Posts from the ‘Economics’ Category

Teaching Vacancy – Economics & Business Teacher & HOD – Kendrick School Reading

January 26th, 2014 at 3:22 pm by Jim Riley

Another excellent teaching opportunity here, this time at Kendrick School, near Reading. Please mention you saw this on the tutor2u Economics or Business Blog if you apply.

Job Title: Teacher of Economics & Business Studies/Head of Economics & Business Studies

School / College Name: Kendrick School

School / College Location: Reading

Salary Level: up to TLR 2b

Description of the Job

An enthusiastic and well qualified teacher of Economics at A Level and Business Studies at GCSE is sought at this very successful 11-18 girls’ grammar school in Reading. Kendrick School is a centre of academic excellence with a track record of high performance and achievement. Kendrick has a large Sixth Form and within the A Level curriculum, Economics is a popular subject with many students wishing to study the subject further, many at Russell Group universities.

An application form and further details can be downloaded from the school website or obtained by emailing

Essential & Desirable Experience and Qualifications

This position would suit a recently qualified teacher who has aspirations to lead a department and can be mentored towards this role. At the same time a suitably qualified and experienced teacher who is ready to take on a Head of Department role is very welcome to apply

Closing Date for Applications: Thursday 30 January 2014

Interview Dates: week commencing 10th February 2014

Contact Name for Applications: Amanda Emberson

Email Address for Applications

Telephone Number for Further Information: 0118 9015859

Address for Postal Applications

Kendrick School,  41 London Rd, Reading RG1 5BN

School / College Web Site:

Application Form

Further Information

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Teaching Vacancy – Head of Economics & Business, Grammar School at Leeds

January 26th, 2014 at 2:57 pm by Jim Riley

Many thanks to the team at GSAL who have asked us to let teaching colleagues know about this fantastic HOD opportunity in Yorkshire. Please mention that you saw this on tutor2u when applying.

Job Title: Head of Economics and Business Studies

School / College Name: Grammar School at Leeds

School / College Location: Alwoodley Gates, Leeds, LS17 8GS

Salary Level: The salary is constructed from a combination of National Spine points and GSAL supplements to reflect the commitment that is expected from all staff

Description of the Job

An exciting opportunity is available for a well-qualified and experienced Economics teacher to join the Grammar School at Leeds, to lead the successful Economics and Business team from September 2014.

The successful candidate will have strong academic and leadership pedigree, and whilst having overall responsibility for the delivery of both Economics and Business Studies will have an especially strong role in relation to Economics, there being two individuals with extensive delegated responsibilities for GCSE and A Level Business Studies.

Essential & Desirable Experience and Qualifications

Further information and detailed job and person specifications are available on the school’s website

Closing Date for Applications: Wednesday 29 January 2014

Interview Dates: Thursday 6th February 2014

Contact Name for Applications: Elizabeth Carruthers

Email Address for Applications

Telephone Number for Further Information: 0113 2291552

Address for Postal Applications

Alwoodley Gates Harrogate Road

Leeds, West Yorkshire LS17 8GS

United Kingdom

School / College Web Site

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Unit 1: The first controls on the e-cigarette market

January 26th, 2014 at 9:46 am by Blogger Bryn

Under 18’s are to be banned from buying them reports the BBC video article

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Unit 2: Jan 2014: Falling unemployment

January 25th, 2014 at 9:39 pm by Blogger Bryn

Good news from the latest data

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Teaching Resources on Game Theory

January 25th, 2014 at 8:57 pm by Geoff Riley

In this updated blog entry I am bringing together some of the resources that we have produced on the Tutor2u website covering aspects of game theory. I hope this will be useful for students and teachers who focus on ideas from game theory as part of their courses:

You can play some online game theory games here

The Art of Negotiation: Game Theory:…

Oxbridge Economics: Introduction to Game Theory (Mo Tanweer):…

Game show game theory:…

Streamed presentation

Oligopoly Collusion and Game Theory from tutor2u

Mo Tanweer’s streamed game theory introduction

Game Theory – An Introduction (2009) from mattbentley34

Coursera game theory course:

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Working for the Few – Development and Inequality

January 25th, 2014 at 2:53 pm by Geoff Riley

Notes from a talk given by Ricardo Fuentes-Nieva (Head of Research at Oxfam) at the Marshall Society Economics Conference in Cambridge in January 2014

Oxfam has a new report entitled Working for the Few – access it here:…

Coverage here:… and plenty of extensive coverage in other areas. Tim Harford made some criticisms of the report in his recent FT column - click here

The concentration of wealth in the world is enormous – 85 richest people in the world have the same wealth as the bottom 50% of the world’s population. Those 85 people can fit into one of the large double-decker buses

The share of total income of top 1% has increased in 20 of 24 leading advanced rich nations – greatest rise has been in the USA 

Actual inequality might be even higher as much of the data is based on tax records and those with extensive wealth have a great incentive to hide it!

Increasing inequality in middle income countries already a dominant theme in development policy at the moment

Branko Milosovic has important data on the income and wealth inequality discussion – link to previous blog and presentation

Inequality, Economic Growth and Development from tutor2u

Oxfam’s analysis suggests that developed and developing countries can introduce effective policies for reducing inequality over time

  1. Cracking down on financial secrecy and tax dodging
  2. Redistributive transfers; and strengthening of social protection schemes
  3. Investment in universal access to healthcare and education
  4. Progressive taxation i.e. higher marginal tax rates for wealthier groups
  5. Strengthening wage floors and worker rights in labour markets
  6. Removing the barriers to equal rights and opportunities for women

Rejoinder: Bill Gates on dispelling three poverty myths (Economist Free Exchange Blog):…

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Unit 1: Should government intervene in the market?

January 25th, 2014 at 1:59 pm by Blogger Bryn

You would think so if there are negative externalities like…..death!

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The Emerging World and Poverty – Where Next?

January 25th, 2014 at 1:52 pm by Geoff Riley

Notes taken from the Marshall Society Economics Conference  - this panel session focused on growth and development issues in South Korea and sub Saharan Africa

Professor Agit Singh

  • The present state of the world economy departs radically from previous historical experience
  • South Korea is the most successful industrialisation story in the history of mankind
  • Since 2000, developing countries have expanded at a much faster rate than developed countries – India has been growing at more than 7%, there are others too with a stellar growth rate – this is of huge economic and geo-political significance. Developing / emerging countries have largely become the locomotive driving the world economy out of the crisis since 2007.

