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Amazon comes in for some pretty severe criticisms from various quarters. So I enjoyed reading an article by Reihan Salam in Slate, who argues that “Jeff Bezos’ company is not the problem with American capitalism. It’s the solution to our economy’s ills”.read more...»
The world seems to want, and need, plenty of advice on ways to boost macroeconomic performance. I was drawn to one piece on Project Syndicate that was especially interesting because the author, Jeff Sachs (one of the most famous development economists) introduces his comments by saying:
“I am a macroeconomist, but I dissent from the profession’s two main schools of thought … the neo-Keynesians, who focus on boosting aggregate demand, and the supply-siders, who focus on cutting taxes. Both schools have tried and failed to overcome the high-income economies’ persistently weak performance in recent years. It is time for a new strategy, one based on sustainable, investment-led growth”.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...»
Reports out over the last couple of days suggest that government spending on free nursery places for 3 year olds since 1998 has not produced any valuable educational or economic outcome. The policy was introduced as part of a series of reforms introduced by Tony Blair when he came to power in 1997. The Blair Government saw it as a method of reducing the differentials between educational attainment of poorer and wealthier sections of society and promoting a speedier return to work for some mothers.
Researchers studying the impact of the policy during the 2002 to 2007 time period, where spending on the policy amounted to more than £7bn found that the education received at age 3 had some impact on attainment at age 5 but any improvements were lost by age 11. The research suggested that the policy had only a minor impact on enabling more women to return to work earlier. Also, there is evidence that 5 out of 6 users of the free place would have gone to a paid-for equivalent at age 3 anyway.
So, does this offer us a good example of government failure in economic and social policy?read more...»
Why can’t the UK government get its deficit down? This question has been exercising commentators recently, in the light of the latest assessment from the Office for Budget Responsibility (OBR) that George Osborn will once again miss his target for the deficit in the 2014/15 financial year. Of course, the size of the deficit has fallen, from the £157 billion which Labour bequeathed in 2009/10 to £108 billion in 2013/14. But it does just not fall as much as either the OBR consistently predicts it will or the Chancellor would like it to. This limits the ability of the government to deliver tax cuts in advance of the election next year.read more...»
If you have a short break coming up - and you're new to economics - now would be a great time to collect together some resources about the extraordinary recent shift in the oil market.read more...»
A seasonal quiz challenge for your economics students fresh out of the tutor2u Learning Lab.read more...»
A2 development economists will read this article from the BBC with great interest and ought to be able to extract plenty from it. Extraction lies at the heart of the piece because instead of simply growing sugar, Mauritius has successfully invested in capacity and capabilities to create more value from the basic crop. Their economy has prospered in recent years with strong increases in real GDP per capita (PPP adjusted).
But there are fears that the relaxation of sugar production quotas in the European Union from 2017 onwards will be a competitive threat for her sugar exporters. EU sugar growers are likely to expand and perhaps crowd out Mauritian exports. Declining world sugar prices also represent a threat to the sustained growth and development of the Mauritius economy in the near term.read more...»
New data has been released on relative productivity for the UK and other G7 nations. In 2013, based on GDP per hour, the UK came sixth of the G7 countries, with the USA top and Japan bottom. UK productivity was 17 percentage points lower than the average for the rest of the G7, the widest productivity gap since 1992. In absolute terms, UK output per hour fell slightly in 2013 compared with 2012, contrasting with an increase of 1.0% across the rest of the G7.
The relatively low level of labour productivity is a key supply-side issue for the UK economy to address. What factors do you think contribute to our output per hour lagging behind other advanced countries? Why does it matter?read more...»
Here are some summary notes on economic growth and development prospects for the Ivory Coast.read more...»
In this TED talk, Dilip Ratha, of the Migration and Remittances Unit at the World Bank, sets out simply both the size of remittances and the economic impact on the countries that receive them.read more...»
This article from the Sunday Observer http://www.theguardian.com/business/2014/oct/18/ec... is really useful for understanding some of the longer term dynamics in the labour market that are affecting the pattern of demand for jobs of different skills.read more...»
Behavioural economics figures more prominently in the new specifications for A level economics from September 2015 onwards. This brief essay from Cass Sunstein, the co-author (with Richard Thaler) of "Nudge" offers a general introduction to the idea of nudging, along with a list of ten of the most important “nudges.” It also provides a short discussion of the question whether to create some kind of separate “behavioral insights unit,” capable of conducting its own research, or instead to rely on existing institutions.
Click here to access the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id...read more...»
If you have studied the economic importance of capital investment as part of your macroeconomics, then this short article on the German economy (Europe's biggest but experiencing weaker economic growth) will be of interest.
