Sunday, February 24, 2008

Bush is right about something....

Check out this post on pyramid building and war in Krugman's blog. He is quoting this famous passage from Keynes' General Theory which we will be discussing shortly in class:

Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better.
It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for wholly “wasteful” forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict “business” principles. For example, unemployment relief financed by loans is more readily accepted than the financing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable of all solutions.
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.


This post in Jeff Frankels blog is also quite interesting and somewhat related. It warns us on the dangers of labelling in economics (and, more generally). Read it. You'll have plenty to say in a heated discussion someday soon while in a trendy sushi bar.

Two blogs to keep an eye on!

The first one is Liz Ball's biology blog where it seems that even ignoramuses like me can find interesting stuff. Check it out here!

The other one has interesting commentaries on issues pertaining to education and as such it may prove interesting to follow. Let's see! It can be found here.

Monday, February 11, 2008

Single industry towns

This is from the latest Economist (FEB 7 , 08)

Canada's parliament approved a plan to spend C$1 billion ($1 billion) to help single-industry towns where factories, and especially lumber plants, have shut down because of the slowing economy in the United States.

Remember this when we talk about protectionism and the role of the government. This is Canada, not Kenya.

You have no clue what I'm talking about but hopefully soon you'll understand my point.

Thursday, February 7, 2008


I was checking out articles that you could read on the issues we are currently discussing in class and I fould plenty from a great source, Project Syndicate.

These are the articles:
The Case for Mitigating Greenhouse Gas Emissions by Kenneth Arrow, 1972 Nobel Prize.

Showdown in Bali by Joe Stiglitz, 2001 Nobel Prize (check out here his CV)

The Rising Cost of Nature by Jeff Sachs, Professor of Economics and Director of the Earth Institute at Columbia University.

Remember, cute and cuddly, boys. Cute and cuddly....

Friday, February 1, 2008

New blog added to your right -->

The name is Managing Globalization, it's by Daniel Altman and it's in the IHT . Check it out.

There is interesting post today (1/2/08) about prices in China rising and the effect on other economies. There is also an interesting phrase that we will be discussing later on in the course : 'Labor costs are rising, too, after more than a decade of stagnation caused by wave after wave of rural-to-urban migrants'.


Read this IHT article on the bird flu in Indonesia. Then think of the 'factors affecting demand' section of our course earlier this year. We've learned that if the price of a substitute of good X decreases then demand for X will decrease. It makes perfect sense.

Now, think of these two questions:

1. Draw a diagram to show the effect on the demand for Pepsi of a decision by the marketing directors of Coca Cola to decrease the price of Coke.

2. Draw a diagram to show the effect on the demand for fish of a decrease in the price of chicken as a result of an outbreak of the bird flu.

Iτ should be clear that it is very important to THINK why the price of the substitute good decreased.

Later on in the course we'll check out a past data question that can be very confusing!

BTW, καλό μήνα παιδιά μου γλυκά!

On inflation and macro

We will be starting our discussion of macro pretty soon so I'd like you to read this IHT article on inflation pressures in Europe. Inflation is defined as a 'sustained increase in the average price level', in other words it exists if prices, on the average, have a tendency to rise. Inflation is risky business in the sense that it creates costs on the economy and it becomes difficult to decrease once inflationary expectations are created.

The article discusses the causes of this inflationary bout (' oil prices hover above $90 a barrel and the conversion of farmland to grow biofuel crops increases food prices) as well as the trade-offs the ECB faces('The ECB has resisted increasing political pressure to ease monetary policy, keeping the benchmark interest rate at 4 percent since June').

Read it!