Here is a great set of revision videos by Geoff Riley of Tutor2u. They cover a range of macro and micro topics for AS and A2 Level economics. Most of them are around 8 minutes long and he uses the powerpoint slides very effectively so you get his oral contribution plus the key points on the presentation slides. Well worth a look and you are bound to find them very useful as exams approach. Below is the video on the Circular Flow.
A HT to Michael Cameron associate professor in the Department of Economics for his post on Bazinganomics. It is a website that uses scenes from the comedy show The Big Bang Theory to illustrate economic concepts which mainly fall into micro topics:
MARKETS AT WORK
EXTERNALITIES & PUBLIC GOODS
COSTS & PRODUCTION
MONOPOLY AND PRICE DISCRIMINATION
STRATEGIC BEHAVIOR & OLIGOPOLY
BEHAVIORAL ECON & RISK
Like the Economics of Seinfeld, the purpose of Bazinganomics is to provide teachers with video clips from a popular television programme that can be used in the classroom to help facilitate engagement. Worth a look especially if you are a fan of the show.
Recently The Economist wrote a piece on the port of Rotterdam as a global indicator. The port has been heralded as the instant indicator of the state of the global economy. In 2014 it handled 446m tonnes of cargo which was double the amount in Antwerp Europe’s second largest port. So why is Rotterdam such a prevalent indicator? Well the trends that are transforming the port include those that are rapidly growing in the global economy – e.g. automation and the reduction of fossil fuels.
The port has evolved and kept up with new ideas and before the post-war boom Rotterdam built new storage facilities for oil and chemicals. Furthermore, with the onset of globalisation the port started to accepts mega-ships bringing sneakers and flat screen TVs from Asia to Europe. Activity in the port bears witness to four trends in the world economy:
- The low price of oil
- Slow growth in China and Emerging markets
- The sluggish euro-area recovery
- The global slowdown in manufacturing and trade.
Rotterdam’s vast storage tanks (see photo below) quickly filled, as traders bought cheap crude on the spot market and sold futures at a higher price, locking in a profit. The slow down in China has led to the appearance of Chinese ships offloading surplus steel as demand for German cars in China has dropped which means less demand for steel. Therefore the drop in shipments of bulk goods arriving in Rotterdam is a result of this threatening cycle.
Global trade has been falling for the last few years (down by approximately 14% in 2015) and has been less than global growth (usually the other way around). The port of Rotterdam has been felt this pinch as one in four containers originates form China. Although the volume of goods in the port has increased by 4.9% in 2015 it was almost entirely due to the increased trade in oil and oil products as container volumes dropped by 1.1% and agricultural bulk by 3.8%. As the production of oil becomes concentrated in fewer countries there will be the requirement of shipping oil as well as storing it which will add to the activity of Rotterdam.
Another indicator that is prevalent in Rotterdam is automation. A lot of the work usually carried out by labour has been replaced by automated guided vehicles (AGV’s). The cranes lift the containers onto these vehicles who then deliver them to stacks to be distributed by truck train or barge. Furthermore these new technologies are powered by electricity as solar panels and an increasing number of windmills provide much of the power the port consumes.
RBNZ Deputy Governor Geoff Bascand presented a speech on inflation pressures through the lens of the labour market. The key message from the speech is that weaker than expected labour market pressures have been “a factor in our assessment that it has been appropriate to keep monetary policy accommodative” RBNZ research has identified large flows from non-participation into employment, flows that are much higher than that witnessed in other countries. Around two thirds of the newly employed were non-participators in the previous quarter. Bascand stated that “one implication is that participation is potentially more sensitive to cyclical variation than previously thought. Another is that the unemployment rate is a weaker indicator of labour market slack and inflationary pressure than previously assumed.”
Therefore, the RBNZ has developed a labour utilisation composite index (LUCI) which shows how tight or loose the labour market is relative to a long-run average. It combines 17 labour market indicators,weighted so as to provide the best historical fit to the broader economic cycle. The boom in the early 2000’s saw labour market conditions tighter than usual with resulting higher wages. However the GFC put a stop to that with a lot of labour market slack. Today, with labour market conditions broadly in balance since 2014 there has been little upward pressure on wages.
Recent low consumer price inflation in New Zealand of 0.1% can be mostly explained by falls in commodity prices and the high New Zealand dollar which makes imports cheaper. However, the growth in labour force participation rates (see graph below) have put the brakes on wage inflation and therefore has had a lower inflationary impact than expected.
The participation rate has trended higher over the past 15 years, reaching around 69 percent in 2015. The main influences on this trend have been the ageing population, increased participation of older workers, and increased participation of women.
Participation tends to be cyclical in nature:
- Strong employment and wage growth encourage people to seek work, who otherwise would not choose to participate.
- When unemployment rises people spend longer time out of work. However some are discouraged from seeking work and no longer participate in the workforce.
