Halloween is probably one of the best occasions to demonstrate how seriously you take yourself (or not!) and how far your creativity can go to show it. If you think that Halloween is below your intellectual level, well, they say that even Paul Krugman threw one economics-themed party, where “two guests came as Asian tigers, several came as hedge funds, one woman came as capital, dressed as a column..." Browse our PhD listings for more opportunities In keeping with the season, we have put together a short list of ideas, collected from various econ-related source (like a Halloween Edition from Economists Do It With Models), which may be useful if you are attending a Halloween party full of like-minded economists. 1. EconoTroll Take a look at this well-known post from Noah Smith about EconoTrolls and you may be surprised by the amount of ideas for Halloween costumes. In his witty blog post from last year, not only has Noah categorized all possible species of trolls in the econ blogosphere, but also explicitly illustrated them. Don’t miss out on the comments either. 2. Your favourite “evil” economist It might sound easy, but creating a good costume of a real person is an art that is hard to master. Although anyone can buy a mask of Ben Bernanke, only a few would be able to depict his persona in an allegoric way. To succeed: think of the most “infamous” policies or just a tiny character detail anyone would recognize about that person and play around them. 3. Economics theory & concepts There is no need to be creative if the great thinkers have already done it for you. Any economics textbook has a whole host of ideas for Halloween costumes – just read all the definitions literally. Invisible hand, indifference curve, price elasticity, budget constraint … it is a list without end. 4. Financial crisis related Financial crisis has become a buzzword, referred to by individuals regardless of profession and status. So if your Halloween party-mates happen to come from outside of the economics community, costumes related to financial crises might be the only ones that have a chance of being understood: just dress-up like an investment banker and add horns, or dress yourself up as a bubble. 5. Economics costumes for couples Although some might argue that a couple is a rare phenomenon among economists, ideas for Demand & Supply or Keynes vs Hayek could make it worth making an effort to find at least a temporary partner. There's also the classic 'bear and bull' duel Halloween costume, also financial crisis related, and relatively easy (bear and bull costumes aren't too difficult to come by). 6. An Econometrician An idea from one of the many anonymous users from econjobrumours: “Find a friend who dressed up as a statistician, blatantly copy his/her costume, get twice as much candy”. 7. The Wolf of Wall Street How do you make yourself look like Leonardo DiCaprio? Actually, you don't have to develop an inferiority complex by attempting this. A much easier way to do this is wear a suit, shove fistfuls of fake money (or real money, if you're into extravagant displays of wealth) into your pockets, and throw a wolf mask on top. Very easily done. 8. An Economist At the end of the day, is there a need for a costume at all? Just look at the pictures from your last academic conference and copy a look of a random audience member.
In keeping with the season, we have put together a short list of ideas, collected from various economics-related source, which may be useful if you are attending a Halloween party full of like-minded economists.
Let’s first see how an increase in government spending can accelerate economic growth. Part of the aggregate demand in an economy comes directly from the money spent by the government. Like private households and firms, governments themselves can buy goods and services and participate in the labor market. For instance, when governments set out to construct roads or other infrastructure, they hire private companies to do so, putting government money back into the economy directly (and increasing aggregate demand). Further, when governments attempt to hire new employees and workers to perform different services, they increase the demand for labor. If a government increases spending on nationally produced goods and services - such as construction of the aforementioned roads - this will translate into a direct increase in aggregate demand. Firms will raise production and hire additional workers to meet this demand. Thus, an increase in government spending leads to an increase in output (GDP) and a decrease in unemployment. One important question is by how much output will increase if the government decides to spend an additional million euros. Of course, aggregate output will increase by at least the same amount (in this case one million euros), but that’s not all. The initial stimulus will generate an increase in income which in turn will increase demand. From there, the production will rise by more than that initial increase in government spending. Why is that the case? Firms will sell more because of the increased demand and make higher revenues. Part of this revenue they will keep as profits and part will be used to pay their workers. Hence, the incomes of the workers and business owners increase. Because of increased demand, firms might be induced to hire new workers. Then, some workers who were formerly unemployed will gain a job and an income. They can therefore buy more goods and services. This in turn increases again the income in certain sectors and thereby aggregate demand. This effect – that government spending can increase aggregate demand by more than the amount spent – is known as the multiplier effect. The magnitude of the multiplier effect crucially depends on the marginal propensity to consume (MPC) of the households in the economy. This term refers to the fraction of income that households consume and do not save. For example, say you spend 80% of each euro that you earn while the remaining 20% you deposit in your bank account and save for later. Your marginal propensity to consume is equal to 0.8, and your marginal propensity to save is equal to 0.2. In a simplistic world (without income taxes or imports) an increase of 1 million in government spending will increase GDP by: Change in gdp = Change in government spending * multiplier = 1,000,000 \(\frac{1}{1-mpc}\). The term \(\frac{1}{1-mpc}\) is the multiplier. If households consume 80% of their income, the multiplier will be equal to 5 (\(\frac{1}{1-0.8}\)). Clearly, the higher the marginal propensity to consume, the higher will be the multiplier effect. If, for example, households only consume 50% of each euro that they earn, the multiplier will be equal to 2. So, on the one hand, an increase in government spending will boost GDP by more than the initial increase in spending due to the multiplier effect. On the other hand, however, an increase in government spending may cause a "crowding out" effect which will hinder growth. The crowding out effect works in the following manner: to finance the increase in government spending, the government must borrow funds. This rise in the demand for loanable funds will cause the price of money, i.e., the interest rate, to increase. At a higher interest rate, it will be less attractive to borrow money and more attractive to lend money. Firms and households with savings will prefer to lend the money instead of spending or investing the money. Those without their own savings may not be able or willing to borrow money at this higher interest rate. If households and firms borrow less money, they cannot invest in new structures, buildings or machinery. Thus, public investment displaces (or crowds out) private investment. Another instrument of fiscal policy is tax law. Tax reductions may stimulate private consumption if the tax cut leads to a direct increase in households’ disposable income. Part of this additional income the households will spend on goods and services (the other part will be saved). This, in turn, increases demand. This increase in demand can only be met if firms increase production. In order to do so, they will have to hire more workers. So, production increases and unemployment decreases. Another channel through which tax reductions may stimulate economic growth is the impact tax cuts have on the investment activity of firms. Tax cuts may stimulate investment, and an increase in investment leads to an increase in the demand for goods and services. Hence, production will increase and unemployment decrease. Now you may wonder what are the downsides of the fiscal policies we just described. The main problem is the increase in public debt. An increase in government spending without an increase in taxes will increase the budget deficit. In a similar manner, tax cuts that are not accompanied by a decrease in spending will also increase the deficit. High levels of debt are problematic for a variety of reasons. The government might face high debt interest payments in the future, which could necessitate raising taxes at the cost of output. Debt can also cause the crowding out effect that we mentioned above. The type of tax cut or government spending will determine its effects. For example, the effect of a reduction of the income tax will be different from the effect of a reduction of the value added tax. Similarly, government spending can benefit some sectors more than others. Additionally, the type of spending determines the overall effect on the economy. Further reading For policy makers, it’s important to have an idea which types of fiscal policies work best for the goal in question. Consequently, empirical economists have spent a lot of effort trying to analyze and quantify the effects of different types of fiscal policies on growth and employment. Kneller, Bleaney and Gemmell, for example, studied fiscal policy in a panel of 22 OECD countries for the years 1970-95. The authors found in “Fiscal policy and growth: evidence from OECD countries” (Journal of Public Economics, 1999) that government expenditure only fosters growth if it is productive. Meaning, if it is defined as the sum of expenditure on education, health, defense, housing, economic affairs and general public services. Meanwhile, the authors found that non-productive government spending in the form of social security or recreation expenditure tends to hinder economic growth. Good to know During the COVID-19 pandemic many countries reacted with severe lockdown measures to stop the expansion of the virus. These actions had severe economic consequences such as rising unemployment and decreasing production. The measures to prevent COVID-19 from spreading differ from country to country as did the public policies implemented to protect the economy. The International Monetary Fund provides on its website a policy tracker. It contains information on the main economic responses governments are taking to limit the economic impact of the COVID-19 pandemic. With it, you can have a look at the fiscal policies taken by several different countries as a response to the crisis.
Government authorities use taxes and/or government spending to influence the economy of a country. This is known as fiscal policy. The government can use various tools to influence a country's economy if it thinks it's needed. During recessions or in times of economic crisis, for instance, production is low and unemployment rates are high. To stimulate economic growth the government may use tax cuts or an increase in government spending. These types of measures are known as expansionary fiscal policy.
