Local area figures for life expectancy have just been released for the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK. There is a difference of over twelve years between the highest and lowest and a very clear north-south divide in the regional breakdowns.

What factors help to explain such a persistent discrepancy in average life expectancy?

The good news is that in 2004-06, for the first time all local areas in the UK had a male life expectancy at birth of more than 70 years.

Fact of the day: After many years of rising spending, people in Britain are spending less (in real terms) on life insurance than they were a few years ago. Why?

Highest Life expectancy at birth

Kensington and Chelsea London 83.1

East Dorset South West 81.4

Hart South East 80.7

Rutland East Midlands 80.6

Elmbridge South East 80.4

Christchurch South West 80.3

Wokingham South East 80.3

South Norfolk East of England 80.2

Westminster London 80.2

Guildford South East 80.1

Lowest Life expectancy at birth

Glasgow City Scotland 70.5

West Dunbartonshire Scotland 71.8

Inverclyde Scotland 72.2

Eilean Siar Scotland 73.0

Manchester North West 73.0

North Lanarkshire Scotland 73.0

Clackmannanshire Scotland 73.2

Blackpool North West 73.3

Renfrewshire Scotland 73.4

Dundee City Scotland 73.6

Source: Office for National Statistics

Cartels in the news!<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

An interesting day for students and teachers of A2 microeconomics!

There were three examples today of alleged producer cartels working in different sectors of the economy. This BBC news online article reports that ‘Four of the world's biggest glass manufacturers have been fined a total of 486.9m euros (£348.2m) for illegally co-ordinating price rises.’ The colluders included Pilkington Glass based in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK.  More on this in this Times feature.

Across the water in Canada, a price-fixing investigation has been launched into alleged collusion by some of the biggest makers of chocolate bars in Canada. This BBC news online report has the details. And on the same day, the Australian airline Qantas is reported as having pleaded guilty in the USA for its role in a conspiracy to fix the price of international air cargo shipments. 

Tutor2u revision presentation on cartels and oligopoly

Firstly there is a good example of the derived demand for labour and the impact that a housing industry slowdown can have on unemployment. The BBC reports that ‘Building and plumbing firm Wolseley plans to cut around 1,300 more jobs in North America after being hit by the slowing US housing market.’ Labour shedding is relatively easier in a flexible labour market; the US business is forecasting that the redundancies will eventually save them in excess of £50m dollars. If lay offs gather increased momentum, then the risks of a full blown recession in the USA are heightened.

Writing in the Times today, Anatole Kaletsky neatly summarises the transmissions mechanism between changes in house prices and the US economic cycle:

There are, in principle, three ways that a housing collapse can affect the broader economy and financial markets:

1. Directly, through a cutback in construction activity.

2. Indirectly, through a negative wealth effect on consumer confidence and demand for credit.

3. Indirectly, through damage to bank capital and, thus, the supply of credit.

Kaletsky offers some optimism

§         The housing sector is weakening but the export sector is booming on the back of the weak dollar – an important counter balance to upwards of ½ a million jobs that might be lost in a housing recession

§         The scale of income inequality in the USA is enormous – if much of the fall out of redundancy, negative wealth effects from a slump in property values and a general loss of consumer confidence is concentrated in those families linked to sub-prime, such is their low relative income that the aggregate effect on consumption might be fairly small.

Evan Davis has been reporting from the USA this week – covered extensively in his excellent blog.

Tutor2u: US economy in charts

Black Gold – an extraordinary documentary about coffee
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‘As westerners revel in designer lattes and cappuccinos, impoverished Ethiopian coffee growers suffer the bitter taste of injustice. In this eye-opening expose of the multi-billion dollar industry, Black Gold traces one man's fight for a fair price.’

Black Gold is a 78-minute documentary feature from Mark and Nick Francis which provides an extraordinary vivid and remarkable insight into the lives and challenges facing coffee farmers in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Ethiopia. These producers supply some of the finest coffee in the world but who are struggling to survive because of the obscenely low prices they get from multinational coffee exporters and roasters. For a £2 tall latte, less than 2 pence goes to the grower – a pitiful return for the creator of the raw coffee beans that we turn into a multi-billion dollar pound lifestyle industry at retail level.

The film offers economics students so much – the trading on the floor of the New York Board of Trade Exchange; the monopsony power of the multinational coffee buyers bidding for coffee in an Ethiopian auction house; how a simple coffee bean can have value added to it to generate the billions of pounds of profits enjoyed by shareholders in Starbucks; we understand more of the role of incentives  in allocating resources - many Ethiopian coffee farmers are ploughing under their coffee trees and planting ‘chat’ instead – narcotics provide a better price.

Fundamentally this film is about fairness, about equity in the distribution of income. It provokes a response from your students; I anticipate many of them will consider changing their buying behaviour as a result.

The film visits Italian coffee producers and the world Barista championships in Seattle. It is a film of great contrasts, not rubbing poverty into your face, but gently reminding us that, as we sip our expensive lattes, there is a world of desperate poverty just four or five stops down the supply chain.

In the film, we follow the journey of Tadesse Meskela around the world in search of buyers for and a better price for the coffee of the farmer working for the coffee producers’ cooperative. We witness the breakdown of the Cancun trade talks in 2003, we see at the end of the film some glimmers of hope that the Ethiopian coffee producers might be starting to see some of the benefits of Tadesse’s work in creating higher revenues that can be reinvested into the social development of one of the poorest nations on earth.

