Issue 20 by Nottingham Economic Review

ISSUE 20: October 2019

TOP STORY

THE FAILING UK LABOUR MARKET

A PRODUCTIVITY CRISIS?

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Dear Readers,

On behalf of the NER team, it is our pleasure to present the 20th issue of the Nottingham Economic Review. The NER continues to offer students from a variety of degree backgrounds from the University of Nottingham as well as other universities around the world the opportunity to showcase their economic and political knowledge and interest in unique topics of their own choosing. This issue includes a selection of external submissions as well as articles written by our own team of associate editors, highlighting the array of talent our university boasts. Our interview with Lord David ‘Two Brains’ Willetts is not to be missed, featuring a dynamic conversation regarding education, university fees and intergenerational equity. Of particular note this year are the articles receiving the Gainsborough Prize (an essay competition run by the NER each summer) and we would like to extend our congratulations to the winner Samuel John O’Mara and his thought provoking article “The Failing UK Labour Market and How it is Causing a Productivity Crisis”, as well as our runners up, Jessica Richens and Georgina King. These articles, along with several others, are proudly displayed in this issue and we sincerely hope you enjoy reading them as much as we enjoyed writing them! We invite you to have a look at our social media pages to keep up-to-date on NER activities and perhaps apply for a role in the 2019/20 team! We would like to extend our gratitude to the host of individuals who make the NER possible each year with their continued support and dedication. To the School of Economics, and in particular, Frances Twiddy, Suzy Howe, Louise Hemming, Hilary Clayton, John Gathergood and, of course, Philip Watson. The NER would not exist without Philip, a University of Nottingham alumnus, and we thank him sincerely for his vested interest and the wonderful opportunities he has provided us with. Finally, for many of our editors this was their final year as students at the University of Nottingham and they have now graduated, we thank them for dedicating their time to us and wish them all the best for the future. We now look forward to welcoming our new team in the next academic year!

NER Editors in Chief

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The NER Team About us The Nottingham Economic Review is a student-run annual journal, backed by the School of Economics, whose purpose is to showcase undergraduate research and promote ongoing advancements in economic thought. Our editorial team strive to create provoking, insightful and topical content, while simultaneously capturing the interest of our readers. We also welcome external submissions and publish those that add value to our magazine.

Editors in Chief

Associate Editors

Oliver Clark Anna Howell Rosie Mahoney Swati Raipancholia

Charlie Cavill Daniel Ford Chih Han Hseuh Valerie Kielee Georgina King Max Oâ&#x20AC;&#x2122;Brien Samuel John Oâ&#x20AC;&#x2122;Mara Youssef Oukhallou Ewan Phillipson Jessica Richens Keval Shah Chris Spaull Joann Yap Ka Yan

Special thanks to Professor John Gathergood Louise Hemming Suzy Howe Frances Twiddy Phillip Watson

Magazine design Gill Williamson

Find out more or get in touch nottinghameconomicreview@gmail.com

Want to be a part of our next issue?

issuu.com/nottinghameconomicreview @nottinghameconomicreview /nottinghameconomicreview

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THIS ISSUE ISSUE 20: September 2019

Letter from the Editors

About NER

Contents Special Feature

A Conversation with Lord David Willetts Swati Raipancholia & Anna Howell

When Harry Swiped Right for Sally: The Economics of Online Dating Rosie Mahoney

Venezuela: Another Socialist Failure? Ewan Phillipson

How the Housing Crisis Could Hurt the Tories for Generations to Come Oliver Clark

What Kind of a Shopper Are You? Swati Raipancholia

Impressionable Minds: The Role of Professors in Changing Student Opinion on Brexit Charlie Cavill

Prime Discrimination: Could Fast Food Chains Be Racist? Youssef Oukhallou

How has the Barclays Premier League Become More Unequal Than Zimbabwe? Daniel Ford

Are Economics Degrees Letting Society Down? Max O’Brien

Rising from the East: The Chinese Diaspora Valerie Kielee

What Do Barclays Bank and Blues Music Have in Common? Anna Howell

The Transformation of US Healthcare: From Private Healthcare, to Medicare, Medicaid and Obamacare, to the Future of ‘Medicare for All’ Keval Shah

The US-China relationship and Other Countries: Liberalism, Realism and Game Theory Chih Han Hsueh

Barney Stinson – Secret Economist Chris Spaull Gainsborough Prize Runner-ups

New-Age Shirking: How Social Media and Cyberloafing Are Killing the Modern Economy Georgina King

Hey Stranger: The Rise of the Sharing Economy Jessica Richens Gainsborough Prize Winner

The Failing UK Labour Market and How it is Causing a Productivity Crisis Samuel John O’Mara

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©iStock 2019. chef2323@kevin

A CONVERSATION WITH LORD DAVID WILLETTS By Swati Raipancholia, Economics (2019) and Anna Howell, Economics (2019)

his year, the University of Nottingham had the pleasure of welcoming and interviewing The Right Honorable David Willetts: a respected Conservative party politician, academic, and Minister of State for Universities and Science from 2010 to 2015. Our conversation with Lord Willetts was centered around the themes presented in his latest book: ‘A University Education’ and one of his most recent TED Talks on changing attitudes to university. As an important figure in the field of education policy, Lord Willets’ input provided an enlightening perspective on how the university system could operate under current economic conditions.

As spending is due to increase significantly in the UK in the next 20 years, how would you propose revising the tax system to ease the income gaps between baby boomers and our generation of graduates and youngpeople generally?

You’re right, even with no change in public policy, just maintaining the kind of welfare state, as we are used to, does put up public spending as a percentage of GDP. I think an important source of tax revenue is capital taxes. What has happened in the last 20-30 years, is that the value of capital has risen relative to GDP from about 3-times GDP to about 7-times GDP. Meanwhile, the tax taker of capital as a percentage of GDP has not increased at all. The main capital tax we’ve got, council tax, is a very poorly designed tax. There are different ways in which you could tax capital. You can start with some of the specifics like property, as some property is undertaxed; second homes are definitely undertaxed. In general, housing is undertaxed. You could make council tax more progressive. You could reform inheritance tax which is known as a classic bank tax – it’s at a very high rate but starting above at a very high threshold. Those are the kind of things that we propose the government should look at next.

Regarding your TED Talk on the changing attitudes to university, do you think there’s a stigma around that universities ranked comparatively low on tables such as ‘The Complete University Guide’ are not worth attending?

I think the ranking of universities by research performance has relatively reliable metrics – not perfect. There’s actually a

piece out this week that citations of articles are not as good a metric as we thought. Basically, we can rank universities by research, for example a university like this one (University of Nottingham) scores quite highly in research. When it comes to the other elements in the rankings, I think they’re much more dubious. Teaching quality is very hard to assess and employment outcomes for students is much more dubious. Employment outcomes are heavily shaped by, firstly, the subject that you do, secondly, by prior attainment when you arrive and thirdly, by parental background. Some of the rankings are incredibly crude, they literally just rank universities by the grades of the entrance requirements. That means that you’re ranking universities as a signalling function, it’s no measure of the added value of universities or quality of teaching, it’s just telling people, including employers, about good A-Level grades. I think that’s a very poor measure of university performance. My frustration when I was the minister, and we still haven’t cracked it although people have tried, is, comparing with schools, we haven’t got any reliable measure of added value – the teaching gain, the learning gain while at university. Partly because, of course, there is no standard exam for university leavers.

What has happened in the last 20-30 years, is that the value of capital has risen relative to GDP from about 3-times GDP to about 7-times GDP. Once Brexit deals have been finalised, what do you predict will happen to the fees paid by EU students starting 2020? There is talk of the fees increasing to be the same amount as international students, is this a good thing? Do you think it will happen?

I don’t know what will happen. In 2020, we will still be in the transition period, so I would be surprised if there was any significant change then. Down the track, this is one of the many issues for negotiation. You could imagine that, at the end of the transition period, EU students are in the same position as overseas students. Equally, the government may do a deal where you keep some of the current regime. Who knows? They might not extend entitlements to loans. You

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could have a compromise where they get the same price as UK students but don’t have an entitlement to fee loans to cover that cost, which would be an intermediate possibility. But I’m not aware of any agreements on that, or even if negotiations have started.

The OECD treats our university payment system as a private payment system like that of the USA, yet our system prides itself on being free at the point of use. Do you think our current system of university loans is the best way to enable young people from disadvantaged backgrounds to access higher skilled professions?

I would say so because no student pays up front. A graduate only pays back if they are in a well-paid job and because it’s not public spending, governments don’t try to control public spending now by controlling the number of students, which used to be the system. Removing number controls has enabled universities to recruit more people from disadvantaged backgrounds. I think the position we are in is not satisfactory from the point of view of disadvantaged students, but 10 years ago, before Labour began with the 3k fees, about 10% of young people from disadvantaged backgrounds: the poorest quintile of earnings, were going to university. Now it’s 20%. The good news is it’s doubled, the bad news is that for the richest quintile it’s 60% participation, so it’s still a long way behind, but at least the fees and loans structure has not deterred disadvantaged students – if anything, it has enabled a significant increase in participation.

10 years ago, before Labour began with the 3k fees, about 10% of young people from disadvantaged backgrounds: the poorest quintile of earnings, were going to university. Now it’s 20%. Do you have any ideas about the reforms they could implement now to make it even higher?

Well, I regret that, after my time, they got rid of the meanstested maintenance grant. I think the pressure for a student from a disadvantaged background now is the cash-cost of living whilst at university. That’s the issue, not repayment if, and when, you’re in a well-paid job. There is an argument that especially Russell Group universities tend to have a set of assumptions about how you will live whilst a student that means it’s more expensive than other universities.

As students in London get a higher maintenance loan, do you believe more consideration should be taken for students in other major cities, for example Oxford and Cambridge?

That’s interesting, I have not come across that question before. My theory is that it would be very hard to justify a higher maintenance loan for Oxford and Cambridge. Throughout public policy, there’s often a recognition of the higher living costs of London and the South-East. I would have thought Bristol, Nottingham, York, Leeds, living costs were significantly lower than London.

To what extent do you think increasing university fees increases the quality of education with regards to teaching and facilities?

It’s so hard, as I said earlier, to get a reliable metric on that. I think it has had two effects. First of all, it does strengthen the student voice because, although the student isn’t paying up front, he/she can say, ‘You have this amount of money to educated me, I’m not getting £9,000 worth of education’ which is empowering for the student voice. Secondly, universities used to have an alibi. They used to be able to say to people with issues over the quality of their education, ‘Well the unit of resource per student has been cut’ and it was steadily cut in the old days. When university was financed by public spending it wasn’t a priority of public spending. When it declined, it declined in absolute terms. It declined relative to the unit of resource for educating someone at primary school or secondary school. If we reverse that, they haven’t got that alibi anymore. So, although it is frustratingly hard to measure, my impression from being closely involved in higher education for a decade now, is there is more focus on the quality of teaching and there is more focus on the student experience than there was a decade ago. One of my regrets is that we were trapped in the language of ‘tuition fees’, when they ought to be thought of as ‘university fees’. It is not simply paying for the person to conduct the seminar, it is also paying for the sports facilities and all the wider experience of a campus university.

So, although it is frustratingly hard to measure, my impression from being closely involved in higher education for a decade now, is there is more focus on the quality of teaching and there is more focus on the student experience than there was a decade ago. Following this interview Mr Willetts gave a captivating lecture at the University of Nottingham on the subjects present in his latest book: ‘A University Education’; the international history of university establishments, funding, and how technology could affect university experience, to name a few. As an increasing number of students attend university year-on-year, the matters discussed are of vital importance to economic policy makers of the future and should be pondered by great academic minds such as David’s.

The NER would like to thank Mr Willetts for his time and compelling insights.

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©iStock 2019. Anna_leni

WHEN HARRY SWIPED RIGHT FOR SALLY: THE ECONOMICS OF ONLINE DATING By Rosie Mahoney, Industrial Economics (2019)

t is a truth universally acknowledged that any single university student in possession of a smartphone must have, at some point, downloaded Tinder…or at least considered doing so. Online dating and dating apps such as Tinder have addressed a certain disequilibrium in the world of finding love. When in search of “the one”, there are no perfect substitutes due to the diverse nature of human beings. Therefore, in a perfect world we would have the ability to meet and date every single person of a desirable sex and age, to find our ideal match. Clearly, doing so would be very costly, so online dating and various other dating apps have filled a void, allowing you to efficiently scan online profiles and filter your potential partners. Yet, like any other economic tool, Tinder has drawbacks more complex than just running out of Superlikes. As in any other market, online dating has characteristics that define the way in which it operates. The first being its barriers to entry. If you have opposable thumbs and access to a smartphone, you can actively use Tinder, so in this market the barriers to entry are pretty much non-existent. What impact does this have on your likelihood of finding love? In addition to the low barriers to entry in the Tinder dating market, studies have revealed that users of dating apps have a ratio of roughly 60% men to 40% women, with men also being twice as active, creating an even more lopsided ratio (Globalwebindex.com, 2018). This inevitably means guys are trying harder to gain females’ attention- i.e. you swipe right and send out as many Joey Tribbiani “How you doin’?” gifs as you can.

... studies have revealed that users of dating apps have a ratio of roughly 60% men to 40% women, with men also being twice as active, ...

But here in lies the problem, it costs you nothing to do this as the barriers to using the app are non-existent; you are not correctly signalling your interest. Swiping right and shooting off a quick message costs nothing in terms of time or emotional investment. Yet, much like slot machines, the potential for a hottie to reply to your message keeps you coming back for more. In behavioural economics this is called variable ratio reinforcement, where your continual usage of various dating apps is reinforced after an unpredictable number of responses (Weinschenk, 2013). This schedule creates a steady, high rate of responding, and a continual stream of swiping right and unimaginative messages, inundating girls with low quality matches. This may even lead to some girls giving up hopes of finding “the one” and deleting their profiles altogether, further worsening the problem of poor matches.

This is why a guy who is over 6ft will always mention their height, yet boys under 6ft never do.

This problem is exaggerated by the presence of another market characteristic, imperfect information. You lads know that girls are flooded with messages, so you may go the extra mile with your profile to attract their attention, you try to signal your value to your potential date. This is why a guy who is over 6ft will always mention their height, yet boys under 6ft never do. It also explains why if you own a puppy, you will not miss the chance to post multiple photos of you cuddling it to make this known. Yet, as Nobel Prize winner George Akerlof explains, signalling may not be enough to overcome this information gap, the presence of too many “lemons” (people who look nothing like their profile picture) that are unable to be filtered out of the market may also lead to the decay of the market to the point of nonexistence (Akerlof, 1970). And again, Tinder profiles will be deleted after one disappointing date too many. If you do manage to navigate your way past the fake profiles and questionable bios, you have now reached yet another stage where it can all go wrong: messaging. Here, game theory can be used to explain why they seem to be 7

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waiting double the amount of time that you do to reply to your message. You might find yourself in the middle of what economists’ call ‘the prisoner’s dilemma’, whereby two rational individuals (yourself and your hot Tinder match) might not cooperate, even if it appears that it is in their best interests to do so (Axelrod, 1980). In other words, they may not be replying to your messages within a few hours, despite you both having matched and shown significant interest in getting to know each other. Ideally, your match would message you constantly, asking you questions and flirting, all geared towards finally meeting up for a romantic date, but instead they choose to play it cool and wait 4 hours before replying to your last message. Why? Because the risk of replying too quickly and seeming too keen is high.

Ideally, your match would message you constantly, asking you questions and flirting, all geared towards finally meeting up for a romantic date, but instead they choose to play it cool and wait 4 hours before replying to your last message. As can be seen by the diagram below, If you both reply quickly to each other’s messages and show an equal amount of interest in the other, your utility is maximised, a pareto optimal situation occurs (where neither party can be better off without making the other worse off) and here is where love can start to grow, with each of you earning 100 happiness points. However, as often happens, one person is likely to be more into the other, one of you may come across keener and reply quickly to messages, whilst the other takes 4 hours to reply with a one word response. We now move from the top left box to the bottom left one, your match is enjoying all the interest you’re showing them, whilst you feel a bit rejected, causing your utility to fall by 200 points. You now sit in lectures distracted and wondering what you did wrong, why aren’t they replying anymore? As you know, this outcome is relatively worse than the happiness you gain from messaging your match non-stop, you will try to avoid this and hence message less. If your match also follows the same strategy, you will reach what economists call ‘Nash equilibrium’ (a mutual best response) where you both slowly reply to messages, neither of you gains from dating but no one feels rejected either (at point 0,0). If you stay too long at this point, a date is unlikely to happen (Shubik, 1970).

The only way to overcome this problem is to match with someone entirely shameless and who you do not have to fear slow replies from, you’re both equally in to each other and make it known, a rare event. Player 1 Player 2

Quick replies

Slow replies

Quick replies

100,100

-200, 100

Slow replies

100, -200

0,0

Feeling depressed yet? Well don’t give up hope, some app designers have taken in to account these fundamental economic problems with online dating and have put measures in place to try to avoid these. Coffee Meets Bagel (a San Francisco–based dating and social networking website) only shows you a small number of pre-selected matches of the opposite gender, whereas Bumble only lets women send the first message. Both of these apps try to deal with the low barriers to entry and weighted ratio problems addressed above. Similarly, Aisle (an Indian dating app), has differentiated itself by only letting users connect with someone by buying ‘invites’ (of which you can only purchase a maximum of 7 at a time). This avoids the Nash equilibrium problem described above and limits the power that men usually have on these apps by raising barriers to entry (The Guardian, 2013). So fear not, it seems help is on the way to improve the likelihood of finding love online, but until then, we can continue to blame our lonely Friday nights spent watching Netflix in our dressing gowns on the economic problems Tinder fails to address.

References: Akerlof, George. “The Market for “Lemons”: Quality Uncertainty and the Market Mechanism.” The Quarterly Journal of Economics, 84 , no.3 (1970) Axelrod, Robert. “Effective Choice in the Prisoner’s Dilemma.” Journal of Conflict Resolution, 24, no.1 (1980) Globalwebindex.com. (2018). “Latest 2018 Social Media User Trends Report - GlobalWebIndex.” Available at: https://www.globalwebindex. com/reports/social?__hstc=194337778.3ebfaf837662f21e7bb38b5a5db769f5.1539184157506.1539184157506.1539184157506.1&__hssc=194337778.1. 1539184157507&__hsfp=2360349410 [Accessed 10 October 2018]. Shubik, Martin. “Game theory, behavior, and the paradox of the Prisoner’s Dilemma: three solutions”. Journal of Conflict Resolution, 14, no.2 (1970) The Guardian (2013). “Nearly two thirds of mobile dating app users are men” Available at: https://www.theguardian.com/technology/2015/feb/17/mobile-datingapps-tinder-two-thirds-men (Accessed 8 October 2018) Weinschenk, Susan. (2013). “Use Unpredictable Rewards To Keep Behavior Going.” Psychology Today. Available at: https://www.psychologytoday.com/gb/blog/ brain-wise/201311/use-unpredictable-rewards-keep-behavior-going [Accessed 10 October 2018].

If your match also follows the same strategy, you will reach what economists call ‘Nash equilibrium’ (a mutual best response) where you both slowly reply to messages, neither of you gains from dating but no one feels rejected either

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©iStock 2019. badvviser

VENEZUELA: ANOTHER SOCIALIST FAILURE? By Ewan Phillipson, Politics and Economics (2021)

pon his death in March 2013, Hugo Chávez left Venezuela with an unemployment rate which had halved since 1999, a 70% fall in extreme poverty (Johnston and Kozameh, 2013) and inflation at its lowest levels since the 1980s. One might ask how, less than six years later, the country is in such a dire state? The answer, at a glance, would surely be the inability of Socialist governments to control a country’s finances; after all, it is hard to describe ‘President’ (as recognised by Russia and China) Maduro’s Chávismo policies – the root cause of the fleeing of three million Venezuelans since 2014 – as anything other than far-left. With a 64.6% (Doing Business, 2019) total tax rate, and the apparent necessity of nationalising key industries such as the cement industry, banks, and electric, steel and telephone companies, labelling the Venezuelan government ‘left-wing’ might be an understatement. However, to say that this crisis is, in its entirety, the fault of socialism would be unfair. In fact, there is a strong argument to suggest that three factors have played a far greater role in the downfall of Venezuela besides Socialism: Colonialism, U.S. Imperialism and Neo-Liberalism. Venezuela, as a Spanish colony, used an ‘encomienda’ system to produce raw goods (which constituted most of the countries revenue), such as cotton, indigo and cocoa. When the system was abolished by the Spanish crown in 1687, there was a simple shift to the enslavement of black males on plantations. A reliance on such goods as a primary source of income is a notoriously risky concept given the volatility of the market for raw commodities. Spain dictated the Venezuelan economy, and sought a share of the profits; as such, revenue was consistently funnelled into the expansion of plantations and the harvesting of raw materials, as opposed to being dedicated to institutional capacity. Despite gaining independence in 1811, Venezuela was a country still built on exports of coffee and cocoa. These brought in capital which further widened the gap between the bourgeoisie and the proletariat, with neoliberal ideologies acting as the driving force behind acting in self-interest, and being unconcerned with the welfare of the poor. The discovery of oil in Venezuela in 1922 was perhaps the most important dictator of the economic direction of the South American region. That is, if the United States had

not intervened. After unearthing the valuable resource, Dictator Juan Vincente Gómez almost immediately allowed U.S. companies to draw up the Venezuelan petroleum law, opening the country up to exploitation at the hands of the Americans for decades to come. In 1957, over half of both Shell and Standard Oil’s global profits came from their Venezuelan counterparts, evidently exploiting Venezuelan oil for the benefit of North America and Europe. When comparing profit to capital investment, journalist Eduardo Galeano was only able to liken the profitability of Venezuela and its oil for the West to the profitability of the slave trade (Galeano, 1971). The neoliberal objection to a large-scale redistribution of wealth meant that the proletariat (which made up a large proportion of Venezuelan society) remained poor and uneducated, limiting the countries potential to advance its production techniques. Further to this, the bourgeoisie tended to import goods from North America, meaning aggregate domestic demand in Venezuela was low, and job creation was limited. Despite this, the 1970s saw Venezuelan liberals attempt, for the first time, to make something out of the crumbs left behind by U.S. companies, with education and health care at the forefront of their plans. Further to this, the Arab oil embargo of 1973 saw Venezuelan oil revenues quadruple (Wilpert, 2003), with President Carlos Pérez promising the dedication of the revenue to fighting poverty, increasing income levels and increasing employment, resulting in what he assured would be a significant development in coming years.

