Growth Revised Up Again

Hot on the heels of the Chancellors debate on Channel 4 last night, today the Office for National Statistics (ONS), which calculates GDP for the UK, reported that its number for 2009Q4 growth has been revised up again, now to 0.4% growth.

This even newer number is the result of the ONS adding up the rest of outputs for companies in the economy, and a strong performance by manufacturing has driven this upward revision. Perhaps the weak exchange rate has helped after all.

The Guardian article linked up ends with a quote from someone at the British Chamber of Commerce, a body representing companies in the UK. He supports the Labour take on spending rather than the Tory angle: We need to avoid letting the economy slip back into recession, and as such cutting back spending sooner, as advanced by the Tories, is not wise given that.

More bad economics in popular movements

Many of you probably like the idea of the Robin Hood Tax, despite its multiple problems (not least: Would everyone just keep on behaving as they had done if the tax was introduced? No). Then there was the NUS president last week backing rent controls, basically arguing for lower standards in student accommodation for you all.

Here's another example of bad economics getting its voice heard and attempting to influence people: Some bizarre idea to boycott BP and ESSO (see here for the lowdown on it). I got the email in a forward.

I've already mentioned this on here. It's not sexy, it's not evil, it's simply the exchange rate, something we've covered in lectures.

The pound has lost over 25% of its value since 2008, and that's why petrol costs loads more despite the price of oil being lower. Recall: Worse exchange rate means imports (oil) more expensive, exports cheaper for the UK.

As students of econ101, you now have a much greater economics education than most of the population, the kind of people that come up with illogical ideas like boycott some oil companies because the pound has lost 25% of its value. Educate these people!

Confidence affects things

On the BBC today, the Institute of Directors have announced that they are unimpressed with the Chancellor.

45% of those directors of companies interviewed thought Darling is doing a bad job, whereas only 16% thought he was doing a positive job.

We've talked in previous weeks about how confidence is all important in generating economic activity. The most recent channel we thought of was the interest rate channel, whereby interest rates stimulate investment. This only happens though if firms are confident. There are questions about whether indeed businesses are confident enough to invest, even if the government is spending money to stimulate the economy...

Economics students needed to educate NUS

This is from a couple of days ago: Rents are soaring for student accommodation. What is the NUS's response to this? There should be rent caps.

Sound like a good plan? I'm sure it does, keeping rents low.

But you've studied economics this year, the market for accommodation is like any other market: There's a demand, and there's a supply.

I suspect the NUS has missed the fact that there are more students than ever at university now. So the demand for housing has gone up, and hence it's not surprising prices (rents) are up too.

What kind of a solution would capping rent be? If rent was capped at some below market equilibrium price, then there would be an excess demand for accommodation, as landlords would be unwilling to provide accommodation at the lower prices, and would instead offer their housing to others - immigrants, families, etc.

Rent caps have been tried, and have failed, around the world over the years (New York is an often touted example). All they do is cap the quality of accommodation. If a landlord can't raise his rent, he has no incentive to improve the accommodation, and the shabby state of student accommodation will only get worse.

It's a hard truth, but it's the truth sadly. Capping rents are not the solution, so if you're in the NUS and study economics, do try and educate your Union on the economics you've learnt this year.

What would the Tories do?

 You've had macroeconomics, and in particular monetary and fiscal policy and their effects on the wider economy from a lecturer who doesn't find the Conservatives very appealing a prospect.  Perhaps you want the other end of the spectrum?

If so, tomorrow's the day.  George Osborne is on campus tomorrow at the Business School presenting his alternative.  Coffee is at 9:30am, speech from 10.

If you want to attend, email e.g.leftwich@bham.ac.uk to register your interest.

Sadly, I'll be in Jersey while George blows hot air....

Budget Day

Today, Wednesday, is budget day.  The Chancellor will announce spending plans for the year ahead.

Don't expect big pre-election hand outs - we've talked in lectures about electioneering in budgets.  But this year will probably be different because of the extreme pressures facing the Chancellor.  More spending or tax cuts would be irresponsible right now as folk up and down the country are tightening their own budgets, and would actually be politically counter-productive.

Hence, the electioneering (tailoring economic decisions towards re-election) will be the opposite of what would normally happen, I suspect today.  The best decision for the election will be for the Chancellor to show restraint.  But I'll probably be proved wrong...

After the Event: Class Attendance

You're all aware I don't quite understand what motivates you to come to lectures and talk.  I suspect those of you that do this haven't come even close to this blog, but if you have, I'm all ears about why it makes sense to turn up to a lecture just to talk.  There are cafes and pubs on campus.

But even more important is class attendance.  This is a compulsory part of your degree.  Well done to those with perfect attendance records (I now have them from the class tutors), and for those who didn't attend because of other difficulties that were raised with your tutor, again well done.

But the rest of you, be warned.  I mentioned this at the start of term.  If you want a reference from your personal tutor, he or she can make use of your attendance records when writing that reference.  Hence even if there is no direct consequence for your violation of a compulsory part of your degree, there is an indirect consequence.

If I was employing someone, and the reference came in telling me the person didn't comply with the compulsory parts of their degree programme, I simply would not employ them, and I doubt I'm on my own in saying that.

Hence, again I'll repeat the warning you had back at the start of term: Fail to comply with compulsory parts of your degree and face the consequences.

Your picking and choosing when you attend (attending a different session is equally much a violation and won't look good on your reference) is unfair on everyone apart from yourself.  The class teacher who does not know who will turn up, and may have to teach to 2 or 20 students (very different proposition), and your fellow students who signed up for that particular class, who get their experience diluted when you barge rudely into their class, uninvited.

At university we expect mature behaviour on the part of you, because you're not school kids any more.  The kind of behaviour displayed by class attendance and talking in lectures is anything but what would be expected from mature, respectful people.