Think like an Economist

           THINK LIKE AN ECONOMIST

The Masters of Money documentary series (aired on SBS, February 2013) provides an excellent introduction to three important Economists who have shaped our economic thinking. Furthermore, the views on these economists are discussed in a historical context as well as in light of recent world events. This enables us to hypothesize and hear the varied views of current leading economists around the globe. The series is very engaging, topical and informative and is a useful resource for Economics teachers and students.

Students would benefit from gaining an understanding how Economists think, and learning about how economic theories have evolved over time.

Episode 1: John Maynard and Keynesianism (13/2/2013)
Episode 2: Hayek and the Free Market (20/2/2013)
Episode 3: Karl Marx and Marxian Economics (27/2/2013)
A few ways to use this fantastic series:

Part A: Questions and tasks linking the documentary Masters of Money to specific units and areas of study in Economics.

Part B: A student and class based set of tasks culminating in a Conference on Famous Economists

i)                    Biography of a famous economist

ii)                   Class Conference

iii)                 Summary exercise  

Part A: Questions linked to the VCE Economics course

Unit 1: Economics: Choices and Consequences

Area of Study 1: ‘A market system’

The nature and distinctive features of economic systems

1. Economics is classified as a “social science”. Discuss comments made by each of the three economists in the documentary that support this classification.

2. Distinguish between the following pairs of terms:

     a. capitalism and socialism

     b. market and non-market (planned)

3. Outline the key characteristics of Australia’s market capitalist economy.

4.  Describe how the three basic economic questions are answered in a market capitalist economy, a market socialist economy, a non-market (planned) capitalist economy and a non-market(planned) socialist economy.

5. Karl Marx predicted that capitalism would collapse. However, this did not occur and many former non-market (planned) and market socialist economies have adopted market capitalism. Research and discuss the process of change in at least one country that has undertaken this transition and given up central planning.

6. Karl Marx would say that capitalism is the cause of great economic evil. Discuss three advantages and three disadvantages of a market capitalist economy.

The degree of market power

1. Some economists would argue that the profit motive drives the economy forward, while others would say that greed and the profit motive divides society and promotes inequality. Explain two disadvantages and two advantages of firms having market power.

 2. Explain the opinions that Keynes, Hayek & Marx would have in regard to the existence of oligopolies operating in the Australian economy.

 3. Distinguish between the terms market failure and government failure. Explain which economists would argue that market or government failure exist. Provide two examples of each within the Australian economy.

 The role of markets

 1. “Markets, left to their own devices, will ultimately allocate resources efficiently.” Explain what is meant by this statement.

2. “Government subsidies to producers manipulate the market price.”

a. Discuss two examples of subsidies being used to improve living standards.

b. Discuss two arguments against government subsidies.

3. Hayek was adamant in his sentiment that meddling with the market distorts price signals. Explain how the price mechanism operates in a perfectly competitive market.

 Area of Study 2: ‘Economic issues’

Economic growth

1. Discuss three economic costs and three economic benefits of economic growth on Australia’s material and non-material standard of living.
2. According to Hayek, governments should not prop up failing businesses. Explain two economic costs and two economic benefits of governments propping up failing businesses.
3. Explain how Keynesian economics would work to support the economy during an economic downturn.
4. Provide specific examples of G1 and G2 spending that the Australian government used to lift aggregate demand and stimulate the level of economic growth during the GFC. (see www.budget.gov.au)
5. Discuss the importance of consumer and business confidence as demand side factors that have a significant influence on aggregate demand and economic growth.

Creation and distribution of wealth and income

1.Karl Marx was of the view that capitalism was productive but inherently unfair. Outline three aspects of capitalism that Marx saw as its failings.

2.The income gap between workers and owners of businesses was a major concern for Marx. He said that while the owners of resources get richer, the workers get poorer. What measures exist in the Australian economy to redistribute incomes and ensure greater equity?

 Inflation

 1. After WW1 a number of countries experienced hyperinflation.

a. Define what is meant by hyperinflation.

b. Discuss what caused hyperinflation to occur.

c. Explain the impact of hyperinflation on households, firms and governments.

d. Copy and paste 3 photos from google images depicting the impact of hyperinflation on daily life.

 2.In the 1970s the rate of inflation globally rose significantly. Research what aggregate demand and aggregate supply factors might have caused this to occur.

 Unit 2: Economic Change: Issues and Challenges

Area of Study 1: ‘Population, employment and change’

1. Explain how Keynesian economics would work to decrease the high level of unemployment during a recession.

2. Hayek believed that any attempt to intervene in markets would have unintended consequences and make problems even worse than they already are. Discuss how the economy may self-correct in a period of recession.

3. It seems that “governments spending their way out of recession” was successful during the GFC. Explain this statement.

4. Classical economists said that wage cuts would increase job creation and stimulate economy activity. Discuss the costs and benefits on the economy of cutting wages for workers.

5. Keynes was quick to point out the multiplier effect of economic actions such as the government stepping in to lift government consumption and investment expenditure. Explain what the multiplier effect is in terms of job creation.

 Area of Study 2: ‘Global economic issues’

International economic relations

1. Keynes would question the austerity measures being forced upon weaker Eurozone countries. Explain what austerity measures are and why Keynes suggests that such measures are not the solution to the crisis.
2. There is much debate about the benefits of free trade. Discuss the views of Hayek, Marx and Keynes to the general reduction in tariffs and increased move to free trade between nations and regions.

Development economics

1. “Global income inequality reflects the rich world exploiting the poor world.” Discuss this statement.

 2.“The new pool of cheap labour is located in poorer countries around the world.” Explain the costs and benefits of this for developed countries and developing countries.

 Economic Globalisation

 1.“Today, the global economy is still struggling.” What do Marx, Keynes and Hayek suggest could be done to stabilise the global economy.

1. “Keynes was convinced that economies needed institutions to force them together to cooperate.”  Work in pairs to prepare a PowerPoint presentation for your class on the workings of one of the organisations listed below.  Include the following- history of the organisation, aims and role of the organisation, members of the organisation, activities of the organisation,)
   1. International Monetary Fund (IMF)
   2. World Bank
   3. United Nations (UN)
   4. Organisation for Economic Cooperation and Development (OECD)

Part B: A Famous economists Conference 

TASK ONE (Homework):

 The obvious starting point would be for students to prepare a short (400-500 word) biography on one famous economist. In order to learn about their thinking they need to understand something about their background.

From experience, I think it is easier to allocate an economist to each student (or a few students) and depending on class size increase or decrease the number of economists studied. This will help concentrate the class conference on a few famous economists and give students a more in-depth understanding of the chosen economists.

It is really useful to cover a broad range of ideas and therefore ensure that for your class conference you have a number of students representing each economist.

