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Scooped by
Graham Watson
onto Microeconomics: IB Economics January 4, 3:59 AM
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Environmental groups urge government to keep tougher green targets as industry argues they are unsustainable
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Associated British Foods’ sale of Allied Bakeries would bring together two of the UK’s biggest breadmakers
Graham Watson's insight:
More merger activity hoves into view with iconic British brands Hovis and Kingsmill contemplating joining forces. Associated British Foods (ABF), which owns the Kingsmill parent Allied Bakeries and Hovis’s private equity owner, Endless, a discussing a potential sale of the bakeries arm. The argument is that both are struggling and that this would generate "cost efficiencies" - i.e. economies of scale.
The immediate issue is that this is likely to attract the attention of the competition authorities. It would see the 2nd and 3rd largest players in the sector merging and push current market leader, Warburtons, into second place.
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Professionals call for a fundamental transition including controlling flight numbers
Graham Watson's insight:
Not much economic theory, more of a rallying cry, with a campaign group - Call Aviation to Action - alarmed that the aviation sector isn't doing enough to tackle carbon emissions, and in doing so is missing the opportunity to initiate radical change
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As big companies and informal miners blame each other for the damage to rivers and forests, mining risks long-term harm to those living nearby
Graham Watson's insight:
The negative externalities of emerald extraction in Colombia is laid bare in this Guardian article with different stakeholders - big business and informal miners blaming one another for pollution from resulting emerald extraction.
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The slowdown in the market was expected due to the lowering of thresholds at which buyers need to start paying stamp duty at.
Graham Watson's insight:
D&S basics - with the impact of an indirect tax - in this case Stamp Duty - have the expected effect on the housing market.
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Labour to press on with pylons as study shows underground cables more costly | Energy | The Guardian
IET report says running cables below ground about four and a half times more expensive than overhead lines
Graham Watson's insight:
Lots of lovely Microeconomics here - opportunity cost, renewable energy and energy security for a start. However, to what extent do pylons generate negative externalities? My impression is that people who say this don't have much of a case.
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The tax would be applied to manufacturers of milk-based drinks and dairy-based substitutes, under the plans.
Graham Watson's insight:
It looks like the government are going to extend the sugar tax to include milkshakes and other dairy-based substitutes, like yoghurt drinks, to try and reduce sugar consumption and tackle obesity.
Manufacturers will complain but its interesting to note that only 89% of soft drinks are now subject to the sugar tax because of the reformulation of these drinks and it's thought that this will be the main way that sugar consumption is reduced.
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Conservationists fear fallout from president’s proclamation on fishing in federally protected area of Pacific Ocean
Graham Watson's insight:
A common access resource problem may occur as the result of President Trump's deregulation of fishing in the Pacific. The fear is that a lack of regulation will spur the 'Tragedy of the Commons' as the resource is over-used and depleted, generating negative externalities.
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Northeast Atlantic mackerel populations depleted, and Good Fish Guide says shoppers should look for other options
Graham Watson's insight:
Here's a classic example of a common access resource being over-exploited, with the Good Fish Guide noting that that Northeast Atlantic mackerel is being over-fished and encouraging consumers to buy other types of fish. You should know all about the characteristics that make resources such as these prone to being being over-consumed resulting in the Tragedy of the Commons.
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The brands are warning of the impact of employer National Insurance Contribution rises which kick in on Sunday.
Graham Watson's insight:
This could easily be a Macroeconomic 'scoop' but I'd like the Year 13 economists - some of whom will have finished for Easter - to think about what this does to a firm's costs and, by definition, it's equilibrium position.
That might indicate why prices rise for most firms, unless, of course, they're prepared to accept lower profit margins.
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Action urgently needed to save the conditions under which markets – and civilisation itself – can operate, says senior Allianz figure
Graham Watson's insight:
This Guardian article cites a senior figure at insurance company, Allianz, who suggests that the global inability to tackle climate change poses an existential threat to capitalism itself. He notes that if insurers are unable to insure against climate disasters this has wider implications for all sorts of financial markets, precipitating what might end up being the largest market failure of all.
