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One of the jobs of an economist is to ask this question daily. What else might these resources have been spent on? This concept is known as opportunity cost.
Perhaps the mission can be justified in cost/benefit terms. But maybe it shouldn’t have to.read more...»
Just this week Ben Christopher has blogged that China poised to pass US as world’s biggest economy. It’s an interesting question of measurement, and there’s a long running debate about When will China ‘overtake’ America?
It will be many years yet before China really catches up on a per capita basis, of course. Rather depressingly, I have been wondering if the great catch-up is slowing down. From around 2000 to 2008 poor countries made galloping progress, but they seem to have hit headwinds. Will China also suffer this fate?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 Economist have posted a terrific video that takes a tour along the Pearl River in China. As the scenery rolls by, the narrator comments on the extent to which the journey through the surroundings reflects a journey through China's recent economic development.read more...»
Economics examiners like you to be able to differentiate between two types of poverty. We come out with statements like “of course you don’t get absolute poverty in Britain”. But I’ve just been reminded that it’s not so long ago that some people in the UK lived a very threadbare existence. Even today there are pockets of shocking deprivation.
When the issue of poverty crops up in the UK, we tend to be referring to relative poverty. But might there be good reasons to stop using that term?read more...»
Hopefully Economics keeps moving forwards, with new ideas enriching the subject in schools and universities. You may be aware that there is a ‘post-crash economics’ debate out there, with people wondering how economists got things so wrong in the lead up to the crash.
I was lost for words when I met Cambridge economist Ha-Joon Chang recently. Partly I was a bit star struck, but mainly it was because I was so impressed by his plea: can’t we draw on more sources of inspiration than the neo-classical school of economics which has come to dominate the subject?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...»
Here is a really excellent blog on the issue of growth divergence - Simon Taylor contrasts the historical growth records of the United States versus Argentina and then South Korea against Ghana. The accompanying charts reveal starkly the widening gap in GDP per capita between each pair of countries over the very long term.
I will be following Simon Taylor's blog as the new school year comes into focus http://www.simontaylorsblog.com
Violence is obviously the worst element of conflict, but the economic devastation can also be huge. Economists should be reflexively anti-war. Jeffrey Sachs discusses the waste of war on Project Syndicate. You can use the topic of war to introduce economic ideas like opportunity cost, fiscal stimulus and supply side shocks.
I was reading about sanctions and trying to think how they affect economies. They are obviously intended to reduce the benefits of specialisation and international trade for their target. And like almost all trade restrictions, they hurt the economies implementing such policies too.read more...»
I am often writing blogs on the debate over the limitations of GDP as a measure of economic and social progress, most recently with coverage of the Social Progress Index. Here’s another approach, the Good Country Index. It's a deceptively simple concept, yet quite powerful.read more...»
The varied nature of Economics means there are so many (sometimes it can seem too many) themes to explore. And priorities change. Sometimes the main issue is production (making more stuff – and how the value of that is measured). Sometimes it’s exchange (looking at how markets work). Yet distribution (often overlooked, especially when economies are booming) seems the hottest topic at the moment. Inequality tops the bestseller lists.
Here are a few tips and links for using the topic as an intro to A2 economics, great for macro, with scope for analysis and evaluation of UK government policy and approaches to development economics.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...»
The annual Institute for New Economic Thinking (INET) conference was held in Toronto earlier this month. INET was created by George Soros in the autumn of 2009 in response to the economic crisis. Mainstream economics bears a heavy responsibility for creating the intellectual climate prior to the crash that the problems of boom and bust had been solved forever. New ideas were needed. Certainly, INET has funded lots of interesting projects which orthodox funding bodies would have rejected.read more...»
A century ago, Scotland probably had the most globalised economy in the world. Since then, especially since the 1960s, Scotland has de- industrialised, and because industry is so much more globalised than other sectors, the economy has also ‘de-globalised’.read more...»
Smaller families, improved knowledge about nutrition and hygiene, and a cleaner environment with better housing, less overcrowding and a reduction in toxic heavy industry – all of these things have contributed to the spectacular increase in the height of the average young man in Britain over the past one hundred years.read more...»
