In microeconomics it is assumed that firms aim to maximize profits. They can do this by reducing unit costs through economies of scale, and/or by growing big enough to push competing firms out of the market, thus reducing competitive price pressure on their revenues. Some firms seek to grow big quickly by taking over, merging, or coordinating activities with other firms. Such collaboration between firms is known as a “trust” and it can lead to a reduction in market competition with higher prices for consumers. The existence of a trust can also act as a barrier to entry, making it more difficult for smaller firms to participate in the market. Governments representing consumers and smaller firms may hence choose to intervene in the market with legislation against the trust, i.e. antitrust policies. Antitrust policies gained prominence through the (US American) Sherman Antitrust Act of 1890. This Act outlaws the formation of monopolies and other practices that restrict trade. One of the most famous antitrust cases is that of the Standard Oil Company founded by John D. Rockefeller. By the early 1900s, Standard Oil had grown both organically (by increasing its own sales) and inorganically (by purchasing competing firms as well as client and supplier firms) to control an estimated 90% of the US market for petroleum. In 1911 the US Supreme Court ruled that Standard Oil constituted an illegal monopoly. The Court concluded that Standard Oil had restrained trade through its dominance of the market, increasing prices, lowering output, and diminishing the quality of the oil traded. The Court ordered that Standard Oil be divided into 34 separate entities. National governments subsequently set up agencies to design and implement antitrust policies. Such agencies include the Federal Trade Commission (USA), the Competition and Markets Authority (UK) and the Federal Cartel Office (Bundeskartellamt, Germany). Antitrust policies are also enshrined in European law, through Articles 85 and 86 of the European Community Treaty of Rome and Articles 101 and 102 of the Treaty on the Functioning of the European Union. In addition to lower output and higher prices, having one firm dominate a market and restrict competition can cause a lack of innovation for the product or service and a reduction in the choice available to consumers. Such reasoning was used in the case against Microsoft in the late 1990s and early 2000s regarding its dominance of Operating Systems for personal computers which were restricting the use of software provided by competitor firms. The European Commission won the case and Microsoft was forced to pay substantial fines and to make its source codes available to other producers of software. The European Commission highlights cartels and the coordination of prices and sales between supposedly competing firms as “the most flagrant example of illegal conduct infringing Article 101”. A well-known case of price-fixing involved the common surcharges for fuel levied by British Airways and Virgin Atlantic for their long-haul flights between 2004 and 2006. Although both airlines profited from the scheme (through higher prices paid by passengers) the deal ultimately failed because there was an incentive for whistle-blowing: Virgin Atlantic reported the collusion to the UK Office of Fair Trading and only British Airways was fined for the illegal activity. Occasionally, governments contradict themselves due to the national and international dimensions of antitrust policies. While a national government can be keen to stimulate competition in its domestic market through policies that deter monopolies and cartels, it may also be under pressure to represent “national champion” firms that compete in international markets. For example, the French electricity provider EDF received state aid in the form of lower corporation tax at the time the European market for electricity was being liberalised, strengthening the firm’s ability to compete against other large European suppliers. However EDF was also accused of using its dominant position in the French market to reduce output and raise the price of electricity for French consumers. It should be noted that more competition is not always conducive to a better market for consumers. Intense price competition should lower prices but it can also reduce the quality of goods and services provided. So-called “natural” monopolies that are forced to break up in the name of antitrust simply for being big are not always substituted well. For example, a national mail firm charged with delivering mail is able to provide complete coverage of a country by compensating less profitable areas through its revenues from highly profitable areas. However if the firm is split and sold then profitable areas such as large cities with high population density will tend to see a better delivery service while remote areas can suffer due to a lack of profitability. A similar example is that of public-transport networks. Thus, in order to serve the consumer, good antitrust policies should be applied on a case-by-case basis. <11an>limit:2;categories:jobs|courses|conferences;disciplines:Law and Economics (JEL K)|Microeconomics (JEL D) </11an> Further reading Herbert Hovenkamp has written extensively on antitrust policies in the United States from both legal and economic perspectives. For an introduction and brief history of antitrust policies, see his article, “The Antitrust Movement and the Rise of Industrial Organization” (Texas Law Review, 1989). Good to know Antitrust policies are still very much a hot topic, particularly regarding big-tech firms such as Facebook, Alphabet (Google) and Amazon. These firms boast revenues that outstrip the Gross Domestic Product of some smaller nations and they wield political power on a global scale through their control of people’s personal data and the information that people receive. The international coordination of antitrust policies is a key challenge in today’s world.
An antitrust policy is a law or other government regulation that limits the dominance of large firms and promotes competition in the market.
Public Economics & Economic Policy (JEL H)
In competitive markets for consumer goods and services there are typically many producers selling the items and many consumers purchasing them. Participation in the free market is more attractive for producers, the higher the price at which they can sell their product. The quantity of the item offered on the market thus increases as the price increases and the supply curve is generally upward-sloping. Conversely, participation in the market is more attractive for consumers, the lower the price at which they can purchase the item. The quantity demanded thus increases as the price falls and the demand curve is generally downward-sloping. The market equilibrium, consisting of the item’s price p* and quantity q* bought and sold, is determined where supply meets demand, i.e. where the supply and demand curves cross. For lower quantities of the item than q*, consumers in the market would be willing to pay a higher price than p*. However in the equilibrium they are able to purchase and consume all q* of the item at price p* per unit. The difference between the higher prices they would have paid for the lower quantities and those lower quantities priced at p* is the consumer surplus. This is a gain for consumers in terms of the value that they attach to the item in excess of the price they pay for it. The consumer surplus is represented in the graph below by the area below the demand curve D stretching to price level p*. Figure 1: Depiction of consumer and producer surplus in a competitive market Similarly, for lower quantities of the item than q* producers in the market would be willing to accept a lower price than p*. This is because typically it’s cheaper to produce fewer units. However, in the equilibrium they are able to sell all q* of the item at price p* per unit. The difference between the lower prices they would have accepted for the lower quantities and those lower quantities priced at p* is the producer surplus. This is a gain for producers in terms of the money that they receive for the item in excess of the price at which they value it. The producer surplus is represented in the graph by the area above the supply curve S stretching to price level p*. The sizes of consumer surplus and producer surplus are determined by the relationship between the elasticities of supply and demand. Ceteris paribus, the more elastic demand is for an item, the flatter the demand curve and the smaller consumer surplus will be. Price-sensitive consumers do not tend to value items much more than the price they pay for them! Analogously, the more elastic supply of an item is, the flatter the supply curve and the smaller producer surplus will be. In a perfectly competitive market the supply curve is horizontal in the long run (supply is perfectly elastic) and producers make no profits; producer surplus then reduces to zero. Both consumer surplus and producer surplus are somewhat hidden in reality. A reservation price is the private information of the individual who keeps it in reserve. How much a consumer is willing to pay or how little a producer is willing to accept for an item will only be revealed if they actually exchange the item at those prices. Nevertheless, economic surpluses on both sides of the market can be estimated by observing consumers and producers joining and leaving the market over time, or by observing what happens in the market in response to various events such as major changes in markets for related items or government interventions. Indeed, estimates of consumer surplus and producer surplus are important for guiding policy: a government considering a change in the tax on an item will be interested in who will bear its main burden in terms of forgone surplus (consumers or producers), and in estimating how much of it they will cede to the exchequer (i.e. how high the tax can be set). Similarly, producers with market power will be interested in understanding consumer surplus in their markets and whether they can extract value from it through market segmentation and price discrimination. Occasionally, groups of consumers may also exert their power in numbers and negotiate lower prices with producers, effectively taking a cut from producer surplus. Further reading When new technologies or business models disrupt long standing markets, opportunities to find out how to calculate consumer and producer surplus are created! Economists Cohen, Hahn, Levitt, and Metcalfe collaborated with Jonathan Hall of Uber to estimate consumer surplus of US $2.9 billion in the market for taxi journeys while the UberX service was operating in 4 major US cities in 2015. Projected to the whole of the United States, consumer surplus in the taxi market may have been as high as $6.8 billion that year, or $1.60 consumer surplus for every $1 spent on taxi journeys. See “Using Big Data to Estimate Consumer Surplus: The Case of Uber” (National Bureau for Economic Research, Working Paper No. 22627, 2016). Good to know A form of consumer surplus may also develop after the purchase of some goods. It has been shown in economics experiments that individuals tend to attach personal value to objects after they have obtained them such that they are unwilling to exchange them for the same price at which they purchased them. This is known in the literature as the “endowment effect”. Think about it: how hard would it be for you to part with your favorite pair of shoes or that special jacket?
Consumer surplus is the gain made by consumers when they purchase an item at the competitive market price rather than the (highest) price that they would have been willing to pay for it. Analogously, producer surplus is the gain made by producers when they sell an item at the market price rather than the (lowest) price that they would also have accepted for it.
