| Welcome to the final set of news articles for the academic
year 2001/2. I hope that you have found the articles this year useful for
your studies. The next set of articles will appear in August.
John Sloman
|
News Item
1: House prices rising faster
| Relevant to: |
| Economics (4th edition), Chapter 2 |
| Essentials of Economics (2nd edition), Chapters 1, 2 |
| Economics for Business (2nd edition), Chapters 4, 5 |
| Property prices in the UK rose by more than 15 per cent over the 12 months to April 2002. Why has this property price boom occurred? Is it likely to continue? Will there be a property price crash in the not-too-distant future, or will there be a 'soft landing' with the rate of increase gently slowing? The following articles look at the facts and explore the arguments. |
| Questions | |
| 1. | How has the pattern of house price inflation around the UK changed in recent years? Why, do you think, has this change has occurred? |
| 2. | What has caused the current property price boom? |
| 3. | Consider whether it is appropriate to describe the current rise in house prices as a 'bubble'. |
News Item
2: Oligopolistic collusion between American oil companies?
| Relevant to: |
| Economics (4th edition), Chapter 7 |
| Essentials of Economics (2nd edition), Chapter 4 |
| Economics for Business (2nd edition), Chapter 12 |
| Petrol (gasoline) prices have been rising in the USA. Some commentators have claimed that this is partly the result of collusion between the oil companies. The following article, from Time Magazine of 30 April 2002, examines the evidence. |
| Questions | |
| 1. | Why have mergers occurred in the US oil industry? |
| 2. | If there is no open collusion between oil companies, does this mean that there are no 'competition' issues about which consumers of oil should be concerned? |
| 3. | Why are there cyclical fluctuations in oil prices? For what reasons are these fluctuations greater than in most other industries? |
News Item
3: The future of capitalism
| Relevant to: |
| Economics (4th edition), Chapters 1, 11, 15, 25 |
| Essentials of Economics (2nd edition), Chapters 1, 6, 7, 8 |
| Economics for Business (2nd edition), Chapters 18, 25, 28, 31 |
| The past year has seen the disaster of September 11, the collapse of Enron, a severe economic crisis in Argentina and a decline in stock market values. Does this mean that capitalism is seriously flawed, or does the recent recovery in America and elsewhere prove that capitalism is robust even in the face of severe shocks? |
| Questions | |
| 1. | Make out a case for the future of capitalism being bright. Explain what you understand by the term 'bright'. |
| 2. | Make out a case for the future of capitalism being bleak. Explain what you understand by the term 'bleak'. |
| 3. | What reforms would help to ensure that the future of capitalism is bright rather than bleak? |
News Item
4: Long working hours in the UK
| Relevant to: |
| Economics (4th edition), Chapter 9 |
| Essentials of Economics (2nd edition), Chapter 5 |
| Economics for Business (2nd edition), Chapter 17 |
| British workers work some of the longest hours in Europe. At the same time, productivity per hour is less than in many other European countries. The following two articles, from the Independent of 30 April 2002, contrast the situation in Britain and France. |
| Questions | |
| 1. | How can worker productivity be measured? |
| 2. | What determines worker productivity? How is this related to the number of hours worked? |
| 3. | Why are working hours in the UK much longer than in many other European countries? |
| 4. | What would be the economic impact on the UK economy of adopting the French policy of limiting the working week to a maximum of 35 hours? |
News Item
5: Taxing plastic bags?
