Globalisation is a word we hear a lot of. The world economy is constantly changing and the financial crisis, from which the world is still recovering, is a prime example of just how interdependent nations are. Tony Blair has extended this idea of interdependence in the context of universities and the so-called knowledge economy. As technology advances and economies become more interdependent, international competitiveness is becoming increasingly important and this is one area where universities are vital.
“If you look at the world’s current and emerging superpowers, nearly all have either well-established or are currently establishing university systems that will help them compete in the global economy.”
Just how important is a country’s higher education system and what has been the impact of globalisation on them?
Tony Blair’s global ‘battle of ideas’ BBC News, Sean Coughlan (7/3/11)
Top schools face globalisation challenge Financial Times, Jonathan Doh and Guy Pfefferman (6/3/11)
Questions
- What do we mean by a ‘knowledge economy?
- What is globalisation and how is the interdependence of nations relevant to this concept?
- Tony Blair says that the world’s superpowers all have well-established or are currently establishing university systems. Why is it this helps them to compete globally?
- What are the benefits of higher education? Do they accrue mainly to the individual receiving the education or to society? On which factors does your answer depend?
- What role does information play in making the global education environment more competitive?
Economics is about choice – and choices occur in all parts of our lives. One area is personal relationships. Are we making the best of our relationships with family, friends and sexual partners? Increasingly economists are examining human behaviour in such contexts and asking what factors determine our decisions and whether such decisions are rational.
A recent book looks at the economics of marriage and goes under the title of ‘Spousonomics‘. Its authors, Paula Szuchman and Jenny Anderson, use economics “to master love, marriage and dirty dishes”. As they say:
Every marriage is its own little economy, a business of two with a finite number of resources that need to be allocated efficiently.
They look at ways in which such resources can be allocated efficiently. They also look at apparently irrational behaviour and seek to explain it in terms of various ‘failures’ (akin to market failures). They also examine how these failures can be rectified to improve relationships.
So is this economics stepping on the toes of relationship counsellors and psychologists? Or is this the legitimate domain of economists seeking to understand how to optimise in the context of scarce resources – including time and patience?
Spousonomics gets to heart of the matter Belfast Telegraph (19/1/11)
Run your marriage with ‘Spousonomics’: A new book says applying economic rules with transform your relationship Mail Online, Lydia Slater (31/1/11)
Spousonomics: How Economics Can Help Figure Out Your Marriage Book Beast (31/1/11)
Spousonomics Lesson #1: Loss Aversion YouTube (15/1/11)
Economist’s Explanation For Why Getting Married Isn’t Rational Huffington Post, Dan Ariely (15/1/11)
How Economics Saved My Marriage Newsweek, Paula Szuchman (30/1/11)
Want your marriage to profit? New York Post, Sara Stewart (29/1/11)
Spousonomics: blog, Paula Szuchman and Jenny Anderson
Questions
- How would you define ‘rational behaviour’ in a personal relationship?
- Why may marriage be a better deal generally for men than for women?
- Give some examples of asymmetry of information in marriage and why this may lead to bad decision making?
- Give some examples of risk averse and risk loving behaviour in personal relationships?
- Why are many actions in marriage apparently irrational? Could such actions be explained if the concept of ‘irrationality’ is redefined?
- Why may a simple demand curve help to explain why sexual relationships tend to wane in many marriages?
- Why does moral hazard occur in marriage? Does a combination or moral hazard and asymmetry of information help to explain divorce?
- Should marriage guidance counsellors study economics?!
With news of the economy contracting in the previous quarter, it was perhaps a surprise to some that BSkyB has seen growth in its customer numbers to above 10 million: much of this increase due to growth in broadband numbers. In the second half of 2010, BSkyB reported that revenues increased by 15% to £3.2bn and their pre-tax profits were also on the way up to £467m. These latest figures are likely to put increasing pressure on News Corp’s takeover bid for the shares they do not own in BSkyB (61%), as share prices increase by 2%. Last summer, a bid of 700p per share was rejected and while both companies did agree to work together to determine if a future merger was viable, these higher share prices put BSkyB in a much stronger position.
However, before anything else happens, Rupert Murdoch’s company is waiting for regulatory approval from Ofcom for this takeover. BBC reports sugges that Ofcom has made an:
“unambiguous recommendation that News Corp’s plan to acquire all of BSkyB should be referred to the Competition Commission for further investigation.”
The Culture Secretary, Jeremy Hunt, has spoken of his intention to refer this potential merger to the Competition Commission, following Ofcom’s recommendation. There are concerns about the impact on competition and Rupert Murdochs’ increased influence over public opinion, if this merger were to go ahead. Any delays in finalizing a deal could benefit BSkyB, if their financial performance continues. Analysts suggest that the delay could be 6 months, while any investigation takes place. If profits continue to rise, share prices may also go up, requiring higher and higher bids by News Corp. Watch this space!
BSkyB profits soar 26% to £520m putting pressure on NewsCorp to increase takeover bid Daily Mail (27/1/11)
BSkyB reports big jump in profits BBC News (27/1/11)
BSkyB spends £7m on News Corp bid Guardian, Mark Sweney (27/1/11)
BSkyB result to highlight pressure on News Corp Reuters, Kate Holton (26/1/11)
HD TV, broad demand boosts BSkyB Telegraph (27/1/11)
News Corp bud for Sky should go to Competition Commission, recommends Ofcom Telegraph (27/1/11)
Call off the hunt Financial Times (20/1/11)
Numis raises BSkyB on expected News Corp deal delay Reuters (21/1/11)
Questions
- Explain what type of merger it would be between News Corp and BSkyB.