Similarly, governments often require funding beyond their tax revenues in order to commission large infrastructure projects or new services that are critical to the economy. Capital markets offer the opportunity for entrepreneurs and governments to be matched with individual and corporate investors in order to access the necessary capital. Capital markets are generally categorised into two groups: primary and secondary markets In a primary capital market, investors provide capital directly to investees, who issue a “security” (typically equity in the business, or a promise of repayment with interest) in exchange. Investors in primary capital markets tend to spend time getting to know the investee and exploring the proposed projects and ventures in detail to assess whether they can make a positive return. Examples of primary capital markets include fora where private-equity investors and providers of venture capital (also known as angel investors or venture capitalists) meet potential investees, initial public offerings (IPOs) where new stock in a company is issued to the public for the first time, as well as bond markets where firms and governments issue new debt securities to fund their spending. In a secondary capital market, a security that has already been issued in a primary market can be traded between investors. There is no need for direct contact between investors and the original investee/ issuer of the security. Public stock markets such as the New York Stock Exchange and the London Stock Exchange are examples of secondary capital markets. By their public nature, secondary capital markets offer access to very high numbers of traders and they tend to be more liquid than primary capital markets. The prices of securities traded in secondary capital markets are transparent, guaranteeing fair deals to buyers and sellers. In theory, prices of securities in a capital market reflect all available information about the corresponding projects and ventures. It follows that there is no room for arbitrage because no one would buy a security for more than its fair value, nor would they sell it for less than its fair value. This idea is known as the “efficient-market hypothesis” and the assumption of its validity underpins much economic thinking. However, there are some obvious flaws to it in practice: there is a real cost to obtaining and processing information and this cost can differ among market participants. Indeed, the way that information is interpreted differs from individual to individual so the notion that the price of a security must be the same for everyone is also doubtful. A sub-field of behavioral economics, behavioral finance has gained traction since the global financial crisis of 2007-2009 when traditional economics failed to predict the market crash. In behavioral finance, insights from psychology are combined with economic modeling to study what happens in capital markets when their participants are not perfectly rational and instead react to information according to their emotions. An important example here is the phenomenon of “herd instinct”, where investors have been shown simply to follow what they think others are doing rather than processing information independently for themselves. Further reading Eugene Fama is one of three economists to have won the Nobel Prize in 2013 for empirical analysis of asset prices. In his fundamental analysis, see this particular formulation of the efficient-market hypothesis in “Efficient Capital Markets: A Review of Theory and Empirical Work” (Journal of Finance, 1970). Good to know Most transactions in capital markets today are performed by computers and there is a very high degree of automation. Exchange-traded funds (or ETFs), which are financial instruments that automatically track stock-market indices, have emerged as a cheap and increasingly popular alternative to traditional stock-broking for trading transactions. Yet, despite their computing power, machines are only ever as good as their makers: a small human error in the programming can quickly lead to so-called “flash crashes” and a lot of lost money!
In capital markets, capital is exchanged between investors (who supply it from their assets) and investees (who need it to fund projects and ventures). The investment horizon is usually at least one year. At its core, economics is about the efficient allocation of scarce resources. If the initial division of resources in an economy is not efficient then the individuals within that economy can be made better off through a reallocation. Capital markets exist to smooth the process of reallocation. Indeed, without capital markets, many investments that help an economy to grow would not take place. Entrepreneurs with their bright ideas need access to finance in order to turn them into reality.
Browse our academic job listings The problem of disciplines Inter-disciplinary dating remains a largely theoretical proposition in academia, and that is to say nothing of the taboo against undergraduates dating postgraduates - or vice versa. Whereas the first of these can be termed horizontal dating, and carries casual social penalties, the second, vertical dating, is often viewed with much more serious contempt. Indeed, for all of academia’s professed liberalism, there remains a severely entrenched elitist platform upon which status and seniority carry significant weight. As in every social and professional situation, groups quickly form, select cliques are established and patterns followed, until soon enough you find yourself surrounded solely by people on the same course and level of study as yourself. As noted above, it is a curious thing given that the university environment should provide a warm bed - no pun intended - for open-minded dating. Clearly, though, this is rarely the case. What becomes apparent when it comes to dating in academia is that it would be helpful if short manuals on dating etiquette and rules were handed out during freshers/orientation week, as these would provide a basic layout of the hostile battlefield. And yes, the library is as hostile a terrain as you will ever come across. Just try asking somebody out in a whispering voice, or try following somebody around the bookshelf corridors without appearing like a stalker, and you will know what we mean. Libraries aside, the whole set-up seems unfriendly. Even career academics seem not to have mastered the art, often electing to stay within the safe confines of their chosen academic field. Perhaps - dare it be said? - the longer you remain in academia the greater the chances are that your dating behaviour fossilises within your disciplinary speciality. In fact, the ever-increasing wave of students and teachers turning to online dating could be a result of the unfriendly character of dating in academia. In part this can be understood and explained by the nature of academic speciality. After all, how many conversation convergences can there be between a physics PhD and economics Bachelor? That is not to say, though, that it is impossible for them to converse or to find common ground, or that people of common study areas should always stick together. It is just that it sure does help in an opening conversation if there is an easy point of convergence. Hope? Even though horizontal dating is strategically difficult and vertical dating is frowned upon, that is not to say either is entirely impossible - but it's no coincidence that many of those long-term couples who say that their love first blossomed during their university years shared the same disciplinary field. So here, in summary, are the two fundamental principals to dating in academia: 1. If you want to make your dating life both easier and more successful, don’t stray far from your chosen academic field. 2. Never try to begin a romantic adventure in the library.
Dating in academia is riddled with potholes, the most immediate of which is do not stray far from your academic discipline. Curious indeed considering that the academic world is meant to be populated by an abundance of young and energetic minds from a variety of different cultures, races and ethnicities, all of whom are hungry for new information and experiences. One would think that such an environment would provide the perfect dating terrain, right? Wrong!
Top Recruiting Trends You Need to Know in 2020
But, before you go about implementing your recruitment strategy, there are certain trends, approaches and developments you should consider to ensure maximum success. The way recruitment works has changed significantly in recent years. In fact, research suggests that in today's world, the recruitment process is 90% candidate-driven. That said, to reach out and connect with the right talent, evolving your approach to recruitment is essential. Apart from providing niche career hubs to recruit the best researchers, professionals and students, at 11 Academia Networks (particularly INOMICS as our flagship brand), we think about helping universities, research centers, private companies and think tanks design their recruitment strategies. To help you get 2020 off to the best possible start, here are the recruitment trends you should know. Recruitment marketing By focusing on your recruitment marketing and inbound recruiting, you’ll be able to promote your brand values, services, offerings and USPs to a targeting segment of prospective employees, attracting them to your institution. Investing in this area will not only help bring the right talent to you but it will ensure a steady flow of engaged candidates on an ongoing basis. Employer branding 86% of HR professionals feel that recruitment is becoming more like marketing. Expanding on our previous point, to entice the right candidates to your organization and showcase your value, focusing on your employer branding efforts will be essential to success in 2020. Additionally, to prioritise candidate experience will help you create a good image as company as well as attract the best talent. According to Talent Board, during the last 9 year over 1,000 organisations have worked harder to define clear processes to improve the candidate experience. According to Deloitte, 87% of candidates say that a great recruitment experience can change their mind about a company they have once doubted. If you want to learn more about candidate experience and journey, check here the complete report of Deloitte. Moreover, if you are ready to start boosting your employer branding activities, here we share with you digital tools that you could use to optimize the process. We offer multiple online products to help you boost your employer branding strategy and build reputation among the best academics and professionals online. If you are interested in more information, please contact us at info@11academianetworks.com. If you are a INOMICS Customer, please contact us at info@inomics.com. Talent pools As the digital world continues to evolve, active talent pools will become all the more valuable. Essentially, a talent pool is a platform or database where recruiters and HR Managers store all of the details of their top-performing candidates. By adopting this approach in an intuitive, organized an accessible way, when you need a specific type of talent to complete a project or fill a vacancy, you can filter through your talent pool and pick the best person for the job with ease, enjoying the results you deserve in the process. Social recruiting Studies suggest that, in the near future, 94% of recruiters plan to use social media for recruitment. Moreover, of the current businesses using social media for recruitment, 49% confirm that they've seen an increase in candidate compatibility. While job seekers use internet and social media as a marketing medium, it allows companies and recruiters to view candidates, their portfolios, microsites and encourage the best to apply to open positions. By using social media to proactively search for candidates that match your needs and sparking up meaningful dialogues with them, you will boost your chances of finding the right candidate for the job significantly. If you are looking to connect to top economists worldwide, INOMICS has more than 90,000 fans in social media ready to explore job opportunities at your institution. If you want to access our pool of economists, please contact us at info@inomics.com and ask for our social media campaign options. Diversity Recruitment According to our previous article about diversity recruitment and multicultural talent, diversity is one of the best ways to ensure the success of an institution. "With today’s globalized markets, it is necessary to understand a different set of cultures, and their associated behaviors, needs, and demands, in order to develop appropriate products and services. The most valuable market insight can come from employees who have a cultural background comparable to those of your target groups." Additionally, the report created by McKinsey & Company in 2015 revealed that institutions with a greater diversity were 35% more likely to have a better return on investment than their peers in the same industry with lower diversity quotas. Collaborative hiring/ Employee referrals According to Careerbuilder Ebook on Referral Madness, 82% of employers have rated employee referrals as the best recruitment channels based on return on investment metrics. Your own employees are the best proof and advocates of your employer brand. Collaborative hiring is a recruitment method in which both HR teams and those from other departments work in unison to source, screen and hire talent. Collaborative hiring is significant as it improves the quality of new hires by addressing the broader needs of the business and those working within it. As a result of this more panoramic approach to hiring, turnover rates tend to drop down which, in turn, positively affects the overall recruitment and hiring strategy. And if you’re looking to source new a host of new candidates in 2020, this is certainly a method you should explore. and last but not least Soft Skills: Looking beyond the traditional set of skills Nowadays it is a big challenge to find candidates who fit culturally and skill-wise to the institutions. Hence more and more organisations are looking beyond the traditional standards of their industry and hiring candidates who are more than eager to learn. According to Cubiks, a 2016 survey revealed that 9 in 10 recruiters have rejected candidates due to their lack of cultural fit. Cubiks explains in their report that the "cultural fit is formed from the values, vision, norms, working language, symbols, belief systems and habits of staff along with their tacit agreement to a set of acceptable behaviours". The New Year is just around the corner, but by taking these essential recruitment trends on board, success will be yours for the taking in 2020, and beyond - best of luck. Do you have any recruitment tips or trends that you’d like to share? Please feel free to do so by leaving a comment. If you are interested in knowing more about our products and services, drop us an email to info@11academianetworks.com . We will be happy to consult you on the best ways to approach your target audience and get the best candidates for your institution. Join our community of recruiters! Subscribe to our newsletter to get news in the education and recruitment industry, as well as offers from our company Subscribe now
With a fresh year fast approaching, you might be thinking about recruiting new members of staff - forward-thinking talent that will drive your institution forward and take its offerings to the next level.
