No Deal Brexit and the Threat to UK Universities
The threat to universities Last week it was the turn of the universities to express their horror at a possibility of a ‘no deal’. An open letter from five higher education groups, including the Russell Group and University Alliance, described its consequences, unequivocally, as the ‘biggest threat’ UK universities have ever faced. As of January 2019, the bodies collectively represented 50,000 EU staff and 130,000 EU students in the UK, along with 15,000 UK students studying on the continent - all, they stressed, now face a future fraught with uncertainty. For some institutions, the threat posed is an existential one. With the number of EU students predicted to fall as much as 60%, and a potential loss of an estimated €1.3bn of European Research Funding, certain universities could be forced to seek government bailouts to stay open. In such a scenario, the government's response remains uncertain, the current signs, though, look far from positive. Just two months ago, the Office for Students (OfS) declared that universities that were not financially sustainable would not be bailed out. Evidently, the mantra ‘too big to fail’, a favourite of the banks, doesn’t seem to apply to educational institutions. Failing finances These predictions, too, come at a time when British universities are already feeling the pinch. Earlier this year regulators warned that many stood on ‘the brink of a credit crunch’, having embarked on ill-advised borrowing sprees designed to boost student intake. The sector’s debt is reported to have risen to £10.8 billion, more than three times what it was prior to the financial crash. And now the fear is that ‘no deal Brexit’ will be like dousing an already dangerous looking fire with a can of petrol, while simultaneously knowing that the fire service is on strike. To make matters even worse, university closure, if it does happen, is likely to be regionally uneven and will help exacerbate existing inequality. As Vice Chancellor of Buckingham University Sir Anthony Seldon has warned, “The ones that will close will be in the areas of greatest social and economic need. The damage that will do will be immense to the social fabric of this country and the economy of those regions.” So far, there has been little reassurance that measures will be taken to prevent this outcome. Government response, or lack thereof Rather, the common response, when there’s been one, has been a reminder of the government’s adherence to the principle ‘science knows no borders’ and the promise that Brexit will not jeopardise this. Yet, with only the Horizon 2020 funding guaranteed, this has for some time sounded like empty rhetoric. The maxim itself, though, is informative, recognising that scientific research would be among the worst hit areas in the case of ‘no deal’. For instance, projects involving the development of cancer treatments and the combatting of climate change are widely expected to be compromised. Certainly, vice-chancellors remain unconvinced the requisite measures will be implemented, and are seeking ‘cast-iron guarantees’ that European Research Council and Marie Sklodowska-Curie funding, in particular, will either be protected or replaced. Without, they fear academics and researchers, and those considering relocating to the UK for academic purposes will rethink. This would disrupt essential research networks, and in the process, further dis-incentivise research in the UK. Vice-Chancellor of Warwick University, Stuart Croft, has suggested this would eventually even affect British nationals, and force them to ‘think hard about their positions.’ The wider concerns The projected brain drain would hit the economy too, at a time, which - if post-Brexit forecasts are anything to go by - it will likely already be floundering. Currently, the university sector contributes £21bn to UK GDP every year and supports almost a million jobs, making the potential problem, as university heads have put it, ‘critical to the national interest’. It would constitute, they say, ‘an academic, cultural and scientific setback from which it would take decades to recover.’ Alongside the NHS and BBC, British universities are among the UK’s most prized possessions. Their history of innovation and breakthrough has accounted for countless advances in the natural sciences, technology, and medicine, and has pushed boundaries in both literature and the arts. Their legacy is everywhere and unavoidable. For the UK to achieve the thriving post-Brexit future it craves its universities will have to play an integral role - their protection, thus, is imperative. Assurances must be given so that, regardless of the political outcome, regardless of in-party fighting, personal opportunism, and all we have come to expect from the political classes, the most damaging effects on British higher education can be kept to an absolute minimum. Britain’s future relies on it.
With every passing day - and they seem to be whizzing by now – the likelihood of the UK leaving the EU without a deal, known as a ‘no deal Brexit’, is increasing. For the large majority, the prospect of this is nightmarish. In the event, it is widely understood that there would be a number of inevitabilities: the economy would slump, possibly crash; many businesses would flee, and with them whatever tax receipts they hadn’t yet evaded; and the Tory hard right would sit back and revel. That only a handful of MPs and a slither of the broader population actually desire this, testifies to the failure of parliament, and more so, the failure of government in dealing with the negotiations. For two years, it has concerned itself with little else, shelving manifesto pledges to deliver the country here, to the now. And the situation, to put it lightly, is a shambles.
Urban, Rural and Transportation Economics (JEL R)
Looking for a graduate program to continue your studies? Check out our program listings. Odds and the efficient market hypothesis If you go to make a bet on a particular sporting outcome, the bookmaker will offer you odds: that is, their figure for how much they will pay out if you win the bet, based on their estimation of the probability of you winning. For an event that is highly likely, you will get odds that pay out very little, but for an unexpected turn of events, you would be paid more. Setting these odds is one of the most important jobs of a bookmaker, as the odds that they offer must be realistic enough to draw in betters but not too generous that the bookmaker risks losing money. The economics comes in when we consider the efficient market hypothesis, which states that markets will natural organise themselves into the most efficient form, so that the price of any goods or services are inherently linked to the worth of those goods or services. This assumption is pervasive throughout economics theory, and if it held for sports betting then we would expect that the odds offered by a bookmaker represented the exact odds of that event occurring. However, this is clearly not the case as if it was, neither bookmakers nor gamblers would ever make a long-term profit. Instead, both bookmakers and betters are driven by psychological forces, such as peer pressure – feeling that you ought to make a bet because everyone else is doing so – and the sunk cost fallacy – when you know your faith in a certain team is misplaced but you keep betting on them anyway because you don't want to confront the fact you were wrong about their skills. These are examples of a recent approach to economics, behavioural economics, which has been championed by Richard Thaler and others and which seeks to bring together insights from both economics and psychology. The costs and benefits of gambling Another feature of gambling noted by both economists and psychologists is the individual differences in how people respond to betting. For the majority of people who gamble, betting is an entertaining activity that they enjoy periodically and usually don't take too seriously. But for a minority of people, gambling becomes highly addictive and a destructive force in their lives. It is for this reason that gambling is heavily regulated in most countries and outright banned in others. There is a tension here between the free market approach which would classify sports betting as similar to trading on the stock exchange or any other kind of investment activity, and a paternalistic approach which says that gambling can be harmful and people should not be allowed unfettered access to gambling. As David Forrest put it in his 2013 paper on gambling in Great Britain, “Across the World, there therefore appears to be a strong current of opinion that gambling is 'exceptional' and has special characteristics which mean that significant numbers in the population would, unrestrained by restrictions, take systematically poor and self-harming decisions about their levels of consumption.” Gambling clearly brings pleasure and amusement to many, but the fact that it is regulated in most places shows that despite economic assumptions that people will maximise their own self-interest, when betting, they often do not. The economics of match-fixing A final point of interest when looking at the role of economics in sports betting is that of match-fixing. Match-fixing is a problem throughout both amateur and professional sports, and some argue that fixing arises in part because the stars of sports are young players who are often from humble backgrounds, who may not have a lot of experience with issues of finance, and taking bribes to fix a match is a temptation that is too strong for them to ignore. However, economic theory suggests that the problem is more complex than young men who suddenly become famous having poor impulse control. In his paper on match-fixing from 2015, Bibhas Saha argues that there are hidden economic incentives to cheat. He divides cheating behaviours into “cheating to win” like smuggling notes into an exam, and “cheating to lose” like a student who deliberately flunks an exam because she does not want to continue her field of study despite her family's ardent wishes. But match-fixing is different, because the aim is not for the player being bribed to lose, but rather to under-perform. The issue is that this method of cheating is hard to spot, especially in team sports where each player has only a limited influence on the outcome of a match. Further, with the rise of betting websites, there are more incentives for players to participate in match-fixing because there are more financial opportunities available, and the anonymised exchange of money facilitated by these sites makes taking that money less risky. One way to identify this more complex form of cheating is to look at aggregated data from betting websites, which is what Christine Deutscher and colleagues did in their 2017 review of match-fixing in the German Bundesliga. By examining data from the website Betfair they were able to identify specific referees whose matches brought in a significantly higher number of bets than other referees, possibly suggesting improper behaviour. They point out the often low salaries that referees receive as an incentive to participate in match-fixing as well as the short term contracts many are on which makes them uncertain about their financial future. Seen in economic terms, match-fixing may be less of a moral failure and more of a rational financial decision for sports professionals. As match-fixing by team officials is especially hard to detect, this kind of analysis using large data sets may be the best chance we have to identify cheating in team sports right now.
One area of life that is greatly influenced by economics but you might not think of as a typical economics topic is sports and match betting. Gambling on sporting events is a huge international multimillion dollar industry covering gambling from traditional betting events like dog or horse races to modern betting outfits that let you place bets on everything from how many goals will be scored in a given match to which players will be picked for a draft. As betting on sports events is essentially an exercise in modelling and probability, we can use the lens of economics to understand more about how match betting works.
