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Mark Carney says that a period of low inflation – even deflation – propelled by falling oil prices would be “unambiguously good” for the economy. How do we reconcile this with the textbook position that the economy needs a little bit of inflation, and that deflation is to be avoided? He has also said there were no signs yet of “bad” deflation – what is the difference between ‘good’ and ‘bad’ deflation? Can we assess whether it is true to say that deflation is always bad for the economy?
I have picked up on some of the analysis of yesterday’s inflation rate as well as last Thursday’s Inflation Report to consider this. If you want to set this task for your students, here are a few links to get them started:
-(If students only read one of these, they should really see this last one.)read more...»
When the government still has to borrow an extra £90bn per year, in spite of all their efforts to cut spending, then the rate of interest they need to pay in order to get access to that borrowing has got to be very important. George Osborne certainly thinks so; a key reason for his deficit-reduction strategy is to retain the confidence of the bond markets, so that bond-buyers are prepared to lend to the UK at low rates. This week, that rate touched a historic low of 1.396 per cent on 10-year bonds, and as the FT report, longer term 30-year gilt yields, considered particularly reflective of the country’s inflation prospects, also dropped to a record low of 2.102 per cent.read more...»
Inequality is on the rise. Not so much between countries as within them. There is some worrying indications, reported this week, that the gap between Britain’s best performing and worse performing regions remains thoroughly entrenched.read more...»
CPI inflation has slipped well below the lower limit of the Monetary Policy Committee's target, to 0.5% - that is far lower than it fell during the recession, and the lowest level since May 2000. So, as Mark Carney prepares his letter to the Chancellor to explain how this has happened, and what the Bank of England intend to do about it, the BBC have published an article which examines why we need some inflation. It is one of those articles which is truly useful - probably more so than a text book as it is based on real, current context. Highly recommended to AS students learning about inflation for the first time, and A2 students who need to revise the basics.read more...»
Every so often I read an article and start to tot up the number of economic concepts being covered in just a few words. This occurred to me again this morning when reading this BBC news article on train fare rises. Train fares are pegged to July's inflation rate and, as inflation is quite low at the moment, this means that the average rise of 2.2% is also relatively low (although regular train users may still feel aggrieved).
Have a read yourself and see how many concepts crop up or give them same exercise to your A2 students. My thoughts are below:read more...»
American financial services firm PNC have been producing an index of the price of Christmas for many years. They take the carol The 12 Days of Christmas, and calculate the cost of all the 'gifts' given in the carol, then create an index of how much those prices have changed over the last year. They accompany the index with a story-telling video, and they have often made an entertaining, if quirky, Christmas lesson.
This year's version is, frankly, a little weird. They have created a 'story' around each of the gifts, which is supposed to bring the carol back to popularity for a new generation. The stories range from a lonely Partridge in a Pear Tree who visits all the other characters in the carol, to videos of milking maids playing a tune, leaping squirrels singing the carol, and hens forming a 'rock band'.
It's also a bit clunky to work your way through. After watching the intro, if you click on the cross in the top left hand corner you will get the twelve stories to select from, each with a video which will appear underneath the selection. I can't really do justice to it all with a description - but I'm not sure it works quite as well as a Christmas lesson as it has in other years. Have a look and see what you think....perhaps I am missing the point?
He's back! Sort of by popular demand! If you're looking for a quickfire activity for your Economics lessons this week then download the latest edition of the Angry Economist. Ask your students to choose one of the 8 policies announced in today's Autumn Statement by George Osborne and our favourite curmudgeonly economist randomly chooses an objective to analyse.
How does the proposed funding for new roads impact on equality for instance? How does the change in Stamp Duty application affect economic growth. A fun and quick way to get your students analyzing first thing in your lesson.
Download the Angry Economist Autumn Statement Edition here.
Don’t worry about all the world’s fossil fuels running out. The graphic above suggests that we can’t run the risk of burning all the fuel that we know we have anyway! But if that’s true, then what are all those fossil fuel reserves worth?
According to the Guardian, the concept of a “carbon bubble” has gained rapid recognition since 2013, and is being taken increasingly seriously by some major financial companies. The concern is that if the world’s governments meet their agreed target of limiting global warming to 2C by cutting carbon emissions, then about two-thirds of proven coal, oil and gas reserves cannot be burned. With fossil fuel companies being among the largest in the world, sharp losses in their value could prompt a stock market crash and a new economic crisis.read more...»
Just a quick post to share a great little video I just found on the Guardian website.read more...»
This is an excellent podcast to introduce year 12 students to the importance of controlling inflation and the perils of deflation.read more...»
