Posts from the ‘Economics’ Category
Planet money explains all
HS2 has been given the go-ahead, but not everyone is happy
a) What are the positive and negative externalities associated with the project?
Here is a short revision presentation on evaluation skills for AS and A2 economics questions which we produced a couple of years ago which might still be useful for the forthcoming exams.
Vicky Pryce FRSA has a new article on the economic significance of manufacturing industry for UK economic renewal. It is available here from the January 2012 edition of the RSA Journal. In a related article Sir Christopher Frayling FRSA discusses the rise of the Maker Movement.
Back in November 2011 Channel 4 news ran a special on the future for UK manufacturing here is a link to a related video
Profit-seeking businesses will go ahead with an investment if they believe that it will – over its projected lifetime – yield a real rate of return greater than if the money had been invested in the next best alternative way. Opportunity cost is a useful idea to use here. Private sector businesses usually focus on these objectives when investing in new capital inputs:
• Improving productivity to drive down unit costs and achieving economies of scale
• Expanding capacity to meet rising demand and to supply to new markets (e.g. exports)
• Increasing capacity in advance of an increase in market demand (i.e. the accelerator)
• Replacing obsolete capital equipment and buildings
For public sector investment such as new roads, schools and prisons, priorities may be different. Public sector capital projects are still subject to tests about their expected rates of return and the cost-benefit analysis will include estimates of the social costs and benefits of the investment rather than a narrow focus on private costs and benefits.
Returns to an investment project are affected by demand for and the price of the output generated by an investment and by the costs of production
1. A rise in demand will increase the revenues a business can expect from a new project
2. A change in the costs of buying capital, the costs of training workers to use new capital and in maintaining the capital stock will also impact on the expected rate of return
3. The expected return from an investment is influenced by the rate at which a new capital project depreciates over time and changes in corporation tax on profits
Expectations – the importance of animal spirits
• One of the important lessons of Keynesian economics is the role played by business ‘animal spirits’ in determining how much money firms are willing to commit to capital spending.
• There is always uncertainty about the expected rate of return particularly when demand is volatile and sensitive to changes in interest rates, the exchange rate and real incomes.
In the chart above we follow the expected export order books for industrial businesses. See how in the final months of 2008 and into 2009 there was a steep rise in the % of businesses reporting export orders below normal and this stayed high throughout 2009. Businesses that sell their products overseas were clearly seeing a fall in new export sales because many other advanced economies were going into recession.
Sentiment in the survey improved during 2009 and one key reason for this was twenty per cent depreciation in the value of the pound against other major currencies which made UK exporters more price competitive. By 2010 there were hopes of a strong export-led recovery in the British economy.
However recent data shows a new fall in export optimism among industrial businesses – bring this kind of updated information into your exam answers. Export order books are falling and this time the main cause appears to be the crisis in the Euro Zone countries into which more than 40% of UK exports flow. Is this a sign of a second “double-dip” recession in 2011 and 2012?
Our second confidence chart (see above) provides some background evidence on business sentiment and the percentage of firms reporting that they are working below full capacity.
• Ordinarily around half of industrial firms say that they are producing below their full capacity output although this varies at different stages of the cycle.
• This figure climbed from 55% in the middle of 2008 to a high of 76% in the second quarter of 2009 – clear evidence that falling demand had led to a reduction in production leaving many businesses with spare productive resources.
• This is often enough to postpone planned investment because there is little need to invest to boost capacity when demand is low.
• The bottom pane on the chart shows general business optimism or pessimism and sentiment about exports. The data shows the percentage balance of replies, for example, if 65% of businesses are pessimistic and 35% are optimistic then the net balance is -30% (some of course might be neutral!).
• The key point is that business confidence did worsen a lot. Exporters were less worried about the situation but many domestic firms feared the effects of a deep recession.
With consumption being such a large component (approximately 2/3rds) of aggregate demand, it is important to understand the role that consumer confidence plays when decisions are made upon major spending commitments.
The main factors affecting consumer confidence can be summarised as follows:
• Expectations of future living standards and income levels
• Unemployment trends and perceptions of job security
• Expectations of changes in direct and indirect taxation
• The current rate of interest and expectations of future interest rate changes
• Changes in household wealth including factors affecting share prices and house prices
The problem facing economists is that consumer confidence tends to be quite volatile from month to month, and notoriously difficult to measure. How confident are you today on a scale of 1-10? How confident are you about the state of the economy? These questions will bring a range of answers from different people and are based on subjective opinion. Nevertheless a range of polls exist to try and measure such factors.