Your Guide to Student Recruitment Tools & Trends in 2020
But, of course, if your prospects aren’t privy to what you have to offer, you’d may as well not exist. It’s harsh, but in many ways, it’s true. And, in the age of digital transformation, reaching out to the right students though the touchpoints that they’re most likely to engage with is essential to success. No longer is demonstrating your values, telling your story and showcasing your offerings online optional - these days, if you want to get budding higher academics excited about your institution, you have to get digital. To help you enhance your student recruitment efforts in 2020, we’ve put together a guide that outlines current student recruitment trends, in addition to a rundown of the tools that will help you connect with your audience in the most valuable way possible. Student recruitment trends A UCAS report revealed that in the UK alone, student applications for higher education dropped by 5% in 2017, with a 7% drop in the EU. But, while this may be the case, understanding your audience while remaining abreast of the latest recruitment trends will help you boost your enrollment rates this year, and beyond. To help you steer your student recruitment efforts in the right direction this year, here are the three latest recruitment trends that you should know: Emerging technology continues to evolve: In recent times, recruitment and technology have become almost synonymous, with artificial intelligence (AI) and machine learning (ML) tools and platforms becoming increasingly sophisticated, and tailored, to specific goals, needs and preferences. With such platforms, potential candidates are presented to the user based on their skills, background, personal goals and personality type. By using tech-driven recruitment platforms, you’ll be able to understand your target demographic on a deeper level, while sourcing potential candidates that you can potentially reach out to and engage. Data-driven recruitment equals success: You might use digital data for a number of reasons within your organization: measure student engagement, internal efficiencies, financial fluency, and more. But have you ever considered using demographic data to understand your target audience on a deeper level? Harness the power of analytics platforms such as Google Analytics to gain tangible insights that will help you tailor your communications, campaigns and recruitment processes to the needs, wants desires and interests of your prospects, and you will start to see positive results. Data-driven recruitment is set to be a big deal this year, and beyond, so ride the crest of this valuable wave now, before it’s too late. Recruitment marketing is now essential: Expanding on our previous point, creating cohesive recruitment student marketing strategies is now essential, with today’s student spending large proportions of their time on various digital touchpoints, most of which are mobile. That said, to help inspire your intuition’s recruitment marketing efforts, explore our 10 top tips to build your university brand online Modern day students: the hard facts As mentioned, understanding the students of today holds the key to recruitment success. To give you a headstart, here are the essential facts you need to know about today’s ambitious academics: Campus visits are critical to the decision-making process: 46.7% of students consider a campus visit a significant factor in selecting a college or university. Social media usage is at an all-time high: Social media usage has peaked among all demographics - and various studies suggest that more students now use social media platforms on a daily basis than ever before. Get social and engage your prospects where they feel the most comfortable. More students are consuming online content all year around: Recruitment is not a seasonal activity anymore. The modern students are looking to engage to Universities even during festive seasons. Even more the social networks have made more accesible and easy to consume content of Universities during holidays. Take advantage of these dates and create campaigns that are driven to generate brand awareness for your Institution. As an inspiration we share here ideas on how to increase student engagement to your University over Christmas. Offline or online is not enough: with the boom is new online technologies, apps, influencers, social media channels, etc. multi-channel campaigns are the only way to keep your brand relevant to digital-geeky generations who handle communicationand take decisions in channels such as websites, online and offline catalogues, email, direct mail, mobile, messaging apps, social media, etc. Multi-channel marketing has been heavily used mostly in the retail industry by enabling customers to buy a product or service by using the communication channel of their preference. However this approach can also be very effective in the recruitment industry. Designing and implementing a multi-channel campaign can be a project that demands time and effort from you and your recruitment team. It may also seem to be expensive and it often requires resources that are not easily available at your institution. At 11 Academia Networks this month we have designed a special promotion package to help your institution implement a successful multi-channel campaign. Thanks to our experience with the summer schools, we decided to implement our knowledge in content marketing, social media promotion and online listing to promote masters and PhDs. From past campaigns, our customers attributed around 10% of the campaign results to our multichannel offer. If you are interested in booking a multichannel campaign for your program, you can contact us at info@11academianetworks.com. If you are already an INOMICS customer, please contact your account manager or send us an email to info@inomics.com to get more information about this offer. Student recruitment tools Now that you’re up to data with the student recruitment trends, let’s explore the tools you can use for ultimate success: Applicant tracking systems (ATS): An ATS will empower you to make your application experience more cohesive, allowing you to monitor applications across a multitude of digital channels, in turn, offering a more personalized level of support to those interested in your organization. In doing so, you’re likely to earn a higher recruitment conversion rate and more quality enrollments as a result. Internet sourcing tools: Fundamentally, internet sourcing is using the right tools to source the right prospective candidates for your institution and reaching out to them on a personal level. By leveraging services such as LinkedIn for Students, XING, social media forums, and connecting with the right people, you’ll be able to demonstrate your unique value and encourage more enrollments. YouTube: With 1.8 billion users every month, YouTube boasts a great deal of opportunity for Institutions looking to entice prospective students. By offering virtual tours as well as mix of engaging, inspirational content that answers your prospects’ most burning questions and delivering said content at an optimal time via the right online channel, you stand to drive more students to your application pages and onto your campus. We hope these student recruitment trends and tips help you with your initiatives in 2020 and while it may be challenging out there on the digital battlefield, we know you have what it takes to boost your enrollment in 2020, and for many years to come. Stay tuned this coming month for our PhD and academia recruitment and employer branding mini series where we will share invaluable tips and actionable advice on sourcing the best students and talent for your institution. Do you have any of your own student recruitment tips? Share them with us by leaving a comment. Join our community of recruiters! Subscribe to our newsletter to get news in the education and recruitment industry, as well as offers from our company Subscribe now
With a fresh year in full swing, it’s time to start thinking about fresh blood, or in other words: attracting new, prosperous students to your institution. You know that you’re worthy; you know that you have something unique to offer, and you know that you have the faculty, as well as the facilities, to provide an exciting, inspirational academic experience.
Esther Duflo, Abhijit Banerjee, Michael Kremer win the 2019 Nobel Prize
Michael Kremer showed the efficacy of experiments in economics with his research (alongside other colleagues) in Kenya in the 1990s. These experiments were aimed at increasing the effectiveness of schooling. Kremer received his PhD from Harvard University in 1992 and is the Gates Professor of Developing Societies at Harvard University, Cambridge, USA. Abhijit Banerjee is the Ford Foundation International Professor of Economics at MIT; he formerly taught at Princeton and Harvard. He earned his PhD from Harvard University in 1988. He has authored a number of books in economics, and is a fellow of the National Academy of Sciences, the American Academy of Arts and Sciences and the Econometric Society2. Alongside Esther Duflo, he has conducted research using more experiments – making novel use of randomized controlled trials in economics – in areas such as health, education, and microcredit. Esther Duflo is something of a rarity in her field, being the youngest ever recipient of the Nobel Prize in Economics (she received her PhD from MIT in 1999), and the second female winner. Eschewing the grand theory model favored by her contemporaries, Duflo has carved out her own academic path, pursuing a rigorous analysis of - in her own words - "the pieces that comprise the whole". Her motivation: a long-held commitment to the alleviation of poverty. She is the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at Massachusetts Institute of Technology at MIT. "Instead of relying on our intuition, or that of others, we set up large-scale, rigorous randomized controlled trials to understand what works, what does not work, and why. We are not alone: this movement has taken hold in economics" She's not wrong. Randomised Controlled Trials (RCTs), whose popularization the Nobel winners have helped to spearhead, have changed the face of development economics in two very different ways. The first is practical: they’ve simply become the new norm. As put by the Royal Swedish Academy of Sciences, RCTs now ‘dominate development economics’, and are riding the wave of methodological supremacy. Originally borrowed from medicine, their premise is easily understood. Researchers assess the effect of a ‘development intervention’ by dividing participants into groups, with only some being subjected to said intervention. The outcomes of each group are then measured against each other, and the efficacy of any intervention is thus determined. Through the Abdul Latif Jameel Poverty Action Lab, which Duflo and Banerjee co-founded (along with Sendhil Mullainathan) in 2003, over a thousand of these experiments have been conducted across the developing world. These have occurred in studies ranging from levels of immunization in India to primary school standards in Kenya. In RCTs, these researchers saw an apt way of identifying - if present - causal relationships between intervention and outcome, while simultaneously guarding against the chronic problem that blights much development policy - selection bias. Especially in development, but also across economics more broadly, the method has been readily accepted. The commitment to RCTs is rooted in humility - a sentiment that elsewhere in economics often appears conspicuously absent. Duflo has likened her work to plumbing: "we solve problems with a combination of intuition grounded in science, some guesswork aided by experience and a bunch of pure trial and error". Their approach also helps address something economics has long failed to do: it humanises the poor. Again, it’s Duflo's words that capture this best: "we have to abandon the habit of reducing the poor to cartoon characters and take the time to really understand their lives, in all their complexity and richness." Awareness of this kind not only imbues their research with nuance and thus precision, it gives it morality too - an appreciation and respect of the human subjects at the center of their work. Sources 1: https://www.nobelprize.org/uploads/2019/10/press-economicsciences2019-2.pdf 2: https://economics.mit.edu/people/faculty/abhijit-banerjee/short-bio
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2019 has been awarded to three economists “for their experimental approach to alleviating global poverty”1: Esther Duflo, Abhijit Banerjee and Michael Kremer.