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Only a third of 16 to 24-year-olds gave to charity last year, down sharply since the pandemic.
Graham Watson's insight:
There are various levels of interest here, both Micro- and Macroeconomic. In the latter case, the level of charitable giving reflects economic sentiment, but you might also see this as an unusual application of the theory of the firm, reflecting costs and revenues, and then question what the objective of charities is. Are they profit maximisers, or is there another objective that's more likely to reflect their intentions?
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Duration of spills by water companies up on previous year, in data described by environment secretary as ‘disgraceful’
Graham Watson's insight:
The latest data from the Environment Agency reveals that Britain's water companies pumped raw sewage into the nation's streams, rivers and seas for nearly 4m hours last years. That's a lot of hours. and a lot of sewage. And a lot of negative externalities too.
However, is there an optimal level of sewage leaks? I hate to disappoint the environmentalists among you, but there clearly is, and it isn't zero either. You need to use marginalist principles to work out what this would be - and then you'd have the difficulty of trying to establish marginal costs and marginal benefits.
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New powers mean regulator can ban payouts under criteria of Ofwat’s choosing
Graham Watson's insight:
An important point to remember when looking at how industries are regulated is the fact that the regulator is almost always the second mover. The industry does something, it has adverse effects and only then does the regulator act.
Shouldn't this sort of thing have been thought of earlier? You would have thought so, but the prospect of fining executives no shifts the goalposts and seems to better align incentives to reduce chance of environmental damage, if this is what the powers are going to be used for.
However, I also worry about the phrase "criteria of OFWAT's choosing"; for me, it's too vague and creates uncertainty, which might reduce investment in the sector, or, alternatively, see some activities being over-consumed.
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The deal is the latest example of a UK-listed company being taken over by a US rival.
Graham Watson's insight:
It's happening: Doordash has agreed a £2.9bn takeover of Deliveroo, consolidating the sector and creating a larger rival for Just Eat and Uber Eats. The deal values Deliveroo at 180p a share, well below the IPO price of 390p, and there are also concerns about another firm being taken over by a US company.
Will Shu, Deliveroo's CEO is recommending the deal to shareholders, not least because he will trouser over £172m, but because the new entity"will have the scale to invest in product, technology and the overall consumer value proposition."
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Such a takeover would be one of biggest deals ever in oil and gas industry
Graham Watson's insight:
Wow! This would genuinely be a mega-merger, if Shell decided to bid for BP, prompted by the latter's falling share price. The combined company would be likely to have a value around £200bn, and considerable market power in many markets.
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Watchdog considers crackdown amid record complaints from pet owners
Graham Watson's insight:
It seems as thought the Competition and Markets Authority is going to intervene and potentially impose a price cap in the sector. Prices have risen by 60% in 8 years, compared to general service sector inflation of 35%.
It's argued that one of the causes of this has been a change in market structure and increased market concentration with large firms consolidating and the suggestion is their demands on their employees might be driving practitioners to limit the services that they offer to customers, and in doing so boost their employers profits.
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Federal funding was critical to Tesla’s survival. Yet the Doge boss now derides subsidies as government overreach
Graham Watson's insight:
A fascinating perspective on Elon Musk and government intervention with the author, Christopher Marquis, noting the irony in his current position as head of the “department of government efficiency” (DOGE) looking to cut government spending when his companies have greatly benefitted from the largesse of the state.
It's a similar story with Apple too - something Mariana Mazzucato's "Entrepreneurial State" is good at exposing - and it suggests that we often overlook the role of the public sector in bringing about innovation.
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Nearly 30% of total spending by biggest chains over four weeks was on special offers and discounts, says Kantar
Graham Watson's insight:
Unusually, it seems as though there's a price war in UK grocery retailing, with Kantar reporting that the last 4 weeks has seen significant spending on promotions. You wouldn't expect this to be the case in an oligopoly - and Year 13 economists should be thinking about why that's the case - however, lengthy periods of price stability are interspersed with short periods characterised by intense competition and it seems that's what happening at the moment.