- What are the arguments (a) for the merger and (b) against the merger? Consider the impact on the public, the competitors, the workers etc.
- What is the role of Ofcom and the Competition Commission? How do their responsibilities differ?
- As demand for Sky’s products increases, what could we expect to see in terms of price? Now explain why your answer may not happen!
- Why have BSkyB’s share prices been affected? Is it the demand of supply of shares that has changed? Illustrate your answer on a diagram.
If you want to buy a newly released DVD, a cheaper option than buying off the high-street tends to be to buy online, in particular through Amazon, the world’s largest online retailer. However, Amazon has been facing increasing competition from another US giant, Netflix that has over 16 million subscribers and is looking at entering the British market. Arguably, in a response to this threat, Amazon has agreed to purchase Lovefilm, the online movie rental service that has grown rapidly over the past few years, with over 1.4 million members around the UK.
As of 2008, Amazon already had a 42% stake in the business, but as Lovefilm has been running into difficulties, their senior management team has been looking at the possibility of selling the remaining 58% share. Enter Amazon in a bid to cement and defend their place in the British market to companies such as Netflix. Below are a few articles concerning this takeover – more will be added, as further details emerge.
Amazon acquires Lovefilm for £200m Financial Times, Tim Bradshaw (20/1/11)
Can Lovefilm survive the streaming revolution? Telegraph, James Hurley (27/1/11)
Amazon takes full control of Lovefilm Guardian, Josh Halliday(20/1/11)
Amazon buys remaining stake in Lovefilm DVD service BBC News (20/1/11)
Amazon takes control of Lovefilm Broadband TV News, Julian Clover (20/1/11)
Amazon acquires Lovefilm, the Netflix of Europe Tech Crunch, Mike Butcher (20/1/11)
Questions
- What type of takeover is this and what are the main motives behind it?
- How are consumers likely to a) benefit and b) suffer from Amazon’s takeover bid for Lovefilm?
- Who are Amazon’s main competitors? (Think of all the products they sell.)
- Will the Competition authorities be interested in this takeover? Explain your answer.
- In which type of market structure would you place Amazon, Netflix and Lovefilm? Explain your answer.
A huge majority of the British population are in agreement on one thing: UK drinking is out of control. At a cost to the NHS of over £2 billion per annum, it’s quite obvious that the current ‘binge drinking’ culture is unsustainable for those doing the drinking and for the NHS.
This issue was raised back in January 2010, when the Labour government came under pressure to impose a minimum price on alcohol. (see All-you-can-drink bans) The report published in early January suggested that a minimum price on alcohol of 50p per unit would save more than 3000 lives per year. Dr. Richard Taylor said:
“The evidence we took showed that minimum pricing was the most effective way forward and at the moment you can sometimes buy beer cheaper than water. Our message is that the price would be put up but only by a little for moderate drinkers. Surely that is a sacrifice to pay for the good health of young people.”
The Coalition’s plan is to introduce a minimum price for alcohol, which would increase the price of a can of lager to a minimum of 38p and a litre bottle of vodka would be a minimum of £10.71. By increasing the price of alcohol, it is hoped that demand will be reduced and this will go some way to tackling the problem of binge drinking.
However, many argue that the proposal will be ineffective. Some believe that the minimum price is not high enough and that such a small increase will have no effect. Others argue that it will only affect small supermarkets and will have a significantly adverse effect on pubs, which are already struggling. Furthermore, a concern is that by raising the price of alcohol, the only people who will suffer are the so-called ‘sensible’ drinkers. Those who go out and binge drink will be largely unresponsive to the higher price.
Articles
How can raising the price of alcohol improve health BBC News, Michelle Roberts (18/1/11)
Pub association responds to alcohol minimum price BBC News (18/1/11)
SNP refuses Britain-wide alcohol minimum price Telegraph, Simon Johnson (19/1/11)
Experts say the new minimum prices on alcohol sales are not enough Wales Online, Abby Alford (19/1/11)
UK drinking ‘is out of control’, two thirds of public believe Guardian, Alan Travis (18/1/11)
Alcohol price plans will only save 21 lives per year, says expert Telegraph, Tom Whitehead (19/1/11)
Supermarkets forced to charge ‘minimum price’ for alcohol in bid to curb binge drinking Mirror News, James Lyons (18/1/11)
Report
Alcohol House of Commons Health Committee (10/12/09)
Questions
- Using a diagram, explain how a minimum price control on alcohol will work. What are the likely effects?
- Which factors will determine the effectiveness of the minimum price?
- Why is it that ‘binge drinkers’ may not be responsive to the higher price?
- The Mirror article refers to ‘loss leaders’. What are they and how are they relevant here?
- What other policies could be used to tackle binge drinking?
- Given that taxes on products such as alcohol and cigarettes raise so much tax revenue for the government, would there be an adverse effect by raising the minimum price on alcohol?
- Why is the current drinking culture unsustainable?
- Is alcohol a de-merit good? Why is it an example of market failure?
