Irrational behaviour

Classical economic theory assumes that individuals are rational. However, in the real world, we often see irrational behaviour – decisions which don’t maximise utility but can cause a loss of economic welfare. Irrational behaviour is not just isolated to a few ‘irrational individuals’ but can become the dominant choice for most people in society (e.g. …

Read more

Deflationary Spiral

A deflationary spiral occurs when falling prices cause further deflationary pressures to cut prices. Deflation creates expectations of further price falls, and therefore consumers reduce their spending because they expect goods to become spending in the future. This fall in spending creates further deflationary pressure in the economy. Deflation increases the real value of debt. …

Read more

Problems of a strong currency

effect-of-appreciation

A look at the impact of strong (overvalued) currency Readers Question: Why would a strong currency be bad for a country? If we consider a country like an individual, having a strong currency means the country can accumulate more assets and resources for its people, thereby increasing the value of its country.  As for the …

Read more

Irresponsible tax cuts

The current US administration is proposing tax cuts which ‘The Committee for a Responsible Federal Budget’, estimates it will include $5.8 trillion of total tax cuts over the decade and a net cost of $2.2 trillion through 2027. The problem with these tax cuts It is unclear how these tax cuts will be financed. An …

Read more

Should we tax robots?

Automation and AI have been called the fourth industrial revolution. Robots replacing the jobs of human labour will increase efficiency and enables higher economic growth But, others are concerned that rapid automation can create unequal outcomes, with some losing their job and struggling to gain new forms of employment. A robot tax would, in theory, …

Read more

What happens when bubbles burst?

What happens when bubbles burst? Who experiences the most financial losses, and how does it affect the economy? I was reading about the famous Tulip mania of the Netherlands in the 1630s. Firstly, some of the stories may have been slightly exaggerated, but there was no doubt that small tulip bulbs vastly increased in price …

Read more

Money supply and the exchange rate

Readers Question: Does expansionary monetary policy, where money supply is increased, also cause a depreciation in the currency?  – Since there is a surplus of the currency in the foreign exchange market. Expansionary monetary policy means policies to increase demand in the economy. Expansionary monetary policy typically will involve: Lower interest rates – to make …

Read more

Cracking Economics – new book

I have published a new book “Cracking Economics” (Cassell Octopus Press) It is an overview of economics, split into easily manageable topics. The book is illustrated throughout with diagrams, graphs and photos to give a visual explanation of the text and economic ideas. It is aimed at anyone with an interest in economics. Even a …

Read more

Item added to cart.
0 items - £0.00