No 280: USA and EU, Very Different Green Policies

 THE USA has just announced over $1 billion of government funding for tree planting schemes across the country. The money is part of Joe Biden's "Inflation Reduction Act", which has made hundreds of billions of dollars of funding and subsidies available for green uses.

https://www.theguardian.com/environment/2023/sep/14/tree-planting-us-climate-crisis

Meanwhile, in a similar move to those by Richi Sunak last week, the European Union has pushed back new stricter air pollution limits from 2030 to 2035, in what environmentalists have caused a "lifeline for dirty cars".

https://www.theguardian.com/environment/2023/sep/13/eu-air-pollution-limits-2035

What do you think: do you agree with the Biden administration that net zero should happen as quickly as possible (and that being first will have economic advantages), or with the UK and EU that some policies need to be delayed to avoid high costs, especially for consumers and households?

No 279: Increased Alcohol Prices in Scotland?

 SCOTLAND since 2018 has a price floor law for alcohol, which stipulates a minimum price a unit of alcohol can be sold for.

Now, some economists are calling for the minimum price to be raised. The policy has so far been mixed in its effectiveness, with some saying this was just due to the unfortunate impact of Covid lockdowns on alcohol consumption, others saying it proves the minimum price isn't working, and still others saying it does work, just needs to be higher.

Read this and then see what you think:

https://www.bbc.co.uk/news/uk-scotland-66865144.amp

No 278: UK Government Borrowing in August

 WAS "only" £11.6 billion, which was in fact lower than expected.

As you may know, when the government's spending is more than its tax revenue (i.e. so it needs to borrow money), this is called a "budget deficit".

More here:

https://www.bbc.co.uk/news/business-66872233

No 277: HS2 Even Shorter?

 MORE controversy over HS2 - the high speed rail link being built from London to Manchester. It is projected to cost at least £50billion, about £20 billion more than planned, and to to not be ready until 2035 - 5 years later than planned. (See https://www.theguardian.com/uk-news/2023/sep/24/how-much-has-been-spent-on-hs2-so-far-and-what-is-at-stake).

The central London link section has already been scrapped. Now the government is considering cancelling the section from Birmingham to Manchester, citing the high costs, the poor state of government finances, and the need to invest the money in other projects and/or tax cuts.

https://www.theguardian.com/uk-news/2023/sep/23/rishi-sunak-pushes-to-axe-northern-hs2-rail-line-ahead-of-tory-conference

Question for you: What would be the economic impacts of not building HS2 from Birmingham to Manchester? Would the benefits outweigh the costs?

No 276: Amazon In Legal Trouble

IN the USA, regulators have sued Amazon, alleging that the internet giant is illegally maintaining monopoly power.

The Federal Trade Commission (FTC) said Amazon uses "a set of interlocking anticompetitive and unfair strategies" to push up prices and stifle competition.

If the legal action is successful, Amazon may have to pay hundreds of million of dollars in fines. Jeff Bezos probably won't go to jail though!

Meanwhile, Google is also in a similar situation.

Read more here:

https://www.bbc.co.uk/news/business-66920137

No 275: Should Inheritance Tax Be Abolished

THE link below will take you to an interesting exchange of letters on the topic of UK inheritance tax - a tax that households pay on the value of the estate left behind when a family member dies. 

There are predictions that the Conservative Party will soon announce the abolition of the tax will be one of their manifesto policies for the election next year.

Many agree - thinking the tax is unfair since everything in a person's estate has already been taxed in their lifetime - but others point out that it is only the very rich (about 3.7% of the population) who are liable for the tax anyway, and many of these people employ tax accountants to help them avoid paying the tax at all.

What do you think?

https://www.theguardian.com/money/2023/sep/28/will-ditching-inheritance-tax-make-british-society-a-fairer-place

No 274: A Very Sad Day For The Uk

Environmentpolicyuturn

NO 273: UK Teacher Shortage

 ONLY half the required number of trainee secondary school teachers have been recruited for UK teacher training courses starting this academic year.

Read this article to find out why, and what may help in the future: https://www.theguardian.com/education/2023/sep/12/only-half-of-required-number-of-trainee-secondary-teachers-in-england-recruited

USE YOUR ECONOMIC KNOWLEDGE - what would be the economic impact on the UK economy of not having enough secondary school teachers?

No 272: Call for Tougher Ads About Alcohol

 WE all know that in the past the governments of many countries have produced hard hitting and even shocking advertisements on topics like cigarette smoking and wearing seatbelts.