Economic Development, Innovation and Growth (JEL O)
Download the INOMICS Handbook! Communication At the top of every list of essential soft skills seems to be communication. Effective communication doesn’t just mean being able to talk to another person as though they are a human being (although this is obviously useful on a day-to-day basis) – it also means being able to adapt your communication style to different people based on their seniority, age and relationship to you. It means having the ability to adapt your presentation skills, according to whether you’re talking to five people in a thesis workshop or five hundred at a conference. It means being able to write a pithy research proposal for your PhD thesis, slog out a decent essay introduction that remains concise and yet easy to understand, or compress your ideas into a couple of sentences to efficiently get across exactly what it is you do, want, or need. It also means shutting up and listening to someone else speak in order to learn and grow. This last part includes emotional intelligence, something very important for effective communication. If you can’t empathise with people, it’s impossible to communicate effectively with them. Communication skills will help you in every aspect of your life, from forming new relationships with people (this doesn’t necessarily mean friendship, but rather contacts; an essential part of networking is communication) to listening to what others have to say even when you disagree with their opinions. So how to improve these communication skills? A good way is to surround yourself with people you know are good at communicating – whether that means getting someone who can hold an audience to help you with your next presentation or sitting down with a colleague who seems to know absolutely everyone to help you improve your networking skills. You could also take a course in communication (yes, they exist), or throw yourself in at the deep end by forcing yourself to present and talk to people as often as is humanly possible. Teamwork So what’s next, once you’ve learned how to effectively communicate? The next step is using this skill effectively as part of a team. Humans are social animals, and two heads (or three, or four) are almost always better than one. Solving problems with other people means you’ll hear ideas you would have never thought of by yourself, while additionally becoming familiar with disparate perspectives and means of deciphering complications. But it’s not just about coming up with solutions. It’s also about simply working together with people in the same office or classroom, and being flexible with their plans so you can work together when it’s convenient for both of you. It’s about listening to other people, respecting their viewpoints, and being able to articulate yourself so you can disagree or agree when necessary – being polite while maintaining your integrity. Essentially, it’s about being able to trust others to help you, whether that’s planning and organizing a task together, making important decisions as a group, or using all of your brains to solve a problem. All of this can come in handy when, for example, you need to work with other students or researchers on group projects. Collaborating on a university project can be a great way to improve your teamworking skills. Time management and self motivation The flip side of this, of course, is that it’s also imperative to be able to work by yourself and manage your time effectively. Working by yourself involves having some self direction – that is, motivation to work when there’s nobody pushing you to get stuff done – as well as the initiative to know what to do next. Prioritising can be a difficult task in and of itself. It involves making sure you know what’s most important to get done – not only for yourself, but also for the other people in the team and the company in general. Delegation can be helpful when prioritising, leaving you to get on with more critical tasks. Another technique is to keep a to-do list in order of priority – but make sure organising your to-do list doesn’t become a stressful task. Perhaps most importantly, learning to say no will do wonders for your time management. If someone asks you for help and you think it will distract from more important tasks, or if it’s something that shouldn’t be delegated to you, or if you simply can’t find the time, it’s okay to apologise and say no. The alternative is to take on too much and stress yourself out, leading to lower-quality work, or worse, simply not getting everything done. Being a leader What was the soft skill LinkedIn said was going to be the most likely to get you hired in 2018? That would be leadership. Leadership is the quality of being able to inspire people, talk clearly to them about your ideas, and actually see things through. Leadership is really a combination of many different skills, including most importantly communication, but also being hardworking, delegating, being responsible, going above and beyond your expected work, and creatively finding solutions to problems. On a more basic level, though, a leader is someone people are willing – even happy – to follow. It also includes skills less related to working and more towards people – being open, empathetic and communicative with your employees and a person to whom they can come with questions and concerns is vital. You need to retain the ability to be professional while not coming across as too ‘corporate’, meaning being social while acknowledging the inevitable hierarchies of the workplace. It means listening to your employees’ ideas and judging their utility fairly. Leadership is perhaps the hardest skill to improve as it encompasses so many other qualities, and it seems that some people are simply born leaders. But despair not. There are a few things you can do to improve your leadership skills. Classes exist on refining body language, problem solving, and management and leadership skills. Improving your communication skills can also help you become a more effective leader, opening you up to other people and making you more empathetic (or at least seem so). Other more abstract ways of improving this skill are maintaining a sense of integrity and being passionate about what you do. People are often drawn to leaders who are obviously passionate and genuinely care about what they are trying to achieve. There are many different types of leaders – coaches, dictators, authoritarians, democrats and partners, to name a few. Each of these styles has upsides and downsides. Find the leadership style that fits with your aims, personality and strengths, and hone your other soft skills as best you can. Get to work In the end, soft skills are just as important as the hard skills with which we’re all familiar. Unfortunately, they’re usually more difficult to hone. But it can be done, and employers and bosses love to see them in action. However you choose to improve yourself – through classes, by surrounding yourself with accomplished soft-skillers, by throwing yourself in at the deep end, or a mixture of all three – try to spend at least a little bit of time improving your communication, teamworking, time management and leadership skills. If you do this, you’ll be nicely set up for the myriad job interviews you’ll undoubtedly be attending in later life.
Everyone knows about the hard skills you need to be able to succeed in economics or in academia in general: excellent writing and proofreading skills, the ability to extract information from what are often dense scientific texts, and being able to evaluate and analyse data effectively, among other things. But they aren’t the only skills you need to have. There are, of course, the dreaded soft skills – a slippery term that can mean anything from being able to clearly communicate your ideas to another human being to more abstract concepts like emotional intelligence. But what are the most important soft skills to have, and how can you develop the ones that need some more work?
In game theory the decision makers (i.e., individuals) are called players and each has a set of possible actions they can take. For example, in chess you have two players and each player has several possible actions or moves to choose from. In a simple decision problem, an individual chooses the best option between several alternatives. The main difference between this and a game is that in a game, the payoff that the player gains from making a decision depends on the opponent's reaction. When a chess player moves a figure, they will try to predict how their opponent will react, and how they can counter that reaction. This series of decisions will influence the game’s outcome and the player’s chances of winning. Of course, game theory isn’t only used to study real games like chess or Settlers of Catan. It’s also used to analyze any type of strategic interaction. For instance, in economics we use game theory to study how firms interact in a particular market. Let us, for example, consider two main competitors in the airline industry - Lufthansa and United. When Lufthansa decides how to price their plane tickets, what kind of conditions to offer to their customers, or how to design new flight routes, they will need to predict how their customers are going to react to these decisions. This of course depends on the reaction of United. If Lufthansa raises ticket prices, United may counter by offering a promotion or simply not lowering prices, and gain more market share from Lufthansa as consumers switch over. The market for passenger planes is not the only market in which a few or several firms compete. In oligopolistic markets, profit-maximizing firms take into account the strategies of other firms when they decide how to price a product, whether to launch a new marketing campaign, how much to invest in R&D, and so forth. Besides competition between firms, game theory can also be used to study many other questions. For example, how do recommendations from other consumers influence consumption decisions? How can employees be incentivized to exert effort? Is it possible to achieve cooperation among members of a team? And how should politicians design their campaigns if they want to attract as many voters as possible? As you can see from these examples, there are many applications of game theory and therefore it is a very important field of research in economics. It is assumed in game theory that actors act rationally. That is, that they act in order to maximize benefits to themselves. Under this assumption, people do not make mistakes, and they are able to always make the optimal decision to maximize potential benefits. Increasingly in modern times, subfields such as behavioral economics relax this assumption and attempt to explain real-world decision-making. Besides this, another common assumption in game theory is that the structure of the game and all of the information about the game is common knowledge. For example, if Anne and Bob play a game and both are rational and it is common knowledge that both are rational then this means that Anne knows that Bob is rational and Bob knows that Anne is rational. If the entire game and all of its attributes are common knowledge, then the players are said to have complete information. Similarly, information is incomplete if certain features of the game are not common knowledge. Examples may include situations in which one player does not know all the possible moves the other player could make; when a player does not know who their competitor is; or when a player does not know how payoffs relate to their actions. The game finishes when equilibrium is reached, meaning after all players have made their decisions and the outcome has become clear. Equilibrium of a game refers to a situation in which no player wants to change their strategy given the strategy of the other players; no one has incentive to deviate. One well-known example is the Prisoner’s Dilemma. One of the most famous equilibrium concepts in game theory is the Nash equilibrium. But, there exist a variety of other solution concepts and refinements of the Nash equilibrium like the Bayes-Nash-equilibrium, the sub-game perfect Nash equilibrium, the trembling-hand perfect equilibrium, and many more. Games can be classified according to their structure, the information that the players have, or the time horizon of the game. Whether players choose their actions at the same time or one after the other determines if it’s a simultaneous-move or sequential game. One-shot games are games in which players interact only once, while a repeated game is a game in which players interact in several time periods. In many markets, for example, firms "meet" daily and compete by strategically choosing their prices or other instruments of competition. Further reading Given that game theory in economics is a broad field with many diverse applications, there are several excellent books available if you are interested in the topic in general. There are also a large variety of books on specific applications of the theory. A gentle introduction to game theory can be found in Avinash Dixit and Barry Nalebuff's "The Art of Strategy". The book first covers some foundational concepts using some limited mathematics, and then turns to real-life examples like voting to illustrate game theory concepts. For a more in-depth look at game theory, many modern textbooks cover the topic. You might also be interested in "Theory of Games and Economic Behavior" written by the mathematician John von Neuman and the economist Oskar Morgenstern, published in 1944. It’s one of the first game theory books ever written and is a classic in the field. Good to know Game theory is not only used in economics but also applied in a variety of other fields including many social sciences. In biology, for example, game theory is used to study population dynamics (reproduction, mutation and extinction). This branch of game theory is called evolutionary game theory and was pioneered by John Maynard Smith. Psychologists as well as neuroscientists may apply game theory in their experiments and studies. Besides this, game theory approaches are used in mathematics, the political sciences, management, and the fields of operations research, electrical engineering and computer sciences.
In economics, game theory is an important field of study that focuses on the interaction of several decision makers that act strategically. A game refers to any type of situation in which the payoff or utility that an individual can gain by making a decision depends not only on their decision but also on the decision of others.
