Readers Question: If I have to get economic master degree,what kind of job İ will apply in real life . can you give me list of economic job?
The most common questions I get asked by students is either?
Why didn’t you get a better paid job in the city?
What Job can I get with an economic Degree?
It is important to bear in mind an Economics degree will provide you with many skills desirable by employers. These include:
Maths skills
Ability to understand key issues affecting business
Ability to analyse, understand and interpret data
Ability to evaluate and solve problems.
Communication skills
Many employers don’t look for particular degrees, but, evidence of the ability to learn fast, be articulate and have the above qualities. In reality, the degree you choose is not as critical as students sometimes feel. For certain professions like medicine – your choice of degree is pretty limited. But, for many other professions a variety of degrees are possible. With an economic degree, you will have a variety of options open to you, especially in the business and accounting world
According to prospect magazine, the most popular destination for economic graduates are – 20% of economics graduates going straight into employment become business and finance professionals, and 17% become commercial, industrial or public sector managers. Almost 18% go on to further studies or training of some sort. (source: Why Study Economics?)
So, you will not just be limited to a poor economics teacher or jobs as an economists. And if all else fails, you can always set up a blog on economics…
Readers Question: I really wanted know more about private, public, free and merit goods not luxury,normal and inferior goods.that makes absolutely no sense at all. well by the thanks for your answer.
Free Good. A free good is a good needed by society but available with no opportunity cost. It is a good without scarcity. For example, air is a free good, because we can breathe it as much as we want. Water is usually another free good. Though in some countries, water can become scarce – then it is no longer a free good.
Note: a good may be given away for no charge (e.g. health care is free at the point of use) However, it is not a free good because there is an opportunity cost – health care paid for out of taxes
Public Good – A public good has two characteristics
Non rivalry – consuming good doesn’t reduce amount available to other people
Non excludable – once provided you can’t stop anyone consuming it.
Examples include street lights and national defence. Typically they are not provided in free market because firms cannot charge people.
(Note: Goods provided by the public sector (government) are not necessarily public goods. e.g. government provide education, but, education is a merit good not a public good)
Private Good – This is the opposite of a public good. It is a good which has rivalry and excludability. E.g. a bottle of water is sold to one individual who will consume it all. These goods are provided in a free market because a firm can make profit from them.
Merit Good – A good where people underestimate the benefits of consuming. Merit goods usually have positive externalities.
Eg. Education is a merit good. People underestimate benefits of studying and so there is underconsumption.
Note Merit goods may be provided in a free market – but in insufficient quantities.
A few people have asked why don’t government’s just default and not pay their debt back?
Firstly, a government could effectively default just by printing money, creating inflation and making it easier to pay debt back. But, if the government does create inflation (print money) to pay off its debt or simply refuses to pay, there are real problems.
Debt Defaulter If a government defaults on its debts, who is going to lend it money in the future? Once you get a reputation as being a defaulter, it will be very difficult to encourage people to buy your bonds again. That means the government will not be able to borrow in the future. Or if it does borrow more money then it will have to pay a much higher interest on the debt.
Reduction in Living Standards. Weimar Germany in the 1920s and Zimbabwe in 2008, both had high levels of government debt which led to hyperinflation. But, this kind of inflation destabilises the economy. Money becomes worthless and people resort to a barter economy. This kind of inflation damages economic activity.
Reduction in Value of Currency. If you default on your debt, there will be a sell off of your currency. This will make imports more expensive and reduce living standards.
Confidence in Single Currency
In a single currency, the default of one nation, would damage the exchange rate for all member states. If one country defaulted, markets would lose confidence in other countries will similar situations. It would become more difficult and more expensive for all member countries to borrow.
Note: In a period of deflation, it is possible for a Central Bank to pursue quantitative easing (creating money) without causing inflation. To some extent, in certain circumstances, a government may be able to create money to buy a proportion of its debt. But, to completely default on your debt would create many problems, and you would probably never be able to borrow again.
The Budget deficit is the amount a government has to borrow in a particular year. Total Debt (known as public sector debt or referred to as national debt is the total amount of debt that the government owes – to private sector, Central Bank e.t.c)
In the case of Greece, they already had a high debt, before the onset of the crisis. Even during reasonable growth, they had a high budget deficit and national debt as a % of GDP.
Note, if you had a budget deficit equal to 3% of GDP and economic growth of 3%, then national debt as a % of GDP would remain the same. Negative growth in this recession is another factor that has increased the debt as a % of GDP in many countries.
I made a short video on some of the problems facing Greek economy and Euro below. Recently, the EU and Germany have been making suggestions that they will offer Greece a bailout – to protect the value of the Euro (see: Telegraph article). However, I’m sure any bailout will have strict measures for Greece to reduce their budget deficit. The Greek economy still faces many deflationary pressures. The end of the fiscal crisis will not be the end of their problems.
The cost of bailing out the Greek debt is very small for the EU. The more significant issue is the precedent the EU are taking in bailing out countries who have large debts. It shows that in Monetary Union, there is a need for countries to maintain fiscal responsibility – otherwise the whole currency will be effected.
Readers Question: Can you please discuss the nature of the current account deficit and the exchange rate in the UK along with the theory that would suggest there is a relationship between the exchange rate and the current account.
In theory, the exchange rate will have an impact on the current account.
If there is a depreciation in the exchange rate. Then that particular country will experience a fall in the foreign price of its exports. It will appear more competitive and therefore there will be a rise in the quantity of exports.
