Bellerbys Economics - Mr Stephenson

Wednesday, May 31, 2006

Watch TV!!!

Absolutely essential that you should watch the 'Money Programme' this Friday, June 2nd at 7pm on BBC2. Make sure everyone else know too!!

The programme is on emissions trading systems which is at the heart of Module 3. The programme will discuss Kyoto, the EU emissions trading scheme and the pressure within some of the US states for the development of local schemes.

The Money Programme is now 40 years old. They have their own website which includes ALL the programmes from the lat five years here:

The Money Programme is now sponsored by the Open University - which in itself is a government-sponsored online university which allows students (including you in theory) to follow courses or degrees in the evenings whilst continuing to work. A couple of years ago I taught a Singaporean student at Bellerbys who was taking her first-year Law degree modules through the OU whilst taking her A-levels at Bellerbys - she got grade A for all her A-levels and also passed her Law exams!

Tuesday, May 30, 2006

Azerbaijan - Buy Now!

Finally, after some delays, the Caspian Pipeline has opened. It runs from Baku through Georgia to Ceyhan in Turkey.

This is excellent news for Azerbaijan which should now see revenues from oil sales triple in the next decade. Previously, the Azeris had only been able to transmit their oil through Russian pipelines at a rate that was more advantageous to the Russians than the Azeris. Now, however, more equitable agreements have been reached with Georgia and Turkey which should benefit all three countries.

This has, however, been a project fraught with difficulties. Azeri oil is expensive and has only become viable recently because of the increase in oil prices. There have also been social and environmental externalities in the creation of the project. Also, this project is clearly dominated by American interests and Baku has been criticised for creating potential instability in the area by favouring the Americans at a time when Russian, Armenian and some Arab groups are feeling a bit anti-American.

American troops will also be sheltered in Azerbaijan for the first time and this has also raised concerns - although the pipeline itself will be guarded by Azeri security.

Saturday, May 27, 2006

Warwick University

Warwick University is the home of new economics in the UK and consistently ranks above LSE in terms of league tables. You can find out more here:

Ben Lockwood is professor of Economics at Warwick. His work covers the whole range of macroeconomics although more recently he has concentrated on fiscal policy and its relationship to productive efficiency - raising the issue, for example, as to whether tax competition between countries is beneficial or not. You can find out more about Ben - and even drop him an email if you wish - right here:

Jeff Round is another interesting economist at Warwick worth getting to know. He specialises in Development Economics and has been particularly helpful to Ghana which has become one of the most stable and fastest developing African countries. The chairman of the UN, Kofi Annan, is of course Ghanaian. You can meet Jeff here:

Here is the full list of staff and their research interests. It gives you a feel for the range of work undertaken by one of the world's most respected economics departments:

