Saturday, August 24, 2019

The limits of monetary policy?

Despite the work I have editing a new book (writing it with a colleague who happens to be an ex-student (IB) of mine), I just cannot ignore the news, especially when a lot has been going on lately in the world.

What am I referring to?
  • the escalating trade war between the US and China 
  • the rising chances for a no deal Brexit
  • China and the Hong Kong protesters
  • Italy's political instability
  • and, unfortunately, quite a few other 'developments'
Since I need to maintain focus on IB Economics, I will refer to an article in today's NYT titled One Crazy Day Showed How Political Chaos Threatens the World Economy What is of special interest to me and the course I teach are a couple of points made by Jerome Powell, Fed Chairman (the Fede is the Central Bank of the US) and by Mark Carney, the Governor of the Bank of England, about the limits of monetary policy.

This quote from the article refers to Jerome Powell:
Mr. Powell delivered a nuanced speech signaling the Fed was committed to a “risk management” approach, of adjusting policy to try to prevent bad things from happening. His words kept the Fed’s options open.
But he made clear that a breakdown of global trade relations was not the kind of thing that the Fed’s interest rate policies were well suited to addressing.
While monetary policy is a powerful tool,” Mr. Powell said, “it cannot provide a settled rule book for international trade.” The central bank can only adjust policy to try to respond to the ways trade policy changes affect the overall outlook.  The implicit message: If erratic trade policy undermines the economy, the Fed’s tools are likely to have only limited ability to overcome the damage. Interest rate cuts in that situation would be like giving pain relievers to someone with a broken bone — better to have than not, but unable to solve the underlying problem.
And this one to Mark Carney:
 Also speaking at the Jackson Hole symposium was the Bank of England governor, Mark Carney, who described a limited ability to use monetary policy to offset the damage from Britain’s potentially messy exit from the European Union this fall.
“In the end, monetary policy can only help smooth the adjustment to the major real shock that an abrupt no-deal Brexit would entail,” Mr. Carney said, and that ability would be constrained by the need to keep inflation under control.
Food for thought! 

Tuesday, August 20, 2019

The new IB Economics Syllabus

 I assume that most probably, the new Economics Syllabus for first teaching in August 2020 and first assessment in May 2022, will be out very soon.   

There are nine key concepts around which the course will be structured: scarcity, choice, efficiency, equity, economic well-being, sustainability, change, interdependence and intervention.  The initial decision to dump the theory of the firm and market structures thankfully does not seem to be the case as section 2.11, in the January 2019 updated syllabus outline, is on Market Power. 

Since to teach market power, and to ensure that students do understand its meaning and  implications, the basics of the theory of the firm and of market structures are necessary, I assume that they will also be present in the new syllabus.  We'll see. 

Otherwise, there is little in the latest outline to fully grasp the differences between the new and the current syllabus. 

In the area of assessment, what makes me wonder a bit is where it is stated that in the 'new' Paper 3:

 "students will work with new quantitative and qualitative data demonstrating a deeper understanding of a real-world issue scenario, using the theories, models, ideas and tools of economics and culminating in policy advice"

"Policy advice"!  I know a few governments (😜) that would need some good policy advice now! This new expectation is both interesting and will be a nightmare to mark (and to come up with an appropriate MS and provide guidance to examiners ).  We'll also see how this one works. 

The last item that makes me a bit curious (I was initially going to use the word 'worried'...) refers to the Internal Assessment.  It states in the outline:

"Each of the three commentaries should use a different key concept as a lens through which to analyse their commentaries"

The 10 'key concepts' are in italics above.  First of all, I would assume that a commentary can 'use' more than one 'key concept'.  But I am not at all sure what exactly the verb 'use' means.  Most, if not all of these concepts permeate all of economics.  And, of course, the question is how can a teacher or a moderator judge whether (and to what extent) a commentary does indeed 'use' a key concept'?. We'll also see this one in practice.

A more general point.  I've been teaching for a long-long time Economics (IB for 25+ years) and I have a decent (terminal degree) background in pure Economics.  I have to admit that I am not so sure what much of the language used in curricula and other IB guides/documents really means.  I am afraid that the program has been hijacked by many who have basically a solid background in Education (but a minimal background in a discipline) and who are forcing fashionable concepts and terms without a clear knowledge of how exactly these apply to each discipline.  More like buzzwords...

I do know that a solid background in Physics is needed to teach Physics and a solid background in Economics is needed to teach Economics.  Sometimes, it seems, this background is just not there.  Einstein had said that 'if you can't explain it to a six year old, then you don't understand it yourself'.
I am afraid that lots we lately find in many IB documents cannot be explained to a six year old.

PS: I had promised that I would maintain this blog last year (and, I am afraid the year before).  I didn't.  Let's see if I keep a new promise to maintain it this time.  The fact that real world examples are lately in such high demand by examiners and what's going on in the real world will be even more important when teaching the new syllabus, makes me hopeful that I will at least try harder this time around.  The goal is to facilitate both students and colleagues of IB Economics .  😁