Saturday, September 20, 2014

China: extent of pollution and policies to address the problem

An article in the The New York Times a few days ago presents the acute pollution related problems China faces as well as the responses that the Chinese government has started to adopt.

'Why this budding environmental consciousness now? The answer is simple: 2013 was, by any accounting, one horrific year for the environment....'

...In March 2013 pig carcasses came bobbing up and down the Huangpu River, a major source of Shanghai’s drinking water...

... In 2013 the Beijing government acknowledged what environmentalists had long suspected: some villages in the countryside had become so-called cancer villages, communities where cancer cases “cluster” and far exceed the norm. These villages are usually just downstream from an industrial plant that discharges hazardous waste into rivers that villagers use to drink and to irrigate their crops.

...People living in northern China were informed by a team of American, Chinese and Israeli researchers that they should expect to live much shorter lives — a full 5.5 years shorter — than their countrymen to the south. The reason: Heavier coal dependency in the north makes the air they breathe that much more toxic…
But officials in Beijing have started to respond with a variety of tools/ policies. The article's title is illustrative: China's Environmental Awakening.

The article seems very useful as a source of examples for IB Economics SL and HL paper 1 essays. It relates to several sections/ topics and sub-topics of the syllabus, such as:

  • Explain, using diagrams and examples, the concepts of negative externalities of   production, and the welfare loss associated with the production of a good.
  • Evaluate, using diagrams, the use of policy responses, including market-based policies (taxation and tradable permits), and government regulations, to the problem of negative externalities of production.
  • Discuss, using negative externalities diagrams, the view that economic activity requiring the use of fossil fuels to satisfy demand poses a threat to sustainability
  • Evaluate, using diagrams, possible government responses to threats to sustainability, including legislation, carbon taxes, cap and trade schemes, and funding for clean technologies.
  • Explain the meaning and significance of “green GDP”, a measure of GDP that accounts for environmental destruction.
  • Discuss the possible consequences of economic growth, including the possible impacts on living standards and sustainability.
Seems both interesting and useful!

Saturday, September 6, 2014

A great site by Bloomberg for IB Economics students

I recently found Bloomberg's 'Quick Take' section which has very many entries that could prove helpful to IB Economics students.

I will introduce this section with a Quick Take on Deflation.  Deflation is under section 2.3 of the IB economics syllabus ('Low and Stable Rate of Inflation') where candidates are asked not only to distinguish between inflation, disinflation and deflation but also to discuss the possible consequences of deflation.

Quoting from the site:
The ogre stalking Europe’s weak economy isn’t the one people have learned to fear. The monster isn’t inflation but its opposite: falling prices. Its name is deflation and it appears friendly. Why be afraid when the cash in people’s wallets buys more fuel and televisions, not less? Because when deflation grabs hold, companies and consumers stop spending. It strangles borrowers because their debts get harder to repay — a menace for countries struggling to exit the worst recession in a generation
Having prices go up more slowly helps consumers and can boost purchasing power. But when they actually drop, economic activity screeches to a halt. Households hold off making purchases as they anticipate further price declines; companies postpone investment and hiring as they are forced to cut prices. Sliding prices eat into sales and tax receipts, limiting pay raises and profit margins. They add to the debt burdens of companies and governments that would otherwise be eroded by inflation.
Students will also find excellent examples and reference material.


In this New York Times article the latest policy initiative by the European Central Bank is presented: Europe's Bank Takes Aggressive Steps.

Friday, September 5, 2014

Price controls considered in Argentina

An important part of the IB Economics Syllabus (HL and SL) is section 1.3 on Government Intervention which includes indirect taxes, subsidies, price floors (minimum prices) and price ceilings (maximum prices).

The Wall Street Journal has an article titled Argentina's Government Is Considering Price Controls.  Apparently, Argentina's government is considering '...legislation letting the government regulate private-sector prices, profit margins and production levels'.

Quoting from the article:
Business groups say the legislation would be ruinous for an economy already in recession, with companies curbing production, laying off workers and struggling with inflation thought to be around 40% annually.
"This is absolutely ridiculous. It's part of a very primitive ideology that says government officials should decide what people should make, how much they should make and how much they should charge," said Congressman Federico Pinedo of the opposition Pro party.
Supporters say the bill is unpopular among big business because it would prevent monopolies from abusing their power.

As written, the bill would allow the government to "establish, at any stage of the economic process, profit margins, reference prices, maximum and minimum prices, or all or any of these measures."
It would also let the government close businesses for up to 90 days and fine them up to 10 million pesos ($1.2 million) if they raise prices abusively or cause scarcity by hoarding essential goods.
Opposition to the bill is so intense it has united many of the country's disparate business interests, leading big business chambers to speak out in unison.
"We already know exactly what it is like to suffer from these kind of interventionist economic policies," said Luis Etchevehere, president of the Argentine Rural Society, the country's top farm group. "This will lead to divestment and possibly even supply shortages of some products like is now happening in Venezuela."

You can also read on this issue an article from Bloomberg titled Argentina Says It’s No Venezuela as Price Cap Law Debated.

Remember that to earn top marks (L4), examples are expected in Paper 1 (HL and SL) in both part (a) and part (b).  These articles could thus prove useful.