growth. Some participants take what might be described as a Kuznets Curve approach to the issue. That might be simply summarised as things get worse to begin with, but after a while they start to improve (OK, I’m simplifying a bit here). In environmental terms, you might illustrate this with the Peak Stuff idea. For several years now, the UK economy’s total consumption of physical resources has been falling. In the past, growth made our economy more and more damaging to the environment. But future growth might have far less of an impact, and even contribute to significant environmental improvements.
What about tropical forests, which observers in the last decades of the 20th century noted were under severe threat? The Economist newspaper seems to take an optimistic view. Future growth may have far less worrying consequences for tropical forests.read more...»
This west African health crisis is a tragedy. It could be an issue that stimulates an economics discussion. According to James Surowiecki in The New Yorker there are no real tools to stop the deadly Ebola outbreak in West Africa. The lack of treatment is disturbing. But given the way drug development is funded, it’s also predictable.read more...»
Download this engaging teaching resource to test student awareness of the international competitiveness rankings!
You may have already seen Geoff's blog on the newly released International Competitiveness Index. The World Economic Forum annually release its table of competitiveness using a variety of data measures including economic performance, quality of education and labour efficiency. The UK has moved up to 9th in the World.read more...»
Tata Group, perhaps best known in the UK for its ownership of Jaguar Land Rover (JLR) and Corus, has set out ambitious plans to invest $35bn in capital spending over the next three years as part of its vision for the next 10 years.read more...»
Here is a link to a video report produced by the IMF as part of their annual assessment of the UK economy. Overall, the IMF is considerably more optimistic than it was in 2013 about prospects for near term recovery of output and continued reductions in unemployment.
Risks to macro stability are also considered, namely weak productivity growth and high housing pricesread more...»
Does inequality in the output of scientists matter? Inequality is a fashionable topic these days, and evidence for its existence is keenly sought in all sorts of places. John Ioannidis, a health policy researcher at Stanford, and his colleagues have found it in the research outputs of their fellow academics. In a paper published in the prestigious journal PLoS ONE, they searched the entire published scientific literature in academic journals over the period 1996-2011.read more...»
This is an absolutely outstanding article to use when introducing development economics to a level students. The work of Hausmann and Hidalgo on complexity and economic development is becoming more widely recognised and used in schools. Hausmann's article here in Project Syndicate emphasises the importance of building capabilities within an economy to promote the growth of higher value added industries. Here is the link to the article: https://www.project-syndicate.org/commentary/ricar...
The Russian central bank has raised their main policy interest rate by 0.5% to a new level of 8% in a bid to control inflationary pressures in the Russian economy.read more...»
Three years on from the riots and deep economic, financial and political crisis, is the reforming Greek economy turning a corner and improving outcomes for the key macroeconomic indicators. Professor Paul Collier labelled Greece as a "sub-merging economy" a little while ago but there are now some positive signs reflected in this highly relevant news report from the Financial Times. I have added some key macro data on Greece and other troubled Euro Area countries using data from the IMF World Economic Outlook.
Guardian: Greece forges template for economic recovery as tourists pour in: http://www.theguardian.com/world/2014/jul/03/greec...
BBC video: Pain in paradise for struggling Greeks: http://www.bbc.co.uk/news/world-europe-28012089read more...»
An important landmark for the UK economy? Britain’s economy is finally larger than it was before the financial crisis six years ago. FT economics editor Chris Giles analyses the data and warns that continuing weak productivity means output growth will be slower than before the crisis - an excellent analysis of the key macro indicators suitable for all A level economics students.
I have added some charts on the UK drawn from the latest IMF world economic outlook.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...»
This Mini Lecture discusses issues of labour productivity, low-wage work and economic growth of emerging markets.read more...»
