The values of money Particularly philosophical readers may wonder why money is important at all. After all, most money is simply a piece of paper, a small bit of metal, or a number on a computer screen. We could easily decide that something else – say, seashells – was really money, and ignore the silly bits of colored paper. Or, we could do away with the paper and the seashells entirely, and just trade real goods with one another. So why do people use money? The immediate answer is that money has value and is useful because people believe it has value. We all recognize that money is a valid and useful way to pay for goods and services, which makes it worthwhile to have. Going further, there are three main helpful qualities that make money useful for us. First, money is a medium of exchange. This means that any person is able to exchange money for any good or service, because everyone recognizes that money has value. For example, a barber does not need to provide a haircut to a butcher in order to buy some raw beef (which would be bartering). Instead, the barber can receive money from any of their customers, and use that money to purchase the beef they want from the butcher. This purpose of money serves as a massive boon of convenience for all individuals. It allows trade to happen between individuals even when one person is not providing a good or service for the other. Second, money is also a store of value. The value of money (usually) can be relied upon because it does not rapidly decay and is not easily destroyed. For example, ice cream would be a poor store of value because it would only last for a few minutes before melting away. In contrast, paper or coin money is normally, but not always, a good store of value. In cases of hyperinflation, money makes a poor store of value because runaway inflation erodes its worth faster than people can spend it, leading to economic hardship. See the linked articles, particularly hyperinflation, for examples of how improperly managed currencies can become poor stores of value. The third useful property of money is that it is a unit of account. It is the same everywhere (that uses the same currency, at least). When someone walks into a store and sees a menu of prices, it’s very clear how much each item is worth and how much each will cost to purchase. Without a consistently defined system of money, judging how much things cost might be very confusing. Of course, even with these three useful characteristics, money itself does not create productivity or grow the economy. Having more money doesn’t necessarily mean the economy is growing or doing better. For example, consider a bicycle. Suppose the bike costs £15. It’s pink, and it is a good quality bicycle. Then, suppose that all prices in the economy double, so the pink bicycle now costs £30. Although the price has changed, in this case the actual number value is meaningless – the bicycle is still the same, good quality, pink bicycle. Its true usefulness has not changed, even though the price doubled. Having more bits of paper and coin to pay for a bicycle doesn’t make the bicycle worth more; it just increases the otherwise arbitrary number value we assign to it in monetary terms. Of course, in this case, the value of the bicycle didn’t change because all other prices doubled as well. But if the price rises or falls for just one good but not others, the relative values will change. How the money supply is measured: M1 and M2 Defining money more formally will help us to analyze it further. Money is an asset that individuals can use to trade for goods and services that they desire. As an asset, it is very liquid – liquidity measures how easily an asset can be converted into cash. Highly liquid assets can thus easily be traded for goods and services. When you say “money”, most people think of cash. But cash isn’t the only form of money. Economists generally track money using two different categories. These “monetary aggregates” are called M1 and M2, and they contain different forms of assets at varying levels of liquidity. In other words, M1 and M2 are two different measures of the money supply. M1 is the most liquid measurement of the money supply; it is composed of assets that can very quickly be used to make purchases. This includes cash, of course. It also includes liquid assets like debit cards linked to your bank account, traveler’s checks, and other checkable deposits. Essentially, all of the money in M1 consists of assets that could be used as payment very quickly – within hours or even seconds. Thus, M1 is the most direct sense of the amount of money or currency in circulation. M2 consists of assets that are relatively liquid, but less liquid than M1. These assets can still be used to pay for things in the short term, though. M2 includes money deposited into assets such as savings accounts, money market accounts, and certificates of deposit. Generally, the assets can’t be used to pay for something directly. But, these assets can quickly be converted into M1. For example, you don’t hand over your savings account to buy a new car. But you can withdraw several thousand dollars from that savings account (turning it into cash, part of M1) to pay for the new car relatively quickly. M1 and M2 help economists analyze the health of the economy in a number of ways. For example, if there’s too much money in circulation, the economy is at risk of high inflation. By carefully analyzing the supply of money in the economy, central banks can implement different monetary policy strategies that are best for the economic situation. The Monetary Policy article details the various considerations that central banks must make when examining the economy, and is worth a read. Further details on M1 and M2 Readers may wonder how M1 and M2 are controlled. After all, the government prints money, and the central bank conducts monetary policy. Therefore, one may expect that the money supply is directly controlled by one or both of these institutions. This is not the case, however. In some countries, the government controls the printing of money directly; in others, the central bank – which in many countries is not a government institution – determines how much money is printed, even if the government does the printing. The central bank is also usually responsible for conducting monetary policy; it may conduct strategies like “open market operations” to influence the money supply. But even the central bank does not completely control the supply of money. This is because the money supply is also influenced by the actions of banks. Banks can choose to hold excess money as reserves with the central bank, which effectively removes that money from circulation. Reserves can’t be used for transactions until the bank takes it out again. This lowers the money supply. The central bank does, however, directly control the monetary base. This consists of the total amount of cash in circulation plus the total amount of reserves that banks hold with the central bank. Further Reading Even though M1 and M2 are useful definitions for the money supply, different countries may define the aggregates differently. For example, some countries may consider certain savings accounts to be part of M1 while others would place it in M2. There is no strict rule. In actuality, most countries have very similar definitions for M1, but varying definitions for M2. For more information about the precise differences in how countries track money supply, this linked page from the US Federal Reserve will prove instructive. Although out of date, the page clearly shows how countries can measure monetary aggregates differently around the world. Good to Know Money being used in most economies today is known as “fiat money”. This means that the value of the money stems entirely from its officially recognized role as currency. Fiat money is controlled by a central bank, and this bank has tools to help stabilize the currency (and potentially exchange rates) to avoid currency crises. In the past, though, countries have relied on commodity money – such as gold and silver – that are considered to have value in themselves. Some countries have also relied on money backed by commodities. Using this system of money gives their currency value by promising that a certain amount of a commodity – usually a precious metal like gold – was represented by that paper money. Theoretically, people could trade in their paper notes for a certain amount of that commodity if they so wished. Commodity money and money that is tied to the value of commodities face issues that fiat money does not. For this reason, fiat money is generally considered superior. For instance, countries that tied their currency to a commodity needed to hoard that commodity in order to have a stable money supply. Moreover, commodities like gold exist in limited quantities, which imposes very real limits on how much money can be in circulation. And, the fluctuating value of the commodities themselves could pose problems. But commodity money hasn’t entirely disappeared from our economies. Digital or cryptocurrencies represent a recent, new form of commodity money that many investors have eagerly participated in (Bitcoin, for example). These currencies tout additional benefits such as speed, security, global reach, and decentralization that older commodity monies did not have. However, they may still face some challenges that older commodity currencies did, too; for example, the supply of many cryptocurrencies is fixed, similar to how the supply of gold is fixed, and no central bank is able to control the value of a cryptocurrency.
Money is an important facet of our daily lives. We use money to conduct transactions for just about everything – haircuts, bananas, trips abroad, fertilizer, shares of public companies, and much more can all be purchased with money. In fact, money is usually the only realistic way to acquire something. It’s very difficult to get goods or services in a modern economy without it.
Macroeconomics and Monetary Economics (JEL E)
Adam Smith is arguably the most famous economist. His name is almost inevitably thrown around within the first few minutes of every introduction to economics course, and of course his famous book An Inquiry into the Nature and Causes of the Wealth of Nations is oft-discussed. But neither Adam Smith nor his contemporaries would have described him as an economist for most of his life. Instead, Smith was a philosopher, professor of logic, and sociologist. Today, he is often credited with launching the field of economics. Some even call him the “father of capitalism”, although Smith himself never used that word. So who was Adam Smith really, and why did he become so famous in economics? The life of Adam Smith Smith was born in Scotland in 1723 and lived until 1790. He was a philosopher as well as economist – indeed, economics as a field didn’t really exist until after Adam’s transformational The Wealth of Nations had been published. In 1737, Adam Smith matriculated at the University of Glasgow, graduating in 1740 at the age of 17. He then undertook graduate studies at Oxford, leaving there in 1746. In 1751, Smith was appointed professor of logic at the University of Glasgow, and a year later he was appointed the Chair of Moral Philosophy at the same institution. He was a fully participating member of university society, giving lectures daily and being elected the dean of the faculty in 1758. Adam Smith published his first book, The Theory of Moral Sentiments, in 1759. In it, he theorized on human nature, which laid a foundation for his later assertions about economic behavior. The work is primarily concerned with the moral character of humans and how reason interacts with selfish passion. It’s worth noting that even in this book Smith had stated that some “invisible hand” compelled the self-seeking rich to improve society, leading to benefits for everyone, although it would not be until Smith’s later writings that the phrase gained more recognition. Smith was offered a lucrative job as tutor for a duke’s son, so he left his professorship in 1763 and traveled to France. From there, he had the opportunity to meet other luminaries such as Voltaire, a major figure in the French Enlightenment. Scholars debate how much his conversations with the French Enlightenment figures influenced his work. Adam Smith later moved to London and was inducted into the Royal Society in 1767. Ten years later, the work that has made him so famous in economics – An Inquiry into the Nature and Causes of the Wealth of Nations, more commonly known as The Wealth of Nations, was published in 1776. Adam Smith was no stranger to success. He garnered a reputation for himself during his life; according to the Encyclopedia Britannica, Smith “enjoyed a high measure of contemporary fame”, and his later works were lauded by contemporaries and recognized as important by “British governing circles”. This latter part was no doubt due to how The Wealth of Nations gave rise to classical economic theory, which provided defensible, reasonable alternatives to the prevailing mercantilist ideas of the time. How Wealth of Nations advanced economic thought The Wealth of Nations has five main sections. First, it describes self-interest and the division of human laborers. Next, it discusses the roles of stock and capital in a “commercial society”. The third section describes the formation of then-modern society, and of commercial markets, throughout history. It examines the origins of commerce from hunting and gathering up through agriculture, feudalism and finally an unconstrained market economy. Then, the book turns to how economic growth, as a force that is driven by human nature, results from the interaction of different parts of the economy. And finally, it examines the role of the government, particularly examining the limits of government power to positively influence markets. Smith posits that economic growth would result as long as governments didn’t stifle competition in markets. And of course, within his most famous book is Adam Smith’s famous hypothesis: that the self-interested actions of individual people, summed together, actually create economic activity that is in the benefit of society overall. Following from Smith’s earlier work The Theory of Moral Sentiments, he posits that those self-interested actions arise from the emotional and rational states of man. In The Wealth of Nations, Smith famously writes: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest.” Following from this line of thinking, Smith argued that – led by an invisible hand – markets are self-correcting. In this view, the ubiquitous “invisible hand” represents the unseen market forces that compel selfish individuals to act in a way that happens to be in society’s best interest. And a crucial component of these market forces is competition, which The Wealth of Nations describes fastidiously. By pitting one person’s desire for self-betterment against another’s, competition produces (economically) productive outcomes. This idea greatly influenced economic theories of the time (and continue to do so today); the classical economists believed that any intervention in the markets was doomed to make things worse, as all markets would self-correct eventually. As he was an ardent supporter of free market competition, Smith was critical of monopolies and of then-popular government policies that supported them. In fact, rather than acting as one might expect of a non-interventionist, pro-capitalist thinker, Adam Smith wrote at great length about morality, and saw great value in supporting all members of a “commercial society”. Smith believed that the natural growth of competitive, unregulated markets should be used to better everyone. In The Wealth of Nations he writes, “But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” Smith’s legacy in economics Adam Smith’s ideas were lauded and embraced within his lifetime. They went on to form the basis of the classical school of economics, and indeed kicked off economics as a serious field of study. Of course, earlier philosophers and political theorists had contributed to discussions that led to the rise of ideas like Smith’s, yet his famous The Wealth of Nations is often considered the beginning of economics as its own, separate field of thought and study. Classical economists began to influence economic policy greatly, shifting much of the world away from mercantilist practices (hoarding gold and silver, increasing exports) towards laissez-faire economic policies that served to promote market competition. This included de-emphasizing having a trade imbalance in favor of the home country, and promoting free trade (the value of free trade was further supported by David Ricardo’s economic theories, which came after Smith’s work). Part of the prevailing mercantilist ideal of the time was that acquiring more assets and keeping them within a country would lead to growth and wealth for that nation. Mercantilists supported trade restrictions partly for this reason. Smith countered this idea with the theory that it was the product of labor (in other words, productivity) that determined a nation’s wealth, irrespective of their balance of trade. Labor that produced goods resulted in economic output, and increasing that would increase a nation’s wealth, allowing them to purchase more goods from home or abroad. Whether or not exports were larger than imports becomes a relatively superfluous question in this case, which was news to the mercantilists. In fact, Smith argued that free trade can increase a nation’s wealth by opening up more opportunities for labor to work. The larger the market, the more opportunity for productive labor to supply the markets, and the more economic growth. David Ricardo later expanded on this line of thought with the theory of comparative advantage. Adam Smith’s ideas and the classical school of economic thought it launched became the prevailing advice for governments managing their economies. These views weren’t seriously challenged until the Great Depression in the late 1920s, which saw a period of several years of high unemployment and low output, in many parts of the world, that classical economic models couldn’t explain. This left room for John Maynard Keynes to expand economic theory, giving rise to the golden age of Keynesianism. That’s not to say that Adam Smith’s work has become obsolete. Classical economists have continued to build off of Smith’s original ideas while responding to criticism of their theories, eventually giving rise to the neoclassical school of thought. And regardless of their particular ideological leanings, economists today all owe a debt to Adam Smith and his famous book, which is considered the start of the modern field of economics. References https://www.britannica.com/biography/Adam-Smith/Legacy https://iep.utm.edu/smith/#H3 https://www.econlib.org/library/Enc/bios/Smith.html Header Image Credit: scotlandstudycentre via Pixabay
Students often learn about important figures in economics only briefly and in passing, yet the content taught in economics courses often comes from brilliant economists such as these.