Developing countries have an increasing resilience – defined as an ability to absorb domestic and external shocks – developing countries have improved their macroeconomic management and have built up larger external currency reserves to cope with volatile trade balances / current account imbalances

Average annual GDP growth for advanced nations 2006-2012

  • 0.47% Japan
  • 1.05% in USA
  • 0.4% in UK

South Korea

  • Until 1990, economic history scholarship was dominated by neo-classical ideas and IMF & other institutions
  • Crucial role of government in building institutions and infrastructure to support domestic industries and export growth
  • Industrial policy increased the growth of exports – subsidies socialised the entrepreneurial risk when making investment decisions
  • South Korean government went further than Japan in actively building industrial conglomerates – they wanted to establish enterprises of large scale and diversity
  • The long struggle to build democratic institutions has been more protected and difficult but Singh argues that without the expansion of a large working class in manufacturing industry, that would have been much more difficult

Korea and Taiwan, Malaysia and Indonesia have adopted similar industrial models – Singh argues that there are important lessons and models to follow here for other middle income countries

South-south economic cooperation including expanding trade and capital flows is and will be an important contribution to the future development of these nations (See HSBC research – a new Southern Silk Road -…)

Stephen King: “The original silk road was across Asia. This was an extraordinarily important trading route across land. And what I’m really talking about is a 21st-century version of that trading route, but, rather than being confined to Asia, it’s including Asia but also Latin America, Sub-Saharan Africa, the Middle East. And all these kinds of connections begin to come through and of course, where the original silk road was very much based on land, this one’s based on land, sea, air, the electronic ether, all these extraordinary connections being made.”

Revision presentation on economic growth and inequality

Inequality, Economic Growth and Development from tutor2u

Professor Andy McKay:…

Growth and Living Conditions in Africa in the past 20 years

African growth – something has changed – but there remains huge diversity in performance

  • 1970’s -1990’s was a development disaster – in part due to very poor management of resource wealth
  • Recovery starts in the mid 1990s, particularly fast in the last ten years
  • 30% rise in real per capita GDP over the last 15 years in a region with fast population growth and including the basket-cases of Zimbabwe and the DRC.

Economist feature on African growth reflects some of the recent surge in interest in African economic development – a strong cluster of African countries features in a league of the world’s fastest growing countries

Radelet Emerging Africa – 17 African countries have emerged, four ready to emerge (links to follow)

Radalet does not include oil-producers among his group

Important factors (according to Radalet)

  1. More democratic accountable governments
  2. More sensible economic policy
  3. New technologies
  4. New generation of political leaders, activists and business people

Add in

  • Favourable commodity prices
  • Natural resource discoveries

Living standards

Possible to have growth without improved living standards (Economist:…)

Are people feeling growth in their pockets? Is growth inclusive? For millions the experience is of being excluded from growth

  • Health, education and poverty outcomes are key to this
  • Under 5 mortality rate is falling in almost all countries – e.g. Rwanda and Senegal – although the rates are still very high
  • Secondary school attendance has increased almost everywhere – Ghana and Nigeria has been big increases
  • Monetary poverty is harder to measure – but again the trend is favourable 

Afrobarometer survey – picked out concerns over rising wealth and income inequality (African Development Bank: Inequality in Africa -…)

  • Job creation remains one of the major growth and development barriers in Africa – especially for young women leaving school
  • Rate of extreme poverty reduction in Africa has been slower than East Asia – the latter tends to be better at growing
  • Continued conflicts e.g. South Sudan, Central African Republic
  • Issues of political succession e.g. Rwanda and Uganda
  • Political stability is not guaranteed – e.g. contested result of the Kenyan elections in 2007. Ghana on the other hand has managed two changes of regime in their democratic period

Biggest challenge is probably sustaining growth, building the structural transformation of the economy and sharing the benefits of growth more equitably. Also many African countries are not achieving the same levels of capital investment growth and there remains a huge amount to do in increasing the degree of export sophistication.

Suggestions for further reading:

World Bank (October 2013): Africa Continues to Grow Strongly but Poverty and Inequality Remain Persistently High:…

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Poverty: New Thinking About an Old Problem

January 25th, 2014 at 10:58 am by Geoff Riley

Here are some notes taken from a talk given by Peter Coy, Economics Editor for Bloomberg Businessweek, at the Marshall Society Economics Conference in Cambridge in January 2015

Will there be another significant phase of extreme poverty reduction in the global economy over the next fifteen years? Or will recent progress slow down and come up against a wall?

The pessimistic view

Poverty is historical and embedded in society. Why Nations Fail is a book that focuses on some of these issues. Those who have power (i.e. extractive elites) make choices that create poverty on purpose, the power elites benefit from the conditions of poverty that they create. They hoard and seal economic resources. 

Significant poverty reduction is extremely hard – it requires time and luck. For example, peasants in England became the owners of the precious commodity (labour) during the Black Plague and allowed them to assert their independence. Chance events can have effects that can last for centuries afterwards.

The optimistic view

Reverse the Curse is a new study published by McKinsey and it offers some insights into how countries rich in natural resources can harness revenues to sustain poverty reduction. Access it here:…

Countries driven by resources account for 27% of GDP (up from 18% in 1995) but 69% of people in extreme poverty are also in resource-driven economies.

“Rising resource prices and expanded production have raised the number of countries where the resource sector represents a major share of the economy, from 58 in 1995 to 81 in 2011 …..To date, resource-driven countries have tended to underperform those without significant resources: almost 80 percent of the former have a per-capita income below the global average.!

The McKinsey prescription for reversing the curse is built around the following

  1. Build institutions and governments, stable regulation, exposure to competition
  2. Removing infrastructure bottlenecks which hamper trade and growth
  3. Robust fiscal policy and supply-side policies
  4. Supporting local content suppliers where possible
  5. Spend the windfall wisely – difficult in countries whose commodities are volatile in price

The over-arching strategy should be to transform the economy to broaden development (this is easy to type, tremendously tough to achieve)

Some countries have reversed the curse – many already well known – Botswana, Malaysia, South Africa, Kuwait – much attention now focusing on development in resource-rich countries in sub Saharan Africa.

