We Are Now On Twitter+ Announcement

Great news!

You can now follow us on twitter and keep up to date with us on the go.
Our twitter name is: @HappeningsEcon
You can also search/use the hashtag #happenings to tweet us/ to get easy access to our latest tweets.

We would love it for you to mention us in your tweets, and tweet us about anything you're finding interesting in the news, and to help sustain the relationship with our followers.

We are also pleased to inform all the Economics students who follow our blog, that we will soon be featuring exam revision notes/techniques! As much as this will be beneficial for us, we hope that it will certainly be as helpful for you, and keep you on track with Economics revision! (Especially as exam season is approaching!! eeek!)
And for those of you who don't currently study Economics, the notes are still a great way to have some insight into what we learn in Macroenomics. We hope this can give you some understanding about the economy and how what we hear in the news applies to the work learnt in the class-room.

Thanks for reading and don't forget to follow!
@HappeningsEcon

K&T
Happenings

Because Thursday Is One Step Closer To Friday..

"The only way of finding the limits of the impossible is by going beyond them into the impossible- Arthur C. Clarke"

We hope you liked this motivational quote!
It's always nice to have something keeping you going!
Never give up.

K&T
Happenings

What Is To Blame For The UK's Low Productivity?- Hot Topic

The UK's productivity is something which can be highly debated about, mainly due to the fact that in recent years it has been surprisingly low, and not showing many signs of an increase. It has been mentioned in the news, and not to talk about it being a very 'hot topic' between K and I, and within our AS classroom.

So for starters, what is productivity?

Productivity is an average measure of the efficiency of production. It is the total output per man per hour. 

Productivity has a great impact on the amount an economy is able to produce, and also determines the amount of growth which an economy can experience as a whole. High productivity means that an economy like the UK can produce more goods and services, which can then be available to sell. By exporting these products it can help reduce a balance of trade deficit (when the amount of imports is more than exports). 

It was reported that productivity in the private sector dropped to its lowest levels since 2005, as companies continued to hire new staff, despite there being a reduction in the demand for goods and services.  It was then said that the output per hour of private sector workers fell by almost 4% reported by the ONS. 

These figures are in no way promising to the economy, and it raises the issue which frequently makes me question - what exactly is causing this slump in productivity?

For starters (and in my opinion), it is the work ethic which we have in the country which really pulls the UK behind many other countries. This does not apply to all, but in the UK, the motivation to produce more and work harder is not present in comparison to countries like China and India. Countries like this are able to maintain extremely high levels of productivity which benefits the country, and makes them more internationally competitive, as they have more goods and services to offer. 

The amount of work man is producing in the UK per hour is not living up to the standards of firms, and it is these firms who should be the ones to take action. If they want to see their workers being more productively efficient, then they need to promote a higher standard of working expectations. This could be done by rewarding staff more and using forms of encouragement to increase their amount of labour per hour.

The increase in productivity could see a rise in the aggregate economy if more firms choose to adapt to this hard working lifestyle. 

However this is easier said than done, and despite many companies taking to this style of work morale boosting, it doesn't have the desired outcomes as productivity still remains shockingly low. So instead of trying to help the work force grow and promote workers to increase their output, are the workers themselves in the first place the issue? Should firms look into investing in more capital machinery to increase productivity? 

Well as harsh as it sounds, replacing workers where machinery can be used would definitely have an impact on the amount produced, and firms would see their prices shrinking as they wouldn't have to be concerned about paying as many workers. It is however due to the welfare of society that firms use every opportunity to create jobs as the unemployment rate is tremendously high at around 7.7%.

And it's not just the workers who suffer from investing in capital machinery. Firms have been faced with difficulties when trying to invest in capital machinery as banks are less willing to lend out money to them. This again creates more difficulties, and puts productivity at stake of growing. 

Paul Gregg, a labour market economist, said that companies could be opting to hire more staff for extra shifts, and to delay purchases in new machinery. But would this be a bold move?

