May
17
2012
There is something of a game of poker going on in the EU at the moment. On the one hand you have the anti-austerity parties in Greece, buoyed by their recent election success, stating for anyone who cares to listen that the Eurozone can’t afford for Greece to exit the euro, and as such Greece has a strong hand at the negotiating table. There is talk of demanding a restructuring of its debt, a debt moratorium, further write downs and a general renegade on its previous agreements with its lenders. On the other hand you have European leaders who for the first time are publicly stating that preparations are underway for a possible Greek exit (known as the Grexit). Whoever blinks first, Greece’s exit from the euro is looking more like and when, rather than an if.
At this stage it is impossible to know what impact Greece leaving the euro would have. On the surface, Greece’s total debt figure of €420bn is less, albeit only just, than the €480bn debt accumulated by Lehman Brothers when it went bankrupt in 2008 (source). Certainly the collapse of Lehman Brothers gave the world economy something of a heart attack, but that’s because it was, at the time, largely unthinkable and unpredicted. Hardly the situation with Greece today. Of greater consequence is the potential domino effect of Greece’s exit. In other words, economists are worried not about the impact on Greece, but on everyone else. Of particular concern are the other PIIGS (Portugal, Ireland, Italy and Spain), whose economic recoveries are tenuous at best. It could plunder the EU, and therefore the global economy, back into another sharp recession. Without Greece, the PIIGS turn to PIIS.
The reason there is little concern for Greece is that, economically speaking, it is already long past the point of no return. As Jeremy Warner writes in an excellent article in today’s UK Telegraph:
Without the euro, Greece fears, the dream of European modernity will be over, and they’ll be banished back to the Balkan deprivation from whence they came. If they would only open their eyes, they’d see that they are already there. It’s hard to see how things could get any worse. More than half of young Greeks are out of work, output is contracting at a rate which makes even the Great Depression seem positively buoyant, the stock market has lost more than 90pc of its value, and deposits are fleeing the country at the rate of €1bn a day. Greece has to all intents and purposes returned to being a pure cash economy. Against this catalogue of misery, Greece’s Balkan neighbours might actually seem to have something going for them.
May
14
2012
It appears that Japan has fallen in love with the idea of free-trade. It was announced yesterday that Japan, China and South Korea are starting talks to make a free trade area (“FTA”). To be a FTA, the countries involved are not permitted to use any protectionist measures, such as tariffs, subsidies or quotas, on any goods or services imported from the other FTA countries, although they are free to use protectionist measures against other countries. This new East Asian FTA would be significant – these three biggest economies in Asia have between them nearly 20% of the world’s GDP – a figure that is only getting higher. It would make for a significant force in global economics, and not that much smaller than the other two large FTAs: the EU (European Union) and NAFTA (North Atlantic FTA between USA, Canada and Mexico) with 27% and 28% of the world’s GDP respectively. The infographic below shows the key FTAs in the world today.
Free Trade Areas - www.wikipedia.com
This development is interesting because Japan is also in negotiations – albeit not officially – to join the TPP (Trans Pacific Partnership). The TPP would dwarf any other FTA, accounting for nearly 40% of the world’s GDP. The TPP is essentially NAFTA joining forces with some of the key economies in South America, Australasia and Asia. Although both the TPP and the East Asian FTA are in the early stages of negotiations, Japan acting as the only common member of both would be an fascinating development. It would open Japan up to free trade with every major economy outside the EU. This will be hugely beneficial to some Japanese exporters, especially the electronics and motor industry where they have a genuine comparative and absolute advantage. However, it would also require some painful restructuring of the Japanese economy as some sectors, in particular agriculture, would struggle to compete with much cheaper imports. Japan’s membership in both would also open up the possibility of the two combining, creating an enticing free trade area including China, Japan and the USA – the world’s three largest economies. This is some way off, and there are many obstacles along the way, but this would be a large step towards creating free trade around the world. It’s interesting, and not a little surprising, to see Japan at the forefront of that movement.
May
01
2012
A few of you have been asking questions regarding the end of year exam on May 28th, in particular what will be covered and how it will look. I have given details of both the SL and HL exams below. This will be the last formal assessment of the semester and the only homework you have between now and then is revision. The exam result will count as one summative assessment with respect to your end of semester grade. However it will have greater prominence when coming up with your predicted grades (for college applications).
Standard Level
The exam will cover everything we have done this academic year. The exam will be in two sections. Section one will be in IB paper one style questions (10 & 15 mark questions) – you will be given two micro questions and will answer one. Section two will be in IB paper two style (data response with 2, 2, 4, 4, 8 mark questions) – you will be given two macro questions and will answer one. Each section will take 45 minutes, so the exam is 1.5 hours in total.
Higher Level
Your exam will also cover everything we have done this academic year. The exam will be in three sections. Sections one and two will be as described above for the SL exam. Section three will be questions on the quantitative sections of the HL subject guide. Section three will be 30 minutes, so your exam will be 2 hours in total.
Apr
26
2012
Apologies for my absence. Below is the work I would like you to complete:
G10 History – 11.05-12.35
For those not doing the Meiji Restoration you can use this lesson as a chance to revise your history, especially with the mini-mock coming up on Tuesday. These two powerpoints may help you revise USCW – they cover the causes of the war and why the North won. For those who still wish to study Meiji, then this scan of a textbook might well help, as might this textbook that comes in two parts (part 1 and part 2).