The neoliberal objection to a large-scale redistribution of wealth meant that the proletariat (which made up a large proportion of Venezuelan society) remained poor and uneducated, limiting the countries potential to advance its production techniques. In a period when the future was looking bright for Venezuela, Juan Pablo Pérez Alfonzom, a Venezuelan diplomat responsible, in part, for the creation of OPEC, claimed that “Ten years from now, twenty years from now, you will see, oil will bring us ruin... It is the devil’s excrement.” (Useem, 2003). That was in 1976- it was as if he could see the future. 9

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By 1981, the volatile oil market had brought Venezuela to her knees. A rapid decline in the price of oil brought President Pérez’s plans to a holt, and saw Venezuela sink further into debt. The impact was felt all over the economy; the Bolivar devalued- its free market rate tripled-, unemployment doubled and external debt reached its highest figure in the country’s history. At the root of this crisis was the change in Venezuela’s oil revenue from $26.96 billion in 1980 to $9.62 billion in 1982 (The Global Economy, 2015). As was becoming a common theme in Latin American in the period, Venezuela entered its Lost Decade. It would be far from unfair to say that the corruption in Venezuela in the same period had a damaging impact on the economy; the ability of the rich to profit from preferential rates of currency exchange in the RECADI scandal being just one of the operations which enabled the rich to increase their wealth. The acceptance of the Washington Consensus was another low point in Venezuelan history; the acceptance of $4.5 million from the IMF in 1989 on the condition that they implement free-market Capitalism led to the Caracazo riots, in which hundreds of rioters were killed, and the poor decided they would no longer stand by and watch the bourgeoisie exploit their country for all it was worth. In an attempt to reverse Perez’s neoliberal reforms, the electorate chose Rafael Caldera as their President in the 1994 elections. He had stood as President in the 1970s, and ran his campaign based on the reformation of existing neoliberal policies. His Presidency was another failure in the Venezuelan collection- ‘Agent Venezuela’ (in collaboration with his newly appointed Marxist Minister of Planning Teodoro Petkoff) saw inflation rise to 100% in the late 1990s (Index Mundi, 2015), with 66% of the country living in poverty (McCaughan, 2005). The Premiership of Hugo Chávez, at least initially, looked like it might have had potential benefits for Venezuela. Having run a successful election campaign based on the dismantling of the two-party system, bolstered by promises to fight corruption and end poverty, The start of Chávez’s Presidency coincided with a rapid rise in the price of oil (in 2000), which helped to lift the Venezuelan economy, providing Chávez with funds to raise the country’s standard of living. His policies were far less positively received than he perhaps believed, however, with a (potentially U.S. supported) Coup and the ‘Paro Civico’ (general strike) in 2002 being far from the only examples of discontent Chávez faced during his term.

The start of Chávez’s Presidency coincided with a rapid rise in the price of oil (in 2000), which helped to lift the Venezuelan economy, providing Chávez with funds to raise the country’s standard of living.

of the market. Nonetheless, Maduro has stayed in power since 2013, overseeing human rights abuses, severe shortages of food, a 1,300,000% inflation rate between November 2017 and November 2018 (BBC News, 2019), with prices doubling approximately every 19 days. It is hard to draw a conclusion on which factor the overall blame for the collapse of Venezuela should be placed. Strong claims could be made that the Socialist policies of Chávez and Pérez, for example, exploited Venezuela to foreign bodies, due to their reliance on foreign aid to fund their welfare policies. Others might blame the volatile nature of the commodity markets on which Venezuela is so dependant. The US has even been accused of causing the country’s collapse, both through its initial oil agreements and through the recent political moves to ostracize Venezuela economically. In my view, the reliance on strong commodity markets didn’t put Venezuela on the easiest of paths to becoming a prosperous nation. However, I feel that this issue only became catastrophic when it was combined with the imperialist nature of the U.S. which Venezuela was exposed to, thanks to the actions of Dictator Gómez in the 1920s. By allowing American firms to effectively dictate their petroleum laws, the Venezuelan government ensured that relying on this commodity as a profitable export would always be risky, and are only now truly seeing the widescale impact of this vulnerability on the survival of their country.

References: ‘Ease of Doing Business in Venezuela’, Doing Business, 2019. Available from: http:// www.doingbusiness.org/en/data/exploreeconomies/venezuela/#DB_tax [Accessed 5 February 2019] Galeano, Eduardo. Open Veins of Latin America: on U.S. multinationals’ exploitation of Venezuelan oil. Mexico: Siglo XXI Editores, 1971. Johnston, Jake and Kozameh, Sara. ‘Venezuelan Economic and Social Performance Under Hugo Chávez, in Graphs’, CEPR, 2013. Available from: http://cepr.net/blogs/ the-americas-blog/venezuelan-economic-and-social-performance-under-hugo-chavez-in-graphs [Accessed 4 February 2019] McCaughan, Michael. The Battle of Venezuela. New York: Seven Stories Press, 2005. Useem, Jerry. ‘The Devil’s Excrement’, Fortune, 2003. Available from: http://archive. fortune.com/magazines/fortune/fortune_archive/2003/02/03/336434/index.htm [Accessed 3 February 2019] ‘Venezuela Crisis: European States Recognise Guaidó as President’, BBC News, 2019. Available from: https://www.bbc.co.uk/news/world-latin-america-47115857 [Accessed 5 February 2019] ‘Venezuela Inflation Rate (Consumer Prices)’, Index Mundi, 2015. Available from: https://www.indexmundi.com/venezuela/inflation_rate_(consumer_prices).html [Accessed 6 February 2019] ‘Venezuela: Oil Revenue’, The Global Economy, 2015. Available from: https://www. theglobaleconomy.com/Venezuela/Oil_revenue/ [Accessed 5 February 2019] ‘Venezuela’s Nicolás Maduro: Dictator or defender of socialism?’, BBC News, 2019. Available from: https://www.bbc.co.uk/news/world-latin-america-20664349 [Accessed 1 February 2019] Wilpert, Gregory. ‘The Economy, Culture, and Politics of Oil in Venezuela’, Venezuela Analysis, 2003. Available from: https://venezuelanalysis.com/analysis/74 [Accessed 5 February 2019]

Consequently, the country suffered economically under Chávez. When Nicolás Maduro assumed power after the passing of Chávez, he inherited an economic war with the U.S. and its allies, who were attempting to isolate it economically, and an oil market which in itself was plummeting. With 90% of its foreign revenue coming from the sale of oil (BBC News, 2019), Venezuela was bound to take a hit from the fluctuation

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HOW THE HOUSING CRISIS COULD HURT THE TORIES FOR GENERATIONS TO COME By Oliver Clark, Economics (2020)

here has yet to be a more exciting and engaging time in my life to be an avid follower of politics. It seems that there is a new twist on the rollercoaster every time one checks the headlines or opens up their Twitter feed. The previous days’ groundbreaking discovery or breakthrough is nearly always made redundant by lunch time, whether it be the erratic Brexit negotiations, the troubles of the Eurozone, or the unpredictability of Donald Trump. Yet for the vast majority of the population who are not spending their days watching Politics Live, reading the Spectator magazine, or listening to the latest episode of Brexitcast, there are a number of issues that are far more important to daily life than these massive global debates. One of the most pressing matters for this country is the deep-rooted housing crisis. A home is not just an asset that one acquires, for many it is a representation of stability, security, and when comparing to private renters, affordability (renters pay approximately 40% of their net salary on rent, compared to home owners forking out just 20% of their salaries on mortgage repayments). A mortgage can eventually lead to a property that you own outright and can keep for as long as one sees fit, whereas a standard rental contract can last as little as six months. Yet the current housing situation is not a pretty picture, with a lack of affordable housing to buy and rocketing prices of private rent. The housing issue is also exacerbating the current generational divide which is shaping our politics. If the Conservatives survive the current turbulence that is the negotiations with the EU, they need to urgently inject some serious vigour into their domestic policy. If they fail to do so, Jeremy Corbyn, John McDonnell, or one of their acolytes, are all too ready to pounce at the next General Election, something which may damage the Tories for generations to come.

The housing issue is also exacerbating the current generational divide which is shaping our politics.

Figure 1: Government Briefing Paper, 9 June 2017 In his 2015 Tory Party Conference speech, David Cameron called for a ‘democracy of home-ownership’, echoing back to the days of Thatcher’s push for a ‘property owning democracy’, when she set up her Right to Buy scheme (where council house tenants could buy the property at a heavily discounted price). One’s status of home ownership is a key determinant of how you vote. One of the key drivers of the success of the Conservative Party over the last century has been due to their positioning as the party of aspiration and home-ownership, the belief in the equality of opportunity and not outcome, rewarding those who strive to succeed. If one works hard from the day they leave education, a house to call their own is the ultimate goal of this vision. But with home ownership rates at their lowest level in over 30 years, particularly among young, middle class professionals, this aspiration is becoming little more than fantasy to voters, as they look evermore forlornly at the ladder being pulled away from them. If the Tories do not fix the broken housing market, the ever-growing number of voters without capital are going to question the point in voting for the party of capitalism. According to the English Housing Survey, now just 1 in 4 renters in social housing expect to be able to buy their own home in the future, down from 30% in 2017. Their lack of optimism is understandable. In a 2018 study, the IFS found that for those born in the late 1970s, 43% owned their home by the age of 27. For those born in the late 1980s, that figure 11

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has dropped to just 25%, with many of these relying on inheritances or purchases from parents. The issue is even worse when looking in the capital and South East, where the percentage of 25-34-year olds owning a home has dropped from 64% to just 32% in 20 years. With the UK average house price in 2015/16 now double what it was two decades ago, and real wages rising by just a fifth in the same time period, it is hardly surprising that home ownership rates have plummeted. In the 2017 General Election, the gap between the voting behaviour of renters and owners was shown to be greater than ever. According to research conducted by homelessness and housing charity Shelter, the lead for Labour among private renters went from 11 points up to 23, a huge swing. This was particularly felt in marginal seats, with the number of private renters in an area even more strongly correlated with a decrease in the Conservative vote than age. YouGov highlights 52 marginal seats in England where poorer, private renters are disproportionately represented. The Tories failed to make gains in any of these seats, whilst losing eight MPs. This was enough to cost Theresa May her working majority. It is not just renters that the Tories have to worry about, but also the parents of these renters, who own a home but feel that the current system is not working for their offspring. The idea that Jeremy Corbyn’s policies of rent controls will do anything other than cut the supply of affordable rented accommodation even further is laughable, but that is not how voters see it. The current system is not working, and they want something new. If the Tories wish to remain in power post-Brexit, they cannot afford to let their domestic policy sit idle any more.

The percentage of 25-34-year olds owning a home has dropped from 64% to just 32% in 20 years

There are many reasons as to why we are in this current situation, including an influx of foreign buyers, an ageing (and rapidly growing) population and the current regulations placed on planning permission. But both the current and past governments have failed to inspire in finding solutions to the housing issue. Looking back to the work of Cameron and Osbourne, there was little done to prioritise housing. Osbourne introduced the Help-to-Buy scheme, where taxpayers helped underwrite the mortgages of first-time buyers, but this demand-side policy has helped few and ultimately caused house prices to rise even further (shifting the demand curve to the right without affecting supply). Moving forward to the present, at Prime Ministers Questions, Theresa May will repeat her rehearsed statistics, claiming that the Tories have delivered more homes since 2010 than the past Labour government did in its last seven years. Whilst this is a true statement (346,000 verses 333,0000) it fails to mention that fellow EU countries are far surpassing the UK, both in house building and home ownership rates. According to Eurostat in 2016, only Germany, Austria and Denmark had lower owner-occupancy rates than the UK.

Figure 2: Shelter, Ipsos Mori Data There is clearly a clash at the top of the current Conservative Party, with May’s willingness to spend more money to solve the issue going in direct contrast with the views of her fiscally conservative Chancellor, ‘Eeyore’ Phillip Hammond. Spreadsheet Phil has shown he is far more interested in freeing up planning permission regulations and opening up certain areas of the Greenbelt for development. This ideology does not sit well with May, wishing to protect her rural constituency of Maidenhead, with fears that traditional conservative voters will be in uproar at changes to the protected land. The cuts to Stamp Duty in the last two Budgets, scrapping the cap on borrowing limits for local councils to build housing, and the decision to enforce a levy on foreign buyers of property are welcome changes but do not appear to meet the scale of the problem. Cabinet turmoil caused by various resignations has also been unhelpful for finding a solution. The current Ministry for Housing, Communities and Local Government is headed up by James Brokenshire, who is deputised by the promising Kit Malthouse (whether the ‘Malthouse Compromise’, developed during the writing of this article, proves to be the crucial breakthrough on the current Brexit deadlock, is yet to be seen).

The cuts to Stamp Duty in the last two Budgets, scrapping the cap on borrowing limits for local councils to build housing, and the decision to enforce a levy on foreign buyers of property are welcome changes but do not appear to meet the scale of the problem. Brokenshire was preceded by Sajid Javid, who was a longtime foe of May until his appointment as Home Secretary last year. Javid fought for construction of new housing on the Greenbelt within a half mile radius of train stations but was shot down by the PM. Dominic Raab saw six months as Minister for Housing and Planning before being promoted to Brexit Secretary in mid 2018, whilst his predecessor, Alok Sharma, was in post for just half a year as well. May’s ally Garvin Barwell was in the department for slightly less than a year up until losing his seat in the 2017 election. One must ask, how is progress expected to be made when the people in charge of solving the problem are changing every 6-12 months? This

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can be directly contrasted with Jeremy Hunt, who spent nearly six years at the Department of Health, battling through the challenges of the junior doctors strikes, or Michael Gove, who has made numerous high-profile advances in the past year at DEFRA. Judging by the performances’ of May and Hammond over the past two years, one must anticipate that neither will be in their posts going into the next General Election, and so it is up to the new breed of Tory MPs to make up for the poor vision promoted by the current party leaders. It is unquestionable that the housing crisis cannot be simply solved overnight. Research from Sky News (2018) suggests that the UK is ‘in fact’ facing five simultaneous crises, ranging from a lack of supply in London and the South East, to poor quality accommodation in built up cities, to a lack of demand in poorer areas in the North, Scotland and Northern Ireland. The constant calls from those on the right to just solve the problem by building more homes, verses those on the left calling for rent controls and mandatory acquisition of property, are far from helpful. From the perspective of this writer, there needs to be a serious look into what can now be classified as ‘Greenbelt’. 35% of this area protected from development is just intensive agricultural land, which could be sacrificed without great loss to the wider community, in favour of truly affordable housing. Research conducted by ComRes for the Centre for Policy studies found that although there is still a base support from full protection of the Greenbelt, views are beginning to shift. When framing the question in relation to building affordable housing, there is a far greater support of development. If the political cost of building on the Greenbelt is falling, politicians must begin looking at the social gains.

the terrorist group attempted to kill the entire Conservative Cabinet with a bomb attack at the Brighton Tory Party Conference, killing five people. He is now idolised by millions in our country, singing ‘Oh Jeremy Corbyn’ on the streets of Nottingham after a night out at Rock City. It is because of this apparent short-term memory loss of voters over issues that do not affect their day to day lives, that I believe solving the housing crisis will be key in the political landscape. A house can span a family, it can go down generations, it is something that you can come back to every night after a hard day’s work. It is a place to call your own. And while Brexit or global trade wars may be dominating the news stories, I feel that it is these Bread and Butter issues will define the future of UK politics. If the Tories are seen as the party who have let down the voters, by having a decade in government but worsening the housing market for renters and prospective buyers alike, it will be the voters who let down the Tories the next time we go to the polls.

References “A Home Truth for the Tories: Fix the Housing Crisis or Lose Power for Ever.” The Spectator. April 18, 2018. https://www.spectator.co.uk/2018/04/a-home-truth-forthe-tories-fix-the-housing-crisis-or-lose-power-for-ever/ [Accessed 27 February, 2019]. “Budget 2018: What Do the Housing Measures Mean?” BBC. October 30, 2018. https://www.bbc.co.uk/news/business-46024789. [Accessed February 27, 2019]. “Housing and the 2017 Election: What the Numbers Say.” Shelter. February 23, 2018. https://blog.shelter.org.uk/2017/06/housing-and-the-2017-election-what-thenumbers-say/. [Accessed February 27, 2019]. “Line 18: How the UK Is Facing Five Housing Crises at Once.” Sky News. https:// news.sky.com/story/line-18-uks-housing-crisis-wont-be-solved-by-building-morehomes-11503447. [Accessed 27 February 2019]. Barton, Cassie. “Home Ownership and Renting: Demographics.” Commons Library Briefing - UK Parliament. June 09, 2017. https://researchbriefings.parliament.uk/ ResearchBriefing/Summary/CBP-7706. [Accessed February 27, 2019]. Beckett, Andy. “The Right to Buy: The Housing Crisis That Thatcher Built.” The Guardian. August 26, 2015. https://www.theguardian.com/society/2015/aug/26/ right-to-buy-margaret-thatcher-david-cameron-housing-crisis. [Accessed 27 February 2019]. Chapman, Ben. “Home Ownership Falls More in UK than Any Other EU Country.” The Independent. August 21, 2018. https://www.independent.co.uk/news/business/ analysis-and-features/uk-home-ownership-falls-more-than-eu-country-france-poland-property-market-a8501836.html. [Accessed 27 February 2019]. Full Fact. “Affordable Homes: Comparing Labour and Conservative Records.” Full Fact. May 08, 2018. https://fullfact.org/economy/affordable-homes-labour-conservative/. [Accessed 27 February 2019]. Heath, Allister. “The Real Ticking Time Bomb for the Tories Is Home Ownership.” The Telegraph. October 07, 2015. https://www.telegraph.co.uk/finance/property/11917816/The-real-ticking-time-bomb-for-the-Tories-is-home-ownership.html. [Accessed 27 February 2019]. Malnick, Edward. “Cabinet Urges May to Build on Green Belt.” The Telegraph. October 06, 2018. https://www.telegraph.co.uk/news/2018/10/06/cabinet-urgesmay-build-green-belt/. [Accessed February 27, 2019]. Ministry of Housing. “English Housing Survey 2017 to 2018: Headline Report.” GOV. UK. January 31, 2019. https://www.gov.uk/government/statistics/english-housingsurvey-2017-to-2018-headline-report. [Accessed 27 February 2019].

Figure 3: The breakdown of the Greenbelt. Telegraph. I do wonder as to how much of this political turmoil we see around us, both on a domestic and a global level, will be remembered or seen as significant just 10 or 15 years down the line. Look at the case of Jeremy Corbyn, a man who has called Hamas and Hezbollah his ‘friends’, has shared platforms with numerous vicious anti-Semites, and invited two convicted IRA volunteers to the House of Commons, just weeks after

Savage, Michael. “May Acts to Tackle Housing Crisis by Imposing Levy on Foreign Buyers.” The Guardian. September 29, 2018. https://www.theguardian.com/politics/2018/sep/29/theresa-may-slaps-new-property-tax-on-foreign-buyers. [Accessed 27 February 2019]. Wilson, Josh. “Homeownership in England at a 12-year High after Boost from First-time Buyers.” The Telegraph. February 01, 2019. https://www.telegraph.co.uk/ property/buy/power-first-time-buyers-homeownership-england-12-year-high/. [Accessed 27 February 2019].

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WHAT KIND OF A SHOPPER ARE YOU? By Swati Raipancholia, Economics (2019)

ehavioural economics tells us a lot about consumer behaviour and the psychology behind economic decisions that are made every day. Purchasing of goods (i.e. shopping) is largely an economic decision. Given certain assumptions, consumers buy more when prices are lower or when their income is higher, for example. But what are the psychological factors that motivate us to make choices when purchasing products? Have a look below to decipher which shopper you most identify with!

1. Delayed Payment Dan – Dan wants to buy a new phone but can’t currently afford the one that he wants. When he is presented with a deal that allows him to make a series of smaller payments over time, he immediately purchases the phone. The price is the same (if not higher with an interest rate being charged) and Dan’s disposable income is not due to increase, so why is this deal so much better to him than paying it all upfront? The time value of money makes future payments less costly than immediate ones (Psychology Today, 2019). Dan is likely to spend more on his credit card than he is on his debit card for this reason. Dan thrives on immediate gratification as opposed to waiting for a higher reward (in this case, a lower price as a result of higher income or product price lowering in the future). 2. Everyone-else-is-doing-it Ellie – Ellie isn’t particularly interested in shopping, but peer pressure plays on her mind and she buys things she doesn’t necessarily want. This trait is particularly prominent among young people. In 2008, researchers reported in “Child Development” that this pressure to conform increases as teens grow older (Living.Thebump.Com, 2019). Ellie’s decisions to buy certain products stem from what her friends and colleagues are using alongside an inherent desire to ‘fit in’. This behaviour can also be observed in other areas. For instance, organ donation rates in Canada are 2.5% and in Austria they are 99%. This is because there is a process to become a donor in Canada, as opposed to Austria, where it’s ‘a given’ unless one opts out. This social pressure of being automatically included in the donation group encourages individuals

to make certain choices, even if they otherwise wouldn’t (Shopping Direct, 2019). Furthermore, humans are lazy, and if there is a process to opt out of a payment scheme, or in this case, organ donation, they would rather incur the cost of the default option than make the effort to revoke themselves from the scheme. Martin and Randal (2008) provide another example. Their study finds that the propensity to donate to charity increases as a donation box is filled with more money, giving onlookers the impression that many donations have been made. Ellie is incentivised to donate when she sees and/ or believes everyone else is.

3. Framed Finley - Framing refers to the way in which choices are described and presented (Tutor2u, 2019). Finley finds himself drawn in by a sign showing the price of a car to be £4,500, down from £5,000. The discount presented makes the car seems like a much better deal than the original price, but in reality, the ‘discounted’ price Finley will pay is much more attractive to him as it makes it appear as though he is getting a bargain, while the price of the car in the eyes of the retailer would have always been £4,500. 4. Impulsive Irina – Irina buys items impulsively and without much thought or consideration. This could be due to a personality trait known as ‘impulsive buying tendency’, because she enjoys shopping or because Irina forms a connection to the product, be it physical (by being in contact with the product) or social (by seeing others with the product and comparing herself to them) (Psychology Today, 2019). So, we have an Impulsive Irina, what about an Impulsive Ian? This is possibly less likely as consumers’ impulsive buying behaviour shows significant differences between men and women, with females being more likely to purchase impulsively compared to males (Žnideršić et al, 2016). Find Irina making spontaneous purchases and being especially tempted by items near the cash register. You know – the ones that are designed to be futile. 5. Loss Averse Lucy – ‘Losses hurt twice as much as gains make you feel good’ (Psychology Today, 2019). Due to the loss averse nature of humans, phrases such as ‘Last Chance to Buy!’ are used frequently in marketing campaigns. Kahneman & Tversky (1979) found that people evaluate changes in wealth rather than absolute wealth. Choices

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depend on a reference point, which defines gains and losses. Lucy often finds herself purchasing multiple items that she doesn’t ‘really need’ because they’re discounted or in limited stock. This is because the loss she’d face by missing out would feel larger than an equally sized gain.

6. Of Two Minds Oliver – There can be two types of behaviour – the narrow-minded ‘doer’ who values immediate gratification over long-term happiness and a far-sighted ‘planner’ who values long-term satisfaction. Oliver may buy things he doesn’t need, displaying the ‘narrow-minded doer’ behaviour. Alternatively, Oliver may find it important to plan and conduct cost benefit analyses before making a purchase, illustrating ‘far-sighted planner’ behaviour. Salespeople try to assess which behaviour Oliver is exhibiting at the time and act accordingly (Psychology Today, 2019). 7. Sunk-cost Sally – A sunk cost is a cost that has been incurred and cannot be recovered (Wilson, 2002). Sally has spent £100 on a festival ticket for this weekend but has fallen ill a couple of days before. We assume this cost was significant to her and is not recoverable. Sally decides to go anyway, even though she will feel worse if she does so. Sally also decides to stay in the movie theatre despite not enjoying the movie as she has already paid for a ticket and continues to eat in a restaurant despite being full in order to not ‘waste’ the money she’s spent on the food. Examples such as these perfectly exhibiting the sunk cost fallacy experienced by consumers every day. 8. Tired Tina – Tina has had a long day at work. She has spent a lot of her day putting out fires at work. She comes home and decides not to cook, and simply to order an expensive take-away. Her mental fatigue (Psychology Today, 2019) got the better of her. It is often the case that consumers succumb to temptation when they are exhausted or are mentally drained. Fossey (1990) states that the physiological disruption and psychological strain as a result of shift work can have serious detrimental effects [..] on health and wellbeing. We can expect Tina to make expensive purchases towards the end of a tiring day at the shopping centre as she just wants to tick things off her list and go home.

