...ECON3007 Economic Policy Analysis Topic: Institutions and Economic Reforms Wendy Carlin This topic focuses on the role of institutions in economic growth and the implications of this for the design of economic reforms. We examine why some large-scale economic reforms have been surprisingly successful and others have been disappointing. It will be argued that the consistency between existing institutions in the economy and the reforms is an important factor in determining reform success. We look at property rights and contracting institutions, at the experience of transition economies – both in the former Soviet bloc and China and at reform policies including privatization. The empirical techniques that we study include cross-sectional and panel regressions using aggregate (i.e. country-level) data and micro-economic data. Key readings: Institutions and growth: Acemoglu, D., Johnson, S. and Robinson, J. A. (2001) (AJR) “The Colonial Origins of Comparative Development: An Empirical Investigation”. The American Economic Review, Volume 91, Number 5. Use the UCL Economic Journals page and choose the Atypon link. Acemoglu, D., Johnson, S. (2005) (AJ) “Unbundling Institutions” Journal of Political Economy Volume 113, Number 5, 949-995. Use the UCL Economic Journals page. Deaton, A. (2009) ‘Instruments of Development: Randomization in the Tropics and the Search for the Elusive Keys to Economic Development’. NBER Working Paper 14690. Use google. Transition: China and Russia ...
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...Scarcity & Opportunity Cost Economics is a very important field of study in modern society. It helps us to understand the choices we have to make to satisfy our unlimited wants and needs to have a better life. Microeconomics is the study of households, firms, and government in specific markets. One of the main problems economics tries to address is scarcity. Scarcity is the term economist use to describe a situation when the amount of something available is not sufficient to satisfy the desire or demand for it. Scarcity can be applied to all aspects of economics and is one of the most crucial points to understand. Because we are consumers in a free market, we live on income constraints or budgets. Limited income forces us to make choices about goods and services we will purchase, as well as goods and services we will forgo. As a society, we also experience scarcity. Societies face scarce economic resources. Economist classify these economic resources into four categories: land, labor, capital, and entrepreneurial ability. Land is considered to be not only physical land but also water, oil, wind, and all other natural resources. Labor would be described as not only the workforce, but the quality of the workers in the workforce. Capital is the facilities, tools, machinery, and any other components that go into manufacturing a good. Entrepreneurial ability is outlined by the people who exploit opportunities in markets. Entrepreneurs combine economic resources with creative and...
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...Economics’ Approach to Financial Planning by Laurence J. Kotlikoff, Ph.D. |Executive Summary | |Economists long have shown that when it comes to consuming lifetime economic resources, households seek to neither splurge nor hoard, but | |rather to achieve a smooth living standard over time. Consumption smoothing not only underlies the economics approach to spending and | |saving, it is central to the field’s analysis of insurance decisions and portfolio choice. | |Smoothing a household's living standard requires using a sophisticated mathematical technique called dynamic programming to solve a number | |of difficult and interconnected problems. Advances in dynamic programming coupled with today's computers are permitting economists to move | |from describing financial problems to prescribing financial solutions. | |Conventional planning’s targeted liability approach has some surface similarities to consumption smoothing. But the method used to find | |retirement- and survivor-spending targets is virtually guaranteed to disrupt, rather than smooth, a household’s living standard as it ages.| |Moreover, even very small targeting mistakes will suffice to produce major consumption disruption for the simple reason that the wrong...
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...HW assignment 4 (Week9): Analysis of the Business Cycle. The main objective of this exercise is to get students thinking analytically and creatively about the two-edged nature of many economic phenomena so as to present a “balanced” perspective based on economics principles, theories and concepts against the backdrop of conceptual and analytical thinking. Visit the web sites or similar ones containing national economic data. National Economic Accounts at the Bureau of Labor Statistics at http://www.bea.gov , Bureau of Labor Statistics at http://www.bls.gov/data/, The Conference Board at http://www.conference-board.org/economics/indicators.cfm, US Census Bureau at http://www.census.gov/mtis/www/mtis_current.html, National Bureau of Economic Research at http://www.nber.org/releases/, The Federal Reserve at http://www.federalreserve.gov/releases/h15/update/ Review the most recent 8 – 12 months of data on real GDP growth, inflation/CPI, unemployment, Interest rates, consumer confidence index, consumer sentiment index, inventory level, and other relevant economic data. Based on the collected data, analyze the current macroeconomic situation and its impact on any two(2) Monopolistically competitive firms of your choice. Explore in particular how the two companies’ respond to the macroeconomic conditions in terms of their: • stock performance, • current and future sales revenue, • current and future profits, • labor costs, and • hiring decisions. Your paper should...
