What you will learn this year...

So you chose economics, and you've arrived at university.  If your A-level economics was anything like mine, you may have been given a stylised history of the UK with some brief treatment of the 1970s before moving on to the 1980s and Margaret Thatcher.  You probably got the impression from how the material was presented to you that Labour had a reputation for being unable to manage the economy - something that bedeviled them in 1992, but something New Labour managed to overcome in 1997.

One thing though has become remarkably clear since the May General Election this year - the Conservatives are remarkably good at rewriting economic history, and unfathomly good at getting people (who don't necessarily even vote Tory) to believe what they say about the economy.

You will learn this year and in your three years studying economics that politicians generally are not folk to be trusted when they open their mouths about the economy.  You'll learn about incentives, and how incentive structures influence perverse outcomes (e.g. see page 19 of this newsletter about this).  You probably already knew this, but the incentives in play for politicians influence the things they utter on the economy - they are party political first, and truthful a distant second.

An example of this was William Hague on Radio 4 yesterday morning.  Cuts will harm defence, yet as with any Tory comment on anything related to cuts, they try and paint a picture of how shambolic Labour was, the mess they left, etc., in order to (1) score some political points (who would ever vote that lot in again after this?!) and (2) excuse themselves from the blame for the adverse effects of the cuts they intend to make.

The fundamental underlying matter here though is that people do actually seem to believe cuts are unavoidable.  You would almost think, given this, that the economics profession was in consensus about this: Cuts are necessary and unavoidable.  It may, then, come as some surprise to find that a lot of prominent economists actually don't believe this.  Paul Krugman, Joseph Stiglitz (both Nobel prizewinners), Brad DeLong, Martin Wolf (writer at the FT), Robert Skidelsky to name but a few, dissent.

Stay tuned then: Don't skip lectures, listen in them, attempt the assignments you get for each class and attend each class, and you'll learn a lot more about why these economists think the way they do, and why you should treat with scepticism every economic utterance from a politician...

Learning Economics Will Challenge You...

...if the views held by the NUS are anything to go by.  I've blogged on this before, but the National Union of Students, whom you may come to enjoy the provisions of during your time at Birmingham, tend to appoint economic illiterates to their Presidency.  This morning the current incumbent, a chap called Aaron Porter, displayed another great dose of either economic illiteracy, or just naivety on Radio 4.

The basic gist was: Fees may go up in the future, and Radio 4 had Dr Wendy Platt of the Russell Group of universities (which includes Birmingham) interviewed along with Porter.  Porter, however, disputed the idea that universities are making a loss on teaching undergraduate students in the UK due to the constraints on fees and other funding from central government.

The fact is, the Economics Department makes a huge loss on teaching undergraduates here in Birmingham, and we don't have anything like the amount of equipment involved in the physical sciences when teaching you.  £3000 from each of you per year simply doesn't cut the mustard of hours of lecturing, hours of preparing, hours of TAs giving classes, room bookings, energy costs of lighting rooms and powering up huge projectors, etc.  And that doesn't even begin to get going on opportunity costs - what else could the University have done with these resources?  Couldn't I have been researching?

Furthermore, a more important question even than this is: Why should the taxpayer completely fund your university education?  What does Joe Bloggs taxpayer down in the less wealthy suburbs of Birmingham gain from your being educated here that his taxpayers money should subsidise it?  (in reality: To subsidise your beer consumption)  Why shouldn't fees be much, much higher than they are to reflect this?

You'll learn this coming term about externalities of education: The social benefit is actually greater than the private benefit: It does actually help Joe Bloggs in the suburbs if you help to shape better government policy, if you run a company that provides them with better products, and it certainly helps Joe Bloggs if we have a much better educated elite in this country dictating what will happen in the future.

But how much is he helped?  How much greater is the social benefit of having an educated you vs a non-educated you?  The chances are, you will earn hundreds of thousands of pounds more than you would have without your degree for various reasons (not even related to the intrinsic quality of it - just having the degree signals a lot about you to future employers) - so you're getting a fantastic pay-off for your trifling three grand a year - why shouldn't you pay a bit more for that?

Final point: What about those that can't afford it?  Scholarships.

Welcome to Birmingham!

The new term and academic year is upon us.  If you are just arriving at Birmingham for the first time, welcome!  If you're returning, welcome back!

This blog is something I've set up for the part of econ101ab (Principles of Economics), an introductory economics course at the University of Birmingham.  I teach the second part ("b"), which is macroeconomics.  In the coming term before Christmas you'll have lectures from Martin Jensen on microeconomics.

If you're unsure of the difference between the two, PJ O'Rourke has helpfully obliged with a definition:

One thing that economists do know is that the study of economics is divided into two fields, "microeconomics" and "macroeconomics". Micro is the study of individual behaviour, and macro is the study of how economics behave as a whole. That is, microeconomics concerns things that economists are specifically wrong about, while macroeconomics concerns things economists are wrong about generally.

Enjoy microeconomics this term!

The New Year

It's mid August, but fairly soon the academic year will be starting.

A huge amount has been happening in the macroeconomy over the spring and summer of this year, and so I'll start to make posts on here for keen econ101ab students at Birmingham, and students elsewhere who might be interested.

As a taster, the big debate over the summer has been over austerity vs spending. The Tories have started drastically cutting government spending, waxing on repeatedly, with ad nauseum, about Labour's supposed recklessness. Here's an example I saw today.

Were Labour reckless? Or are the Tories the reckless ones, potentially plunging the UK back into recession? It's the kind of question that gets right to the heart of what economics is. Keep tuned for more...