Public Economics & Economic Policy (JEL H)
Macroeconomics and Monetary Economics (JEL E)
Browse our PhD program listings for economics 1. Cookie Monster teaches you about supply and demand It's so much easier to understand the basic principals of economics when cookies are involved, isn't it? This is the kind of Sesame Street content that we are in support of. From https://www.pinterest.co.uk/pin/15058979980424165/ 2. Opportunity costs we can all understand We all remember our student days: grassy campuses, intellectual stimulation, and the eternal question of whether to force yourself out of bed and away from Netflix and get to class. It's opportunity costs in action. From https://www.pinterest.co.uk/pin/15058979980424089/ 3. The truth of being an economist We've all had the experience of trying to explain what it is that we actually do at parties. The reactions you get when you tell people that you are an economist can be... wide ranging. That's why we can all sympathise with the image below: Photo credit: Fgcu.edu 4. The free trade debate rages on The ethics and effectiveness of free trade is surely not a debate that we've going to solve any time soon. So why not make debate points through the endlessly eloquent world of memes? From https://i.pinimg.com/originals/ac/d4/f4/acd4f482eb52da528fb773ae31f12629.png 5. Ash makes full use of comparative advantage When you've caught them all, you've cornered the market. Pokemon trainers understand that better than most. From https://i.pinimg.com/originals/ee/6f/4b/ee6f4b07247287e29d3f70dc867c5280.jpg 6. The conundrum of internet shopping Do you really need that new sofa? Those new shoes? That gadget you've been coveting? You just looked at the online shopping page briefly, but it's on sale. Maybe you should snap it up now while it's on offer? From https://www.pinterest.co.uk/pin/15058979979756752/ 7. We've all been there We all know that the candy you eat after eating 50 other candies doesn't taste as good as the first one. And yet... we can't seem to put the bag down. Bam! That's diminishing marginal returns. From https://i.pinimg.com/564x/33/27/45/33274534de5cb25af02fafadbf9d8740.jpg 8. Economics in action Who can resist a student happy hour? Not most economists, that's for sure. After all, it only makes economic sense... From https://www.quickmeme.com/user/artcarden/ 9. The realities of negative externalities We all like to think that we are not the problem – that the ills of society are caused by someone else. Except when it's something that we really need to do, like driving our cars. That's negative externalities for you. From https://i.pinimg.com/564x/ee/f8/8b/eef88b56844de8742f228363626c90aa.jpg Header Image Credit: White77 on Pixabay (free for use under the Pixabay Content License)
Economics is serious business, but sometimes we all need a break! And that's when the internet is there: to sympathise, to commiserate, and to make us smile at the end of a tough day. Fortunately the stereotype of economists being humourless is not true – there are plenty of fun and funny economists who are out there sharing their humour. From students to senior professors, there are memes on the internet to express all aspects of the study and practice of economics. Below you'll find 10 of our favourite memes that we know all economists will love!
Yes, because economic sanctions provide an alternative to military action One of the primary arguments for economics as a method of preventing war is that it provides alternative mechanisms for nation states to respond to each other without necessitating military involvement. Both nation-states and international bodies such as the UN have tools for censuring other nations that are behaving dangerously, without having to engage military tactics as a first step. For example, if a nation is behaving aggressively towards its neighbours and threatening to destabilize an area, then other nations can impose economic sanctions as a first step rather than sending in troops straight away. Economic sanctions can include trade barriers, higher tariffs, or restrictions on financial transactions. In more serious cases, an embargo or trade ban can prevent trade between the nations entirely. The nation which is the subject of the sanctions will certainly experience a drop in trade, which will negatively impact their growth and development. Additionally, they may come to be seen as a pariah on the international stage. For these reasons, a nation may decide to curb its aggressive behaviour in order for sanctions to be lifted, all without risking the loss of life or military operations. Yes, because global economic interdependence necessitates peace Connected to the use of economic sanctions is the concept of economic interdependence. The idea is that as our world becomes increasingly globalized, nations rely on each other more and more. States rely on each other even for essential tasks like food production, where large quantities of basic foodstuffs may be imported from other locations around the globe. Certainly, this is true in business, when huge multinational corporations have offices or points along their supply chain in many different countries. This is termed economic interdependence. This means that for both the political leaders of nations and for many business people living within the state, maintaining a good relationship with other states is essential for the continued well-being of the state and its businesses. If a nation needs the support of another nation, either to buy or sell goods to them, then they are incentivised to maintain a positive and peaceful relationship, and to find answers to conflicts that do not involve war. Thomas Friedman termed this the Dell theory: “No two countries that are both part of a major global supply chain, like Dell’s, will ever fight a war against each other as long as they are both part of the same global supply chain". Yes, because free trade bolsters peace and improves human rights Finally, there is a moral argument that free markets support peace and promote human rights. The idea is this: take a country with a strong economy but a dubious humans rights record, such as China. If people in developed Western nations want to improve the well-being of people in China, then they need to maintain a political connection with them. If countries decided that they would stop trading with China because of its human rights abuses, then not only would they likely harm Chinese workers, but also the Chinese government would have no incentive to improve their human rights record. In order to influence the behaviour of another nation, you need free trade with them to use as a bargaining chip. The second part of this argument states that human rights are best improved by modelling them for other countries. In order to improve human rights, nations have to interact with each other and show how a nation can progress and thrive without human rights abuses. It is therefore essential for nations to interact with each other through trade, because this is how human rights will eventually be improved globally. However, there are also arguments to the contrary: No, because war drives economies An argument against the above goes as follows: economics cannot prevent war, because economic well-being is itself supported and driven by war. In wartime, a nation's manufacturing and infrastructure are increased in order to build military structures and weapons and to mobilize those elements around and beyond the state. This increase in manufacturing leads to lower unemployment, increased efficiency, more production, and therefore a stronger and growing economy. In the end, wars can be seen as “necessary” in that they provide justification for economic growth. George Orwell popularized the concept of perpetual war, in which wars are fought endlessly not because of the actions of other states, but to preserve order within a state: “[War] eats up the surplus of consumable goods, and it helps to preserve the special mental atmosphere that a hierarchical society needs... The war is waged by each ruling group against its own subjects, and the object of the war is not to make or prevent conquests of territory, but to keep the structure of society intact.” Under this view, economics can never prevent war because war is such an effective economic driver. No, because economic sanctions eventually lead to military actions Another argument can be marshalled against the use of economic sanctions to prevent war, and that is that such sanctions are either ineffective enough to be ignored, or effective enough to harm the people of the target nation – and in this case, military actions are often not far behind. An economic sanction such as a blockade can help cut off supplies to a nation and impress upon that nation the displeasure of another. But when this blockade threatens the stability of the nation, then military action can be justified in response. For example, consider the Cuban Missile Crisis. The partial blockade of Cuba in 1962 was established by the US to prevent Soviet missiles from being moved to Cuba where they would be close to US soil. But this blockade did not alleviate tensions between the US and the Soviet Union, it increased them. Not only this, but it also pulled other nations into the conflict and obliged them to choose a side. Although eventually an agreement was reached between the US and Soviet Union, the blockade came extremely close to kicking off a third world war. Similarly, those convinced that, unlike war, economic sanctions are not harmful to the well-being of citizens should consider the blockade of the Gaza Strip that has been ongoing since 2007. The situation within Gaza is horrendous, with water that is undrinkable, not enough food to go around, a lack of fuel, regular power cuts, and the destruction of trade and industry. It would be hard to argue that economic sanctions are a more humane alternative to war when they cause such suffering. No, because history demonstrates otherwise Regarding the value of economic interdependence in an increasingly globalized society, one need only look to history to see how effective this has been at stopping war in the past. The pre-WW1 period was marked by a strong internationalisation of trade and business, with economic interdependence a key feature of the European landscape in particular. The widespread use of the gold standard made trade between nations easy, and therefore common. But this interdependence utterly failed to stop the first world war. If interdependence failed to keep the peace then, what reason is there to believe it will work now? Some writers have even argued that economic interdependence creates war by bringing powerful nations into contact with each other. As Kenneth Waltz put it, “It is impossible to get a war going unless the potential participants are somehow linked.” When states are dependent on each other, especially for essentials like food, this is perceived as a vulnerability. States, therefore, seek to control each other in increasingly severe ways as a response to this perceived vulnerability, and are more likely to end up in a situation of war. Conclusion Clearly, there are strong arguments both in favour and against economics as a method of preventing war. The difficulty is in untangling the particular effects of economic policies - the consequences can often be far-reaching, and in some cases unforeseen. The historical context, potential for a military response, and the overall state of global politics must also be taken into consideration - it really is a complex matter.
Is economics a useful tool for maintaining peace? Can nations use economic policies to avoid war? With globalization an established fact of modern politics, this question is more important than ever. In this piece, we'll consider arguments both for and against.
Tuition Fees at Czech Universities – How and Where to Learn Czech and Study for Free
Browse our programs in the Czech Republic Study in Czech for free Have you ever considered learning the Czech language? Knowing Czech has much more advantages than easier communication with the locals! Whatever you nationality is, if you study a degree programme taught entirely in the Czech language at a public or state university in the Czech Republic, there are no tuition fees, according to the country's Higher Education Act. This Act says that the foreign students have the same rights and duties as their Czech colleagues. The students can only expect paying the fees that are connected with their studies. These are administrative fees related to the entrance procedure or fees for exceeding the standard length of studies by more than one year. Programmes in foreign languages are available The offer for international students at Czech universities is expanding and there are 1,000 accredited study programmes in English offered at present. Should a Czech public or state university offer degree programmes carried out in foreign languages, it sets tuition fees for these study programmes. Even if you opt for studies in foreign language instead of a free-tuition public higher education, the costs will be lower when compared to other countries with an equally good educational reputation. The tuition fees differ from 0 - 22,350 USD per year and the amount depends on the relevant institution and study programme. Studying at private higher education institutions is always paid, no matter what the teaching language is and it varies with every institution. Czech language for foreigners Foreign students who wish to enrol in a Czech taught study programme must prove the adequate knowledge of the language and pass the entrance exams in the Czech language just like Czech applicants. If you don't know how and where to start learning Czech, you can find some useful links at the Study in the Czech Republic website. For example, you can register for one of the year-long preparatory courses of Czech language for foreigners that are organized by some Czech universities. Such courses can help you to master the language and prepare you for studies at universities in the Czech Republic. The language preparatory courses are usually paid, but there may be exceptions, e.g. in case the preparatory course is a part of the government scholarship. An alternative method of mastering the Czech language are courses organized by Czech Centres. Czech Centres were established by the Ministry of Foreign Affairs of the Czech Republic to promote the Czech Republic abroad and they are systematically expanding Czech language tuition abroad. Czech is being taught at lots of Czech Centres abroad, including Berlin, Bratislava, Budapest, Bucharest, Kyiv, London, Milan, Munich, Moscow, New York, Paris, Sofia, Tokyo, Warsaw, Vienna. For those who are not yet decided whether studying Czech language would be the right decision, summer schools of Czech culture and language might be the first step. Several public universities in the Czech Republic organize Summer Schools of Slavonic Studies which offer Czech language courses. The courses are held during the summer months, their length ranges from 2 to 4 weeks and are designed for foreign students, teachers, translators and interpreters and other experts active in the field of Czech/Slavonic studies. The Summer Schools offer language courses at various levels of proficiency, seminars on the Czech literature, culture and history, free-time activities including theatrical, musical and dance performances, trips etc. Each year the Czech Ministry of Education, Youth and Sport offers a limited number of scholarships for participation in the Summer Schools of Slavonic Studies to applicants from certain countries. More information is available here. Find out more about studying in the Czech Republic at www.studyin.cz.
