Unit 4 Macro: Unemployment Scarring Effects
In the past we have discussed some of the long term economic and social costs of a persistently high rate of unemployment and we have used the term hysteresis effects. It seems that a new term is being used to cover some of the consequences of millions of people being out of work - unemployment scarring - and this revision blog looks at some of the causes of this.
read more...»Unit 2 Macro: Revision on Real Disposable Income
Real disposable income (RDI) measures income after taxes and benefits, adjusted for the effects of inflation. It is a guide to the quantity of goods and services that people can buy after the tax and benefit system has adjusted original incomes and we have made allowance for the effect of price changes.
read more...»RES Annual Essay Competition for Students 2012
Entries for the 2012 Royal Economic Society Essay Competition are flowing in strongly with just less than a month to go before the final date for submitting an answer.
read more...»Unit 2 Macro: Gross National Happiness in Bhutan
On Monday 2nd April 2012 a landmark resolution (number 65) is before the United Nations General Assembly. Bhutan has a population under 800,000, the average income is about $110 per month - low enough for the vast majority of people in Bhutan not to have to pay taxes. The fledgling Bhutanese constitution requires that at least 60% of the country remains under forest cover forever and its stated policy is to be 100% organic in its agricultural production. Major progress has been made in achieving rising per capita incomes, reduced infant mortality, higher life expectancy and a rising percentage of females in education.
Resolution 65 states that “happiness is a fundamental human goal and universal aspiration; that GDP by its nature does not reflect that goal; that unsustainable patterns of production and consumption impede sustainable development; and that more inclusive, equitable and balanced approach is needed to promote sustainability, eradicate poverty and enhance well-being”.
The passing of resolution 65 is a small stepping stone towards a wider recognition that ecological sustainability, equity, and life satisfaction are being given great emphasis in global politics. But whether gross national happiness (GNH) will ever substitue Gross National Income as one of the default measures of economic progress is doubtful.
Bhutan leads the world to a new economy of happiness (Guardian)
read more...»Unit 2 Macro: Revision on Index Numbers
What are index numbers and why do economists use them?
read more...»Posen on slower growth in the UK compared to the USA
Adam Posen is a member of the Monetary Policy Committee featured in Extract 1 of the OCR F585 paper for June 20120. He has consistently argued that the Bank of England should maintain their policy of ultra-low policy interest rates and also expand QE if and when the economic conditions require it. In a speech to the National Institute this week, Adam Posen contrasted the differences in economic recoveries in the United States and the UK.
read more...»Unit 2 Macro: Revision on Capital Investment
Here is a planned answer to an exam question
“Explain two factors that are likely to affect the level of aggregate investment.”
read more...»Global Economy- the 2012 BRICS Summit
Leaders of Brazil, Russia, India, China and South Africa are meeting for the 4th time to discuss a deepening of economic ties within the fast-growing bloc of countries. The acronym BRIC was first coined by Jim O’Neill from Goldman Sachs in 2001. Recently he suggested another group of countries that deserved to be included in a broader grouping of high-growth and increasingly influential economies in the world economic system.
These countries make up forty per-cent of the world’s population and over a fifth of global GDP. Crucially they, and another cluster of rapid-growth countries will be the main drivers of world growth in the years ahead even though they are not immune to the financial volatility and commodity price inflation inflicting external shocks on advanced nations.
One of the key items on the summit’s agenda is a proposal to establish a “BRICS Bank” that would fund development projects and infrastructure in developing nations. The summit is also on opportunity to discuss ways of building intra-BRICS trade, which expanded by 28 percent last year to $230 billion. There are divisions within the BRIC grouping - for example Brazil’s criticisms of China’s exchange rate policies but the summit is a reminder that the balance of power and influence in the world economy is changing forever.