Utility is maximised when the marginal utility for the next unit consumed is 0 (assuming that the budget of the consumer allows this point to be reached). As we have seen in this article, there are clearly many alternatives and other reasons behind the decisions consumers make, outside of simply utility maximising. We must adapt to and attempt to further understand and accept the deviations from standard economic theory towards behavioural economics.

References “10 Factors That Influence Your Purchase Decisions”. 2019. Psychology Today. https://www.psychologytoday.com/gb/blog/science-choice/201712/10-factors-influence-your-purchase-decisions. “How Does Peer Pressure Influence Teen Purchasing Choices?”. 2019. Living. Thebump.Com. https://living.thebump.com/peer-pressure-influence-teen-purchasing-choices-8191.html. “Behavioural Economics In Ecommerce – Shopping Direct”. 2019. Shopping Direct. http://shoppingdirect.co.za/behavioural-economics-ecommerce/. Martin, Richard, and Randal, John. 2008. “How Is Donation Behaviour Affected By The Donations Of Others?”. Journal Of Economic Behavior & Organization 67 (1): 228-238. doi: 10.1016/j.jebo.2007.08.001. “Framing And Behavioural Choice (Behavioural Economics) | Tutor2u Economics”. 2019. Tutor2u. https://www.tutor2u.net/economics/reference/framing-and-behavioural-choice. “What Motivates Impulse Buying?”. 2019. Psychology Today. https://www.psychologytoday.com/gb/blog/sold/201207/what-motivates-impulse-buying. Žnideršić et al. 2016. “Impulsive Consumer Behaviour.” Kahneman, Daniel, and Amos Tversky. 1979. “Prospect Theory: An Analysis Of Decision Under Risk”. Econometrica 47 (2): 263. doi:10.2307/1914185. “Sunk Cost”. 2019. Investopedia. https://www.investopedia.com/terms/s/sunkcost. asp. Wilson, Janet L. 2002. “The Impact Of Shift Patterns On Healthcare Professionals”. Journal Of Nursing Management 10 (4): 211-219. doi:10.1046/j.13652834.2002.00308.x. “Utility”. 2019. Investopedia. https://www.investopedia.com/terms/u/utility.asp.

At the end of the day, according to standard economic theory, all consumers are:

Utility Maximising Ulysses – Ulysses makes choices based on rationality and is always looking to maximise his utility. Utility is an economic term referring to the total satisfaction received from consuming a good or service (Investopedia, 2019). A consumer’s utility is hard to measure as there are various unobservable factors that contribute to utility levels. However, we may use behavioural economic theories to decipher how consumers maximise utility. Utility is maximised when the marginal utility for the next unit consumed is 0 (assuming that the budget of the consumer allows this point to be reached). Ulysses may maximise his utility per £ by carefully comparing prices of goods and weighing up the costs and benefits. However, this can become tricky, as the time Ulysses spends on comparing products is also worth something and contributes to his utility level. ©iStock 2019. alexsl

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IMPRESSIONABLE MINDS: THE ROLE OF PROFESSORS IN CHANGING STUDENT OPINION ON BREXIT By Charlie Cavill, Philosophy, Politics and Economics (2019)

aving spent the majority of their lives in full-time education, university students are undeniably very well-accustomed to absorbing, and repeating, information from their teachers. Beyond the scope of the syllabus, school teachers also have character-building roles, essential to normal childhood development, which could include helping to resolve playground conflicts, cultivating students’ moral compasses, and influencing their tolerance and respect of others. However, could such an ingrained disposition to assimilate the principles given by our teachers present problems as we enter into the world of adulthood? With this in mind, it is possible that at this crucial stage of development, university students’ impressionable minds may be subject to the influence of their professors, no longer only on trivial playground drama, but on more serious issues which may greatly affect our future, such as, in recent years, our views on Britain’s exit from the European Union. In order to test this concept, one must find evidence that university students are, in fact, changing their opinions within a given time frame, and then consider the likelihood that professors may have had an impact on this change. Taking data from five waves of the British Election Study (BES), Wave 10 (W10) to Wave 14 (W14), one can track changes in individual answers to the question: (See figure 1 opposite).

‘How well do you think the UK government is handling the process of Britain’s exit from the EU?’ (Fieldhouse et al, 2018) The five surveys were conducted between November 2016 and May 2018, with an average of 31,600 respondents per survey (Fieldhouse et al, 2018). Having adapted the data to reflect only the views of university-age respondents (18-22

year olds), four cross-tabulation tables were produced, as a method of tracking changes at an individual level from one wave to the next. The graph below shows the percentage of people who have given a different answer to the one they chose in the previous wave, signifying a changed opinion during the time elapsed. Explicitly, looking at responses between W11 and W12, just under 30% of these respondents changed their answer from ‘Very Badly’ in W11, to something else when asked the same question in W12; considering responses between W13 and W14, 25% of people changed their answers from ‘Very Well’ in W13 to something else in W14. As a final illustration, just under 50% of respondents changed their answer from ‘I don’t know’ in W12 to something else in W13, signifying the formation of an opinion between this time. From this data it is clear that young people have been changing, and forming, their opinions on Brexit over the past two years. Could their professors be responsible?

Students could be influenced by a variety of sources, including, but not limited to, their parents, peers, politicians, celebrities and the media. Students could be influenced by a variety of sources, including, but not limited to, their parents, peers, politicians, celebrities and the media. Borrowing an idea from management theory, ‘good’ decision-making (or in this case, opinion-formation) is reliant upon ‘good’ information, classified by O’Reilly (1982) as being of high quality, accessible to the individual and from a trustworthy source. Although our parents may be trustworthy on the whole, as well as being both sufficiently and directly accessible, many are not political experts. Unfortunately, this means that the quality of their information is often unsatisfactory, according to the theory. Considering our peers, one could easily argue that in many cases, it is the blind leading the blind, as the data encapsulates fluctuations in opinion regardless of degree discipline or

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background. This similarly signifies that the quality and trustworthiness of political information is rather low from our peers. Celebrities are accessible via social media, but do not often possess the personal trust nor quality factors necessary for political influence. Following cues from political leaders, known as heuristics, is a popular means of decision making for people young and old, particularly regarding complex issues such as the EU (Goodwin, 2016). One would expect politicians to be a source of high quality political information and expertise, and be sufficiently accessible via MPs surgeries and their presence in the media. However, recent polls have highlighted a long-standing problem of political trust (Seyd, 2016), with Government ministers scoring a mere 17% score for being trusted to tell the truth, according to Ipsos MORI (Skinner & Clemence, 2017). This brings us back to professors.

However, recent polls have highlighted a long-standing problem of political trust (Seyd, 2016), with Government ministers scoring a mere 17% score for being trusted to tell the truth, according to Ipsos MORI (Skinner & Clemence, 2017). This brings us back to professors.

As highly educated individuals, lecturers, particularly those in the social sciences, produce high quality information. In terms of accessibility, students spend multiple hours per week in direct contact with them via lectures and seminars; considering their trustworthiness, professors score 85% for overall trust in the same poll by Ipsos MORI (Skinner & Clemence, 2017), and an even higher trust score of 92% among degree-level educated individuals (Skinner & Clemence, 2017). In line with O’Reilly’s (1982) theory, inferences can be made that a lecturer would most likely be able to change a rational student’s opinion on how Brexit negotiations are going. However, the biggest question is, should they?

References Fieldhouse, E., Green, J., Schmitt, H., Evans, G. & van der Eijk, C. ‘The British Election Study 2014-2018: Combined Waves 1-14 Internet Panel Codebook,’ YouGov, 2018, pp. 1-311 Goodwin, M. ‘Could Jeremy Corbyn have kept Britain in the EU?’ in Cowley, P. & Ford, R. (eds.), More Sex, Lies and The Ballot Box, London: Biteback Publishing, 2016, pp. 252-255 O’Reilly, C. A. ‘Variations in Decision Makers’ Use of Information Sources: The Impact of Quality and Accessibility of Information’, The Academy of Management Journal, 1982 15:4, pp.756-771 Seyd, B.‘Worse than estate agents: the problem of political trust’ in Cowley, P. & Ford, R. (eds.), More Sex, Lies and The Ballot Box, London: Biteback Publishing, 2016, pp. 144-148 Skinner, G. & Clemence, M. ‘Veracity Index 2017’, Ipsos MORI, 2017, pp.1-12

Figure 1

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©iStock 2019. Kit_Leong

PRIME DISCRIMINATION: COULD FAST FOOD CHAINS BE RACIST? By Youssef Oukhallou, Economic Development and Policy Analysis (2019)

o the poor pay more? This seemingly simple question has captivated the interest of several economists during the last decades. It all started with David Caplovitz’s seminal study where he uncovered how low-income families in New York paid higher prices than the rich for both food and consumer durables. This first research came as a reaction to the 1960s riots, and corroborated the commercial discrimination practices that were denounced by the residents of poor and African American neighbourhoods during said riots. Throughout their studies, American sociologists such as Caplovitz described this situation as “unfair” and those practices as “unethical and illegal” (Caplovitz, 1963). This topic sparked attention again after the 1990s race riots. This time, the focus turned to racial discrimination. In 1995, Economists and law experts Ian Ayres and Peter Siegelman investigated race-based price discrimination in the cars market in the US, and found that African American buyers were charged for identical cars largely higher prices than white buyers. Economist Kathryn Graddy examined this same question in the fast-food sector and then investigated, alongside Diana Robertson, whether the price discrimination is linked to store franchising (Graddy & Robertson, 1999).

Economists Ian Ayres and Peter Siegelman had found that African American buyers were charged largely higher prices in the US cars market They found that price discrimination is not intentional. Some authors, especially in the marketing field, even argue that in some situation, price discrimination could lead to relatively efficient prices. This argument holds particularly when the price discrimination is based on each costumer’s valuation of a certain good (Geng et al, 2005, and Armstrong, 2006). This article replicates the methodology established by Graddy with the aim to explore the existence of fast-food price discrimination in the US based on racial and socioeconomic characteristics. The emphasis is put on the influence of race

and income level on the prices of a meal in four American restaurants in different areas. The model fits in an imperfectly competitive framework, where marginal cost is not the only variable explaining the pricing policy. Thus, following the seminal theoretical framework in this field (Bresnahan, 1989, and Porter, 1983), combined with the hypothesis of constant elasticity of demand, the supply relations equation could be expressed as follows: Log P= logMCi – log [1+(1/ε.θi )]

(1)

Where P is the market price, ε is the price elasticity of demand, MCi is the marginal cost of each firm and θi is an index of the extent to which stores’ conduct is close to perfect or imperfect competition. This equation can also be augmented by encompassing an explicit discrimination coefficient (1– d). It then becomes: Log P = log MCi – log (1– d) – log [1+(1/ε.θi )]

(2)

For this particular case study, the intuition behind the Becker discrimination coefficient would be that if a fast-food chain has a taste of discrimination against African-American buyers, said chain would be willing to accept a smaller price p(1 – d) rather than p in areas with a lower proportion of the black community (Graddy, 1997, and Becker, 1971). Based on the abovementioned elements and with the purpose of analysing whether fast-food prices change based on the ethnic and socioeconomic characteristics of an area, the following equation is estimated: Log Piz = α + β.Rz + γ. COMPiz + ω. MCiz + εiz

(3)

The ethnicity and income vector Rz includes, for each area z, the proportion of the black community, the median income and the proportion of the population below the poverty threshold. COMPiz is a vector that encompasses variables that represent whether a store is company-owned or franchised, the proportion of the population without a car, and the store concentration in each area.

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The marginal costs MCiz include the starting wage, the number of employees, the crime rate and the median value of housing respective to each area as a proxy for the fixed cost related to the ownership/rent of the store in said area. Since real-estate costs are also correlated with population density, they are added to the equation. The use of the crime rate is justified because it is highly correlated with maintenance and insurance costs, hence represents a reliable measure proxy. MCiz also encompasses dummy variables for the different chains and for the state of New Jersey. The purpose of the latter dummy variable is to neutralise the potential differences in costs that could result from operating in different states, e.g. differences in tax rates between New Jersey and Pennsylvania. Data regarding ethnicities and socioeconomic levels are taken from the US census report, the 1992 Uniform Crime Reports and two surveys led by economists from Princeton University (Card and Krueger, 1994). The data includes price information, number of employees, wages and estate ownership status of Burger King, KFC, Roy Rogers and Wendy’s during the 1990s. The price of each meal includes a main course (an entrée), a medium soda and a small portion of chips.

Equation (3) is estimated using an OLS regression with the given dataset. The results of the main regression with the average price of the meal as an endogenous variable are presented in the first column (Model 1) of TABLE 1. With 322 observations, my estimation yields mildly different coefficients than Graddy’s (Graddy, 1997), but most of them ultimately confirm the same initial conclusions. A 50% jump in the proportion of the black community in an area would lead restaurants to increase their prices by 4.98% (coefficient = 0.0997). Graddy had found a larger variation, i.e. 5.4%. On the other hand, if the income level in area A is 100% higher than in area B, the prices in the rich zone are allegedly lower by 15.7%, and if B has a high poverty proportion, the difference reaches 74.6%. The suspiciously large coefficients lead to question Model 1 specification. In Model 2 (second column of TABLE 1), I follow Graddy’s approach in allowing county-dummy variables in order to correct for differences in costs (e.g. insurance). The three discrimination coefficients decrease noticeably. In Model 3, store-specific variables are excluded based on previous studies stating that the decision to franchise or company-own is simultaneously made with price (Shepard,

Table 1: Determinants of the price of a meal Dependent variable: the log of average price of a meal (1)

(2)

(3)

(4)

(5)

(6)

VARIABLES

Model 1

Model 2

Model 3

Model 4

Model 5

Model 6

Proportion black

0.0997***

0.0888**

0.0758**

0.0993**

0.0301

(0.0365) -0.157*** (0.0432) -0.746*** (0.216) 0.00652 (0.00574) 0.0410 (0.105) -0.0309** (0.0124) 0.249* (0.143) 0.119*** (0.0221) -0.0281*** (0.0102) 0.0855 (0.120) -0.00606** (0.00262)

(0.0396) -0.0697 (0.0491) -0.482** (0.238) 0.00166 (0.00663) 0.0583 (0.112) -0.0417*** (0.0126) 0.215 (0.155) 0.0239 (0.0354) -0.0201* (0.0103) -0.0374 (0.141) -0.00537** (0.00272) 28 3

(0.0364) -0.146*** (0.0438) -0.612*** (0.218) 0.00388 (0.00580)

(0.0398) 0.0883*** (0.0318) 0.0287 (0.157)

(0.0278)

0.116 (0.349) 323 0.761

1.072*** (0.00809) 323 0.749

0.556*** (0.185) 323 0.754

Log income Proportion in poverty Log population density Log starting wage Log no employees Crime rate Log housing value Company-owned Proportion car Store concentration County dummy variables Chain dummy variables New Jersey Constant Observations R-squared

3 0.0512*** (0.0126) 1.322*** (0.350) 322 0.835

1.595*** (0.404) 322 0.863

0.0483*** (0.0172)

0.168 (0.130) 0.122*** (0.0223)

0.0868 (0.122)

3 0.0556*** (0.0125) 1.139*** (0.338) 322 0.825

Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 19

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Table 2: Determinants of the price of a soda Dependent variable: the log of average price of a soda (1) Model 1 0.0747*** (0.0277) -0.101*** (0.0328) -0.282* (0.164) -0.00215 (0.00436) -0.0644 (0.0799) -0.00909 (0.00939) 0.141 (0.109) 0.106*** (0.0168) -0.0148* (0.00771) 0.0859 (0.0913) 0.000285 (0.00199)

(2) Model 2 0.0822*** (0.0302) -0.0517 (0.0375) -0.156 (0.182) -0.000323 (0.00507) -0.0475 (0.0860) -0.0123 (0.00962) 0.0627 (0.118) 0.0558** (0.0271) -0.0114 (0.00787) -0.00467 (0.108) 0.000901 (0.00208) 28

(3) Model 3 0.0644** (0.0271) -0.102*** (0.0327) -0.247 (0.162) -0.00345 (0.00433)

Chain dummy variables

New Jersey

0.0514*** (0.00958) -0.0215 (0.266)

0.0864 (0.309)

VARIABLES Proportion black Log income Proportion in poverty Log population density Log starting wage Log number employees Crime rate Log housing value Company-owned Proportion car Store concentration County dummy variables

Constant

R-squared

Observations 0.488

0.569

(4) Model 4 0.0803*** (0.0300) 0.107*** (0.0240) 0.318*** (0.118)

(5) Model 5 0.0771*** (0.0211)

(6) Model 6

0.0512*** (0.00929) -0.117 (0.252)

-1.122*** (0.263)

0.0460*** (0.00614)

-0.0911 (0.145)

322 0.478

322 0.275

322 0.226

323 0.196

0.0134 (0.0135)

0.153 (0.0967) 0.105*** (0.0167)

0.0816 (0.0911)

Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

1993, and Lafontaine, 1995). Models (columns) 4, 5 and 6 only keep the discrimination variables and then isolate the main ones. In the column 6 where only income is considered, the prices actually increase as income increases, which corrects for the abovementioned suspiciously large negative correlation found in Model 1. On the other hand, it is worth bearing in mind that the meal price data could have a bias risk coming from the differences in the entrĂŠes depending on the stores. An example here could be the fact that some Burger King stores offer Whoppers instead of regular burgers, and how KFC offers different products compared to the other restaurants. This doubt could be neutralised by exclusively examining the prices of homogeneous items such as the soda (TABLE 2). The results presented in the latter table suggest that for sodas, stores in black-majority areas simply charge more with coefficients statistically significant at 5% and ranging from

0.06 to 0.1. Therefore, regardless of income or cost controls, African American buyers seem to be paying more for identical items in supposedly identical stores.

Table 3: Heteroscedasticity test result for the regression with meal prices [Model 1] The Breusch-Pagan / Cook-Weisberg test for heteroskedasticity [fitted values of log(meal price)] X_1^2

0.08

Probability > X^2

0.7712

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Table 4: Heteroscedasticity test result for the regression with soda prices [Model 1] The Breusch-Pagan / Cook-Weisberg test for heteroskedasticity [fitted values of log(soda price)] X_1^2

8.89

Probability > X^2

0.0029

In TABLE 3, the Breusch-Pagan test for the meal prices regression (model 1) shows homoscedasticity, i.e. the null hypothesis of constant variance of error is accepted. However, heteroscedasticity is largely present in the regression with the soda prices, as shown in TABLE 4. Also, the R-squared is the lowest in that regression, i.e. between 0.19 and 0.56, as opposed to over 0.75 to 0.86 in the meal price regression. This indicates potential model misspecification; hence, the coefficients should be analysed with caution. The specification problem completely changes the sign of relationship between income and the prices. As opposed to Model 1, a price decrease in poor areas is suggested by Models 4 and 6. The results of this article corroborate previous evidence on race-influenced price discrimination in the fast-food industry. Regardless of income or cost controls, African American buyers seem to have been paying more for identical items (e.g. sodas) in supposedly identical stores, and a 50% jump in the proportion of the black community in an area would lead restaurants to increase their meal prices by 4.98%. However, these results should be considered with caution because they are most significant when regressing prices of relatively heterogeneous goods such as meals, while regressions using identical goods such as sodas generate heteroscedasticity for the most part. This could imply misspecification and the existence of omitted variables, such differences in price elasticities or costumer preferences etc. As seen in Tables 1 and 2, adjustments in the model’s specification completely alter the sign of relationship between income or poverty and the prices from one model’s version to another. The results discussed above and those of the study led by Graddy provide the research community with insightful evidence on potential price discrimination. And as much as they show correlation, there is no evidence whatsoever on causality. It is possible that the discrimination is unintentional or not actually based on ethnic reasons, and other factors could be in play, e.g. non-uniform franchising pricing policies and other costs that could not be observed through the available data. In the meantime, and according to recent surveys, Americans emphasize that racism is still a major problem in the different aspect of society and politics. According to a poll led by the NBC News in May 2018, 40% of African American citizens said they were treated unfairly in a store/restaurant because of their race. The rate is 26% for Americans of Hispanic origins. On overall, 94% of the national sample of 6,518 adults acknowledged the existence of racial discrimination; 64% said that it is a major problem while 30% arguing that it is not a critical one. A series of incidents has continued to corroborate this feeling. For instance, two black men were arrested in April 2018 in Philadelphia while they

were merely waiting for another person in a Starbucks, which led to anti-racism protests1. The chain then closed 8,000 of its stores all over the US for “racial bias training”. From the academic perspective, contemporaneous and specific studies of ethnic and income-based price discrimination require data that are more recent. Thus, new surveys and investigations should be launched. The research community should not wait for new major riots like in the 1960s and 1990s to start examining again this sensitive question and provide reasonable discussions in this framework.

NBC News, Poll: 64 percent of Americans say racism remains a major problem, May, 2018. Accessed 15 February 2019. Link: https://www.nbcnews.com/politics/ politics-news/poll-64-percent-americans-say-racism-remains-major-prob-

lem-n877536

References Ayres, Ian and Siegelman, Peter. Race and gender discrimination in bargaining for a car, American Economic Review, Vol. 85, No. 3, June (1995), PP. 304-321 Armstrong, Mark. Recent Developments in the Economics of Price Discrimination, in Advances in Economics and Econometrics: Theory and Applications, Ninth World Cogress, eds. Blundell, Newey and Persson, Cambridge University Press (2006) Becker, Gary. The economics of discrimination, 2nd edition, the University of Chicago Press, Chicago (1971) Bresnahan, F. Timothy. Empirical studies of industries with market power, in The Handbook of Industrial Organization, eds. R. Schmalensee and R. D. Willig, North-Holland, New York (1989), PP. 1011-1057 Caplovitz, David. The Poor Pay More, The Free Press of Glencoe, New York (1963) Card, David and Krueger, Alan. Minimum wages and employment: a case study of the fast-food industry in New Jersey and Pennsylvania, The American Economic Review, Vol. 84 (1994), PP. 772-793 Geng, Xianjun, Stinchcombe, Maxwell, and Whinston, Andrew. Bundling Information Goods of Decreasing Value, Management Science, Vol. 51, No. 4 (2005), PP. 662-667 Goodman, Charles. Do the poor pay more?, Journal of Marketing, Vol. 32, January (1968), PP. 18-24 Graddy, Kathryn. Do fast-food chains price discriminate on the racte and income characteristics of an area?, Journal of Business & Economic Statistics, Vol. 15, No. 4, October (1997), PP. 391-401 Graddy, Kathryn and Robertson, Diana. Fairness of pricing decisions, Business Ethics Quarterly, Vol. 9, No. 2 (1999), PP. 225-243 Lafontaine, Francine. Pricing decisions in franchised chains: a look at the fast-food industry, National Bureau of Economic Research, NBER Working Paper No 5247 (1995) Lavin, James. Evaluating the impact of minimum wages on employment: endogenous demand shocks in the fast-food industry, Stanford University, Department of Economics (1995) NBC News, Poll: 64 percent of Americans say racism remains a major problem, 29 May (2018). Link: https://www.nbcnews.com/politics/politics-news/poll-64-percentamericans-say-racism-remains-major-problem-n877536 [Accessed 15 February 2019]. Porter, Robert. A study of cartel stability: the Joint Executive Committee, 1880-1886, Bell Journal of Economics, Vol. 14 (1983), PP. 301-314 Shepard, Andrea. Contractual form, retail price and asset characteristics in gasoline retailing, the Rand Journal of Economics, Vol. 24 No. 1, March (1993), PP. 58-77 Sturdivant, Frederik. Better deal for ghetto shoppers, Harvard Business Review, March-April (1968), PP. 130-138

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©iStock 2019. Pixfly

HOW HAS THE BARCLAYS PREMIER LEAGUE BECOME MORE UNEQUAL THAN ZIMBABWE? By Daniel Ford, Economics (2021)

recent piece of research by Cinar Baymul, using the estimated market value of the players owned by each team, has revealed that inequality in the Premier League is on a par with that of Zimbabwe during the reign of Robert Mugabe. Figure 1 corroborates this conclusion as it shows that between 2004 and 2017 the Gini coefficient for the league was around 0.45; in comparison the same figure for Zimbabwe was 0.43 in 2011 (CIA, 2018).

