The Story of ‘Adam Sugar’ (aka Aggregate Supply)
This is a great activity my HoD Luke McIlvenna did today with our mutual Lower Sixth Economics Class, which helped them to develop and demonstrate their understanding of aggregate supply.
read more...»Unit 4 Macro: Focus on India - World’s Cheapest Computer
A few weeks ago came the announcement that an Indian business is finally set to launch the World’s cheapest tablet computer. This laptop device will sell for around 18 times less than the price of an iPad in London! How can a laptop be manufactured for less than $US 40?
read more...»Unit 4 Macro: Focus on India - Supply Side Issues
The rapid growth of the India economy has been helped by her economy enjoying a number of supply-side advantages. That said there remain structural supply-side weaknesses that will limit her continued competitiveness and development. This blog looks at the plusses and the minuses.
read more...»Unit 3 Micro: 3D Printing and a Manufacturing Revolution
Additive manufacturing or 3D printing is an emerging technology that takes product design data which provides a geometric representation of a product such as a pen and that data is then sent over to a machine that allows products to be manufactured ‘on the spot’ typically using additive materials in liquid or powder format.
This TED talk from Lisa Harouni (co-founder of Digital Forming) looks at examples of intricately designed products made using this new and increasingly affordable manufacturing technology. 3D machines can build structures, build replacement parts and parts within parts - the detailed resolution possible is incredible.
read more...»Unit 2 Macro: Population Shift in China
What happened in the UK in 1851, the United States in 1920 and in the World in 2008? These three years mark the estimated year when the size of a given urban population overtook the size of the rural population. And now China has reached this significant landmark.
The Chinese Bureau for National Statistics reported recently that in 2011, the proportion of urban population reached 51.27 percent (1.3% higher than in 2010) with the urban population standing at 690.79 million persons, an increase of 21 million persons in a year. China’s rural population stood at 656.56 million persons and for the first time her urban population was 34.23 million persons more than the rural population.
Click below for some study / teaching resources:
read more...»Unit 4 Macro: Natural Disasters and their Economic Impact
From tsunamis to tornadoes, from droughts to floods, 2011 was a particularly nasty year for natural disasters in many parts of the world. These natural disasters inevitably have demand and supply side effects affecting not just those countries affected but ripple impact across regions and in the broader global economy.
The Al Jazeera news video report below provides a clear overview of some of the major natural climatic shocks of 2011 and could easily be used as an introductory resource to discuss what are some of the micro and macroeconomic effects in both the short and medium term.
These include:
* Effects on the stock of physical capital / infrastructure
* Impact on a country’s human capital
* Effects on commodity prices, export revenues
* Effects on agricultural output, profits, investment, productivity
* Ripple effects on manufacturing industries and energy supply/cost
* Impact on state tax revenues and the costs of re-building and providing emergency financial support
* Effect on the movement of population following extreme climatic events
* Natural disasters and changes in the distribution of income / risk of poverty
This Economist graphic (published in Jan 2012) looks at the human cost of natural disasters and claims that “the world has succeeded in making natural disasters less deadly.”
read more...»Unit 4 Macro: India - the Road Ahead
Here is a short 12 minute video on prospects for the India economy produced by economists at the International Monetary Fund. It covers some of the key current issues including high inflation in a supply-constrained economy, partial progress in reducing poverty and the impact that poor infrastructure has as a constraint on further growth and development. Click on the video link below
read more...»Unit 2 Macro: Will a Youth Jobs Subsidy Work?
The Coalition Government recently heralded a new scheme designed to address the structural problem of high youth unemployment in the UK economy. Under their “youth contract” plan, employers will be given “wage incentives” worth £2,275 to take on some 160,000 18-to-24-year-olds. But will it have much impact on the problem? The independent Office for Budgetary Responsibility says that the net effect on overall unemployment will be close to zero, because the subsidy incentive will lead to a switch in employment away from older workers.
read more...»Unit 2 Macro: Analysing Government Spending Cuts
It is rare that a day would go by without you being able to find a news article on issues that affect the macro-economy; a good tip is to constantly think like an economist and analyse these issues as you may do in the exam.
read more...»Unit 2 Macro: A Widening Regional Divide in Life Expectancy
Life expectancy in the United Kingdom continues to improve. But one important aspect of the deep and structural divide in incomes, economic activity and status and health across different groups in Britain is the marked variation in average life expectancy for men and women. The UK Statistics Commission has just published new data on this covering the period 2004-2010 and finds that:
read more...»Global Economy: Increased risk of future shocks
A new OECD report on the risks of external shocks to the global economy looks like being really useful for teachers preparing fresh materials for their courses. “The interconnectedness of the global economy makes it more vulnerable to major shocks…...these shocks include cyber attacks, pandemics, geomagnetic storms, social unrest and financial crises.” The report can be downloaded here.