Findings from this survey of adults in Great Britain, conducted by Ipsos MORI on behalf of new think-tank British Future, offer insights into the public’s hopes and fears for 2012. (the full data can be found on the Ipsos MORI website). However a piece on the guardian website captured my attention
It is no surprise, when questioned about the ‘biggest challenges facing Britain in 2012’, to see macroeconomic issues topping the rankings. Keep an eye out for any other pieces of evidence you can find which help you to make a judgment on consumer confidence levels – they play an important role in consumer spending levels but can be difficult to successfully monitor.
There has been much debate about the top 50p rate of income tax, and whilst the actual data on whether it has led to more tax revenue or less (a good place to introduce the Laffer Curve) is not expected until Jan 31st, The Prime Minister and George Osborne are understood to have concluded that abolishing the levy is politically impossible in the near future amid fears that they will be accused of pandering to the wealthy.
The HMRC report is expected to show that the tax rate has added to the tax coffers in the short term but if seen as a more permanent feature of the tax landscape, over time, may fall, as wealthier taxpayers develop ways of circumventing the higher rate.
Read more here.
Here is a quick revision multiple choice quiz on public and private goods created using Zondle
This is a splended DVD with a huge amount to interest students. Great for using when discussing incentives and looking at social policy issues from a different angle.My own students love the section featuring Urail King and his attempt to raise his test scores!
Freakonomics Asks: Can you pay students to get better grades?
On 11th March 2009 the Bank of England started a policy of quantitative easing. QE is also called an ‘asset purchase scheme’. It was extended to a total of £275 billion in October 2011 and is likely to be expanded further during 2012.
Other central banks have introduced quantitative easing in recent year through huge purchases of government bonds. Indeed the economist Gavyn Davies, writing recently in the Financial Times has calculated that “around one half of the bonds issued to fund the budget deficits of the US, UK and eurozone since 2008 have been acquired by the Fed, BoE and ECB.”
This is a remarkable change in the conduct of monetary policy in advanced nations.
The aim of QE is to inject liquidity into the banking system, boost demand and prevent inflation remaining persistently below target or becoming negative (deflation).
The Bank moved to QE because nominal interest rates had already been cut close to zero and because it was felt that low interest rates were having little effect on aggregate demand in other words a liquidity trap was being experienced.
The conventional use of Monetary Policy appeared to have lost traction because of the circumstances of the global financial crisis.
The Bank of England uses quantitative easing to act on the quantity of money. The media call this ‘printing money’ but this is only true in an electronic sense – the Bank does not print new £10, £20 and £50 notes in a direct attempt to inject cash into the economy!
QE is a deliberate expansion of the central bank’s balance sheet and the economy’s monetary base.
1/ A rising demand for bonds and other assets ought to drive up their price and lead to a fall in long-term interest rates (yields) on such assets. (There is an inverse relationship between bond prices and bond yields).
2/ If long-term interest rates fall and the banks have stronger balance sheets because of BoE purchases, the hope is that this will stimulate lending and stronger growth of business and consumer demand
Has QE worked?
1. Cash hoarding: Asset purchases have improved the liquidity of banks and pension funds but banks have been happy to ‘sit on the cash’ rather than lending to businesses and consumers.
2. Credit availability remains low – many businesses who need funds to expand complain that they remain effectively frozen out of the loans market or have to pay premium interest rates
3. De-leveraging: Commercial banks are still engaged in a process of de-leveraging meaning they are desperate to reduce the amount of existing debt before starting to lend out again. They are risk-averse or cautious about expanding their lending
4. Opportunity cost: Is £275bn of QE the best use of the Bank of England’s money? How much of it has filtered through to the small businesses likely to lead the way in creating new jobs in the next few years?
5. Future inflation: Monetarist economists warn that a huge expansion of the money supply through quantitative easing risks causing much higher inflation in the years ahead.
QE in other countries
QE has been tried in other countries including the United States. And it became an important part of the policy of the Bank of Japan to drag their economy out of a deflationary slump in the 1990s.