More than 43.000 foreign students are currently studying at universities in the Czech Republic. Many of them don't have to pay tuition fees, because they are enrolled in Czech taught degree programmes and therefore they study under the same conditions as Czech students do. While it might be difficult right now to move during the pandemic, it's always worth keeping yourself informed of what your future options are.
Alarming Trend due to COVID-19 – Maritime Piracy on the Rise
It is more difficult for poorer countries to fight piracy, as the global pandemic has further weakened their economies. In 2019, it seemed to everyone that there was a decline in maritime piracy, with the lowest number of attacks in the world in 25 years. However, this year showed the opposite. The global pandemic did not weaken the occupation, but allowed it to flourish again. This, in turn, opened up new opportunities for maritime piracy. Due to restrictions, low trade and diseases, there are fewer crew members on board. Reduced global consumer spending means a drop in trade, which gives companies less revenue to provide greater protection on board ships, such as armaments or other equipment against attacks. As a result, ships are likely to become an easier target for sea pirates. Check out our job listings Profile of a pirate from our century Nowadays, pirates do not sail with big ships, do not wear tricorn hats like in movies and do not fly pirate flags. Modern sea pirates travel in small high-speed motorboats. Their goal is to stop quickly and rob a slower ship. Pirates are usually well-armed with firearms. The pirates aim to hijack parts, oil, crew members' personal valuables, and communication equipment - anything that can later be sold on the black market for money. In more severe cases, pirates take the ship's crew hostage for later ransom. One third of pirate attacks take place on large container ships and tankers. This type of attack is usually planned in advance, but ships are observed and tracked. One of the reasons for robbery is that criminals need resources and weapons for their fights on land, which is why ships passing by or nearby are robbed. Which countries are affected? A lot of maritime piracy affects poor countries with weak economies, weak leaders, poverty and official corruption. These include South America, Venezuela, Brazil, West Africa, Nigeria, Somalia, Yemen, Guinea, etc. These countries are also experiencing a particularly high outbreak of COVID-19, which is why the government is now focusing more on what is happening on land, while forgetting about the situation at sea. Ecuador, for example, is not a pirate's favourite place at sea, but armed robbers regularly attack ships in and around the port of Guayaquil. It is the seventh busiest port in Latin America, handling most of Ecuador's agricultural and industrial imports and exports. Cases of piracy have also doubled across Asia, with 50 incidents in the region in the first half of the year, compared with 25 in the same period in 2019. The Singapore Strait, one of the world's busiest commercial routes, has experienced 16 incidents between January and June. The number of attacks has also increased in Bangladesh, India, Indonesia, the Philippines, Vietnam and the South China Sea. Meanwhile, the International Maritime Bureau (IMB) reports that a total of 77 seafarers have been taken hostage or abducted for ransom since January. This highlights, for example, the Gulf of Guinea near West Africa, which accounts for just over 90% of all hijackings in the world. Meanwhile, in 2008, the large area of the Gulf of Aden off the coast of East Africa became the most dangerous place in the world due to pirate attacks. Somali pirates regularly hijacked large commercial ships for five years. The situation was stabilized by 2019, but there is no longer any certainty as to how things can change in the near future. In Southeast Asia, better and more coordinated air and maritime surveillance has reduced the threat of piracy through better coordination between national governments. As a result of these efforts, the number of attacks and attempts in the world has dropped significantly over the last decade, from almost 450 incidents in 2010 to less than 165 incidents in 2019, which has been the lowest number of actual attacks and attempts since 1994. Ship hijacking, which is the most serious and visible form of maritime piracy, has also decreased since 2010. But already this year, about 200 pirate attacks have been registered in the world, drawing many ship-owners’ attention. It is possible to follow the cases of maritime piracy attacks and the live piracy map on the website of the IMB Piracy Reporting Centre.
Speaking of current issues under the influence of COVID-19, events on the water, or sea, which is another parallel world with its written and unwritten laws, are somewhat undeservedly forgotten. Looking at the latest data, we need to talk about a very worrying trend over the last year. Although global maritime piracy is not as high as between 2009 and 2012, in 2020 the number of pirate attacks and attempts has increased by 24% compared to 2019.
Economic Development, Innovation and Growth (JEL O)
Urban, Rural and Transportation Economics (JEL R)
Letters of Reference for UK University Applications
Most students ask for letters of reference from their thesis advisor, academic advisor or professors with whom they have taken multiple courses or who are very familiar with their work. Such a close relationship will allow for a thorough and well-written letter. If you do not have more than one professor who you feel would be qualified or willing to write a positive letter on your behalf, it is also acceptable to ask employers or other mentors to act as a referee. If you chose this route, it is advisable to include an explanatory note detailing the grounds for your selection. Browse our UK economics programs listings here Content of the Letter The letter of reference should be no more than one page in length and should explicitly reference your overall work ethic, career interests, research skills and ability to meet deadlines. Your referee should explain their relationship to you and highlight important milestones or achievements from your academic career. Moreover, a good reference letter offers clear insight into why you are interested in the course to which you are applying and how it would fit into your academic trajectory. Your referee should be able to comment specifically on your level of engagement with material, thereby emphasizing your particular strengths. Your reference letter might indicate that you sought out extra discussion during office hours, highlighting your added commitment to go above and beyond what is required of you. Additionally, if your referee is familiar with your extracurricular work, including positions in clubs, teams or even student jobs, it is perfectly acceptable for them to mention such engagements if they are relevant to the course. If you engaged in voluntary work, it is always positive for a referee to mention such an endeavour. By referencing such activities, your referee is showing that he or she is familiar with you as a person, while also highlighting your numerous positive attributes and qualifications. <11an>limit:2;categories:jobs|courses|conferences;countries:United States;disciplines:General Economics (JEL A)</11an> Structure of the Letter A letter of reference should be written on the official letterhead of your referee’s home institution. It should contain their name and contact information on the right side and the name and address of the course to which you are applying on the left. Before the letter begins, the referee has the option to include a subject line identifying the aim of the letter. This line is not required, however. The letter should open with the formal “To Whom it May Concern,” unless you are aware of a specific person who will be heading the admissions committee, in which case that person’s name can be included. Be careful with titles, however, and if you do include a name always double check spelling for any unintentional errors that could bring down the value of the whole letter. There is no specific requirement in terms of how a reference letter is organized, though it is important that your referee display a certain level of knowledge regarding the course to which you are applying before delving into your skills and qualifications. Such a display indicates both a high level of professionalism as well as a certain level of commitment to you as a student and applicant. Admissions committees inherently acknowledge such commitment, though it may or may not be intentional on the part of your referee. Your letter of reference should conclude with an offer for further contact from your referee. Moreover, be sure that he or she personally signs the letter, or else uses an electronic signature. A letter of reference without a signature is not official. Letters of reference are often sent or uploaded separately from the rest of your application, in order for them to remain private. Just be sure that you have clearly communicated all deadlines to your referees so that no application remains incomplete due to an error in timing. If you are asked to include an uploaded version of reference letters, simply ask your referees to create a signed PDF, which you can add to the rest of your application. Header Image Credit: alexxis on Pixabay (free for use under the Pixabay content licence)
Regardless of where you are applying, nearly every course requires at least one, if not two or three letters of reference. Such documents are sometimes also referred to as letters of recommendation. In general, it is best for reference letters to be written by professors with whom you have worked closely, so they can offer detailed insight into you and your work.
MBA and PhD programs have the potential to transform your career. A PhD allows you to become a professor and pursue a lifetime of research while an MBA can open up job opportunities at the top of business and drastically increase your salary expectations. No wonder it’s a difficult decision for many people. INOMICS as the leading career website for economists wants to help you make the right decision. Therefore, we are going to run through the key factors in this decision: career direction, requirements and cost. For a quick overview check out our video on just this topic! Requirements Most Master of Business Administration programs require that you have at least two years of work experience. PhD programs meanwhile normally require that you have already attained a master’s degree or have an exceptional bachelor transcript. Obviously, your academic past will shape your choice between a doctorate and an MBA. A good tip is to read some actual MBA and PhD program overviews and their requirements. Transform a theoretical question into a practical choice. You can find hundreds or the latest MBA and PhD course right here on the INOMICS website. <11an>limit:3;categories:PhD Programs;disciplines:Economics</11an> Career Direction The key question is what ultimate career direction do you want to go in? Ask yourself this question, would you like to end up working in academia or as a researcher? If the answer is yes, then you should start by looking at PhDs. A doctorate is a pre-requisite for nearly all academic jobs. If no, then an MBA or another career training opportunity will be the better choice. Taking a PhD can be a demanding process. It takes years of hard work with little immediate financial reward. You need to love doing research and have a genuine interest in what you are studying. If you are looking at a PhD purely in terms of future salary maximisation then best look elsewhere. There are a number of pros and cons to a career in research. But there is more to life than amassing every last dollar, right? Harder to quantify factors such as job satisfaction and independence are often cited as pros of taking an academic route. Also, bear in mind your preference can change overtime. There are job opportunities outside of academia where having a PhD is a plus. Our advice is simply that if your end goal is to work outside academia then a PhD is typically not the best route to take. MBA programs are designed specifically to teach you about how businesses work and set you up to thrive at the top level of business. They are focused on practical skills and knowledge and often involve group work to mimic the cooperation required by many businesses. On a reputable MBA program, the networking with other students and alumni can often be more important for opening up new and well-paid career paths than the teaching itself. If your goal is to work at the top end of the business world then an MBA is the better choice. Cost MBA programs are normally very expensive, however. Unlike most PhD programs where funding is often provided, there are few scholarships or funding options available for MBA's aside from expensive private loans. An MBA should be viewed as an investment. How risky that investment is depends on the quality of the MBA program. Check out the quality of the school and the career prospects of graduates before proceeding. Both MBA and PhD programs involve a degree of risk. Either financial, in time or both. Remember, you might be able to reach your career goal without committing years of your life and potentially loads of cash on an MBA or PhD. There are always additional courses to improve your prospects in a career in economics. Make sure you consider other routes before committing to either a PhD or MBA. If you plan to start your PhD application this autumn, download our free guide "How to successfully apply to a PhD in Economics" Browse our PhD program listings for economics Browse our MBA program listings
Every year thousands of economics students decide to continue education, either straight away after graduation or after a year or two of “real world” work experience. Often at this point comes the question: should I pursue a PhD or enroll in a Master of Business Administration program?
