Automation – benefits and costs

Automation – benefits and costs

Definition of automation Automation refers to the process of automatically producing goods through the use of robots, control systems and other appliances with minimal direct human operation. Within manufacturing industries, automation has led to increased labour productivity as fewer workers are needed to produce the same number of manufactured goods. A perceived downside of automation is that it leads to jobs being displaced in traditional areas of work – in particular, ’blue collar’ manufacturing jobs. Less visible is how the process of automation leads to the creation of new jobs in…

Rational expectations

Rational expectations

Rational expectations is an economic theory that states – when making decisions, individual agents will base their decisions on the best information available and learn from past trends. Rational expectations is the best guess for the future. Rational expectations suggests that although people may be wrong some of the time, on average they will be correct. In particular, rational expectations assumes that people learn from past mistakes. Rational expectations has implications for economic policy. The impact of say expansionary fiscal policy will be different if people change their behaviour because they expect…

Inefficiencies within Greek economy

Inefficiencies within Greek economy

Over Christmas and the New Year I visited Greece – landing at Athens airport then hiring a car to Kalamata. After writing many articles on the economic troubles of Greece, it was interesting to visit in person. Whilst enjoying a holiday, I was always aware – in the back of my mind – the Greek economic crisis and I was looking for signs or anecdotal evidence of why Greece has struggled from…

Impact of raising US interest rates on US and global economy

Impact of raising US interest rates on US and global economy

After keeping interest rates at close to zero for several years, the US Federal Reserve have moved to finally increase interest rates. This increase in interest rates is more significant than usual because it marks an end to the unique circumstance of ultra low interest rates. The Federal Reserve have also indicated they expect to raise interest rates three times throughout 2017. Basic impact of increasing interest rates. I have covered this in detail before, so I won’t repeat too much here. See: Impact of raising interest rates, but to…

Impact of falling house prices

Impact of falling house prices

A look at the economic impact of falling house prices. Readers Question: Explain why a decrease in the price of houses can lead the economy to experience a recession. In summary: falling house prices reduce consumers’ main form of wealth. This tends to cause lower spending and lower economic growth due to a negative wealth effect. Falling house prices tends to have a significant impact in the UK because of the relative importance of the housing market.

Reasons for falling wages

Reasons for falling wages

Since the financial crisis, we have seen an unprecedented stagnation / decline in real wages. This decline has been most noticeable for low income workers, with growing levels of inequality. The decline / stagnation in real wages is a global phenomena – though some countries have been more affected than others. Reasons suggested for falling wages since 2008 include: Recession – causing unemployment and downward pressure on wages Decline in trade union membership. Increased labour market flexibility, such as more zero hour contracts, new gig economy…

Problems facing UK economy post Brexit

Problems facing UK economy post Brexit

After the UK’s decision to leave the EU, what economic problems will it face? Summary of problems Devaluation of Pound Sterling, increasing price of imported goods, such as food, oil, manufacturers and domestic inflation. Decline in capital flows as UK is seen as more risky place to invest and save. Decline in inward investment. UK is currently 3rd largest destination for inward investment in world, but this may fall when it is outside the EU. UK’s large current account deficit, which will put further downward pressure on Sterling Decline in…

Impact of US tariffs

Impact of US tariffs

Readers Question: I’m an American, and I have a question on tariffs. Donald Trump has said he will place a tariff on all Chinese steel, and on Mexican cars. My question is, “Are tariffs still useful, and if so, why not put tariffs on all cars from Japan, Korea, Mexico, and Germany?” A tariff on Chinese Steel is designed to help the US steel industry. At the moment, American producers may find it cheaper to import steel from China so US steel producers lose out. This has led to job…