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Scooped by
Graham Watson
onto Microeconomics: IB Economics October 2, 3:26 AM
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If the government is in the intervention game, it should be intervening where need is most urgent – among JLR’s suppliers
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EVs rise nearly a third in September compared with a year earlier, as plug-in hybrids jump by 56%
Graham Watson's insight:
Nice little D&S story that Year 12 economists should be starting to get their teeth into. There's been an increase in the number of electric cars sold as a result of the reintroduction of a subsidy designed to encourage their take-up.
As a result, battery EV sales are up by a third and "plug-in hybrids, which combine a petrol engine with a smaller battery that can be recharged by cable, jumped by 56% to 38,300". The extent to which the quantity demanded will have increase depends upon the size of the subsidy and PED/PES, of course.
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New figures reveal mums in England see their earnings drop after having a first, second and third child.
Graham Watson's insight:
The ONS has investigated the cost of women having children on their post-childbirth pay. Indeed, as the article states "Five years after having their first child, mums' earnings drop by an average of £1,051 a month compared with their salary one year before having a child" with their earnings further affected as they have more children.
It's a stark reminder of the existence of the gender pay gap and how far we've got to go in tackling it, with some staggering figures produced: the total loss in earnings when having their first child is £65,618, £26,317 for a second child and £32,456 for a third.
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Lenders say a ‘full return to legal, regulatory and environmental compliance’ under new rescue plan would not be completed until at least 2035-2040
Graham Watson's insight:
Apologies for one of my 'going off piste' moments.
However, the executives who've allowed Thames Water to get into this state should face criminal prosecution for flouting environmental law. It will be the case that they are no longer in post, but this has been a persistent campaign to evade the law and should be treated as such.
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The industry has always wanted the NHS to pay more for its drugs; now it is pulling research and investment out of Britain, says director of Global Justice Now Nick Dearden
Graham Watson's insight:
This Nick Dearden article highlights the ongoing stand-off between big pharma and the UK government. The former have postponed nearly £2bn of investment, the latter are accused of negotiating down the price of drugs to an uncompetitive level, and the voluntary scheme for branded medicines pricing, access and growth.
It's also interesting to note that their are suggestions that there's been some collusion among the drug companies when they announced the postponement of investment so closely together - something that's not inconceivable.
It's almost as if there's a bilateral monopoly in the sector.
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The number of visitors to the region has risen 160% in 30 years as concerns grow for its fragile ecosystem and indigenous practices
Graham Watson's insight:
In a similar vein, are there inevitable environmental costs to increased tourism? This article looks at an explosion of tourism in Lapland and the potential external costs that this entails.
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Companies call for an "enduring" support scheme as energy prices rise by 2% for millions of households.
Graham Watson's insight:
The latest version of the energy price cap - or more technically the Energy Price Guarantee - which will see the average energy price increase by 2% per year. However, households are currently £4.4bn in debt to energy companies and there are concerns that this will get worse, even with interventions such as the Warm Home Discount, which knocks £150 off winter bills for one in five households.
Fuel poverty, it seems, is here to stay.
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White House allocating 13.1m acres of public land to coal mining, which has been on rapid decline over past 30 years
Graham Watson's insight:
Not sure what to make of this: US coal production has fallen in line with the falling share of coal-fired electricity generation - from 50% of the total in 2004, to around 15% today.
And whilst everyone else is moving towards cleaner fuels, the US is spending $625m reviving the dirtiest fossil fuel - coal mining. It just strikes me as a retrograde step given the environmental impacts.
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While Javier Milei’s shock therapy to tame inflation has won support from Washington and the IMF, ordinary Argentinians seem less impressed
Graham Watson's insight:
Interesting Heather Stewart article looking at the extent to which the US is supporting Javier Milei's government in Argentina, the effects of his two years in power on the Argentinian economy.
Elected on the basis of his opposition to the status quo, Milei has cut public spending, tackled the trade unions and privatized a number of industries, straight from the Thatcherite playbook. However, although these policies have proved popular with the IMF, have the increased economic welfare in the economy?
A number of indicators suggest not: unemployment is up, and under-employment may also have increased, real wages and investment has fallen. But is this the price that has to be paid for driving out inflation and getting the economy back on track? We shall see...
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Work Foundation says key elements of bill promote secure jobs amid fierce business lobbying against legislation
Graham Watson's insight:
The issue of workers' rights has become more pressing with the increased use of zero-hour contracts and the rise of the gig economy. However, the issue of strengthening those rights is vexed: to many it's to protect employees from exploitation but it comes at a cost - literally higher costs - that businesses oppose, with some saying that it will be enough to drive them out of business.
