INSIDE:
Crossroads for the Developing World
How does education quality impact adult health? Is finding a cure the first step to combating disease? Is there a case for countercyclical fiscal policy?
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Contents l Global Round up................................................................................................4 l A Guide to Economics Freshers .......................................................................6 l Top Internship Tips ..............................................................................................7 l Austerity in the UK Today Is a Mistake...............................................................8 l Long Run Growth and Development.............................................................10 l Fiscal Procyclicality: An Issue for Both Developing and Developed Nations.........................................................................................12 l Is a Rethink Needed in the Current State of Health-Oriented Aid?............14 l Inequality of Opportunity in Health: Some Recent Research Findings from HEDG .....................................................................................................16 l Hasten Slowly ...................................................................................................18 l Chasing Dreams: Rural to Urban Migration in China ................................20 l Political Reality versus Long Term Investment in the UK ............................22 l The More The Merrier ......................................................................................24 l The Science of Procrastination .....................................................................27 l Would you like a graduate job? ...................................................................28
Article references available at www.yorkeconomicssociety.co.uk
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Autumn 2013
Economics Society The University of York A Brief Message from the Committee of the University of York Economics Society
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conSoc was founded on the principle of supporting students, and it is with a focus on employability, advice and networking that the Economics Society continues to thrive, with over 1000 members contributing to a society run by students, for students. Following these objectives, with events such as a module choices talk for first years, a consulting experience day and skills sessions with leading employers, the society was pleased to see so many economists attend the jointly-organised Summer BBQ. Over 150 members of the society were greeted with food, beverages and a live band. The end of exams in June last term warranted our biggest social ever. With an impressive turnout of over 900 students, the committee members were again delighted to see so many students representing the society in a frenetic night of hedonism. We are thankful to the joint efforts of everyone involved in organising these events, as they were a great way to celebrate the final term of some students. It is the dedication of our members that continue to makes EconSoc a success, but we don’t intend to stop there. As this is the final term of the current committee, we intend to make it the best yet. We have 25 events planned for you to look forward to, including our brand
Editors: James Daveney
new weekly Coffee & Capitalism discussions, film and cinema nights, skills talks by leading employers, and several exciting socials. We also have our end of term ball on Sunday 1st December, with election results also being announced at the event. This promises to be a great night, with guests being treated to a full three course meal, complimentary drinks, DJ, private bar and free entry to Revs with a champagne reception. We hope you enjoy the cumulative efforts of the editorial team, academics and writers in our latest issue of Equilibrium, and that you will join us in the future for more outstanding events. Until next time, The EconSoc Committee President: James Daveney jd803@york.ac.uk Editor: Usama Polani mp899@york.ac.uk
Copy-editor: Usama Polani
Daniel Howdon
Graphic design: Jessica Ochalek
Printing:
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Global Round up: TPP, the trade agreement that could reinvigorate the global economy By Usama Polani, 2nd Year Economics
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he recovery of the global economy is supposedly underway, yet with all the BRICS no longer growing at the frenzied pace to which we had become accustomed, the recovery could do with a boost. This injection of growth could very well come from trade agreements which are being seriously discussed, the most important of which is the American
...with the catastrophe of the Doha round of WTO talks hanging over them, leaders are facing political pressure to come to an arrangement swiftly led Trans-Pacific Partnership (TPP). This is a free trade deal which brings together 12 countries – including America, Australia and Canada – who are responsible for one third of all global trade, with Japan also showing its interest by taking part in the 18th round of talks as well. It is also hoped that this trade agreement, along with the Transatlantic Trade and Investment Partnership(TTIP) – the proposed free trade deal between America and the EU – will go beyond just the parameters of traditional trade agreements, with plans to also incorporate rules on labour standards, intellectual property, government procurements, amongst others. The all-encompassing nature of the TPP deal, however, leads to a whole set of problems: the lack of transparency of the talks and the broad scope of the deal has led to conspiracy theories about America trying to impose its values and standards on
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the whole world. In addition each country wants their own exemptions, or “carve-outs”, from different parts of the deal, such as Vietnam’s resistance to being forced to buy yarn from other TPP members, rather than cheaper non- members like China. With some estimates of how long it could take for the agreement to be finalized being as high as ten years, and with the catastrophe of the Doha round of WTO talks hanging over them, leaders are facing political pressure to come to an arrangement swiftly. The danger with this is that it may allow more countries to get their own “carve outs” into the final deal, with the consequence that it becomes a diluted mess, with the most ambitious and globally beneficial parts left out.
India: The BRIC full of cracks From 2003-2008, India was a darling BRIC nation, with fast growth and an economy with much potential. Over the last two years, however, growth has been relatively sluggish by its standards (4-5%), and inflation stubbornly high (around the 10% mark). The true weaknesses of the economy were exposed in May when the Federal Reserve said it may slow down the pace of its asset purchases and, as investors swallowed the bitter pill
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of a new reality without ultra-cheap money, a substantial withdrawal of funds took place from emerging markets like India. The major reasons why India is more vulnerable to this upheaval is its high current account deficit (on course to be 4-5%
[One of] the major reasons why India is more vulnerable to this upheaval is its high current account deficit... of GDP by the end of the year) and its recent reliance on more short term debt: all of this means they are heavily dependent on foreign capital . A few weeks ago, with the Indian Rupee in the doldrums and foreign investors fleeing the stock market, it was feared that it would evolve into a full-blown balance of payments crisis. Thankfully it seems the fears were overblown, as relative stability has returned to the Indian economy, but the underlying problems remain: primarily, the growing dependence on imported energy which fuels over half of the high current account deficit. Many long-term solutions are being discussed, one of the most viable of which is the encouragement of domestic exploration for oil and gas. This would not only reduce the cost of imports, but would also create many jobs, providing a boost to the economy. It should be noted that, in the past, many international oil companies have been reluctant to go to India, driven away by unfavourable taxes, overcomplicated regulation
and domestic price controls. With India being the fourth biggest energy consumer in the world, we can only hope that it finally starts cutting the red tape. The Brewing troubles in the Eurozone: Lately, the Eurozone – in terms of panicked media coverage – has been pretty quiet, as it seems the trading bloc might finally be creeping out of recession. A storm is brewing, however, as all three countries rescued by bail-out programmes are still in pretty dire condition and, it seems, in need of even more funds. Although after its 67.5 billion euro rescue, Ireland will leave the bail-out programme as planned and will now rely on the private market for its borrowing needs, it is still vulnerable to jittery bond markets and may need to sign up to a precautionary programme with the Eurozone’s rescue
fund in order to guarantee a credit line. Meanwhile, it was planned Portugal would leave the bail-out programme in 2014, 3 years after its 78billion euro rescue. A crippling recession in the country, and the subsequent loss of support for the government, means their ability to tackle a growing budget deficit (5.5% of GDP for this year) seems severely hampered, and another bail out may be needed. Then we come to the (never defused, and still silently ticking away) time bomb that is Greece. Even after 246 billion euros of rescue financing, it seems more is still needed, as public debt peaks at 175% of GDP this year. It is hoped that austerity, along with continued economic recovery, will help with the downward trajectory of the debt levels but, for Greece to meet its IMF targets, more debt relief is urgent. No matter how much treatment the Greece economy has received so far – such as lowered interest rates on loans – it still remains ill, and may need large scale debt forgiveness to finally get it to start recovering. We can only hope
...for Greece to meet its IMF targets, more debt relief is urgent.
ous with reality. Thankfully inflation has been modest, but wages have been lagging behind, with a recent survey finding almost 52% of Britons are struggling to pay their bills. The reasons for this can be partially attributed to the shifting nature of the labour market in Britain. As the
...a recent survey finding almost 52% of Britons are struggling to pay their bills.
industrial base declines, fewer midskilled level workers are needed, with most of the jobs offered being for either low skill (and low paid) or high skill (and higher paid) jobs. Many of those trapped in the middle don’t have the skills for the higher paid positions, and don’t have the time or the money to attend the training to gain the vocational skills in which they are lacking. For this ever-squeezed middle, the only option then left is to take up lower wage jobs, where available. Arguably more investment by firms into their workers training would help, but, with profit margins squeezed by the stagnant economy, this seems unlikely. The government has tried to offer up solutions, such as increasing the income tax threshold, but even these is offset by the fall in real incomes and are not enough to address the underlying problems.
that the solution is found and, for once, employed quickly, before the markets make their own decisions. Recovery… but for whom? GDP grew by 0.6% in the second quarter of 2013, and house prices by almost 4%. George Osborne is trying to convince anyone that will listen that we are moving from “rescue to recovery”. For many Britons, especially those who are in the lower and middle income brackets, the talk of a recovery is painfully incongru-
For years, the disposable income of this group has been artificially raised by tax credits – hiding the true extent of the problem – but, as these are also scaled back as part of the austerity programme, more and more households are feeling the pinch. Data might show a recovery but, for many, the situation is as bleak as ever.
