Austrian School of economics

If you have done research in your spare time then you would have definitely come across other ideologies and notions in economics.

The one we primarily learn in A-level economics is Keynesian economics which believes that the private sector could choose decisions which would create inefficiency in the economy. To counteract this effect they believe that there should be policy measures put in place by the government in particular monetary policy (creating low interest rates) or by utilising fiscal policy to stabilise price levels and output because of the damaging effects.

Austrian economics however disagree with this very strongly. This kind of intervention by governments would create a false economic setting misinforming firms and consumers about the real price level, what is generally accepted by Austrian economists is that the economy works best when there is no form of any discretion at all and that markets equilibrate on their own. If governments play a big role in an economy this could result in 'crowding out' of investments and the stifling of private sectors.

They also criticise Keynesians on their mathematical models which assume many factors that can prove to be false since many factors are hard to calculate and measure and some are purely irrational so making these assumptions can cause a severe degree of inaccuracy of how the economy should be run. Keynesians believe that macroeconomics is a very good procedure to secure economic sustainability whereas Austrian economists think it is to do with micro-economic factors.

Coming into the study of economics, you will be instantly bombarded with different views. What you choose to believe in should be from your views and your own research in it. Economics is as varying and as fundamental as our bodies, appreciate it.

Sex, money and economics

Economics is one of the most competitive degrees being studied at university along with: Law, business and management studies, art and IT and computer science, this may be the reason why in a recent survey that economics students have recently had the highest average of sexual partners since starting college!

                                                      
                                                                     (Giacomo Casanova)

The survey done by http://www.studentbeans.com/ found that on average students studying economics had an average of 4.88 sexual partners, this may be due to some form of self-induced panic caused by the news of slow growth and a bleak future for the UK's economy, or maybe studying economics just exudes an aura of sex appeal.

BBC's economics editor, Stephanie Flanders has allegedly had a relationship with Labour leader Ed Miliband as well as Ed Balls, the shadow chancellor.

Next on the list were:
Community care and counselling- (4.7 partners)
Marketing- (4.57 partners)
Leisure, hospitality, tourism and retail- (4.56 partners)
Agriculture- (4.44 partners)

Now comes the more 'innocent' subjects:
Theologians-(2.13 partners)
Environmental science-(1.71 partners)

Economics, an intellectually and physically stimulating subject by all accounts.

<a href="http://www.hypersmash.com">Hypersmash.com</a>

A False Hope?

Huzzah!!!

For people who have read the latest on our economy's progress would have by now realised that our disappointing 0.7% contraction in the economy was actually miscalculated, it's now at a slightly better 0.5% this is due to economists estimating the construction sector wrongly, it was higher than previously calculated leading to a smaller contraction than previously estimated.

This does not mean that the economy is getting any better though, the bank holiday we just had didn't help much either with GDP taking away roughly 0.5%. Some blame the recession on the severe spending cuts that the government has implemented but regardless of the slow growth in the economy it is not all bad.

Compared to two years ago the deficit has been reduced, inflation is down and there are more private sector jobs, but this has led to some questioning as to how unemployment is falling when the economy is shrinking, one reason is that there has been a move to part-time work which has affected the productive capacity of the economy.

A First in the Economy

Even bringing the interest rate down to an all time low doesn't mean the banks will listen and start lending again or as much as the Bank of Scotland thought banks would. So they've resorted to quantitative easing.

Quantitative easing is when the central banks buys assests (mostly corporate and government bonds), but they use money that they've just created or in other words "printed off", but since we are living in the 21st century this is all done electronically. By doing this commercial banks and financial businesses will have newly created money in their accounts which means there is more money in circulation, increasing the money supply.

There are two effects which will hopefully occur through this method: By conducting reverse auctions for government bonds (sellers competing to sell so as to reduce price), it starts increasing the amount of money within bank's bank accounts this may then increase lending activity of banks, this will then help improve activity of the economy. The other effect is when bonds are bought this reduces the availability of them within the economy, this increases demand for the bonds and should it make it easier and cheaper for businesses to borrow.

Since short-term interest rates are as low as possible only long-term interest needs to be driven down, long-term interests are used by companies for long-term investments and individuals for things such as mortgages.

Now analysts are debating whether quantitive easing has been a success or not since it's hard to calculate how much worse off the economy would have been without putting the quantitive easing into practise.