I'm always suspicious of this: if you're previously making a profit, then it might affect your profit margins - so adapt. In the second instance, why is it assumed that such a move is going to lower productivity? Might it not increase it?
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Concerns over whether gas generators are making fair profits are prompting fresh proposals to reform the system
Graham Watson's insight:
If you look at this from the perspective of energy security, then this is a macroeconomic story. However, from a profit perspective, this poses the question as to whether the extent to which these marginal power stations that generate power when existing capacity is strained should be able to make what seem like supernormal profits.
Ordinarily, UK electricity market prices are between £60 and £100 per megawatt-hour. However, in Winter 2022, Rye House, a gas-fired plant charged £6,000 for every megawatt-hour it generated. Not only does this seem a lot, but it's also not environmentally very friendly.
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As the government explores options to support suppliers it should ensure that the carmaker foots the eventual bill
Graham Watson's insight:
For the record, I'm not Nils Pratley. However, we both reach the same conclusion about the JLR cyber attack and factory closures. The costs of the closures and the risk associated with them should be borne by the company and not the taxpayer. Pratley's article fleshes out the detail noting that the company has up to £5bn in liquidity. Another example of when an Economics qualification stands you in good stead.
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The iPhone-maker criticises Brussels’ Digital Markets Act and says delayed features are leading to a worse experience for users
Graham Watson's insight:
The current competition battlefield appears to be the digital economy, with competition authorities looking to uphold consumer interests, and guarantee choice, and big tech firms, such as Apple, looking to integrate their services - including search engines, app providers and messaging services.
Obviously, turkeys don't vote for Christmas but does tighter regulation necessarily imply a loss of efficiency, justifying Apple's position, or is it essential to prevent the abuse of a dominant position? As ever, I suspect that the answer lies somewhere in between the two extremes.
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Eli Lilly CEO says Britain’s strict regime means it could miss out on new drugs being rolled out unless it pays more
Graham Watson's insight:
This is an article with hidden depth. You might not immediately spot the underlying economic issue here, given that it involves a government.
In short, market power is central to this article. The CEO of Eli Lilly is effectively saying that the company doesn't like doing business in the UK because the regulation of the pharmaceutical sector drives down the price of its drugs and reduces its profit margins. He's threatening to withhold some of the company's newest drugs until the UK relaxes its strict regime; in addition, a number of pharmaceutical investments in the UK have been cancelled.
However, whilst no one denies the right of big drug companies to make a profit does the statement that "Lilly raised the UK price of the popular weight-loss drug Mounjaro by as much as 170% for those who buy it privately" imply that Eli Lilly are earning a normal profit on this drug or is this redistributing income from patients to the firm and its shareholders.
I'm not sure I'd want to be working in an occupation where I'd brazenly put my company's profits and the returns to shareholders so nakedly before saving lives. |
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The EU and the UK have imposed sustainable fuel mandates, but airlines question supply availability and pricing
Graham Watson's insight:
The prospect of aviation being net zero by 2050 is largely dependent upon technological advances, not least in terms of the commercial use of sustainable aviation fuel (SAF). The EU and UK have imposed mandates, stipulating that 2% of jet fuel should be sustainable, and this will rise to 6% in the EU and 10% in the UK by 2030.
Some airlines appear to have secured sources of SAF, but far from all - not least budget airline Ryanair who have dismissed the mandate as unattainable. although there are suggestions that it could become easier to produce 2nd generation SAF.
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Creditors may well succeed in their plea for lower standards, but at this point customers deserve to see some proper detail
Graham Watson's insight:
Another Nils Pratley piece looking at the danger of unsatisfactory intervention, with the future of Thames Water being debated. The notion that the government would allow a company not to comply with existing environmental regulation for a decade is absurd, and surely Thames' creditors must realise this.
This is why, on balance, it seems that Pratley argues for temporary renationalisation. That way the Augean stables may well get swept sooner rather than later, and things like the environmental costs of marine pollution prioritised over returns to creditors, which, to be fair, is what it should be.
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If the government is in the intervention game, it should be intervening where need is most urgent – among JLR’s suppliers
Graham Watson's insight:
Excellent evaluation of the government intervention to defray the costs of the cyber-attack on Jaguar Land Rover and an introduction to how lobbying distorts policymaking.
As Nils Pratley rightly outlines JLR should be able to access cash at a very reasonable rate of interest to sustain its operations; the same cannot be said for its smaller suppliers. Similarly, whilst JLR is likely to be heard by the government, the same cannot be said for its smaller suppliers.