Source: Baymul (2018) Zimbabwe has more parallels to the Premier League than one might think, firstly, both have spent an elongated period of time ruled by a controversial leader: Zimbabwe led by dictator Robert Mugabe and the Premier League by highly unpopular chief executive Richard Scudamore. Furthermore, Zimbabwe experienced dramatic hyperinflation which was rooted in an unsustainable increase in spending following their involvement in the Second Congo War, which cost them $33 million a month (Shapiro et al., 2010). Many argue that a similar rise in spending within the Premier League transfer

market has catalysed the excess inflation that has been experienced in the last decade. Ask any member of the British general public to name an English football team and it is almost certain that the majority would say one of the so-called ‘big six’ sides: Manchester United; Liverpool; Chelsea; Arsenal; Tottenham and Manchester City. These teams have dominated the Premier League since the turn of the millennia. Simultaneously, they have inexplicably been allowed to establish an effective oligopoly within the transfer market due to their economic superiority. Since the creation of the Premier League in 1992, transfer spending has increased exponentially. For example, the biggest spenders in the 1992/3 season were Blackburn Rovers who splashed out £8.5 million on players, in comparison in 2017/18 Manchester City spent £279 million acquiring new additions (Stead, 2018). Furthermore, the 2015 summer transfer window saw Premier League clubs spend a total of £1.47 billion on players, an average of £73.5 million per team. Delve deeper into these statistics though and the economic dominance of the ‘big six’ sides is undisputable. Of the £1.47 billion spent, over 53% of this was expended by these six sides, Manchester City alone accounted for 15% of the entire spending of the league. Perhaps the most staggering statistic of all is that in 2017/18 Manchester City spent £203.3 million on new defenders, which was more than 52 countries (including Cuba and Afghanistan) in the world spent on national defence! Undoubtedly this increase in spending has been in tandem with the unprecedented inflation within the transfer market, football transfer fees have increased 40-fold since 1990 (Dore, 2018). One can only hope that this does not provide the foundations for a similar crisis to that experienced by Zimbabwe, which experienced a period of hyperinflation that ultimately culminated in the abandonment of the Zimbabwean dollar in April 2009. Importantly, research by Szymanski and Wilson provides conclusive evidence that this economic imbalance filters through into a lack of competitiveness on the pitch. In their 2016 study, they argue that ‘the most valuable workers, measured by the transfer fee paid to acquire their services, tend to exert the greatest impact’. This conclusion is corroborated by the data displayed in Table 1, as this shows

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that for eight of the 11 players there is a positive correlation between their market value and contribution to results. Notably, the effect is most pronounced for the players with the highest market value in each team (Wilkinson et al, 2016). Average over 2047 models Player rank

Frequency in top 100 models

Coefficient

t-statistic

One

1.307

1.857

Two

100

2.751

6.254

Three

1.966

2.325

Four

1.046

0.974

Five

2.283

2.654

Six

2.422

1.639

Seven

-1.318

-0.816

Eight

-1.122

-1.533

Nine

0.530

1.131

Ten

0.836

5.051

Eleven

-0.138

-0.996

Source: Szymanski and Wilson (2016)

Another key indicator of the growing inequality within the Premier League is that of per annum wages. The average total wage bill of the ‘big six’ equated to £208 million per year in 2016/17, in stark contrast the average total wage bill of the rest of the league was equal to £79.7 million a year (Planet Football, 2018). To put this into perspective, Manchester City had a wage bill 435% higher than lowest wage spenders Burnley, in comparison in the rugby union Aviva Premiership top wage spenders Wasps had a wage bill 260% larger than smallest spenders Sale (The Guardian, 2018). Inequality is rife within English football and shows no signs of slowing. So how has this been allowed to happen? In theory, the biggest equaliser is supposed to be the sharing of TV revenue. In recent years broadcasting giants have vociferously competed for the rights to show live games, leading to the price of TV rights increasing drastically. Between 1992 and 1997 Sky Sports paid £304 million for exclusive rights to broadcast the Premier League, between 2016 and 2019 Sky Sports and BT Sport between them paid £5.1 billion for the same rights. Before BT entered the market in 2013, Sky operated an effective monopoly of English football coverage, hence the increase in competition has seen the price of rights triple over less than a decade, as both companies attempt to achieve market domination. In an attempt to capitalise on this, and simultaneously equalise incomes, the Premier League have ruled that 50% of domestic TV revenue must be equally shared between clubs, however, this is simply not a strong enough measure. This is because the other 50% is shared unequally, as 25% is based on how often a club’s matches are broadcast and the other 25% is based on where the team finishes in the table. Therefore, in 2017/18 top of the table Manchester City obtained TV revenue 485% higher than bottom of the league West Bromwich Albion (Premier League, 2018). From a purely economic point of view, one must argue that an effective way to break up an oligopoly (as I would argue the Premier League has become) is through the means of regulation. In theory these regulations are in place in the form of the Financial Fair Play rules. One example is enough to illustrate why these have been ineffective: the rules state that the wage bill of a club is not allowed to exceed £81 million, so how have clubs been allowed to rack up wage bills of over £200 million? The answer lies in the fact that

this regulation comes with an exception: the wage bill of a club cannot exceed £81 million UNLESS it is financed by an increase in the revenue of the club. Therefore, for clubs like Manchester United who generated a commercial revenue of £276 million in 2017 (BBC, 2017) this regulation is effectively null. Henceforth, Financial Fair Play rules have been widely criticised and in fact ‘it is widely claimed in academic circles that the FFP regulations have done nothing to eradicate unfairness in European football’ (Riley et al., 2017) To summarise, inequality within the Premier League is rife and the situation will only precede to deteriorate unless the FA remove regulatory loopholes and step up their enforcement. The Premier League could also take a leaf out of the model used in Holland, which sees the additional revenue from European competitions split equally amongst the entire league in an attempt to make it more competitive. Despite my qualms, as the legendary Johan Cruyff once said “I’ve never seen a bag of money score a goal” and therefore once in a blue moon miracles do happen. Just ask Leicester City who pulled off the most astonishing feat in football history by winning the Premier League in 2016, despite having the third lowest wage bill. One final link between English football and Zimbabwe is perhaps the most worrying of all, Mugabe’s economic policies must ultimately be concluded to have failed to arrest the issue of poverty which ravaged Zimbabwe throughout his reign. In 2017 72% of the population were faced with chronic poverty (Quinn, 2018). Similarly, many people argue that the FA’s policy is neglecting the masses, as participation in grassroots football has fallen by almost 10% in the last decade. Fascinatingly then, the job faced by new Zimbabwean leader Emmerson Mnangagwa and whoever is selected as the new Premier League chief executive is strikingly similar, they must both rectify the mistakes of previous regimes by specifically targeting those who have been neglected. The FA may be trailing at half time, but luckily for them football is a game of two halves: let’s hope they make the most of it!

References Central Intelligence Agency, “COUNTRY COMPARISON: DISTRIBUTION OF FAMILY INCOME - GINI INDEX”, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html [Accessed 25 January 2019] Conkling, Thomas Stoddard and David Shapiro. “Analysis of the Zimbabwean Hyperinflation Crisis: A Search for Policy Solutions.” PhD diss., 2010. Stead, Matthew, “The biggest spender in every PL season - and how they fared”, Football 365, Published April 19, 2018, https://www.football365.com/news/the-biggestspender-in-every-pl-season-and-how-they-fared [Accessed 21 December 2018]. Dore, Louis, “Manchester City’s annual defence spending now exceeds that of 52 actual countries”, Published January 31, 2018 [Accessed January 06, 2019]. Szymanski, Stefan and Wilkinson, Guy 2016 Testing the O-Ring theory using data from the English Premier League; Wilkinson, Guy Research in Economics, Vol.70(3), pp.468-481 “A club-by-club breakdown of wages in the Premier League & Championship”, Planet Football, Published May 20, 2018, https://www.planetfootball.com/quickreads/a-club-by-club-breakdown-of-wages-in-the-premier-league-championship/ [Accessed January 15, 2019]. Conn, David. “Premiership rugby finances: the full club-by-club breakdown and verdict”, The Guardian, Published August 28, 2018, https://www.theguardian.com/ sport/2018/aug/28/premiership-finances-the-full-club-by-club-breakdown-and-verdict [Accessed 15 January 2019]. “Statistics | Premier League”, Premier League value of central payments to clubs, [Accessed January 06, 2019]. Wilson, Bill. “Man Utd reports record revenues as TV cash soars”, BBC, Published September 21, 2017, [Accessed 6 January 2019]. Iorwerth, Hywel, Paul Tomkins, and Graham Riley. “Financial Doping in the English Premier League.” Sport, Ethics and Philosophy 12, no. 3 (2017): 272-91. Quinn, Amanda. “Causes of Poverty in Zimbabwe”, The Borgen Project, Published March 21, 2018, [Accessed January 30, 2019].

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ARE ECONOMICS DEGREES LETTING SOCIETY DOWN? By Max O’Brien, Economics with Econometrics (2019)

The failing

t seems pertinent to consider how the content of an economics degree could have a direct impact on someone who may never have heard of, let alone studied, the subject. Yet catastrophic events such as the Great Depression in the 1930’s and the financial crisis of 2008 provide stark examples of how shortcomings of the economy, and economics, can wreak havoc. Austerity, soaring unemployment and spluttering wage growth are just some of the ways these events have damaged households. Given the far-reaching consequences of these economic failings, it would seem common-sense then to ensure economics degrees evaluated and addressed where the subject had gone wrong, equipping the next generation of economists with the ability and knowledge to avoid the recurrence of such disasters.

...it is vital that students are given a complete education and are trained to think critically, applying economic models to the real-world. The crisis in 2008 raised many questions about how economics had failed to predict the events that would unfold. One fundamental reason for this is the lack of applicable economics teaching. The education that economics students receive is supposed to provide them with the skills and knowledge to be the experts of tomorrow – dominating central banks, government departments and other organisations and playing key roles in formulating policy. For example, the Government Economic Service (GES), part of the UK civil service, has approximately 1,600 economists – employing twice as many economists as there are other social researchers (Earle, Moran and Ward-Perkins, 2017). Therefore, it is vital that students are given a complete education and are trained to think critically, applying economic models to the real-world.

However, this is not the case. Economics not only distances itself from the other social sciences, but also a large majority of economic schools outside of the main-stream neo-classical theory. Degrees often limit the fundamental understanding of economic thought and provide a narrow education that teaches neo-classical theory as fact. Furthermore, mathematics is dominant in economics and the structure of university economics exams places significant emphasis on this skill – often failing to reward critical evaluation of the models being used and thus neglecting a key skill within economists’ repertoire. An over-reliance on a neo-classical framework with unrealistic assumptions may have been the reason so few predicted the 2008 financial collapse.

...mathematics is dominant in economics and the structure of university economics exams places significant emphasis on this skill – often failing to reward critical evaluation of the models being used and thus neglecting a key skill within economists’ repertoire. The issue Given economics’ failure, it might have been expected that radical reform of the models and assumptions that underpin the subject would follow – similar to how Keynes spearheaded an economic revolution in the wake of the Great Depression during the 1930s. This did not happen and consequently we see students themselves leading the fight for change. This belief led a group of undergraduate University of Manchester economics students to establish the Post-Crash Economics Society in 2012, calling for curriculum reform and more accessibility with less elitism within the subject. This movement was not alone. In 2000, French economics students of the Post-Autistic Economics Movement produced an open letter signed by almost 1,000 economics students (La Monde, 2000) expressing their dissatisfaction with the neo-classical bias they experienced in their degree – the main themes of the petition were adhered to by Robert Solow (Solow, 2001). In the Netherlands in 2016, an analysis of the

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economic bachelor curricula by Rethinking Economics NL found neo-classical economics to dominate, with only 4% of theoretical teaching time devoted to other approaches, generally offered as optional extras (Tieleman et al, 2018). The report concluded a more representative and holistic syllabus was needed so graduates could think critically about the subject. Rethinking Economics (RE) is a movement made up of over 40 groups in 13 countries, consisting of students, academics and professionals committed to promoting open and relevant economics for everyone. Given the growth in the prominence of economics in politics over the course of the 20th and 21st centuries, RE believes that the public needs an understanding of economics to engage in the debate over matters which directly affect them, rather than leaving it to the ‘experts’. In a YouGov poll conducted in 2015 measuring the public’s perception and attitude towards economics, around 65% were found to be disengaged with economics, with 47% of respondents stating they discuss economics once a month or less and a further 12% only talking about it 2 or 3 times a month.

Rethinking Economics (RE) is a movement made up of over 40 groups in 13 countries, consisting of students, academics and professionals committed to promoting open and relevant economics for everyone.

©iStock 2019. Filip_Krstic

The importance of understanding the economy, especially for each general election and currently with Brexit, means such low levels of engagement with the subject may be cause for concern. How can the public be expected to challenge or understand decisions affecting the economy, and therefore themselves, if they have never been taught the subject? And when the people making these decisions have an received an education of economics that is narrow in its teaching, are they informed enough to make important decisions on

behalf on the public? The financial crisis would suggest not. As Martin Wolf claims “if war is too important to be left to the generals, so is the economy too important to be left to narrowly trained economists.” (..) “given the role economists play in our society, we need them to be more than adepts in manipulating equations based on unrealistic assumptions.” (Earle, Moran and Ward-Perkins, 2018). It is certainly true that neo-classical models are effective at modelling and providing answers to questions of the economy and can be rigorous in their approach. Nevertheless, it would be naïve to place a fundamental understanding of the subject on neo-classical assumptions alone: the assumption people are rational utility-maximisers. The nature and style of examination at many Russell Group universities for economics centres around these neo-classical models, with little or no reward for critically analysing them. As a result, the economic advisors and central bankers of tomorrow are missing skills in evaluating the models they are taught – and are not illuminated to the fact they could interpret these issues differently. The financial crisis demonstrated this unravelling: economists using the neo-classical approach failed to predict the crisis. Those who did, most successfully Steve Keen who supported the French economics students petition in 2000 (Real-World Economics Review Blog, 2010), were of non-mainstream economic schools (Earle and Moran, 2013). By expanding undergraduate economics degrees to other schools of thought, students will have the opportunity to critically analyse how different theories can explain a variety of economic phenomena and become familiar with assumptions outside of the dominant neoclassical framework. Examples of different economic schools and their assumptions can be seen in Figure 1. Pluralism is not demanding that any single theory be taught, but rather there be at least some consideration of these different ideas. Figure 1 [overleaf] shows the wide-ranging assumptions and the effect they have on how economics is used. By ignoring schools outside of the mainstream neo-classical theory, we portray an incomplete picture of economics.

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‘Old’ Neoclassical

Optimise narrow self-interest

A vacuum

Stable

Start from rationality and scarce resources

Teach both models and broader social knowledge

Increased productivity of richer individuals

Not possible

Average over 2047 models

Humans…

Humans act within…

The economy is…

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Economic analysis should…

Implications for education

Analysis of income inequality

Views on financial crises

A macro-economic context

Use rules of thumb

Caused by external shocks and frictions in financial markets

Driven by market frictions

Teach mostly models

Be built up from individual optimisation

Generated by financial markets

Increased power of finance and capital

Teach models with realistic assumptions

Be descriptively realistic

Stable in the Naturally volatile absence of frictions and shocks

A market context

Can optimise a variety of goals

‘New’ Neoclassical Post-Keynesian

Ambiguous

Increased power of capitalists

Ground education in broader social knowledge

Be grounded in politics

Largely selfstabilising

A class context

Act in their selfinterest

Classical

Act according to their subjective knowledge and preferences

Austrian

Generated by falling rate of profit

Increased power of capitalists

Ground education in broader social knowledge

Recognise power relations

Both volatile and exploitative

Generated by central banks

Caused by government intervention

Teach economics without maths

Be based on individual action

Volatile, but often a sign of health

A class and historical A market context context

Do not have predetermined nature

Marxist

Consequence of the concentration of firms and poor financial regulation

Changes to tax and regulatory structures

Ground education in historical context

Focus on the relationships between people and institutions

Dependent on legal and social structures

An institutional environment that shapes rules and social norms

Exhibit changeable behaviour

Institutional

Figure 1: (Source: Joe Earle, Cahal Moran and Zach Ward-Perkins, The Econocracy: The perils of leaving economics to the experts, page 62-63, exhibit 3.1, Manchester Capitalism, 2017)

Generated by complex, interdependent phenomena

Ambiguous

Recognise complexity and independence

Complex; both stable and volatile

An evolving complex system

Act ‘sensibly’ but not optimally

Evolutionary

Related to male domination in finance, and impact is stratified by gender

Highly gendered

Ground education in broader social knowledge

Recognise more than just the ‘economic’

Ambiguous

A social context

Exhibit gendered behaviour

Feminist

Ambiguous

Ground education in environmental knowledge

Recognise environmental constraint

Embedded in the environment

A social and environmental context

Ambiguous

Ecological

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Not only are economics courses neo-classical heavy, they do not place emphasis on critiquing the models being taught. Although economics is a social science and often subjective, the mathematical nature of the content can give the appearance of it being a ‘pure’ science when this is not the case. As a result, students miss out on the opportunity to identify limitations to the material and investigate alternative interpretations to resolve these limitations. In research of six Russell Group universities’ (LSE, Sheffield, Exeter, Cambridge, Manchester and Queens Belfast) examination of economics students, conducted by the same students who established the Post-Crash Economics Society at Manchester University, they found for the Macroeconomic and Microeconomic modules (the fundamental compulsory modules of an economics degree) that 55% of marks were associated with operating a model, while only 8% were given for evaluating the model (Earle, Moran and Ward-Perkins, 2017). Clearly, this does not provide a sufficient opportunity for economics undergraduates to question the assumptions and limitations of the models they are using and implies that the models are correct without any extensive critique. Mathematics, on which much of the ‘scientific’ aspects of economics are based, cites other disciplines more than economics - demonstrating that there is no reason why economics should isolate itself from the other social sciences (Haldane and Turrell, 2017). As a result, undergraduate economists do not have the complete skill set they need for the roles they will go on to perform.

the mathematical nature of the content can give the appearance of it being a ‘pure’ science when this is not the case. As a result, students miss out on the opportunity to identify limitations to the material and investigate alternative interpretations to resolve these limitations. In addition, a student-led report on the economics education that students at Durham University receive found that, while there was some opportunity to study nonmainstream economic schools, in the mainstream economic course there was little mention of non-mainstream schools (they may be mentioned but not in sufficient depth). In a survey of undergraduates, they revealed only half felt their degree encouraged them to think critically and only 60% say they are given the opportunity to apply economic models to real world issues (Svenlen et al, 2018). The report concluded that Durham was failing to provide a pluralistic education to its economics students, not adhering to the principles of a real-world approach: critical and evaluative thinking, mathematical and technical skills, and perspective in terms of pluralism and an interdisciplinary approach. The use of mathematics and complex jargon portrays economics to be a more reliable and technical subject than other social sciences, and certainly within in some circles within the field, there is a superiority complex that exists. However, this inhibits the ability of economics to be able to answer society’s issues. As John Maynard Keynes, to many the founding father of economics, wrote in his obituary essay on Alfred Marshall, an economist must be a “mathematician, historian, statesman, and philosopher – some degree (…) He must study the present in light of the past, for the purposes

of the future. No part of man’s nature or his institutions must lie entirely outside his regard.”

an economist must be a “mathematician, historian, statesman, and philosopher What can be done? A pluralist economic syllabus is the goal of many of these movements. This would incorporate economic schools outside of the mainstream, shifting greater emphasis onto applying models to the real-world and on students’ ability to critically evaluate the tools that they are using. It may also stretch to a more interdisciplinary approach, introducing more economic history and greater context to the models that are taught. Further to this, changing the way exams are assessed could be a useful way to alter how economics students think about the content that they are being taught, for example awarding marks directly for evaluation. In addition to this, CORE is a global movement of social scientists, mostly economists, pushing for economic textbooks to be written in a more complete, interdisciplinary way – including recent real-world data and research. There have already been several textbooks produced by leading economists that aim to help broaden the curriculum (Svenlen et al, 2018). For change, there is no single solution due to the systemic barriers that stand in the way of pluralism in economics. The payment structure in the UK by which economics departments receive their funding in particular means that it is unlikely much action will be taken, and it is not the departments or lecturers who are at fault, but rather the system. The Research Excellence Framework (REF) which provides the funding is dominated by neo-classical academics, therefore due to the pressure on academic departments it may be difficult for them to realistically redesign their syllabus and risk their funding. While this by no means should stop change, it is a prevalent prohibiting factor.

References: Earle, Joe; Moran, Cahal; Ward-Perkins, Zach. The Econocracy: The perils of leaving economics to the experts. Manchester Capitalism. P 1-63. (2017). “Lettre ouverte des étudiants en économie” [Open letter from students in economics]. Le Monde (in French).. Retrieved 3 February 2019 – via autisme-economie.org. (2010). Solow, Robert. Economics between empiricism and mathematisation. La Monde (in French). Retrieved 3 February 2019 – via autism-economie.org. (2001). Tieleman, Jories; et al. Thinking like an economist? A quantitative analysis of economics bachelor curricula in the Netherlands. Rethinking Economics NL. P 5. (2018) Real-World Economics Review Blog, Keen, Roubini and Baker win Revere Award for Economics, Retrieved on 11 February 2019 via https://rwer.wordpress. com/2010/05/13/keen-roubini-and-baker-win-revere-award-for-economics-2/ (2010). Ward-Perkins, Zach; Earle, Joe. The Guardian: Economics students need to be taught more than neoclassical theory, accessed on 11.2.2019 via https://www. theguardian.com/commentisfree/2013/oct/28/economics-students-neoclassical-theory. 2013. Haldane, Andrew G; Turrell, Arthur E. Staff Working Paper No. 696 for Bank of England: An interdisciplinary model for macroeconomics. (2017). Svenlen, Sally; et al. Educating Economists? A Report on the Economics Education at Durham University. Durham Society for Economic Pluralism. P 28. (2018).

