Category Archives: Eco Publications

Financial Times – Free access and teaching ideas for economics teachers / students.

You may have seen this before but the Financial Times is offering free access to schools.  As long as teachers and students have an email associated with your school internet address, you can also create your own personal FT account, download the app and use the service on mobile/from home. Click the link below for more information and to register:
https://enterprise.ft.com/en-gb/secondary-education/

You can also access recommended FT articles and tasks picked by teachers which have exam type questions which relate to the articles. Very similar to the data response questions found in most exam papers.

What is ‘Value’ in an economy?

I was recently given a review (from Palladium Governance Futurism) of Mariana Mazzucato’s book ‘The Value of Everything : Making and Taking in the Global Economy’ in which she challenges the view of what ‘value’ is in an economy. She refers to ex Goldman Sachs CEO Lloyd Blankfein’s quote

The people of Goldman Sachs are among the most productive in the world.’

Goldman Sachs was one of the many investment banks that had to be bailed out after the GFC but how do we value their productivity?

Privatise reward and socialise risk
It seems that the investment banks were happy to privatise the reward but socialise the risk – when it all “turns to custard” they need to be bailed because they are too big to fail. The question that people are now asking is what is the vulnerable asset class? Mortgage-backed securities was the cause in 2008. For a lot of these companies a large payout is a sign of success in that they are too big to fail and leave the government no alternative. However where is the value generation from this?

Value – historical perspective

  • French physiocrats – value was produced from the land
  • Adam Smith – saw landlords as rentier class
  • Marx – labour is the source of value

Today economics is more focused on a subjective, utility-focused approach and therefore sidestepping the historic debate about value which is undermining the discipline of economics. This new approach, according to Mazzucato, has weakened neoliberal economies to innovate. Key to understanding the the value debate is what is considered production in our GDP. The informal economy is a part of all economies but is not included in the national accounts. As is someone building their own house. So what is considered to be real wealth/value? Rather than focusing on how wealth was created and what counted as wealth, economists began to ask how utility was satisfied on the margin. This allowed for the mathematical approaches to be used in modern economics.

Thomas Aquinas stressed the need for a ‘just price’. It was immoral for a supplier to raise his price when consumers are in great need of a specific good (inelastic demand). The price should cover the cost of production and the maintenance of the worker and his family. Today value is in the eye of the consumer and price, in turn, reflects utility gained by a consumer from an additional unit go goods or services.

Finance and productive value

Finance’s case is founded on the notion that it is a necessary part of production by allocating capital to businesses. However Banks direct their revenues into interest payments and the share price. This fuels speculative bubbles which are refinanced through the securitisation food chain and therefore inflating assets without investment.

Australian bank Macquarie acquired utility company Thames Water – increased its debt to US$10.05 bn over 6 years, therefore leveraging the privatised assets they had acquired into increasing debt. By doing this they saved their own revenues for interest payments and shareholder distributions – hard to make the case for privatising public assets. Mazzucato also points out that since the GFC the finance sector has focused on debt deflation and unemployment and wage reduction so corporate profits could be maintained at the expense of employee earnings. So the financial sector continues to make contributions to GDP in the money it generates but firms in the tech sector and natural resources can’t contribute to the money supply the way commercial banks can, and can’t easily hedge parts of the economy.

The book also gives examples of factors that contribute to GDP but they don’t actually produce anything.

  • Ford – 2000’s – they made more money from selling loans for cars than by selling cars themselves
  • General Electric – finance arm of the business made around 50% of the whole group’s earnings.

On a more positive side Welsh Water was a company with the lowest ratio of debt to equity and the highest credit rating. It is mutually owned and operated as a not-for-profit operation.

Two great myths – Innovation and Public Sector

She points out that the world’s biggest companies have built themselves on the legacy of state backed, publicly funded innovation. EG:

  • Nearly all major parts on smartphones were developed in university-based research facilities using public money.
  • Defence Advanced Research Projects Agency – developed the Internet and SIRI
  • US Navy – GPS system used by phones and computers.
  • National Science Foundation grant – created the algorithm behind Google.
  • Pharmaceutical drugs – 2/3 of the most innovative drugs trace their research to funding by the US National Institutes of Health.

Final thought

Keynes was seen as the last supporter of government investment. He recommended state intervention during downturns in order to stimulate growth and spending. This intervention is intended to shock the economy into greater output

According to Mazzucato the public sector is the true creator of economic value – value which could not just be created by private counterparts. Vital to this is the rebuilding of the public sector’s funding for innovation. Her clear goal is that economists and governments alike to cease viewing value as a purely subjective and individualistic measure.

Holiday reading – Rowing – Economics – Psychology

Here are some books that are on the list to read this holiday. There is a mix of some new, some old and some rowing. Thanks to Leith Menzies for the rowing books:

  • Mind over water: lessons on life from the art of rowing – I am told that this book is a combination of rowing and life lessons. Rowers will recognise the technical side of things but the book does address the aspects of our world whatever challenge you set yourself.
  • The Kiwi Pair – Another rowing book following the double olympic champions and numerous world champions Hamish Bond and Eric Murray. Very different personalities and also interesting to read how coaches got the best out of them – a lot of psychology in achieving consistent elite performance.
  • Narconomics – I’ve had this book for awhile – like 3 years and it has been lent to numerous students who have said it is very good. Tom Wainwright – who was Central American correspondent for The Economist – argues that most successful drug cartels operate like Wal-Mart in that they have a virtual monopoly on the product at the source of supply.
  • The Economists’ Hour – A recent publication that how economists who believed in the power and the glory of free markets transformed the business of government, the conduct of business and, as a result, the patterns of everyday life. It explains how globalisation failed to deliver on its central promise of increased prosperity.
  • Messengers – The review in The Economist got my attention. With the amount of information available to people these days why is it that self-confident people are believed over experts in their field. Stephen Martin and Joseph Marks look at variables such as appearance and financial status that influence our trust in these people.
  • Licence to be bad – Modern economics dismisses ethics in favour of a narrow focus on self-interest – they have applied the same reasoning in the law courts, leading to the doctrine that bargaining by parties achieves the optimal outcome. However it doesn’t favour behavioural economics which suggests that we are not calculating machines.