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A Guide to Economics Freshers: By Usama Polani, 2nd year Economics, Secretary of the Economics Society
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ello and welcome to Economics at the University of York, and congratulations for making it into one of the top universities in the UK to do arguably one of the hardest and most respected courses. After surviving my first year of Economics at York, I thought I could prepare an unofficial guide, with some friendly advice, on how to navigate your way through the first part of your degree, while squelching every last drop of value out of the £9000 sponge that UCAS refers to as L100.
detail in the explanations by lecturers – especially for the statistics/probability modules, where you will find explanations vital. The extra information gained in lectures can become crucial when exam season creeps up on you. Furthermore, in my first year,
Firstly, I would like to provide a disclaimer – one which I am sure you are already aware of – the course is not perfect, and neither is the university. Ask any 2nd or 3rd year Economics student, and they will have grumblings ranging from the feedback to the graduate prospects. No matter how much truth there is in this, I can reassure you that after sharing my experiences of first year with friends from other top universities for Economics, it is clear the grass is not greener on the other side. The differences are that the brown patches are in some cases in different places, with the important similarity being that it is only those who work hard and are fully committed who find the lush green patches. Now that we have got a strained metaphor out of the way, here are lists of things – in no particular order – which will make your first year a more satisfactory and fun experience.
too many seminars were at times filled with awkward silences where students would be too shy or reluctant to engage with the content and the tutor desperately tried to spark some interaction. I know that it can be daunting to the first person to answer a question in a class full of strangers, but if you do take the bold step you will be rewarded with a more engaging and enjoyable seminar.
1) Participate in your lectures & seminars: In your course only around 20% of your term time consists of actual contact hours so, even if you attend all of your timetabled slots, you can still have plenty of time to enjoy the other facets of university life. Although it may be tempting to miss lectures, many of which have PowerPoints available, I can say from experience that there is much more depth and
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The extra information gained in lectures can become crucial when exam season creeps up on you.
2 ) Get involved in EconSoc: Whether it is by attending the events or running in the upcoming election to become part in the committee, getting involved in the society is something you will not regret. We have a packed line-up of events in the first term alone. The social at Salvation in week three, for instance, will give more of a taste of York nightlife. In a more academic context, the weekly Coffee & Capitalism get togethers from week two will allow you to meet fellow economists from all years, and career events, such as the 1-to-1 CV sessions, can boost your chances of getting that crucial internship. The Economics Society will help you get the most out of the opportunities that are presented to you in the first year. 3) Go to the career events: Following on from tip number two: go to as many career events as possible. There will be career fairs which will have representatives from leading
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organisations, as well as events run by organisations themselves, such as that run by Ernst & Young later in the term. Furthermore, there will be workshops organized by Careers and EconSoc. It may seem a tad early to think about what career you want to pursue, but with the graduate market being so competitive and with there being many programmes (such as Insight Days and Spring Weeks) offered for first years, any work experience you can sort out for yourself in the first year will boost your chances of getting vital 2nd year internships. Knowing roughly what direction you want to head into after university, while still in your first year, will also allow you to build up your skills and experience in working towards that goal for the next two years. Have a look at James’ article on page 28 for a more detailed look at internships and careers.
...any work experience you can sort out for yourself in the first year will boost your chances of getting vital 2nd year internships. 4) Build a relationship with your lecturers: This is perhaps the hardest thing to do. It took me several weeks before I could even utter a few words in front my lecturers. However, if you can persevere, it can be a great thing. Although lecturers can at first glance seem like intimidating figures, with their vast amounts of knowledge, with which they blast you for hours each week while striding across the lecture hall, the truth is that they are friendly people who are passionate about Economics and their students. Once I worked up the courage to finally talk to my lecturers, either at the end of lectures or in their weekly office hours, I slowly built up a rap-
port with some of them and overall it made me enjoy the course more. Hearing people who are experts in their field talk about their area of economics has also helped me realise which aspects of economics I enjoy the most. 5) Remember why you did the course: This may be just me, but a few months into the course while I was relearning the different types of market structures, and trying to get my head around a multitude of probability distributions, as well as reading papers on the causes of the industrial revolution (which can occasionally be dry enough to actually make you thirsty) I started to feel a bit disillusioned. You might feel the same
sometime during your first year, but it is no reason to panic. The helpful advice which I received was to think of this as a year to ground the basics of Economics into you, while the next two years allow you to choose a lot
The most important things are to not try and bribe your lecturers with custard creams which, from personal experience, never seems to work, and to try your very, very best. of your own modules and branch off into your own specific interests. My advice is to remember why you chose
Top Internship Tips
• Make sure your grades are as good as you can make them. Some companies have a 2:1 cut off point for graduate and intern recruitment. • Make sure you get someone else to go over your CV, cover letter, and application. EconSoc will be holding one-on-one CV help sessions in Week 4, so make sure you have yours checked. • Try and talk to as many people as possible, so you know you’re applying for a role you will like. • Think of internships as a ‘try before you buy’ for a job market, so do as many as you can. • Apply early – many companies recruit on a rolling
the course revisit the books you read (books like the Undercover Economist) and keep in mind the Economics you want to learn in the future. So there it is: some tips on how to make the most of your first year. You will all have points from the list which you find more helpful than others. Or possibly none of the tips will seem helpful, in which case I apologise to you, and to my parents for guzzling all that electricity in charging my laptop. The most important things are to not try and bribe your lecturers with custard creams which, from personal experience, never seems to work, and to try your very, very best. Good Luck!
28 page t n o e l rtic ok a mes’ a iled lo ers. See Ja more deta care for a nships and r inte
basis. Use websites such as www.graddiary.com to send you alerts as soon as applications open. • Google, Google, Google. • Research global, national and local companies. • Research your company’s competitors to know where they stand in the market. • Know your job role well – what will you actually be doing? Do you think you’ll gain experience from the role? Can you see yourself working there after University? • At the end of most interviews you will be asked if you have any questions – have at least five questions prepared. • See if someone can give you a mock interview. You could always get your housemates to try out nontechnical questions on you. • Once at an interview, it is important to make sure you let them know you’re brilliant, whilst staying humble. It’s all about teamwork. • Be prepared to be challenged once you’re at your internship – if you’re not feeling challenged, you may not be making the most out of the experience.
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Austerity in the UK Today Is a Mistake By Sean Metcalfe, 3rd Year Economics
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rom the perspective of an economics student, the sharp U-turn in policy of the last three years, from fiscal stimulus to fiscal contraction, is rather puzzling, given that many of the world’s big economies – including Britain’s – remain in a deep slump.