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...Question 2 Refer to Q1.2 Chapter 1 (Page 78). What is scarcity? Why is scarcity central to the study of economics? Question 3 Refer to Q1.10 Chapter 1 (Page 79). In a paper written by Bentley College economists Patricia M. Flynn and Micheal A. Quinn, the authros state: “We find evidence that Economics is a good choice of major for those aspiring to become a CEO (Chief Executive Officer). When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming and S&P 500 CEO than any other major.” A list of famous Economics majors published by Marletta College inculdes business leaders Warren Buffet, Donald Trump, Ted Turner, Diane von Furstenberg, and Sam Walton, as well as former Presidents George H.W. Bush, Gerald Ford and Ronald Reagan. Why might studying economics be particularly good preparation for being that top manager of a corporation or a leader in government? Based on Patricia M. Flynn and Michael A. Quinn. “Economics: A Good Choice of Majorfor Future CEOs,” Social Science Research Network, November 28, 2006, and Famous Economics Majors, Marletta College, Marletta, Ohio, May 2, 2010. Question 4 For the sake of argument, let’s assume that you would never cheat. Under what circumstances are students in general more or less likely to cheat on an economics examination? Question 5 Refer to Q1.6 of Chapter 1 (Page 78). Jay Bhattacharya and M. Kate Bundorf of...
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...Economics in the current news BUS 640: Managerial Economics Professor Kunsoo Choi June 17, 2013 Economics in the current news Economic theory is a framework for understanding how the U.S. economy works. One economic theory, classic economic theory can be defined by command economies driven by national governments. Communism and socialism are two terms associated with these economies. Majority of the economic resources are controlled by the government as one of the main ideas behind these theories. This is such the case when reading the article, Secure enough. This article talks about the government spending billions of dollars to protect the US border. The questions whether the border is truly secure even when the government is constantly spending an enormous amount of money to protect the border. To increase the safety and protection of the border, the government has increased the amount of drones that patrol the skies as well as border patrol agents. When looking at the other aspects of the economy, it can be argued that these funds can be used in other areas. According to the Migration Policy Institute, a think-tank, border enforcement costs $18 billion a year, more than all other federal criminal-law-enforcement agencies combined. With the budgets issues that are being experienced today, the border control is more of an economic issue now instead of enforcement issue. Because of the sequestration, border agents had to think of more creative ways of protecting the border...
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...different parts of our planet is sufficient to raise various questions. Why does affluence coexist with dire poverty not only on different continents but also within the same country or even the same city? Can traditional, low-productivity, subsistence societies be transformed into modern, high-productivity, high-income nations? To what extent are the development aspirations of poor nations helped or hindered by the economic activities of rich nations? By what process and under what conditions do rural subsistence farmers in the remote regions of Nigeria, Brazil, or the Philippines evolve into successful commercial farmers? These and many other questions concerning international and national differences in standards of living, in areas including health and nutrition, education, employment, environmental sustainability, population growth, and life expectancies, might be posed on the basis of even this very superficial look at life around the world. This book is designed to help students obtain a better understanding of the major problems and prospects for economic development by focusing specifically on the plight of the half or more of the world’s population for whom low levels of living are a fact of life. However, as we...
