Investment in Energy Infrastructure
Many people take as given a pressing need to increase capital investment in the infrastructure of our energy sectors - but how strong are the economic and social impacts of such investment? The LSE Growth Commission met this week to discuss this and I have brought together some of the arguments drawing on a number of various twitter feeds
read more...»Unit 1 Micro: Climate Change Policies - Finding the Right Mix
There are many different market failures when it comes to understanding some of the key environmental problems and challenges of the age. Addressing, attacking and correcting for complex and multiple market failures requires pointing to different policy instruments / interventions. Together can they make a sizeable difference to consumer and business behaviour and lead us away from a “business as usual” approach?
read more...»Unit 1 Micro: Using the Cost-Benefit Principle
The cost-benefit principle is one of those core ideas that can be brought into so many evaluation discussions both in micro and macroeconomics – you should be using it in your papers!
read more...»Unit 4 Macro: African Aid - Helpful or Harmful?
This highly interactive programme on Al Jazeerah a few days ago focused on the impact of foreign aid on the African economy. It runs for 35 minutes but there is plenty of interesting debate and many comments flying in on the twitter feeds. Plenty of discussion that might inform a revision session on the future for the African economy and the debate over the effectiveness of aid programmes.
read more...»Unit 2 Macro: Heathow’s Capacity and Connectivity Crunch
The capacity and efficiency of our transport infrastructure has a huge bearing on the supply-side potential of the economy and in this Channel 4 news video, the CEO of British Airports Authority argues that Heathrow is now full to bursting. The Conservative and Liberal Democrat coalition manifesto in 2010 ruled out a third runway at Heathrow - to the relief of those (including me) who live under Heathrow flight paths. But without much needed investmnt in air transport, there are fears that UK business will suffer and the economy will become less attractive to inward investment.
According to BAA (owned by Spanish infrastructure company Ferrovial), 77,000 people are employed inside the airport’s perimeter, with a further 59,000 jobs supported across London. In a recent research report commissioned by BAA and produced by Oxford Economics, a failure to support Heathrow over the next ten years could cost 78,800 jobs from tourism, 55,300 jobs from foreign investment and 7,300 jobs from exports to emerging markets – 141,400 jobs in total
By 2021 lost GDP could total £8.5 billion a year – £3.6 billion from tourism, £4.5 billion from foreign investment and £410 million from exports.
Unit 1 Micro: Ban on cigarette display advertising
In a fresh move to reduce consumption of cigarettes, legislation has come in force banning the displays of cigarettes for sale in large retail stores. The display ban will apply to shops of more than 280 sq m (3,014 sq ft). Newsagents and small stores can display cigarettes until 2015, giving them time to refit shelves and cabinets.. It is part of the armoury of interventions that have been tried over the years to change consumer behavioural - from real terms increases in cigarette taxes to bans on advertising and ever-stronger advertising and health campaigns. The focus of the ban is to influence younger smokers by removing cigarettes from point of sale display - will it be effective?
This news report below from Al Zajeerah looks at the new measure
read more...»2012 Economics Revision: Ways to Improve your Paper
Here is a revision presentation offering ideas for stronger evaluation and analysis in your AS and A2 economics exam papers. Ten strands are suggested for students who want to build really good answers especially to evaluation questions.
read more...»Unit 1 Micro: Nottingham introduces workplace parking tax
Nottingham has become the first major city in the UK to introduce a compulsory workplace parking levy (WPL). Businesses in Nottingham with more than 10 parking spaces will have to pay an annual charge to the council of £288-per-space.
Critics of the scheme argue that the levy will add to costs and damage profits at a time when the local economy is struggling to drag itself out of recession. They believe that the levy will be an unfair extra charge for people who work shifts or live in areas without adequate public transport have to drive. The Taxpayers’ Alliance which is a fierce critic of what they see as inefficient local government opposes the WPL and say that 96% of Nottingham businesses in the area oppose the charge, with 62% of those businesses claiming that they would now consider relocating their interests.
