econoMAX May 2012

The latest edition of econoMAX (May 2012) is now available to download. The new articles and case studies are summarised below:

Is it possible for government policy to deter the consumption of cigarettes? (Andy Reeve)

In his recent budget, George Osborne added 37 pence to the price of a packet of 20 cigarettes. In doing so, he was signalling a desire to raise additional revenue and also discourage the use of cigarettes. In his budget speech, the Chancellor stated that “smoking remains the biggest cause of preventable illness and premature death in the UK and there is clear evidence that increasing the cost of smoking encourages smokers to quit and discourages young people from taking it up”

The economic importance of the Commonwealth (Robert Nutter)

The Commonwealth cannot be seen as a trading bloc such as the EU or NAFTA but it does have economic priorities. According to the Commonwealth Secretariat; “The Secretariat aims to strengthen policies and systems that support economic growth in our member countries. We help Commonwealth countries take advantage of opportunities for economic growth and improve their ability to manage their economic development in the long-term”.

Let’s all panic! (Liz Veal)

There was a wave of panic spreading through Britain this spring. The trade union, Unite, balloted it members and the fuel tanker drivers looked as if they would take action. The government hastily suggested that people should top up their petrol tanks, so they did not risk running out.

Why do some economists think road pricing is the most effective solution for traffic congestion? (Tom White)

Traffic congestion is a huge problem in Britain and most economists perceive it as a form of market failure that has arisen because of negative externalities - external costs not included in market transactions. The existence of these costs means that consumption can often be higher than the social optimum. Traffic congestion is a good example of a negative externality because when you drive your car you can put a cost onto other people: delays, longer travel times, higher fuel consumption, extra noise, stress, accident and additional vehicle wear and tear. As one German government-funded advert says, “You are not stuck in traffic. You are the traffic”.

Sovereign Debt and Banking Crises (Mark Johnston)

The credit crisis of 2008 is the major economic story of this century but should economists, politicians, bankers and others have seen this coming? If there is one common theme to this present crisis and others that went before, it is the excessive debt accumulation.

Royal Mail tries to Stamp out its Losses (Andy Reeve)

The price of a first and second class stamp is rising in the United Kingdom from the end of April. Currently, the price of a first class stamp is 46 pence and this will rise to 60 pence at the end of the month. The price of a second class stamp is 36 pence and this will rise to 50 pence. These are significant price hikes, which are designed to reduce the losses that Royal Mail made in 2011.

Is Spain becoming another Greece? (Mark Johnston)

With increasing debt, out of control unemployment and a general strike Spain has some serious economic problems. However, before the financial crisis of 2008 Spain was seen as a prudent member of the Eurozone with GDP debt being half that of Germany at 36%, and a well regulated financial sector. But since the aftermath of the financial crisis it has been all downhill for the Spanish economy with unemployment now at 24% and public debt at 66%.

Is US unemployment Cyclical or Structural? (Mark Johnston)

Whilst a lot of the talk in US political circles has focused on the fiscal crisis of budget deficits and tax rates it seems that those without work has been put further down the priority list. With almost 13 million Americans still without a job and little change apparent on the horizon, the US economy is struggling to develop any significant growth to rectify these jobless levels. However, the significant issue to do with unemployment is how many of the 13 million reflect cyclical or structural unemployment?

Will we consume more – or less? (Tom White)

If you’re worried about the environmental consequences of economic and population growth, one question is more important than any other. Is further economic growth a good thing? Will that extra growth (and associated technological change) help or hurt the environment? You might think the answer is obvious, because more growth causes us to consume more. Only we don’t, according to the Material Flow Accounts, a set of data published annually by the Office for National Statistics (ONS). Yet it may be that 2001 will turn out to be the year that the UK’s consumption of ‘stuff’ – the total weight of everything we use, from food and fuel to flat-pack furniture – reached its peak and began to decline.