 These are the Economists I have used in the past but they can easily be added to:

Adam Smith

Friedrich Hayek

Milton Friedman

John Maynard Keynes

John Kenneth Galbraith

Joan Robinson

Karl Marx

 TASK ONE: Present a 1-2 page typed biography on the Economist allocated to you. Be sure to include the following:

1. the country they were born in & date of birth/death
2. family background
3. place and level of education
4. occupation/s and employer/s
5. friendships and/or influence of other Economists
6. Name and date of major published works
7. Overview of main economic theory/ies

TASK TWO (one week):Hypothetical- Famous Economists Conference

 Pre-conference

 Students are to undertake extensive research on the economic thinking and rationale, ideas and theories of the economist allocated to you.  Once you have completed this research you need to meet with the other students in your class who have been allocated the same economist. Together, you need to imagine that your economist is alive today. Discuss and form opinions on what he or she would say about a range of current domestic and global economic events and situations.  You should then meet with your teacher to discuss your views. At the conference you will be able to use your research and notes to contribute to the topics of discussion.

 Teachers could ensure a few things have been done to allow for an informative conference:

a)      Have Economists name stickers in large letters available for the day so everyone can identify easily who is present

b)      Have a photo of each of the Economists you have chosen on a single PowerPoint slide on screen during the conference or a series of A3 sized photos of the Economists on display in the room

c)       Have a list of topics/questions you will discuss

d)      Ensure the classroom is set up in a horseshoe shape with you as Chair in the middle so you can see everyone and control the discussion

 Irrespective of when you hold this conference, students need not and will not have an in-depth understand of economics, given their commencement of this subject in Year 11. Nevertheless, challenging them to read, research and discuss their understanding of their economists views in light of topical issues will extend their learning and, from experience, remain a memorable task that they will enjoy.

Conference (a double lesson-100 minutes):

 *Students should bring their notes, writing paper and pens to the conference.

* Teacher: As your Economists arrive in the classroom ask them to get and display their name sticker on them and sit next to that or those Economists with whom they share similar views. This is interesting as they should end up with some introductions and discussion with each other to sort this out, as well as being seated in the spectrum of thinking from totally laissez faire economics (Adam Smith) to the other extreme of communism (Karl Marx).

 Start the conference by asking each Economist to introduce him/herself and the major contribution that was made to economic thinking. After a general introduction, guide the discussion to the some or all of the topics listed. Ideally every student will get a number of chances to contribute to the conversation. If this is not the case, invite comment from certain people.

Possible topics to choose from, discuss, add to and seek Economists’ opinions on:

 General themes relevant to Australia and global economy:

• Greece should exit the Eurozone.
• Austerity measures in Europe will simply make the economic crisis in Europe worse.
• The Australian government should NOT have introduced a carbon tax.
• The Rudd government did the right thing by implementing expansionary budgetary policy to prevent Australia from going into a recession during the GFC.
• The government should NOT subsidise the Australian car industry.
• Budgetary policy is more important than monetary policy.
• Unions distort the allocation of resources and have too much power in Australia.
• Free markets improve people’s lives.
• In the last few decades most countries have adopted market capitalist economies and planned (non-market) economies have collapsed. Why is this?
• Stong, rich countries typically exploit weak, poorer countries.
• Creating jobs is the way to increase economic activity.
• The RBA should step in and depreciate the Australian currency.
• Free trade will benefit all economies.
• The Australian government should privatise all GBEs
• The private sector should run all schools in Australia.
• The Melbourne City Council should introduce a congestion tax for the Melbourne CBD.
• If water had a market price we wouldn’t have a shortage of water in the first place.
• Affluenza is the cause of many of our economic woes.
• The minerals in the ground belong to all Australians and therefore the Australia government has a right to tax miners.
• Imported goods under the $1000 GST free threshold should also be taxed.
• The 10% GST is too low in Australia.
• The supermarket duopoly in Australia should be prohibited.
• The Taxi industry needs to be totally deregulated.
• Unemployed people should only receive the Newstart allowance for 6 months.
• Victoria’s desalination plant is a total waste of taxpayers’ money.
• Should firms outsource labour?
• Capitalism caused the GFC.

  Task Three:Post Conference (1 lesson)

 Students are to write a summary of the key theories of each economist who attended the conference. These summaries should be on the sheet provided.

Name	Date of Birth/Death	Key economic theories and beliefs
Adam Smith	1723-1790
Karl Marx	1818-1883
John Maynard Keynes	1883-1946
Friedrich Hayek	1899-1992
Joan Robinson	1903-1983
John Kenneth Galbraith	1908-2006
Milton Friedman	1912-2006

 General Resource List:

Great Economists and their Times – The Federal Reserve Bank of San Francisco

http://www.frbsf.org/publications/education/unfrmd.great/greattimes.html

 How influential economists changed out History

http://www.investopedia.com/articles/07/economists.asp#axzz2N2tMgFHo

 Timeline of Famous Economists- Bized

http://www.bized.co.uk/virtual/economy/library/economists/timeline.htm

 
http://www.youtube.com/user/EconStories?feature=watch
 Keynes versus Hayek

Pricing Carbon in Australia

Environmental Economics: in 2010 I wrote a section on this blog (see further down) under the heading of Environmental Economics. It was a hot topic domestically and globally. Since then, Australia has moved from various proposals on how to price carbon to an actual price on carbon in the form of the Carbon Tax, which commenced on 1/7/2012. This section updates the previous one.

 The Carbon Tax

Set at $23 per tonne of carbon emitted, the carbon tax quantifies the value of the marginal external cost of each tonne of carbon firms emit into the atmosphere and yet do not build in to their costs of production. The tax impacts on price in the hope that it will then impact on the quantity of carbon emitted.  The carbon tax now prices carbon, adds to firm’s production costs, IS incorporated into their pricing and will be passed onto consumers through increased prices. The cost of carbon is now internalised.

The carbon tax will create disincentives for all firms that emit carbon. The tax will send the signal to firms that if they hope to avoid the tax then they will need to reduce emissions through innovation and invention via a more to greener and cleaner energies.

 How does a Carbon Tax work?

• Aim of the tax is to reduce greenhouse gas emissions
• The carbon tax is an environmental tax on carbon emissions SET by the GOVERNMENT (so the market determines how much it will pollute)
• This tax is levied on producers, distributors and users based on emissions=the 500 major companies (ie those that emit >25,000 tonnes of carbon per annum from a single plant/factory.)
• Examples of big emitters; mining companies-BHP, Rio Tinto, aluminium, glass, steel producers, natural gas retailers, etc…
• Government has set a price on polluting per tonne on carbon=$23 per tonne
• In order to reduce their tax costs, people/businesses/utilities will attempt to use LESS energy derived from fossil fuels.
• Individuals might switch to public transport, replace old light bulbs with compact fluorescent lamps (CFLs)
• Businesses might increase energy efficiency by installing new appliances, updating older heating/cooling systems
• Utility companies (gas, electricity, water) might invest in clean coal technology
• Alternative energies become more attractive to use
• THEREFORE: the carbon price will, over the long term, reallocate the economy’s resources and facilitate structural change AWAY from high polluting emitting industries and TOWARDS more carbon efficient industries. Eg:

  • Shift away from coal to solar

  • Shift away from oil to biofuels

  • Shift away from new to recycled

The Emissions Trading Scheme (ETS)

ABC TV 7.30 Report on the Announcement of our ETS being linked to the EU carbon trading market

http://www.abc.net.au/7.30/content/2012/s3578963.htm

http://www.abc.net.au/news/2012-08-28/scrapping-carbon-floor-raises-budget-uncertainty/4229100