Both the IMF and World Bank have improved their policies and moved away from the strict Washington Consensus – this has important consequences for policy-making. The IMF for example prepared to accept limited capital controls as it did with Iceland following their devaluation and collapse of the banking system


Now a middle income country, Mexico’s unit labour costs will be 30% lower than China next year – auto-making and auto-parts supplies now scaled up and a significant contributor to the economy. Mexico has more auto manufacturing than the US mid-west. According to their WTO trade profile, Mexico’s economy is closely tied to the United States, destination for nearly 80 percent of local factory exports. Most of Mexico’s exports are manufactured goods.

Facts on the ground suggest that countries can rise up from poverty and pull themselves up by their boot-straps. Manufacturing allied to innovative design and supply-chain clusters can create significant value-added for an economy.

Bill Gates - 3 Myths that Hold Back Progress

  1. Countries are doomed to stay poor – by 2035 there will be almost no low-income countries left in the world
  2. Fighting poverty is a big waste – consider the success of vaccinations in eradicating polio, by 2035 child mortality worldwide will be down to the level that the USA managed to reach in 1980
  3. The myth of over-population – countries with the highest mortality rates have the fastest growing populations e.g. Afghanistan where over 10% of children die in childhood. 

Suggestions for further reading on these topics

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Newsnight: Mark Carney

January 25th, 2014 at 10:43 am by Mo Tanweer

A hat-tip to Oli Wood for this Newsnight clip - Mark Carney and Paxman in this short clip discussing monetary policy decision making in the UK.

Useful for those preparing for Target 2.0 Challenge or studying AS macro monetary policy.

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China’s Development – Past Present and Future

January 25th, 2014 at 10:05 am by Geoff Riley

Notes from a talk given by Liu Xiaoming, Chinese ambassador to the UK at the Marshall Society economics conference in Cambridge in January 2014.

Poverty reduction

  • China has made an extraordinary contribution to extreme poverty reduction in the world – 616m lifted out of extreme poverty, reducing the rate from 84% in 1980 to 10% now (source: The Economist)
  • Rural population in absolute poverty has come down from 250m to 35m – China the 1st country to meet the MDG of halving rural poverty

More information on poverty reduction here

Regional balance

More focus now on balanced regional development – emphasis on development programme in Western provinces and regions – more than 40% of transfer payments from central government now diverted to these areas

Excellent article here from the FT on shifts in regional investment, costs, growth

Delta Blues (Financial Times, January 2014)

Increasing development capacity of regional development

Investment in micro credit and expansion of small enterprises

South-South cooperation

Aid/financial assistance from China to more than 120 countries

China and the Lewis Turning Point

In a process of development, there is a point when excess labour in the subsistence sector is fully absorbed into the modern sector of the economy. At which point, following extra capital investment to drive growth higher, labour shortages drive up wages and unit labour costs. Will this erode China’s comparative advantage in manufacturing?

  • China has no labour shortage at the moment – only a temporary effect
  • Reforms aimed at increasing geographical mobility including reformed system of housing registration to allow more surplus labour in rural areas to migrate to cities. The urbanisation process in China will accelerate.
  • Investment in human capital to raise productivity to offset the natural growth of wages that comes with a fast-growing economy
  • Focusing on quality rather than quantity in labour supply
  • Adjustments to China’s demographic policy – allowing parents to have two children – increasing the base of population and tackle population ageing

Inequality in China

China’s Gini coefficient has been between 0.47 and 0.49 in recent years – China recognises the dangers that can arise from a high and growing gap between rich and poor . Recent evidence suggests a small fall in income inequality in China: Read:…


  1. Raising minimum wage levels and pension standards
  2. Increased transfer payments to lower income earners
  3. Scaling up support for farmers and rural areas
  4. Policies to stimulate growth in poorer regions
  5. Anti-corruption measures to reduce the impact on inequality of rent seeking from owners of capital

China needs to find the right balance between development and distribution, between markets and efficiency

Environmental challenges

  • A severe test for China’s economy
  • Tightened measures of environmental protection

Investment in renewables – see David Shukman: China on world’s biggest push for wind power:…

Rapid expansion of local carbon trading schemes (a key part of the 3rd five year plan)

See this article from Reuters:…

Middle Income Trap

  • Will China experience the middle income trap? Will economic growth be held back by social upheavals, slowing productivity and a reduction in innovation. China must keep the growth engine running:
  • Deepening of economic reform – the most powerful driving force for economic development – market forces will play a decisive role in resource allocation.

Suggestions for further reading

Coverage here of the Shanghai free trade zone:

The BBC’s Linda Yueh has a good feature on the changing nature of Chinese economic growth

“The Chinese government is attempting to persuade markets and others that it is slowing the economy down to a more sustainable pace and trying to be less reliant on investment-led, credit-fuelled growth.”

More here:

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Has austerity worked in Europe?

January 24th, 2014 at 5:51 pm by Geoff Riley

Inside Story from Al Jazeerah considers whether the worst is now over for some of the cluster of Euro Area countries who have received huge bail-outs  accompanied by fiscal austerity measures. The Spanish economy seems to be moving tentatively towards a stronger rebound despite persistently high mass unemployment.

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Capping Bonuses for Bankers – Unintended Consequences

January 24th, 2014 at 4:50 pm by Geoff Riley

Capping seems to be all the rage at the moment. We read of capping electricity and gas prices, capping welfare payments for families … and now a proposed cap on bonuses for bankers is being put forward by the EU and by the Labour Party. 

In this article, Tim Harford cuts to the chase and highlights the contradictions in the EU blanket policy on capping bankers’ bonuses. It is a good example of a policy where the unintended consequences include the probably that banking salaries would rise still further.

Under the EU proposal, a cap on rewards would limit payouts to banking executives to annual pay – or twice that only if shareholders approve.

Further reading:

BBC - banking bonuses – how much do they matter?

BBC Hard Talk:  Adair Turner on the effect of a bonus cap on bank salaries

Channel 4 news

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30 Most Innovative Countries in the World

January 24th, 2014 at 4:36 pm by Geoff Riley

Successful innovation is a driving dynamic of competitive businesses and countries. Bloomberg Rankings recently examined 215 countries and sovereign regions to determine their innovation quotient. They have narrowed this down to thirty countries and the results are available through this Bloomberg slideshow. Which nation comes first?