...the Bank of England base rate is currently at 0.5% – leaving little room for monetary policy to accommodate austerity. Indeed, basic economic theory teaches that reducing government spending (and/or increasing taxes) leads to a reduction in aggregate demand, which reduces growth and employment. Under more normal conditions, to counteract the contractionary effects of this policy, interest rates could be lowered. But interest rates are already near zero – the Bank of England base rate is currently at 0.5% – leaving little room for monetary policy to accommodate austerity. What, then, is the rationale behind it?
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Most people are aware of the basic argument by now. Cuts are needed to reduce deficits and debt levels, which have soared since the financial crisis of 2008. Greece’s sovereign-debt crisis seemed to provide an example of the severe costs associated with “fiscal irresponsibility”. If the UK didn’t make a commitment to reducing its debt levels, investors would lose confidence in the government’s ability to pay back its debt, and bond yields would soar, as they did in Greece, precipitating a debt crisis and a risk of default. Some “austerians” also dispute the Keynesian view that government spending cuts are contractionary. “Expansionary austerity” is the theory that commitment to “fiscal consolidation” will inspire confidence amongst businesses and households to such an extent that the resulting increase in aggregate demand will outweigh the direct effects of a cut in government expenditure: on balance, resulting in an increase in output. This was a line of argument acknowledged by Cameron when he announced the coalition’s deficit reduction plans,
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stating that “those who argue that dealing with our deficit and promoting growth are somehow alternatives are wrong”. The experience of the last three years, during which a number of countries have implemented austerity measures, however, does not lend support to such a theory. Research from the IMF suggests the effects of austerity on growth during the slump have been overwhelmingly negative,
Research from the IMF suggests the effects of austerity on growth during the slump have been overwhelmingly negative, and that under current conditions may even prove to be self-defeating. and that under current conditions may even prove to be self-defeating: the decrease in growth that results from spending cuts may mean the government brings in less money from taxation, potentially worsening deficits. The empirical support for what Paul Krugman mockingly terms the “confidence fairy” is very weak. Fears that the UK could become another Greece have also been heav
ily criticised, and rightly so, because they implicitly ignore a significant difference between the two countries: the UK has its own central bank, and can therefore print its own money. Greece, being part of the Eurozone, lacks this freedom. The UK is much less vulnerable to a debt crisis. Additionally, the fact that interest rates on government debt in the UK, as well as many other countries outside of the Eurozone, have remained low
“stimulus today, austerity tomorrow” throughout the crisis, suggests that concerns over a crisis of confidence in the government’s ability to pay its debt are misplaced.
Not even the most hardline prominent anti-austerians, such as Krugman, however, think that this all therefore means that debt levels in countries like the US or the UK are not a cause for concern. What they argue – and what mainstream economics suggests – is, in the words of the late John Maynard Keynes, that “the boom, not the slump, is the time for austerity”. It is, of course, easier for a government to reduce its deficit in times of higher growth because it generates higher revenues. It is also easier for a government to reduce its deficit when the economy is not in a liquidity trap: as earlier discussed, when interest rates are not at their lower bound, they can be reduced to offset the contractionary effects of a reduction in government expenditure. Carrying out austerity
Paul Krugman
in a slump, according to theory and evidence, prolongs and worsens the slump. A more sensible course of action for the UK, I would argue, is the one set out by Oxford Economist Simon-Wren Lewis: that of “stimulus today, austerity tomorrow”.
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Long Run Growth and Development By Professor Sue Bowden and Alex Sadler, PhD Candidate, Department of Economics
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e have been working both independently and, more recently, together on how and why societies and households can become locked into cycles of poverty – and as such become trapped by the historical and long run roots of poverty. In our research on Europe, we have collaborated with colleagues from the OECD and the Portuguese Ministry of Economy. Our interest lies in the human capital dimension of this problem – more particularly in relation to the problems of pulmonary tuberculosis. In so doing, we have widened our interest to encompass the institutional and medical constraints on peoples’ ability to live without fear of this debilitating illness.
Illness makes working increasingly difficult; when people cannot work, they cannot earn income, and so households can become locked into poverty.
tive in human development terms. It also creates a “lock in” situation, whereby the afflicted find it difficult to earn sufficient income to escape poverty. We know from our work that the risks of infection are related to sustained exposure to the disease –made more likely by overcrowded and badly ventilated living and working conditions. This is why morbidity (illness) can be a complement to more conventional measures of standards of living. We have used such an alternative approach to map standards of living in Europe in the post-war period, across English and Welsh administrative areas in the interwar period, and across all countries between 1950 and 1980. It is sobering to discover that less than
Tuberculosis is one of the diseases longest known to man. Pulmonary tuberculosis has a long history and has impeded and shortened the lives of men, women and children for centuries. Respiratory tuberculosis is a particularly debilitating form of the disease. If untreated, the symptoms of active tuberculosis of the lung include coughing – sometimes with sputum or blood – chest pains, weakness, weight loss, fever and night sweats. Illness makes working increasingly difficult; when people cannot work, they cannot earn income, and so households can become locked into poverty. Adopting the human development perspective of our research, it follows that an illness which impairs the ability of people to work, and which cuts short their lives, is a nega-
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a hundred years ago, those living in certain counties or towns in this country were at risk of contracting, and dying from, the disease. It is also sobering to learn that, in the post-war period, those living in more developed western economies could be cured – but those in developing economies remained at much more severe risk of illness and early death. We also know that very few of those infected go on to develop active symptoms. Malnutrition is identified as the main culprit here – but what it is about nutrition is still not clear. Is it total calorific intake, or is it consumption of protein or certain vitamins? What we do know from our research, however, is that nutrition in terms of total calories does seem to play an important role in explaining why some countries have higher mortality rates than others. This is, furthermore, corroborated by recent studies which repeatedly find a strong link between low body mass index and susceptibility to disease. The problem from our perspective is that
we cannot always get reliable data on the various dimensions of nutrition – this is something to which Alex, in his research, hopes to have an answer soon.
The answer according to our work is not an issue of cost. It is an issue of institutions at their most basic level. Why is this a problem of medical science, and how does it impinge on human capital in the wider perspective of long-run growth and development? Between 1950 and 1980, medical science provided a reliable and effective chemotherapeutic cure for the disease – so, in these terms, there was a 30 year period in the history of the disease in which no-one (in theory) should have died. From 1980, drug resistant tuberculosis started to emerge – and is now be-
coming a real problem again. This is why we have been keen to understand what was done by administrative areas in this country to drive down illness rates, before there was any real cure available. This has involved hands-on work in the archives both at Kew (the National Archives) and at a local level. No downloading data from the internet, but the somewhat more laborious transcription in pencil – such are the joys of doing work on the past! We have also undertaken two pieces of work which look at this issue between 1950 and 1980. In theory no one should have died – anywhere in the world. But they did – in developing countries in particular. Why? The answer according to our work is not an issue of cost. It is an issue of institutions at their most basic level. We have looked at this both in qualitative and quantitative terms. In terms of the former, we sought to ascertain the problem on the ground in developing countries, in terms of the availability of the drugs that could cure the disease. The issue was not just the health system in different parts of the world. It was also a question of technology in terms of the reach, reliability and efficiency of transportation and refrigeration. But the explanation also lies in a problem which applies to HIV/AIDS today in many parts of the world – the social stigma attached to being diagnosed.
We also found that, as countries industrialised and urbanised, the disease spread and became a real problem – a lesson to emerging economies today. Enlightened economies such as Japan were ready and willing to plough resources into dealing with the problem as the country industrialised.
But the explanation also lies in a problem which applies to HIV/AIDS today in many parts of the world – the social stigma attached to being diagnosed. We are, of course, enlightened, social scientists who collate, synthesise and evaluate the evidence in a dispassionate and professional manner. But we are also human beings and to read accounts of how people lived and worked, ate (or otherwise), had no resort to medical science and no chance of escaping the poverty the disease created not so long ago is not the easiest of things to do. But as we hope we have shown above, it matters.
