Time management One of the first skills that you'll pick up in your PhD program is the ability to manage your own time. Unless you have an unusually overbearing supervisor, you will have to be responsible for organizing your own working days and making sure that your work gets done on time. This is excellent training for other roles later in your career in which you will have to allocate time for various tasks to meet deadlines. Browse our PhD program listings for economics Importance of prioritization Related to time management, you will also learn to assess the priorities of various tasks. What needs to be done right now, and what can wait? Is it better to get small tasks out of the way quickly, or should you tackle big, demanding projects first? There are different styles which work for different people, and being responsible for your own research project will teach you which prioritization techniques work for you. How to work with others Although doing a PhD is largely an independent undertaking, you will also need to work with others. Whether working as part of a research group or organizing an event with your fellow PhD students, you will learn to listen to others, to make your own suggestions to a group, and to find compromises. These are all invaluable skills for later in life. How to give an oral presentation At some point in your PhD you will be required to give an oral presentation, such as at a conference, workshop, or as part of your thesis defense. You will get in practice at putting together interesting slides, at speaking clearly to a group, and at conveying information in a comprehensible way. Self-motivation One of the biggest challenges to overcome in your PhD is having to motivate yourself. It's unlikely that anyone else will push you to get your work done, so you have to find ways in which you can encourage yourself, even when you're tired or bored. Being able to push through negative emotions to meet your goals is one of the most broadly useful life skills you can acquire.​ Effective writing and editing Whether you write up your thesis as one large document or as several shorter journal articles, you will learn a lot about making sure that your writing is not only accurate, but also concise and engaging. People who have done postgraduate study will have much more writing experience than most of the public, and this is advantageous for many career paths. <11an>limit:3;categories:PhD Programs;disciplines:Economics</11an> Independent creative thought An underrated skill that you will pick up from running your own research project is the ability to think about problems in creative ways and to come up with novel solutions and ideas. Because you will be working on a new and previously uninvestigated topic, you will not always be able to rely on the concepts of others, and will have to find your own approach to issues. The confidence that this gives you will help you when problem solving in future situations, both personal and professional. Learning how to learn Possibly the most useful thing that you'll discover when doing a PhD is what learning methods are effective for you and how to make use of them. You may need to teach yourself skills such as data analysis, programming, or other technical skills. Beyond acquiring the skills themselves, you will also find out about how you learn, and what teaching methods work best for you. Do you like to read a lot of written information? To see someone knowledgeable working in practice? To test and experiment with new tools by yourself? Being able to identify the methods that work for you will mean that you are capable of teaching yourself any skills that you may require in the future, which is helpful whenever you come across a new or unfamiliar situation. Header image credit: Pixabay.
Doing an economics PhD will make you an expert in your research topic, but, beyond that, it will also teach you a number of valuable lessons which are applicable to other jobs and your personal life. Here are some of the most useful lessons that you'll learn from undertaking your own independent research project. If you plan to start your PhD application this autumn, download our free guide "How to successfully apply to a PhD in Economics".
How to balance your PhD and your social life
Treat your PhD like a regular job One of the challenges of adjusting to life as a PhD student is the lack of a firm schedule or a definite structure. Although there are options for structured PhD programs, especially in the US, many PhD programs do not have required coursework or set work times. This can make it hard to know when you should be working, and conversely, when you are allowed to take time off. To help with this, where possible set some regular working hours for yourself and try not to answer emails outside of normal working hours. There can be considerable pressure from your supervisor and others to be available at all times, but waking up in the middle of the night to answer emails is not healthy. And, if you stick to regular working hours – for example, 9 to 6 from Monday to Friday – you'll have less of a need to answer late night emails. This will help to keep your evenings free for social events, both practically and mentally. <11an>limit:3;categories:PhD Programs;disciplines:Economics</11an> You need holidays and days off Similar to the advice above, when doing a PhD program there is a feeling like you should be working every spare second that you have. But no one can work 100% of the time. For the sake of your social life and your well being, it's vital that you take weekends and holidays off. Use this time to see friends and family and try not to think too much about work while you do. One good way to take vacation is to add a few days to the end of your trip when you travel to a conference. Conferences are usually held in exciting locations and you'll only need to pay for the extra days at a hotel and your daily expenses. A few days off after a busy conference can be a great way to relax with friends, co-workers, or a partner. Attend social events at your institution If you don't know many other people who are doing a PhD, you might feel very isolated and like no one understands what you're going through. A good way to get to know other people in the same situation as you is to attend grad school events at your institution. It is always helpful to get to know other PhD students, especially those working in your field, so that you can support each other and trade tips on succeeding at a PhD. Taking this time to meet and chat with other PhDs isn't only important socially – it's also a part of professional networking. So don't feel bad about taking a few hours after work to go out with your fellow PhDs. Prioritize events and don't try to do everything On top of your research work, when you do your PhD you'll have lots of other events to attend too: department meetings, grad school events, lectures, workshops, conferences, summer schools, and more. These extra events can absolutely help you in your PhD and you should definitely attend some of them. However, you won't be able to attend everything – and if you tried to then you wouldn't have time for your research, let alone for time off. So prioritize these events – what is necessary, and what is optional? You are allowed to decide not to attend a lecture or other event if you are just too busy. Create a timeframe for finishing your PhD A difficult part of finding a balance with your PhD is that it is such a long-term project; usually it lasts at least three years, but often more. This makes it hard to know what goals you should be hitting when, which in turn means that you don't know when it is reasonable to take time off. A way to deal with this is by drawing up a timeframe of your PhD which plans the dates by which you would like to have achieved certain goals. For example, maybe you would spend three months researching experimental methodologies, another three months designing and implementing your own methodology, six months of data collection, then a year on your data analysis and writing up a paper. Once you have this timeframe, even if it is only approximate, you can feel more confident about your progress through your PhD and feel less guilty about taking time off. Knowing that you are hitting your targets will allow you to take social time more comfortably.
Doing an economics PhD can feel like an all-encompassing task, but it's important for your well-being that you have a social life during this time as well. It can be hard to balance the two, but if you don't, you may find yourself overwhelmed and not able to enjoy your time researching and writing as much. Here are tips on balancing your PhD with your social life.
If you go through curricula vitae of recent PhD graduates, you may find it’s not uncommon to see that a PhD owns two master’s degrees. As lots of MA/MSc in Economics programs are one-year programs, some students will pursue an MRes or MPhil in Economics afterwards. Others may opt for a degree in applied mathematics, statistics or another field with an intention to strengthen their quantitative and/or coding skills (summer school programs are another option to do this). Even more common in those CVs is seeing a predoctoral research assistantship (henceforth, “predoc RA”). For many students, this job was done during their bachelor’s or master’s studies, while for others, it was a full-time predoc RA position in the interim before their PhD programs. Both of these cases are what the phrase “predoc life” refers to in this article. As a current PhD student who has fairly recently experienced the application process, and who has quite a few friends and peers who have also had this experience, I’m sharing this overview to help others who are considering a PhD. This article is specifically for those students who are not sure whether to apply to a PhD straight away, or to extend their predoc career first. <11an>limit:3;categories:PhD Programs;disciplines:Economics</11an><o:p></o:p> The pros and cons of predoc life There are differing viewpoints about whether prolonging your predoc life is helpful or not. Although receiving broader academic training, replacing the current GPA with a better one, and developing a more fully-fledged research idea are some of the many pros, the cons deserve to be shared. Given increasingly difficult admissions (which has been observed, but as of this writing not proven), a second Master’s without plenty of advanced courses and excellent grades may even hurt your chances of being admitted to a PhD program. Likewise, a full-time predoc RA position does not necessarily help a lot if the professor is not truly satisfied with your work and would not give strong support to your application. Anyhow, a research Master’s, predoc RA, or even a combination (a few master’s programs actually offer RA positions to all admitted students, such as the Master in Quantitative Economics at LMU Munich) tend to be indispensable for candidates who want to earn a place in prestigious programs, although the minimum requirement of some of those programs on the surface may just be a Bachelor’s degree. A PhD fellowship is highly demanding, even beyond top-ranked programs. For that reason, many students have to choose between a fully-funded fellowship or a more prestigious program. On the one hand, more prestigious programs are more selective, offering self-funded admission or partial scholarships (tuition waiver or similar) to candidates who are qualified but less competitive in their intake year. On the other hand, “aiming lower” can make applicants eligible for full scholarships in some other programs. What are common PhD pathways? Regardless of program choice, sometimes we have no choice but to catch up with our peers, or we may simply self-select and join this marathon. Reasons we do so are complicated. Earlier this year, one of my friends discussed her PhD application with me. Both of us had the same concern that we were not yet well-prepared to be competent in carrying out research after our two-year Master's studies. Thus, we preferred a structured PhD program involving one to two years of intensive coursework, which corresponds to an MRes or MPhil in Europe but is a default component of PhD programs in the US. I bet we are not the only two people on this planet who were not confident, and puzzled by whether we should extend this “prelude”. Our concern is somehow endemic to the EU, as, unlike the US, students here generally have two application paths with funding opportunities. One path is position-oriented, often tied to a funded project where the principal investigator (PI) who will be the supervisor can decide the candidacy. Whether applicants’ previous research experience and their proposals fit the project are often the most important factors in the decision. And the application highly hinges on timing – you cannot predict when a PI will obtain a grant and start recruiting a PhD. This is a traditional pathway in many European countries, including the UK, Germany, Sweden, Spain, etc., for both professors and students to find each other. The positions are typically funded for 3–4 years, with strong heterogeneity across countries, universities and disciplines. Candidates will then be employed as faculty and mainly work for the project they applied to. In most cases, there is no more coursework prior to the dissertation stage. In contrast, the other pathway is more like the US where the intake is routinely organized with a definite starting date and application deadline. Admission is relatively more merit-based, i.e., utilizing GPA, IELTS and/or GRE scores, and scrutinized by a committee. Top-ranked students will usually receive scholarships with no obligation to teach or assist in research, while others may apply for teaching or research assistantships to get financial aid. These PhD programs may or may not include a one- to two-year Master’s component. More and more Economics programs do include one, particularly among those that offer funding. Some students accepted in the first pathway will also be enrolled in these programs. There are also similar types of programs that are open for applications throughout the year, but candidates are often required to seek funding opportunities on their own in this case. Will your studies adequately prepare you for research? Let’s get back to our puzzle. Should you prolong your predoc life? I do not deny that additional coursework could be helpful and provide more buffer time to allow students to adapt to research. Yet when my friend said she thought she needed it to underpin her research abilities, I started wondering if this is truly the case. Why were we not trained well enough by our Master’s to be capable of doing research right away? Research is a new domain and requires its own set of skills. Consider that time spent on coursework can indirectly help students develop research abilities. My friend thinks (and I used to agree) that we do not really master what we were taught, but as we have learned topics once, we will understand them better if we learn them again. Suppose we attend a course in fall 2021 and start a relevant research project in spring 2023. To what extent will we still remember those details? Will we need to learn them a third time? Will a mathematical proof perfectly done in the exam enable us to apply it practically in our projects right away? Will specialized courses taken during a program cover all the knowledge we need for our research? To be very honest, I’ve found that things I learned from the majority of my courses are irrelevant to my research. This is because as our studies become more advanced, the content of courses becomes narrower and narrower and relies more or less on lecturers’ research interests. Thus, if you have been taught income inequality in a Development Economics course, when you later undertake research on human development you may still need to cover some gaps on your own. However, this doesn’t mean that those courses are useless. They are meaningful in a way besides directly contributing to my work – they made me aware of what are canonical and/or cutting-edge studies in many subfields and whether I am interested in them or not. Therefore, exposing you to some topics and helping you explore your interests are part of their true value. The importance of “learning by doing” I believe we can never be truly “well-prepared” for research. We may often find ourselves falling short in certain knowledge or skills, but we cannot rely on classes and exams forever. My personal experience is that “learning by doing” makes more sense. It’s always somewhat of a mystery until you actually try to do it. This, not uncommonly, goes beyond what you learned in courses such as advanced microeconomics or econometrics and into something much more “niche”. However, we can hardly figure these things out ex ante. When we kick off our research, we should not only identify gaps in scholarship but also in our own knowledge. In fact, I think learning and researching often co-evolve during my work. When I do a literature review, I always learn about new models, theories or econometric techniques that are not so classical and thus not covered in courses. Following the literature review, I may choose a few favorite articles as a starting point, think about what they didn’t address and what virtues I can absorb, and accordingly what else I can do based on them. In my case, this could lead me to a better dataset, a new methodology and/or a more refined model. For the latter two, reading and learning from recent articles and books is often important, as all traditional approaches have already been done – after all, how else did they become traditional but by being done often? In conclusion: recommendations for students Personally, I would suggest students try a part-time RA in parallel with their studies rather than directly jumping into a second Master’s or other program, ceteris paribus. If this is not an option for you, in my humble opinion, a research Master’s with RA opportunities or a Master’s in statistics or data science is a good option. This is because they can at least improve your employability in industry (if you change your mind, you can apply for an internship before your graduation – enrollment is important in some EU countries for finding interns). Instead, doing a full-time predoc RA would be more ideal if you are very certain that you want to do a PhD. It will take some commitment, but if you are dedicated to getting your PhD, the payoff could be worth it.
