Category: Economics for Business: Ch 20
Britain’s recycling strategy is under risk following a collapse in waste paper prices. Three quarters of UK waste paper is exported to Far Eastern buyers, but demand from this region has collapsed in recent months. The price collapse has led to a surplus of recyclable paper and some local authorities have proposed using Ministry of Defence (MoD) sites to store the waste while there is no market or use for it.
Paper price collapse blows hole in Britain’s recycling strategy Guardian (11/11/08)
Recycled waste could be stored on MoD bases Guardian (16/11/08)
Questions
- Define the terms (i) private cost and (ii) external cost.
- What are the external costs resulting from disposing of waste paper and other recyclable products in landfill sites?
- Using diagrams as appropriate, illustrate the changes that have taken place in the market for waste paper.
- Evaluate two strategies that the government could adopt to increase the price of waste paper.
- Discuss the likely success of a policy of storing waste on MoD sites to await an upturn in the recycling market..
The European Commission has fined four glass companies, including the UK firm Pilkington, for operating a price-fixing cartel in the market for car glass. As part of the cartel, managers in the firms, met in secret to fix prices and carve up the market between them. The largest single fine was handed down to the firm Saint-Gobain, the owner of the UK plasterboard group BPB. Saint-Gobain was fined 896 million euros. The four firms between them controlled around 90% of the market for car glass at the time the cartel operated.
Glassmakers fined record €1.4bn for price-fixing by European regulators Guardian (13/11/08)
Europe fines glassmakers record €1.4bn Times Online (12/11/08)
Questions
- Explain what is meant by a cartel and how it is able to increase the profits of its members.
- What market conditions are most likely to lead to the formation of a cartel?
- Compare and contrast the role of the UK Competition Commission and the European Commission in maintaining competitive markets.
- Evaluate two policies that can be used by governments to prevent price-fixing.
The current financial crisis has led many to wonder whether this may mark the ‘death of capitalism’. While this may almost certainly be an over-statement, it may mark a fundamental sea change in the way in which we oversee and manage a capitalist system. The articles below look at some of the implication of this possible change in approach.
Positive thinking Guardian (18/10/08)
A category error Guardian (10/10/08)
History can guide, yet there are new limits of the possible Guardian (10/10/08)
I’ve watched the economy for 30 years. Now I’m truly scared Guardian (28/10/08)
The new New Dealers Guardian (26/9/08)
Europe and America in the shadows as a new era dawns Telegraph (26/10/08)
Questions
| 1. |
Explain what is meant by a capitalist system of economic organisation. |
| 2. |
Assess the extent to which a ‘soft-touch’ regulatory approach can be blamed for the current financial crisis. |
| 3. |
Discuss the extent to which greater levels of government intervention and economic regulation are likely to result from the current financial crisis. |
| 4. |
Are we witnessing the death of capitalism? |
Hayek, through his book the ‘Road to Serfdom’ became one of the founding fathers of the market economic system that we have adopted as the principal method of organising economic activity. However, like all neo-liberal economists, his views and recommendations have come under increasing scrutiny in the current financial crisis.
Faith. Belief. Trust. This economic orthodoxy was built on superstition Guardian (6/10/08)
Dangers of worshipping false god of self-regulating markets Irishtimes.com (3/10/08)
Questions
| 1. |
Write a short paragraph setting out the key arguments in Hayek’s book ‘The Road to Serfdom’. |
| 2. |
Assess the importance of confidence in an economic system. To what extent is a lack of confidence a ‘self-fulfilling prophecy’? |
| 3. |
Discuss the extent to which Hayek’s work influenced the adoption of neo-liberal economic policies. |
Public choice theory is an area of economics that uses standard economic tools to consider the decisions made by politicians and others within the public sector. In essence the theory applies economic principles to politics. In the article below Simon Caulkin argues that public sector reform and the application of public choice theory has failed and likens the public sector reforms that have been implemented to Soviet central planning.
Labour’s public sector is a Soviet tractor factory Observer (4/5/08)
Questions
| 1. |
Explain what is meant by public choice theory. |
| 2. |
Describe the principal public-sector reforms that were implemented under the Blair government. |
| 3. |
Discuss the extent to which recent public-sector reforms have succeeded in delivering a more responsive and efficient public sector. |