So far reports from the Bank of England have suggested that it has helped boost GDP by between 1.5% and 2% which means that the scheme may be economically effective and rewarding for the long run despite doubts.

LSE fantasy share game

Hullo everyone, I've recently joined this LSE fantasy share game (here's a link for anyone who wants to join http://game.lse.co.uk/). It's basically a simulation of the stock market, the London Stock Exchange specifically and it's open at certain times throughout the day, following Greenwich mean time. For anyone who wants to play the stock market when they're an adult or now, I would say this is probably one of the best ways to prepare yourself for it, I personally find it enjoyable (If there's anyone who wants to contact me in the game, my uusername is krumister). LSE are also offering prizes for monthly winners first prize: £150 second prize: £100 third prize: £50.

Moving on, if there are any students who want to expand their knowledge on economics there is a list of books that I suggest you should read such as:


1. The Undercover Economist
2. Freakonomics
3. The Truth About Markets
4. The Armchair Economist
5. The Mind of the Market
6. Why Most Things Fail
7. The Worldly Philosophers 
8. Capitalism and Freedom
9. The Wealth of Nations
10. Tipping the velvet
11. The misfortunes of prosperity
12. The elusive quest for growth: Economist's adventures and misadventures in the tropics
13. The bottom Billion: why the poorest countries are failing and what can be done about it
14. Globalization and its Discontents 
15. Making Globalization Work 
16. The Dragon and the Elephant 
17. The Age of Turbulence 
18. The Accidental Theorist 
19. The Roaring Nineties 
20. Butterfly Economics 
21. Everlasting Lightbulbs 
22. In Defence of Globalization 
23. Development as Freedom 
24. Capitalism and Freedom 
25. Peddling Prosperity 
26. Eat the Rich 
27. A Random Walk Down Wall Street 
28. Thinking Strategically 
29. Reinventing the Bazaar 
30. Lives of the Laureates 
31. The Return of Depression Economics and the Crisis of 2008
32. Free Lunch 
33. The World is Flat 
34. The Next Global Stage
35. Wikinomics
36. Bad Samaritans 
37. Equality and Efficiency: The Big Tradeoff 
38. Rethinking International Trade 
39. Game Theory and Economic Modelling 
40. A Theory of Economic 
41. The Economic Naturalist 
42. The Affluent society
43. Keynes and After 
44. Road to Serfdom by Hayek
45. New ideas from dead economists


I will soon get Freakonomics myself and tell you my verdict on it as soon as possible, some of these books will be difficult to understand and even harder to grasp the concepts, but it requires nothing more than a determined mind to comprehend.

Why tuition fees, why?

As everyone probably knows in 2010 the British coalition government removed the £3,290 cap per year on universities, at first they decided to remove it completely but then they proposed to set the cap at £9,000 per cap. This was nearly triple the original amount that students had to pay per year, undoubtedly this sparked a major nation-wide protest particularly in central London against this review, which led to sporadic bouts of violence, causing a lot of disruptions and chaos across areas of London on different days. But it is not entirely the government's decision to increase tuition fees, they only set the cap. Universities themselves are deciding to increase the tuition fees but then again this is from cuts in public spending (education) from the government, so who shall we point the blame at?

Whether this was morally right or not is not my place to say, but I will explore the reasons behind the review.

One of the biggest reasons that contributed to the increase in tuition fees by the universities was massive cuts in government spending on education, this meant that universities were underfunded so they were not as able to improve facilities as they were originally, this meant students were less likely to go to the chosen university, leading UK to lose their world class status in terms of higher education.
The financial crisis led to the reduction in money spent on the education, which was only exacerbated by inflation which meant that students were still paying roughly the same amount as they did 6 years ago, but because of the rate of inflation (which was at a low of 1.1% in 2004 but peaked at 5.4% in 2009) this meant that improvement on facilities required more money to purchase and most probably professors and other employees of the universities were demanding an increase in pay due to the rise in prices.

Even though this meant that students would find it considerably harder to pay off their financial debt once they finished university, the government did make it easier for undergraduates to be able to gather their sums and pay it off. They agreed that incomes from £21,000 had to pay 9% towards their student fees, once your income starts increasing and it hits £41,000 they will have to pay 3% real interest on top of the inflation.


In the most basic terms universities are trying to earn some more pocket money to be able to continue to maintain their high profile status. And whom to blame? The financial crisis for persuading the government to reduce our most esteemed universities's pocket money.