The Local Government Association (which represents local councils in the UK) have joined the debate about term time holidays for pupils this week. They argue that current rules banning term time holidays or imposing fines on those families who take such breaks do not recognise the complexities of modern families and also prevent poorer families from affording vacations that are invariably dearer during the holiday period.
It struck me whilst reading one of the reports that the suggested policy is to allow head teachers that most quantifiable of options, 'common sense', to make decisions on a case-by-case basis would be the sort of argument that would make me scream if a student wrote it in an assessment answer. Economics students, unlike Local Government officials, need to take a much more analytic approach to this question!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...»
Yesterday’s Conservative party conference threw up some lovely economic policy proposals for students and teachers to get stuck into. They certainly grabbed the headlines today with David Cameron’s proposals to increase the personal allowance and 40p tax thresholds. Sky News have some decent coverage which can be used to spark a good discussion.
AVAILABLE TO PRE-ORDER NOW: ESTIMATED PUBLICATION DATE: EARLY DECEMBER 2014
AQA ECON1 & ECON2 Worked Answers is a new printed resource from the tutor2u Economics team which we expect to be available for dispatch from early December 2014.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...»
Will the best place to live - as identified by the Economist newspaper - be found in the country with the highest GDP per capita?read more...»
Download this engaging teaching resource to test student awareness of the international competitiveness rankings!
You may have already seen Geoff's blog on the newly released International Competitiveness Index. The World Economic Forum annually release its table of competitiveness using a variety of data measures including economic performance, quality of education and labour efficiency. The UK has moved up to 9th in the World.read more...»
Here are a couple of current UK problems. Firstly, although the economy is recovering strongly, tax receipts aren’t. Secondly, flaws in the way the welfare system operates may be creating disincentives in the labour market. Could a radical proposal: streamlining the whole welfare system by paying everyone a ‘citizen’s income’ help?read more...»
I’m always on the lookout for GDP stories – what is GDP, how is it measured, and what are the problems of using GDP to measure social progress, standard of living and sustainability.
Big changes coming to the national accounts next month, which means that GDP will be calculated slightly differently.read more...»
Many readers at this time of the year will be looking forward to their summer break, perhaps contemplating with a certain amount of envy their colleagues who have already departed. But is leisure good for you? A bit of a no brainer one might think. Indeed, until recently the consensus amongst applied economists was that even enforced leisure, by being made unemployed, seemed to be a good thing.read more...»
Here is a link to a video report produced by the IMF as part of their annual assessment of the UK economy. Overall, the IMF is considerably more optimistic than it was in 2013 about prospects for near term recovery of output and continued reductions in unemployment.
Risks to macro stability are also considered, namely weak productivity growth and high housing pricesread more...»
The Russian central bank has raised their main policy interest rate by 0.5% to a new level of 8% in a bid to control inflationary pressures in the Russian economy.read more...»
Three years on from the riots and deep economic, financial and political crisis, is the reforming Greek economy turning a corner and improving outcomes for the key macroeconomic indicators. Professor Paul Collier labelled Greece as a "sub-merging economy" a little while ago but there are now some positive signs reflected in this highly relevant news report from the Financial Times. I have added some key macro data on Greece and other troubled Euro Area countries using data from the IMF World Economic Outlook.
Guardian: Greece forges template for economic recovery as tourists pour in: http://www.theguardian.com/world/2014/jul/03/greec...
BBC video: Pain in paradise for struggling Greeks: http://www.bbc.co.uk/news/world-europe-28012089read more...»
An important landmark for the UK economy? Britain’s economy is finally larger than it was before the financial crisis six years ago. FT economics editor Chris Giles analyses the data and warns that continuing weak productivity means output growth will be slower than before the crisis - an excellent analysis of the key macro indicators suitable for all A level economics students.
I have added some charts on the UK drawn from the latest IMF world economic outlook.read more...»
This Mini Lecture discusses issues of labour productivity, low-wage work and economic growth of emerging markets.read more...»
Each year the Human Development Report published by the United Nations gives a special focus on a particular issue related to development. In 2014 that issue is vulnerability.
To quote from the opening of the report:
"Real progress on human development, then, is not only a matter of enlarging people’s critical choices and their ability to be educated, be healthy, have a reasonable standard of living and feel safe. It is also a matter of how secure these achievements are and whether conditions are sufficient for sustained human development. An account of progress in human development is incomplete without exploring and assessing vulnerability."read more...»
A new online comedy series launches on Thursday 24th July!
The series tells the story of Scott and Adrian, two lovers on the verge of break up. Scott runs an oil company – bath oils that is – and Adrian spends their money as if it’s his own. Will they work things out or will Scott go it alone? All will be revealed when the series launches this August in time for the Scottish independence referendum.read more...»