How does a Emissions Trading Scheme (ETS) work? (a market based system) 2015 and beyond

• The Australian government’s preferred method of reducing  carbon emissions is via an Emissions Trading Scheme (ETS)
• An ETS makes emitters pay for the right to emit carbon
• The government sets a CAP on the total emissions allowed, i.e. it decides how much pollution will occur (but the MARKET determines the price of pollution)
• Permits to emit are sold, so that large firms can emit a certain amount of carbon per year
• Producers are paying a price per tonne of carbon emitted
• The total amount of permits=National cap decided on by Government
• Emitters that do not have enough permits must EITHER BUY more permits from other carbon emitters OR cuts their emissions
• Emitters that have not used up their allocation of permits can SELL them or save them for  the future.
• CARBON TRADING is the buying and selling of permits on the open market
• The market will be linked to the European Unions Scheme
• The $15.00 floor price (from 2015) set earlier by the Government has been scrapped. The price will now FLOAT.
• A carbon emissions cap too low will make the price too high
• A carbon emissions cap too high will make the price too low
• If the price of permits rises too high, the government can issue new permits
• The number of permits is reduced each year and then gives the signal to reduce pollution as the cost of buying permits and polluting rises.

The Government established a number of principles for pricing carbon

1. It must be revenue neutral on federal finances (50% revenue raised goes to consumers; 40% to industry and 10% to the Clean Energy Finance Fund
2. It must be able to lead to a reduction in emissions
3. It must be simple, fair and flexible
4. It must take account of the impact on industry

Government Compensation

Part of the carbon tax package includes a compensation package for industries that are adversely affected by a shift to a low carbon emitting entities and for low income consumers affected by higher electricity prices and other prices that rise as a result of the carbon price.

Features of the package:

1. Compensation to households and pensioners to offset higher prices
2. Tax cuts for taxpayers up to $80,000 income per year
3. Funding for renewable energy, low pollution and energy efficient technologies
4. Government funding to support jobs in high pollution industries eg: steel and coal

The Household assistance package

http://www.budget.gov.au/2012-13/content/ministerial_statements/climate/html/climate_change-03.htm
(Budget outline of Household assistance)

(Household assistance package Ad.)

Spoof Ad on Household assistance package 

 

 

What’s so Super about our Supermarkets?

Australia’s Market System: A Case study of Supermarkets in Australia

Year 11 Economics students study the way markets operate and take an in-depth look at the functioning of a particular market. Over the past few years, if not longer, the supermarkets have come under increased criticism for the lack of competition in this market for groceries, the tactics they use to limit competition and the resulting effect on both consumer choice and the prices of grocery items.

• Firms in this industry

The grocery industry in Australia is one of the most highly concentrated/least competitive in the world with Coles & Woolworth’s market share being approximately 80% of the market. This makes these 2 companies a duopoly. Together they have a strong and growing dominance that makes it difficult for other supermarkets in this industry.

Overview of the duopolistic nature of this industry:

Which key supermarkets operate in Australia?

Coles, Woolworths, IGA, FoodWorks, Franklins, 7-Eleven,  Aldi, Tesco, Costco and small independent supermarkets

Submission to the ACCC by the Master Grocer’s Australia:
http://www.accc.gov.au/content/item.phtml?itemId=812906&nodeId=7ef361fe5e262a67065affa7961b65c6&fn=096%20-%20Master%20Grocers%20Australia%20(12%20pages).pdf

• Level of competition in this industry

ABC Four Corners Investigation in 2008 on the 2 supermarkets that dominate the grocery industry:
http://www.abc.net.au/4corners/content/2008/20080901_woolies/interviews.htm

iView ABC TV 7.30 Report 6/1/2012  Heinz Factory closure and link to Supermarket oligopoly.

Taking on the Supermarket Giants: (Aussie Farmers Direct)

http://www.theage.com.au/victoria/taking-on-the-supermarket-giants-20130224-2ezfx.html
 (interview & transcript)

Define and give examples of firms/industries that operate as a:

1. Monopoly
2. Duopoly
3. Oligopoly
4. Unconcentrated industries
5. Competitive industries
6. Highly competitive industries
7. Perfectly competitive industries

What are the benefits of competition?

1. Increased efficiency
2. lower prices for consumers
3. increased economies of scale
4. improved resource allocation & therefore less waste

• Strategies used by supermarkets to decrease competition & increase their power

All about Supermarket psychology:

http://www.bing.com/videos/search?q=supermarket+tricksP

Generic and Own brands:
http://www.crikey.com.au/2011/09/26/coles-lookalike-products/

Fruit & Vegie price war:
http://www.abc.net.au/news/2012-01-31/concerns-over-fruit2c-vegetable-discounting/3802094

• Restrictive Trade Practices (RTPs).

There are a range of anti-competitive activities firms undertake to try and increase their market share while also decreasing the level fo competition in the market so that they have greater control over the market place. Some of these activites are legal and others are illegal. Investigate each of the following:

1. Price discrimination
2. Collusion
3. Multiple branding
4. Predatory pricing

Copycat Branding:
http://www.abc.net.au/rural/news/content/201112/s3397199.htm

Government intervention in this industry:

• The role of the ACCC: www.accc.gov.au

Supermarket Inquiry into supply chain:
http://www.abc.net.au/news/2013-02-15/supermarkets-supplier-dealings-in-accc-sights/4520632

http://www.abc.net.au/news/2013-02-15/accc-checks-out-supermarket-supplier-dealings/4521318

Criticism and investigation of price control by the main supermarkets:

ACCC Report: What is happening in the grocery game in Australia? Are consumers being ripped off by an increasingly powerful duopoly of Coles and Woolworths?

http://www.accc.gov.au/content/item.phtml?itemId=922072&nodeId=1021595c3dbca3dbdc4db6a70d82fc1a&fn=Update%2028.pdf
  pp13-14

National Retailer’s Association submission to the ACCC enquiry into Supermarket competitiveness in 2009:
http://www.accc.gov.au/content/item.phtml?itemId=813242&nodeId=a5849a79108b95b63c70c8d0279cb7e9&fn=129%20(late%2014%20Mar)%20-%20National%20Association%20of%20Retail%20Grocers%20of%20Australia%20(sub.2)%20(69%20pages).pdf

ACCC Supermarket Inquiry

http://www.abc.net.au/news/2012-03-22/climate-of-fear-thwarting-supermarket-inquiry/3905046

http://www.abc.net.au/am/content/2013/s3690926.htm
 (radio interview)

http://au.news.yahoo.com/today-tonight/latest/article/-/16211915/taking-on-the-big-two/
 (text)

http://theconversation.edu.au/accc-grocery-inquiry-will-take-a-long-time-to-bear-fruit-12244

• Globalisation & MNCs

1. Define what globalisation means.
2. Define what a Multinational company is and give some examples of supermarket MNCs.

