The Economist

Today's post is going to be about The Economist. Reason: I've been made the Student Brand Ambassador for The Economist on campus at the University of Birmingham. Therefore, my role is to promote the brand to students on campus - however it can also be relevant to anybody with an interest in current news, whether it be economic, financial or political.

In general terms, The Economist is a fantastically well informed weekly newspaper that can be delivered to your door. Each issue gives a brief run-down of the political and business news of the week, then further goes on to give in depth articles on matters affecting Britain, the US, Europe, Asia, The Americas, business and finance.

The main audience I'm targeting, however, is students. The Economist acts as excellent supplementary reading for those studying degree courses in economics, finance, politics and many more. For students, this is invaluable. I found in my first year at university that having knowledge on current affairs was essential for my exams, with questions asking for real life exams to back up concepts being discussed. The fact I regularly read The Economist meant I was in a position to answer these questions. Second big selling point (similar to the first, I know) relates to the job market. Through personal experience, I've found out that interviews for spring weeks/internships/graduate jobs(I assume) all require you to know how your chosen industry is being affected by current affairs. A degree alone is no longer good enough, you need a lot of further knowledge about your chosen sector - and The Economist is a good way of getting this. The final selling point is for referencing terms. The deal gives you full access to The Economist online which gives you a fully searchable archive dating back to 1997. Perfect for pulling up past news as a reliable source for referencing in coursework and essay tasks.

The student deal currently being offered is a staggering 90% off of the standard price. It is now possible for students to get themselves 12 issues for £12, which will cover you for a term at university. After that period has expired you'll be paying £38 per 13 issues, however the offer is on a completely no contractual basis. The deal can be cancelled at any time, meaning as soon as the offer period has expired you can walk away from the subscription if you so wished. In addition, the subscription can paused for up to a period of 4 weeks. This is extremely useful during exam periods when there isn't the time to read and when on holiday or away from the home. The subscription can be restarted again with the click of a few buttons.

What's more if you sign up now you get a free mini speaker!

So, here's a brief summary of what The Economist is offering to students:

- 12 print issues for £12

- No contract, cancel the subscription at any time.

- Full access to The Economist online - giving an archive of news dating back to 1997.

- The ability to pause your subscription for up to 4 weeks.

- All of this available on your smart-phone and tablets. (iPhone, iPad, Android devices, Blackberry)

- Free mini speaker.

Follow this link to subscribe now: The Economist Subscription

If there's any other questions about The Economist feel free to comment and I'll be very happy to help you out as soon as I can.

Cheers guys.

Using Your First Year of Economics Wisely...

Firstly, feel free to write off any of the drivel I spurt out here as rubbish - this will be coming from my own personal experiences, and I know everyone is different. So today I'm going to try and give some advice into how to spend your first year studying economics at university to set yourself up for the future. I started my first year fairly clueless about how to move forward and help myself pursue a career in finance - so I contacted a third year friend who has tied down a graduate job at an investment bank. I took that advice on board and used it to steer me in the correct direction. I feel if I had known what I do now before even starting my degree I'd be better placed, but that's life and the benefit of hindsight. I'm going to go through three main points: studying, interning and 'other stuff'.

So, firstly, the studying. A lot of the people you meet at university will tell you "it's only first year, it doesn't count". Ok, yes, that is partly true. At most universities what you achieve in your first year has no effect on your final degree classification. Most will have it in their heads that they only need to achieve the bare minimum to pass, 40%, anymore would be wasted efforts. I disagree totally with this. When you get into your second year and things get serious, the only thing anyone has to go on regarding your academic ability is your first year grade. So they may see a 42% average and get the wrong impression, you could be the smartest guy alive. However, try hard in your first year and achieving a good grade isn't that difficult. Put the effort in and reap the rewards. A solid 2:1 in your first year is a great way to start your degree, it shuts no doors in your face - and in fact opens a lot. My first piece of advice for your first year studying economics would be to take it seriously, aim for a decent grade.

My second point is interning. This is the information I could really have used before I started my degree - but I was lazy and didn't put the effort into researching. My fault entirely. The bottom line is, if you want to enter the finance sector after completing your degree you need some experience under your belt. The best way to get this experience is to intern. Internships are commonly done during the Summer of your penultimate year, but you can get a head start. Many firms offer what is known as a 'Spring Week' during first year. This is essentially, as the name suggests, a week during Spring spent at the firm learning the ropes and getting an insight into the operations undertaken there. It can lead to a fast track to a second year Summer internship, which is fantastic. These aren't a necessity though, I never got a Spring week because I started applying too late, but they sure will help. Applying early is my advice. Applications for some firms can open as early as August, and as they recruit on a rolling basis getting in there early is the best bet. I applied in late December/early January and didn't even get a look in.

My third point is do 'stuff'. Ambiguous, I know, but you need to get out there and do as much as you can in the first year. Join societies, go to events, network.. everything will help. Even if it doesn't seem like its helping, it isn't doing any harm. The likelihood is that your CV will be fairly dull before going to university, you need to spend first year sprucing it up - doing things that show you'd be a great catch for some firm in the future. Get on committees for societies, volunteer, these sort of things all make your CV look good. And it needs to. Talk to people, get numbers and e-mail addresses. Having a large network of people you can talk to is vital - you'll hear it a lot but it's definitely 'who you know' that gets you places nowadays. You'll be surprised how much you can benefit from befriending and staying in contact with just a few people. So, my third tip for first year is to build up the CV fodder.

I hope my advice is helpful to some, if not then I apologise for taking up your time and I'll ask you nicely to bugger off my blog. If you want to ask any questions about being a first year economics student with a goal of the finance career then feel free, I'll be happy to answer. Best of luck. 

Economics at the University of Birmingham

My first year at the University of Birmingham came to an end last Friday. I finished my last exam at half past 11 and now I have an overwhelming feeling of freedom. Too much so, perhaps. I have nothing to do, hence why I'm here. I wanted to give my opinion on the University of Birmingham, and the economics course they offer. I'm going to try to be honest, but of course I have the potential to be bias so feel free to ignore every word I say. There will be a few words of advice towards the end.

I'll start by saying that I've loved my first year at University. It's been great. I've enjoyed pretty much all of it - but it did fly by, unfortunately. It seems only yesterday I was moving my stuff in and saying goodbye to friends from home. If I had to quantify my first year studying economics at the University of Birmingham it would be a solid 8 out of 10 (I believe that nothing is perfect, so an 8 is pretty damn good coming from me).

