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Microeconomics: IB Economics

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May 21, 1:29 AM

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From www.bbc.co.uk - May 20, 9:39 PM

Graham Watson's insight:

One of my favourite topics - executive pay - is raised by this article that illustrates the extent to which labour market theory is increasingly nonsensical. Thames Water has announced that it is pausing its retention scheme - or bonuses - which amounted to 50% executive pay packets, in the face of public criticism.

How does someone already earning a seven figure salary justify a £1m bonus when the firm itself is £20bn in debt? And as for the utter guff spouted by Thames CEO, Sir Adrian Montague ""We live in a competitive marketplace and we have to provide the right sort of packages to these people otherwise the head hunters come knocking," I'd beg to differ. The nature of pay determination is imperfectly competitive, impossible to measure the MRPL of executives and, frankly, the history of Thames Water suggests that, in many instances. the headhunters would be welcome to employ these managers.

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Microeconomics: IB Economics

A brief overview of relevant articles for IB, A-Level and Pre-U economists relating to microeconomic issues

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June 4, 1:57 AM

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The Guardian view on Great British Railways: renationalisation can put passengers back in the driving seat | Editorial | The Guardian | Microeconomics: IB Economics | Scoop.it

From www.theguardian.com - June 3, 1:49 PM

Graham Watson's insight:

Today's Guardian editorial looks at the future of Great British Railways and argues that, instead of being seen as a last resort, renationalisation should be seen as an opportunity to bring coherence to Britain's rail network.

That said, it's idealistic in imagining that all of this can be provided with reduced fares for customers. The sector needs a real rethink - but in the short-term resolving industrial relations and improving customer service would be a start.

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June 3, 8:55 AM

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From www.bbc.co.uk - June 3, 2:38 AM

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And now the end is near...

It seems as though the rotund soprano is limbering up in the wings, as far as Thames Water is concerned, with preferred potential investor KKR pulling out of bidding for the company. I presume that some, if not all of this, is a result of the recent fine imposed on Thames, and the implications of this for its already pretty tarnished brand image.

Still, as long as the executives get their bonuses, it shouldn't matter, but it looks increasingly like it's going to go back into government-supervised ownership.

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May 31, 5:06 AM

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From www.bbc.co.uk - May 30, 7:33 AM

Graham Watson's insight:

I scoop this, unsurprisingly, because it's one of my favourite topics and because I think it provides an interesting starting point for discussing labour market theory.

Even more interestingly, although I'm generally opposed to such obscene bonuses, I also have a degree of respect for Michael O'Leary and how he's transformed Ryanair from a small regional airline. However, 100m euros strikes me as an unreasonable bonus - not least because in part it's been accrued on the back of the effort of Ryanair's notoriously poorly paid staff.

I also think that his point of comparison with Premier League footballers is inappropriate; I don't think that the notion of 'superstars' earning economic rent applies to business. Most Chief Executives are interchangeable and don't have a unique skillset. However, does the bonus reflect his marginal revenue product over time? Worth discussing.

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May 30, 6:03 AM

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From www.theguardian.com - May 29, 1:41 PM

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Despite the fact that the minimum wage is presented as a legally enforceable wage floor, you'd be amazed at the companies that don't pay it.

This article highlights that British Airways, Halfords, Lidl, Capita and Pizza Express have been forced into giving employees back pay after HMRC. They're not insignificant employers - 60,000 workers are set to benefit as a result.

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May 29, 2:16 AM

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A great prize, but a great risk: why we all need the nationalised South Western Railway to work | Sarah Nankivell | The Guardian | Microeconomics: IB Economics | Scoop.it

From www.theguardian.com - May 28, 3:00 AM

Graham Watson's insight:

Whilst I agree with some of what Sarah Nankivell of Common Wealth is arguing - about the renationalisation. I'd be cautious about this article.

In it, there are a number of things that you might quibble with, not least the notion that rail fares should fall. Perhaps they should, in real terms, but how is that compatible with a higher standard of service and investment in the sector? And if there is significant investment in the sector, shouldn't this be paid for by rail users, rather than the taxpayer?

