Tag: Cambridge Economics Tripos

The Lewis Model

Posted on by Rhys Williams

Describe carefully the Lewis dualistic labour surplus model. Does the Lewis model describe accurately the process of economic development in poor countries?

The Model

The Lewis model proposes a dualistic economy consisting of a formal, industrial and urban sector, and an informal, agricultural and rural sector. The formal sector is characterised as capital intensive and being run by profit-maximising capitalists who hire labour until the wage rate equals the marginal product of labour. This is because it makes economic sense for a firm to continue to hire labour until the costs (wage) equal the benefits (the marginal product of the additional unit of labour). [...]

Minimum Wages

Posted on by Rhys Williams

Why have statutory minimum wages become more prominent in recent decades? Why have they generally had little adverse effect on employment?

Prior to the introduction of the national minimum wage (NMW) in 1999 there had been no statutory wage floors since the abolishment of the Wages Councils in 1993 by the Conservative government. Growing wage inequality in both the D50:D10 and D90:D50 measure (which looks at the differing wage rates in the respective percentiles) was one of the leading reasons in the demand for some form of minimum wage to counter this growing inequality. Metcalf finds that the NMW reduced the D50:D10 ratio by 9 points if we include the effects of immigration. [...]

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. [...]

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

Posted on by Rhys Williams

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. [...]