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Fiscal Procyclicality: an Issue for Both Developing and Developed Nations By Richard McManus, PhD Candidate, Department of Economics
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he 2008 financial crisis and subsequent global economic downturn has renewed political and academic debates on the conduct of fiscal policy. These debates have manifested themselves both domestically and internationally as world leaders look to coordinate policy actions. The April 2009 G20 Summit resulted in an announcement of a combined global stimulus package in excess of $5 trillion, as collective wisdom saw such measures as necessary to combat depressed demand. However, this collective response led to subsequent fears over sovereign debt, and talk of ‘fiscal responsibility’ and ‘consolidation’
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became widespread political rhetoric. A central question underlying the policy debate is whether countercyclical policy actions, expansionary in bad times and contractionary in good times, are likely to be effective. In this respect there are two schools of thought. The Neoclassical view, citing Ricardian equivalence, suggests that fiscal policy should remain neutral to the business cycle, appealing towards the tax smoothing hypothesis of Barro (1979). The Keynesian view, by contrast, is that fiscal policy should be countercyclical, in order to maintain demand at relatively smooth levels. Despite these academic debates, empirical evidence has suggested that fiscal policy is neither acyclical nor countercyclical but procyclical – government spending increases during boom periods and falls during downturns – in developing countries: see for example Gavin and Perotti (1997); Kaminsky et al. (2004) and Woo (2009). Research performed by Professor Gulcin Ozkan and I (McManus and Ozkan, 2012) supports these empirical results. Not only are developing countries seen to conduct procyclical fiscal policies, but we find that so too do many developed nations. Our results suggest that as few as 19 countries (including 11 ‘high income’ countries) , out of a sample of 114, conducted countercyclical fiscal policy on average between 1950 and 2010. Moreover, we find evidence that levels of fiscal procyclicality have been increasing with time.
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The current examples of fiscal austerity in the presence of a weak economy are clear demonstrations of fiscal procyclicality. However, a key empirical question is that of what the consequences from such policy are. It could be argued, for example, that forward-looking rational agents make the conduct of fiscal authori-
...empirical evidence has suggested that fiscal policy is neither acyclical nor countercyclical but procyclical – government spending increases during boom periods and falls during downturns – in developing countries. ties largely irrelevant as fiscal actions have little impact on the aggregate economy.
Our research suggests that countries who conduct countercyclical fiscal policy have higher rates of economic growth, lower rates of
...countries who conduct countercyclical fiscal policy have higher rates of economic growth, lower rates of growth volatility and lower rates of inflation compared to those countries that do not. growth volatility and lower rates of inflation compared to those countries that do not. For example, we estimate that the growth advantages of conducting acyclical policy instead of the average level of procyclicality across all countries are 0.6% per year: a significant amount, made more so when compounded over a period of time. We also find that this effect is diminishing with the level of GDP per capita in the economy; that is to say, although both developing and developed countries tend to adopt procyclical fiscal policies, the impact on the former is larger than that on the latter. Moreover, we observe, as
capital flows that also act as borrowing constraints in bad times (Kaminsky et al. 2004); political constraints such that fiscal pressures from multiple power groups for higher public spending in good times results in contractionary fiscal policy in bad times due to insufficient savings (Lane and Tornell, 1998); and political distortions such as corruption leading to public pressure for greater public spending in good times to reduce the rents available to corrupt governments (Alesina et al., 2008). These explanations are consistent with the observation that fiscal procyclicality is more common and more pronounced in developing countries. Our results suggest that, unless governments can find a way to move towards countercyclical discretionary fiscal policy, it would be more advisable to commit to acyclical policy that openly does not target the business cycle. Possible ways to do this would be to make fiscal decisions independent from elected officials, similar to
the move to central bank independence, but whether politicians would be willing to forgo this power, and whether the electorate would allow such decisions to be made by unelected officials is a political question of importance. Continuing policies of fiscal procyclicality will, however, continue to be detrimental to both developed and developing economies and therefore represents an issue of key concern.
Continuing policies of fiscal procyclicality will, however, continue to be detrimental to both developed and developing economies. does the majority of the literature, that developing countries carry out more procyclical policy than richer ones. Many potential explanations for such fiscal behaviour are put forward in the literature: borrowing constraints that restrict policymakers’ ability to follow countercyclical fiscal policy in bad times (Gavin and Perotti, 1997); the procyclicality of
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Is a Rethink Needed in the Current State of Health-Oriented Aid? By Finn McGuire, Graduate Student, Department of Economics
Healthcare seems to be the only commodity for which many people consider an egalitarian distribution to be unequivocally fairest. While we are willing to tolerate vastly inequitable distributions of other commodities, the presence of national healthcare systems in many countries reflects our unwillingness to accept a skewed distribution of, at least, access to healthcare. If within countries we are so unwilling to accept such inequalities, why are we more accepting of inequalities in health care provision and health across countries? Despite, arguably, our best efforts, some countries remain hundreds of years behind in terms of health and healthcare provision. Governments and NGOs do try to address this inequitable global distribution of health through foreign
aid. Three of the eight Millennium Development goals are explicitly health oriented. However, health is not a commodity that can be bought, but one in which investment must be made. Debatably, global commitment to this investment has fallen in recent
Health is not a commodity that can be bought, but one in which investment must be made. times. Since 1960, US economic assistance as a percentage of GDP has fallen from 0.8 to 0.1. This is consistent with the general trend of bilateral financial assistance. Obviously, this does not mean that aid has fallen in absolute terms – in fact, it has risen – but it does point to a falling commitment to combating global disease
and poverty. An important point for optimism is that a majority of the most damaging health concerns in developing countries are caused by a small number of known conditions, many of which have effective, existing treatments which can dramatically reduce the burden on those countries affected. However, it remains the case that a lack of financial resources is the main constraint for developing countries being able to effectively tackle the most damaging diseases. Sub-Saharan Africa has 24% of the global disease burden, yet only 3% of the world’s health care workers: a clear illustration of the gap that must be bridged. Tackling this imbalance must be the first stage of any concerted effort to improve health in the developing world and, until this issue is properly addressed, we cannot hope to achieve any sort of international parity in health. Therefore, increasing donor aid to provide the financial resources is necessary before any significant
Sub-Saharan Africa has 24% of the global disease burden, yet only 3% of the world’s health care workers and lasting gains can be achieved. An impasse has been reached in recent years with donor countries increasingly stipulating that reforms must be made in recipient countries, in order to ensure that financial assistance is spent as efficiently as possible. This increasing emphasis on efficiency over impact has arrested many potential improvements in global health. It is something of a paradox that, while we direct aid largely on the premise of a country needing external
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Simple, effective, and inexpensive
assistance, we then insist that these countries create systems to ensure aid is well-directed after if has already been established that their organisational capacity is underdeveloped at best. Of course it is often the case that where health is worst and financial support is most beneficial is also where misuse and waste are worst. The current precedent of support being withheld, or reduced, in such areas nevertheless only acts to prevent the development of systems to allow for more efficient use of support in
future. Efficiency may not be achieved in some senses: not all donor funds will reach their intended destinations. However, this is offset by the real impact the funds which do have, due to the low starting level of recipient country health. It costs around $40,000 to provide a trained guide dog to a blind person in the developed world. It costs around $30 to cure a blind person in a developing country suffering from trachoma, the leading global cause of infectious blindness. Therefore for the same cost it takes to provide one blind person in the developed world, 1,300 people in the developing world could be prevented from suffering blindness. It is estimated that, in the developing world, $34 per person per year is enough to provide basic medical care, as opposed to the $2,000 average spend per person, per annun in high-income countries. The efficiency loss usually associ-
ated with donor aid could be seen as being offset due to the increased real health benefits that an equivalent amount of funding can create when spent in the developing world, rather than in countries with established healthcare provision. It is only once sufficientlyfunctioning healthcare systems are established that waste should be duly addressed, and not before. Of course, scarce resources mean that countries must be careful with their use of funds, but there is the potential for using the lack of efficiency as an excuse not to provide the sums necessary for countries to start developing their own healthcare systems. The shift in emphasis to efficiency of input, rather than efficiency of outcomes may have reached a damaging point for development. In other words, we may have to incur degrees of waste and inefficiency initially in order to make a difference.