Now, many health care campaigners are arguing for the same kind of ads to make people aware of the health problems caused by drinking alcohol and eating unhealthily. Read about what they are calling for here: https://www.theguardian.com/society/2023/sep/16/dire-need-for-labels-on-alcohol-and-ads-about-unhealthy-eating-to-cut-avoidable-cancers

What do you think - do you think such advertising would be successful?

No 271: The US Economy Has Recovered Well But People Don't Believe It

 During Covid, unemployment in the USA reached nearly 15%. Now it is less than 4%. Wages have been rising too. Inflation was high, but is now falling much faster than in the UK or EU.

Yet, many American people do not think their own economic situation has got better despite the statistics. This article tries to find out why: https://www.theguardian.com/business/2023/sep/16/us-economy-inflation-wages-salaries-recession

No 270: Populist Leaders Are Bad At Economics

 A good topic here for possible PPE students to look at.

This short article https://www.theguardian.com/commentisfree/2023/sep/17/populist-leaders-bad-for-economy-but-hard-habit-to-break features some academic research about the effect of Populist leaders:

once they get into office they tend to stay for twice as long as non-populists. They are annoyingly good at politics, but very bad at economics.... a populist leader hits a country’s GDP per capita and living standards by about 10% over 15 years

No 269: What younger people want?

 INTERESTING article here: https://www.theguardian.com/politics/2023/sep/17/rishi-sunak-tories-image-under-40s-younger-people-britain-net-zero which lists what the economic demands of "younger"people in the UK might be ("younger" = younger than people like me, older than you!).

It seems they have 5 areas of concern - 

(1) Economic stability.

(2) Housing and rent.

(3) Tuition fees and training.

(4) Childcare.

(5) Green policies.

Maybe the issues on this list are not so surprising, but it will be interesting to see what the different political parties say about them in the run up to next year's General Election.

No 268: A Global Carbon Tax?

FOR years, many environmenal economists (including me!) have argued that the best policy to reduce fossil fuel emissions is a carbon tax.

This kind of tax would be charged both to businesses and consumers according to how much CO2 was emitted by the different activities they engage in. Although everyone hates taxes, they are a very useful way to stop people doing something. And if they do not stop doing it, it nonetheless provides revenue to be used to clean up any problems they are causing.

Cigarette smoking, plastic bag use, consumption of fizzy drinks, are all areas in which this seems to have worked.

This week, leaders at the African Climate Summit have called for a global tax on carbon emissions. Why this is different from individual countries doing it themselves is that it may help with "climate change inequality" - whereby the poorest countries in the world face the biggest costs from climate change, have the least money to deal with it, yet have done the least in terms of emissions to have actually caused it.

Under the proposal, the proceeds of a global carbon tax would go to these countries. Do you think it is an idea that can work? Read about it here: https://www.bbc.com/news/world-africa-66733557

No 267: Problems in the Chinese Economy

FOR the first time in many decades, China's macroeconomic performance is struggling.

It has had a very hard time time recovering post-Covid due to factors like slow domestic consumption, high youth unemployment and a decline in exports. This lack of growth is leading to the risk of deflation - where prices across the economy fall.

While having prices falling across the economy may seem like a good outcome, it often then leads to consumers postponing purchases in the hope of buying at even lower prices. Firms cannot sell enough, so cut their prices. If consumers still delay purchases, the result can be a "deflationary spiral" where growth falls, firms go out of business, and jobs are lost.

Read about how this is affecting China: https://www.theguardian.com/business/2023/sep/09/chinese-economy-out-of-deflation-but-faces-threat-of-relapse

No 266: Why There Will Be No New Wind Farms in the UK

ALL countries see wind power as a crucial way to reduce CO2 emissions and the UK has been one of the pioneers in this kind of energy.

However, at this year's UK government auction, no firms at all chose to bid for contracts to provide new wind farms.

Why this was is a very interesting Economics lesson about the right and wrong ways to set up markets and prices: https://www.theguardian.com/environment/2023/sep/08/what-went-wrong-at-uk-governments-offshore-wind-auction

No 265: How Smartphones Can Be Sustainable

 DID you know that the lifespan of the average smart phone is only just over two years? Did you also know that the pay and working conditions for those who extract the raw materials for smartphones, and who assemble them, are often extremely poor?