AS Macro Key Term: Spare Capacity
Spare capacity measures the extent to which an industry, or economy is operating below the maximum sustainable level of production - there are spare factor resources of land, labour and capital. There are many measures of capacity utilisation including surveys of business activity, the estimated output gap and the rate of unemployment in the labour market.
read more...»AS Macro Key Term: The Output Gap
How much spare capacity does an economy have to meet a rise in demand? How close is an economy to operating at its productive potential? Has the recession damaged the economy’s productive potential? These sorts of questions all link to an important concept – the output gap. The output gap is the difference between the actual level of national output and its potential level and is usually expressed as a percentage of the level of potential output.
read more...»AS Macro Key Term: Brain Drain
A brain drain is a term that describes the movement of highly skilled or professional people from their own country to another country where they can earn more money. It has been used to describe net outward migration of people from several European Union countries in recent times (notably Ireland, Greece and Spain) - another phrase for this is human capital flight.
A sizeable brain drain can bring economic costs and benefits for the sending nation. One disadvantage is that countries lose out on the benefits that might have accrued from the resources used in educating people who leave. Add to this the loss of tax revenue from those who choose to live and work overseas. A sizeable loss of skilled workers (many of whom may be younger and therefore more geographically mobile) could lead to labour shortages in the sender country, putting upward pressure on wages and labour costs.
Some of this income earned overseas returns to the sender country in the form of remittances (adding to GNP) and many skilled migrants often leave only for a year or two - the percentage of permanent migration inside the EU is relatively small.
A2 Macro: Chinese investment in the EU
There is much focus on Chinese foreign direct investment in Africa and Latin America - China is also making huge investments in Australia as my friend Mark Johnston writes about in this blog. Here Euro News looks at investment in the European Union by Chinese owned businesses. New motorways in Poland ahead of the 2012 European Football Championships, co-financed by the EU, are being built by Chinese companies. The Chinese are also buying up public debt, in Greece, Spain and Portugal.
AS Macro: Essay Plan on Rising Imports
Here is an essay plan on this question: Assess the extent to which a rise in imports may affect macroeconomic performance (25 marks). Like many macro questions, the focus is on the longer-term performance of the economy – this requires a brief explanation at the start of the answer – e.g. economic growth, unemployment, inflation and material well-being. The essay plan can be downloaded using the link below:
Essay_Plan_Imports_Economy.pdf
The economic & social benefits of migration
My own students know that I am strongly in favour of open migration and oppose the government’s attempts to impose artificial caps on economic migrants from outside of the EU. A hat tip to Philippe Legrain for spotting this article from today’s Guardian which is heavily tilted towards the longer-term economic and social benefits of migrants for the UK economy. So David Cameron wants to talk about immigration? Bring it on As a partial counter-balance perhaps I should link you towards a piece in the Daily Mail by Andrew Green: Why is the BBC STILL so hideously biased on immigration? I have also linked below to some of our recent blogs on the migration issue. And here is a link to a presentation on the enlargement of the EU that I gave in London back in February 2011.
AS Macro Key Term: Double-Dip Recession
A double-dip recession happens when an economy goes into recession twice without having undergone a full recovery in between. There are several different possible causes of a double-dip recession:
read more...»Patent Box or Innovation Box as Innovation Stimulant?
The UK coalition government does not yet have a growth strategy worth the name but they have invested plenty of capital in the idea of a Patent Box. This involves a lower corporation tax on profits drawn from patented products) and is a supply-side policy to make UK an attractive location for innovative industries. One proposal is that royalties and other profits from patented products and technologies would be taxed at just 10 per cent.
But many economists argue that this is at best an ineffective way of lifting the amount of research and development in the British economy. They look instead to the Netherlands where an Innovation Box has had a significant impact - it reflects the view that patents are only a small part of the innovation process - you dont necessarily have to patent an idea to make small scale innovations commercially viable.
Channel 4 news tonight visited Sandwich in Kent where the Pfizer research and development facility is set to close.
Economic Growth Presentation
Here is a streamed version of my notes from the LSE presentation last night on “Where is economic growth going to come from”? PDF Handout available here
A copy of Professor John van Reenen’s powerpoint presentation is available to download. Download ‘Where is Future Growth Going to Come From?’
China and Africa - Resources on their relationship
The deepening economic ties between China and the continent of Africa is a hot topic in the globalisation debate and one that has been covered in a two part series on the BBC by Justin Rowlatt. Details here. Episode 1 / Episode 2 More programme information can be found here.
Diane Coyle has a revealing blog post on the subtleties of this relationship in this blog post where she reviews the new book The Dragon’s Gift.
For visual learners this photo archive from the BBC is superb!