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©iStock 2019. chengyuzheng

RISING FROM THE EAST: THE CHINESE DIASPORA By Valerie Kielee, Economics (2020)

ne out of every seven people in the world is from China. So it is certainly no surprise that the Chinese across the globe are becoming more visible, especially with the ever expanding climate of pop culture presence and business ventures today; the past year alone has shone a spotlight on the dazzling lifestyle of ‘Crazy Rich Asians’ and the notorious speculation surrounding Chinese tech giant ‘Huawei’ in the United States. The Chinese Diaspora – the ethnic Chinese who reside outside of mainland China – are one of the largest scattered populations in the world, but with regards to selfidentification most no longer see themselves as immigrants but members of the countries their parents or grandparents founded a home in. One can usually find multiple generations residing under one roof; ancestral tablets beside flat-screen TVs, English interspersed with Cantonese or Hokkien. Often underestimated, however, is the cultural and economic impact of the ethnic Chinese, most notably their instrumental role in the developing economies of Southeast Asia and even the West. Despite this, many still face discrimination in the form of tough immigration policies and even domestic rulings that bar those of a Chinese background from certain state benefits. This article explores the evolution of the Chinese diaspora from initial low-level immigration into what it is today – a hidden momentum for growth.

From China to Chinatown Although Chinese migration extends as far back as 210 BC, the term ‘overseas Chinese’, or Huáqiáo, was initially associated with the pre-Communist China era of mass migration which expanded during the mid-19th century (Liu & Van Dongen, 2013). It was during this period that many Chinese immigrants relocated to Malaysia and Singapore (both under British rule, which promoted enterprise), forming the English-educated “Straits Chinese” population. Many South Chinese also inhabited nearby Southeast Asia, furthering a movement that dates back to the Ming Dynasty (1368-1644), when the legendary envoy Admiral Zheng He sent pioneering expeditions to explore and trade in the South China Sea and the Indian Ocean. Many Chinese merchants

chose to settle in Southeast Asian ports such as Java, Malacca and Siam, forming families with natives and teaching their children to carry on their trade and establish unique blends of local and Chinese tradition such as that of the Peranakan culture in Malaya, remnants of which can still be observed today (Lee, 2016). A number of these ethnic Chinese also migrated to Europe in the period after the Xinhai Revolution (1911-12) and established recognisable communities. In addition, there was widespread emigration from the Sze Yup region to North America, due to the attraction of the notorious California Gold Rush, culminating in the dominant Toisanese communities being founded in the ‘Chinatowns’ of Canada and the United States (Kwong, 2007).

A number of these ethnic Chinese also migrated to Europe in the period after the Xinhai Revolution (1911-12) and established recognisable communities. The period between 1950 and 1980 saw new migration patterns, as Chinese from Hong Kong, Taiwan and SouthEast Asia began emigrating to Australia, western Europe and North America, as a reaction to the post-War era of travel and looser immigration laws (Liu & Van Dongen, 2013). Following the end of the Cultural Revolution in China, more liberalized emigration policies in the 1980s (as part of Deng Xiaoping’s ‘Opening of China’ reformation) encouraged the legal departure of Chinese nationals who joined their relatives abroad, in both Europe and North America. This coincided with a monumental demographic shift of China’s population induced by its rapid economic expansion, with some 200 million people leaving their homes for cities, creating social disorder, overcrowding and a downward pressure on urban wages, prompting the more ambitious to seek opportunities overseas (Kwong, 2007). Since then, a number of treaties and government initiatives have been implemented to facilitate the integration of a quickly industrialising China to the world stage. For instance, the ‘Four Modernisations’ program supported Chinese students and scientists in attending foreign institutions, particularly in industrialised nations. The United States consular offices issued more than 12,500 immigration visas to the Chinese in 1984, while the

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exportation of Chinese labour to foreign countries increased, with China sending 50,000 workers to the Soviet Union and Germany by 1986 (Facchini et al., 2018). Today, approximately 35 million Chinese reside outside mainland China in over 150 countries – the global body we know of today as the Chinese diaspora – but their presence is controversial (Kwong, 2007).

Chinese overseas In the framework of transnational Asia, the overseas Chinese have played a unique role. Having integrated themselves into local communities, contributing wealth and furthering national development in both their host countries and mainland China, the proliferation of business networks that has been fostered through kinship relations and language ties across borders grew. Such relations have swiftly built reliability in the flow of trade data and cooperation, strengthened by the knowledge of local environments across emerging economies that had weak commercial regulations. The Southeast Asian region provides an obvious example of the economic role of overseas Chinese. Although they are the minority in these host countries, they own more total assets than any other ethnic group; in Indonesia, for example, while only 3% of the population were ethnic Chinese, they had control over more than 70% of the Indonesian private economy. In 2012, Forbes found that the top ten richest people each of Thailand, Indonesia, Malaysia and Singapore include eight ethnic Chinese (Chareonwongsak, 2012). In addition, China has become a major investment target in the last decade, having increased its tolerance of capitalist markets, and it has been estimated that about 60% of foreign direct investment came from countries that contained large amounts of the Chinese diaspora, such as Singapore (Global Times, 2013). The effects are seen even in the West where a study concluded that both fiscally and economically the overseas Chinese, a growing portion of whom are highly-skilled, in the United States have done more to benefit the American economy than exacerbate some of the domestic fears linked with immigration, such as job losses and crime. There was evidence to suggest that Chinese-American entrepreneurs have been able to link the American economy to that of China and Taiwan. Particular emphasis was put on the skilled Chinese as a “must for the future of the United States if it intends to remain a superpower” (Zotter, 2012). Moreover, a Harvard study found that American companies found it easier to hire people from the Chinese diaspora to establish and run their businesses in China (Chareonwongsak, 2012). Furthermore, the number of Chinese students living and seeking a higher education abroad is on the rise, and this too has had an impact both in the global academic sphere and in the mainland. In 2007, there were 32,000 Chinese scientists in the United States; they also comprised 22.5% of the total number of overseas students who achieved a doctorate degree. Many of these people remain overseas, contributing vastly to enterprises and research in their host countries (Chareonwongsak, 2012). A significant proportion (17.2%) of patents filed by emigrants between 2007 and 2012 were done so by the Chinese diaspora (The Economist, 2015). In addition, the increasing number of graduates returning to China since 2001, equipped with knowledge, experience and contacts, have played essential roles in developing China’s technology industry, as well as in strengthening its competitive advantage (Chareonwongsak, 2012).

A significant proportion (17.2%) of patents filed by emigrants between 2007 and 2012 were done so by the Chinese diaspora (The Economist, 2015). However, the fact that the ethnic Chinese were prospering, especially in the majority of Southeast Asia (with the exception of Singapore, which is majority ethnic Chinese, and Thailand) during the new era of independence of the 1900s, created friction with the indigenous majority in terms of cultural identity, rights and political ideas. This animosity translated into restricted access to housing deeds, political participation and a general sense of anti-Chinese sentiment. For instance, Indonesia’s government, under the rule of President Suharto, established policies to limit the civil rights of the Indonesian Chinese (a number of which still exist today), and the 1998 Asian recession that hit Indonesia particularly hard made the Chinese targets for riots, looting and rape (Global Times, 2013). This form of prejudice persisted until as recently as 2016 when Indonesian Army General Surya Prabowo commented that the incumbent governor of Jakarta, Basuki Tjahaja Purnama, the first to be ethnically Chinese, should “know his place lest the Indonesian Chinese face the consequences of his action” (Santoso, 2016). Additionally, there is evidence to suggest that many of these racial biases occur in the form of discriminatory treatment in the workplace, in education and in politics. A 2017 NPR survey found that large numbers of Asian-Americans still experience discrimination in many areas of their daily lives, including job seeking, college applications and housing/rent (Neel, 2017). Harvard University has recently been accused of discriminating against Asian-Americans, and faces a law-suit (The Guardian, 2018). The phenomenon of ‘ethnic politics’ is often founded upon the conviction held by native groups that economic protection is needed in order to retain their patrimony. The question of to what extent the ethnic Chinese are “native”, however, is a sensitive one and it is almost taboo to even raise the issue in parliament as this would be deemed ethnic incitement; this undocumented belief is widely noted amongst the overseas Chinese and “bumiputra” (indigenous people) of Malaysia. The lack of political power and government protection force the overseas Chinese to adapt to the contexts of these countries, and in some respects stifle their potential for economic growth (Suryadinata, 2017). Today the problem is less pronounced through the force of globalisation in the 1990s and China’s rise as a major world power, yet somewhat counterintuitively, it persists exactly for this reason.

Setting in the west During his 2016 presidential campaign, Donald Trump proclaimed that China was “raping” the United States with free trade. He has continued to communicate anti-Chinese stances, further fuelling domestic fears of intellectual property theft, export piracy, and the looming implications of China’s growing economic presence that have been raised by conservatives since the Cold War. The terrifying response to these claims was a proposed 45% tariff on Chinese exports to the United States to give “American workers a level playing field,” kick-starting an ongoing trade war with China 29

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(Pereira, 2018). One of the most distressing aspects of this is the negative speculation that has arisen in light of China’s relationship with the Chinese diaspora spread across the globe and will be especially significant in Southeast Asia where the ethnic Chinese control most business ventures with China. The integration of the Chinese and Association of Southeast Asian Nations (ASEAN) economies has been well underway, and relations have been improving year by year. One major collaboration is the Belt and Road Initiative that was announced in 2013, which came with the expressed hope that bilateral trade between China and ASEAN would reach one trillion dollars by 2020. But the Sino-American trade war places the very existence of ASEAN at an ideological crossroads, since its regional rationale is founded upon its global relevance. Since it is not a supranational entity like the EU, it could break up according to its member nations’ external affiliations, and this has serious repercussions for the overseas Chinese presiding over the numerous joint ventures with Chinese companies. It could mean either a financial backlash if they remain loyal to China, or a possible gain if their host country chooses to go the other way. Furthermore, foreign companies may be reluctant to pursue future projects with Chinese-affiliated companies, of which a great proportion are owned by overseas Chinese. In other words, the future of the overseas Chinese in these parts will be largely dependent on the political allegiance of their national governments, and they could be negatively impacted simply by affiliation with the mainland (Pereira, 2018). Moreover, with tensions flaring between Washington and Beijing, Chinese-Americans and Chinese students have been caught in the crossfire. Many have begun to complain that they are subject to tighter scrutiny, and have had their loyalty unfairly called into question. Chi Wang of the US-China Policy Foundation summed up these general feelings of hostility when he said that it was sad to see his “Chineseness” used somehow to make him seem “less American” or less trustworthy. This is not the first example of political dissent between Western lawmakers and the Chinese government, and the Chinese diaspora who suffer the social repercussions are certainly not new to this kind of treatment. China’s past of communism and anti-Western campaigns had given rise to a history of suspicion; since 2009, the percentage of Chinese Americans charged for economic espionage has tripled (Jiangtao, 2018). For much of recent history, the Chinese diaspora have struggled to establish a national identity in various countries across the world due to their perceived connection to mainland China and are still susceptible to discriminatory policies and treatment as a result. The problem lies in China’s historical lack of involvement in intervening with such acts of disparity, though they have since made attempts to bridge the gap especially in light of the increasing friction with the United States, and the perspective of locals across the globe (Lee, 2016). In the era when East Asia and Southeast Asia are becoming the main engines driving the world economy, and with China expected to become the most economically powerful nation, the Chinese diaspora will be an essential tool in creating the connection between the Chinese economy and their host country. However, the factors contributing to the success of Chinese businesses and the roles undertaken by the Chinese diaspora in terms of creating wealth are changing, particularly in terms of the potential divergence of culture, language, and business cooperation. In the current political climate, it appears as though many Asian nations are affiliating themselves with the United States rather than China due to

historical territorial matters, though both of these global superpowers are fighting for influence (Pereira, 2018).

the Chinese diaspora have struggled to establish a national identity in various countries across the world due to their perceived connection to mainland China The diaspora should be seen as a positive link between Western nations and China due to their neutral alignment between the two, rather than accomplices against or for either. As China expands its investments further across the globe, particularly in Latin America and East Asia, the role of the overseas Chinese will become increasingly significant both in commerce and in terms of social capital, so it is this author’s belief that the relationship between China and the Chinese diaspora should be the focus of new foreign policies, especially where China is still viewed warily by many Western and Asian powers. This form of economic cooperation could help to improve upon the underlying economic potential that was planted by the Chinese diaspora and has been brewing in nations across the world, possibly generating far-reaching impacts on these nations’ economies as a result. In the past year the proliferation of Asian presence on social media has been a promising movement and has done much to promote a more affirmative image of the overseas Chinese, and as they continue to move increasingly into the corporate world, the perspective has started to shift from that of low-skilled labourers to accomplished citizens – a beneficial force rather than a hindrance. We must continue to spread this message to transform the views of society as well as that of policymakers in order to induce meaningful changes in attitude and governance. After a history of struggle for belonging, and having been continually dissected and scrutinised for being either too Chinese or too foreign, they should instead be fairly acknowledged in their duality as well as in their concurrent uniqueness as neither. After all, the overseas Chinese are simply Chinese overseas.

References: Liu, Hong, and Els Van Dongen. “The Chinese Diaspora”. Oxford Bibliographies (2013). Lee, John. “The Chinese Diaspora’s Role in the Rise of China”. East Asia Forum (2016). Latham, Kevin, and Bin Wu. “Chinese Immigration Into The EU: New Trends, Dynamics And Implications”. ECRAN: Europe China Research and Advice Network (2013). Kwong, Peter. “Chinese Migration Goes Global”. YaleGlobal Online (2007). Facchini, Giovanni, Maggie Y. Liu, Anna Maria Mayda, and Minghai Zhou. “IZA DP No. 11279: China’s “Great Migration”: The Impact of the Reduction in Trade Policy Uncertainty”. IZA: Institute of Labor Economics (2018). Chareonwongsak, Kriengsak. “The Global Chinese Diaspora - Creating Wealth, Contributing to National Development Abstract”. Harvard University (2012). “Overseas Chinese Still Playing Crucial Role on Transnational Continent”. Global Times (2013). Zotter, Andrew. “Engaging China Within U.S. Borders: Examining the Economic and Social Effects of Chinese Immigration and Policy Proposals for the Future”. The Ohio State University (2008). “Migrant Brainpower”. The Economist (2015). Santoso, Joko. “Sustaining anti-Chinese sentiment in Jakarta”. New Mandala (2016). Neel, Joe. “Poll: Asian-Americans See Individuals’ Prejudice As Big Discrimination Problem”. NPR (2017). Associated Press in Boston. “Harvard uses vague ‘personal rating’ to reject Asian Americans, court hears”. The Guardian (2018). Suryadinata, Leo. “THE RISE OF CHINA AND THE CHINESE OVERSEAS: A Study of Beijing’s Changing Policy in Southeast Asia and Beyond”. ISEAS Publishing (2017). Pereira, Derwin. “How the US-China Trade War Will Make or Break Asean”. South China Morning Post (2018). Jiangtao, Shi. “Caught in the Crossfire: Chinese-Americans Feel the Heat as Tensions Flare”. South China Morning Post (2018).

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WHAT DO BARCLAYS BANK AND BLUES MUSIC HAVE IN COMMON? By Anna Howell, Economics (2019)

he arguable beauty of economics as a discipline lies in the complexity and implicit links between seemingly unrelated markets and how effects of phenomena on the other side of the world can be felt in our own homes. Moreover, historic economic events continue to act as lessons for policymakers, permeating the current economic climate with the wisdom of hindsight. A particularly moving example of this fact occurred in 2007 when the Mayor of London, Ken Livingstone, gave a tearful tribute and apology to those individuals victimised in the Transatlantic Slave Trade to mark the 200th anniversary of its abolition, acknowledging that many institutions still benefit from the wealth created through the UK’s participation whilst gesturing towards the surrounding skyscrapers in London’s thriving financial area (Muir, 2007). The Transatlantic slave trade refers to the barbaric buying and selling of enslaved African people for manual labour and profit purposes as early as the 16th century (Williams, 2010). The relationship between this inhumane industry, Barclays bank and the Blues music genre is the epitome of the intricate web of economic activity across nations and throughout history.

Barclays bank and the Blues music genre is the epitome of the intricate web of economic activity across nations and throughout history. The British Empire was one of the most prominent slave trading nations due to significant naval technology progress throughout the 15th century allowing more frequent and secure expeditions across the Atlantic to reach societies on the African coast (Klein et al, 2010). Over the ensuing two centuries, the British economy experienced major industrial advances, with increasing demand for overseas commodities, such as sugar and cotton: maintaining profits accumulated from slave-produced goods and therefore the trade of slaves themselves (White, 2009). At the beginning of the 18th century, 80% of British exports were to Europe, whilst, by

the turn of the 19th century, 60% of British exports went to Africa and America. From a purely economic perspective, the prosperity from the trade allowed certain major UK cities to flourish – particularly Liverpool, from which more ships left in pursuit of foreign slaves than all other British ports combined at the end of the 1800s (International Slavery Museum, 2015). Merchants of goods produced abroad by slave labour had to find means of financing the voyages, sailor wages, ship maintenance, and insurance against the risk that the ship may not return; British financial and insurance markets developed rapidly to meet this new enlarged demand. One particular example is of James Barclay, whose wealthy family had profited from the slave trade, becoming a partner in a goldsmith bank in 1736 – founding one of the largest most established British banks in our 21st century society: Barclays (Ackrill and Hannah, 2001). We have seen how the British financial intermediaries may have been impacted by the slave trade from an economic perspective, yet how did this same industry influence Blues music? The smooth soulful sounds of artists such as B.B. King and Robert Johnson have evoked both appreciation and melancholy in Blues fans worldwide since their music careers during the 1900s. However, many are unaware that this music genre embodies a poignant reminder of the oppression and maltreatment of African slaves during the 17th century Transatlantic slave trade. Inspired by work-songs and Gospel music of African American individuals, the lyrics and melodies represent the everyday hardships faced by an entire demographic. Historians have deduced that, on vast plantations where the African slave workers were denied their cultural freedom, singing work songs allowed them to subdue the tedium of the work whilst also expressing their narratives and religious teachings without punishment (Evjenth et al, 1994). Field Hollers; a kind of musical ‘cry’ many African slaves used to communicate during work, are also prevalent in the very roots of Blues and Gospel music (Kopp, 2005). Along with many other musical stimuli, these songs facilitated the evolution of the Blues genre over succeeding decades. It is consequently of vital importance to reflect on how, out of one of the most disturbing historic examples of mankind’s greed, this iconic genre was born and should continue to act as a tribute to those persecuted in the slave trade. 31

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To recognize the damage of such an industry is imperative when we acknowledge that history’s teachings have not perfectly eradicated the trade, as individuals continue to endure illegal enslavement in many societies in the 21st century. In 2017, the UN’s International Labour Organisation estimated that approximately 24.9 million people were sufferers of contemporary slavery with 4.1 million of these assumed to be state sponsored, which includes forced military enlistment (Kelly, 2018). These figures are particularly disturbing when we consider that the UN adopted the Universal Declaration of Human Rights which prohibited slavery all the way back in 1948, yet the act persists in great numbers. The 2014 signing of a declaration against modern slavery by world religious leaders representing the Global Freedom Network, committed to eliminate all operations by 2020 – a goal we can only hope is achieved (Belardelli, 2014).

repercussions but for succeeding generations also. Additionally, spanning over continents, races, and societies, the slave trade should act as a lesson of how economic policy rulings can result in terrible widespread deprivation and inequality and that one man’s gain can often be as a consequence of another’s loss.

These two cases simply show just how historical hardships of this magnitude can have implications for apparently unrelated branches of civilization... References Muir, Hugh. ‘Livingstone Weeps as He Apologises for Slavery’. The Guardian. 24 August 2007.

out of one of the most disturbing historic examples of mankind’s greed, this iconic genre was born and should continue to act as a tribute to those persecuted in the slave trade. In unique and inexact ways, Blues and Barclays share a common ground in the sense that, to an extent, both were influenced by events of the Transatlantic slave trade. Although, to say that the entire UK banking sector and Blues genre were induced by the slave trade would be ignorant and inaccurate due to the countless environments affecting both. These two cases simply show just how historical hardships of this magnitude can have implications for apparently unrelated branches of civilization – not solely as immediate

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Eric, Williams. Capitalism and Slavery. The University of North Carolina Press. 2006. Jacob Klein, et al. The Atlantic Slave Trade. Cambridge University Press, 1999, pp. 103–139. 2010. Matthew White. The Industrial Revolution. Georgian Britain articles. The British Library. 2009. “The capture and sale of slaves”. Liverpool: International Slavery Museum. Retrieved 14 October 2015 Margaret Ackrill and Leslie Hannah. Barclays: The Business of Banking, 1690-1996. Cambridge University Press. 2001. Camilla Evjenth, et al. The Slave Trade and its Influence on Music. UNESCO Slave Route Project. UNESCO. 1994. Ed Kopp. A Brief History of the Blues. Articles: From Far and Wide. All About Jazz. 2005. Annie Kelly. Latest Figures Reveal More than 40 Million People are Living in Slavery. Global Development Articles. The Guardian. Guilia Belardelli. Pope Francis and Other Religious Leaders Sign Declaration Against Modern Slavery. Religion Articles. Huffington Post UK. 2014.

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THE TRANSFORMATION OF US HEALTHCARE: FROM PRIVATE HEALTHCARE, TO MEDICARE, MEDICAID AND OBAMACARE, TO THE FUTURE OF ‘MEDICARE FOR ALL’ By Keval Shah, Economics (2020)

n 6th November 2018, voters up and down the United States headed to the polls. Voting in congressional and gubernatorial races, this was America’s chance to make their voices heard in the most important midterm elections in a generation. After 2 years of protests, marches and twitter wars, American voters were finally given the opportunity to decide the fate of their country. Some would argue that this election was a referendum on the President. Mr Trump is a polarising figure, remaining extremely popular within the Republican party, despite achieving historically low approval ratings within the low 40s. However, one could argue that this election was also a referendum on the Democratic party. Was the country happy with one party rule, with an opposition without any real power? Or was it time for the Democrats to take back control of congress to keep Mr Trump and his economic policies in check. Prior to the elections, there were ample reasons for Democrats to feel optimistic about taking control of congress. Incumbent Presidents tend to face losses in midterm elections. Since 1934, a President’s party has only made gains in the House of Representatives 3 times. Mr Trump’s approval ratings were sitting in the low 40s, lower than Barack Obama’s and Bill Clinton’s, who saw major losses in their first midterm elections. The Democrats were most likely to take the House, whilst the Republicans were widely favoured to keep their Senate majority, and possibly even expand it. FiveThirtyEight, a polling aggregation website, used unique electoral analysis to give the Democrats an 87.9% chance of winning the House (Silver, 2018). But in the world of Donald Trump’s America, nothing was ever going to be that simple. People became very sceptical of pollster’s predictions, following the 2016 elections and the Brexit vote.

