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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...»
A great line at the end of this BBC video about China. In the cartoon mentioned, a patient asks a doctor if there is a cure for diabetes, the doctor replies: "Yes - poverty".read more...»
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...»
It was a pleasure to visit the LSE earlier on this week to hear a lecture from the distinguished economist Professor Angus Deaton from Princeton University in the United States. His new book "The great escape from inequality" is on my must-read list for the half term holiday and brings into focus over 250 years of changes in health and income inequalities across the world economy.
I will blog about his book a little later on but for now this Financial Times interview provides an introduction to some of the main themes of his book. Incidentally, Professor Deaton has strong views on the efficacy of foreign aid and this chapter of his book has provoked some strong responses from the pro-aid lobby active on twitter. Click below for the full video of his lecture at the LSE.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...»
For years, a mystery has baffled visitors to developing countries: Coca-Cola is everywhere, but basic medicines are not. This year, Zambia has become the first African country to embrace a trial of the ColaLife concept. ColaLife aims to use Coca-Cola’s distribution model to deliver life-saving medicines to far-flung, rural communitiesread more...»
FOOD banks are a rapidly growing phenomenon in the UK. A few years ago, they barely existed, but an estimated half a million people now make use of them every week. On the face of it, it seems that poverty has sadly become endemic since the financial crisis, with many families unable even to feed themselves. Real incomes have declined since 2007, putting pressure on household budgets. But the pace of increasing demand is surprising.
In fact, the food bank is a market. It is, however, complex – with particular features which mean that it is likely to grow rapidly, exactly as we have seen. The key point is that food is not the only commodity traded.
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.
I'm always sightly dubious about statistics and information represented by campaign organisations - I'm left with the reservation that information can presented in any way that you want to prove whatever point that you are trying to make (wasn't it an economist who came up with the phrase 'lies, damned lies and statistics'?). So this fascinating report from an organisation called 'Vision of Humanity' needs to be looked at with an open mind.
However, if you take it at face value, it offers some really interesting information.read more...»
AS Micro students will be gearing themselves up for a key period of intensive revision over the coming days and weeks. For most, being able to analyse and evaluate government intervention in markets is crucial to scoring well in exam questions and reaching those top grades.
Evaluation is not a skill that can be learnt overnight. It requires plenty of attempts to get the evaluative style and approach working well.BTW, if you are revising market failure I highly recommend Matt Smith's Scoop.It Board - full of great applied examples on this big area for the Unit 1 economics exam! Click here to view it read more...»
Schools and College up and down the country are preparing for all sorts of different activities for the Comic Relief Red Nose Day this Friday (15th March). Are you doing anything with your class?
Here is a ready-made Powerpoint game to run for approximately 20 to 25 minutes in your class this Friday. Whilst being a fun, team-based challenge, the multi-choice questions are all about facts and figures related to the causes that Comic Relief are attempting to support. As such, the information contained within the game should prove a useful stimulus for discussion within your class about the causes of poverty in Africa, as well as alcohol-abuse and other social issues within the UK. It could also prove a useful tool with discussing why these problems exist and what government solutions could be implemented (as well as asking why they haven't already been put in place!).
Click on this link to go to the Powerpoint file that contains the game.read more...»
The subject of obesity is an increasingly important topic in the study of market failure. Its consequences are severe and go right to the heart of the ‘inefficient allocation of resources’ economic concept of market failure. Overconsumption of a number of demerit goods are one of the many causes of this growing epidemic and worrying trends and statistics can be found here with this BBC video clip also providing a useful overview on the facts behind global obesity. The UK is one of the most obese nations in the world with about a quarter of adults classed as obese and that figure is predicted to doubly by 2050.
It has suddenly become fashionable to be concerned about China’s growth rate slowing down. This is not a matter of a short-run cyclical downturn, with normal service being resumed shortly as the economy roars ahead once more. It is a worry that there will be a permanent slowdown by the end of this decade. Instead of annual growth rates around 10 per cent and even more, the Chinese economy will settle down to the much more sedate rates seen in the West in the 1950s and 1960s in the range 3 to 5 per cent.