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Inequality of Opportunity in Health: Some Recent Research Findings from HEDG By Professor Andrew Jones, Head of Department, Professor Nigel Rice and Dr Pedro Rosa Dias
What is HEDG? The Health, Econometrics and Data Group (HEDG) was created in the spring of 2005 as a collaboration between the Centre for Health Economics (CHE) and Department of Economics and Related Studies (DERS). For the last four years it has had funding from the Economic and Social Research Council (ESRC) through their Large Grant Scheme, to pursue a programme of research to support and develop the activities of the group. HEDG’s mission is to promote the development and application of state-of-the-art quantitative research methods to inform health policy through empirical evidence. The group’s research programme has been organised around three broad, and interrelated, themes: the performance of health systems and organisations; inequality of opportunity in health; evaluation of public health interventions. This article focuses on some recent research findings from the theme of inequality of opportunity in health. Inequality of opportunity and health Education and health are widely regarded as essential and complementary dimensions of human development. The relationship between educational attainment and a range of health outcomes is well documented in the research literature. Less is known, however,
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about whether quality of schooling also has an impact on health and how this interacts with the effect of educational attainment. Our research has been concerned with evaluating the joint impact of educational attainment and of attending qualitatively different types of school on health outcomes and health-related behaviour later in life. We have addressed two key issues: (i) the overall impact of educational attainment and the quality of schooling on adult health and health-related behaviours (ii) variation in the impact of educational attainment, particularly according to the type of school attended. Evidence from the NCDS Those born in 1958 will turn 55 in 2013. They grew up during the 1960s and 1970s and experienced a major overhaul of the system of secondary education with the introduction of comprehensive schools. What does this tell us about the broader consequences of selective schooling and the type of schools that people attend, beyond the usual focus on educational attainment and how successful people became in the labour market? The year 1958 has a special standing in British social science as it marks the creation of the National Child Development Study (NCDS). This study has followed a cohort of around 17,000 people who were born in the week of 3rd March 1958. Members of the
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cohort went through secondary schooling during the 1970s and this coincided with of the introduction of comprehensive schools, a major reform aimed at reducing inequality of opportunity that transformed secondary education in Britain.
Differences in child development and education begin to fuel health disparities long before secondary schooling. The comprehensive education reform replaced a selective system, based on grammar and secondary modern schools, with a non-selective system of secondary schooling. The policy was implemented at different speeds at the local level; some local education authorities (LEAs) introduced comprehensive schools quickly, but others resisted the change, some for decades. Because of this gradual and uneven transition the two systems co-existed for a long while. Among members of the 1958 cohort, 12 per cent attended grammar schools at age 16, 25 per cent attended secondary moderns and 57 per cent attended comprehensives. A further 6 per cent attended private fee-paying schools, independent of the state educational system and reforms. Our analysis of the health outcomes and habits later in life
shows evidence of the long-term association with different qualities of education, over and above the effects of measured ability, social development, years of schooling and academic qualifications. Differences in child development and education begin to fuel health disparities long before secondary schooling. After controlling for a wide range of other factors, including cognitive aptitude, the development of non-cognitive ability at age 7 is associated with a much lower incidence of physical
Those with higher attainment are less likely to be smokers and smoke during pregnancy; they also consume vegetables more frequently. and mental illness in adulthood. In addition there is a strong correlation between the early social development and a reduced probability of being a cigarette smoker at age 42. In contrast, conditional on social development, cognitive ability at age 7 is not significantly
associated with health outcomes in adulthood. Attendance at comprehensive and secondary moderns, is associated with a much larger incidence of chronic illness than grammar schools. Furthermore, those who went to private secondary schools faced a higher prevalence of mental disorders in adulthood than those who went to grammar schools. However, there is little evidence of quality of schooling, as measured by single sex schools, academic streaming, the pupilteacher ratio and the ratio of expelled pupils, having a direct effect on health-related behaviours. Educational attainment, measured by the 12-point scale for highest secondary qualification, has a strong impact on lifestyle choices made in adulthood. Those with higher attainment are less likely to be smokers and smoke during pregnancy; they also consume vegetables more frequently. On average, educational attainment also has a negative effect on the incidence of long-standing illness and mental health problems later in life. However, when those who went to grammar and
to secondary modern schools are paired up with comparable groups who attended comprehensives it is clear that these effects depend crucially on the type of schooling and ability groups individuals belong to. Attainment has an impact on adult health-related behaviours for both groups; in particular, the effects of attainment on smoking, drinking and diet are strongest for the group who either did or would have attended secondary moderns. But attainment only has an impact on adult health for those who either did or would have attended grammar schools.
...quality schooling may be a catalyst of the effect of educational attainment on health. Education can to be a powerful means to tackle public health issues. But the results also indicate that the effect of length of schooling on health depends critically on quality of schooling. In this sense, quality schooling may be a catalyst of the effect of educational attainment on health.
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Hasten Slowly By Anton Gospodinov, 3rd Year Economics
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he slowdown of China’s economy has already begun to show its negative effects. After a decline in growth to 7.5 per cent in the second quarter, production activity in the most populous country in the world began to lose speed in July. The negative consequences are clear – from a decrease of Japanese exports to China, despite the weaker Yen, to a decrease in Apple sales in the Celestial Empire. After taking office in March, the new leaders of China have indicated their willingness to tolerate lower growth, by focusing on domestic consumption in the country in order to overcome the massive export dependence. “The slowdown in China is becoming dangerous”, according to Yasuo Yamamoto for Reuters, senior economist at Tokyo Mizuho Research Institute. The index of managerial orders prepared by HSBC shows a largerthan-expected decline in production and employment in July. The overall index fell to 47.7 percentage points from 48.2 in June. This is the third consecutive month that the index remained below 50 points – a level that would indicate no change since the previous month. Expectations of
most analysts are for modest growth, by Chinese standards, of 7 per cent in the medium run. The president of China, Si Jinping, has tried to reassure markets that Beijing will not allow an exces-
In July, foreign direct investment (FDI) in China rose at its smallest rate for six months sive slowdown and that measures will be taken if needed. In August, the Ministry of Industry issued a statement that it will focus on reforms in sectors that have excess capacity such as steel, cement, aluminium and shipbuilding. The causes Even though the old proverb – that we should seek the mistake first in ourselves – may be true, Beijing cannot be blamed entirely for what has happened. The need for reforms in many sectors does not mean that
external factors, such as the global economic slowdown, should be ignored. After the revised IMF forecast for global GDP growth of 3.1 per cent, compared to 3.6 per cent in the previous report of the organization, many analysts predicted that the future for the second largest economy in the world may not be as rosy as it looks. “China cannot grow at higher rates, because of structural problems at the national level such as overcapacity in some sectors and shadow banking, and also because of the slowdown in the global economy’’, said Wang Jian, of the Chinese Institute of Macroeconomics. The latest data on China’s foreign trade does not give grounds for optimism. Exports declined by a year-on-year 3.1 per cent in June, in stark contrast to the positive expectations of analysts whose forecasts were for growth of
The Chinese government is trying to ease the bureaucratic procedures for foreign investors and to stimulate economic growth. 4 per cent. Problems of domestic demand are confirmed by import indicators that suggested a shrinking of 0.7 per cent over the same period. The effects As one of the largest importers of raw materials, the slower growth in China has negative consequences on the markets. The country consumes
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half of the produced iron ore and coal in the world, and between 30-40 per cent of the world production of major metals such as copper. Copper futures on London Stock Exchange retreated from their monthly peak, and the Australian dollar fell, as China is the largest importer of Australian goods. U.S. giant Apple has also been hit by relatively weak Chinese growth, and incurred a 14 per cent fall in sales in the county compared to the second quarter of last year. In China, an average of 13 per cent of the company’s sales – worth 4.9 billion USD – are realised only in the last quarter. The effects of the slowdown of the Chinese economy will not be beneficial to other countries around the world.