An Inquiry into the Nature and Causes of the Wealth of
Encouraging collaboration in teaching data analysis skills
We propose three tips on how to successfully encourage collaboration between students in learning data analysis for applied courses: (i) design engaging teaching materials, (ii) get students to work in pairs during classes, (iii) use peer feedback for formative assessments. How to prepare: Engaging teaching materials Figure 1: Cheat sheet used in a session on data analysis and visualisations in Python for complete beginners (Image Credit: Author Generated / Economics Network) First, when choosing the materials, it is key to use real world datasets that are relevant for your students and that they will be interested in exploring further. In this way, even the process of data cleaning, which is quite feared by many students, can turn into a more engaging exercise. Second, during the applied classes (or labs), ask students to solve new exercises that they haven’t seen beforehand. Third, it is important to design cheat sheets that students can use in class, to enhance autonomy during the sessions. This enables students to develop their technical skills and focus on the exercise, rather than spend the session struggling to discover basic commands they need to employ. A cheat sheet also acts as a revision aid for students later. Thus, these cheat sheets should include the key commands (or functions) needed to tackle the exercises. Rather than making this a long list of commands, set up examples that students can follow easily. Then, it is up to them to find the commands from the cheat sheet that are relevant to each exercise. We have included an example of a cheat sheet used during a session on data analysis and visualisations in Python for complete beginners (Figure 1). Students were provided the cheat sheet and given a set of exercises, using a completely different dataset. How to deliver: Work in pairs in classes To facilitate the use of cheat sheets, get students to work in pairs. Pair programming is widely used by data scientists in industry for coding tasks: two people use one computer, where the “driver” controls the keyboard, and the “navigator” observes and supports (Williams, 2001). The driver and navigator swap roles regularly, and discuss their work throughout (Demir and Seferoglu, 2021; Hannay et al, 2009). Using this technique for data analysis encourages cooperation between students in the classroom, enhances learning by doing, and builds relationships between students. The teams can be set for the term, or they can change every class. What is important is that students work together and do not feel overwhelmed by the task at hand. How to assess: Peer feedback formative assessments Finally, use formative assessments (i.e., assessments that do not count towards the final course mark). These have been shown as central in promoting students’ learning and understanding (Wu and Jessop, 2018; Black and William, 2019; McMallum and Milner, 2021). The challenge with these assessments is that many students do not engage with them and even if they do, many do not collect or incorporate the provided feedback in future assessments (Duncan, 2007). But evidence suggests that students find assessing the work of their peers quite motivating, enhancing their learning and development (Ballantyne et al, 2002; Vickerman, 2009). Short regular formative assessments where students can offer peer feedback can be very easily incorporated into a course with a learning outcome of developing data analysis skills. First, students attempt the questions; next they submit their answers; finally, each student reviews another student’s attempt and provides written feedback. In this way, students get to see how other students have solved the questions, learning different ways to approach the exercises, while also checking the validity of the solution given by their peer and reflecting on the validity of their own proposed solution. It is up to each teacher to provide guidelines for feedback, but we have found that it is best to initially give some guidance on what was well done and what could be improved, and to release the full solutions after the students have given feedback to each other. In this way students get to review the feedback received one more time after the answers have been made available, and reflect more when providing feedback to their peers. Conclusion While the task of working with and analysing data can be daunting for students at first, educators can make the learning engaging and more approachable for students by rethinking the design of the material, the delivery, and the assessments. Our tips get students to learn-by-doing and encourage them to be very active in classes, as well as outside the classroom when working on their assessments. References Ballantyne, R., K. Hughes, and A. Mylonas, (2002). “Developing Procedures for Implementing Peer Assessment in Large Classes Using an Action Research Process.”, Assessment and Evaluation in Higher Education, 27(5), 427–41. Black, P., and D. Wiliam, (2009). “Developing the Theory of Formative Assessment.”, Educational Assessment, Evaluation and Accountability 21 (1), 5–31. Demir, Ö., and S.S. Seferoglu, (2021). “A Comparison of Solo and Pair Programming in Terms of Flow Experience, Coding Quality, and Coding Achievement.”, Journal of Educational Computing Research, 58(8), 1448-1466. Duncan, N., (2007). “‘Feed-forward’: improving students' use of tutors' comments.”, Assessment and Evaluation in Higher Education, 32(3), 271-283. Hannay, J. E., T. Dyba, E. Arisholm, and D.I. Sjøberg, (2009). “The Effectiveness of Pair Programming: A meta-analysis.”, Information and software technology, 51(7), 1110-1122. McMallum, S., and M.M. Milner, (2021). “The Effectiveness of Formative Assessment: Student Views and Staff Reflections.”, Assessment and Evaluation in Higher Education, 46(1), 1–16. Vickerman, P., (2009). “Student Perspectives on Formative Peer Assessment: An Attempt to Deepen Learning?”, Assessment and Evaluation in Higher Education, 34(2), 221-230. Williams, L. (2001). “Integrating Pair Programming into a Software Development Process.”, Proceedings 14th Conference on Software Engineering Education and Training. 'In search of a software engineering profession' (Cat. No. PR01059), 27-36. Wu, Q., and T. Jessop, (2018). “Formative Assessment: Missing in Action in Both Research-Intensive and Teaching Focused Universities?”, Assessment and Evaluation in Higher Education, 43 (7), 1019–1031. This article was produced in cooperation with the Economics Network, the largest and longest-established academic organisation devoted to improving the teaching and learning of economics in higher education. Learn more about the Economics Network here. Header image credit: StockSnap onPixabay.com (free for use under the Pixabay Content License) Additional image credit: Image Credit: Author Generated / Economics Network
Given the increase in data availability worldwide and the surge in demand for data literacy in the labour market, more and more economics courses are including data analysis skills in their intended learning outcomes. As a result, helping students to develop these skills in the classroom is increasingly important for economics educators.
Sometimes, but not always, this involves making a Pareto improvement. For example, consider a market that under-produces a good or service that does not exhibit any externalities. If production was increased, overall social welfare would increase with no negative consequences. Market failure signifies that the sum of individuals’ self-interested actions have caused the market to reach an outcome that is not in the best interest of everyone involved. This is called market “failure” because typically, Adam Smith’s “invisible hand” does lead individuals’ self-interested actions to reach the socially optimal outcome in a market, as Smith famously observed. Paul Krugman and Robin Wells put it this way in their seminal text Macroeconomics: “...market failure […] happens when the individual pursuit of oneʼs own interest, instead of promoting the interests of society as a whole, actually makes society worse off.” It’s important to note that in the cases of both market failure and market efficiency, individuals are assumed to be rational. In other words, market failure does not result from individuals acting “incorrectly”, but rather from the best privately optimal decision(s) becoming misaligned with the best choice(s) for overall societal well-being. There are many potential causes of market failure. These include the presence of externalities, asymmetric information, market power (like monopoly or oligopoly), government overreach, recessionary pressures, and more. Most of these causes have something in common (with the exception of macroeconomic phenomena like recessions and bad government): they cause individual’s incentives to become misaligned with the socially optimal outcome. Market failure in economic theory Although it is widely agreed in the modern era that markets do fail, the reasons they fail and the strategies to correct them are important sources of ideological differentiation between economic schools of thought. In classical economic theory, market failure is seen as either not realistic, or is viewed as a situation that cannot be improved by any intervention strategy. Many classical economists promoted a “laissez faire” approach to the economy as a result. However, these views were challenged by historical events, like the Great Depression, that pure classical theory could not adequately explain (but that’s not to say classical ideas have disappeared: some contemporary economists still hold to updated and modernized theories that a laissez faire approach is best in most cases). In fact, this is one of the key criticisms of classical economic theory and eventually gave rise to John Maynard Keynes’ new economic school of thought, which was introduced towards the end of the Great Depression and dominated economic policy until the 1970s. Named Keynesianism after him, this school leans heavily into prescribing government intervention as one possible solution to many different forms of market failure. Of course, classical economic theories have been adapted and updated to better explain our world, resulting in the Neoclassical school. In much the same way, the Keynesian ideas have been criticized and reformulated, giving rise to New Keynesian economics. Regardless of which school of thought an economist belongs to, most modern economists agree that market interventions can be utilized in market failure situations. The goal of these interventions is to induce the socially optimal equilibrium that maximizes overall social benefit (as measured by utility). Private market solutions and occasionally charitable activity can sometimes be proposed as alternatives to government intervention. For instance, litter can be viewed as a failure in the “market” for waste disposal services. A community might introduce a volunteer cleanup program or a community watch program to reduce litter. Put another way, littering creates a negative externality for others who use common spaces like public parks; littering thus reveals the under-provision of cleanup services, a common problem with public goods. Mitigating market failure with government intervention However, government intervention is the most common means of mitigating the effects of externalities. It can take the form of taxes, subsidies, regulations such as price ceilings or floors, or even tariffs or trade restrictions. However, even if the optimal equilibrium is known and the intervention works flawlessly, the process is not without drawbacks. Deadweight loss is created whenever governments intervene in markets. For example, the market for cigarettes produces a negative externality, as it forces non-smokers to deal with secondhand smoke. Further, the health problems caused by smoking increase healthcare costs. In a country with a healthcare system funded by taxpayers, this increases every taxpayers’ expenses to support individuals who wish to smoke. The market failure from the negative externalities of smoking cause this market to over-produce cigarettes (as compared to quantity that would produce the optimal social benefit), since the private costs to market participants fail to include the full social costs. By taxing the market, the government can (theoretically) induce the socially optimal amount of cigarette sales, which will be lower than the amount of sales from the unregulated market. This improves overall social welfare by reducing the negative externality by more than the amount of the deadweight loss in the market for cigarettes. However, deadweight loss is still created; buyers and sellers of cigarettes must contend with the new tax, which reduces their welfare from the cigarette market (and possibly lowers the welfare of suppliers of intermediary goods used in the production, distribution, and selling of cigarettes). However, all of these stakeholders still benefit from lower healthcare costs and cleaner air caused by reducing the negative externalities. Market failure with positive externalities Market failure also often occurs when there are positive externalities. In this case, private producer and consumer surplus is typically already maximized by the market. But, in this case the market produces some benefit for people who aren’t participating in the market. Because the benefits to these non-participants aren’t factored into private decisions, consumers and producers don’t supply and demand the socially-optimal quantity in the market. This is often the case with public goods and common resources. An example of this is the market for education. Education is greatly beneficial for society overall; when more people are better educated, the economy benefits from more innovation and research and higher levels of human capital. But, education is expensive; even without considering possible tuition costs, education greatly reduces the student’s income during their years of study by preventing them from working full time (which is a major opportunity cost of schooling). This can be a difficult or financially painful period for the individual, before they’re able to make use of their education to command a higher salary. Therefore, some individuals choose not to pursue higher education even when they’re capable of doing so. Thus, subsidizing education can help a society to realize the benefits of improved human capital. This would increase the amount of degrees being granted (or professional skills training courses completed) compared to the privately optimal market equilibrium. However, this too introduces deadweight loss: in order to subsidize education, the government must charge higher taxes in some other area of society. Market failure as a macroeconomic concept Many of the examples shared in this article come from a microeconomic perspective. But market failure can be viewed on a macroeconomic level as well. Consider one of the most important topics in macroeconomics: (un)employment. Employment is a result of laborers selling (and employers demanding) work hours from qualified workers in the labor market. There is a natural rate of unemployment that is (usually) deemed unavoidable as the force of creative destruction operates in the economy. However, times of recession or depression are usually accompanied by excessive unemployment that causes economic hardship for many people. This is a very undesirable outcome, as it reduces social welfare and indirectly reduces consumer demand, which can create a negative feedback loop. In this way, excessive unemployment can be viewed as a market failure in the market for labor. Government policies during times of recession often include attempts to correct this failure by increasing employment. For example, the US granted so-called “Paycheck Protection Program (PPP)” loans to businesses during the COVID-19 pandemic, intending to help businesses retain workers rather than cut staff. Good to Know Market failure isn’t limited to private markets for goods and services. This term describes any market that is operating inefficiently, producing sub-optimal outcomes for society. Government actions are typically mentioned as examples of how to correct market failure, but in some cases, they can become a source of market failure. Corruption is a good example of how a government’s operations can create market failure. Corrupt governments fail to operate in society’s best interests, instead serving the private interests of corrupt officials. This may take the form of bribes or kickbacks, the granting of monopolies when they shouldn’t be formed, and excessive printing of money that can lead to inflation or hyperinflation. These scenarios cause excessive expenses for taxpayers. These taxpayers lose money to activities that don’t benefit them and can even lower their utility, as they face higher prices due to additional monopolies, or an erosion of the value of their wealth from hyperinflation.
“Market failure” is a term that economists use to describe a market that is not functioning optimally. This is typically measured in terms of social welfare. Market failure in economics means that there’s a better outcome the market could achieve, one that would lead to an increase in social welfare.
Public Economics & Economic Policy (JEL H)
Private goods in economics are goods that are both excludable and rivalrous. This means that if one person uses the good, it reduces others’ ability to enjoy the good. And, consumers can be prevented from accessing the good if they don’t pay for it. This is the most common type of good, and often what most people think of when they think about goods in economics. Private goods include most goods and services that one can purchase: new shoes, a house, a pretzel, a concert ticket, and a beach towel are all examples of pure private goods. When you buy one of these items, you can use it, but others can’t (unless you let them, or they steal it). And, if you don’t pay for them, you’ll be prevented from using them. Note that the distinction “private good” has to do with the rival and excludable characteristics of the good or service, not the actual ownership or use of the item. If you buy a gift for someone – say a new headset – the headset is still considered a private good, because the gift recipient owns the headset (after you give it to them), multiple people cannot use it, and others can be easily excluded from using it. Likewise, if a family purchases a new microwave or TV, the good is still a private good even if multiple household members might make frequent use of it. Out of all the four categories of goods determined by rival and excludable characteristics, private goods are the only ones that markets can typically provide efficiently without much – or any – intervention. The cost of private goods is accounted for by the firms that produce them, and consumers buy private goods up to the point where the marginal benefit is equal to the marginal cost. This results in a combination of producer and consumer surplus that is efficient and maximizes overall welfare. Of course, many things besides characteristics of goods can prevent markets from efficiently providing private goods: monopoly or oligopoly, externalities, government intervention, imperfect information, and more. However, not every private good is provided by a private corporation. Post offices and mail services are private goods that are often provided by the government. Schools for children are another example. In both cases, private options may additionally be available, but the government typically funds or operates these goods or services for the betterment of the region or country. This is often the case for useful goods or services that have positive externalities (for example, an education) and so may be under-provided by a private market. Good to Know The reason that the other types of goods (club goods, common resources, and public goods) cannot be efficiently provided by unregulated markets is that they introduce certain characteristics into the market that prevent efficiency. For example, public goods and common resources are more commonly subject to externality issues and the free-rider problem. They often require government intervention to induce market participants to provide the socially optimal level. Club goods, meanwhile, operate by charging consumers a fee to access the goods or services within the club. For example, specific TV shows or movies, gym machines, or courses at a golf club are all specific goods or services that an individual consumer may want to utilize on their own. But, to use them they must purchase a full membership that includes additional goods and services they don’t want. Private goods, by contrast, are more often goods that do not introduce externalities, don’t suffer from free-rider or public goods problems, don’t introduce other market distortions, and can be efficiently provided by private, profit-seeking corporations. In this case, a perfectly competitive market will produce the socially optimal level of the private good without intervention, just as Adam Smith posited.