In order to examine people’s utility-maximizing behavior, a few assumptions must be made. First, economists assume that people are rational and seek to maximize their personal utility functions. We also assume that their preferences are consistent and do not change over time. This means that people will behave in a sensible and predictable way. Next, economists often assume that there are diminishing marginal returns. In the consumer theory context, this means that people enjoy something less as they accumulate more of it, which is usually the case. The first pizza you buy will probably bring you a good amount of utility; the fifth, not quite so much. In the case where we’re discussing utility functions, we call this diminishing marginal utility. Fully analyzing utility functions requires the use of mathematical models. Some of the common, core assumptions in consumer theory when deriving equations are: Consumers have perfect information: This assumption states that consumers have complete information about their options, so they can always make the best choice possible for themselves given their budget. Thus people always know how good a new food will taste, how well a new device will work, and how much fun a vacation to a new country will be. Consumers are price-takers. That is, they do not try to negotiate or otherwise change the price or quantity parameters they face. Prices are linear. This means that the price for each unit of a good does not change as more of the good is purchased. No bulk discounts here. Goods are divisible. This simply means that it is possible to purchase a fraction of a good, i.e. 2.5 cars. This assumption mainly serves to simplify the mathematical work for economists. These assumptions can be modified slightly for different scenarios without changing the major takeaways of consumer theory. For instance, the perfect information assumption can be relaxed, and peoples’ maximization problems updated accordingly, but many of the key learnings remain the same. As another example, non-linear price structures and indivisible goods can be considered with slight modifications to the equations used. But again, the main takeaways are not changed very much in this case. As a side note, there are other fields of study where these assumptions are more deliberately challenged to improve economists' models. Behavioral economics is one such field. Psychology and other social sciences can give further insights too. These studies of human behavior lie at the heart of how consumers make choices in reality; every consumer is, after all, only human! Getting back to consumer theory, what are the main takeaways? Much like with market equilibrium, consumers will achieve maximum utility where the marginal benefit per unit of money spent on a good is equal for all goods purchased by the consumer. This is the point where the marginal rate of substitution is equal for all goods consumed To see why this is, imagine that a consumer is at a point on their budget line where the marginal utility of one good (oranges, for example) is greater than the other (apples). This consumer could achieve a higher utility by buying one more orange, for which they will give up a number of apples. Thus, they reach a higher utility without increasing their overall budget. Due to the assumption that goods are purchasable in any quantity (not just integer amounts), the prices of these goods don’t matter in this example. The consumer can buy one tenth of an orange and give up a whole apple to do so, or whatever the pricing situation may be, and still achieve the same outcome. Microeconomics courses will often present mathematical problems from consumer theory that ask you to solve a Lagrangian optimization problem in order to maximize a utility function. These problems are solved using derivatives. To learn more about solving these types of consumer theory problems, see the linked articles. Good to Know Consider an individual’s preferences for oranges compared to all other goods. Given their budget constraint and their preferences, we can use a utility maximization equation to solve the question of how many oranges this individual will purchase at any given price for oranges, ceteris paribus. Now, we can go ahead and solve this same problem for every other consumer in the economy. If we do this, and then add the results for all individuals together, we will generate the entire demand curve for oranges in this economy! Hopefully this example demonstrates that consumer theory is an important piece of microeconomics and lies at the heart of economic theory. For this very reason, many introductory microeconomics courses focus on utility maximization problems and how to use Lagrangian methods to solve them.
Also known as consumer choice, this term refers to the study of how and why people spend their money based on their preferences. This involves analyzing how they maximize the utility of their purchases while working within budget constraints.
The formula for elasticity is straightforward. It can be found by dividing the percentage change in quantity demanded by the percentage change in price. However, this simple formula (known as the point elasticity formula) yields a different answer depending on which point is chosen as the first point. Sometimes, this is undesirable behavior. To correct for this, economists also use a formula for elasticity shown below. This is known as the midpoint formula (sometimes also called arc elasticity). This is a very similar formula to that for elasticity of substitution, cross elasticity of demand and income elasticity of demand. \begin{equation*} \text{Elasticity}= \frac{\frac{\mathit{Q}_{2}-\mathit{Q}_{1}}{(1/2)*(\mathit{Q}_{2}+\mathit{Q}_{1})}}{\frac{\mathit{P}_{2}-\mathit{P}_{1}}{(1/2)*(\mathit{P}_{2}+\mathit{P}_{1})}} = \frac{\text{%}\Delta\mathit{Q}}{\text{%}\Delta\mathit{P}} \end{equation*} Elasticity is a general term, but forms the basis of several important concepts in economics. For more information on these more specific concepts, please see the other terms that have been linked in this article.
Elasticity refers to how much a business, a producer, or a consumer changes its amount of goods demanded or supplied as a result of price and income fluctuation. It provides answers to some useful questions, such as how much more or less a product will sell if the price changes. It’s defined for both quantity demanded (price elasticity of demand) and supplied (price elasticity of supply).
In classical economics, decision making is seen as black and white. People make optimal decisions that always provide them with the best available results in terms of satisfaction and benefit. Additionally, people are assumed to have perfect information. Behavioral economics, however, shows how this often isn’t the case, and that humans also make decisions that are contrary to their self-interest or which don’t maximize benefits. It then tries to explain why this is the case. Behavioral economics concepts are used extensively by businesses to induce behavior in customers. Product designs, special deals, sales, and advertising campaigns are all ways that businesses try to persuade customers to buy or use a certain product. Much research has gone into understanding what factors can convince people to buy something, or what might alter their decision. One example of this is the “decoy effect”. Often, a business will want to sell a certain item - let’s consider the example of a large soda. By including a “medium” size soda that is smaller than the large, but only at a slight price discount, more people will purchase the large soda since that seems like a better deal. There are many other examples of how behavioral economics concepts are used by companies, advertising campaigns, product design, and more to try and induce specific choices. Behavioral economics is closely related to psychology, and as such benefits greatly from collaboration with psychologists or other experts who understand human behavior. In fact, economics itself is built on models of human behavior as participants in markets (which are usually not entirely accurate, as we’ve described above). Psychology, meanwhile, has a long tradition of understanding human behavior not from mathematical models, but from real-world experiments. Bringing the two fields together and updating economic models with more realistic representations of human behavior is an ongoing process. But, it’s one that will continue to improve economics as a whole. Good to Know Since it is concerned with individual decision-making, behavioral economics is mostly a microeconomics concept. However, there are obvious macroeconomic applications, especially when observing events like stock market runs and crashes. Speaking of the stock market, the term “irrational exuberance” was coined by former U.S. Federal Reserve Chairman Alan Greenspan to describe irrational behavior in the markets. This is a clear application of behavioral economics - why do people continue to invest in a stock well after it has become overvalued? His memoir, The Age of Turbulence, touches on this topic among others and is an interesting read for students of financial economics. Further Reading A popular book about behavioral economics concepts is Dan Ariely’s Predictably Irrational. In his book, he describes several experiments and shows how they uncover flaws in human decision-making that are both irrational and systematic. These include fascinating observations about everyday decision-making that most people probably don’t think about. We tend to overvalue our own belongings, tend to stick with default options, fall victim to the decoy effect, and much more. The book is interesting and digestible even for non-economists, too, so no previous subject knowledge is required to get started.
This subdiscipline of economics studies how decisions made by individuals and institutions are influenced by psychological, cognitive, emotional, cultural, and social factors. It is concerned with understanding how people actually make decisions, rather than assuming that the decision-making process is perfectly rational.
Macroeconomics and Monetary Economics (JEL E)
These concepts are often used in reference to international trade, and are perhaps best demonstrated in that context. Consider two nations - we’ll call them Atlantis and Narnia. Below, we will demonstrate that even with absolute advantages in both goods, Atlantis is better off if it cooperates with Narnia and trades - despite being able to make more of both goods than Narnia can. Suppose that there are only two goods, smartphones and bread. Also assume that each country has 10-hour work days. Atlantis, being a very advanced nation, can produce 15 smartphones per hour, or 150 smartphones per day (since we assume 10-hour work days). It can also make 10 loaves of bread per hour, or 100 loaves of bread per day. Meanwhile, Narnia is not as efficient; it can make 3 smartphones in an hour, or 30 per day, and it can produce 6 loaves of bread per hour, or 60 per day. Smartphones Bread (loaves) Atlantis 150 100 Narnia 30 60 It is clear from the table that Atlantis has an absolute advantage in both goods. That is, Atlantis can produce more than Narnia no matter which good it produces. Let’s consider a scenario where each country uses the 10 hours it has in a day to produce its own goods. How much can each country make on its own? We can use the table above to draw a Production Possibilities Frontier for both countries and answer this question: Figure 1: PPFs for Atlantis and Narnia Any point on this line for either country represents a product mix it can produce on its own. For example, if both countries decide to split their time equally between each good, then Atlantis can produce 50 loaves of bread and 75 smartphones; meanwhile Narnia can produce 30 loaves of bread and 15 smartphones. This gives a total of 80 loaves of bread and 90 smartphones produced in total with both countries in autarky. But, can we do better? If the countries can trade, can we improve overall economic welfare? To answer this question, let’s examine comparative advantage by looking at opportunity costs. If Atlantis produces a loaf of bread, it gives up the chance to produce one and a half smartphones. This is because in one hour, it can produce 15 smartphones or 10 loaves of bread; so, for every loaf of bread produced, it must “give up” 1.5 smartphones. Thus, the opportunity cost for Atlantis of producing a loaf of bread is 1.5 smartphones. By similar logic, the opportunity cost of a smartphone is two thirds of a loaf of bread. Narnia, meanwhile, can produce either 3 smartphones or 6 loaves of bread in one hour. So, Narnia’s opportunity cost of producing a smartphone is 2 loaves of bread, and its opportunity cost for producing a loaf of bread is 1/2 of a smartphone. Let’s examine these opportunity costs in a new table. Opp. Cost of Smartphone Opp. Cost of Loaf of Bread Atlantis 2/3 of a loaf of bread 1.5 smartphones Narnia 2 loaves of bread 1/2 of a smartphone Clearly, it is relatively more expensive for Narnia to produce a smartphone than for Atlantis; much more bread must be given up for Narnia to produce a smartphone. Likewise, Atlantis must give up more smartphones than Narnia to make a loaf of bread. Instead of each country producing both goods, what happens if each country specializes in the good that is relatively cheaper for it to make? This should help the countries minimize difficult tradeoffs within their own economies. In this case, Narnia will spend all of its time making bread, and so it will make 60 loaves of bread. In the example where both countries split their time, 80 loaves of bread were made; so, let’s say that Atlantis brings our total bread up to par by making 20 more loaves of bread using 2 hours. It then has 8 hours left to make smartphones, and so it produces 8*15 = 120 smartphones. The total production from both countries is now 80 loaves of bread like before, but 120 smartphones instead of just 90. By shuffling production around so each country focuses on the good it has a comparative advantage in, we’ve produced 30 extra smartphones and the world is better off (assuming the countries trade)! This is true even though Atlantis can make both more bread and more smartphones than Narnia can. Despite its absolute advantage in both goods, it is better off when it trades with Narnia. Good to Know The above example of comparative advantage is one argument against trade barriers. If Atlantis and Narnia are unable to trade, or if trade is made less efficient by artificial barriers like tariffs, the countries miss out on the full benefits of comparative advantage and free trade. Often in the real world, it is difficult to remove trade barriers like tariffs. This is because they can prop up a domestic industry, which can have political and social advantages. In Narnia’s case, trade barriers could preserve some smartphone production in the country, enriching the phone makers in Narnia. These people would be opposed to free trade in smartphones, because they would lose their entire industry to Atlantis if trade was free.
