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Entries for the RES essay competition have been flying in today! And we can announce that the provisional judging for the competition will take place on Friday 12th June. A shortlist of essays selected for final judging will be announced on this blog later that night so that students can find out who have made it through to the last stage and scrutiny by a high profile judging panel!
Entries for the 2009 RES Essay Competition are flowing in and there are just over two days left before the deadline on Monday 18th May. So far students from over eighty schools and colleges have submitted their thoughts on the question “Are economic recessions inevitable?” There is still plenty of time to submit your entry which must be done online using this link.
We look forward to receiving your entry!read more...»
William Baumol defined contestable markets as existing where “An entrant has access to all production techniques available to the incumbents, is not prohibited from wooing the incumbent’s customers, and entry decisions can be reversed without cost.”
For a contestable market to exist there must be low barriers to entry and exit so that new suppliers can come into a market to provide fresh competition. For a perfectly contestable market, entry into and exit out must be costless
An important area for students to understand are the ways in which global economic forces affect the domestic economy. Both the new AS and the legacy A2 syllabus for AQA expect students to be aware of the nature of and possible consequences of external demand and supply-side shocks. This chart from the Bank of England Inflation Report (May 2009) highlights just such a demand-shock - the collapse in world trade and the global recession.
There has been a period of steep and sustained deflation in the average prices of property in the UK. Commercial property is 40% down from the July 2007 peak and residential property is - on average - down by 20% since the peak in the autumn of 2007. Land Securities, Britain’s largest real estate company has just revealed a £4.7bn fall in the value of its investments. It’s retail properties fell in value by 37 per cent and fared only slightly worse than its stock of London offices, which were down by 34 per cent. The commercial property sector is suffering from a slump in demand and sharp rise in vacancy rates. Housebuilders have made big cut-backs to the number of new homes being built. Both commercial and residential property markets are experiencing excess supply.
I have produced a mark scheme for the mock 2888 paper included in the toolkit that was produced last month. I hope it will be of use for students and teachers alike.read more...»
Tom Witherow reviews the new book by Kelsey Timmermann. This review is part of the new edition of Etonomics - the economics magazine produced by some of our Year 12 students.
“When I first saw the title of Kelsey Timmerman’s new book Where Am I Wearing, I thought I was going to be made to feel outraged at the global corporations such as Nike, Gap and Primark. Their exploitation of workers in countries such as Bangladesh and Cambodia would make me look at myself and wonder how much I needed the new t-shirt I had bought just earlier this week. However, the view offered is original – we’ve all seen a few too many Panorama specials and other undercover camera programmes revealing desperate factory conditions. Timmerman considers the garment factories as a way that
countries can develop with dignity, without the need to rely on the West. But the real charm of this book is the fact that Timmerman takes the global issue of globalization and attempts to see what it means to people on a personal level.”
Read the rest of the review here
Another visit to the LSE tonight for the Ralph Miliband public discussion on the global financial crisis. Will Hutton (Work Foudnation) and Martin Wolf (Financial Times) in conversation and taking questions from the floor.
Tom Hosking asks where blame can be apportioned as the recession deepens. An article from the new edition of our Year 12 economics magazine Etonomics.
“A golden age of low inflation and money-for-nothing increases in property wealth served only to blind most of us to the excessive risks that bankers were
taking. The reckoning may last for a generation.”
The power of networks is becoming increasingly recognised in the economics of long run costs, revenues and profits. Network economies rarely figure in mainstream AS and A2 economics textbooks but they will have to eventually as the sheer scope of network effects is understood.read more...»
Forty nine schools and colleges have already submitted some entries from their students for the RES essay competition with the deadline for entries still a week away! We would love to see that figure double over the coming week and I am sure there are many schools encouraging their students to polish off their essays and submit using the online form available here.
For the moment here is the roll call of schools who have already entered the competition! Who will be the fiftieth? And can we reach 100 schools and colleges?read more...»
A ten question diagram test for my Year 13 students preparing for their A2 micro paper. Available for download as a word file.
Having worked through the Jan 2009 papers and the specimens, I have produced a couple of mock AS macro questions for my students in the final week of their exam preparation. The first one - on unemployment and the economic cycle - is available below. I will post a suggested mark scheme in my blog tomorrow.