Click here to find out

Innovation was measured by seven factors, including R&D intensity, productivity, high-tech density, researcher concentration, manufacturing capability, tertiary efficiency and patent activity. The methodology, definitions and weightings are explained in the last slide.

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Technology and the labour market

January 24th, 2014 at 2:35 pm by Mo Tanweer

A hat-tip to Tom Bolton for pointing me to this article from the Economist last week on the effect of today’s technology on tomorrow’s jobs.

It looks at how technology has displaced, and will continue to displace, jobs, with capital-labour substitution being a very real problem in many industries and economies.

Whilst technology may promote productivity and efficiency, to ensure this does not lead to structural unemployment, government policy will have to  be focussed and clear.

Read more here.

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Saudi Arabia – the ‘dominant producer’ in the world’s oil market

January 24th, 2014 at 2:11 pm by Geoff Riley

Saudi Arabia’s position as one of the largest players in the global oil market, producing more than a tenth of the world’s output and owning a quarter of the world’s proven reserves, has negative effects on other market participants. Writing in the Economic Journal, Anton Nakov and Galo Nuño document two features that have made the Kingdom different from other oil producers:

  1. Output squeeze: First, it systematically restricts its production. In fact, its spare capacity is much larger than the aggregate spare capacity of the rest of the world’s oil producers.
  2. Volatile supply: Second, its production is quite volatile. The variance of Saudi oil output has been very high compared with that of the other producers, even though the Kingdom itself has witnessed few domestic shocks affecting oil production directly.

The Kingdom is a key member of OPEC (Organization of Petroleum Exporting Countries), playing a central role in its decision-making. Indeed, some economists have argued that ‘OPEC is Saudi Arabia’ and that ‘the Saudis have acted as what they are: the leading firm in the world oil market’. Are these claims exaggerations?

Nakov and Nuño show that it is possible to explain the behaviour of Saudi Arabia as that of a dominant producer operating alongside a competitive fringe. They build an analytical model in which a dominant oil supplier anticipates the behaviour of both fringe oil producers and oil consumers.

This means that Saudi Arabia exploits the fact that its operations affect the supply of fringe producers, oil demand and the oil price. The result is that Saudi Arabia produces a smaller amount of oil than its capacity given the oil price, which allows it to charge a high mark-up over its marginal cost.


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Business and Economics Quiz – 24 January 2014

January 24th, 2014 at 6:23 am by Geoff Riley

It has been quite an interesting week in the business & economics news – as reflected in this latest Biz Quiz:

Launch The Biz Quiz – 24 January 2014

Download printable version

Download solution (teachers only)

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Unit 2: Unemployment data charts

January 23rd, 2014 at 10:48 pm by Blogger Bryn

Thanks to tutor2u

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Unit 2 Macro: 10 Questions on Supply-Side Policies

January 23rd, 2014 at 9:19 pm by Geoff Riley

Here are ten questions for students wanting to check their understanding on supply-side economic policies …. and improve their bobble shoot tekkers at the same time! Courtesy of our sister site Zondle

zondle – games to support learning

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RES Lecture on UK Economy – Vince Cable

January 23rd, 2014 at 8:34 pm by Geoff Riley

The Secretary of State Vince Cable delivers a lecture on the UK economy at the Bank of England on Monday 27th January starting at 6.30pm. I will be there on behalf of Tutor2u and I will post a report on his talk on this blog entry as soon as possible after the talk. 

The Rt Hon Dr Vince Cable MP, Secretary of State for Business, Innovation and Skills will be talking on ‘The shape of the economic recovery’ on Monday 27th January at the Bank of England Conference Centre. The RES is widening the outreach of its policy lectures by broadcasting the lecture live in HD video and encouraging participation and interactivity through this site.

Access is entirely free. Simply create an account here or sign in.

The hashtag for the event is #reslecture

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Thought-provoking data

January 23rd, 2014 at 8:21 pm by Graham Watson

It’s always a delight to be introduced to economic data that confounds you, and this BBC Newsnight piece is no exception, ranging widely across the global economy in search of data that every delegate at Davos should be aware of…

The clip is excellent:

Look out for any statistics that support any likely area of extended writing that you are likely to be asked about. There should be something for everyone, from lots of China material to other bits and bobs, some of it surprising and some of it seemingly straightforward, but all of it thought-provoking. It might be quite a nice activity to do at the beginning or end of a lesson, asking everyone to choose a statistic and explain (a) why it is pertinent and (b) the economic principles that might explain it.

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UK Economy Biggest fall in unemployment in decades

January 23rd, 2014 at 8:07 pm by Geoff Riley

Here are some news clips on the sharp fall in measured unemployment and a record rise in employment in the UK economy at the end of 2013. Students can find revision notes on unemployment using this link

Will interest rates rise?

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6 Charts on UK Unemployment and the Labour Market

January 23rd, 2014 at 7:53 pm by Geoff Riley

It was no surprise when the latest release of unemployment and employment data for the UK labour market up to the end of 2013 made headline news across the media. There was a dramatic decline in the labour force survey measure of unemployment and news of a record level of employment. Many teachers will be covering unemployment as part of their AS macro course – I have put together six updated charts into a PowerPoint file for those who want to integrate the data charts into their teaching. Download using the link below:

PowerPoint file on Unemployment


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The ‘output gap’: another piece of economic mumbo-jumbo

January 23rd, 2014 at 7:36 pm by Paul Ormerod

The concept of the’ output gap’ is central to mainstream
macroeconomics. It is not merely of
academic interest. The Office for Budget
Responsibility (OBR) has a specific requirement to estimate the output gap,
which it defines formally as “the difference between the current level of
activity in the economy and the potential level it could sustain while keeping
inflation stable”. The output gap is a key consideration for central banks
around the world. If output is well below its potential, interest rates should
be kept low, to try to stimulate the economy.
And a large output gap should keep inflation low. Prices are hard to put up in a depressed

The task of estimating the output gap
empirically is fraught with difficulties.
The OBR points that there are at least three recognised ways of doing
this, none of which will make sense to anyone lacking an advanced training in
statistics. So there is plenty of scope
for disagreement amongst orthodox economists who believe in the concept. Yet rather like the medieval debates about
how many angels could dance on a pin, these disputes have little meaning in the
economy of the 21st century.

