A report out today by the World Bank has urged a rethink on what aid spending should target. According to the report, there should be more focus on the justice system, policing and ensuring political stability, rather than on health and education.
Is this a new take on "trickle-down" economics ? Or is it reasonable to suggest that money spent on developing health and education systems in failed or failing states is a waste of money ?
Report is available here.
BBC background article available here.
Monday, April 11, 2011
Thursday, April 7, 2011
Patrick Honohan Suggests GNP-Linked Bonds
Governor of the Central Bank, Patrick Honohan, has proposed a new risk-sharing idea to deal with Ireland's seemingly unsustainable debt repayments. To put it very simply: when Ireland's GNP increases it should pay more and when the country's growth falls it should pay less back.
Apart from being a good idea, although one that will require many conditions and qualifiers to have a chance of being even reviewed by Ireland's partners, it also highlights Ireland's need to find a way to manage its huge debts.
FT article by Honohan here.
Wall Street Journal article disccuses it here.
Apart from being a good idea, although one that will require many conditions and qualifiers to have a chance of being even reviewed by Ireland's partners, it also highlights Ireland's need to find a way to manage its huge debts.
FT article by Honohan here.
Wall Street Journal article disccuses it here.
Monday, April 4, 2011
Wayne Rooney curses at cameras AND explains the Ricardian/Malthusian theory of rent economic rents
In the Financial Times, British economist John Kay dicusses that age-old question asked by people who don't "get" sport: Why do modern footballers get paid so much compared to their predecessors ?
In answering he applies the concept of economic rent* to the problem. This issue was first discussed 250 years ago by James Anderson, a Scottish farmer and economist who put forward his ideas about economic rent in An Enquiry into the Nature of the Corn Laws in 1777. He stated that "it is not the rent of the land that determines the price of its produce, but it is the price of that produce which determines the rent of the land". Seemingly a paradox exists, but, Kay explains, Anderson found that:
"The demand for corn determined how much land had to be cultivated: the worst land that needed to be brought into production to satisfy that demand would earn only the cost of production, and better land would earn rents that measured the value of their superiority. Who benefited from these earnings was a political issue"
These ideas would go on to form the Malthusian/Ricardian theory of rent although it is believed that Ricardo and others were not aware of Anderson's theories.
So why does Rooney earn relatively more than the great Stan Matthews ? Basically as demand for footballers increase, lower quality footballers are brought in, squads expanded, youth players paid more etc., to meet the demands of the public. The superior footballers (Rooney and to a lesser extent, Titus Bramble) will be able to dictate higher relative wages, although the extent of these is down to the negotiating skills of their agents.
At least, that's my understanding of it....
The other major reason is of course the huge increases in profits generated by clubs compared to the 1950s and the obvious impact this will have on the players.
Kay's article is available here.
Background to the Ricardian/ Malthusian theory of rent available here.
* = The excess payment for goods and services beyond the amount needed to bring the required factors of production into a production process and sustain supply.
In answering he applies the concept of economic rent* to the problem. This issue was first discussed 250 years ago by James Anderson, a Scottish farmer and economist who put forward his ideas about economic rent in An Enquiry into the Nature of the Corn Laws in 1777. He stated that "it is not the rent of the land that determines the price of its produce, but it is the price of that produce which determines the rent of the land". Seemingly a paradox exists, but, Kay explains, Anderson found that:
"The demand for corn determined how much land had to be cultivated: the worst land that needed to be brought into production to satisfy that demand would earn only the cost of production, and better land would earn rents that measured the value of their superiority. Who benefited from these earnings was a political issue"
These ideas would go on to form the Malthusian/Ricardian theory of rent although it is believed that Ricardo and others were not aware of Anderson's theories.
So why does Rooney earn relatively more than the great Stan Matthews ? Basically as demand for footballers increase, lower quality footballers are brought in, squads expanded, youth players paid more etc., to meet the demands of the public. The superior footballers (Rooney and to a lesser extent, Titus Bramble) will be able to dictate higher relative wages, although the extent of these is down to the negotiating skills of their agents.