Due to COVID-19, PhD applicants over the past two years have had quite difficult application periods. It seems common now for students to apply to a range of universities and not be accepted to any of them. In fact, even without this exogenous pandemic factor, admission to economics PhD programs has been becoming increasingly difficult as a result of the excess supply of PhD applicants.
Broadly speaking, there are two types of software: proprietary and open source. Some people and organizations choose to use proprietary packages, which are developed and copyrighted by a single company. Others rely on free, open source solutions, like the popular “R” Project. Within these two categories, there are dozens if not hundreds of alternatives, varying in price, complexity, capability, user-friendliness and popularity. This post by Bob Muenchen is a great resource if you are looking for a survey of the most popular packages. He uses a number of different measures to evaluate different software options and keeps it up to date. Note that this survey is for data science in general - not just economics. That said, all of the common software used in economics are represented - like Python, R, Stata, SAS, SPSS, MATLAB, and more. That’s quite the list of names, and it can sound intimidating. To help you understand the software tools landscape, in this article we will shed some light on the most popular software packages for economists, and offer some details about how you can learn more about them. 1) Which software should I use? Before buying a package or downloading an open-source option, it is a good idea to talk to colleagues, visit online forums or communities related to each product of interest, examine your course curricula if you’re a student, and take advantage of free trials. It is also important to consider your own abilities and/or the level of expertise available within your team (if applicable). If there are several software packages that meet your needs, options with better support may save you time and stress in the long term. That said, students of economics may tend to focus on the major open-source, non-proprietary tools in their studies; many courses use open-source tools to teach. Python and R are two examples. R is used very often by economists. Python, meanwhile, is used somewhat less often in economics, but is used frequently in data science, which increasingly overlaps with econometric analyses that economists might want to run. There are many statistics packages for Python that allow it to conduct the same analyses that other popular packages like R can do. So, familiarity with both packages pays dividends. There is a great deal of free educational material on both R and Python available online; knowing how to run regressions and manipulate data in these programs is a great advantage for a serious economics student. However, there are other advantages to proprietary software platforms with paid licenses such as Stata, SPSS, and MATLAB. Often, the support and training opportunities behind these platforms are likely to be more extensive than for open-source software. Moreover, these tools might be easier to use for economists with little coding experience, with well designed user interfaces enabling economists to manipulate graphs and variables where open-source tools might require lines of code to do so instead. 2) What kind of license should I buy? If you are a university student or an employee of a company that uses a proprietary software tool, you likely already have access to the software without needing to purchase it for your own personal use. Otherwise, if you desire to use these options, you’ll have to pay for a license to do so. The criteria for different types of licenses vary from one software manufacturer to the next. Typically, student licenses will be the cheapest, and are offered for shorter periods (weeks or months, rather than one or more years). Many software packages also have an academic and/or non-profit license available. Corporate licenses are normally the most expensive - but you won’t likely need to purchase a corporate license yourself. Check the criteria for each package, and consult with your local distributor to see which kind of license and corresponding level of training and support is right for you. 3) Should I purchase direct or from a distributor? If you’re going the purchasing route, it is nearly always possible to buy directly from the software manufacturer via their website. But, consider looking for a local distributor instead. The prices are normally more or less the same (with exceptions), but distributors are advantageous for the “extras” you receive as a customer, such as in-house support, newsletters and local user-group meetings. In addition, support and training local to you and in your language can be a major plus-point. Another advantage is that if you are purchasing different software packages, you can have one contact point for all of them. 4) How much mastery of coding or programming do I need? Regardless of your chosen software package, you might be wondering how much coding experience you’ll need to succeed as an economist. Do you need a deep knowledge of data science, programming, or coding as well as economic theory to succeed? Most likely, the answer for you will be “not really”. Most economists will not need to be master programmers too. Proficiency with defining your own functions, manipulating data, and understanding the algorithms behind common functions will make your economic analysis life easier. Deeper expertise is probably not required, since the software tools are built to help you do your job – but of course it will give you an advantage. For example, most software packages contain built-in commands that are short, easy to execute, and allow you to dive right into statistical analysis. As an example, to run a linear regression in R, you only need to type one command and tell the program which data to use. After, typing “summary” will spit out a linear regression analysis complete with t-statistics and p-values, the R2 value, F statistics, and many others besides, all computed in a fraction of a second. Many other, more complicated regressions can often be done in similarly easy fashion. Running these simple commands doesn’t require advanced coding experience, but basic proficiency with your chosen software will often come in handy. Say, for instance, you get an error message. Familiarity with your software of choice and the algorithm used to generate your model output will help you clear the error quickly so you can get back to the interesting stuff. Additionally, if you have some coding ability, you will often be able to write your own functions and understand what the existing functions are doing. This gives you extra flexibility when you need to implement a very specific probability distribution, re-parameterize something, adjust a graph to highlight your findings, etc. Overall, the key to being successful in such economic analysis lies in understanding the model output and interpreting it in the context of economic theory, which does not require advanced coding experience. However, if something goes awry, or you need a particularly complicated setup to conduct your analysis, some coding skills are a boon. Studying some of the software packages mentioned in this article will help you get started on your economic analysis journey. Best of luck! Photo Credit: Gilad Lotan on flikr (CC BY-NC 2.0)
Economists very often work with statistical software that is used to build economic models and conduct econometric analyses. Learning to work with and analyze data is thus an essential skill for young economists. To be competitive as an economist in the job market, demonstrable skills and experience using some of the popular analysis and forecasting software environments are a must.
Econometrics, Statistics and Quantitative Methods (JEL C)
The PPF is often defined for two different goods that utilize the same inputs in their production; this can be shown on the vertical and horizontal axes of a graph. Moving further along one axis means the economy produces more of that good. To create the PPF, you need to know the opportunity cost of producing each good. In other words, you must know how many units of good A you must give up in order to produce one more unit of good B at all levels of total production. To demonstrate with a simple example, let’s consider an economy that produces food and electronics. Let’s further assume that the only production inputs in this economy are the labor hours required to produce the goods. The economy’s production can be represented in the following table: Food Electronics Units produced per labor hour 10 5 If the economy has a total endowment of 100 labor hours, then it can produce 1000 units of food or 500 units of electronics by spending all 100 hours on either good. These two points become the intercepts on the PPF graph. If we graph food on the horizontal axis and electronics on the vertical axis, then the x-intercept will be 1000 and the y-intercept will be 500. Now, let’s assume that the amount of labor hours required to produce these goods is constant at all levels of production. That is, regardless of whether we make 1 unit of food or 1000 units of food, it always takes one labor hour to make 10 units of food. Likewise for electronics. Taken together, these facts will produce the following PPF: Figure 1: A simple economy's PPF One useful aspect of the PPF is that it helps us easily see if an economy has reached a Pareto efficient outcome. At every point on the line shown, the economy is using all of its available labor hours to produce some mix of the two goods. This is efficient in an economic productivity sense. But, every non-negative point under the line is also a possible product mix. The problem with them is that they are inefficient. This is because the economy must leave some of its available resources unused to reach a point under the line. In this case, a Pareto improvement can be made by shifting the production mix to any point on the line, where all available inputs are being used. This can be easily seen by starting at any point under the line and moving vertically until the line is reached. In this case, the same amount of food (on the horizontal axis) is produced, but more electronics are produced (vertical axis). We produced more electronics without sacrificing any food, so the economy is strictly better off – a Pareto improvement has been made. What does the slope of the PPF mean? Remember that the slope of a line is a ratio that shows the rate of change of the y variable compared to the x variable. Also remember that we assumed the amount of labor hours used to produce each good is constant at all levels of production – in other words, the tradeoff between the two goods is always the same. This means that the slope of the PPF at any point is the opportunity cost between the two goods! What happens if production in this economy is affected by the law of diminishing returns (a more common scenario)? That is, the more a good is produced, the more labor hours it takes to produce each next unit. This would be the case if the production function was something like a Cobb-Douglas function. In this case, the graph will be curved, as shown below: Figure 2: A simple economy's PPF with diminishing marginal returns Now, the opportunity cost of producing either good changes as you move along the graph. Close to the y-intercept, where we are producing mostly electronics, it costs more and more labor hours to produce the next unit of electronics. Consequently, we are giving up more and more units of food to produce each next unit of electronics. If we start to move down the curve, we start producing more food and less electronics. We can still find the opportunity cost at any of these points by taking the derivative of the function to get the slope. In this case, the opportunity cost for producing more food is higher the closer we get to the x-axis, and vice versa. As a note, economies of scale can be represented in the PPF, too. Economies of scale mean that the opportunity cost for producing a good fall as more of that good is produced. In this case, the graph is likely to have a bowed-inwards (convex) shape. Keeping to our example of food and electronics, in this case moving further along the x-axis would produce increasing amounts of food and fewer amounts of electronics as before. But, the opportunity cost of producing one more unit of food in terms of electronics would decrease as more food is produced. Good to Know The PPF clearly defines the full product mix that a given economy can produce. We have already seen that every point on the line is Pareto efficient. But, for economies that trade with other economies, it is actually possible for a country to consume at a point above its PPF. From the model we’ve studied above (a theoretical economy producing two products in autarky), this is not possible. Every point above the PPF represents an amount of production that the country cannot reach, because it requires more input (in this case labor hours) than is available. For example, if we return to our linear PPF example above, it would be impossible for the country to produce more than 1000 units of food. It can produce 10 units of food in one labor hour, and it has 100 labor hours available, for a maximum production of 1000 units of food. When it comes to consumption, a trading economy is not restricted in the same way, due to the gains from trade that comparative advantage allows. When nations specialize in producing goods that they are relatively more efficient at producing, total output in the world economy can actually be higher than if every country produces only for itself. To see how this works, head over to our article about comparative advantage.
The Production Possibilities Frontier (PPF) is a graph that can be used to describe the production of an economy in macroeconomics, or production decisions by a household or firm in microeconomics. It shows possible combinations of two (or more) products that an economy can make, in one simple graph – hence the name.