You may be asking why what sounds like a politics question finds a place on the economics blog. The answer of course is that the issue of governance crops up a lot in economics. Governments have to address the challenges thrown up by market failure, and offer a fiscal framework that helps tackle macroeconomic problems. Regulators intervene in uncompetitive markets. Those of you looking at development economics don’t get far before asking if poor quality government holds back the weakest economies.
Hence the question (above). All rich, developed, mature economies are democracies. Ricardo Hausmann offers and insight into why this might be so on the pages of Project Syndicate.read more...»
Pub economics often explains the plight of poor countries in terms of the problems posed by corruption. That approach might have some value, and to raise the quality of your analysis of this topic, it’s helpful to say why and how it might arise, and the effects it might have. Rich countries are also vulnerable of course.
The Economist has a really helpful couple of articles on this topic, which it calls ‘crony capitalism’.read more...»
Here’s a great topic for an economics debate. National income is still lower than before the financial crash. We have a ‘cost of living crisis’. Yet it’s possible to argue that life is better now than it was in 2005. How can that point be made without being laughed out of the room?read more...»
A You Tube version of the BBC documentary on Hayekread more...»
A great introduction to some global or development economics, looking at the world’s biggest problems, as measured by their cost to the world’s economy. There’s commentary and a good stimulus video. It will add a dimension to your introduction to global challenges, even if you’re already familiar with the basic Copenhagen Consensus idea: prioritise the world’s problems from biggest to smallest. That approach should lead to a more efficient response, given that resources – and political will – are limited.read more...»
The NHS is part of the British establishment just as much as tea, talking about the weather and sarcasm. This view through rose-tinted spectacles has prevented serious debate and clouded our judgment. Foreign visitors are now being charged to use our A & E services, yet they can still see GP's for free. This ludicrous half measure is just one example that we are blinded by love for our NHS. A situation has arisen in which any attempt from politicians to discuss much needed improvements for the current healthcare system is political suicide. This is hindering development.
'Tis the season of making predictions about the future. What will 2014 bring? There has also been a lot a coverage of a study making predictions as far ahead as 2030.read more...»
In a recent assignment, A2 students were asked to write a 500 word profile on each of two development economists of their choice and to capture their key ideas and connect to one or more current issues in development. I will be adding some of their responses to the economics blog. Here Ben Evans focuses on the work of Amartya Senread more...»
In a recent assignment, A2 students were asked to write a 500 word profile on each of two development economists of their choice and to capture their key ideas and connect to one or more current issues in development. I will be adding some of their responses to the economics blog. Here Ben Evans focuses on the work of Daron Acemogluread more...»
Anyone starting out in Economics will almost certainly tackle this issue right from the start: it's completely fundamental to the way economists think. Ben Cahill may have helped you with a starter activity on this topic, and I've included a few more links that may help you link to the topic of specialisation and the division of labour: our main way of tackling the problem.read more...»
If, like me, you were fortunate enough to attend this week's Tutor2u Economics Teacher National Conference in London, I'm sure you would have been equally captivated by Tim Harford's talk on the life and times of Bill Phillips. It was fascinating to know that Phillips was so much more than just a downward sloping curve!
The Chancellor's review of public spending tomorrow will generate a wealth of articles and analysis - here is a nice one to start with. The BBC website has looked at how the proportion of total spending which goes to each department has changed since 2004, when government spending was last 40.5% of national income: this is the figure that the Chancellor is aiming at in 2017-8 if the government reaches its targets, and is a stark contrast to the 47.4% reached in 2009-10.
SPOTTING and identifying new species is always exciting. And the last couple of years has seen the emergence of a new type of economic commentator, the recovery denier. Paul Krugman, the Nobel prize-winning economist, wrote a piece at the end of last year in which he compared the current situation to that of the 1930s. On Newsnight recently, another Nobel economist Joseph Stiglitz poured scorn on my assertion that the US economy has recovered.
