Get Summer 2014 Right First Time with tutor2u Exam Coaching & Revision Workshops
I don’t know the answer to the question I've just posed, but I think the recent news about RBS raises some interesting issues about the perceived zombie problem in the UK economy.read more...»
I've recently looked at the issue of a smaller slice of GDP going to wages, and here are a couple of links and updates on the minimum wage discussion. For those of you who follow this topic, you’ll also perhaps be familiar with the idea of a living wage, which is based around the argument that minimum wages are too low anyway.read more...»
This topic is of profound importance. It gets the heart of a fundamental economic issue: the distribution of income. When national income rises, does that extra income go into the pockets of workers or capitalists?
The answer is clear cut: labour is getting a smaller slice of the pie. How and why might that be happening, and what might be done? Here are links and summary of a couple of articles, plus a great Economist video clip.read more...»
Suyash Raj Bhandari considers some of the ways in which the rapid expansion and adoption of mobile technology in Africa can act as a spur to growth and development on the continent. We link also to some useful background video resources on this issue.read more...»
In the second part of his conversation with Professor Richard Hausmann, John Authers from the FT asks which countries are well set for growth in the years ahead. Hausmann argues that there are three factors that explain growth - firstly how well natural resources are used, second how many productive capabilities a country currently has. And thirdly, how easy can a nation can acquire new productive capabilities. He claims that Mexico is better placed than Brazil on account of improved diversification into more sophisticated products. Hausmann forecasts that China will grow at a rate of around 5% between now and 2020, well below the growth target set by the Chinese government.read more...»
The nature of A2 economics specifications is that they lag interesting and important developments in the subject much of which are directly relevant to what students are taught in the classroom. The role of complexity in understanding how and why countries grow is one such example and I have blogged before about the work of Cesar Hidalgo and Richard Hausmann through the Observatory of Economic Complexity - see "Teaching Trade in a Different Way"
It is a joy to find the Financial Times covering some of their ideas in a brace of short videos as part of the John Authers Daily Note. You can always find these clips on the FT's You Tube Channel and I strongly recommend this for ambitious and enthusiastic students.read more...»
This is an updated revision presentation covering some of the factors that determine short run aggregate supply (SRAS) in an economy. Click here to take a quick revision quiz on short run aggregate supply.read more...»
The entrepreneur is considered crucial in economics: so crucial that they are even described as a factor of production, listed alongside land, labour and capital. Supply side economic approaches often recommend policies that will encourage and support entrepreneurs, as a way of stimulating the economy.read more...»
There’s been plenty of recent coverage of the fact that Britain needs more investment for a sustained, balanced recovery. Why aren't firms investing more? Many firms are flushed with cash. Interest rates are at a record low. As The Economist notes, profits have been booming in America, reaching the highest proportion of GDP since the second world war. Given such buoyant conditions, you might imagine that businesses are investing like crazy to take advantage of all those great opportunities. Not a bit of it. The ratio of business investment to GDP has picked up since the depths of the financial crisis, but is still close to the lows of previous cycles. Instead, businesses are handing cash back to shareholders, a tactic once reserved for executives who had run out of ideas. In 2011 the value of British share buy-backs was equal to 3.1% of GDP.
Enter a new theory shedding light on this puzzle – why might investment be so low?read more...»
A revision presentation on aspects of the links between investment and economic growth. Plus some slides on the causes of the so-called Middle Income Trapread more...»
Here are some video resources on Shanghai's new tree trade zone. The Financial Times reports that "The Chinese government has declared that it wants to use the zone – a small 28 sq km sliver of Shanghai – as a test bed for policies from interest rate liberalisation to capital account opening - There are no residents in the zone – only offices, factories and hotels" There is much debate about whether the creation of a new free trade zone will bring about greater digital freedom in China - allowing for example, freer access to social networks such as Facebook and Twitterread more...»
The Ethiopian government is ploughing up to 15% of her GDP into large-scale infrastructure development projects - will this kick start a renewed period of fast growth and development? The Grand Ethiopian Renaissance Dam will be the largest hydroelectric power plant in Africa when completed, delivering 6,000MW. The cost and the potential impact of diverting the Blue Nile have created controversy in the region. This FT video looks at some of the issues. This BBC news resource is also useful: The dam that divides Ethiopiansread more...»
Many of you starting out on Economics programmes will quickly hit on this topic. Is it wise to take a 'free market' or Laisser Faire approach to organising the economy? Or should the government be controlling key parts of the economy? This theme is likely to run through the course, as you go on to consider the ways in which government intervention in the economy can make things better - or worse.