The INOMICS Questionnaire: Fratzscher vs Tooze
The titular economic historian, Adam Tooze, was born in London, spending parts of his childhood in England and in Heidelberg, Germany. He earned his BA in Economics from King’s College Cambridge in 1989, and then began his postgraduate studies in Berlin. He received his PhD from the London School of Economics in 1996. From then until 2009, Adam taught at the University of Cambridge. He was then appointed to the Barton M. Biggs Professorship at Yale University. Adam joined his current position in Columbia University’s history department in the summer of 2015. He is well-known for his economic histories (including The Wages of Destruction) which have won him several awards, including the Wolfson History Prize and the Lionel Gelber Prize. Marcel Fratzscher: What is your favorite place on earth? Adam Tooze: I thrive on the intensity and hustle of New York City. I love the cultural density of Europe. But my favorite place right now is a lagoon - “The Cut” - between two of the outer islands of the Abacos in the Bahamas. It’s an extraordinary place. Ravishingly beautiful. Creole. Wild. A bit dangerous. The infrastructure is fragile. Sharks and barracudas in the water. Extreme weather. The historic hurricane Dorian which made landfall on the islands on 1-2 September 2019 wiped out the homes of practically everyone else on the island, including a cottage we called our own. We have rebuilt a house in its place. MF: Outside of economics, what occupation would you have if you could be absolutely anything? AT: I left economics to become a historian. So that is part of my answer. As a boy I wanted to be a mechanical engineer. If I had the talent I would wish to be a visual artist. MF: What is the virtue you appreciate the most? AT: Sincerity. MF: Your all-time favorite figure in economics? AT: John Maynard Keynes. MF: Your # 1 economics blog? AT: In the new substack universe it is Matt Klein’s Overshoot. Amongst the earlier generations of blogs Timothy Taylor’s Conversable Economist is indispensable. In Germany I like Makronom. MF: Your ideal student? AT: Someone who has a profound inner drive, but also has a sense of humor, is open and receptive intellectually to other people and other ideas. MF: What should be done to address a gender bias in research in economics? AT: This is an urgent question for economists. I say this as a man who left economics in large part because of the toxic masculinity to which I was subjected during my training. I found it intellectually unproductive and I didn’t like what it was doing to me. So I got out. I admire both women and men who decide to stay and fight. I worry about what it costs them. I hope they are right that it is possible to change economics from within. When I want encouragement I put my historian’s hat on and remind myself of the truly gigantic transformation that we are collectively undertaking with regard to the gendered division of labor. Two of the academic places which shaped me went co-ed only fifty years ago. In my current department at Columbia in history we are, I believe, at full parity even in the professorial ranks. And there is no reason that it should stop there. MF: What is the most misguided research agenda in economics? AT: I don’t like laying down the law in a negative sense. I avoid zero sum trench wars for intellectual space. I know this is to a degree naive, given the constraints of funding, jobs and who gets the mic matters. So let me give you a reluctant answer: I was profoundly at odds with the Real Business Cycle movement. And I also regret the narrowing effect that the preoccupation with causal identification has had across the social sciences. Like many people I feel that the search for truly water-tight causal demonstrations often leads to triviality. Of course no one would deny the significance of supply-side shocks and the problem of precise causal inference are of abiding interest, but to make either of them into the gold standard is narrowing. I’m afraid that my pluralism doesn’t make me the best warrior for “plural economics”. MF: What is the most promising current research field or issue in economics? AT: I am sure there are many, but the one I know best is macrofinance. Personally, it has been my point of re-entry into economics. Driven by the shock of 2008 and the Eurozone crisis, it is a field that is open to an unusually wide variety of interested folks. MF: Where does economic research have the most influence on policy-making? AT: I observe this as an outsider, but the area of interaction that I am most closely involved with is central banking where, for better and for worse, the boundary between research and policy practice seems very porous indeed. Even someone who is deeply interested in economic history, like Ben Bernanke, can become a top decision-maker. The risk is that the central banks dominate the field of monetary economics to such an extent that it becomes an echo-chamber. To that extent I appreciate the arrival on the central banking scene both of “heterodox” schools of thought and of pragmatic, lawyerly, political types like Jerome Powell and Christine Lagarde. MF: On what issues should policy listen more to economists? AT: Answering this questions depends on a judgment both about policy and economics. Given my policy preferences and my doctrinal preferences in economics, which group of economists would it be safe and beneficial for policy-makers to listen to? In the area of climate change, I tend to think that economists have been listened to too much. Policy makers have also listened to the “wrong” economists too often with regard to fiscal policy. The group of economists that I think it would be safe and beneficial for policy-makers to listen to more are economists in macrofinance. As I say, that is a subfield that was developed to address financial instability and crisis, to bridge the divide between finance and macroeconomics. MF: What is your career advice to a young economics researcher? AT: Take care of your mental health. The above article first appeared in the INOMICS Handbook 2022, which you can download on our site. Header Image Credit: Photos provided.
The following article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook Professor Marcel Fratzscher, esteemed macroeconomist and president of the DIW Berlin, once again asks questions about economics and life in general to a peer in the 2022 edition of the INOMICS Handbook Questionnaire. This time, he has the pleasure of being joined by renowned economic historian Adam Tooze, who generously agreed to take the hot seat in this exchange. Thus, the back-and-forth has been dubbed Fratzscher vs. Tooze, as is tradition. What follows is a dive into the beauty of wild places, the gender bias still present in economics, the link between policy makers and central banks, the limits of the search for perfect causality in the social sciences, and even more. Tooze’s perspective is unique and fresh, and is sure to be an interesting read you won’t want to miss.
The game is an interesting one from an economics standpoint, since players must collect and trade resources, invest in the growth of their own miniature economy, barter with others, and make decisions about trade-offs and opportunity costs at every turn. In Catan, the person who builds the most efficient and fastest-growing economy almost always wins. In this article, I aim to shed some light on the economics of Settlers of Catan, and show how it reflects some economics principles and real-world concepts. Without further ado, let’s dive in. The Foundations of a Productive Economy In Catan, resources are gained by a roll of two six-sided dice each turn. This means that possible numbers rolled are between 2 and 12, with the number 7 being the most likely. On the board, each resource tile has a number from 2 to 12 on it (except 7 – more on that later), and when that number is rolled, every settlement touching that tile gets one resource from it. Cities get two. Clearly, it is better to get your settlements and cities on the more commonly rolled numbers. On average this will yield more resources, putting you at an advantage ceteris paribus. Those tiles with more likely numbers represent land that is more productive. In the real world, especially for developing economies, concentrating production on the most productive land is also the best way to build the foundation for a healthy economy. Often, this means early cities developed along waterways and in areas with productive soil for agriculture. But, sheer productivity isn’t everything in life or Catan. Some resources are more valuable than others, and the opportunity cost of each one changes depending on the game and your particular economy. In Catan, you need brick and wood to build roads, which let you expand and build more settlements in new places. Settlements cost a brick, wood, wheat, and sheep to build, and they allow you to collect more resources when a resource tile they touch has its number rolled. Expanding your territory and building on new spaces is quite important, then, especially because each settlement prevents anyone else from building in an adjacent space. Basic economic theory tells us that having more input will yield more output, and on an island where real estate providing those inputs is scarce, it pays to get there first! Realizing Economic Growth via Agglomeration Settlements help you expand, but to realize economies of scale by increasing your economic efficiency, you’ll need cities. Cities are built by upgrading an existing settlement using two wheat and three ore. As mentioned before, cities gain resources more quickly, and a city built early in the game can grant a big advantage due to this fact. This isn’t just true of Catan. Agglomeration economies in the post-industrialization world mean that cities are the centers of economic activity in modern economies, too. As more and more production concentrates in one area, the economy benefits due to economies of scale, knowledge spillovers between local industries, labor market pooling, increased opportunities for local residents, and many other factors. The last thing that can be built with your Catan resources are Development Cards. Rather than representing microloans from the IMF or World Bank for your burgeoning island economy, these cards grant different one-time-use powers that can tip the scales in your favor. They can be thought of as purchasable positive shocks to aggregate supply. An example is the monopoly card that lets one player take all resources of a certain type currently in play at that moment. Another grants two roads for free, a boon that many economies would love to experience. There are also ports in Catan which allow players to trade resources more efficiently. Normally, players can trade with the “bank” (i.e., the game box) by giving up four cards of one resource to get one card of a different resource. This is a brutally expensive exchange rate, but ports give players the opportunity to get more favorable rates for certain resources. In the real world, international trade allows countries to leverage the power of comparative advantage to consume more goods than they could have otherwise. Ports in Catan approximate this fact by improving your exchange rate for trading resources. One key difference, though, is that trade between players is always possible with zero transaction costs. This dilutes the importance of port cities compared to a real economy. If trading costs and distances were factored into the game, no doubt ports would see an increase in strategic value closer to their real-world counterparts. So, building settlements on ports and upgrading settlements to cities are the two main ways players can start to economically overpower their competition in Catan. Analyzing the Relative Value of Catan’s Resources That was a lot, so let’s briefly review what each built object can do and what they cost: Object Benefits Cost Settlement Collect 1 resource each time a number touching it is rolled, gain 1 victory point Brick (1), Wood (1), Sheep (1), Wheat (1) Road More opportunities to build settlements, 2 points if you have the longest continuous road (“Longest Road”) Brick (1), Wood (1) Development Card Random one-time-use economic benefits (or possibly a victory point) Sheep (1), Wheat (1), Ore (1) City Doubles the resource income of the settlement it upgrades, gain 1 extra victory point Wheat (2), Ore (3) Examining the last column in the table provides some interesting insights about the relative economic value of each resource. First, wheat appears in almost every single row. The only thing that doesn’t require wheat to build is a road, which is the cheapest item and only indirectly contributes to economic growth. So, having a source of wheat income is very important at all stages of the game! The next obvious thing that jumps out from the table is that cities are the only buildable object that takes more than one resource per type to build. Cities are also the most expensive thing you can build, requiring 5 resource cards. But, the player with the earliest city usually has a big advantage since cities increase economic output quite drastically. So, the best Catan economies must ensure they have access to (or can trade for) reliable sources of wheat and ore. One last thing to note about the relative value of resources is their relative scarcity. Each game of Catan will have four spaces each of wood, sheep, and wheat, but only three brick and three ore spaces. This means that, ceteris paribus, brick and ore are relatively more scarce, and therefore more valuable. The number placements on the island can also greatly change which resources are more or less valuable. Basic theory of supply and demand tells us that if a specific resource has only low-probability numbers on its spaces, it is very likely to be rare and therefore more valuable than normal. Picture credit: Pixabay.com The Temporal Value of Resources What may be less obvious from the table above is how time affects the value of each resource. Certain resources become more or less important as the game continues. The value of expanding an economy is highest at the beginning of the game, when the island is mostly unsettled and people’s incomes are lowest. This is akin to a market that is underdeveloped. Often, the first firm to begin production in a new market has the easiest time securing market share, and has an advantage over following firms – who must outdo them in some way to compete. We refer to this as a first-mover advantage in economics (for more on this, see Stackelberg Competition). Although Catan players are not “producing” - rather, they are receiving a random resource bounty - the “first mover” in this sense will have the best choices of new expansions available. They will gain an advantage, all else being equal, in terms of accessing new numbers and resources. So in the early turns, building roads and settlements as fast as possible to claim new territory is important. This means there will be a relatively high demand for brick and wood in the early stages of the game. Towards the end of the game, when land has been mostly claimed, players must focus on building upward instead of outward. Yet again, this reflects real economic phenomena; once the more limited factor of production (productive land) is mostly being used, economies must focus on increasing their efficiency and intensive use of capital to continue growing. Thus, later on in the game of Catan, wheat and ore become very important since they are the city-building resources. Meanwhile, brick and wood become nearly useless since expanding becomes more difficult and less valuable as the most productive land is claimed. Savvy Catan players will know this, and prepare their economies to eventually transform or trade off their brick and wood for ore and wheat (perhaps by using ports). This transition process mirrors how developing economies change over time, as well. Most developing economies tend to produce goods from raw materials, often shipping finished products over to more advanced economies for sale. As a country grows richer and more developed, it may begin offshoring production of primary goods, while service industries flourish. These economies do not stop producing end goods from raw materials, but most productive land is already being used, and much more of the economy is focused on increasing productivity. This is done through realizing economies of scale, increasing investment into human capital, and encouraging innovation. In Catan, this is represented by the growth of cities as the island becomes almost fully settled. Despite the methods available for increasing economic efficiency, it is unrealistic for a single economy to be entirely self-sufficient. Significant gains from trade can be had when countries focus on their comparative advantages and trade to increase overall welfare. Which finally brings us to the last aspect of your Catan economy… International Trade & Politics There are a few key ways that players can interact in Catan and hopefully gain an advantage. Those familiar with game theory should have a leg up in this aspect of the game. First, you are free to make trades with other players as you please on your turns. Often on your turn, you may lack one or two important cards. You can ask the other players if they have something you want and trade on a bartering basis. Remember that you can also trade with the bank, but this is quite expensive without a port. Trading with players is usually a better option. Players can also more directly interfere with one another. When someone rolls a 7, no resources are collected. Instead, the player who rolled gets to place the knight (also known as the robber, or bandit, or even “Gary the angry snowman” – if you play with my family!) on any space. The knight blocks resource collection on that space until it is removed - a significant negative supply shock that just might send your economy into a recession. There are massive economic and political implications for rolling a 7 and being in charge of the knight’s placement. Most players will be unhappy with you for blocking one of their spaces. If you block someone, you can severely cripple their production for a length of time. But, you may lose them as a future trading partner for your crimes against their economy! Often, players will try to convince others that a certain person is winning and thus they should be blocked. But, this can backfire; a particularly outspoken player can create political enemies, even if their reasoning is solid. Informal sanctions and blockades abound late in the game, especially as multiple players start to close in on 10 points and try to subvert one another. So, placing the knight is a delicate balancing act of slowing down the player with the best economy (or limiting the most dangerous opponent, if you’re in the lead) while also maintaining the best “international” political relationships you can to preserve your access to economically beneficial free trade. Get Ready, Get Set, Settle! Catan is a game that is easy to pick up, but has surprising depth. Many principles of macro- and microeconomics are at play, which along with randomness lend to Catan’s replayability. If there are any economists out there who have yet to play the game, I would encourage you to give it a try. With your knowledge of economic theory, you just might become the best settler that ever was! Header image picture credit: dograapps via Pixabay (free for use under the Pixabay content license)
Klaus Teuber’s Settlers of Catan is a popular board game that has become a mainstay of friendly gatherings across the globe. For the uninitiated, in Catan up to 4 players compete to be the first one with 10 victory points. Points are gained by building houses (“settlements”), cities, and roads on a heretofore unsettled island rife with natural resources. Catan has nearly limitless replay value - with 3,695,814,682,560,000 (over 3 quadrillion!) different unique board layouts using just the base rules. Chances are, you’ve heard of Catan even if you don’t particularly love board games.
