Economics in Action

My colleague Martin sent me a rather interesting link to EDGE World Question Centre 2011. I found two particular articles on Positive-Sum Games and The Law of Comparative Advantage interesting. Below are the links to them:

http://www.edge.org/q2011/q11_2.html#pinker

http://www.edge.org/q2011/q11_2.html#evans

Hope you all enjoy reading this

As part of the ongoing development of Why Study Economics and Studying Economics, we are now looking for student contributors. Because the websites are aimed at Economics applicants and students respectively, we think it is very important for us to have students’ views reflected in our content.

The content provided can be in any format about anything related to Economics: current affairs and politics to day-to-day activities, such as analysis of economic concepts in movies and music. We also encourage entries about the social life of Economics students. Most entries will go to Economics in Action blog, but there is a possibility to write a material for other sections of the websites.

Being a contributor for us will be beneficial for you in many ways. Firstly, if you want to pursue journalism, this is a great way to start. The websites are very popular with lecturers and students, so you will have an audience. If you become a frequent contributor, we will make sure your name appears on the websites, and this will look great on your CVs. Finally, writing something contemporary and interesting will widen your views about Economics as well as distract you from all the maths you have to do for your course.

If you are interested, please email Anh with your details and a possible entry. We can also discuss what sort of material you would want to write or feel comfortable writing.

Sheila C. Bair, who chairs the US Federal Deposit Insurance Corporation (FDIC), has another string to her bow: she’s the author of Isabel’s car wash, a children’s book in which little Isabel borrows money and washes cars so she can buy a doll.

It’s not every day you see a children’s book taken apart for its assumptions about consumer behaviour and the private sector, but that’s just what reviewer Glenn Fleishman does, with tongue somewhat in cheek. Fleishman seems exasperated that plenty of adults’ understanding of money and markets is no more sophisticated than Isabel’s Car Wash, and that some of those adults have responsible jobs.

The University of East Anglia has put together a very shiny YouTube video in which students and staff discuss the advantages of a degree in Economics.

Britain’s next Chancellor will oversee the start of most sustained squeeze on public spending in at least 60 years.

Without huge tax rises, government departments will have to cut around £37bn from their budgets by 2013-14. Yet all three main parties refuse to explain how at least £30bn of these savings will be found.

To illustrate the scale of the challenge, the Financial Times has simulated the next three year spending review, highlighting the type of decisions the next chancellor will face if taxation stays on the same path.

You need to register to play (but it’s free).

It’s a good introduction to the tough decisions that the next chancellor will have to make.

You can play the game here.

Is this economics explained in one picture?

Who would you give the iPod to?

Hat tip @gregmankiw

A great article in the Wall Street Journal shows the link between economics and the recent earthquakes.

“It’s not by chance that Chileans were living in houses of brick—and Haitians in houses of straw—when the wolf arrived to try to blow them down. In 1973, the year the proto-Chavista government of Salvador Allende was overthrown by Gen. Augusto Pinochet, Chile was an economic shambles. Inflation topped out at an annual rate of 1000%, foreign-currency reserves were totally depleted, and per capita GDP was roughly that of Peru and well below Argentina’s…

Milton Friedman has been dead for more than three years. But his spirit was surely hovering protectively over Chile in the early morning hours of Saturday. Thanks largely to him, the country has endured a tragedy that elsewhere would have been an apocalypse.”

Read the article here.

What does economics teach? Why study economics Whats the big deal? In a lecture
by Robert P. Murphy of the ‘Mises Institute’ he explains ‘ The Core of What Economics Teaches’
in yet another fascinating video.

Economics is a fascinating subject, but it is always controversial.
Here the always controversial ‘Mises Institute’ present their take on the recycling debate and whilst we don’t have to agree with their solutions the arguments are important to understand!

Let us Know what you think!?

Image copyright of mises.org/

John Maynard Keynes was born in 1883 the same year that Karl Marx died, and whilst both wrote critiques of the capitalist system here the similarities end. Marx was an angry loner, his ventures and business failed and the majority of his life was spent in exile. Working anonymously and alone in  the British library, Marx spent many years sculpting his theories about the inevitable overthrow of the free market system. Perhaps the saddest thing is that Marx never lived to see his theories proved wrong.

Keynes was very different, a dashing figure and a brilliant economist, who could also mix with the elite of British society. Keynes attacked the inequalities and inefficiencies of the capitalist system it didn’t stop him from making a small fortune speculating on the foreign exchange markets.

Keynes was also a visionary, while the Allies were clamoring reparations to be imposed on Germany he saw that they would be would be impossible to repay claiming that it would reduce

His book on the subject “The economic consequences of the Peace” became a best seller. Keynes didn’t just restrict himself to economics, he wrote a book on mathematical philosophy, was a leading figure in the Bloomsbury group of leading artists, poets and writers. He even opened his own theater, which proved a great success.

Keynes was brilliant at many things and he knew it. Once he was placed second in an economics exam. His only reply was that:

“That shows I know more economics than the examiner.”

It was the effect of the great depression that led Keynes to his greatest work. He scoffed at the orthodox free market economists who said the government should do nothing in the face of mass unemployment. Keynes’s strategy was for the government to intervene by spending, if necessary by borrowing. This would create jobs, which would give income for others to spend thus creating more jobs. A simple idea but one too radical for western governments who were too unwilling to borrow. (Un)fortunately it wasn’t until the Second World War that  governments were forced to spend so that employment increased to pre 1929 levels.

Unlike the  radical ideas from economists such as Malthus, and  Marx .  Keynesianism wasn’t rejected by later theorists the vine but became part of the economic orthodoxy in turn creating a whole section of economics (Macro Economics).

The legacy of Keynes is remarkable; governments in the West followed Keynesian policy’s up to the 1970s. Generally these decades were seen as a time of great stability and prosperity. Full employment was maintained and many countries experienced record growth.

However economics is a fluid subject,  Keynesian economics fell out of favor with a recent resurgence of support for neo-classical ideologies with governments once again praising the ideals of the free market.

However following the rise and fall of (Neo)Orthodoxy Keynesian theory has seen a resurgence fortunately time and space prohibit a discussion of this latest development right now . The previous Bush administration showed remarkable fiscal irresponsibility. The current budget deficit is approaching $600 billion combined with a current account deficit of approximately $665 the US economy is anything but a paradigm of classical economics.

In our next Blog we will look at the rise of (Neo) Orthodoxy and we will look at Keynes’s doppelganger Milton Friedman.