There are many different ways that economists classify the different types of goods and services sold in the economy. The characteristics of goods – for instance, whether they are rivalrous or excludable – help economists classify goods into one of four categories. These are club goods, private goods, public goods, and common resources.
How (and why) can we embed employability within economics degrees?
Introduction: The motivation for embedding employability skills Undergraduate economics degrees have traditionally been designed to develop a range of analytical skills, including solving economic problems using simple (mathematical) models, evaluating causal relationships via quantitative analysis of (complex) data sets, and the holistic combination of theory and empirics to communicate results to politicians, decision-makers, and the general public. Many of the skills that we think good economists should develop during their undergraduate studies are valued by employers. For instance, the 2019 employers survey from the Economics Network identified that employers value skills such as abstraction; analysis of economic, business and social issues; presenting quantitative ideas; and communicating economic ideas. However, the survey also shows that economics graduates often enter the workplace with gaps in skills that are sought. For example, while economics graduates are likely to have very high proficiency for analysing quantitative data, other key skills – such as the ability to apply economic concepts to a wider context – are scored poorly by employers of economics graduates. Employers also see gaps within economics degrees, suggesting that courses need to improve training in areas such as communication of economic ideas. Another example: while most economics degrees provide students with opportunities to develop skills using software packages such as Stata and R, employers also highlighted that this was still an area that required improvement. Employers emphasised a need for greater understanding of programming, through languages such as Python. Image credit: Pixabay.com. In addition, throughout their careers, graduates will need to develop new skills and learn to adapt in a rapidly changing world. This has led to an increasing demand for graduates who can demonstrate an awareness of key environmental issues, such as sustainability. Further, students will be expected to respond to new technologies and tools, such as artificial intelligence – the use of which has expanded significantly in recent years. This will require universities to strengthen the delivery of innovative pedagogical methods, including assessments, to better reflect the complex trade-offs and decision-making processes that graduates will face throughout their careers to meet increasingly complicated challenges. Embedding employability The employers’ survey identified key skills that students need to develop within undergraduate economics degrees, but a key question that remains is how these should be embedded in the classroom. 1. Application of concepts to the real world The typical economics graduate shows strong abstraction skills. But, their ability to apply economic models developed in one area to another area of the real world was a weakness identified by employers. One reason for this may be biological – parts of the brain that allow students to make connections between existing knowledge and new concepts may develop more slowly (e.g. Howard-Jones et al, 2018). This highlights the important role that a teacher can play in providing the scaffolding to allow students to develop these connections. Assessments can be designed to encourage students to use a more holistic approach to learning, understand the big picture, and find innovative solutions to real-world problems through rigorous analysis. For example, some innovative pedagogies such as Core-Econ start with problems faced by society (such as climate change and inequality) and use economics to explain these key challenges. This immediately allows students to think about the application of (often abstract) economic models to real-world issues. Research-based assignments can additionally provide the opportunity for students to explore how concepts can be applied in different environments. For example, educators might provide a scenario of how competition between healthcare providers affects quality of the care provided, and ask students to build on this to evaluate the impact of competition in a different scenario. The assessment could be a traditional essay, or to build in other “soft” employability skills, educators could have students create presentations, blogs, videos, or other types of media. These alternative formats can help develop students’ ability to communicate the key concepts to different audiences, and think about how they have been adapted from another area. The climate emergency is also transforming universities with concepts such as living labs, where students engage in projects with external stakeholders (e.g., local councils and charities) to apply theoretical models to real-life issues related to sustainability. 2. Communicating ideas and economic concepts A key element within an economist’s toolkit is the ability to communicate (sometimes complicated) ideas in a way that is understandable to policy-makers and the general public, as well as other professional economists. Economics as a discipline has a lot of great ideas to share with the public, but even academics may not always succeed in communicating them effectively. Image credit: Pixabay.com. Communication is not just limited to written formats, and well-rounded students will need to be able to communicate across a range of media, including through data, presentations, videos and podcasts. Providing students with authentic opportunities to communicate in safe spaces in class is a great way to prepare them for communicating in their careers. For instance, you could ask students to prepare the same “economics content” in several different ways; ask them to explain (for example) adverse selection firstly in a newspaper article, secondly in a policy brief for ministers, and finally to an expert audience. Consider having different small groups of students complete and present each one of these to the class, and discuss how each different group of stakeholders might respond. For more, see the Economics Network videos that touch on this topic: Clear communication is vital in economics How can economists better engage with the public? Further, the Economics Network has produced a range of advice for economists to help them communicate their ideas. These tools can also be adapted when designing assessments for students. 3. Beyond data analysis Aside from real-world application and communication skills, economics degrees should help students to develop research skills, quantitative skills, and data-based and IT skills. Quantitative (or numeracy) skills include the ability to gather, interpret, analyse and communicate mathematical information to solve real-world problems. Of particular importance are data analysis skills, including the ability to manipulate spreadsheets and visualise data. This involves acquiring, cleaning and collating data, creating descriptive statistics, and analysing broad outcomes. These core competencies are typically covered in economics curricula already. Strong numeracy skills, coupled with subject knowledge and analytical thinking, signal that a student can readily translate knowledge in a way that is useful to employers. Yet as identified by the Economics Network employers’ survey, these skills are not the only ones graduates should possess. In an economics course, research skills involve gathering information from various sources and analysing, interpreting, and evaluating the information/data, and then communicating the results to others. This hones students’ ability to generate innovative ideas and research new concepts, products, and ways of working. Students develop these competencies by solving complex problems. Assessments that might help develop these skills include problem sets and individual or group research projects. These should be designed to test fundamental and more advanced numeracy skills in quantitative modules. Students should be asked to solve complex mathematical and analytical problems and interpret the results to apply to real-world scenarios. Emphasising software programs such as R and Stata (or even Microsoft Excel) are a must, and these can be easily incorporated into these types of assignments. Educators can require students to use these or similar programmes to conduct their data analysis. Consider providing more time than usual for students to complete projects assigned in this way if your students are still new to the software. It may also be worth spending some lecture time working through a simple example and providing base code or “cheat sheets” for students to work with, or directing them to an appropriate resource to learn themselves. This will go a long way towards developing students’ software and programming skills to a level that employers are looking for. Summary In this article, we have made the case for embedding employability skills within economics degrees, and provided some motivation. Authentic assessment used across economics degree courses can help further embed employability within the curriculum for students. This article was produced in cooperation with the Economics Network, the largest and longest-established academic organisation devoted to improving the teaching and learning of economics in higher education. Learn more about the Economics Network here. Header image credit: standret on Freepik.de / Magnific (free license). Other Images: This_is_Engineering on Pixabay (free for use under the Pixabay Content License) Crystal710 on Pixabay (free for use under the Pixabay Content License)
The higher education (HE) sector is under increasing pressure to embed employability skills within the curriculum to prepare students for the real world and create responsible graduates and citizens. This article reflects on how (and why) we, as educators, can better incorporate highly-demanded employability skills into the economics curriculum.
Free riding occurs when individuals lack proper incentives to contribute, or cannot be stopped from benefiting from others’ actions. If you maintain a garden and you live close to a bee farm, you will very likely benefit from extra pollination in your garden as a result of the farm’s bee stock. But, you won’t have to pay for this service, you probably won’t stop the bees from pollinating your garden, and you’re very unlikely to offer to pay for the free pollination you receive. In this scenario, you would be free riding. This is because you’d be enjoying the benefits of a positive externality (pollination) without contributing to the market for beekeeping services. The garden example is fairly innocuous. However, free riding can be an issue in certain situations, particularly with public property or common resources. In other words, contributing to a public good can often leave incentives to free ride. For example, consider a shared apartment with multiple roommates and a shared kitchen. The kitchen is used by everyone, but nobody “owns” the kitchen; everyone can use it freely. <11an>limit:3;categories:Bachelor's Programs;disciplines:Economics</11an> As many have experienced, over time the kitchen is likely to degrade significantly. In the absence of any interventions, it will become overused, dirty, and under-cleaned. Dishes will probably pile up in the sink. This is another example of free riding. The roommates are all incentivized to provide as little cleaning service as possible, and hope that another roommate will do the work for them, saving them time and effort. In this case, cleaning provides a positive externality, and is being under-provided due to free riding behavior. There are methods to solve the roommate’s kitchen sink problem, and others like it (such as slacking off during a group project, or littering). These include negotiating to create some sort of contract, or building and enforcing social norms. For example, if the roommates agree to a cleaning schedule, social norms are put into place. A roommate who shirks from then on is likely to receive the ire of their roommates, and will suffer socially for their lack of contributions. Free riding can occur on a larger scale too. An important characteristic of public goods like roads, public transit, national defense, and similar goods and services is that they are non-excludable. This means individuals can’t be easily prevented from using them. These goods and services provide positive externalities but, in a private market, they would be under-provided because individuals would hope that others would pay for it and they could free ride. Just as with other markets that feature externalities, government intervention is one solution to the problem. Through taxes, governments can pay for public infrastructure, provide national defense, etc. However, it’s not easy for the government to know the optimal amount of each good to be provided, and taxes introduce deadweight loss, so this solution may not be perfect in practice. Good to Know The provision of public goods with positive externalities often creates free riding incentives. This scenario can be represented by the Prisoner’s Dilemma. Imagine a scenario where the dilemma being fought over is not freedom from prison, but cleaning the kitchen, or contributing to a group project. In both cases, an individual’s utility is maximized when the service is provided without them exerting any effort. Thus, everyone’s preferred outcome is one where they defect. Likewise, free riding when overuse creates a negative externality can be seen in the Tragedy of the Commons scenario. Consider pollution. A factory that pollutes the air or the water in a community creates a negative externality. Without a government to regulate, it’s likely that cleanup operations will be left to the community members or a non-profit volunteer organization. In this case, the polluting corporation free rides on the cleanup efforts of the community.
The free rider problem in economics is a situation where certain individuals benefit from others’ actions for free, and so “free ride” by taking advantage of the situation. This is (usually) fully rational behavior from an economic standpoint. Often, when free riding occurs in a market, it signifies the presence of externalities and means that the good or service is being under-provided or overused. Free riding in economic theory can thus be a symptom of market failure.
Working in the USA: How to apply for a work visa after graduation
First of all, congratulations! You’re on your way to becoming a full-fledged economist. But, if you want to transition from student to economist in the “land of the free and the home of the brave”, you’ll need to prepare to apply for your US work visa. We’re here to help you begin tackling the process. Read on for information about getting your United States work visa, and our tips for making the entire affair go smoothly. From student to job seeker: the H-1B visa program If you’re not from the US but completed your economics studies in the US, you probably had to get a Type F student visa. The process for attaining this visa is explained in the linked article. The US student visa does not authorize working in the country long-term. Once you complete your studies, you have a 60-day grace period where you’re allowed to remain in the US, and then you must leave the country. But fear not: if you successfully received a Type F visa and studied in the US, you’ll be eligible to apply for a change of status from non-working student to an employed worker. There are two ways to do this: either apply for a non-immigrant H-1B visa that allows working in the US, which is the most common and straightforward method, or apply for an immigrant visa. This latter visa type means you intend to live in the US long-term. However, if you plan to settle in the US long term, it’s entirely possible to apply for the H-1B visa and then later apply for permanent residence. In fact, this is one of the most common methods used by international students who plan to stay in the US after graduating. This method is typically recommended even if you want to live in the US permanently; directly applying for a permanent stay visa is more difficult than receiving an H-1B first. To apply for an H-1B visa, you must find a job in the US. Then, the employer can sponsor your application for the H-1B, which is necessary for your visa application to be processed. Because of the need for an employer sponsor, it pays to take full advantage of the career services, job fairs, and other employment events at your US university campus. This can help you network and find a full-time job that suits you quickly after you graduate. Be sure to check with university officials for more information on these events! Working before you find your employer sponsor: OPT and CPT But if you don’t have access to career services, or can’t find a job before you graduate, fret not – you don’t need to have a job lined up immediately to stay in the US. You can apply for temporary work authorization first, and work for up to one year before you find a job with an employer who can sponsor your H-1B. If you work in a STEM field, you may have up to three years. This work authorization is known as Optional Practical Training (OPT). The OPT period lasts for up to a year after graduation. Again, if you’re working in a STEM field, you can extend the period for another 17 months on top of the initial year. To apply, you must be a student on an F-1 student visa studying in the US and planning to work in the US after you graduate, in the same field you’re studying. You must apply using Form I-20, which must be signed by the designated university official (DSO) who handles immigration and foreign student affairs. If successful, you’ll then receive your Employment Authorization Document (EAD). Each university may have a varying process for assisting their students with this application. If you plan to pursue an OPT, find your DSO beforehand and be sure to communicate with them before getting started. Remember, you do need an employer sponsor in order to eventually apply for an H-1B – which you’ll need to do during your OPT period if you plan to stay in the US. So, during your OPT period, make sure you’re still looking for a job that will sponsor your H-1B application after your work authorization period. How the H-1B visa system works Whether you apply for an OPT period or not, the formal requirements to qualify for an H-1B visa are as follows: A valid job offer from a U.S. employer for a role that “requires specialty knowledge”; this requirement typically means you need at least a university degree to reasonably work the job Proof of a bachelor’s degree or equivalent experience in the field you’ll be employed in, i.e., economics A $10 application fee (accurate as of this writing, but the fees are subject to increase) Your employer must show that there is a lack of qualified U.S. applicants for the role If your application is selected for further processing, your employer will need to pay the government a fee and submit a Form I-129 The US typically has many applicants apply for immigration each year, but the government only allows new visas up to a certain quota. Thus, valid H-1B visas are awarded via a lottery system. Extra lottery slots are reserved for applicants who have a Master’s degree or higher. Further, the visa cap is ignored for applicants who are sponsored by a university, a university-affiliated non-profit, or a government research organization. Thus, if your employer matches one of these categories, you have better-than-usual chances of receiving an H-1B. Unfortunately, the fact that H-1B visas are awarded via lottery means that even if you do everything right, you might be unlucky and not be drawn from the lottery. On the bright side, though, this means that your school performance doesn’t matter when you’re considered for the visa. You still need a company to sponsor you, but once you have a valid and complete H-1B visa application, your name will be entered in the lottery and your chances will be the same as everyone else. Thus, it’s wise to prepare a backup plan in case you don’t win the lottery the first time around. Will you have enough time remaining on your existing visa to stay and try again next year (such as if you have a three-year work authorization in a STEM field), or should you make contingency plans? Remember that you can always re-enter the lottery later, provided you still have an employer sponsoring you. Failing to receive an H-1B from the lottery is not the same as your visa application being rejected; it simply means the immigration quota was full and you’ll need to try again next year. A quick tip about switching jobs on the H-1B Because the H-1B is tied to employment, it will be more difficult than usual to switch jobs or employers while you’re in the US on this visa. It is possible through a process known as the H-1B transfer; this is done by first accepting a job offer from the new employer, and then applying for a transfer. However, this is a cumbersome process and could put you at a disadvantage on the job market. Thus, if you have options, you should consider carefully the first job that you decide to take on when applying for the visa. Staying longer: applying for permanent status after your H-1B visa Your H-1B visa can be extended and allow you to stay in the US for up to six years. If you intend to settle in the US permanently, this gives you plenty of time to begin applying for a more permanent stay visa if you so wish. After receiving your H-1B, you’ll be able to apply for a change of status to US permanent resident and receive the “green card” if you’re successful. This will grant you the ability to stay in the US permanently and change jobs as much as you want, although it is not considered citizenship. For more on the green card and citizenship, be sure to check out the US Department of State’s and the US Citizenship and Immigration Service’s websites. Hopefully, this article will help you get started on launching your career in the US. Remember that many people have completed the process before you; don’t get discouraged if it takes some time. Best of luck! References https://www.uscis.gov/working-in-the-united-states https://hbr.org/2022/08/a-guide-to-u-s-work-visas-for-international-students https://internationaloffice.berkeley.edu/students/employment/opt Header image credit: Image by YOONHEECHO from Pixabay
So, you’re studying for your economics degree in the United States of America. It's going well, and you’re enjoying life in the USA, so much that you’re thinking about staying longer and looking for a job in the US.