'Old Joe'

As far as the University as a whole goes, there are plenty of positives. The campus is talked about a lot - it's a beautiful campus, centring around the main attraction 'Old Joe', and it doesn't get that reputation for no reason. It even looks good in the rain. It almost makes you want to walk on to campus for your 9 o'clock lecture! Understandably, having a nice environment around you for your 3 years+ of studying is important - it really does help. The transport links are also a massive benefit. Having an on-campus train station that can take you to Birmingham New Street in 10 minutes is invaluable. It makes the trip home/back to university for holidays so much easier and less stressful, as well as giving you easy access to a great city in your free time. I'd recommend getting a 16-25 railcard if you plan on using the station a lot, the railcard makes a return journey into New Street only £1.40 and you can also use it to get a third off trains home. Perfect. Amenities on campus are also pretty awesome. I love my coffee, so being able to pick up a Starbucks or a Costa in the middle of campus is great. The queues aren't even that big as you might expect, and it's normal pricing. There's also the farmers market for all of your fresh fruit and vegetables which is a neat touch.

The walk to campus during the snow

Everything of course isn't perfect, there are some downsides which I'll even admit to. Firstly, although this depends on what sort of person you are, the accommodation leaves a fair bit to be desired. Although I can only speak for the halls I live in, I assume it's a similar story for the others. For what you're paying you may expect a lot more. I've paid over £4,000 a year for my room and with that I get a flat with one shower, two toilets and a kitchen that I'm sharing with 4 others. The rooms are averagely sized. The biggest problem is from above. The management seem very unwilling to put any effort into helping out students. I met with my halls manager twice about issues in my flat that were affecting me and my flatmate and she virtually laughed us out the door - not ideal, but if you have thick skin you probably won't meet many problems. The maintenance service is also pretty slow - expect at least a 2 day delay when it comes to fixing broken things in your flat. We had to cook for a week using torchlight because our kitchen light broke and essentially bath in the shower because of a blocked drain. Another slight issue is location for decent food shopping. If you're a food delivery sort of person then ignore this, but if you're like me and you actually like going to the shop and picking out your own things then there's a slight problem. You get an Aldi, a Sainsbury's, a Tesco and a Morrisons nearby, but all are about a twenty minute walk. This of course limits the amount of stuff you can actually buy to the amount you can carry in bags, meaning you may have to go a few times a week - which can be a bit of a pain.

The course itself was very good. I went with straight economics, but there was plenty of scope to vary that a bit - maybe put in a language, or go down a more mathematical route. I liked the fact I could cater my degree to my own preferences, despite still sticking with pure economics. There's a good balance of modules in first year: a few maths-y ones, some pure economics and then more applied and specific modules which give you a good introduction to the whole subject and assist you when it comes to picking modules in the second year. On that note, for the second year you get to choose 6 out of the 12 modules you will study - so there is a lot of freedom for you to make your degree as appropriate to you and your aspirations as possible. The teaching quality is as good as I expected - I do feel I've learnt a lot in this first year, despite it of course not really counting for anything. The office hours of lecturers are always available if you're having any issues with the work and they're more than happy to help you over e-mail in the hours when their office isn't open. One of the big debates nowadays is how the university are spending our £9000 tuition fees - but I think the economics department is doing it well. We get all lecture slides printed out for us, which is good when it comes to note-taking and the revision period. We also get a personal tutor that we can see with any issues and an economics office staffed with friendly people who are always willing to help. I'd say that money was well spent relative to other departments in the university.  

One little fault I had with the course was that one of the modules was made up of 50% business studies. I mean, no disrespect to business studies students, but that wasn't really the sort of stuff I wanted to be learning on my economics degree. It's not very relevant to me and thus I found it frustrating. Especially when it came to revising for the exam, I couldn't focus or concentrate on learning the material because it just didn't interest me. Although the boundaries between economics and business studies can be blurred at times, this module definitely took a step over which I wasn't best pleased with. My second problem is the library. This is probably an issue in all other universities at exam time, but I noticed it was particularly difficult to even get a space during April and May, let alone get a computer. The solution would be to get up at 8 am and get in there before the crowd, but that isn't always ideal. I toyed with taking my laptop down there to use, but found the Wi-Fi to be infuriatingly unreliable and I had to just stay at my flat to revise. There could be an improvement in this area. However, the next big investment from the university is a re-housing of the library so that could solve the issues.

My 'average' sized bedroom

I'd like to conclude by saying that Birmingham is a great place to study. It's an awesome city, everything you need is right on your doorstep and the University is fantastic. It's highly rated and will take you places in life. I do have some tips for you, though. First, try hard in your first year. Many people will tell you that the first year is a doss and 40% is all you need to continue to second year. Yes, that's true, but 40% doesn't look great on the CV, and if you have real aspiration you're going to want to be doing internships during the Summer of second year. A 2:1 minimum in first year is needed to do these internships, and that will take some commitment and some work. My second piece of advice is to dive in to everything. So many opportunities will present themselves in such a short space of time. Try as much as you can and get involved in everything that takes your fancy. If it means little sleep, so be it - you won't look back and remember the nights where you got plenty of sleep. "C.V, C.V, C.V" will be hammered into you for the first few weeks, and the only way to make yours look good is to do stuff, get involved and experience things. Good luck in your ventures, and I'll potentially see you at Birmingham next year. Laters.

Sam.

The Transformation of Policy Between the Wars

Immediately after the First World War, the government's aim for policy was to get the economy back to the 'normality' experienced prior to 1914. This sort of thing included the government playing a limited role in the economy, more integration with the world economy and restoration of the gold standard, free trade and a balance budget.

Initially these three final points are achieved. The budget is eventually balanced, albeit a higher budget than previous years due to the increase social spending and maintenance of the national debt. During the 1920's the policy of free trade is also pretty much restored. Britain gets back on the gold standard in 1925 at the rate of £1 = $4.86. Germany and France both rejoin the gold standard at a similar time, along with most other leading economies. Why did we return to the gold standard you may ask? Well, firstly it helped achieve the restoration of pre-war 'normality'. Also, it aimed to try and stabilise the currency which would in turn help out trade. Another feature of the gold standard was to allow the monetary system to function on its own. What I mean by this, is that if the country runs a payments surplus then gold will flow into the country, interest rates will be decreased so wages and prices will fall. This will in turn cure the surplus. It also works the opposite way for a payments deficit. A final point is that the gold standard was a means of stopping politicians from meddling with the money supply!

However, pre 1914 the gold standard worked but after the war and during the 1920's it just didn't. There is a list of potential reasons for this:

• Why the gold standard worked pre-1914:
• It was developed gradually over time.
• Capital and labour was freely moving.
• The central bank could use interest rates to protect the currency, independent of the government. 
• London was still a financial centre.

• What changed in the 20's?
• There was a rush to return to the gold standard.
• More protectionism and less migration due to barriers.
• Central banks were under pressure from politicians.
• Paris and New York now competing against London as financial centres. 