So what does autarky entail, exactly? A nation that is completely isolated from the outside world and refuses to trade or interact with other countries as much as possible would be described as isolationist. This type of nation would have a fully autarkic economy. They would refuse international trade and only consume goods produced within the country. This is a closed economy, and we would describe it as being “in autarky”. In the modern world, autarky is a state that is very hard to maintain. Global trade has become more interconnected, cheaper, and faster than it was in the past. The benefits of isolationist economic policies are hard to argue for in the modern age, especially with examples of comparative advantage and arguments against trade barriers. In fact, most economists believe that free trade is beneficial for economic growth, while trade barriers resulting from protectionist policies are a hindrance. Unsurprisingly then, most countries in the modern age trade with one another even if they have some protectionist policies like tariffs in place for some industries or goods. Being completely self-sufficient (“in autarky”) is a rare case in the modern age, although countries may seek to achieve autarky in certain strategic areas (energy supply, for instance). An example of a largely autarkic nation is North Korea. It is a nation that faces heavy economic sanctions and has few opportunities to trade with other countries. Even nations that will trade with it, like China, have a much larger volume of trade with other countries due to the low production of goods for export in North Korea. So, the majority of its output is produced and consumed by North Koreans. Of course, even North Korea still has some trade with other countries – like China – and so isn’t fully autarkic. Good to Know The term “autarky” should not be confused with “autocracy”. The latter is a system of government where one person rules with absolute power (i.e., a dictator). Nations governed by an autocracy may have very nationalistic tendencies, and may also have protectionist trade policies, but that does not make them fully autarkic. Nor does a country that maintains a high degree of autarky necessitate any specific political structure. Autarky does, however, have appeal for political reasons. Politicians may argue for trade barriers to protect domestic industries (even though this causes deadweight loss), or governments might want to limit their economic dependence on other nations for security reasons. In these cases, a certain degree of autarkic policy may be called for. Autarkic arguments are also central to many populist policies and platforms, which have become more widespread in the past decade (i.e., the “Make America Great Again” movement in the United States). Often, these platforms call for domestic protections to support or revive local industries as a central feature of their policy. Unfortunately, many of these policy proposals downplay or fail to take into account the detrimental effects of both increased trading costs and less open and efficient markets on the economy. There is a risk of artificially inflating consumer prices due to implementing too many inefficient protections. For example, imagine that importing a good (like a car) is cheaper than making it domestically for a certain country. If that country decides to implement tariffs on foreign cars to protect domestic production, this is economically inefficient. Consumers will face artificially higher prices and fewer car choices than they would have if cars were freely traded, so overall utility is diminished.
Autarky’s definition, according to the Oxford dictionary, is “economic independence or self-sufficiency”. It can also be spelled “autarchy”. This word is seldom used outside of academic contexts like economics or political science. Unfortunately, it may be sprung on you in economics courses without any warning, and since it is an actual word it may not be explained.
Macroeconomics and Monetary Economics (JEL E)
How to Find Student Accommodation in a Foreign Country
INOMICS has partnered with Uniplaces to help students find accommodation abroad. This means that on articles related to student accommodation or housing, we may make some money if a user clicks through to an affiliate link and makes a qualifying purchase. INOMICS users also gain a 15% discount on the Uniplaces Service Fee at the time of booking payment (the discount of your promo code must be entered in the payment session before sending the reservation request). Use the promo code: UP15INOMICS. However, these posts are not sponsored posts. Through your university Wherever you're travelling for your study abroad, it's likely that the university which you're visiting will be able to help you with your move. Many universities have an international students office, or a visiting students office, which is there to help you with any issues you have – including dealing with paperwork, help with language problems, and finding accommodation. They may have a list of reliable private accommodation in the area, or a message board on which staff and students can post if they have a room to rent. Some universities even have their own residence halls or other campus housing options, which you can rent by the semester, usually for not too much money. The advantage of going through your university is that people who know the local area can advise you on good locations, and what a reasonable cost is. The distance to campus is often manageable, too. The disadvantage is that university-provided accommodation can tend to focus on being safe and in less exciting areas of town. If you want somewhere more adventurous in a lively area, then you should consider renting privately. Through personal contacts When you're moving to a new country, often you won't know many people there and so won't have a social network to help you out. But before you go, ask your friends and use social media to find out if there are any friends-of-friends living in or near to the area you're traveling to. If you can find someone who lives there and has a sofa that you can sleep on for a few days, this can be a more relaxed introduction to the city and the chance to meet someone new. Ideally you would have a place to stay for a week or two and then when you arrive you can start house hunting. Searching for housing is much easier when you're already in the area – you can call agents, arrange viewings, and bring along a friend if you're having language issues. Online Search Options If you're looking for a short-term rental flat for a few weeks to a few months, then you can check websites like Uniplaces, HousingAnywhere, or even Airbnb. There are often short-let flats advertised, and you can see photos and descriptions of the spaces even if you can't visit them in advance. Of course, it's hard to say whether the flat is to your taste, whether you will like the local area, or how good the transport connections are, until you actually arrive at the place. For this reason, if you're going to use a website to find your accommodation, it's a good idea to start a rent for just a few weeks at first. If you find that you like the accommodation very much, you can try to extend your stay or choose to live nearby. But if you don't like the place, you know you only need to be there for a short time, and you can look in another area of town. Newspapers and Classified Ads Finally, if you speak the local language already, don't forget to check out newspapers and classified ads in magazines. Depending on the country you're moving to, you might find even more options for accommodation which are advertised offline rather than online. This can be difficult, but if it works out, you can often save considerable money by avoiding estate fees or over-priced private accommodation. If you do go this route, make sure you check up on local laws regarding letting, and that you're aware of your tenants rights. When in doubt, ask for a written contract which you can show to someone at your new university. They should be able to advise you if the terms of rental look reasonable.
If you're going abroad for your studies, either for a few weeks or a few months, you'll need to deal with some practical issues. One such practical concern is finding student housing – how can you find international student housing when you're not currently in the country? To help you through this, we're sharing some tips on how to find a place to live while you're studying abroad.
In our experience, using short in-class games is a great way to engage students. In addition, it makes it easier to get across the underlying economic theory and bring out the implications of the resulting predictions. There is also evidence to suggest that introducing games can have a positive impact on students’ learning. These games typically take between 20 and 40 minutes to run. During this time, students make decisions and find out the implications of their payoffs (winnings) at the end of the round. Then, in subsequent rounds they can respond to the outcomes from their own and their classmates’ previous behaviour. Traditionally, in-class games were played in a paper-based format in face-to-face classes. For example, experimental economics pioneer Charles Holt demonstrated that ordinary playing cards can be used to facilitate the running of games. However, over the last ten years, many online versions of economics games have been developed. Students can play these games on laptops, tablets or even mobile phones. As a result, it is now possible to play online games in the classroom or even through remote delivery. The following websites provide, typically for free, a wide range of single player and interactive games covering topics including game theory, industrial organisation, macroeconomics, the environment, and finance: Vecon Set up by Charles Holt, this site provides a wide range of games for free. These include classic lottery and intertemporal decision making games and a host of market-based games as well. They are all presented with simple graphics and easy to use interfaces. The results can be presented in graphic form and saved to be revisited in subsequent classes. Economics-Games Again free, this site provides a range of single and multiplayer games. These include both simple games and more involved simulations, for example on pricing strategies and competition in markets. ClassEx This is another site that provides a wide range of games for free. One very nice feature is that instructors can access the code underlying these games. It is straightforward to learn how this code works. Then, the games can easily be modified to suit your needs. Furthermore, it is also possible to create your own games. This feature also allows you to imbed student questionnaires at the start, during and after playing a game. Moblab Accessing the games on this site requires a subscription fee. The games are presented with sophisticated graphics and are based on a range of real-world settings. There is the option to have students play games against pre-programmed robotic players. In addition, polling software is embedded, and it is possible to set assignments based on gameplay. A good way to learn how these online games work is to set yourself up as the instructor on a laptop or desktop and as separate players on your phone or tablet. After spending 10 minutes or so playing a few rounds, it will become much clearer how the game works from both the tutor’s and the students’ perspectives. In addition to these suggestions, the Economics Network has a range of resources to help with using games in the classroom. We encourage you to experiment with this engaging method of teaching! This article was produced in cooperation with the Economics Network, the largest and longest-established academic organisation devoted to improving the teaching and learning of economics in higher education. Learn more about the Economics Network here.
The playing of simple, short games has become an increasingly common way to teach a range of key concepts and theories in economics.
Finance Option #1: Assistantships, Teaching and Research Most major universities offer teaching or research assistantships. Teaching assistants will typically be placed with a professor to assist with one or more courses. This could include grading, tutoring students, helping to organize assignments, and even leading lectures in your area of study. Assistantships provide tuition remission in addition to stipends and are a great way to get a taste for working as a professor. A research assistantship will likely pair students with one professor or a team of professors working on a specific research project. Most assistantships will be offered on a merit-based program, but you should nevertheless reach out to your specific department and make them aware that you’re interested. It is not uncommon to be offered an assistantship mid-semester or midyear. Look outside your own department, too, especially if there are opportunities to work with Deans or leadership offices, as these also tend to provide opportunities. <11an>limit:3;categories:PhD Programs;disciplines:Economics</11an> Finance Option #2: Fellowships and Grants Fellowships are awarded to PhD students; they are incredibly competitive and often are not available to students until they are nearing the completion of their academic work, but there are exceptions. Fellowships are typically based on your research background and scholarly promise, so invest time in early years of the program developing a solid academic profile for consideration in these competitive offerings. A research grant is generally offered to programs or research projects working on a specific research design or vision. Grant programs will assist with the funding to complete the project, such as needed materials or travel associated with collecting data. Keep in touch with professors in your field and email news lists or online sites relevant to your department. Finance Option #3: A Night Program/ Part Time Program With the recognition that some students cannot attend PhD courses full time, there are a growing number of doctoral programs with flexible options. Some have portions of the program that can be completed online, while others have part-time schedules to allow you to maintain full-time employment (and use tuition remission programs through their company). Still others operate programs on a night basis to allow you to study or earn an income during day hours. If you’re planning to move near the campus anyway, consider getting some “hands on” experience in your field (for example, an urban affairs student might take a position at the city manager’s office). When you’re at interviews for academic positions, you can highlight your academic and “real world” experience as a unique combination. Finance Option #4: Mixed Bag Many PhDs fund their studies with several different options. Some will take out loans as financial aid, since in many countries government-backed student loans have better interest rates compared to private lenders. Others pick up part-time jobs, work as substitute teachers or obtain jobs directly at the university. Scholarships are also available at the doctoral level. Consider searching for them with keywords such as “my department” “PhD scholarship”. Universities, corporations, and communities are known for sponsoring these and they are generally merit-based. Funding a PhD is a unique challenge. But rest assured that many have successfully navigated this path before. Investigate your options, remember what your goals are, and stay patient. It is possible to become an expert in your field, and by combining a smart approach and a persistent attitude you too will find the (financial) means to do so.
A PhD can be a very expensive endeavor regardless of your background. There are many funding opportunities to finance your economics PhD and they are all worth considering prior to committing to a specific program. Remember that there are options, and that ultimately most graduate programs will view you as an asset based on what you can give back to the program through research, assisting other professors, or even obtaining grants. So, although you’re competing to get into their programs, they should also be “competing” to offer you the most options for financing. If you plan to start your PhD application this autumn, you can also download our free guide "How to successfully apply to a PhD in Economics".