Here's the ideal topic to get you thinking. Are industries best managed when they are in the hands of the government (which is often described as nationalised)? Or is it better for them to be run as regular private businesses - that is privatised?read more...»
The Focus Circle is quickly becoming one of our most popular teaching & learning activities and here is a version that comes ready-made for a lesson macroeconomic policy.
In the Focus Circle, students are shown up to 4 topic areas (categories) inside. Around the Focus Circle are up to 18 words/ phrases which belong to one or more of the different categories. Students select 1 of the topic areas and decide which of the key words/ phrases belong inside the Focus Circle (words that are specifically related to that topic area).
So, is currency intervention a supply-side policy? Is "forward guidance" part of fiscal or monetary policy? Can your students define the words or phrases they select? Can they provide an example to back-up their selection.
The possibilities for an engaging and effective lesson are endless...read more...»
Why is economic growth such a rare and elusive butterfly in the UK garden? What institutions and policies are needed to sustain UK economic growth in the dynamic global economy of the twenty-first century?read more...»
Would Apple Inc have succeeded without a helping hand from the US government? Where are the European Googles? A new book focuses on the key roles that the state can fulfill as an agent of innovation and economic growth. Without the US government for example, there would be no iPhone, says economist Mariana Mazzucato in her new book 'The Entrepreneurial State'. The author of the book is featured here in an FT interview. Some of the examples discussed in the book are covered in this article from the Economist. Mazzucato argues that "“All the technologies which make the iPhone ‘smart’ are also state-funded ... the internet, wireless networks, the global positioning system, microelectronics, touchscreen displays and the latest voice-activated SIRI personal assistant.”read more...»
The International Business Times is producing a series of short videos on life, work and enterprise inside Tech City - a fast-growing hub of digital start ups and established tech businesses centred around Old Street / Digital Roundabout. The clips reveal the energy of the start-up economy in this part of London and the importance of network effects, collaboration and attracting human capital in accelerating routes to market for lean start-ups. This series of short videos is worth a look if you are interested in this potentially significant catalyst for growth in the UK economy and to learn more about the factors that influence the emergence and success/failure of start ups.read more...»
How sticky is unemployment? Will it take three years to fall?
The views expressed by the new Bank of England Governor, Mark Carney, on interest rates and unemployment remain a hot topic. Interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years.read more...»
As of today, any employee wishing to take their employer to an unfair dismissal, unequal pay or sexual discrimination tribunal will have to pay a fee. This fee will not be automatically refunded on a successful tribunal outcome meaning that employees who are making choices about such an action have to be aware of the potential financial cost of such an action.
The government argue that this removes some of the burden of tribunal costs away from tax payers and should also reduce the number of frivolous claims made (and thus reduce a further burden on businesses). As such, you could claim that the tribunal fee represents a supply-side policy by the government - an attempt to improve the efficiency of the operation of businesses by reducing some of the red-tape that can stop a business working effectively (particularly small businesses).
Trade Unions are unhappy about the fee introduction. They argue that it reduces the opportunity for poorer workers (or unemployed people who have lost a job) to seek justice for what may have been unfair treatment. An evaluative argument here, therefore, might suggest that the tribunal fee acts as a barrier to fair pay, particularly in cases of discrimination.
Follow this link for some details as illustrated by the New Statesman.
Access to affordable comprehensive child care and schooling is widely regarded as being crucial to improving the incentives for mothers to actively search for and take paid work. Effective early years education also has a long run positive effect on employment prospects and is important as part of the overall supply-side capacity of the economy.read more...»
In its annual assessment of the U.K. economy, the IMF called on the UK to invest in skills and infrastructure and increase banking sector competition in order to foster growth and achieve a sustainable recovery.
The report can be found here and contains plenty of relevant background information on the current situation facing the UK - here is a selection of quotes from their summary
The UK Coalition government has introduced a controversial welfare cap - imposing a maximum on the total social security spending per year for each family. The welfare cap limits households to £26,000 a year. Couples and single parents receive no more than £500 a week in benefits, while the limit for single people is £350, although there are some exemptions.
The cap is designed to ensure that benefits payments do not exceed the income of the average working household and is designed both to cut total welfare spending and as part of a strategy of improving incentives for people to actively look for and take paid work.
Critics argue that a welfare gap does little or nothing to address deeper underlying problems such as the soaring cost of renting property and the lack of affordable child care.
Social spending varies greatly across different countries. The Economist live chart below looks at some of these differences.read more...»