Mr. Keynes pops up again in this debate. He pointed out that British prices had risen faster than the US', so starting at the same £1 = $4.86 rate would be an overvaluation of the pound. Although this shouldn't have matter because the gold standard should re-adjust prices, Keynes doubted it would work. He thought it would have bad domestic effects including interest rates needing to be kept at 4.5-4.5% and due to this borrowing would become expensive and investment would suffer.

The world slump is the next chronological step in the economic history of Britain. The recession of 1929 - 1931 started because of the Wall Street Crash in the US. This meant massive balance of payments problems. In 1931 came the European Banking Crisis and so in Autumn of that year Britain was forced off of the gold standard. This was first portrayed as a temporary change, but gradually the realisation came about that it was for good. Interest rates were cut to 2% to encourage borrowing and investment which would boost the economy again! Amazingly, there was a recovery. GDP rose as investment rose and Britain actually now compared well with other global economies. It would be easy to say all of this was because of the gold standard, but it isn't true as many other factors were also contributing to the recovery of the British economy. What the slump did cause, however, is the abandonment of free trade between 1931 and 1932. 

Keynes had the idea that investment from the government was something that was necessary for the economy. But, the treasury wasn't in agreement with this theory. They believed it would unsettle foreign investors and worsen the national debt. Keynes thought that there was no point in cutting wages because demand and consumption would suffer. What was needed was public investment which would boost the economy via the multiplier effect. The treasury argued it would be inflationary and any more borrowing would get out of control. The only time borrowing was allowed was in a one-off circumstance for rearmament!

Thanks for reading again guys, that'll be it for economic history for a while... I promise! Haha.

Sam. 

The Economy During Interwar Britain

We've seen how the economy functioned prior to war and during the First World War in the last few blog posts, now we'll move on to the economy between the two world wars. Instability is the major recurring theme in this period. We see two major recessions, one between 1920 and 1922 and another from 1929 to 1932. There's also a slight one between 1937 and 1938, but this wasn't as sever. If you look at this in context with the rest of the world, Britain's economy is actually relatively stable yet still under-performing comparatively to the other large economies. If we look at growth statistics we can see that in the latter half of the interwar era the economy was growing at a respectable 2.2%, however before this the economy actually shrunk and therefore the growth average for the whole interwar period (1913-1937) isn't at all impressive.

There were many weaknesses to the interwar economy, as you'd expect. Firstly, international trade was falling. We'd relied so heavily on it in the 1870-1914 period but now it was dwindling rapidly. In 1913, international trade and services was at 30% of GDP. In 1938 it was only 15%. The levels of trade did not exceed the 1913 levels until after the Second World War. One of the causes for this fall in trade is that world output grew faster than world trade. Essentially this meant that demand for Britain's goods would fall because the market was getting more competitive as supply was increasing. Here are some statistics to back that point up:

• 1929 - There is 80% higher production of manufactured goods than in 1913.
• Britain's market share for manufactured goods fell from 30% in 1913 to 22% in 1937.

An example of this downturn in trade can be seen in the cotton industry. In 1914, Britain was a net exporter of cotton, with 80% of what was produced being shipped abroad. Other markets around the world, such as India, began to become self-sufficient behind tariff walls and therefore didn't import as many. Other countries such as Japan began to produce cotton too at a lower cost because of the low-wages. Because of this British cotton exports halved over the period 1913 to 1936.

Another issue with the economy is the mass unemployment. In the good years it's still at 8%, in the worse years it could reach as high as 17%. However, the issue was mostly geographical, or regional. The north of England, Wales, Scotland and Northern Island were the worst affected. These ares tended to rely a lot on the older Victorian industries such as coal and cotton. In the South and the Midlands, new developing industries were adopted, such as cars and chemicals and therefore unemployment here was at a reasonable level. Old industries were failing and not enough new jobs were being created to keep the unemployment down. 

Some economists began to argue that the problem with the economy was an inflexible labour market after 1914. Why was this? Well, trade unions had gained a lot more power, there were generous unemployment benefits giving no incentive to find work and institutions could set their own minimum wage rates. This made wages pretty stuck and unable to change much to changes in prices. However, it isn't crystal clear that wage flexibility was that much greater than before 19144. Benefits only got better as time went on. Keynes got involved and argued that government monetary and fiscal policy was the problem... debate ensues!

Thanks for reading!

Sam. 

The Role of the State and the Challenges of WWI, 1870 - 1921

This post will go into a little bit more depth about how the government ran the economy and the challenges it then faced as Britain went through the First World War. Prior to WWI, Britain was referred to as a 'night watchmen' state. This means the state didn't try and an direct or manage the economy, they only intervened when it came to necessities such as health and safety, company law, basic education and the provision of welfare.

The aim was to maintain a balanced budget and fund any spending through taxation. Due to this, not much really was spent because it would only be justified if the taxpayer paid for it, and to avoid a backlash from high taxes the tax rate remained constant. After 1890 strain on the budget begins to show. Higher grants were needed for welfare and education and defence spending, especially for the navy began to rise. Spending as a percentage of GNP grew. Government spending in 1913 was roughly £305 million, compared to £130 million in 1890. Due to this increase in spending, taxes had to rise to fund it all. A super tax on incomes was introduced in 1909 and income tax for the better off increase to 6% in the same year.

However, despite all this government activity was still relatively constrained. Rules were still in place to make sure the budget remained balanced and spending was only at 13% of GDP in 1913. Some economists believed that the limits on taxation had been reached.

When the war begins in 1914 the government take a 'business as usual' approach. The assumption was that the war would be a short one and that Britain's main role would be more financial than military. Things have to change, though, as the government begins to realise that the war isn't going to be a short one. The railway and sugar industries are a few industries that were controlled at the start of the war and a large army had to be raised, needing to be fed and armed.

This leads us onto the munitions crisis. Arms factories cannot cope with the demand for munitions and shell shortages begin to develop. The reply from the government is to set up the Ministry of Munitions in 1915. This controlled over 2 million workers by 1916 and started to spend a lot of money on the production of more ammunition. Between the years of 1916 and 1917 a lot more industry came under government control, including: shipping, mining and food and raw material imports.

One of the big issues that comes up during war is labour, and it's no different in this case. Women and unskilled male labour are brought in to work in the factories. Unions agree that unskilled workers are allowed to now do tasks that were previously only allowed to be done by skilled workers. Strikes are banned (in theory), but this essentially fails as 11 million working days were lost between 1917 and 1918 due to strikes. As incentives to direct workers into the essential industries, better pay is offered.

The war has to be financed, of course. This meant a massive increase in government spending; up to 59% of GDP which was roughly £2,800 million. 72% of the money is funded through borrowing, leaving to a large national debt being racked up. This is very problematic, the national debt reaches the level of £6.1 billion in 1919 and of course servicing the debt with interest payments because a massive drain on the economy.

