Unit 4 Macro: Economics of Fiscal Deficit Reduction
How far, how fast and in what way should the UK government seek to cut the annual budget deficit and improve the state of public sector finances? These questions continue to be at the centre of a fierce debate among economists.
read more...»Unit 2 Macro: Factors Driving Business Investment
Profit-seeking businesses will go ahead with an investment if they believe that it will - over its projected lifetime - yield a real rate of return greater than if the money had been invested in the next best alternative way. Opportunity cost is a useful idea to use here. Private sector businesses usually focus on these objectives when investing in new capital inputs:
read more...»Resources on Keynes and Hayek
In this blog we are putting together a suite of web-based resources on the clash between supporters of Keynes and Hayek, a debate that have gathered momentum in recent times largely in the wake of the global financial crisis.
read more...»Unit 2 Macro: A Prezi on Unemployment Policies
After a hesitant start and some time spent getting to know the user interface, I am starting to use Prezi more widely as an alternative to other presentation software. I would be really keen to share ideas and collaborate on presentations with other colleagues so if you are interested in joining up please let me know. Here is an initial presentation I used this afternoon on unemployment policies - focusing on ten strategies to reduce unemployment. The aim is to stimulate discussion among students who can take apart the proposals and substitute their own.
read more...»Unit 2 Macro: Video Clips on Unemployment
I blogged last week about unemployment and made available some updated charts on unemployment for the UK and a range of other countries. Here are some short video news clips on aspects of unemployment that I have been using when teaching unemployment to AS and A2 groups. These clips provide a window on the human and social cost of high rates of unemployment and are especially useful in reinforcing the causes of unemployment and evaluation of policies likely to be most effective in bringing jobless rates down over time.
read more...»Skidelsky in Madrid
Last week the Economics Society at King’s here in Madrid organised a trip to the Ramon Areces Foundation where Lord Skidelsky gave his talk “A Keynesian Perspective on the Slump of 2007-8 and How to Recover from It”.
read more...»Keynes v Hayek - the BBC Debate
A summer hat tip to Angela Aldridge from Haverstock School in Camden for flagging up a BBC Radio 4 programme scheduled for Wednesday 3rd August on a debate between supporters of John Maynard Keynes and those behind the views of Fredrich Hayek. The debate was recorded at a packed London School of Economics last week and was chaired by BBC Newnight’s Paul Mason.
What caused the financial mess we’re in? And how do we get out of it? Two of the great economic thinkers of the 20th century had sharply contrasting views: John Maynard Keynes believed that government spending could create employment and longer term growth. His contemporary and rival Friedrich Hayek believed that investments have to be based on real savings rather than increased public spending or artificially low interest rates. Keynes’s biographer, Professor Lord Skidelsky, will take on modern day followers of Hayek in a debate at the London School of Economics.
Here is the link to the programme
A2 Macro: Twin Deficits
Here is a revision note on the economics of twin deficits. Twin deficits refer to a situation where an economy is running both a fiscal deficit and also a deficit on the current account of the balance of payments. The revision note is available for download as a pdf file.
Twin_Deficits.pdf
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...»Keeping Track of UK Macro Objectives
Traditionally towards the end of an AS macro course we brings things together by focusing on the possible trade-offs or dilemmas facing economic policy-makers not least in an age of great uncertainty and change. I have usually emphasised the following macro economic indicators as being key though others are sure to differ!
* Price stability (low positive inflation)
* Rising employment / an improving unemployment rate
* Sustainable growth of real GDP / national income
* A degree of balance in trade in goods and services (a sustainable external position on the current account)
* Manageable public sector finances - including sustainable debt levels and annual budget financing
In this blog and using the Timetric data I plan to keep all of this data in one place and automatically updated so that I can return to it when needed and so too can students if they need to refresh quickly and easily what is happening in the UK economy. The charts can be found below
read more...»Keynes spotted in London
Paul Mason the BBC’s Economics Editor manages this terrific end of scoop by spotting John Maynard Keynes near his old stomping ground in Bloomsbury - a quiet interview in a local pub provides some clues to Keynesian thinking on the recession!