The economy is not a physical object and
cannot, say, be placed on a pair of scales and weighed. GDP has to be estimated, using a wide range
of information. The basic principles of
how to measure output were worked out in the 1930s and 1940s. A major problem is that these principles are
much more suited to an economy which, as it was at that time, is dominated by
the production of goods rather than services.
We can count how many Ford Model Ts have been built. It is much less clear what the outputs of
Google or Facebook are. The problems are even more acute with the concept of
potential output. Many internet-based
services incur substantial fixed costs in order to have just a single
customer. But the additional cost of
servicing the second customer, and all subsequent ones, is effectively
zero. Potential output does not have
much meaning in these contexts, it is not obvious what the limit might be.

A powerful blow against the concept of
potential output has been published in the latest edition of the American
Economic Association’s journal Applied
. Igal Hendel and Yossi
Speigel document the evolution of productivity over a 12 year period in a steel
mini-mill producing an unchanged product, working 24/7. The steel melt shop is almost the Platonic
ideal from a national accounts perspective of output measurement. The product – steel billets – is a simple,
homogenous, internationally traded product.
There was virtually no turnover in the labour force, very little new
investment, and the mill worked every hour of the year. Yet despite production conditions which were
almost unchanged, output doubled over the 12 year period. As the authors note, rather drily, “the findings suggest that capacity is not well
defined, even in
batch-oriented manufacturing”.
Time to put the concept of potential output into the rubbish bin!

Ormerod is an economist at Volterra Partners LLP, a Visiting Professor at the
UCL Centre for Decision Making Uncertainty, and author of Positive Linking: How Networks Can Revolutionise the World

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Killer aps and smarter phones

January 23rd, 2014 at 2:43 pm by Michael Owen

An item on a Twitter feed, highlights how changes in
technology, contribute to a rise in the standard of living as prices of
consumer goods fall. However the demand for most the products in the advertisement from 1991 has collapsed. Look at the
items in the photo, most have been replaced
by a lightweight, plastic coated bundle
of superior technology, the smart touchscreen phone. 

Steve Cichon concluded that you  might ’have spent $3,054.82 in 1991 or c. $5,100 in today’s money to buy all these items. 

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Exchange rates and the ‘Big Mac’ Index

January 23rd, 2014 at 1:51 pm by Tom White

This is a great learning aid, especially if you’ve not come across it before.  If you’re trying to understand exchange rates, you often end up wondering which countries have overvalued exchange rates (that should, ideally, depreciate in value) or those that are undervalued (where appreciation would probably help).

The idea is so simple – find a product that’s available in most countries, produced to a standardised design, and that serves as a reasonable ‘basket of goods’ capturing a range of price data for the economy you’re looking at.  By this measure, the countries with expensive Big Macs have overvalued exchange rates and cheap Big Macs means an undervalued exchange rate.

The Economist have been producing their index for several years, and what started out as a light-hearted exercise has turned into something that is taken seriously – so seriously that you can legitimately talk about the Big Mac index in your exams (with supporting explanation, of course).

The key concept under discussion is really PPP (Purchasing Power Parity, or what is the real buying power of a local currency).

This topic is hugely relevant to Economics students, and it’s very current.  No matter how you measure it – Big Macs or otherwise – the £UK has steeply depreciated in recent years.  That should have boosted our exports …. only it doesn’t seem to have done so, and the UK’s export performance is struggling

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Mediacore: Revision of Elasticities

January 23rd, 2014 at 12:56 pm by Mo Tanweer

We are experimenting with some
new software called Mediacore at my school – to try to promote more
flip-teaching and independent learning as well as easier revision.

My initial idea was to create short video tutorials explaining
key concepts on the topic of elasticity.The pupils are to watch this
outside the classroom, and then in the classroom we would follow up with class
exercises to check their understanding. The plan is that they will also prove
useful for revision.

I have put them on a public page so you can view them – note,
they are ‘unpolished’ in terms of presentation but they may be useful to some pupils on the key
issues with elasticity.

I have uploaded 12 short audio-video tutorials of me
teaching the key points on these topics.

They are deliberately short and rapid-fire – around 10 mins
long for each mini topic – remember, you can pause, take notes, rewind,
re-watch them as many times as you wish.

Then if you have any further queries, you can ask your teacher to clarify any points you didn’t understand. This will
make the lesson time much more productive.

The tutorials are short and quick:

The website link is:

  • -PED introductionThis introduces the
    elasticity concept from scratch and explains what elasticity is all about,
    including elastic vs inelastic concepts.
  • -PED and total revenue link – watch this
    if you are not sure how whether a good being elastic or inelastic affects the
    total revenue a firm collects.
  • -PED factors affecting PEDwatch this if
    you are unsure what makes demand for a particular good elastic or inelastic –
    how and why it varies.
  • -XED summary 2014 – watch this for a
    summary of XED, what it measures, what a positive and negative XED means with
    respect to substitutes and complements.
  • -Burden or incidence of taxation – watch
    this if you are unclear how to show the consumer and producer burden of a tax,
    or how it varies depending on what the PED is – specifically why inelastic
    consumers pay more of the burden of a tax.
  • -Incidence of subsidieswatch this if
    you are unsure how to show how much the consumer and producer benefit from a
  • -Deadweight losses of taxes – watch this
    if you are unsure why the ‘triangle’ of deadweight loss exists and what it

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Information failure in the NHS

January 23rd, 2014 at 6:29 am by Penny Brooks

The NHS gives us so much value, as Economics teachers, as it serves as a great example of so many areas of theory. The story which heads up the BBC News site this morning is another useful one: NHS waiting time data for elective surgery has been found to be ‘unreliable’

The NHS, although not strictly non-excludable or non-rival, is provided as if a free public good in order to benefit from the huge positive externalities to be gained from a healthy population. It is a glowing example of The Economic Problem: scarce resources
which have to be allocated as efficiently as possible in order to
satisfy our infinite (and growing) needs and wants for healthcare.
Waiting time targets have been set by government (government
intervention) in order to try to overcome the potential for inefficient
use of those resources, which may arise in the public sector without the
incentive of the profit motive that the market mechanism would supply.
This also helps to ration the use of those scarce resources. In order to
introduce some consumer choice into what is really a monopoly market,
patients can choose where they would like to have planned operations –
and to overcome the problem of information failure, in which patients
don’t know which hospital to choose, data is collected and published
about how long patients will have to wait for that operation at each