Comparative advantage means that you can produce a good or service at a relatively lower opportunity cost than that of your competitors. Comparative advantage is different from absolute advantage, which means you can produce a given item more efficiently than someone else.
There are two types of assets, tangible and intangible, which are themselves made up of subclasses. Of the tangible variety, most commonly you’ll hear about current and fixed assets. Current assets refer to things that can be consumed, exhausted or sold. Examples of current assets are cash, stock, and marketable securities. Fixed assets meanwhile are trickier to convert into cash, like land, buildings, equipment and machinery. Fixed assets are used by businesses over a long period of time and they play a crucial role in a company's long-term operations. While they may not be as easily converted into cash as current assets, they hold significant value and contribute to the overall worth of a business. Examples of fixed business assets include real estate, manufacturing equipment, vehicles owned, office buildings, etc. These economic assets are not meant to be sold, but rather they generate revenue by helping the business perform its operations. In contrast to tangible assets, intangible assets don't have a physical form. They are more like ideas or concepts, making it difficult to determine their value accurately. This difficulty sometimes leads to disagreement between the value a company claims it has and its actual market value. Examples of intangible assets include patents, trademarks, goodwill, copyright, trade names, and other intellectual property. For instance, patents offer legal protection for inventions and innovations, giving exclusive rights to the inventor for a specific time period (to distribute and use the invention). However, trademarks are unique symbols, logos, or names that can distinguish a company's products or services from others in the market, and they are valuable assets that help create brand recognition and customer loyalty. Just like how certain logos and colors are known by almost everyone, like the specific dark blue associated with Yves Klein. Meanwhile, goodwill in economics refers to the positive associations that consumers have about the business; this contributes to factors such as reputation, customer loyalty, and brand image. Goodwill can be measured when a company acquires another business (takeover) for a price higher than the net value of its identifiable assets. Copyright is meant to protect original works of authorship, including literature, music, art, and software, giving exclusive rights to their creators. And finally, trade names are names or symbols used to identify and differentiate a company or its products in the marketplace. Intangible assets can have a significant impact on a company's competitive advantage in their field and long-term profitability. They are often crucial in attracting new customers, creating innovation, and establishing a unique position in the market. However, their intangible nature makes it challenging to measure their value accurately, as they are not easily quantifiable like tangible assets are.In summary, intangible assets lack a physical form and include patents, trademarks, goodwill, copyright, and trade names. Even though evaluating intangible assets and their value can be more complex, at the end of the day, they play an important role in a company's success, contributing to its market capitalization and competitive advantage. Further Reading “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk" by William F. Sharpe is a perfect paper to dive more into the topic of assets. This seminal paper introduces the Capital Asset Pricing Model (CAPM), which provides a framework for understanding the relationship between risk and return in financial markets, explains the general concept of assets, and more. Good to Know Did you know that assets can have negative values? While we typically associate assets with positive values, there are times where an asset can have a negative net worth. This occurs when the liabilities associated with the asset outweigh its original value. One example of this is a mortgage-backed security (MBS). An MBS represents a pool of mortgage loans that are packaged and sold to investors. If the underlying mortgage loans in the MBS default or decrease in value, the MBS itself can have a negative value, representing potential losses for investors. These instruments were one important cause of the Great Recession that began in late 2007.
An asset is ANY resource that produces positive economic value for its owner - its owner being its owner as a result of a past event, most likely a transaction.
Econometrics is a relatively recent revolution. In the past, economists’ ability to test economic relationships was severely limited, since they had to work by hand. Large datasets make working by hand nearly impossible, even for the most simple statistics concepts. Thankfully, the advancement of technology has allowed today’s economists to work with large datasets, complicated models, and cutting-edge statistics using software tools such as R, Python, and Stata, to name but a few. But not every econometrician uses a dataset at all times. Theoretical econometrics is closely related to statistical theory, and studies estimators and other theoretical relationships. This is an important process that helps improve the efficiency of later economic research by discovering better statistical methods to use. Clearly then, this process of searching for better methods uses math and statistics techniques intensively. Key to this theoretical process is the search for unbiased, efficient and consistent estimators. These qualities are desirable in statistics because they usually make an estimator suitable for inference, and so let us “prove” economic relationships via known math and statistics results. <11an>limit:2;categories:Courses|Programs;disciplines:Econometrics, Statistics and Quantitative Methods (JEL C)</11an> The applied branch of econometrics, meanwhile, uses data to describe and predict economic phenomena. An example: a bank might rely on a model using customer characteristics to predict how many customers will default on their debt. Such models are used widely in the credit industry. To illustrate further, an econometrician can build this model using explanatory variables like age, debt to income ratio, credit rating, and employment status in a regression. Once the model is estimated, they can use statistical tests to learn about the relationships among these variables. For example, economic theory tells us that we expect rates of default to decrease if someone has a better credit rating. Through a hypothesis test, the econometrician can confirm if the data supports that theory or not. Naturally then, econometrics is closely related to statistical inference and certain math topics (such as linear algebra). Econometricians utilize tools like regression analysis and statistical software in their work. Math and statistics knowledge is therefore extremely important for econometricians, so that they can build proper models that adequately test their hypotheses. If the analysis is successful, an econometrician will find evidence for or against the question of interest, which is usually an economic relationship. Hopefully, the data match what economic theory would predict. In the case that it doesn’t, the econometrician may have discovered a new truth that could deepen our understanding of the real world! Further Reading Jeffrey M. Wooldridge’s Introductory Econometrics: A Modern Approach is a classic and widely referenced textbook that offers an introduction to econometrics. It begins by introducing the simple linear regression model, and discusses the assumptions and problems that arise with its use. Gradually, the book builds to more complicated models and situations. For those who want to study econometrics and get a comprehensive introduction, the Wooldridge text is a good choice. However, a knowledge of statistics and math concepts like the expectation operator and probability distributions are necessary to understand econometrics. Students without this background should focus on those fundamentals first; statistics and linear algebra courses can get you up to speed. Good to Know Econometrics offers a promising path for a future career. Econometricians can get hired for a wide variety of roles in finance, research, government, consulting, and even data science. As there are many jobs that might require statistical techniques and an economists’ knowledge, there are even more options beyond these. What differentiates econometricians from “regular” statisticians? The former must also be trained in economic theory. This is important so that econometricians can ensure their models make sense and produce results that are usable, rather than just leaning on data. But the fundamentals of an econometrician’s work come from statistics. For example, an econometrician working for a government might need to conduct a statistical analysis to help design a policy. A statistician without economics training might not be able to set up the model properly or gut-check whether the regression results make economic sense. They might not be able to identify appropriate economic variables for the model, and end up with a model that doesn’t hold up under scrutiny.
Pioneered by Ragnar Frisch, Jan Tinbergen, Lawrence Klein and Simon Kuznets, econometrics is the application of statistical models to economic data. Its aim is the quantitative analysis of economic phenomena, either theoretically or with real data. This gives empirical rigor to economics, and can possibly “prove” economic relationships or discover new ones.
Econometrics, Statistics and Quantitative Methods (JEL C)
Types of capital Financial capital Capital is most commonly thought of as money, specifically money used to buy other goods which are then sold for a profit. An example of this would be the money that a business uses to buy its products, such as a retail business buying its clothes. More generally, financial capital can be thought of as assets a company needs to provide its products for sale. Capital goods These are things which are used to make goods or services, and as such can be a variety of goods. For example, tools would be a capital good to a handyman; oil rigs would be a capital good for an oil company; wind turbines would be a capital good for an energy company. Capital in this sense is considered one of the major “factors of production” (alongside labor) and is a foundational part of many economic models. Natural capital/ecological capital Didn’t think the world had capital? Think again. Natural capital is natural resources, such as air, water, and organisms. This type of capital is arguably the most important, as it includes things like clean drinking water and fertile soil which the world gives us and makes civilization - and life in general - possible. The future of natural capital is dependent on a healthy ecosystem, making the fight against climate change and environmental destruction all the more crucial. Social capital Something a little more abstract, social capital includes intangible things like the relationships between people (i.e. networking), as well as cultural heritage and identity. However, it also refers to more tangible things, such as shared public spaces. Human capital Human capital is perhaps the most self-explanatory of these terms. You have human capital, and so does this writer, because our knowledge enables us to perform labor and therefore helps the economy grow. Instructional capital A controversial definition as it is sometimes thought of as an extension of human capital, this could include the learning materials which make education possible. It is often used to refer to guidance which restricts the actions of people, and is therefore linked to social capital, since guidance often turns into societal norms. Public capital An extremely wide-ranging type of capital that includes all government-owned assets. This covers things like roads and railways (assuming they are publicly owned) as well as education, hospitals, emergency services, and systems such as utilities and sewage. It can be both a government outlay and infrastructure itself. Intellectual capital This generally refers to the intangible assets of a business or economy. It includes the people who work there, the relationships between them, and the actual infrastructure that allows employees to work together. It can also refer to the passing of knowledge between members of the same company. Due to its being intangible and therefore difficult to measure, it can be hard to take into account when judging how much a business is worth. However, in the knowledge economy and Information Age, it is arguably very important. Business capital There are several related forms of capital that businesses may have. These include debt capital, when a business assumes debt; equity capital, which often refers to shares and investors; working capital, meaning the business’s assets and its accounts payable; and trading capital, which is used to buy and sell securities. Theories of capital (Neo)Classical economics Land, labor and capital are the three main factors of production in classical economic theory. Other things which contribute to an economy’s production are referred to as intangibles, and have since been redefined as capital. These include intellectual capital which is part of human capital, and management, which could be subsumed under social capital. Marxian economics In Marxian economics, capital refers to three things: constant capital (capital goods), variable capital (meaning the input of labor), and fictitious capital, which includes stocks, bonds, securities, and the like. Human development theory This theory holds that social, individual, and instructional capital are the three most relevant areas which define human capital. This idea has also been carried over to ecological, welfare and green economics. These all use more abstract ideas of capital rather than referring to tangible objects such as work tools.