This interview with Jurgen Maier of Siemens is well worth reading on several different levels. It challenges the conventional wisdom that UK will always lag behind Germany in terms of high value added manufacturing; it refers to the economics risks of Brexit (Britain leaving the EU) and it also stresses the importance to the UK of foreign investment from German businesses many of which have been in the Uk since well before the first World War - Siemens and Bosch are two well-known examples.read more...»
Here is a short video featuring Mike Kitson from Cambridge University explaining the role universities play in knowledge exchange with businessesread more...»
According to The Economist, the great commodity boom caused by the industrialisation of China and India provided an unprecedented boost to the terms of trade (defined as the ratio of the price of its exports to that of its imports). Yet now the commodities boom may be running out of steam, these countries face a challenge.read more...»
The Philippines has enjoyed a period of rapid economic growth in recent years and attracted increasing attention as one of the fast-growing economies of South East Asia. Can this growth be sustained? What are the risks, challenges and the constraints facing the country? And how can the benefits of growth contribution to a transformation of economic and human development? This blog provides links to some useful resources:read more...»
According to some sources, Dropbox was the 37th online storage solution to be developed for the web - but despite early failures and late entry it has emerged as the cloud storage product of choice for over 300 million people. The firm is now estimated to be worth about £5.9bn.
This BBC article looks at the background to the story. Article can be found here: http://www.bbc.co.uk/news/business-27579790read more...»
Data on export patterns for goods from countries around the world provide a fascinating window on the degrees of complexity that nations have achieved. There is growing interest in the significance of knowledge capital or know-how in lifting productivity, competitiveness and improving trade performance for economies at different stages of development. Below is my selection of countries.
There then follows links to videos from Cesar Hidalgo and Riccardo Hausman on their theory of productive knowledge - and in particular how it is acquired at the level of the individual, the level of organizations, and cities, regions, countries and societies.read more...»
In these short interviews with the Financial Times, economist Gerard Lyons highlights some of the key drivers of the global economy and he paints a fairly positive picture of the prospects for developed countries in an ever-changing world economy. In the second interview, Gerard Lyons, 'The Consolations of Economics' author, discusses with John Authers whether the system is safely retuned, and whether it can boldly go into a universe of greater growth opportunities.
Observer review (3 August 2014): http://www.theguardian.com/books/2014/aug/03/conso...
Independent review (July 2014): http://www.independent.co.uk/arts-entertainment/bo...
Evening Standard: http://www.standard.co.uk/comment/gerard-lyons-lon...read more...»
This new short video from the World bank looks at the economic benefits that flow from investment in an improved road network in Senegalread more...»
Here is your starter for ten. What do the Uber app and David Ricardo have in common? Ricardo, I hear you ask. Scarcely known outside academic economics, he ranks equal with Adam Smith and Keynes as the greatest ever British economist. His classic Principles of Political Economy was published in 1816. He made millions of pounds on the stock market, at a time when a million was a vast amount of money.read more...»
Question six for the RES competition in 2014 is bound to produce a large number of answers. Labour migration is an important economic, social and political issue and many students will have clear views on the issue. So what will make an essay stand out from the crowd?read more...»
Drawing on data from the 2013 Human Development Report, here are the 24 countries in the 2014 World Cup ranked according to the Human Development Scoresread more...»
This question gives students a superb opportunity to explore the debate surrounding economic growth in in the leading advanced nations of the global economy. It ties in well with research into the effects of globalisation and the legacy from the financial crisis. I have put together some reading and short video clips that might be relevant to the discussion:
Secular stagnation: (or .... growth pessimism!)
"Secular stagnation refers to the idea that the normal, self-restorative properties of the economy might not be sufficient to allow sustained full employment along with financial stability without extraordinary expansionary policies. The idea was put forth first by Alvin Hansen in the late 1930s." (Source: http://www.washingtonpost.com/blogs/wonkblog/wp/20...)
One common interpretation is that - if we are in an age of secular stagnation - and this is an idea that might just be wrong! Maintaining demand often requires extensive periods of ultra loose monetary policy which in turn can create fresh bubbles in property and equity markets.