Assuming demand for exports is relatively elastic then a depreciation will lead to an increase in the value of exports and therefore improve the current account deficit.
Similarly a depreciation of the exchange rate, will also lead to an increase in the cost of buying imports. This will lead to a fall in demand for imports and also help to reduce the current account deficit.
Therefore, in theory, a depreciation in the exchange rate should improve the current account and an appreciation should worsen the current account.
However, in practise this might not happen for a variety of reasons.
1. Elasticity of Demand. The impact of a depreciation depends on the elasticity of demand. The Marshall Lerner condition states that a depreciation in the exchange rate will only improve current account – if combined PEDx and PEDm is greater than 1.
e.g. if demand for UK exports is very inelastic. They a depreciation will lead to only a very small increase in demand.
2. Profit Margins. A depreciation means exports can be cheaper. However, a UK firm may decided to keep the same foreign price and just make a bigger profit margin. This often occurs in the short term. Firms don’t adjust prices to consumers but have exchange rate movements absorbed in their own margins. This is one reason why a movement in the exchange rate often takes time to effect the current account.
The J Curve effect states how a depreciation can worsen current account in short term because demand is inelastic, but, over time, demand becomes more elastic and therefore the current account improves.
See also: Terms of Trade – Using example of UK, a depreciation in the Pound did not effect the terms of trade as much as might be expected.
See: Terms of Trade Effect
3. Global Demand.
The depreciation in the Pound Sterling didn’t effect the UK current account deficit. One reason was the sluggish global growth. There was little foreign demand for UK exports
Whilst the UK is slowly struggling out of recession – spare a thought for Greece, who are experiencing a real economic crisis – partly of their own making – and exacerbated by the straitjacket that EURO membership entails.
The Greek economy has several significant problems
Current account deficit of 14% of GDP – their exports just aren’t competitive – and they can’t devalue, since they are in the EURO
Government borrowing has increased sharply – public sector debt is now over 100% of GDP and still increasing.
The market fears that the government borrowing is becoming at risk of default. Therefore, it is becoming difficult to sell bonds. The bond yield on Greek bonds reached a peak of over 7.1% last week – compared to 2.3% on German bonds.
Economy in recession.
To deal with the Greek Fiscal deficit, the EU are putting pressure on the Greeks to:
The Greek premier, Mr Papandreou, has agreed to cut the budget deficit from 12.7pc to 3pc in three years, but it is uncertain whether he will have political will or political capacity to push through such a politically undesirable set of policies.
But, it is not just political difficulties. The Greek economy is already weak, suffering low growth, high unemployment. The latest figures suggest GDP falling by -0.4% Q3/Q2 2009. Inflation is very low at 0.5%.
If the Greeks pursued the policies suggested in the draft EU policy it would lead to a large deflationary effect on the economy. Growth would fall further, and the economy would be very likely to slip into a very dangerous period of deflation.
Furthermore, by strangling the economy through higher taxes, wage cuts and spending cuts, tax receipts will fall and there will be a rise in unemployment benefit spending.
From an economic perspective it looks a very dangerous policy prescription.
If I was Greek I would be desperate to see the economy leave the EURO, devalue the Greek currency and pursue an independent monetary policy.It seems that being in the EURO, the biggest target is reducing government borrowing. But, the biggest problem is the recession, and unemployment. Unless growth is gained, it will be very difficult to tackle the fiscal deficit anyway.
I was looking at the scale of previous recessions. The current recession, which technically ended last quarter with a 0.1% rise in GDP, is the second worst on record.
I was surprised to find that in the Great Depression, UK GDP only fell 10%. However, it is somewhat misleading. The UK economy struggled in the 1920s (due to deflation and overvalued pound – see: Economics of the 1920s). Thus, unemployment was already high at the start of the Great Depression. In the US, output fell 30%, but, there was higher growth in the 20s and in the mid 1930s there was a strong recovery before the second recession of 1936.
Anyway there are some signs to be more optimistic about the UK economy in the forthcoming year.
Manufacturing Output. The PMI manufacturing survey from the Chartered Institute of Purchasing and Supply/Markit gave a main reading of 56.7 for January (50 indicates expansion). This is the highest reading since 1997. (link) This indicator is forward looking and gives an indication manufacturing output is likely to be growing in 2010.
Housing Recovery. House prices increased strongly in January (1.2% according to Nationwide). This growth in house prices will be welcomed by homeowners and banks (though not first time buyers still struggling with expensive prices)
Depreciation of Sterling Will help UK trade. The Depreciation in the value of the Sterling has, so far, had little impact. However, as the global economy recovers, the more competitive UK goods should help boost exports and lead to a more rounded economic recovery than just the usual consumer led recovery.
There are, of course, other reasons to be less optimistic – for example, the deflationary fiscal effect that will come from tackling the budget deficit. But, unless there is a real mess up, a double dip recession is unlikely at the moment.
GDP measured by Purchasing Power Parity takes into account local costs of living and the fact exchange rates may not reflect different living costs. For example, the Chinese economy is undervalued for various reasons.
When will China Overtake US as World’s Largest Economy?
I have seen a few news reports to suggest China will soon overtake US as the world’s largest economy. It depends on which models of growth you use. Using PPP measure of GDP, the Economist predict China will overtake the US in 2017 (link – subscribers of Economist only)