Asian countries form the largest trading partner for many – this is of great concern to foreign exporters, now potentially faced with a need to switch focus to other markets. The anxious investors and the hampered growth of foreign direct investment to China In July, foreign direct investment (FDI) in China rose at its smallest rate for six months, causing, according to Bloomberg, concern among investors that further growth of the second largest economy in the world may be delayed. The flow of investment into China rose by 0.3 per cent, compared to a year earlier, to 9.26 bil-
lion USD. In July, outflows of investment also increased by 20 per cent to 34.3 billion USD, while in the period from January to June such growth was 27.4 per cent. The Commission of National Development and Reform (State Planning Agency of China) forecasts that FDI will increase by 1.2 per cent to 113 billion USD this year. They expect China’s investment abroad to increase by 15 per cent. “Economic growth in developed countries is rising, while China is slowing down. China is no longer an attractive location for low-cost manufacturing,” according to Dariusz Kovalchuk, senior economist and strategist at Credit Agricole in Hong Kong. Financial instability in China is resulting from the huge share of the informal sector in the banking system: this instability poses a threat for the whole economic environment. The Chinese government is trying to ease the bureaucratic procedures for foreign investors and to stimulate economic growth. Prime Minister Lee Katszyan announced the country’s intention to eliminate the need for government approval for a wide range of investments. This could prove very important as, according to the Ministry of Commerce, enterprises with foreign capital generate half of the imports and exports of China in 2012, equivalent to a quarter of the whole country’s industrial output, and a fifth of its tax revenues. To conclude, it is clear China is no longer the apple of every economist’s eye, and faces a number of external and internal challenges. Although it is sluggishly starting to adapt to this new economic reality, more reforms must be made so that when the global outlook does pick up, China is a reformed and revitalized economy, able to take advantage of this. One such reform would be to allow more external competition with Chinese banks, in order to make them more efficient, although decision makers in China are reluctant to do so. We can only hope that they are spurred into action sooner rather than later.
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Chasing Dreams: Rural to Urban Migration in China By Jessica Ochalek, MSc Health Economics, Department of Economics
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oday there are more people living in China’s cities (691 million) than in the countryside (657 million). Nobel economics laureate Joseph E. Stiglitz has cited urbanization in China as one of the most important issues that will shape the world’s development during the 21st century (Bloomberg News Jan 17th, 2012). China’s rapid urbanization is driven in large part by the migration of labor from the countryside to urban areas, a phenomenon that can be illustrated using the Lewis Model. Also known as the dual-sector model of development, it explains developing economy growth in terms of a labour transition between two sectors, the capitalist sector (the high-productivity manufacturing sector in China’s case) and the subsistence (China’s agricultural) sector. The profitability of the capitalist sector depends on the surplus of cheap labour that results from low wages in the subsistence sector. Where the neoclassical model assumes that quantity of labour is fixed, the Lewis Model assumes instead that supply is unlimited in rural areas: such individuals serve as
a reservoir of cheap labour for urban areas. China’s unlimited supply of labour derives ultimately from population
Where the neoclassical model assumes that quantity of labour is fixed, the Lewis Model assumes instead that supply is unlimited in rural areas: such individuals serve as a reservoir of cheap labour for urban areas. pressure, a phase in the demographic cycle described by the Lewis Model. China had already sought to reduce the demand created by the population for natural resources (in hopes of maintaining a steady labor rate, reducing unemployment caused from surplus labor, and reducing the rate of exploitation) by implementing the one child policy. Introduced in 1978, the policy bars urban couples
Migrant workers from southwest China head home for Spring Festival in January. (Xinhua/Ju Huanzong)
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from having more than one child and allows rural couples a second (and sometimes more) child if their firstborn is a girl. While the policy’s “success” is arguable, it has nonetheless contributed to surplus labour in rural areas and a shortage in urban areas. Shortly after the policy’s introduction, China’s property ownership began the process of de-collectivization, contributing to surplus labor in rural areas. By the beginning of 1983, private ownership had become institutionalized. However, as a result of the lack of property rights, cadre corruption ensued and many farmers lost land through unfair land sales and cadre theft. The average peasant today holds 1.4亩 (pronounced mu) of land, the equivalent to .165 of an acre or 1/15th of a hectare. Since only one to two people are needed to work the land, other family members are free to earn income elsewhere. With plenty of reason to leave and the pull of opportunities to make more money, pursue a career, or just bask in the glamour of city life, millions migrate each year. However, they are faced with a variety of policy-related challenges once in cities. One of the biggest difficul-
ties is China’s registration or hukou system, which was introduced in 1955 and originally intended to stop rural migrants flowing into the cities. Although some localities sell urban hukous or the – nearly impossible to obtain – blue stamp hukou (lanyin hukou), the system bars nearly all migrants from accessing education, health care and housing outside of the area in which they are registered, forcing many to eventually return home. While in cities, as a result of the hukou, migrants surrender their rights as local citizens and are put at the mercy of factory owners’ rules as enforced by the factory bosses. Few laws exist to protect workers’ rights, and those that do are little enforced by local officials who have no more
than very thin ties to the migrant population in their town or city. As a result, the hukou policy, “…all but ensures that the migrant workers are at the mercy of employers and receive lower wages under worse conditions than would otherwise prevail” (Unger 127). Despite the often-brutal challenges posed by migrant life – from heavy, dirty work to discrimination and danger to the inability to become local residents – people are still on the move. There were 262.61 million
There were 262.61 million total migrant workers in 2012, up by four percent from 2011.
total migrant workers in 2012, up by four percent from 2011 (NBCS). When migrants return home, “the experience that they have gained during migrant work and the contributions they make to their village enable them to be potential sources and agents of social and economic change in China’s countryside” (Gaetano 177). All is not rosy, however. China is said to be moving rapidly toward labour scarcity. By 2025 the country is expected to cross the Lewis Turning Point – the point at which a drop in the number of unskilled surplus workers leads to increasing wages in cities, which results in lower profits and a drop off in investment. As Stiglitz aptly noted, this would affect not only the development of China, but also that of the rest of the world.