Looking for a job in economics? Check out our job listings. On first view, economics and ethics appear incompatible Economics is based primarily on the view of people as rational actors, who will make predictable decisions to optimise their own well being. Rational choice theory states that an agent can be said to be acting rationally if they have rational preferences and they choose the option which is preferential to them compared to the alternatives. Under this understanding, the key factor that economics attempts to optimise is preference satisfaction. Inherent in this approach is the assumption that human well being is served best by allowing people to choose whatever will satisfy their individual preferences best. However, there are clearly limitations to this view. Someone might have preferences which are detrimental to their well being, such as a belief that a pseudoscientific treatment will improve their health and a preference towards that treatment over conventional medicine when they fall ill. A totally free market for healthcare with no restrictions on misleading advertising and no requirement to base treatments on evidence might satisfy individual preferences, but it would be hard to argue that it would benefit human well being when it would cause more people to become sick and die. On the other hand, economists might argue that preference satisfaction is valuable not because it promotes human well being, but because it is a method for optimising the efficient sharing of resources. Under this view, ethics is not within the realm of economics, as the two are totally different frameworks for approaching the world. Market forces require companies to consider ethical values The problem of differentiating economics from ethics in this way is that ethical concerns do have a marked impact on economical issues. It may be most efficient, for example, for a business to employ children. Children cost less in wages than adults and they can perform tasks such as squeezing into small spaces which adults cannot. However, most people would recoil at the use of child labour in this way. Any company which sells a product or service to customers but which makes use of child labour could expect to lose support and to be the target of public scrutiny. Therefore, it is in the interest of the business to behave ethically, at least to a degree that customers can accept. If customers' preferences include not buying into a supply chain which uses child labour, then businesses need to consider the ethical views of the public and produce their goods in a way that does not violate those preferences. You could say that this is simply another case of satisfaction of individual preferences – but you could also describe this as people in business adjusting their behaviour so as not to violate moral norms which are held by others in their society, which is basically the social contract theory of ethics laid out by Thomas Hobbes. In this way, economics does hew to an ethical framework, even if that framework is understood primarily in terms of preference satisfaction. What is economics for? Is it descriptive or prescriptive? Within economics, approaches to the subject can be divided into two fields: positive economics and normative economics. Positive economics seeks to examine the economy in a given country, area, or international region, and to see that economy as it is. The aim is to collect data and form an accurate picture of the world. Eventually, with enough data, economists can make predictions about what effects an action such as raising interest rates could have on an economy. Positive economics seeks to understand the economy as it exists and to accurately predict what outcomes will arise from various forms of intervention. Hence it describes how the economy is, with no stance taken on how the economy should be. Normative economics, by contrast, looks at how the economy should be and what actions should be taken. It is the enacting of moral principles into economic actions, so for example, if one holds the principle that “All people should be compensated fairly for their labour” then one should support policies that advance that principle, such as instituting a minimum wage. This is where values come into play: should the economy be manipulated in such a way as to promote fairness, growth, equality, standard of living, life expectancy, or something else? A positive theory of economics can tell you how to achieve these aims, but in order to decide what aims to pursue, you need normative economics. A fuzzy line Many economists consider themselves data collectors and analysts rather than politicians or philosophers, so they would identify more with the framework of descriptive positive economics than that of prescriptive normative economics. However, this emphasis on data and objectivity has a tendency to lead people to believe that they are being objective when in fact their values are coming in to play. As any scientist or journalist can tell you, what questions you ask when searching for facts has as much bearing on the conclusion you eventually reach as the facts themselves. In studying positive economics, economists necessarily make judgements about what topics to examine, which forms a kind of normative approach about which issues are most important. In this way, the distinction between positive and normative economics is not as clear as you might think, and plenty of economists are working with prescriptive and therefore moral values even if they are not aware of it. And when values come into play, then ethics must necessarily follow. Ethics, economics, and psychology Finally, it is important to consider the role of psychology in both economics and ethics. With economic theories based primarily on the assumption of individual rationality, assuming that people will make the choices which will maximise their utility. However, evidence from psychology makes it abundantly clear that this assumption does not hold – from the innocent person who confesses to a crime under intense questioning, to the person who develops a destructive gambling habit, to the person who goes along with a social group even if they disagree (as most of us do from time to time), there are no shortage of examples of human behaviour where people do not act rationally and maximize their utility. So the assumption of rationality on behalf of economic subjects can in fact be seen as prescriptive. An economist does not, in fact, describe the world as it is, because they assume that individuals are making rational economic decisions, which is not always true. By basing their systems of understanding on the assumption of rationality, economists discuss how a rational actor “ought” to act. This provides another arena for discussing the role of ethics in economics: examining the choices that people ought to make based on their situation, finances, and psychological state as well as their individual preferences. Although at first blush, then, it may appear that ethics has little to do with economics, once you dig down into the details of the practice of economics it becomes clear that ethical concerns impact the subject in a number of ways. Even when economists are unaware of the fact, they are already operating within an ethical framework.
Can economics ever be ethical? This might sound like a strange question to an economist who focuses on collecting data, analysing it, and using that data to make predictions. What ethical considerations could be raised here? What do abstract theories of ethics have to do with cold, hard economic facts? Today we'll look at some of the ways that economics interacts with the topic of ethics.
An early step: the introduction of coinage In order to have a concept of economics, first, there must be a concept of money as an object in and of itself, with money existing independently of trading through barter. During the 6th century BC, precious metals were used in bars or bullion for trade, measured by weight. Most scholars agree that the Lyndians, a people from an area called Anatolia which is now Turkey, were the earliest to use coins. They first minted coins around 600 BC, although these early coins were of such high value that they would be used for saving and to pay for rare large expenditures rather than everyday expenses. As trade between peoples promoted the concept of the coin, it was adopted by the ancient Greeks and Romans, and from there the idea spread throughout Europe and beyond. The coin was easily transportable and became one of the earliest pieces of shared understanding between different cultures, allowing trade between unknown parties on a scale which had been impossible before. The beginning of modern economics: trade between nations The widespread adoption of coinage facilitated trade at an unprecedented level during the ancient Greek and Roman eras. Large-scale trade between nations arguably began with the empire of Alexander the Great in 300 BC, who ruled Macedonia and expanded his reach through Asia and Africa to create one of the largest empires in this period of history. This empire created a shared economic and cultural understanding between nations that were hundreds of miles away from each other. Following this period, the Greeks remained in Central Asia from 250 BC to 10CE, opening up a trade route between the East and West known as the Silk Road. Along this established route, people could trade goods more easily and smoothly than ever before, which allowed them access to new resources and ideas. The route was named for the precious silks that were exported from China to the Roman Empire in addition to jade, bird feathers, spices, tea, and what would have been new and exotic fruits and vegetables like carrots and pomegranates. In exchange, the Romans provided the Chinese with a great number of horses, as well as other items like gold, olive oil, and grapes. This long-standing trade relationship facilitated a cultural exchange between nations as well, marking the starting point of globalisation. A revolutionary change: the industrial revolution The next major development in the history of economics was the industrial revolution of the late 1700s to early 1800s. During this period, a transition was underway in the West to move away from hand production methods such as weaving or picking fruits by hand and towards automated production using machines to perform repetitive tasks. This changed occurred firstly and primarily in the area of textiles, but automation soon spread to other areas of production too and technological developments were used to increase the speed, efficiency, and accuracy of production. In economic terms, the industrial revolution allowed greater production for lower effort, which over time raised the standard of living so that more people could afford first more essential goods, then eventually more luxury goods. The economies of scale made these goods more affordable and for the first time mass-produced goods were available to the masses as well as to the elite. The GDP per capita began to grow rapidly for the first time, signalling the most significant change to daily lives since humans first began relying on agriculture to produce their food. However, the turn towards automation was not uniformly positive in its effects across the board. Economic historians have argued that the workers on the lowest rung of the social ladder actually saw a reduction in their living standards as they suffered from the harms of industrialisation like pollution and long working hours without seeing the benefits: in affordable goods and services. The twentieth century: population boom During the 20th century, the growth following the industrial revolution continued and the global population exploded from 1.65 billion people at the start of the century to 6 billion people by the end. This was due to factors like improving medicine and healthcare that lowered mortality rates, particularly lowering child mortality and the likelihood of mothers dying during birth, and the wider availability of resources and goods thanks to economic forces. The population began to urbanise, congregating in smaller and denser city areas than the traditional rural way of living, due to jobs being located primarily in cities. This urbanisation made it easier to share resources and provide services like clean running water, heating, electricity, and education, and made distributing foods and other goods more efficient. All of this allowed people to live for longer and to have more children, resulting in the population boom. In turn, this growing population provided a plentiful and cheap source of labour, allowing companies to produce more and to earn more. The two world wars in the twentieth century were economic drivers as well, obliging countries to increase their production of weapons and military goods and causing women to join the workforce in record high numbers. Over this century, GDP per capita grew by five times. This was particularly spurred by the development of shipping containers that were cheap to manufacture, standardised, and reusable. The standardisation of shipping containers made transporting goods in large quantities over the ocean cheaper and easier than ever before, pushing international trade to new heights. The modern era: crises and environmentalism At the turn of the twenty-first century, the Great Recession was a period of economic decline across the world. It was the most severe economic decline since the Great Depression of the 1930s, and was spurred on by a failure to regulate financial markets. Corporations and financial firms took on considerable risks and lent excessively to individuals who were unlikely to be able to pay the full amounts back, resulting in skyrocketing household debt and the bursting of a housing bubble. This period saw the global financial crisis of 2008 as well as the subprime mortgage crisis, both of which threw economics markets into disarray. Economics has not only been tied to crises in the twenty-first century, however. A growing awareness of climate change has spurred on a popular interest in environmentalism, to which economics has contributed. One of the most realistic and broadly popular proposals for combating climate change is the introduction at either a national or an international level of a carbon tax, in which a fee must be paid when carbon-based fuels (i.e. fossil fuels) are burned. This tax would reduce the use of fossil fuels over the long term by making them more expensive and therefore less appealing than using renewable sources of energy. Carbon taxes of various kinds have been implemented in the UK, Ireland, Australia, Chile, Sweden, and other nations and have been debated in many more. Conclusion In many ways, the history of economics is the history of society, showing how resources were valued, traded, and consolidated across periods of time. Despite its reputation for abstractness as a subject, economics has had a formative impact on life in our society for thousands of years, and will likely only become more relevant in a future of increased globalisation.
Although it is generally thought of mainly as a theoretical academic subject, economics has been a driving force in society for thousands of years. The exchange of money and the way that financial systems interact has lead to some of the most profound changes to the everyday lives of human beings across the planet. To illustrate how the practice of economics has changed the world, today we'll look at the role of economics in Western history from the 6th century BC era up to the present day.