Let's move on to the post war stage now. Things look good and bad in a sense, there is a post-war boom due to a lot of money being in circulation. This could be seen as a good thing, however the massive demand outstrips output and this leads to runaway inflation. The other issue at the time was demobilization. This all gets too much and we enter into a slump between 1920 and 1922, by 1921 this is a recession. GDP falls by 7% and unemployment is up at 2.2 million. The big debate is whether this was avoidable or not? Some say it was unavoidable, world conditions were awful and it was impossible to avoid the effects. However, government policy could be said to have worsened things. Policy was too lax in 1919 yet too tight in 1920 and 1921, which didn't help the economy.

Have your own say! That's it for this part of the economic history of Britain, thanks for reading.

Sam.

'Dilemmas of an Economic Theorist'

Just a quick one here, thought I'd pass on a link to a great article I've just read by Ariel Rubinstein. He's written a paper named 'Dilemmas of an Economic Theorist' in which he questions the place of economists in the real world. Whether our models and our input are actually having a positive impact on the real world. It's a very engaging and entertaining read, much different from your standard academic paper. The conclusion is that the models we economists create are much like fables or fairy-tales as we make our models free of extra data and annoying diversions, just like in a fable. Have a read, here's the link:

Dilemmas of an Economic Theorist

Let us know what you think of it. I'll be back later in the week with another post, so have a good few days! Cheers guys.

Sam.

'Slowing Down and Falling Behind' - Prof. Charles Feinstein

Professor Charles Feinstein wrote an article named 'Slowing Down and Falling Behind' which was a discussion as to the potential reasons why Britain may have lost it's economic dominance at some point before the First World War. This blog post will discuss what I took from the article when I read it and what I think about the issue. For a brief synopsis of what happened to Britain economically between 1870 and 1913 have a read of my previous blog post by clicking here.

The Great Depression of the mid 1880's could be partly to blame as this was basically a decade of falling prices which meant a fall in incomes for the farmers and a cut in profits for manufacturers. A fall in income for the farmers obviously restricted purchasing power, and because agriculture took up a large percentage of the economy we can infer that this was detrimental for the economy. Profits falling aren't necessarily such a big issue, but it does restrict the ability for the firm to expand somewhat which is not fantastic. Falling prices, however, could be said to be beneficial to wage earners as it effectively increased the power of their wage. Despite all of this, the volume of output and exports did continue to grow.

Feinstein immediately talks about how difficult it was to pin down actual GDP figures at the time, because looking at the three different measures of growth of real output per worker from 1856 to 1913 gave three varying results. If the data was entirely accurate then the three different measures should give the same figure. What was obvious, thought, was that that the growth rate over the whole period in question was roughly 1%. Income and expenditure were the more volatile measures as they had a brief period of growth from 1882 to 1899 but then fell sharply, whereas output slowly and consistently fell for the whole period. The reliability of the data is one thing Feinstein blames for the differing results of GDP figures. Revisions need to be made although estimates show a significant worsening of the economy from the turn of the century. For example, the measures for the output index were created based on the raw material inputs, rather than the actual output. Therefore, any boom period would be understated because the figures would pay no attention to the fact that stocks of raw materials were being used to meet the rising demand rather than more raw resources being input. Similarly, in a depressed period the figures would be overstated as the estimates made no account for the fact that stocks may have been filling up without the inputs being turned immediately into finished goods. Another explanation for the potential variation was the unrest towards the end of the Edwardian era which meant that between 1908 and 1914 on average 14 million working days were lost through strikes compared to the two to three million from previous years.

Maybe it wasn't a case that Britain was actually doing badly, it could just be that we see other countries doing better over the same period. At the end of the day Britain's economy was still growing, just not at a rate of 1.5-2% per year like some of the other economies around the world were. Admittedly, Britain was using less advanced equipment, had less standardization of its output and was slow to develop it's new industries (chemicals, for example). It was an inevitable process in some people's view, the latecomers were just catching up.

However, Feinstein also discusses the point that entrepreneurial failure could to be to blame for Britain's relative decline. He gives examples of when British firms were slow and ignorant when it came to adopting new methods and machinery. What's interesting though, is that scholars looked at data and noticed that profits were being maximised and costs minimised with the policies installed -  inferring that the entrepreneurs weren't to blame for the decline. Another group of scholars entered the argument to say that installing policy and overseeing production was the job of the manager and not the entrepreneur. The entrepreneur's job was to make changes in the current business framework, finding new products for example. The entrepreneurs therefore failed to create the large scale corporations with management systems that dictated policy rather than following market forces. These firms would have developed specialised managerial skills and co-ordination as well as allowing the benefit of economies of scale in production.

The debate is ended on a, well, un-ended note.  The point is made that there is still a lot of uncertainty about the cause of Britain's economic downturn and that the downturn has pretty much continued throughout the 20th century and due to this it's a very important investigation to have.

Sam.

European Economic Issues: Background to the EU

The European Union we know today was formed back in 1957 wen the Treaty of Rome was signed and it came into operation on the 1st of January. It was initially called the European Economic Community. Initially, it had six member states whom had started to integrate their economies as early as 1952 with the European Coal and Steel Community which removed trade restrictions between the countries in an attempt to gain economies of scale and be able to compete with the U.S.A. Most internal tariffs had been abolished and common external tariffs introduced by 1968. However, the European Union at this point was still a 'customs union' rather than a 'common market' because restrictions were still in place on trade (legal, administrative and fiscal).

Many policies were in place at this point that made the EU a very integrated economy, these include:

• Common Agricultural Policy - Includes common high prices for farm products and import duties to bring foreign food up to EU prices.
• Regional Policy - Grants to firms and local authorities in deprived regions.
• Competition Policy - For example, Article 81 of the Amsterdam Treaty says that agreements between firms cannot be made if it will affect competition in trade between member states. 
• Taxation - VAT is the standard form of indirect tax through the EU.

A further move towards making the EU a single market came in 1987 with the Single European Act. This aimed to remove any extra barriers and form a common market by 1992 using the principle of mutual recognition. This meant that if a firm could do something under the rules of one EU country that firm could do it in all EU countries. It stopped individual governments from making special rules that would keep competition from other EU countries out. In June 1997, the 'Action Plan' aimed to remove any remaining barriers before the launch of the euro currency in January 1999. The 'Internal Market Scoreboard' was published every six months to show the progress made towards the abandonment of restrictions. The last two nations joined the EU in 2007: Bulgaria and Romania to make it 27 members. 

The EU now consists of 27 states. These states are classed into different categories depending on the population of the countries. For example, 6 'big' nations are part of the EU. A 'big' nation in terms of population means that the population is greater than 35 million. Germany and the United Kingdom are two of these 6 'big' countries. Next comes the mid-sized countries of which there are two: Romania (22 million) and the Netherlands (16 million). Smaller than these still are the 'small' countries with a population of between 8 and 11 million, this category includes Greece and Belgium. Finally the rest of the countries are referred to as 'tiny' nations making up less than 5% of the EU25's population between them. Examples of these 'tiny' nations are Denmark and Finland.