Aldi: Case study

http://www.theage.com.au/business/victoria-shows-the-way-for-aldi-attack-20120905-25erk.html

http://www.coriolisresearch.com/pdfs/coriolis_aldi_in_australia.pdf

Costco:
http://www.smartcompany.com.au/retail/20090507-how-costco-australia-will-change-australian-retail.html

http://www.ausfoodnews.com.au/2012/08/06/costco-looking-to-source-new-deals-in-the-australian-market.html

 

Food INC, the documentary, exposes the activities of major American MNCs involved in the food industry. It explains the way in which competition is restricted and the impact large MNCs have on other firms and consumers. Food, Inc. exposes America’s industrialized food system and its effect on our environment, health, economy and workers’ rights.

The Food INC website:
http://www.foodincmovie.com/

After viewing the documentary students will need to write a reflection on what they learned as well as answer a series of questions.

Great links & resources to use….

Using ART to teach Economics:

https://intra.krannert.purdue.edu/sites/econandart/Pages/Home.aspx

Council for Economics Education: www.EconEdLink.org    (see Silly Bandz)

 

Paul Solman’s Making Sen$e segments from the PBS NewsHour are being used in schools to illustrate economic issues and concepts.
http://www.econedlink.org/interactives/making-sense-with-paul-solman.php

 

Seinfeld & Economics

http://yadayadayadaecon.com/

 

Dirk Mateer

http://dirkmateer.com/

 

Movies & Economics:  
http://criticalcommons.org/Members/ccManager/lectures/dirk-mateers-econ-media-library

 

Music & Economics:

http://divisionoflabour.com/music/mt/mt-search.cgi?tag=Money&blog_id=1

 

Drew Carey Project:

http://reason.tv/video/show/gridlock

 

Part A: Some Teacher resources

i)              Visual Economics

Using Art in Economics

This website, developed by Michael Watts, uses Artworks to illustrate a wide range of economic concepts. It includes details of the Artists, Paintings and economic concepts. It is excellent for visual learners. This website could also incorporate discussions on economic history.

https://intra.krannert.purdue.edu/sites/econandart/Pages/Home.aspx

An article in The Journal of Economic Education, 2012,  (Watts, M & Chineze,C. Using Art (Paintings, Drawings, and Engravings) to Teach Economics   43(4), 408–422, Taylor & Francis Group, LLC, p410) discusses the use of the above website in teaching economics. The article and the website contain a series of questions to stimulate student learning and discussion on basic economic concepts.

http://www.krannert.purdue.edu/centers/pcee/Using%20Art%20to%20Teach%20Economics.pdf
  

Using Cartoons to teach Economics

A favourite of many Economics teachers when looking for cartoons to stimulate discussion is John Ditchburn’s website which has fantastic cartoons on a range of topics relevant to Economics.

www.inkcinct.com.au 

Another fantastic source of cartoons is Peter Nicholson’s website:

www.nicholsoncartoons.com.au

ii)            Mathematics & Economics

Economists are always analysing data, studying graphs, forecasting trends and working with a vast range of statistics. There are just three key websites we can use:

Reserve Bank of Australia (Excellent graphs in Chart Pack, Statistics, Speeches and Publications) www.rba.gov.au

Australian Bureau of Statistics www.abs.gov.au

Trading Economics (Useful for International comparisons in data and graphs)
http://www.tradingeconomics.com/
 

iii)           Oral & Visual Economics

The TED website provides access to brilliant talks on a wide range of topics, including economics. This site is well worth a regular check as you begin a new topic.
http://www.ted.com/talks/tags/economics

A fairly new feature on ted.com are flips. These are short but excellent video animations on a range of topics, including economics. You watch it, then think by answering some questions, then dig deeper.  
http://ed.ted.com/lessons?category_id=41

Using YouTube, the ted.com site enables you to flip the YouTube link and therefore extend its educational use in the classroom. 
http://ed.ted.com/videos?q=what+is+economics

The Khan Academy has received a great deal of good press recently, especially for its free online teaching tools. It also has some online lessons on economics.  
http://www.khanacademy.org/

Prezi provides a newer format for presentations besides powerpoint. You need to sign up to get access to this site. However, once signed up there are many useful Prezis you can use and store on your own page. 
http://prezi.com/
 

Using Movies & TV in Economics,

The comedy series Seinfeld was a massive hit when it aired on TV many years ago. This website has cut and tagged segments of the show according to the economic concept/s illustrated.  The Economics of Seinfeld www.yadayadayadaecon.com

Article on using Seinfeld to teach Economics.
http://www.businessweek.com/magazine/content/10_48/b4205026175789.htm

There are a number of lists detailing relevant movies to use in teaching Economics. Here is an incomplete but relevant list that may interest Economics teachers and students. This list is not up to date and could easily be added to with some older and some newer movies:
http://tutor2u.net/blog/index.php/economics/comments/economics-movie-theatre/

Dirk Mateer has spent a great deal of time researching, cataloguing and building a great list of visual resources for economics. Movies, TV shows, music. 
http://dirkmateer.com/
  

Some other Movies to consider:

Charlie and the Chocolate Factory-2005

An Inconvenient Truth-2006

The Bank-2001

The Corporation-2003

Wall Street- 1987

Wall Street – Money never sleeps 2010

Margin Call -2011

Trading Places-1983

You’ve Got Mail -1998

The Economics of Happiness 2011

Australian TV

The main source of excellent, up to date news has to be the ABC News, 7.30 Report, Lateline, Lateline Business as well as episodes of 4 Corners, Foreign Correspondent, Landline and SBS Dateline and Insight, among other programs.  

www.abc.net.au

Political and economic satire is always stimulating, clever and funny. Watch out for Clarke & Dawe each week on the 7.30 Report and YouTube.

iv)           Aural Economics

Using Music in Economics

Many songs can be used to teach economic concepts. This website has lists of song titles, lyrics and music as well as assignments related to a wide range of economic concepts. From Abba to Zeppelin, LED 
http://www.divisionoflabour.com/music/
  

This website provides a fun way to learn about economic concepts using Rap songs in Rhythm, Rhyme, Results
http://www.educationalrap.com/music/economics/

Music links on Economic issues, including Weird Al Jankovic’s Ebay song 
http://www.criticalcommons.org/Members/oroark/clips/7-ebay.mp4

Music links on Economic issues, including Weird Al Jankovic’s EBay song 
http://www.criticalcommons.org/Members/oroark/clips/7-ebay.mp4
                                                                                                         

v)            Economic Limericks:  

(Get your students writing ones relevant to your current topic or at the end of each term.)
http://www.limericksecon.com/

vi)           Interactive/Simulation Economics

Using Simulation Games in Economics

A range of Classroom experiments and games  
http://www.economicsnetwork.ac.uk/themes/games

An excellent set of resources for teachers and students
http://www.econedlink.org/

Although you do need to register, this website generates quizzes on economic content & terminology 
http://quizlet.com/
 

Australian Stock Exchange Game- Sharemarket Game School Competition www.asx.com.au

Dirk Mateer on YouTube
http://www.youtube.com/user/dmateer

Tennis Ball activity (Production lines, productivity, marginal product, law of diminishing marginal returns )
http://www.economicsnetwork.ac.uk/showcase/hedges_tennis

International Trading Game
http://www.economicsnetwork.ac.uk/showcase/sloman_game