Economics Podcasts

Here are a couple of podcasts that I have found useful

  • FT – News Briefing – each podcast is usually around 10 minutes in length – a good summary of the issues of the day
  • IMF Podcasts – longer podcasts with leading economists discussing topics such as climate change, development economics and a recent one on monetary theory with Mervyn King.
  • Project Syndicate – a hub for conversation on the world’s most pressing issues. Elmira Bayrasli sits down with leading economists, policymakers, Nobel laureates, academics.
  • BBC Radio 4 – Today Programme – daily summary of business and economics and longer documentary type podcasts.

Free access to the FT

You may have seen this before but the Financial Times is offering free access to schools.  As long as teachers and students have an email associated with your school internet address, you can also create your own personal FT account, download the app and use the service on mobile/from home. Click the link below for more information and to register:

King’s College Economics Magazine – Marginal Utility #7

Welcome to the seventh issue of Marginal Utility – a student magazine from the King’s College Economics Department. Edited by Year 13 student Josh Grant this issue has articles on:

MU 7 cover.png

• Pension Tension – Harriet Butt (Year 12, Taylor)

• To Aid or Not to Aid – Josh Grant (Year 13, Marsden)
• What if New Zealand Elected Trump? – Benji Flacks (Year 13, Marsden)
• The European ‘Disunion’ – Tanay Mukherjee (Year 13, Peart)
• Too Demanding: Diagnosing NZ’s housing crisis – Geneva Roy (Year 13, Taylor)
• How much is Lionel Messi worth? Jacob Samuel (Computing Department)
• Gustav Mahler – Wealth Generating Musician – Warren Baas (Economics Department)
• The Paradox of Choice – Mark Johnston (Economics Department)
• Economics Bookshelf – three popular books published in 2016
• Economics Crossword
Click the link below to open the publication.

 

King's College Economics Magazine – Marginal Utility

Welcome to the sixth issue of Marginal Utility – a student magazine from the King’s College Economics Department. Edited by Year 13 student Amay Aggarwal this issue has articles on:

mu6 The Power of Loan-to-Value Ratios. OLIVER GILBERTSON (GREENBANK)

The Housing Market Crisis. HARRISON ZHANG (AVERILL)

The Trump Effect. AMAY AGGARWAL (PEART)

Beyond Gold Medals: The Realities of Hosting the Olympics. JOSH GRANT (MARSDEN)

Brexit – Making Britain Great Again? MICHAEL DAYA-WINTERBOTTOM (MARSDEN)

Monetary Policy Needs Help.  MARK JOHNSTON – (Economics Department)

The Economic Phenomena of Pokemon Go.  BENJI FLACKS – (MARSDEN)

Economics Bookshelf – TWO POPULAR BOOKS ON ECONOMICS

Quiz – WHERE ARE THESE BUILDINGS?

Click below to download:

mu-6-pdf

King's College Economics Magazine – Marginal Utility

Welcome to the fifth issue of Marginal Utility – a student magazine from the King’s College Economics Department. Edited by Year 13 student Amay Aggarwal this issue has articles on:

MU5The Sugar Tax  BY OLIVER GILBERTSON (GREENBANK)

China – fixing currency BY
HARRISON ZHANG (AVERILL)

The Interest Rate Limbo BY AMAY AGGARWAL (PEART)

Unfair Economics JOSH GRANT (MARSDEN)

TPPA: Good or Bad for NZ? MICHAEL DAYA-WINTERBOTTOM (MARSDEN)

High Frequency Trading – MARK JOHNSTON – (Economics Department)

Doing Good Better – WARREN BAAS – (Economics Department)

Economics Bookshelf – FOUR POPULAR BOOKS ON ECONOMICS

Quiz – WHO ARE THESE FAMOUS ECONOMISTS

Click below to download:

MU 5 copy

 

 

King's College student magazine on economics – Marginal Utility

MU 4Welcome to the fourth issue of Marginal Utility – a student magazine from the King’s College Economics Department. Included in this issue you will find articles on:

The cracking China
MARTIN LUK – MARSDEN HOUSE

Bridging the gap
AMAY AGGARWAL – PEART HOUSE

Game theory and the cold war
AMANDA NGO – TAYLOR HOUSE

Inflation compensation degradation (say it)
JAKE McCONNELL – GREENBANK HOUSE

Global oil prices
SHAAN KESHA – PEART HOUSE

Syriza’s rescue programme for Greece “ pure Keynesian policies”
MARK JOHNSTON – ECONOMICS DEPARTMENT

The King’s College ‘Phillips Society’
AMANDA NGO – PRESIDENT

BOOKSHELF- recently published economics books

Click below to download:

Marginal Utility 4

How to Speak Money – a new book from John Lanchester

Will Self called John Lanchester’s previous book on money and banking – the bestselling ‘Whoops!’ – as ‘the routemap to the crazed world of contemporary finance we’ve all been waiting for’. If ‘Whoops!’ was the routemap, then his new book ‘How to Speak Money’ is the phrasebook. It shows you that it’s possible to learn to speak the language of money. Possible, desirable and perhaps even necessary if we’re to avoid feelings of complete helplessness and bafflement when confronted with the big financial forces that shape our lives.