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...Unemployment: An evil necessity? 1. Introduction By definition economics is “a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.” And as with other types of sciences, economics contains many beliefs and theories that may be difficult to understand, yet are essential in the “day to day” decision making for many people. But also like other sciences, economics has evolved into what it is today. And it will continue to evolve as the practitioners of the science debate, test and discover better and more efficient way to “analyze the data.” Perhaps more than any other time in our nation’s history, people have personally seen the effects of economics. One of the most visible areas seen in the market place today is the economics of unemployment. Unemployment is currently 8.2% as measured by the United States Bureau of Statistics. I believe that most people are familiar with the term “Unemployment Rate”, but I imagine that only a handful understand the significance of what this “number” is telling us. Economics is similar to mathematics, physics and chemistry in the sense that all disciplines require thought, equations, observations and experiments to be performed in order to get an “observable” end result. And from that result we make conclusion about the very thing we are testing. So it is with unemployment; a “mathematical equation” that has the possibility of helping us understand the underlying...
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...both Macro and Micro Economic principles and is aligned with the California State Standards for Social Science in Economics. It is designed to provide a basic understanding of the core concepts, ideas, and theories relevant to the study of Economics as a social science in today’s world. Although many of the topics we cover will be new to many students, it is my goal to relate them to both the life of a teenager about to embark on his or her own economic odyssey and the larger issues filling up space on the pages of our newspapers and the screens of our computers. Whether you like it (or even know it) or not, we are all subject to the economic system we live in and its ever-changing conditions. We are all economic actors! Course Topics: 1. What is Economics? What are the basic ideas, questions, and vocabulary underlying the study of economics as a social science? 2. Economic Systems How do society’s decide what to make, how to make it, and who gets what is made? 3. Supply and Demand How are prices, the language consumers and producers use to communicate, determined in a free market system? 4. Labor Unions What do they do, what are their pros and cons, what is their history, and their current status? 5. Financial Markets What are the fundamentals of our financial system and how can you begin to learn to take advantage of it for your own benefit? 6. Macroeconomics How are large-scale economic indicators, such as...
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...Title: Economics Name: Professor’s name: Course title: Date: Economics Suggest how an economist would approach the problem of alcohol abuse. Provide two (2) possible solutions to this problem. Include the four (4) elements of the economic way of thinking in your analysis. It is a genuine case of negative externalities both in production and consumption. Alcohol production also causes pollution of the environment especially due to the large CO2 emissions produced by factories and some of the byproducts. Two possible solutions to these problems proposed by economists are: • Coase theorem. Negotiating for compensation with no any government intervention on condition that the cost of negotiation is not high and the property rights are secured. • Pigouvian regulations or taxes: Drunk driving is incorporated. An economist would raise cost through reduced availability and added taxes Analyze how prescription drugs affect the demand and supply of other products and services in this country. According to Garrod and Willis (2007), in economics, the law of supply and demand is regard as one of the fundamental principles running an economy. It is illustrated as the situation where as supply raises the price will likely drop or vice versa. As demand raises the price will likely increase or vice versa. Essentially this is a standard that nearly all people intuitively understand concerning the relationship of services and goods against the demand for...
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...Intro to Economic Thought (ECO 105) Robert Ellmann Financial Crises Irina Sterpu __________________________________________________________________________________ OUTLINE Introduction into the topic and its origins The Great Depression 1929-1939 German Hyperinflation 1918-1923 The Great Recession 2008 1973 Oil Crisis European Sovereign Debt Crisis 2009, onward Ruble Crisis 1998 Black Monday 1987 Conclusion References Financial crises – definitions and origin The majority of economists and monetarists define financial crises as a manifestation form of banking crises, with an impact on financial stability and reaching the state of collapse of the financial infrastructure in the absence of central bank‟s intervention. Financial collapse which affects most of the companies generates quickly problems over the banking system as the following consequences: the panic of the clients, inability to distinguish between the efficiency and the difficulty of banks, deposit withdrawals. Jack Reed, an American politician mentions: “The financial crisis is a stark reminder that transparency and disclosure are essential in today's marketplace.” In economic literature, the problems in the banking system are the main sources of the financial crises. All the economic collapses require injections of liquidity or public financial funds, in some cases, private funds from banks and international institutions. Financial crises have usually...