The council’s defence is that the revenue from the levy will be hypothecated - that is the money will be earmarked to help fund improvements to Nottingham’s tram system, infrastructure with long term economic benefits. Other transport projects will be allocated funding from the tax.
Pricing to ration scarce parking space is an attempt to manage demand for car use within the city centre and to tackle congestion particularly at peak periods. Other cities are said to be interested in launching similar schemes and Nottingham’s experience may well tell us how quickly it will be rolled out in the years to come. A key decision for many businesses is whether to pass on the charge to their employees.
How will the charge be likely to affect:
1/ Demand for city park and ride schemes?
2/ Demand for Nottingham’s tram system?
3/ Demand for tele-working among Nottingham’s businesses
4/ Profits for businesses with more than 10 workers inside the parking levy area?
5/ Demand for public car parks
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The Economics of Climate Change - Stern 5 Years On
Lord Nick Stern tonight gave the first of three lectures on the ethics and economics of climate change as the annual lecture series in honour of Lionel Robbins started at the LSE.
It is over five years since the publication of the Stern Report and much has happened in the intervening period. Stern however was at pains to emphasise that his core message remained undimmed, namely that the costs of inaction are enormous but the costs of early action to cut emissions are manageable. We have seen in recent years rapid technological change much of which is hugely encouraging in taking us closer to de-coupling the relationship between production and consumption and carbon emissions. But more is needed, Stern is arguing in these three lectures for a new industrial revolution, a deep set of changes to production processes and technologies that happens across every sector. The economics and politics of how progress might be made in moving towards a new revolution will be the focus of the second and third lectures.
LECTURE 1 - Tuesday 21 February 2012
What we risk and how we should cast the economics and ethics
LECTURE 2 - Wednesday 22 February 2012
How we can respond and prosper
LECTURE 3 - Thursday 23 February 2012
How we can get there: building national and international action
Drink, drink, more drink
Students are often asked to weigh up policies to limit the over consumption of demerit goods like alcoholic drinks. This BBC article cited by Ben White considers some of them.
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...»Unit 3 Micro: Video Resources on Carbon Taxation
The crucial issue of how best to tackle climate change and make significant progress towards a low-carbon economy is one that gives students tremendous opportunities to hone their analysis and evaluation skills. A few weeks ago the Australian government was successful in getting through the Senate proposals for a new carbon tax and in this blog we link to some excellent video reports on the background to this decision.
read more...»Unit 1 Micro: Winning the War on Deforestation
Justin Rowlatt from the BBC has been investigating some of the remarkable progress being made in controlling deforestation in Brazil. The battle focuses on an area known as the “arc of destruction” and the video reports here show the impact of a government making a clear commitment to tackling the issue and backing it up with force and with incentives.
read more...»Unit 3 Micro: The Economics of Solar Subsidies
This blog provides a link to a new prezi presentation on the economics of solar subsidies - I have been using it as part of my teaching on aspects of environmental economics for Unit 3 AQA but it might also be useful for unit 1 market failure. I have kept theoretical diagrams out of it and plan to build up relevant analytical concepts such as economies of scale, consumer subsidies, economic and social welfare, government failure et al on a normal whiteboard rather than embed them into the Prezi. I hope it is useful.
Follow the tags at the bottom of the blog entry for more recent articles on solar subsidies such as feed-in-tariffs and other environmental economic resources.
read more...»Unit1 Micro: Processed Meat and Cancer Risk - Information Failure?
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...»Unit 3 Micro: World’s Largest Solar Plant Opens
This autumn the world’s biggest solar plant power station opened in Spain. Comprising 600,000 parabolic mirrors, the Andasol 3 CSP plant is the size of 70 soccer fields and has 88km of piping. The economies of scale are huge and if solar power is going to work and be viable anywhere it is probably here or in North Africa.
read more...»Unit 1 Micro: Biomass Subsidies and Timber Prices
If you are a fan of laminate flooring, wood panelled walls or neat wood-based fencing for the garden, the chances are that you will be paying higher prices in the years ahead. Despite the Britain offering a temperate climate for a plentiful supply of wood and a well organised system of land registry and plantation management, the UK market price of different types of timber has shot up over the last two years.
read more...»What is the socially optimal level of concerts in Hyde Park?