The term capital is used differently in different economic contexts. The common theme is that capital usually refers to some productive asset or capability that can be used to contribute to the economy. Below, we will detail some of these different meanings.
Browse our job listings for economics opportunities 1. Journal of Finance Published by Wiley. The official publication of The American Finance Association, which publishes English-language research in all areas of finance. It is one of the most highly cited and broadly read journals in the field. It reaches over 8,000 academics, professionals, libraries and institutions around the world, and is published six times a year. 2. The Review of Financial Studies Published by Oxford Academic. Covering both theoretical and empirical work in finance, the Review publishes high-quality papers which are immediately relevant to the field of finance. It interprets finance as including 'the interface between finance and economics.' It is published once a month. 3. Journal of Financial Economics Published by Elsevier. A top-tier journal which accepts empirical and analytical papers, particularly in the areas of capital markets, financial institutions, corporate finance, corporate governance, and the economics of organizations. It focuses on 'research in the area of... the theory of the firm', and is published monthly. <11an>limit:2;categories:jobs|courses|conferences|Professor;disciplines:Financial Economics (JEL G)</11an> 4. Journal of Accounting and Economics Published by Elsevier. A journal which focuses on the interface between economic theory and the practice of accounting, particularly in how economic analyses can be applied to accounting problems. It covers the role of accounting within firms, the information content and role of accounting numbers in capital markets, the role of accounting in financial contracts and monitoring agency relationships, determining accounting standards, theories of accounting firms, and government regulation of corporate disclosure and the accounting profession. It is published bimonthly. 5. Journal of Financial and Quantitative Analysis Published by Cambridge. Covering theoretical and empirical research, particularly regarding the topics of corporate finance, investments, capital and security markets, and quantitative methods of particular relevance to financial researchers. It has a circulation of 3,000 and accepts less than 10% of the manuscripts submitted to it every year. It is published bimonthly. 6. Journal of Banking and Finance Published by Elsevier. A journal for research on financial institutions and the system in which they operate, with a focus on policy-oriented research and theoretical work. Its aim is on theoretical developments and how these can be implemented, as well as research on domestic and international policy with respect to financial institutions and markets. It aims to improve communication between academic communities and policymakers. It is published on a monthly basis. 7. Journal of Money, Credit and Banking Published by Wiley. A professional journal aimed at researchers and policymakers as well as academics, which covers broad areas of money, banking, credit markets, regulation of financial institutions, international payments, portfolio management, and monetary and fiscal policy. It is published seven times each year. 8. Journal of International Money and Finance Published by Elsevier. A journal for those who work in the areas of international monetary economics or international finance, including researchers and financial market professionals. It hopes to provide research that combines both of these areas, and authors are generally focused on exchange rate behaviour, foreign exchange options, international capital markets, international monetary and fiscal policy, international transmission and all related research areas. It is published monthly. 9. Journal of Business Finance & Accounting Published by Wiley. Covers topics in accounting, corporate finance, and corporate governance, with an emphasis on informational problems in financial markets and business organisations and the way in which accounting can help alleviate them. It aims to publish research on accounting, corporate finance, corporate governance and their interfaces. It welcomes theoretical papers, but the theories therein 'should yield novel testable implications'. It is published ten times per year. 10. Journal of International Financial Management and Accounting Published by Wiley. For the publication of research on the international aspects of financial management and reporting, banking and financial services, auditing, and taxation. It focuses on expanding knowledge of the impact of imperfections in the world product, factor and financial markets, as well as the impact of institutional, regulatory and accounting differences across countries. It tries to provide a forum for interaction between academics and practitioners. It is published thrice per year.
It's important to keep your finger on the pulse of the latest updates in your field. Otherwise your knowledge could be out of date and your research won't be be topically informed. The finance journals listed here are some of the best in the English-speaking world, offering the latest insights into finance, economics, accounting and business. If you're studying or working in the field of finance, here's our list of the top finance journals you should be reading.
Economists, so the story goes, had successfully grasped the essence of human behaviour: rational, and, therefore, highly predictable. With this discovery, an age-old question whose answer for millennia had eluded humanity was finally laid to rest. Where philosophers, psychologists, and sociologists had failed, economists had struck gold. They had cracked it. As a result, imperfect theories - as economic theories inherently are - started to be treated as laws of nature, like facts, and confidence among economists erred towards hubris. A sense of exclusivity pervaded the field, an unspoken agreement that outsiders were unwelcome, and their contributions unneeded. Economists preferred to work in isolation, adding to what they saw as a body of incrementally growing objective knowledge. When called upon, politicians typically assimilated their prescriptions - who were they to contest it? - and a docile public simply stood by, watching on in ignorant bliss. How could it be any other way? To the untrained, the language of economists is enough to render any growth-guaranteeing model incomprehensible. Indeed, the extent that their work is misunderstood is shocking - Brits were famously unable to distinguish debt from deficit despite enduring waves of austerity justified, in part, by both. Thus, for much of their legitimacy economists have relied upon blind faith, an investment the masses have, for a long time, been more than happy to make. It’s basically a science after all! <11an>limit:2;categories:workshops;disciplines:Economics</11an> A discipline in crisis In the last 10 years, however, things have changed, and in this era defined by populist, anti-establishment politics, economists’ time in the sun looks to be drawing to a close - for the time being at least. Reliance on their theories is withering, and general trust in their practice has waned. Politicians, clearly, have distanced themselves from economic aides. Gone are the days when leaders swore allegiance to economists. Margaret Thatcher’s fawning over Milton Friedman or Bill Clinton’s exaltation of Joseph Steglitz now feel like distant memories. And it’s difficult to imagine Trump invoking the spirit of Robert Lucas Jr. any time soon. To the contrary, much of his policy has been at odds with mainstream economic wisdom - his trade war with China, for instance, widely condemned. Although Trump’s particular ambivalence towards economists is indicative of his own capricious nature, it's also aligned with a general breakdown of trust that has swept society. 2008 Financial Crisis Much can be traced back to the global financial crisis, which left the profession reeling, dealing its reputation an almighty blow. As professor Franklin Allen recalls of economists of the time, ‘it’s not just that they missed it, they positively denied it would happen’ - the banks, consensus dictated, were simply ‘too big to fail’. Following the crash, economists were expected to take centre stage and steer the global economy towards recovery - that was their job. On that front, though, they also failed. The recovery - itself a generous term given the context - has been sluggish and uneven, the Economic Policy Institute calling it ‘the slowest in recent history’. And meanwhile, poverty levels across much of the Western world have been rising. Orthodoxy had long dictated that job creation solves poverty, the dictum to this day forming the basis of many an economist’s outlook. If jobs can be made, things will be okay. Post-recession developments on both sides of the Atlantic, however, have seen this one-time pillar of economic thought gutted of its credibility. The UK city of Sheffield provides an illustrative example. Deindustrialised in the 80s and 90s and then hit hard by the recession, Sheffield was subject to a typical prescription for economic revival: redevelopment of the city centre and an expansion of its university that together were designed to stimulate job creation. Superficially at least, the initiative worked as intended: as of 2018 unemployment was down 50% compared to the 1990s. Statistics like these, though, serve only to mask how little has changed. Indeed, despite more people working, in many parts of the city the exact same social problems persist. The issue is no longer finding a job; it’s finding a job that pays enough to live on, and they, by all accounts, are in short supply. As a result, in-work poverty across Britain has skyrocketed, working families often unable to put food on the table, forcing food banks to make up the shortfall. Data suggests that this trend, far from exclusive to Sheffield, is replicated across the EU, workers in poverty ‘rising steadily since the financial crisis’, according to one Financial Times article. In America the same development is underway, food stamps reaching record levels while employment statistics soar. GDP may be rising but wages have stagnated. Currently in the US over half the households classified as living in poverty contain now at least one working adult. Back in the UK, real wages have actually fallen against a backdrop of slow but steady growth. Across the continent, ‘the lost decade’ - a phrase originally used to refer to Japan’s period of stagnation in the 1990s - is frequently invoked, in an illustration of the widespread nature of the phenomenon. In truth, the decoupling of growth and wage gain has baffled economists, many finding it difficult to comprehend the disintegration of one of their founding myths. ‘An upturn is coming…’ Offering little in the way of remedy, they instead continue to insist that with unemployment falling, the tightening of the labour market will eventually lead to a corresponding rise in wages. While there is fairly widespread consensus supporting this, the economy of Australia encourages scepticism. Sheltered from the recession and approaching 30 consecutive years of productivity growth, its wage growth at the end of 2018 was barely 2%. The upturn is yet to happen. For those experiencing an extended period of wage stagnation, or even decline, constant promises of a just-round-the-corner increase mean little. They are no distraction from the grim realities of life getting harder. To make matters worse, in the few instances where wage growth has been recorded, it’s generally been unevenly spread. Studies of OECD members have shown that when growth occurs, the wage increases of the top 1% typically far exceed that of the median worker. This is consistently supported by statistics from across the developed world, which uniformly show that inequality, in both wealth and income, is deepening - a trend described by UNCTAD Secretary-General Mukhisa Kituyi as a ‘significant obstacle to translating economic growth into inclusive prosperity’. Recent research has even suggested that in certain areas IMF prescriptions have actually exacerbated inequality, the same IMF that boasts its staff are among the ‘best and the brightest’, and has solidified its reputation as ‘an organisation that solves problems’. A glimmer of hope? In many ways, the loss of faith in economists is really not surprising. Their record, quite simply, is a bad one. On the big questions, they have, for over a decade now, given few answers. A culture of overconfidence led to the 2008 crash, and since then the profession’s reputation, like many economies around the world, has been in tatters. Sidelined by politicians and mistrusted by the masses, economists' stock is somewhere close to an all-time low. There is, at least, some sign rehabilitation may be underway. Most notably, a growing number of outsiders have been welcomed into the field, in an overdue tempering of its more exclusive tendencies. The inclusion of historians, psychologists, and sociologists, among others, has afforded economics a methodological dexterity it previously lacked, broadening its scope. Greater interdisciplinary dialogue has also overseen a return of humility, as theories and models previously sacrosanct have been better scrutinised, refined, and sometimes debunked. However, in response to many of the biggest challenges (inequality, stagnant wages, etc.) the discipline remains wanting. Its orthodoxies have been undermined, but are yet to be replaced, and it’s crying out for fresh ideas. Perhaps the saddest thing, though, is that this has been the case for some time.