Using Google Docs - The Irish Financial Crisis
My Year 13 students have worked on a collaborative piece this week on the Irish financial and economic crisis. We considered the background to the crisis, why the UK is helping with the bail out and some of the consequences for the future stability of the Euro. The final version of the Google Doc is available to download here.
read more...»The Acid Burns Through - Requiem for Neo Liberalism
For Paul Mason, BBC Newsnight’s Economics Editor, there is a scene in the film Alien that provides a powerful allegory for the ways in which the global financial crisis has seeped through several floors of the economic system creating along the way severe tensions and challenges that threaten the whole process of globalisation. You can see this scene here. In it, Ash (Ian Holm) tries to sever the alien off Kane (John Hurt), but the blood that gushes out turns out to be acid which then burns a hole in the ship. As the acid works its way inexorably through several floors, the fear is that it will eventually reach the shell of the space capsule and endanger everyone within in.
read more...»Krugman attacks the coalition’s fiscal policies
Paul Krugman is currently on a speaking tour and he has used his column in the New York Times to lay into the coalition government’s fiscal plans - confirmed this week with the spending review. Winner of the 2008 Nobel Prize in Economics, Krugman’s strong Keynesian foundations rarely take long to surface and this article is no exception. “The best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997. That is, premature fiscal austerity will lead to a renewed economic slump. As always, those who refuse to learn from the past are doomed to repeat it. So is Britain on the road to a lost decade such as that suffered by Japan? Keep reading as many articles as you can on the stimulus v fiscal consolidation debate for it lies at the heart of so much that is important in macroeconomic policy-making at the moment.
Revisiting the economics of John Maynard Keynes
I came across this PBS documentary piece on Keynes whilst researching for the new school year. The feature was broadcast in December 2009 but is still highly relevant today and includes an interview with Professor Robert Skidelsky.
What does Keynes mean?
Over at the Enlightened Economist blog, Diane Coyle has a super blog on three new books on Keynesian economics. Read it here
Blanchflower scathing on cuts
Blanchflower here criticises Osborne’s contractionary fiscal policy at a time when growth is still anaemic, emphasising the collapse of multiplier effects from government spending, but also the negative impact on employment, both in the public and private sector, at a time when the private sector is still recovering slowly from the recession. Whilst cutting in a recession is clearly against the Keynesian ethos, Blanchflower accuses the Conservatives of also only following ideology rather than common sense, at a time when the government is one of the few entities to still be able to spend right now. He says this, and while there are reasons why the fiscal outlook for the UK is different to Greece’s, it is the financial markets that will dictate whether the government is allowed to spend right now…
The cutting begins…
The first round of government spending cuts were announced earlier today amounting to £6.2 billion. Whilst this is not “austerity” of the sort that Greece has been talking about recently, they are genuine cuts, albeit further measures are still required to tackle the huge black hole in the public purse.
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?
Revision Presentation on the UK Economy
Contagion spreads…
After Greek’s junk status downgrade yesterday, as well as Portugal’s downgrade; S&P today downgraded one of the other PIIGS, Spain as the contagion effect takes hold… Last night’s (Wednesday) Newsnight discussed the potential contagion ( from 27 minutes).
With Spain’s economy making up 8.5% of the EU GDP, this downgrade has bigger consequences than Greece’s.
Could the UK be next?
Animal Spirits
Animal spirits refers to the state of confidence or pessimism held by consumers and businesses. Expectations for the future inevitably influence decisions made today about how much consumers are prepared to spend or save and the willingness of businesses to commit funds towards capital investment in their chosen markets.
read more...»Lessons for economists from the crisis
Larry Elliot has a superb piece in today’s Guardian on the challenges facing the economics profession in the fallout from the global economic crisis. He flags up a new book by David Smith “The Age of Instability: The Global Financial Crisis and What Comes Next ” which is now available through Amazon and will be a great read for ambitious AS and A2 students. And he flags up the first major meeting of the George Soros funded Institute for New Economic Thinking which is meeting appropriately enough in Cambridge. Reading through the agenda for the conference it looks like a gold mine of top quality speakers and sessions - sadly by private invitation only!