A recent example of cyclical impact is Canterbury, where the strong rebuild activity encouraged additional workers to join the labour force. Participation in Canterbury rose from 67 percent at end-2011 to around 72 percent at the end of 2015, 4 percentage points above the rest of the country
A HT to Kanchan Bandyopadhyay for this piece from the Associated Press. Petrol prices in North Korea since February have risen by approximately 14% as it contends with the tougher international sanctions over its nuclear programme which is potentially putting a brake on the emerging market economy. However it is difficult to say what is exactly happening as officials in North Korea don’t discuss issues like this openly
What about supply and demand?
It might be a simple matter of the market. With more vehicles on the road there is more derived demand for petrol putting the price up. It is also possible that more fuel is being used for military purposes or for government construction or development projects. Most of the supply of petrol comes from China and the impact of sanctions is limiting the supplyThe fear that prices will rise further has consumers stock piling petrol coupons. In North Korea customers usually buy coupons for the equivalent amount of fuel that they wish to purchase. To purchase 15 kilograms (petrol is sold by the kilogram in North Korea) it about $12 in Pyongyang which equates to a 20% increase in price. As with most planned economies the supply of petrol is controlled by the state and it decides on who gets what – military and public transportation such as street c
ars and buses are still kings of the road.
Black market currency
Strangely enough North Koreans usually pay for their fuel in US dollars or euros. One kilogram of gas is currently about 80 North Korean won but no one actually pays that.
80 won = 80 U.S. cents under the official exchange rate, but only about eight-tenths of a cent under the unofficial exchange rate most North Koreans use when buying and selling things among themselves – the “real economy,” in other words.
The number of passenger cars has grown rapidly and rather than the typical black limousines or blue Mercedes sedans driven by communist party officials, they are middle of the range cars imported from China.
The growth in traffic in the capital is a visible indicator of economic activity the North generally prefers to keep under wraps. Many vehicles these days are clearly being used in an entrepreneurial style, moving people and goods around for a fee.
Higher gas prices could put a damper on such activities, or at least cut into their profits. The rise of automobiles is focused on the capital, which remains a very special place. Most North Koreans don’t have cars, or even access to cars. In the countryside, major highways are still not very well traveled and often not even paved. And gas, when it’s available, is usually more expensive.
A HT to Yr 13 student Albere Schroder for alerting me to this interview with the four most recent US Federal Reserve chiefs.
- Janet Yellen, the current Federal Reserve chairwoman was joined by:
- Ben Bernanke (2006-2014)
- Alan Greenspan (1987-2006)
- Paul Volcker (1979-1987)
Although the Fed Reserve chiefs served during widely divergent eras and are known to have different political views, the most notable take-away of the evening was the extent of their deep agreement.
There was a consensus that the Fed’s post-crisis rescue efforts have been successful and the economy is currently on a steady growth path, rather than rising thanks to a bubble that will soon burst. The remarks were a sharp rebuttal to the conventional wisdom of the contemporary Republican party and many grassroots conservatives that excessive stimulus from the Fed is either on the verge of sparking a drastic uptick in inflation, or already fostering a stock market or asset bubble.
“I’m not saying that the government should always be spending,” Bernanke said. “But at certain times, particularly in a recession, when the central bank is out of ammunition or ammunition is relatively low, then fiscal policy does have a role to play, yes.” Ben Bernanke
Greenspan had other ideas in that he disagreed with the idea that government spending should be increased during a downturn as this impacts on the country’s longer-term debt problem. Worth a look.
The Economist ‘Free exchange’ had a piece on productivity and how it has been rather stagnant in the rich countries. Since the 1960’s rates have dropped (except for Japan in 1970’s) and economist are suggesting that this has contributed to such low wage increases. Explanations for this problem fall into three categories:
1. Robert Gordon (Northwestern University) suggest that humanity has run out of big ideas. Inventions of the early19th and 20th centuries (electricity, indoor plumbing etc) have had a much greater impact on productivity than those of recent technological advances. However it was software and computing power that was the driver behind the productivity boom of the late 1990’s. Productivity growth has also slowed in developing countries (Mexico and Turkey) which should be able to achieve greater output per worker with using technology.
2. Some have suggested that the problem lies in the way productivity is measured as statistical agencies sometime fail to include things like the massive reduction in the cost of digital media (free in most cases) subtracts from measured GDP – smartphones greatly improve productivity but are not captured by the statisticians. But the loss of productivity is far more than the estimates of the unmeasured gains from information technology. A ball park figure (Chad Syverson – University of Chicago) has the US economy losing $2.7 trillion in lost output since 2004 which equates to about $8,400 per person.
3. A further explanation is that inflexible developed economies are not efficient at moving people out of areas where there is no work to areas of growth. Business start-ups have fallen steadily since the late 1980’s. High growth companies have not expanded to other areas and have also preferred to bank profits rather than taking the option of reinvestment. An issue could be that if it was easier and cheaper to locate in depressed areas employment would rise.
Machines or Labour in low paid jobs.
In order to boost productivity companies need more financial support for research and development and a reduction in government regulations – red tape. However low pay does allow companies to employ more people in marginal jobs as in some cases the cost of labour is less than the investment needed to introduce automation – checkouts in supermarkets for instance. But the abundance of cheap labour has led to firms to use that labour in less productive manner which leads to underemployment.