Browse all of our Bachelor's Programs here History of the theories Marxian economics is, as the name suggests, a school of thought based on the work of Karl Marx. During the 1800s Marx wrote extensively in the area of political philosophy looking at labour and the economy, and particularly focused on the power dynamics between workers and the ruling class. This work was a reaction against the classical view of economics developed by theorists such as Adam Smith, an early pro-free market theorist who believed the invisible hand of the market would benefit society. The Marxian approach to economics rejects this framework and instead considers the construction of value within a capitalist society. Marx was especially concerned with the rights of workers, who create value through their labour but do not gain the full rewards from this value. Instead, labour is exploited by members of the ruling class for their own interest. Unlike Smith, who believed in a laissez-faire approach to economics and argued that the market would eventually correct any unjust imbalances, Marx argued that capitalist society is specifically structured in order to extract value from the working class by means of labour for the benefit of the ruling class, and that this exploitation is not a bug that will eventually be worked out but an essential feature of capitalism. By contrast, neoclassical economics emphasises individual rationality and the maximisation of profit and is one of the primary models of economics used by those in the field today. The approach was developed throughout the 1800s but was not named until 1900, when Thorstein Veblen wrote an article discussing various schools of economics. The essential principle of neoclassical economics is that every individual will attempt to maximise their personal satisfaction through the means that are available to them – in a capitalist society, that will be primarily through the gaining and spending of money – and that individuals will make informed judgements about economic decisions which can be understood rationally. This individualised approach to economics was new and coincided with the emergence of both psychology and sociology, which suggested that individual behaviour could be understood as rational and that it was informed by the particular needs and desires of the person in question. Individual differences were being studied for the first time in Western post-Enlightenment culture, paving the way for a theory of economics which used concepts of rationality and individual preferences. <11an>limit:2;categories:jobs|courses|conferences|Professor;disciplines:Politics|Economic Systems (JEL P)|Economic History (JEL N)|Economic Thought & Methodology (JEL B)</11an> Key players in the fields The most prominent figure in the history of Marxian economics is Karl Marx, obviously enough. His contemporary, the philosopher Friedrich Engels, was also a formative influence on the economic critiques of capitalism, contributing to Marx's books. Another key figure from just before their time is Georg Hegel, a philosopher whose method of dialectics was used by Marx to understand the relation of society and individuals. However, Marxian economics is not merely a historical field. Modern-day thinkers still make use of Marxist insights to understand economics. This approach tends to create some confusion, as the public tends to assume that anyone discussing Marxian economics is themselves a Marxist, and that Marxism is synonymous with communism – and a totalitarian communism at that. In fact, Marxian economics is a tool used by many economists who may or may not consider themselves politically Marxist as a way to understand economics under capitalism. An important related school of thought was the neo-Marxian economists who came to prominence in the 1970s and 1980s, particularly those writing in the journal Monthly Review, who used techniques of neoclassical economics such as game theory and mathematical modelling to examine Marxist concepts of exploitation or conflict between classes. Neoclassical economics developed from the classical economics of the 18th and 19th centuries, including the work of Smith, which underwent a period known as the marginal revolution. Around the late 1800s, economic theorists began to examine concepts of utility and marginalism, referring respectively to the measuring of worth or value on an individual basis and the discrepancy between the values of the same goods or service to different individuals. This approach was influenced by philosophy also, and in particular by Jeremy Bentham's concept of utilitarianism which sought to maximise the happiness of as many people as possible. The ideas of what created happiness for any particular person – which came to be described in the concept of utility – was important for both ethical and economic theories. After this initial period of development of neoclassical thought, the school was refined in the 1930s by two key figures, Joan Robinson and Edward H. Chamberlin, who introduced the concept of imperfect competition. This describes certain situations in which the free market is not optimised, for example due to one company holding a monopoly. Further refinements to the school were made through the 1970s with the development of econometrics, a field which applied statistical models to economics, which was used to measure the changes in the price of goods and services. This lead to the formation of the field of macroeconomics, which studied economic systems as a whole. Eventually, neoclassical microeconomics and Keynesian macroeconomics were brought together to form the dominant paradigm in economics today. Key differences in outlook Marxian economics is to some extent based more in politics than in economics, in that it is a critique of our capitalist political system as well as our economic system. It has an emphasis on ethics and human rights, with concerns of fairness, justice, and equality. This has lead to a situation in which critics of Marxian economics, such as Ladislaus von Bortkiewicz, often focus on the problems with Marx's labour theory of value and argue that his theories are internally inconsistent – which is widely accepted by both sides as an accurate criticism. Pro-Marxist writers, however, respond that the details of the theories are not important – it is the moral imperative to correct power imbalances in society which is the real point of the approach. In this way, Marxist approaches generally are more based in ethics than in economics. However, even today the concept of power differentials between the individual and societal forces are used in understanding issues such how individuals interact with credit markets when constrained by their financial situations. Marx's work can be seen as an early precursor to microeconomics, with his theories anticipating questions that would later be answered through mathematics. Neoclassical economics, on the other hand, is more based in the principals of mathematics and is the major influence on the field we traditionally think of as economics. With the rise of econometrics, modern economic theories seek to explain the choices of individuals and the way that these choices affect and are affected by society more broadly. There is, therefore, less concern with moral questions of “ought”, and more focus on a descriptive understanding of “is”. However, the framework of an individual as a rational actor who makes choices to maximise their utility is in tension with the modern understanding of psychology, in which individuals frequently do not act purely rationally but are strongly swayed in their actions by the norms around them. A critique of the neoclassical approach is therefore that despite its claims to objectivity through mathematical analysis, it is in fact just as much of a theoretical tool as Marxian economics. In conclusion Despite their many differences, both Marxian and neoclassical economics are powerful theoretical tools for understanding the ways in which individuals interact with each other, power structures in society, and financial systems. While neoclassical economics is undoubtedly the major theoretical force in the study of economics today, there are still important insights from Marxian economics which can be used to explain various phenomena that are observed in society.
Economics is a broad and always developing subject, and there have been many schools of economic thought over the years. Today we'll be looking at two prominent schools that are relevant for modern economists, Marxian and neoclassical economics, to see how they differ and why they both continue to be of interest despite their many differences.
1. Academy of Management Journal Published by Academy of Management. For the publication of empirical work in the field of management, with particular focus on findings which contribute directly to the practice of management. AMJ includes empirical methods including qualitative, field, laboratory, quantitative, meta-analytic and mixed-method. The journal is published six times a year in February, April, June, August, October, and December. 2. Academy of Management Review Published by Academy of Management. For the publication of theoretical insights and developments, covering the conceptual aspects of management practice and with a particular focus on challenging the conventional wisdom of the field. All its articles 'extend theory in ways that develop testable knowledge-based claims' and are generally grounded are economics, psychology, sociology, or social psychology. AMR is published quarterly in January, April, July, and October. 3. Journal of International Business Studies Published by Springer. An interdisciplinary journal which covers the strategies of multinational enterprises and their interactions with other organisations and institutions. The journal is the official publication of the Academy of International Business and 'provides accessible, thought-provoking content for the general academic business community'. The Journal of International Business Studies is published nine times per year. 4. Journal of Management Published by Sage. Accepting both empirical and theoretical research articles, this journal covers all topics in the field of management, including business strategy and policy, organisational behaviour, human resource management, and organisational theory. It aims to publish pieces that have a high impact on the field of management in general, and is itself published eight times a year. Two Review Issues are also published in January and July which include the most widely read and cited articles. 5. Journal of Business Ethics Published by Springer. With a focus on ethical issues that are related to business, such as the moral aspects of systems of production, consumption, marketing, advertising, or social and economic accounting. Encourages a jargon-free style to promote dialogues between different fields. It's website states 'from its inception the journal has aimed to improve the human condition by providing a public forum for discussion and debate about ethical issues related to business.' Being less full of jargon (though not necessarily less academic), the journal is able to publish a whopping 28 issues per year. Not bad. <11an>limit:2;categories:Jobs|Programs|Conferences;disciplines:Business Economics (JEL M)</11an> 6. Review of Accounting Studies Published by Springer. For the publication of all aspects of research in the field of accounting, including theoretical, empirical, and experimental work. The journal website states that it 'is committed to the principle that distinctive scholarship is rigorous.' The quarterly journal was established in 1996 and year on year holds a good reputation and impact factor. 7. Accounting, Organizations and Society Published by Elsevier. A journal focused on the relationship between accounting and human behaviour, such as the importance of organisational structures and the way in which enterprises fit into the social and political environment. It states its aims as challenging and extending understanding of the 'roles of accounting and related emergent and calculative practices in the construction of economic and societal actors'. The development of markets and infrastructures is also key in how economic organisation and societal actors are influenced and therefore how they act. Accounting, Organizations and Society published eight times per year. 8. Administrative Science Quarterly Published by Sage. For the field of organisational studies, this journal publishes empirical and theoretical papers from both new researchers and established scholars, plus interdisciplinary work on organisational theory. It is managed by Cornell University and focuses on interdisciplinary work in organisation theory and has had a myriad of award-winning papers attached to it. As the name suggests, it is published four times a year. 9. Journal of Business and Economic Statistics Published by the American Statistical Association. A journal which publishes materials related to the statistical analysis of problems in economics, forecasting, business, and finance. It also welcomes general papers in statistics and econometrics which are related to the journal's topics of interest. It is interested in high-quality methodological content, 'excellent exposition', and empiricism is highly valued. The Journal of Business and Economic Statistics is published quarterly. 10. Entrepreneurship Theory and Practice Published by Wiley. For the field of entrepreneurship studies, this journal publishes conceptual and empirical articles which would be of interest to entrepreneurs as well as researchers, consultants, and policymakers. Article topics often focus on new venture creation, the behaviours of entrepreneurs, business management, sustainable entrepreneurship, and venture financing, among many others, with the aim of contributing to the advancement of entrepreneurship. It is published bimonthly, meaning every two months.
If you're in the field of business, whether you're a student, a researcher, or an entrepreneur, then you'll know how important it is to keep up to date with all the latest developments. To help you with this, we've compiled a list of the top academic journals in business, so you can know where to look for all the latest cutting-edge research.
Economics Blogging Tips From Leigh Caldwell
For other articles on economics, studying and finding jobs... ➲ Download the 2019 Handbook now! Introducing the esteemed Mr Leigh Caldwell…. If forced to pick, which blog article would you say you are most proud of? And, in addition to that, which has created the most ‘buzz’, not necessarily just in terms of reads, but in the conversations it started? I think my personal favourites [from the blog Knowing and Making] are the series of posts in which I lay out my core ideas about cognitive economics. Cognitive economics studies how individuals make economic decisions based on what’s going on in their heads - primarily through an individual’s imagination, empathy and beliefs. Looking at my series posts, such as, ‘Introducing System 3: How we use our imagination to make choices’,’ Neuroscience, psychology and economics: the evidence for System 3 (long)’ and 'Lassie died one night', would give a reader a great insight into cognitive economics. The blog that got the most attention, however, was probably this one, 'Behavioural economics: the Kylie Minogue of market research' - I think people in the market research industry found it amusing. Finally, I would like to hope that 'The gender pay gap on Euristica: an imaginary island' (accompanied by a video of my TEDx talk) has also had a positive impact. This one is for the economic-blog enthusiasts out there. Which fellow (rival?!) bloggers are you currently reading? And whose blogs would you recommend as essential for our readers to follow? I don't see them as rivals at all! My current favourites are Steve Randy Waldman's blog, Interfluidity: he doesn't post too often but when he does, his articles get straight to the heart of complicated, deep topics. Miles Kimball's blog, Confessions of a Supply-Side Liberal is also commendable, often containing insights into cognitive economics - my core focus. If you are looking for funny and penetrative, check out Chris Dillow's blog, Stumbling and Mumbling. His blog is aligned mostly to the left of British politics, but not dogmatically so. A further recommendation would be Frances Coppola's blog, Coppola Comment, which typically contains well-informed comment pieces on business and economics from the perspective of a (reformed) banker. Coppola's is also one of the few popular blogs by female economists - I really hope we'll see more in the future. Others female economist bloggers worth checking out are Carola Binder, Frances Woolley and Jodi Beggs. And finally, can you give, in under 100 words, a description of your blog, and tell the people why they should visit it? My blog, Knowing and Making, covers cognitive economics: a new field of economics that studies the mental and emotional outcomes that people pursue, not just the material and financial goods of traditional economic theory. I write about the latest findings in this field, its applications to business and politics, and related areas such as behavioural economics. Cognitive economics allows us to better understand human psychology, why we care about things that are all in our (or other people's) heads and how we make economic decisions based on these beliefs. If you think traditional economics is too limited, lacks an interdisciplinary approach or you want to find out more about events and conferences happening around cognitive economics, please come and have a look. For other pieces on economics, finding jobs, and studying... ➲ Download the 2019 Handbook now!