But what does the data tell us? In the 1930s, output in America fell by nearly 30 per cent from its 1929 peak. This time, the fall was only 3 per cent, and the level of output is now higher than it was below the crash. The latest US labour market figures show continued growth in employment. Over 5m net new jobs have been created over the past three years, all of which have been in the private sector. Unemployment has just fallen to a four year low.
Understand better some of the very long term changes in the structure of output and employment in England and Wales using this clear video resource published by the Office of National Statistics. The video also looks at some of the key technological changes that have driven big changes in output and jobs over the years.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.
On the morning that news of the death of Margaret Thatcher came through on the news wires, I was visiting Woodhorn Colliery Museum near Ashington in Northumberland. It was an eagerly anticipated journey having seen the Pitmen Painters (now on a national tour) a few weeks earlier.
The play celebrates the work of the Ashington Group of painters who began studying art as part of an Workers' Educational Association course in the mid 1930s and eventually found themselves on a life-changing pathway as they drew inspiration from their life and work in the pit communities of the North East.
If you are in the North East please pay a visit to the Woodhorn Colliery Museum. First of all, it is free save for the £3 car parking charge. Second there is a stimulating, evocative and often moving exhibition on the rise and eventual fall of the coal mining industry in the UK. Just a few weeks back Maltby Colliery one of the last deep mines in England, was closed as owners Hargreaves Services said it was no longer viable. And the Daw Mill colliery in north Warwickshire recently shut down with 650 jobs being cut, after a big fire at the facility which made future use of the mine impossible. Despite a plethora of open cast mines, there are now only two deep mines left in the UK at Kellingley Colliery in Yorkshire and Thoresbury Colliery, Nottinghamshire both run by UK Coal.read more...»
A recent World Bank report asked ‘Where is the Wealth of Nations?’ Calculations presented at the Economic History Society’s 2013 annual conference show that for Britain, the answer is undoubtedly in its people.
Dr Jan Kunnas and his colleagues calculate that Britain’s ‘human capital’ has grown by a multiple of 123 over the past 250 years. The main drivers of this phenomenal growth have been the growth in the workforce and the growth in wages.
The researchers define human capital as the knowledge and skills embodied in individuals – and they measure it by the discounted earnings the population is expected to earn during their time in the labour force.We have an extended revision note on human capital and economic growth - read it here
The Changing Wealth of Nations - World Bank reports can be accessed here
How Britain escaped from the travails of the Great Depression and achieved 4% a year growth in the years from 1933 to 1937 has important lessons for today’s policy-makers, according to research by Professor Nicholas Crafts, presented at the Economic History Society’s 2013 annual conference.read more...»
Oxfam senior researcher and former co-author of the UN's annual Human Development Report Kate Raworth visits the RSA to explain 'doughnut economics' - the bold new theory that is sweeping the development world
Investors vs Managers vs Employees - a classic example of stakeholder conflict - is to be examined in a 30-minute radio programme on Monday evening, spotted by my colleague David Wright. Radio 4's Analysis series will be looking at "...how the relative power of executives has grown and is now reflected in their own
much higher financial rewards and enhanced esteem. And if both workers and investors want to increase their influence and their share of the rewards how might they go about it?".
The programme will also look at the power that trades unions held in the 1960's and 70's, and how that power was lost. Looks like a useful half hour: BBC Radio 4 on Monday 21st January at 8.30pm.
Here is a link to a video of a talk given by the eminent economic historian, Professor Nick Crafts on whether there are important lessons from the 1930s for policy-makers as they search for growth enhancing policy measures. The opening statement is gloomy, but the historical sweep and arguments are impressive! A stretch and challenge talk for ambitious sixth form economists.read more...»
Identify and explain four factors that have contributed to Indian
economic growth in recent years
The presentation streamed below is from a talk given to the 2011 Economics Teacher National Conference organised by Tutor2u entitled "The future of economics – lessons from
the Nobel Laureates… and beyond"
A recent BBC World Service's World Business Report included an interview with Moeletsi Mbeki, deputy chairman of the South African Institute of International Affairs. The discussion focused on the problems facing the South African mining industry which currently accounts for nearly 60% of total SA exports.