G11 Economics (HL) 2.35-3.55
I would like you to watch this video about the Phillips Curve and then read this article and make a summary of what you learned from both. The summary should be around 250 words, and will almost certainly need to include a diagram or two. Please note that you do not need to know about the NAIRU, as that has been taken out of your syllabus. So just ignore those parts. If you have completed that task, please read this article.
Apr
18
2012
Bloom's taxonomy
Evaluation and synthesis (AO3) is one of the four key skills in IB economics, the others being knowledge & understanding, application & analysis and selection of appropriate techniques. It is also, by some distance, the hardest and students stand little or no chance of achieving a 6 or a 7 without it. In its simplest form, evaluation involves making a judgement based on evidence. Yet it is more challenging than it seems.
To start with we shall look at the evaluation command terms that you could face. Like some other IB subjects, in economics DP we know in advance which questions will require evaluation. It’s the 15 mark questions in paper 1 and the 8 mark questions in paper 2. So you only have three opportunities to demonstrate evaluation. Better make it good. The six command terms requiring evaluation are below. (* The final two are not officially IB command terms but have been used in the past).
- Compare and contrast… (e.g. compare and contrast a fixed exchange rate with a floating exchange rate).
- Discuss… (e.g. discuss the consequences of a government increasing interest rates).
- Evaluate… (e.g. evaluate the different government policies to reduce consumption of negative externalities).
- Examine… (e.g. examine the significance of PED for government in relation to indirect taxes).
- Justify*… (e.g. justify why the government was correct to proceed with the nationalisation of the oil industry).
- To what extent*… (e.g. to what extent if low inflation a more important government goal than low unemployment).
Different teachers use different methods to get their students to think about evaluation. The word I prefer to use is SPEARS, as in Britney.
- S – short run vs long run. This is where you assess the impact of decision in the short run and then in the long run. Will the decision fix one problem now only to create another in years to come? For example, a government nationalising a firm could, in the short run, have a positive economic impact as it lowers unemployment. However in the long run it could be far from beneficial as the firm’s reliance on the government makes it incredibly inefficient. As such you could argue that the nationalisation shouldn’t take place.
- P – prioritise your argument. During your essay you might have put forward two or three different arguments as to why a certain economic decision should take place, or perhaps you’ve explained a couple of reasons why a decision should take place and a couple of reasons why it shouldn’t. To evaluate you could prioritise your arguments by justifying which is the most important argument and therefore passing judgement on whether the decision should take place or not. What are the priorities of the society or the government?
- E – effectiveness. This is especially useful when evaluating government policies. To be effective a government policy needs to accomplish the goal it sets out to achieve. You can therefore evaluate a government policy but assessing whether that goal would be met. If you can argue that it might not be met then you can argue the policy should not be used as it will be ineffective. Is the cost of the policy too great a price to pay for what it achieves?
- A – advantages and disadvantages. This is possibly the simplest of the evaluative techniques, and is especially useful in macroeconomics. You could look at the advantages and disadvantages of a decision, such as a policy change, highlighting in reality which of the points you are making are most likely to occur. This way you can then suggest whether the advantages outweigh the disadvantages or vice versa.
- R – reliability of the data. It is quite legitimate to question the data that has been given to you. Often in paper 2 you will be given some data and asked to make a judgement based on it. Always assess from where the data has come. If it’s the World Bank then it’s probably legitimate. If it’s the central bank of a North Korea, perhaps less so.
- S – stakeholders. A stakeholder is any group that is impacted by a decision. It can include households, firms, governments, foreign firms, local communities, the environment, workers etc. Virtually every economic action will impact stakeholders, some positively and some negatively. You can evaluate how ‘successful’ an economic decision is by which stakeholders it impacts and which are the most important. For example you could argue that a decision that benefits the government but disadvantages foreign firms should be implemented. But which stakeholders are the most important?
Britney thinking about which economics evaluation tool to use
Whichever of the tools above you use, it is important that you identify what I call the ‘hinge word’. This is the word in the question on which your whole answer hinges. For example: “Evaluate the view that producers and not consumers are the main beneficiaries of an oligopolistic market” (paper 1 HL May ’08). The hinge word here is “main beneficiaries”. You whole argument, and evaluation, is who benefits most – not is oligopoly good or not. My evaluative tool of choice here would probably be to prioritise my arguments. I would give two economic reasons for why producers benefit most and then two for why consumers benefit most. My evaluation would be which of those arguments, in reality, is the most powerful and why. Finally, whatever arguments you make remember to PEE all over it: point, explain, example.
Apr
13
2012
Apologies for being away. The work that I want you to do has already been emailed to you. You can contact me by email during the lesson if you have any important questions.
Apr
11
2012
On Tuesday 24th April both classes will sit timed essays. You are to choose from one of the questions below and prepare to write both parts a) and b). You will have one hour in the class but will not be allowed any notes.
Either Question 1
- (a) Explain why a government might find it difficult to maintain a low rate of inflation as the economy approaches full employment (10 marks)
- (b) Evaluate the strategies that may be used to reduce unemployment, referring to more developed countries and less developed countries in your answer. (15 marks)
Or Question 2
- (a) Using one or more diagrams, explain the difference between the equilibrium level of national income and the full employment level of national income (10 marks)
- (b) Evaluate the proposition that the priority in government economic policy should be the maintenance of low unemployment (15 marks)