Studying in the USA: How to apply for a student visa
Applying for the US student visa might seem to be a daunting process, but we’re here to help make sense of it. The process is relatively straightforward, although it has many pieces. Read on to learn about how to apply for the student visa for the USA and our tips for making the application process easier for you. Note that this information is accurate as of the publish date above. Some of these requirements could be changed by the US authorities over time, however. Be sure to double check with the appropriate US government authority. Note that this article only covers studying in the United States; it does not cover work visa requirements for the US. But fear not – we have another article for just that! First step: Entering the US To enter the US, many travelers will need a Type B tourist visa. This is a nonimmigrant visa that allows someone to stay in the US temporarily, but does not allow long-term stay. If a prospective student wishes to travel in the US – perhaps to explore university campuses – before they acquire their student visa and start university, this is the visa to apply for. Details on applying for the Type B visa can be found at the US Department of State’s website. Then, a prospective student with a Type B visa can apply for a Type F visa to allow long-term stay for studies with a proper application supplemented by Form I-539. However, this strategy is not guaranteed and so is not recommended. Rather, it’s more secure to apply for a Type F visa from the get-go – but this requires acceptance to a university program in the US. Some travelers will be able to enter the US without an official visa at all. However, these travelers must still fill out the Electronic System for Travel Authorization form (available here) as part of the US’s Visa Waiver program. As of this writing, the list of eligible nationalities includes 40 countries that can be found here, including most of Europe, Japan, South Korea, New Zealand, Australia, Singapore, and Taiwan. These travelers can stay for up to 90 days without needing a visa, but must be careful not to overstay. Requirements for a student “Type F” visa To study in an accredited university program in the US – whether for undergraduate or graduate studies – you’ll need a Type F visa. One important fact to note before getting started is that you cannot apply for a visa without proof of acceptance to a US university, and you can’t apply more than 365 days in advance of your program’s start date. Besides this, the exact requirements for this visa are subject to vary depending on the specific embassy or consulate you apply in, as well as the country you come from. Nevertheless, we’ve compiled a general overview of the requirements so you can begin to prepare. Visa application form After being accepted to a US university, you’ll be eligible to apply for the Type F visa. One of the first steps is to fill out Form DS-160, print it out, and take it to the visa interview with you. This form requires including a picture. According to the Department of State’s website, among other requirements this picture must be: Sized such that the head is large and visible and the full face is visible without any shadow being cast on it Taken within the last 6 months (ensuring it accurately reflects your current appearance), in front of a plain white or off-white background, taken in full-face view directly facing the camera, with a neutral facial expression and both eyes open Taken in non-uniform clothing that you normally wear on a daily basis (normal wear includes religious clothing that is worn daily) Lacking any obscuring headwear (unless worn daily for a religious purpose), but including a hearing device or similar articles if you normally wear them. Further and more specific requirements can be found at the US Department of State’s website. In practice, reputable photo shops and studios should be aware of the requirements for visa application photos for all major countries, and will be able to take your photo with the appropriate specifications. Schedule a visa interview Find the US embassy or consulate nearest to you, and apply for an interview. Applying early is recommended; depending on the city, the earliest available interview slot may not be available for thirty days or more. Note that you’ll be required to pay a non-refundable fee to apply for the interview. Documents typically required for a US student visa A number of documents are typically required for the visa application and interview, though again, this may vary by the specific embassy or consulate that you apply to. Be sure to check with your local embassy before applying. Nonetheless, the documents that are typically required include: A valid passport that remains valid for at least six months after the planned end of your stay in the US The aforementioned DS-160 visa application form At least two copies of your photo as detailed above A filled out form I-20 (provided by your school after you are accepted) Consular officers may request additional documents during your visa process, including: Proof of academic qualifications such as transcripts or standardized test scores Proof of sufficient funds to live on during your stay Once you have successfully received your visa, you’ll be ready to plan your trip into the US. Restrictions on entering the US with a Type F student visa To enter the US after receiving your student visa, you’ll need to bring your copies of forms I-20 and DS-160 as well as your valid passport to the port-of-entry where you intend to enter the country. Then, it’s just a matter of settling into your new home and beginning your studies. Officially, you are not required to show proof of accommodation to receive your visa. However, when entering the US, you may be required to show proof of accommodation or proof of financial means. If you can’t provide any proof that you have a place to stay, you may not be allowed to enter even if you have the proper visa type. Further, universities themselves may request such information when processing your application, and in order to receive a Type F visa you’ll need proof of acceptance to a US university. Therefore, you should start finding a place to stay or gathering financial records early on in the process to make the process easier for yourself. Working while studying in the US Students on a Type F visa are allowed to work on-campus in their first year of studies, but not elsewhere. After the first year, they are allowed to work in the same or a related field as their course of study, subject to approval by school and immigration officials. Questions about this should be directed to the Designated School Official, the employee of the university who manages Student and Exchange Visitor Information System (SEVIS) requests for their institution. Studying in the US, as with studying abroad in general, can be a rewarding and valuable experience. We at INOMICS encourage anyone interested to give it a shot – hopefully, this article has helped you to realize that the student visa process is entirely doable. We wish you the best of luck as you get started on your educational journey in the “land of the free and home of the brave”! References https://travel.state.gov/content/travel/en/us-visas/study/student-visa.html Header image credit: Hyein Nam from Pixabay (Free for use under the Pixabay Content License)
So you want to study abroad in the United States of America, the largest economy in the world. In keeping with its “melting pot” reputation, the US has been an education destination for many over the years, and is filled with many high-quality, internationally competitive universities. Of course, if you’re an international student, you’ll probably need to get a visa before you can go.
Public goods in economics are goods that are both non-excludable and non-rivalrous. These characteristics of public goods mean that if one person uses the good, it does not reduce others’ potential enjoyment of the good, and further that people cannot be prevented from accessing the good. It’s easiest to illustrate the concept by using an example. A lighthouse provides a service that’s considered a public good. Lighthouses help guide ships by providing a signal that land is nearby, and warn against potential dangers in the water. The signal sent by lighthouses cannot be given to some ships but prevented from reaching others – it simply gets emitted. This makes the service non-excludable. Similarly, the signal put out by a lighthouse doesn’t diminish in usefulness as more ships receive it. Thus, a lighthouse’s service is also non-rival. Another example of a public good is the air we breathe. People can’t be stopped from using air, nor does breathing limit someone else’s ability to breathe. Yet more examples of public goods are disease prevention and national defense. Both of these services benefit everyone, and when one person benefits from them, others aren’t prevented from benefitting either. Because they are both non-excludable and non-rival, public goods are often subject to the free rider problem in economics. This problem arises when people can freely access a good or service, and as such are not incentivized to help pay for it or maintain it – in other words, they “free ride”. Free riders benefit from the work of others at no cost to themselves, and they refuse to pay if they have a choice. Because of this behavior, public goods that aren’t naturally occurring (like breathable air) are often provided by a government via taxation, as the private market will almost always under-provide them. In fact, public goods usually have large positive externalities, for instance: national defense makes everyone safer, parks improve neighborhoods (note these can also be classified as a common resource; more on that in the Good to Know section), disease prevention improves public health, etc. Goods with positive externalities are usually under-provided by the market, which is one form of market failure. The government usually taxes the citizenry to provide these services themselves and mitigate that market failure, improving society’s overall welfare. Therefore, public goods are typically either provided by a government, or are naturally occurring. The non-rival and non-excludable nature of public goods make them virtually impossible to sell for a profit. However, radio programs are one example of a public good that have been provided privately by companies operating in a market – although even this required some regulation to allow the market to operate. Radio stations buy the right to use specific radio frequencies from the relevant authority (usually a governmental body) and are then allowed to broadcast their signal via radio waves. Radio is a public good. Radio waves are freely available for any citizen with a radio to tune in to, and listening to the radio program does not prevent others from doing so. Further, anyone with a radio can’t be stopped from listening to any radio station. So, how do radio stations make money? Advertising; advertisers seeking new audiences support the radio station by purchasing time on the station’s program. Of course, this means that the cost for radio listeners isn’t entirely free after all: they must pay the cost of their time listening to ads instead of their favorite program when they use their radio. Good to Know Certain public goods, due to their non-excludable nature, are subject to the Tragedy of the Commons problem. Although air is non-excludable and non-rival, it can be degraded by pollution. Indeed, this degradation – in other words, air becoming less enjoyable as others pollute it – is characteristic of a common resource. Economists will often classify air as both a public good and a common resource, depending on the context. If air is plentiful, and the analysis is limited to a specific area where pollution is not a concern, then fresh air exhibits qualities of a public good. Otherwise, especially if pollution is a concern, fresh air is better classified as a common resource. This example shows how the line between public goods and common resources can be blurred sometimes. Examples of pure public goods that are always fully non-excludable and fully non-rival are hard to come by, but the categorization is still quite useful for economic analysis.
2023 Nobel Prize in Economics - The Winner
Receiving this prize makes Claudia Goldin only the third woman to win the Nobel Prize in Economic Sciences (following Elinor Ostrom in 2009 and Esther Duflo in 2019), and makes her the first to do so alone, i.e. without sharing the prize with another economist. The research that awarded the prize The research that won Dr. Goldin the Nobel Prize examines the gender pay gap between men and women through the centuries. To start, Dr. Goldin gathered U.S. data across the past 200 years. She analyzed this data to look for trends in employment and earnings for both men and women to study how the gender pay gap evolved – and to explain why it still exists today. Part of the reason for her Prize is that this information can help society to fight the gender pay gap, ensuring that equally qualified men and women are paid the same amount. According to the Royal Swedish Academy’s press release1, Chair of the Committee for the Prize in Economic Sciences Jakob Svensson had this to say about Dr. Goldin’s research: “Understanding women’s role in the labour market is important for society. Thanks to Claudia Goldin’s groundbreaking research we now know much more about the underlying factors and which barriers may need to be addressed in the future.” A few of Dr. Goldin’s findings stand out. First, the participation of women in the workforce has evolved over time in a roughly U-shaped pattern (see Figure 1, which was illustrated by Johan Jarnestad for the Nobel Prize organization). A few centuries ago, before the Industrial Revolution – when society was more agrarian – women participated in the labor force at a rate of almost 60%. During the decades from the late eighteenth century through the start of the twentieth, women’s workforce participation steadily declined as society industrialized. Then, in the early twentieth century, it started to rise again. Dr. Goldin postulates that several factors gave rise to this resurging increase in women’s workforce participation. First, educational attainment for women began to climb in the twentieth century. That trend in particular has continued; in the present day, the majority of college degrees are now earned by women rather than men in most western nations, including the U.S3. Changing social expectations aided the increase in workforce participation, too. Around the 1960s, cultural expectations about a woman’s role in the family became less strictly about motherhood and child-rearing5. Dr. Goldin theorizes that younger women began to expect less and less that they needed to devote their lives to managing a household and raising a family first, as their mothers did. This enabled women to tackle their career without as much stigma (although that’s not to say these expectations have ceased to be an issue for women in the workforce in many countries today). Another factor that enabled women’s participation in the post-industrial workforce to rise again was better access to contraceptives, particularly “the pill”. This gave women more power to choose when and if to become mothers, which can potentially put their careers on hold, traditionally significantly more so than for men. Detailing the gender pay gap Yet, despite increasing educational attainment and workforce participation, men still earn more than women on average, even when they are of the same skill and experience level as their female counterparts. Dr. Goldin finds that although the pay gap for men and women can be explained to a large extent (at least historically) by educational attainment and career choice, the modern gap is more complicated. Even between men and women in the same career field, the pay gap widens significantly once a woman has her first child. From that point on, the earnings gap between men and women remains throughout the rest of their careers. The Pew Research Center additionally finds that the gender pay gap in the US has remained mostly unchanged for the past twenty years. The data shows that in the US, women earn roughly 82% of what an experience-equivalent man would earn on average. Last year, INOMICS Salary Survey data showed that on average in economics careers, male economists are paid 23.1% more than female economists. This figure remained remarkably stable at roughly 20% for men and women with a Master’s degree, and also men and women with a PhD. The pay gap varies significantly by employer type within economics, however; the worst offenders according to the 2022 data are private employers, with an average pay gap of 35%. Universities and governments exhibited a gender pay gap of again roughly 20%. Dr. Claudia Goldin: Bio Labor economist and economic historian Dr. Claudia Goldin was born in 1946 in New York, NY, USA. She received her BA in economics from Cornell University, after originally intending to study microbiology. She received her PhD in economics from the University of Chicago in 1972. After receiving her PhD, Dr. Goldin began to teach; she taught at various universities including Princeton before being offered tenure at Harvard in 1990. Another first: she was the first woman to be offered tenure in Harvard’s economics department. She became an editor for the Journal of Economic History from 1984 until 1988. She served as the president of the Economic History Association and the American Economic Association in 1999 to 2000 and 2013 to 2014, respectively. She is a member of the National Academy of Sciences and the American Philosophical Society, and was elected a fellow of the American Academy of Political and Social Science, the Society of Labor Economists, the Cliometric Society, the Econometric Society, and the American Academy of Arts and Sciences. Dr. Goldin is also the author of many successful books, including Understanding the Gender Gap: An Economic History of American Women, a book that details some of her research on the topic that won her the Nobel Prize. She has supplemented this book with further research on topics like the impact of the contraceptive pill on women’s career decisions, the usage of woman’s surnames after marriage, and the fact that women have become the majority of undergraduate degree earners. Previous to her Nobel Prize award, Dr. Goldin has been the recipient of many awards and accolades, including (but not limited to): the Richard A. Lester Award for the Outstanding Book in Industrial Relations and Labor Economics in 1990, 2008, and 2021 the American Economic Association’s Carolyn Shaw Bell Award in 2005 the 2009 Mincer Prize for her labor economics contributions the IZA Prize in Labor Economics in 2016 the 2019 BBVA Frontiers in Knowledge award in economics the 2020 Nemmers award in economics You can read the full Nobel Prize in Economic Sciences press release at the Royal Swedish Academy of Sciences’ webpage. References 1: https://www.nobelprize.org/prizes/economic-sciences/2023/press-release/ 2: https://scholar.harvard.edu/goldin/biocv 3: https://www.kva.se/en/news/the-prize-in-economic-sciences-2023/ 4: https://www.richmondfed.org/publications/research/econ_focus/2014/q4/interview 5: https://www.usnews.com/news/articles/2010/03/12/the-1960s-a-decade-of-change-for-women Header image credit: fill via Pixabay.
