The best way to understand economic interdependence is the classic pamphlet I, Pencil.
This guy attempted to make a sandwich from scratch. It cost $1500 and took 3 months. It’s remarkable how cheap and plentiful sandwiches are, due to an extended global supply chain and division of labou.
This video shows the history of globalisation through some important maps:
Here we use basic demand and supply analysis to look at the welfare effects of trade intervention:
These resources form part of my Managerial Economics course map. You can watch the full YouTube playlist here. This page ties into Chapter 10 of ‘Markets for Managers’.
Learning Objectives: Understand the root causes of inflation, and contribute to policy discussions. Understand how monetary policy affects business decision-making and thus generates macroeconomic fluctuations
This lecture covers a lot of ground but tries to give you a relatively simple, usable framework to relate monetary economics to monetary policy decisions. One problem when studying macroeconomics is the belief that it equips us with an ability to forecast. See my video on Economic Prediction for why I think we need to be careful.
Conventional monetary policy is a simple link between a target (usually inflation) and a tool (interest rates). During the lecture I implied that central bankers change interest rates relative to the current rate. In some cases, however, they may be trying to move the policy rate closer to some sort of benchmark. A common benchmark can be calculate using a Taylor Rule. For examples, see Kaleidic Economics.
A corridor system is when the central bank targets three policy rates. We looked at how those rates changed from 2003-2015 in the Eurozone. The ECB website has more recent data.
The Dynamic AD-AS model is a really good way to think through macro events. If it is unclear after the Monetary and Fiscal policy lectures, there are plenty more resources on this page of my website.
The lecture also introduces the concept of the signal extraction problem. This isn’t the most intuitive concept to grasp, but it explains how nominal shocks can have real effects. In other words how changes in the money supply can affect inflation and real growth. A good article on this is Steve Horwitz’s ‘The Parable of the Broken Traffic Lights“.
These resources form part of my Managerial Economics course map. You can watch the full YouTube playlist here. This page ties into Chapter 7 (Sections 7.3, 7.5 and 7.6) and Chapter 8 (Section 8.1 and 8.2) of ‘Markets for Managers’.
What’s the conventional definition of a recession?
How does the NBER officially define recessions?
The content on policymakers feeling pressurized to “do something” is an element of crisis management more generally. An interesting example of the types of trade off that policymakers face is BBC Radio 4’s ‘Discussion Time: Coronovirus‘. Even though it relates to an epidemiology situation, it is relevent for any PR situation. Policymakers face a balance between maintaining public confidence, being seen to be providing a quick and clear response, without inciting a general panic. This relies on having good frameworks and tools that relate to the specific situation (the Radio 4 panel explain how important expert forecasts of the spread of foot and mouth disease were, in a recession economic impact studies play a critical role); but also an ability to manage public expectations. The goal of successful crisis management is to balance these things without introducing new uncertainties.
When talking about macroeconomics I think it’s important to distinguish between the overall economy and the circumstances of an individual firm. We can’t always assume that macro conditions are felt the same by each company within it. I explain more in this video:
Regarding public finance more generally, in 2012 I participated in the 2020 Tax Commission. You can read our report here.
Regarding tax compliance, you may hear things like:
Apple can pretty much choose how much tax it wants to pay and to whom. One EU estimate was that it pad less than 0-01% tax on profits of over $100 billion (Frisby 2019, p.175)
This may be true, but it doesn’t mean that tax is voluntary. The choice that Apple have is over what activities they undertake, each of which have different tax implications. So they can affect their tax obligations, but only in as much as they alter their business decisions. They are still at the mercy of the state.
These resources form part of my Managerial Economics course map. You can watch the full YouTube playlist here. This page ties into Chapter 7 of ‘Markets for Managers’.
In 1945 Hong Kong was a poor territory. After war and Japanese occupation many of its 600,000 people were starving. They had no traditionally considered natural resources, and yet soon became a major manufacturing location, the busiest port in the world, and a centre of the global financial market.
What happened? In 1945 civil servant John Cowperthwaite made Hong Kong a free port, which meant no tariffs for most goods, no export subsidies, and few restrictions on imports. Trade grew quickly.
On the supply side, it is not as though Hong Kong’s services lack in any way. The territory has the fourth best education system in the world, according to Pearson, and it ranks top of Bloomberg’s healthcare index. Its public transport system was ranked the world’s best last year, and it is consistently used as a model elsewhere (Frisby, 2019, p.13)
Perhaps even more powerfully, Hong Kong has been used as a model for other areas on mainland China. In 1980 Shenzhen became a “special economic zone” with low taxes and market-friendly regulation. The population rose from 30,000 to 13 million. Here’s Hong Kong in 12 amazing photos.
In 2014 I attended a Mont Pelerin Society meeting in Hong Kong. Here I am in front of that amazing skyline, with my undergraduate econ study partner!