The European Central Bank (ECB) has been more reluctant to use QE during the present slump but started to do so during the summer and autumn of 2011
Channel 4 News: Bank of England Governor Mervyn King talks to Channel 4 News’ Economics Editor Faisal Islam about the pros and cons of QE.
AlJazeera: Skepticism clouds new US stimulus plan (US QE)
One revision to the current system of QE is that the Bank of England should buy newly issued bonds directly from the government rather than existing bonds held by the commercial banking system. What is the reasoning?
• The early version of quantitative easing has done little to boost lending by the Banks
• The UK government is solvent, there is a negligible risk of default for the Bank of England
• It would allow the government to cut taxes temporarily to boost demand and kick start the economy using fiscal policy whilst holding down spending as planned in the 2010 review
• Effectively the BoE becomes bond purchaser of first resort, the central bank would be financing fiscal policy decisions, monetary and fiscal policy would become joined at the hip.
Is there an alternative?
1. Credit easing: Another policy proposed is called credit easing where the Bank of England buys the bonds issued by companies to help them finance a rise in capital investment.In his November 2011 Autumn Statement, Chancellor George Osborne announced a £40bn “credit easing” scheme to make it simpler to underwrite bank loans to small firms.
2. Bank bonds: Some economists are now calling for the Bank of England to buy bonds issued by commercial banks so that the banks can build up their capital base and eventually lend out more to hard-pressed businesses and consumers.
Lots of data can be gleaned from the infographic below and found here and the numbers are astronomical! With government spending at $ 3.6 trillion and tax revenues at $2.3 for 2011, that makes a pretty large shortfall. Inaddition, the US government spends $227 billion just to finance its debt! With a rather bleak prognosis for 2012, US policymakers need to come up with a pretty radical job creation plan that can ease some of this debt burden in order to avoid the damaging effects of doubts over debt repayment some European countries are experiencing at the moment.
Here is a quick and short revision quiz on negative externalities created usign Zondle
Could 2012 provide stronger news for the US economy and offer President Obama a decisive electoral dividend in the run up to the November Presidential Election?
The recent jobs data in the USA looks more promising for hopes of a significant pick-up in growth and employment all of which will help attempts to control the fiscal deficit. This news report from AlJazeera looks at the latest US unemployment figures. Falling unemployment provides a platform for rising aggregate demand and stronger short term economic growth. And stronger economic activity in the world’s biggest economy is good news for the UK too!
Guardian: How silly does the party that said no to stimulus look now? (David Blanchflower, Jan 2012)
From tsunamis to tornadoes, from droughts to floods, 2011 was a particularly nasty year for natural disasters in many parts of the world. These natural disasters inevitably have demand and supply side effects affecting not just those countries affected but ripple impact across regions and in the broader global economy.
The Al Jazeera news video report below provides a clear overview of some of the major natural climatic shocks of 2011 and could easily be used as an introductory resource to discuss what are some of the micro and macroeconomic effects in both the short and medium term.
* Effects on the stock of physical capital / infrastructure
* Impact on a country’s human capital
* Effects on commodity prices, export revenues
* Effects on agricultural output, profits, investment, productivity
* Ripple effects on manufacturing industries and energy supply/cost
* Impact on state tax revenues and the costs of re-building and providing emergency financial support
* Effect on the movement of population following extreme climatic events
* Natural disasters and changes in the distribution of income / risk of poverty
Top 5 worst natural disasters of 2011 (Global Post)
Natural disasters and extreme weather (Guardian news reports)
The cost of calamity (March 2011) The Economist
Creative Destruction – James Surowiecki, New York Post (March 2011)
The Economics of Natural Disasters – Australian National University essay prize winner, 2011 (pdf link)
Here is a ten question revision multiple choice revision quiz on monetary policy designed for students taking AS macroeconomics (unit 2). The quiz has been created using the free software Zondle.
Thanks to tutor2u for this
a) What are the negative externalities from metal theft, and why are they negative externalities?
A hat-tip to Thomas Rockall for updating me with this bit of news: In a major shift, the Federal Reserve will start announcing four times a year how long it plans to keep short-term interest rates at existing levels, according to minutes from its December policy meeting.