W Arulampalam (Professor of Economics): Labour Economics; Econometrics.
C Blackorby (Professor of Economics): Welfare Economics and General Equilibrium.
G Boero: Econometrics and Financial Econometrics.
S N Broadberry (Professor of Economic History): Quantitative Economic History of Britain; Applied Macroeconomics.
J Cave: Game Theory; Industrial Economics.
N Chen: International Economics.
M Clements: Econometrics.
K G Cowling (Emeritus Professor): Industrial Economics; Political Economy.
M Devereux (Professor of Economics): Public Economics; Corporate Finance and Investment.
A Dhillon: Economic Theory.
B Dhutta (Professor of Economics): Economic Theory.
M Ellison: Macroeconomics.
S Ghosal: Economic Theory; Game Theory.
L Graham: Macroeconomics
B Gupta: Economic History; Economic Development; Industrial Organisation in Colonial India.
M Haag (Leverhulme Lecturer in the Economics of Industry and Organisation): Industrial Economics.
R M Harrison (Professor of Economics): Soviet and Russian Economic History.
N J Ireland (Professor of Economics): Public Economics and Industrial Economics.
A Kar: Economic Theory.
K G Knight: Labour Economics.
E Kohlscheen: Political Economy and Macroeconomics.
D Leech: Empirical Co-operative Game Theory; Power indices; Econometrics.
B Lockwood (Professor of Economics): Public Economics; Political Economy; Monetary Policy.
M H Miller (Professor of Economics): International Macroeconomics.
S Murty: Public Economics.
R A Naylor (Professor of Economics): Labour Economics.
A Oswald (Professor of Economics): Labour Economics; Applied Economics.
C Perroni (Professor of Economics): Public Finance; International Economics.
M Pitt: Econometrics; Time Series.
E Proto: Development Economics.
N Rankin: Macroeconomic Theory from Microfoundations.
G Renshaw: Macroeconomics.
J Rigolini: Developmental Economics.
J I Round: Development Economics; Economic Statistics.
K Scharf: Public Economics.
R Skidelsky (Professor of Political Economy): The Intellectual History of the Keynesian Revolution.
M E Slade (Leverhulme Professor of the Economics of Industry and Organisation): Empirical Industrial Economics.
J C Smith: Labour; Macroeconomics.
J P D Smith: Econometrics; Time Series Modelling.
R J Smith (Professor of Economics): Econometrics.
M B Stewart (Professor of Economics): Labour Economics; Econometrics.
M Taylor (Professor of Economics): Macroeconomics and Finance.
I Walker (Professor of Economics): Labour and Public Economics.
K F Wallis (Emeritus Professor of Econometrics): Econometrics; Time Series Analysis.
M J Waterson (Professor of Economics): Industrial Economics, Theory and Applied.
M Wooders (Professor of Economics): Public Economics; Game Theory; General Equilibrium Theory.
L Zhang: Financial Economics.

Friday, May 26, 2006


Continuing our recent round-up of key news items from the countries where most of our students come from, let's take a quick look at Kazakhstan - a country rich in oil and gas reserves, at least for the next twenty years - but which is also investing heavily in infrastructure, human capital and diversification projects.

The new Atasu-Alashankou pipeline to China has opened providing Kazakhstan with a new giant customer for its oil to the east as well as its lucrative pipelines to the west (via Turkey) and to the south via Pakistan. New agreements with Iran have also been formed to exchange oils as the two countries produce two different types. This is good news for Kazakhstan who now have many nations competing for their oil.

Some efforts are being made to look more closely at environmental problems with the building of a waste-sorting plant and in some ways this is linked to the greater emphasis on tourism in the new economic plan. Kazakhstan is a very beautiful country but because of its location has so far not been able to exploit this resource economically.

More women are now entering business in Kazakhstan increasing GDP further.

The big question at the moment, however, concerns the President's health. Recent photographs have shown that he is not a healthy man - and the question must be - what comes next? Is the transition mechanism already in place or will we enter a period of disruption whilst different government factions fight amongst themselves for first place in the new government?

Thursday, May 25, 2006

Vietnam economic news for our Viet students

It might be argued that one of the problems that Vietnam has is over-regulation. This can sometimes result in government failure where the cost of regulation exceeds the benefit gained. Here are some examples from today's press:

Five different inspection groups created to audit transport projects - why, five? In addition, a further team has been created to inspect the inspection teams. The Prime Minister has asked that similar teams be created to inspect irrigation projects.

A department of business licenses is to be set up to issue licenses for starting new businesses. Is this really necessary? In most countries, anyone can start a business with some restrictions on obviously difficult areas like food hygiene and so on.

However, there are many good things coming out of Vietnam at the moment so we should remain very optimistic:

Economic growth is high
Exports are likely to rise with Vietnam's WTO entry
Closer links are being established with the EU thanks to the hard work of Austria
Russia will be building Vietnam's first nuclear power station
India is exploring for oil off Vietnam's coast in partnership with Vietnam
Corruption is slowly being reduced
The Vietnamese have done an excellent job in removing bird flu from their country
Hong Kong company Hutchison is investing $655m in telecoms in Vietnam
Both Wal-Mart and Carrefour are planning to open supermarkets in Vietnam next year

All these are good signs for rapid development in the future.