Clearly, this is a very undesirable economic state. Low growth and high unemployment mean that there are few opportunities for people to become employed or seek better jobs, while high inflation continually erodes the value of people’s money over time. This can spiral an economy into a recession situation complicated by the fact that promoting growth to end the recession will make inflation, and people’s financial situations, even worse. The term “stagflation” was popularized in the 1970s (although its first use came as early as 1965), reflecting similar economic situations in the United Kingdom and United States. This was the first time in modern economic history that stagflation had occurred, taking economists and policy makers by surprise. Several factors contributed to its onset. One commonly cited factor is an oil trade embargo from OPEC countries that began in 1973 and caused energy prices to rise sharply, creating a feedback effect that increased the prices of many other goods. This is an example of a supply shock. In this case it contributed to high inflation, which reached 18.0% in the UK and 13.5% in the US in 1980. However, other factors had already started developing stagflationary pressures before the oil embargo. In the US, the federal government had a high budget deficit following the Vietnam War, but the government was unwilling to raise taxes to eliminate the deficit. In addition, the Federal Reserve was focused on promoting economic growth to combat unemployment and the multiple recessions that occurred in the 1970s, which meant that interest rates were kept low throughout the decade. Low interest rates disincentivize saving and encourage spending, which contributes to growth - but also inflationary pressure. In the U.K., it is often argued that policymakers did not appreciate the role that monetary policy could play in controlling inflation. This was despite the warnings of Iain MacLeod, who is sometimes credited with coining the term stagflation. He warned Parliament in 1965 of the dangers of simultaneous high inflation and unemployment, which the economy was even then trending towards. Regardless of the factors contributing to stagflation, politicians and economists were caught off guard. This was partly due to the fact that many of them believed unemployment and inflation shared an inverse relationship, a belief reflected in the Philips Curve. This economic moment proved that the Philips Curve was not a true, stable relationship, but had been just a circumstance during the decades prior. To deal with stagflation, typically a country needs to reduce the amount of spending in the economy (i.e., reduce the velocity of money) to allow inflationary pressures to ease up. A central bank can encourage this by raising interest rates. Higher interest rates, ceteris paribus, incentivize people to spend less and save more. This is because savings grow more quickly with a higher interest rate, while the opportunity cost of holding cash is greater as it is devalued faster. This is partly how the U.S. was able to stave off stagflation in the early 1980’s. The Chair of the Federal Reserve at the time, Paul Volcker, became heavily unpopular after he raised interest rates in the midst of the economic struggle. He also tightened the money supply to reduce inflation more directly, by “restraining growth in money and credit”. However, these unpopular moves were ultimately successful, and by the end of his appointment Volcker’s policies had led to a sustainable drop in the inflation level. Unemployment soon fell as well, and the economy was primed for excellent growth after 1982. Good to Know This first major period of stagflation was a boon to the ideas of Milton Friedman and the monetarist school of thought. Monetarism states that money is non-neutral in the economy and must be managed well, in opposition to Keynesian ideas that money is just a nominal tool and doesn’t affect the economy on its own. These once-dominant Keynesian ideas were proved lacking after stagflation. However, Keynesian economists learned from stagflation and updated their models - as economists often do when challenged by new evidence. This led to the formation of the New Keynesian school of thought, an evolution of the old Keynesian ideas but updated for the modern era. References Bryan, M. (n.d.). The Great Inflation. Federal Reserve History. Retrieved July 6, 2022, from https://www.federalreservehistory.org/essays/great-inflation.
Stagflation is a macroeconomic phenomenon. It is an amalgamation of the words “stagnant” and “inflation”, which is a reflection of its meaning. Economists use this term to describe an economy that is suffering from low growth, high unemployment, and high inflation.
Public Economics & Economic Policy (JEL H)
Recent research has suggested that feedback is more effective if we stop seeing it as an event that students receive, but rather as a conversation enabling students to gain a deeper understanding of the material. Effective feedback should be timely, encourage students, and provide useful tips for how to improve. Audio feedback - whereby the instructor records a clip for the student to listen to - is an easy-to-implement alternative to written feedback that acts as the beginning of this conversation. Audio feedback may have better engagement from students and be easier to provide in a timely manner. Compared with written feedback, it can be more interesting and unique as students feel the person marking their work is talking to them. As students perceive verbal feedback as more personal than written feedback, they respond more positively since it feels closer to a dialogue. This short guide can help you get started with providing audio feedback. How can I provide audio feedback? Most virtual learning environments (including Blackboard, Moodle, Canvas) and marking platforms (such as Turnitin) have the functionality to record audio feedback. This allows users to record directly on the platform, making it significantly easier and quicker. The audio feedback is then directly linked to the corresponding submission, so there is nothing more you need to do. If you don’t have access to a marking platform that allows audio feedback, or you want the opportunity to edit or add a transcript, you can record locally on a desktop/laptop or even a smartphone. Then, you can use an app to manage and send your feedback. There are many free apps and software packages available to record audio feedback that, in many cases, also allow you to edit the recordings. However, it should be noted that the sound quality might be affected by the microphone or the software used. If you are manually recording the audio feedback for a large course, make sure you carefully name the files, so that you can easily link the feedback to the correct student! Useful tips Providing an appropriate amount of feedback is important; too much or too little can make the feedback less useful for students. One way to ensure that you offer an appropriate amount is to set an average recording time. It is usually a good idea to avoid providing very long feedback, to prevent the student’s attention from drifting, and to ensure that the feedback is concise. In fact, many learning platforms have a maximum recording time of 3 to 5 minutes. An audio recording of between 40 seconds and 2 minutes should be adequate for a piece of student work. Before you start, you might need to do a few practice runs. This will help you ensure that you do not exceed the maximum recording duration, understand the amount of content that can be covered within the available time, and ensure the recording is audible. Decide on a specific structure for giving feedback to students. It is always nice to start in a friendly way, such as addressing the student by name. Some instructors find it easier to provide holistic feedback by connecting comments to the marking criteria, while others prefer to address the work by section. Use the structure that is most appropriate, but remember to include suggestions on how to improve for future work, as this tends to be very important to students. One of the reasons that students prefer audio feedback is that it can convey nuance through tone of voice, which may not be captured by written feedback. It is often helpful to keep notes as you are reading an assignment. The notes do not need to be detailed, as they should be used as guidelines to make sure that you focus on the key areas for improvement. With audio feedback, students are often forgiving of minor issues, such as grammatical errors or stumbling over words. Such mistakes are common in spoken language. You should not feel that you need to delete or redo the feedback so long as any verbal mistakes do not affect its quality. That being said, if you are not happy with the recording, it is often quicker to redo it than to edit it. Do not forget to inform students that you have provided audio feedback, show them how to access it, and explain what to do in case they face technical issues. If you don’t let students know about the feedback, they might not notice there is an audio file. Or, they may think that their assignment has not been marked or that they didn’t receive feedback. Audio feedback can be inclusive as it supports students with different learning styles who might prefer to listen rather than read. Recent research has shown a strong link between the type of feedback students prefer and their perceived learning style. Nonetheless, there might be students who strongly prefer written feedback. To help these students, and to make audio feedback more accessible for students with disabilities (or to overcome significant language barriers for non-native speakers) you may wish to provide transcripts. Some recording apps offer direct AI or human transcription of your recordings. Windows 10 offers a fully integrated voice recognition function, but there are also websites such as Veed or 360 Converter that are very accurate and easy to use. Written and oral feedback might be used as complements. You might want to use one to give generic comments, and the other to focus on specifics. For example, written feedback can be in the form of an evaluation rubric with a Likert scale that captures performance in a range of criteria, while audio feedback can focus on particular weaknesses, or vice versa. Key things to avoid Make sure the assignment is appropriate for this type of feedback. For example, when marking mathematical problems, it may be easier to identify where there are errors by directly writing on the students’ work. This may be more difficult to express verbally. Another aspect that should be considered is the length of the assignment. A long piece of academic work, such as a dissertation, might not be ideal for audio feedback. In this case, audio feedback might not be sufficiently detailed to cover the key elements, or the recording would be overly long if it did so. Technical issues may arise when creating a recording and/or accessing it. Some web browsers might not allow you to use the audio feedback function or might not have created an audio file after the recording has finished. This is very simple to check, and using a different browser (such as Firefox or Chrome) can easily correct the issue. If problems persist, you might need to check the browser’s privacy settings for your microphone. Students might experience similar issues accessing or listening to the recording – again, this is likely to be related to the web browser. To find out more about audio feedback, see the Assessment and Feedback Handbook produced by The Economics Network. This article was produced in cooperation with the Economics Network, the largest and longest-established academic organisation devoted to improving the teaching and learning of economics in higher education. Learn more about the Economics Network here.
Good feedback helps students to understand the scale of any weaknesses in their understanding. To be effective, it will also be timely, encourage students and provide useful tips for how to improve in the future.
What does this imply? Imagine the cost of your average weekly grocery list increasing from €100 to €150 within a month, and €225 in the next month. In extreme periods of hyperinflation, prices rise exponentially, sometimes doubling within a week or even a day. What causes hyperinflation? Almost all hyperinflations occurred in times of war, conflict, or severe economic turmoil, in conjunction with government budget deficits being financed by currency creation. In those instances, the need for continued government spending is large, but there is a situation of declining real tax revenue. Being unwilling or often unable to increase borrowing, governments started printing money to cover expenses. When the money supply expands while output remains constant, there is more money available in the economy to spend on the same number of goods. As expected from the quantity theory of money, this causes the value of money to fall and prices to increase. In addition, the velocity of money increases as people prefer to spend their money immediately rather than hold on to depreciating cash. As prices rise exponentially, things become more expensive, including for the government. If in such a situation the government continues printing even more money instead of tightening monetary policy, inflation will continue to rise, creating a snowball effect. As wages fail to keep up with this surge in prices, and cash or savings deposited in banks decrease in real value, consumers’ purchasing power falls rapidly. In response, people start hoarding essential goods in anticipation of further price increases, thereby causing supply shortages and further spiraling price increases that can get out of control. How to address hyperinflation? Expectations play a major role in perpetuating price spurts during bouts of hyperinflation. To end this spiral of exponentially increasing prices, it is necessary to break the public’s expectation that price increases will continue and restore confidence in the country’s currency and economy. This requires a tightening of monetary policy and a credible commitment by the government to reverse the factors that caused rapid inflation and currency devaluation in the first place. Measures that have been successful in the past include the institution of an independent central bank, fundamental fiscal policy regime changes, and the establishment of a credible exchange rate stabilization mechanism. A common accompanying measure is currency redenomination. This is the process of changing the nominal value of banknotes and coins in circulation, often simply by reducing digits (eliminating extra zeroes). This may go in line with a change in the currency name. While the process is mainly symbolic and does not affect the currency’s real value, it can have a psychological impact on the population, if citizens trust that the new currency will be more stable in value and will not be overprinted. Another option is currency substitution. In this case, the country officially abandons the local currency in favor of the exclusive use of another country’s currency, usually the US dollar. This practice is known as full dollarization. It often follows processes of partial dollarization, where citizens themselves start substituting domestic currency with foreign currency to make transactions and allocate savings. Good to know While hyperinflations are rare, they have occurred in more than a few countries throughout history – including Germany (1920s), Greece (1944), China (1948-49), Hungary (1945-1946), Argentina (1989-1990), Yugoslavia (1994), Zimbabwe (2000s), and Venezuela (2016-2021), for example. Below we provide two historic and two recent examples. Two historic examples of hyperinflation Germany 1920s Germany saw a period of hyperinflation during the Weimar Republic, between 1921 and 1923, which was closely linked to the consequences of World War I. Unlike France, which implemented its first income tax to cover war expenses, Germany decided to fund the war entirely by borrowing. The government believed that it would be able to pay off the debt by winning the war and imposing war reparations. This strategy failed as Germany lost the war, which left the new Weimar Republic with massive war debts that it could not afford. The debt problem was exacerbated by the Republic printing money without any economic resources to back it, as the country had suspended the gold standard (the convertibility of its currency to gold). Hyperinflation began from January 1920, when the monthly inflation rate hit 57 percent. By 1923, it had reached a level where prices were doubling every two days. In November 1923, the monthly inflation rate stood at about 29,500 percent. The Reichsbank responded by introducing a new currency: 1 trillion old Marks were exchanged for 1 Rentenmark, such that 4.2 Rentenmarks were worth 1 US dollar, exactly the same rate the Mark had in 1914. Hungary 1945-1946 Between 1945 and 1946, Hungary experienced the worst episode of hyperinflation ever recorded, which had its origins in the consequences of World War II. In 1944 the country became a battleground between Russia and Germany, which destroyed or damaged most of the country’s industrial capacity. Due to the substantive fall in production capacity, prices started to rise. With no tax base to rely upon, the Hungarian government decided to stimulate the economy by printing money and injecting it into the economy through various channels, including low interest rate loans. At its peak, the monthly inflation rate increased from 28 million percent in June 1946 to an unthinkable 12,952 trillion percent in July 1946. At this point, the daily inflation rate exceeded 200%, with prices doubling every 15 hours, making normal economic calculations impossible and transactions using money extremely difficult to execute. Despite its severity, the reforms of August 1946 were successful. The reform package included a range of stabilization measures. Specifically, a new currency was introduced, an article guaranteeing independence of the central bank was reestablished, reserve requirements for commercial banks were imposed, the tax system was reformed, and public sector employment was reduced. Two recent examples of hyperinflation Zimbabwe 2000s Zimbabwe suffered an economic crisis in the early 2000s. The economy entered into decline in 1999. Agricultural production had been falling due to droughts and processes of land reform, accompanied by rising government debt and withdrawals of development aid over land seizures. In the face of shrinking revenues and rising debt obligations, the government responded by printing more money. Inflation started to surge in 2001 in response to serious food shortages. After the first peak in 2003, the government managed to keep inflation in check during 2004 and 2005, following a reduction in money supply. However, rates started to escalate in 2006. In 2008, Zimbabwe’s annual inflation rate exceeded 231 million percent. At its highest point, prices doubled every few days. The Economic Times newspaper noted on June 13, 2008, that “a loaf of bread now costs what 12 new cars did a decade ago,” and “a small pack of locally produced coffee beans costs just short of 1 billion Zimbabwe dollars. A decade ago, that sum would have bought 60 new cars.” To slow inflation, the government enforced price controls between 2007 and 2008. Producers were obliged, sometimes under police force, to sell their goods and services at government-mandated prices. Given that producers were incurring losses at the established sales prices, this resulted in significant output cuts and shortages in supply – with many goods being unavailable in stores, while being traded at much higher prices on the black market. Groceries and food items were sometimes accepted as barter for rent, and some commodities, such as gasoline, were exclusively traded in US dollars or South African rand. The period of hyperinflation ended in 2009, when Zimbabwe abandoned its currency and adopted the US dollar, opting for full dollarization. Venezuela 2016-2021 Venezuela recently came out of a four-year cycle of hyperinflation. By 2014, Venezuela’s economy and public budget had become increasingly dependent on oil exports, accounting for 90 percent of the country’s total export earnings. When the global oil price dropped, foreign demand for the Venezuelan bolívar fell, reducing the currency’s value and driving up the cost of imported goods. In face of shrinking government revenues, the government responded by printing more money. The situation worsened as the oil price continued to fall, and other factors reduced Venezuela’s oil output. Venezuela first declared a state of emergency in 2016, when the annual inflation rate hit the 800 percent mark. During 2017 the inflation rate remained in a similar range, but then inflation spiraled out of control in 2018, reaching 130,000 percent. Seeing their currency’s value plummet, Venezuelans started to convert their savings into US dollars, which further lowered the value of the bolívar. In the face of exchange controls, which had been in place since 2002 to avoid declines in the official value of the bolívar against the US dollar, the black market price for US dollars went up. In 2019, the government relaxed economic controls, and started to reduce government spending. As a result, the annual inflation rate declined to about 9,500 percent in 2019, 3,000 percent in 2020, and just below 700 percent in 2021. In January 2022, monthly inflation had been below 50 percent for 12 months, which officially ended the state of hyperinflation. Nonetheless, Venezuela still displays one of the highest inflation rates worldwide. While the bolívar is still the official currency, the US dollar is used in more than 60 percent of all transactions.
