Posts from the ‘Economics’ Category

Unit 3 Micro: Video Resources on Trade Unions

February 25th, 2012 at 8:54 am by Geoff Riley

Here is a selection of short news video resources on trade unions in the UK

BBC news – Feb 2012: Are we seeing a return to trade union militancy?


BBC News: 1984 Archive: Orgreave picket

A look back to the Miners’ Strike of 1983-84 and the infamous confrontation at the Orgreave Coking Plant- click here


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Unit 3 Micro: Trade Union and Industrial Stoppages

February 25th, 2012 at 8:22 am by Geoff Riley

I am teaching trade unions as part of our study of labour markets in the UK and the rest of Europe. This data from Timetric tracks the number of days lost from industrial disputes / stoppages and is always useful in providing historical context. Data on UK trade union membership can be found here

* Trade union density for employees in the UK was just 26.6 per cent in 2010
* Trade union membership levels for UK employees was 6.5 million compared with 2009. Across all sectors of the economy, just under half of UK employees (46.1 per cent in 2010) were in a workplace where a trade union was present
* The hourly earnings of union members, according to the LFS, averaged £14.00 in 2010, 16.7 per cent more than the earnings of non-members (£12.00 per hour)

Includes working days lost, stoppages and workers involved

Data from Timetric.

To view this graph, please install Adobe Flash Player.

Labour Market: Labour disputes, UK from Timetric

Number of stoppages

Data from Timetric.

To view this graph, please install Adobe Flash Player.

Labour Market: Labour disputes, UK from Timetric

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Unit 3 Micro: Volkswagen targets growth markets

February 25th, 2012 at 7:59 am by Geoff Riley

Here is a one minute news clip packed with nuggets of good business economics. Profits have more than doubled at German car-maker Volkswagen after the company delivered a record number of vehicles last year. It delivered more than 8.2 million vehicles, up almost 15% on 2010. Listen and watch for information on their acquisitions and competitive strategy especially when targeting fast growing markets in emerging economies especially China, India and Brazil.


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Unit 2 Macro: Rosling on China and the UK Converging

February 24th, 2012 at 8:26 am by Geoff Riley

Here is a lovely three minute Newsnight video featuring Hans Rosling on the convergence in income per capita and health outcomes between China and the UK. Great presentation.

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Unit 3 Micro: Low Pay in Supermarkets

February 24th, 2012 at 7:53 am by Geoff Riley

The award-winning journalist Paul Mason provides this video report on low pay for hundreds of thousands of people who work for the big four supermarkets. I use this video when teaching monopsony power in the labour market. For many people, supermarket workers’ wages are being supplemented by state benefits such as child tax credits

In a related issue, Channel 4 news reports on Tesco buckling under pressure over its use of unpaid work experience staff – and announced they will now be paid – unlike the government’s work experience scheme

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Are Graduate Economists Fit for Purpose?

February 23rd, 2012 at 10:50 pm by Geoff Riley

A fortnight ago I spoke at an event organised by the Government Economic Service and the Bank of England on the teaching of Economics in schools and universities.It was a really interesting day and in this article Diane Coyle, Managing Director of Enlightenment Economics draws together many of the threads of discussion and debate. I’ll be writing up my own commentary after the weekend.

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The Business of Sport – An Evening with Leeds Rhinos

February 23rd, 2012 at 10:18 pm by Geoff Riley

Kevin Sinfield

Rugby League legend Kevin Sinfield and Leeds Rugby CEO Gary Hetherington are speaking at the Eton College Sports Society on Monday 27th February starting at 8.40pm. If anyone is in the vicinity and would like to come to the meeting please feel free to do so. Entry is free, please contact me if parking is needed. It should be a great chance to discuss the business of professional rugby in one of the toughest sports in the world.

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Lord Bilimoria at the Entrepreneurship Society

February 23rd, 2012 at 10:09 pm by Geoff Riley

Bilimoria at Eton

Karan Bilimoria, Founder of Cobra Beer is speaking at the Eton Entrepreneurship Society on Thursday 1st March starting at 8.40pm. If anyone is in the vicinity and would like to come to the meeting please feel free to do so. Entry is free, please contact me if parking is needed.

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Unit 2: Macro videos from the ONS: Youth unemployment

February 23rd, 2012 at 8:57 am by Blogger Bryn

Thanks for tutor2u for pointing me in the direction of the ONS video channel

This is really good on youth unemployment

a) How much of a problem is youth unemployment in the UK?

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Greek Debt – Its Over, Totally Over!

February 22nd, 2012 at 5:15 pm by Jim Riley

Another great piece of work by the team at the Guardian here using Xtranormal.  This one tries to explain the current situation regarding the Greek debt deal.  Is it over? Sorted?  maybe not…

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Unit 1 Micro: Ten Approaches to Curbing Binge Drinking

February 22nd, 2012 at 1:56 pm by Geoff Riley

Economics is a social science involving the study of human behaviour. we know that binge drinking is an economic and social issue that probably requires a range of policy interventions to address effectively over time. This BBC news magazine article offer ten policy prescriptions – students can easily add to the catalogue – but provides a really good example of how to build good evaluation into an AS micro market failure / government failure question.

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Unit 2 Macro: Targeted Tax Cuts to help the Economy

February 22nd, 2012 at 1:26 pm by Geoff Riley

The Confederation of British Industry is a lobbying organisation and seeks to promote and protect the interest of many of the UK’s leading businesses across manufacturing and services. Ahead of the March Budget, their head John Cridland argues in this video for a series of targeted tax cuts as a stimulus for the economy. This is worth watching to get a feel for what are the priorities of business at this stage of the cycle. How much different would it be if the interviewee was representing the trade unions?


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The Economics of Climate Change – Stern 5 Years On

February 21st, 2012 at 11:25 pm by Geoff Riley

Lord Nick Stern tonight gave the first of three lectures on the ethics and economics of climate change as the annual lecture series in honour of Lionel Robbins started at the LSE.

It is over five years since the publication of the Stern Report and much has happened in the intervening period. Stern however was at pains to emphasise that his core message remained undimmed, namely that the costs of inaction are enormous but the costs of early action to cut emissions are manageable. We have seen in recent years rapid technological change much of which is hugely encouraging in taking us closer to de-coupling the relationship between production and consumption and carbon emissions. But more is needed, Stern is arguing in these three lectures for a new industrial revolution, a deep set of changes to production processes and technologies that happens across every sector. The economics and politics of how progress might be made in moving towards a new revolution will be the focus of the second and third lectures.

LECTURE 1 – Tuesday 21 February 2012
What we risk and how we should cast the economics and ethics

LECTURE 2 – Wednesday 22 February 2012
How we can respond and prosper

LECTURE 3 – Thursday 23 February 2012
How we can get there: building national and international action

In the first lecture Lord Stern reviewed some of the science of climate change, he addressed those who remain in denial and touched briefly on the vexed on the issue of discounting the future benefits arising from climate change interventions.

