A2 Micro

Flood defences, cost benefit and opportunity cost

Money spent on flood defences both here in the UK and overseas raises plenty of interesting questions relating to the use of cost benefit analysis and the opportunity cost of public money. What are the external costs and benefits of flood defence schemes? Are flood fences a pure public good? Who should pay for them? There have been several excellent news articles and video clips on this issue on the BBC web site in recent days - here is a selection

Canny pricing in a slowdown

There is a super feature on pricing strategies from Adam Jones’s management blog on the Financial Times web site - available here

Canny businesses are willing and able to adjust their pricing strategies to suit ever changing business consumers. The key seems to be in having good market intelligence about which consumers have a demand that is sensitive to price and those who spending on goods and services is affected more by changes in real take-home income. Deep discounting is often observed in an economic slowdown or outright recession as businesses look to shift unsold stock, maintain sales volumes and generate extra cash to tide them through the tough times. But as the FT blog points out, offering discounts to consumers can risk unleashing an unwelcome price war (which damages profit margins) and overly-aggressive discounting can ultimately damage the brand.

There is a bit more on pricing do’s and don’ts in a recession here

Fishing and the Tragedy of the Commons

The Observer ran a special feature at the weekend about the global fishing crisis that results from over-fishing and the permanent reduction in fish stocks

Revision: Climate Change Policies

A brief revision PowerPoint used in a lesson on climate change policies .... I kept the analysis diagrams outside of the presentation

PowerPoint
Climate_Change_Policies.ppt

Carbon Trading - News Update

Here are three good articles on carbon trading for students wanting to be up to date and have some more arguments to hand:

BBC: “Carbon market’s value hits $64bn”

Nova Scotia News: “Canada may hook up with the EU carbon trading scheme”

Reuters: “British government shelves plans for personal carbon trading”

Gangmasters and monopsony power

How many gangmasters are there operating in the UK? Does the Licensing Authority really have a proper handle on the scale of workers being organised and often exploited by gangmaster businesses?  I was discussing this issue of monospony in my A2 revision presentations at London and Manchester in the last week. It is I feel one of the really important aspects of market failure in a largely deregulated labour market.

The BBC reports that ”a gangmaster has been stripped of his licence after investigators uncovered a “disgraceful story of forced labour” amongst migrant workers in Scotland.” The government has introduced a licensing scheme for gangmasters - partly as a consequence of the awful events that unfolded for the Chinese cocklepickers on Morecambe Bay (captured superbly in Nick Broomfield’s recent film “Ghosts").

Has competition in postal services delivered?

Two years on from the liberalisation of the postal services industry, has this supply-side policy to make the market more contestable made any noticeable difference to the quality of service, prices and investment in delivery? A new report casts doubt on the changes to the industry since the market opened up to competition at the start of 2006 to businesses such as UK Mail. Robert Peston reports for the BBC in this video clip. His feature asks whether the universal service provision is a millstone round the neck of the Royal Mail which remains in deep financial trouble.

Jeffrey Sachs on Carbon Trading

Jeffrey Sachs features on “You ask the Questions” in today’s Independent. There are loads of interesting questions and answers - Sachs remains positive about China’s growth potential although he expects it to decelerate to around seven per cent in the years ahead. Here he is on a question about carbon trading .... good evaluation here for students preparing for a question on carbon trading versus carbon taxes versus other policy measures:

“There is a good case for putting a price on carbon emissions but it is more straightforward to do it as a tax rather than a system of tradable permits. It would be easier to tax carbon at source – coal, oil, and gas companies. Tradable permits or carbon taxes will not help develop low-emission technologies. We need to combine carbon pricing with initiatives to promote sustainable energy and farming technologies.”

Catch the remainder of his article here

Labour’s failure on inequality

Gary Duncan has a really important and useful article in The Times today on the issue of persistent and deep-rooted relative poverty in the UK - something which transcends the political posturing of recent days and weeks over the furore about the abolition of the 10% starting rate of income tax.

“The stark truth is that after a decade of Labour Government, Britain is a nation of greater income inequality, in which the plight of the very poor has worsened. True, Labour has succeeded in lifting half a million children out of poverty since 1998. Yet the Government’s figures are based on a poverty line drawn at 60 per cent of average incomes. If it is placed, instead, at 40 per cent - officially defined as “severe poverty” - the picture looks much bleaker, with the numbers of children in such dire straits no lower than in 1997.”

This is a superb article to read for those students revising for exam questions on income and wealth inequality. A BBC news article from March highlighted the widening wealth gap and here is a reminder that inequality is not solely a question of disposable income.

The rest of Gary Duncan’s article can be found here

Organic growth for Costa

It is early days yet, but the new Costa Coffee store on my local high street seems to be bedding in nicely. The passing trade has been boosted by providing free wifi access in store (I am sat here now enjoying a small latte writing this blog article) and there is a really nice open patio area behind the building for coffee-lovers to sit watching the Thames go by. The Starbucks over Windsir Bridge is fast becoming a distant memory.

Whitbread, the owners of Costa Coffee and Premier Travel Inn has announced plans today for a very large organic growth of their business - the number of Costa stores worldwide is set to double and the room capacity of their budget hotel business may grow by 50% over the next five years. How recession-proof are these businesses? Despite the increasingly congested markets for retail coffee sales (McDonald’s is making a strong pitch for some of the action) I reckon they are a decent bet providing Whitbread can keep their costs under tight control and limit price rises on the high street. With a weakening pound against the Euro, many more people are likely to holiday at home this year and next boosting the demand for good value budget hotel accommodation en route or at chosen destinations.