Responding to the success of our blogging article in our 2019 INOMICS Handbook – for those of you unacquainted, click here – the economists are back, answering more blog-oriented questions. This time around, we’ve taken a bit of a personal turn, quizzing our participants about their blogging successes; the concepts behind their writings; and their preferred reads. For those setting out on their economic journey, the following makes for essential reading
Compiled by over 80 of the world’s leading climate scientists - in an amazing feat of international cooperation - the report lays out the devastating consequences of allowing global warming to reach 2C above pre-industrial levels – the world’s survival, in any recognisable state, resting on a few fractions of a degree. In particular, the study emphasises the importance of keeping global temperatures below 1.5C, rather than 2C, listing the many frightening scenarios this would help stave off. Of the most dangerous, it's expected to: halve the number exposed to water scarcity; help prevent sea level rise that would otherwise obliterate low-coastal regions; and significantly reduce the risk of extreme weather events. Time, the report reinforces throughout, is now scarce, and terrifyingly, the point of no return is drawing close. To limit warming to just 1.5C, the transformation of economies, worldwide, must begin now. How do we get there? Regrettably, moral arguments – ‘we must preserve the world for future generations, etc.’ - have often failed to engage the masses; even when some of the world’s most precious places are imperilled. This general inertia has various sources, from the almost incomprehensible scale of the impending crisis, and its amorphous nature, to, from a business perspective, the perceived costliness of taking action. Often, unless one is on the absolute front line of climate deterioration, the typical response is a simple shrug of the shoulders, followed by a murmuring about enjoying the warmer weather. To be clear, this is not to say that moral arguments should be abandoned, they shouldn’t. Indeed, they should constantly be reinforced, repeated, and reiterated. It is rather that additional, equally strident means of persuasion also be adopted. Increasingly, given the rapid technological advancement in renewables, the economic argument is now looking a particularly sound one. The economic argument As put by Adnan Amin, the Director General of the International Renewable Energy Agency (IRENA), turning to renewables for new power generation 'is not simply an environmentally conscious decision, it is now – overwhelmingly – a smart economic one'. The cost of renewable energy, already competitive in many regions and industries, is expected to outcompete fossil fuels as a source of electricity in almost all markets by 2020 - a prediction based on the current trajectory of investment and, thus, easily improved upon. Earlier this year, British economists published a paper in the journal Annual Review of Environment and Resources that examined, in detail, the funding of renewables. It concluded that over the course of this century investment would only need to be 50% higher that it is currently to limit warming to 1.5C instead of 2C. Nowhere near the increase often presumed. And yet, many governments are still to make the required stand. Because of its marginal and normally short-term cost benefits, countries like Pakistan, Egypt, Indonesia, Philippines, and Vietnam continue to invest, sometimes heavily, in coal-fired plants. Even Germany, once heralded as a leading force in the fight against climate change, has invested in new coal-fired plants over the last decade, and is now preparing the clearing of the ancient Hambacher forest to allow for coal surface mining. Japan, too, is high-profile offender, having made huge commitments to coal since the disaster at Fukushima and the turn away from nuclear. In total, it is estimated that the coal-fired plants across the world, both existing and planned, will emit 330 gigatonnes of CO2 over their collective economic lifetime. Alone, this would exhaust almost the whole available carbon budget for the 1.5C scenario, begging the question: how then do we veer away from fossil fuel usage? A carbon tax Well, first of all, global leaders must take responsibility and start listening to the experts, whose voices are increasingly unanimous. The works of economist and recent Nobel Laureate, William Nordhaus, would be a good start. For many years, he has been a very public advocate of a global carbon tax. The policy, however, requires popularity and legitimacy to be implemented, which is, as of yet, still lacking. For politicians, therefore, the policy proposal's 'packaging' is of vital importance. This needn't be too difficult and could be presented like the following. The introduction of a carbon tax, it should be emphasised, would create a feedback loop - a snowball effect of falling energy prices. The revenue the tax generates could be funnelled towards the research and development of zero-carbon alternatives, which would see their already competitive costs reduce and their efficiency increase. This, in turn, would further de-incentivise the use of coal-derived energy, and as a corollary, encourage greater investment in renewables - in effect, closing the circle. Additionally, increased revenue could allow for the reduction of unpopular taxes, or be injected into public services - historically, two effective vote winners. Acknowledging this need for new global policies, the directors of the Potsdam Institute for Climate Impact Research have looked into carbon taxation in more detail, suggesting it be set at €30 per tonne of C02 (currently, 75% of carbon emissions are priced at just €10). This is believed to be the threshold that would render investment in coal-fired plants unprofitable. The spike in the price of carbon would proliferate the use of electric cars - boosting jobs in an already expanding sector - and accelerate the phasing out of the internal combustion engine. Going forward Support for a global carbon tax is widespread, even reaching global financial institutions. Only recently, the World Bank released a statement declaring: ‘carbon pricing represents a simple, fair and efficient policy option to address climate change’. Its clarity, it concluded, enables businesses to ‘manage risks, plan their low-carbon investments, and drive innovation’. In December, world leaders will descend on Katowice, Poland, in a follow-up to the Paris agreement in 2015. There, guidelines will be drawn up as to how the targets set in Paris will be met. Any chance of success - and they currently look slim - will necessitate the rolling out of extensive and aggressive carbon taxes. For such an initiative to gain legitimacy, people have to become familiarised with the idea - the conversation discussing its merits, therefore, needs to start now. Image Credit: Shutterstock (licensed image - copyright)
Climate change is back on the front pages of the world’s press – belatedly. Its return is thanks to the landmark IPCC report, published in October 2018, which has served as a brutal reminder of the dystopian future that awaits humankind if radical policy change is not enacted immediately.
Public Economics & Economic Policy (JEL H)
Economic Development, Innovation and Growth (JEL O)
Agricultural and Environmental Economics (JEL Q)
Nobel Prize in Economics 2018 - The Winners
All this talk of awards got you feeling inspired? Well, check out all the latest academic opportunities in the field of economics here! William Nordhaus Outside of a commitment to long-term macroeconomic analysis, the pair’s research is actually very different. Yale economist Nordhaus is commonly seen as a pioneer in environmental economics. Since the first murmurings of climate change in the 1970s, he has warned governments of the dangers of global warming and explained how their economic models are contributing factors. As a prolific researcher, he has produced multiple models designed to alleviate these damaging effects, the best known of which - his Dynamic Integrated Climate-Economy (DICE) model - was adopted by the US Environmental Protection Agency, and has been used to measure the impact of climate policy interventions. In more recent years, he has become a public and very vocal advocate for a universally imposed carbon tax as the best means of tackling greenhouse gas emissions. Paul Romer Romer’s research has promoted the so-called ‘endogenous growth theory’, which posits that countries can ensure economic growth through a focus on supply-side measures, i.e. investments in human capital, innovation, and knowledge. Further, he has argued that technological change can be induced by appropriate state intervention, specifically, in the form of R&D tax credits and patent regulation. Politically minded Brits may remember Gordon Brown being roundly mocked following a speech, co-written with Ed Balls, in which he mentioned ‘post neo-classical endogenous growth theory’. In words now immortal, Michael Heseltine disparagingly responded to it by saying: ‘it wasn’t Brown’s, it was Balls’. Oh Michael, how times have changed. Looking forward In accepting the award, both economists looked beyond the precariousness of the current moment and remained optimistic about the future. Acknowledging the Trump administration's climate change scepticism, Nordhaus did concede that the US faces ‘a difficult period’. Nonetheless, he was unerring in his confidence that the country is sufficiently equipped to see it through. Equally hopeful, Romer said he believed the prize’s announcement would reinforce the message that ‘people are capable of amazing things when they set about doing something’. With positivity so conspicuously absent from recent public discourse, it was refreshing to hear it from two experts whose fields offer so much opportunity for pessimism. In tackling both inequality and climate change, it is exactly the mentality we need to harness.
The announcement of the Nobel Prize in Economics 2018 could not have been timed better. It took place just 24 hours after the release of the Intergovernmental Panel on Climate Change’s (IPCC) stark warning that only 12 years now remain for global warming to be kept to a minimum of 1.5C, beyond which catastrophe looms. Rather appropriately, considering the admonishment, the gong was jointly awarded to Americans William Nordhaus and Paul Romer for their research into, as put by Swedish Academy, two of the most ‘basic and pressing’ economic issues of our time: ‘long-term sustainable growth and the welfare of the world’s population’.