The science tells us a lot about the link between changes in the flow and stock of emissions and the likely changes in average temperatures. There is a clear trend in temperature but lots of oscillations, and whilst uncertainty is fundamental and we can never be sure, he argues that

(i) The the scale of the likely effects are enormous

(ii) The time lags are long

(iii) The consequences are public -  the effects of climate change are blind to where the emissions are generated and the wholly public nature of emissions-related carbon change is now well understood around the world, especially in countries where the impact is being seen now in increasingly volatile weather patterns.

To hold to a 50-50% chance of holding the rise in average global temperatures to 2 degrees centigrade, we need CO2 emissions to peak and start falling rapidly before 2020.

There are big dangers in delaying not least because holding to existing technologies and processes are likely to lock-in up the majority of hydrocarbons and make any attempt at cutting the stock of emissions difficult and costly in the future.


As social scientists we must not be afraid of bringing our core values to the fore when thinking about policy options and policy architecture. The ethics and the economics of climate change are intertwined and will always be so. The issue raises all kinds of ethical debates, for example the rights of future generations and their ability to enjoy liberty and justice. The question of how a virtuous person ought to behave. And also the vexed issue of intra-generational equity across countries.

Stern argued that rich advanced nations have duties and responsibilities. It is immoral for countries with high per capita incomes to deny rights to the remaining carbon space (the scope for the annual flow of emissions to rise without jeopardising a target for the overall stock of emissions) to those in emerging / developing lower-income countries. 


Stern’s review came under criticism from some quarters about the low discount rate chosen for calculating the present value of the benefits of climate change policies whose impact will be many years into the future. He argued in his lecture tonight that the debate over the discount rate essentially diverts attention away from what really matters which is that we are dealing with risk management and effects that could have catastrophic human, economic, social and political consequences for many millions of people. Those who come after us are worth just as much as we are. We need to make long-term collective decisions and there are few if any market interest rates (set in capital markets) that capture the risks and uncertainties for a time frame that is a hundred or more years into the future.

Economic growth will not be positive if we mis-manage climate change. There is a strong probability that the next generation will be poorer than the current one not least with the fragilities laid bare but the continued fall-out from the global financial crisis.

The scale of emissions reduction needed

* The world is currently emitting around 50 billion tonnes of CO2 each year. Even with all of the commitments and plans for action made at Copenhagen, Cancun and Durban at previous summits it is likely that this annual flow of emissions will plateau (developed country emissions falling, fast-growing emerging countries seeing their emissions rising as consumption grows).

* If the world economy grows at an annual rate of 2.5% for the next forty years, this implies a world economy nearly three times bigger than it is now

* We need to cut emissions per unit of output by a factor of eight – this requires an industrial revolution and you cannot leave sector out

* This industrial revolution needs strong policy interventions to nurture it and to correct for the many market failures. Investment in low carbon technologies and processes might have to grow by 2 or 3% of global GDP, and the majority of this will come from the private sector, we can see already many firms taking a very long view.

We should not simply focus on improving energy efficiency (although this is important and can be done at a relatively low marginal abatement cost). We should also look seriously at ways to reduce consumption and change the pattern of consumption on different goods and services. Just stopping economic growth does not deliver the deep cuts in emissions that are needed.

Emissions trading has a role to play. The current low price for carbon credits within the European Union emissions trading scheme is not surprising if you have macro policies sending the EU into a state of semi-permanent depression whilst at the same time national governments hand out carbon credit quotas that pretend the EU economy was continuing along previous growth trajectories. Some intervention is justified to support the carbon price because it is confidence in the price in a market-based mechanism that drives investment

Developing countries leading the way

Growing evidence that many less developed countries see low carbon technologies as offering huge opportunities for growth, development and over-coming poverty. They are likely to lead the way not least in disruptive innovations that can then be licensed and sold to rich nations!

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Unit 1: Evaluating alternative policies to reduce the negative externalities from alcohol

February 21st, 2012 at 8:12 pm by Blogger Bryn

Two excellent posts from tutor2u, the first with 10 posible solutions to evaluate and the second with some moreinformation on actions already tried
which appears to be a summary of theis BBC article and then

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Drink, drink, more drink

February 21st, 2012 at 6:18 pm by Michael Owen

Students are often asked to weigh up policies to limit the over consumption of demerit goods like alcoholic drinks. This BBC article  cited by Ben White considers some of them.

Most governments have used a combination of policies with varying levels of success. One policy option is the use of variable rates of Excise Duty. The March 2011 budget resulted in a rise in the duty on strong beers (above 7.5% alcohol) of 25%, and the duty on weak beers (below 2.8%) cut by 50%.

The excise duty changes in The 2011 Budget were to tackle problem drinking by encouraging industry to produce, and drinkers to consume, lower strength beer. HMRC believe that there would be some unstated long term health benefits as a result of the change.

The Scottish Government and pressure groups have proposed a minimum price system, which might make a pint of beer at least £1.25 and a bottle of wine £5. This could affect low-cost retailers and some supermarkets but few pubs. Opponents of this measure imply that unintended consequences might be smuggling or the production of counterfeit drinks, and the loss of revenue for the UK government.. Consumers can still travel to France, load up a van or car with as much alcohol as they want.

Some US states have a legal drinking age in of 21. A higher minimum age, might make it easier for pubs to police under-age Yet Alcohol Concern, a pressure group, agrees but says it would be politically impossible to raise the drinking age. One thing to bear in mind is that laws need to be enforced to make them effective and to achieve the goal of lowering the consumption of demerit goods. Few off-licences and pub licensees appear to prosecuted for selling to under 18s.

Are the problem drinkers the under 25s drinking lager, beer, wines and spirits to excess at weekends, or are they older, sitting at home drinking heavily.

In parts of Canada, and Sweden, drinkers only buy alcohol from state-owned shops. This may prevent impulse buys during a visit to a supermarket. But this might be a radical measure too far to gain support from free market Conservative MPs in The UK Coalition Government.

Politicians wanted encourage the drinks industry to support the Drink Aware Campaign, but were aware that this can lead to lower sales and profits for the drinks manufacturers. There was a potential conflict of interest, and some might wonder if the firms would really back it. A voluntary code of practice might be seen as a the lesser of two evils, as some medical pressure groups and politicians have introduced outright bans on tobacco advertising, and advocate a similar prohibition for alcoholic drinks.

Others are content to see government intervention on labelling drinks bottles, all now carry health warnings and state how many units of alcohol they contain, but as The House of Commons Select Committee observed in December 2011, “the pharmacological properties of alcohol…include loss of inhibitions in the short term and dependence in the long term,  make it impractical to rely on a ‘nudge’ framework of ‘rational man making informed decisions’ about drinking alcohol to effect behaviour change.”

The House of Commons Select Committee questioned the effectiveness of existing Government Information on Alcohol, and suggested that campaigns focused on the short term acute risks associated with individual episodes of heavy drinking and (ii) the longer term chronic risks associated with regular drinking. (Do you want to end up like Father Jack Hackett?)

