QUICK WIN ECONOMICS, Oaktree Press, 2011

Link to Book (€14.95)

Link to ebook (€4.95)

by Stephen Kinsella, Lecturer in Economics, University of Limerick.
http://stephenkinsella.net

Q: What is this book about?

Quickwin Economics looks at the 100 most common questions asked in
economics and gives short, commonsense answers, normally with a chart,
graph, or example to back these answers up. The emphasis is on rapid
understanding of the key elements of an idea, with links to further
readings, other important concepts, or real world examples given just
after every entry.

Q: Who is it for?

The book is written to be halfway between a Wikipedia entry and a
textbook. It portrays economics as an unfinished conversation rather
than a canon of knowledge. Economics as it exists today is as full of
contradictions as it is full of promise and insight. Readers will get
a sense of this from the book.

Q: Can you give us a feel for the book?

Sure. Here’s something I wrote for the book about Monetary Policy.
It’s an extra entry, but you’ll get the idea of the book right away.

Q: Can the government manage the economy through monetary policy?

Monetary policy is a set of tools that governments use to control the
levels of spending in an economy. By setting interest rates and
reserve rates on levels of funds that banks must have to meet
withdrawals, by buying and selling government-backed securities, by
deciding how much money to allow into circulation, and by providing
credit to private banks, central banks use the instruments of monetary
policy to try and keep the economy ‘on track’.

So, if the economy is in a slump, central banks can reduce the
interest rates at which they lend money to private banks, allowing
private banks to lend more cheaply, so increasing the amount of credit
in the productive parts of the economy, because banks lend more to
more people, and the economy gets stimulated.

If the economy is going ‘off track’, and inflation is rising as a
result, then the central bank can increase interest rates to private
banks, making loans more expensive, and ensuring the economy stays ‘on
track’, that is, close to its potential output.

If the central bank wants to reduce the money supply, it can start
selling long-dated bonds to the public (usually via private banks and
lending institutions), which buyers pay for by using their deposits of
cash. Banks thus have less money on their books to lend with, and so
the volume of lending drops, followed (in theory) by a drop in
productive activity in the real economy.

Monetary policy is not a science, but rather an art – and does not
always work as intended. In an era of globalised money, the inflows
and outflows of currency make operating a domestic monetary policy
extremely difficult, even for a large country like the United States.
There are many other difficulties besides, including lags between the
setting of monetary policy in a central bank, and its effect on the
real world, and the existence of financial ‘innovation’, where private
banks and lending institutions produce ‘new’ and unregulated financial
products, which make the imposition of credit controls very difficult,
if not impossible.

WHY STUDY ECONOMICS AT UNIVERSITY?

Her wrinkled, tired face turned to me:

No Roads; No Light

Where is the light at the end of the road?

No Income; No Food

Who am I to want food when my family starves from having no income?

No Hospitals; No Safety

When will it be safe enough to survive in our hospitals?

No Water; No Strength

Do I not need strength to lug water home from the town well?

No Education; No Future

What will the future of my offspring be when I leave them with no basic education?

No Leadership; No Inspiration

How can my children be inspired with no one to genuinely lead?

No Home; No Consideration

Why should I consider the consequences of my actions when I was left with no home?

How can you care? What can you do?

You are only one out of a 150 million others.

I can start by caring enough to want change,

I can start by admitting we have a major problem,

I can start by learning the accumulation and maintenance of wealth.

Mother!

For you, I learn about sustainable development.

For you, I learn the difference between money and wealth.

For you, I learn how I can generate income and growth using our very own resources.

For you, I learn the components needed for a free market,

For you, I learn about Public Goods and can tell you that you deserve access to healthcare, education, water and shelter.

For you, I stay up all night reading and applying the mechanisms that help boost Investment and Savings.

With this, I propose economic growth that will take you a step further towards that essential job you want.

For us, I do a degree that gives me the skill and passion to make our motherland prosperous.