This short video from the OECD looks at the importance of knowledge capital as a key driver of innovation and growth for businesses and economies across the world. Innovation -- building on human knowledge - is booming, changing the way business invests and grows. As coal drove the last industrial revolution, software, databases, research and development, designs, new business models and the skills people bring to an organisation are driving revolutionary changes today.read more...»
For students' exam answers to be lifted from the ordinary to the higher levels, they really need to add some convincing evidence for their statements of theory. Here is a nice, simple report from the BBC of the latest figures from the ONS which shows what happened to household incomes in 2011-12, which would really fit the bill nicely.
Average household income has fallen by £1,200 since 2007-8 in real terms;
Before tax and benefits, the average income of the top fifth of households was £78,000 and of the bottom fifth was £5,400 - a ratio between them of about 14:1
After tax and benefits these had changed to £57,300 and £15,800 - a ratio of four to one
Between 2007-8 and 2011-12, the average income of the top fifth has fallen by 6.8% and the bottom fifth has risen by 6.9%, so the gap between the two has narrowed (- note that the latest changes in benefits are not included as they took place after the end of the 2011-12 year).
All groups paid more in indirect tax in 2011-12 than in the previous two years, due to rises in VAT in 2010 and 2011.
We link here to a recent lecture given by Professor Doug McWilliams at Gresham College that might be of particular interest to students and teachers who are taking the transport economics option.
London has some major disadvantages that would make any transport policy difficult. However, even given the constraints, the current policy mix is so far away from ideal that it could be costing each household about £1,000 more than it should if transport were to be organised rationally. The lecture outlines some proposals for transport reform in the capital.
We link here to a recent 45 minute illustrated lecture given by Professor James Sproule on the impact of demographic change on competitiveness and growth prospects for the UK and other economies.
Economic growth depends on productivity gains and changes to the workforce. With service sector productivity gains diminishing and baby boomers across Europe approaching retirement, businesses face crucial questions on how they will fare. What can be done to maintain levels of prosperity in the UK?
The scale of the new London Gateway Super deepwater Port is truly stunning and its importance to the economy as a trading nation is hard to underestimate - Britain will have a new world class hub port in a key location impacting on many trades and services in and around the South East and beyond. It has taken 10 years to establish and build this huge new infrastructure project, building eventually started in 2008.
Behind the port sits Europe's largest logistics park connected to the South east by road and rail.
This Financial Times news video looks at the background to the project - it is a good example to consider of the macroeconomic consequences of the investment. What price a new Thames Estuary airport (supported by Boris Johnson) to amplify the transformative impact in the years ahead?
Update: BBC news (November 2013) - click hereread more...»
Students looking for a good example of a supply-side policy for improving the economic performance of the UK may be interested in this news article about how increasing the labour participation rates of women in the UK could lead to an increase in GDP by up to a staggering 10%. This growth could be achieved by encouraging the number of women wishing to provide their labour (or increase the provision of their labour) to the same level as men.
The common view now is that legislation is no longer good enough in itself to provide this encouragement. The Equality Act of 2010 combined the various equal opportunity laws together to penalise businesses that operate unequally. What appears to be needed is an improvement in the accessibility, availability, cost and quality of childcare facilities to allow more mothers to work (or work longer).
A further article (follow this link) explores how this principle is equally true of the Japanese economy. This article has a fantastic graph comparing the female participation rates for many of the major economies which might be a fantastic data example for teachers to use as a compare and contrast exercise.
As for the costs on society of such a policy....... That's a different question!
Much of the recent talk about tax has been linked to the avoidance stories by big multi-national companies like Google. An alternative angle that students may find interesting as a counter argument is the use of tax concessions as an incentive by government. The most commonly used example is the concessions given to more environmentally-friendly cars when their owners pay road tax.
Another interesting example has been highlighted this week, in concessions given out to those people who give away items classified as culturally significant. Follow this link to read an article on how some handwritten lyrics penned by John Lennon have been given away by their owner as part of the Cultural Gifts tax relief scheme.