The MPs also wanted to highlight situations where it is not appropriate to drink at all, for example while operating machinery, and perhaps change the focus of Government Information Campaigns.

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10 Solutions to Binge Drinking

February 21st, 2012 at 5:08 pm by Ben White

Last week David Cameron called binge drinking a “scandal” and referred to the negative externalities that are incurred by 3rd parties – in this case the NHS, to the tune of £2.7bn a year. He pledged to introduce drunk tanks whilst there are plans for a minimum price for alcohol.

The BBC website today has an excellent article that would be an excellent starting point for a discussion on the ways that the government might intervene to correct the market failure arising from the negative externalities associated with binge drinking. The 10 ‘radical solutions’ mentioned in the article are:

1. Subtly make drinks weaker
2. Enforce a minimum price for alcohol
3. Get people back into pubs
4. Raise the legal drinking age
5. Nationalise off-licenses
6. Discourage rounds
7. Ban alcohol marketing
8. Target middle class professionals
9. Not in front of the children
10. Stop exaggerating the problem

This would be an excellent opportunity for students to apply these ideas to the problem of binge drinking and practice their analytical and evaluation skills. Whilst reading the supporting paragraphs in the article for each suggestion you may wish to consider the following:

a) Using economic terminology and diagram analysis, how would each of these options reduce the market failure associated with binge drinking. How might each option affect private costs and the amount of quantity demand / quantity supplied of alcohol?

b) How effective would each option be? Can you spot any problems with each method? Would each option achieve the desired outcome?

A good way to approach the evaluation of each option might consider the WEESTEPS approach to evaluation highlighted in Jim’s blog

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Unit 2: Japan’s current account defecit

February 20th, 2012 at 7:49 pm by Blogger Bryn

…….as got worse says the BBC Aljazeera

a) Using the “evaluation ” criteria we have gone through, comment on how much of a problem this deficit is for Japan

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Teaching Opportunity – Economics at Oundle School

February 19th, 2012 at 11:23 pm by Jim Riley

Exclusive news of a temporary teaching opportunity to work alongside the superb Econ team at Oundle…

An excellent opportunity to join the economics team at Oundle School, with Mo Tanweer (Head of Department and tutor2u presenter/blogger) and Andrew Ireson (tutor2u presenter). Details below.


-  For September 2012 we are looking for an enthusiastic graduate teacher of Economics who has a real passion for the subject to become part of a friendly team, to provide maternity cover for 7 months – September to March.

-  Currently in a department of four, Economics is a popular and growing subject with approximately 110 pupils across the Sixth Form opting for the subject.

-  We offer the choice to pupils to pursue either the Edexcel A-level syllabus or the Pre-U qualification.

-  In 2011, 80% of candidates gained an A* or A grade at A2 level.

-  There is a healthy level of extra-curricular economics activities, with active Junior and Senior Economics Societies which allow the pupils to experience the subject well beyond the confines of the curriculum.

-  The successful applicant will be innovative, competent in the use of ICT, and willing to embrace the use of technology to aid learning. The successful candidate will have a real enthusiasm for, and interest in, the subject which will inform their teaching.

-  Oundle School has its own salary scale.

-  Accommodation may be available.

-  Please contact Mo Tanweer at if you require any further information about the vacancy.

-  You can visit the School’s website at to learn more about the school.

-  Closing date: 1st March 2012.

-  To apply for this vacancy, please complete the application form here: and send your CV and letter of application to: Mrs Tracy Heath – PA to the Deputy Head; Oundle School, Brereton Rooms, Church Street; Oundle, Peterborough PE8 4EE

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Pinterest: Board on Developments in the EU Economy

February 19th, 2012 at 5:00 pm by Geoff Riley

Here is a new macroeconomic board drawing together news flow on key developments in the European Union economy as the continent struggles to overcome the financial, political, economic and social crisis: Pinterest European Economy Board

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Unit 2 and Unit 4 Macro: The Truth About Long-Term Unemployment

February 19th, 2012 at 1:40 pm by Ben Christopher

Here’s 10 examples of people in the US who once found their skills in great demand but for various reasons once the bubble burst they have found it impossible to find work again and so join the increasing ranks of the long term unemployed.

It’s useful for students to understand that it is not just factory workers who are losing their jobs in droves and the social problems that arise the longer people remain out of work afflict everyone regardless of qualifications and experience. One lady, who suffers from panic attacks, talks about how she used to have to turn down jobs, “When things were good, she worked at some well-known firms in New York’s Financial District, including Lehman Brothers, yet no one will hire her now because she isn’t as young as the new college graduates.”

I often use the Tees Street Isn’t Working series from the 80s recession (part one below) to illustrate the effects of long term unemployment and also Geoff’’s more recent post on this topic with video resources found here.

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Unit 3 Micro: Inside the iPhone and Intellectual Property

February 19th, 2012 at 12:32 am by Geoff Riley

This is a remarkable video featuring Geoff McCormick, director of UK design firm The Alloy that looks inside an iPhone at the component parts. Each and every iPhone contains thousands of patented components, ideas, designs and processes. Fantastic when teaching about the economics of intellectual property and the patent wars dominating the courts.


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Unit 2: Is a high gdp per capita a good indicator of the sol in a country?

February 18th, 2012 at 12:42 pm by Blogger Bryn

Not according to this BBC Panorama video

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Pinterest: Board on Developments in the UK Economy

February 18th, 2012 at 10:00 am by Geoff Riley

I am putting together a new Pinterest board on developments in the UK economy – it can be found here If any teaching colleague would like to collaborate and help maintain and grow the board please let me know.

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Unit 3 Economics: Cooperation and Competition

February 17th, 2012 at 4:56 pm by Geoff Riley

Paul Ormerod blogs here about the growing academic interest in cooperation between businesses and within our economic system. Our discipline will move towards embracing cooperative strategies between agents in markets because often it provides a way to reduce the fragility of businesses and economic systems in an age of systemic shocks and threats. Paul links to another really interesting blog by Ed Mayo.

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Unit 1 Economics: Panorama – Poor America

February 17th, 2012 at 3:31 pm by Glyn Manton

For those of you who missed this week’s panorama “Poor America” it is well worth 30 minutes of your time.  Students often assume that a high GDP per capita always leads to the good life for all- this programme highlights inequality well.

Video clip: Poor America: ‘Some kids are making ketchup soup’

The Panorama programme on America’s poor is available to view for the next 12 months – click here

The programme fits in well with both macro and micro – There is also an excellent part looking at the effects of hunger on student, which could be used for business as an example of Maslow.

I plan to get students to first find the following from the CIA web site

There are some fantastic statistics given in the programme which students can spend some time with; such as the cost of a hernia operation in the US- Students may want to look at the cost of a similar operation in the UK (The best source I could find was suggesting a maximum cost of £380)

I am glad that I remembered to record it!

Real Gross National Income per capita in the United States

Data from Timetric.

To view this graph, please install Adobe Flash Player.

World Bank from Timetric

Per capita incomes and unemployment in the USA

Data from Timetric.

To view this graph, please install Adobe Flash Player.