Spotted this tonight - a BBC international radio interview from a few days ago in which Dan Ariely explains the essence of behavioural economics. Dan Ariely has done a string of experiments to show how people actually behave.He finds that they don’t behave like the economically rational person that economic theory assumes. Hear the interview here.
The Economic Naturalist is one of my favourite books on economics. Robert Frank had a simple but powerful idea - to get his students to think of interesting economic enigmas and then write a short paper on each as part of their assessment. The best questions raise all sorts of issues in our mind and prompt us to consider some of the basic core economic concepts that students are presented with in their introductory courses.
Robert Frank is scheduled to speak at the Royal Society for the Arts on Wednesday 10th June and this promises to be a lunchtime meeting full of interest. Here are the details:
“Join the renowned ‘economic naturalist’ Robert Frank, who argues that much of the handwringing about deficit-financed economic stimulus spending is overblown. For Frank, failure to engage in aggressive stimulus spending will simply prolong the downturn, causing tax receipts to decline further and result in even larger deficits. If stimulus spending is focused on investments that yield higher returns than government bonds, its effect will actually be to make our grandchildren richer, not poorer. But they would be much richer still in the long run if we paid for the same investments with our own money. Join Frank as he asks: How can we break out of our current, wasteful consumption pattern? Will a new taxation system solve all of our woes? And can we have ‘more of everything’ by eliminating economic waste?”
Details and ticket applications from the RSA website
I have attached a mock A2 AQA macro data question that my students attempted this morning. Because our lessons are only forty minutes long I missed out the two short questions at the start and just got them to try a couple of analysis and evaluation questions. My answer plan for the final part is below
A group of my Year 12 students have written, edited and produced a new edition of Etonomics, an informal magazine that encourages them to write about issues of economic interest. In the past we have found this a good way to stimulate ideas and writing that goes beyond the confines of the syllabus and it is also an idea for stretching students after the AS exams are over.read more...»
Here is an interesting example of environmental policy coming into conflict with short run macroeconomic priorities. The Financial Times reports that “In an effort to ease the strain on an economy now on the edge of recession, Prime Minister Kevin Rudd said the government would delay the start of the world’s most sweeping cap and trade scheme outside of Europe until mid-2011, but still aimed to push the emissions trading laws through parliament this year.” The government has come under huge pressure from organised business who have argued that in a recession, imposing extra costs through a carbon allowance scheme could damage profits, jobs and investment in the short run.
And given the volatility of carbon prices within the EU emissions trading scheme, it worth noting that Mr Rudd has said there would be a fixed carbon price within the embryonic Australian scheme for 1 year to July 2012. According to this BBC report, “Australia has the highest per capita emissions in the developed world and coal is its biggest export.”
Submitting your entry for the RES competition is very straightforward! Simply click on this link for a form which gives you all that is needed to send your essay on its way!
Please note that for 2009, postal entries are not permitted. The form enables you to upload a Word or PDF version of your entry. You also need to provide contact details of your supervising teacher or lecturer. You are also asked to submit a word count for your entry. There is a word count facility in microsoft word - found under File - Properties. The bibliography does not count as part of your word limit so you may have to make a small adjustment for that. Dont worry too much about this - the word limit is a strict one in the sense that all short-listed essays will have a full word count done by us to make sure they meet the guidelines.
When submitting an entry for the RES competition please remember to include a bibliography with your essay, preferably at the end of the essay. This is an important aspect of an essay - acknowledging some of the main sources used and giving the reader a perspective on the books, articles and other information used in preparing your answer. My advice is that a bibliography should not be top heavy with web site references - beware the curse of relying too heavily on the university of Wikipedia!
Welcome to the merry month of May! Our email inbox is filling up nicely with essays submitted for the RES competition.
Who to blame? Who to target in the search for the culprits behind the great banking crisis which has mutated from a calamity in private sector credit and derivatives markets into a broader, damaging economic and social disaster. Playing the blame game is easier armed with the benefit of hindsight. But with each passing day it becomes clear that what we have seen is a multi-tiered case study in market and governing failure. Ordinary citizens — whose pensions and living standards are now threatened and blighted by the folly of financiers blinded by their own hubris and greed — will not easily accept that the current generation of leaders are the people to lead us out of this mess.read more...»