The German Finance Minister wants the ratio of investment to GDP to start climbing again with infrastructure projects at the forefront of his mind. But how best to finance this when the German priority is to control government debt?read more...»
I am sure many economics teaching colleagues will be fascinated to read this blog from John Tomsett at Huntingdon School in York on how he has approached his microeconomics teaching in the first six weeks of the new term. For me, John's blog is an essential read and he is also prolific, perceptive and entertaining in equal measure via his twitter account @johntomsett
Newnight's Economics Editor Duncan Weldon looks at prospects for the UK economy. How well the economy is doing depends on where you look. Unemployment is falling but real wages for people in work are stagnant or falling. And the productivity gap between the UK and the rest of the world is widening once more. Newly-released data shows that output per hour in the UK was 17 percentage points below the average for the rest of the major G7 industrialised economies in 2013, the widest productivity gap since 1992.read more...»
The slump in global oil prices is one of the BIG economic stories at the moment. There is plenty of comment and analysis around - this article from the Observer is really good focusing on the gainers and losers from an international perspective.
Read: Low oil price means high anxiety for Opec as US flexes its muscles: http://www.theguardian.com/business/2014/oct/19/oi...
Read: Falling oil prices: Who are the winners and losers? (BBC): http://www.bbc.co.uk/news/business-29643612read more...»
I find it reassuring that we have an intellectual heavyweight as Chief Economist of the Bank of England. Andy Haldane gave a talk last month to the Keynes Society that was easily one of the best I have heard in the last ten years. Haldane understands that Economic forecasting and policy-making has to respond to a non-linear world in which external shocks are more frequent, complexity and interconnectedness is the norm and the behaviour of consumers and businesses does not follow textbook patterns. "Are they hiring staff? Are they pouring concrete? Are they buying that machine?” - these are important questions relating to the real world and not some dusty office in Threadneedle Street.
Read The Observer (19/10/2014): Bank of England’s chief economist struggles with stance on Britain’s prospects: http://www.theguardian.com/business/2014/oct/19/an...read more...»
The BBC's Linda Yueh has been given unprecedented access to the campus where Huawei is based and the result is a superb background article on one of the first Chinese companies to break into the world's 100 top global brands. The scale of Huawei's activities are vast, half of Huawei's 150,000 employees work in R&D and it holds an impressive 49,000 patents. Please do read this to understand a little more how the centre of gravity in the world economy continued to change every single day. Article: http://www.bbc.co.uk/news/business-29628044read more...»
Modernising and energising the Royal Mail is challenge facing the newly privatised Royal Mail. In this FT video some of the obstacles to keeping the Royal Mail profitable are discussed. Market demand for letters is falling and the contestability of the parcel industry becomes more intense with each passing year. There is strong pressure to keep costs down and justify future capital investment designed to extend capacity and efficiency in the business. When a firm is operating with spare capacity, the average fixed costs are higher which ultimately hits the bottom line. Royal Mail is now facing competition in direct delivery across a number of UK cities from companies such as TNT Post. The Royal Mail is under obligation to maintain a universal postal service but their emerging competitors are not.read more...»
Ethiopia is a fascinating country to use as a case study in economic growth and development. According to a recent editorial in the Financial Times, "Ethiopia has transformed in 20 years from a famine-ravaged nation into a destination for savvy and well-known private equity groups such as KKR."read more...»
Profitability has a bigger impact on corporate capital investment spending than changes in market interest rates. And businesses appear to be disproportionately affected by volatile swings in sentiment when deciding how much to spend on investment - Keynesian animal spirits at work! This is a good article to read when studying the macroeconomic effects of monetary policy! Click here: http://www.economist.com/news/finance-and-economic...
Year 12 Economist Archie Barnes has written this excellent assignment on the contemporary relevance of Keynes
John Maynard Keynes is the Einstein of economics. He is the face of a field; he is without a doubt the most famous economist there ever was and ever is and possibly ever will be. To assess his economic policies and ideas and there effects and relevance on and to the Economies of the world today we must first try to define Keynesian economics without spreading into tomes of paper and devoting copious amounts of time.read more...»
The world's economic order is changing. I struggle with labels for groups of countries. Have you heard of the BRICs, NICs, Next 11, CIVETS, MINTS, LEDCs, MEDCs and the Tigers? Sometimes I feel most comfortable talking about rich countries, poor countries and middle income countries (and when I do, I'm careful to differentiate between economic growth and economic development).
In the years when several large economies appeared to be catching up with the richer nations, the label emerging markets seemed to fit. Those stuck in poverty were then the submerging markets.
I heard a new one (to me) today - a frontier market - it was in an online quiz.read more...»