The famous 2023 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, colloquially known as the Nobel Prize in Economics, has been awarded to a Harvard University economist this year: Dr. Claudia Goldin. The prize – worth 11 million Swedish crowns, or about $1 million or roughly €949.000 – was awarded to her by the Royal Swedish Academy of Sciences “for having advanced our understanding of women’s labour market outcomes…Her research reveals the causes of change, as well as the main sources of the remaining gender gap.”1
Common resources in economics are goods that are rival, but non-excludable. This means that if one person uses the good, it reduces others’ ability to enjoy the good. But, people cannot be prevented from accessing the good. This unique blend of characteristics can cause problems with the usage of common resources. For example, a public park is considered a common resource. Public parks are freely available to anyone who wishes to go to them. But at the same time, if one person goes to the park, it means there’s less space left for others to enjoy. Park area is not infinite; if everyone tried to go at the same time, it would be far too crowded and noisy to be enjoyable. Moreover, because a public park is free and non-excludable, individuals’ incentives to keep the park clean and tidy are very low. It’s quite easy for people to use the park, litter, and go home without cleaning up after themselves, which is often privately optimal (at least from a purely rational standpoint, economically speaking). Over time, this degrades the space. In economics, this situation is known as the free-rider problem. In order to keep the park clean and usable, a government authority or the charity of kind citizens is needed. Some natural resources are also considered common resources. An example is the amount of fish in the ocean. The ocean is a vast resource that every coastal nation in the world can utilize. It holds an abundant (and regenerating), but at any one time finite supply of fish. Crucially, nobody owns the ocean, and while it is very difficult for one nation to prevent another one from fishing (non-excludable), fishing the ocean leaves fewer fish for others to find (rival). Each (coastal) nation tends to maximize their own private utility functions from ocean fishing; they choose to fish at a privately optimal level. On its own, this amount will not deplete the oceans, because the ocean is so large compared to just one country. But, if every nation chooses to fish its own privately optimal amount of fish, the supply of fish in the ocean will be reduced below the replacement level (the point at which the supply in the ocean will naturally replenish itself). This leaves fewer and fewer fish left in the ocean each year, degrading the space, making everyone worse off over time. Incidentally, pollution in the ocean is another way – similar to the public park example discussed above – that this common resource can be degraded. Without cooperating to produce and enforce international law that protects the ocean, each nation is incentivized to over-pollute. These problems might sound familiar; they are the Tragedy of the Commons. Common resources can exhibit both free-rider and Tragedy of the Commons problems because the incentives in place often encourage participants to act in their own private interest, which in most cases is not aligned with society’s best interests overall. Rivalrous goods inherently demand that each selfish individual take as much as possible as fast as possible, while non-excludability means everyone can rush to do so. Overcoming this issue and maintaining the common resource can be very difficult, as it requires independent economic agents to negotiate and cooperate. Good to Know Common resources are related to externalities as well, as they often allow negative externalities to occur. Being non-excludable but rival, these goods incentivize over-use, which is itself a negative externality. Another way to conceptualize this: with common resources, “market” participants do not consider the cost of their actions on others in the “price” of their “purchase” decision. For example, when one nation overfishes, they’re fishing a privately optimal amount without considering the negative impacts on other countries from their overfishing. This constitutes a negative externality and contributes to the Tragedy of the Commons problem.
Insights into Central Banking Careers with Dr. Gómez-Pineda
This includes advice about which skills aspiring economists should learn, the differences between research and policy economists, topics that prospective central bankers should focus on in their studies, and more. Any serious student of economics – and indeed, many curious economists – will benefit from hearing Dr. Gómez-Pineda’s advice. Javier G. Gómez Pineda is Senior Economist (Investigador Principal) at Banco de la República (the central bank of Colombia). He also teaches Monetary Economics at Universidad del Rosario in Bogotá. His research interests are in Monetary Economics and International Economics; he is author of the textbook Dinero, banca y mercados emergentes, los países emergentes en la economía global, 2010, Ed. Alfaomega; and he holds a PhD in Economics from the University of Chicago. Are you an economist already working in the field? You, like Dr. Gómez-Pineda, have a chance to assist INOMICS’ economist job market research. Simply fill out our anonymous, 3-5 minute Salary Survey and help us research the state of the economics job market in 2023. Without further ado, read on for the interview! Sean McClung: How did you become an economist – was it always your plan? Javier G. Gómez-Pineda: Choosing a career can be challenging. In the beginning I was not very sure about my career choice, I considered at least two alternatives, but in the end I decided to study economics. I think what ultimately led me to this choice was perhaps the idea that what is important in choosing a career is not how you earn an income, but how you will spend the rest of your life in a way that contributes and serves others. Later, you discover that in order to serve others, you need to know how to be useful, to have a good command of your field, your techniques and your work. At the end of my undergraduate studies, I worked as a research assistant (RA) for Professor Lauchlin Currie. It was he who encouraged me: “if you want to be a good economist, you have to study abroad.” At that time, there were no graduate programs in Colombia, but there were scholarships for graduate studies abroad, provided that the studies were made at a top university. These Central Bank scholarships were named after Professor Lauchlin Currie. My main challenge was the English language; not so much the reading, because I had studied English reading in my undergraduate studies; but more the listening and writing. So, I did some English work before I applied to graduate school. I studied American English at an institute and learned some grammar. At the same time, I studied British English at another institute and learned some conversation skills. I also traveled to the United States for a short time to study English and to expand my vocabulary a little. In the end, I passed the English exam and got a place on a graduate program. However, at the beginning of my first year of graduate studies, I struggled with listening comprehension. By the middle of the first year, it was not the language that was the problem, but the math. I overcame the “math scare” by putting more emphasis on economic intuition. I think in the process I managed to learn some English, get over the math scare, and study abroad, but I still strive to become a better economist and write more in English. SM: What part of your educational background would you say is most valuable to your current work? JGP: I think a valuable part was my thesis work during my graduate studies; this was due to my empirical thesis. It was this work that got me into running regressions. Since then, I have done more empirical work than theoretical work. I think another part of the training that I found valuable was the macro problem sets. In one or two of them, I had to learn how to run macro models on the computer as well as get familiar with some of the software packages. Of course, the most valuable part of the educational background were the courses themselves, especially in macroeconomics, international economics and econometrics. However, education does not stop when you graduate. Theory evolves, better techniques become available, new software packages are developed. As research economists, our job is to contribute to these developments, and so we must continue to educate ourselves by at least reading the most relevant authors in our field and attending conferences. As policy economists, our job is to incorporate these developments into our analysis so that our work is based on the most appropriate methods. SM: How has your day-to-day as a central banker been different than you expected (if at all)? JGP: I expected that my work would involve running regressions, as I had done in my thesis work, and that turned out to be true. In contrast, I did not expect that my work would involve DSGE models, Kalman filtering, and Bayesian estimation, which I had learned in the university, but that turned out to be part of my work. SM: What is/are the most rewarding part(s) of the job for you? JGP: The contribution of an economist is sometimes less tangible than that of other professions. Unlike economists, a doctor can have a big impact on a person’s life in a very concrete way, and the medical profession can contribute to the health of the people in a country or even in the world. I think the work of a macroeconomist should have a small impact on the country while the economics profession should have an impact on the economic well-being of the people in the country. For me, the most rewarding part of the job has been to see that the inflation model is used by the Central Bank as an input in the interest rate policy decision, to know that our monetary policy report is valued by the interest-rate-setting committee, and to see that our policy working papers are used as a reference point for understanding monetary and macroprudential policy in Colombia. At the end of the day the expectation is that this work will hopefully have some impact in the country. It is also rewarding to be able to share this knowledge with students at the university. SM: As a central banker, do you get to research? What is your favorite part of that research? How is it different from academic research? JGP: Central banks typically have two types of economists: research economists and policy economists. Research economists write papers that are published as central bank working papers and in academic journals. Policy economists work on the periodic inflation forecasts, the Inflation Report (IR); and the periodic financial stability assessments, the Financial Stability Report (FSR). The IR supports interest rate policy decisions and the FSR supports macroprudential policy decisions. I work about 80 percent of the time as a research economist and 20 percent as a policy economist. Since I work on monetary economics in both roles, my work as a research economist and as a policy economist overlap. In Colombia, the central bank has a committee of research economists that prepares a quarterly monetary policy note to the central bank’s interest-rate-setting committee. I am a member of this three-person research economists committee, and this work represents about 20 percent of my work as a policy economist. The time devoted to research may vary across economists. For instance, in Colombia the central bank has research economists that devote 100 percent of their time to research. Conversely, some policy economists do not have time left for research and some might work about 20 percent of the time as research economists. They publish this research as technical notes in the IR and FSR, as working papers and sometimes in journals. Academic research covers a wide range of topics, while central bank research tends to focus on monetary and financial stability. Academic research tends to produce sophisticated analytical and algebraic results; however, at times the quantitative dimension of academic research is not as sophisticated as that sought for by central bank economists. Academic research tends to emphasize the sign and significance of estimated coefficients, while central bank research tends to emphasize the quantitative performance of the models, issues such as the impact of interest rate decisions on inflation over time, in exact percentage points, also quantifying the amount of uncertainty involved in the transmission. While there are differences between academic and central bank research, there are also similarities. Both academic and central bank research share the current paradigm of the New Neoclassical Synthesis, see Goodfriend and King (1997) and Woodford (2009). Some academic economists sometimes hold policy positions in central banks, and some central bank economists also teach at the university. SM: In your experience, what would you say is the best type of experience for prospective central bank hires to have? JGP: For me, a sufficient condition is a strong interest and vocation in monetary economics or macroeconomics. A thesis in monetary economics or in international economics is a clear sign of this interest. Beyond the thesis, a working paper or article in monetary economics is also a good signal. Other skills are very welcome, but not strictly necessary, as they can be acquired on the job. These include familiarity with software packages such as R, Python and Matlab and a good command of the English language. SM: What other tips, advice, or insights do you have for younger economists interested in monetary policy or central banking? JGP: My advice would be: read the literature and get into the habit of reading the papers. In addition, keep in mind that what you sow is what you shall reap, so read the literature and also get familiar with the software packages used to build your estimations and models; get those skills. Finally, for those who are not native English speakers, it is important to learn how to write papers. There are several books and articles available on this subject. One starting point is McClosky (2000) and also Banco Central de Chile (2017). It is a good idea to go through this literature and try to learn how to write papers. If possible, get help from an English editor at your institution or on your own. SM: What else (if anything) do you think should be shared about your career path or current role? JGP: Central banks face issues that are common to the central banking community as a whole. So try to make your research relevant not only to your central bank, but if possible to the central banking community; if possible, work with a global approach. And finally, group research is better than individual research. So, it is important to work in groups and write papers with others. References Banco Central de Chile, “Guía de Estilo en Inglés” (Accessed Sep. 19, 2023), 2017. Goodfriend, Marvin, and King Robert. “The new neoclassical synthesis and the role of monetary policy.” NBER Macroeconomics Annual 12 (1997): 231-283. McClosly, Deidre, Economical Writing, 2nd Ed. Waveland Press Inc, 2000. Woodford, Michael. “Convergence in macroeconomics: Elements of the new synthesis.” American Economic Journal: Macroeconomics 1, nº 1 (2009): 267-279. Header image credit: Dr. Javier G. Gómez-Pineda.
Dr. Javier G. Gómez-Pineda, our interview guest for the 2023 INOMICS Handbook, graciously agreed to return for a second interview. This time, the INOMICS team prepared some career-related questions for the central banker. With his answers, Dr. Gómez-Pineda shares his wisdom about central banking and economist careers in general with you, our readers.