Wednesday, May 24, 2006

Ukraine Update

The haggling over coalition partners in the new government is still continuing. Both Bloc Yuliya and Our Ukraine are both now talking to the Socialist Party. As time passes, the lack of stability will continue to deter investor confidence from overseas.

Meanwhile, at the GUAM summit of Russia, Ukraine, Moldova, Georgia and Azerbaijan, all the countries except Russia signed a free trade agreement. It's not clear at this stage what this will mean (free trade agreements have often been signed at summits involving former members of the Soviet Union and then been left to rot away on the desk) but if it becomes genuinely active, this could be of benefit to the Ukraine. It may provide them with easier access to Azeri oil and gas - helping them to become a bit less dependent on Russia.

However, the Russians quite rightly pointed out at the summit that they are the dominant partner in the region - the biggest market and the biggest producer. It's simply unrealistic in the short term for any of the other countries to believe they can continue to operate if they have a bad relationship with Russia.

Tuesday, May 23, 2006


The Examining Boards became independent foundations in 1987 - in effect, private businesses. Before this, they were run by the government. This was a government attempt to introduce competition into a missing market (module 1). At first, there were twelve examining boards - but these soon became an oligopoly of three - AQA, OCR and EdExcel.

They exhibit all the characteristics of oligopolies - sticky, high prices; barriers to entry; abnormal profits; asymmetric information; product differentiation and so on. the industry is regulated by the QCA - a government department.

Most teachers think the QCA is weak and is suffering from regulatory-capture.

There may be a conflict of objectives here between the profit objectives that drive business and the educational objectives that drive teachers and a number of issues have arisen since the privatisation including:

- Are educational standards falling? Do the examining groups make their exams easy so that teachers choose their exams over their rivals? Or sometimes make the pass marks so low, it's almost impossible not to get an A-grade? Some universities now automatically ask for AAA for university entrance and some professions - medical / legal etc - have started setting their own entrance tests eg LNAT and BMAT.

- Are examiners underpaid? Each year, the exam groups struggle to find markers for their exams - this often means exams are marked by inexperienced examiners

- Are the costs of administration being reduced to the point where the system is breaking down. There are increasing signs of strain in the system - big mistakes being made - such as this:

- Are there too many exams. The more exams, the more exam fees. Do we really need six modules for each exam? Before the change, most exams made do with 1, 2 or 3 papers

- Are there too many new levels of exams. UK students now sit exams at 7,11, 14, 16 and 18
- Is there too much coursework. It's cheap to mark bacause the teachers have to do it for no extra pay but causes terrible stress for the students.

- Is there too much exam stress? Isn' t this an externality?

And yet, there may also be a lack of innovation. With 30% of students taking the exams now from overseas, teachers have been calling for a long time for papers to be avaialble in other languages and in other exam centres worldwide - but the examining boards have been very slow to capitalise on this.

Meanwhile, some students have been fighting back - property rights:

But one of the weaknesses of the property rights argument, of course, is demonstrated here - one small student against the mighty EdExcel

Meanwhile, on a slightly different topic - here's an interesting development for our Chinese students:

There will soon be many jobs available in the UK teaching Chinese in independent and state schools.

Saturday, May 20, 2006

Collaborative Essays

Students are often surprised when I say to them at the beginning of the year that I have no objection to them doing their homework together, or in groups. In fact, I encourage it!

Of course there's no point in just copying someone else's work - trying to cheat - that's just a waste of time - teachers aren't stupid and no one is fooled. Also, it's crazy to buy an essay or a dissertation from the Internet and then try to present it as your own. This is fraud, it's illegal and most universities will remove you from the college immediately.