At least, that's my understanding of it....
The other major reason is of course the huge increases in profits generated by clubs compared to the 1950s and the obvious impact this will have on the players.
Kay's article is available here.
Background to the Ricardian/ Malthusian theory of rent available here.
* = The excess payment for goods and services beyond the amount needed to bring the required factors of production into a production process and sustain supply.
Wednesday, March 23, 2011
Top 20 Articles in the American Economic Review
To celebrate the 100th anniversary of its first publication, The American Economic Review has released its "Top 20" articles, as selected by a committee consisting of Kenneth Arrow, B. Douglas Bernheim, Martin Feldstein, Daniel McFadden, James Poterba and Robert M. Solow.
Background article by the Economist available here.
Document with links to the articles available here.
So get reading on some of these monumental economic texts and wow your friends in the pub with your knowledge of the Kuznets Curve and the Cobb-Douglas theory of production.
Background article by the Economist available here.
Document with links to the articles available here.
So get reading on some of these monumental economic texts and wow your friends in the pub with your knowledge of the Kuznets Curve and the Cobb-Douglas theory of production.
Tuesday, March 15, 2011
Irish Times: The Psychology of Selling
The brilliant Mr. Patrick Freyne (ex-TV reviewer for the Sunday Tribune) has an article in the Irish Times on behavioural economics and the logical fallacies we, as consumers, fall for again and again. Read it here.
Sunday, March 13, 2011
Daniel Gros: Flawed Economics of the Competitiveness Pact
The Director of the Centre for European Policy (CEPS), Daniel Gros, has written a short article examining the logic behind the so-called Competitiveness Pact, a joint proposal from France and Germany to improve the Euro Area's competitiveness. The Pact led to a number of alternative proposals being offered, most notably one by the Presidents of the Commission and European Council.
The Pact will be debated at the European Council held on 24-25 March and we can expect sparks to fly over contentious issues such as the harmonisation of corporate tax rates and the retirement age. There are also calls for Wage Indexation to be abolished (this is where social welfare and other payments are calculated based on the average wage as opposed to inflation or price levels)
In his piece, Gros states that there are two underlying hypotheses which provide the basis for the Competitiveness Pact:
Read it at the Eurointelligence website here.
The Franco-German Competitiveness Pact is available here.
And some background on the issue is available on the Euractiv news website here.
The Pact will be debated at the European Council held on 24-25 March and we can expect sparks to fly over contentious issues such as the harmonisation of corporate tax rates and the retirement age. There are also calls for Wage Indexation to be abolished (this is where social welfare and other payments are calculated based on the average wage as opposed to inflation or price levels)
In his piece, Gros states that there are two underlying hypotheses which provide the basis for the Competitiveness Pact:
- If we fix (relative?) wages no external imbalances can arise since relative costs determine export performance.
- Higher productivity always means more ‘competitiveness’, and is thus always useful to reduce divergences.
Read it at the Eurointelligence website here.
The Franco-German Competitiveness Pact is available here.
And some background on the issue is available on the Euractiv news website here.
Tuesday, March 1, 2011
Happy Maths Day!
Such a shame it only comes once a year....
Here's a video by Professor Mark Thomas of the University of Oregon, who very kindly put up all his excellent introductory econometrics lectures on Youtube. Like every other econometrics lecturer in the world he has his own take on notation but the lectures are quite accessible and a great first step in learning more about what economics is based on.
NB. Lecture starts at the 12 minute mark.
Here's a video by Professor Mark Thomas of the University of Oregon, who very kindly put up all his excellent introductory econometrics lectures on Youtube. Like every other econometrics lecturer in the world he has his own take on notation but the lectures are quite accessible and a great first step in learning more about what economics is based on.
NB. Lecture starts at the 12 minute mark.
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