Bill Morrison examines whether proposals for a minimum price for alcohol will work in the UK. The UK Government is looking to introduce a minimum price per unit for alcoholic drinks. The price muted is 45p which would make a relatively strong can of lager approximately £0.95. Currently a local supermarket is retailing a brand of lager containing 2.1 units per can at the equivalent of £0.75. Under the new legislation, should it come into force, the equivalent box of ten cans would have to be sold at a minimum of £9.46. More of which later. However, why do we need to introduce a minimum price for alcohol?read more...»
In a democracy, it is always a risky business for politicians to tell the electorate things they do not want to hear. So Steve Webb, the pensions minister, must be congratulated. He told the truth about the retirement age. In a speech last week he stated bluntly: ‘If someone tells a 30 year old what their state pension age is going to be, they are lying’.
A great video clip to introduce students to the new Government adverts advocating "healthy eating" and a solution to the negative externalities created by eating fast food.
We had quite a debate as to whether this would actually work or not!
An updated glossary of key terms for the Unit 1 Economics paperread more...»
I'm sure you don't have any problems convincing your students that education is a merit good/service. Every so often, however, it may be difficult for young people in the UK, aspirational and aiming high, to see how their own learning impacts so positively upon the wider society. Although we constantly debate the quality of education in the UK and strive to improve, many young people will take opportunities to access schools and colleges for granted - perhaps arguing about local differences and the cost of higher education but rarely about actual access to basic education. With such relatively high levels of literacy and numeracy amongst British youngsters it is difficult for them to imagine a society where this is not the norm. The Waseela-e-Taleem initiative in Pakistan, however, could prove a useful example of how government intervention into education is about more than just the structure of assessment and paying teachers - but a country's drive to improve access to basic education and shift its economic as well its political and sociological prospects.read more...»
You may have been too busy to notice but today has been National Stress Awareness Day. This comes just a few days after Ed Milliband's speech about the taboo of Mental Health and how it impacts upon people's lives. If you haven't done so recently, do check out the World Health Organisation 's website which has lots of data on the prevalence of mental health issues around the world with the most startling facts being that 1 in 4 people around the world suffer from mental health issues at some point in their lifetime affecting as many as 450 million people.
And yet, when was the last time you used this as an example of labour market failure or poor economic performance?read more...»
This is the title of a new report from Save the Children, released ahead of a meeting of a high-level UN panel on poverty which takes place in London today. It says that global inequalities in
wealth are at their highest level for 20 years and are growing. In some countries, the gulf between the richest and poorest families has increased by up to 179% over the past two decades, and more than twice the numbers of poor children die before the age of five than rich children. While the charity acknowledges progress has been made in goals such as reducing child mortality, the report says this has been uneven across income groups.
I was told off this week by my students for using McDonald's as an example to illustrate my point yet again. In fact it was the second week on the trot that I was reprimanded as they told me previously that I was always peppering my conversation with Latin phrases "'cos it makes you sound more clever."
"No I don't," I replied - I've told my students a million times not to exaggerate. The offending example came as I was attempting to explain how fatty foods (especially those from the exalted temple of the Golden Arches) were a demerit good. I thought about it for a little while and realised that two weeks ago I'd told them about the use of 'stars' to motivate McDonald's staff and their extensive training programmes when we discussed labour productivity. I'd also mentioned them when we discussed possible issues relating to economies of scale and the fact that a homogenised world can lead to less choice (a weak argument in their view - a McDonald's in every town sounded like a wonderful idea) and discussed the use of persuasive advertising as an example of non-price competition. They were right, I seemed to be talking about McDonald's all the time - and I'm a vegetarian!
"Mea culpa," I confessed.read more...»
Listen, I'm an old curmudgeon. I don't wear patches on my jacket elbows nor do I wear corduroy trousers but that's because I don't like newfangled things. So when I said to my students today that I think that tattoos may be an example of a demerit good they responded with "well, you would say that, wouldn't you!" read more...»