Figure 1

Democrats won because of one issue: healthcare. They focused on protecting Obamacare and expanding Medicare and Medicaid. Many Democrats took a different approach in these elections to last time round in many of their key races. In Florida, the history-making candidate Andrew Gillum was running as the state’s first African-American gubernatorial nominee in the state. He ran a progressive campaign, arguing ‘to the left’ of issues such as ‘Medicare for all.’ Next door in Georgia, Stacey Abrams ran to become the first ever AfricanAmerican female governor. She ran a grassroots campaign, by focusing on fighting for policies such as Medicaid expansion. This was the most historic midterm elections in a generation, resulting in record voter turnout of 49.2% (Zurcher, 2018). In the elections, the Democrats took control of the House of Representatives in a so called ‘Blue Wave election,’ achieving the largest raw vote margin in the history of midterms. 33

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...Andrew Gillum was running as the state’s first African-American ... a progressive campaign, arguing ‘to the left’ of issues such as ‘Medicare for all.’ On 3rd January, Speaker Pelosi took back the gavel and laid out her agenda for the next two years. One of her most important messages was fighting for the protection of the Affordable Care Act (2010), also known as ‘Obamacare.’ This bill was initially introduced to make sure all Americans were able to get health insurance. They also wanted to lower the cost of health care. That would reduce the growing cost of Medicare and Medicaid (Baker, 2017). These are government-run programmes, created in 1965 by President Lyndon B Johnson, in response to older and lower-income people’s inability to afford private health insurance. Medicare is a federal programme, providing health coverage for those over 65 or with a severe disability. Whilst Medicaid provides health coverage for those on very low incomes.

Before Obamacare, many just did without it and took the risk. Some also had a chronic illness, called a “pre-existing condition,” and the insurance companies wouldn’t even offer them coverage. So, what happens to someone who is making too much money for Medicaid and are too young for Medicare, but are also either self-employed or don’t get insurance from their jobs? They have to pay for their own insurance, and it can be very expensive. Before Obamacare, many just did without it and took the risk. Some also had a chronic illness, called a “pre-existing condition,” and the insurance companies wouldn’t even offer them coverage. The ACA requires that everyone buys health insurance — a mandate that enables those with serious health problems to afford insurance at a reasonably affordable price. The

ACA also provides subsidies to those on low- and moderateincomes, since many people cannot afford an insurance policy even when it’s based on average costs. The subsidies are primarily paid for through a tax on the wealthiest households; those with incomes over $200,000. Private health insurers are required to insure everyone who applies charge the same premiums to people of the same age, as well as cover preexisting conditions (Amadeo, 2016). As a result, health care cost growth has slowed sharply in recent years. The ACA likely contributed to slower cost growth as insurers were prevented from making unreasonable rate increments. Nearly 20 million Americans have obtained a health insurance cover since 2010, with a large percentage of these individuals being young adults. Obamacare promised to make prescription drugs more affordable, especially for senior citizens who were unable to afford all their medications. The number of generic and prescription drugs covered by Obamacare has been grown over the years. Savings on generic and prescription drugs was reported to be over $15 billion within the first five years of Obamacare (Lombardo, 2014). Republicans promised to lower prescription drug costs and to repeal Obamacare in 2016 (Kliff, 2016). Through a series of healthcare policies, they have managed to weaken it considerably, but failed to gain a Senate majority for an alternative healthcare plan. In December 2017, the Tax Cuts and Jobs Act was introduced to repeal Obamacare tax on those who do not get health insurance, removing the incentive for healthier people to get insurance. This is predominantly childless single adults to whom the ACA expanded benefits. Fewer healthy people paying premiums could lead to higher healthcare costs (Long, 2017). Insurers were no longer reimbursed, who waived deductibles and co-payments for six million low-income customers. These subsidies allowed insurance companies to cover 3.2 million people, providing enough revenue to lower premiums for everyone by 20-40%. Insurance companies responded by saying they must raise customer premiums by 20%. Trump’s administration has also proposed plans to loosen regulations on short-term insurance. House Democrats ran on a ticket to protect Obamacare (Lovelace, 2019) and will likely block the Trump administration’s attempts to ‘repeal and replace’ it. However, 10% of Americans still lack coverage. The question still looms about how healthcare will change. This election saw

Figure 2: Obamacare repeal would amount to a massive tax cut for the wealthy, too.

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a series of progressive Democrats being sworn in, who will be applying pressure on Speaker Pelosi and the Democratic establishment to back more ambitious plans of ensuring universal healthcare, such as ‘Medicare for All.’ ‘Medicare for all’ is a national government-run programme, which would entirely replace private health coverage, similar to that of Canadian healthcare and some European countries. It would expand the existing safety net for people over 65 to all Americans. This system would break the link between employment and insurance. Instead of paying a premium towards a for-profit insurance company, employers and workers would pay taxes towards Medicare and the government would work as a ‘single payer’ towards private doctors (Scott, 2018). Supporters of ‘Medicare for All’ including 2020 hopefuls: Sen. Elizabeth Warren (D-Mass), Sen. Bernie Sanders (I-Vt), Sen. Kirsten Gilibrand (D-NY), and Sen. Kamala Harris (D-CA). (Photo: Yuri Gripas/Reuters). Is ‘Medicare for all’ popular? With one third of Democratic senators and almost every 2020 Democratic presidential candidate supporting Bernie Sander’s single player plan, the new bill is gaining huge popularity. ‘Medicare for all’ (Scott, 2018) The Kaiser Family Foundation, amongst other pollsters, found that majority support for ‘Medicare for all’ amongst the general public, standing at 62% (Kirzinger, 2019). Both Obamacare and ‘Medicare for all’ have similar intentions, in ensuring a wider proportion are able to access healthcare at affordable costs. Two things are clear. Republican leaders are opposed to government-run healthcare and will continue to fight against Obamacare, as well as the expansion of Medicare and Medicaid across states. Whilst the ‘Blue Wave’ has significantly shifted powers and Democratic leaders will make protecting Obamacare their number one priority. However, the extent to which government should be intervening within the healthcare system has divided Democrats for years and will likely play a key role in the 2020 Democratic primaries. The US remains the only highly developed country without universal healthcare. From the fight for Medicare and Medicaid, to Obamacare, to ‘Medicare for All,’ the debate as to whether or not healthcare is cheaper, more accessible and of a higher quality, when funded by the government, or by private insurance companies, will continue to dominate American politics for years to come.

The US remains the only highly developed country without universal healthcare. References Silver, Nate. “Forecasting the race for the House.” Election 2018 FiveThirtyEight. https://projects.fivethirtyeight.com/2018-midterm-election-forecast/house/. [Accessed 2 Feb. 2019] Zurcher, Anthony. “US mid-term election results 2018: Maps, charts and analysis.” BBC News. https://www.bbc.com/news/world-us-canada-46076389 [Accessed 2 Feb. 2019] Baker, Joe. “Differences between Medicare and Medicaid.” Medicare Interactive. https://www.medicareinteractive.org/get-answers/medicare-basics/medicare-coverage-overview/differences-between-medicare-and-medicaid [Accessed 1 Feb. 2019] Amadeo, Kimberley. “Obamacare Explained.” The Balance. https://www.thebalance.com/obamacare-explained-3306058 [Accessed 1 Feb. 2019] Lombardo, Crystal. “8 Pros and Cons of Obamacare.” Green Garage The Eco-Friendly Blog. https://greengarageblog.org/8-pros-and-cons-of-obamacare [Accessed 3 Feb. 2019] Kliff, Sarah. “15 charts that show how Obamacare works now — and how Republicans would overhaul it.” Vox. https://www.vox.com/policy-and-politics/2017/1/4/13937032/ obamacare-repeal-charts. [Accessed 1 Feb. 2019] Long, Heather. “The final GOP tax bill is complete. Here’s what is in it.” The Washington Post. https://www.washingtonpost.com/news/wonk/wp/2017/12/15/the -final-gop-taxbill-is-complete-heres-what-is-in-it/?utm_term=.21f724dd4fe9 [Accessed 1 Feb. 2019] Lovelace Jr, Berkeley. “House Democrats set up framework to intervene in federal court case striking down Obamacare.” CNBC. https://www.cnbc.com/2019/01/02/ house-democrats-want-authority-to-intervene-in-obamacare-court-case.html [Accessed: 1 Feb. 2019] Scott, Dylan. “Is Employer-Sponsored Insurance Really A Good Deal For Workers?” Vox. https://www.vox.com/policy-and-politics/2018/12/14/18117917/medicare-for-all-explained-health-insurance-deductibles [Accessed: 2 Feb. 2019] Scott, Dylan. “The ‘pleasant ambiguity’ of Medicare-for-all in 208, explained.” Vox. https://www.vox.com/policy-and-politics/2018/7/2/17468448/medicare-for-all-single-payer-health-care-2018-elections [Accessed: 2 Feb. 2019] Kirzinger, Ashley. “KFF Health Tracking Poll – January 2019: The Public On Next Steps For The ACA And Proposals To Expand Coverage.” KFF. https://www.kff.org/ health-reform/poll-finding/kff-health-tracking-poll-january-2019/ [Accessed: 4 Feb.2019]

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BARNEY STINSON – SECRET ECONOMIST By Chris Spaull, Philosophy, Politics and Economics (2019)

hen you think of Barney Stinson - the breakout character of How I Met Your Mother, played perfectly by Neil Patrick Harris you think of suits and money. You think of legendary stories and wildly quotable sayings. You think of Laser tag and scotch. You do not think of him as being an economist. Yet if you delve deeper, beyond the humour and the charm, you find Barney to be an economist of some insight. Through his rules and theories, Barney demonstrates a strong grasp of economic theory and concepts. This article will highlight some of Barney’s most important theories and rules and explain how they are either rooted in economics, or how they can be applied to the world of economics.*

Tip generously. We all have to make up for Ted Barney Stinson is a high-flying corporate worker with a great personal wealth that is hinted at throughout the show. It thus might be surprising to see Barney fundamentally espouse the need for taxation in the above rule. Although its fundamental purpose is to poke fun at Ted, the rule is based on the principle that those who have greater ability to pay should contribute more to public finances, a core tenant behind progressive taxation. A progressive tax is a tax whereby the average tax rate increases as the taxable amount increases, put simply when applied to income (which is where it is most commonly applied) the amount an individual must pay in tax increases as their income increase (Sommerfield et al, 1992). In the situation referred to by Barney, we can think of tipping as some sort of tax which is necessary to ensure future good service at the bar and that a certain threshold is needed to be reached to ensure this future level of service. What Barney therefore argues in this rule, is that those that are able to tip more, such as himself and possibly Marshall (who, as a Lawyer, is likely earning a sizeable income), should compensate for those such as Ted, who are unable to tip a sufficient amount, to ensure that the group as a whole contribute enough so to be able to reap

the benefits of tipping (the tax). Although this is a very basic economic concept, it is a very clear and useful demonstration of the economic logic that underpins many of Barney’s rules.

Although its fundamental purpose is to poke fun at Ted, the rule is based on the principle that those who have greater ability to pay should contribute more to public finances, a core tenant behind progressive taxation. The Cheerleader effect: The flaws of individuals are masked when they are in a group making them appear better than they actually are This original theory dates to 2008 and led to various psychological studies which attempted to and did confirm the effect Barney laid out (Walker and Vul, 2014; Van Osch et al, 2015), showing both how seriously Barney’s word is taken in the academic world as well as his accuracy. Although the theory is rooted more in psychology than it is in economic theory, it is still applicable to economics and can be used to partly explain what went wrong with the Collateralized Debt Obligations (CDOs) Market. CDOs have been around since the 1980s and by the 2000s they were often made up of risky mortgage-backed securities. These high-risk assets were pooled together into one structure, the CDO, and then repackaged into discrete tranches corresponding to different risk profiles with the senior tranches considered less risky since they had first priority on the collateral in the event of a default (Uzialko, 2017). However, even these senior tranches, which were considered safe and marketed as being riskless, were still essentially composed of risky assets which were not properly diversified according to geography leading it susceptible if there were local housing marking slides (Uzialko, 2017). Essentially the flaws of these assets, the risk, were masked by the fact that they were in a group making them appear better, less risky, than they actually were as it made them appear more diversified. Thus, it can be seen that investors fell foul of the cheerleader effect when it came to

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CDOs since they did not properly inspect the individual assets and whether or not the fact they were grouped together actually made them less risky, instead assuming that because they were in a group that they were less risky. Thus, one of Barney’s key theories can directly be applied to economic situations to better inform are analysis.

An easy way to attract girls is to pose as a NASCAR driver because they’re rich, dangerous, and nobody knows what they look like because, duh, helmets Here Barney illustrates the concept of asymmetric information and signalling, and how an individual can use these to their advantage. Information asymmetry occurs when one party of a transaction possess more material information than the other. The information asymmetry that Barney relies on here is that of the girls he is trying to attract not knowing whether he is a NASCAR driver or not since they are not easily identifiable due to their helmets, whereas he of course knows that he is not. He then, plausibly, assumes that if a girl believes him to be a NASCAR driver that they would be more attracted to him since they are rich and dangerous. He then attempts to pose as a NASCAR driver and this would need to involve the use costly signals, since costly signals due to the nature of being costly are taken to be believable (Spence, 1973), to try and convey the message that he is indeed a NASCAR driver. These costly signals may include having to learn about the technicalities and details of NASCAR driving, buying the equipment a NASCAR driver would have (including, obviously, the helmet) and perhaps even learning to drive a NASCAR Car. Thus, taken together, the asymmetric information the girls suffer from by not knowing the appearance of NASCAR drivers, combined with the costly signals needed to pose as A NASCAR driver, allow an individual to greatly benefit themselves. Barney therefore cleverly uses another economic concept to create a rule that he can use to his benefit.

Guys will always try and claim they’re 6 foot or taller, most aren’t. However old a girl says she is, add five years Here Barney is referring to messages that individuals send in equilibrium in “Cheap Talk” games with monotonic preferences. “Cheap Talk” games are those games where the messages a sender transmits are costless to transmit and receive, are non-binding and unverifiable (Farrell, 1987), whilst preferences are monotonic if all sender types want the receiver to choose as high an action as possible. Clearly the situations referred to in the rule meet the criteria of cheap talk games with monotonic preferences. In the scenario involving guys, the sender (guys) always wants the receiver (girls whose numbers they are trying to get) to think that they are attractive since they are trying to gain the girl’s number, thus they have monotonic preferences. The message they send to attempt to make themselves appear more attractive, that they are taller than they actually are since it is a wellknown (and painful) fact that taller guys are seen as more attractive (all other things being equal), meets the criteria of a cheap talk message. It is free to send, it does not cost anything to say that you are 6ft if you are actually 5ft 10. It is non-binding since it does not limit the options available to either player. Finally, the message is unverifiable if we make

the assumption that the conversation is happening in a public place, like a pub, where you are unable to easily obtain a measuring device. In this scenario we can then prove that the message guys will send in equilibrium is that which Barney claims, that every guy will exaggerate their height claiming they are 6 foot or taller. This is known as a pooling equilibrium, where all sender types (guys of different heights) will send the same message i.e. that they are 6 foot or above. We can very simply proof this by using proof by contradiction i.e. we imagine that there is not a pooling equilibrium and guys of different heights send different messages. In this case shorter guys will send the message that they are not above 6 foot. However, using the assumption that girls prefer taller guys, all other things being equal, then it is the case that the payoff the guy receives is reduced i.e. the likelihood they get the girl’s number falls. They thus would not choose to do this since they have a profitable deviation, saying they are above 6 foot, which is available to them and results in a higher payoff. Therefore, it must be the case that all guys will claim that they are above 6 foot and the same logic applies to the claim that girls will claim they are 5 years younger than they actually are. Thus, it can once again be seen that Barney bases many of his rules on economic concepts and theory.

“Cheap Talk” games are those games where the messages a sender transmits are costless to transmit and receive, are non-binding and unverifiable (Farrell, 1987) At first glance Barney’s rules may be seen to be solely there for comic purposes, designed to make us as an audience laugh. And undoubtedly this is one of their major purposes. However, underlying many of his rules are rigorous economic concepts and theory that stand up to scrutiny which show that Barney is, at heart, an economist of serious repute. *Some of the quotes and rules used in this article have been edited so to remove any crass language or distasteful views towards women.

References Farrell, Joseph. “Cheap Talk, Coordination, and Entry.” The RAND Journal of Economics 18, no. 1 (1987): 34-39. http://www.jstor.org/stable/2555533. Sommerfeld, Ray M, Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson. Concepts of Taxation Fort Worth Texas: Dryden Press, 1992 Spence, Michael. “Job Market Signalling.” The Quarterly Journal of Economics 87, no. 3, (August 1973): 355–374. doi:10.2307/1882010 Uzialko, Adam C. (2017). “The Return of CDOs: Is Another Economic Crisis on the Horizon?” Business News Daily available at https://www.businessnewsdaily. com/10353-cdo-financial-derivatives-economic-crisis.html [Accessed 25 Jan. 2019] van Osch, Yvette, Irene Blanken, Maartje H. J., and Job van Wolferen. “A Group’s Physical Attractiveness Is Greater Than the Average Attractiveness of Its Members: The Group Attractiveness Effect.” Personality and Social Psychology Bulletin 41, no. 4 (April 2015): 559–74. doi:10.1177/0146167215572799 Walker, Drew, and Edward Vul. “Hierarchical Encoding Makes Individuals in a Group Seem More Attractive.” Psychological Science 25, no. 1 (January 2014): 230–35. doi:10.1177/0956797613497969.

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THE US-CHINA RELATIONSHIP AND OTHER COUNTRIES: LIBERALISM, REALISM AND GAME THEORY By Chih Han Hseuh, Philosophy, Politics and Economics (2019)

hile China has slowly taken up a powerful economic and political role in the world, many have viewed China as an opportunity for other nations, whilst others hold the opposite opinion and regard China as a threat for other countries. This is especially the case under the current US-China relationship, whether other countries can benefit in this situation is an interesting question to discuss. The dynamic relationship between America, China and other countries can be analysed using game theory. However, before applying the economic model, it is useful to first conduct some political theory in order to provide some theoretical basis for our analysis. Hence, this article will first apply the political theory of liberalism and realism to show how China can be both an economic opportunity and a political threat for the US. Later on, we will explain how the current US-China relationship can be viewed as an opportunity for other countries. After fully addressing the political theory, the article will apply a game theory model to illustrate the economic and political equilibrium in the US-China relationship to see whether the political theory is consistent with our economic model. In conclusion, we view China as a political threat yet also an economic opportunity for the US and this relationship could provide opportunities for other countries.

Economic opportunity In the concept of commercial liberalism famously represented by David Ricardo, Richard Cooper, Karl Deutsch and other economists as well as international politics scholars, world trade is a positive-sum game and the growing economic power of one country will favour other countries under the framework of open and free trade (Cohen, 2008). By applying this concept to the relationship between China and the US, China’s role in the international political economy will become an economic opportunity for the US. The basic logic is developed from comparative advantage theory stating that countries could focus on their own comparative

advantage and trade with other countries to gain the goods they want and maximize their utility (Ricardo, 1984). Therefore, comparative advantage theory suggests that the US-China relationship should be beneficial for both countries. In terms of the supply side, China can supply its own labour and the US can supply its knowledge and technology. Taking Apple for example, most of Apple iPhones are assembled in China by Taiwanese companies (i.e. Foxconn and Pegatron) and sold back to the US. During this process, American companies such as Apple profit from China’s cheap labour. On the demand side, as China becomes richer and its middle-class grows, consumption of US goods has increased as well. In order to examine how the increasing Chinese middle-class helps the US economy, we can look to an example provided by an open letter from Tim Cook, CEO of Apple. On 2nd January 2019, Apple cut their estimation of the sales of iPhones due to the weaker buying power of the Chinese middle-class and the stock price of Apple dropped significantly on that day and the stock price of S&P500 dropped 1.7% as well (Cook, 2019). Now, after fully addressing the political theory, it is worth looking into the economic model of game theory to justify why cooperation in trading is beneficial for each country. Before going into the model, it is essential to introduce the concept of Pareto equilibrium. A Pareto equilibrium is an equilibrium that no agents in the economy can be better off without hurting other’s interest. And the concept of Pareto equilibrium is important because economists tend to view Pareto equilibrium as the best outcome in welfare analysis. Payoff (China, US) Red ones are the Nash equilibria US

China

Hawk

Dove

Hawk

-1,-1

3,1

Dove

1,3

2,2

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The payoff matrix above represents the outcome for China and the US depending on whether they choose to cooperate/ trade. if both countries cooperate, each can earn the highest payoff (2,2) which is the Pareto equilibrium and if one country would like to cooperate and the other does not, the country will pay the cost for cooperation (i.e. domestic reputation). If both countries do not cooperate, they both get zero payoff. In this matrix, there are two Nash equilibria (Cooperation, Cooperation) and (Non-Cooperation, Non-Cooperation) but there is only one Pareto equilibrium which is (Cooperation, Cooperation). It is true that both countries are better off by cooperating, but the equilibrium of Non-Cooperation is also possible in this case. Therefore, even if liberalism is right about both countries being better off by cooperating, it is possible that both countries do not cooperate with each other and cause a trade war. However, in the long term it is possible that we can achieve the Pareto equilibrium as liberalism describes as long as each country cares about the future enough. As Gibbons (1984) points out, according to Folk theorem, there could be the subgame perfect Nash Equilibrium(SPNE) strategy that enables two countries to reach Pareto equilibrium. In SPNE, both countries can conduct the following strategy: in the first term of trading, try to cooperate, if the result is (2,2), continue to cooperate; otherwise, choose not to cooperate. Consequently, if two countries are rational and they care about the future, they should both conduct this strategy which will reach the point of cooperation of both countries. However, empirical evidence does not show that people can always maintain the SPNE strategy because people might need time to learn and even if people do learn the SPNE strategy, they might still prefer to try the alternative strategy (Crawford, 1990). Most recently, the trade war between China and the US seems to be a sign of non-cooperation and thus it might be necessary to turn to political theory to seek an answer to explain their relationship.

Political threat In political theory, when it comes to political threat, it is quite common to turn to the idea of realism. Traditional realism can be traced back to Thucydides, Machiavelli and Morgenthau. As Morgenthau suggested, realism argues that all countries would seek to maximise their influence and power due to the nature of humans (Morgenthau, 1967). Traditional realism suggests that the rising power of China will follow the Thucydides trap and eventually challenge the leading US for its role in international politics (Allison, 2015). As first discovered by Greek historian Thucydides, the emerging of the new political power will eventually challenge the role of the existing ruling political power and thus two countries will inevitably encounter a war. As China emerges as a new political power, since America would like to maintain the status quo position as the regional hegemon it cannot tolerate the appearance of the other regional hegemon (Mearsheimer, 2014). In order to examine the context of realism, it is worth looking at the famous Hawk-Dove game in game theory. In this game, both countries can be radical (Hawk) and nonradical(Dove). Following the theory of realism, if China would like to become a regional hegemon like the Hawk and the US remains peaceful like the Dove, the US will suffer and vice versa for China. If both remain Dove, then both can earn from cooperation as already discussed previously. However, if both play Hawk, both countries would suffer. The payoff matrix is presented as the following:

Payoff (China, US) Red ones are the Nash equilibria US

China

Cooperation

Non-Cooperation

Cooperation

2,2

-1,0

Non-Cooperation

0,-1

0,0

Now, there are two Nash equilibria which are (Hawk, Dove) and (Dove, Hawk) and there are three Pareto equilibria: (Hawk, Dove), (Dove, Hawk) and (Dove, Dove). Clearly, both countries would like to avoid the outcome of (Hawk, Hawk) but there is no guarantee that this outcome can be avoided because both countries have the incentive to choose Hawk. Perhaps communication is one useful way to convince other countries to not conduct the strategy of Hawk. This can be related to the sender-receiver game model mentioned by Crawford and Sobel (1982). Taking China as a sender and the US as the receiver, if the true type of China is “Hawk”, he will send message “Hawk” because he would expect the US to be “Dove”. If the true type of China is “Dove”, he will also send the message of “Hawk” because he would also like the US to be “Dove”. The same situation also applies by shifting the US and China around. The result is that both countries should send the message of being radical (ie Hawk) even if they would like to seek peace and thus communication does not help solve the political problem between the US and China. This result seems to justify why the US should always view China as a political threat even if the US would like to seek peace. Perhaps it is worth bringing back the idea of Folk theorem again. According to Folk theorem, it is plausible to have (Dove, Dove) outcome in the long run if two countries care about the future enough. But again, as mentioned before, humans might also try to use an alternative strategy even if this strategy will cause revenge from the other.