Hyperinflation describes very high and rapidly accelerating inflation. Following a widely accepted definition developed by American economics professor Philip Cagan in 1956, hyperinflation begins when monthly inflation rises by more than 50 percent.
The leader might emerge in a market because of its size, reputation, innovative capacity, or because it simply started operating first. The leader will generally be better known and more recognized by customers, and is therefore better placed to decide first which quantity to sell. The follower(s) then decide(s) on their output after observing the leader's production choice. The Stackelberg leadership model was developed in 1934 by the German economist Heinrich Freiherr von Stackelberg in his book “Market Structure and Equilibrium” (Marktform und Gleichgewicht). The assumptions in the Stackelberg model are mostly the same as in the Cournot model, with the important exception that firms make their production quantity decisions sequentially. These assumptions are as follows: There is a fixed number of firms in the market and firms have market power. This means that each firm's production-decision affects the market price. All firms produce a homogenous good, and are subject to the same demand and cost functions. In other words, there is no product differentiation. This means that the goods produced by any firm are completely identical in the eyes of the consumers (they are perfect substitutes). Firms compete in terms of the quantities that they produce. That is, they compete for market share. This is the key difference compared to Bertrand competition, in which firms compete in prices. Firms decide sequentially on the output they produce, which means we have a model consisting of two distinct periods. In the first period, the leader chooses its production quantity. This decision cannot be changed after. In the second period, the follower firm(s) choose(s) their output after observing the quantity chosen by the leader. This is the key difference when compared to Cournot competition, in which the production decisions by all firms are taken simultaneously. Each firm acts strategically on the assumption that its competitor(s) will not change their output, and decides its own production quantity so as to maximize its profit given its competitors’ output. Firms do not cooperate. The Stackelberg-Nash Equilibrium To derive the Stackelberg-Nash equilibrium, we will focus on the example of a duopoly. That is, there are only two firms in the market. We will assume that firm 1 (leader) and firm 2 (follower) both produce the same good at the same production cost c1 = c2 = c. We further assume that both firms face the same linear demand function given by: p(Q) = a - bQ where a > 0 and b > 0. The total market quantity is the sum of production by the leader (q1) and the follower (q2), which is Q = q1 + q2. We can substitute this expression for Q in the following equations. Firm 1's total revenue is then given by the market price p(Q) times the quantity produced: \begin{equation*} r_1=p(Q)q_1=(a-b(q_1+q_2))q_1 \quad \text{(analogous for firm 2)}, \end{equation*} and Firm 1's total profits are calculated as the difference between revenue and production costs: \begin{equation*} \pi_1= p(Q)q_1-cq_1=(a-b(q_1+q_2)-c)q_1 \quad \text{(analogous for firm 2)}. \end{equation*} From here we will assume a > c, which is a necessary condition such that positive profits can be realized. Each firm chooses the production quantity that maximizes its profits, taking the quantity produced by other firms in the market into consideration. To find the Nash equilibrium of this sequential game, we need to use backward induction. That is, we first solve the optimization problem for the follower in the second period, and with this information determine the optimal choice by the leader in the first period. In the second period, Firm 2 (follower) chooses q2, taking the quantity produced by the leader in the first period into consideration. So, to derive the optimal output, we need to find the quantity q2 that maximizes the profit function for Firm 2, taking q1 as given. For Firm 2, the problem is thus similar to the Cournot model: \begin{align*} \max_{q_2} \{\pi(q_2) &=(a-b(q_1+q_2)-c)q_2\} \\ \frac{\partial \pi(q_2)}{\partial q_2} &= a-bq_1-2bq_2-c = 0 \quad | \quad \text{solve for q2} \\ q_2^* &= R_2(q_1)= \frac{a-bq_1-c}{2b} \quad \text{= Cournot's reaction function}. \end{align*} As in the Cournot Model, the equation R2(q1) is the best response function of Firm 2 to any quantity produced by Firm 1. In the 1st period, Firm 1 (leader) chooses q1, with the understanding that Firm 2 will react to this choice in the second period according to its reaction function R2(q1). To calculate the optimal quantity produced by Firm 1, we thus insert the optimal response of Firm 2 into Firm 1's profit function in place of q2 and then take the first derivative: \begin{align*} \max_{q_1} \{\pi(q_1) &=(a-b(q_1+R_2(q_1))-c)q_1=aq_1-bq_1^2-bq_1R_2(q_1)-cq_1\} \\ & \quad \text{Note: Use the product rule to differentiate $-bq_1R_2(q_1)$} \\ \frac{\partial \pi(q_1)}{\partial q_1} &= a-2bq_1-bR_2(q_1)-bq_1R_2'(q1)-c = 0 \quad | \quad \text{insert $R_2$ and $R_2'$} \\ & \Leftrightarrow a-2bq_1-b\left[\frac{a-bq_1-c}{2b}\right]+bq_1\frac{1}{2}-c = 0 \quad | \quad \text{solve for q1} \\ & \Leftrightarrow a-2bq_1-\frac{a}{2}+\frac{bq_1}{2}+\frac{c}{2}+\frac{bq_1}{2}-c=0 \\ & \Leftrightarrow \left[\frac{a-c}{2}\right]-bq_1=0 \\ & \Leftrightarrow q_1^*= \frac{a-c}{2b} > \frac{a-c}{3b} = q_{Cournot}^*. \end{align*} Given the quantity produced by the leader, q1*, we can then calculate the output produced by the follower: \begin{align*} q_2^* &= \frac{a-bq_1^*-c}{2b} = \left[\frac{a-c}{2b}\right]-q_1^*\frac{1}{2} \quad | \quad \text{insert $q_1^*$} \\ \Leftrightarrow q_2^* &= \left[\frac{a-c}{2b}\right]-\frac{1}{2}\left[\frac{a-c}{2b}\right] \\ \Leftrightarrow q_2^* &= \frac{a-c}{4b} < \frac{a-c}{3b} = q_{Cournot}^*. \end{align*} Thus, in the Stackelberg-Nash equilibrium, the leader produces a larger quantity and the follower produces a smaller quantity than the same firms would have produced in the Cournot-Nash equilibrium. The figure below illustrates the difference in quantities produced in a Stackelberg or Cournot oligopoly (imperfect competition) or monopolistic market (firm 1 is the only firm in the market), where q1S > q1C and q2S < q2C: Figure 1: Stackelberg equilibrium compared to Cournot equilibrium Calculating the total quantity and the market price, given q1* and q2*, we see that Stackelberg's sequential game leads to a more competitive equilibrium -- characterized by a larger total output and lower price level -- than Cournot's simultaneous game: \begin{align*} Q^* &= q_1^* + q_2^* = \frac{a-c}{2b} + \frac{a-c}{4b} = \frac{3}{4} \left[\frac{a-c}{b}\right] > \frac{2}{3} \left[\frac{a-c}{b}\right] = Q_{Cournot}^* \\ p^* &= a - bQ^*= a - \frac{3}{4}(a-c) = \frac{a+3c}{4} < \frac{a+2c}{3} = p_{Cournot}^*. \end{align*} The Stackelberg leader takes into account that higher output causes the follower to produce less, but also that higher output depresses the price level. In this particular scenario, with a linear demand function and identical costs, the two effects happen to cancel exactly and in this case we end up with a solution where the Stackelberg leader produces the monopoly quantity (although due to the depressed price level, receives less than monopoly profits). If we were to insert the production quantities and price level into the profit functions, we would find that the Stackelberg leader has higher profits, and the Stackelberg follower lower profits, than the same firms in the Cournot model. This extra profit that the leader has compared to the follower is due to them making a production decision first, which means the follower must accept the leader’s output as given and produce a smaller output for itself. This is called a first mover advantage. In the figure below, areas 1 + 2 illustrate the welfare gain in the Stackelberg model compared to Cournot model, while area 3 illustrates the remaining deadweight loss compared to a situation of perfect competition. Importantly, the Stackelberg equilibrium is only more efficient than the Cournot equilibrium if firms are symmetric; that is, if both firms have the same production cost. If the leader were to have higher production costs and thus be less efficient than the follower, then the Cournot equilibrium would be preferable from a welfare perspective, since the Stackelberg's sequential model would give an advantage to the less efficient firm with higher costs. Figure 2: Stackelberg competition surplus compared to Cournot competition and perfect competition Good to know Actual markets may exhibit Stackelberg-type competition when, for example, sequential market entry or R&D races put one firm in a better market position than its competitors. Let’s examine Microsoft in the 1990s as an example of this. Consider the market for operating systems that we use to interact with our computers. Microsoft was the leader in the operating system market in the 1990s, eventually commanding over 90% of market share with their popular Windows OS. Because of this market position, software applications generally needed to be compatible with Microsoft’s operating system. Microsoft’s production decisions overshadowed any following firms, who had to account for the massive market share that Microsoft had (or, devise a plan to capture some of that market share for themselves) when making production decisions. Eventually Apple computers became popular as well, and the Apple DOS took some market share from Microsoft’s Windows operating systems. Of course, in real life people generally have a strong preference between using a Mac or a PC. This is where the example differs from the Stackelberg model we’ve talked about in this article, since operating systems are not identical in the eyes of consumers. Although the products are similar, in reality there will almost always be some product and price differentiation that causes market dynamics to diverge from the stylized model.
Stackelberg competition describes an oligopoly market model based on a non-cooperative strategic game where one firm (the “leader”) moves first and decides how much to produce, while all other firms (the “followers”) decide how much to produce afterwards. This sequential structure is the main difference to Cournot’s model, where firms decide simultaneously on the quantities they produce.