Macroeconomics and Monetary Economics (JEL E)
Economics Blogging Tips From Miles Kimball
Other articles on economics, studying and finding jobs... ➲ Download the 2019 Handbook now! Introducing the esteemed Mr Miles Kimball…. If forced to pick, which blog article would you say you are most proud of? And, in addition to that, which has created the most ‘buzz’, not necessarily just in terms of reads, but in the conversations it started? If I consider what I have written on Quartz as an extension of my blog then the first piece I wrote on negative interest rate policy, "How Subordinating Paper Currency to Electronic Money Can End Recessions and End Inflation", is up there. The piece represents a whole area of research and activism that I am very proud of. You can see how much intellectual effort this led to in all the links on my bibliographic post, "How and Why to Eliminate the Zero Lower Bound: A Reader’s Guide". The argument made here is that if we make vigorous use of negative interest rates, we never have to have a repeat of the Great Recession, and we can avoid secular stagnation. By far the most buzz I have ever had for anything is from the piece I wrote with Noah Smith about math education: "There's One Key Difference Between Kids Who Excel at Math and Those Who Don't". Our message there is "You too can do math." In our society we expect almost everyone to be able to learn to read. We should have a similar can-do attitude toward learning math. Of things that have never appeared on Quartz, let me point to "On the Great Recession" as a blog post I am proud of. More recently, the blogging I have done on obesity has gotten a lot of buzz and engendered a lot of discussion. Going simply on page view data alone, the most popular post on my blog is: "John Stuart Mill's Brief for Freedom of Speech". Such is its popularity it shows up as the second hit if you google John Stuart Mill freedom of speech. Finally, I also have one blog post that successfully popularized a new word. If you google "teleotheism" you will get to my post "Teleotheism and the Purpose of Life" - check it out. This one is for the economic-blog enthusiasts out there. Which fellow (rival?!) bloggers are you currently reading? And whose blogs would you recommend as essential for our readers to follow? I am very proud to be able to claim Noah Smith as my PhD student. He has a constant flow of incisive insights, well expressed and certainly worth a peruse. Tyler Cowen, too, is an excellent writer and is doing a great service as an aggregator. Brad DeLong is very impressive when he puts on his history-of-thought hat, and I think John Cochrane is the smartest right-wing economist currently taking a big role as a blogger and public intellectual. Finally, for those interested in monetary systems, I recommend JP Koning, he is not to be missed. And lastly, can you give, in under 100 words, a description of your blog, and tell the people why they should visit it? Readers of "Confessions of a Supply-Side Liberal" will find a wide range of topics, centered around trying to make the world a better place, whether through better monetary policy, better financial policy, more honest science, more freedom, encouraging more respect for others as human beings, thinking bigger about the long-run future, or fighting the rise of obesity that is killing and maiming so many people around the world. I hope especially to raise the sights of young economists beyond narrow career success. I also hope I have something on my blog for almost anyone, economist or not.
Responding to the success of our blogging article in 2018r’s INOMICS Handbook – for those of you unacquainted, click here – the economists are back, answering more blog-oriented questions. This time around, we’ve taken a bit of a personal turn, quizzing our participants about their blogging successes; the concepts behind their writings; and their preferred reads. For those setting out on their economic journey, the following makes for essential reading.
As in previous years, around a quarter of our survey’s participants were female. However, because this edition is our largest, in terms of respondents, to date, the actual number increased on last year, totalling 586. The representation of women according to the level of seniority varies significantly, with women overrepresented at junior-level and midlevel positions within academia. Worryingly, senior-level women are underrepresented in both academia and the private sector – the trend exhibited clearly in both graphs above. This indicates the existence of a “glass ceiling” that makes it disproportionately difficult for female economists to reach senior level positions. There is also a salary disparity between male and female economists that, as the graph above shows, increases with seniority. While at junior-level discrepancies in pay are around $6,000 and $3,000 in academia and the private sector respectively, at senior-level this increases to $22,000 and $28,000. In percentage terms, this equates to men receiving 27% and 34% higher salaries – a shameful gulf. Evidently then, even when the 'glass ceiling' of job accessibility is circumvented, females often then encounter a 'salary ceiling' - quite obviously, the field of economics has much to do to achieve salary equality across the genders. It is, for this reason, we believe studies like our Salary Report are essential; publicising and exposing retrograde trends, and beginning conversations that will eventually tackle such flagrant injustice. ➲ Download the full Salary Report here! There will be more analysis of the Salary Report’s findings in the upcoming weeks, keep an eye on the INOMICS insights section for future instalments. Additionally, for career opportunities and job listings in business, finance, and economics, take a look at our jobs section. It has all that you will need to take that next big step!
The following is an analysis of data taken from the INOMICS Salary Report 2018 - downloadable for registered users here. Specifically, it looks at the representation and average salaries of both men and women, across all levels of seniority, in academia and the private sector. It is the 5th instalment in a series of insights handling the Report’s findings, and the first that seeks analysis through the prism of gender. The first four can be found in our insights section.
Economics Blogging Tips From John H. Cochrane
For other articles on economics, studying and finding jobs... ➲ Download the 2019 Handbook now! Introducing the esteemed Mr John Cochrane…. If forced to pick, which blog article would you say you are most proud of? And, in addition to that, which has created the most ‘buzz’, not necessarily just in terms of reads, but in the conversations it started? The ones I am most proud of are the longer form essays that introduce some relatively new ideas, or explain research in (I hope) an accessible way. The series on neo-Fisherism is perhaps the best example. It was great as a two-way conversation. I wrote the blog posts as I was wrestling with the ideas -- theory and fact took me far beyond my own comfort zone -- and the back and forth is provided with commenters, other blogs, and even academic papers clarified the ideas for all of us. (I now actually have citations to the blog from academic papers!) The "stock gyrations" is a recent example of this kind of writing, though in this case an old idea rather than a new one. The series on the Fama vs Shiller Nobel prizes was pretty good, and I learned a lot about basic philosophy of science differences in writing it. The blog gives, I think, far more widespread readership of essays I write that might otherwise get buried by being published in somewhat small circulation outlets. "Rule of law in the regulatory state" "Towards a run-free financial system" "how and why we care about inequality" "trade and immigration" and so forth. As for buzz, I'm happiest when I see the blog cited in academic articles, or when a serious blog discussion happens, say between myself, Steve Williamson, Dave Henderson, Alex Tabarrok, Tyler Cowen, Miles Kimball and so forth. I must admit though I got a lot of initial buzz back when Paul Krugman and Brad DeLong had a habit of writing that I am stupid, corrupt, an idiot, and so forth, at least when Paul finally started actually putting links into the things he was making fun of. They seem to ignore me these days, but being in the Paul-Krugman-writes-you're-an-idiot club actually gave me a lot of credibility. However, a blog post lasts about two weeks. A tweet lasts 5 minutes, an op-ed lasts a week, an essay lasts maybe 6 months, an average academic article lasts a few years, and a really good academic article lasts 10 years. This one is for the economic-blog enthusiasts out there. Which fellow (rival?!) bloggers are you currently reading? And whose blogs would you recommend as essential for our readers to follow? I read marginal revolution every day, the links are great. Economists view (Mark Thomas) has a comprehensive set of daily links, even to blogs that annoy the heck out of me. Econlog (Bryan Caplan, David Henderson, Alberto Mingardi, and Scott Sumner), Supply-side liberal (Miles Kimball), and Econbrowser (James Hamilton) are all good. But…. my advice to young academics, is ration yourself! Don't spend the whole day on the internet. Once you've read a few blogs, and the WSJ, NYT, or FT editorial page, get to work! And lastly, can you give, in under 100 words, a description of your blog, and tell the people why they should visit it? This is a blog of news, views, and commentary, from a humorous free-market point of view. After one too many rants at the dinner table, my kids called me "the grumpy economist," and hence this blog and its title. I'm not really grumpy by the way.
Responding to the success of our blogging article in this year’s INOMICS Handbook – for those of you unacquainted, click here – the economists are back, answering more blog-oriented questions. This time around, we’ve taken a bit of a personal turn, quizzing our participants about their blogging successes; the concepts behind their writings; and their preferred reads. For those setting out on their economic journey, the following makes for essential reading.
1. Tax deductions Most people hate paying their taxes. Filling out forms and handing over a load of your money to the government is not what anyone wants to do, and if there's a chance to save money on taxes then most people are delighted with that. But not economists. They point out that tax dedications and tax loopholes create an unnecessarily complex system that benefits some more than others – and that benefits those who can afford accountants the most. Making a tax system too complicated increases the number of loopholes available and makes the system harder to manage and less fair. 2. Corporate income tax Conversely, most people think that corporations should pair their taxes in order to benefit everyone in society. But many economists disagree. They argue that corporations should be encouraged to keep their money and reinvest it into their business, not hand it over to the government. If governments want to tax rich people then they should raise the individual income tax rate on the highest earners, not add an extra tax on companies. 3. Untaxed carbon pollution Almost everyone agrees that climate change is a real and pressing problem, but there are many disagreements about how to combat it. One policy with only middling support is taxing carbon emissions so that companies have to pay for the pollutants that they produce. This policy is unpopular among business owners, but it has strong support from economists who argue that it makes economic sense to incentivise the cutting of carbon emissions through taxation. 4. Agricultural subsidies In both the EU and the US, as well as elsewhere in the world, governments pay massive amounts of money in the form of subsidies for the growing of particular agricultural crops. The idea is to safeguard an essential food supply, but in practice, the policy encourages the overuse of chemicals, the growing of only certain crops, and the dumping of large amounts of unused food. Many economists agree that subsidies should be discontinued. 5. Poor economics journalism Economics is not the easiest subject for the public to understand. Unfortunately, that means that the subject is frequently misconstrued and is blamed for various ills in society. This is not helped by articles in newspapers which perpetuate the idea that economics is incorrect or irrelevant because it is not “intuitive”. 6. Austrian Economics Austrian Economics is an esoteric school of economics which rejects mathematical modelling and empirical testing, instead using a narrative approach that critics say is not in any way based on the real world. The famous economist Paul Krugman described the school as having “the psychology of a cult” and the whole concept of doing economics without empiricism is rejected by the large majority of economists. 7. Fairtrade Fair Trade is a label that customers like because it allows them to make more informed choices when purchasing goods like coffee which have to be sourced from other countries where very low prices or labour exploitation may be common. Economists, however, are frequently critical of the initiative, arguing that the system is ineffective at raising payment or increasing quality of life for farmers and workers – instead, the extra money goes to middlemen in the supply chain. 8. Presents Gift giving during holiday seasons is one of those traditions that everyone enjoys – other than economists, apparently. Gift giving is not rational as any gift that you could give could easily replaced by cash which has a higher level of utility. So remember that when Christmas rolls around and you're trying to choose a present for the economist in your life. 9. Non-evidence-based economic policies Because economics is complex and predictions are hard to make, there is a perception among the public and policymakers that economists disagree about everything and that one policy is as good as another. But in fact there is broad consensus among economists on key issues like the effectiveness of stimulus packages or bank bailouts, and considerable scepticism over popular political ideas like the claim that tax cuts will boost the economy. One thing almost all economists agree on is that policy should be based as far as possible on sound evidence. Looking for a job in Economics, Finance or Business? Yes? Well cast a glance over our job section for all the latest job opportunities!