It seems those fortunate enough to live next to Hyde Park are increasingly bothered by the negative externalities arising from the concerts put on there. This BBC article is a good illustration of the difficulties involved at arriving at a socially-optimal level of production.
Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry
British Petroleum has decided to exit the solar energy energy industry claiming that the business has become unprofitable because of excess supply and falling prices. In 2011 a number of solar firms have gone out of business including California’s Solyndra and Germany’s Solon. BP will focus instead on investing in other renewable energy sectors including wind power and biofuels.
Whilst the decision by BP to exit the industry appears significant, infact total global investment in solar power continues to rise. MidAmerican Energy Holdings owned by Warren Buffett have agreed to purchase a $2 billion solar project under development in California and a 49 percent stake in a $1.8 billion plant in Arizona.
Google Inc. and KKR & Co have announced a joint venture to pump money in four California solar power plants with total capacity of 88 megawatts. The powerful search engine business uses a huge anount of energy every year and has committed itself to large scale investment in renewable energy supplies to help power their server farms.
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Economics of Deforestation
The Human Development Report 2011 reported that deforestation is a severe problem. In the last two decades, Latin American and Sub-Saharan Africa have experienced severe forest losses, especially when compared to the rest of the world.
For economists the economic and social costs of rapid deforestation represent a telling example of the tragedy of the commons where the pursuit of individual self-interest can risk a permanent destruction of natural resources that undermines the sustainability of communities and societies for current and future generations. The United Nations calculates that deforestation and degradation is responsible for nearly 20 per cent of global greenhouse gas emissions.
Will the REDD programme make a difference?
REDD stands for Reducing Emissions from Deforestation and Forest Degradation in Developing Countries and is designed to provide financial incentives funded by advanced nations for developing countries to preserve their forests and instead invest in low-carbon paths to sustainable development.
The UN estimates financial flows of up to $30bn could come from REDD and related initiatives - the scheme effectively allows rich countries to offset their carbon emissions from domestic industries and consumers by funding clean low-carbon development projects in developing countries. But it is highly controversial and opposed by many organisations such as Friends of the Earth and the World Rainforest Movement.
In this blog we have put together some web resources on the issue of deforestation - focusing on causation, consequences and also on some of the policy approaches that might work to bring about behavioural change.
Unit 3 Micro: Time of Use Pricing for Energy
When is electricity demand highest in the UK? The answer comes at the end of the blog!
The UK government is committed to the rolling out of smart energy meters between now and the end of 2020. Millions of homes will have smart meters installed which track how much electricity you use and when you use it - the installation cost is approximately £350 per unit although this may come down with the utilisation of economies of scale. Smart meters will give consumers and the utility businesses minute-by-minute information about energy consumption and this could fast-forward the launch of time of use pricing tariffs for us all in the years ahead. It will mark a move away from flat-rate tariffs towards fully-fledged peak and off-peak pricing.
At the moment around one in ten households are on Economy 7 tariffs which offers lower prices for electricity used during off-peaking times in the late evenings and early mornings. Economy 7 seems to have been around for as long as CEEFAX and if you understand that you are giving your age away!
read more...»Unit 1 Micro: Costs and Benefits of a Super Sewer for London
Thames Water has plans for a super sewer running 20 miles from Hammersmith to Beckton but the plan has come up against intense opposition from many local resident groups. It is a good example to use of cost-benefit analysis in action with a project that will directly affect millions of people living and working in the capital. There is an almost unending list of stakeholders involved in the debate.
read more...»Unit 1 Micro: Is the Sun Dipping on Solar Subsidies?