Some mobile phone companies are trying to produce phones that we can use for longer (e.g. by giving more years of updates), therefore reducing e-waste and making the emmissions from producing a mobile phone more worthwhile. Companies are also trying to source Fair Trade materials and only get their phones assembled in factories that pay a living wage.

A very interesting article about this: https://www.gizmochina.com/2023/07/17/environmentally-friendly-smartphones-a-closer-look-at-sustainable-phones-fairphone-4/

No 264: Success in the Irish Economy

 THIS article below is about a worry that economists in Ireland have, which we can dream about in the UK!

They are worried about the economy "overheating" - that is, of GDP growing so quickly that it makes inflation also increase rapidly.

Meanwhile, in the UK, we do have high inflation, but certainly not due to fast GDP growth....

Something else Ireland has that we have not had for a long time (since about 2003) is a budget surplus - that is, when government revenue is higher than government expenditure.

Good economic times for them!

Read about it more here: https://www.bbc.com/news/articles/c3gw0888ew5o 

No 263: Three Interesting Current Micro Stories

 (1) There is to be an investigation over UK food prices, to check if supermarkets have been taking advantage of the recent rise in food prices to overcharge customers:

https://www.bbc.co.uk/news/business-65601292

 

(2) While the UK CMA has blocked the proposed merger of Microsoft and Activision (a games company), the EU have approved it:

https://www.bbc.co.uk/news/entertainment-arts-65566438 

 

(3)  The energy firm, Octopus Energy, recently switched its email answering service from humans to AI. It has replaced the work of  250 people. Customer satisfaction is much higher with the AI generated emails:

OctopusenergyAI Yahoo News

 

Would really impress examiners to able to refer to such recent events.....

 

 

No 262: Round Up of UK Economic Data

 LOTS of important UK macro data in the last week or so.

(1) The Base Rate of Interest was put up from 4.25% to 4.5%.

https://www.bbc.co.uk/news/business-65554797

(2) UK GDP Growth in Q1 2023 was only 0.1%.

https://www.bbc.co.uk/news/business-65562888

(3) ***TODAY*** UK unemployment (Q1 2023) has gone up from 3.7% to 3.9%.

https://www.theguardian.com/business/2023/may/16/uk-payroll-fall-unemployment-rate-rises

Referring to such "fresh" data is sure to impress the examiner! Even better if you read the articles above and absorb some more detail.....

No 261: More Green Money

SOME of the announcements in today's Budget have already been revealed in advance.

One was that there will be £20 billion of extra funding for measures to cut carbon emissions. The money will be focused on carbon capture projects and low carbon energy production. Benefitting particularly will be projects for the construction of small modular nuclear reactors (SMRs). These choices of what to fund are very controversial. Carbon capture is largely a technology that does not currently exist, and many environmentalists disagree with the government's claim that nuclear energy is "green" (although in my opinion it is probably necessary to have more nuclear power to enable a quick enough transition away from fossil fuels.)

As well as for the environmental impacts, another reason for this funding is the worry that the US government's huge recent green subsidies of over £300 bn are attracting firms to move their operations to the USA. Currently the UK has a competitive advantage in many climate change industries such as wind power, but there is fear that we could lose this to the USA. However, renewables are not receiving any of this additional funding and it may seem that the UK's sum of £20 bn is rather small compared to that of the USA.

 Read the full article here: https://www.theguardian.com/uk-news/2023/mar/10/jeremy-hunt-budget-cut-carbon-emissions-clean-energy-small-nuclear-reactors

260: You Cannot Eat Your Salad Even If You Want To

YESTERDAY I was in my favourite coffee shop, and heard a woman from the next table saying, "I've spent all morning trying to buy a pepper - six supermarkets, and couldn't find one in any of them!" "You need to get a life," her friend said.

If you have been to a UK supermarket in the last few days you too may have noticed large gaps in the fruit and vegetable sections (see the photo below). While some of us may not be too upset at not being able to eat our salad, it is nonetheless always worrying when important foodstuffs disappear from our shops. As this article recounts (asda-morrisons-ration-tomatoes-peppers-fruit), the supermarkets Asda and Morrisons (***Breaking News - now Aldi and Tesco's too***) are restricting the amount of some types of fruit and veg to only two packs per person - and when rationing of something starts, that is a sure sign of problems in markets.

The secret about learning Economics is that although it is hard at first, many of the ideas you study in the first year are relevant forever after, even for university academics or newspaper journalists. Here are the factors that seem to be causing the shortages. Think about how you would use a supply/diagram to talk about this, and you will have a spot on analysis of the whole situation.