The change is intended to reassure consumers and investors that they will be able to borrow cheaply well into the future. The Fed’s first forecast for interest rates will be included in the economic projections it will issue after its Jan. 24-25 policy meeting.
The Fed has left its key short-term rate at a record low near zero for the past three years. In August, it said it planned to leave the rate there until at least mid-2013, unless the economy improved.
You can read more on its likely impact here.
Here are some revision multiple choice and type the correct answer questions on aspects of unemployment – designed for students taking AS Macroeconomics. Provide correct answers and see who gets the top score on the crystal cannon! The quiz has been created using Zondle.
Here is a fourteen question revision quiz on key terms linked to the economic cycle – in this quiz type in the correct answer and earn the right to play a Zondle game! Good luck!
One for the teachers, not the pupils…
We started term today with what the rest of you will no doubt also have experienced – an INSET training day, with the usual fears of being bored silly, waiting until it all ends, so you can go to your classroom to actually get on with preparing for the start of term.
Well, today I was pleasantly surprised by our INSET session which involved a couple of hours with Kim Wells from Caterham School. He is the Director of Learning and Teaching there but delivers these workshops to schools, businesses, and even the judiciary(!). He talked to us about ‘meta-cognition’ – that is, thinking about the thinking process, and focussed on De Bono’s Six Thinking Hats as a thinking tool for group discussion. You can read an overview about it here.
Like many of these things, I would say it’s a process that needs to be seen in action to see its worth, rather than just read about.
In our subsequent department meeting, we were thinking if there was potential for use of the Thinking Hats in Economics.
We will be trialling it with our Junior Economics Society session next week and I will let you know we get on!
Rather than different people having different ideas simultaneously, the Thinking Hats tries to get everyone to think in parallel, that is focus on one aspect of an issue together, before moving on to another area. In this way, you have a more structured and coherent response in the end, rather than a confused mess.
The hats are (and yes there were physical hats!):
Red (emotional/intuitive response);
White (Informational/data focused);
Yellow (Logical upside / positive benefits);
Black (Caution / flaws / barriers) – but logical ones, not to be confused with red hat
Green (Alternatives / possibilities) – the ‘what if’?
Blue (Overview / process) – the thinking about your thinking.
I thought it would be a good way of teaching certain economics topics, such as when looking at policies to solve a certain market failure, which lends itself to knee-jerk reactions (red hat) and both positive (yellow hat) / cautions (black hat); whilst also offering evaluation techniques with more information questions (white hat); alternative proposals (green hat); and a conclusion (blue hat). This is something we could trial as a lesson plan for say “should the rich be taxed highly?”; or the best way to tackle alcohol or cigarette consumption. I imagine the red-hat response would be to say yes to banning it, but would be interesting to see if they can think of problems with banning it.
We also thought the Hats could be a good way of thinking of how to structure an essay, particularly for the weaker thinkers in the cohort.
This could be used to complement the WEESTEPS method for evaluation that has been mentioned on tutor2u before.
As I say, it needs to be seen in practice to see its worth, and whilst usually I am a big cynic of these things, this did actually catch my eye.
Below is a clip with Kim explaining it himself:
A brilliant tutor2u resource, full of theory and video examples. It goes a bit further than the OCR syllabus needs and I have labelled the diagrams differently, b ut if you want a real, in depth analysis, this is great
As students build their revision efforts ahead of the impending A Level Economics units, here is an updated version of my revision document on evaluation skills for AS and A2 economists…
This blog entry brings together a selection of recent news reports and videos covering the economics of unemployment in the UK and inother countries.
Channel 4 News: Unemployment special report (November 2011) – Focusing on unemployment in the North East of England
Channel 4 News: Rise in long-term unemployed (December 2011)
Al Jazeerah English: Spain’s youth battle unemployment (May 2011)
Al Jazeerah English: Texans struggle with unemployment (August 2011)
BBC: Jasper’s Dream Music Job – Young, Jobless and Living at Home
This blog provides a link to a constantly updated revision Prezi on negative externalities and market failure – designed for students taking AS Microeconomics Unit 1 and those studying externalities for the IB Diploma. The Prezi contains lots of short news videos on examples of externalities. Click on the link below to access the Prezi.