For us, I work towards being the change we need

In a country filled with abundant natural, human, physical and mental resources such as Nigeria, extreme poverty still outweighs the abundance of wealth. Poverty as mentioned does not occur mainly from the lack of resources but from the unequal share of wealth amongst citizens of a proud nation like Nigeria. The wrinkled, tired woman mentioned in the poem represents the average mother in Nigeria who has no choice but to be strong and extremely hardworking to put food on the table and keep a roof over her family’s heads. Nigeria is the 5^th largest oil-producing country in the world and yet over 50% of its inhabitants lack basic water supply, affordable and efficient health services, roads, education and many other basic goods. Nigeria’s economic failure to develop is primarily attributed to its domestic market imperfections, economic inefficiencies, and social rigidities. Political corruption, a parasite social and bureaucratic structure, and the failure to make appropriate Investment in education, agriculture and other prerequisites for economic development restrain the nation.

As a Nigerian student lucky to be born in an averagely comfortable home, I was only made aware of the seriousness of Nigeria’s economic imperfections when as a teen my Father took me to a less developed area in the business capital city of Lagos [areas normally termed the Ghetto] called Ajegunle, and was shocked at the living conditions imposed on the less privileged. This made me aware that life was not all rosy and thus from that moment on, I made a pledge to myself and my fellow countrymen- to do my bit as a citizen of the country to help fully develop the country to a favourable standard. At this time, I was just about to enrol into the upper Secondary School level where I had made plans to take subjects that were intended for a career in creative writing or journalism, however after that experience, I started to read on politics and economics and thus found I had a higher interest in these topics; this made me take these subjects at school and ever since it has been my focus of study till now, and will definitely be for the next few years. The first half of the poem in literary terms depicts the thoughts and fears experienced by the average Nigerian parent on the future of their offspring; the second part is a form of revelation that shows that change can come from the littlest of things, meaning change happens not by thoughts alone but by actions; the third part of the poem substantiates this and shows how in my own way, I am working towards making that change.

We have asked Eoghan, an undergraduate at the University of Bristol, to interview students about their experiences since coming to the university to study Economics. The videos he produced give great insights into the lives of typical Economics undergraduates. Hopefully, they will help you the final decision to apply for Economics at university.

Videos

On behalf of the Economics Network, I attended the event on the second day to promote our Student Challenge as well as the two websites I am working on. Needless to say, I was very impressed with the quality of the student team that organised the event (despite some initial hiccups with booking tickets). Everyone was very friendly and helpful, and I instantly felt welcomed. It was clear that everyone put in lots of effort to make the summit a success.

I decided to go to few talks myself. Perhaps, the most interesting for me was the talk given by Nick Leeson – a former derivatives broker who went to prison for his fraudulent activities (his autobiography was made into a film starring Ewan McGregor). After that I went to one of the many seminars, which I easily signed up for using the form on their website.

Unfortunately, being a busy student meant I could not attend all other exciting events organised by the summit team, which included several networking sessions with sponsors and the amazing Masquerade Ball. Nevertheless, the summit left a big impression on me.

Finance and Stability talk by Andy Haldane

http://economix.blogs.nytimes.com/2011/02/18/why-does-college-cost-so-much/

According to Adam Smith, people have different motives for their actions, one of which is self-interest or self-love. It is important to note that Smith did provide a distinction between them. People are selfish if they act purely to gain for themselves. This involves the taking of more than one’s ‘fair share’. Smith actively condemned this behaviour in his writing:

‘…all for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.’

On the other hand, self-interested people do have other people’s interests in their mind. Self-interest is the interest in the well-being of the self. It is only a part of what people consider when they decide whether or not to act. Therefore, Smith thinks it is not logical to condemn this behaviour. It is not wrong if an individual wants to buy a new shirt for himself. He clearly acts upon his self-interest, but he is not selfish unless he stole the money in order to purchase the shirt.

Smith wrote that we benefit from the self-interest of the butcher, brewer and baker, and it is clear from his writing as a whole that, because they are self-interested, the butcher, brewer and baker look out for themselves; however, because they are not selfish, they also care for their customers. It is this kind of self-interest (not selfishness) that leads to social improvement.