There's nothing wrong, however, in quoting someone else's work if you wish, provided you make the source of the work clear - this is research. Also, there's nothing wrong in reading someone else's essay and learning from that.

Students who genuinely share ideas or provoke each other's thoughts, who learn how to divide up work and then report back, who learn from the best practice of others, these students are developing skills of teamwork and analysis that will be invaluable later in life.

This type of approach to student education is perhaps more advanced in the US where it is called collaborative education. It's just a question of being responsible and grown-up about it.

Here are some useful banks of essays:

They cover a wide range of topics and you can learn a great deal just by browsing through them on a rainy afternoon

Friday, May 19, 2006

Dollar Falls

So as we predicted last week, the dollar has fallen by about 5% during the week. What are the implications of this?

Well, for one thing, it means the real value of US wages has just fallen by 5%. It will take a while for US workers to realise this but it will soon become clear through higher import prices. Unfortunately, this is also inflationary and it already looks as though the Fed may be thinking of raising interest rates again - with the usual consequences from that of reduced demand and investment in the future.

On the plus side for the moment, the fall in the dollar has reduced the trade gap as export prices have become relatively cheaper and US industrial production has therefore increased - jobs are up - but not for long! (see above)

For the rest of the world, the fall in the dollar has been a bit of a blow - especially China, Korea, Germany and Japan - all of whom have built up huge dollar reserves - the value of these has just fallen by 5%. So not only was China selling products cheaply to the US through a low exchange rate - but now they've just lost another 5% on the deal. Hmmm...difficult that one. Probably still worth it (American dollars still flooding into China - but not quite as good a deal as they thought)

Also, it will get a little tougher now to sell to the US - the world's biggest market. Perhaps it's time businesses started looking for markets elsewhere - in the long term, a less monocentric world economy will be a good thing.

But it's not over yet. Venezuela has just announced it will only trade oil for euros - like Iran did last month. As more countries move away from the dollar standard for oil trading, there is less need for central banks worldwide to hold the dollar, reducing demand further. And the US stupidity at refusing Dubai Ports the chance of buying some US ports has recently in a substantial chunk of Arab investment looking elsewhere - also reducing demand.

It may just be that we are at a significant turning point in the world economy.

Thursday, May 18, 2006

Free Resources

Here's an interesting portal for free Economics resources - including a complete set of lecture notes for the Economics degree at MIT!!

Most of these resources are American - but not all.

Have fun!!

Tuesday, May 16, 2006

China China

An update on news from China China:

1) has launched its own version of Wikipedia - called Baidupedia. You can find it here:

Working with Google, the Chinese government has built a firewall around China's broadband network which prevents access to any sites that are critical of the Chinese government, or which might promote 'negative or depressing ideas'. In economic terms, this represents a form of protectionism - opening up opportunities for companies like Baidu to create Chinese websites similar to western ones like Wikipedia, ebay and so on. A form of import-substitution.

It also raises the question as to why the US and UK governments consistently claim that they can't do anything about the wave of pornographic and gambling websites that dominate the Internet - the vast volumes of aggressive spam and so on.

2) Chinese consumption has finally begun to rise at a rate greater than economic growth - 13.3% in April as against 9.9% economic growth. We've been predicting this in class for months as the next phase in Chinese development - the growth of consumption - when Chinese people themselves begin to share in the rewards for the last 15 years of hard work.

The Chinese government has called this new policy - 'Two Legs not One' - there must be a whole Government department that dreams up these strange policy titles - the Four Pillars of Progress, the Eight Noble Truths and so on.

It's a good move, however, there will be some trade diversion away from exports towards domestic consumption which will reduce the current account balance a little, reducing some of the criticism from the US.

3) Okay, not China - but still interesting. Vietnam and the USA have now signed an agreement on Vietnam's membership of the WTO. This should mean Vietnam will join the WTO very quickly now as the USA was the last big obstacle.