Is the secular stagnation argument too pessimistic? Can advanced economies rev up the engine of growth once more perhaps by using structural reforms to boost their competitiveness and drive new investment?read more...»
Technology always disrupts markets. It provides dynamic efficiency improvements, creates new markets, destroys old ones, and in some cases destroys monopolies and in others, creates new monopolies.read more...»
Students preparing for unit 4 on Tuesday might spend half an hour or so analysing this report of the IMF’s update on the UK economy. Here are some key points worth noting:read more...»
This blog entry will feature frequently updated revision resources on economic growth trade and development aspects for a range of sub Saharan African countriesread more...»
Mozambique has discovered large amounts of natural gas - can the extraction of this act as a catalyst for economic growth and development or will Mozambique be added to the long list of countries who have experienced a natural resource curse?
Manuel Chang, Mozambique's minister of finance, says economic growth is only part of the story of a country's development. He tells Javier Blas of the Financial Times how his nation plans to make the most of its vast natural resources.
Manufacturing output in the African continent accounts for less than 2% of global manufacturing production.read more...»
I am really grateful to Bob Denham from Econ Films who has shared with us this newly launched video from the International Growth Centre. It focuses on the competitive challenges facing Pakistan's football manufacturing sector as it loses market share to countries such as China and Indonesia. Footballs in Pakistan are still made mainly by hand, stitching together hexagons and pentagons - a process that leads to a lot of waste and higher unit costs and which then affects the profitability of businesses in what is already a low-margin sector.
Could a team of economists find better ways of cutting the patterns for footballs and then align the incentives of workers and owners? This is a fascinating short video which captures many aspects of the Unit 4 development economics course. Enjoy!read more...»
May 2014 marks the tenth anniversary of Poland's accession to the European Union. Poland was easily the largest of the ten countries that came into the EU single market a decade ago. It was an important economic and geo-political moment for a country of just under forty million inhabitants.
The country has always traded heavily with the EU and that trade dependency has deepened over the last ten years. According to economists at HSBC, Poland is well placed to sustain strong export growth even though much of Western Europe as a whole is struggling to escape from below trend growth.
Poland has had the most stable growth of any economy in Europe in recent years. It avoided a recession in the aftermath of the Global Financial crisis - helped in part by the depreciation of the Polish Zloty. The economy is the sixth biggest in Europe and in the top twenty five countries ranked by GDP. Steady progress in lifting relative incomes per capita towards the EU28 average has helped to grow the size of the middle-class consumer sector - a big opportunity for British businesses looking to invest in the country.read more...»
Guinea has agreed a huge new capital investment framework with a number of transnational partners including Rio Tinto and Chinalco to develop one of the world's biggest iron ore assets. This is a project that may double the country's GDP not least because as well as mining the iron ore, there is a proposal to seek funding to construct a 650km railway and a deep-water port to transport the rocks and minerals.
It is one of those examples that comes along every once in a while that prompts both students and teachers to re-visit the economics of large scale foreign direct investment projects. Is this nation building of the old style? Or is the proposed investment framework one that could be genuinely transformative for one of the world's poorest countries?
- Forecast of 45,000 new jobs created across the entire project
- State of Guinea will retain 15% of any proceeds from the mine
- In exchange, the joint venture with Rio Tinto / Chinalco will enjoy eight years' tax free operations in the country
- Production at the Simandou mine is expected to start within five years
- It will be Africa's biggest mine
Worries are growing about some of the countries in the Euro zone slipping back into double dip recession. By convention, a recession is when national output (GDP) has fallen for two successive quarters. But this is far from being news. In a substantial number of economies, output is lower than it was not just two quarters ago, but three whole years ago, at the start of 2011.