| Relevant to: |
| Economics (4th edition), Chapter 12 |
| Essentials of Economics (2nd edition), Chapter 6 |
| Economics for Business (2nd edition), Chapter 21 |
| Some 10 billion plastic bags are given away free very year by supermarkets in the UK. Most of these end up either in landfill sites or littering the countryside. Some countries have taken tough action to tackle the problem. In Ireland, a tax of €0.15 is imposed on each new bag and supermarkets are required to pass this on to consumers. Bangladesh has gone further: it has banned the use of plastic bags entirely. What should the UK government do? The following articles, from BBC News Online explore the alternatives. |
| Questions | |
| 1. | Why does giving plastic bags away free by supermarkets lead a socially inefficient level of their consumption? Use a diagram to demonstrate this. |
| 2. | How would you determine the optimum tax to charge on plastic bags? |
| 3. | Compare the relative benefits of taxing and banning plastic bags. |
News Item
6: Tackling Britain's transport problems
| Relevant to: |
| Economics (4th edition), Chapter 12 |
| Essentials of Economics (2nd edition), Chapter 6 |
| Economics for Business (2nd edition), Chapter 21 |
| In 1998, the UK government published a White Paper setting out a 10-year plan for transport. In May 2002, the House of Commons Transport Select Committee published a damning report, arguing that the 1998 plan was 'ill-balanced, incomprehensible and incoherent.' The following articles from the Observer and the Guardian look at the arguments in the select committee's report and generally ask what can be done to avert increased gridlock on the roads. The final link is to the White Paper. |
| Questions | |
| 1. | Why does the current system of allocating transport resources lead to an under-use of public transport and bicycles and an over-use of cars? Use a diagram to illustrate your answer. |
| 2. | What are the main criticisms made by the Transport Select Committee of the government's transport plan? |
| 3. | What determines the price elasticity of demand for car use? How does the price elasticity of demand affect the suitability of congestion charging as a means of reducing congestion? What could be done to make demand more price elastic? |
News Item
7: Energy deregulation in California
| Relevant to: |
| Economics (4th edition), Chapters 11, 12 |
| Essentials of Economics (2nd edition), Chapter 6 |
| Economics for Business (2nd edition), Chapters 20, 21 |
| In 1998, California partially deregulated its electricity market, allowing competition at the wholesale level, but fixing prices at the retail level. The years since then have witnessed blackouts and the insolvency of the state's two largest power distributors. The following linked article, from the Financial Times of 22 may 2002 examines the working of this partially deregulated market and the abuses that have taken place. |
| Questions | |
| 1. | Describe the system of deregulation that was adopted in California. |
| 2. | Why did it lead to the insolvency of certain power distributors? |
| 3. | How did energy traders manage to bid up the wholesale price of energy? |
| 4. | Could regulation have been more successful if differently designed? Explain. |
News Item
8: Measuring health service performance
| Relevant to: |
| Economics (4th edition), Chapters 3, 11, 17 |
| Essentials of Economics (2nd edition), Chapters 6, 8 |
| Economics for Business (2nd edition), Chapters 19, 29 |
| The increased expenditure on health announced in the Budget by the UK Chancellor, Gordon Brown has led many to question just how much improvement will be achieved from extra expenditure and how these improvements will be monitored. In the following article, taken from the Financial Times of 24 April 2002, Samuel Brittan explores some of the difficulties in achieving improvements in the National Health Service (NHS) when market forces are lacking and when the indicators of health care output can be questioned as to whether they genuinely measure the benefits experienced by patients. |
| Questions | |
| 1. | Why are the benefits of health care so difficult to measure? |
| 2. | What role can 'trust' and 'professionalism' play in ensuring 'value for money' from public expenditure on health care? |
| 3. | In what ways could market forces play a larger role in the NHS? Discuss their merits and problems. |
News Item
9: US recovery: will it continue?
| Relevant to: |
| Economics (4th edition), Chapters 13, 16 |
| Essentials of Economics (2nd edition), Chapters 7, 8 |
| Economics for Business (2nd edition), Chapters 25, 28, 29 |
| The US economy has grown in recent months after the recession of 2001, but will the recovery continue? One of the key factors affecting recovery is consumer and business confidence. As the first two articles show, the messages here are mixed. Also, as the third article shows, there are still some underlying weaknesses in the economy. |
States Remain Gloomy Over Speedy Economic Recovery (Washington Post 16/5/02)
Despite a Year of Upheavals, Economic Optimism Is High (New York Times 21/5/02)
A hard act to follow (The Economist 2/5/02)
| Questions | |
| 1. | Why is consumer optimism generally high in the USA? |
| 2. | What are the current weaknesses of the US economy? |
| 3. | What could start to erode consumer confidence? |
News Item
10: The Australian economy
| Relevant to: |
| Economics (4th edition), Chapters 13, 14, 22 |
| Essentials of Economics (2nd edition), Chapters 7, 10, 12 |
| Economics for Business (2nd edition), Chapters 25, 26, 30 |
| Despite the recession or slowdown experienced in most developed countries in 2001, the Australian economy boomed and has continued to do so. Why has this been so? The following linked article, from The Economist of 4 April 2002, offers an explanation. |
| Questions | |
| 1. | What reasons are given for the ability of the Australian economy to 'shrug off' the global downturn? |
| 2. | How has the depreciation of the Australian dollar helped the Australian economy? |
| 3. | Are there any economic problems on the horizon that could jeopardise the continued rapid growth of the Australian economy? |
News Item
11: Recovery on the way in Japan?