Many thanks to Tim Mason for providing this helpful guide for students ahead of their papers. Tim welcomes all comments especially from centres who are experienced hands at the OCR course! Please leave your comments below.read more...»
I have put together my recent series of posts on exam technique for the AQA AS economics papers into a single word file - available for download by clicking the link below.
Part (c) explanation questions in the new AQA AS papers score 12 marks. For example in the January 2009 macro paper students were faced with this question:
“Extract B suggests that international studies ‘provide explanations for differences in labour productivity’. Explain two determinants of labour productivity.”
On the other question
“Explain two determinants of saving by households”
The examiners’report gives some important clues as to how to approach these questions and achieve high marks with the mimimum of fuss.read more...»
The second question on the AQA units 1 and 2 papers asks students to identify features of selected economic data - usually in the form of a chart and/or table. The question carries 8 marks. I produced a quick revision exercise on this aspect of the new paper a few weeks ago and it is available for download here.
The January 2009 Examiners’ reports make for important reading once againread more...»
There is an excellent graphic available on The Times website that would be well worth down loading, printing out and sticking in your folder or study wall. It is a summary of the budget given by Alistair Darling last Wednesday and the differences between the government’s economic outlook and the outlook put forward by city economists. Remember examiners love to see exam answers which are packed with current economic data.
The pdf of the graphic can be found here.
If you can get to the RSA on a lunchtime, this looks like a stunning opportunity. Thursday 21st May at 1pm
“Acclaimed economist Robert Shiller challenges the economic wisdom that got us into the current financial mess, and puts forward a bold new vision to transform economics and restore prosperity. The global financial crisis has made it clear that powerful psychological forces are imperilling the wealth of nations today. From blind faith in ever-rising housing prices to plummeting confidence in capital markets, ‘animal spirits’ are driving financial events worldwide.”
Will King, founder and CEO of King of Shaves is featured in today’s Sunday Times. He is to demerge the division of his company that produces shaving products under licence for other brands including Ted Baker. According to the article “this will allow King to focus on the manufacturing business, which last year expanded into making razors with the launch of the Azor. The product is designed to break up a market dominated by Gillette and Wilkinson Sword.”
Will is speaking at our National Conference for Economics Teachers and delegates will each receive a King of Shaves goody bag.
A Channel 4 programme due to air on Monday 20th April might be one for the departmental DVD library? How the Banks went Bust is due to be shown at 2000 hrs. Economist and author Will Hutton gives the definitive insider’s account of what went wrong. Talking to the key players in government, Wall Street and the City, Hutton unveils the true extent of the greed, ambition and reckless risk-taking that is now carrying the economy into the worst recession for a century. Is it really true that no one saw it coming? Or could the recession have been prevented? More details here.
A highly relevant piece from the BBC web site - carbon markets promise to be a key player in the fight against climate change, argues Professor Michael Grubb
During a spring clean I came across a book of hand-written teaching notes from my first two years at the chalk-face - 1987 and 1988. There were some pleasant reminders of time spent getting my hands dirty on the banda machine (do you remember the smell of those freshly printed pages?) and also numerous flashbacks to how dependent I was on getting the scissors out to cut useful articles, charts and tables to insert into student worksheets and handouts - has anything changed? Two images below take us back to the end of the Lawson Boom of the late 1980s.read more...»
Details of a new book by the International Editor of the Financial Times Alan Beattie
“The path to prosperity is rarely obvious and the sources of success are often unexpected. Time and again, world leaders have failed to learn the lessons of economic history, and their mistakes continue to have surprising and catastrophic consequences. In False Economy, Alan Beattie uses extraordinary stories of economic triumph and disaster to explain how some countries went wrong while others went right, and why it’s so difficult to change course once you’re on the path to ruin.”