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...something else. The difference between rational and irrational economists is based on the forces that drive their decisions in the market. For irrational economists, they are driven by their emotions when they want to purchase something and the rational economists are driven by critical decision making when they want to purchase something. This is reflected in the person who bid $28 for $20. This person made such a bid because he wanted to win in the group and come out as the highest bidder. People selected $100 today and not $102 tomorrow because they wanted a quick reward and they would rather get the $100 today than wait till the next day to get $102 ("NOVA Mind Over Money"). Adam Smith is the father of economics and the writer of the book "Wealth of Nations". Groups of people with high security numbers bid highest for the bottle of wine because they were influenced by these high numbers. People who had watched a sad movie bid higher because of the emotional influence of the movie and this suggests that human behaviour influences our actions. A spectacular bubble is a phenomenon that explains the rise in house prices when prices of a financial asset suddenly takes off and keeps rising. Tulip bubbles are bubbles that came up as a result of rises in the prices of this was irrational because after the prices rose, they started falling after this. The housing bubble refers to the rise of housing costs and it collapsed because...
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...Economics Human beings are an ever changing species when it comes to what they desire and how they attempt to acquire those desires. Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society (Colander, 2010 pg. 4). This is a broad study that encompasses entire cultures. Businesses are burdened to answer three basic questions when they decide to enter into the markets. The first question is what to produce and how much of it to produce. The second is how to produce the product. Finally, for whom should the product be produced? These are fundamental questions that establish the foundation of the product market. To further narrow the down the study to individual preferences the term microeconomics is used. Microeconomics is defined as the study of individual choice, and how that choice is influenced by economic forces (Colander, 2010 pg. 15). The reason microeconomics is studied is companies can determine how individuals desire to make purchases. By studying individual’s spending habits allows businesses to determine what products the consumers are wanting. Companies do not want to produce goods that have little to no market value. The basic economic structure includes two elemental laws. The law of supply and the law of demand. Without these two elements economics would have no meaning. The law of demand states that the quantity of a good demanded...
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...Inflation and Government Economic Policies Student’s Name Course Name Instructor’s Name 1. What is inflation? What are the causes of inflation? Is inflation desirable and what can be done to control inflation in a market economy? Inflation, in simple terms, is the sustained increase in prices of goods and services produced and rendered in an economy. It is the upward movement in the average level of prices. Each unit of currency buys fewer goods and service when the general price level rises. Market power is the cause of inflation. The two main causes of inflation are: a. Demand push: When an economy is almost at full employment, the increase in the average demand with lesser supply will lead to inflation. This is because, all people will have disposable income as they are employed which gives way to the need for luxuries. When the supply is less, the prices increase. b. Cost pull: This kind of inflation is because of the rising costs. Companies have to necessarily meet these increase in costs. The best way to do it is to pass the costs to the consumers. This results in price inflation. (Economics help, 2014) Sometimes, an inflationary economy is a sign of growth. However, it may not be desired at all times (i.e.) when it grows consistently. Inflation can be controlled by increasing indirect tax rates or increasing the savings and lending rates. Increasing tax rates will make the consumers pay more tax and hence discourage them from spending. The...
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...Nations in 1776 which reflected on the economics at the end of the 18th century and it presented the argument as to why a free market economy is so beneficial. Smith's theory of the invisible hand was used as a metaphor for self interest which was a key focus in the work of writing. Smith felt that when people tried to maximize their personal gains in a free market they would also be benefiting the economy more so than if they were to act for the good of others. "By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such manner as its produce may be of the greatest value, he intends only his own gain, and he is in this...led by an invisible hand to promote an end which was no part of his intention...by pursing his own interests he frequently promotes that of society more effectually than when he really intends to promote it.”1 With faith put in the driving force of self interest via the invisible hand theory it has been depicted by many economists to be the best way to steady an economy under laissez-faire conditions. Other than a brief showing in the later party of the 18th century the invisible hand theory made its presenc felt during the Industrial Revolution when many economists argued for the invisible hand which was very appropriate for the development of society at that time. However, recently, the theory invisible hand theory no longer leads to economic prosperity and innovation. The thought...
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