Monday, May 15, 2006

Amazing Economics Lectures

The days are long past when an Economics student had to rely on a single boring Economics teacher to learn about the subject.

It's now possible to download the very best Economics lectures and commentators in the world for free. Want to find out what's happening in India, then don't listen to me, listen to Amartya Sen, India's most famous living economist. Want to know whose citizens will be the richest in 2026, find out from Daniel Franklin, futurologist - don't take my word for it. Want to understand the recent developments in the oil industry, then listen to specialist Daniel Yergin

All of these and more can be found on the Economics podcasts linked here:

And finally, from the very prestigious Centre for Economics Policy & Research:

Saturday, May 13, 2006

Shhh! Don't Tell the Americans!

During the Great War 1914-18, the economic system in Europe collapsed leading to revolutions all over the place - Germany, Russia and so on.

The British government kept going and avoided revolution by borrowing money from the Americans - at a very low interest rate in fact - about 2%. Rather cleverly, we then passed on quite a large percentage of this money to other countries as loans (at a somewhat higher rate of interest of course!). After the war, we had to pay the Americans interest on these loans and we continued to do so until the 1930s.

Then the western economies collapsed again. There was complete confusion. Many of the countries who had borrowed money from Britain stopped paying it back to us (except Finland strangely, who paid off all their debt) - so we did the same to the Americans - just stopped paying. They weren't very happy about it but then the second great war came (1939-45), other priorities became more important - and the whole thing was forgotten.

Except that no one has ever actually cancelled the debt.

Technically, with interest etc, the UK now owes the USA about £250bn. A ridiculous figure - much more than it could ever hope to pay. Nothing has been paid towards this debt, you see, since 1934 - it's just got bigger and bigger - hardly anyone knows about this debt anymore - except me and you that is - it's our little secret!

Friday, May 12, 2006

Don't Forget the Popcorn!!

Another batch of good economics films just about to hit cinema screens near you. The best of these is 'Wal-Mart - the High Cost of Lo-Price' which looks at the way in which Wal-Mart dominates American food sales and is moving rapidly into other countries such as the UK (Asda) and China.

There are many criticisms that can be made of Wal-Mart under the heading of corporate governance (module 5) such as the low wages they pay - this forces many of their workers to claim welfare benefits from the state - so in effect the American people through their taxes are subsidising Wal-Mart's profits and growth. Also, an analysis of company structure shows that it is very unusual for women or people from ethnic minorities to gain promotion within the company. Then, of course, there's the slightly unusual slogan 'Bringing America Home to Americans' that you find all over their shops when 80% of their non-food items are made in China.

On the other hand, of course, as the film 'The Corporation' released last year suggested, you can't really blame them - in a world of competitive market economics, businesses will do whatever they need to do - or whatever they can get away with - in order to maximise their profits. If you don't grow as a business, you will shrink and die.

So corporate governance theory tells us that the role of government becomes one of establishing the rules of the game - a regulator - just like in football - so that competition is encouraged but the rules ensure that the net effect is a positive one for society and not a negative one.

Other new films to watch out for soon include 'Fast Food Nation' - a look at how fast food businesses are distorting the US economy and 'An Inconvenient Fact' which looks at the US government's response to global warming.

Thursday, May 11, 2006

Games War

Nintendo will launch their new Wii games machine next week at the annual E3 exhibition in the US. The XBox 360 came out last year and the Playstation 3 will be available in November.

The games market is a monopoly-power oligopoly. Sony currently have 70% of the market with the other two on 15% - but Sony have been badly hit by the late delivery of the Playstation 3 - and analysts predict the market could flip dramatically in favour of Nintendo over the next twelve months.

There are huge barriers to entry to this market - particularly in development costs. But of course, the products sell cheaply because of bundling through derived demand. If you buy a Nintendo then you must buy Nintendo games - and these are very expensive.

The next generation of games machines will include full-motion sensors - thin gloves and spectacles containing mini-plasma screens providing a 3-d sensurround effect - you won't just see the games, you will be inside the game.