| Relevant to: |
| Economics (4th edition), Chapters 13, 14, 16, 18, 19, 24 |
| Essentials of Economics (2nd edition), Chapters 7, 8, 9, 12 |
| Economics for Business (2nd edition), Chapters 25, 26, 27, 29 |
| The Japanese economy seems to be recovering at last, but will this recovery be sustained? The following two articles look at the prospects for and potential threats to continued economic growth. |
| Questions | |
| 1. | Why is the Japanese economy growing so rapidly at the moment? |
| 2. | For what reasons might an appreciation of the yen be seen as undesirable? In what ways can the Bank of Japan intervene to prevent further appreciation? |
| 3. | What could cause Japanese growth to falter? |
News Item
12: Current UK and US monetary policy
| Relevant to: |
| Economics (4th edition), Chapters 18, 19, 20 |
| Essentials of Economics (2nd edition), Chapter 9 |
| Economics for Business (2nd edition), Chapters 27, 29 |
| Both UK and US interest rates have been kept on hold. This was the decision of the Bank of England's Monetary Policy Committee and the US Federal Open Market Committee respectively. What was the thinking behind this? The following articles look at the reasoning. |
| Questions | |
| 1. | Why have the monetary authorities in both the UK and the USA decided to keep interest rates on hold? To what extent are the reasons given similar or different? |
| 2. | Why are future movements in interest rates in both countries likely to be upwards? |
| 3. | What will determine the timing of any rises in interest rates? |
News Item
13: Trade wars: the latest skirmishes
| Relevant to: |
| Economics (4th edition), Chapters 23, 25 |
| Essentials of Economics (2nd edition), Chapter 11 |
| Economics for Business (2nd edition), Chapters 22, 31 |
| The imposition of tariffs by the USA on steel imports and increased support for American farmers has led to criticism from around the world and plans for various retaliatory measures. The following articles look at some of the reactions from various countries. |
| Questions | |
| 1. | What actions have the Chinese, Japanese and European Union taken in response to the US measures? |
| 2. | In what sense can trade protection be seen as a 'negative sum game'? |
| 3. | Is it in the interests of countries suffering from US protectionism to abide by WTO rules? |
News Item
14: Hong Kong: now in second place to Singapore as Asia's best place to
do business
| Relevant to: |
| Economics (4th edition), Chapters 22, 23 |
| Essentials of Economics (2nd edition), Chapter 11 |
| Economics for Business (2nd edition), Chapters 22, 23, 30, 31 |
| According to the Economist Intelligence Unit's business environment rankings, Hong Kong has slipped from Asia's most business friendly country and been pipped at the post by Singapore. The following press release of 9 May 2002 from the Economist Intelligence Unit, explains the new rankings. |
| Questions | |
| 1. | Why has Hong Kong slipped to second place in Asia and to 11th place in the world rankings? |
| 2. | What are the most important factors that make a country attractive to business? |
| 3. | Is a country that is attractive to business also likely to be an attractive place in which to live? |
News Item
15: Which country is next to join the euro?
| Relevant to: |
| Economics (4th edition), Chapter 25 |
| Essentials of Economics (2nd edition), Chapter 12 |
| Economics for Business (2nd edition), Chapter 31 |
| Denmark, Sweden and the UK are the only three members of the EU that have not adopted the euro. Denmark and the UK do not have to join if they do not wish and the Danish electorate decided in a referendum not to adopt the euro. But what of the UK and Sweden? Sweden is committed to join if its economy is sufficiently convergence with the eurozone. The UK government has agreed to put membership of the euro to the electorate in a referendum if five economic tests are passed. The following articles look at what is likely to happen about UK and Swedish membership. |
| Questions | |
| 1. | Which of the euro entry convergence criteria does Sweden pass and which does it fail? |
| 2. | Examine whether the Chancellor's five tests are currently passed by the UK and why. Why is there scope for disagreement? |
| 3. | Why does the assessment of the appropriate sterling/euro rate for UK membership of the euro depend on what happens to the dollar? |
News Item
16: Peter Bauer
| Relevant to: |
| Economics (4th edition), Chapter 26 |
| Essentials of Economics (2nd edition), Chapter 11 |
| Economics for Business (2nd edition), Chapter 31 |
| Peter Bauer, one of the most famous development economists of all time, died on 3 May 2002. A day before his death, The Economist published the following article looking at his life and work. |
| Questions | |
| 1. | Why, according to Bauer, does reliance on market forces encourage economic development? |
| 2. | What criticisms did Bauer make of foreign aid? |
| 3. | Provide a critique of Bauer's arguments. |
News Item
17: Bono and the US Trade Secretary visit Africa
| Relevant to: |
| Economics (4th edition), Chapter 26 |
| Essentials of Economics (2nd edition), Chapter 11 |
| Economics for Business (2nd edition), Chapter 31 |
| Towards the end of May, the US Treasury Secretary, Paul O'Neill, and the U2 lead singer, Bono, began a 10-day visit to various African countries. The following two articles, from AllAfrica.com of 21 May 2002, look at the issues they would be seeing and discussing. |
| Questions | |
| 1. | What is the AGOA programme? What contribution could it make to the relief of poverty in Africa? |
| 2. | How is the US farm Bill likely to affect African agriculture? |
| 3. | Is it possible for Africa to achieve the necessary economic growth to relieve its crippling poverty without substantial cancellation of debts? |