As with population, the EU nations can also be categorised based on their income per capita. This is GDP divided by population and is a good way of comparing the wealth of a country with another. 12 countries fall into the 'high' income category. As you'd expect, Germany and the U.K are in this category as well as the likes of Denmark and Italy. 7 countries are classed as medium income; Greece, Portugal and Cyprus are examples of this. The rest of the EU nations fall under the low income band. Luxembourg is the richest country when looking at income per capita, they have an income per capita that's more than double France. The poorer countries have generally done better economically since joining the EU. Here is a graph to show the income per capita figures graphically, taken from the Eurostat website.

Source: http://epp.eurostat.ec.europa.eu/tgm/graph.do?tab=graph&plugin=1&pcode=tec00114&language=en&toolbox=sort


The economies in the EU are very uneven in their sizes. For example, the following six nations together make up over 80% of the EU's economy: Germany, France, Italy, Spain, Netherlands and the United Kingdom. The rest of the countries are once again sorter into categories such as 'small', 'tiny' and 'minuscule' depending on the size of their economy. 'Small' is an economy that accounts for between 1% and 3% of the EU's overall economy. Sweden and Belgium, for example. 'Tiny' is an economy that accounts for less than 1% of the EU's overall economy and Hungary and Belgium fall under this title. Finally, 'minuscule' refers to an economy that makes up less than one tenth of 1% of the EU's economy (Latvia, Estonia, Malta).

EU countries tend to most of their trading with, well, themselves. Roughly two thirds of imports of exports are to or from Western Europe. Exports to North America make up roughly 10% of the total and to Asia even less, around 8%. About 80% of these EU exported goods are industrial goods.

The EU's budget has to balance each year. The four sources of funding for the budget are tariff revenue, agricultural levies, VAT resource and GNP based (A tax paid by members based on their GNP). All countries tend to contribute roughly 1% of their GDP to the EU budget, meaning it's not a 'progressive' tax. Germany and the United Kingdom are at the top of the spectrum of countries that donate a lot more than they receive in benefit from being part of the EU, whereas Spain and Greece gain a lot more in benefits than they donate to the EU. The majority of the EU budget is spent on agriculture, roughly 46%, hence the Common Agricultural Policy we hear a lot about.

That's a rough insight into the background and habits of the EU. I wanted to lay some foundations for some of the posts on European economic issues that are to come. Thank you for reading, stay tuned!

Sam.

Britain's Victorian Economic Dominance

Back in 1870, Britain still held the position as the top economy in the world. We were producing more than 50% of the worlds cotton cloth, iron, steel and coal in 1851 and 20% of the worlds trade was conducted through British ports. We were dominating after being the first economy to go through the industrialisation phase.

However, after 1870 the British economy has gained an association with decline, despite still growing in absolute terms. There are two reasons for gaining this reputation: the rate of growth was less than in previous years and other countries were growing at a faster rate. So comparatively, the era following 1870 was a time of economic failure for Britain. An example of this slowing of economic growth can be seen by the British manufacturing output statistics for the time. From 1856-1873, the annual growth of British manufacturing output was 2.6%. From 1873 to 1913 this annual growth had fallen to 2.0%. Britain's competitors were growing at a faster rate as well, as i said, which made the British economy look like it was failing even more.
The 1870 - 1913 figures for annual growth of output look like this:

• Britain - 1.9%
• Netherlands - 2.1%
• Germany - 2.8%
• USA - 4.2%

As can be seen from these figures, Britain was growing a lot slower than it's competitors and due to this the USA and Germany overtook Britain's economy by the time the First World War came around. The U.S now had the biggest economy with Germany close behind. The share Britain held on world manufacturing exports also declined from 37.1% in 1883 to 25.4% in 1913 whilst at the same time the U.S's and Germany's grew. 

Some economists came to the conclusion that this relative decline of Britain was inevitable as other countries began to make their way through the industrial revolution phase. On the other hand, some economists blamed the United Kingdom's internal weaknesses for this decline. These weaknesses include a failure to adopt the latest machinery, too much focus on older industries (coal, steel, etc) and not good enough commercial and technical education. But, nowadays this view has pretty much been dismissed as more data and evidence has come to light. British firms were still maximising profit and production at the time, which suggests that there wasn't a need to adopt new machinery. Technology from the U.S wasn't always suitable for the British market. An example of this is the ship building industry. The U.S were more technologically advanced when it came to building ships yet Britain could still produce them cheaper and therefore more efficiently. Finally, the main causes of this relative decline were external. Britain was losing out to countries with more raw materials and larger markets. The U.S, for example, had a lot of land, oil and coal and a massive internal market which benefited them greatly. This is known as the 'Factor Supply Thesis'. This also leads onto the 'Early Start Thesis'. This is basically the principle that because Britain had industrialised first, other countries could learn from Britain's mistakes during the process and catch up much quicker. Also, because of Britain's early start, many aspects of the economy had become very outdated and difficult to change. The railway system is a good example of this. The Victorian railway system which Britain was left with was not as efficient as it could have been.   

Overall though, the structure of the British economy in 1913 was still good. There was a small agricultural sector, taking up an 11.5% share of employment. This differed from the U.S and Germany who's agricultural sectors were much larger. The U.S's took up 25% of employment and Germany's took up 33%. Britain had many large firms operating in many sectors of the economy. There was a very sophisticated service sector holding a share of 44% of Britain's employment. Manufacturing held steady at 32.1% of employment. Britain even had the highest level of output per head in Europe in 1910. It lead the way with $1,302 per head compared to $958 per head from Germany. 

In summary, up to 1870 the British economy was dominating the world due to it being the first economy to industrialise. After 1870, other economies started to industrialise too and this meant they caught up the British economy, leading to doubts about the economy. However, these doubts were pretty much out of the control of Britain and despite these problems, in 1913 the outlook for Britain was still good as they were producing more per head in Europe than anyone else. The position of the economy of Britain was made to look worse because all the other economies were doing so well. 

A brief insight into Britain's Victorian economic dominance and the period from 1870 up to 1913. Thanks for reading, have a good day!

Sam. 

Principles of Economics: Demand (Microeconomics)

*Disclaimer: I'm fully aware of the fact that I've already written a post on demand. However, I've decided to cover it again now I know more on the subject and can give a better coverage.*

Basically, I'm back to cover a very basic principle of microeconomics: Demand. Demand refers to the amount consumers can and are able to purchase of a good or service, 'can and able' being a very important part. Note that a consumers want for a good should not be included in demand. I'm sure everyone wants a flashy sports car on their drive yet the true demand of that good will be very small. Glad we got that out of the way. The demand of a good in a market plays a pivotal role in determining the price. For this, demand must interact with supply and the point at which they meet can be called the 'market output' or the 'equilibrium output'. This is displayed on a graph which I'll do a post about in a few days. The price at this 'equilibrium output' is called the 'market price' or the 'equilibrium price' which is essentially the price consumers have to pay for the good and the price suppliers are selling at.