(1) Bad weather and storms in the Mediterranean and North Africa.

(2) Bad frosts before Christmas affecting UK crops.

(3) High energy costs putting off growers in the Netherlands, who use large greenhouses to produce fruit and vegetables all year around.

(4) Time consuming and costly UK border checks discouraging overseas suppliers from wanting to sell their produce here.

No 259: Excellent Introductory Article to Government Borrowing

 PUBLIC finances are an important part of the Economics course and a crucial current UK issue (as shown by the last post), but it is a tricky topic, especially the subject of government borrowing.

Hence all of you should read this excellent article from BBC News: How much money is the UK government borrowing, and does it matter?

No 258: Lots of Lovely Tax Money!

A PLEASANT surprise for the UK Government - public finances for January were in surplus, with £5.4bn more received in tax than was spent.

It seems there were two reasons for this. Self-employed workers (e.g. tradespeople like plumbers, business workers like consultants) pay their income tax once a year. The deadline is the end of March (the end of the financial year) but it seems that more people than ever decided to pay early, hence a large boost to tax revenue.

There has also been less spending than expected on subsidies for household energy bills, since the prices of gas and oil have not gone by as much as forecast.

This surplus has led to calls for the government to cut taxes / increase spending in the March Budget. But Chancellor Jeremy Hunt says this is only a blip, and the wider picture is still excessive government debt from the shocks of Covid and the Ukraine War (see the chart below). Nonetheless, striking state workers like nurses and teachers will certainly think it makes their case for the government to pay them higher wages stronger.

As always, my summary is only that, so make sure to read the full story: https://www.bbc.co.uk/news/business-64705051

No 257: Many Important UK Economy Figures This Week

 A BUMPER week for UK economic data. Here is a summary, but make sure you also read the full article given for each one:

UK GDP Growth was -0.5% in December. But over the quarter (Oct, Nov, Dec) it was 0%, so the UK avoided (just!) being in a recession. uk q4 gdp

Wages increased by a near-record 6.7% in Q4 2022, but this is still far below inflation. Unemployment remained extremely low - 3.7% for Q4 2022. uk wages / unemployment

Inflation for January was 10.1%, lower than the 10.5% of December, but still near record high. A particular worry is inflation in food and drink prices, which was 16.7%. uk jan inflation figures

No 256: Battle of the Bots

 YOU may feel there is pressure on you to get it right when you do a test or exam, but imagine giving one wrong answer that cost you $106 billion!

As this article explains, exactly that happened earlier on this week when Alphabet (owner of Google) demonstrated its new AI rival to ChatGPT, called Bard. It gave wrong information about the James Webb space telescope, and markets took this as such a negative sign of Bard’s capabilities that within a day Alphabet’s shares lost 9% in value.

This comes in a week when Microsoft announced a deal to use ChatGPT technology in its Bing search engine. Currently, only 3% of internet searches are done using Bing, while Google search accounts for 90%. However Microsoft estimates that every 1% of the search engine market represents $2 billion extra in advertising revenue. Let’s say they pay ChatGPT $10 billion and this in turn increases Bing’s share by 5% - this would obviously be well worth it. On the other hand you can bet that Alphabet will be putting lots of money in developing Bard, especially its knowledge of astronomy!

No 255: My verdict on chatgpt for Economics essays

 AS you can see from the previous post, I have been playing around with chatgpt - a new AI chat bot I am sure most of you will have heard of. I got it to write an IB IA, an A-Level 25 mark essay, and a competition essay.

And the verdict is….. don’t bother using it for your own work. Apart from it being morally wrong to do so, you will not get a good mark if you do. I marked what chatgpt did - the IA scored a 4, the A-Level essay a D, the competition essay was only mediocre. While it can produce a reasonably general Economics essay for, say, a blog, it is simply is not able to follow the very particular demands of a specialist Economics essay (which, by the way, is what you are learning to write!). Some people have also said that what one could do is use it for the basis of an essay and then modify the result. I think you would spend more time on the modifying than it would take to write it from scratch yourself.

So my message is, sorry,  you’d better do your own homework!!!!

No 254: A Message To You From A Very Famous "Writer"

No 253: Bank Of England Increases Interest Rates

 THIS morning the Bank of England increased it's Bae Rate of Interest to 4% up from 3.5%. The effect of this will for all other banks to put up their interest rates too. This is a good brief explainer from the BBC: