Author: Tejvan Pettinger

Creative destruction

Creative destruction

Definition of creative destruction. This refers to the process of how capitalism leads to a constantly changing structure of the economy. Old industries and firms, which are no longer profitable, close down enabling the resources (capital and labour) to move into more productive processes. Creative destruction means that the company closures and job losses are good for the long-term well-being of the economy. Creative destruction and Marxism Karl Marx wrote at length about the nature of capitalism causing large scale loss, which enabled new wealth to be created. Marx saw wars and…

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Should UK stay in EU or leave? (personal view)

A few readers have asked me about where I stand on UK, EU and Brexit. These are some personal notes – not necessarily economic (or coherent!) I will probably vote Remain, though not with any particular enthusiasm. I do identify as both British and European. I would like to see Britain act closely with European countries to help deal with global issues, such as the environment. Post war Europe has been a great success story. Compared to the turmoil that went before 1945, Europe has come along way and the…

How much does the EU cost the UK?

How much does the EU cost the UK?

Finding the cost of EU membership to the UK is not straightforward. If you Google ‘Cost of EU membership’ you will see many different figures reflecting different methodologies. For example, those keen to leave the EU may include all the gross costs, plus estimated bureaucratic costs and not include any benefits. Those wishing to highlight the benefits of EU, may use different methodologies The ONS. has produced a useful page, which gives the cost of EU membership, including net flows. These are based on figures from 2014. Gross Payment In 2014,…

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Laissez-faire economics

Laissez faire economics is defined as a situation with minimal government intervention. Under laissez-faire, governments and regulators ‘leave alone’ private firms to allow them to make decisions about production and output. In particular, laissez-faire involves zero / minimal government intervention on issues such as regulation, taxes and tariffs. Origin of Laissez faire Laissez-faire is a French term and is said to have originated in the Eighteenth Century. French industrialists were asked about the optimal policy for the French government to help business and the term ‘laissez-faire’ was used in response – translating…

Hysteresis

Hysteresis

Hysteresis is a concept which states that history affects the value of a current issue. In economics, hysteresis states that historical rates of unemployment are likely to influence the current and future rates of unemployment. If there is a recession and rise in cyclical unemployment, this temporary unemployment can affect the underlying structural rate and increase the natural rate of unemployment. This phenomena can make unemployment a lagging factor. Why does past unemployment affect future unemployment? If people are made redundant in a recession, then they may become demotivated and…

Immigration and housing

Immigration and housing

Is net positive migration a factor behind the UK’s recent rise in house prices? Given rapid rise in house prices since mid 1990s and corresponding rise in number of immigrants, it is hard to avoid the conclusion, levels of net migration are having, at least, some effect on exacerbating the UK housing crisis. However, there are also interesting studies showing that high levels of net immigration can lead to lower house prices in certain localities as native homeowners move elsewhere.   Generally, economists find net immigration has positive benefits, with limited…

Economic predictions of Brexit

Economic predictions of Brexit

There have been numerous economic predictions springing from a possible Brexit including recession, unemployment, falling Pound, falling stock markets, collapsing house prices, inflation and the end of civilisation as we know it (I’ll leave predictions of world wars e.t.c. for someone else to grapple with). But, what is the economic theory behind these economic predictions? Recession The logic is that if the UK leaves the EU, it could plunge us into a deep recession. The IMF have warned of a ‘severe global shock’ A recession could occur due to the uncertainty of…

Tips for memorising economics and other items

Tips for memorising economics and other items

It is getting close to the summer exams, and one reader asked if I had any tips for memorising information. Some things that worked for me Read then close book. I used to read a book, then close and try to remember was is in the closed book. If I couldn’t remember, I’d check and then try again. This was hard work, but is the most effective way for getting that learning and recall. Understand and learn. Economics isn’t like learning a lot of Latin vocabulary. By comparison with other subjects there…