As a student of Economics and a political neutral, the recession has been particularly interesting, with the revelations of how much debt we as a country are in. This is not just governmental overspending revenue incomes, but the public and the culture of buying now paying later on credit. For proof you only have to watch TV for an hour or so and you’ll be amazed at how many advertisements (ok not BBC) there are for quick-money, consolidating your debt etc. The conservatives and now the newly-informed liberal-democrats are for reducing the debt of the nation, by limiting the size of governmental spending i.e. “The Cuts”, I don’t intend to get into any sort of political debate as to whether we need to cut or not, but the nation’s majority have decided democratically that this is the way that we are going to get out of this “crisis”.

But, I can’t but help see the contradiction in raising university fee’s at this moment in time, here it’s not so much a cut but an increase in revenue, which hypothecates the budget reduction. With the clear aim of reducing debt, what the coalition here is effectively doing is lowering governmental debt in the short-term, 5 years let’s say, in exchange for a higher student debt. This is completely counterproductive, and I do realise that there is no debt till graduation or drop-out, but this then has to be paid back which reduces the spending power of those graduates who will be lucky enough to have walked into a job straight after their graduation. This coupled with the aim of 50% of school leavers moving into higher education as well as international intellectuals, equates to a more competitive job market giving lower wages and increased uncertainties over employment, means that we are highly likely to have an even more indebted student population. This in fact, will make our nation’s debt and future less sustainable.

Students can feel more aggrieved depending on what subject they study, those on engineering, chemistry, physics, medicine are actually getting a cut-price deal for their education, which is actually compensated by degrees which cost their respective universities a lot less such as geography, mathematics, languages, politics, media studies, music, history etc. So broadly speaking on the whole students are proportionally paying more than what they are actually receiving from their education anyway. Therefore this increase in fees, like any other increase to those yet to enter the professional job ladder, is most unwelcome.

About the author: Josh Taylor is a first year undergraduate at the University of Manchester studying Economics and Economic & Social History (BAEcon). In the past, he has blogged on the economics of football, faith and religion, music, law amongst others.

In his Spending Review yesterday, George Osborne announced a 40% cut in the teaching budget for universities. This is part of the coalition’s plan to tackle the UK’s historical deficit. Universities now have no other option than increase tuition fees in order to fill the new gap in funding. This will be possible if Browne plan is implemented. Essentially, the implementation of this proposal will create a free market for higher education in the UK, very similar to what already exists in the US. However, this also signals the end to a great education system that used to be free and available to everyone. So, what do we take from this?

The cost of teaching a degree is estimated to be around £7,000. Under the current system, universities are allowed to charge students up to £3,290, which most of them do. The remaining cost is then subsidised by the government. If the cap on tuition fees is removed, we can expect most elite universities to raise their fees without facing a decrease in demand for places (demand for places at big universities is indeed very inelastic). This will enable them to invest more in researches and compete with big American universities.

However, there is also a downside to this. Firstly, creating a market place for higher education will benefit only a certain group of universities. As in any other competitive market, smaller and less prestigious universities will struggle to compete and shut down eventually. This will increase unemployment level in the public sector (not every lecturer can go and work for a private company), which in turn will have a wider adverse effect on our newly recovered economy. Furthermore, bright students from poor families will no longer be able to go to places like Oxford or Cambridge simply because they cannot afford them.

In the end, higher education is a public good that will always be under provided in a market system. This is why government provision of education is so vital. However, a market for higher education now means it is money that gets you into the best universities, not your real academic potential.

Please comment below to let us know what you think.

Photo by Gaetan Lee on Flickr

Each choice that you make as an individual is decided by a society of billions: namely, the billions of neurons that populate your brain. Economics, being the science of choice, has until recently treated the human being as a black box rather than looking inside. That has changed with the advent of neuroeconomics, a branch of science which examines what those cells are doing when people are making choices.

Neuroeconomists have studied blood-flow to find where the brain measures uncertainty; measured hormones in subjects’ saliva and their effect on impulsive decisions; and worn conductive caps to measure brain activity while they make a purchase.

The questions thrown up by neuroeconomics include whether we are really rational, or destined to be biased, and whether it will be possible in the future to read off someone’s preferences with a powerful brain scan. In an article for Slate and a recent programme on BBC Radio 4, Tim Harford discusses the potential power of this emerging discipline.

Tim Harford writes both the ‘Undercover Economist‘ and ‘Dear Economist‘ for the Financial Times.