World Bank from Timetric



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Unit 2 Macro: The Dash for Gas in Mozambique

February 17th, 2012 at 2:54 pm by Geoff Riley

In the last twelve months two huge discoveries of natural gas have been made in the East African country of Mozambique. The latest – a deepwater discovery – is said to hold over 210 billion cubic metres of natural gas and investment in exploiting the field could be the major cataylst for a rapid phase of growth and development for one of the world’s poorest countries. The country has large untapped oil, coal and titanium reserves in addition to the gas. According to the UK Trade and Investment body, within 15 years Mozambique could be Africa’s second largest coal producer (after South Africa) and one of the largest coal exporters in the world.

Can it benefit in a sustainable way from exporting these resources or will they prove to be a curse on development?

For many years Mozambique has been afflicted by a brutal civil war which ended in 1992 and then a series of natural disasters including floods in 2001 and 2001 which destroyed much of its infrastructure.Floods were replaced by a calamitous drought in 2002 but more recently the economy has achieved strong growth and progress in lifting people out of absolute poverty. That said, 50% of Mozambicans living on less than $1 a day, foreign aid accounts for nearly half of government spending and there remain severe doubts about whether the dividends of an export-boom in natural resources will feed through the the majority of the population.

The Mozambique government has a 10% stake in the newly-discovered gas fields, it sold a licence to the Italian company Eni to explore for new gas reserves and Eni has committed to building a multibillion-dollar liquefied natural gas terminal in the country as a distribution platform to export mainly to fast-growing Asian economies.

Other transnational companies are investing in Mozambique. Vale, a Brazilian multinational is spending over $3 billion to rebuild and extend the 425 mile Nacala railway and connect it to a deep water port so that Mozambiquan coal can be exported.

Putting the infrastructure in place will take several years and gas production on a huge scale may not start before 2016. Although new industries brings risks as well as opportunities, the potential for a step change in development in the country is enormous.

Progress in raising per capita incomes

Data from Timetric.

To view this graph, please install Adobe Flash Player.

World Bank from Timetric

Exports as a share of GDP and debt interest payments as a percentage of export values

Data from Timetric.

To view this graph, please install Adobe Flash Player.

World Bank from Timetric

Video Resources: Doubts over equality in Mozambique’s coal boom


Riots over food price hikes in Mozambique


Poverty at $2 a day (PPP)

Data from Timetric.

To view this graph, please install Adobe Flash Player.

World Bank from Timetric



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2012 RES Essay Competition: Clarification on Question 6

February 17th, 2012 at 2:39 pm by Geoff Riley

Question six in this year’s competition is likely to prove highly popular. “‘Is austerity the best way out of the debt crisis?”. Just to clarify for students already engaged in research for this question, the answer does not have to be specifically related to the UK but it would be fine to focus on the UK. The debt crisis extends to many parts of the world economy and students are free to adopt any approach they choose. The judges will always credit an interesting and relevant approach to the question drawing on debt issues facing one or more countries.

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A return to Glass-Steagall to prevent another crash? A lesson from economic history.

February 17th, 2012 at 9:48 am by Penny Brooks

At the World Traders’ Tacitus lecture last night, Terry Smith proposed a return to the provisions of the Glass-Steagall Act in order to reform the banking sector. The title of his lecture was ‘Is Occupy right?’, and while he clearly didn’t go along with some of the propositions of the Occupy movement, such as the imposition of a financial transaction tax, he did say that they have a serious point to make about the financial system.

The Glass-Steagall Act was passed in the US in 1933 as a response to the 1929 Stock Market crash, the failure nationwide of commercial banking, and in midst of the Great Depression. At the time, “improper banking activity”, or what was considered too much risky commercial bank involvement in stock market investment, was deemed to be the main culprit of the financial crash. The act therefore set up a firewall between commercial banking and investment activities, with controls imposed on both. Does this sound familiar? Take a look at the proposals of the Vickers Commission in the UK and the Volcker rule in the US, and you will find that ironically regulators are looking at bringing in very similar controls now, in order to prevent another crash like that of 2008.

These re-imposed controls are needed because Glass-Steagall was repealed in 1999 during Bill Clinton’s presidency. For more than six decades it had provided a framework that had governed the functions and reach of the nation’s largest banks. The Act was repealed, as a move to liberate financial markets. It was called the ‘Financial Modernisation Act’, was passed by 90 votes to 8 in the US Senate and was hailed as the most important breakthrough in the worlds of finance and politics in decades. However it caused great concern among some economists about the implications of creating banking institutions which were too big to fail.

The Huffington Post reports some of these concerns. Edward Kane, a finance professor at Boston College warned against this move in 1999 and ten years later said “It made it possible for the very big firms to take risks in a way that would require a great deal of investment risk and time for regulatory agencies. You had people who could basically outplay the regulators.” Jeffrey Garten, who at the time had left his post as Undersecretary of Commerce for International Trade at the Clinton White House, wrote in the New York Times that if these new “megabanks” were to falter, “they could take down the entire global financial system with them.”

Prescient words, which suggest that removals of regulation created the opportunity for sub-prime lending and the intricate web of credit swaps and other obscure financial instruments which led to the crash and credit crunch. Mr Smith suggested that Big Bang in the UK in 1986, which scrapped fixed commissions on Stock Market deals and made London a more competitive location for trading, created conflicts of interest between brokers and clients, which contributed to the same effect. He also referred to the bonus culture, which doesn’t evenly share the downside risk of bad deals, and to the fee structure in hedge funds which doesn’t allow a fair sharing of the upside risk but passes on to the client all of the trading fees, but only a proportion of the profit.

His conclusion was that yes, Occupy is right to say that the markets need harsh reform. But his view was that, within new regulation, they need to be more free – with the freedom to fail as a result of Creative Destruction in markets, without the need to be bailed out because they are too big and too complex.

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LSE talks coming up – Resuscitating the Single Market and Banks vs the Economy

February 17th, 2012 at 8:48 am by Penny Brooks

Here is a link to information about two talks which have just been added to the LSE’s programme. The first is on Wednesday 29th February at 5pm; the Czech Prime Minister will be talking about potential solutions for Europe to restore growth and create jobs, and the untapped potential of the Single Market. The second is on Tuesday 3rd April at 6.30; Newsnight’s Paul Mason will be interviewing the ‘radical economist’ Professor Steve Keen who believes that “If we keep the parasitic banking sector alive, the economy dies”.

Both sound like excellent extension opportunities for keen students. They are free and open to all but you do need to apply for tickets; follow links from the LSE link above to apply for them.  For those who are unable to get to the LSE to attend them, they are likely to be available as podcasts later; again follow the link above for details.

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Economics Revision Workshops – Session Topics

February 16th, 2012 at 9:16 pm by Geoff Riley

The workshop booklets and supporting materials for the intensive one-day revision workshops are now on the way to the printers!  We have been really busy this week finalising our programme of revision exercises and updates for both the AS Economics and A2 Economics workshops, which for Spring 2012 have a macroeconomics focus.

The session titles are outlined below.  Bookings can still be made using this link

Please note that we permit Year 13 students to attend on their own (or in small groups). 

AS Economics

Session 1: Recession and Recovery – Understanding the Economic Cycle
Session 2: Inflation and Unemployment- Conflicting Objectives?
Session 3: Monetary Policy and Economic Performance
Session 4: Fiscal Policy and Supply-side Policies
Session 5: Exam Technique in AS macro

A2 Economics

Session 1: Prospects for the UK Economy
Session 2: Monetary and Fiscal Policy Economics
Session 3: Trade Imbalances and Exchange Rate Economics
Session 4: The Euro Zone Crisis
Session 5: Session Focusing on Exam Technique

The latest availability for these workshops can be found here;

Please note that we normally receive a significant number of new bookings in the days immediately after half-term.  So please contact us as soon as possible to arrange your places.

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Unit 2 Macro: Is the UK Economy Turning a Corner?

February 15th, 2012 at 11:49 am by Geoff Riley

Joe Lynam reports for BBC Newsnight on prospects for the UK economy – an excellent short feature on attempts to grow the economy and achieve a re-balancing towards exports and investment. See also BBC news: Bank of England says UK economy ‘to zigzag’ this year

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Unit 4 Macro: King on the UK Economy

February 15th, 2012 at 11:34 am by Geoff Riley

Here are some notes from watching and listening to the Bank of England Inflation Report press conference. As always there was much for students of macroeconomics especially those keen to pick up some of the key thoughts of policy makers as we strive to achieve a sustained recovery.

King said that recovery in the UK will eventually be driven by rising real incomes and a pick-up in capital investment but the biggest risk remains economic and financial instability in the Euro Zone where a number of countries continue to suffer from a structural lack of competitiveness, high government debt and financing difficulties.

Questioned on a possible Greek default, King remarked that both the BoE and the Govt have considered a range of possible outcomes and made contingency plans. Many large UK banks are exposed to the real economy of the fragile Euro Zone economy rather than to Euro Zone sovereign debt.

“We are steering a course through choppy waters but we are aware of the fact that people are facing painful times – the consequences of the adjustments made inevitable by the financial crisis and the need to rebalance the economy.”

“We all want to return to a world of steady growth, inflation close to target and normal interest rates will take time. There is a limit to what monetary policy can achieve when real economic adjustments need to be made.”

Weak money and credit growth


There has been a noticeable and significant fall in the growth of money and credit – this is inevitable in a “balance sheet” recession resulting from a financial crisis where lenders are engaged in de-leveraging (i.e. cutting their loan books and tightening the supply of new loans to personal and business customers)

One of the main objectives of asset purchases (QE) by the Bank of England is to inject more money into the economy. But will fresh credit get to small businesses in the economy? Credit conditions if anything are still tightening for small businesses. Net lending to small businesses has fallen quarter by quarter in 2011.

In 2012, big businesses can borrow money more cheaply than our biggest banks- they are much less affected by the de-leveraging occurring in the banking system. Banks are still trying to strengthen their capital position in order than they can borrow more cheaply from the capital markets. In the long-term this will help small businesses but provides a problem in the near-term. The national loan guarantee scheme is a way forward, how quickly can it be set up?

The Bank of England will not buy assets other than gilts in QE programme as that would be a public sector subsidy, which is matter for the Government not the central bank

Diminishing returns to QE programme?

Any monetary policy easing can exhibit a limit to how far it can go. Monetary policy at the moment is trying to nudge people to bring forward their spending e.g. from next year to this year. But confidence is low and an impaired banking system constrains the effectiveness of monetary policy

The position of savers

Ultra-low returns on savings deposits and the growing impact of QE on pension scheme deficits and annuities beg the question about whether it is worth saving at the moment? The evidence is that household saving in the UK has gone up despite negative real returns on deposits, this is a sign of wider economic weakness and desire to repay debt

A return to normalised interest rates of say 4 or 5% might on the surface provide some relief to millions of hard-pressed savers, but a quick return to normal rates would also cause asset prices to fall, a sharp appreciation in the exchange rate and an almost guaranteed recession in which everyone is worse off

King reflected that all groups in society are suffering from the consequences of the financial crisis – an example of the externalities of financial collapse. He believes that the UK has put in place conditions to make the necessary real economic adjustments

1. Credible fiscal plan to bring down the budget deficit
2. 25% fall in exchange rate without a rise in wage inflation allowing the real exchange rate to fall
3. Historically large easing of monetary policy including QE

He reminded those there not to underestimate the impact of the automatic stabilisers – an important part of fiscal policy – they are more potent in the UK than in other nations. And looking to medium-term adjustment and re-balancing of the economy, it is particularly valuable to bring in supply-side reforms to raise productivity – it will raise higher future incomes which will help address the debt overhang. Which supply-side reforms will best support the growth agenda?

The Bank of England says UK inflation will reach 2% target by end of 2012 before falling as low as 1.5% in 2013. UK policy interest rates look to be on hold for the foreseeable future. We haven’t seen a rate change since the spring of 2009. What probability that interest rates will remain at 0.5% or at least 1% or lower when we head into 2014?

See also BBC news: Bank of England says UK economy ‘to zigzag’ this year


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Valentine’s Day Special – how an economist says “I love you”

February 14th, 2012 at 3:46 am by Ben Cahill

How better to say “I love you” than with an economic model? There is something for every economist here with PPC’s, diminishing (or lack thereof) returns, game theory, natural monopoly, elasticity and more.

I have put my favourite two below, and the rest of them can be seen at this website. Happy Valentine’s day!

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2012 RES Economics Essay Competition is Underway!

February 13th, 2012 at 8:07 pm by Geoff Riley

The 2012 essay competition for sixth form economists run by the Royal Economic Society is well underway. This year we have six essay titles that all encourage independent research and which provide an opportunity for students to showcase their understanding of economics, take evidence and come to reasoned conclusions. Posters have been sent out to over two thousand schools and colleges and some entries have already arrived!

RES Competition 2012

We are really keen this year to broaden the spread of economics departments that motivate their students to enter the competition. In the next few weeks we will provide some support on individual questions highlighting some of the recently-published research and signposting some recommended links to high quality resources on the web.

These resources will be posted here – on the dedicated RES Essay Competition 2012 Channel on the Economics Blog

Our experience is that students love putting the economics they are taught into context and the RES competition is a terrific platform for developing skills of independent learning and communicating ideas and passion for the subject.

The final deadline for online entries is the last day of April so there is plenty of time to make a start and produce an essay that the judges will enjoy reading.

Here is a reminder of the titles for 2012:

1. Africa is well-placed to achieve rapid and sustainable development in the decade ahead. Do you agree?

2. Over a million young people in the UK are unemployed. What should be done to address the problem?

3. A breakup of the euro provides the best hope for a durable recovery of the European economy. Discuss

4. To what extent can we use ideas drawn from behavioural economics to help address specific social and economic problems?

5. Manufacturing’s share of the UK economy shrank from 19% in 1998 to 12% by 2007. Does this matter and, if so, how could policy revitalise British manufacturing?

6. Is there a better way out of the debt crisis than austerity?

The judging panel for the final shortlisted entries will be Professor Richard Blundell (RES), Charles Bean (Bank of England) and Stephanie Flanders (BBC)

The online entry form for the competition can be accessed here

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Whitney Houston Dead – Demand for Music

February 13th, 2012 at 7:05 pm by Roberta Keys

A nice little clip to use when highlighting the concept of factors affecting demand. Get the mini white boards out to start drawing shifts and movements.  Can use similar clips with Michael Jackson and Amy Winehouse.

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Economics at University: Boosting your Application

February 13th, 2012 at 10:07 am by Geoff Riley

For the majority of university admissions tutors, their main concern is your intellectual / academic potential, commitment, curiosity and passion for your chosen subject disciplines compared with other students applying for a course. One admissions tutor said: “we look for intellectual curiosity and a wide-ranging view of the subject, i.e. not just focused on the UK.” Good advice, show awareness of the big changes happening in the world!

Focusing your UCAS statement

Your UCAS personal statement should be at least 80% about commitment to a subject and must demonstrate evidence of having gone well beyond the syllabus, with a commitment to independent study.

Enrichment and Extension Activities in your Subjects

Here is some advice on improving the quality of your application – assuming that you have the grades

* Independent enrichment reading

* Try to read articles from a quality newspaper every day. This will give you breadth of awareness and it will undoubtedly improve your written work in your final papers. Your UCAS form is stronger if you include evidence of diverse reading with personal thoughts and reflections on how this reading has enriched your understanding of a subject.

* Develop your own personal learning network using blogs and twitter – for example by following and engaging in discussions with subject experts
* Websites such as Project Syndicate are superb
* Watch TED talks and talks from the Royal Society of Arts and the London School of Economics
* Read up on critical thinking / thinking skills and practice past papers where universities set critical thinkin entrance papers e.g. Oxford for PPE and Economics and Management

Get involved in school societies and make contact with visiting speakers – follow them on Twitter or draw on some of their most recent articles and books – this is a great way to immerse yourself in a subject

Enter essay competitions such as the one organized by the Royal Economic Society RES Essay competition for 2012details here

Get involved with summer schools that give you fresh insights into subjects you want to take further. Check to see which UK and US universities are organizing summer schools and apply early!

Challenge the conventional wisdom in the classroom – try to question what is being taught, take issue with your teachers and explore different arguments – don’t take a back seat, don’t be a passive student – it will help you in interviews and later on in university seminars and improve your self-confidence

Explore areas of the subject beyond the syllabus such as game theory and behavioural economics

Explore opportunities for work experiences with different organizations and people – the more diverse the experience – the better. Working for a charity, with a local newspaper or new business start-up is more valuable than a week sat with boring people in an investment banking office or a firm of accountants!

Travel and seek to understand more about the social – economic – political and historical background of the countries that you are visiting. Read up about them, perhaps contributing to school-based magazines or other student publications. Blog about your experiences and your views.

Attend outside lectures and other events – look for lectures made available to the general public at your local universities or academic organizations: In London for example:

LSE Public Lectures

RSA Events

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Economics at University: Conditional Offers

February 13th, 2012 at 9:56 am by Geoff Riley

Here is my latest updated version of conditional offers in Economics for a wide range of UK universities. I am grateful to colleagues from many schools who have helped with recent news of conditional grade offers. I am happy to revise as and when new information becomes available

General Background

Economics can be studied either as a single honours subject or in combination with other subjects (these are known as joint honours courses).  Check carefully to see what options are available. Thousands of students each year combine Economics with Maths, History, Geography, Law, Philosophy, a Modern Language and also Politics, Engineering and Management.

Course requirements vary by institution and these can change from year to year – you are advised to contact the university department concerned for precise information before applying. Further details are likely to be given out at the official university / faculty open days

For many of the top courses, a top grade in Further Maths is recommended to give your application a stronger chance.  For single honours Economics it is rare to apply without an A grade in single Maths.

Conditional Offers and Recent Advice (updated: February 2012)

For competitive courses in 2012 – single Honours economics will require at least one A*at A2 – probably Maths. You are strongly advised to take Further Maths for Cambridge, UCL, Warwick, LSE and Oxford Econ & Management

Bath: Typical offer: A2: A*AA, Mathematics and Economics A2 is required at grade A or above; AAA offer Business Administration (Sandwich)

Birmingham: Typical offer: A2: AAA, GCSE Mathematics grade A if not offered at AS or A2 level; AAB for Business Management

Bristol: Typical offer A2: A*AA including AAAA in C1, C2, C3 and C4. For Economics and Management: AAA including AAAA in C1, C2, C3 and C4. For Econ and Finance A*AA offers made for 2012. Likewise – Economics with Study in Continental Europe (4 years) A*AA. Economics and Politics AAA including A in C3 and C4 Maths

Bristol is more likely to make you an offer if you are studying Further Mathematics within the context of four recognized A-level subjects. Some pure mathematics (mainly calculus) is needed for econ theory which is compulsory in the first year (1/6th of the first year course). Most of the mathematics will not be harder than you would find in Further Maths A-level

City University: Typical A2 offer:  Economics: AAB

A-level Maths is essential for those applying for entry. The vast majority of offers for economics at Cambridge require A2 grades of A*AA but for 2012, St John’s College made offer in Economics of A*A*A (in Maths, Further Maths and Economics. Clare College made offer of A*AA (with A* in Maths or Economics)

Each college adopts a different entry procedure: all have interviews (one 25-30 minute subject specific, one 15 minute general), some have tests: TSA, Maths or a comprehension/ submitted work.

Cambridge require you to submit AS module scores and as a rule of thumb you should be scoring at lest 93% in each of your AS module units. In December 2011, at Selwyn College 8 successful applicants (out of 89) averaged 97.1% across their top 3 AS subjects

Cambridge is looking for students with the intellectual curiosity to investigate contemporary and historical patterns of economic behaviour, and a wide–ranging interest in the evolution of the global economy. You should also have good quantitative skills and an interest in applying mathematical and statistical tools to the analysis of economic issues. Their Tripos system is flexible – e.g. you might study Law or Management Studies in 3rd year

Typical offer A2: A*AA. Economics BA (Honours) and for Business Economics;  For Combined Social Sciences (Econ + Geography) typical offer is A*AA

You will need an A* in Maths for Economics but don’t bother applying for PPE if you are doing Double Maths as they think this shows too narrow a focus.  Durham’s PPE admissions advisor wants students to be taking four A2 subjects. If you aren’t taking four subjects to A2, consider applying for the Combined Social Sciences degree which has more places and is fine with 3 A2 subjects. You can study the same modules as the PPE

Edinburgh: Typical A2 offer: AAB: Single Honours Economics: Maths: Maths AS or A-level desirable.