Teaching Economics with Real-World Context
Today’s students share a collective angst, an anxiety about the future—and rightfully so: worried about getting a job, worried what the planet will look like when they are ready to settle down and raise a family, and even angry that they had nothing to do with climate change; it was not of their doing, but placed on their laps - a negative externality if you will - only to unravel and become their responsibility. Students (and the public) look to economics and the economics profession for help and guidance. Probably at no time in recent history have we had a greater ethical obligation to educate our students within a context of hope and aspiration so that all can successfully (and sustainably) provision for themselves and for others. Based on our collective years of teaching, as well riding the waves of pluralism, sustainability, and rethinking economics, we offer the following suggestions for would-be teachers of economics and, of course, veteran teachers as well. 1. Align Course Content with Current Issues We need not become messengers of doom and gloom; instead, emphasize the role of education in giving students the ability to think and to solve problems. And, most importantly, let’s instill students with a sense of optimism and empowerment (for a helpful resource, see Boyd and Reardon 2020). Construct the course so it aligns with the big issues of the day, and today there is no bigger issue than climate change, and how we can live our lives sustainability (A helpful guide is the UN 17 SDGs; also see Reardon et al. 2018, and Reardon 2021). Doing so will make the course more thematic and interesting to students, while still covering core topics, but grounded in the context of the 21st century. And it will shed light on other pressing problems such as inequality, migration, species depletion, technological change, and even the coronavirus itself, all of which are interrelated with climate change. Our goal is to educate and not to proselytize. Not all economists think alike, and this is something we should celebrate. But we must teach our students to communicate their results and thoughts clearly. The world needs graduates who can be critical thinkers, who can listen, engage in dialogue, and respect and work with others with whom they disagree. 2. Teach Multidisciplinary Thinking and Cooperation Once the course is re-structured to align with the big issues of the day, i.e., climate change and sustainability, pluralism automatically follows: “It is absolutely impossible to discuss sustainability from one perspective. It is absolutely impossible to discuss sustainability without discussing justice, ethics, and power. And it is absolutely impossible to discuss justice and power without developing the skills to listen and dialogue. It simply cannot be done. Start teaching the UN 17 SDGs [with its emphasis on sustainability], and pluralism with its myriad benefits becomes inevitable. Thus, recognizing and incorporating sustainability is a game changer” (Reardon 2021, p. 294). Pluralism, like sustainability (and democracy and freedom) is a complex and multi-faceted concept. A simple, working definition is a willingness to listen, engage, and dialogue with different and often opposing views. This is necessary because pandemics and climate change do not respect well-established intellectual silos nor international borders. Workable solutions are not the prerogative of one discipline as if only one discipline has the answer. Does pluralism mean that every issue must be taught from every possible school of thought? And that every instructor should master every ideology? Absolutely not. At the individual level, pluralism is a modus operandi, in which one humbly accepts what one does not know, works with others to understand their point of view, listens, and dialogues with others. This is something that every instructor can and should do; and is probably the best thing with the most far-reaching benefits that a professor can instill in his/her students. For even more credibility, invite guest lecturers from politics and sociology. While most of the social sciences are still ensconced in silo-based teaching and research, students (and society) would most benefit from our disciplines pooling together—generating positive externalities if you will. 3. Be Realistic by Discussing Societal Power and Model Efficacy Speaking of power, don’t ignore it. Students see it every day in their relationships with landlords/landladies, in their summer jobs and internships, in their colleges and universities, and sometimes in their own family and relationships. Power in any economy is central and ubiquitous, and must become intrinsic to the economics curricula. To ignore it in one’s teaching is to lose credibility with students. The preponderant lesson from Jared Diamond’s Collapse is that elites and vested interests have universally used their power to thwart and parry necessary reforms which would have benefitted all. In today’s economy, what are the contexts in which power takes place, and how can the existence of power be mapped, understood, and incorporated into the economics curricula? Here students and faculty alike can benefit from an active perusal of the history of economic thought. Not only does it showcase how economic thinkers were well-focused on the issues of their day, but how various configurations of power either promoted or thwarted the adoption of various ideas. Use models that are realistic and empirically based. Every discipline uses models, but economics (especially neoclassical) is notorious for using models that are overly deductive and anti-historical, or lacking in empirical validity. If we want to teach our students how to be critical thinkers, we must roll up our sleeves, so to speak, and get our hands dirty. Data, evidence, and discussions of how the foundational models of economics have outdated assumptions (but can be modified to incorporate new learning) will gain you credibility and teach your students to test everything. After all, this is what they should be doing when they graduate into the real world. 4. Don’t be Discouraged by Having to Work Within the System Now wait a minute, you might say: I accepted a tenure track position and am expected to teach standard economics; I will be evaluated by my colleagues and our department will assess students. So what? Yes, we are all constricted by working within the current system, but that doesn’t give one a license to do nothing. Teach our students to listen, dialogue, and work with others—much-needed skills that are in short supply not just in economics, but throughout society. Isn’t this what good teaching is all about? Have we become so inured to the drudgery of teaching the bread-and-butter issues that we forget what it means to be a good teacher? It doesn’t matter if the course is online or face-to-face (although after two years of virtual teaching, students welcome the chance to be back in the classroom); learning is a unique and exciting opportunity. Working with students, getting to know them individually, and teaching them to listen and dialogue with others, in a spirit of humbleness, will ripple and multiply throughout society. Teaching economics is an honorable profession. We have an ethical obligation to educate our students and to teach them how to think critically, and how best to live and provision in a world that is becoming increasingly warmer. Let’s make it happen. The above article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook References: Boyd, Graham and Reardon, Jack (2020) Rebuild the Economy, Leadership, and You: A Toolkit for Builders of a Better World, Evolutesix, London. Diamond, Jared (2005) 'How Societies Choose to Fail or Succeed,' Penguin, New York. Reardon, Jack (2021) 'Improving Pluralism in Economics Education,' in Hermann, Arturo and Mouatt, Simon (Eds.) Contemporary Issues in Heterodox Economics: Implications for Theory and Policy Action, Routledge: London, pp. 282- 298. Reardon, Jack, Madi, Maria and Cato, Molly Scott (2018) Introducing a New Economics: Pluralist, Sustainable, and Progressive, Pluto Press, London.
The following article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook While every generation claims its problems are the most formidable and pressing in the annals of humankind, our generation certainly has a strong case: a global pandemic that has already taken five million lives, and a world seemingly headed toward catastrophe, unable to keep global temperatures from rising and thus contain climate change.
Building Your Career in Economics: From Study Choices to the Economics Job Market
Economists work in a variety of industries including business, health, government, and education, and their role mostly involves research and providing reports and recommendations based on data collection, analysis, and interpretation. In the United States, local and federal government agencies are the largest employers of economics graduates. It is essential that students plan their education based on where they are interested in entering the workforce. Although it is possible to gain an entry-level position with a bachelor’s degree, a master’s degree or a PhD are typically required to work as an economist for the government or in academia. In the competitive economics jobs market, it is important for students of economics to consider their career choices early. 1. Choosing a Concentration When pursuing a degree in economics, students can choose various concentrations: business economics, corporate finance, quantitative economics and econometrics just to mention a few. Students who graduate with a concentration in finance can find employment at large banks and government organizations as a consulting, financial, credit, risk, or valuation analyst; or a databank administrator, trader and more. A concentration in business economics, on the other hand, offers versatility which translates to a wide range of employment opportunities such as entrepreneurship or marketing in any sector such as finance, manufacturing, services and government. Concentrations in quantitative economics and econometrics can lead to jobs that require expertise in economic modeling, forecasting and evaluation. Students who choose this major usually continue to graduate studies and find employment in academia or as data scientists, risk model analysts, market researchers, consultants or investment bankers. The ability for economists to analyze data using mathematical and statistical methods is in high demand and short supply, which puts economists with strong analytical and quantitative skills at an advantage when seeking employment. Regardless of the concentration chosen and the level of the degree pursued, there are some steps students can take to build a foundation for a successful career as an economist. 2. Skills for Undergraduates Undergraduate students should focus on developing and demonstrating technical and soft skills such as the ability to communicate effectively. A good analyst must also be able to explain their work. Hard skills, including quantitative analysis, are also very important. Any economist would recommend undergraduate students to take at least one econometrics course to demonstrate quantitative and data skills. It’s also a good idea to pair economic courses with some computer or data science courses for a well-rounded background. Researching a preferred industry or role and tailoring your academic path with a goal in mind will also improve your appeal when seeking a job. Networking is critical as it allows you to garner real-world knowledge of the skills required and job opportunities available in your career path by meeting professionals who work in your industry of interest. Many recent generations of college graduates are already at ease with technology and social media and can put that expertise to work by using platforms such as LinkedIn to streamline their job search and application process. 3. Skills for Graduate Students While graduate students should hone their technical and soft skills, they should be more mindful of demonstrating solid hard skills through their research work, especially quantitative skills that are in high demand in both the private and public sector and in academia. Economics graduate students should seek out internship opportunities, study abroad if they can, and identify service-learning opportunities. Internships and corporate partnerships offer students real-world insight into the professional world and can consolidate and enrich their graduate research work. As interns, graduate students should focus on developing leadership and communication skills and seek mentorship from colleagues with more experience. Professional networking can really jumpstart a career both in the professional world and academia. Joining professional organizations, such as the American Economic Association (AEA) in the United States or the European Economic Association (EEA) in Europe, can provide opportunities to meet fellow economists to read, write, and review research papers, while also making contact with professionals in a specific career field or even learning of available job opportunities. Professional networking associations and academic institutions often host conferences, gatherings and workshops that provide excellent casual networking opportunities. Services like INOMICS are a great place to find conferences and events like these. 4. Find out about Employment Opportunities Opportunities that can benefit undergraduate and graduate students are available through their university, such as corporate partnerships and college fairs. Corporate partnerships are a partnership between a university and a private or public company, and allow students hands-on experience in certain fields and roles. Career fairs allow companies that are seeking new employees to meet a pool of economics graduates in one place. The students are often able to make a first impression with the representatives of a company in a setting that is more informational than a job interview. Informational interviews are another way to make contact with professionals that work in a specific career field or company. The purpose of an informational interview is to have an informal conversation and learn more about a company or a career without actively seeking a job. It requires preparation and some amount of research, and can lead to learning more about career paths you may not have known existed while also learning what it would be like to work for a specific company. The first step is to identify a professional to interview; help in this process can come from family, friends, university alumni or even LinkedIn and then make first contact and request a meeting. Preparation before the meeting is fundamental to the success of an informational interview as this is a unique opportunity to prepare and ask questions about the career field and the company and also seek advice, present a resume and make a good first impression. An informational interview can remain just that and end with a note of thanks or can be the foundation to building a professional relation with the interviewee that can lead to job opportunities (Knight, 2016). 5. Research the Economics Job Market There are several places to find economics jobs. INOMICS is a great place to start, with opportunities around the world offered at all career levels, from PhD and entry-level industry to tenured professor positions. Updated on a daily basis, INOMICS is a strong example of a real-time economics job market. The European Economic Society (EEA), together with the Royal Economic Society (RES), and the Spanish Economic Society (SEA), have created the European Job Market (EJME) to match promising economists with European research institutions and universities. The AEA also hosts academic job listings for economists, as well as the annual job market scramble for recent PhDs. Successful job seekers in economics and any other field are ultimately proactive individuals who do their homework. They are go-getters who research the industry and the career positions. Most of all, they pursue opportunities to build a strong network of professional contacts that can provide insider knowledge of the industry and roles of interest and bring future job leads or offers. The good news is that the U.S. Bureau of Labor Statistics estimated a 13% projected growth of economics jobs in the next decade (Bureau of Labor Statistics, 2021), making economics one of the most promising fields of study. So look out for jobs you could imagine working in, think about which classes will help you get those skills, and fret not. You’re on a good path. The above article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook Sources: Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Economists at https://www.bls.gov/ooh/life-physical-and-social-science/economists.htm.