Which countries own the world's largest container ships?
Leader – Panama According to the available global data, Panama currently has the largest number of ships with a capacity of more than 20,000 TEU, with at least 20 such ships, and about 10 more ships with a capacity of up to 20,000 TEU. This is quite a triumph in the international container shipping arena. Why is that? Panama is a transcontinental country in Central and South America. The Panama Canal is an economically important geographical location for the country, generating millions of dollars in tolls for the national economy and providing huge employment, as well as a significant share of Panama's GDP. Its economy has grown steadily over the past decade, making Panama the country with the highest GDP per capita in the region. The transfer of the canal and military facilities to the United States has led to major construction projects. The expansion of the Panama Canal, the large foreign and domestic investment and its strong logistics industry make sea freight to Panama a safe investment, as it is generally assessed by risk rating agencies. In total, Panama has five seaport areas: Panamas City, Manzanillo, Balboa, Colon, and Cristobal. These seaports export and import $16,000 and $17,000 million, which is the annual value of Panama's foreign trade. Due to its central geographic location, Panama's economy is mainly based on a well-developed service sector, in particular trade and tourism, which are important and growing sectors. Therefore, Panama is considered a high-income country. In addition, in politics, Panama is one of the founders of the United Nations and other international organizations such as the OAS, LAIA, G77, WHO and NAM. The world's largest container ships are also owned by Hong Kong and Denmark Hong Kong is the next largest container ship leader in the world. At least 17 of the world's largest container ships are owned by Hong Kong, but both Hong Kong and China are among the shipping operators of these ships. Hong Kong is one of the most densely populated areas in the world and has become one of the world's most important financial centres and trading ports. Hong Kong is also the world's tenth largest exporter and ninth largest importer. The economy of Hong Kong is a highly developed free-market economy characterized by low taxation, almost-free port trade and a well-established international financial market. The strengths of the Hong Kong economy are a stable banking system, almost no public debt, a strong legal system and extensive foreign exchange reserves. At the end of the 20th century, Hong Kong was the seventh largest port in the world. Hong Kong is also a full member of the World Trade Organization and owns the largest container port complex in Asia. Denmark, with at least 11 such container ships, is the third leading country in the world with the largest container ships. Not only do they belong to Denmark, but they are also operated by Danish companies. Denmark is an example of the Nordic model: its economy is modern, and the country boasts a high standard of living, well-developed public services and a high dependence on foreign trade. It is not yet possible to judge whether these leadership positions among countries could change in the near future for large container ship owners. However, given the economic stability of these countries and the well-developed freight industry, these positions are likely to remain for a long time.
According to the International Chamber of Shipping, more than 50,000 container ships are currently active in the oceans. These are large vessels that carry cargo in closed containers. The capacity of a container ship is measured in twenty-foot equivalent units (TEU), while a vessel with a capacity of more than 20,000 TEU is defined as a very large container ship.
Financial analyst The job of a financial analyst is to research and create reports on the status of companies, industries, stocks, or other financial products. These analyses usually consist of statistical tests using the advanced quantitative skills that economics majors have often acquired. But in addition to mathematical and statistical skills, such work also requires the ability to write reports and to convey this mathematical information in a clear way. This is a skill which economists tend to have more practice in than mathematicians or hard scientists, so the job is a good fit. As long as there is a market for financial products and investments, there will be a need for financial analysts so this is a job that will be in demand for the foreseeable future. Browse our analyst job listings Actuary Actuaries most often work in the field of insurance, and their job is to create models which will determine how likely it is that a given event will happen: fires, earthquakes, accidental deaths, natural deaths, businesses failing, and more. The idea is to quantify how much risk there is of a particular event occurring so that insurance companies can use this information to set the costs of their coverage. Like working as a financial analyst, this role also requires exceptional quantitative skills, although it has less of an emphasis on written reports. The insurance industry is one of the more stable industries over the long term, so this job will continue to be in high demand. Auditor An auditor works to check and verify the financial statements of companies to ensure that they have paid the correct taxes and that their finances are in good order. This requires skills in quantitative analysis, but even more so it requires recognising patterns and identifying outlying or suspicious data points. As economics researchers often focus on analysing patterns, this is a task they are well suited to. Auditing is important for all big companies and will be especially important as computerisation and automation take over more and more tasks. There is a big need for auditors who can check and verify the numbers produced by automated systems to ensure they are in compliance with all relevant regulations. Browse our auditing job listings Information security analyst An information security analyst works to create and maintain the security measures that an organisation has in place to protect them from cyber attacks. While this is traditionally a job more linked to computer science than economics, in fact, there is quite some crossover in the skill required. Security analysts require excellent attention to detail as well as a degree of creative thinking to imagine all of the ways that a security system might be vulnerable. This job is hugely in demand thanks to recent high profile hacking events, and it is a job that an economics major with an interest in computers and digital security could be well suited for. Environmental or resource economist A major growth area is the environmental sector, as companies become more aware of the importance of sustainability and the need to follow environmental regulations. Environmental economists perform empirical or theoretical studies into the economic impact of environmental issues and policies, such as examining the economic impact of new air pollution regulations, carbon tax initiatives, plans to dam a river. Environmental projects such as working to reduce waste or improve air quality have economic effects as well as ecological effects, so environmental economists are required to predict the economic outcomes of these projects. With an increased emphasis on environmental awareness all around the world, this job is one that is highly demanded. Browse our environmental job listings
When it comes to choosing a career path, pragmatic people know that they shouldn't select a job purely based on how interesting they find it. In order to have a stable, long-term career, the job path chosen should be based on the needs of the market as well as the interests and skills of the individual. For this reason, we've rounded up some potential jobs for economists which are highly in demand today.
Additional Courses to Improve Your Prospects in a Career in Economics
From business to programming to statistics, there are plenty of areas which can help you improve your chances of getting a job and widen your skillset more generally, if you've got the money and time to enrol on one. Of course, not everyone will be able to attend these courses due to aforementioned money and time limitations; however, those who are able to will find that improvement in these areas will greatly help your career prospects, and of course, if one looks to websites like Coursera and Udemy, many introductory and intermediate courses can be found for free. But which are the best areas to improve upon? Browse our course listings to help maximise your career prospects Business and finance As there is a great deal of crossover between economics and business in the job market, you can widen the potential pool of jobs to which you can apply by taking some units in business or finance. You might have such units as part of your course, or you may be able to take units from the Business Studies department in addition to your regular units. You could consider studying topics like management, marketing, leadership, or accounting, all of which can give you an edge when it comes to applying for jobs and will be useful when you start work too. Moreover, courses on business and finance are easy to find online, often for free, especially for beginners. Programming and IT You probably already have basic IT skills like online research, word processing, using spreadsheets, and perhaps using databases. Improving these skills, though, particularly alongside your studies, can be extremely useful in all sorts of jobs. Even if you're not hugely technical, you can can find some IT skills which you can learn – for example, HTML is easy to learn and being able to build basic websites will be useful to many employers. On top of this, basic coding courses, and even coding which takes you to the intermediate and advanced levels, can often be found online. Bear in mind that coding is literally another language, meaning many hours of hard work will have to be put in to become competent. Statistics and data analysis It's not always the most exciting of topics, but gaining a good understanding of statistics will help you during your degree and beyond. If your program doesn't include a methods course to teach you the basic principles of statistics, then consider taking this as an extra unit. Also think about honing your data analysis skills by learning to use software like MATLAB, SPSS, R, or Stata. This will benefit you when you are performing data analysis for your projects, and will also show to employers that you have highly technical skills. Real world projects An excellent way to make yourself stand out in the job market as a recent graduate is to have experience on a real-world project. One of the best ways to do well when applying for jobs is being able to demonstrate that you have already succeed in the type of work which they are hiring for. You can impress an employer by showing that you don't just have knowledge from your studies, but also that you know how to apply that knowledge to a real-world business challenge. Courses sometimes offer an optional placement year, and some modules will allow you to work for a time at an organisation or business; you should jump at the chance to attend courses and modules like this. Also, make sure that you record the results of your project and write them down somewhere: if you can show that your project resulted in a 10% increase in sales, for example, or made a company's processes more efficient, then you can add this to your CV and it will be a real eye-catcher for hiring managers. Moreover, keeping a diary of your efforts or a log of your duties will be helpful during the dreary task of waffling on about yourself in a cover letter. On top of all of this, internships and placement years sometimes offer full-time roles after the completion of a degree for particularly successful candidates, meaning the immediate post-degree job search is made somewhat less stressful. Soft skills One area which you shouldn't neglect in your degree is soft skills. These are non-technical skills which allow you to interact with other people more effectively, but are sometimes overlooked by students as they are not tested academically. However, you can get a lot of benefit from taking a course of a day or two on topics like giving academic presentations, writing a CV, writing grant proposals, communication skills, etc. If you're looking to improve your job hunting skills by getting better at interviews, then you can certainly benefit from such a course. Universities typically offer soft skill courses either through graduate schools (for graduate students), or through the library or research department (for Bachelor's and Master's students). Sometimes these courses are offered online, which can be useful for those unable or unwilling to head to the campus. On top of this, there is a wealth of information about soft skills online, whether in article or course-format. Check out places like Coursera or Udemy where you'll be able to find often-free courses on many soft skills.