And then there's the notion that's always wheeled out about comparative train fares in the UK and Europe. Yes, we pay five times more than European rail users but that can be attributed to a high level of state subsidy, and it might be argued that European rail benefits from great economies of scale than the UK.

However, her overall point that rail renationalisation needs to succeed isn't unreasonable. It's just that I don't think that all the arguments in support of this stack up.

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May 29, 2:02 AM

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From www.theguardian.com - May 29, 1:00 AM

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This article highlights the extent to which competition policy is dependent upon the structure of the market it's imposed on. Despite a Competition and Markets Authority investigation of the market for baby formula, its price remains stubbornly high. As one campaigner notes: "...despite being exposed for maintaining 50-75% profit margins, the big brands are maintaining high prices, which we think is shameful.”

The exceptions to this are Aldi and Lidl whose own brand baby formula costs £6.99 in comparison with the £11.99 charged by major brands, who account for 85% of the market. So why haven't other supermarkets sought to produce their own brands? You would have thought that the high price of branded baby formula suggests that there's supernormal profit being earned and that should attract new entrants. Or is it the case that the existing brands are so strong that other action needs to be taken? And would this be good economics or not?

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May 28, 3:04 AM

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From www.theguardian.com - May 27, 2:49 PM

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Innovation is tackling food waste, with a number of UK companies, including Nestlé, trialling the use of AI to 'design out' food waste. At present, as is noted in the article, "About 4.6 million tonnes of edible food, equivalent to 10bn meals of food, is wasted in the UK each year".

The use of such technology might help food charities like FareShare to redistribute food to more than 8,000 charities and community groups across the UK.

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May 28, 2:56 AM

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From www.bbc.co.uk - May 27, 6:39 PM

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A big day for regulation, with energy companies also fined £74m by OFGEM for forcing customers onto smart meters - some of which don't function very well.

As a result of breaching standards of service and customer care, 8 energy companies have been fined including Scottish Power, E.On, EDF and Octopus, and they will have to make redress in the form of compensation or writing off customer debts.

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May 27, 8:25 AM

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From www.bbc.co.uk - May 27, 6:04 AM

Graham Watson's insight:

I could easily pop this in the Macroeconomic board as an example of FDI, but I'm most interested here in KFC's response to greater competition in the market for fried chicken.

Clearly the market has seen a number of new entrants - Wingstop, Popeye's and Dave's Hot Chicken. However, they're tiny in comparison to KFC, and the prospect of an additional 500 sites in addition to its current 1,000 plus sites strikes me as more of an attempt to erect a barrier to entry rather than simply internally growing the business.

And then there's the local context to take into account - in Birmingham, for example, there are lots of local competitors. And then there's Bonehead which, frankly, knocks all of these bigger chains into the proverbial cocked hat.

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May 24, 6:36 AM

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From www.theguardian.com - May 22, 10:02 AM

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A classic of the genre - D&S - with falling oil prices likely to be followed by falling petrol prices. The price of crude oil has fallen well below $80 to $63.86, in part as a result of an increase in the output of oil producers.

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May 23, 3:29 AM

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From www.bbc.co.uk - May 22, 7:01 PM

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As predicted by Cornwall Insights, the Energy Price Guarantee - the energy price gap - is going to be lowered by £129, reducing the energy bills of the average household to £1,720, down from the current level of £1,849.

It's welcome relief at a time when many other bills have risen.

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May 21, 1:38 AM

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From www.theguardian.com - May 21, 1:00 AM

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Another shortage-related article, with climate change driving a shortage of cocoa and other key crops. This is because many of the major producers are vulnerable to the worst effects of climate change, such as unpredictable weather. As a result, this increases food prices and adversely affects food security.