Will all the tax avoiders in the front row please jangle their jewellery?
employer's point of view, a zero hours contract is a great example of the
benefits of the flexible labour market. They allow the employer to change the
number of hours an employee works each week, with more shifts offered when they
are busy, and fewer when they are not; costs can therefore be controlled and
matched more exactly to revenue. Neil Carberry at the CBI says that they have
helped to save jobs during the recession and stagnant growth: "It's zero
hours contracts and other forms of flexible working that mean there are half a
million fewer unemployed people than there might otherwise have been." Now
figures from the Office of National Statistics (ONS)
show the number of 16 to 24-year-olds on zero hours contracts has more than
doubled since the start of the economic downturn, rising from 35,000 in 2008 to
76,000 in 2012. This means that one in every three people on a zero-hours
contract is under 25 (- although that proportion doesn't look as if it has
changed very dramatically throughout the period shown). If this is good for the employer, how is it for the
Apparently this is how George Osborne ended his tweet last night, announcing that the next Star Wars film is to be made in the UK - how nice to have some good news for a change! It looks like a great example of supply-side fiscal policy being effective. As long as at least 25% of the total production expenditure takes place in the UK, the film will benefit from tax relief, up to a maximum of 80% of the total budget for production costs in the UK. This seems to be acting as a powerful incentive: hundreds of films have been made here in the last few years and benefited not only from the tax relief but also from the comparative advantage which the UK is establishing in the creative industries with major film studios such as Pinewood, Leavesden and Ealing. How much is this worth to the UK economy?
Here is a streamed (and downloadable) presentation on policies to cut unemployment in the UK economy.read more...»
I'm always sightly dubious about statistics and information represented by campaign organisations - I'm left with the reservation that information can presented in any way that you want to prove whatever point that you are trying to make (wasn't it an economist who came up with the phrase 'lies, damned lies and statistics'?). So this fascinating report from an organisation called 'Vision of Humanity' needs to be looked at with an open mind.
However, if you take it at face value, it offers some really interesting information.read more...»
Fantastic interactive website here lets you check out migration flows both inward and outward from any country you care to look at.
Introducing The Government Game - tutor2u's new Economic Simulation game that is just perfect for revising for AS & A2 Macroeconomic Policy topics!
The annual NORFACE migration conference at University College London this week has generated plenty of new research papers on the economics of international migration, a topic that of growing significance for students of globalisation, competitiveness, innovation and growth. Some of the key findings are summarised below together with external links to relevant articles and news reportsread more...»
Unicef have just released their latest 'report card' on the relative state of well being among children in 29 of the most wealthy countries. The report (a full version and a summary) are available from this link.
The report shows pleasing progress for the UK (our place on the overall ranking has gone up from last place to 16th) with an improvement in obesity levels and a reduction in consumption of alcohol, cigarettes and drugs compared to the 2007 report.
However, worryingly, the UK is ranked 24th in the table with regards to its provision of Education. The biggest weakness highlighted, is the fact that the UK has one of the lowest percentages of young people continuing with education post 16 (only 74%) and very high levels of young people not in education, employment or training at all (nearly 10%). Students of economics could use this as evidence of government failure with regards to supply-side policies - with such a low level of participation in comparison to our major competitors can we guarantee that we are developing skills that will allow the economy to grow in the future? Could your students suggest (and then evaluate) suggestions for how this situation could be remedied?
A recent World Bank report asked ‘Where is the Wealth of Nations?’ Calculations presented at the Economic History Society’s 2013 annual conference show that for Britain, the answer is undoubtedly in its people.
Dr Jan Kunnas and his colleagues calculate that Britain’s ‘human capital’ has grown by a multiple of 123 over the past 250 years. The main drivers of this phenomenal growth have been the growth in the workforce and the growth in wages.
The researchers define human capital as the knowledge and skills embodied in individuals – and they measure it by the discounted earnings the population is expected to earn during their time in the labour force.We have an extended revision note on human capital and economic growth - read it here
The Changing Wealth of Nations - World Bank reports can be accessed here
How Britain escaped from the travails of the Great Depression and achieved 4% a year growth in the years from 1933 to 1937 has important lessons for today’s policy-makers, according to research by Professor Nicholas Crafts, presented at the Economic History Society’s 2013 annual conference.read more...»
GDP per hour – labour productivity – in the UK remains lower than at the beginning of the recession in 2008. A special session at the Royal Economic Society on Friday 5 April held jointly by the Centre for Economic Performance (CEP) and Institute for Fiscal Studies (IFS) investigated the causes of this mystery. It was also the subject of radio 4 In Business - click here
See also: the Job Rich Depression (The Economist)read more...»
Germany’s low unemployment is in large part due to the ‘Hartz Reforms’, which started as early as 2003 and have reduced the long-run rate of unemployment by 1.1%. That is the central finding of research by Matthias Hertweck and Oliver Sigrist, to be presented at the Royal Economic Society’s 2013 annual conference.