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Founder Will Shu could net £172m as biggest US food delivery app looks to global expansion
Graham Watson's insight:
There's seemingly the prospect of a takeover in the food delivery app market, with US market leader DoorDash potentially going to bid for Deliveroo, despite the fact that the latter has, for most of its existence been a loss-making business.
I'm sure that there are economies of scale to be gained from any such move, but it strikes me that margins in the sector are incredibly tight and I suspect that the competition authorities will also have a view.
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The government says it will save parents £50 a year, but retailers say it could end up costing more.
Graham Watson's insight:
This is an unusual example of government intervention affecting the price of school uniforms, with a reduction in the number of branded items that schools are allowed to insist upon, seemingly lowering the cost of school uniform for family by up to £50.
Strange to relate, turkeys don't vote for Christmas, and in this case branded uniform manufacturers are opposing the move suggesting that parents will have to pay more to replace lower quality uniform and highlighting the impact of branded uniform on behaviour amongst other things. I have to say, I don't find their arguments terribly convincing.
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The Spanish government is moving to make renting more affordable and boost the supply of homes.
Graham Watson's insight:
A housing shortage in Spain has seen rents double in the past decade, whereas incomes have only gone up by 20%. As a result, a significant proportion of renters are having to spend more than 40% of their incomes on renting property.
As a result, the Spanish government are having to intervene, to incentivise housebuilding, individual cities have started to clamp down on tourist flats and there's even been talk of introducing a rent cap, something that rarely succeeds in solving the problem.
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Research finds proposal may also drive up cost of building new windfarms as developers need higher subsidies to offset cost
Graham Watson's insight:
I've 'scooped' this before - however, the prospects of remodelling the way in which energy is priced on a local level appears to be more expensive than the government had hoped. A UK Energy Research Centre (UKERC) paper suggests that the higher price of energy could mean that zonal pricing is unfeasible and would both increase bills and discourage investment in renewable energy sources.
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BMW, Ford, JLR, Peugeot Citroen, Mitsubishi, Nissan, Renault, Toyota, Vauxhall and Volkswagen have all been fined.
Graham Watson's insight:
I'm always saddened by this sort of story. In short, the Competition and Markets Authority (CMA) has fined ten carmakers £78m for not providing customers with perfect information about the amount of their cars that are going to be recycled.
It's sad for all sorts of reasons: in the first place, I'm not sure it's a major factor in why consumers buy a particular brand so it seems like an odd metric to target.
I'm also saddened when it appears that firms take what in their eyes in the economically rational decision to not bother complying with a regulation on the grounds that the cost of the fine is lower than the cost of compliance - and that rather indicates that the regulation itself has little merit.
It's also slightly worrying that firms aren't able to monitor this sort of thing more easily; you'd think that having better information about t would encourage greater recycling.
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Analysis published by non-profit group Oceana comes amid fears over human health risks posed by the spread of microplastics
Graham Watson's insight:
Non-profit group Oceana have identified Coca-Cola as the world's largest branded polluter estimating that by 2030, there will be 602 million kilograms per year of Coca-Cola branded waste in the world's oceans. Wow!
One for Old Edwardian, James Quincey to ponder...
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Prices of some chocolate products have risen by 50% in a year while many have also shrunk in size, Which? reports
Graham Watson's insight:
Spot the economic concepts in this article: D&S, derived demand, development economics - if the price of chocolate has risen so dramatically, how much of this will find it's way into the pockets of West African cocoa farmers, shrinkflation, changes in the cost structure facing firms. What's not to like?
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The number of new cars sold in 2024 was 1.95m, with nearly 20% of them electric cars. That said, the official target was for electric cars sales to represent 22% of the total, with a target of 28% for the coming year, although the government is considering relaxing this, in the face of criticism from environmental groups.