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May 21, 1:29 AM

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From www.bbc.co.uk - May 20, 9:39 PM

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June 3, 3:28 PM

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From www.theguardian.com - June 3, 9:00 AM

Graham Watson's insight:

This Guardian piece highlights the apparent trade-off between economic growth and the environment, and, in this case, Labour's housebuilding plans and the UK's biodiversity. In doing so, it develops the idea that 5,000 nature sites are going to be imperilled by housebuilding on this scale.

However, that rather assumes that the loss of any environmental resource is a bad thing; the reality is that as an economist you have to weigh up the value/cost of the natural resource and the benefits that would be derived from developing it. If you don't you could reasonably argue that you prefer the level of biodiversity associated with the 16th century, but are you prepared to sacrifice all the economic growth that has taken place since then? I'd very much doubt it.

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June 2, 2:55 AM

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From www.theguardian.com - June 1, 7:52 AM

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The increased demand for energy means that nuclear power has come back into fashion, with a number of European economies thinking about restarting their nuclear programme to guarantee their energy security.

This is interesting because there's a clear cost-benefit analysis required: nuclear power is also associated with negative externalities.

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May 30, 6:06 AM

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UK’s shift on car sales rules may lead to higher emissions, says statutory adviser | Electric, hybrid and low-emission cars | The Guardian | Microeconomics: IB Economics | Scoop.it

From www.theguardian.com - May 29, 12:52 PM

Graham Watson's insight:

One for the now-famous "That's Why they Earn the Big Bucks" folder, with a climate advisor reporting that a relaxation of the EVs sales target rules is going to result in higher emissions. Remarkable acuity.

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May 30, 5:31 AM

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From www.theguardian.com - May 30, 3:40 AM

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What a week for the regulator, with OFGEM fining three companies for their poor service, and failure to respond to callouts relating to gas leaks.

The three firms, Cadent Gas, Scotland Gas Networks (SGN Scotland) and Southern Gas Networks (SGN Southern) have been fined £8m for failing to attend 97% of these callouts within two hours. The money has been earmarked for spending on the most vulnerable customers.

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May 29, 2:09 AM

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From www.theguardian.com - May 28, 9:42 AM

Graham Watson's insight:

This could be Macroeconomic, but I've put it her because for me it raises questions about the nature of government intervention. The article highlights the fact that the government appear to be considering funding the construction of a so-called green steel (technically, a direect reduced iron [DRI]) plant. Such a plant would cost up to £2bn to build but if green hydrogen were used, it would be an environmentally-friendly method of steel production.

However, it's all about weighing up the costs and benefits: frankly, the benefits don't seem massive given that such plants aren't very labour-intensive and only employ around 200 people. And there's one question that needs to be answered. If such plants were profitable, then why isn't the private sector investing in them.

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May 29, 1:41 AM

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From www.bbc.co.uk - May 28, 7:11 PM

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This article highlights how government regulations - such as health and safety legislation - can affect supply. In this case, it's heat pumps that are affected, so the government is relaxing regulations that require planning permission if a heat pump is within 1m of a neighbour's property, something that would be an issue given the nature of a lot of the UK's housing stock.

However, the issue is that I, and many others, don't think that this is going to have a marked effect upon their uptake, given their high initial, sunk cost.

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May 28, 3:00 AM

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From www.theguardian.com - May 28, 2:00 AM

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The negative externalities of air pollution are well known, but I'd love to see the methodology that allows the Centre for Research on Energy and Clean Air (Crea), which conducted the research for environmental law group ClientEarth, to make such specific claims.

The article states: "In the UK, these excess emissions had led to 800,000 days of sick leave and a total economic burden due to deaths and poor health of £96bn by 2024...Across the UK and EU combined, the fallout from Dieselgate has included about 124,000 early deaths and economic damage of €760bn (£637bn), the study estimated. Without action, a further 81,000 premature deaths and €430bn are projected by 2040, by which time most Dieselgate vehicles will no longer be in use."

An interesting article for ToK students as well as Economics students.

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May 28, 2:52 AM

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From www.bbc.co.uk - May 28, 2:36 AM

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Regulation in action - but watch this space. OFWAT has issued a record fine to Thames Water for breaching both waste water standards and dividend payments. This might ultimately trigger the collapse of Thames Water, and certainly if that's the case this is exactly what the company will claim.