You might find this news report from KL.FM (a radio station in King's Lynn) about the self-regulated sales of 'strong booze' in Ipswich an excellent example of a policy to deal with de-merit goods. Alcohol is a prime example of a de-merit good and a common student response regarding government policies to reduce its consumption often centres around the use of taxation and age-based prohibition. A good evaluative answer to questions relating to government policy would mention the fact that alcohol remains a popular product despite its obvious issues and might also discuss how the over-consumption of alcohol could be linked to something more cultural (compared to, say, France) - hence the need for something a little more creative than blanket bans or high duties. I would want to ask my students questions such as 'what are the costs to society' mentioned within the report and why might the targeting of high-strength alcoholic drinks be a more affective policy then banning sales of all alcohol?
Demographic change can have a direct bearing over time on the growth and development potential of individual countries.
Micro insurance is a growing sector within developing country finance. The number of people covered by micro-insurance has increased almost 6.5 fold in five years, reaching nearly 500 million worldwide, with China and India leading the charge. Micro-insurance attempts to protect poor people against risks arising from accidents, illness, a death in the family or the damage caused by natural disasters - in exchange for insurance premium payments tailored to their needs, income and level of risk.read more...»
In an important new report, Save the Children has highlighted the rising scale and intensity of poverty facing millions of children living in Britain's poorest families. Rising food prices,sharp increases in property rent, fewer employment opportunities and steep hikes in energy bills are just three of the factors that have affected hundreds of thousands of Britain's most vulnerable households. In the United States food stamps are required by millions. In Britain we are seeing a rapid expansion of and demand for food banks provided by charities to offer assistance to families who live hand-to-mouth for weeks and months on end.
Malnutrition has been called by economists at the World Bank as the “non-human face” of poverty. High rates of malnutrition can severely impair development and bring untold human misery. In 2006, around 40% of Indian children under the age of five were undernourished. Progress in reducing this has been painfully slow. See this video from BBC news (Aug 2012) on India's enduring problem with malnutrition.
The Indian government spends little over one per cent of its GDP on healthcare and the state-run hospitals suffer a severe shortage of doctors and beds in state hospitals, but provides tax concessions and cheap land to its booming private healthcare industry providing expensive treatments to India’s most wealthy people. India in total spends only 4% of their GDP on healthcare.read more...»
The supply of health care in the UK is an important economic, social and political issue. Demand for health care treatments grows year by year as the population expands, ages and as incomes rise. For millions of people private health care is regarded as a necessity even though the NHS provides a vast range of services free at the point of use. Treatments such as cosmetic surgery, hand surgery, laser eye treatment, physiotherapy, weight loss services and hip and knee replacements are offered by a range of private sector providers in addition to state health care facilities.read more...»
Teresa May has copied Nicola Sturgeon’s proposals for minimum prices of alcohol which appeared in Scotland last year. Last year’s budget had significant increases in excise duties on stronger beer, lager and cider.
This resource from the Centre For Policy Studies may help pupils and teachers to evaluate different forms of government intervention and their effectiveness.
Here is an example of the law of unintended consequences where unlikely side-effect is a thoroughly welcome positive spillover effect. Researchers are finding that the number of premature births and exceptionally under-weight babies in Scotland is falling - watch this video - and then consider why this might be happening.
Scotland was the first country in the UK to ban smoking in public places, followed by Wales, Northern Ireland and England in 2007. Several years on, nearly one-in-five of mothers to be still smoke - how sad.
No one is in any doubt that smoking kills and for half a century the Royal College of Physicians has been warning of the damaging health consequences of nicotine consumption and addiction. They continue to campaign for higher prices and tougher laws on advertising and packaging to curb consumption - even today one fifth of the adult population smokes. Smoking continues to kill around 100,000 Britons each year and unless smokers give up their habit, 100 million years of life will be lost in the UK, according to experts. Channel 4 news reports on changing social norms and the battle to change behaviour. A good historical perspective on information gaps.read more...»