False Economy: A Surprising Economic History of the World - available now for pre-order from Amazon
Diane Coyle’s blog over at Enlightenment Economics is superb for teachers who want to keep up to speed with new books on economics. In today’s blog she casts her eye on the plehtora of new titles covering the credit crunch - over ninety are listed by Amazon .... and counting! More here
Today’s Observer carries some hugely encouraging news:
Economics is a must study for students in recession
A surge in sixth-formers applying to study economics at university is being attributed to the global recession awakening a public thirst for knowledge about how the financial system works. Applications for degree courses beginning this autumn or next were up by 15% this January, according to UCAS, the Universities and Colleges Admissions Service. A spokesman for the Royal Economic Society said applications to do economics at GCSE and A-level were also up
Interest in the Royal Economic Society’s annual essay competition for sixth form economists is very strong this year. There is still more than a month before the final deadline for entries to be submitted. Here are the main details.
This link might be useful for colleagues wanting to add to their image library when teaching economic systems. Most of these images seem to hark back to the days of state planned output, rigid price controls, long queues and a distinct lack of choice! I love the image of a shelf of soviet astronauts - light years before Buzz came along!
A programme due for screening on BBC 4 this coming Wednesday could be a really useful teaching resource on the economics of farming.
This is a new documentary series looking at the history of 20th century farming in Britain opens by focusing on milk. In the early years of the century, 150,000 dairy farmers milked by hand and sold milk door to door. By the end of the century the 15,000 that were left were breeding cows that increased yields by 400 per cent and milk was sold through supermarkets.
A fascinating article from Nick Fraser (editor of BBC 4 Storyville) on economics, economists and the financial crisis. A mixture of scorn and cynicism - much of which is well targeted - but with rays of hope that a new breed of economists can emerge from the storm with fresh contributions to make
“We do need to tell economists how we want the world to be. And if economists are to fix our world, they need to know more about it.”
Here is his list of ten must read books on the crisis:read more...»
“When we emit greenhouse gases we damage the prospects for others and, unless appropriate policy is in place, we do not bear the costs of the damage. Markets then fail in the sense that their main co-ordinating mechanism – prices – give the wrong signals.”
Professor Nick Stern (Blueprint for a cleaner planet)
Carbon trading is an important part of the EU’s environmental targets – the challenge is to find policies that are EFFECTIVE, EFFICIENT and EQUITABLE.
This four page revision note provides some analysis and evaluation on the European Union emissions trading system - designed for AQA A2 economists but hopefully also useful for those preparing for the 2888 paper and for students preparing environmental questions for the Edexcel Board.
Revision on Carbon Trading:
In 2012 European airlines are scheduled to be included in the carbon emissions trading scheme for the first time. Aviation is a industry responsible for 650 million tonnes of CO2 annually - around two percent of global greenhouse gas pollution but this share is expected to rise in the years ahead and the industry has been under sustained pressure from stakeholders including the EU Commission and green pressure groups to do something to tackle carbon emissions.
The airlines have complained about being included in the EU scheme - they complain that participation will damage their competitiveness during a difficult time for airline businesses. Swiss International Airlines chief executive Christoph Franz has argued that including airlines in the EU-ETS could actually lead to more greenhouse gas emissions as airlines sought to fly around EU airspace.
But without signs of an active commitment to reducing their emissions, the industry may well find that it is subject to even tougher regulation in the years ahead and/or a specific pollution tax on aviation fuel as a means of ‘making the polluter pay’.
This week four of the world’s biggest airlines have supported a global scheme to curb carbon emissions - they are Air France/KLM, British Airways, Cathay Pacific, Virgin Atlantic together with the under-fire airport operator BAA.
The Aviation Global Deal Group is pushing for a global cap on aviation emissions to take effect in 2013 when the new climate deal to replace the Kyoto Protocol must be in place. A UN body would be charged with auctioning the C02 allowances with some of the revenue earmarked for financing lower carbon investments in developing countries and some to help fund development of sustainable second-generation biofuels for use in aviation.
Watch this airspace .... this is a really important aspect of the climate change policy domain within the European Union.
I recently came across the WallStats web site - there are some superb graphics here with an US-tilted economics and politics focus.
“The theories and principles behind economics are difficult for many to understand. However, many of the following blogs take this difficulty into consideration as they try to reach out to a broad audience in many cases. The list contains some of the most popular international perspectives, academic blogs and a list of “come-hither, I know you want to hear me out” blogs written by economists or by those who are mired in this field.”
The good news is that we make it into the list .... you will have to find out where! Plenty of very good blogs listed here and I have already added several to my own personal blogroll as a a result of going through them. I particularly like this one From Abba to Led Zeppelin which uses music lyrics to explain economics ideas!
