The Economic Method

My wife and I were discussing the 'cashless society' this morning, arguing that our children's primary school should have a system of electronic payment for school meals and breakfast club and so on. We think that it would be much easier and cheaper for the school and for parents, and also reduce the amount of cash held on the premises.

However, perhaps we've overlooked the poor and those without internet access - as this article implies. That said, I can't think of many people who always carry odd sums - like £4 - to pay for breakfast club.

And ATMs are closing at an alarming rate too - so, does the dash for 'cashless' transactions raise distributional issues?

Certainly those living in rural communities seem to think so - but it could also be argued that by choosing to live there, that's a price they have to be prepared to pay. And, equally, does it discriminate against SMEs. In this day and age, I'm less convinced.

Is the end in sight for cash - the rise of person-to-person payment apps is revolutionising shopping and even repaying your friends.

However, there are still concerns about the security of some apps.

I've 'scooped' quite a lot about the Bitcoin bubble. Does this story spell the beginning of the end for the cryptocurrency? As it is, it's spooked investors, and seen demand fall, with obvious implications for price.

If cash is no longer king, what does this mean for the modern economy. Brett Scott isn't convinced that it's a good thing - his view is that, in 'nudging' consumers towards digital services, it is allowing 'big finance' to exploit them.

I suspect there's some truth in this - for example, the current charges on using debit and credit cards overseas, and the  commission charges for getting hold of foreign currency or travellers cheques is a con, and I suspect that there are many more examples.  

Another simple answer to a question in a headline: they become Economics teachers.

However, this is instructive, in many senses, in that it highlights the fact that Economics is arcane to many, does seemingly try to isolate itself via jargon, and has become cultish, in that there are elements of the discipline which seek to make it exclusive rather than inclusive.

And fundamentally, it's also an inspiring story about how to bring the subject to a diverse audience many of whom are sceptical about the function of the subject.

Robert Schiller on Bitcoin.

A precis: much sound and fury, signifying nothing.

Just a great piece looking at modern capitalism through the prism of cheap food production, not so much theoretical economics but a really fascinating read nonetheless.

Just an interesting article about banknotes, with the majority of the world's banknotes printed outside the borders of the country using them. This is, in part, prompted by a recent event in Liberia where the Liberian government lost $104m that had been printed overseas.

That smacks of something similar that stoked Congolese hyperinflation, nearly 20 years ago, when widescale abuse of the knowledge of which notes were being printed meant that a given run of notes was printed up to ten times. You might have a think about how this might impact inflation - perhaps using the Fisher equation?

A little aside - cash is no longer king. In fact, it only accounts for around 22% of consumer spending. That is because credit cards are ubiquitous, and fulfil many of the functions of money.

Is this true? And do I feel threatened by it? 

In part, yes. I work in education, but I'm of the view that you could have said that same about any cohort of undergraduates or graduates, as the baton passes from one generation to another. Do they know as much as us? What is to blame for this?

I don't even think this is economic-specific either. I think that its chronocentrism - we've forgotten the state of our own education when we left university. Did we really know that little then? The answer, I fear, is probably 'Yes'.

A  look at the nature of GDP, how it is calculated and how it falls short of measuring the real value of output generated by a 21st century economy. I suspect that this might end up being in my material on GDP next year. 

This story in the Guardian caught my eye - it's about the fact that cash is no longer king: in 2017, we spent more via debit cards than in cash.

This has all sorts of implications, not least the fact that card payments have a lower opportunity cost, and this might encourage people to spend more than they can afford.

So, OK, this might be a little bit basic for post-16 education, but this Bank of England investigation is one of four looking at the nature of money. I might have to show it to my son!

An interesting article that flags up some of the local currencies operating in the UK and might get you thinking about the characteristics and functions of money.