I don't like computer games because of the enormous time they take to play. The opportunity cost of playing games is life itself - but my son argues that the opportunity cost of all the time we make him spend on real life is less time spent with Lara Croft.

By the way, you might like to know that I was the teacher for the model who was the very first Lara Croft - Rhona Mitra. She has also starred in films like 'Spartacus' and 'Beowulf'. Here's her website: (terrible name for a website!)

She was a nice girl - but strangely not very good at Computing...

Don't forget, next Wednesday (May 17th), my six-term groups will be visiting the Bank of England, leaving at 11.15am from outside House 46. Here's the BofE website:

Wednesday, May 10, 2006

Mark Schemes

Just a reminder that there is a link to all the past papers and mark schemes in the March 2006 section of this blog. Reading the mark schemes is helpful - not because they are directly relevant (you won't get the same questions again, so don't waste time trying to memorise them) - but because they show you the type of ideas and thinking the examinaer will be looking for. You will also notice that the examiner actually has a great deal of freedom in awarding marks during an essay - providing what you say makes sense, you will get marks. The standard approach to writing an essay is: define any economics terms in the question (quickly); divide your answer into two or three sections; produce two or three statements in each section; deliver a conclusion.

The conclusion can be either:

a) On balance, it could be argued that...............
b) From analysing the arguments, the most important argument appears to be......
c) In the short-term, we would expect happen - but in the longer term, we might find.....
d) Without having more information's not possible to reach a firm conclusion at this stage but the evidence appears to suggest....

The importance of Kazakhstan as a world-player has been underlined by an EU delegation to Astana to discuss the building of a gas pipeline underneath the Caspian direct to Europe - bypassing Russia. This could break Russia's monopoly of gas supplies to western Europe from the east. By 2015, Kazakhstan will be one of the world's biggest suppliers of natural gas and is destined to be a fast-growing economy for at least the next 25 years.

It's perhaps too soon to say for sure but it could be that Japan's Great Stagnation (15 years of almost no economic growth) may just be coming to an end. Interest rates are 0% in Japan - but inflation has finally crept up to 0.5% so now that inflation > interest rates, there's hopes that the Japanese will now start spending again giving the economy a welcome boost.

Monday, May 08, 2006

Urgent Advice & News

1) Warren Buffet - the world's biggest investor - signalled his desire over the weekend to start buying companies overseas as he fears the dollar will weaken significantly.

By doing this, of course, he will send many other investors into a panic and they will start selling dollars over the next few weeks.

There are two things we should note from this:

a) Now would be a good time for you or your parents to move from dollars into other currencies before the big fall comes.

b) It's quite likely that Warren has ALREADY moved out of dollars secretly - and will move back into dollars when the price has fallen significantly. He's always been a shrewd market operator.

2) Wal-Mart are trying to copyright the Smiley face !! This is an example of businesses trying to create barriers to entry through commercial property rights - patents, copyrights etc. Imagine a world where every time you drew a smiley face, you had to pay Wal-Mart a fee!! Similar cases recently include a Chinese coffee company that was banned from using Chinese characters for their company name which - in Chinese - looked similar to Starbucks; a Scottish person called McDonald who wanted to start a burger shop called - well, you can guess; and some British pop stars who are fighting to increase the copyright on their pop songs recorded in the late 1950s from the current 50 years to 70 years.

Saturday, May 06, 2006

Personal Statements

Some of you are beginning to think now about applying to university - and I've already had some questions about personal statements:

You don't need to lose any sleep over this. Personal statements are most useful for older people who are trying to get into university but perhaps don't have any A-levels - just years of practical working experience.

For most A-level students, the personal statemens are really just a formality. Most universities barely glance at them - remember they may be processing tens of thousands of applications in one year - the process is now highly automated. Offers are issued automatically for most courses - the grades required being the 'price' of that course based on supply-and-demand for places.