A gentle introduction to LaTeX for economists
Enter LaTeX, a typesetting system that’s been developed for researchers of all stripes to write and neatly print properly formatted mathematical formulae. If you’re able to learn and use it, you’ll be able to write important documents such as your economics thesis or a research paper in no time. While LaTeX isn’t the only option economists have to handle this work, it is a commonly used and freely available option. The most common alternatives include Markdown and plug-ins for Adobe InDesign. That’s right – anyone can get started practicing LaTeX for free, using a popular site called Overleaf. Because the basic version of Overleaf is a free and easy to use LaTeX editor (though paid plans are available for more features and integrations), the rest of this article will assume that the reader is using it. This is a skill that’s great to have for your economics coursework and future career, and not terribly difficult to learn, so let’s dive into some LaTeX basics. Before you start: understanding mathematical symbols The first step to learning LaTeX and writing professional-looking economic formulae is understanding what those formulae are and how they are typically written. We’ve already shared an article that describes many of the commonly used symbols in economics. If you find yourself struggling to read some of the strange symbols presented in economic formulae during lectures or in textbooks, the linked Math Symbols article is a great place to start. Once you’re familiar with the symbols typically used in economic formulae, continue reading! Getting started in LaTeX: the preamble The “preamble” in LaTeX is a section found at the beginning of the document. In Overleaf, this will be at the top of the left-hand side Code Editor section. The preamble is written by the author, and contains important code for setting up the document. This is where you’ll install packages and other functions that you’ll need, as well as set document-wide defaults like margin spacing and font size. The preamble – and thus the document – always starts with the “\documentclass{}” command. This defines what type of document is being produced. Inside the curly braces can be written a number of words; “article” is probably the most commonly used, and will serve most purposes. Thus, the first line of code is typically “\documentclass{article}”. Research papers ought to use this command, and it’s also suitable for a casual learner to start using LaTeX. Other document classes tend to be more specialized, such as “beamer” for presentations, “minimal” for debugging and “slides” for a slideshow. An important fact to know is that you can set certain parameters for your document, and any equation or function that you type, using brackets such as [] right after a command. For example, you can set the font size equal to 12 for your entire document using “\documentclass{article}[12pt]”. We’ll return to the usefulness of these brackets later when we discuss graphing. Other lines of code that will be entered in the preamble include packages that you’ll need to install, similar to software programs like R that econometricians use. There are many, many packages containing specific and niche tools, and LaTeX does not automatically have access to all of them. So, by inserting lines of code like “\usepackage{pgfplots}”, specific functions will be loaded so that you’re able to access them when you need them. Some common packages that you may need to install as an economist include, but are not limited to: pgfplots: contains useful functions for graphing. tikz: another package that contains useful functions for graphing. amsmath: developed by the American Mathematical Society (AMS); contains useful functions and improvements for writing equations in LaTeX. amssymb: again developed by AMS, contains useful math symbols that you can insert into your document. graphicx: allows you to insert images into your document from an external source, like your hard drive. tabularx: contains further options when making a table. multirow: if you’re using a lot of tables, this package allows entries to cover more than one row, which can be useful. mathpazo: sets a standard font used when printing mathematical characters. nicefrac: an option for typesetting in-line fractions neatly. subfig: allows you to more easily create a figure that’s broken into multiple sub-figures. footnote: further options for formatting your footnotes. natbib: contains helpful support for handling in-text citations and the bibliography. If you need more specific packages for your economics coursework, your instructor is likely to provide them for you. If you’re working on your PhD thesis or other research, your supervisor(s) or colleague(s) might be able to help you find specific packages you may need on top of these basic suggestions. After installing packages, you ought to include lines for the title, author, and date the document was written. The commands for this are “\title”, “\author”, and “\date”; fill these in with braces as with other commands. For instance, if this article was written in LaTeX, it would have these three lines of code: “\author{Sean McClung}” “\title{A gentle introduction to LaTeX for economists}” “\date{October 2 2023}” At the end of the preamble, you’ll need to write “\begin{document}”. This tells LaTeX that the code below this line is used to actually generate your document. With the preamble out of the way, you – and this article – are now ready to move on to the meat and potatoes. Writing your first equation in LaTeX There are a few commonly used commands that you can use to write an equation in LaTeX. These include (but are not limited to): Equation: this will print your equation with a line number, which can be useful in some contexts. Use “equation*” instead if you don’t want line numbers. Align: vertically aligns multiple equations (this makes them look neat in your document when printed and avoids awkward spacing). Can also be used to break up multiple equations into columns, should you wish to present them that way. Multiline: allows long equations to be split up on multiple lines so that they display properly. Gather: Another option to simply print a number of centered equations. The differences in these options tend to be minor, and in many cases which one you choose won’t affect your output much. But, using the right one for the right niche circumstance can still make the difference between a professional-looking paper and a haphazard one, so it pays to learn the difference. After you’ve decided on one of the above options (and picked a formula to write!), you’ll be ready to start typing. Simply type out your desired equation using the proper symbols, and LaTeX will be ready to produce professional-looking output of it. A note – if you need to use fractions, you must do so using the “\frac{}{}” command. This can be confusing at first. However, it’s quite simple to use. The expression in the numerator belongs in the first set of braces, while the denominator goes in the second set of braces. Thus, to type 1/2 as a fraction, you’d enter “\frac{1}{2}”. Very quickly, you’ll probably realize that you need to insert a specific symbol that isn’t found on a keyboard – like \(\partial\). This is done by first typing a “\” symbol, which tells LaTeX that you’re about to use a special character (or type a new command). When you do this, a list of symbol and function names will appear next to your cursor. You can scroll this list to choose the option you want, or keep typing to narrow the list. Simply press “Enter” or click on the option you want. You can even type out the entire name and ignore the list, if you wish. In the coding window, this won’t appear to do much. But, when you compile your work, you’ll see LaTeX print out “\(\partial\)” instead of “\partial” on the document compilation output. Read on for how to compile and check out your work done so far. The “Recompile” button You now know how to write formulae in LaTeX. But, since the Code Editor doesn’t automatically show you the exact output, it can be hard to know precisely what you’ve written. Further, at first you’ll probably run into many simple error codes as you get used to the new language of LaTeX. How can you check this to review your progress and make corrections? At the top-right of your Overleaf screen, you’ll see the “Recompile” button. Clicking this button will execute your LaTeX code. This will cause your entire document to appear as if it was being printed out on the document screen to the right. Then, you can check visually if your formulae turned out as expected. If there are any errors, the compile will fail, and the document screen will display an error message instead of your work. Helpfully, the offending line(s) on the left-hand side Code Editor will be highlighted with a red symbol. Hovering your mouse over the symbol will show a message describing what went wrong on that line. Check your code to ensure you’re using the proper syntax, and start small so that it will be easy to identify errors. Search engines like Google are great friends to have during these steps. Now that you can write equations – and compile the document – here’s an example. Try copying this code in your own Overleaf project, and see if you can manipulate the equation yourself. The following code produces the Cross Elasticity of Demand equation shown below: \begin{equation*} \epsilon_{AB} = \frac{\Delta\mathit{q}_{A}}{\Delta\mathit{p}_{B}} = \frac{\frac{{dq}_{A}}{\mathit{q}_{A}}}{\frac{{dp}_{B}}{p_B}} \end{equation*} \begin{equation*} \epsilon_{AB} = \frac{\Delta\mathit{q}_{A}}{\Delta\mathit{p}_{B}} = \frac{\frac{{dq}_{A}}{\mathit{q}_{A}}}{\frac{{dp}_{B}}{p_B}} \end{equation*} Making graphs in LaTeX Making graphs in LaTeX is intimidating at first, because even a simple graph requires using many different lines of code. However, it’s quite intuitive to create graphs once you get the hang of it. As with writing equations, it’s best to start small. Start with a simple graph as an end goal, and introduce one or two elements at a time until you’ve finished the graph. It will be easier to identify errors and learn that way. To start drawing a graph using LaTeX, you’ll need to use one of a few commands just like when writing an equation. The most commonly used commands are: begin{tikzpicture}: used after installing the tikz package. This line of code tells LaTeX that the following lines are being used to create a graphic of some sort. Then, the line “begin{axis}” should follow for most economics applications. begin{axis}: this command will create an x-y axis. You can set its dimensions and scale; it defaults to a maximum x value of 10 and likewise for y values. The aforementioned brackets are also very useful when creating your axis, allowing you to set the axis parameters. For instance, “\begin{axis}[xmax = 15, ymax = 15]” will create a larger axis than the default, showing elements up to 15 units away from the origin instead of the default 10. Then, LaTeX expects you to introduce elements via equations or plotting them on the graph, somewhat similarly to how a graphing calculator works. You’ll typically use the “\addplot{}” command to graph equations. For instance, to add a simple line, you can use a linear equation such as: "\addplot [domain = 1:10, restrict y to domain = 0:10, color = blue, very thick] {x+1}". This will graph the simple line y = x + 1 as a blue line on your graph. A few other useful tricks have been shown in the brackets: you can set the domain as shown, and even restrict the domain of the function if you only want to show part of the line. For example, you can adjust the above command to read “restrict y to domain = 3:5” if you only want to show the parts of y = x + 1 that cross through the points (2,3) and (4,5). You can also produce a dashed line by typing “dashed” instead of “very thick”. Try it! Of course, lines need labels in economics. You can add a label to your line with the “\node” command, like so: “\node at (4, 1) {$D$}” prints a nice D, for demand curve, at the point (4,1). Finally, the “draw” command is a useful tool to know about when graphing. It allows you to create more free-form shapes and lines without needing to specify an actual equation to draw them. This can be a great option when you want to draw a graph that involves undefined points, sharp angles, or odd shapes. For example, you can use the command “\draw[dashed,gray] (5, 2) to (5,0)” to draw a dashed, gray line from the point (5, 2) to the point (5,0). As an example, the following code (with a proper preamble already written) produces the simple graph shown below: \begin{tikzpicture} \begin{axis}[ xmin = 0, xmax = 10, ymin = 0, ymax = 10, axis lines* = left, xtick = \empty, ytick = \empty, clip = false, scale = 1.5, ] % Curves \addplot [domain = 0:10, restrict x to domain = 1:9, color = green, very thick] {-x+10}; \addplot [domain = 0:10, restrict x to domain = 1:9, color = blue, very thick] {x}; \node [] at (9, 0.8) {$D$}; \node [] at (9, 9.2) {$S$}; \node [left] at (0, 5) {$p^*$}; \node [] at (5, -0.3) {$q^*$}; \node [left] at (0, 9.8) {price}; \node [left] at (9.8, -0.3) {quantity}; \draw[dashed] (5,0) -- (5,5); \draw[dashed] (0,5) -- (5,5); \end{axis} \end{tikzpicture} See if you can tell which commands produced which elements on the graph. Try copying this code into your own Overleaf project, and see if you can manipulate the elements. This will help you learn quite swiftly! Once you’ve started making graphs, and got the hang of it, we have a further practice suggestion for you. All of the graphs in our Economics Terms A-Z were made using LaTeX. Why not pick a graph from one of these articles – such as Demand Curve or Market Equilibrium – and see if you can recreate them in LaTeX? If you’re feeling confident, try making a complicated one like Deadweight Loss or Edgeworth Box. The “end” command One final and important note; at the end of each equation, graph, and document, the “end{}” command must be typed with the \ symbol just before it. This is the counterpart to the “begin{}” command that starts a graph, equation, or document. Without a matching “end{}”, you’ll receive error messages. Fortunately, when you type “begin{}”, this is automatically produced for you in Overleaf. But it still pays to be aware of its importance. If you end up deleting an “end{}” on accident, you’ll receive error messages. The tip of the iceberg This article has only shared the very basics of using LaTeX for economics. If you’re just looking to get started with learning LaTeX for practical application purposes, you should now be all set to start writing equations, making graphs, and even drafting your economics thesis or research paper. But as with most tools and applications, a vast sea of advanced knowledge awaits. If you want to learn more, head over to Overleaf’s “learn” section for more in-depth explanations and tutorials. There are also numerous online resources that will be able to help you find specific code if you’re stuck. Best of luck! Header image credit: Elchinator on Pixabay (free for use under the Pixabay content license).
Economists often run into situations where they need to type out mathematical formulae or draw up a graph, especially for research papers. But, anyone who’s attempted to do so knows that math symbols and complicated graphs are very difficult to produce using typical word processor options. So, what’s a humble econometrician to do?