As the Eurozone continues to be bufferted by instability in Spanish Banks, and uncertainty over Greek membership of the single currency. Robert Peston fronts a programme on The Euro on BBC2 tonight.
It remains to be seen if he offers any answers to Mervyn King’s observation, that the UK biggest trading partner, the euro area, is “tearing itself apart without any obvious solution,”
At the World Traders’ Tacitus lecture last night, Terry Smith proposed a return to the provisions of the Glass-Steagall Act in order to reform the banking sector. The title of his lecture was ‘Is Occupy right?’, and while he clearly didn’t go along with some of the propositions of the Occupy movement, such as the imposition of a financial transaction tax, he did say that they have a serious point to make about the financial system.read more...»
Last night’s edition of Newsnight should be required viewing for all AS and A level economists - and it is a huge shame that it is only available on i-player for another 7 days. Introduced on the shock news that even Tesco is vulnerable to the downturn, it included reports from Andrew Verity looking at whether the British economy will ever wean itself off shopping and the City, and an excellent (and all-female!) discussion including Deborah Meaden and the FT’s Gillian Tett. Try challenging your students to watch and listen to this while noting down every aspect of the syllabus which is mentioned or referred to - that will keep them busy!
There was also a debate between Employment Minister Chris Grayling and disability campaigner Sue Marsh about the government’s welfare reforms, defeated in the House of Lords the night before, and finally Tokyo correspondent Roland Buerk looking at Japanese economic stagnation of the late 1980s and 90s, to consider whether it was a “lost decade” and what could be learnt from it.
A superb, relatively simple, explanation of the Eurozone debt crisis with good data on historical compliance to the ‘Stability and Growth Pact’. Plenty data for students to get their teeth into. How significant is the level of government debt?
What changes are produced by great economic upheavals? The financial and economic crisis prompts a rethinking of the assumptions about how businesses succeed and how economies operate. In a recent edition of the Global Business programme on BBC radio 4, Peter Day met Richard Florida, a renowned economic geographer who has written a new book The Great Reset. Here are some of the notes I jotted down from the programme:read more...»
A recent economic study1 found that bicycle ownership can boost household income in sub-Saharan Africa by 35%. I may be biased given my passion for cycling but I think there are indeed some very strong economic arguments for encouraging more bicycles both in the developing and the developed world.read more...»
Many thanks to one of my students from last year (thank you, Henry!) who has just attended his first undergraduate Economics lecture and enjoyed this YouTube clip. It shows Yoram Bauman, self-appointed Stand-up Economist, making a presentation to the AAAS (American Association for the Advancement of Science) in 2007, in which he translates the Ten Principles of Economics.
Five minutes of good fun, at the expense of economists who take themselves too seriously, which you and your students might enjoy as a contrast to the gloom of impending meltdown - although I wouldn’t want to spoil the fun of their first lecture at university.read more...»
A new event for Tuesday 26th July has been added to the LSE listing today, which is a debate to be chaired by Paul Mason, economics editor of BBC 2’s Newsnight (and author of Meltdown: The End of the Age of Greed) and recorded by BBC Radio 4 for broadcast later on 3rd August. Billed as a debate between modern day followers of the sharply contrasting ideas of Keynes and Hayek, one of the speakers will be Robert Skidelsky, Emeritus Professor of Political Economy at the University of Warwick, with others to be confirmed. Entry is free, and no tickets are required as it will be first-come-first-served.
A wonderful chart showing the long run path of GDP per capita for the USA, Africa, Western Europe and Asia at constant 1990 prices. The sweep of this data makes for a terrific discussion in the classroom. So too does the second chart which tracks UK population and per capita GDP (measured in US dollars at constant 1990 prices)read more...»
BBC Radio 4 has a new series on the history of economic ideas starting next week. Michael Blastland lays out the history of economic ideas to understand why economics goes wrong and whether it can ever go entirely right - here is the link to the relevant web page
This second Wildcard Wednesday extension activity post draws inspiration from a fascinating exhibition on isotype that I went to at the V&A in London over half term .