Sample personal statements can be found here:

If you would like to write your personal statement in rough and email it to me, I would be pleased to smooth it out for you.

Basically, the personal statement should include:

a) Where you come from
b) Why you have chosen the field of study that you have
c) What you see yourself doing in five/ten years time
d) What extra-curricular things you have done / work experience you may have had and what you learned from it
e) specific personal interests - what motivates you

The last two may include things like voluntary work, or paid work, competitions you have entered, teams you have played for, interesting visits you have been on and so on. Personal interests should not include reading, watching TV, playing computer games, going to the movies - everyone does that. But maybe you play the piano, or you are a taekwondo champion or things like that.

For some universities - Oxford and Cambridge in particular - the personal statement is critical. Everyone who applies to Oxbridge will get A's in all their subjects, so they decide on offers based entirely on the personal statement and interview. I would be pleased to give you a mock interview nearer the time. The interview is also important for UCL - although it is rumoured that UCL will be phasing out the interview soon as it is expensive. Most universities no longer give interviews.

Here is some more information on applying to Oxbridge:

The other common question I get asked at this stage is: what are the best universities for Economics. Well, here's the league table so you can see for yourself:

Friday, May 05, 2006


One or two students have expressed surprise that banks - such as Citibank - are even more profitable than oil companies.

The answer to this is: distribution.

If you can control distribution - be the man in the middle - you can maximise your profits. If you can control the distribution of the factors of production, you become the king of money!Tesco is a good example of this - being the distributor sitting between food producers and consumers.

In effect, banks act as the distributor for money. The central banks produce it and consumers/businesses consume it. They are helped in their task of making money by the way the credit multiplier works. In short, this means that any money deposited in a bank may be loaned out to people/businesses perhaps as much as 35 times - making profit from each loan.

Distribution is also the key to the changes we are seeing on the Internet. In some ways, we have lived through a golden age of free access (apart from a small monthly subscription) to all the world's knowledge. This was because the Internet was created partly by accident and partly by idealists. The millions of websites on the net and the millions represent almost a perfect market in knowledge.

This is rapidly changing.

Already it is the case that sponsored links appear at the top of any search. What is less well known is that you can pay meta-engines to ensure that in an open search your website appears near the top of the open search, pushing down the list those not willing to pay.

Very soon, it will be the case that you will be able to pay the meta-engines to ensure that your rivals do not appear on the list at all.

Soon after that, it may be the case that only a few professional knowledge providers will exist - drifting more towards an oligopolistic market. You can already see this beginning to happen with companies like becoming more prominent in any search.

The big companies are also beginning to move into position. Microsoft was damaged by failing to recognise the rapid growth of the internet - Microsoft still essentially sells product eg. Windows, rather than controlling distribution. Google dominates distribution. But Microsoft is working hard to compete with Google in the next generation of internet development - this will see television/movies/news/financial services/retail products/gambling delivered through broadband everywhere to everyone at any time - linked to local product distribution centres - destroying existing delivery mechanisms like satellite television and seriously damaging the profitability of physical shopping centres.

The next 25 years will see a revolution in the way we consume - and he who controls distribution will be king.

Wednesday, May 03, 2006

JK Galbraith

Sadly, JK Galbraith has died. He was 97 (Economists live a long time - it's all that thinking.) JK was not one of the great economic theorists of the last century - in some ways, he was more important - a practical economist who combined a daily working knowledge in government administration with mass observation sociology.

When I was 15 and like most intelligent boys of that age feverishly developing my own theory of life, the universe and everything, I read JK's "The New Industrial Age" and it was like a light turning on in my head - I suddenly understood how the world worked!!

What JK was explaining to me in that book, of course, was Keynesianism. Of course, this would be later modified by other economists - but for me at that time, it was a great leap forward in understanding.