Purpose of the job: To manage all commercial aspects of projects, from assisting the tendering process to the settlement of accounts. Seek to minimise costs and enhance value, while still achieving the required standards and quality. Key Objectives Maintain contract documentation e.g. applications for payment, quotations, variations, notifications and ensure such is provided in accordance with the terms and conditions of contracts Monitor and control income and expenditure on contracts e.g. interim/final applications for payment/final accounts/payments for late monies etc. liaising where necessary with the relevant people e.g. clients, Project Managers, senior management etc. Produce relevant monthly reports for the Commercial Manager e.g. cost and value reports, cashflow forecasts, cost to completes, turnover forecasts, WIP reports, risk and opportunity registers, earned value analysis etc. ensuring information is complete and accurate Maintain compliance of contracts in accordance with corporate procedures quietened Main Responsibilities Undertake programme monitoring to ensure identification of delays and entitlement to time Administer effective potential and actual contract change control ensuring timely submission of correct notices and prompt agreement/implementation with client and subcontractors Build positive relationships with subcontractors and ensure subcontracts are properly let. Ensure financial and contractual control of subcontractors accounts in accordance with legislation and corporate procedures Develop proactive and appropriate relationships with both internal and external stakeholders; to provide the appropriate guidance to make good business decisions Work with Project Managers to support the efficient and effective execution of projects ensuring contractual arrangements for cost, quality and delivery are achieved • Ensure all commercial activates are in line with the Commercial Strategy and meet all operational, financial, commercial, legislative standards and targets To attend contract handover meetings, start up meetings, progress meetings and contract review meetings as necessary Provide support to Sales and Estimating for all commercial activities To ensure that Contracts are set up according to Project and Company requirements including the use of WBS codes were relevant and that all associated paperwork and accurate records are collated and filed appropriately Ensure that any potential issues are raised with the relevant personnel at the earliest opportunity Responsible for open and adequate communication with peers, line management, senior management, project delivery teams and with clients as necessary To undertake the administration of the sub-contracts to ensure that the Sales contracts are appropriately supported Contributing positively to the effectiveness of project team commercial performance to include priming project managers and their teams on key risks/opportunities in customer contracts, effectively participating as necessary in validation of projects won and interrogating and reporting periodic reviews of lessons learnt Preparation and submission of Interim application for payment, analysing payment notices and monitoring cash receipts. Progress recovery of outstanding debts and resolution of financial exceptions Any other ad hoc duties as may be required and as are commensurate with the grade of the post. Qualifications, Knowledge, Experience and Skills Essential Candidates to have a minimum of 5 years’ experience from a main contracting or project delivery background HND/degree (or equivalent) in Quantity Surveying Previous experience of commercial management and procurement of subcontractors, including chairing regular meetings, measurement and control cycle, certificates and accruals calculations Good contractual and commercial understanding of JCT/NEC/ICHEME forms of contract and knowledge and understanding of Construction Law Ability to demonstrate a good knowledge of monthly reporting and earned value analysis Have knowledge and experience in estimation and cost analysis Excellent communication, numeric and computer literacy skills, proficient in Microsoft Office Excellent organisation and time management skills, with the ability to work under pressure and to tight deadlines Ability to work effectively in a team and delegate, but also able to work on own initiative and build relationships with clients’ surveyor Wide exposure to applications, claims process, placing sub-contracts, negotiation of contracts and agreeing final accounts. Be a problem solver/critical thinker with good attention to detail and good negotiation skills Takes ownership and accountability and demonstrates a professional approach to self and others Desirable Building productive business relationships at all stakeholder levels Results driven self-starter Member of RICS or other relevant professional body, or working towards CSCS card Measures • Performance based KPI’s • Routine appraisals • Feedback from peers Salary: £35K - £45K Dependant on experience Job Type: Permanent. Salary: £35000 - £45000/annum.
Econometrics, Statistics and Quantitative Methods (JEL C)
Why So Serious? 10 Hilarious Economics Jokes to Lighten the Mood
1. An Economist's Guessing Game Did you hear about the trained professionals who get paid to guess wrong? They're called economists! With their expertise in analyzing complex systems, economists often find themselves making educated guesses about the future. And let's face it, sometimes their predictions can be quite off the mark. But hey, at least they're trying! As Laurence J. Peter once said, “An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.” 2. The Light Bulb Conundrum How many economists does it take to change a light bulb? None. If the light bulb needed changing, the market would have already done it! After all, many economists prefer a hands-off approach to the economy, believing that market forces will naturally lead to optimal outcomes. In this case, they're taking that approach quite literally! 3. Handling the Gross Domestic Product What do an economist, plumber, and garbage disposal worker have in common? They all handle the gross domestic product! It turns out that the economic concept of GDP has a lot in common with the everyday work of different professions. It reminds us that even the most mundane tasks can have an economic impact. 4. Avoiding Rollercoaster Rides Why did the economist refuse to go on a roller coaster? Because he didn't want to experience any "ups" or "downs"! The economist's preference for stability and avoiding unpredictable or volatile situations is well-known. Perhaps this extends even to a recreational context like going on a roller coaster. 5. Noah, the Economist Which biblical character would have made a great economist? Noah! After all, while everyone's stocks were in liquidation, his were afloat. It shows that even in difficult times, there's always room for a bit of humor. Just ask the biblical Noah, or your friendly neighborhood economist. 6. An Economist’s Career in Fortune Telling Why did the economist take a job as a fortune teller? Because he wanted to specialize in "forecasts" and "predictions"! Well then, this seems to be something economists and fortune tellers have in common. 7. The Seasonally Adjusted Graduate Student Did you hear about the economics graduate student who got injured by diving into a pool in winter? He forgot to seasonally adjust! Seasonally adjusting data is a common practice in economics, but even economists can forget to account for seasonal variations in an important analysis. 8. The Rockstar Economist Why did the economist start a band? Because he wanted to study the economies of “scale”! A witty way of combining economics and music: use musical scales to sing the praises of cost efficiencies through scaling up operations, aka, economies of scale. 9. Guaranteed Method to Confuse an Economist How do you confuse an economist? Ask them to explain the "real world"! While studying, remember economists' tendency to operate in the theoretical realm – there’s always a potential gap between economic models and the complexities of real-life economic dynamics. 10. Trickle Down Economics Finally, I have a joke about trickle-down economics, but most people won’t get it. Get it? While economics may be a serious and complex field, it's important to remember that laughter can lighten the mood. These jokes serve as a reminder that even the most educated individuals in the world of economics can appreciate a good sense of humor. So, next time you find yourself overwhelmed by economic theories and concepts, take a moment to enjoy a good laugh. A little humor can go a long way in making the subject more accessible and enjoyable. So, why not share these jokes with your fellow econ enthusiasts and spread a little laughter? After all, a smile is always a valuable commodity, no matter the economic climate. Header image credit: Tumiso on Pixabay. (Free for use under the Pixabay Content License)
Are you feeling overwhelmed by the complexities of economics? Do you need a break from the serious and often confusing world of resource distribution, scarcity, and production? Look no further! We have collected 10 hilarious economics jokes that are sure to bring a smile to your face. So sit back, relax, and get ready to laugh!
The Job Outlook for Economists in the US
Are economists in demand? Is it a good idea to pursue a Master’s degree or Ph.D. in economics right now? If you’re pondering questions like these, good news. In today’s world, the answers appear to be “yes”, and “yes”, respectively. This article will examine growth in economics jobs in the US using Bureau of Labor Statistics (BLS) data together with our own data from the 2022 INOMICS Salary Report. If you would like to anonymously help INOMICS continue to learn about the economics job market, and empower economists to make informed career decisions, we implore you to take 3-5 minutes to answer our anonymous Salary Survey. Job growth for economist roles in the US The US BLS publishes job outlooks for various careers, showing how demand for those jobs is expected to change in the US over time. This data gives a sense of the future growth of economist roles, and can help economics students get an idea of the job opportunities they can expect. Although this article dives into US data, these findings can be thought of as an indicator for other regions with comparable socioeconomic profiles as the US, too. Last updated on September 6, 20231, the BLS reports that the number of positions for economists from 2022 through 2032 is expected to grow at a rate of 6% over the decade. This is roughly twice as fast as the economy-wide average; the BLS states that “The average growth rate for all occupations is 3 percent”. Economist job growth also beats out job growth in other social sciences, which are projected to grow at 5%. The data shows that there are currently about 17,600 economists employed in non-academic roles in the US. 6% job growth means that by 2032, the BLS expects there to be about 18,650 non-academic economists employed in the US (though they also project 1,100 new positions, which would represent a 6.5% increase). Similarly, the BLS estimates that there are 11,640 economics faculty positions in the US as of May 2022. A job growth estimate for economics professors is not given. However, utilizing past BLS data can help us examine the trend and learn more. Table 1 below records the number of economics postsecondary teaching positions in the US according to past BLS data. Table 1: Employment numbers for US economics faculty BLS estimate as of May… Economics Postsecondary Faculty Positions 2022 11,640 2021 11,790 2020 13,080 2019 13,270 2018 12,750 2017 12,770 It’s difficult to judge how economics faculty positions will evolve in the US over time based on Table 1 alone. These positions appear to be on a slight downward trend over time. It’s highly likely that the pandemic reduced job opportunities at universities, the largest employer of economists (see Table 4). Further, Inside Higher Ed reported in July 2022 that faculty were leaving their positions at high rates during the so-called “Great Resignation”, which may have impacted the industry. But, this slight downward trend in economics faculty mirrors a slight downward trend in postsecondary faculty positions in the US across all disciplines since the pandemic. And, it’s likely that increasing demand for industry economists will increase demand for both economics research and economics degrees. Both of these factors increase demand for economics professors, who conduct research and train new economists. Overall, the number of industry economist jobs is increasing and is expected to continue increasing faster than average. Meanwhile, economist jobs in academia have declined somewhat since the pandemic. Employment and Wages for economists in the US A note – the BLS uses the terms “Economists” and “Economics Teachers, Postsecondary” to describe economists employed outside of academia and within it, respectively. In the following tables, I term these “Industry Economists” and “Academic Economists” to align with other articles on INOMICS, and our own salary reports. Table 2 below summarizes the BLS data on the number of industry and academic economist positions, as well as the mean annual wages for both1,2. Table 2: Employment and wages for US economists in 2022 Employment Mean Annual Wage Industry Economists 16,370 $128,180 Academic Economists 11,640 $122,750 Table 2 shows that the mean annual wages are comparable (and quite high) for both industry and academic economists. As a comparison, 2022 INOMICS Salary Report data found average pay for US economists at $136,650. However, we know that these simple averages mask some nuance. INOMICS Salary report data show that industry economists tend to out-earn academic economists, except for when academic economists are promoted to full professor. This promotion grants them a salary comparable to top executives in industry. For a more detailed look at the breakdown of average economist salaries around the world, see the 2022 INOMICS Salary Report. And, be on the lookout for the 2023 Salary Report, which you can still support by answering our anonymous Salary Survey. Table 3 examines wages by percentile as well, for a more holistic analysis1,2,3: Table 3: Percentile wage estimates for Economists and Economics Professors in 2022 (BLS data): Percentile 10% 25% Median 75% 90% Industry Economists $62,480 $81,810 $113,940 $156,940 $207,230 Academic Economists $51,480 $76,580 $103,930 $144,980 $213,680 Table 3 shows that median economist salaries are lower than average salaries in the US. This means that high-earning economists bring up the average, so that the distribution of economist salaries in the US is right-skewed. It seems that highly experienced economists, whether in industry or academia, command very high salaries in the US – another sign that highly skilled economists are in demand. The BLS data also supports the INOMICS Salary Survey findings that industry economists tend to out-earn their academic peers through the middle of their careers, until academic economists earn the rank of full professor, where they earn salaries comparable to top executives in industry. High demand for economists will make it easier for economics graduates to find work, and will likely push up the wages that experienced economists can enjoy. Thus, economics remains a practical and eminently employable field of study. But, who exactly will be hiring these economists? Industry breakdown of economists employed in the US compared to the world Economist jobs are further broken down by category in the BLS data. Table 4 reproduces some of this data taken from the BLS2,3: Table 4: Economist Employment Estimates (BLS data): Employer Type Employment Annual mean wage % of economists employed Colleges, Universities, and Professional Schools 10,250 $127,410 41.05% Federal Executive Branch (OEWS Designation) 4,440 $133,220 17.78% Management, Scientific, and Technical Consulting Services 3,410 $152,330 13.66% Scientific Research and Development Services 1,740 $124,060 6.97% State Government, excluding schools and hospitals (OEWS Designation) 1,620 $80,850 6.49% Junior Colleges 1,350 $88,190 5.41% Local Government, excluding schools and hospitals (OEWS Designation) 1,190 $91,330 4.77% Business, Professional, Labor, Political, and Similar Organizations 560 $130,080 2.24% Central Bank 260 $220,460 1.04% Other Businesses* 150 $193,092 0.60% *This category consolidates the BLS’s “Nondepository Credit Intermediation”, “Legal Services”, and “Accounting, Tax Preparation, Bookkeeping, and Payroll Services” categories. The BLS data shows that universities are the largest employers of economists in the US by a significant margin. The federal government is another major employer, followed by management and technical consulting firms. Other employers of economists include junior colleges (schools that grant associate’s degrees or other certifications that are not Bachelor’s degrees), research institutes, local and state governments, and other businesses. Worldwide INOMICS data can be compared with US-only BLS data to get a sense of how representative the US data may be of economics careers worldwide. Although the employer categories are different, it appears that both sets of data contain similar proportions of economists in government, academic, and industry roles. 55% of the worldwide 2022 INOMICS Salary Report respondents were employed at a university, compared to the BLS’ 48.3% (found by summing the Universities and Junior Colleges categories). Academia is the largest employer of economists around the world, though it appears to be less so in the United States. 13% of Salary Survey respondents were employed in private businesses, while 16.5% of economists in the US were employed in private businesses (found by summing “Other Businesses”, “Business, Professional, Labor, Political, and Similar Organizations”, and “Management, Scientific, and Technical Consulting Services”). There are some differences as well. 5% of worldwide Salary Survey respondents were employed in a Central Bank, while just over 1% of economists in the US are employed by the US central banking system. In contrast, while 25.25% of economists in the US were employed in federal or state governments, only 11% of Salary Survey respondents worked for a government. The comparison shows that US employment numbers may understate the availability of central bank and academia roles and overstate the availability of government roles worldwide. Nevertheless, the proportions of economists in different roles in the US appears fairly representative. For regional breakdowns of economist employment within the US, see the BLS’s website2,3. Support more research into economist careers If this information is useful to you, please take a couple of minutes to complete the (anonymous) INOMICS Salary Survey. We use these responses to study the job market for economists and help current and future economists make informed career decisions. Filling out the survey takes only a few minutes, and you’ll receive a copy as soon as the Salary Report is published. References 1: https://www.bls.gov/ooh/life-physical-and-social-science/economists.htm 2: https://www.bls.gov/oes/current/oes193011.htm 3: https://www.bls.gov/oes/current/oes251063.htm#nat Header image credit: rawpixel.com via magnific (free license)
Being (or becoming!) an economist probably seems like a good idea. After all, you’re reading the INOMICS Blog! Beyond reading relevant advice and interesting articles, it can be helpful to have real data to answer questions about the job market for economists.