If a criminal steals metal from a building yard or a jewellers the impact is relatively isolated but when metal theft extends to lifitng metal from roofs, railway lines and many other public buildings, thousands are inconvenienced and left to pay the cost – negative externalities are clear.
This news report from Al Jazeera looks at the growing economic and social problem of metal theft in London and a second video report from Channel 4 news looks at the external costs of copper theft from cables on the rail network that delays services and puts lives at risk. What are the best options for dealing with this crime epidemic? The Met Police has set up a specialist metal theft unit as part of their response.
Metal theft plagues London
Cable theft ‘epidemic’
The global financial and economic crisis has created many problems for airlines – falling business and 1st class passenger revenues, increased insurance costs, problems in getting loan finance, volatile exchange rate and the challenges of steep increases in aviation fuel prices to name just a few. We could also add the shockwaves from the spring 2011 Japanese earthquake and tsunami, the Arab Spring and a decline in tourism, and the steadily deteriorating global economic outlook – with the Euro Zone crisis threatening a second recession for Western Europe.
But discount airlines – carriers that offer no-frills and charge plenty for extras on top of low basic fares – seem to have fared pretty well despite the turbulent conditions. Many passengers now appear willing to sacrifice luxury for cheaper flights and there are plenty of news stories of low-cost airlines in Europe, Asia and Africa who are announcing expanded route maps for 2012 and beyond.
What economic factors help explain the continued expansion of low-cost airline carriers?
Low cost carriers flying high
Singapore Times: A testy year ahead for global aviation
BBC News: Business bites: Trade row fears over EU airline carbon emissions tax (December 2011)
Bet Fair has built up an enviable reputation for running an efficient platform for in-race betting online. The platform gives punters the chance both to lay odds on a race and also to take a standard gamble on the result and the technology allows betting before and during the race. But events last week in Ireland have dealt a blow to the standing and reputation of the business as this Channel 4 news video amply demonstrates.
The company blames a technological hitch but as the dip in the share price shows, the stock market was quick to mark down Betfair shares as a consequence of the fierce criticisms of the standard of their customer services.
Is the US dollar going to be knocked off its perch as the only true global currency? Professor Barry Eichengreen, the author of Exhorbitant Privelege argues that there are strong reasons to believe that the US dollars’ position in the world financial system will decline in the years ahead.
The US dollar has been for many years the world’s most powerful currencies but this power seems to be waning as other currencies rise in significance and the US economy struggles to recover from their financial and economic crisis and the fiscal challenge. Eichengreen argues that there will be three truly global currencies going forward – the dollar, the Euro and the remnimbi.
Influences on the external value of the US dollar
1. Multi-polar world economy – there are different centres of growth now and the size and impact of the economies of emerging market fast-growth countries is changing the landscape of the currency markets
2. Trade: The US Dollar is accounting for less of the annual value of world trade year by year and a smaller percentage of foreign currency reserves held by central banks
3. Convertibility and transparency: It is now much easier to exchange currencies and convert into others – several monies can compete on the global stage and immediate real time information gives traders instant data on macroeconomic performance. Just last week there was news of an agreement between China and Japan to facilitate full currency convertibility between the two countries (read: China and Japan plan direct currency exchange agreement) See also: China to make more yuan currency available for trade
4. Slower growth for the USA: There are deepening worries about future trend growth in the US economy causing a structural decline in the size of the US economy in the global economic system. High unemployment rates and the prospect of years of fiscal austerity are two key factors behind slow GDP growth forecasts
5. BoP: The USA continues to run a persistent current account deficit – will it always be able to finance this through capital account surpluses?
6. Politics: Political gridlock in the USA (a dysfunctional political system) will constrain macro policy options and undermine financial market confidence in the US economy in setting the stage for a durable recovery
A depreciation of the US dollar would clearly help to improve US export competitiveness and perhaps provide a boost to their economic growth rate in the short term. But international holders of US dollars might get very nervous of the risk of capital loss if depreciation became a rout.
Spain’s new government has said the public deficit for 2011 will be 8% of GDP, well above its target of 6%, and has announced increases in income and property tax along with a wage freeze for civil servants to tackle it. Looks like a very tough year ahead for the Spaniards, one of several in the last few years,as illustrated in this timeline.