It's important for me to point out here also that when looking at demand we assume that we're operating in a market of perfect competition. This basically means that in the market there are an abundance of consumers and producers and therefore they have no control over prices. We call them price takers. The size of each producer is too small and there is too much competition from other firms that it would be impossible for them to raise prices and still make sales. Perfect competition is the closest theoretical example to most real-world markets and therefore we use it in our examples.

Let's now look at the relationship between the demand and the price of a good or service. The law of demand is as such: 'When the price of a good rises, the quantity demanded will fall'. This occurs for two reasons:

1. The good/service will cost more than substitute goods. Other similar products will be comparatively cheaper and therefore demand for the good will fall as consumers start to purchase the substitute. For example, a Playstation 3 could be said to be a substitute good for an Xbox 360. Therefore, if the price of the Xbox 360 were to rise then the demand for it would fall as consumers move over to purchase the comparatively cheaper Playstation 3. This is called the 'substitution effect' of a rise in price.
2. People will feel poorer. A rise in the price of a good means people will effectively be able to afford less of the good which makes them seem less well-off, or poorer. This is known as the 'income effect' of a price rise. 

Obviously it occurs the other way also; if the price of a good falls then the quantity demanded will rise. We'll consider the following example, theoretical figures for the monthly coffee demand:

Now, if we were to plot the demand curve for this data it would look something like this:

A typical demand curve would look like this, if real data is being used. The curve you can see slopes downwards from left to right, also called a negative slope, as when the price falls the quantity demanded rises. In most cases, however, real figures aren't used, it's just theoretical. In these cases the demand curve will just be a straight line sloping down from left to right. Remember that we still use the term 'curve' when the line is straight. 

Apart from the price of a good, the demand for a product is also determined by other factors. These are as follows:

• Tastes - The more desirable a good the more it will be demanded and vice versa. This is often affected by advertisements, fashions and what other consumers are purchasing. 
• Quantity and Price of Substitute Goods - If a substitute good has a higher price then demand for the good in question will be higher. If the substitute good has a lower price then the demand will be lower for the initial good.
• Quantity and Price of Complimentary Goods - This works in the opposite way to above. Complimentary goods are products that are consumed together, examples would be cars and petrol or DVD players and the actual DVDs. If the complimentary good's price rises you can expect the demand for the good in question to fall and vice versa. 
• Income - This one is fairly obvious. As people's incomes rise, so does their spending power and therefore demand for 'normal' goods will rise. With this, demand for 'inferior' goods will fall. When we say 'inferior' goods we are talking about things such as supermarket own brand foods. 
• Distribution of Incomes - This determinant is a little more ambiguous. If wealth was re-distributed from the rich to the poor, then demand for luxury items would rise as the poorer people would be able to buy these goods for the first times. It works in the opposite way too, if the poor in society get poorer then the demand for 'normal' goods will fall as the demand for 'inferior' goods should rise. 
• Expectations - Last but not least, people's expectations. Everyone speculates, and if the speculation is that the price of a good is set to rise in the near future then we can expect demand to rise in the short term. If the price is expected to fall we'd expect demand to fall as people hold out until the lower price arrives. 

When we put together a demand curve, we do it assuming that all other things are remaining equal and this is known as ceteris paribus. Nothing but the price changes and when the price changes it results in a movement along the curve. A movement along the curve is different to a shift of the curve, which is very important to remember. When any other determinant of demand changes the curves will shift. A movement along means the demand curve remains the same but the demand just moves to a different point on that curve. A shift means a new demand curve, where at each price a different amount is demanded. 

This is the same demand curve we used earlier, but here we can see that the demand curve has shifted. At each price a different amount of coffee is being demanded. This occurs when a non-price determinant of demand changes. That's probably the hardest basic principle of demand to grasp, but here it is summed up:

• A change in price results in a movement along the demand curve.
• A change in a non-price determinant results in a shift  of the demand curve.

If the change in the determinant of demand causes a rise in demand then the demand curve will shift to the right. If the change in the determinant causes a fall in demand then the demand curve will shift to the left.
The proper names for these two principles are as follows:

• A shift in the demand curve is called a change in demand.
• A movement along  the demand curve is called a change in the quantity demanded.

And that is pretty much that, the principles of demand. The hardest part here is probably differentiating between a movement a long and a shift in the demand curve, however you can pick it up rather quickly. Feel free to comment if you feel i missed something out or something is incorrect. Thanks for reading!

Sam.

Economics at the University of Birmingham

Such a hectic week, so I've rushed a few things so I could squeeze in a blog post today. I'm going to focus this one of Economics at the University of Birmingham, which is where I am currently studying. I arrived on Sunday the 16th of September and as of today, the 24th, i started my 3 year Bsc course in Economics properly. I will be blogging about what I've learned, as well as going into depth more during my debates as my economic knowledge improves.

The timetable I've created myself for the coming semester (24th September - 7th December) is as follows:

A bit confusing I know, but basically every 'code' in the timetable corresponds to either a room or a subject in the keys at the bottom. From this you can see that I'll be studying modules in the following disciplines: Principles of Economics, Mathematical Modelling for Economists, Advanced Quantitative Methods, Economic History of Britain and European Economic Issues. Excited is an understatement, I just want to dive in and start. I'll be blogging about all of these subjects within the next few months so stay tuned for them. Follow the blog as well to keep in touch.

Anyway, I'd like to talk about my application process to study at the University of Birmingham as well. I knew from early on in my AS level studies that economics is what i wanted to take further. It always helps to have an idea of what you actually want to do when it comes to the visiting stage of universities or else you could be in for some very long days trawling from talk-to-talk on different subjects. Not fun! I looked at umpteen different universities: University of Bristol, University of Bath, University of Southampton and the University of Warwick to name but a few. I had no issues with any of the universities I visited, it's just I found Birmingham to be more 'me', so to speak (So far it's proving to be!). So i went through the application stage and was given an offer from Birmingham of AAB or AABB because I studied four subjects through to A2 level. I met this target with a grade A in economics, A in computing and a B in both maths and history. So, it all went to plan and here I am. But, that was only the grades. Of course universities expect a lot more; expressed through your personal statement. Speaking from experience, I found this to be the hardest part of the application process, as I'm sure many other people did too. However, displaying your interest in the subject is all that really needs to be done. For me, I talked about the fact that I blogged about the subject (fully recommend it, great revision and fun too!)  which displayed an interest in the subject outside of college hours. Also mention any books you've read. 'Freakonomics' is a good one, seems to be quite a commonly read economic related book, but still, they all count and plus it's quite an entertaining read. Subscribe to the Economist too! Being a student you can get some great deals on it, 12 issues for £12 is a great example, you can't turn that down! Basically, i padded out the personal statement with a variety of economic related things to show my interest, rather than just monotonously listing a bunch of books i'd read. It seemed to work, so take note!