By companies choosing to employ more staff would mean they would have to face more costs, and have the same issue of low output per worker per hour, yet just on a greater scale. In the short run shouldn't firms aim to invest in capital machinery to help boost productivity  and maybe even use that as a wakeup call the potential employees that their job can be easily replaced? It may sound radical, however at a time like this, anything is needed to try and help the UK economy recover. 

Also should it be that the government continue to try and invest in the younger generation of today? If enterprise and business incentives are introduced at a young age, then this could give us hope for the future of our economy, as younger people are being trained from a younger age on how to address the current situations we face today.

There has been no immediate reaction by the government to try and recover the UK's low productivity, however the sooner they react, the better, because in the long run, it would damage our ability to trade effectively, and weaken the image of the UK economy as a whole.

Photo taken from google images

Thanks for reading, and please leave your comments down below on what you have to say about this 'hot topic'

T
Happenings

What Would Hayek Do?

Last Monday T and I took a trip up to Holborn to see Dr Eamon Butler at London School of Economics. He was giving a public speech named ‘What Would Hayek do to Sort out this mess?’.

For those of you who aren’t as clued up on historical economists, Friedrich Hayek was Austrian born economist born in 1899. F.A. Hayek, as he is frequently known, was in fact a British economist and philosopher. He is perhaps best known for his defending of classical liberalism, and in 1974 he shared the Nobel Memorial Prize in Economic Sciences. He is also known for being the arch rival of fellow economist J.M. Keynes, due to their conflicting objectives, however they are known to have been great friends outside of work.

Now, onto the lecture itself, Dr Butler opened by showing this clip, which amused us all greatly and from then on had us hooked on his every word. After a brief introduction on F.A. Hayek he began to explain exactly what Hayek would do. According to Dr Butler, Hayek would say that you cannot cure a recession by trying to recreate a boom, and that in actual fact it is the boom that is more problematic than the bust. The longer the boom is, the longer the recession is. In order to prevent the bust from occurring, it is austerity during the boom that is needed, not during the recession. Price signals should be taken into greater account, and government prices should be removed, as it is the bad policy that leads to a recession. Hence 'free' markets are important. Hayek believed that growth comes from saving, and investment and postponing consumption. Therefore interest rates should be a true reflection, not fixed to try to encourage spending.

So what would Hayek do to sort out this mess?

•  Savings are a key element that is needed. 
• A reduction of marginal tax rates to provide better incentives, for example; cutting tax on a capital and inheritance.
• Some methods of deregulation are needed, with the view to cutting the cost of new ventures, making starting new businesses cheap and easy.
•  A slightly more controversial policy, removing price laws, therefore no minimum wage.
•  An altering of the banks’ policies, to prevent them earning so much, a mechanism to curb the central bankers. 

Some form of reserve banking is proposed, as forcing banks to keep capital prevents the money multiplier effect, which as a result, encourages entrepreneurs to build up capital.

Although Keynes’ plans to invest in infrastructure may be good in the short term due to the direct creation of jobs etc., in the long term, the money borrowed must be paid back, meaning raising taxes, de-stabilizing the currency, more borrowing, all of which destroy jobs in the long term.

Another point which Dr Butler raised was the fact that the current situation we are in is causing people not spend, as people are afraid of spending. This is mainly due to the fact that people face such uncertainty about what the future might bring, and are uneasy about even spending the money they have. The fact is that the only people who are spending right now is the government, and not enough on the part of everyone else.

Finally, it was mentioned that government shouldn't be taking business, and put taxes on capital gain. This gives people a disincentive to start up their own business, fearing that the tax which would be imposed on them would not make it worth their while in the long run. Dr Butler mentioned that we need concentrations of wealth to build up capital, and in fact taxing the wealthy is not the greatest idea. Things like cooperation tax also produce the same out come as it is 'damaging' to the economy and people incentives, and that the government shouldn't be taxing company's, but instead tax people. 

We both really enjoyed the talk, and it helped broaden our views on the current economic crisis, and the factors which could maybe help curb us from entering what is said to be a 'triple dip recession'. The views of Hayek and Dr Eamon Butler were clearly addressed in order to give us insight into what Hayek would do..

 F A Hayek: google images

Thanks for reading!

K

Happenings