Here are some more recent news stories on this topic:
China Foreign Minister Yang Jiechi in Zimbabwe visit (BBC)
China-Africa trade set to keep on booming in 2011 (BBC)
Poverty and Development: Africa-China relations mutually beneficial (Tutor2u Politics Blog)
James Dyson on Innovation
This is a must read article for every student who wants to appreciate the impact of innovation on competitiveness and growth. Writing in the Business Guardian, James Dyson argues that “For me, the UK economy shouldn’t be built entirely on the City of London or the next digital fad. We need substance – patentable exports. They bring new money into our coffers. And what will generate economic growth is not just talk of spending cuts, but creating the right environment for research and invention.” Dyson is a strong supporter of tax credits and lower corporation tax for research and development projects and also for science and maths graduate teachers to be paid more.
More here: Innovation: Britain’s other deficit
Tories look to Dyson on hi-tech economy (BBC news video)
An Aggregate Supply puzzle
A rather fascinating debate has been raging in my department office since we returned from the Christmas holidays. Surprisingly, it doesn’t concern the ‘big news’ items such as the VAT rise or the government’s austerity measures, but instead we seem to have found a bit of a theoretical conundrum.
The debate started as a result of a puzzling entry in the original AQA Unit 2 specification, which stated that candidates must have an understanding of the Keynesian LRAS curve. To our relief, this has been updated to just ‘an understanding of the Keynesian AS curve’, although candidates (unlike for any of the other major exam boards) must still use both the ‘classical’ upwards sloping SRAS and vertical LRAS, as well.
Our conundrum deepened when we started to think about representing output gaps using the AD/AS framework, and it is this part of the puzzle that we think would benefit from input from the readers of this blog.
read more...»Tacit collusion between oil producers and consumers?
Are crude oil prices set to rise above $100 a barrel and stay there as we head into 2011? As our chart shows, there has been a steady increase in world oil prices over the last two years and a barrel of oil is now comfortably above $90. World economic growth is picking up - the main driver is strong activity in fast-growing emerging nations - and the oil producer cartel OPEC has announced that it sees no need to increase their output quotas in a way to stabilise the price below $90.
External shocks
Some recent examples of external shocks, useful for classroom discussion on the economic effects of these on the economy (bearing in mind that external shocks can have positive and negative effects):
Snow
Shark attack in Sharm al-Sheikh
Fifa awarding Qatar
French strikes
Spanish strikes
Iceland ash cloud
Apprenticeships for a Silver Generation
The oldest contestant in the new (6th) series of The Apprentice is thirty one! But why should apprentices be concentrated only among those in the early stages of their careers?
The number of people aged fifty and over who are applying for and winning places on apprenticeship schemes has more than doubled in the last few years as this BBC news video explains. Apprenticeship programmes for older workers challenges our common preconceptions about their place in the labour market - and this is a good thing as the debate continues about how best to support and encourage people to stay in work during these challenging economic times. Lifelong learning is not merely a vaccuous slogan - it has a real meaning and is hugely important for the British economy in the years ahead.
This video reinforces the importance of human capital, the need for flexible skills to avoid structural unemployment. And it raises questions about who should and who can fund apprenticeship schemes and their longer-term economic and social benefits.
Hysteresis in the US Economy
The idea of hysteresis from the current recession is well illustrated in this article.
Millions of Americans risk falling out of the job market forever, the Organisation for Economic Co-operation and Development said today, as it cautioned a full recovery will take years. This recession has left the US with a long-term unemployment rate - a measure of those without work for more than six months - of 4.5pc, almost double that seen in the downturns of the 1980s and 1990s… Read more here.
read more...»AS Macro: Extreme weather hits Russian economic growth
This BBC news article explains how extreme weather conditions in Russia this summer is hitting GDP growth.
read more...»Warnings of hysteresis for the EU economy
This is an updated blog post on the topic of hysteresis in the EU economy. The recession and financial crisis may lead to a permanent loss in potential economic output and a slower trend rate of growth in the future according to a study by the European Commission. The fall in potential GDP will be an example of hysteresis effects across the European economy and the cyclical downturn in output and jobs creates long term damage.
read more...»AS / A2 Revision - Where Next for the UK Economy?
Students wanting to demonstrate up-to-date understanding of the UK economy should find this streamed revision presentation really useful. It was delivered by Geoff at our AS & A2 Economics workshops in London & Manchester. It provides a comprehensive coverage of recent developments in the UK economy and highlights some potential downsides and upsides as the economy attempts to sustain a recovery during 2010 and 2011. Has the era of macro economic stability been replaced by a new phase of macro economic uncertainty, slower growth and a recovery constrained by debt? Or are there grounds for being more optimistic about the near-term future for the British economy?