Interactive demand and Supply  
http://www.bized.co.uk/learn/economics/markets/mechanism/interactive/part1.htm

Interactive activities on Unemployment
http://wps.pearsoned.com.au/jmam/50/12846/3288811.cw/content/index.html

Kim Sosin’s Interactive Demand and Supply
http://ecedweb.unomaha.edu/dem_sup/econqui2.htm

Lemonade Stand game  
http://www.classbrain.com/cb_games/cb_gms_bag/lemonade.html

Board games

Megabucks

Monopoly

Some key International websites

The Business Education website (UK)
http://www.bized.co.uk/learn/economics/index.htm
 

Economist Magazine www.economist.com

European Union www.eu.org

International Monetary Fund www.imf.org

Khan Academy has received a great deal of good press recently, especially for its free online Mathematical teaching tools. It also has some online lessons on economics.  
http://www.khanacademy.org/

National Council of Economics Education (USA) www.econedlink.org

Organisation for Economic Cooperation and Development www.oecd.org

Ted.com website www.ted.com

A wide range and style of resources for Economics teachers and students
http://www.tutor2u.net/blog/index.php/economics/

World Bank www.worldbank.org

World Trade Organisation www.wto.org

 

 

Eurozone crisis

The love story sours…. start by watching these 2 fun Youtube clips:

now the sequel….

Which countries use the Euro?

17 of the 27 countries in the European Union (EU) use the Euro. On January 1, 1999, the euro commenced trading electronically and on January 1, 2002, the currency became legal tender (with notes and coins being traded/used). 12 EU countries began using the Euro in 1999 and 5 more countries joined the eurozone later. The Euro is the second most traded currency after the US dollar.

Prezi:
http://prezi.com/yl8fth9w8xs0/project-on-the-eurozone-crisis/?res_nr=5&sis=9958670613

The Eurozone countries-who is and is not using the Euro? (www.thomasgraz.net)

News of the day-In the beginning……excitement when the Euro was launched:
http://news.bbc.co.uk/2/hi/business/1736691.stm

Ten years later- how things have changed. Will the Euro survive?   
http://www.abc.net.au/7.30/content/2011/s3308081.htm

The European Central Bank (ECB) is based in Frankfurt, Germany. (
http://topnews.us/)

What are some of the benefits of using the common currency of the Euro throughout much of Europe?

• Easier travel between countries in the Eurozone
• Easier trade and business with the Eurozone countries
• A stronger Europe and greater competition for the USA and other regions
• Increased efficiency in running businesses- reduced costs
• Less individal currency fluctuations due to switch to a common currency
•  Increased economic stability

What are  some of the disadvantages of using the common currency of the Euro throughout much of Europe?

• Loss of sovereignty in joining the Eurozone
• exchange rate volatility
• economic instability beyond just one country
• one currency zone but very different rates of economic growth across the Euro country’s. Hard to apply monetary policy across a region.

Why is there a debt crisis in Europe?

A Timeline of the crisis:  
http://www.bbc.co.uk/news/business-13856580

The Great Eurocrash: 4 Corners (LRC)-11/6/2012

Coming Acropolis (Foreign Correspondent):
http://www.abc.net.au/foreign/content/2010/s2878167.htm

The Greek Tragedy unfolds:
http://www.sbs.com.au/insight/episode/index/id/445/Greek-Ruins#watchonline

Greek Tragedy (Dateline) 15 mins 10/7/2011

The Greek Crisis (Dateline)- 52 mins 5/6/2012

http://www.sbs.com.au/dateline/story/related/aid/583/id/601483/n/Greece-in-Crisis

http://www.sbs.com.au/dateline/story/watch/id/601267/n/Greek-Tragedy

The Khan Academy: Greek debt crisis explained:
http://www.khanacademy.org/finance-economics/greek-debt-crisis

Ireland in distress:

Goodbye My Ireland (Foreign Correspondent):
http://www.abc.net.au/foreign/content/2011/s3145891.htm

Dicing with Debt (Ireland); 4 Corners: 12/3/12

http://www.abc.net.au/4corners/stories/2012/03/08/3448633.htm

Iceland was sinking:

Hook, Line and Sunk (Iceland) (Foreign Correspondent):
http://www.abc.net.au/foreign/content/2009/s2693259.htm

The Euro crisis song:

BBC News:
http://www.bbc.co.uk/news/business-15056425

Clarke & Dawe: The Lending Merry-Go-Round:

Statistics on the Eurozone debt crisis

The key charts to help you understand the crisis:

The Economist:
http://www.economist.com/blogs/graphicdetail/2012/05/european-economy-guide

http://www.guardian.co.uk/news/datablog/2011/nov/07/euro-debt-crisis-data

What is being done to solve the crisis??

Setting up of measures over the past few years to counter and stabilise the eurozone area e.g.:

• the European Financial Stability system (May 2010)
• the European Financial Stabilisation Mechanism (EFSM) in January 2011

The ECB has used its powers to implement monetary policy measures to help reduce instability: (wikipedia)

• First, it began open market operations buying government and private debt securities worth 183 billion euros (as of mid November 2011).^[116]
• Second, it announced two 3-month and one 6-month full allotment of Long Term Refinancing Operations (LTRO’s).
• Thirdly, it reactivated the dollar swap lines^[117] with Federal Reserve support.

Other measures:

• stronger Eurozone countries (Germany, France) bailing out weak countries-eg; Greece (will the PIGS follow…)
• write off some of the accumulated debt for weak countries

Some other measures that have been proposed:

• Eurobond proposal:
  http://www.bbc.co.uk/news/business-14542220
  
• Put weak countries out of Eurozone-they would have to return to their old currency (high risks)
• Create a new super Eurozone area-only those countries that have strong economies join (French proposal)

European Central Bank (ECB) to the rescue

September 8th 2012- The ECB has come to the rescue by saying that it will buy unlimited amounts of government/sovereign bonds from troubled EU countries, concentrating on maturities between 1-3 years. This will put upward pressure on bond prices and downward pressure on borrowing costs and help the PIIGS stimulate their economics to generate some growth. The ECB will require troubled countries to sign up for aid from Europe’s bailout finds-the EFSF and the ESM.

How does/might the Eurozone crisis effect Australia?

• sharemarket instability
• slower global growth and therefore slower growth in Australia
• increased business and consumer uncertainty
• decreased business investment and consumer spending
• banking sector problems due to possible defaults, tighter credit availability and therefore increased cost of credit (higher borrowing costs)
• lower commodity prices due to falling demand
• China and Europe are major trading partners. If China ‘s economy slows it directly impacts negativel on Australia

What does the Reserve Bank of Australia think?

October 2011:

Conditions in global financial markets have continued to be very unsettled,
with uncertainty increasing about both the prospects for resolution of the
sovereign debt and banking problems in Europe, and the outlook for global
economic growth. While temporary impediments that had contributed to a slowing
in growth in some countries over recent months are lessening, recent data
suggest a continuing period of soft economic conditions in both Europe and the
United States. Moreover, the uncertainty and financial volatility have reduced
confidence, which could result in more cautious behaviour by firms and
households in major countries.