Chiara Yates, professor of economics at Southern New Hampshire University, offers advice to aspiring economists navigating their studies and the early stages of their career. The following article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook
World, Business, & Financial News Apps 1. The Economist App Store / Google Play This app from The Economist magazine focuses on news and analysis for economics topics from around the world. It offers a selection of free articles from The Economist, plus reports on current affairs, science, technology, and other news. You can save articles to read later and share articles over social media. If you’re a regular reader of The Economist, then this app is a must-have. 2. Yahoo Finance App Store / Google Play One of the most popular finance apps is Yahoo Finance, which you can use to track the stocks that you are interested in and get real-time information on the stock market. There is also a section for finance news which has all the headlines you need to read to stay updated about the current economy. The app is mostly aimed at investors, but with all this information it’s also helpful for economists (particularly those in the finance industry) who want to stay informed. 3. Castbox App Store / Google Play A great way to keep up with the latest news and discussions in economics is to listen to podcasts. Podcasts like Marketplace, Planet Money, or Bloomberg Taking Stock are great ways to learn about current events with an economics angle, and you can listen to them while you are exercising or pottering around the house. Castbox is a free and easy to use podcast app. 4. Bloomberg App Store / Google Play Another very popular finance app like Yahoo Finance is Bloomberg. This app has sections for business and finance news, market data, and portfolio tracking. The news section is also outstanding and offers analyses and opinion pieces as well. Economic Databases 5. FRED App Store / Google Play Another fantastic place to find economic data, the Federal Reserve Economic Database (FRED) app contains “nearly 810,000 economic data series from 108 regional, national, and international sources”. These data series include a myriad of economic indicators and variables, like interest rates, prices, international trade volume, etc. over time. The app is perfect for economists, financial industry professionals, academics, and anyone else interested in economic data. 6. IMF App Store / Google Play Simply titled “IMF”, the International Monetary Fund’s app contains news, press releases, podcasts, and other insights. It also contains a huge amount of economic data. One of the coolest features is the app’s Data Visualizations tool; with it, users can easily visualize color-coded maps, charts and graphs of worldwide economic data with the touch of a finger. The app also contains country-level data on a wide variety of statistics to dive deeper into specific regions. This is a great way to explore macro-level economic data in style. Calculators & Tools 7. PocketCAS lite for Mathematics App Store If you’re doing advanced calculations for your data analysis, then it’s useful to have a scientific calculation app on your phone. The PocketCAS app (for iOS only) has advanced features like creating 2D and 3D plots, performing calculus operations, algebra functions, and conversion of physical units. For advanced statistics users, this app is a must. 8. HiPER Scientific Calculator Google Play A free calculator option that can be used with Android, HiPER includes writing expressions as fractions, symbolic algebra, integral and derivative functionality, and up to 100 digits of significance and 9 digits of exponent. It can also detect repeating decimals. There is also a Pro version that is a paid upgrade option. 9. Oanda Currency Converter App Store / Google Play When you need to stay informed about fluctuations in world currencies, it helps to have all of the important information in one place. This is what the Oanda Currency Converter offers, letting you track daily rates for different currencies and including an option to add a percentage to rates to simulate the actual rate offered by banks and credit card companies.
In spite of all its distracting qualities, your phone is one of the most useful tools you’ve got, whether you’re studying or working in the field. It’s simply a question of how you use it. With this in mind, we have compiled a list of apps that are helpful for economists to have. They can help you find data, stay up to date, and crunch numbers on the go. INOMICS takes part in the Apple affiliate program. This article contains affiliate links, which means we may earn money through any qualifying purchases made after you click through. However, this is not a sponsored post.
Summer Schools and Courses – Top Searched Terms on Google
The increase in interest is clearly seen around the internet. Google searches for the phrase "Summer School" follow a similar trend to that on INOMICS, with the number of searches in April-June around three times higher than the monthly average in the winter months. The growth trend is almost identical for the search phrase "Economics Summer School". Interestingly, according to Google the countries in which this latter search term is most entered are Italy, India, the UK, the USA and Germany. The visitor stats on the INOMICS website are similar, although Turkey, Belgium, France, Russia, China and the Netherlands also represent important traffic sources for Summer School seekers. In order to reach the maximum possible candidates for your Summer School, we recommend the following top tips when uploading your course to INOMICS: Use a Concise Title – Use "Summer School" plus the main focus of your program for the title. If possible a key subject area can help attract interest, for example "Summer School on Health Economics". Add a logo – This highlights the announcement on INOMICS, and increases the likelihood of prominence on Google results. It also helps to hold the attention of page visitors. Get the timing right – As described above, March, April and May are the most popular times to look and apply for Summer Schools on INOMICS. Announcements should go online from late February, and ideally be placed six to eight weeks before the deadline (the maximum allowed on INOMICS is twelve). If your Announcement is online for two months or more, you may also consider booking a repost shortly before the deadline. Include application details – Add clear instructions how applicants can apply, as well as a concise program description. Presenting your program and the application process as well organized and straightforward can give your Summer School the edge over others. Include keywords – Using relevant popular search terms in the main body of your INOMICS announcement has a doubly positive effect. First, it increases the chance of an INOMICS user finding your Summer School using the website search. Second, it increases the chance that it will show up also in Google results. INOMICS is indexed daily by Google, and Announcements with a good range of keywords often appear very prominently.
How to Optimize Your Summer School Promotion on INOMICS With the festive period over, now is the season to find Summer Schools on INOMICS. Each year we see a marked increase between January and May in the number of visitors navigating on the INOMICS site to the "Summer Schools" sub-category.
The French polymath Antoine Augustin Cournot (1801–1877), after whom this economic model is named, illustrated this market situation using the example of two firms exploiting mineral water springs, each able to produce unlimited quantities at zero cost. According to the law of demand, there is an inverse relationship, or negative correlation, between quantity and price. That is, higher levels of production result in relatively lower prices, and vice versa. To maximize profits, each firm has to consider this trade-off between quantity and price, taking the expected market supply by its competitors into consideration. This constitutes a game strategic situation (see also game theory). In the Cournot-Nash equilibrium, each firm chooses the quantity that presents the ‘best response’ to the competitor's production quantity. Below we derive the Cournot equilibrium quantities and calculate the market price. We will see that Cournot competition leads to a more efficient market outcome than if there was only one firm in the market (monopoly). But, there is still an efficiency loss compared to the equilibrium under perfect competition. Model Assumptions Let's have a quick look at the main assumptions of the Cournot model: There is a fixed number of firms in the market and firms have market power. This means that each firm's production decision affects the market price. All firms produce a homogenous good. In other words, there is no product differentiation. This means that the goods produced by any firm are completely identical in the eyes of the consumers (they are perfect substitutes). Firms compete in terms of the quantities that they produce. That is, they compete for market share. This is the key difference to Bertrand competition, in which firms compete in prices. Each firm acts strategically on the assumption that its competitor(s) will choose the equilibrium quantity, and decides its own production quantity so as to maximize its profit. The production decisions by all firms are made simultaneously. This is the key difference to Stackelberg competition, in which the leader firm moves first and then the follower firms move sequentially. Firms do not cooperate. The Cournot-Nash equilibrium To derive the Cournot-Nash equilibrium, we will focus on the example of a duopoly. That is, there are only two firms in the market. We will assume that firms 1 and 2 both produce the same good at the same production cost c1 = c2 = c. We assume demand is a linear function given by p(Q) = a - bQ where a > 0 and b > 0. If one firm produces q1 and the other produces q2, then the total market quantity is Q = q1 + q2. So, we can substitute this expression for Q in the following equations. Firm 1's total revenue is then given by the market price times the quantity produced: \begin{equation*} r_1=pq_1=(a-b(q_1+q_2))q_1 \quad \text{(analogous for firm 2)}, \end{equation*} and firms 1's total profits are calculated as the difference between revenue and production costs: \begin{equation*} \pi_1= pq_1-cq_1=(a-c-b(q_1+q_2))q_1 \quad \text{(analogous for firm 2)}. \end{equation*} From here we will assume a > c, which is a necessary condition such that positive profits can be realized. Each firm then chooses the production quantity that maximizes its profits, taking the quantity produced by its competitor into consideration. So, to derive the optimal output, we need to find the quantity q1 that maximizes the profit function for firm 1, taking q2 as given. Analogously, we will do the same for firm 2. To find the optimum, we take the partial derivative of the profit function and set that equation equal to 0: \begin{align*} \max_{q_1} \{\pi(q_1) &=(a-c-b(q_1+q_2))q_1\} \\ \frac{\partial \pi(q_1)}{\partial q_1} &= a-c-2bq_1-bq_2 = 0 \quad | \quad \text{solve for q1} \\ q_1^* &= \frac{a-c-bq_2}{2b} \\ \text{and analogously} \quad q_2^* &= \frac{a-c-bq_1}{2b}. \end{align*} The equations q1*(q2) and q2*(q1) are called the best response functions. They tell us firm 1's optimal output for any quantity produced by firm 2, and firm 2's optimal output for any quantity produced by firm 1. In the Cournot-Nash equilibrium, both firms will give their best response to each other's actions. To derive the equilibrium, we thus insert the optimal response of firm 2 into firm 1’s equation to calculate its optimal quantity, and vice versa: \begin{align*} q_1 &= \frac{a-c-b\frac{a-c-bq_1}{2b}}{2b} \quad | \quad \text{solve for q1} \\ q_1^* &= \frac{a-c}{3b} \\ \text{and analogously} \quad q_2^* &= \frac{a-c}{3b} = q_1^*. \end{align*} This is the unique Nash equilibrium for the Cournot duopoly. Entering the optimal quantities into the demand function gives us the total quantity and the market price in the equilibrium: \begin{align*} Q^* &= q_1^* + q_2^* = \frac{2}{3} \left[\frac{a-c}{b}\right] \\ p^* &= a - bQ^*= a - \frac{2}{3}(a-c) = \frac{a+2c}{3}. \end{align*} Graphically, the equilibrium point E is where the best response curves q1*(q2) and q2*(q1) intersect. The figure also illustrates the quantities q1M and q2M that would have been produced if either firm 1 or firm 2 was the only one operating in the market; that is, if either firm had full monopoly power. Figure 1: Cournot-Nash Equilibrium We can also use the model solution derived above to compare the monopoly and Cournot duopoly situations. If we assume that firm 1 is the only producer, this implies q2 = 0 and thus: \begin{align*} q_1 &= \frac{a-c-bq_2}{2b} \quad | \quad q_2=0 \\ \Longrightarrow q_1^M &= \frac{a-c}{2b}=Q^M \\ \text{and} \quad p^M &= a - bQ^M= a - \frac{1}{2}(a-c) = \frac{a+c}{2}. \end{align*} From this we can conclude that in the duopolistic Cournot-Nash equilibrium, the total quantity of output produced is larger and the price is smaller than in the monopolistic market equilibrium: \begin{align*} Q^* &= \frac{2}{3} \left[\frac{a-c}{b}\right] > \frac{1}{2} \left[\frac{a-c}{b}\right]=Q^M \\ \text{and} \quad p^* &= \frac{a+2c}{3} < \frac{a+c}{2} = p^M \quad \text{if} \quad a>c. \end{align*} However, there is still a welfare loss compared to the market equilibrium under perfect competition. In a perfectly competitive market, price equals marginal cost and firms earn zero profits, thus pC = a - bQC = c. From this we can conclude that in the duopolistic Cournot-Nash equilibrium, the total quantity of output produced is lower and the price is higher than in the competitive market equilibrium: \begin{align*} Q^* &= \frac{2}{3} \left[\frac{a-c}{b}\right] < \frac{a-c}{b}=Q^C \\ \text{and} \quad p^* &= \frac{a+2c}{3} > c = p^C \quad \text{if} \quad a>c. \end{align*} In the figure below, which assumes that marginal costs are constant over all output ranges, we illustrate the market quantities and prices realized under a monopoly, a Cournot oligopoly, and perfect competition. The Cournot-Nash equilibrium will occur on a point between the monopoly and perfect competition solution. Areas 1 + 2 illustrate the welfare gain with Cournot competition compared to a monopolistic market, while area 3 illustrates the remaining deadweight loss compared to perfect competition. Antoine Cournot argued that by colluding and forming a cartel, the two firms in the market could move toward the monopoly solution. However, this is not a stable Nash-equilibrium, since both firms would find it beneficial to deviate (as the derivation of the best response functions above has shown). The deadweight loss will decrease as the number of firms competing in the market increases. If the number of firms in the Cournot oligopoly converges to infinity, the Cournot-Nash equilibrium converges to the market equilibrium under perfect competition. Figure 2: Deadweight loss from a Cournot oligopoly Good to Know The Organization of the Petroleum Exporting Countries (OPEC) is often mentioned as a good example of a Cournot oligopoly. Research has shown that the behavior of OPEC member countries is somewhere in between a non-cooperative Cournot oligopoly and a cartel. That is, while there is some cooperation, it can be optimal, especially for smaller OPEC producers (whose production has less potential to impact market prices), to follow more expansionary production policies. The study by Okullo and Reynès (2016) offers interesting insights in this regard.
Cournot competition describes an oligopoly market model in which two or more firms produce the same good and compete for market share. The competing firms decide simultaneously and independently of each other on the amount of output they will produce. The total quantity supplied by all firms then determines the market price. This is distinct from Bertrand competition, where firms compete in prices, or Stackelberg competition, where firms sequentially choose their production quantities.