The reputation gained by economists has been a remarkable feat of PR; a branding job like no other. Quite how it developed remains a mystery, some inexplicable sleight-of-hand. Its consequence, however, is far easier to discern: in the minds of many, economics came to be thought of as a science. Removed from its rough prediction roots, it became a discipline of watertight theory, with a methodology capable of unearthing indisputable truths.
Check out our economics job listings Rebranded as microcredit and more recently, financial inclusion, it has come to dominate the social investment sector, acquiring something of a cult following in the process. Described as transformative, and touted a panacea by its loyalists, the craze has persisted despite growing academic evidence questioning its efficacy. In some ways, such loyalty is unsurprising. There is little shortage of inspiring anecdotes of hardworking individuals pulling themselves up by their bootstraps having put their meagre micro-loan to exceptionally good use. These stories are uplifting and it’s tempting - and all too easy - to conclude that they’re typical of recipients of microfinance. And yet, when the data has been assessed - of which, it should also be said, there is not a huge amount - the results have been inconclusive, at best. Empirically speaking, a resounding endorsement of microfinance is impossible; the research simply isn’t there. ‘On current evidence, the best estimate of the average impact of microcredit on the poverty of clients is zero’ declared development economist David Roodman. The UK’s Department for International Development (DFID) has expressed similar reservations. Commenting on a systemic literature review into microfinance it concluded that ‘no clear evidence yet exists that microfinance programmes have positive impacts’, also stating that the zealous support it receives is based on ‘foundations of sand’. It’s certainly curious that although formal, government-backed microfinance initiatives are now widely available across much of the developing world, a huge number of loan sharks and predatory lenders still operate in parallel. Surely if microfinance is failing to compete with informal lenders, it’s not functioning as intended? Here the problems it's encountered are explored in an attempt to better grasp why a seemingly so-well-intentioned endeavour has reportedly been so badly misfiring. The issues There are a number of problems that microfinance has run into, problems which Roodman’s sobering book, Due Diligence, has taken great pains to uncover. Some are the result of good intentions gone awry, others the result of mismanagement; most, though, are underpinned by the commercialisation of the industry that took place in the 2000s, when many non-profits involved in microfinance became commercial enterprises. The unleashing of the profit motive saw interest rates rise as boards caved to money-hungry shareholders, while an increase in aggressive marketing and loan collection simultaneously occurred. During the 2000s, in both Zambia and Mexico, interest rates for some microloans were hiked to over 200%. Rather than relieving, they actually exacerbated poverty in the areas where they were taken out. Similar problems were also uncovered in Bangladesh, one of the biggest recipients of microfinance, where women were found borrowing money from relatives, and at times, even forgoing basic necessities in order to repay their loans. Often, this was for fear of the consequences of defaulting. The majority had been lent money through borrowing groups - a means of credit where groups are jointly responsible for one another’s loans - and research revealed that this had created intense peer pressure with regard to repayment, the ‘group’ sometimes taking the law into its own hands when payments went unpaid. The industry has also become a victim of its own monetary success. Massive proliferation of profit-seeking microfinance programs has led to fierce competition in the sector, with some institutions surrendering to a ‘race for clients’ in order to increase their profitability and to attract lenders. As a corollary, background checks made on prospective borrowers’ ability to pay back their loans became less and less stringent. In many cases, this caused spiralling over-indebtedness - microfinance’s long-term foe - as people were unable to pay back the money they’d been lent. Use of the loan This lack of prudential oversight has contributed to another big issue facing microfinance: that many loans are used to fund consumption rather than income-generating initiatives. A study from 2015 showed that in South Africa 94% of microloans were being used simply to fund subsistence. In these instances, those borrowing do not generate any new income, making the repayment of the initial loan difficult, if not impossible, which prompts them to take out further loans, thus accruing further debt. On the occasion that loans are used to bankroll new businesses, the pervasive poverty that often surrounds them can mean a lack of consumer demand, leading to the eventual failure of the venture. A potential solution to this would be to place greater restrictions of those eligible to take out loans. Applicants, for instance, could be obliged to fulfil some kind of financial criteria like providing a credible business plan. This, however, introduces a host of ethical problems, the most prominent being to what degree should rich people be able to determine how poor people spend their money? And relying on the behavioural standards of the rich, as history has repeatedly shown, is rarely a good idea. The ill-judged allocation of credit, as is commonplace across microfinance schemes, also provides entrepreneurship opportunities for ‘middle men’. Borrowers who have greater access to microfinance initiatives have been known to then lend to poorer borrowers at higher interest rates than they themselves received. Consequently, the poorest micro-entrepreneurs benefit less than the comparatively less poor, in a dynamic that reinforces existing socio-economic hierarchies and creates greater room for exploitation. <11an>limit:2;categories:jobs|courses|conferences|Professor;disciplines:Financial Economics (JEL G)|Economic Development, Innovation and Growth (JEL O)</11an> What can be done? Many of these problems arise from a lack of sufficient regulation. Until now the sector has regulated itself, with undue faith placed in the free market’s ‘natural’ efficiency. The main effort to protect clients thus far has come in the form of a global regulatory initiative called The Smart Campaign, described by chief operational officer of Alliance Microfinance, Hugh Sinclair, as offering a ‘watered-down, ineffective set of voluntary principles’. In 2014, it was widely panned when it certified the infamous Banco Compartomas, Latin America’s largest microfinance bank, which had previously made headlines for charging poor Mexicans triple-digit interest rates. This led even Yunus to concede that ‘self-regulation doesn’t really work’, and that many practices really should not continue as they were. Looking forward Perhaps part of its appeal is based on the fact that microfinance does not threaten existing political or economic structures. It is simple and highly seductive: the poor can be saved by the rich, who, by doing so, become richer. What’s not to like? It’s the neoliberal’s dream. Clearly, though, things are not that simple. When the profit motive is involved, exploitation is rarely far behind. Whether it’s extortionate interest rates or general misallocation of funds, the transgressions of this project have been many. For this reason, regulation, currently all too lacklustre, must be rigorously enforced so that the benefits of microfinance are not entirely lost. Countries like Ecuador have recognised the need for a national regulatory framework and offer the beginnings of a roadmap that could be emulated elsewhere. Reasonable interest rate caps, client protection, beefed-up risk management, flexible repayment periods; all must be considered if the true potential of microfinance is ever to be realised. Quite how far that may stretch remains to be seen.
Since its inception in the 1970s, microfinance has become the darling of development organisations the world over - the idea with the potential to save the planet’s poor. Pioneered by Bangladeshi social entrepreneur and Nobel Peace Prize Winner Muhammad Yunus, it provides the financially marginalized with banking services that, given their impoverishment, would otherwise be out of reach. Such provision, its proponents claim, empowers the poor to take control of their own lives and plot their own path out of poverty - an antidote that is humane, retains the dignity of it recipients, and is lucrative. Aside from bank accounts and insurance, it is mostly implemented in the form of microloans.
Browse our job listings in international economics 1. Work as an analyst One of the most popular career paths for economists generally, and for international economists specifically, is working as an analyst. This is a broad term which refers to anyone who performs work in which data is analysed in order to find particular patterns or to determine the best course of action. There are many types of analyst role which an international economist could take on – from financial analysts, who analyse businesses' equity and securities, to research analysts, who dig through data which is collected as part of a research project, to policy analysts, who work on investigating the effects of public policies to see whether they are effective. You could find a job as an analyst at a private think tank such as the Peter G. Peterson Institute for International Economics, in a business such as Reis, a commercial real estate analytics company or for the federal or local government. 2. Work in the finance industry Another big employer of economists is the finance industry. Having a knowledge of international affairs and international money systems is highly useful in an increasingly international finance market. You might find work with a bank or an insurance company, working in a role such as financial analyst, financial management, or investment banker. Work in the finance industry tends to be very well compensated but is also high-pressure and with long working hours expected. If you love to throw yourself fully into projects and don't mind putting your social life on the back burner for a time, then you could find work in the finance industry to be very rewarding. However, if you're looking for a job with good work-life balance or a strong social outlook, this may not be the industry for you. <11an>limit:2;categories:jobs|conferences;disciplines:International Economics (JEL F)</11an> 3. Work for a global organisation A way to put your specialist knowledge of international economics to good use is to work for an international organisation such as the IMF. The global money system is vast and complex, and the organisations which try to regulate it are becoming more important as globalisation keeps spreading. In a global organisation you might find a role performing research, promoting particular policies, or navigating national and international law as applied to finance. This kind of work is suited to someone who has an open mind and is understanding of different cultural and political viewpoints. It's the kind of work which requires being able to work with other people from all over the world. 4. Work for the government Finally, one obvious employer for international economists is the government. Economists work in all branches of government, but international economics is a particular match with the governmental branches dedicated to diplomacy and international relations. The United States Foreign Service, for example, employs economics officers who design and oversee economic programs in developing countries. This kind of work is not well paid but can be greatly personally rewarding as it puts the skills of an international economist to direct use in improving the lives of people abroad. It requires the ability to collaborate effectively and to manage complex projects, making it well suited to people who are highly organised and able to juggle many different priorities at once.
If you're an economist and you're thinking about working in the field of international economics, you might be wondering what kind of career options are open to you. Here are a few suggestions for jobs which you could do.