Chance to be Chancellor

Fancy a go at being Chancellor? Well now you can thanks to a competition being run by the Citizenship Foundation and The Times.

Here is what you have to do:

Students are provided with a list of ways (policies) in which public money can be spent on areas such as Environment, Health and Education. However, just like in the ‘real world’, they can’t pick them all. Students will need to prioritise the policies that they think are most important, making compromises where necessary, and then justify their choices by writing the Chancellor’s speech. Once they’ve made their choices, students will need to write a speech of between 500-1000 words to explain to the country what they will be spending their money on, and why. Students will need to express their opinions clearly in writing and be persuasive in their arguments. They’ve got a whole country to convince!

Contact SDW if you are interested in taking part - the competition is open to all students aged 14 - 19. Closing date for entries is 31 March 2009.

Further information

Chance to be Chancellor website

Competition pack

Briefing information on the Budget and the economy

What IS happening to prices?

During the Great Depression prices in the US fell by 10% a year from 1930 - 33. Fears of deflation are obviously weighing heavily in the minds of the Bank of England's MPC (see 'Turn on the printing press' below) But what exactly IS happening to prices in the UK.

On the government's preferred measure of prices (the Consumer Price Index - CPI), prices were UP 3.0% last month compared to January 2007. So what is all the fuss about deflation? Part of the problem is that whilst the CPI shows prices rising the comparisonn is with the same period last year. So prices may be falling but they may still be higher than last January. The expectation is that by the middle of the year CPI will be showing more of the trend that worries the Bank of England.

An alternative measure of prices, the RPI (Retail Price Index), shows prices last month only 0.1% higher than last January. But the RPI includes a measure of mortage interest payments which are falling due to lower interest rates and falling house prices. The correction in house prices is probably in itself desirable. Asset price bubbles as they are known (over-inflated house prices for eaxmple) tend to devote scarce resources away from their most productive uses - a little less obsession with property prices would not be a bad thing. The house price bubble of the last decade is, after all, why we are where we are today and what led to 'creative' banking practices at the root of the credit crunch.

Prices, then, may not be falling and inflation may still be above the Bank of England's target rate of 2%. But, as we have seen, economic indicators can turn on the head of a pin.

Watch this space ...

Useful weblinks

Spectre of deflation haunts Britain (Independent)

Turn on the printing press

The latest minutes of the Bank of England's Monetary Policy Committee (MPC) recorded a unanimous vote in favour of the Bank requesting premission from the Chancellor of the Exchequer to turn on the priniting presses and print more money. In an unprecented move the Governor of the Bank of England is expected to write to Alistair Darling within the next few days.

There has been much about 'quantitative easing' on this blog and in lessons (thanks to Rex Harrison). Here are just t a couple of links which economics students may find useful.

At the end of 2007 while writing a chapter on macroeconomic performance for the new OCR A2 economics textbook, I remember opening to a Study Tip with the words "you live in interesting times" - little did I know HOW interesting times would become!

Useful weblinks

Bank to request permission to print (Independent)

Stephanie Flanders on quantitative easing

Times graphic explaining quantatative easing

Guardian Q&A on quantative easing

Too high, too low - but not 'just right'

The rate of inflation in the UK is falling, whichever measure you look at. According to the latest CPI (Consumer Price Index) inflation was down to 3% last month. On the RPI (Retail Price Index) measure it was close to zero.

In the current climate monetary policy is being driven by a fear of deflation - falling prices. Listen to Stephanie Flanders report on the Bank of England's fears here.

Yet some believe that the slashing of interest rates is stoking up an inflationary problem for 2011. All of this uncertainty means that the period of price stability ushered in by the granting of operational independence to the Bank of England is over. It is anyone's guess whether prices will actually fall (deflation) or whether prices will rise (inflation) dramatically in 18 - 24 months time. According to Stephanie Flanders, the Goldilocks economy (where prices are 'just right') is a thing of the past. This makes things very tricky for the Bank of England ...

My challenge to Yr 12 economics students

Why are there different measures of inflation and does it matter?

Old or new romantic?

Economic's claim to be a science is rooted in the 'marginal revolution' of the 19th century. Economic agents were thought to act rationally, seeking to maximise their gain from consumption and production and acting independently of each other. The neatness of such rationality was that economic theories could be developed with the tools of mathematics. As time passed, economic theories became more mathematically elegant and testable by their predictions.

This was all very different to the era of the Romantics in the 18th century which inspired music, literature and the arts. Yet a new book, The Romantic Economist, argues that we have much to learn from the likes of Byron and Wordsworth. Economics is as much an art as a science, if not more so.

The Romantic Economist is reviewed by Larry Elliot in Monday's Guardian here. I will make sure that there are copies available in the library after half term.

My challenge

For those thinking of applications to Oxbridge for PPE / economics consider whether economics is an art or a science. We will meet up during the second half of term to discuss. Prepare by reading The Romantic Economist and books / articles in the library on the methodology of economics.

Growth and development

It hardly seems like the time to be critical of economic growth! Most commentary on the global economy takes for granted that it would be quite nice to have a little growth at the moment. For with growth comes jobs, with jobs comes income and with income comes a higher standard of living.

But is economic growth the be all and end all of economic policy? My Year 13 economists are beginning to question whether economic growth necessarily implies development in the early stages of their final A2 module on development economics. I'll get around to looking at their first thoughts when I mark their blog task challenge based on the recent news about tyhe activities of a UK multinational mining company in India. Not long either before the same sorts of questions are posed to Year 11 economics and business students.

Both year groups will find the following link to a great resource on the BBC website useful. It provides a walk through of the United Nation's Millenium Development Goals (MDGs) and is accessible to all students.

My challenge to Year 11 students

To what extent has China's recent impressive economic growth been desirable?

Latte lessons

My Year 12 economics classes are now well into their weekly 'latte lesson'. The concept is simple - each Friday morning is a break from the monotony of the specification and a chance to explore something economic that takes the students' fancy. Oh, and the drinks, biscuits, homemade brownies and chocolate tea cakes the presenter must supply!

The result? Some fantastic research, presentations and discussions so far on the Japanese economy and Zimbabwe. And a couple of inches on my waist line too!

Rex Harrison was spurred on to research Japanese economic performance in the 1990s in order to draw lessons about the current economic downturn and the appropriate policy responses. Rex's explanation of quantitative easing was masterly - who will forget his matchstick bankers? I will make his presentation available on the VLE for everyone to download.

In the meantime, as interest rates in the UK fall to 1%, the likelihood of 'quantitative easing' grows stronger. Year 12 students might be interested in this interactive guide to quantitative easing from the FT as a follow up to Rex's presentation. I think the FT may have borrowed the idea from Rex!