There are over 19 million referrals from GPs to
hospitals for planned operations each year – that implies an operation
is needed by almost one in five of the population of the UK each year.
The government’s target is that the waiting time between referral and
having the operation should be no longer than 18 weeks, and the NHS is
just about meeting this at present. However, the National Audit Office
(which has two aims: to hold government departments and bodies to
account for the way they use
public money, thereby safeguarding the interests of taxpayers, and to
help public service managers improve
performance and service delivery) has found that the data supplied by
hospitals is unreliable. It found wrong and inconsistent recording after
reviewing 650 cases in seven trusts, and said it was unable to discern
whether this was deliberate, but says it should be investigated. Could
it be that the data provided by the hospital trusts about their waiting
times has been ‘fudged’ in order to make it appear as if they are
meeting the targets, when in reality they are not? Hospital managers may
be finding ways to massage the data; the NAO said that in about a
quarter of the cases they reviewed, the rules for calculating waiting
times were not being correctly applied.As so often happens,
government intervention designed to correct for market failure rears its
ugly head – it may be that the rules of the system are too complicated
or that they don’t apply in practice to the range of problems the
hospitals face; it’s also probably an example of how an attempt to solve
one problem simply gives rise to another, and the law of unintended
consequences as the requirement to meet targets results in systems of
data collection which enable the target to be met, rather than keeping
the focus on allocatively efficient use of resources to meet patient

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Capitalism: an engine for progress

January 22nd, 2014 at 2:40 pm by Tom White

It’s the time of year when many commentators are going back to basics and asking if our dominant economic model – free market capitalism – is a force for good in the world.

A few days ago I drew attention to Oxfam’s double decker bus analogy – that half the world’s wealth is owned by 85 people, who could all fit on a bus at a squeeze.  That’s a shocking suggestion, and well worth taking seriously. There is an appalling long and depressing list of economic injustices and challenges facing the world.

So there’s a lot wrong with the world, and some of the problems can be directly attributed to capitalism.  But when listening to some people, many economists feel like a clown at a funeral.  Things are not so bad.  In fact, in some ways they are vastly better than we typically imagine.

This is a huge debate in which you might try compiling evidence on either side.

Allister Heath (a renowned ‘supply-sider‘) writes in The Telegraph that we should be prepared to celebrate millionaires and their fortunes – if they have been earned, rather than a product of what he describes as ‘Crony Capitalism’.  That’s almost the opposite point to the one made by Oxfam about inequality.  According to the Huffington Post, Bill Gates is reported as saying that there will be ‘No More Poor Countries By 2035‘ (the article also contains a link to Hans Rosling who makes the clear point that economic growth is essential to reduce population pressures).  The Economist also predicted that the world has an astonishing chance to take a billion people out of extreme poverty by 2030.  Last summer I wondered if we might all look forward to a future of astonishing abundance.

I don’t mean to sound complacent.  There’s clearly a potential conflict between economic growth and the environment, for instance. Last year I also had a go at putting some resources together myself on that subject – the impact of business on the environment, for good and for bad.  I think I might go back to the fundamentals again…

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The case for foreign aid

January 22nd, 2014 at 11:56 am by Mo Tanweer

Jeffrey Sachs on great form in this article ‘The Case For Aid‘. Well worth reading the article for pupils to see how well-reasoned and well-researched arguments can be used to put forward a compelling case for aid.

 To summarise his article in a few lines: “It’s become fashionable to argue that foreign aid
doesn’t make a difference. Here’s why the critics couldn’t be more wrong. The issue is not “yes” or “no” to aid. Aid is needed, and can be highly successful. The issue is how to deliver high-quality aid to the world’s poorest and most vulnerable people.”

Good timing to go with Bill and Melinda Gates’ annual public letter on 3 myths of development.

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Market failure: Pubs

January 22nd, 2014 at 11:47 am by Mo Tanweer

It is common for pupils to be taught the market failure associated with alcohol, negative externalities, demerit goods etc.

However, it is worth also using the pub industry as an example for teaching other issues involved with free markets. Around 26 pubs a week are closing in the UK.

Are pubs merit or demerit goods? Do they create any positive externalities? 

This article discusses how pubs need to be protected from closure - There is certainly a strong argument to be made for the social and economic value of the community pub. A recent report from the Institute for Public Policy Research, set the wider social value of a sample of community pubs at between £20,000 and £120,000 each. It found that pubs inject an average of £80,000 into their local economy every year, on top of their cultural and practical community value. 

In the Newstatesman last week there was an article that discussed the unbalanced and unfair relationship between landlords and the large pub companies (known as PubCos) from whom they rent their premises. Too many pub companies force their licencees to buy limited products at inflated prices. This offers a discussion of market failure, of relative bargaining power in the production supply chain and the abuse of oligopsony power. With some pub owners as a result earning less than the national minimum wage

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The CMA = OFT + CC

January 22nd, 2014 at 11:30 am by Mo Tanweer

It is always worth keeping abreast of institutional reform to ensure that exam responses show an awareness and understanding of current contexts.

In light of this, one of the important reforms in the anti-trust arena is the creation of the Competition and Markets Authority, which comes into full existence in April 2014.

In 2012 the Government announced its plans for reform of UK’s competition regime. These include creating a new single Competition and Markets Authority (CMA), which will take on the functions of the CC , and the OFT’s competition functions and consumer enforcement powers. The Enterprise and Regulatory Reform Bill, which gives the effect to these reforms, was approved in April 2013.

A summary of these reforms can be found in this PDF here.

The CMA’s website is here.

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Demerit Goods and Energy Drinks

January 22nd, 2014 at 11:25 am by Mo Tanweer

Demerit goods are market failures which arise from information failure – specifically that consumers/producers fail to fully understand and therefore value the true costs and benefits of consumption/production. In particular, with demerit goods, consumers underestimate the long term costs and overestimate the short term benefits of consumption.

A good current example of this at the moment in the news involves energy drinks. A 500ml can of Red Bull contains about 13 teaspoons of sugar and the equivalent caffeine of two cups of coffee - There is a lack of awareness on their part and their parents of the effects - Children get a brief high followed by a low. As a result energy drinks have been banned at a school in Manchester to try and help pupils be healthier.

John Vincent, a government adviser on school food, thinks the mix of sugar and caffeine in energy drinks can damage children’s concentration and health. He’s called for more research into the effects of the drinks. Gavin Partington from the British Soft Drinks Association says the drinks “are not designed for children.”