Here is a selection of news articles and videos covering the BRICS summit for 2012
read more...»Intergenerational Equity - Fairness and the Slump
The recession and weak recovery is bringing about important employment and income distribution effects among different generations in Britain. The externalities of a slump are never uniform and I hope that good examiners at AS and A2 level will always reward students who bring comments and arguments about equity / fairness into their evaluative discussions. Recently there has been increased media coverage of the inter-generational effects of the financial crisis and the recession.
read more...»Blanchflower calls for more action to address youth jobless crisis
Professor David Blanchflower didn’t pull his punches when he was a member of the Bank of England’s Monetary Policy Committee and he is making his mark once more with an attack on what he views as the Coalition government’s lacklustre approach to tackling youth unemployment. Blanchflower is reported in the Guardian as wanting zero national insurance contributions for employers who take on younger workers in depressed regions and localities. And he wants greater investment in vocational education in schools and colleges with the school-leaving age raised to 18.
read more...»Life in the Slow Lane - UK Growth in 2011 Lags the Euro Area
Newly published and revised figures for growth in the UK economy show that output fell by 0.3% in the final three months of 2011, and that, over the year as a whole, real GDP in Britain climbed by a paltry 0.7% during the year as a whole. To put that into context, the crisis-ridden Euro Zone achieved growth of double that largely because of a strong performance from Germany.
Output in the UK remains well below the peak before recession engulfed the economy in the autumn of 2008. In the charts and links below we track some of the key economic indicators as the country stuggles to achieve a durable and resilient / robust upturn.
read more...»George Buckley at the Millfield Economics Society
Millfield’s Economics Society was privileged recently to welcome George Buckley, Deutsche Bank’s Chief UK economist, to the school to deliver a lecture on the current state of the UK economy. Laura Dearman reports on his talk and the issues raised in discussion.
read more...»Did the Bank of England cause the boom and bust?
What contributed to the boom and bust?
Many answers might focus on the reckless behaviour of lenders and borrowers; or irresponsible fiscal policies set by politicians who believed that the days of boom and bust were over. But to turn the question on its head, you could ask if “to what extent did Central Banks play a part in the debacle”?
read more...»Unit 4 Macro: Evaluating 3 Years of Quantitative Easing
It is now over three years since the Monetary Policy Committee of the Bank of England cut policy interest rates to 0.5% and subsequently introduced a policy of quantitative easing (or an asset purchase programme) now worth £325 billion.
These have been difficult times for the Bank. The average rate of CPI inflation since 2008 has averaged 3.5% - well above the official target - and the Bank has faced pressures from many sectors of the economy not least the millions of pensioners and other net savers whose incomes have been dragged lower by this period of ultra-low interest rates.
Has conventional monetary policy lost its effectiveness in the aftermath of the global financial crisis? Bank lending continues to fall, consumer and business confidence is fragile, many people have seen interest rates on unsecured credit rise not fall, and the depreciation of sterling seems to have had a muted expansionary effect on demand, profits and jobs.
Here are a few evaluation slides on Monetary Policy and the Bank of England from our recent A2 macroeconomics revision workshop together with some links to recent news reports on the Bank of England’s strategy and the impact of policies such as QE.
read more...»Free Trade Agreements
Given the return to protectionist strategies that we have seen post -financial crisis as governments seek to protect their domestic economies, it is interesting to see a number of free trade agreements being discussed this week. To aid with application and context, pupils might be interested to read about the following agreements that have been in the media this week between
USA and South Korea
Canada and Japan
Given this context, for revision purposes it might be worth considering the macroeconomic consequences of such deals and use this to contrast against the reasons for, and consequences of protectionist strategies.
Solar Panels and Tariffs
The US and China rely heavily on each other for trade but retaliatory protectionist policies continue to be a recurring theme between these two nations that prevent the free movement of goods and services between the two countries. Allegations that the undervalued Yuan gives an unfair advantage to Chinese exporters, twinned with high US unemployment has led to protectionist American responses and a tariff (tax on imports) on Chinese solar panels to protect this strategic and growing industry. The move followed a review by the US Commerce Department which in a preliminary decision claimed that Chinese firms are benefiting from unfair export subsidies.
read more...»Where does my money go?
It will be interesting to receive my personal statement spelling out exactly how much of my income is paid to the state and what it is being spent on! However for those wanting this information sooner than this, there is a great resource from the Guardian data team which shows you, on a sliding scale, exactly how much direct taxation you pay on your income and specifically where that money is spent.