...and here I am at Birmingham! Loving it so far, the course looks great, exactly what I want to learn about - so I can't wait to start. Seems like I'll be starting properly next week as I've previous economic experience so just a week more of waiting around! I plan to do some reading around the subject. Also, I'm starting to put myself out there in terms of networking. I've joined a number of societies and plan on getting involved as much as I can to get my name in with potential graduate employers. I'd love to chat with anyone with experience in the banking and finance industry, so drop me a comment if you don't mind and we can talk! Once again, thanks for reading, enjoy your day, stay tuned & follow the blog!

Sam.

Debate: Rise In University Costs

We all know about the big 'hoo-har' that was caused when the government scrapped funding for universities, meaning students now have to pay a lot more to go than in previous years. Speaking from experience, this is, I've just arrived at the University of Birmingham to study a Bsc in Economics and i'm paying £9000 a year for this. That means i'll be riddled with £27,000 of 'debt' by the time i (hopefully) graduate in 2015. I'd like to put my opinion across about these changes to the university funding system.

Basically, the expectation is that all students despise this change and are totally against it. Well, i differ from these. I actually think it's quite a good idea and will be beneficial to me. Why do i think this i hear you say? Well, first and foremost, competition. The amount of applications in the United Kingdom in 2012 fell by 8.9% according to the BBC news website. So, for me, when i finally leave university in 2015 the amount of U.K graduates competing for jobs will be lower and therefore i have a better chance of achieving a job. Call me greedy, but it's in the human nature to be greedy isn't it. Look at the American Government for example, they were one of the biggest and richest economies at a recent point yet they still feel the need to try and make even more money be it through war or whatever. So, my greed isn't really unjustified as everyone seems to want better for themselves.

Leading on from this is the fact that due to falling numbers of applicants it means fewer degrees will be handed out from 2015 onward, compared to previous years. I think this is excellent. Degrees had become too common in recent years, it seems that the majority of people naturally moved onto university after completing A-Levels, whereas in the past this was never the case. Back then, degrees were rare and it really separated the good from the great. Nowadays, with degrees becoming so common, employers look more at other factors such as skills and personality rather than how hard-working, dedicated and academically sound a person is. I think this is wrong. You're born with your personality and it's very hard to change. So, people who were born confident and outgoing are going to stand a better chance of a job than people who are shyer and keep themselves to themselves, purely because they may both have degrees and therefore other factors need to be assessed. Whereas, if degrees become rarer then it goes back to academic achievements as the main basis for employment, which is a much better reflection of how well rounded a person is in a work environment.

My final point as to why i feel the increased cost of university is good is the risk factor. The fact that a student will be put into £27,000 of debt makes going to university a natural risk. But this risk is then very motivational and makes people work harder in an aim to not waste the three years or so that they're spending so much on. The risk factor makes those with ambition thrive and this is a very good thing. It brings the ambitious and driven people to the front of the group academically, which is where they rightfully should be. These are the people we want to be running businesses and taking the top jobs in the future as they're the ones with the drive to push things forward which will more than likely enhance the economy. The great get separated from the good and i think this is fantastic.

Call me bias, i don't mind, it's my opinion. Feel free to throw yours out there! Thanks for reading guys, have a good day!

Debate: Thoughts on U.K Foreign Aid

Quick point I'd like to discuss in today's post is the foreign aid given out by the United Kingdom and whether it's justified. The form of aid I'm most focusing on here is 'Official Development Assistance'. It comes in many different forms, not just lump sums of cash, and it represents one of the financial flows received by the so called 'developing economies'.

In many cases I'm sure this aid is very much necessary. For example, a case I think the aid is necessary is to Ethiopia. In 2007, Ethiopia received $273 million in Official Development Assistance from the United Kingdom. In that same year, the GDP per capita in that country by PPP was $779, making Ethiopia a very poor country. They also had a Human Development Index rating of 0.414 which is a low score, bearing in mind in 2012 the United Kingdom posted a rating of 0.863. I feel in this scenario, the aid is justified because they need capital to help their economy grow, and with such little money to start out with they'd have been getting nowhere without such aid. Another fairly decent example of justified ODA is to Afghanistan who had a HDI rating of 0.352 in 2007. However, this does lead me on to the main argument I have against foreign aid. It's all well and good it being justified, but is the money going to where it needs to go?

Lots of these less economically developed countries are like that for a reason. Whether it be corrupt government, lack of resources or whatever. Donating lump sums of money to countries with a corrupt government is just a pure waste of capital. The money will be thrown about to fund lavish lifestyles for those in favour of the government with very little being invested into the people living in poverty and on expanding the economy. This is a big put off against ODA in my opinion. The money needs to be directed at precisely the places that need it, there's no use giving it to governments if the money will not be invested efficiently. Furthermore, adding on to this point is the fact that are we not partly to blame for the money not being invested wisely? It doesn't take a rocket scientist to work out that if the money is invested into the economy and the economy grows, the aid will stop. Living off the aid is an easy way out for these developing countries and they may be using that as an incentive not to expand their economies. The over-reliance on aid would soon become apparent when it stops and the developing countries start to crumble again. It seems the aid that has been throw around has placed the world in a bit of a catch 22. Keep investing money in the form of aid and the money is not all used efficiently, or stop the aid and watch countries fall further into poverty. Dilemma, in my opinion.

What's more is that it's not like our country is a perfect example. We throw all this money away to other countries without a second thought about the issues we have regarding poverty and a dwindling economy. I know that we feel there is an obligation to Commonwealth countries or an expectation that at some point in the future we'll be rewarded with great trading deals from these countries when they finally develop, but i think it has to be toned down. The money needs to be re-invested directly into our own country in times like these until we can reach the point where we can say 'Yes, our economy is running smoothly and the people are happy'. If that ever happens, who knows?

I guess I wouldn't have as much of a problem if the amount we plan to give in foreign aid didn't grow anymore, but that isn't the case.

Notice here, virtually all government departments in the United Kingdom were planned to be cut by 2014-2015 and that money basically sent out in the form of foreign aid. How that can be justified i do not know! Our economy is shrinking, taking more money out of it doesn't seem at all logical in my mind. Believe it or not, though, in 2007 we gave almost $1 billion of ODA to China and India, the two economies that will be dominating the world potentially in the coming years. Of course they do have problems, but we have problems too.