November 2011:

Financial markets have recovered somewhat from the turmoil of recent months,
helped by stronger economic data in the United States and by signs that European
governments are making progress in their efforts to deal with the sovereign debt
and banking problems. Equity markets have gained ground and the Australian
dollar has risen significantly as risk aversion has lessened. But it is likely
to be some time yet before concerns about the European situation can
definitively be laid to rest and the effects of the recent turmoil on confidence
may result in a period of precautionary behaviour by firms and households.

June 2012:

The Board has noted previously that Europe would remain a potential source of adverse shocks. Europe’s economic and financial prospects have again been clouded by weakening growth, heightened political uncertainty and concerns about fiscal sustainability and the strength of some banks. Capital markets remain open to corporations and well-rated banks, but spreads have increased. Long-term interest rates faced by highly rated sovereigns, including Australia, have fallen to exceptionally low levels. Share markets have declined.

August 2012:

The most significant area of weakness continues to be Europe, where economic activity has been contracting and policymakers confront the very difficult task of seeking to put both bank and sovereign balance sheets onto a sound footing, while promoting conditions for improved long-term growth.Financial markets have responded positively to signs of progress, but Europe will remain a potential source of adverse shocks for some time.

September 2012:

Financial markets have responded positively over the past couple of months to signs of progress in addressing Europe’s financial problems, but expectations for further progress are high. Low appetite for risk has seen long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels.

Stay tuned: The Global economy.. current analysis (BBC)

http://www.bbc.co.uk/news/special_reports/global_economy/

http://www.businessweek.com/global/euro-crisis/

Down-grading European countries credit ratings

Nine countries have had their credit rating downgraded by Standard & Poor’s in January 2012. France, as a major player in working to lessen the crisis, has had its AAA rating downgraded to AA+. Austria has also lost it’s AAA rating- now AA+.  Also downgraded were: Italy, Spain and Portugal, Cyprus, Malta, Slovakia, and Slovenia. The credit crisis is impacting on a broader range of countries than just the very indebted so called PIIGS. The key reason for the downgrades was the fact that not enough policy action has been taken despite numerous and ongoing meetings, to lessen the impact of the financial crisis in Europe.

Austerity versus Stimulus

It has been argued that too much austerity is in fact worsening the economies of the very countries and continent that is struggling to grow. Government policy makers, global organisations and key advisers all have a fine line to tread between reviving economic growth and ensuring debt consolidation occurs. What advice would J.M. Keynes have given in this situation?

Chaos in Cyprus

http://www.abc.net.au/news/2013-03-25/the-cyprus-solution/4593748

http://www.abc.net.au/news/2013-03-26/the-cyprus-deal-is-done-but-at-what-price/4596098

http://www.abc.net.au/news/2013-03-27/anger-mounting-over-the-cyprus-bailout/4598470

http://www.abc.net.au/news/2013-03-26/cyprus-banks-remain-shut-michael-pettis-offers-his/4596150

 Cyprus Timeline

 
http://www.telegraph.co.uk/finance/financialcrisis/9951858/Cyprus-bailout-timeline.html

 Cyprus capital controls-March 2013

• Daily withdrawals limited to 300 euros
• Cashing of cheques banned
• Those travelling abroad can take no more than 1,000 euros out of the country
• Payments and/or transfers outside Cyprus via debit and or credit cards permitted up to 5,000 euros per month
• Businesses able to carry out transactions up to 5,000 euros per day
• Special committee to review commercial transactions between 5,000 and 200,000 euros and approve all those over 200,000 euros on a case-by-case basis
• No termination of fixed-term deposit accounts before maturity

Should Cyprus Leave the Eurozone?

http://business.financialpost.com/2013/03/28/paul-krugman-cyrpus-should-leave-the-euro-now/

*Cyprus will face a severe economic contraction if it stays in Eurozone. If it leaves the Eurozone, the severity of its economic contraction may be less severe and

*if Cyprus leaves the  Eurozone, a massive currency depreciation will result and significant short term pain and an export tourism services led recovery, perhaps creating economic recovery sooner rather than later cmpared to staying in the eurozone

*a trade exposed banking services/sector hard hit by debt problems

 

The Market for Human Hair Extensions

The Market for Human Hair Extensions

Girls studying Middle School Commerce or VCE Economics will be fascinated to learn about the international market for human hair in the form of hair extensions. With hair extensions becoming an increasingly popular fashion accessory,  as well as more affordable, the international demand for human hair is outstripping the international supply of human hair. So, where does the human hair used to make hair extensions come from?

The answer to this question is interesting and complex. Students will need to do alot of research to find the answers. However, there are two recent and excellent documentaries to open up their eyes about the workings of this market.

1) The Foreign Correspondent documentary aired on 23/2/2010 examines the international market for hair by looking at the sacrifice of hair made by Hindu Indians and then following the journey their hair takes as it moves from Temple to intermediate buyers to manufacturers to hairdressing salons. The production process is interesting and along the way raises more questions than answers, including that of ethical hair extensions.

“Hair extensions have become the wildly popular, breath-takingly pricey accoutrement for the cashed-up, style-conscious around the world. They are an elaborate way of adding length and volume and customers can spend thousands in one sitting.

http://www.abc.net.au/foreign/content/2010/s2828237.htm

But where do the raw materials come from?

It’s effectively being harvested from one of the poorest parts of the world from people who have no idea their hair is being spun into gold. Human hair is feeding what one industry leader estimates to be a billion dollar business.

Reporter Tracy Bowden (ABC TV)  follows the hair trail from temples in India to the high-streets of London, with a stopover in Rome to meet the self-styled king of hair extensions David A Gold.

“This market is gigantic, beyond comprehension, we are talking about billions and billions of dollars of turnover yearly in this extension field,” Gold declares.”

2) The second documentary is: Jamelia-Whose hair is it anyway? A BBC documentary now available on YouTube in 6 parts. Jamelia investigates the sources of human hair, the trend in hair extensions, the cost of human hair, the quality of human hair used in hair extensions and the ethics of this industry. Students will know Jamelia and this is what makes the documentary captivating!

Jamelia-Whose hair is it anyway? (BBC documentary in 6 parts on Youtube)

Student activities:

Once students have viewed the two documentaries, a range of individual, class and student activities are suggested to help them understand and investigate the workings of the market.

Individual task: After viewing the documentary, write a reflection on what you saw and your thoughts about the many issues raised.

Class task:

1. Is this another example of the developed world exploiting developing countries?
2. Would you want to know where the human hair in your hair extensions comes from?
3. Explain some of the ethical issues raised in this documentary.
4. Why can David Gold be described as an entrepreneur.
5. Explain why Jamelia does or does not have a responsibility to make others aware of the way in which this market operates.
6. What are the human costs of the desire by western women around the world to be beautiful?

Paired task:

1a) How is the price of human hair determined? (Investigate the cost of human hair and how it is sold-per length? price per kilo? quality?)

2a) List and explain 3 microeconomic demand factors (condition changes)  that influence the international price of i) human hair and ii) hair extensions.  Draw the relevant demand and supply diagrams to illustrate this.

2b) List and explain 3 microeconomic supply factors (condition changes) that influence the international price of i) human hair and ii) hair extensions.  Draw the relevant demand and supply diagrams to illustrate this.