How many workers does the typical American firm employ? Actually, it is a trick question. The answer is ‘zero’. More than 50 per cent of all companies in the United States are one person operations - the owner, and no-one else.read more...»
A tidy and timely short video graphic from the economist on the size of major economies over a long historical sweepread more...»
A new report from Credit Suisse on the distribution of global wealth provides a torrent of thought-provoking and discussion prompting material. In UK for example, 30 million people are among the world’s richest 10%, while 2.9m make the top 1%. This article from the Telegraph provides some of the main points. You can download the full report from here: https://publications.credit-suisse.com/tasks/rende...read more...»
Year 12 students were covering elasticity of demand last week and were given an assignment encouraging them to create a resource on the topic. Some chose a (challenging) snakes and ladders quiz, another group produced a news video. And a third group produced this fine video-scribe production covering the various elasticities of demand.read more...»
In 2015, the UN's Millennium Development Goals are expiring and the international community will set new goals. This is a hugely important exercise, so I'm drawn to the discussions as part of the Copenhagen Consensus -
"Effective investments for today’s children are fundamental for a better and more equitable world in the future. The Copenhagen Consensus Centre brings a simple but compelling logic to this endeavor: if we want to make sure that this world is realized for our children, let’s focus on the investments that will generate the most good”.
- Richard Morgan, UNICEF Senior Advisor on the Post-2015 Development Agendaread more...»
The dates and locations for our programme of intensive exam coaching & revision days for AS & A2 Economics in Spring 2015 are now available. Details below. We'll add details of how to book online to this blog entry shortly.
To see what is involved in our exam coaching & revision days, watch this brief video from a recent event:read more...»
New research on the economic cost of natural and human-induced disasters has been produced by the OECD. Large-scale natural and human-induced disasters have generated over USD 1.5 trillion in economic damages over the last decade in OECD and BRIC countries.read more...»
The 2014 Nobel Prize has been awarded to a microeconomist who has done a huge amount of work on the economics of large-scale businesses operating in monopolistic and oligopolistic industries.
Tyler Cowen from Marginal Revolution has a superb landing page commenting on the award - click here - http://marginalrevolution.com/marginalrevolution/2...
Here is the Economist lauding Tirole's 2006 book: http://www.economist.com/node/5492253?fsrc=scn/tw_...read more...»
The BBC reports here that
"Directors of the top 100 listed UK companies now earn 120 times the average sum earned by their employees, according to a report by Incomes Data Services (IDS)."read more...»
Last Monday’s Panorama Worker’s on the Breadline saw Richard Bilton investigating why many families and single people on lower wages are struggling to make ends meet. He interviewed families from across the country who suffer from what we know in economics as the poverty trap.
For teachers, there’s a good interactive resource on the poverty trap here, produced by The Children’s Society.read more...»
Are UKIP (who finally have their MP after the by-election in Clacton) really the party of "fear and division"? After last nights discussion on BBC Radio 4's Any Questions, one might be inclined to think so. Excellent for #econ2 and especially #econ4 where Britain's EU membership is studied alongside the arguments for/against further integration and more specifically the economic effects of inward migration (Paul Nuttal) vs the benefits 2 million Brits get from living outside the UK but in the EU (rest of the panel). This feitsy part of the debate starts around 16mins 44 secs and leaves it very clear what UKIP's stance is on the matter.
When discussing the strategies and policies that firms adopt, textbooks often discuss things like profit maximisation, revenue maximisation... but in the real world, most firms adopt some form of satisficing (achieving a minimum level of some variable, rather than maximising it).
Even within that, the strategies that a firm chooses to adopt, will depend on a number of things. Some Behavioural Theories state that the objectives/strategies firms go for depends, rather than one decision maker, input from all decision makers or stakeholders in a business. And what strategy prevails at any given point in time, depends on the relative bargaining strength of those stakeholders.
A neat example illustrates this this week when because of pressure from the Greenpeace, Lego decided to end a 60-year long partnership with Shell. (One could argue that Lego are adopting a long run profit maximisation strategy). See the video below and read more about it here.
Eric Beinhocker and Nick Hanauer have published a thought-provoking article in McKinsey Quarterly, 'Capitalism Redefined'. Their argument is that, while it may be true to suggest that, over the last two centuries, capitalism has been responsible for our economic growth and prosperity, we do not correctly understand why and how it has done that.read more...»
Here are details of the Head of Economics and Politics post at Eton college - to take effect from 1st September 2015. It is a fantastic school and a wonderful department and a superb opportunity! Click here for information about the post: https://www.dropbox.com/s/r7tt30280owd211/Head%20o...