Teaching colleagues who would like to have a free trial of our Economics VLE for the remainder of April are very welcome to leave me a contact email address and I will set up a trial account which gives access to the four courses we have at the moment - two for AS and two for A2 economics.
The Society of Business Economists is offering Economics teachers a substantial discount on their journal - read on to learn some more about the leading organisation serving business economists in the UK.read more...»
The Lex column in today’s Financial Times has a superb piece on why food prices may start rising again raising fresh fears of high food price inflation. The key is to understand the reactions of farmers to changes in prices and the decisions they make about whether to plant new crops on marginally productive land. See this short extract:
“The cost of corn, soya and wheat has fallen sharply from the levels they reached last summer at the height of the commodity boom. But lower prices mean lower returns per acre, so farmers are cutting plantings of marginally productive land to maximise profits…....This is precisely the set-up investors who worry about a rapid return of inflation fear: low prices lead to underinvestment and cuts in productive capacity. When the economy picks up, prices soar because suppliers – in this case, farms – cannot keep up with renewed demand.”
(1) How could you illustrate the process described above with supply and demand diagrams?
(2) Explain why price elasticity of demand and price elasticity of supply is relevant in explaining food price volatility
(3) What do you understand by the term ‘marginally productive land’?
Two of the key themes of the OCR2888 pre-release stimulus material this year are the causes and consequences of rapid food price inflation - something known to economists as agflation. 2007-08 witnessed a dramatic increase in the prices of many basic foodstuffs across the world. Agflation has many demand and supply-side causes (discussed in our toolkit publication) and the economic and social impact is hugely important not just for EU consumers and producers but around the world. This is highlighted by a number of global campaigns by organizations such as the World Food Programme and Save the Children.
A recent Save the Children press release for a food relief programme for people in Kenya makes the point better than I ever can:
“Poor people in the poorest countries were hit hard by the rise in food and fuel prices last year. The financial crisis will hurt them even more, and children are most at risk. Without a big increase in financial resources for the poorest countries, large numbers of children will fall into poverty, drop out of school, suffer ill-health or be more exposed to violence and exploitation.”
And now Save the Children is turning its attention to food poverty in the United Kingdom. This BBC article covers the issue but better to turn to this short video clip. Persistently high food price inflation creates winners and losers (someone somewhere receives the money down the supply chain) but the social consequences cannot be denied especially the dangers of malnutrition and its impact on education and health outcomes among the most vulnerable.
There us what looks to be a very promising series launching on Channel 4 next Thursday - With £25,000 in his pocket from the sale of his flat, Conor Woodman travels across four continents, trading in all kinds of products with the aim of doubling his money - Around the World in 80 Trades. This potentially could be an excellent resource to use alongside your teaching on international trade, commodity markets and globalisation. There is also a new book to accompany the series.
The EU single market has enlarged on several occasions – the most recent being 2004 (ten new countries) and 2007 (two new countries). For many countries of ‘New Europe’ the accession into the EU has been an event of major economic and political importance.
Enlargement occurred during a period of strong economic growth (driven by fast-growing exports in an era of globalisation) and low inflation and interest rates. One can argue that this was an opportune time to widen the single market – macroeconomic conditions were favourable.
But progress made by new EU members has not been even – most have achieved a degree of income convergence and have managed to bring down unemployment levels. But there have also been underlying problems – notably property bubbles, rising inflation and the effects of depopulation as migrant workers from central and eastern European countries in particular moved west in search of work and higher incomes.
From late 2007 onwards the global credit crunch and ensuing international slowdown and recession has hit the EU hard. The Euro Area is export dependent (more so than the USA) and economic and financial difficulties have spread into many of the new member states.
This three page revision note is designed for students preparing for their EU paper this June.
Here are some advice notes for students researching an entry for the RES essay competitionread more...»
UK trade in goods and services with fellow members of the European Union (EU) has deepened in the 36 years since we joined the European community. This revision note designed for A2 students taking the AQA paper looks at trade between the UK and the EU and in particular the fast growth of our exports of goods and services with the countries of ‘New Europe’. However the deep recession in the Euro Area is leading to a steep decline in the value of our trade despite a much more competitive exchange rate.