Suggested links:

Coffee calculator: http://www.blackgoldmovie.com/CoffeeCalculator/

Oromia Coffee Farmers Cooperative Union see also http://www.greendevelopment.nl/progreso/ocfcu/

The DVD is available from Amazon using this link See also Black Gold: The Dark History of Coffee

 


The world price of coffee is rising, but how much of this finds its way through to the producers of the raw coffee beans?

Interview Questions

We are heading towards the Oxford and Camrbidge interview season, nerves for many and hopes and dreams on the line. Whilst no amount of preparation can deliver a good performance on the day, here are some of the questions I have been firing at some of my students ahead of the interviews in early December. I will publish another set in a couple of days.

Questions

What would you understand by the term “Keynesian Economics?”<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

What has caused the significant productivity gap between <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK and the US?

What would be the affect of tightening monetary policy on the value of bonds in the bond market?

How could the government prevent people from taking certain motorway routes (and thus decrease congestion)?

Why did Japanese Kamikaze pilots wear helmets?

If the government borrows a lot of money, what will this do to interest rates?

If interest rates are raised, will firms invest more or less?

'The housing market is currently seen as a place where it is very hard for some sectors like nurses to find affordable housing.  Please comment on that.'

How will $2:£1 effect the US economy?

What is correlation? Does correlation provide enough evidence for the two factors being directly linked?

What was Keynes' most important principle?

Are there any examples of markets that do not exist?

Is impulse buying irrational?

There is a rare disease that infects every 1/1000 people. There is a test to see if you have it - which is wrong 5% of the time. What is the probability that you have it? Should you be worried?

What is globalisation?" "What does the average citizen gain from globalisation?"

"Should employees, firms, or the government pay to train workers?"

Why do teachers become plumbers and who should pay for their training?

Can addiction be rational?

"Why shouldn't we work the same hours as they do in France or Spain?"

Is saving a strangers life from drowning a rational or irrational action?

What is the difference between a leader and a manger?

Why do governments not seek to eradicate inflation completely?

In your studies of economics, have you come across any examples of a theory or idea that seems completely counter-intuitive?

What part of economics really interests you?

Why do you want to study E&M at Oxford?

What motivates an entrepreneur?

Explain the underlying causes of the business cycle

Talk about a situation in which a monopoly practises price discrimination. Is there any welfare loss if a firm practises first degree price discrimination?   

Is a $1 a gallon subsidy on bio-fuels a crime against humanity?

What does web2.0 mean? What does it mean for businesses and for management?

Should senior executives receive no more than 20 times their average salary?

Should the pay of every employee in a business be known by everyone else?

Feeling the pain – will the diving dollar cause Airbus to crash?<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

 


The rising Euro-US dollar exchange rate has now taken Airbus ‘beyond the pain barrier’ according to this excellent short news report on BBC online. With the dollar stumbling to record lows against the Euro in recent days, it is becoming more difficult for Airbus to remain competitive in the global market for new aircraft. They have already instigated a huge cost-reduction programme but this is unlikely to be enough. And it goes against the grain to be looking at radical cost reductions at a time when orders for new planes are actually quite strong. The problem is mainly the scale and pace of changes in the exchange.  CEO Thomas Enders was reported as saying back in September that ‘every time the dollar loses 10 cents we lose one billion euros."’

Airbus fears 'weak-dollar death'

http://news.bbc.co.uk/1/hi/business/7108146.stm

The article is a good example of how significant exchange rate movements can affect the price and cost competitiveness of producers in one country when facing up to a giant rival (in this case Boeing) across the Atlantic.

Airbus CEO says dollar slide "life-threatening" (The Guardian)

The profits warnings are needed because sales of replica shirts will now fall well short of expectations. Domestic interest in the 2008 tournament will be badly affected.  Umbro, the company behind England's kit and Sports World, owned by Mike Ashley's Sports Direct both issued a downgrading of profits forecasts. Back of the envelope calculations from the British Retail Consortium estimated that sales would be down by £600m next year. Nationwide, Carlsberg, Eon and McDonald's - the FA's main corporate sponsors will also be feeling blue about the result last night. And the FA itself has suffered a potential loss of revenue - England will be playing friendlies but nothing more for the coming months. Attendances will suffer.

But this forecast fails to consider that out spending power has to find a home somewhere. England's abysmal performance opens the door for other summer activities to take the spotlight. As our over-paid footballers lounge on the beach desperately trying to avoid watching tv coverage of the Euro finals, so the marketing people and TV companies will be looking for new ways to fill the schedules and make some money.

The bad news for replica shirt manufacturers could be good news for travel agents and holiday companies as they look to provide alternative holidays for the fans who might otherwise have stayed at home glued to the box or travelled to watch England play. And such is the diverse nature of our population these days that there will undoubtedly be a rising demand for the replica shirts of the other competing nations. What about the bookmakers? On the surface the result is bad news for them too. But my gut feeling is that punters will continue to have a punt on games in the European championships. Last time around, Greece came from nowhere at ridiculous odds to take the title, is there another team lurking in the draw that might be worth an outside bet?

It is also probably good news for students approaching their exams; there will be fewer distractions mid evening during those balmy June nights!

England failure 'may hit economy' (BBC)

http://news.bbc.co.uk/1/hi/business/7106952.stm

England's summer off could cost UK economy £1bn

http://www.brandrepublic.com/News/MostRead/768591/Englands-summer-off-cost-UK-economy-1bn/