If you're doing an economics degree and thinking about ways to maximise your career prospects once you graduate, there are lots of courses outside the realm of economics for you to choose from.
Econometrics, Statistics and Quantitative Methods (JEL C)
According to some economic theories, changes in the money supply affect investment and consequently economic growth. Economists who subscribe to Keynesian or monetarist theories believe that increases in the money supply foster investment and spending, which results in higher production and lower unemployment. At the same, though, increases in money supply raise inflation. The same is true in reverse for the opposite situation: a decrease in the money supply dampens investment and spending, which leads to a decrease in production and higher unemployment, while at the same time lowering inflation. Students should note that classical economists, however, may disagree with these views and assert that the money supply does not affect real economic variables, a theory known as monetary neutrality. This article ignores the classical viewpoint and considers monetary policy as it is typically introduced in macroeconomics courses. The role of the central bank So, how does the central bank influence the money supply? Central banks directly control the monetary base. But, they cannot completely control the entire supply of money since the monetary base only forms part of the money supply. Central banks have three main instruments available to influence the money supply of a country: the discount rate, open market operations, and the reserve requirement. The discount rate Readers may already be familiar with the idea that central banks “set” interest rates. But, central banks cannot do this directly; rather, they use the discount rate to influence interest rates in the economy. The discount rate is the interest rate at which commercial banks can take out a loan from the central bank. It is an important macroeconomic variable that has cascading effects for all other interest rates in the economy. Banks typically borrow money from the central bank when they don’t have enough liquid assets on hand to pay some unexpected obligation (i.e., withdrawal requests from customers) or to satisfy increased reserve requirements. At a lower discount rate, borrowing money from the central bank is more attractive for commercial banks (as there is less to pay back) and hence the demand for those loans increases. The same is true for the reverse; a higher discount rate increases the cost of borrowing from the central bank and decreases the demand for loans. Money borrowed by commercial banks from the central bank is then made available to private households and businesses, also in the form of loans. So, central banks can increase the money supply by reducing the cost of banks borrowing from them. Similarly, a higher interest rate makes borrowing more expensive and less attractive, incentivizing commercial banks to borrow less money from the central bank. Consequently, there is less money available for the bank to give out as loans for private households and firms. So, if the central bank wants to decrease the money supply, it can raise the discount rate. Open market operations and reserve requirements Open market operations refer to the purchase or sale of government bonds “on the open market” by the central bank. In other words, when the central bank buys and sells securities like a normal individual or firm, it’s called open market operations. If the central bank decides to buy government bonds that are held by private households, companies or commercial banks, it increases the amount of money that's circulating in the economy. This is because the central bank can simply create the money used to buy the security, adding it to the economy during the purchase. Similarly, by selling government bonds, the central bank reduces the money supply as individuals or firms give the central bank their money to purchase the asset. Then, the central bank can take that money out of circulation, reducing the money supply. The central bank has a third main instrument to control the money supply: the reserve requirement. The reserve requirement is the fraction of each unit of money deposited in a bank that the bank is legally obliged to keep as a reserve. In other words, the bank must have some amount of cash on hand that they are not allowed to use for anything except meeting their obligations (such as fulfilling withdrawal requests). The reserve requirement is set by the central bank. By increasing the reserve requirement, the central bank decreases the money supply because commercial banks must hold more of their money in the form of cash that is sitting “unused”. Therefore, they have less money to give out in the form of a loan. Conversely, if the central bank wants to increase the money supply, it can decrease the reserve requirement, which frees up more of the bank’s “unused” reserves to be lent out. While changes in the discount rate and open market operations are commonly used to alter the money supply, changes in reserve requirements are rare in practice. Contractionary vs. expansionary monetary policy Expansionary monetary policy describes policies that lead to an increase in the money supply, like decreasing the discount rate or purchasing government bonds through open market operations. According to economic theory, expansionary monetary policies will stimulate investment and consumer spending, shifting aggregate demand to the right; this leads to an increase in production and a decrease in the unemployment rate. Therefore, expansionary policies are deemed appropriate to stimulate growth during recessions when unemployment is high and production is low. But, an increase in the money supply will lead to higher inflation rates. Thus there is widespread agreement among economists that expansionary monetary policies should not be used when the economy is already performing well. Conversely, contractionary monetary policy is policy that reduces the money supply and lowers aggregate demand. While this may seem like a bad thing, in times of high inflation contractionary monetary policies are the main tool used to lower inflation and stabilize the economy. Contractionary monetary policies include increasing interest rates or selling government bonds through open market operations. A higher interest rate makes saving more attractive than spending and decreases the demand for loans as borrowing becomes more expensive. Consequently, investment and consumption decrease, and so does production. Lower production in turn will lead to higher unemployment, which may further dampen consumption. Other interest rate targets When a bank needs cash, it generally has two options for borrowing: from the central bank and from other commercial banks. The “discount rate” sets the cost of borrowing from the central bank, which was discussed above. But when commercial banks borrow from other commercial banks, they don’t use the discount rate. The interest rate at which banks borrow from each other is very important, though it can have different names depending on the country and the context. It’s important because this interest rate often sets a benchmark by which other interest rates are determined. So, if this interest rate increases, borrowing generally becomes more expensive across the whole economy. Thus, central banks may want to influence (or outright set) the interest rate that banks face when they borrow from each other. For example, in the United States, this rate is known (somewhat confusingly) as the “federal funds rate”. The U.S. Federal Reserve sets a target interest rate range, and commercial banks can borrow money from each other at an interest rate within this range. This rate is one of the key subjects of the widely-referenced “Taylor Rule”, a rule of thumb posited by an American economist that describes optimal monetary policy responses. It has often been used by analysts to predict future monetary policy. Although the federal funds rate may be used as a benchmark by financial institutions around the world, it’s specific to the US. Other countries and other financial institutions around the world may reference other rates. For example, the London Interbank Offered Rate (LIBOR) played a similar role until 2023, where it began to be replaced by the Secured Overnight Finance Rate (SOFR). These interest rates in turn influence the “prime rate” in different regions, which is the interest rate that banks give to high-quality borrowers. If you have a good financial history and healthy credit score, you’ll likely be offered the prime rate for many financial products. Further Reading The main objective of monetary policy is to ensure steady, long-term economic growth and to stabilize the economy in times of a crisis. Many economists have studied the reactions of governments during financial crises to assess the effects of monetary policies on production, inflation and unemployment. Jannsen et. al. show in their article “Monetary policy during financial crises: Is the transmission mechanism impaired?” (International Journal of Central Banking, 2019) that the effects of monetary policy on production and inflation depend on the timing of their implementation. They also show that these policies have greater effects during financial crises. The authors found that the differences in the timing and size of the monetary policies taken during the financial crisis of 2008-2009 helped explain differences in the macroeconomic performance of different countries after the crisis. Good to Know Because contractionary monetary policy can increase unemployment and slow economic growth, it can be very unpopular with individual voters. Thus, politicians may be reluctant to implement contractionary policy even during times of high inflation, to avoid becoming unpopular. Similarly, because expansionary policy encourages growth while lowering the unemployment rate, it can be tempting for politicians to implement expansionary monetary policy during an election year – even if the economy doesn’t need it. In this case, expansionary policy can lead to very high inflation that will ultimately harm the economy. These are two major reasons why most countries today keep monetary policy in the hands of a central bank that is not beholden to political leadership. This allows the central bank to conduct monetary policy that is right for the economy without interference from political pressure. Of course, this is a simplification. In the real world, different central banks may feature different levels of actual independence in practice. As research from Caixa Bank shows, central banks in many Western countries have been becoming more independent over time. In many of these countries, historical episodes of inflation or stagflation demonstrated the need for an independently operating central bank, causing the nation to be more inclined to increase central bank independence. However, while independence has proven useful, if the central bank makes mistakes or fails to react to the economy appropriately or in a timely fashion, it may cause additional hardship. This type of situation has led Australia, for example, to attempt to increase accountability for central bank officials. For more on this topic, visit Caixa Bank’s article about central bank independence.
Monetary policy refers to the set of policies that monetary authorities such as central banks use to influence the money supply of a country and thereby economic activity.