This Reuters video provides more background information on the proposed austerity measures;
If you are a fan of laminate flooring, wood panelled walls or neat wood-based fencing for the garden, the chances are that you will be paying higher prices in the years ahead. Despite the Britain offering a temperate climate for a plentiful supply of wood and a well organised system of land registry and plantation management, the UK market price of different types of timber has shot up over the last two years.
Rising demand for timber
The underlying cause is pretty straight-forward – namely a surge in market demand for wood much of which is linked to the UK government’s legally-binding commitments to meeting tough targets for energy generated from renewable sources. Indeed at a time when the UK housing industry is in the doldrums, timber prices might be even higher if the construction industry was enjoying a stronger rebound from the recession.
Wood is a product in composite demand – meaning that there are many competing and highly valuable uses for wood. An increase in demand for using wood in one way reduces the stocks available for other users and drives prices higher. This is where the impact of green energy subsidies comes into force.
Government financial support for using biomass (derived from living, or recently living, biological organisms) are providing incentives for power stations to use wood as an alternative to coal. In doing so, the cost of wood for alternative uses such as furniture, packaging, fencing and in the building industry is rising too.
Drax Power Station in Yorkshire (Britain’s single source of carbon emissions) has recently been given the go-ahead by the government to invest in two huge wood burning power plants at Selby in Yorkshire and South Killinghome, in North Lincolnshire. When fully up and running, these two plants will burn nearly 6 million tonnes of wood a year – over half the UK’s annual wood harvest.
But will a shift towards bio-mass energy production bring unwanted side-effects to other important industries in the UK that use wood in manufacturing consumer and industrial products? Higher timber prices increase costs in the construction industry and many other businesses have to adjust to increased costs. Furniture manufacturer for example have to pay more for their chipboard made from waste wood. So too do farmers who pay for timber to make fence posts.
Some UK wood panel producers are saying that unless timber prices fall, they might have to close UK-located wood mills and import cheaper wood from overseas.
They have established a new campaign “Make Wood Work” outlining what they see as the dangers for wood panel manufacturers and for jobs in Britain unless the renewable subsidy regime is altered. They also argue that subsidies for using wood to generate energy is more harmful to the environment that manufacturing products using the same wood. “Burning virgin wood, or used wood that has recycling potential, is a waste of a valuable resource.”
One leading wood panel maker – Kronospan Ltd – has this year established their own bio-mass plant at their factory to generate energy using waste timber.
If timber prices stay high we can expect to see a supply-side response from the market as more agricultural land is given over to growing coppices and existing forestry is subject to better-organised management. But increasing the volume of new timber available in the UK will take many years to achieve since the elasticity of supply for new timber is low in the short run.
Related news articles:
BBC Wales News: Plans for a biomass plant at Kronospan, Chirk, revealed
Channel 4 News Video: Government subsidies to encourage power companies to burn wood are distorting the market for timber and forcing up prices in manufacturing and construction industries
Reuters: Power station looks to biomass for low carbon future
Fergus Walsh from the BBC provides this really clear video info graphic on the expanding global population estimated to have exceeded seven billion during 2011 and forecast to rise to eight billion by 2025.
As one of many turn-of-the-year round-ups, the BBC has polled 34 ‘leading economists’ in the UK and EU to find out what they expect for the EU in 2012. Unfortunately this report of the results doesn’t give details, but says that25 of the 27 respondents expect recession to return to Europe next year, with many finding it fairly likely that the eurozone will break up, and 20% expecting that at least one member will leave during next year.
Also released today is a New Year message from John Cridland, Director General of the CBI. His theme is that 2012 will be the time for the UK to ‘power up’ and begin rebalancing its economy. The CBI’s report of his message is very clear, and should be very accessible to AS and A2 students:
“The CBI’s ‘vision for rebalancing’ makes clear that the unprecedented economic stability between 1993 and 2007 masked growing imbalances. The UK economy has become dominated by debt driven household and government consumption, which together accounted for 89% of GDP in 2009 – more than in France, Germany or the US.
To achieve sustainable growth in the medium to long-term, the economy has to become more driven by investment and exports, while allowing the burdens of both government and consumer debt to subside. Failing to rebalance alongside debt reduction would leave the economy struggling to grow.”