Exeter: Typical A2 offer: Economics A*AA: Selectors prefer applicants to be offering grade A at GCE A level Mathematics. They also prefer to see subject combinations which demonstrate both analytical and writing abilities. Economics and Politics offer: AAB; Business and Management offer:  AAA

Leeds: Typical A2 offer is AAA for most Economics options including Management. You must have A/A* in GCSE Maths; AAB for Economics and Maths

London School of Economics (LSE): Further Maths is a must for Economics L100, but it is not necessary to have studied even single Maths to apply for Economics and Government. LSE put a HUGE emphasis on the UCAS statement. They make 2.5 offers for every place they actually have

Manchester: Typical A2: Economics AAB, Development and Economics AAB; Economics and Finance AAB

Newcastle: Typical A2 offer: AAB excluding General Studies. GCSE Maths grade A and English grade B

For the BA and BSC Honours Economics: Typical A2 offer is A*AA and for those taking four full A2 subjects (not including general studies) A*ABB. An A in Maths at GCSE is required.
For Economics and Econometrics an A in A2 Maths or equivalent is required
Economics with Hispanic Studies (4 years) A*AA; Management Studies: AAA

Oxford (Economics and Management):
Typical A level offer: AAA. Candidates are required to have Mathematics to A-level. For Oxford, candidates’ work experience and “extended projects” almost irrelevant – they read the Personal Statement excruciatingly carefully
TSA exam is crucially important for Oxford E&M and also for PPE (read below):
They look at your public exam grades and your TSA score and your school reference, and by using “regression analysis” they produce an “algorithm”, from which they give each candidate a score. They then rank all the candidates. The TSA is the major component here
When final decisions are being made about marginal candidates, it is all about the interviews and the personal statement

Oxford (PPE): Typical A2 offer: AAA (Maths and History are helpful but not essential)

Queen Mary London: Typical A2 offer: Economics AAA

Royal Holloway: Typical A2 offer: Economics: AAB; Economics with Politics: ABB

Southampton: Typical A2 offer: 3 A level subjects: AAA including A level Mathematics; 4 A level subjects: AABB including A level Mathematics at grade B or above

St Andrew’s: Typical A2 offer for single honours Economics is AAA

UCL: Typical A2 offer for Economics: A*AA in the first sitting, to include grade A* in Mathematics (and grade A in Economics if taking this subject), plus a pass in a further subject at AS level.

Warwick: Typical A2 offer:  A*AAB – For applications to ‘L100 Economics’ or ‘L112 Economics and Industrial Organization’ you must obtain a minimum grade A in A2 level Maths. A*AAa for those taking 3 A2 subjects

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Unit 1: Negative externalities from gold mining in Nigeria

February 12th, 2012 at 8:00 pm by Blogger Bryn

From the BBC

a) State the negative externality and explain why it is a negative externality
b) What actions could the government take to reduce the negative externalities
c) How successful are such policies likely to be?

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Unit 2: Is quantitative easing working?

February 12th, 2012 at 7:50 pm by Blogger Bryn

An interesting argument from Ch4!

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Unit 1: Public goods videos

February 12th, 2012 at 7:45 pm by Blogger Bryn

Thanks to tutor2u for these links to video clips illustrating public goods

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Economics Explained, by Evan

February 12th, 2012 at 7:41 am by Penny Brooks

Here is a great little article on the Today programme’s website by Evan Davis, looking at the relative merits of Plan A – Austerity – vs Plan B – government spending. He takes the arguments of Jonathan Portes, director of the National Institute of Economic and Social Research, who believes that what’s required at the moment is a short term, temporary fiscal stimulus to boost output and jobs and of Roger Bootle, managing director of Capital Economics, who thinks it would be dangerous for the government to divert from its Plan A of spending cuts.

What we find is that they both agree that cutting won’t create growth. When looking at spending, one of the problems which is specific to the UK economy is that extra spending is likely to become a greater leakage from the circular flow as it will be spend in imports. So the multiplier effect from that spending is diminished. And again, they both agree on that.

(Incidentally, they also both suggest that, as the US is less dependent on imports than the UK, therefore the multiplier effect of government spending in the US is greater as more of the injection will be retained in the economy. Interesting to consider this against this report that the US trade deficit has just worsened due to higher imports….)

Where they appear to differ most is in considering the importance of the reaction of The Markets. For Roger Bootle,this is the major cause of risk and so retaining credibility by sticking to Plan A through thick and thin is the only option. Jonathan Portes agrees that this is an issue, but believes that the extra unemployment caused by the austerity is worse for the economy both in the short term and the long term..

So the conclusion is that it depends on what kind of risk you would prefer to take. Either way, its not very pleasant.

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Evaluating the effect of Quantitative Easing – A Case Against?

February 12th, 2012 at 7:35 am by Jim Riley

The effect of QE on savers is examined here in this excellent video and studio discussion led by Faisal Islam, the Economics Correspondent at Channel 4 news.  Those households that don’t borrow are less interested in sustained low interest rates.  One significant effect of QE and the decision to keep the base rate at 0.5% is to effectively eliminate the returns to saving.  Is the policy worthwhile?

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Unit 1 Micro: Public Goods News Clips

February 11th, 2012 at 7:04 pm by Geoff Riley

A selection of recent news clips linked to the concept of public goods

Flood defence

Lighthouse protection

Speed cameras

Private prisons

Fireworks in Oban

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The Story of ‘Adam Sugar’ (aka Aggregate Supply)

February 10th, 2012 at 4:05 pm by Ian Pryer

This is a great activity my HoD Luke McIlvenna did today with our mutual Lower Sixth Economics Class, which helped them to develop and demonstrate their understanding of aggregate supply.

The students were asked to write a story about aggregate supply in which they had to imagine it as a person or thing with characteristics or even a personality.  They needed to think about being quiet and unoccupied, becoming busier, and then becoming super stressed as they reached full capacity.

Some of the work produced by students was really great, not to mention creative.  Here are two examples:


The Story of Adam Sugar (link to file via our department blog)

I’m looking forward to being able to build on this knowledge as we cover economic growth, unemployment and demand pull inflation.


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Unit 2 Macro: China’s Trade Engine is Spluttering

February 10th, 2012 at 3:57 pm by Geoff Riley

New data suggests that the rapid growth of exports from China is once again slowing down. This Reuters business news video (2 minutes) provides some useful background information on the recent downturn in export and import volumes and mentions that rising imports and a shrinking trade surplus may help the Chinese to rebalance their economy and perhaps provide a demand stimulus for exporters from struggling European countries.

That said the continued weakness of many EU countries will make it difficult for Chinese exporters to maintain sales and employment. During the global recession of 2008-09 millions of workers in Chinese manufacturing industry lost their jobs prompting many to return to their rural homelands in search of work and income.

* Which industries in China are likely to be most affected by a reduction in the growth of exports?

News video


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Unit 2: How does quantitative easing work?