There are some surprising ways in which the opinions of economists diverge from most other people – and some things about which economists agree that they can't stand. Here are 9 things that economists hate:
With Britain's Brexit Negotiations in Flux, Let's Talk About No Deal
Then, just days later, when the dust had settled and the topography of the new cabinet revealed, it was suddenly the reverse that looked most likely - perhaps coherency in governmental policy was to be the result of the most recent tumult? Certainly, with Davis and Johnson gone, two prominent and highly-influential proponents of ‘hard-brexit’, a path had emerged - by no means free of obstacles, but visible nonetheless - for the hobbling government to stagger down in the direction of a ‘softer’, and judging by the polls, more popularly endorsed brand of withdrawal. Going Soft? These particular developments, triggered by the so-called ‘Chequers Agreement’, were fleetingly believed a breakthrough - finally, after two years the Prime Minister had formalised some kind of Brexit strategy. Even though there was no guarantee how those on the continent would respond - commentators were quick to point out that much of the proposal stood at odds with key tenets of EU legislation - the agreement represented a softening in position, a willingness for concession, and a concern for the mounting evidence suggesting disaster if negotiations were botched. No Deal in Sight Alas, rather predictably, the position held for little over a week before the government caved to the demands of the increasingly influential right-wing European Research Group. Most significantly, the compromise included an amendment to the ‘customs bill’, a part of the Chequers Agreement it was thought would lead to too close a relationship between Britain and the EU27, post-Brexit. Perceived a capitulation by many, these concessions have since been rounded on by all sides of the chamber. Peter Dowd, the shadow chief secretary to the Treasury, disdainfully summarised the collective mood to the Guardian: “It took two years for the prime minister to reach her Chequers deal, but only two days for it to fall apart”. With every passing day, as factions further divide and consolidate, it is becoming harder to see any Brexit plan carrying a parliamentary majority, whether it be the Norway model, Canada, Canada ++, or any of the other incarnations mooted. WTO rules on the horizon? For business, this uncertainty is worrisome, to say the least. With no coherent strategy in place, departing without a deal and trade reverting to World Trade Organisation (WTO) rules is now a real possibility. As reported by Reuters, in Germany business groups are already urging their members to prepare for the outcome, such is their fear of its potential disruption. WTO regulation, long an article of faith for hard brexiteers, is seen by many on the right as harmless, benevolent, and even, in some cases, an opportunity. The question often posed: given that it is the means by which the rest of the world trades with the EU, how bad could it really be? Rhetorically, to an ill-informed ear, this may sound almost convincing. However, under scrutiny, its exposed for what it really is. The first thing to point out is that Britain’s relationship with the EU is hugely different to other countries trading bilaterally with the bloc. Having been a member state for so long, Britain has naturally developed a far more intimate and complex relationship with the EU. As The Economist explains: ‘the EU accounts for 43% of Britain’s goods exports and half its imports’, and when also taking financial services into consideration - the sector making up 80% of the British economy - the reliance is shown to be even greater. With this in mind, it should be remembered that a Canada-model deal, mooted some months ago, was rejected on the premise that it imposed too great a restriction on mutual market access, thus making it economically dangerous. Shifting to WTO regulation, the Economist forecasts, would encourage similar hazards, only worse. And it is still celebrated? To return to the oft claimed, ‘well if everybody else is doing it, why can't we?’; well, on literal inspection this too quickly looks a duplicitous supposition. Most developed countries actually have trade agreements in place with the EU, encompassing customs co-operation and standards of goods, and are not on WTO regulation alone. Whilst looking into this, researcher James Hardy found that only handful of countries traded on a solely WTO footing, and the ones that do are almost uniformly developing countries. Not only is this a relatively clear indication that many find its terms of trade unsatisfactory, it also undermines influential pro-Brexit group leave.EU, which has been repeating, relentlessly, that 'if it’s good enough for Australia, America and Canada, it’s good enough for the UK”. As it turns out, this is at best misleading, and at worst plain untrue. The Warnings Closer to home, the Governor of the Bank of England, Mark Carney, has joined the chorus of concern, warning of the ‘big economic consequences’ of a no deal and adoption of WTO regulation, confessing it would have to be considered a ‘material event’ when deliberating future interest rates. His cautionary remarks have also coincided with a fall in wage growth in Britain, increase slipping to just 2.5% on Tuesday. If Carney’s intervention felt ominous, big business has been even more explicit in its condemnation. Bosses of both Airbus and BMW could not even guarantee the retention of production on British soil if Britain were to leave the negotiation table empty handed. Airbus, who employs 14,000 people at 25 sites in the UK, declared only last week that just departing the Single Market could prompt it to up sticks. Evidently, with jobs and livelihoods at stake it is imperative the no deal outcome is discussed, seriously and honestly. It is one of a number of Brexit scenarios whose comprehension is essential if Brits are to make an informed decision about their country's future. Much could still change, and at this point, Britain's future is anyone's guess. We'll be covering more topics related to Brexit soon, so check back to INOMICS.com soon for more.
The reporting of British politics for journalists has rarely been so onerous. Dramatic landscape shifts in the form of u-turns, resignations, and unexpected elections, are now so frequent the lifespan of articles, previously measured in days, are better predicted in hours - sometimes just a handful. Last week’s rapid-fire resignations of Brexit Secretary, David Davis, and Foreign Secretary, Boris Johnson, over their intransigence regarding Britain’s Brexit strategy epitomised this difficulty. Following the double salvo, it looked, albeit briefly, as though anything was possible: a vote of no confidence; a leadership election; maybe even a general election. All bets seemed off.
Browse our PhD listings for more opportunities This emergent brand of patriotism is just one in a long list of certainties the World Cup will be serving up; the menu year to year, comfortingly, rarely changing. That said, given the propensity of every nation to hugely inflate its own chances pre-tournament, each will be met with a familiar mixture of disbelief, outrage and eventually depression. The scenarios we still have to enjoy, in no given order, will include: an England exit (on penalties, naturally); a disappointing Argentina (and subsequent referendum on Messi’s psychological fortitude); and a plucky underdog, whose fearlessness steals the hearts of all neutrals, but whose hopes are cruelly dashed when knocked in the quarters - presumably by an offside goal inexplicably missed by VAR. And yet, despite knowing all this, we wait, as always, with bated breath. Recent History Regrettably, in recent years the host nation losing out financially has become almost as predictable as the above; this outcome though, the loss of billions of dollars of taxpayers’ money is less amusing, and its effects far longer lasting, than the odd England penalty miss… With Russia having committed a reported $11.6 billion for this year’s incarnation, questions have once again been swirling as to the financial viability of hosting football’s greatest prize. The widening economic consensus on the topic is that approaching hosting duties as a financial investment to be followed by commensurable returns is foolhardy, at best. Casting an economic eye over the experience of the last few hosts provides ample evidence to support this theory, undermining, in the process, the age-old maxim that economists are simply ‘bad sports’. The 2014 world cup in Brazil is perhaps the case in point. Four years on from what by footballing standards was a huge success, and the post-festa hangover is still being keenly felt. The Numbers According to the Harvard Business Review, the country’s preparations cost an estimated $11-14 billion dollars, a sizable chunk ($550 million) funding the construction of Brasilia’s Estadio Nacional – rather symbolically, now used as a bus parking lot. Put into context, such outgoings, if redirected, could have paid for the country’s annual social welfare bill twice over. Of course, comparisons of this kind are immaterial if the investment had given sufficient returns. Alas, until now this has not been the case. Rather, its economic impact is expected to be at it’s very - and most unlikely - best around $13 billion, while its lowest estimate stands at a paltry $3 billion. There are some very basic economic reasons for this shortfall, which, in addition to Brazil’s relative lack of pre-existing infrastructure, diminished from the outset the chances of the country turning a profit. The most obvious, and aforementioned, is the cost of sporting infrastructure – stadia do not come cheap. Even when constructed, maintenance costs can spiral, especially when, like in Brazil’s case, they cannot be used regularly enough post-tournament to cover the costs of their own upkeep. This, unfortunately, is also the enduring legacy of the 2010 World Cup in South Africa, where, as explained by Reuters, 9 out of the 10 stadiums built or renovated for the tournament – a process which made up a quarter of the overall budget – are now in the red, with overheads falling on often ‘cash-strapped’ municipalities. In some areas financial plight has been so severe, guilt-ridden officials have resorted to talking up the ‘non-tangible’ benefits the tournament afforded - not always the best consolation for those without basic social amenities. As a result, both Brazil and South Africa have experienced much of debate, conducted with some stridency, as to whether it would have been more humane to have simply invested directly in their respective communities most in need. A common counter to this has been that government spending tends to prompt a rise in Gross Domestic Product - a key indicator of national economic performance. However, this can often be unevenly felt and short-lived; the effects of little consequence to the median worker. In response to increasing global inequality, the OECD has recently put forward that emphasis is better placed on ‘inclusive growth’; spending that attempts to deliver economic growth whilst fostering widespread and sustained improvements to living standards. Sporting infrastructure is not conducive to this goal. Beyond the fact that a stadium is not integral to the fundamental well-being of the common man, they routinely take up scarce and highly sort after real estate. Boost to Tourism? A boost to tourism, one of the favoured arguments adopted by prospective hosts, also begins to look dubious under closer inspection. Yes, events of such magnitude attract huge numbers of fans for the period in which they run, but they also disrupt existing flows of holidaymakers, and in many cases put people off visiting for fear of overcrowding. Even when numbers do increase it may not lead to a ‘Pareto’ gain due to the associated costs from which the increase is procured. South Africa, again, provides a prime example. As the World Economic Forum explains, although failing to match the anticipated 450,000 tourists, South Africa did experience a ‘visitor spend increase of over a quarter’ during the World Cup period; this was, however, offset by the acquisition cost of an estimated $13,000 per visitor. Enough, as the forum points out, to have ‘paid the wages of the entire working population for a week’. Brazil too didn’t experience the boost to its tourism industry it had anticipated, and importantly, had been factored into its costing. Scholar, Mirele Matsuoka De Aragao, in his report on the ‘Economic Impact of the World Cup’, estimated that increased tourist revenue, in the time since, amounted to only 2.5% of the total governmental investment. And, the boost in the number of tourists lasted for only 3 years following the tournament’s close – both, particularly bleak figures. Despite the above, as damning an analysis as it may sound, the World Cup and similarly large-scale events like the Olympics can still be profitable, a prime example the London 2012 Olympics, which brought in revenues that exceeded $5 billion. Its success was attributed to a combination of meticulous planning and high-quality, pre-existing infrastructure. The Flip Side And yet, it should be remembered that assessment based solely on economic figures, growth and the like, only tells one side of the story. The events themselves create things immeasurable: memories, pride and unity, things that, when established in fractious settings can be of untold benefit. South Africa bears out this point. Having suffered the injustices of Apartheid rule for 46 years, that 91% of residents believed the World Cup had a unifying influence cannot be underplayed. Evidently, it is not always all about the money… Browse our job listings for more opportunities
With the world cup now over a week old, we have reached the moment when even those initially reluctant, those who decried it at its outset, give in to football frenzy and find themselves, at least twice a week, standing amid a crowd of similarly dressed strangers, screaming at 11 little men on a screen they can barely see. It is wholly inevitable, and few would disagree, thoroughly enjoyable.