Although referencing football – specifically, the English variety - the sentiment was also thought applicable to sport more generally. Because eye-catching qualities like creativity and flair are difficult to quantify, the consensus was that judgement of sporting prowess was best left to those well-versed in said sport - in the majority of cases, former players. Certainly, the very notion that statisticians had anything to contribute in terms of team selection, acquisition, or even strategy was given little consideration. Statistical Analysis, the Roots In the UK, this began to change in the 1990s, when - as documented in the New Statesmen - undergrads at Lancaster University analysed, in-depth, goal-scoring probability in a hypothetical football match. While rudimentary in its technique, the analysis attracted the attention of more senior statisticians, namely Stuart Coles, who then expanded on the students' findings. His resultant work was to have far-reaching consequences. Across the pond, a similar development was already underway. This one, however, was to be even more transformative, radically altering the way certain sports, particularly baseball, were conceived. Owing to its easily isolated ‘one-on-one’ contests - pitcher v batter, for example - baseball lends itself well to statistical analysis. Indeed, the use of sabermetrics, ‘the empirical statistical analysis of baseball’, has been employed in some capacity ever since the sport was first professionalised. Its current use, though, both its universality and sophisticated nature, has its roots in Billy Beane’s tenure as General Manager (GM) of the Oakland Athletics, and his now much-famed ‘Moneyball Effect’. The 'Moneyball' Effect As GM of the (relatively) cash-strapped Oakland A’s, Beane’s innovative approach was the perfect manifestation of necessity being the mother of invention. With no way to meet compete with the spending power of their deep-pocketed rivals, Beane adopted an analytical, ‘sabermetric’ approach when planning the assembly of his squad, bringing into his management team a number of statisticians for the purpose. Through rigorous and incredibly time-consuming analysis, the team learnt that ‘stolen bases’, ‘runs batted in’, and ‘batting averages’ – for years the yardsticks by which a player’s ability was measured - were not necessarily the best gauges of overall effectiveness. Rather, it was not-so-glamorous ‘on-base percentage’ and ‘slugging percentage’ that were more accurate indicators of players’ potential offensive success. Historically, scouts overlooked these traits in favour of speed and contact, meaning their market price was undervalued, and players possessing said traits could thus be acquired on the cheap. It was following these new principles, heeding the word of his statisticians that Beane assembled his team. The result dismayed many, for on paper, the newly formed roster was a motley crew of old, in some cases injured, has-beens. Their appearance alone drew ire from the purists already angered by the cold scientific approach. How could a team of such visible misfits go onto success? Well, initially they didn’t. The Athletics fared so poorly during the first part of the season - enduring at one stage a 5-16 streak - that many were quick to declare the method a failure. And yet, as many will know through its dramatisation in the film ‘Moneyball’, their fortunes reversed, the A’s eventually winning the American League West, breaking the long-standing record of 19 consecutive victories in the process. The Spread Around the world, these developments did not go unnoticed. The sporting community watched keenly as baseball laid down the statistical blueprint for success. It was not long before comparable models were incorporated into the management systems of football teams, both American and English, Ice Hockey, Basketball, and many others. One of the highest profile converts was American football coach Bill Belichick. Although denouncing its use publically (to guard his methods), the New England Patriots boss had long held ‘a Moneyball sort of attitude’. In fact, the whole management team at the Patriots was imbued with a Moneyball-esque philosophy. From the owner Robert Kraft, described as the ‘biggest believer in data and analytics’, to Belichick's most trusted advisor Ernie Adams, the Patriots’ football research director and previous bonds trader, most were willing converts. Even Belichick himself holds a degree in economics. Such expertise, NBC has commented, is easily read into the team’s recruitment which is highly suggestive of a sophisticated understanding of ‘hyperbolic discounting’ - the result, thus far, has been the acquisition of high-quality players at bargain prices. On the field this has led to five Super Bowl triumphs - it seems to be working. Professional basketball teams were also quick to jump on the bandwagon, compiling huge databases of information from games that were then used in the offseason to inform decisions regarding contracts and free-agent signings. Many a romantic will be turned off by the use of intensive, analytical thinking almost instinctively. The deployment of cold, emotionless figures to make sense of sport, something that by nature is highly dynamic, emotional, and capricious, just doesn't sit right. Such a mindset, though, ignores the creative latitude many of these models allow, particularly in more fluid games like English football and basketball, where a value judgement must still be made as to which parts of the game are prioritised. But in the End... Obviously, it will never be possible to reduce human behaviour to a simple formula - no matter how badly the betting enthusiast may wish. Yet, what analysts have proven, through the employment of statistical models, is their ability to get teams punching above their weight - a weight normally dictated by financial restrictions. That said, the advantage gained, history has shown, can often be short-lived. As the A’s experienced, the problem was that as soon as these models gained credibility, they were quickly adapted, and in some cases, bettered by other teams. Just two years after the A's experiment, the Boston Red Sox also adopted a sabermetrics model to aid recruitment. The result? They won the 2004 World Series, their first since 1918.
‘Chance dominates the game’ concluded C. Reep and B. Benjamin in their 1968 study ‘Skill and Chance in Association Football’ - and not without consequence. Until recently, this statement stood as received wisdom, the phrase deemed self-evident, its veracity left unquestioned. Predictions based on statistics were a folly they said, the game was ‘too fluid, too unpredictable’.
Inventory of hazardous substances in container vessels: another necessary but bureaucratic burden for carriers
In addition, as early as the end of this year, from 31 December 2020, in accordance with the European Union Ship Recycling Regulations (EUSRR), ships of 500 gross tonnage and upwards with the EU member state flag and all other ships, regardless of country of origin, will be required to keep an inventory of hazardous substances and materials (IHM) when visiting an EU or European Economic Area (EEA) port. New European ships and EU-flagged ships which are being dismantled must have this list of hazardous materials (IHM), inspected by the relevant administration or authority, indicating the location and approximate quantity of these materials. Check out our engineering jobs listings COVID-19 is stirring things up However, as a result of the COVID-19 coronavirus pandemic, many ship-owners may not be able to complete the required Inventory of Hazardous Materials (IHM) before the deadline. To this end the British and International Maritime Council (BIMCO) recommends that its members firstly develop an IHM on older ships. Older ships are usually recycled more quickly, and such planning will show that ship-owners are proactive in meeting the requirements of the new EU regulations. In addition, as members of BIMCO, www.strategies.lv has already written to the European Commission and asked for favourable conditions for all parties concerned regarding the deadlines for shipping companies to complete the IHM process while dealing with COVID-19 limitations and outages. The letter also includes a set of industry guidelines on compliance with EU ship recycling regulations and the establishment of an inventory of hazardous materials, which BIMCO members are encouraged to use. It is now known that the new regulation will affect approximately 137 (58%) of the 236 BIMCO member vessels. Only 33 ships have completed their work on this, while the rest are in various stages of development in an attempt to meet these new requirements. www.strategies.lv is propounding streamlining of the system, but it also wants it to be a reasonably achievable condition for all market participants and for this new bureaucratic burden not to further restrict companies which are already hit by the pandemic.
The European Union (EU) is working very hard to make ship recycling greener and safer in the future. It is quite clear that the dismantling of ships in many parts of South Asia in its current state is not acceptable, either from an environmental or a social point of view. Ship recycling regulations, adopted seven years ago, are finally gathering pace now. In particular, the regulation firstly prohibits or restricts the installation and use of hazardous materials such as asbestos or ozone depleting substances on board ships.
How to Write a Successful Motivation Letter for Economics Conferences
Browse our economics conference listings Start with the basics: your name, institutional affiliation, and a very brief career recap You should open your letter of motivation by introducing yourself and giving basic information on your current role and the current topic of your economics research. You may want to include a sentence in which you mention the positions you have held previously, or any grants which you have been recently awarded. However, the majority of your letter should be about your research rather than about yourself, so keep this section short and to the point. Give a basic description of your economics research You don't need to describe the exact details of your research, such as the experimental methods used or the results which you have gathered so far, as this information should be contained in your abstract. But you should give a simple summation of which sub-field you work in and what your research is about. Keep this general, as the people reading it may not be experts in your area. Imagine you were describing your work to a friend who works outside of academia, and write a few sentences about your research in this style. <11an>limit:2;categories:conferences;disciplines:General Economics (JEL A)</11an> Fit your topic to the conference theme As well as a general topic or subject which they cover, many economics conferences will have a theme which is different each year. The theme will typically reflect a large or important issue in the field which has been prominent over the year. If you can find a way to fit your research into the conference theme, this will greatly improve your chance of being accepted. The fit doesn't have to be perfect, but the themes are usually designed to be flexible, so put a sentence into your abstract about how your findings do or will impact on the theme and you'll make your presentation more relevant for the conference organizers and the audience. Be specific about the benefits of your economics research You probably know that you should describe all the ways that your research could have an impact on the field, in order to persuade the conference organizers that the attendees would benefit from hearing about your work. However, you should avoid the common mistake of describing the benefits of your work in generic terms. For example, 'This work will help to develop a more complete understanding of [this particular sub-field]' is too vague and is not convincing. Instead, be specific about the benefits of your work, for example 'This work will add the perspective of [a particular group] which is currently missing from analyses in [this particular subfield].' Also make sure to note why your research timely and of relevance at this time in particular. For example, 'Following the publication of [major work] last year', or 'With the [major world event] approaching next year, this research adds [a new perspective/important data/a new theoretical framework or idea] which is important at this time because...' Describe how your economics research is relevant to the conference audience You should consider why your work would be of interest not only to other members of your field in general, but to the audience at this conference in particular. For example, if you work in psychology in the field of mental health, and you are applying to a conference with a strong clinical focus, then you could describe why your work would be useful to clinicians for their practice. Or if you are applying for an interdisciplinary conference, describe the relevance of your work to the other fields represented at the conference.
When you apply to present at an economics conference, you'll often be asked to provide a letter of motivation along with your abstract and CV. This is used to decide which applicants will be invited to give a talk or poster presentation at the conference. But what information should this letter of motivation contain, and what's the best way to increase your chances of being accepted to present?