Most governments have used a combination of policies with varying levels of success. One policy option is the use of variable rates of Excise Duty. The March 2011 budget resulted in a rise in the duty on strong beers (above 7.5% alcohol) of 25%, and the duty on weak beers (below 2.8%) cut by 50%.read more...»
Last week David Cameron called binge drinking a “scandal” and referred to the negative externalities that are incurred by 3rd parties - in this case the NHS, to the tune of £2.7bn a year. He pledged to introduce drunk tanks whilst there are plans for a minimum price for alcohol.read more...»
For those of you who missed this week’s panorama “Poor America” it is well worth 30 minutes of your time. Students often assume that a high GDP per capita always leads to the good life for all- this programme highlights inequality well.
Video clip: Poor America: ‘Some kids are making ketchup soup’
The Panorama programme on America’s poor is available to view for the next 12 months - click hereread more...»
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...»
I do my level best to avoid the processed meat aisles in the supermarkets - or at least the lower end of what is on offer (I remember once the 5pence sausage that was a guaranteed 2 per cent pork!). But perhaps excessive consumption of processed meats - much of which finds a way into the traditional Full-English might be doing people much more harm than good? Follow this BBC news report for more details.read more...»
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...»
Our first few lessons with the new AS Economics students this year were based on the excellent NHS resources suggested by Ben Cahill and Geoff.
The class discussion that these generated was terrific, with the students coming up with a wide range of ideas and questions that led us through many aspects which they will cover in depth over the next two years. One issue was the scarcity of qualified doctors, and the opportunity that immigrant labour gives to increase the ‘labour’ factor of production, and so shift the production possibility boundary to the right - which also touched on regulation in terms of ensuring that doctors who have qualified abroad do match up to the high entry requirements and depth of study for UK medical students. So it will be interesting to discuss with that group today, reports on the BBC this morning that the General Medical Council is concerned that doctors who qualify abroad need more support and induction training on arrival in the UK.
One third of the doctors employed in the NHS qualified abroad. Without them, queues for the services the NHS provides would be much longer and we rely on them to expand the capacity of the service. The GMC’s report draws on a wide range of data including doctors’ surveys and patients’ complaints, and concludes that many overseas doctors have problems adjusting to a different cultural, ethical and professional environment in the UK. One example is the regulation by which the NHS is prevented under European law from providing language checks on doctors from the EEA. The reports also say that doctors need help in understanding how the NHS actually works, its structure and the interrelationships of the different bodies within the service.
It seems pretty extraordinary that an employer which employs 89,000 staff from overseas would not have thought of offering basic induction training when those staff first arrive - but putting that to one side, hopefully now that the issue has been raised, the employer will find use of resources to provide that training more efficient than dealing with the patient complaints and difficulties that the absence of the training creates
This is a follow-up blog to Ben Cahill’s superb idea for a first lesson in economics focusing on making tough choices about resource use with a kidney dialysis machine. See: An activity for the first Economics lesson of the year!
I too will be using health care economics as a starter activity with my AS micro groups this year. I was interested in finding out some of the assumed costs of different health care treatments offered by the NHS and my research took me to published cost/price lists used by NHS Scotland. Drawing on a detailed spreadsheet I selected the following:read more...»
This Washington Post article reports on a decision by the FDA in the United States to significantly ramp up the mandatory health warnings on cigarette packets. Starting next year, cigarette cartons, packs and advertising will feature graphic warnings, replacing the discreet admonitions that cigarette manufacturers have been required to offer since 1966. This follows a similar move by the Australian government a few months back. When will the UK government finally get the message?
So far, governments in the developed world seem to have failed in terms of developing and implementing effective policies that might reduce the negative externalities associated with the ‘obesity epidemic’. However, based on various different news reports this weekend, it seems that the private sector may actually have come up with some strategies that could be worth a try.