It goes on to make it clear that the prospects for successful rebalancing face a significant threat from continuing instability in the Eurozone, but should take advantage of “rise of middle-class consumers in emerging markets, spurring a greater demand for our services”, and investment into infrastructure, the digital economy and renewable energy – with private sector investment as the key factor.
Finally a Radio 4 broadcast of a discussion with the BBC’s special correspondent Lyse Doucet, North America Editor Mark Mardell, Newsnight’s Economics Editor Paul Mason and diplomatic correspondent James Robbins sounds like a worthwhile 50 minutes. This is to be broadcast on Friday 30th at 8.00pm and Saturday 31st at 1.10pm, or can be downloaded as a podcast via this link.
Here is a ten question picture quiz on some of the personalities who have made the business news headline during 2011. How many can you get first time? When you get the questions right – how fast can you speed down the powerboat river?
This is a quiz created using the free software provided by Zondle. User registration is free and teachers can safely and securely upload student details if they want their students to take the growing range of subject and topic quizzes on Zondle. Click below to start the quiz – good luck!
We are putting together a survey of Economics teachers to assess the current market shares of awarding bodies for GCSE & A Level Economics. Which boards do you currently offer at your school or college?
To help us in our survey, please complete this form and click submit:
…..according to the BBC
I love peanuts and so I’ve noticed the rising price in pubs and supermarkets. This post from tutor2u explains why
In this special report from BBC reporter Fergus Walsh, the rapid population growth in the African country of Zambia is examined. Population growth in the country is so quick that it could perpetuate deep poverty in the country despite relatively fast growth in recent years. In Zambia, the UN predicts that the population could triple by 2050, reaching 100 million by the end of the century.
Here is an excellent overview and discussion of the tumultuous events of 2011 from the Channel 4 team. See below for the link to a twelve minute video retrospective and discussion.
Supply shortages in key growing regions have caused the price of peanuts to surge to record highs. Peanut prices in Europe are 60% higher than a year ago and the cost of peanuts in the USA has more than doubled in the last twelve months. The price spike is the result of lower production from India, Argentina and the United States.
In 2010, American farmers harvested 2.1 million tons of peanuts. This dropped to 1.8 million tons in 2011, a 15 percent drop that caused prices to more than double to about $1,000 a ton
With raw peanut prices jumping sharply higher consumers have found that staple products such as peanut butter, peanut oil, peanut flour and nut-enhanced cereals have become more expensive in some case by more than 30%.
Peanut production in the United States has been hit by drought conditions in states such as Georgia and Texas. And some farmers have switched production away from nuts towards cotton and corn because higher world prices have offered better expected profits. However if peanut prices stay high well into 2012, there are hopes that growers may start planting in states such as Arkansas and Mississippi where there is current ample water to achieve good harvests.
How will peanut-loving consumers react to these higher prices? I’ll continue to buy my usual combination of cheese and onion crisps and a packet of dry-roasted (tip – empty the nuts into the crisp packet for an unbeatable pub snack). But for others the temptation to spread that peanut butter a little more thinly on your bread will be strong.
This blog entry provides a variety of news video clips illustrating examples of negative externalities from production.
• Externalities are third party effects arising from production and consumption of goods and services for which no appropriate compensation is paid.
• Externalities occur outside of the market i.e. they affect people not directly involved in the production and/or consumption of a good or service. They are also known as spill-over effects.
• Economic activity creates spill over benefits and spill over costs – with negative externalities we focus on the spill over costs
Hungary town still shaken by toxic sludge (October 2011)
Nepal deforestation highlights clashing interests (April 2011)
Oil giant Chevron fined for Ecuador pollution (February 2011)
This blog entry will provide a regularly updated set of links to resources to the European Union’s Common Agricultural Policy and attempts to reform this contentious and complex system of farm support.
Check below for suggested links
BBC News: Q&A: Reform of EU farm policy (October 2011)
Guardian: Agriculture needs massive investment to avoid hunger, scientists warn (November 2011)
Guardian: EU agriculture policy ‘still hurting farmers in developing countries’ (October 2011)
Guardian: Britain targets substantial reduction in European farm subsidies (October 2011)
Friends of the Earth: Natural resources campaign news
CAP Reform Campaign Website
Farmers Weekly – Interview with Tim Mead of Yeo Valley
There are many retail industry experts forecasting that the early months of 2012 might be tough for some struggling retailers. We will keep this blog post updated on a regular basis as news of some high profile retail failures comes through. And we will link to media coverage of some of the attempts to restructure retailers under the threat of closure.