The quarterly numbers have wobbled around up and down over this period, but they are now unequivocally below the 2011 figure in Greece, Ireland, Italy, Portugal and Spain. No surprises there. But the list goes on to include Finland, the Netherlands and the Czech Republic.read more...»
Here is a short interview in which it is argued that China will increasingly focus on the quality of growth rather than the quantity. A Chinese slowdown may affect countries that have exported to China more than China itself.read more...»
Just in time for the unit 2 exam, and in good time for unit 4 students, this week's Deloitte Monday Briefing looks at the reasons behind the rapid recovery of growth in the UK. The Monday Briefing always makes very good reading, and often features analysis which is written with great clarity by Ian Stewart, their Chief Economist in the UK - to subscribe and receive an email every week, visit www.deloitte.co.uk/mondaybriefing
Below, I have copied much of this week's briefing with a little additional comment to emphasise the role of monetary and fiscal policies, and to look forward in order to consider how these may be evaluated in order to assess the contribution they may make in the near 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...»
Here are some resources on the newly created Pacific Alliance which - in the short run - has achieved significant tariff reductions but which in the long run seeks to create a new economic community / single market in the region.read more...»
With the European Parliament elections on the near horizon there is plenty of discussion about the merits and de-merits of continued UK membership of the European Union.
The Centre for Economic Performance (CEP) has just launched a new report in its series of CEP Policy Analyses: ‘Brexit or Fixit? The Trade and Welfare Effects of Leaving the European Union’ by Gianmarco Ottaviano, Joao Paulo Pessoa, Thomas Sampson and John Van Reenen. Here are their main findings:read more...»
Here is a short revision resource on the South Korean economy that I have used in a revision lesson with my A2 macro students.read more...»
At some point the United States ‘overtook’ Britain as a global power and many people fret (or celebrate) that one day China will ‘overtake’ the US. I’ve used inverted commas on purpose. What does ‘overtake’ mean? If the conversation is between economists, they are probably talking about the crucial concept of GDP.read more...»
Here is a two page revision document on aspects of the Mexican economy together with with A2 macro exam questions based on the material. You can download the resource from our slideshare accountread more...»
Imagine that, for some reason, you were forced to choose between having to read a long, turgid novel like Westward Ho or Middlemarch, or a book on the methodology of the national economic accounts. Most people, however reluctantly, would plump for the former. But the latter can at times be very exciting. A recent paper uses national accounts concepts to revolutionise the conventional view of world trade.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...»
Boston Consulting Group have produced a fascinating new report which investigates the competitiveness of the world's top 25 goods exporting nations. Their press release highlights significant changes in the world order over the last decade. The newly-minted BCG Global Manufacturing Cost-Competitiveness Index incorporates four factors: energy costs, productivity, wages and exchange rates. That analysis shows that Brazil is now one of the highest-cost countries, and the UK is the cheapest location in western Europe. Mexico now has lower manufacturing costs than China, while costs in much of eastern Europe are basically at parity with the U.S.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...»
Enrichment video for students interested in the long history of financial crises in the world economy. Financial crises date back to the 4th century BC, but we seem incapable of learning from them. Bob Swarup, author of 'Money Mania', explains to John Authers how innovation and crises are related. Both have their roots in growing complexity and in human nature.read more...»
This video from the Economist looks at some of the views on the economic and social impact of the ageing population in the world economy.read more...»
In the year to March 2014, consumer prices in Sweden fell by 0.4 per cent. This has prompted the central bank, the Riksbank, to abandon the normally cautious language used by such institutions. Over the same period, inflation was negative in a further seven European countries, such as Greece, Portugal and Spain. In eight other countries, inflation was still positive but very low, running at an annual rate of less than 0.5 per cent.
The Riksbank argues that these very low, often negative, rates of inflation are caused by a ‘very dramatic tightening’ of monetary policy. There is a definite risk of a slide into a prolonged depression similar to that of the 1930s.
Surely low inflation is a good thing? Well, up to a point.read more...»