Scientists rejoice: the UK rejoins the Horizon Europe programme
This general maxim can be applied to the growth of knowledge as well as the trade of physical goods. When researchers are allowed to specialize in their own topic areas and then collaborate with the other researchers around the world, knowledge – and therefore human capital – grows more than it would otherwise. Research and innovation can therefore be thought of similarly to the trade of physical goods; the more that is shared, the merrier. That’s part of why news about an agreement between the UK government and a prominent EU research program have given European and UK-based researchers – including many economists – renewed hope in the future of science. The Horizon Europe program On September 7, 2023, it was announced that the UK is set to rejoin the Horizon Europe research programme, after an agreement between the UK’s Prime Minister Rishi Sunak and European Commission president Ursula von der Leyen. It is expected that the UK will rejoin the programme effective January 1, 2024. The Horizon Europe programme is a framework for collaborating research across borders in the EU (and around the world) that includes researchers from top research institutes, technology companies and universities. The programme presents a framework of societal goals, some shared by member nations, and some (such as the UN’s Sustainable Development Goals) that are not just limited to relevance in the EU. The programme benefits researchers by streamlining complex administrative requirements and allowing access to a wide pool of potential funding; together, this makes it easier for a diverse body of researchers to work together, which lowers the barriers to advancing science. The programme notably features an open science mandate as well, helping to break down artificial barriers to sharing knowledge. According to a fact sheet released by the European Commission, as of 2021 the programme accounted for 17% of global R&D expenses and was at least partially responsible for 25% of the world’s top scientific publications. It has a budget of €95.5 billion across the years 2021-2027, which it grants to research projects across six different topic “clusters”. Funding in the programme is not just limited to EU countries. While a small proportion of each project’s team is usually required to be EU-based, researchers around the world are very much allowed to be part of research teams that receive funding from the programme. <11an>limit:3;categories:Jobs</11an> History with the UK Originally, the UK remained part of the Horizon programme even after the “no deal” Brexit situation came to pass. However, the UK left the programme after negotiations over the Northern Ireland Protocol caused relations to grow tense. This had several effects detrimental to the progress of science, particularly in the UK. It became more difficult for researchers in the UK to collaborate with colleagues in other parts of the EU through Horizon-funded research, and it cut off UK funding to Horizon Europe research projects. On top of the difficulties introduced by Brexit, this made it more difficult for scientists to conduct research in the UK, and less attractive for prospective scientists to settle in the UK or seek partnerships with UK-based institutions or researchers. Organizations based in Europe, uncertain about the future ability of their UK colleagues to cooperate in a post-Brexit landscape, were incentivized to find non-UK options for funding and research collaborations. As a result, the UK lost a significant number of researchers and received significantly less money from EU sources. What does this mean for economists in Europe? By rejoining Horizon, the UK is unlocking unparalleled research opportunities. This has the potential to alleviate much of the pain caused in the past few years. Economists in Europe, particularly those in the UK, should find that this change is positive or neutral for their work, with little downside. It will be easier for economists to collaborate with British or European colleagues, and funding might be more accessible for some projects. Moreover, science as a whole will benefit as researchers face fewer barriers to international collaboration and increased access to funding. To learn more about Horizon Europe, consider downloading a fact sheet about the programme, available at the European Commission’s website. Have you or your department been affected by the changes in the UK’s status in Horizon Europe, or have you been affected as an academic post-Brexit? Please share your experience in the comments below. References https://www.independent.co.uk/news/uk/politics/rishi-sunak-european-union-government-horizon-brexit-b2406606.html https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-open-calls/horizon-europe_en Header image credit: vwalakte on Freepik/Magnific (free license)
International cooperation is important for economic growth, because it allows societies to grow more than they could on their own. When countries specialize in the economic areas they are relatively more productive in (utilizing their comparative advantages) and trade with other nations, everyone is made better off.
John Maynard Keynes was a philosopher and economist who made a massive impact on the field. He is often placed next to luminaries such as Adam Smith and Karl Marx as one of the great founding thinkers in economic theory, and for good reason. Keynes’ ideas formed the basis of Keynesianism, a school of economic thought that was the first to seriously challenge the classical way of thinking. Keynesianism is one of the major disciplines or philosophies of economics, as opposed to the classical, Neoclassical, or monetarist (and etc.) schools of thought. Until Keynes’ new theories, economists had been stuck with classical models of economics that were a great starting point for economic theory, but were ultimately too inflexible and unrealistic. (Eventually, economists who saw value in the classical models gave rise to the Neoclassical school of thought, which has updated and improved classical economic thinking to remedy some of the criticisms thrown at it). Economics was forever changed as a result of this new perspective, giving rise to many new models and theories and cementing Keynes’ place in the history books. <11an>limit:3;categories:Bachelor Programs, Master Programs;disciplines:Economics</11an> The life of Keynes Keynes was born in Cambridge, England, and remained there to study at King’s College in Cambridge. He received his degree in mathematics in 1905. There, he was influenced by the eminent economists Alfred Marshall and Arthur Cecil Pigou, whom he studied under. Keynes bounced around between academic and government employment during his adult life. In 1908, he became a lecturer at King’s College. He left to work for the British government in the India Office, which was tasked with overseeing British rule in India. Here he wrote his first major book, Indian Currency and Finance, in 1913. Later, he returned to the university to teach again until 1915. Keynes left university employment again to work for the British Treasury, where he was the chief representative during the peace talks that led to the Treaty of Versailles, which was signed in 1919. However, Keynes left the Treasury soon after, as he thought the Treaty was unnecessarily burdensome to the Germans. In fact, Keynes wrote his work The Economic Consequences of the Peace to state this, correctly predicting that the punitive measures levied by the Treaty would keep Germany poor and politically unstable. Famously, that political instability allowed the Nazis to rise to power less than twenty years later. Keynes returned to Cambridge as a professor after his career with the Treasury. Later, he contributed to both the Bretton Woods conference that helped to devise post-World War II international trade regulations, and the formation of the International Monetary Fund (IMF) at the same conference. Keynes passed away in 1946, just a few years after the Bretton Woods agreement. Keynes’ contributions to economics When the Great Depression hit in the 1930s, then-contemporary economic theory could not explain why the Depression was so severe. Classical economic models tend to explain how the economy self-corrects over time, and classical economists believed the market would self-correct and government intervention would do nothing at best. Yet, with the Depression, the economy continued to stagnate with massive unemployment and a lack of self-correcting market behavior that these models could not explain. Keynes’ initial theories were an attempt to explain the times. Beyond the issue of describing the Great Depression, he did not see a way for classical economic theory to explain how economies can come out of recessions. So, he reassessed and started to develop theories of economics that could account for the Depression, and that showed how governments could help their economies to recover. This new reasoning was readily accepted by political figures at the time, who embraced government spending as a policy tool. U.S. President Franklin D. Roosevelt’s “New Deal” policies, which involved much government spending as a way to spur the economy out of the Great Depression, were urged on by Keynes himself in a letter he wrote to the American president in 1933. In this line of reasoning, and with his works Tract on Monetary Reform and Treatise on Money, Keynes contributed to the theory of monetary policy. He believed that a stable economy required stable interest rates, so advocated for the central bank to adjust the interest rate based on the price level. If the price level rose, Keynes thought the central bank should lower the interest rate, and vice-versa. The basic idea behind this thinking is that as the interest rate rises, borrowing becomes more expensive, so individuals and businesses will consume less; this can counter inflation. But, it was Keynes’ work The General Theory of Employment, Interest and Money that revolutionized economics more than any of his other works. This book introduced many foundational concepts that have become important theories and given rise to much more economic thinking since. For example, the concept of aggregate demand – the principle that the overall demand in an economy is the sum of consumer demand, government spending, and investment – was created and popularized by this book. He also showed that unemployment was probably impossible to prevent without sufficient government spending, which later gave rise to the idea of a natural rate of unemployment. This was in direct opposition to classical economic models, which again assumed that the market would achieve full employment on its own via self-correcting behavior. Keynes’ The General Theory also advocated for government spending to stimulate the economy during economic downturns, to lessen the impact of the recession. Notably, Keynes argued that it would even be a good thing for governments to take on debt to do so, in an era where balancing the government budget was seen as crucially important. Despite this, Keynes was a proponent of a free, perfectly competitive market, believing in Adam Smith’s idea of the invisible hand. Keynes’ legacy Of course, Keynes’ ideas were eventually built upon and critiqued, for example that his models cannot account for sticky wages or prices, and that they would overstate the usefulness of government spending as that encourages crowding out. As a result, Keynesian economics has changed greatly since the titular economist introduced the ideas. In particular, Keynesian ideas have been expanded upon by economists such as John Hicks, Robert Solow, Paul Samuelson, and others - producing much of modern economic thought in the process. Through their work and that of still more economists, the New Keynesian field has emerged with models that can account for some of the criticisms levied at Keynes’ original work. Yet the revolution that Keynes started has retained his name, and rightfully so. References https://www.econlib.org/library/Enc/bios/Keynes.html https://www.britannica.com/biography/John-Maynard-Keynes Header image credit: IMF, Public domain, via Wikimedia Commons.
So, how do you find the exchange program that’s the right fit for you? It can be a tough decision and one you should deliberate properly, so read on for INOMICS' best tips to help you find the ideal exchange program tailor-made for you. <11an>limit:3;categories:Bachelor's Programs;disciplines:Economics</11an> Location, Location, Location One of the biggest issues to consider when thinking about an exchange program is – obviously – where you would like to stay. You should consider not only the country that you would like to visit, but also the specific city or region (and even different regions of your home country). Are you a fan of big, bustling cities? Or would you prefer a small town or somewhere in the countryside? Would you like to be in a cosmopolitan place, surrounded by people from all over the world, or would you prefer to be somewhere more homogeneous with a strong shared culture? The area around your university of choice will greatly affect your experience studying there, so be sure you research the region to know what you’re getting yourself into. Naturally, you need to think about language as well. You probably won’t have time to learn a whole new foreign language before your planned semester exchange – unless, of course, you plan it far enough in advance to take language courses one or two years before. This could be a fantastic way for you to solidify those skills and help you get the most out of your degree. But keep in mind that foreign universities may not only offer classes in the local language. For instance, you might be able to study entirely in English during a semester exchange while abroad in France, Brazil, or many other countries. Be sure to explore the options that you have with your current language skills even in other countries – you might be pleasantly surprised with the options. Naturally, if language remains a concern for you, it’s worth considering an exchange program that takes place in a country with the same mother tongue, or even within your home country. The National Student Exchange program in North America, for example, offers study away programs within the United States and Canada, potentially allowing you the benefits of a different perspective on your studies but without the cultural and linguistic challenges of living in another country. When and how long to go? The next big issue to consider is the length of time that you would like to spend on exchange. Short-term programs tend to run for a few weeks to three months, often over the summer break. They allow you to have the experiences of studying abroad (or just farther away from home), without interrupting or changing the schedule of your regular learning. These programs rarely include a full course-load compared to a normal semester, instead focusing intensively on a smaller handful of classes. However, don't assume that such a short-term program will be easy, or not require any work! Often short-term programs are the most study intensive, as all the materials must be compressed into a smaller number of hours. Although it may be less intimidating given the shorter time you will spend away, a short term trip can also have its drawbacks. Inevitably, you have less time to settle in, and often just as you feel like you’ve gotten used to the new setting, the trip is done and you are sent back off home. And, a short-term trip is less likely to be as much of a cornerstone of your life experience as a longer trip could be. A long-term exchange, on the other hand, typically lasts for six months to a year or more, and may include teaching from a local university which forms a part of your degree back at your home institution. So, with sufficient planning you won’t increase your overall semester count. This means that you get the true local's experience of attending university in your host country, and gain a different perspective on your subject. Such a longer term exchange can help you more fully experience a new part of your country or a foreign culture. It can allow you to develop new language skills, study your field under the guidance of experts with a different perspective, or with different strengths than the faculty at your home institution, and help you to network with colleagues from around the world. And, a longer term exchange abroad allows you to immerse yourself fully in a new culture and experience what studying abroad is like, while getting support on topics like visas and finding housing from your home institution. But longer exchanges come with their own drawbacks as well. A year can be a long time for an undergraduate student in particular to miss out socially at their home university – possibly some of the most formative years of your adult life. Not to mention the family, friends and traditions that might be left behind for a time. Plus, studying on exchange for a long time can put strain on your path to graduation if you aren’t careful, even if it’s at a university that partners with your home university, for example if you need to catch up on exams or coursework when you return. Degree Planning Exchange programs are usually not a core part of the degree experience you originally signed up for. They are typically not considered when university officials design curricula and schedule classes. Thus, it pays to be careful academically when considering an exchange program. When choosing a program, it might be exciting to jet off to the fanciest destination available. But, you must be aware of how the credits will transfer and what it will mean for the remainder of your degree. Exchange programs probably offer a limited selection of courses that your home university will accept as part of your degree program, and they might have prerequisites. Ensure you qualify for the courses you intend to take while on exchange. The last thing you want is for your exchange program to prevent you from graduating on time! Further, particularly when studying abroad, the course content in classes with the exact same name likely differs. To ensure you don’t miss any foundational topics, you should study the syllabi from your home institution’s course and your options on the exchange program to compare. Are there any major topics covered at one university, but not the other? Are there any topics missing from the exchange program? Checking the syllabi can ensure that you don’t accidentally put yourself behind your colleagues at home. There’s a chance that you could be the first person from your home university to take a specific class at your host institution while on exchange. Or, if you might even be the first person to go on exchange to that particular university in general. In both of these cases, you’ll need to work closely with administrative officials – and possibly class professors – from each institution. Be prepared to proactively ask questions about course content, fill out required forms, and argue the case for the new course credits you’d like to have transferred. Talk to other students who have done it before One important resource that’s easy to forget is those who have come before you: former exchange students! Universities will sometimes maintain a list of students who have studied abroad or done exchange programs at specific universities before, or organize an open-day or presentation where you can hear from study-abroad graduates. Alternatively, students who complete such a program can opt-in to such a list, and might be willing to talk to you about their experience. Don’t be afraid to ask around about students who have done the program before you – their advice will be invaluable. Funding Finally, it's important to consider how you will pay for the expenses of your exchange program. You will need to cover your travel expenses, insurance, accommodation costs, living costs, and in some cases university fees too. Generally, for short-term programs you will be expected to cover these costs yourself. Long-term programs, however, often have scholarships available which will cover these expenses. Be sure to check out the details of your program for specifics, as those programs which include scholarship funding often have lengthy application processes. Find out about them early to give yourself the best possible chance of securing one. An exchange program can be an important, unique, and awesome part of your university studies. We hope this article has helped you be inspired to discover which program is right for you. Header Image Credit: Hircus on Shutterstock (licensed image - copyright)
Exchange programs allow students to study at a different institution as part of their degree. Typically, students will use this opportunity to study abroad at a foreign partner of their home institution, though exchange programs can sometimes take place in the same country. Regardless, these programs are a fantastic way for students to broaden their horizons, take specific courses at another institution, and study abroad without committing to living multiple years in another country.