To promote the expansion of renewable energy sources, many governments have introduced subsidies for consumers who install solar panels.
In April 2010, the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Anyone spending £13,000 up front to fit a system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills. The big six energy companies are required by law to pay householders who generate their own energy.
It looks like the days of generous subsidies for solar panels are coming to an end and there is a rush on to install them before the feed-in-tariff system is changed.
read more...»Hard Choice in Kenya
This short video report from Will Ross for the BBC from the island of Lamu, considers a number of economic concepts.
read more...»Unit 1 Micro: Coast Guard Protection and Moral Hazard
A hat tip to Mark Seccombe for spotting this fine piece of economics writing from the New York Times economics blog.
Casey Mulligan explores the question of whether the US coast guard should enforce that boats install safety beacons as a way of cutting the number of incidents they are required to attend. Does providing a safety-net regardless of whether participants have covered the cost of providing themselves with basic safety equipment lead to a problem of moral hazard? Has mandatory safety belts in cars led to a reduction in the quality of driving? Would compulsory air bags do the same? When is the state justified in applying and enforcing stringent safety requirements on people and businesses as they go about their daily lives?
Transport Economics: Rail Investment
Here is a super short transport cost benefit analysis example regarding plans to re-open a rail link between Oxford and Milton Keynes could generate millions of pounds for the economy. In total it would cost £178m and then £11.6m a year to run, but Oxford Economics says it would bring an economic benefit to the area which it estimates at £32m a year. This BBC news video would make for a good short introduction to the example, and here are some other links to coverage of the Oxford Economics research in the local papers.
Oxford Mail: Rail link could be worth £38m a year
Official web site East West Rail
Unit 1 Micro: Opportunity Cost -
A hat tip to John Wilson from New Zealand for spotting this superb article which looks at smarter consumer spending and using opportunity cost as a concept to put some of our many choice in context. Some great examples here that might be used at the start of an AS Micro course.
Transport Economics - Government Failure in Roadbuilding?
A controversial motorway extension in Scotland is set to open. Glasgow’s new £657m M74 extension set to open (BBC News). The 6-lane elevated M74 extension is over-budget at a cost of £657m, which works out at £131m per mile or £75,000 a yard (£80,000 a metre). How can road extensions cost so much? Can the costs be justified by the suggested economic benefits? The BBC article provides a good mini-case study in transport cost-benefit analysis. Here are some other supporting links:
read more...»Oceans at grave risk
The tragedy of the commons and the grave consequences for the state of marine ecology are highlighted in this new report. Covered with passion in this blog. Climate change, pollution and over-fishing are two fundamental problems for the oceans. More details here from the International Programme on the State of the Ocean (IPSO) website.
The report identifies a number of important policy approaches to tackle the problems - The scientists say that the ‘precautionary principle’ must be used in terms of oceanic impacts, in other society shouldn’t don’t proceed with activities unless they are proven to be largely safe for marine ecosystems. And they argue for much stringer use of property rights by widening the size of international marines of the sea.
TED Talk: Jeremy Jackson: How we wrecked the ocean
Is Cost Benefit Analysis of our natural environment ‘a slippery slope’?
Helpful revision notes provided by a new government report yesterday, attempting to put a financial value on Britain’s ecology. The ‘National Ecosystem Assessment’ attempts to give a standard valuation on ‘ecosystem services’ like pollination by insects, water and air purification by soils and plants, the flood alleviation provided by woods and marshes upstream of towns and cities, and the value of living close to a green space; for example the value of living near a green space is calculated as £300 in terms of savings to the NHS. The first of 6 key findings of the NEA is:
“The natural world, its biodiversity and its constituent ecosystems are critically important to our well-being and economic prosperity, but are consistently undervalued in conventional economic analyses and decision making.”
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A2 Micro: Competition and Efficiency
Are highly competitive markets most likely to lead to outcomes that achieve economic efficiency? The common characteristics of markets that are considered to be “competitive” are:
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