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. |
Given the interdependence of the global economy, the economic slowdown in the West is likely to have worldwide knock-on effects. How serious will these effects be for the emerging economies of South East Asia? The following articles consider this question.
The decoupling debate The Economist (6/3/08)
Can Asia escape the effects of the downturn in the West? Times Online (17/3/08)
Just enough power to save themselves Times Online (25/3/08)
Questions
| 1. |
Explain the term emerging economy. |
| 2. |
Discuss the extent to which the economic performance of the emerging economies will help reduce the likelihood of recession in the UK. |
| 3. |
Discuss the extent to which the economic performance of the emerging economies is likely to be affected by recession in the USA. |
The prospect of a severe recession in America has inevitably drawn parallels in the media with the Great Depression of 1929. The parallel may not be entirely appropriate in terms of scale and severity, but what lessons are there that can be learnt from the Great Depression?
Credit crunch: risk-taking Times Online (23/3/08)
America gets depressed by thoughts of 1929 revisited Times Online (23/3/08)
Lessons learnt from Great Depression Times Online (25/3/08)
Questions
| 1. |
Explain the principal causes of the Great Depression of the 1930s. |
| 2. |
Assess the parallels between the current economic situation in America and the situation preceding the Great Depression in 1929.
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| 3. |
Discuss the extent to which the recent loosening of monetary and fiscal policy in America will help reduce the likelihood of recession. |
The recent credit crunch has resulted in a lot of criticism of the banks and other financial institutions. Many commentators have argued for reforms to the financial system with greater controls on lending and restrictions on banks’ ability to create credit. The articles below have a common theme – assessing the actions that politicians and policy makers need to consider as a result of the recent credit crunch.
After excess comes fear – and then socialism, at least for the bankers Guardian (23/3/08)
Capitalism’s too important to be left to capitalists Observer (23/3/08)
If the City won’t put its house in order, politicians must Observer (23/3/08)
Podcast
How to stop the market mayhem Guardian (19/3/08)
Questions
| 1. |
Explain what is meant by the ‘liberalisation of financial markets’. |
| 2. |
“If the City won’t put its house in order, the politicians must”. Examine the validity of Will Hutton’s argument. |
| 3. |
Discuss the extent to which the freedom of banks to lend has been the cause of the recent credit crunch. |
Late March saw the auctioning by the Bank of England of £10.9bn to boost liquidity in financial markets. This was £5bn more than had been expected and so should help ease the liquidity position for cash-strapped banks and other financial institutions.
When the rivers run dry The Economist (6/3/08)
Bank of England answers pleas with £5bn injections Times Online (21/3/08)
Questions
| 1. |
Explain what is meant by liquidity. |
| 2. |
Assess the main factors that have resulted in a shortage of liquidity in financial markets. |
| 3. |
Discuss the extent to which this extra liquidity is likely to help reduce the likelihood of recession in the UK. |