The director of the Soros-funded Institute is quoted as saying
“Too much of modern economic theory relied on sophisticated mathematical models to predict market behaviour. A broader, interdisciplinary approach to economics, taking in history, psychology, natural science — to deal with issues such as climate change — and even literature was now needed”
Larry Elliot argues in his piece that
“There is no need to reinvent the wheel. It’s more important to strip away the layers of complexity that gave big-picture economics a spurious and dangerous exactitude in advance of the crisis. The big lesson in economics from Keynes is that we know less than we think we do, and that there is a vast difference between the output of economic models and the actual behaviour of individuals.”
Read: Rescuing economics from its own crisis
The Times reports that George Soros is to create a new economics institute at Oxford University.
Ask the Chancellors debate
If you missed the live election debate between the Chancellors, you can watch it here on Channel4OD; or read a review of it at the FT here.
Presentation on Fiscal Deficits (ATTACHED THIS TIME!)
(Presentation attached this time!)
Given the Budget 2010 scheduled for next week, and given the importance of the budget deficit to the election campaign, here are some useful resources on the current fiscal situation in the UK:
- Following on from the economists’ letter last month, today, the EU also called for a quicker tightening of the UK’s fiscal position
- A video discussion here between Stephen Timms and Ken Clarke on how Labour and Conservatives would tackle the UK’s deficit - and how there is no clear message from any party on how they would actually achieve it!!
- And finally a PDF document here (which has been compiled by us at Merchant Taylors’ - thanks to Andrew Ellams and Harriet Thompson for their assistance on this!) which may be of use: FISCAL_POLICY_09-10_MTS.pdf
Dispatches
An excellent Channel 4 Dispatches documentary last night on Cameron’s government. Lots of good stuff here for both Politics and Economics students, for example discussing the proposed “Office for Budget Responsibility” to introduce more independence into Treasury forecasts. There’s been lots of talk about fiscal tightening in recent months, but this program asks where exactly do the Tories want to start fiscal tightening - and the non-committal answers will have you laughing/crying*, with no Shadow Minister agreeing to a cut in their department; and the Conservative party not wanting to admit to future tax rises just before the election. It also discusses the issue of the Conservatives and their stance on Europe.
*delete as appropriate.
Withdrawing the drugs
An excellent article in last week’s Economist magazine, which focuses on the difficult task of weaning the world economy off its fiscal and monetary stimulus. In recent years, Interest rates have plummeted, and budget deficits soared; whilst quantitative easing has come out the woodwork; but last week’s announcement that the Fed raised the discount rate in its first step of contractionary policy in quite some time as well as our own general election around the corner, where fiscal prudence is high on the agenda and it seems that the beginning of the next phase in economic policy has begun.
read more...»Lively articles on the fiscal stimulus debate
“Around the world over the last century, the typical financial crisis caused the jobless rate to rise for almost five years, according to work by the economists Carmen Reinhart and Kenneth Rogoff.”
David Leonhardt - writing in the New York Times - praises the employment effects of the Obama stimulus programme in a super piece. Judging Stimulus by Job Data Reveals Success
And over at the Financial Times, the ever-readable Martin Wolf considers the thickness of the fiscal tightrope facing the US government and other leading economies.
“The argument is, rather, that the benefits of the higher output today exceed the costs of debt service tomorrow ....high-income countries face huge fiscal challenges. And yes, the crisis-hit countries start from grossly unsustainable fiscal positions. But the US is not Greece. Moreover, a massive fiscal tightening today would be a grave error.”
And here is the link to last week’s feature in the Independent on the views of economist Joseph Stiglitz: The Money Man: Super-economist Joseph Stiglitz on how to fix the recession
All three of these articles will stretch and challenge A2 economists wanting to understand more about the big fiscal issues facing governments at the moment.
The Keynes and Hayek Rap
If you havent watched this yet, do give it a go! A tremendous reaction amongst the Economics teacher community about this very funny rap on Keynes versus Hayek! Your students will love this!
read more...»Questioning the natural rate of unemployment
Roger Farmer questions the existence of a stable natural rate of unemployment in this post to the Vox Blog.
read more...»Keynes v Hayek (PBS Broadcast)
As part of his continuing series Making Sense of financial news, Paul Solman at PBS has a unique look at the legacy of economist John Maynard Keynes, who first introduced the concept of government intervention in the economy, and his countertenor Friedrich Hayek.