For a decade Africa has enjoyed broad economic success, earning it the moniker 'Africa Rising'. But now a more cautious IMF talks of 'Africa Watching'. In this Financial Times video report, Javier Blas reports on why the continent's countries must now be judged on their own meritsread more...»
Treating mental illness is the right thing to do morally but also economically - Richard Layard of the Centre for Economic Performance explains why treating mental illness should be high on the public agenda. The costs of treatment for mental illness are far less than the costs of doing nothing.read more...»
The psychological cost of a few years of recession can wipe out the benefits of many years of growth. Jan-Emmanuel De Neve of the Centre for Economic Performance explains his latest research on the effect of the recent recession on people's wellbeing.read more...»
One optimistic observation in economics is that poor countries should be able to catch up with the richer ones, since it’s easier to grow from a low level of GDP to a higher one. This observation was made by Nobel-winner Robert Solow in 1956, and is based on the idea that low income countries are poor because their workers have access to less capital. This capital shortage (i.e. insufficient infrastructure) implies that the return on investment should be high, so capital should flow from rich countries to poor ones, leading the two worlds to converge on similar levels of productivity and income.
Furthermore, in this theory, growth in rich countries is driven by new technology which, once developed, could be adopted by poorer economies too. Indeed, the poor could potentially learn from the mistakes made by the rich, and leapfrog directly to more productive ways of doing things.
And so it seemed. From the late 1990s to 2008, poor countries were catching up fast. But that catch up seems to have slowed down (see chart above).read more...»
The Economist have posted a terrific video that takes a tour along the Pearl River in China. As the scenery rolls by, the narrator comments on the extent to which the journey through the surroundings reflects a journey through China's recent economic development.read more...»
There was a nice little article in the Telegraph titled 'Six charts that explain what's going on in the global economy right now' which you can find here: http://www.telegraph.co.uk/finance/economics/11146...
I took the liberty of putting all those charts into a little Powerpoint presentation to stimulate a discussion with my students. You can download it here:
The charts provide an excellent chance to discuss the difficulties of forecasting as well as the problems that policy makers are facing. How would your students do things differently?
The National Institute for Health and Care Excellence (NICE) has been the butt of much ridicule over the past week. A pill designed to reduce alcohol consumption among problem drinkers will be made available across the NHS. But the concept of problem drinkers is so wide that it embraces people who enjoy a couple of modest glasses of wine a day. Indeed, the treatment is not really aimed at serious alcoholics who knock back litres of vodka with meths chasers.read more...»
Have Western economies entered a period of 'secular stagnation'? Among respondents to the latest monthly survey of the Centre for Macroeconomics (CFM), three out of four think not – though, on balance, they feel that policy ought to be more expansionary anywayread more...»
Have a read of this fascinating article from the Guardian about the fall in prices for mink fur in China. It struck me that, not only does the article give you several traditional causes of a slump in demand (let's all draw the diagram!) but comes up with a brand new cause of a shift that I've not seen before!
The article suggests that the shift in demand is caused by a warmer than expected winter (tick, weather conditions) and that an increase in the number of educated Chinese people are choosing not to use mink for ethical reasons (tick, change in tastes). It also says that demand has dropped as the Chinese government are clamping down on corporate corruption preventing Chinese directors from accepting luxury goods in return for favourable business decisions - which of our Economics Teacher categories does that fit in?
PS. Look out for the fantastic activity 'Demand Street', which challenges students to work out what change in demand factor is being demonstrated, showcased at this year's Wow Economics Teacher CPD event fro Tutor2u.
Here's a fun resource that's trickier then it sounds. 'Wordsnake' is a resource developed by our very own Graham Prior. At first glance it appears to be a wordsearch as you see a grid of what appears to be 100 random letters. However, the key phrase being tested 'snakes' around the grid rather than being up, down or diagonal as in a normal wordsearch.
Students are given a question on screen with the answer hidden in the grid. Who can be the first to spot the answer and call out its location?
If the answer is not obvious at first, the teacher can press the space bar and the letters reveal themselves one at a time. This version contains 5 questions relating to elasticity and demand.read more...»
I love a story that really can resonate with students and get them 'irked'. It struck me yesterday that reading about a recent Bristol University research paper that claims that school admission policies lead to greater inequality might strike a chord with some young people.
The study suggests that the common policy in the UK of prioritizing admission places in primary and secondary schools based upon how close a student lives to that school continues a cycle of inequality. The argument is that, wealthier people are more able to afford to move to areas with higher performing schools and so are more inclined to do so. People without that facility have less choice in where to send their children and may have to stick with local schools despite their relative poor performance. So the cycle continues ..... poorer people receive a poorer quality education and are therefore less equipped to get the necessary qualifications to earn higher wages.read more...»