Freight container market needs a two-year recovery period
At first, everyone thought that this was just a problem for China: a significant reduction in manpower, the closure of factories and shipyards, but, as the events unfolded, it was already clear that this was a global crisis. Various restrictions have led to labor shortages in all segments of China's shipping industry, which in turn has affected trade, and this decline is the sharpest in 16 years. China is a major player in the international trade chain, with the most active and important shipping container ports in the world. Although the country was the first to be hit by the coronavirus, it is one of the first to embark on a recovery path, while the rest of the world is still overcome by uncertainty and chaos about the future scenario. Check out our engineering jobs listings Surplus cargo - a major problem in the shipping industry As a result of the economic consequences of the coronavirus, the volume of cargo imported into the USA also decreased significantly - by 12.5%. These retail figures sharply reflect the extent to which domestic consumption of goods has declined, but it will take a long time to recover to pre-coronavirus levels. The United States has also imposed strict restrictions on ships entering Chinese ports by imposing strict crew and ship surveillance. According to the coast guard guidelines, the ship's crew is currently required to have a 14 day quarantine period. These requirements are causing a significant drop in trading activity, which is halting the progress of industry processes. Another trend that is exacerbating the transport market as a whole is the increase in demand for small vessels, while large vessels are experiencing a sharp drop in chartering tariffs on the main long-haul routes with the most delays. With container vessels at a standstill, a new record of -2.65 million TEU was reached in the spring of this year, driven by the transport of semi-empty or virtually empty vessels. Baltic and International Maritime Council (BIMCO) expects the idle fleet to remain at around 10% for the remaining year, which is also in line with the World Trade Organisation's optimistic scenario of a 10% reduction in container traffic demand in 2020. Given that most international cargo ships are quarantined, surplus cargo will create additional problems for freight operators. In some cases, due to increased congestion in ports, containers are sent back to the country of origin because there are countries that avoid Chinese shipments. China is a major importer of crude oil, so the slowdown in economic activity in China is certainly having a negative effect on demand for crude oil tankers. This is also noted in the market research Vessels Value data, which this year showed a sharp drop in demand for Chinese crude oil tankers. From an average of 3.4 billion ton miles per day in 2019 to almost zero today. However, it should be noted that fluctuations in fuel prices have led to a direct reduction in shipping costs for a number of operators. Namely, the demand for oil tankers is currently increasing, as the "collapse" of The Organization of the Petroleum Exporting Countries (OPEC + Alliance) led to a 30% drop in oil prices and a possible price war between the world leaders. Nevertheless, the COVID-19 pandemic is expected to severely damage oil demand 2020, which will have a negative impact on oil transportation rates in the coming months. Demand for container transport will not recover in the short term Experts already estimate that the demand for container transport will not recover in the short term, it will take at least two years. As the virus continues to spread like wildfire, container shipping is increasingly becoming the epicenter of the global shipping industry crisis. The sale of containerized consumer goods has been hit hardest by various restrictive measures and consumer habits, so the crisis could last long enough. The current scenario, which revolves around the coronavirus, has caused a number of setbacks in the maritime and shipping sectors, and it is still quite difficult to predict the future of the shipping industry. If COVID-19 restrictive measures are reviewed at the level of policy makers, this will stabilize the situation and make it more predictable.
The COVID-19 crisis has hit hard enough and continues to affect the global container shipping market. The current economic situation does not give much hope for a short-term recovery of this market. Demand for container shipments has fallen sharply, especially as China closed much of its plants in February 2020. The volume of production or cargo to be exported to other countries plummeted. The situation was exacerbated by a number of restrictions and requirements in almost every industry and in the world's ports.
Event management and organization during the coronavirus outbreak
Virtual options such as GoToMeeting and Zoom are viable solutions which allow conference organizers to host their events safely, in spite of the pandemic. Virtual broadcasting may also allow you to expand the options available to participants. Here’s how: Pre-recorded sessions: Allow each speaker to submit a recording of their presentation along with corresponding written materials. This will enable you to offer your participants access to all materials, or only to those materials which are most relevant to them. This will allow you to structure your pricing in the most effective way, enabling you to offer a more personalized experience and ensuring participants get the best value for their money. If you want to learn more about the risks and challenges for conference organization and recruitment during the 2020 pandemic, download our e-guide resource about recruitment during Covid-19. ➲ Download our e-guide "Recruitment during Covid-19" here Live webinar packages: Live webinars are the best option if you want to give participants a more hands-on and interactive experience. To this end, you can provide a link to all prospective participants asking them to join in at the appropriate time on the scheduled date, allowing them to be part of the active discussion and to ask questions. If you haven’t gotten the message out yet, be sure to take the opportunity to remarket and rebrand your conference or event as an entirely online experience. Social media live events: Going Live on Facebook or Instagram, or using other tools such as YouTube, LinkedIn or Twitter is an excellent way to broadcast your event while growing your social media presence. Social media is a handy tool since users will most likely already have the apps installed or can use it via their browsers; it eliminates the need for any links to be shared or for any type of prior coordination. Users can just click on your social media profile and join in on the conversation. Being honest and clear will get you far and help you establish a good working relationship with your participants. Engage with them every step of the way and make sure they know what’s happening. Communicate concisely and promise only what you can deliver. During the upcoming months, we are releasing a series of articles on recruitment tips and advice during Covid-19. If you are interested in following this series, subscribe to our Newsletter. As a welcome gift you will receive our recruitment e-guide as well as exclusive access to special promotions for our subscribers. If you are interested in promoting events offered by your institution, please contact us at info@inomics.com. We will be happy to boost and support your recruitment strategy during these tough times, help you plan and optimize your strategy for 2021, and support you in reaching your last attendee quotas in 2020 and beyond.
One of the areas of recruitment most adversely affected by COVID-19 is that of conferences and events, which until 2020 had been almost totally based on on-site attendance. With long-term health and safety measures in place affecting and restricting public gatherings, it is now time to rethink budget allocations and put them towards online broadcasting facilities as well as equipping your conference environment with the tools to continue, remotely.
Within free-market economies, market players act via the relevant mechanism or accepted system of determining prices and quantities bought and sold in the market. Occasionally, the actions of market players affect the welfare of individuals and groups who are not directly involved in the market. Such effects are called externalities because they are external to the market. For example, the production of particleboard releases toxic chemical waste into the environment. If producers and consumers are left to negotiate prices freely then the cost of this externality, the environmental damage, will be ignored. Other individuals and groups in the economy who have no need for particleboard will suffer the externality without compensation. This situation is illustrated in the graph: the equilibrium quantity of particle board in the market \(Q_{1}\) is determined where the marginal benefit (\(MB\)), or marginal revenue, to producers equals their marginal private cost (\(MPC\)). If the environmental damage can be costed then for each unit of particleboard produced the additional toxic waste and associated marginal damage (\(MD\)) can also be included in the graph. It follows that the additional cost to society as a whole from the market for particleboard, its marginal social cost (\(MSC\)), is the sum of the marginal private cost and the marginal damage\[MSC=MPC+MD.\] A new socially optimal equilibrium quantity \(Q^{*}\) is determined, taking into account the externality, where the marginal benefit from particleboard production is equal to its marginal social cost. Note that while this quantity \(Q^{*}\) is less than the free-market quantity \(Q_{1}\) it is nevertheless still positive, i.e. it is socially optimal to produce some particleboard. This is because some members of society, namely the producers and consumers of particleboard, stand to gain from it. A compromise is met in which the costs and benefits are simply set against each other from a social perspective. In the above example it is in society’s interest to move from the free-market equilibrium \(Q_{1}\) to the socially optimal equilibrium \(Q^{*}\). This can be seen by quantifying the loss to particleboard market participants in terms of forgone consumer and producer surplus, represented by the pink triangle in the graph, and subtracting it from the reduction in damage, represented by the shaded blue area under \(MD\) in the graph. The result is a positive net social gain (\(NSG\)), which, as shown in the blue triangle between \(MSC\) and \(MB\) in the graph, is also equal to the reduction in social cost minus the reduction in (private) benefit to market participants when moving from \(Q_{1}\) to \(Q^{*}\). Figure 1: Net social gain from "correcting" an externality The obvious question, once one has established the presence of an externality and the existence of a socially optimal equilibrium, is how to get there. More often than not a public (government) response to the externality is required, however, in some cases a private response will be sufficient. In free-market economies, firms that cause general forms of pollution through their operations are often taxed by the government, to compensate society for the environmental damage. The value of the marginal damage is paid back by the firm to society through the tax, and as a result of the effective increase in their costs, firms decide to reduce production. An alternative public solution is for government to allocate a fixed number of pollution rights and to charge firms for the right to produce and cause a limited amount of pollution (here, the ‘socially acceptable’ amount caused by producing \(Q^{*}\) in the graph). Such rights can be auctioned and allocated to the highest bidder, in order to maximise compensation to society for the damage. Each of these solutions effectively ‘internalizes’ the externality back into the market such that the socially optimal equilibrium is preferred by market participants over the original free-market equilibrium. In certain instances, the externality only affects one or a few other members of society. A classic example of externalities is that of a river flowing in a remote part of the country where people fish for food. People living upstream may catch fish before the fish swim downstream so people living downstream have none left to catch. In such cases it is important to have clarity on who owns the rights to the fish in the river, in order to avoid conflict over what then becomes a scarce resource. Yet as long as property rights are properly assigned and upheld by law, and it is not costly for individuals to bargain with one another over these rights, it will not be necessary for the government to intervene any further to manage the externality caused by over-fishing. The individuals affected will sort it out on their own. This laissez-faire solution to the problem of externalities has come to be known as the Coase Theorem after the late economist and Nobel laureate Ronald Coase who described it in “The Problem of Social Cost” (Journal of Law and Economics, 1960). Further reading The problem of externalities in economics and the Coase Theorem are discussed in detail in chapter 5 of Public Finance by Harvey Rosen and Ted Gayer (10th edition, 2013). Good to know As already mentioned, externalities can also be positive. For example, a farmer planting orange trees to grow and sell oranges will be providing new nectar and pollen sources for bees, which benefits the local ecosystem and everyone living in the area. It may be in society’s interest to encourage a greater production of orange trees than the farmer would choose if left simply to the market for oranges. In such cases of potential marginal social benefit, the government can offer subsidies to farmers to increase production. Of course, subsidies also require financing so it is important to quantify the social benefits, and weigh them against any costs when making policy decisions.
Externalities are costs (negative externalities) or benefits (positive externalities) of market transactions that are not reflected in the market price and that affect individuals who are not participating in the market. Depending on the allocation of property rights in the economy, the presence of externalities is addressed through negotiation between the affected parties and/or government intervention in the market.