I'll tie it up there, I think my opinion on foreign aid has become very clear in this post. But that's all it is, my opinion. What do you think? Thanks for reading!

Debate: Transport for the Olympics?

I thought I'd throw my opinion out there on the transport system for the London 2012 Olympics in today's blog post. First and foremost, I think on paper the transport ideas sound like a great idea. The whole idea of making it easier for people to access the events of London 2012 and the Paralympic games economically should be a very sound move. Bear in mind when reading that prior to the Olympics, the games were expected to boost the economy in the short term and the long term. Now that such data has appeared that seems to suggest the Olympics haven’t really achieved that much economically - can we partly blame the transport system?

Mervyn King was reported to have told the Daily Mail that the "the happiness won't last long..." in regards to the short term economic surge caused by the Olympics. More about this story can be read by clicking here. Therefore, economically the consensus is that the games haven't achieved that much, despite the years of planning and millions of pounds of investment. Obviously I understand that nothing can be predicted accurately at this stage, so time may prove Meryvn wrong - which is what we all hope. I think the fact Meryvn has gone so publically with this negative outlook is disgusting, as if there isn't enough bad economic news around as it is. I know people will argue that we have a right to know about these things, but I'd say most people already don't expect much in the next few years economically and the fact that Mervyn has just confirmed this will not install confidence in anyone. The doom and gloom merchants need to keep some of their thoughts to themselves!

I'd like to look at both the London Underground system and the Olympic driving lanes in this debate as these are two of the Olympic transport policies that I have experienced during the games. Firstly, the London Underground. I encountered this at peak time in the middle of the games and I have nothing but praise for the planners. It was seamless, I made a trip into Waterloo and from there I had to get the Victoria Line and then the Northern line through to London Kings Cross. Bearing in mind this was at peak time, so I was expecting crowds of workers as well as Olympic go-ers, I was pleasantly surprised. Everything ran smoothly - I was on and off the Underground painlessly and I have nothing but praise for the. The return journey, also a peak time (the evening this time), was seamless as well. I experienced it twice during the games at peak times and I thought it was great, obviously there will be people who used it a lot more and saw a lot more that went on, but on the whole I think it ran smoothly. Therefore, economically I think the investment that went into the London Underground was very beneficial and justified. Not only were workers in London still able to get to work on time but the extra travellers heading to the games were also catered for and this can only have benefited the economy. My problem occurs when it comes to the Olympic lanes...

The few times I encountered the Olympic driving lanes were around 10 - 11 am. I wasn't heading to the games so therefore I was in the 'normal' lane, queuing, whilst watching the empty lane next to me remain... empty. One occasion, on route to Staines, it took me 25 minutes to travel a mile as all the traffic had to bottleneck into one lane, all whilst a perfectly fine lane lay empty next to me. During those 25 minutes the Olympic lane wasn't used once. This was beyond frustrating, this lane seemed redundant during this time, a waste of space even, yet we couldn't use it and had to queue up in traffic - delaying arrivals to our destinations. Infrastructure is always a big point in the economy, and in my opinion I think this is evidence of it failing. The lanes were unnecessary during the Olympic sessions and should have been opened to all traffic. Already, according to the Daily Mail, Londoners waste 66 hours a year stuck in traffic. 66 hours that could be spent working, benefiting the economy. Turning normal lanes into these Olympic lanes is only going to have added to this figure and that is no way to benefit the economy when we're in a rocky situation. In my opinion, the Olympic lanes weren't thought out too well and didn't function efficiently - but, what is my opinion worth anyway?

I'd like to conclude by saying that I think the Olympics will be successful economically for us. The sense of national pride and 'togetherness' that seemed to shine during the games surely has to have some effect! The London Underground, like I said, was very good during the games but the Olympic lanes let the transport system down. I'd like to hear other people's opinions on the situation, though. So, what are your thoughts on the Olympic transport policies and how do you think they've affected the economy?

Thanks for reading guys, stay tuned.

Sam. (@TutorEconomics)

What Is Economics?

Since I'm reviving this blog, I thought I'd start a fresh in some ways. I therefore have decided to open up this new era of the blog with the simple, yet very difficult to answer question of what economics actually is.  It's a very ambiguous subject in regards to how you'd define it, the study of what exactly? I've encountered a good example of just how difficult it is to define the subject recently during my search for a university. The fact that different universities place the subject in different areas is the said example. The University of Birmingham, for example, place the study of economics within the business school - giving the subject a more monetary focus. However, this contrasts from the University of Warwick whom place economics within the faculty of social sciences - looking more at wants and scarce resources. This differentiation from the universities suggests that Economics is a broader subject than some may have first imagined.

Let's look at a few potential ways of defining economics. One definition could well be 'the human science which studies the relationship between scarce resources and the various uses which compete for these resources'. If we analyse this definition somewhat we could agree that this definition holds true. Economics could most definitely be classed as a human science. It's not an art and studying it will almost always involve looking at the action of humans. The relationship between scarce resources and the uses of resources is also looked at in the study of Economics. One of the first things you learn about as a beginner economist is the basic economic problem of scarce resources and unlimited wants. So, you wouldn't be wrong to define economics in this particular way.

Another definition I've come across is that 'economics is the science of production and consumption, or the use of goods and services'. Production and consumption are definitely involved in the study of economics, these link back to the scarce resources problem that occurs due to consumption being higher than production. However, I feel using 'the use of goods and services' in a definition for the subject is a bit lacklustre and doesn't quite do it justice. But that isn't to say this definition is wrong, as it most certainly isn't. Along with the likes of 'economics is the study of how to improve society'. Economics does look at how best to allocate scarce resources to improve society partly, but not all for that reason. These two definitions aren't incorrect, I just think they don't get the whole point of the subject across.

This debate wouldn't be complete without a token definition relating somehow to money! 'Economics is the study of wealth'. Well, there it is, the study of wealth. Somewhat true of course, the economy is measured in terms of money, goods and services are normally purchased using money and a lot of people evaluate their position in life by how much wealth they have. But what actually is money? It's a medium for exchange when buying goods, a unit of account for placing a value on things and a store of value when saving. So technically, anything could have ended up being money instead of coins and notes as long as it was in scarce and controlled supply, stable and able to keep its value, divisible without loss of value and portable.  Money does play a big part in the economy, some would even say the economy revolves around money with the flow of income and what not, but I'm still not entirely convinced the subject can be classed as the study of wealth.

I could go on and on, reeling off lists of different definitions of 'Economics', but I won't of course, you have better things to do than read that. I'll leave it there and hope I've successfully got the point across that I was trying to make -Economics is a very broad subject and therefore very difficult to define whilst accurately including everything the subject covers. If i was being asked, I'd class it as the study of scarce resources. I question you to have a think about how you'd define the subject!

That's all from me for now, thank you for reading!