3) investigate and then draw a flow chart to step out and show each stage of production in producing human hair extensions.

4a) Design a set of questions (at least 5 questions) to ask 10 buyers of hair extensions ie: people who have or have had hair extensions. (Your survey needs to be photocopied, distributed, collected and results collated). Write a report on your findings.

4b) Design a set of questions (at least 5 questions) to ask 10 different Hairdressers (from different salons) about their sale of human hair extensions. (Your survey needs to be photocopied, distributed, collected and results collated). Write a report on your findings.

4c) Investigate and explain the trend in having hair extensions. i) Why is it popular? ii) Who typically gets extensions? iii) Why are they prepared to pay so much to get them done? iv) What role does advertising play? v) How significant is star power?

4d) Human hair is also used to make wigs. Investigate the use, production, cost, quality and price of human hair wigs in Australia.  Who needs and buys such wigs?

5) Research the prices of human hair extensions in hairdressing salons in Australia. Provide details of prices, quality, source of hair.  Why do prices vary so much?

6) Research the price of human hair extensions in countries other than Australia. Provide details of prices, quality, sources. Why do prices vary so much?

7) Research prices of synthetic hair extensions in Australia. Provide details of prices, quality, place of manufacture, sources. Why do prices vary so much?

8 ) Research prices of synthetic hair extensions outside Australia. Provide details of prices, quality, place of manufacture, soures. Why do prices vary so much?

9a) Investigate the major Companies that supply hair extensions to hairdressing salons around the world.(Start with Great Lengths-the company featured in the Foreign Correspondent documentary)

9b) Who are the key players? Where are they based? What percentage share of the market do they each have? (Remember, Great Lengths supplies about 4% of the international market for human hair extensions).

10) Investigate the incredible profitability of the human hair extension market. What does it cost to buy human hair? What price are human hair extensions sold for? What does it cost to get hair extensions put in your hair? What are the various mark-ups at each stage of production?

From Temples to Salon: Vanity Hair extensions (American clip)

This documentary will show students various stages of production and the price mark-ups and value added at each stage of production.  It follows the journey of human hair from Indian Temple to the hairdressing salon.

Other resources:

There have been many newspaper and magazine articles on the issue of human hair extensions.  Use the net and library resources to source some of these.  Here are a few to get you started:

When raising cash means razoring your hair.  Sydney Morning Herald, 06/03/2010

Blame it on Britney: Is hair trade fair trade? The Sunday Age, 9/12/2007

Scalping third world. The (Sydney) Herald Sun, 22/02/2004

The God Trade. The Dominion Post, 07/03/2009

Children sell their hair for $3.  The (Sydney) Herald Sun, 22/02/2004

Environmental Economics

National and International economic responses to climate change

A Global and Local Focus

Governments around the world have or are realising that economic progress, ie: economic growth, must be ecologically sustainable and that countries must work together to make this happen.

Ann Hodgkinson states “that in economic theory, greenhouse gas emissions are termed a “mutual externality“. Each country pollutes itself and the rest of the world simultaneously. Therefore, the impact each country experiences is actually much larger than that arising from their own country’s emissions. Subsequently, each unit of emission reduction by one country provides benefits to itself and all other countries simultaneously.”

What is climate change?

With each passing year, the discussions and debates on climate change and the impact on our world becomes more urgent. Climate change dominates global and domestic agendas as demonstrated in the months and weeks leading up to December 2009 when world leaders meet in Copenhagen, Denmark, to discuss and (hopefully)  reach some agreement on the way in which the world can take positive steps to slow down climate change.

UN definition of climate change: A change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and that is in addition to natural climate variability over comparable time periods

Question: Why is climate change such an important topic for Economists?

Answer: The economy is a subset of the environment. What happens to the environment always has a direct impact of each region, country and the world’s economic prosperity.

The language of climate change: [http://www.csiro.au/ozclim/glossary.do]

Sir David Attenborough: the truth about climate change

2.44mins

Climate change: the scientific debate 10.40mins

Climate Change reports:

A number of key reports on climate change have been undertaken. In the UK, Sir Nicholas Stern wrote the Stern Review on the Economics of Climate Change in Oct 2006.

In Australia, the Rudd government commissioned Professor Ross Garnaut to investigate,write and make recommmendations on climate change. He completed his Climate Change Review in December 2008.

What is market failure?

Sir Nicholas Stern’s report stated that climate change threatens to be the greatest and widest-ranging market failure ever seen. Both the Stern report and the Garnaut report strongly recommend government action to reduce carbon emissions.

Why is climate change an example of market failure?

The market mechanism (market) is usually a very effective way of allocating resources. However, sometimes it results in an inefficient and undesirable outcome. Climate change is one such example of market failure. This is because the drive for greater economic growth has resulted in environmental damage and costs to society. This negative (bad) externality reflects the negative consequences of production and consumption, where the spillover effects on society are greater than individual effects on producers and consumers. Global warming and climate change are examples of negative externalities. Put simply- the COSTS of climate change are NOT factored into the PRICE of production or consumption.

Burning fossil fuels such as coal to generate electricity and buring petrol to power cars, emits carbon dioxide and other greenhouse gases into the atmosphere, damaging the environment. So, climate change is a form of market failure because the greenhouse gases contribute to climate change, such as global warming, which then impose costs on all people. These costs can include:

• damage to our health from water and air pollution
• a more changeable, volatile climate, leading to more natural disasters (fire, floods, etc)
• coastal erosion & rising sea levels
• loss of flaura and fauna
• decreased agricultural production
• expenditure on having to climate proff our homes (insulation, tanks, etc)
• water shortage
• more natural disasters cause increased insurance costs, loss of life, loss of houses, infrastructure, animals, capital, etc..

As greenhouse gas emissions are undesirable, this cost of production should and will be borne by producers and reflected in the market price of all those goods and services the production of which generates emissions. However, because the use of the atmosphere to disposeof emissions is FREE, the cost of the emissions by the various industries and companies whose activities produce emissions is NOT takne inot account.

Documentary: An Inconvenient Truth

Study Guide: www.aninconvenienttruth.com.au/truth/guide.htm

What are the global costs of doing nothing to reduce climate change?

*low lying islands, disappear

*properties on coastlines are ruined

*increased spread of diseases due to warmer climate

*what else?

How does Australia compare to other countries greenhouse gas emissions?

Read the article: Australia’s Emissions Trading Framework and comment on the data showing various countries emissions.

Federal Government response to Climate change

Clarke & Daw talk carbon trading  2.48

Not long after it was elected, the Rudd government signed the Kyoto Protocol, which committed Australia to restraining it’s greenhouse gas emissions to an average 108% of 1990 levels between 2008-2012. Mr Rudd described the Kyoto protool as “the most important far-reaching agreement on environment and sustainable development ever adopted.”

The government has shown commitment to a range of emissions targets:

a) a medium-term target range to cut emissions by 5% from 2000 levels by 2020 or up to 15% by 2020 if other countries commit to comparable reductions to that of Australia

b) 60% reduction from 2000 levels by 2050

The Intergovernmental Panel on Climate Change recommended emission cuts of 25-40% by 2020 for developed countries in order to reduce the risk of global warming beyond 2 degrees. The Australian government suppports this decision.