During the second world war (the great patriotic war, the war of imperial liberation, depending where you live), JK was given the task of preventing inflation in the US. He did this by adopting a Soviet-style price-setting regime (presumably he didn't tell his bosses he was doing this). Of course, it led to shortages but it did solve the problem. After the war, he was very influential in the Marshall Plan - the plan that rebuilt the economies of western Europe. He had realised that the western economies were sitting in the horizontal plane of the supply curve and it would be possible to increase demand quickly through a combination of donations and printing money - without creating inflation.

It was very important to the Americans to rebuild Europe for a number of reasons. Firstly, there was a genuine altruistic element - at this time America was dominated by the rich liberal families of New England - the Kennedys, Vanderbilts and Roosevelts - long before the heart of America shifted south and west to Texas and California and the more individualistic attitudes that prevailed there. Secondly, Europe was needed as a strong front-line against the growth of the Soviet Empire. Thirdly, the Americans needed people who had some money to buy their products so their industries could continue to grow (which they did - at its peak in 1950, America had 50% of the world's GDP - now it's down to 23%)

Later, JK produced his great work - 'The Affluent Society' in which he argued that we were moving away from a time of scarcity towards a time of plenty when we would all have everything we could wish for. It was poor economics but great sociology. Firstly, he introduced new words into the vocabulary - 'technostructure', 'the conventional wisdom' etc. Secondly, he was the first serious economist to argue worldwide that GDP was not a good measure of living standards. Thirdly, he argued that businesses would reach a stage where they could only grow by creating desires in people through more-and-more advertising and that this would be pointless and dangerous as it would risk creating discontentment and reducing living standards (as opposed to GDP - the standard of living). This was 1958 when there was little serious advertising in Europe but advertising industries were just beginning to emerge in the USA and working for an advertising agency was seen as an exciting and cool job to have. At the time, his ideas were pooh-poohed but now we live in a world where the average person sees 300 adverts a day and 14% of us work in sales, marketing, website design and other advertising fields - after Business Studies, Media Studies is the biggest university course.

Increasingly, there is more emphasis on the image of the product than the product itself - this may also be true of politics!

Monday, May 01, 2006

Bored with Essays

Are you bored with writing essays? Are you worried about the 10,000 word dissertation you will need to produce at University?

Don't worry - help is at hand!

It's now possible to buy essays, coursework, dissertations and so on from many websites for very small sums of money - sometimes as little as £5.

Here's one of the most professional:

This has got many universities worried, including Oxford, where recently it was suggested that more than half the students had used such services in the last year; and the examining boards who are facing a coursework crisis as it becomes increasingly common knowledge that most items of GCSE and A-level coursework are 'bought in' or done by friends of the family (see personal case below). Plagiarism is also a problem with students using copy-and-paste to fill out their work with material from some of the world's greatest economists.

Does it matter?

Well, on the one hand, it doesn't matter. One of the most important skills in the modern world is information management. Information is sometimes called the sixth factor of production. Being able to identify the most appropriate information from the mountain of info on the web is in some ways to be applauded. Secondly, none of us is truly original in our thinking - we build on the knowledge and views of others. Thirdly, in modern business, focussed, problem-solving teamwork is more important than individual decision-making and creativity - working together with someone on a piece of coursework may simply be more efficient than producing two individual pieces.

But on the other hand, if you don't say where the information came from, you are cheating - passing on someone else's views as your own; secondly, you may just be lazy - getting someone else to do your work for you - so you may be credited with a level of commitment that you don't actually have (X-inefficiency). Thirdly, it becomes difficult, perhaps even impossible, to access someone's individual ability and research skills where you can't decide who the true author of a work is.

The strangest case I have come across myself was when I was teaching A-level Computing. A student handed in her A-level project - a superb programme in GBASIC predicting future pressures on natural resources from population growth - with a front page that said, "Most of all, I would like to thank Alfred, my servant, for all the time he put into this - who would have thought he knew so much about computers! - Thanks Alfred - you're a star!!"