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Life at Cambridge Part II

Posted on by Rhys Williams

This is a long overdue follow on from my previous post Life at Cambridge, and details my experience of the Cambridge Economics Tripos for 1st year Lent and Easter terms.
The Course

Lent

Microeconomics

This term we began by looking at Game Theory, where we cover the basics such as Nash Equilibrium, before moving on to more sophisticated games, looking at 3×3 matrices as well as 2×2. Simultaneous games are considered, along with Cournot and Bertrand games and models of business strategy and the notion of game theory is applied to matters such as externalities and public goods. There are also references to evaluation, such as how game theory isn’t the best model of real-life situations; for example in a finite game, theory tells us that if it pays to cheat in the last round (i.e. [...]

New Labour v.s. Old Labour

Posted on by Rhys Williams

New Labour was forced by political circumstances to adopt neo-liberalism and the Conservative European, Foreign and Defence policies, and so abandoned traditional Labour party ideology. Discuss.

New Labour began government with a promise not to increase spending above Conservative plans for the first two years of their government along with no increases in basic or high income tax. The government was strongly pro-Europe and wanted Britain to play an active role in the policy making decisions of the EU along with a future promise to join the monetary union. Foreign policy took on an ethical role with the government promoting human rights and intervening to stop abuses. [...]

Was there an agricultural revolution?

Posted on by Rhys Williams

‘Agriculture played a fundamental role in British industrialisation.’

  • Explain the main ways in which agriculture can theoretically influence industrialisation. Word Count = 498

Agriculture can influence industrialisation through the generation or release of capital, the release of labour, acting as a market for industrial goods or through increased output.

Perhaps the most fundamental way that agriculture affects industrialisation is by providing output (foodstuffs and raw materials) which sustain an industrial urban population. If the urban population is growing quickly then the agricultural industry would need to increase output to feed these workers, this could work by the price of foodstuffs rising which would encourage more investment in farms and a strive to increase productivity. [...]

The Twin Deficit Hypothesis

Posted on by Rhys Williams

Simply put the twin deficit hypothesis is the view that an economy running a fiscal budget deficit will also run a current account deficit. It stems from a national accounting equation which says that NX = S-I. We arrive at this point because Classical economists take S = Y-C-G, so we can arrange our national accounting equation of Y = C + I + G + NX to get the above NX = S – I. Where Y is national output (i.e. GDP), S is savings, C is consumption, I is investment, G is government spending and NX is net exports (exports minus imports). [...]

Demography and the Industrial Revolution

Posted on by Rhys Williams

What were the causes of the distinctive characteristics of English fertility behaviour during the Industrial Revolution? (b) How did the fertility rate interact with economic growth during this period?

demographyBefore the causes of fertility behaviour are explored, we need to first look at what these characteristics were in the first place. From the graph to the left1 we can see that the crude birth rate (which is defined as the number of live births per 1000 people) starts off at about 30 births per 1000 people in 1680 but increases to about 44 births per 1000 by 1820. This is a significant increase, especially as Malthus believed that the maximum biological rate of fertility can only be about 50 per 1000 people – so the fertility rate was approaching the maximum in 1820. [...]

Thatcher and Conservatism

Posted on by Rhys Williams

Margaret Thatcher broke the post-war consensus in British politics and in so doing changed Conservatism in a fundamental way. Discuss.

It is generally agreed that the post-war consensus consisted of 3 broad pillars – the welfare state, a mixed economy and Keynesian demand-management to ensure full-employment. Let us firstly turn to Keynesian demand management; the post-war consensus was established when the dominant economic paradigm was Keynesian thought, it was believed that by altering government spending aggregate demand would change so as to ensure that full-employment was achieved. Traditionally, the government had the trade-off between high inflation and low unemployment or vice versa, this occurred because by reducing unemployment labour had strong bargaining power and was able to bid-up wages which caused inflation. [...]

Politics in Post-War Britain

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Winston Churchill and Clement Attlee established a coherent political order in post-war British politics. Discuss.
The 3 main pillars of the post-war order were; a welfare state, a mixed economy and maintaining full employment. These three policies were introduced by Attlee’s Labour government between 1945 and 1950. They came about through a change in ideology in the electorate during the war. Although sometimes referred to as Butskellism because they were largely enacted by Hugh Gaitskell, Chancellor under Attlee and subsequently Rab Butler, Chancellor under Churchill, they only came to pass with the support and direction of Attlee and Churchill, reflecting their combined commitment to them. [...]

Post-Keynesianism Part II

Posted on by Rhys Williams

Day 1 – Talk 2

After our Introduction to Post-Keynesianism from Engelbert Stockhammer we were given a talk by Ozlem Onaran, from Greenwich University, on “Aggregate demand, income distribution and unemployment”.

She begins by adding to Engelbert’s introduction, highlighting that fundamental uncertainty can lead to path dependency – that is decisions made today (as a result of fundamental uncertainty) will have knock-on effects into the future. Post-Keynesians believe that full-employment is a special scenario, unlike neo-classicalists who believe that full-employment is the natural equilibrium and deviations are temporary and as a result of external shocks.

The determinants of investment are reminded as: capacity utilisation (how much of existing machinery is being used), credit availability, animal spirits, technological opportunities (after WWII there were many new technologies – partially discovered/created through military efforts – which helped aid the post-war boom as firms rushed to invest in these new technologies to make profit from them) and future profitability. [...]

The Economic Implications of a Greek Default

Posted on by Rhys Williams

A lot of media attention has recently been focusing on the potential for a Greek default and exit from the Eurozone, and last Tuesday night Greece failed to repay its IMF loan, becoming the first developed country to default with the IMF. Last Sunday Greece also imposed capital controls to prevent capital flight from occurring. Capital flight is the situation whereby residents and firms move money out of a country because they are scared that they will otherwise lose it. This may be due to government taxation, requisition (some Cypriots who had money deposited with banks lost 25% which was taken by the government through an emergency tax in 2013) or fear of bank collapse. [...]