The Australian government wants a united global response to the challenges posed by climate change.

Dec 2008 White Paper on a CPRS

From 2011, the government will use the price mechanism to establish a price for carbon, ie: higher prices will apply to production involving carbon emissions.

2.30 Rudd addressing Australians

 1.29 Rudd addressing UN

1.20 Penny Wong address

Australia’s CPRS/Emissions Trading (a CAP and TRADE approach)

• The CPRS raises the price of carbon usage.
• A cost will be put on carbon pollution (it will have a market price-expected to be about $20-$25 per tonne)
• It is a national emission trading system (and may later on be part of a global system)

What will this do? It will cause a shift to substitute, cleaner energies (eg: solar, wind, …) Higher prices force consumers and producers to change their behaviour.

• The CPRS places a limit (or a CAP) on total carbon emissions (annually)
• The government will provide funds to assist industries to reduce emissions and secure jobs
• Households will receive financial help to adjust to higher prices

So: businesses that generate greenhouse gases such as carbon will need to BUY a permit for every tonne of greenhouse gas they emit. The more they emit, the dearer it will be for them.

• Businesses are issued with permits and are required to hold an equivalent number of credits, which represent the right to emit a specific amount.
• Businesses who pollute more must buy credits from those who pollute less.
• The polluters/buyers face extra costs
• The sellers are rewarded for lowering emissions

The market system/price mechanism will provide a great incentive to businesses to reduce emissions and produce more efficiently creating less emissions.

Effects of the CPRS on the economy

• inflation will rise by approximately 1.1% in the first year.
• households will pay more for electricity, gas, petrol, etc..
• government assistance will be needed to help households, especially pensioners
• petrol excise tax will be reduced
• businesses will face higher production costs
• the government will raise approx $11.5 bn in revenue from he auctioning of carbon permits
• the government will spend approx $6bn to compensate businesses and households
• added costs may reduce economic growth in the short term
• businesses may be less internationally competitive in the short term
• loss of jobs if business costs rise too much

Climate change Conference

Task: During the next 7 lessons you will need to undertake wider reading & research to gain an understanding of the causes and impact of climate change.

You will be allocated a person, group or organisation to research and will need to become the expert in the class on this person, groups or organisations opinions.

In lesson 6/7 we shall have a round table conference to compare notes and learn more about the impact of climate change on the global economy and the responses from various stakeholders.

Who’s coming to our Climate Change Conference?

Al Gore		www.aninconvenienttruth.com.au/truth/guide.htm
Kevin Rudd    Penny Wong	Australian Prime MinisterClimate Change Minister	http://www.climatechange.gov.au/   www.environment.gov.au
Julie Toth	ANZ Senior Economist	http://www.anz.com/documents/economics/Emissions%20Trading%20Scheme%20update%20Dec%202008.pdf
Don Henry	Australian Conservation Foundation	http://www.acfonline.org.au/default.asp?section_id=6 http://www.acoss.org.au/upload/publications/papers/4549__SXCC%20Joint%20Statement.pdf
Bob Green	Leader of The Greens	http://greens.org.au/campaigns/climatechange
Steven Keen	Associate Professor in the School of Economics & Finance University of WA	http://blogs.crikey.com.au/rooted/2009/02/18/economists-speak-out-against-flawed-carbon-trading-scheme/
Prof Ross Garnaut	Garnaut  Climate Change review	www.garnautreview.org.au http://www.climatechange.gov.au/
Ross Gittins	Journalist with The Age	http://www.smh.com.au/business/emission-impossible-the-sad-truth-20090224-8gsv.html
Sir Nicholas Stern	The Stern Review-The economics of climate Change	www.hm-treasury.gov.uk
	World Meteorological Association	http://www.wmo.int/pages/themes/climate/index_en.php
Sharan Burrow	ACTU President	http://www.actu.asn.au/Campaigns/CleanEnergyJobs/default.aspx http://www.actu.asn.au/Media/Speechesandopinion/SharanBurrowCombatingglobalwarmingisasharedtask.aspx   http://www.acoss.org.au/upload/publications/papers/4549__SXCC%20Joint%20Statement.pdf http://www.greenleft.org.au/2009/807/41527
Ban Ki Moon	United Nations (UN) General Secretary	http://www.un.org/en/globalissues/climatechange/index.shtml   http://unfccc.int/meetings/cop_13/items/4049.php
	CSIRO	http://www.csiro.au/ozclim/home.do;jsessionid=6F96C2B0FF15CF16E3661A2567A05FA3
	Institute of Public Affairs	http://ipa.org.au/news/1958/climate-trumping-needs-of-the-poor http://www.ipa.org.au/news/1927/the-great-cprs-green-jobs-con   http://www.ipa.org.au/news/1923/haste-makes-waste-in-the-carbon-countdown http://www.ipa.org.au/
Heather Ridout	CEO of Australian Industry Group (AIG)	http://www.aigroup.com.au/portal/site/aig/environment/emissions/
Tim Costello	CEO of World Vision Australia	http://www.worldvision.com.au/Issues/Climate_Change/What_is_this_about_/TimCostelloClimateChangeOurGreatestChallenge.aspx
Rob Grant	CEO of Pacific Hydro	http://www.pacifichydro.com.au/en-us/news/11-august-2009.aspx
Ben Ferguson	Senior Economist & Acting Assistant Director, Climate Change, Environment & water, Dept of Treasury & Finance
Malcolm Turnbull	Federal Opposition Leader (Liberal party)	http://www.malcolmturnbull.com.au/FAQs/tabid/85/articleType/ArticleView/articleId/145/Climate-Change-and-an-Emissions-Trading-Scheme.aspx
David Pearce	Executive Director-Centre for International Economics	http://www.thecie.com.au/searchresults.asp?query=CPRS
Andrew Macintosh	ANU Centre for Climate Law & Policy
Craig Gailey	Business Council of Australia	http://www.bca.com.au/Content/101469.aspx
David Spratt	Co-Author of Climate Code red: The case for Emergency Action	http://www.greenlivingpedia.org/Climate_Code_Red   http://www.safeclimate.org.au/node/143 http://www.safeclimate.org.au/node/46
Greg Bourne	CEO of WWF Australia	http://wwf.org.au/ourwork/climatechange/
	Clean Energy Council	http://cleanenergycouncil.org.au/cec/policyadvocacy/Submissions/past/mainColumnParagraphs/0/text_files/file/CEC-Submission08.pdf
Belinda Robinson	CEO of Australian Petroleum Production & Exploration
	Australian Council of Social services (ACOSS)	http://www.acoss.org.au/upload/publications/papers/4549__SXCC%20Joint%20Statement.pdf

Bibliography:

Ambatzis, K. Climate Change: an example of market failure. Compak 2009, Feb.

McConnell, J. Economics Agenda. Workbook for Economic Activity , Book 2. p54-55

Strauss, D. What is emissions trading? Compak.2009. May.

Hodgkinson, A. Australia’s Emissions Trading Framework. Ecodate, August 2009.