Concluding remarks In conclusion, as shown by commercial liberalism and realism, China is an economic opportunity but also a political threat for the US. Nevertheless, under the current framework of the Sino-American relationship, a greater role for China in international politics would be an opportunity for other countries because they can benefit from either China or the US.

References Allison, Ggaham. The Thucydides Trap: Are the U.S. and China Headed for War?. The Atlantic, September 24, 2015.Retrieved from https://www.belfercenter.org/ publication/thucydides-trap-are-us-and-china-headed-war , 2015 Crawford, Vincent, & Sobel, Joel , Strategic Information Transformation, Econometrica,50,6,1431-1451,1982 Crawford, Vincent P. and Hans Haller “Learning How to Cooperate: Optimal Play in Repeated Coordination Games,” Econometrica, 58, 571-595. 1990 Cohen, Benjamin J. International Political Economy: An Intellectual History. Princeton, NJ: Princeton University Press, 2008. Cook, Tim. Letter from Tim Cook to Apple investors. Retrieved from https://www.apple. com/newsroom/2019/01/letter-from-tim-cook-to-apple-investors/ , 2019 Gibbons, Robert. A Primer in Game Theory. New York: Harvester Wheatsheaf, 1993. Mearsheimer,John. Can China Rise Peacefully? The National Interest,October 25,2014.Retrieved from https://nationalinterest.org/commentary/can-china-rise-peacefully-10204 , 2014 Morgenthau, Hans Joachim. Politics among Nations: The Stuggle for Power and Peace. New-York: A.A. Knopf, 1967. Ricardo, David. The Principles of Political Economy and Taxation. London (U.A.): Dent, 1984.

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CHINA’S AI AWAKENING: BRAVE NEW WORLD? Joann Yap Ka Yan (Management, 2019)

n 2017, the introduction by the Chinese central government of the “Next Generation Artificial Intelligence Development Plan” was set as a national strategic priority with the objective to transform China into an “intelligent economy”, thereby surpassing the US and becoming the world leader in AI by 2030. With the targeted scale of its core AI industry size of over RMB 1 trillion, China now dominates global AI funding. Last year, nearly 50% of global AI start-ups’ equity funding came from China, compared to 38% from the US and 13% from the rest of the world. Recently, Chinese AI start-up SenseTime, has raised $600 million in a deal led by Alibaba, reported as the largest and most valuable in the AI space. China’s AI initiative consists of three steps; firstly, aligning the adoption of the latest AI technologies with the global leaders by 2020; secondly, achieving major breakthroughs in AI technology by leading in areas such as city infrastructure and manufacturing by 2025; and lastly, becoming the world’s major AI innovation hub by 2030 (Robles, 2018).

China now dominates global AI funding. Last year, nearly 50% of global AI start-ups’ equity funding came from China, compared to 38% from the US and 13% from the rest of the world. AI represents a significant opportunity for China to stimulate productivity and economic growth. The country’s rapid technological growth stems from its sheer size, global collaboration and scientific research. Being the world’s most populated nation of nearly 1.4 billion, China’s 700 million internet users contribute to the generation of abundant big data, which is fundamental to the development of AI technology. Moreover, national internet giants Baidu, Alibaba and Tencent have recently set up research labs locally and globally by nurturing AI talents and investing substantially in R&D in areas such as cloud computing, voice recognition,

robots, driverless vehicles and virtual reality (VR), in order to accelerate the speed of AI development (Ma, 2018). Global collaboration also plays an integral part along China’s AI journey. Domestic AI operations have opened doors for foreign firms and demonstrated enthusiasm for foreign AI projects. For example, China’s leading voice recognition tech firm iFLYTEK, has recently tapped into overseas markets by opening an office in Silicon Valley, establishing partnerships with foreign automakers, for example, BMW, Volkswagen and global tech conglomerates including IBM and Intel (Tabeta, 2018). In return, Microsoft and Amazon Web Services have contributed to developing AI in China by setting up their new research labs in Shanghai. Many industries in China have undergone and are going through technological breakthroughs, particularly in the financial and manufacturing sectors.

Fintech Being the key player in the fintech market in the world, China currently accounts for over $9 billion worth of shares of fintech investments. Digital payments comprise around twothirds of non-cash payments in China, with 40% of Chinese consumers making payments online nowadays. According to the international consulting firm McKinsey & Company, it is expected that China’s robo-advisory market (platforms that offer automated and algorithm-driven financial planning) is going to be the world’s largest by 2020 (Jacob, Katsuki, Kaushik, Sahai and Sengputa, 2018). One significant action in this regard was the introduction of an online microcredit lender, Qudian, which targets mostly young tech savvy consumers under the age of 35 and small businesses, which are underserved by traditional banks due to their lack of sufficient credit data.

Digital payments comprise around two-thirds of non-cash payments in China, with 40% of Chinese consumers making payments online nowadays.

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The firm has raised USD $900 million in its initial public offering, signifying a positive outlook for the Chinese fintech industry. By collaborating with Alibaba Group’s Ant Financial, it utilizes big data along with Artificial Intelligence and machine learning to offer credit to Chinese consumers (Nair, 2017). In 2017, China’s overall household debt-to-GDP ratio stood at 49%, i.e. higher than the average of emerging economies (39.8%) yet below the average of developed economies (76.1%), including the UK, the US and Japan (caixingglobal, n.d.). Thus, it is believed that Qudian can help the national economy propel towards the desired consumption level.

job loss within the sector has been worsened with 87,000 workers being replaced by robots between 2014 and 2016 (Chan, 2017). Pwc estimated that approximately 77% of jobs in China could be at risk of being automated, higher than other countries. As shown in figure 3, the highest expected level of job displacement appears to be in industrial sectors over the next 20 years. This signifies that the ever-growing demand for manufacturing technologies, including robots and autonomous vehicles, is likely to shift Chinese industrial employment from low value, labour intensive production to high value roles.

Manufacturing

Figure 3: The proportion of existing jobs in China that could be displaced in each sector over the next 20 years

The prevalence of automation is part of the “Made in China 2025” plans to transform the “world factory” into “intelligent manufacturing”. Considering the country’s declining demographic trend (see figure 1) there’s a strong need to accelerate productivity growth.

Figure 1: China’s working-age population, 2000-2035 (million, %)

(Hawksworth and Rao, 2018).

In a discussion paper written by McKinsey & Company, it is believed that AI can make industrial machinery, supply chains, logistics routing and other internal operations more efficient. (Barton et al., 2017). According to an Accenture report, AI-led automation is expected to add 0.8 to 1.6% points to annual GDP growth by 2035, outpacing other AI key players in the world. (See figure 2) It also stated that the manufacturing industry will benefit the most from AI application, adding an additional $2.7 trillion Gross Value Added (GVA) by 2035 (Purdy, Qiu and Chen, 2017).

Figure 2: The Economic Impact of AI

AI has the potential to increase China’s annual growth rate by 1.6 percentage points by 2035 in terms of gross value added (a close approximation of GDP).

Although Foxconn has highlighted its technical training initiatives and the government is planning to recruit 23.5 million students to participate into 3-year vocational programmes. One Foxconn worker claimed, “In the production process, workers occupy the lowest position, even below the lifeless machinery.” China’s robotic future seems to accentuate the polarization of labour. Overall, the growing demand for advanced digital skills will benefit elites and IT professionals, whereas, there will be reduced demand for medium and low skilled workers who will struggle with making a living wage. The government mandatory internship programs have been manipulated by profit-maximizing firms as a mechanism to channel the young generations into the precariat (Chan, 2017). In light of technological revolution, vigilance should be exercised with respect to the multifaceted impact on employment, such as social instability and widening wealth gap.

AI Cold War Cultural and policy differences between the west and the east form an impediment to China’s AI initiative. Its staggering AI growth has been undergoing many hurdles and receiving backlash over its exploration of the dark side of AI and big data.

Huawei Scandal

Taiwanese-owned Foxconn Technology Group, also known as Apple’s biggest supplier, reached unprecedented $4.9 billion annual profits, following a cut of 60,000 jobs in 2016. In an endeavour to apply robotics engineering and innovative yet low margin manufacturing technologies, the deployment of industrial robots, Foxbots, is intended to yield a transformative effect. Meanwhile, the national

Huawei, the world’s largest telecommunications equipment manufacturer, was recently charged with stealing trade secrets and defrauding banks into clearing transactions that violated international sanctions on Iran. Having to overtake Apple to become the leader in the smartphone market and 5G networks, Huawei’s domination in cloud, IoT and AI, which enables wireless networks to connect everything from phones to cars, has driven revolutionary changes across the country. However, it is currently being viewed as a threat to national security by American officials as well as the rest of the world. There are fears that China is 41

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using Huawei as a proxy to spy on competing nations and scoop up useful information by modifying its devices to assist hack attacks and eavesdrop on conversations. Recently, the west has taken a series of actions to suspect the credibility of Huawei. For example, Canada and the UK are carrying out regular security testing on its products, and in worse scenarios, the US and Australia have even barred the brand from involving their next generation mobile networks. The University of Oxford has also suspended new donations and sponsorships from Huawei (BBC, 2019).

There are fears that China is using Huawei as a proxy to spy on competing nations and scoop up useful information by modifying its devices to assist hack attacks and eavesdrop on conversations. According to FBI Director Christopher Wray, “...no country poses a broader, more severe long-term threat to our nation’s economy and cyber-infrastructure than China.” (Zak, 2019). Does this statement reflect US’ fear of China taking over the world’s technology in order to stifle Chinese enterprises’ legitimate operations, or simply a direct attack on Huawei’s intellectual property theft? Vigorous geopolitical tensions seem to lurk behind this battle. US’s legal action against Huawei is only part of the trade war. Broader restrictions on technology exports to china, as well as further restrictions on FDI in the Chinese tech sector appear evident to the US’s endeavour in hindering China’s grandiose plan – “Made in China 2025”. Moreover, Google’s launch of Beijing research centre and its products’ conformance to the nation’s censorship have also received a strong backlash from US lawmakers (Bloomberg News, 2018). Even cross-national cooperation from other parts of the world seems to be slowly falling apart too. Without any concrete evidence of Huawei spying, such aggressive reactions from the west might jeopardize the world economy as global supply chains would be wrecked and customers would have limited choices, given the fact that China is the world’s largest manufacturing economy and exporter of goods.

Broader restrictions on technology exports to china, as well as further restrictions on FDI in the Chinese tech sector appear evident to the US’s endeavour in hindering China’s grandiose plan – “Made in China 2025”

Social Credit System Worldwide fear can be justified by the Chinese government’s recent roll out of the Social Credit Scheme – a big data surveillance system to gauge citizens’ social, political and economic behaviour from online purchasing to their obedience to national laws, social lives and timely bill payments. High score citizens enjoy a variety of social privileges and economic benefits, whereas, low score individuals may be blacklisted from accessing certain services,

such as restaurants and flights (Gan, 2019). Thus, China’s expertise in its big data and facial recognition development is rather perceived as privacy invasion than state innovation. Nowadays, trains in China require national IDs to buy a ticket, which enables the government to prevent human rights activist or anti-corruption journalists from travelling. Moreover, in the Xinjiang province, thousands of national ID checkpoints are set up at mosques and shopping malls to collect visitors’ real time data with personal information ranging from bank accounts to family planning (Herman, 2018). At this point, it is evident that digital technology is an aiding tool for authoritarian regimes like China to reinforce political control. It aims to subordinate an individual fate to the interests of a one-party state. Some reports have regarded this scoring system as a “high-tech dystopia”, in which 1.4 billion citizens are being dictated by an algorithm, with real time point additions and deductions under the eyes of AI powered surveillance devices. Such reward and punishment system can also be viewed as propaganda to promote integrity and trustworthiness but simultaneously more of an enforcement tool in the society. The underlying function is to make the party’s political control inseparable from the nation’s social and economic development.

Some reports have regarded this scoring system as a “high-tech dystopia”, in which 1.4 billion citizens are being dictated by an algorithm, with real time point additions and deductions under the eyes of AI powered surveillance devices. In order to restore trust from both sides, given the case of Huawei, host countries need to develop structures to monitor the firm and offer a proper guidance and response if things go wrong. China, on the other hand, should demonstrate a great extent of integrity and this can be accomplished by appointing foreign directors, recruiting western investors and setting up overseas subsidiaries that have their own boards. To further the nation’s globalization initiative, there is also a need to reform the national rules and regulations in order to succeed its commercial interests abroad. Nonetheless, the United States has a good reason to express its concern and frustration. Apart from the ongoing trade war, as universally acknowledged, the bulk of AI innovation has long been standing in the US, home to tech behemoths including Google, IBM and Apple. China, from imitation to innovation, is surreptitiously yet resolutely building an ecosystem, which feeds on its ambition to become the world’s AI leader by 2030. Whilst the US research sector is struggling due to the recent tightened immigration control and reduction in research and education funding under the Trump administration, this may escalate the difficulty in attracting and retaining tech talents from around the world in order to fuel the cutting edge AI research & innovation at the Silicon Valley. As a result, the state’s unawareness of its AI developments enables China to leap towards global AI supremacy. The Chinese model of government sponsorship and private capital, along with the abundant data provide a solid foundation to achieve its goals. In other words, America’s loss could be China’s gain.

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All in all, is China’s AI awakening leading us to a utopian or dystopian future in this disruptive, transformative age?

Barton, Dominic, Jonathan Woetzel, Jeongmin Seong, and Qinzheng Tian. “McKinsey Global Institute.” ARTIFICIAL INTELLIGENCE: IMPLICATIONS FOR CHINA, April 2017. https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/China/ Artificial%20intelligence%20Implications%20for%20China/MGI-Artificial-intelligence-implications-for-China.ashx [Accessed 9 February 2019]. Purdy, Mark, Serena Qiu, and Frank Chen. How Artificial Intelligence Can Drive China’s Growth.Report. 2017. https://www.accenture.com/t20170629T190038Z__w__/ cn-en/_acnmedia/PDF-55/Accenture-How-Artificial-Intelligence-Can-Drive-Chinas-Growth.pdf#zoom=50. [Accessed 9 February 2019].

References:

‘Replacing Humans with Robots’ Is Already Official Policy in China. What’s the Future for Workers?” New Internationalist. November 07, 2017. https://newint.org/ features/2017/11/01/industrial-robots-china. [Accessed 11 February 2019].

Robles, Pablo. “China Plans to Be a World Leader in Artificial Intelligence by 2030.” South China Morning Post. October 01, 2018. https://multimedia.scmp.com/news/ china/article/2166148/china-2025-artificial-intelligence/index.html. [Accessed 11 February 2019].

Hawksworth, John, and Anand Rao. What Will Be the Net Impact of AI and Related Technologies on Jobs in China? Report. September 2018. https://www.pwc.com/ gx/en/issues/artificial-intelligence/impact-of-ai-on-jobs-in-china.pdf. [Accessed 10 February 2019].

Ma, Raymond. “To Ride on China’s Rise in Artificial Intelligence.” Fidelity Funds | Fidelity Singapore. June 25, 2018. https://www.fidelity.com.sg/market-analysis/ fidelity-insights/to-ride-on-china-s-rise-in-artificial-intelligence-article. [Accessed 11 February 2019].

Ibid

Tabeta, Shunsuke. “Company in Focus: China’s Leader in Voice Recognition AI Goes Global.” Nikkei Asian Review. February 01, 2018. https://asia.nikkei.com/Business/ Company-in-focus-China-s-leader-in-voice-recognition-AI-goes-global. [Accessed 11 February 2019]. Dahl, Jacob, Fumiaki Katsuki, Vishal L Kaushik, Anu Sahai, and Joydeep Sengupta. Will the Good times Keep Rolling for Asia’s Asset Managers? Report. October 2018. https://www.mckinsey.com/~/media/McKinsey/Industries/Financial Services/Our Insights/Will the good times keep rolling for Asias asset managers/Will-the-goodtimes-keep-rolling-for-Asia-asset-managers-web-final.ashx. [Accessed 16 February 2019]. Ambika, Nair. “Qudian and the Rise of Chinese Fintech – LSEEMF.” LSEEMF. December 13, 2017. http://www.lseemf.com/qudian-rise-chinese-fintech/ [Accessed 11 February 2019]. Chart of the Day: China’s Growing Household Debt.” Caixin Global. https:// www.caixinglobal.com/2018-11-06/chart-of-the-day-chinas-growing-householddebt-101343512.html [Accessed 11 February 2019].

“Timeline: What’s Going on with Huawei?” BBC. January 18, 2019. https://www.bbc. co.uk/news/technology-46483337. [Accessed 11 February 2019]. Doffman, Zak. “U.S., U.K. And E.U. Look Set To Deal Death Blows To Huawei’s 5G Ambitions.” Forbes. February 05, 2019. https://www.forbes.com/sites/zakdoffman/2019/02/03/2018-was-a-disaster-for-huawei-but-heres-why-2019-will-bemuch-worse/#1b9b752d4714. [Accessed 11 February 2019[. Bloomberg News. “China Calls for Borderless Research to Promote AI Development.” Bloomberg.com. September 17, 2018. https://www.bloomberg.com/news/ articles/2018-09-17/china-calls-for-borderless-research-to-promote-ai-development. [Accessed 11 February 2019]. Gan, Nectar. “China’s Social Credit Horrifies the West. But Do the Chinese Even Notice?” Hi-tech Dystopian Plot or Low-key Incentive Scheme? The Complex Reality of China’s Social Credit System. February 08, 2019. https://www.scmp.com/news/ china/politics/article/2185303/hi-tech-dystopia-or-low-key-incentive-scheme-complex-reality. [Accessed 11 February 2019]. Herman, Arthur. “China’s Brave New World Of AI.” China’s Brave New World Of AI. August 30, 2018. https://www.forbes.com/sites/arthurherman/2018/08/30/chinasbrave-new-world-of-ai/#53a46fa28e96. [Accessed 11 February 2019].

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RUNNER-UP GAINSBOROUGH PRIZE

NEW-AGE SHIRKING: HOW SOCIAL MEDIA AND CYBERLOAFING ARE KILLING THE MODERN ECONOMY

By Georgina King, Economics (2019)

he daily routine for many of us is much the same. We wake up and check our phones, scrolling through endless social media whilst we contemplate the day ahead. We get out of bed, get dressed, have breakfast and check social media some more. A survey by ReportLinker (2017) conducted using US citizens found 46% of people check their phones in bed when they first wake up, a figure which rises to 66% when isolating for only millennials (18 to 24-year-olds). Overall, social media is just as likely as e-mail to be checked immediately and, by breakfast, 74% of us will have had our morning technology fix. Social media is undoubtedly addictive, and excessive social media usage has been linked to depression, anxiety and social isolation, especially among younger generations. But whilst the detriment to our mental health is a widely publicised research area, the effect of social media on more widely-applicable things such as productivity can be overlooked.

Cyberloafing Cyberloafing is the “term used to describe the actions of employees who use their Internet access at work for personal use while pretending to do legitimate work” (Hogenboom, 2018). Shirking is not new nor uncommon in the workplace, but technology has created new and more discreet methods of time-wasting at work. Although it may seem harmless, the aggregate lost productivity of cyberloafing is significant. ReportLinker’s survey found that at least 44% of people admit to checking their mobile phone whilst at work for personal reasons, and again this figure rises to 60% for millennials, and 66% for “older” millennials aged 25 to 34. It is not just the detrimental impacts of wasted time ReportLinker’s survey at work that need to be considered, but also the effect found that at least of excessive scrolling before bed which was shown in 44% of people admit to a 2017 study by Primack et al to cause increased sleep checking their mobile disturbance. Another interesting finding of their study was that the more frequently participants engaged phone whilst at work for in social media use in the 30 minutes before bed, the personal reasons more likely they were to experience sleep disturbance. Sleep deprivation and poorer sleep cycles are a further detriment to the following day’s productivity.

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It is also important to note that cyberloafing can be considered a threat to company security, by exposing computers and company property to viruses as well as generating slower processing times.

The UK problem The UK economy does not fare well when it comes to productivity compared to the other G7 nations. The latest release from the Office for National Statistics (ONS, 2018) of “International comparisons of UK productivity” showed that the long-running productivity gap of around 16% remained persistent into 2016. The UK, despite efforts to close the productivity gap, experienced below G7-average real productivity growth (measured as growth in GDP) for both output per worker and output per hour. Whilst we cannot blame this post-crisis productivity stagnation solely on non-work-related computing and cyberloafing, in computerised industries there is a definite need for fewer internet-induced distractions. As more millennials enter the workplace the degree of cyberloafing is likely to rise and for firms this is hard to tackle; bans on technology are difficult to implement especially as remote working and working from home are becoming more common, making monitoring difficult. Figures estimate that if 1,000 employees spend one hour a day cyberloafing, it can cost a large business $35million a year. And productivity following social media cyberloafing tends to fall as well, resulting from the loss of morale that comes with checking some social media sites, according to research (Boitnott, 2014).

Figures estimate that if 1,000 employees spend one hour a day cyberloafing, it can cost a large business $35million a year Microeconomic analysis

The diagram below (Economics Help, 2017) is a basic microeconomic analysis of how productivity is lost at industry level. By cyberloafing we restrict the level of output before it can reach the market equilibrium where supply is equal to demand. This leads to allocative inefficiency, which in economic terms means the marginal utility (benefit to the buyer) to be gained from producing another unit is greater than the marginal cost of producing this extra unit. Therefore, producing the extra unit is beneficial as there is a net welfare gain from doing so.

a certain space of time. The firm has the resources and time to produce all 70 reports, but as a result of cyberloafing they are only able to produce 40. This is allocatively inefficient, as the firm would’ve gained more profit from producing all 70 reports – even though the price per unit of each report is lower. This lost profit would have contributed to GDP, the growth rate of which is used as a measure economic productivity.

Millennials vs middle-aged The aforementioned study by Primack et al looked at a sample of over 1,700 young adults aged 19-32. The effect of pre-sleep social media on sleep disturbance was found to be significant and is especially concerning as millennials begin to enter the workplace. The blue light emitted from phones that inhibits melatonin levels (a chemical that tells us to sleep) is one factor that has a more detrimental effect on young adults than older generations due to the biological changes that are occurring in millennials (Hogenboom, 2018). Millennials are also more prone to anxiety induced by social media, thus using social media throughout the day will increase anxiety and make it harder to sleep at night – making the next day’s productivity worse regardless of the extent of cyberloafing that actually takes place.

Millennials are also more prone to anxiety induced by social media, thus using social media throughout the day will increase anxiety and make it harder to sleep at night Nevertheless, cyberloafing is not exclusive to millennials. A report by Nielsen (Gajanan, 2017) showed middle-aged Americans to be consuming five hours-per-week more media than millennials, of which one hour was social media usage. Thus any efforts to counter cyberloafing need to be targeted at all employees, not just the younger workers from the generation of “social media addicts”.