Cheng Xiaolin and his two children sit in their vegetable plots on a hilltop in the township of Shuanglong, Shaanxi province. Chang Xiaolin’s wife has a job elsewhere and does not live home. (Liu Jie/Xinhua)
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Political Reality versus Long Term Investment in the UK By Lorna Simmonds, 2nd Year Economics
A
first look at our political and economic systems and outcomes might suggest a misalignment of our political and economic timeframes. This, too, was my view: I doubted that rational policy decisions were consistently made given the conflict of interests of our politicians. My opinion stands that our political system for policy-making is flawed given the lack of emphasis on long-term planning, arising from political terms being too short. There is an incentive for politicians to impose policies that will aid re-election in the next few years: this, of course, takes emphasis away from long-term planning. The UK has adopted a culture of shorttermism as a result. However, the more research I have done, I have come to believe that economic policies are not the main losers from this misalignment. Research shows the average international political term of office to be five years. The internal time required to decide and implement a fiscal policy regime can take several months and, in addition, the time required to for an effect to be observed can be a number of years. Consequently, many of our fiscal policy changes are not unduly affected by the political time-
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frame, although there is a distinction between the implementation of policies with short- and long-term effect. High-cost policies with no positive short-term effects are unpopular, and are less likely to be implemented by government unless the political gain is substantial. The politician may be well-informed of the positive potential for some policies, but may pursue other sub-optimal policies which provide immediate effects, due to his or her concern with re-election. The UK is beginning to address the issue of short-termism in business, by creating incentives for board executives that are more closely tied to long-term results. A similar programme should be implemented for our economic policy-making, so that policies on issues such as infrastructure are not at the whim of the political cycle. Proposals such as airport expansion and railway improvements have existed for many years, but it is difficult for government to push them through, as the problem of a lack of obvious short-term
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political gain compounds their controversial nature. It would make sense that most of the policies that are finally implemented are aimed at solving problems, whilst also maintaining political popularity. However, we must consider the loss of welfare due to this compromise, coming from the consequent lack of attention to the long-term. Keynes famously noted that, in the long term, we’re all dead but, whilst our immediate issues are of concern, the UK needs to think about the problems we will face in the future – and start tackling them in the present. Environmental policies come to mind immediately. The cost required to seriously address our greenhouse gas emission problem is high, and it would be political suicide to adopt such policies. No prime minister wants to step up spending vast sums (especially in a time of austerity) on the environment. The required actions would be prevented, meaning we would not see the result either. This does not bode well for the next election campaign. The environment is not at the forefront of voters’ minds, and these high-cost, long-term policies are politically unpopular. Our democratic political system is failing to motivate the long term investment which is required: perhaps it is our children’s children who will suffer as a result.
I wanted to make a difference. So I did. Just 16% of pupils eligible for free school meals make it to university, compared to 96% from independent schools.* Â Change their lives. Change yours.
*Source: Sutton Trust, 2010
Matt Inniss, The University of Cambridge Taught: History Now: Head of Department
The single most important thing you will do
teachfirst.org.uk
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Charity No 1098294
The More The Merrier By Oscar Pearson, Social and Political Sciences
W
ith the number of births per annum now more than double that of deaths, the world’s population is continuing to increase at a tremendous rate. Currently rising at 1.14% each year, the average annual population change is estimated to be at 80 million – more than an entire UK population born into the world every twelve months.
The average annual population change is estimated to be at 80 million – more than an entire UK population born into the world every twelve months. But what is often understated, and somewhat ignored, amongst current conversation – even among those who recognise the advantages of, and support, an increasing population fail to advertise their understandings and opinions widely enough – is that, in truth, population growth is a crucial aspect of world devel-
opment. A national and global increase in people is both innocuous and highly advantageous: and analysts have found that the reverse – population reduction – has inadvertent adverse consequences for those nations and regions that practise it. There are, in reality, just two ways a population can grow: by higher birth rates, and by immigration. In the UK there were a quarter-of-a-million more births than deaths last year, helping to form the prosperous path on which a far younger and more thriving society can develop and grow. Larger numbers of young people energise an economy by growing the productive labour pool, driving manufacturing and services through consumption and increasing the national savings rate. Indeed, nations whose population rate runs at below replacement level will see a demographic shift toward a more elderly population, which alters the face of a culture, but also has huge ramifications in nations where retired members are supported by a tax system funded by the currently employed.
David Graeber at a meeting in Piazza Municipale (Francesca Leonardi)
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Hence, this hegira from an older to younger society generates substantial economic growth, causing more demand for products and leading to an upsurge in human labour. A larger and stronger economy is produced, therefore, with more people working, more state income from tax produced, and ultimately a bigger and better economic cycle in action. A higher population often results in a greater economy (look at the US and China, for instance), and a society becomes more advanced
Larger numbers of young people energise an economy by growing the productive labour pool, driving manufacturing and services through consumption and increasing the national savings rate. as competition increases for those top jobs and positions. Many economists contend that it would be thoroughly unwise to seek to actively decrease a population, and when I questioned anthropologist and economist David Graeber on growth at its current rate, he concluded that the “scary numbers” predicted in the 1970s were totally inaccurate. It is prudent to assess the theoretical possibilities, he said, raising the question of whether a contracting population results in a growing economy: the answer to this is a resounding no. Fewer people would, of course, result in lesser economies of scale: there is a smaller cost in production per unit with an increase in volume, and cheaper services per capita, intensifying their economic viability, would not be shaped.
High population growth in a region can also be achieved through controlled immigration, which gifts an area with linguistic, religious and social richness. Critics argue that the national identity of a nation-state is reflected in claims concerning ethnicity, and that immigrants fail to conform to the original culture, replacing it with their own. But this narrow and dogmatic attitude, based on maintaining the rule of the original ethnic group, is seen for what it really is when we ignore the exaggerated and distorted magnification media hype. The liberal cloaks of such commentators can be pulled away to reveal an armoury of caricatured prejudice. Immigration, as a method of accelerated population growth, not only boosts economic prosperity, but on the whole attracts and retains talent that adds a competitive edge to any country. It increases loyalty and feeling of belonging, and in addition to bringing skills and a wealth of knowledge into a particular country, more immigrants, by definition, result in higher societal diversity. This diversity and inclusion bring together a wide range of talent and ability, working towards the common goal of prosperity using various sets of skills that ultimately increase retention, efficiency, and originality. Increased creativity provides the opportunity for solutions and productivity, as every individual adds to the growing pool of ideas and potential for knowledge and national advancement. Indeed, each individual that is a product of a higher population growth rate has the potential to make unique contributions to the society in which they work, and this, in turn, builds overwhelming respect for a nation. Respect is also gained through the fact that generally, a bigger and more populated country is far likelier to
have more influence on the world stage: with a higher population comes more opinion, debate and ideas, and its international presence and views, therefore, command more attention. Moreover, we must appreciate that the growing number of people – with further creativity and knowledge a direct result – allows opportunity to allocate more resource to big issues, such as environmental preservation. Often highlighted as the major
it boosts worldwide economies, produces exceptional numbers of jobs, stimulates investment in global relationships and increases learning-by-doing due to the pressures of increased production volume. We need to approach these questions rationally and, after all, if we’re not aiming for a more sustainable and prosperous future for the human race, then our ambitions are neither ethically nor morally reasonable.
Immigration, as a method of accelerated population growth, not only boosts economic prosperity, but on the whole attracts and retains talent that adds a competitive edge to any country. problem of population growth is exactly this: a country’s ongoing requirement for more resources. Logistically, that country must import and spend more but, ultimately, this in itself is advantageous on the global scale:
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York Community Consulting (YCC) is a non-profit consultancy firm started and run entirely by students at the University of York. We work on projects during the academic year in teams, connecting each team with more experienced individuals where possible. We create the opportunity for students to get consultancy experience with an incredibly broad array of organisations, including Social Enterprises, Charities, student start-ups and local government. It’s a way to get on the ladder, to get concrete experiences that you can talk about in interviews and at assessment centres: a chance to lead, to work in a team, to demonstrate commercial acumen, working as part of highly driven and committed teams at York. We have recently worked with Selby District Council, Recylabook, somewhereto_, and numerous other organisations on a variety of projects involving research, strategic planning, re-branding, social impact auditing and community capital investigation. Our active periods are in the following academic weeks: Autumn term: weeks 1-8 Spring term: weeks 2-7 Summer term: weeks 7-10 We accept applications from students for consultancy work on a rolling basis, selecting teams appropriate to the needs of our clients from our database of interested students. We are however running a selection process for our committee in Autumn term, looking for partners in strategy, research, client relations and corporate relations. Applicant for these positions must have shown prior interest in YCC, taking part in cases or attending training events in order to eligible. If you would like to find out more or be added to our database, send us an email at team@YorkCommunityConsulting.com with a brief (150 words or less) cover letter, detailing your strengths, interests and any past experience (experience is not essential). We will also be at fresher’s fair, so come find us! Please visit our website http://www.yorkcommunityconsulting.co.uk/ to find out more. We look forward to hearing from you!