Ed Miliband has told his party's national policy forum that the party must change policy from their traditional approach of raising spending and taxes, saying ''Higher spending is not actually the answer to the long-term economic crisis''. Some members of the forum wanted to force a vote for an immediate increase in public spending should Labour win the next election, but proposals committing Labour to new spending on housing and school meals were withdrawn at the forum in Milton Keynes.read more...»
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...»
In London and much of the South East, the recovery has been well under way for a considerable time. House prices boom and restaurants are packed. The economic data for the UK as a whole looks just as encouraging, with employment being at its highest ever level.read more...»
This interview with Jurgen Maier of Siemens is well worth reading on several different levels. It challenges the conventional wisdom that UK will always lag behind Germany in terms of high value added manufacturing; it refers to the economics risks of Brexit (Britain leaving the EU) and it also stresses the importance to the UK of foreign investment from German businesses many of which have been in the Uk since well before the first World War - Siemens and Bosch are two well-known examples.read more...»
Data on export patterns for goods from countries around the world provide a fascinating window on the degrees of complexity that nations have achieved. There is growing interest in the significance of knowledge capital or know-how in lifting productivity, competitiveness and improving trade performance for economies at different stages of development. Below is my selection of countries.
There then follows links to videos from Cesar Hidalgo and Riccardo Hausman on their theory of productive knowledge - and in particular how it is acquired at the level of the individual, the level of organizations, and cities, regions, countries and societies.read more...»
You will probably be aware that assessment in the new AS and A level in Economics (starting in September 2015) will have a much greater emphasis on numeracy and quantitative methods. 20% of marks will be awarded to answers based upon number work and interpretation of graphs, charts and tables.
Whatever your view on the merits of this change, there is no doubt that it brings one of the biggest challenges to teachers of economics since the year 2000. Tutor2u have put together a team of experienced teachers with different awarding body knowledge to create resources and give advice through a series of CPD events during the 2014-2015 academic year.
If you look through any of the specimen papers from the three main awarding bodies you won’t be surprised to see a huge emphasis on calculation of percentages, use of index numbers and the need to understanding fractions and ratios. You can already imagine the increased use of elasticity calculations and having to work out costs and revenues.
Did you know however (depending on your exam board choice) that your students may have to calculate opportunity cost ratios for comparative advantage, dependency ratios, quantity theory of money, terms of trade index, national income multiplier and marginal propensity to consume? Imagine a marginal social cost/benefit diagram with figures included! Have you ever asked students to convert money in real terms? How do you think they will cope with medians and quartiles?
Our team are working on resources and advice to hand out to teachers for our ‘New to A level Economics – Quantitative Methods’ CPD days. Details about times, dates and locations to follow soon.
In these short interviews with the Financial Times, economist Gerard Lyons highlights some of the key drivers of the global economy and he paints a fairly positive picture of the prospects for developed countries in an ever-changing world economy. In the second interview, Gerard Lyons, 'The Consolations of Economics' author, discusses with John Authers whether the system is safely retuned, and whether it can boldly go into a universe of greater growth opportunities.
Observer review (3 August 2014): http://www.theguardian.com/books/2014/aug/03/conso...
Independent review (July 2014): http://www.independent.co.uk/arts-entertainment/bo...
Evening Standard: http://www.standard.co.uk/comment/gerard-lyons-lon...read more...»
With World Bank Group support, millions of Rwandans are on their way to integrating to regional power and transport networks, boosting their agricultural productivity, and delivering results for their families. This is a short info graphic video from the World Bank together with some related links to useful resources on the Rwandan economy.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...»
Question six for the RES competition in 2014 is bound to produce a large number of answers. Labour migration is an important economic, social and political issue and many students will have clear views on the issue. So what will make an essay stand out from the crowd?read more...»
Drawing on data from the 2013 Human Development Report, here are the 24 countries in the 2014 World Cup ranked according to the Human Development Scoresread more...»
I was drawn to a Telegraph headline, Europe is jealous as Britain resurrects the Laffer Curve. According to the author, by next year Britain will have the equal lowest headline rate of corporation tax in the G20.
The Laffer Curve offers an intoxicating promise to politicians. It suggests that if the tax rate is too high (above t* in the diagram above) then a cut in tax rates will actually boost the amount of revenue raised!read more...»
You may have already seen my blog/tweet sharing the 'Higher or Lower' game. Below you will find a brand new version of the game featuring the 32 countries taking part in the FiFA World Cup starting tomorrow.
The aim of the resource is to get a feel and understanding of some of the important statistics relating to the economic performance of the countries. In this addition, students can attempt to work out whether the 'higher' or 'lower' statistic relates to predicted GDP growth, unemployment, inflation and Government debt alongside the country's FiFA world ranking.