What is the best solution to address this market failure?

“The short-term high is causing disruption to children’s behaviour,” said Vincent. If a ban were needed, he said, that is what they would support. “Our objective is to stop children drinking them,” he added. “We’re agnostic about the means.”

Read more here.

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From Poverty To Power

January 22nd, 2014 at 8:48 am by Graham Watson

Those who know me, might be unsurprised to learn that I had a very interesting chat in the pub last night with a friend who works in economic development. Apart from discussing the eyecatching headline of the recent Oxfam report published on the day that the World Economic Forum met in Davos, and discussed by Tom White below, he also suggest a new resource that was currently popular among the his world.

The resource is an excellent blog – which I’ve subsequently had a look at – written by Duncan Grant, at strategic adviser to Oxfam GB whose also written a book of the same name, which is currently in its 2nd edition. Now my friend didn’t recommend the book, but he did endorse the blog:


And after a cursory glance I’ll second that endorsement; it has some interesting, engaging and just downright informative insight into the world of development and the NGO

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Will a robot steal your job?

January 22nd, 2014 at 1:27 am by Ben Cahill

Coming hot on the heels of Geoff’s post on “Are Robots Stealing our Jobs”, The Economist has now taken it one step further and attempted to predict the probability that technological unemployment will cause job losses in particular industries. 

The predictions are contained in the article The future of jobs: The onrushing wave. The premise of the article is that technological innovation has always created more jobs than it has destroyed but as the level of automation increases this may not necessarily be the case in the future. However, some jobs are likely to be completely immune to technological unemployment and the following graphic is the estimated probability in each case. Dentists, clergy, and physical therapists seemingly can’t be replaced by a machine whereas the future is not so bright for telemarketers, accountants or retail salespersons! In any case, should make for some interesting discussion and food for thought for students contemplating future careers.

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Global Inequality and the double decker bus

January 20th, 2014 at 8:28 pm by Tom White

According to Oxfam, half of all the world’s wealth is owned by 85 people, who could all fit onto a single double-decker bus. 

It’s an astonishing suggestion, and worth your time to consider the implications.

It’s always worth noting the difference between income (a flow of funds) and wealth (which is a total stock of previous income).  The distribution of income is not as unequal as the distribution of wealth, but that’s not much comfort.

The Guardian covers the story. Here’s Oxfam’s press release, as reported by the Huffington Post:

“We cannot hope to win the fight against poverty without tackling inequality. Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table.

In developed and developing countries alike we are increasingly living in a world where the lowest tax rates, the best health and education and the opportunity to influence are being given not just to the rich but also to their children.

Without a concerted effort to tackle inequality, the cascade of privilege and of disadvantage will continue down the generations. We will soon live in a world where equality of opportunity is just a dream. In too many countries economic growth already amounts to little more than a ‘winner takes all’ windfall for the richest.” 

Oxfam’s statement is intended to be provocative.  It presents a worst case scenario, when the real picture might be slightly more cheerful.  At least inequality between countries is falling, even if inequality is rising within them.  I don’t seek to justify inequality, which is a significant and growing problem, even in rich countries like Britain.

Inequality is an important component in the debate about economic development.  A nice info-graphic about its measurement can be found here.

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Government Failure

January 20th, 2014 at 7:48 pm by Virang Dal

A short clip explaining government failure for AS level students. To find more videos, search for EconplusDal on Youtube

Government failure is a great way to add weight to evaluation and to bring in an extra strand of knowledge that can separate students from the rest. This video aims to provide a brief introduction to the topic with references to Milton Friedman both in the video and at the bottom of the YouTube clip.

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Unit 4 Macro: Latvia Joins the Euro

January 20th, 2014 at 4:12 pm by Geoff Riley

On the 1st January 2014, Latvia became the 18th country to enter the single currency Euro area, joining Estonia who adopted the Euro four years ago. How will it affect the economy? Are the forecast benefits greater than the costs and risks? Here are some resources on the issue:

BBC news

Guardian: For Latvia, euro still attractive despite Europe’s financial crisis (July 2013)

Independent: Latvia – the country that fell for the Euro (Jan 2014)

Reuters: Unease over Latvian euro entry (Jan 2014)

Baltic Times: EU president says Latvia will feel economic benefits after euro switch (Jan 2014)

Estonia’s Euro advice for Latvia (Financial Times)

Latvian government bets on the Euro (Al Jazeerah news)

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Sting performs the last ship

January 20th, 2014 at 4:08 pm by Geoff Riley

Sting’s new musical takes him back to his north-eastern roots and the old shipyards of Wallsend on the Tyne. Here is a flavour of his new album – try it as a starter on the economics of structural unemployment! 

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David Rowan on disruptive entrepreneurs and innovators

January 20th, 2014 at 4:04 pm by Geoff Riley

We have been discussing the economics of innovation in class in the last few days. I came across this short talk given by David Rowan, editor of Wired magazine. What sets disruptive entrepreneurs and innovators apart from the rest? In his INK talk, David Rowan, editor of Wired UK, asserts it’s a “healthy disregard for the impossible” and offers nine tips for cultivating that mindset.

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John Kay on Circular Thinking and Economics

January 19th, 2014 at 11:44 am by Geoff Riley

Here is a beautifully crafted essayby leading economist John Kay on the dangers of an academic obsession with rigour and consistency in developing economic models. “Economics is not a technique in search of problems but a set of problems in need of solution. Such problems are varied and the solutions will inevitably be eclectic.”  He argues for a move away from formulating models that can simply run on a computer and towards “more eclectic analysis ….requiring an understanding of processes of belief formation, anthropology, psychology and organisational behaviour, and meticulous observation of what people, businesses, and governments actually do.”

A rather wonderful piece that will excite many ambitious student economists keen to approach our fantastic subject in a non-linear and often contrarian way. Enjoy!

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Unit 3 Micro: Google Buys Nest

January 19th, 2014 at 11:35 am by Geoff Riley

What type of business integration is happening here? The announcement of Google’s takeover of smart home-appliance maker Nest for $3.2bn is potentially hugely significant for Google.

Google is a highly acquisitive company, completing dozens of takeovers every year in a wide range of technologies and markets. However, there has been particularly intensive media coverage about Google’s takeover of Nest.