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The Science of Procrastination A
By Natasha Bakhir, 2nd Year PPE
t first glance, the connection between economics and procrastination may not seem obvious. Like any university student, you probably think you know everything there ever was to know about procrastination, but it may not be as simple as you think. Cognitive biases are among our biggest perils. The inability to evaluate a situation rationally and to tame our instant wants is what prevents us from acting as the homo economicus of the undergraduate textbook. The three impediments that make life according to rational choice theory beyond our reach are: bounded rationality, bounded self-interest and bounded willpower. How much do we know about the economics that stands behind our addictions, imperfect decision-making, habits, impatience, and other slips of will?
The three impediments that make life according to rational choice theory beyond our reach are: bounded rationality, bounded self-interest and bounded willpower. Behavioural economics is a branch of economics that investigates what happens in the markets where the agents are not perfectly rational, due to their psychological limitations and complications. Let’s look at a familiar situation. You have a project that will be assessed at the end of the month. On Day 1, when you look at the work, you get tiny shivers running down your spine. You tell yourself that you have a lot of other things to do today, and you’ll
need a whole day to make a dent in the work anyway. So you leave it until tomorrow. When tomorrow comes, the ‘Day 2 self ’ convinces you that you are still short of ideas: besides, you are tired and cannot concentrate. Admittedly every single day when you decide to postpone the work you make an error due to the unconsidered salience of some costs and benefits, relative to others. As the days go by, this sequence of small mistakes escalates into a serious problem, generated by the accumulation of small losses, and will finally end in regret, stress and ‘pulling an all-nighter’. The small (but disagreeable) costs of beginning the project can result in costly procrastination. Behavioural economists refer to this phenomenon as ‘time inconsistency’. We tend to disregard the future benefit and concentrate on the opportunity cost of giving up the immediate gratification. Funnily enough, procrastination and indulgence stem from the same inclination: to fall for present benefits at the price of future losses. Smokers and drug-takers face similar problems. Some intend to stop imminently – tomorrow – because they have the necessary knowledge and they understand that, by quitting, they will maximize their lifetime utility and, ultimately, avoid premature death. However, their behaviour does not mirror these desires. The long-term consequences seem
remote, avoidable and probabilistic, when the reward of the immediate gratification is easily achievable and more pertinent. This inability to use the knowledge and the means available to quit goes against our supposedly perfect utility maximizing abilities as suggested by rational choice theory.
We tend to disregard the future benefit and concentrate on the opportunity cost of giving up the immediate gratification. Procrastination might not be beneficial but it is unavoidable. One of the best justifications was probably given by James Surowiecki: apparently we are not just slacking off but ‘engaging in a practice that illuminates the fluidity of human identity and the complicated relationship human beings have to time’. This seems to me to be a brilliant excuse…
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Would You Like a Graduate Job? H By James Daveney, President of EconSoc, 3rd Year Economics
ere it is. Here’s a job, on a silver plate, right in front of you. At least that’s what you might be thinking at the moment. Unfortunately, this is far from true. Although you have made it into a good University, and you are on a good course, this is only the first stage on the road to getting a graduate job. My intention is not to scare you, but to make you realise that your time at York is a huge opportunity. You will never find a place where you can shape your experience more.
You will never find a place where you can shape your experience more. So what’s out there? There are many ways the University can help your employability (this is a word you will hear a lot during your first few weeks). There’s Careers (the University’s careers advice service), the York Award, the Employability Tutorial, Societies, your College: EconSoc can definitely help too. Additionally, there are opportunities outside University. These include travelling, teaching abroad, raising money for charity and off-campus internships during the summer after your first and second year. What can Careers do for you? First of all, skills workshops are held. These are organised throughout term, with three workshops specifically for Economics students, as indicated on your timetable. The workshops give a good overview of skills-based courses that Careers offers, advice on work experience, information about how to improve your CV and much more. This is also where the Employability Tutorial will be explained to you: a useful term-by-term guide about the opportunities open to you. In addition, there are a number of
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York Award courses that are available for you to join. Most of these focus on skills for you to learn and are run by industry-leading firms, which will be useful when applying for internships or graduate jobs. Furthermore, look into the Interactive Careers Service. This is an online event booking system, which enables you to take advantage of companies that recruit on campus. This is also the home of many campus-based internships, which provide a great stepping stone for summer work in your second and third year. It doesn’t all have to be paid work There’s also so much experience to be gained from volunteering. YUSU have Volunteering and RAG (Raising and Giving) activities, which are very active on campus – this year there are 14 volunteering projects to be involved in.
We have over 170 societies here at York and eight colleges. They all have elections every year, with normally over ten positions available in each.
We have over 170 societies here at York and eight colleges. They all have elections every year, with normally over ten positions available in each. This is a perfect opportunity for you to become involved in something you’re passionate about:
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it could be skydiving, Opera, or Harry Potter, to name but a few. Don’t forget EconSoc too – we have dozens of contributors to Equilibrium and, if you want to become one, all you need do is ask. Our hustings (elections) are in Week 8 and we are always looking for enthusiastic people to join the team. It’s one of the best feelings to see members enjoying an event that you’ve organised, knowing it could help them in so many ways. Travelling Travelling is often underestimated by students as a highly useful skill for improving employability. Spending months surviving on your own can be challenging at times, especially if you’re cut off from the Bank of Mum and Dad. Employers really do consider this experience in their recruitment process. For those of you who didn’t take a Gap year, there are still many ways to travel abroad that can be found on campus. Lots of internships abroad are advertised by Careers, some as far afield as China and Japan. There are also charities such as Link Community Development, who can give you the chance to go hitch-hiking and raise money for those in need, and the Study Abroad office gives the opportunity of living in countries like the USA or
Australia for a year. Furthermore, there is still plenty of time to go travelling and learn these skills.
For those of you who didn’t take a Gap year, there are still many ways to travel abroad that can be found on campus.
In the end Becoming more employable may not be your main motivation for being involved in these activities, but, nonetheless, you will still be gaining valuable skills which employers need. Some of these skills will include networking, which is vital whichever career you want to go into. This isn’t limited to handshakes at employer events or connecting on Linkedin. I’ve found the most rewarding op-
portunities have come from people I know personally. Your friends are one of your most important assets. Again, the responsibility is yours to benefit from these opportunities. If you want to stand out in your applications, you’ll need that so-called ‘spark’ much desired by graduate recruiters. That spark comes from getting stuck into life at York. Your time here is what you make of it.
Focus box Careers homepage: www.york.ac.uk/about/departments/support-and-admin/careers/ The York Award: www.york.ac.uk/students/work-volunteering-careers/skills/york-award/ YUSU Volunteering and RAG: www.yusu.org/activities/ Interactive Careers Service: york.targetconnect.net Study Abroad office: http://www.york.ac.uk/study/study-abroad/
18:30 Thursday 14th November (Week 8)
Hustings
Want to be involved in one of the largest societies on campus? Fancy running amazing socials? Or perhaps you want to be the next Editor of Equilibrium? This is your chance to become part of the next EconSoc committee, whilst gaining invaluable skills and meeting loads of great people. Position and nomination details: www.yorkeconomicssociety.co.uk/events/hustings/ Results will be announced on 1st December at the Christmas Ball
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GO FURTHER, FASTER.
EY graduates like Keyan are part of a global organisation advising big businesses on issues critical to their long-term success.
Opportunities in Advisory, Assurance, Corporate Finance and Tax. Find out more and apply at ey.com/uk/careers
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