Teams are presented with the name of a country and its statistic in their chosen category. They are also presented with the name of a second country. They must say whether the second country has a higher or lower statistic. This is repeat a further three times allowing the team to score a maximum of 4 points per round.
Have some fun and get a feel for countries statistics at the same time! Is there any correlation between economic and football performance?
Click here to download the file.
Note: The economic statistics accredited to England are those of the entire UK. Sorry, I was unable to find the statistics relating to just England!
The European Central Bank implemented a negative interest rate policy yesterday. Whilst we have become very accustomed to a low base rate in the UK, the ECB policy seems extraordinary.
The policy has come about due to a continued concern over the economic situation in the Eurozone. Growth remains weak, unemployment is high and inflation sits below the target of 2% in many of the 18 countries. The ECB is unlikely to follow the UK (and others) strategy of quantitative easing and so is left with fewer choices.
By setting a negative interest rate, the ECB wants to discourage banks from keeping larger reserves and promote a greater level of lending (and thus stimulate economic growth).
If you want to download a short Powerpoint slideshow that explains the policy and its possible consequences then click on this link.
The Office for National Statistics (ONS) has just increased the size of the British economy by nearly £10 billion, a figure equivalent to around 0.7 per cent of the economy as a whole. George Osborn has not waved a magic wand. We have not suddenly become more productive. The reason is that, for the first time, estimates of the value added by drugs and prostitution have been included. These activities are included in an economic sector called ‘miscellaneous goods and services’, which, as an indicator of its diversity, already contains things like life assurance and post office charges.read more...»
This blog entry will feature frequently updated revision resources on economic growth trade and development aspects for a range of sub Saharan African countriesread more...»
The Office for National Statistics has, for the first time, included estimates of the impact of prostitution and illegal drugs in the national accounts. By the ONS’ reckoning they add about £10bn to the British economy. The assumptions used in making the calculations have been the subject of some criticism. I have summarised below the assumptions behind the estimated spending / income and output effects of including prostitution:read more...»
High rates of long term youth unemployment will have hugely significant economic and social costs - this short news report from Al Jazeerah news looks at the issue of youth unemployment in Portugalread more...»
If you are like me, teaching unemployment starts with explanation of its causes and then moves on to its impact (before discussing possible solutions). I've always found the 'impact' aspect relatively straight-forward; it would seem students find the concept of loss of output and its consequences fairly logical. Discussing the long-term effects can be more difficult as young adults in full-time education may not be wholly empathetic towards the outcomes of job loss.
An interesting report came out from the Nuffield Trust recently (a copy is available from this link) about the increase in the prescription of antidepressants. The increase from 15 million items prescribed in 1995 to 40 million items in 2012 is quite large but the report shows that the biggest jump has come during the economic downturn since 2008. The report hypothesizes on a number of causes of this increase but does suggest a link between unemployment and the increase in prescription of antidepressants. Perhaps it isn't a quantum leap to illustrate that there is a relationship between unemployment and depression but evidence of this nature may be valuable when making a point about the impact of unemployment (and its cost to society as a whole) in the class or as part of an exam answer.
Unemployment benefits can address the failures of credit markets by enabling unemployed people to spend more time searching for a new job – even in countries like Norway, which have an equitable wealth distribution and a generous welfare state. That is the central conclusion of research by Christoph Basten, Andreas Fagereng and Kjetil Telle, published in the May 2014 issue of the Economic Journal.read more...»
Worries are growing about some of the countries in the Euro zone slipping back into double dip recession. By convention, a recession is when national output (GDP) has fallen for two successive quarters. But this is far from being news. In a substantial number of economies, output is lower than it was not just two quarters ago, but three whole years ago, at the start of 2011.
The quarterly numbers have wobbled around up and down over this period, but they are now unequivocally below the 2011 figure in Greece, Ireland, Italy, Portugal and Spain. No surprises there. But the list goes on to include Finland, the Netherlands and the Czech Republic.read more...»
Just in time for the unit 2 exam, and in good time for unit 4 students, this week's Deloitte Monday Briefing looks at the reasons behind the rapid recovery of growth in the UK. The Monday Briefing always makes very good reading, and often features analysis which is written with great clarity by Ian Stewart, their Chief Economist in the UK - to subscribe and receive an email every week, visit www.deloitte.co.uk/mondaybriefing
Below, I have copied much of this week's briefing with a little additional comment to emphasise the role of monetary and fiscal policies, and to look forward in order to consider how these may be evaluated in order to assess the contribution they may make in the near future.read more...»
Here is a 25 question general knowledge quiz on the UK economy - great for last minute revision! Good luck!read more...»