In order to calculate an elasticity of substitution, it is first necessary to determine an isoquant. From there, one must work out input ratios and marginal rates of technical substitution (or MRTS) along the isoquant. An isoquant represents combinations of inputs \(x_{1}\) and \(x_{2}\), which are required to produce a given level of output \(\overline{Y}\). These combinations along the blue isoquant \(f\left(x_{1},x_{2}\right)=\overline{Y}\) are visible in the graph below. For any given point \(\left(x_{1},x_{2}\right)\) on the isoquant \(f\left(x_{1},x_{2}\right)=\overline{Y}\), it is possible to compute the input ratio. This is simply the quantity of one input divided by the other \(\frac{x_{2}}{x_{1}}\), as depicted by the gradients of the pink and grey lines in the graph. Any production technique that uses inputs \(x_{1}\) and \(x_{2}\) to achieve output \(\overline{Y}\) will have an input ratio specific to that particular technique. For any given point \(\left(x_{1},x_{2}\right)\) on the isoquant \(f\left(x_{1},x_{2}\right)=\overline{Y}\) one can also calculate the marginal rate of technical substitution \(\frac{-dx_{2}}{dx_{1}}\). This is the rate at which input \(x_{1}\) can be exchanged for input \(x_{2}\) while maintaining the level of output at \(\overline{Y}\). Figure 1: Elasticity of substitution along a curve In essence, elasticity of substitution \(\sigma\) measures how easy it is to move between points along an isoquant. When moving between such points there are changes in both the input ratio and the marginal rate of technical substitution. Elasticity of substitution sets proportionate changes in the input ratio against proportionate changes in the marginal rate of technical substitution such that \[\sigma=\frac{\frac{\Delta\left(x_{2}/x_{1}\right)}{x_{2}/x_{1}}}{\frac{\Delta\left(-dx_{2}/dx_{1}\right)}{-dx_{2}/dx_{1}}}.\] A positive value of \(\sigma\) indicates a certain degree of substitutability between production inputs. For the extreme case of perfect substitutes, elasticity of substitution approaches infinity \(\sigma\rightarrow\infty\). Electricity from two different suppliers could be seen as an example of a perfect substitute. Indeed, the electricity does the same job of powering production, regardless of the supplier. On the other hand, a value of \(\sigma=0\) indicates just the opposite: the inputs cannot substitute for each other, as they are perfect complements. Therefore, one cannot be employed without also employing the other. For example, in car production, wheels require tires: neither is sufficient on its own. Thus wheels and tires are perfect complements. In general, elasticity of substitution changes at different points along an isoquant. For example, it may be harder to swap machines for people (low \(\sigma\)) when only a few people are involved in production. On the contrary, it is easier to introduce machines (high \(\sigma\)) while there are still enough people to run the machines. However, a special case is one in which the elasticity of substitution is at a constant level for any combination of production inputs. That is, \(\sigma\) is the same value at any point along the isoquants that represent the production function. In practice, this is somewhat unrealistic but it simplifies the mathematics considerably, in particular for empirical modelling. This explains why the assumption of Constant Elasticity of Substitution (CES) is popular among economists studying production. The best-known example of a CES production function is the Cobb-Douglas production function. The decision about how to organise production depends both on the substitutability of production inputs (value of \(\sigma\), shape of isoquants) and on the relative cost of the inputs to one another, which can be represented by means of isocost lines. For example, if an energy firm produces electricity both through an environmentally friendly source (e.g. wind) and by burning a carbon fuel then how much of each input (wind or carbon fuel) the firm allocates to electricity production will come down to their relative cost. Of course, if the firm suffers a bad reputation for causing harm to the environment then the reputational cost could also be internalised within the production cost. This would make it more likely for the firm to choose or increase its use of the green source. Alternatively, governments could seek to regulate the market for electricity (see the articles on positive and negative externalities). Further reading For an application of elasticity of substitution to the theory of environmental economics, see the paper by economists Daron Acemoglu, Philippe Aghion, Leonardo Bursztyn, and David Hemous, “The environment and directed technical change” (American Economic Review, 2012). The authors compare ‘clean’ and ‘dirty’ technologies within a model of sustainable growth, offering recommendations for different types of government intervention that depend on the substitutability of inputs. Good to know The concept of elasticity of substitution is also applicable to the theory of demand, for the analysis of indifference curves and the substitutability of goods and services in consumption. The concept dates to the early 1930s, when it was originally developed simultaneously and independently by economists John Hicks and Joan Robinson. Ironically, one might argue that Hicks and Robinson were good substitutes for one another in the production of economic knowledge, with a mutually high value of \(\sigma\)! Nevertheless, from the student’s perspective, a good understanding of this concept requires some effort. As Thomas Edison once said, there is no substitute for hard work. <o:p></o:p>
Elasticity of substitution measures the ease with which one can switch between factors of production. The concept has a broad range of applications. For example, it can be used to compare labour and capital in firms, or native versus immigrant workers in the labour market. Additionally, it can assess 'clean' versus 'dirty' methods of production for environmental economics.
Derivatives are widely applied in economic modeling and theory, because they are an invaluable tool used to measure the effects and rates of change in economic variables and find the maximum and minimum values of functions. Microeconomists and macroeconomists alike make frequent use of derivatives. The technique is key to solving constrained optimization problems, such as Lagrangian optimization, for the purposes of maximizing utility and profit. Many other decision problems can be represented mathematically and solved using first derivatives. Further, derivatives are often important for understanding why certain models of the economy differ or to examine their underlying assumptions. Using derivatives in economics with a profit example Consider the following production cost function for a good C(q) = k + aq2 where k is a fixed cost, q the number of units produced and a is a parameter representing variable costs. C(q) represents the total cost of production for q units of the good. When making the decision about how much of the good to produce, a profit-maximizing firm will be interested in the cost of producing the last unit of the good (known as the marginal cost) and aim to set this equal to the extra revenue from selling that unit (marginal revenue). Suppose that (total) revenue from selling this good is simply the unit price p times the quantity sold R(q) = pq. Then profit (π) will be revenue minus cost π(q) = R(q) - C(q). Maximum profit is found by taking the first derivative of the profit function and setting it equal to zero: \[\begin{aligned} \frac{\partial\pi\left(q\right)}{\partial q}=\frac{\partial R\left(q\right)}{\partial q}-\frac{\partial C\left(q\right)}{\partial q}&=0\\ \Leftrightarrow\ \ \ \frac{\partial R\left(q\right)}{\partial q}&=\frac{\partial C\left(q\right)}{\partial q}\\ \Leftrightarrow\ \ \ p&=2aq\\ \Rightarrow\ \ \ q^{*}&=\frac{p}{2a}.\\\end{aligned}\] Since the first derivative of the profit function is zero at this optimal point where p = 2aq, profits are neither growing nor falling. It can be verified that the point is a maximum (and not a minimum) by taking the second derivative of the profit function: \[\begin{aligned} \frac{\partial^{2}\pi\left(q\right)}{\partial q^{2}}&=\frac{\partial^{2}\left(pq-\left(k+aq^{2}\right)\right)}{\partial q^{2}}\\ &=-2a,\end{aligned}\] which is negative for positive a, i.e. the gradient (or slope of the tangent line) of the profit function is decreasing in q. In other words, as q grows, profits increase by a smaller amount, and beyond the optimal point q* profits begin to decrease as q increases further. So, profits are still growing at q < q* but falling for q > q* and therefore profits are at a maximum at q = q*. This example is represented in the following graph where it is shown how profits (π) are maximized at point q = q* where the first derivative of the revenue function, which is marginal revenue, equals the first derivative of the cost function which is marginal cost (in other words, the point where MR = MC): Figure 1: Graphical representation of profit maximization In Figure 1, the red line shows the profit function. It is at its maximum at the point q*, which is also the point where the green cost function C(q)’s derivative (or slope of the tangent line) equals the slope of the blue revenue function R(q). Recall that this is the point where marginal cost equals marginal revenue. Pointed out on the graph are the three relevant points on each function. Recall that profit is maximized at the point where the first derivative of the profit function equals zero. This is shown by the red arrow. This produces q* as the optimal quantity. It can be shown that the first derivatives of R(q) and C(q) are equal at this point by plugging q* into the provided functions and solving; these points are denoted by the blue and green arrows in the graph. A note on total derivatives The above example involves simple, direct, partial relationships between output quantity q and revenue/cost/profit. In most real-world situations, revenue and cost will also depend on other variables. For example, revenue is also affected by sales effort e and marketing expenditure m. Costs are additionally affected by the price of raw materials r and wages w. Insofar as these other variables interact with the production quantity, it may be necessary to calculate the total derivatives of the revenue and cost functions with respect to q in order to determine the optimal level of production, \[\begin{aligned} \frac{dR\left(q,e\left(q\right),m\left(q\right)\right)}{dq}&=\frac{\partial R}{\partial q}+\frac{\partial R}{\partial e}\frac{de}{dq}+\frac{\partial R}{\partial m}\frac{dm}{dq};\\ \frac{dC\left(q,r\left(q\right),w\left(q\right)\right)}{dq}&=\frac{\partial C}{\partial q}+\frac{\partial C}{\partial r}\frac{dr}{dq}+\frac{\partial C}{\partial w}\frac{dw}{dq}.\end{aligned}\] Calculating these total derivatives takes into account any indirect effects of changing the production quantity on revenue and cost that arise due to potential differences in sales effort, marketing expenditure, the price of raw materials and wages brought about by changing the production quantity. Further reading Hal Varian offers a simple introduction for economists on how to calculate derivatives of functions, both total and partial, in the mathematical appendix to his popular text book Intermediate Microeconomics: A Modern Approach (see sections A10 to A13 of the ninth edition). Good to know More often than not, when economists compute derivatives of functions they are performing ceteris-paribus analysis. Taking the partial derivative of a function y = f(x1) with respect to x1 is done to estimate the effect of x1 on y while assuming that all else remains equal. This is why many economics courses only focus on the partial derivatives and assume that other influences on the revenue and cost functions remain constant. Therefore, total derivatives are seldom used in most economics courses. However, it’s still important to remember that basing economic reasoning on partial derivatives involves making the key assumption that other factors are held constant.
Derivatives of functions are computed using differential calculus. A derivative in calculus is defined as “the rate of change of quantity y with respect to quantity x”. This sounds very similar to the definition for a slope, and in fact the derivative can be thought of as the slope of a curve. This article will discuss the usage of derivatives in economics, but will not explain how to calculate derivatives.