Experts Talk: An Interview with Dr. Mark Thoma
For the second installment of the INOMICS series Experts Talk, we interviewed Dr. Mark Thoma, who teaches macro and time-series economics at the University of Oregon. Dr. Thoma also maintains the very popular fiscal policy blog Economist’s View (which is also hosted on the EconoMonitor), is a columnist for the Fiscal Times and has previously been a contributor to dozens of top publications including Forbes, The Economist and The New York Times. After earning your BA in economics and statistics you went directly on to earn your PhD in economics as well. What made you interested in the field initially and what motivated you to pursue an academic career as an economist? When I was in high school, the inflation problems of the 1970s were beginning. I remember asking my parents what caused inflation, and their answer was that they didn’t know. The inflation problems, the gas lines at service stations, and so on heightened my interest in these issues, and probably helped to lead me into monetary economics, one of my specialties. But there were other factors as well. When I took Economics 1, the instructor wrote on my final “you should major in economics” and that encouragement made a big difference. The course itself used a text called “The Economics of Social Issues” and I really liked the way economics gave us insight into those types of problems. I was good at math, so it seemed easy to me, and that helped too. I had worked in tractor stores in the small farming town I grew up in while in high school, and also in college, and I really didn’t like the 8-5 workday routine. It just didn’t suit me. The freedom that academics offered was much more attractive and that was a major reason I decided to pursue a Ph.D. My plan was to teach somewhere, take summers off, etc. and have lots of free time, but once I got to graduate school I realized I liked the research side of the discipline quite a bit. So, instead of having lots of leisure as I initially planned, I ended up in the “publish or perish” world where free time was a luxury. But I’m glad I pursued that route, and that I could teach Ph.D. courses. During graduate school I decided that I didn’t want to go to a place where there were only undergraduates, and you teach the same few courses again and again throughout your career. Teaching graduate courses allows you to continue to grow, to use math in all its glory to illustrate concepts, and so on. How has your perspective as an economist changed over the years in light of socio-political shifts in the United States? I embraced the economics is science view for many years, and believed that the profession as a whole embraced the idea that ideology had no place in the advancement of economics. However, in recent years as I’ve watched the reaction to rising inequality, issues involving social insurance, taxes, etc. I have become much more sympathetic to the idea that important elements and people within the profession are highly ideological. In a piece for the Fiscal Times, you state that alongside Thomas Piketty’s argument that capitalism breeds inequality, you’d argue that politics and policy have a large impact on the distribution of wealth as well. Are there major points on which your views diverge from Piketty’s? I am much more sympathetic to arguments that inequality arises from market failures that lead to a “mal-distribution” of income than Piketty. For example, when a firm has monopoly power, it affects how income is distributed – it no longer satisfies the idea that each individual should be entitled to the fruits of his or her own contribution to the production of goods and services that are valued in the marketplace. As for politics and policy, I believe that the accumulation of wealth arising from the mal-distribution of income has allowed the political process, and hence the rules, laws, and regulations that come from it, have been largely captured by those with the most economic power. Economic power leads to political power, and that tilts the scale in favor of those at the top of the income/wealth distribution. Piketty has similar worries, but as I noted above I believe I am more sympathetic to the idea that the concentration of wealth is due to market failures than he is. Do you think there will be a noticeable shift in the way economics is taught in light of the global recession and the notoriety of work like Piketty’s? I believe that there will be a shift in emphasis that brings theoretical issues about the distribution of income to the forefront (For example, is Piketty’s formula r-g that determines the distribution of income valid always and everywhere, and if not, what are the exceptions and how important are they? How is the formula derived?) But the tools and techniques known collectively as dynamic stochastic general equilibrium (DSGE) models will not change anytime soon. The tools will be applied to different questions, for example the connections between financial intermediation and real economic activity are being explored much more in depth than prior to the crisis, but the tools themselves will not change. It remains to be seen if DSGE modes are up to the task, and if not something will replace them, but for now the tools and techniques of DSGE models will be the primary mode of analysis. One more thing. It would be nice if economic history was emphasized more as a result of the Great Recession, but the amount that students have to learn to be competent at DSGE modeling, microeconomic models that provide the foundation of modern macro, econometric tests of those models, and all the math that goes along with it leave little room for economic history. The lack of knowledge about economic history was costly in the most recent economic crisis, and it will probably be similarly costly when the next one comes along, as it surely will. What inspired you to start your blog? I was disappointed in the way economic issues were being reported in the run-up to Bush’s reelection, particularly the often heard claim that tax cuts pay for themselves, and the reporting on social security privatization. My first reaction was to write several letters to the editor in the local paper, then three op-eds on economic issues, and one day in March of 2005 I started a blog on a whim (I had come across economics blogs in doing research for my first op-ed on social security). I didn’t expect it to ever be much more than a place to state my views, I hosted the pictures on a desktop server that could only handle ten connections at once, but somehow it caught on thanks in large part to Brad DeLong and Paul Krugman. You not only run a very well respected econ blog, you also contribute to The Fiscal Times and write guest pieces for many other top sites. How has blogging impacted your professional and/or personal life? It takes quite a bit of time each day to run the blog. I didn’t start it until my kids were all in college or beyond so I had lots of free time to do it and it didn’t impact my time with them. But it has crowded out some of the recreational things I did before it started, and it has made it much more difficult to conduct academic research. For that reason, I would not recommend it to graduate students, or professors still struggling with the tenure and promotion process. Some people can handle it, but for many it crowds out too much of the work that gets rewarded in academia. You’ve been a professor since 1985. What is one piece of key advice you give to students interested in pursuing a career in economics? Take all of the math that you can. Very few graduate students fail because they don’t understand the economics, it’s the technical requirements that are the stumbling blocks. What is your favorite course to teach? Has this changed over the years? When I was younger, my favorite course to teach was time-series econometrics. But as time has passed, I’ve come to like monetary theory and policy much more (at both the graduate and undergraduate levels). I like both the theory and the fact that it allows us to use the tools and techniques of monetary theory to examine important policy questions. In recent years, due to the financial crisis it has been really fun to teach, and students are very interested in understanding the Great Recession. If you could start over and pursue an entirely different career, would you do it? What would it be? It would be something involving math. I have always been really interested in physics, but I think I would end up in electrical engineering (which shares a lot of technical material with macroeconomics and time-series econometrics). I took a graduate level electrical engineering course on stochastic processes during my time as a graduate student, and really liked the material. If you had the chance to have dinner with three economists, living or dead, who would they be and why? Tough question. I would like to hear a debate between Milton Friedman and John Maynard Keynes on the role of monetary and fiscal policy in responding to recessions. I would also like a chance to ask Keynes how well modern version of Keynesian economics accord with his views. An historical figure such as Adam Smith, David Ricardo, Thomas Malthus, John Stuart Mill, Karl Marx, John Bates Clark, etc. would be an attractive third. It would be great to have Adam Smith, for example, participate in the debate between Friedman and Keynes over how and when the government should intervene to stabilize the economy or correct market failures. But I would also be tempted choose Paul Krugman. It would be a chance to thank him – as I’ve done in person with Brad DeLong already – for all he has done to make my blog so popular. Photo Credit: larspsyll
In this interview, Dr. Mark Thoma discusses his dislike for the 8 – 5 lifestyle, his lifelong love of math, the importance of economic history and why he’d like to have dinner with Milton Friedman, John Maynard Keynes and Adam Smith, among other topics.
The Economics of Christmas Songs: When to start playing Jingle Bell Rock?
Each year, it feels like it comes earlier. You find yourself humming along to ‘Jingle Bells’, or perhaps it’s ‘Feliz Navidad’, maybe even ‘Jingle Bell Rock’. Christmas is usually one of the most important retail periods of the year, and Christmas songs play an important role in boosting sales. Stores start to play Christmas music to remind us that the holiday season approaches, and that it’s time to start buying presents for loved ones. But the timing of when this happens is very, very important. Radio stations and streamer servers have also realised the potential of Christmas songs, and how crucial the timing is. These songs are a special breed – songs that people cringe at for 11 months of the year, but for a limited amount of time they become the most in-demand songs there are! Judging the right time to start playing holiday music is a careful decision. As this blog post on The Dow of Christmas Music argues, top Christmas songs have a market of millions of radio and streaming listeners, and are a ‘major source of ad and streaming revenue’. Recognising this, starting in the 1990s, a vast number of radio stations begin switching to a constant line-up of Christmas songs. This year, the first station made the move to Christmas songs on October 24th. It would seem that the trend is becoming earlier each year, and as this post demonstrates, Christmas song season is becoming gradually more and more data driven. It has also been argued in this blog post on Psychology Today, however, that Christmas music does not increase sales, but rather – it hurts them. So it would appear that (as always) there are arguments on both sides! Many claim that they don’t like Christmas songs – probably mostly economists. A 1993 paper in the American Economic Review on The Deadweight Loss of Christmas would seem to be a testament to a spoiltsport economics approach to Christmas. But it doesn’t have to be all bad – there are a lot of interesting takes on Christmas songs and the economics of Christmas. For example, this blog post on the INOMICS blog has a useful list of economic approaches to the festive holiday season. So, if you’re feeling the Christmas spirit and would like a distinctly economics take on Christmas songs, this post and this video are just a couple of examples of the myriad of funny economics Christmas songs and parodies available for the economics enthusiasts among us. And if you’re having trouble resisting the distractions of Christmas at work or while studying, have a look at our tips on staying motivated during the holiday season!