General Retail News and Research
Channel 4: Brands gone bad in 2011 (December 2011)
Mary Portas Review of the High Street (December 2011)
Blacks and La Senza limp towards administration (December 2011)
Independent: Past Times collapse threatens 1,000 jobs (December 2011)
Daily Mirror: D2 Jeans goes into administration (December 2011)
BBC News: Hawkin’s Bazaar in administration (December 2011)
BBC News: Blacks Leisure sale talks continue (December 2011)
BBC News: Thorntons issues profit warning (December 2011)
In this blog we are putting together a suite of web-based resources on the clash between supporters of Keynes and Hayek, a debate that have gathered momentum in recent times largely in the wake of the global financial crisis.
Recommended Resources on Keynes and Hayek
BBC History: Biography of Keynes
BBC Radio Today: Keynes v Hayek: The debate continues (December 2011) – a short discussion between author Nicholas Wapshott and economist Paul Ormerod
BBC Radio 4 Analysis: Radical Economics: Yo Hayek! (February 2011)
BBC Radio 4: The Story of Economics (programme 3 of 4) – focusing on Keynesian economics and animal spirits
BBC Newsnight: The return of the master? Is Keynes still relevant (September 2009)
BBC Radio 4 Analysis: Keynes v Hayek: Two economic giants go head to head (August 2011)
Project Syndicate: The Keynes-Hayek Rematch (Professor Robert Skidelsky)
Guardian: Keynes: The Return of the Master by Robert Skidelsky (Autumn 2009)
Guardian: My hero John Maynard Keynes, by Joan Bakewell (June 2010)
“Fear the Boom and Bust” a Hayek vs. Keynes Rap Anthem
Fight of the Century: Keynes vs. Hayek Round Two
2011 for the US economy was a year of slow growth and fears of a double-dip recession, but there were some more positive signs as 2011 came to a close.
Can the world’s biggest economy sustain a more durable upturn in activity during 2012? Keep in mind that this coming year will be dominated by the lead-in to the November Presidential election.
* The debt ceiling crisis: After months of wrangling and fears of government metldown, in August 2011 – President Obama and congressional leaders reached a deal which agreed to raise the debt ceiling by US $400 billion immediately, whilst also cutting government spending by hundreds of billions of dollars over the next decade.
* American Jobs Act – this is an ambitious plan to boost employment in the US economy introduced by President Obama in September 2011.
* Operation Twist – this is a new monetary policy announced by Fed Chairman Ben Bernanke in September 2011 – Operation Twist involves restructuring the Fed’s debt portfolio by selling off short-term T-bills and buying long-term debt. The aim of this stimulus measure is to drive long-term rates down, thereby encouraging more mortgages and business loans to be made. Will it work? Business and consumer confidence remains low and many businesses are already sat on large cash-pils that they seem deeply reluctant to invest until economic conditions improve.
* Goodbye Triple A? – in the summer of 2011, the credit rating agency S&P downgraded US sovereign debt for the first time – Standard & Poors downgraded US treasiry debt from the highest rating of AAA to AA+ although the main reasons for doing so appeared to be political rather than economic namely the debt ceiling impasse in the summer which was eventually resolved.
* Stubbornly high unemployment – As individuals face unemployment in an economic downturn, they lose their skills that are commonly developed on the job. Should they face prolonged unemployment, they eventually become unemployable, thereby raising the structural level of unemployment in the long run.
This is worrying because future capacity could potentially be reduced (particularly the case if it is youths who are facing prolonged unemployment), thus creating a long term supply side problem for the US economy. The next chart is revealing and important – look at how sharply has been the rise in the average duration of unemployment in the US over the last two years.
Key US Macro Figures for 2011
CPI Inflation: 3.2%
Unemployment rate (Oct 2011) 9.0%
Current account balance (% of GDP) -3.1
Budget (fiscal) balance (% of GDP) -9.0%
Interest rates (% on 10-year govt borrowing) 2.01%
Economic structure (% of GDP)
Consumer spending 70.5%
BBC Videographic: The US economy: A lost decade?
Detroit ‘savaged’ by economic problems (BBC news)