All in all, a fudge. But one that could have been avoided. No doubt, the government will say that lending to smaller suppliers would represent more of a risk; however, not if JLR commit to continuing to buy from them.
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From
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It will be increasing the price of its breakfast meal deals, with a smaller increase in the cost of its biscuits.
Graham Watson's insight:
A costs related article for Year 13 economists to get their teeth into. Greggs have reported that their costs are rising, and as a consequence, they are going to have to increase the price of its breakfast meal deals and its biscuits. You should be able to model the effect of an increase in variable costs on equilibrium price and output.
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Investigation shows extent of green land lost across UK and mainland Europe to development from 2018 to 2023
Graham Watson's insight:
Does economic growth necessarily entail an environmental opportunity cost? Discuss.
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Crisps, sweets, chocolate and fizzy drinks will be covered by restrictions starting in England.
Graham Watson's insight:
The government is intervening in the market for unhealthy foods - outlawing discounting on unhealthy foods, such as sweets and crisps, and similar BOGOF deals - "buy one, get one free". It's all part of a public health initiative designed to tackle obesity.
However, is it good economics? That, is very much open to question, and it also has implications for consumer choice and the cost of such goods for people on low incomes. Either way, my youngest son will be less than impressed.
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Zaanse Schans, popular for its windmills, has a population of just 100 people - but more than two million tourists will have visited this year.
Graham Watson's insight:
The BBC website carries this little insight into how the tiny Dutch village of Zaanse Schans, famous for its windmills is imposing an entry fee to control the number of tourists, and in doing so limit the social costs imposed by tourism.
It's not unique - Venice has imposed a €5 charge for day trippers - but Zaans Schans is planning to charge €17.50. This might seem like a lot but the village of 100 permanent residents is expecting to receive 2.8m visitors this year. You might also think how PED is relevant here...
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Interest rates, inflation and geopolitical crises are providing the metal its strongest annual performance since 1979
Graham Watson's insight:
Another D&S story, that also illustrates why gold is so important as a store of value in the modern economy. However, in essence, it's basics...
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From supermarkets to restaurants, rising meat costs amid tight supply and strong demand are hitting Americans hard
Graham Watson's insight:
D&S and the US market for beef. The sort of story ever Year 12 economist should be reading to increase their familiarity with basic demand and supply issues. And with a bit more thought, I'm sure that I could come up with a few beef related puns to chuck into the mix, and outflank the average reader.
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Ministers hope the loan, from a commercial bank and underwritten by the government, will give certainty to suppliers.
Graham Watson's insight:
So this is where we've ended up - the government has underwritten a loan from a commercial bank to ensure that Jaguar Land Rover can ensure that the largest supply chain in the UK car industry remains viable over the cyber shutdown.
I guess it's a sort of halfway house: an intervention of a sort but without the opportunity cost to the government that direct intervention would entail.cy
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Fears are growing that some of the car maker's suppliers could go bust without support.
Graham Watson's insight:
One of the more interesting government interventions with the government contemplating buying JLR parts from firms in the supply chain in order to keep them in business and to stop them going bust.
This seems sensible but remember the opportunity cost of this is more than the money spent on the parts; it's the administration, storage and subsequent delivery of the parts that will also all add up. Thus, doesn't it seem sensible to do this but to charge JLR for all of the costs - and I'd even add normal profit to this. The taxpayers shouldn't be bearing the risks associated with commercial activity, not least because it's JLR's IT systems that have let them down.
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His comments come after pharmaceutical giants either paused or scrapped projects in the UK.
Graham Watson's insight:
More on the drug pricing story from yesterday, with Lord Vallance admitting that the amount that we pay for drugs probably needs to increase. The striking thing is that the proportion of the NHS budget spent on drugs has decreased from 15% to 9% over the past decade, whereas its around 14-20% elsewhere in the developed world.
In this case, it might be that the government has used its monopsony power to exert downwards undue pressure on prices. That said, it's hard to feel sympathy for multi-million pound, profitable businesses, or their highly paid CEOs. |
Excellent evaluation of the government intervention to defray the costs of the cyber-attack on Jaguar Land Rover and an introduction to how lobbying distorts policymaking.
As Nils Pratley rightly outlines JLR should be able to access cash at a very reasonable rate of interest to sustain its operations; the same cannot be said for its smaller suppliers. Similarly, whilst JLR is likely to be heard by the government, the same cannot be said for its smaller suppliers.
All in all, a fudge. But one that could have been avoided. No doubt, the government will say that lending to smaller suppliers would represent more of a risk; however, not if JLR commit to continuing to buy from them.