It happens every year. As you’re walking through a shopping centre, a store, or perhaps a supermarket, you hear a Christmas song, and you know it’s the beginning of the buying frenzy that leads up to Christmas.
2017 Nobel Prize in Economics awarded to Richard Thaler
Professor Thaler is currently the Charles R. Walgreen Distinguished Service Professor Of Behavioral Science And Economics at Chicago Booth, the University of Chicago School of Business, and has previously worked at the SC Johnson College of Business at Cornell University as well as acting as the co-director of the National Bureau of Economic Research Behavioral Economics Project since 1991. The Nobel prize was given to Professor Thaler for his foundational work in behavioural economics. He combined insights from the fields of economics and psychology to show how human psychology affects both individual decisions and market outcomes. His work in behavioural economics has been on three primary topics: limited rationality, social preferences, and lack of self-control. His research into the topic of limited rationality looked at how people make financial decisions, and why it is that people make decisions that seem to be against their best interest. For example, why do people choose to satisfy short-term cravings instead of working towards long-term goals? He found that people tend to create a simplified and separate account in their mind for each decision, and to make decisions based on that account rather than considering the larger consequences of any given decision. This work has lead to the development of what is termed the mental account theory, which has changed how economists think about the rationality of decision making. The second of Thaler's main topics is social preferences, and the concept of fairness in particular. The idea of fairness applies to economics in terms of what kind of pricing consumers find acceptable from businesses. For example, consumers tend to be accepting of price increases in goods which are due to rising costs of materials or manufacturing, but they are not accepting of price increases due to high demand. Consumers find it fair to raise prices if materials become more expensive, but if a company raises prices because demand is high, consumers see this as unfair and as taking advantage. Thaler and colleagues researched the ways in which concepts of fairness differ in different societies around the world. The third topic, lack of self-control, was analysed using the planner-doer model, which differentiates long-term planning from short-term action. Humans tend to default to the short-term doing reactions rather than long-term planning, however, it is possible to change this. Thaler coined the terming “nudging” to refer to the giving of small suggestions or interventions in order to encourage people to consider their long-term needs. For example, nudging people to save for their pensions by making the contributions automatically deducted from their income rather than something they have to actively set aside makes people save more consistently. This is the area for which Thaler is best known by the public, thanks to his popular book Nudge: Improving Decisions about Health, Wealth, and Happiness which explains how these concepts can be applied to social decision making. These three areas of study are not only important and socially relevant in their own right, but the combination of them also laid the foundation for the development of behavioural economics as a field. The bringing together of the disciplines of economics and psychology was driven by Professor Thaler's theories and his empirical findings, and it is for this foundational work in the field which he has been recognised by the Nobel committee. If you'd like to learn more about the Nobel prizes, then have a look at our post from last year about the 2016 Nobel Prize winners. Photo Credit: Flickr @Chatham House
The Nobel Prize for Economics, the most prestigious prize in the field, has been awarded this year to American economist Richard Thaler. The prize, fully titled The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was announced by The Royal Swedish Academy of Sciences and will be awarded in a ceremony in Stockholm in December.
One of the major advantages of Stata is that it is eminently portable. Its developers are committed to cross-platform compatibility and so Stata runs the same way on Windows, macOS, Unix, and Linux systems. All versions of Stata provide the full set of features and commands: there are no special add-ons or toolboxes. Five important features for getting started with Stata 1. The toolbar The Toolbar contains icons that allow you to open and save files, print results, control Logs, and manipulate windows. Some very important tools allow you to open the Do-File Editor, the Data Editor and the Data Browser. 2. Current working directory The cwd is the directory to which any files created in your Stata session will be saved. Likewise, if you try to open a file and give its name alone, it is assumed to reside in the cwd. If it is in another location, you must change the cwd [File >Change Working Directory] or qualify its name with the directory in which it resides. You generally will not want to locate or save files in the default cwd. A common strategy is to set up a directory for each project or task in a convenient location in the filesystem and change the cwd to that directory when working on that task. This can be automated in a do-file with the cd command. 3. Command panel As you’d expect, to execute a command in Stata, you type it into the Command Panel. Although traditionally a command-line driven package, recent versions of Stata contain a user-friendly graphical user interface (GUI). A major advantage of the GUI is that when you are using a new command, you can easily find out the correct syntax to use by viewing it in the command panel. 4. Do file The Do-File editor allows you to construct a file of Stata commands, or “do-file”, and execute it in whole or in part from the editor. A major advantage of a do file is that ability to quickly and effortlessly reproduce your analysis and results. 5. Adopath commands Another advantage of Stata’s command-line driven environment involves extensibility: the continual expansion of Stata’s capabilities. Only a small fraction of the commands you can use in Stata are built in. If a command is not built into the Stata kernel, Stata searches for it, meaning you can acquire additional user contributed Stata commands from a number of online sources. Stata’s capabilities thus extend far beyond the official, supported features described in the Stata manual to a vast array of additional tools. These tips are just a start, to gain a deeper understanding of the features of Stata we recommend attending an introductory course. For example, Timberlake’s Stata Fundamentals Online Course gives a complete introduction to Stata and is ideal for new users who want to get a head start and learn how to use the software efficiently. What’s more, with an online course you can learn from the comfort of your own home.
What is Stata? If you want to work in econometrics, chances are you’ll need to learn to use a statistical analysis package like Stata. Stata is one of the most widely used software packages to help students and researchers explore, summarise and analyse complicated datasets. The software is available in several different versions which differ mainly in the number of variables allowed in memory.
Econometrics, Statistics and Quantitative Methods (JEL C)
Standardizing the Data of Different Scales - Which Method to Use?
When you want to analyze this data to find patterns in it, you will often run a regression and look to compare the effect sizes (i.e., the coefficients) of each variable. But, before you compare effect sizes, you first need to make sure that your data variables are on the same scale so that they can be compared. Considering the example above, the effect of the two measures of reaction time on your dependent variable y would be comparable, as they are both measured in milliseconds. But how would you compare, say, the effect sizes of height and reaction time on y? To do this, you need to use a statistical technique called standardization. Confusingly, standardization can have several meanings, depending on the field. And to add to the confusion, others may refer to the same process as normalization, though we will introduce a separate definition for that. The general process we are talking about here (that normalization and standardization fall under) is the transforming of data of different types to the same scale so that their effects on the dependent variable y can be compared. Methods for standardizing data Standardization: calculating Z-score The first step in standardization is quantifying how much variance exists in your data. This is described by the standard deviation, which is calculated by working out the square root of the variance (the average of the squared deviations of each value from its average value). This will give you a number that represents variance, which you need for the next step. Once you know the mean and standard deviation of your data, you are ready to perform standardization. You calculate a z-score by subtracting the mean from each data point, and then dividing the difference by the standard deviation of the population. This means that each variable will have a mean of 0 and a standard deviation of 1, so you can compare your different variables meaningfully. Studentization However, economists never know the true population mean or variance (unless we have artificially generated the data set)! So, when you do this process of standardization, in most cases you will use your estimate of the standard deviation from your data in place of the true population standard deviation. This is called studentization. Note for advanced readers – standardization (and studentization) assume that your data is normally distributed, an assumption that must be checked. The z-score calculation yields transformed variables that are standard normal distributed with mean 0 and variance 1, but this only works if the normally distributed assumption is valid. Normalization Another option is to take your data points and adapt them so that they fall on a scale of 0 to 1. Confusingly, this is referred to as normalization, even though it is not related to the normal distribution. Some statistics programs can do this automatically for you. One big advantage of this method is that it lets you eyeball the effect sizes very easily, as it's intuitively obvious what the difference between a value of 0.6 and 0.8 is on a 0 to 1 scale, for example. The following formula shows how to normalize data: \begin{equation*} \mathit{X}_{\text{changed}}= \frac{\mathit{X}-\mathit{X}_{\text{min}}}{\mathit{X}_{\text{max}}-\mathit{X}_{\text{min}}} \end{equation*} However, scaling in this manner is sensitive to outliers. Depending on the method used, outliers may be dropped to prevent them from overly influencing interpretations of the other variables. This is an inefficient loss of data, so unless there is a strong reason for preferring the 0-1 scale, a z-score is generally sufficient for most purposes if the data is normally distributed. Note for advanced readers – removing outliers from data must be treated with caution. The reason why a data point is an outlier may be entirely valid, in which case removing the data point will cause your inference to be incorrect. This is a serious problem. However, if the data point is an outlier because of a data entry error or similar issue, it is safe to remove the data point. Check your outliers carefully before deciding how to handle them. Find out more To fully understand this topic and choose the right method for your data analysis, we recommend learning about the basics of statistics from an introductory textbook. INOMICS has also recommended several free online courses that you might find very helpful. If you’re ready to dive deep and get formally educated in economic statistics and other economics topics, check out our top program recommendations. Pro tip: you can filter the program listings for programs that include a statistics focus by selecting “Econometrics, Statistics and Quantitative Methods (JEL C)” and “Statistics” at the very bottom of the list. <11an>limit:3;categories:Master's Programs;disciplines:Econometrics, Statistics and Quantitative Methods (JEL C)</11an> You can also read up on papers by statisticians which cover these issues. Here are some references to get you started: - Everitt, B.S. Cluster Analysis. 1993. Third Edition. (New York and Toronto: Halsted Press, of John Wiley & Sons Inc.). - Gower, J. C. 1985. Measures of similarity, dissimilarity, and distance. Pages 397-405 in Encyclopedia of Statistical Sciences, Vol. 5. S. Kotz, N.L. Johnson, and C.B. Read, Editors. (New York: John Wiley and Sons). - Johnson, R.A., and D.W. Wichern. 1992. Applied Multivariate Statistical Analysis. 3rd Edition. (Englewood Cliffs, New Jersey: Prentice Hall). - Milligan, G. W., and M. C. Cooper. 1988. A study of standardization of variables in cluster analysis. Journal of Classification, 5, 181-204. - van Tongeren, O. F. R. 1995. Cluster Analysis. Pages 174-212 in: R. H. G. Jongman, C. J. F. ter Braak, and O. F. R. van Tongeren, Eds. Data Analysis in Landscape and Community Ecology. (Cambridge & New York: Cambridge University Press).
When you're doing data analysis, you might find yourself with a number of different variables to work with. For example, perhaps you have invited participants to your lab and run them through your experiment. You have collected data on variables such as the participant's age (in years), their height (in cm), their reaction time to a particular stimulus (in milliseconds), their reaction time to another stimulus (in milliseconds), and their rating of a preference (on a 1 – 10 scale).