Of course, it's not the years of over-remunerated chronic mismanagement that's to blame. The board and the company's executives should hang their heads in shame.

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May 25, 3:31 AM

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From www.theguardian.com - May 25, 2:00 AM

Graham Watson's insight:

This Guardian article is an excellent look at the nature of the UK's labour markets and wage determination in the current economic environment.

The article starts from the premise that workers now have more power than they've had for most of the recent past, and the suggestion is that workers with digital skills are able to command a premium and they are being well-rewarded for them.

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May 23, 3:39 AM

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From www.theguardian.com - May 22, 5:30 AM

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An externality story for you - albeit an unusual one. This Guardian article highlights how farmed Turkish supermarket sea bass is increasingly being fed fishmeal made using small Senegalese fish, that has depleted West African fish stocks, and put local fishermen out of work.

It's a classic example of the Tragedy of the Commons, where the absence of property rights inevitably results in environmental depletion and environmental degradation.

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May 21, 10:47 AM

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From www.theguardian.com - May 20, 1:50 PM

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Nils Pratley on Thames Water's retention bonus scheme.

He's correct in asserting exactly who the prats are, and why such a scheme is currently indefensible - and why even under normal circumstances it would still seem odd.

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May 21, 1:36 AM

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From www.theguardian.com - May 21, 1:00 AM

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The International Energy Agency reckons that there's a looming copper crisis that is going to make the green transition harder than it might otherwise be. The problem is that demand for critical metals, like copper and lithium, is outstripping existing sources of supply and this has obvious implications for their price.

As a result the head of the IEA, Fatih Birol, is asking for government intervention to encourage increased copper recycling and substituting other metals that are more abundant, such as aluminium, where possible.

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Microeconomics: IB Economics

The Guardian view on Great British Railways: renationalisation can put passengers back in the driving seat | Editorial | The Guardian

Thames Water's future in doubt after investor KKR pulls out

Ryanair boss Michael O'Leary on target for €100m bonus

BA and Pizza Express among companies that failed to pay minimum wage | Minimum wage | The Guardian

A great prize, but a great risk: why we all need the nationalised South Western Railway to work | Sarah Nankivell | The Guardian

Baby formula prices at historic high despite UK watchdog proposals | Food & drink industry | The Guardian

AI tool trial could save equivalent of 1.5m meals in food waste | Food waste | The Guardian

Thousands to get payouts over forced prepayment meter fitting

KFC to create 7,000 jobs in UK and Irish growth plan

UK petrol prices poised to fall further as oil prices tumble | Oil | The Guardian

Energy price cap: Ofgem confirms 7% fall in prices

EU’s ‘chocolate crisis’ worsened by climate breakdown, researchers warn | Climate crisis | The Guardian

Thames Water halts bosses bonus scheme

Destroying our natural wealth makes us poorer in every sense of the word | Environment | The Guardian

Tide is turning in Europe and beyond in favour of nuclear power | Nuclear power | The Guardian

UK’s shift on car sales rules may lead to higher emissions, says statutory adviser | Electric, hybrid and low-emission cars | The Guardian

Three gas firms fined £8m by Ofgem for being too slow to attend leaks | Energy industry | The Guardian

Why a new zero-carbon UK steel plant offers hope and a headache | Steel industry | The Guardian

Planning change makes heat pump installations easier for homes

Dieselgate pollution killed 16,000 people in UK, study estimates | Air pollution | The Guardian

Thames Water fined £122.7m in biggest ever penalty

Who is calling the shots when it comes to UK wage levels: workers or bosses? | Economics | The Guardian

The hidden cost of your supermarket sea bass | Global development | The Guardian

Thames Water’s arrogance over retention bonuses is breathtaking | Nils Pratley | The Guardian

Global copper supply projected to fall 30% short of demand by 2035, IEA warns | Renewable energy | The Guardian