This is an excellent resource for fiscal policy and useful to start debates about how and why the UK taxpayer is taxed and where the government should be spending the revenue received. There is no doubt that following Wednesday’s budget, the role of fiscal policy will take centre stage in Economics classrooms up and down the country - keep your eye out for some top analysis in the media over the next few days.
Unit 2 Macro: Seasonal and Structural Unemployment
This news video from the BBC focuses on a man who has been out of work for over two years in the seaside town of Weston-super-mare a town dominated by tourist businesses where employment is highly seasonal. It provides a strong short case study in the problems of people who have been out of paid employment for a long time. Watch the piece here
Channel 4 news have a special section on the unemployment crisis in the UK economy. Follow this link for fresh teaching and studying resources on unemployment. Follow this link for the Channel 4 News Jobs Report
read more...»Phil Holden’s Video Clips
With the Easter holidays and key revision period not too far away, economists with exams approaching may find the excellent youtube channel of Phil Holden useful. My pupils find these clips concise with clear explanations and they act as a useful revision tool for a variety of AS/ A2 micro and macroeconomic topics. I’m sure colleagues have come across this before but if you haven’t then it’s well worth spending some revision time on this link
Unit 2 Macro: Policies to Drive Economic Recovery
We were looking today in AS macro at the policy options being considered as part of a strategy to drive a stronger recovery in demand, output, jobs and investment in the UK economy.
I am trying to encourage my students to put things into context as soon as possible in their longer essay-style questions. Here are some thoughts on a question on policies designed to bolster growth:
read more...»Unit 2 Macro: News Videos on the German Economy
Germany is always an economy worth looking at by students keen to deepen their awareness and understanding of the European economy. There has been a number of good background news stories on the changing centre of gravity in the German and the EU economy and in this blog I am providing links to some of them - all ideal for prompting discussion in the classroom.
read more...»TED Talks- Income Inequality
I’m going to use Richard Wilkinson’s very interesting TED talk about the serious negative effects of income inequality in my lesson tomorrow about income distribution. Read on to find out about this video and how I will use it to aid classroom discussion of this topic.
read more...»Unit 2 Macro: Focus on UK Manufacturing
There have been lots of stories in recent days about the future for UK industry / manufacturing - here is a selection of audio and video links:
read more...»Unit 4 Macro: Sovereign Wealth Funds
Students of A2 macro will no doubt becoming increasingly familiar with coverage of sovereign wealth funds in their study of global economics, trade, investment and currency developments. A sovereign wealth fund is a government or state run investment fund usually created by supernormal profits from natural resources such as oil, gas or minerals. Here is some brief background on them:
read more...»Unit 2 Macro: Might Oil Prices Bring another Recession?
The international price of crude oil has been rising strongly in recent weeks and threatens to be an external factor driving an already weak Euro Zone and UK economy back into recession.
read more...»Economies hooked on central bank stimulants?
Three years ago Andrew Sentance was one of the 9 members of the MPC who voted for the extraordinary measures of bringing base rate down to 0.5% and creating the new stimulant of Quantitative Easing in an attempt to bring the economy around. In today’s Sunday Telegraph he recalls why he voted for them at that time, and explains why he thinks that they must be gradually withdrawn now from an economy which has become dependent on them for its survival.
read more...»Unit 2 Macro: A Man Regains his Self Respect
We have followed Stephen Stubbs on the economics blog before. This committed man from the north-east of England has been out of work for more than a year and had filed nearly two thousands job applications in a concerted and lengthy pursuit of a fresh job. What marvellous news it is that he has found work with the student loans company. Here are two videos that tell the story of his long and difficult pathway to finding new work.
read more...»Unit 2 Macro: Rosling on China and the UK Converging
Here is a lovely three minute Newsnight video featuring Hans Rosling on the convergence in income per capita and health outcomes between China and the UK. Great presentation.
Unit 2 Macro: Targeted Tax Cuts to help the Economy
The Confederation of British Industry is a lobbying organisation and seeks to promote and protect the interest of many of the UK’s leading businesses across manufacturing and services. Ahead of the March Budget, their head John Cridland argues in this video for a series of targeted tax cuts as a stimulus for the economy. This is worth watching to get a feel for what are the priorities of business at this stage of the cycle. How much different would it be if the interviewee was representing the trade unions?
read more...»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...»
