In the News
Archbishop of Canterbury says UK economic model is 'broken'. What does this mean to a new student of economics?
As with casual conversation with strangers in the queue at the Post Office, I tend to leave the topic of religion out of blogs. However, my eye was caught this morning by the news headline that the Archbishop of Canterbury, Justin Welby, claims that the UK's economic model is 'broken'.
Welby has contributed to a report from the Institute for Public Policy Research (IPPR report here) that has attempted to show that whilst UK GDP has steadily increased over the decades both in real terms and per head, there is now greater inequality as a higher proportion of generated wealth goes in profits to firms and less in wages to the entire workforce. Such increasing inequality, Welby says, could ultimately be 'destabilising' for the country.
Now, as well as finding the IPPR and Welby's comments fascinating it struck me that this would be a fantastic topic to discuss with new Economics students arriving in our classrooms.
Firstly, Welby's comments are normative rather than positive (massive tick, lesson 1 or 2!). Whilst the IPPR uses lots of statistics that illustrates an increase in inequality the view that the shifting economic pattern is 'broken' is subjective and opinion.
Secondly, what does Welby mean by 'an economic model'? Here's a brilliant opportunity to show new students that Economic decisions, in the end, are driven by political and moral objectives and not just about efficiency and wealth creation. If, over time, we work out how to create more economic wealth (through use of comparative advantage theory, specialisation, division of labour, economies of scale etc.), that will only partly answer the fundamental question of how we share our scarce resources.
Welby and the IPPR are asking for an overhaul of the taxation system to ensure fairer distribution. Some would argue that a reduction in tax incidence may create opportunities and inspiration for some to generate increased wealth which will pass down to the rest of society through employment and lower costs. What a timely reminder, therefore, that learning about economic fundamentals and 'core' topics is only half the answer to the questions that students will be asked as their courses progress.