February 10th, 2012 at 10:19 am by Blogger Bryn

Fantastic video fro the BBC

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The Working Poor

February 10th, 2012 at 9:17 am by Mo Tanweer

Superb Newsnight last night that covers:
- the working poor
- the market failure of income inequality
- the abuse of monopsony power by supermarkets
- the government failure of the National Minimum Wage vs the Living Wage
- the burden on the tax payer of the working poor
Watch it here…

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Martin Wolf on Global Shocks

February 10th, 2012 at 9:13 am by Geoff Riley

Some notes from the recent BBC analysis programme on the global crisis presented by Martin Wolf in which spoke to a number of

* We are not yet close to the end of a single long-running crisis / trauma of excessive private and public sector debt

* Excessive debt is not the only danger – there are many systemic issues facing the world economy

* Imbalances in the world economy – trade imbalances persist, and deep imbalances in growth rates going forward that are helping to fast-forward changes in the balance of economic power in the world economy

* Combination of sovereign debt problem (generates weak confidence) but a banking sector that continues to de-leverage (cut their loan books) which hampers private sector growth. The developed world is battered and weak and vulnerable to further macro shocks. There is a generalised slowdown and no country is immune to it.

Policy mistakes

1/ Financial deregulation encouraged reckless and high-risk lending

2/ Belief that sovereign debt was risk-less – inevitably led to too much of it being issued

3/ European monetary union – created with 17 disparate countries and without appropriate fiscal disciplines being enforced – there was a decade of lax lending and spending and worsening competitiveness for many countries in the south.

Financialization – a long-term failure of the capitalist system

Ever-rising borrowing became the only way to finance rising consumption in a decade when real wages were falling – borrowing was the demand-engine but this engine has now badly mis-fired and new sources of growth need to be found.

Productivity gains did not find their way into higher real wages for many millions of people at or around median wages, growth looked strong on the surface but was accompanied by a trend rise in inequality and growing social unrest.

Fallacies of composition

i) All countries should save more – the paradox of thrift

ii) All countries should seek to export more – one country’s BoP surplus is another’s deficit

iii) All countries should seek to reduce their debt – the risk of another global downturn / slump

It is incredibly hard to deal with de-leveraging of the banking system once we have allowed excessive leverage to happen in the boom. De-leveraging constrains the growth of private sector demand – from small businesses who cannot get loans to home-owners finding it tough to get a mortgage. This de-leveraging can take many years to unwind.

Main tool now lies in the hands of developed-country central banks who still have scope for expanding their own balance sheets through quantitative easing as a way of tackling weak growth of money and credit.

Or can we persuade fast-growing emerging countries to provide a further impetus to global economic demand – a new engine of growth that might help lift debt-ridden rich nations to achieve firmer recovery and attack debt in ways other than yet more austerity?

The autonomous capacity of developing countries to grow has increased but will they be willing to provide sufficient help perhaps through the International Monetary Fund? Does the IMF itself need to be able to act as a bank in it’s own right by creating new money – effectively the creation of a new global central bank.












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Stephanie Flanders explains Quantitative Easing in 60 seconds

February 9th, 2012 at 10:22 pm by Jim Riley

This has to be amongst the best 60 seconds of Economics you’ll ever see on television.  The superb Stephanie Flanders takes a leaf out of the RSA playbook to explain the basic theory behind quantitative easing.  Wonderful!!


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econoMAX – latest edition now available

February 9th, 2012 at 12:27 pm by Jim Riley

The latest edition of econoMAX, our digital magazine for A Level Economics students and teachers, is now available to subscribers on the econoMAX website.  Details of the latest articles below.

School / college subscriptions to econoMAX remain at just £50 per year (for the 7th year running!) – your subscription allows whole-school access and distribution of econoMAX articles, including the entire archive dating back to 2004.

You can order your subscription to econoMAX here.

Difficulties on the High Street (Andy Reeve)

Barratts, Blacks, Burtons, Carpet Right, Comet, Currys, HMV, JJB Sports, Oddbins, Thorntons – These are all High Street names and all facing difficulties of varying degrees in 2011. The latest casualty of the continuing economic slowdown is the shoe retailer; Barratts. It entered into administration on 8th December 2011 and it cannot find a buyer. The most likely outcome will be that the administrators Deloitte will make 1610 employees of Barratts concession stores redundant and continue to try and sell on the remaining 173 stores to a potential buyer.

High Speed Rail in Britain: the economic case against HS2 (Tom White)

The improved West Coast Main Line was designed to allow many extra journeys and shave up to 30% off journey times between some of the country’s biggest cities. Although work on the upgrade was expected to cost around £2 billion, problems caused costs to balloon to £9 billion and the project was finished years overdue. Now the British government is raising the stakes by planning a new £32 billion high speed link from London to the north of England.

US Productivity – looking good! (Mark Johnston)

Job creation has been a major concern for the United States economy as it tries to avoid a double-dip recession. US President Barack Obama recently promised to implement new tax incentives for companies that create jobs within the domestic economy – rewarding those that bring jobs into the US and eliminating tax breaks for companies that move jobs overseas. Although the unemployment rate in the US fell to 8.5% in December 2011, the lowest since February 2009, it is the impressive productivity figures which have gone largely unnoticed.

Dental care – an imperfect market (Robert Nutter)

The vast majority of people do not like going to the dentist. Indeed 12% of us have a phobia about it. Visiting the dentist only has some attraction if we have a raging toothache and a dentist can relieve the pain. Currently about 60% of the adult population visit a dentist on a regular basis, but the demand for dental care has fallen in the recent economic climate suggesting that it is a normal good..

Credit – is it still too tight for a sustained recovery in the housing market? (Andy Reeve)

The publication of the Bank of England’s Credit Conditions Survey on 5th January 2012 suggests that the supply of credit for secured loans to individuals (mortgages) was broadly unchanged during the final quarter of 2011. Lenders expect there to be a small increase in the availability of credit during the first three months of 2012, although they point to poor forecasts for the economic performance of the economy as a negative factor on the level of credit that will be available to individuals.

Canada and Kyoto (Mark Johnston)

The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC), aimed at reducing global warming. The Protocol was initially adopted on 11 December 1997 in Kyoto and Canada was one of the proactive countries in its implementation. However, on 13th December 2011, Peter Kent, the environment minister, announced that Canada was withdrawing from the agreement becoming the first country to do so. So, why the reversal of the commitment to the cause of reducing CO2 emissions? Furthermore, will Canada be the first of many that take the same course of action?

Competition and contestability in the UK bus market (Tom White)

Economic theory suggests that competition will often lead to improved economic efficiency, with this logic supporting the moves made in the 1980s to deregulate much of the UK bus market. So it’s disappointing to hear that 25 years later, the chairman of the Competition Commission’s local bus market investigation group has announced that the “reality is that in too many areas of the country, competition has stagnated and the incumbent providers know that they face little in the way of serious challenge”.

What’s best for developing countries – aid or remittances? (Mark Johnston)

In the current economic climate of austerity and government cut backs there has been some debate as to whether the aid budget to help developing countries will be a victim. However, is aid the best policy to assist those countries? Some have suggested that remittances from immigrants living abroad are a more effective tool for assisting those countries that are of developing status.

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