Is a ban the answer? Most people consider using mobile phones whilst in the presence of colleagues and management inappropriate, but when employees are isolated and working independently, the issue of cyberloafing is likely to arise. Policy is at the discretion of the individual firm, and each has the right to ban websites and mobile phones in the workplace should they choose. But for firms in finance and insurance, where communicating with clients is crucial, this could be counterproductive. Lynn Wu’s study (2013) suggests a ban is not the answer. She finds that social media can enable a greater degree of information-richness in an organisational network, which can lead to greater productivity through providing a more diverse information source. Informational diversity is found to be positively correlated with billable revenue (which contributes to GDP) hence social media, in this sense, is a facilitator of productivity by providing an employee with better connections within their firm.

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Employee reactions to monitoring and other solutions Informing employees that their web activity is under surveillance reduces the employees’ ability to deceive and as a result there should be a fall in cyberloafing for fear of repercussions. However, surveillance of this kind could be considered intrusive and create an unpleasant work environment. The subsequent loss of morale could be similarly detrimental to productivity as were the initial effects of cyberloafing (Lowe-Calverley and Grieve, 2017). Alder et al. (2008) postulate an interesting concept in this regard. Monitoring is a universal solution to cyberloafing in a firm, but the reactions to monitoring and surveillance are not uniform across employees and depend on the personality traits of the individual. Those who have a greater degree of utilitarianism in their personality tend to respond more favourably to the use of monitoring. The implications of this therefore suggest that monitoring is only a semi-effective tool and the net productivity effects of its implementation will be dependent on the proportion and extent of utilitarian personalities within the workforce. So, if monitoring fails, what else can firms do? A study by Henle and Blanchard (2008) finds that employees are more likely to cyberloaf when the perceived sanctions of doing so are less, thus emphasising the need for clear company policy. However, stressors in the workplace were found to be a more significant indicator of cyberloafing; reducing stress in the workplace or teaching stress management could be argued a more effective method than monitoring both for morale and productivity. This study also shows that role ambiguity allows cyberloafing to arise. By setting out clear employee job descriptions with set expectations and goals, employees can better manage their time, meaning idle time where cyberloafing may arise is lessened. Better prioritisation of workload is also a factor, as conflicting demands create stress and influence the degree of cyberloafing. Furthermore, Lim (2002) found that employees tend to neutralize their time in the workplace, meaning when a worker feels they have been unjustly rewarded for their work, they will cyberloaf to reconcile some of the time they feel they lost. Thus, implementing a sufficient compensation scheme for completed work reduces the employees need for neutralization behaviours such as cyberloafing. Studies tend to favour the negative consequences of cyberloafing, but internet browsing could be argued to have a positive effect on employee morale through providing an outlet for stress relief. Especially for those who have an intertwined work-life and home-life, is there really a need to monitor time-use so closely?

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...stressors in the workplace were found to be a more significant indicator of cyberloafing; reducing stress in the workplace or teaching stress management could be argued a more effective method than monitoring both for morale and productivity. References Report Linker. “For Most Smartphone Users, It’s a ‘Round-the-clock’ Connection.” Retrieved from https://www.reportlinker.com/insight/smartphone-connection.html. 26 January 2017. Techopedia. “Cyberloafing.” Retrieved from https://www.techopedia.com/definition/2390/cyberloafing. Jessica C Levenson, Ariel Shensa, Jaime E Sidani, Jason B Colditz, Brian A Primack. “Social Media Use Before Bed and Sleep Disturbance Among Young Adults in the United States: A Nationally Representative Study.” Sleep, Volume 40, Issue 9. 1 September 2017. Office for National Statistics. “International Comparisons of UK Productivity 2016.” Retrieved from https://www.ons.gov.uk/economy/economicoutputandproductivity/ productivitymeasures/bulletins/internationalcomparisonsofproductivityfinalestimates/2016. 6 April 2018. Boitnott, John. “Social Media Addiction: The Productivity Killer.” Retrieved from https://www.inc.com/john-boitnott/social-media-addiction-the-productivity-killer. html. 7 July 2014. Hogenboom, Melissa. “The vital time you shouldn’t be on social media.” Retrieved from http://www.bbc.com/future/story/20180110-the-vital-time-you-reallyshouldnt-be-on-social-media. 11 January 2018. Gajanan, Mahita. “Middle-Aged Americans Spend More Time on Social Media than Millennials.” Retrieved from http://fortune.com/2017/01/25/social-media-millennials-generation-x/. 25 January 2017. Wu, Lynn. “Social Network Effects on Productivity and Job Security: Evidence from the Adoption of a Social Networking Tool.” Information Systems Research 24, no. 1 (2013): 30-51. http://www.jstor.org/stable/42004268. Lowe-Calverley, Emily; Grieve, Rachel. “How can bosses put a stop to workers idly browsing online?” http://www.bbc.com/capital/story/20170818-how-can-bossesput-a-stop-to-workers-idly-browsing-online. 20 August 2017. Alder, G. Stoney, Marshall Schminke, Terry W. Noel, and Maribeth Kuenzi. “Employee Reactions to Internet Monitoring: The Moderating Role of Ethical Orientation.” Journal of Business Ethics 80, no. 3 (2008): 481-98. http://www.jstor.org/ stable/25482160. Economics Help. “Allocative Efficiency.” Retrieved from https://www.economicshelp. org/blog/glossary/allocative-efficiency/. 28 November 2017. Henle, Christine A., and Anita L. Blanchard. “The Interaction of Work Stressors and Organizational Sanctions on Cyberloafing.” Journal of Managerial Issues 20, no. 3 (2008): 383-400. http://www.jstor.org/stable/40604617. Vivien K. G. Lim. “The IT Way of Loafing on the Job: Cyberloafing, Neutralizing and Organizational Justice.” Journal of Organizational Behavior 23, no. 5 (2002): 67594. http://www.jstor.org/stable/4093671.

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GAINSBOROUGH PRIZE RUNNER-UP

RUNNER-UP GAINSBOROUGH PRIZE

HEY STRANGER: THE RISE OF THE SHARING ECONOMY By Jessica Richens, Economics (2021)

e may all recall the famous 1968 family film, Chitty Chitty Bang Bang, in which the evil Child-Catcher enticed children with sweet treats, so that they would be lured into his wagon. This, for many of us, taught a valuable childhood lesson, regarding the issue promoting the idea of ‘stranger danger’. Yet, many of us appear to have now disregarded the teachings of this film, as in 2015 PricewaterhouseCoopers estimated that the sharing economy, that is, a system in which assets or services are shared by private individuals, was worth around $15 billion (Cusumano, 2018). The sharing economy is based strongly around the ideals that the fear of the Child-Catcher warns against— trusting in strangers. The Sharing economy was sparked by the emergence of a new currency, constructed on trust, with explosive growth stimulated by relative improvements in technology. It has had its own positive multiplier, due to the changes it activated in modernising society, which led to the increase in collaboration, fresh ideas, and a renewed sense of community, which has in turn allowed the sharing economy to build on its self (Stan, 2016). The Sharing economy Perhaps the most famous examples of services in the was sparked by the shared economy are car sharing apps such as Uber, or emergence of a new Lyft and home sharing sites such as Airbnb.

Trust

currency, constructed on trust, with explosive growth stimulated by relative improvements in technology.

Historically, trust was built around physical perceptions, for example a bank with a large expensive building, would imply to the consumer that the bank is secure and successful, and consequently, they are a trustworthy place to secure your savings. Consumers may also, develop trust as a result of their experiences, for example when an individual books a holiday in France, they may look to stay with a similar or related hotel chain to one they have visited in England, and have had a positive experience with. This signifies the importance of an umbrella brand or chain, as the consumer associates the brand with a guaranteed quality. Many consumers will also, stick with brands they know and trust, for example if a consumer buys an Apple device and enjoys the iOS experience, they are less likely to convert to an Android handset, as they trust what they know and have experienced – much like the loyalty shown to the hotel chain. Advertising is also used to promote trust in an economy, if a TV advert implied an impression of quality, and popularity, this would lead

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the consumer to trust that this good was of superior quality. It is evident that creating a sense of trust has always been an impacting factor on consumer preferences within a market, but what makes the sharing economy so different? In her 2012 TED talk, Rachael Botsman (2012) discussed in detail trust and the sharing economy. Botsman identifies the transactions within the market as ‘collaborative consumption’ which she defines as ‘a social and economic system driven by network technologies that enable the sharing and exchange of assets, from spaces to skills to cars, in ways and on a scale never possible before’. We can assume that these transactions are made possible by the increasing trust stimulated by the rise of the sharing economy. Botsman identifies this increase in societies ability to trust strangers as ‘empowerment.’ She stresses that the sharing economy has created ‘micro-prenurs,’ essentially smallscale entrepreneurs, which has empowered people to make meaningful connections, renewing a level of humanity, as the sharing economy is built on personal relationships, rather than empty, faceless monetary transactions. Figure 1 displays this increasing level of trust, in that 88% of respondents would trust a ‘rideshare driver’ such as an Uber or Lyft driver over their own neighbours. This solidifies the notion that the Childcatcher cautionary tale has been long forgotten, as increasing numbers of us are willing to put our trust in strangers.

Figure 1.

Botsman discussed a Sharing service called ‘TaskRabbit’ which she describes as ‘eBay for errands’, which is a network where people can form online relationships to get tasks done, notably the number one task requested — over 100 times a day is aid in assembling Ikea furniture. This service is based upon trust, as the consumer picks who they want to employ to perform their task without any personal knowledge of who that person really is. Consumers employ based upon trust and upon the “reputation” of each person providing the service.

Reputation Botsman states reputation has a real-world value, explaining that the higher one’s reputation, the more jobs they are likely to receive, and higher the monetary value of their service will be. Many services build their employees reputation by ratings, allowing previous customers to rank the quality of the service they received. These ratings by strangers contribute to and effectively determine our level of

trust in the stranger e.g. Ubers’ star rating system or Airbnb’s ratings. A key part of these services is that the rating system is mutual, this allows for the employee to ensure that their employer is equally trustworthy, so that they feel confident in allowing them into their car, in the case of Uber, or their home, for Airbnb users. We can see the value of trust and reputation in more diverse examples such as LinkedIn, where your likelihood of getting the job depends on the connections and status you have. Crockett (2018) stresses the importance of reputation based around the example of car sharing app Lyft, he states ‘ when you call a Lyft, you can see your drivers face and name… you can follow his journey’, but ‘most importantly you can see the person’s star rating, validated by the collective trust of other users’. Arun Sundararajan, author of ‘The Sharing Economy,’ tells us these technologies have essentially ‘expedited’ the process of gaining trust, noting that when we physically meeting someone the process of gaining their trust can take time, yet the sharing economy gives way to digital systems which allows for trust to be gained instantly.

The future of the sharing economy From current examples, we could predict that growth will continue in the sharing economy; Botsman notes that as of 2015, Airbnb had properties in 192 countries, a truly phenomenal scale, put into perspective by considering that Airbnb have hosts on nearly every main street in Paris. The sharing economy is set to grow $335bn worldwide by 2025 (Crockett, 2018), despite as Crockett points out, with the growth of this economy comes a higher likelihood of failure, ‘yet, our trust in collaborative consumption remains astronomically high’. Stan (2016) suggests that in the future it will not only be commodities which are measured by trust, but people. Suggesting that credit, social following and work connections amongst other things could make up that unit of trust; this could then be used to decide who gets priority customer service or who gets upgraded on a flight.

Whatever the future holds, next time you need your Ikea furniture assembled remember Hey Stranger. References Botsman Rachael, ‘The Economy of Trust’, TEDGlobal, 2012, https://www.ted.com/ playlists/366/the_economy_of_trust (Accessed 30 Dec. 2018) Crockett Zachary, ‘How the sharing economy makes us trust complete strangers’, The Hustle, April 2018, https://thehustle.co/sharing-economy-trust/ (Accessed 29 Dec. 2018) Cusumano Michael, ‘The Sharing Economy Meets Reality’, January 2018, https:// cacm.acm.org/magazines/2018/1/223874-the-sharing-economy-meets-reality/ fulltext (Accessed 29 Dec. 2018) Morgan Jamie and Sheehan Brendan, ‘The Concept of Trust and the Political Economy of John Maynard Keynes, Illustrated Using Central Bank Forward Guidance and the Democratic Dilemma in Europe’, Review of Social Economy, 2015, 73:1, 113-137, DOI: 10.1080/00346764.2014.988054 Nelms Taylor C. et al, Social Payments, ‘Innovation, Trust, Bitcoin, and the Sharing Economy’, Theory, Culture & Society, May 2018, Vol.35(3), pp.13-33 Stan Adriana, ‘The Future is the trust economy’, 2016, https://techcrunch. com/2016/04/24/the-future-is-the-trust-economy/?guccounter=1 (Accessed 29 Dec. 2018)

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WINNER GAINSBOROUGH PRIZE

THE FAILING UK LABOUR MARKET AND HOW IT IS CAUSING A PRODUCTIVITY CRISIS By Samuel John O’Mara, Economics (2021)

ith all the hysteria about Brexit it’s easy to forgot a longer term and perhaps more serious issue facing the UK economy, that being the productivity crisis since the 2008 financial crisis. The pre-crisis trend of 2.5% productivity growth per annum has reduced to 0.4% in the last decade. In the words of Paul Krugman, “productivity isn’t everything, but in the long run it’s almost everything”. This perfectly demonstrates why we should take notice of the issue as without productivity growth, sustained economic growth and growth in living standards is near impossible. Although most of the developed world has experienced a dip in productivity growth since 2008, the UK has suffered more severely. Once the most productive country in Europe, the UK now has productivity levels 16% below the average of the G7 economies (Giles, 2018).

Figure 1: GDP per worker (G7 countries) (ONS, 2017)

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The problem is epitomised by the UK’s lack of growth in education standards. The UK is failing to accumulate as much human capital as countries which have higher productivity growth. Education standards in the UK are hardly differentiable between the older and younger generation. Young people in other countries, such as South Korea, have education standards which are far greater than older people (Giles, 2018). This is a daunting fact as it appears that the problem isn’t going away soon with young people going into the labour market no better skilled than the ones they are replacing.

Figure 2: England as a high proportion of low-skilled young workers. Source: OECD. ©FT. With Brexit coming up and Europe being one of the UK’s main source of skilled workers, the UK has been presented with not only a problem of where to get the skilled labour, but an opportunity to revolutionise the way education is undertaken to fulfil the demand for skilled workers. This is especially prevalent in some industries where domestic skilled labour is hindered by a skill mismatch caused by a reluctance of students to pursue careers in these fields. The construction, computing and financial industries all face a lack of domestic skilled workers and tend to be heavily reliant on imported labour. To add to this, these are industries which once boasted the highest productivity levels and were hallmarks of the UK economy in more successful eras (Giles, 2018). The UK is no longer an economy based around manufactures and the education system faces an issue of raising the number of skilled workers in services. Quite simply, not enough is being done to promote prospective workers to pursue careers in these struggling industries. This goes further than choices of degree, more opportunities and the flexibility to allow students to go down more vocational paths may allow the demand for skilled construction workers to be filled with the sector hoping to find 35 740 new workers each year until 2020 (Jackson, 2018).

With Brexit coming up and Europe being one of the UK’s main source of skilled workers, the UK has been presented with not only a problem of where to get the skilled labour, but an opportunity to revolutionise the way education is undertaken to fulfil the demand for skilled workers.

Though the extent to which there is a skill mismatch is hard to measure, it is clear to see the allocation of skills and education is not very efficient in this country. The ILO estimates the UK to have the fifth highest share of workers with a skill mismatch. With 28.9% of the work force working a job not suitable to their skills with 15% overeducated and 13.9% undereducated. However, the ONS estimates the value to be 31.3% and rising in recent years (ONS, 2016). Though some level of skill mismatch is to be expected, the extent of the problem is causing serious imbalances to the labour market. Following a crisis, it is expected to see a high level of overeducated workers with people accepting a lower skilled job to remain in employment. However, 10 years later and with unemployment at record lows, it makes no sense for this to still be such a prevalent issue. Overeducated workers are perhaps the most worrying aspect as it means the return to education is diminishing if this trend is to continue.

Allowing flexibility in the schooling system may allow students to take more vocational paths whilst also providing the skilled labour demanded in certain areas. I think tackling the issue will most effectively be done by improving our primary and secondary education system, with education at university tending to be rather successful. Allowing flexibility in the schooling system may allow students to take more vocational paths whilst also providing the skilled labour demanded in certain areas. I would suggest that although the budget for education has been restricted, this is a non- argument as the UK spends a relatively high amount per student. In primary and secondary education, spending per pupil is around $12,100, higher than our neighbors France at $10,000 and higher than some of the most successful systems in the world like Finland ($9,800) and South Korea ($10,200) (NCES, 2018). Although, conditions in Finland are different to the UK, I think it is useful to learn what makes their system far more successful despite lower funding. The Finnish education system is widely regarded as the most successful in the world. For starters the curriculum takes a looser stance with only a few mandatory topics allowing for a more practical and less exam-based structure. All students work together with a 100% stated funded system and no separation based on ability. Instead of being obsessed with testing, Finnish pupils are encouraged to follow different paths, with 43% going to vocational high schools (Taylor, 2012). Although

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certain conditions make a system like this unsuitable for the UK, population for example, I think some key lessons could be learnt. What stands out to me is the emphasis on allowing the student and the teacher to discover their own path, instead of laying it out from the age of 6. As Einstein observed, “Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid”, and there is certainly an argument that testing everyone the same way instead of allowing the individual to determine their strengths can be counterproductive. One way of tackling the skill mismatch in this country could be a diversification of the education structure allowing students to gain the skills required for specific industries.

As Einstein observed, “Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid”, Though education is important, the issue with labour goes further. Weak labour laws and a lack of union power, mean that workers in the UK have little bargaining power. Real wages were more responsive to 2008 than they were to previous recessions. This has resulted in an increase in employment but ultimately a decrease in productivity growth. Instead of investing in capital and raising the capital to labour ratio, UK firms decided to invest in further labour. Essentially, workers are being used as substitutes for capital and it is argued this is restricting implementation of innovation and capital accumulation. It is not surprising that rising capital costs and falling labour costs have led to a decrease in the capital to labour ratio. So, a possible solution outside of education would be strengthening the position of unions and encouraging investment in capital and innovation (Van Reenan, Paulo Pessoa, 2014). This idea can easily be reflected in the statistics for automation and investment in this country. The level of automation is extremely low in this country, with 71 industrial robots per 10,000 workers as opposed to 631 in South Korea. So perhaps weak labour laws and low labour flexibility is holding back innovation, investment and productivity growth (consultancy.uk, 2018). So, is it all doom and gloom? Fortunately, I would say no. For starters we are not alone in experiencing slower productivity growth, this is an issue throughout the developed world. After all we are in a post crisis and pre-Brexit country, and so a slow patch is to be expected. With the fiscal restraints and restrictions to credit availability from 2008 caused by austerity and increased regulation on banking. It could also be argued that the UK has been hit harder due to its reliance on the banking sector. Also, the uncertainty from the Brexit-referendum has certainly hindered investment and many

believe any outcome will allow an increase in investment. It is also important to remember that the problem is far more diverse than just education with economists pointing the finger at the lack of utility in recent innovation, the slow rate of diffusion of innovation into the market or even inaccurate measurement (Haldane, 2017). In the long run however, the poor performance of the education system and the UK’s inability to utilise the skilled labour available is a worrying factor. There is a real opportunity for the UK to promote the kind of skills we as a country rely so heavily on imported labour for. Ultimately, raising education standards and utilising human capital efficiently is key to raising living standards in the long run. Although other factors contributing towards the productivity puzzle seem to be more of a short run fix, fixing the imbalances in the UK labour market could take a while and it will be interesting to see how the problem is tackled.

There is a real opportunity for the UK to promote the kind of skills we as a country rely so heavily on imported labour for. References Giles, Chris. August 13 2018. “Britain’s productivity crisis in eight charts”. Financial Times, available at https://www.ft.com/content/6ada0002-9a57-11e8-97025946bae86e6d Office for National Statistics. 6 October 2017. “International comparisons of UK productivity (ICP), first estimates 2016”. Available at https://www.ons.gov.uk/ economy/economicoutputandproductivity/productivitymeasures/bulletins/internationalcomparisonsofproductivityfirstestimates/2016 Jackson, Gavin. August 16 2018. “How a lack of skilled building workers is stunting UK growth”. Financial Times, available at https://www.ft.com/content/53713cfe93eb-11e8-b747-fb1e803ee64e Office for National Statistics, 17 March 2016. “Analysis of the UK labour marketestimates of skills mismatch using measures of over and under education: 2015”. Available at https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/ employmentandemployeetypes/articles/analysisoftheuklabourmarketestimatesofskillsmismatchusingmeasuresofoverandundereducation/2015 National Center for Education Statistics, May 2018, “Education Expenditures by Country” available at https://nces.ed.gov/programs/coe/indicator_cmd.asp Taylor, Adam. November 27 2012. “Why Finland’s Unorthodox Education System Is The Best In The World”. Business Insider available at https:// www.businessinsider.com/finlands-education-system-best-in-world2012-11?r=US&IR=T#43-percent-of-finnish-high-school-students-goto-vocational-schools-12 Van Reenen, John. Paulo Pessoa, Joao. May 1 2014. “The UK Productivity and Jobs Puzzle: Does the Answer Lie in Wage Flexibility?”, The Economic Journal, Volume 124, pages 433- 452, available at https:// academic.oup.com/ej/article/124/576/433/5077339 Consultancy.uk. June 12 2018. “71 industrial robots installed per 10,000 workers in UK”. Available at https://www.consultancy.uk/ news/17481/71-industrial-robots-installed-per-10000-workersin-uk Haldane, Andrew. March 20 2017. “Productivity puzzles”. Bank of England Speech available at https:// www.bis.org/review/r170322b.pdf

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Issue 20

Articles inside

THE TRANSFORMATION OF US HEALTHCARE: FROM PRIVATE HEALTHCARE, TO MEDICARE, MEDICAID AND OBAMACARE, TO THE FUTURE OF ‘MEDICARE FOR ALL’

WHAT DO BARCLAYS BANK AND BLUES MUSIC HAVE IN COMMON?

RISING FROM THE EAST: THE CHINESE DIASPORA

ARE ECONOMICS DEGREES LETTING SOCIETY DOWN?

HOW HAS THE BARCLAYS PREMIER LEAGUE BECOME MORE UNEQUAL THAN ZIMBABWE?

PRIME DISCRIMINATION: COULD FAST FOOD CHAINS BE RACIST?

IMPRESSIONABLE MINDS: THE ROLE OF PROFESSORS IN CHANGING STUDENT OPINION ON BREXIT

WHAT KIND OF A SHOPPER ARE YOU?

HOW THE HOUSING CRISIS COULD HURT THE TORIES FOR GENERATIONS TO COME

VENEZUELA: ANOTHER SOCIALIST FAILURE?

A CONVERSATION WITH LORD DAVID WILLETTS

WHEN HARRY SWIPED RIGHT FOR SALLY: THE ECONOMICS OF ONLINE DATING

THE FAILING UK LABOUR MARKET - A PRODUCTIVITY CRISIS?