Unemployment rates across much of Europe have surged to unprecedented levels in recent years, particularly among the southern countries. In contrast, German unemployment has continued to fall even during the Great Recession. The authors conclude:
‘Our results build a solid basis for the macroeconomic effectiveness of such labour market reforms. This is particularly important for policy-makers across Europe who are currently planning to undertake similar structural reforms.’
The success of small firms is crucial to hopes of a sustained recovery in the UK economy and the government is keen to promote innovation within small and medium sized enterprises with a range of tax incentives including the Patent Box. The Patent Box system allows companies to apply an effective 10 percent preferential rate of corporation tax to profits attributable to patents and is introduced from April 2013.
Will this fresh supply-side fiscal policy prompt a significant boost to patent applications from UK firms? The evidence so far is mixed. The number of patent applications to the UK Intellectual Property Office from within the UK was just 15,370 in 2012, almost equal to the 2011 figure of 15,343. (Source: Independent, March 2013). But there has been a large rise in the number of patent applications made in the UK by foreign businesses especially in the pharmaceutical sector.
The reality is that most small businesses are too busy reinvesting their revenues back into growing their businesses rather than going through the lengthy, uncertain and often costly process of making multiple patent bids on their new product and process ideas. In a recent blog from the Wall Street Journal it was claimed that "it is almost impossible to defend software or business process innovation patents in the UK." Others are more optimistic - read this short piece from the Scotsman which claims that the Patent Box fits well with the ambition of the Scottish government to attract inward investment from high-knowledge businesses.read more...»
Here's a 5 to 10 minute activity for your post-Easter classes on macro-economic objectives - The Angry Economist! The design is very loosely based upon the 'Angry Bird' game.
You will need up to 8 volunteers to answer the 'Angry Economist's' questions.
Each student can choose a Government policy named on-screen and then the Angry Economist randomly chooses a macro-economic objective. The student has to to apply their knowledge and understanding of their chosen policy to the macro-economic objective shown.
The screen encourages the student to analyse and evaluate their own answer.
Use this link to access the resource. Give it a go!read more...»
This 10-question revision quiz focuses on supply-side policies.
I know that it is April Fools Day, but the new and quite radical social welfare reforms are starting to come in to play from this week and they are genuine!
Use this link to access a document that summarises the main changes to the welfare reforms. You can use this document as a lesson activity to discuss government policies to achieve macro-economic objectives.
Are these reforms just aimed at reducing the government's debt or are they aimed at improving the unemployment situation? Are they part of a wider supply-side set of policies aimed at making the UK workforce more effective and flexible?
Could students discuss each policy's strength and weakness? Could they suggest alternative and (possibly) more effective policies.
Useful graphic from The Guardian showing Government Revenues and Spending - helps to put some perspective on some of the announcements.
Politicshome's live Blog showing that hell hath no fury like pressure groups scorned, with plenty of useful links to early comments on The Budget.
Evening Standard's coverage here, it managed to pre-empt the Chancellor's statement.
With Evening Standard-like speed, please follow this link for a short set of questions about today's Budget.
Attention is often focused on the tariff and non-tariff barriers to trade and in particular, the extent to which trade from developing countries to advanced high-income nations is influenced by import taxes. Average tariff rates have come down to historic lows in recent years although non-tariff barriers proliferate.
New research from a group of European economists finds that trade costs - a concept that captures the broader expenses of getting goods and services across borders into international markets - are much higher than tariffs. And for developing countries these costs have not fallen to the same extent as richer countries.read more...»
The economics news, and this blog, has recently featured the debate between those who favour more government spending on public infrastructure and those who favour sticking to the role of austerity, in the search for growth - see the debate (or spat) between Krugman and Sachs, Vince Cable's article in the New Statesman and Liam Fox's speech to the IEA last week for a range of different views. The idea that more UK spending on 'shovel-ready projects' (if such a thing exists) would help to kick start the economy through multiplied growth of GDP suggests that we don't spend enough. And this view would be borne out by those who suffer damaged car tyres from potholes, hold-ups on the roads and railways from lack of maintenance, and delayed or re-routed air travel when the airports can't cope with adverse weather. However, an article in the Wall Street Journal this weekend suggests that the UK's spending is well ahead of other countries,and that Germany in particular has a real problem with aging, collapsing infrastructure.
It’s not often you read such a clearly set out, even-handed article on macroeconomic policy, so this relatively lengthy piece was interesting in itself as its writer appears to deal relatively equally with both sides of the big austerity debate. But you really have to take notice when the writer is the Secretary of State for Business, Innovation and Skills, Vince Cable.