Part of the reason for the takeover (and some of the concerns raised about it) is due to what Nest does. Nest makes smart appliances. For example, it produces a thermostat capable of learning user behaviour and working out whether a building is occupied or not, using temperature, humidity, activity and light sensors. Nest also makes an acclaimed smoke detector and carbon monoxide alarm.

The takeover is seen by some observers as being a significant development in the growth of the “internet of things” – household and other devices being controlled by operating systems (including Google’s Android OS), capturing and transferring data about those “things” and the people that use them.

However, there is potentially something much more significant about the Google takeover of Nest and it concerns the entrepreneurs and team who have built Nest so rapidly (it was formed way back – in 2010!).

The Nest CEO and founder is Tony Fadell. His is probably not a name you are familiar with. However, you will be familiar with two products that he helped create – the iPod and the iPhone. Fadell was a key member of the design team at Apple and worked closely with Steve Jobs. He is said to share many of the attributes of Jobs in terms of his leadership style a vision. Perhaps not surprisingly, Fadell has recruited many ex-Apple employees as he has grown Nest.

The FT suggest that the key feature of the $3.2bn takeover is that Google is effectively buying some of the innovative culture of Apple – te Apple “genome” as well as a fast-growing business. As a result, the potential revenue synergies from the takeover could be significant. However, things could go wrong, as explained here on CNET.

Some key quotes from Google and Nest in their respective announcements about the takeover help explain the rationale for the deal:

Tony Fadell (Nest)

“Google will help us fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone”.

“Google has the business resources, global scale and platform reach to accelerate Nest growth across hardware, software and services for the home globally. And our company visions are well aligned – we both believe in letting technology do the hard work behind the scenes so people can get on with the things that matter in life. Google is committed to helping Nest make a difference and together, we can help save more energy and keep people safe in their homes.”

“I know that joining Google will be an easy transition because we’re partnering with a company that gets what we do and who we are at Nest –and wants us to stay that way”

Larry Page (Google CEO)

“Nest’s founders, Tony Fadell and Matt Rogers, have built a tremendous team that we are excited to welcome into the Google family. They’re already delivering amazing products you can buy right now–thermostats that save energy and smoke/CO alarms that can help keep your family safe. We are excited to bring great experiences to more homes in more countries and fulfill their dreams!”

The excellent Lex team at the FT explore the takeover in a little more detail here – some excellent analysis for students who want to add this example to their research:

This Bloomberg interview also looks at the deal:

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The Changing DNA of Entrepreneurs and Business Start-Ups

January 19th, 2014 at 11:29 am by Geoff Riley

Here is a great overview from the Economist of some of the ideas behind lean start-ups and the shift in focus towards frequent / hi-speed reaction to customer feedback as minimum viable products are launched into the market-place. Conventional views of entrepreneurs are evolving fast but they still need to have that driving energy and a willingness to challenge orthodoxy! The Eric Ries book – The Lean Entrepreneur – is given extensive mentions here and rightly so.

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Royal Economic Society Conference 2014

January 19th, 2014 at 11:17 am by Geoff Riley

The Royal Economic Society annual conference this year is in Manchester 7-9 April - details can be found here

Check out their YouTube channel here

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Government help for exports – could do better?

January 19th, 2014 at 8:18 am by Penny Brooks

This report which the Public Accounts Committee published on Friday, entitled Supporting UK exporters overseas, gives a useful piece of background reading, as it marries up AS and A2 level theory, and micro and macro topics. It looks at the combined efforts of the Foreign and Commonwealth Office and UK Trade and Industry to help UK firms, particularly small and medium sized businesses, boost their exports and so contribute to UK GDP recovery. The summary of the report on the PAC website could be used by students to consider a couple of questions:

How many examples of government failure can you identify?

Given that the UK does not currently use monetary policy to influence the exchange rate, what mix of government policies might be used in order to meet the target of doubling exports by 2020?

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Unit 2: A minimum wage history

January 18th, 2014 at 11:31 am by Blogger Bryn

….from the Guardian. Particularly interesting is the graph showing the change in the minimum wage adjusted for inflation

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Unit 2: Rising and falling prices within the CPI

January 18th, 2014 at 11:28 am by Blogger Bryn

This is from the states, but clearly shows how the CPI measures AVERAGE price changes

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Economics Teacher Networking Group – South-East of England

January 17th, 2014 at 7:42 pm by Jim Riley

Many thanks to Louise Raye at Yavneh College (Borehamwood) who has been in touch to reach out to Economics teaching colleagues in the south-east of England. Louise is keen to encourage the creation of a network of Economics teachers – details below. Do please get in touch with Louise if you would like to get involved.




I am creating a network of Economics teachers in the south-east of England to meet twice a year.

The details of the first event are below and I hope you can make it.

For further information and to confirm your place please email me at

Speaker: Colin Leith – Business and Economics Advisor at Pearson will be talking on “The new subject criteria for GCE Economics from 2015”

Date: Wednesday 26th March 2014
Time: 530pm
Place: Yavneh College, Borehamwood, WD6 1HL
Cost: FREE
Open to all A-level Economics teachers (irrespective of board) in the South-east of England.

Please note that it is not possible to attend without booking due to security restrictions.

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University fees

January 17th, 2014 at 3:01 pm by Mo Tanweer

When analysing the market for education, some good data out today on the effects of tuition fees – could be linked into PED analysis for higher education.

Read the BBC article here.

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Wow Economics Teacher CPD event returns in March and June

January 17th, 2014 at 9:06 am by Jonny Clark

Last week, I was privileged to deliver our first ever Wow Economics events in both Edinburgh and Cardiff. The day-long CPD event had the usual mix of fantastic teacher-designed resources and delegate interaction. We showcased a good selection of our 50+ resources and discussed how they could be used and adapted. We covered a good range of topic matters both in the micro and macro field of economics along-side activities aimed at engaging learners and promoting strong assessment techniques.

The good news is that the same event is coming back for further outings in London, Birmingham, Manchester and Dubai as well as arriving for the first time in Singapore and Belfast. The dates are:

London 12/06/2013

Birmingham 11/06/2013

Manchester 27/06/2014

Dubai 05/03/2014 & 06/03/2014

Singapore 10/03/2014 & 11/03/2014

Belfast 26/07/2014

Some of the fantastic delegate feedback can be found on the Good CPD guide by clicking here.

Bookings for the upcoming events can found here.

Look forward to seeing you in the very near future!

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