My favourite is the ‘pay what you weigh’ approach in a new style of restaurant in Brazil - the heavier the food on your plate, the higher the price. There’s an interesting short clip on this here.
Another approach, this time from Pizza Hut, is to offer unlimited free salad with all meals to all customers - apparently they expect to give away 50m cherry tomatoes and 1.3m million cucumbers over the next year!
And, whilst I haven’t yet seen evidence of this, there is, apparently, an agreement by supermarkets to include portions of vegetables in ready meals in order to help consumers to eat their recommended 5 a day.
Whether these approaches will actually make the nation healthier is unclear, but getting students to think of possible unintended consequences of this might be a useful pre-exam evaluative exercise.read more...»
Should we screen for signs of disease or change the default and provide drugs as a default option beyond a certain age? In a fascinating new study, medics from the Wolfson Institute at Barts and the London Medical School have put forward the case for offering everyone statins over the age of 55 preventative as treatment for blood pressure and cholesterol - they claim that offering relieving drugs might prevent as many as 100,000 heart attacks and strokes each year in England and Wales alone. It is an interesting example of a cost-benefit approach when allocating health service spending.read more...»
The figures are staggering and raise important questions about the system of drug prescription in the UK. 886million prescriptions are now dispensed in the UK every year, at a cost of £8.5billion and the volume of drugs prescribed by GPs here has tripled over 15 years.
There are many factors behind this strong growth in drug use - rising population, growing incidence of obesity, diabetes and depression. But fundamentally it appears that GPs are too inclined to prescribe drugs to patients desperate for some relief. The danger is that over-prescription of drugs can lead to an increase in antibiotic resistant bacteria.
There is much debate and discussion about the Coalition government’s fiscal austerity programme and the tens of thousands of public sector jobs likely to be shed over the remainder of this Parliament. Our Timetric chart today shows total public sector employment and indicates that the jobs contraction has certainly started reversing a long time period of growth in state sector jobs. Much of the spike in numbers post 2007 came from the transfer of several commercial banks into state ownership in the wake of the global financial crisis. The biggest single employer in the public sector is the NHS - here a turning point in employment has begun.read more...»
A St David’s Day hat-tip to Henry Wingfield for spotting this superb visualisation of aspects of the placebo effect. It ties in quite nicely with Rory Sutherland’s placebo segment of his famous TED talk
A hat tip to Diane Coyle for spotting this excellent podcast on the economics of reforms to the NHS - a discussion rich in the use of economic terms and one that might be a great teaching resource for AS micro students looking at aspects of health care markets and government intervention?
If dementia were a country it would be the world’s 18th largest economy - this is the estimated annual cost of coping with dementia according to a new World Alzheimer Report available here and reported here on the BBC news web site. The analysis highlights some of the economic and social consequences of the illness which itself is becoming more prevalent as average life expectancy rises year on year. Lost earnings incurred by people taking time off work to care for a loved one accounts for the bulk of dementia’s costs - and naturally this figure is much higher in richer nations than in countries with lower to middle incomes.
The report says that after age 65, the likelihood of developing dementia roughly doubles every five years.Alzheimer’s Disease International estimated that there are 35.6 million people living with dementia worldwide in 2010, increasing to 65.7 million by 2030 and 115.4 million by 2050. Nearly two-thirds live in low and middle income countries.
My AS Economics students are researching an assignment on the economics of health care - there is a supporting presentation here - and I am hoping that they will consider some of the steep costs of providing care for the elderly as part of their answer. It is a growing burden on the economy and one who global size is now considerable.
Here is a good 5-minute discussion here of the 45p a unit minimum alcohol price proposed in Scotland.
It offers a good application of some of the main AS micro topics - since it is targeting consumers for whom alcohol is a problem, the highly price inelastic demand for alcohol will probably mean the 45p minimum price is not a huge disincentive.
Paradoxically, since minimum prices only work if the free market equilibrium price is currenly below the minimum price, what it may actually cause is a shift towards higher strength alcohols that are already above the 45p a unit! There’s the law of unintended consequences for you!