Economics in Action

The Economist is running a feature article on how the world is, gradually and unevenly, becoming more prosperous and peaceful. Yes, wars and genocides are happening right now. Yes, huge numbers live in extreme poverty and millions of children die each year from preventable disease. However, the figures brought together in this article show that, while those things are horrible, far fewer people are experiencing them than in previous decades. Public health, birth control, immigration and Middle East conflict are among the issues touched on.

It’s not easy being a pirate on the high seas. There is always a possibility that your crew will kill you and take your share of the loot. Since piracy is criminal by definition, you can’t call on the police or courts to enforce contracts. So a pirate ship needs a way of keeping order, just as a country does.

Economist Peter T. Leeson of West Virginia University has released a working paper arguing that 17th Century pirates actually used constitutional democracy, achieving this before either the USA or England. This is is an important recurring theme in economics: how self-interested individuals can work together to achieve a common good.

Read More: An-arrgh-chy: The Law and Economics of Pirate Organization (Abstract of the paper on Social Science Research Network)

Peter T. Leeson (2007) An-arrgh-chy: The Law and Economics of Pirate Organization (full paper in PDF format)

The BBC is reporting that applications to Economics degrees are up 12.8%, against a general rise in university applications of 6.4%. It also has mixed news on the graduate employment front. The number vacancies requiring degrees is increasing strongly but the salaries aren’t increasing at the same rate.

Despite misgivings about the growth of giant retailers, as reviewed in a previous post, the Competition Commission’s new enquiry is unlikely to shake up UK supermarkets any more radically than its earlier probes in 2000 and 2003. Even though it has detected some anti-competitive practices – such as big chains pressuring suppliers to sign exclusive deals, and buying land to stop rivals building stores on it,  the Commission can allow these if consumers are judged to benefit. The ‘Big Four’ can claim they do, through persistently low prices and now from the environmental and nutritional improvements they promise to wring from already lean supply chains.

So why do we still feel uncomfortable stepping through Tesco’s (or Sainsbury’s, Asda’s and Morrisons) ever more prevalent sliding doors, when they can claim to be cutting our bills without crucifying our consciences?

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Sex and drugs could soon be the only item you can’t buy at Tesco, in its UK home market or the increasing number of other countries (China is the latest) to which the supermarket chain now extends.

Tesco accounted for half of the new retail space opened in the UK in 2006 and has tripled its store numbers in the past six years, raising its grocery market share to 31%. (Asda and Sainsbury’s vie for second place with around 16%). Almost 60% of the land bank held by UK supermarket chains for future development also belongs to Tesco, which could raise its market share to 40% if all those sites were turned into new stores.

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Volatile Bangladesh pins hopes on an economist Associated Press proclaimed this month, headlining the story of how the country’s former central bank head Fakhruddin Ahmed was called in to lead its interim government and rescue scheduled elections.

In fact, Bangladesh turned not once, but twice, to an economist to resolve its political deadlock. Dr Ahmed, who worked at the World Bank after his economics PhD from Princeton, took the job after it was turned down by Professor Muhammad Yunus, awarded this year’s Nobel Peace Prize for pioneering micro-credit at the Grameen Bank.

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Muhammad Yunus and the bank he founded to help the poorest Bangladeshis out of poverty have been awarded the 2006 Nobel Peace Prize “for their efforts to create economic and social development from below”.

Yunus pioneered microfinance; small loans made to people whom traditional banks would ignore as too high-risk. Talking to the BBC, he responded, “As a Bangladeshi, I’m proud that we have given something to the world. Our work has now been recognised by the whole world.” Several links found via MetaFilter.

The Economist devotes 15 pages to the coming battle for talented employees. Many firms have gone as far as they can with automation and streamlining, so further improvements in productivity have to come on the human side, meaning their ability to recruit and keep bright, talented staff. While manual workers are increasingly replaced by automation, knowledge workers who can manage people and resources creatively and profitably will be increasingly in demand. As the workforce ages and jobs become more complex, competition for the best individuals will heat up.

You might be reading this as a young adult, considering how you will be earning money in the first half of the 21st Century. You might conclude that it is important to develop and prove your own abilities with a degree, especially in a course that involves numeracy and problem-solving. Far be it from WhyStudyEconomics to suggest a subject…

Further reading: “The battle for brainpower”, The Economist, 7th October 2006
Further reading: Frequently Asked Questions about studying Economics

From the New Scientist:

“An analysis of how cells in a tumour cooperate has provided a unique insight into the evolution of cancer, and may lead to new treatments.

“It makes use of ‘game theory’ the mix of mathematics and economics that has been invaluable in understanding how cooperation can evolve in animal societies, even when individuals are selfish.

“The ‘game’ to grow a successful tumour proceeds more efficiently for all [cellls] if they cooperate, and this can occur without requiring the players to make conscious strategies.”

Read more: “Do cancer cells cooperate with each other?”, New Scientist, 28 August 2006.

From the BBC, “Pupils warned A-levels unsuitable”, 23 August 2006:

“Pupils are being advised to avoid taking certain A-level subjects if they want to get places at top universities. Subjects less favoured [...] include accounting, business studies, film studies, media studies and travel and tourism.”

From the London School of Economics and Political Science’s “How to Apply” page:

“Mathematics, French and Economics would be a suitable combination for almost any of our degrees. Mathematics, French and Business would be acceptable, but we would prefer the first example. On the other hand, Mathematics, Accounting and Media Studies would not normally be considered as suitable.”