Download Current Issues in Economics

Current Issues in Economics
G. T. Jedrzejczak
Winter 2016
Lecture 1
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Current Issues in Economics
Overview
About myself
• 1974-89 Faculty of Management UW
• 1989-91 Government: privatization, stock
market
• 1992-94 private business
• 1994-2013 World Bank: Washington DC, Kiev,
Baku
• 2013 – on Faculty of Management UW
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Current Issues in Economics
Overview
• What does it mean „current issues”?
Changing economy:
- post-2008 crisis
- XXI century perspectives
• How much current issues in economics are
different from the academic textbooks in
economics?
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Current Issues in Economics
Overview
Economist’s assumption: are they still valid?
• The market economy is constantly fluctuating,
but naturally returning to its steady state over
time
• People are rational in their economic behavior
(have rational expectations)
• Small shocks have small effects and big
shocks big effects – assumption of linearity
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Current Issues in Economics
Overview
Economist’s toolbox: is it still useful?
– „Newtonian” mathematical modeling
– Statistical generalizations
– „Silos approach”
– Publisheable in journals
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Current Issues in Economics
Overview
According to Harvard Economics Professor Gregory Mankiw,
economists have the following agreements by percentage.
• A ceiling on rents reduces the quantity and quality of
housing available. (93% agree)
• Tariffs and import quotas usually reduce general economic
welfare. (93% agree)
• Flexible and floating exchange rates offer an
effective international monetary arrangement. (90% agree)
• Fiscal policy (e.g., tax cut and/or government expenditure
increase) has a significant stimulative impact on a less
than fully employed economy. (90% agree)
• The United States should not restrict employers
from outsourcing work to foreign countries. (90% agree)
• Economic growth in developed countries like the United
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States leads to greater levels of well-being. (88% agree)
Current Issues in Economics
Overview
Cont.
• The United States should eliminate agricultural subsidies. (85%
agree)
• An appropriately designed fiscal policy can increase the long-run
rate of capital formation. (85% agree)
• Local and state governments should eliminate subsidies
to professional sports franchises. (85% agree)
• If the federal budget is to be balanced, it should be done over
the business cycle rather than yearly. (85% agree)
• The gap between Social Security funds and expenditures will
become unsustainably large within the next fifty years if current
policies remain unchanged. (85% agree)
• Cash payments increase the welfare of recipients to a greater
degree than do transfers-in-kind of equal cash value. (84% agree)
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Current Issues in Economics
Overview
Cont
• A large federal budget deficit has an adverse effect on the economy. (83%
agree)
• The redistribution of income in the United States is a legitimate role for
the government. (83% agree)
• Inflation is caused primarily by too much growth in the money supply.
(83% agree)
• The United States should not ban genetically modified crops. (82% agree)
• A minimum wage increases unemployment among young and unskilled
workers. (79% agree)
• The government should restructure the welfare system along the lines of a
“negative income tax.” (79% agree)
• Effluent taxes and marketable pollution permits represent a better
approach to pollution control than imposition of pollution ceilings. (78%
agree)
• Government subsidies on ethanol in the United States should be reduced
or eliminated. (78% agree)
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Current Issues in Economics
Overview
•
•
•
•
Western (US) oriented
Market oriented (no state)
Beyond time (no historical context)
Beyond social (no political economy context)
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Current Issues in Economics
Overview
„ My thesis in this lecture is that
macroeconomics in this original sense has
succeeded: Its central problem of depression
prevention has been solved, for all practical
purposes, and has in fact been solved for many
decades”.
Robert Lucas, Nobel Price in econoomics 1995,
2003 Presidential Address to the American
Economic Association
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Current Issues in Economics
Overview
Current Issues in Economics
Overview
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Current Issues in Economics
Overview
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Current Issues in Economics
Overview
Controversial but widely read economists:
Joe Stiglitz, Thomas Piketty, Ha-Joon Chang,
Nuriel Rubini, Nassim Taleb
Warning:
New wave of authors selling „snake oil” of neomarxist of class struggle interpretation or „going
back to old good days” ideas as gold standard.
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Current Issues in Economics
Overview
Objective
Develop sound understanding of the new trends in the
world economy with the consequences for the business
activities, public sector policies, and analytical skills
Why to bother you?
B/c there is no future in traditional production and
services any longer:
• to make money
• to get decent job
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Current Issues in Economics
Overview
Forces behind emerging new economic order
• Global financial crisis was the trigger but not a
cause
• Perfect storm of structural changes in politics,
demography, economy, technology, social life:
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Social changes (leisure middle class)
Demography (ageing societies, migration)
Globalization (chasing the lower costs of labor)
Technology (from production to life encompasing)
Politics (24/7 media cycle, reality show, filter bubbles)
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Current Issues in Economics
Overview
Business new challenges, the world we live in
The course will address the impact of the
secular economic and social changes due to
introduction of the revolutionary innovations,
changes in the demography, and globalization.
From „think globally, act locally” to „think
globally, act globally”.
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Current Issues in Economics
Overview
Topics
• Knowledge and social capital as production
factors
• Internet Economics
• Labor markets in the time of robots, aging
societies, and new era of inequality
• Global imbalances, secular stagnation and New
Industrial Policy
• Austerity vs. Stimulus: policies in the time of the
recession
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Current Issues in Economics
Overview
Knowledge and Social Capital as production factors
• Knowledge as a new miracle economic resource: more you
use it more you have it?
• Differences between a knowledge-based economy and a
traditional economy
• Social capital - cooperation between individuals and
groups:
– How much it matters?
– Can it be engineered?
– Does one size fit all?
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Current Issues in Economics
Overview
Internet Economics
• The Internet began as a way of linking different computers over the
phone network, but it now connects billions of users worldwide
from wherever they happen to be via portable or fixed devices.
• People with no access to water, electricity or other services may
have access to the Internet from their mobile phones.
• Mobie phone became a network-connected personal computer
• The Internet is a multi-billion dollar industry in its own right, but it
is first of all a vital infrastructure for much of the world’s economy.
• A new infrastructure of global economy:
– from Internet of people to Internet of things, to iternet of everything
– who needs two Facebooks?
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Current Issues in Economics
Overview
Labor markets in the time of robots, aging societies, and new era of
inequality
For decades, people have been predicting „the end of work”, but is it
this time different?
• There are warnings that robots will displace humans in the
economy, destroying livelihoods, especially for low-skill workers.
Others look forward to the vast economic opportunities that robots
will take on undesirable jobs.
• Longer lives, lower fertility, older societies: impact on GDP growth
and social expenditures
• Do we witness return to inequality of chances in addition to
inequality of wealth?
Are people to become horses of XXI century?
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Current Issues in Economics
Overview
Global imbalances, secular stagnation and New
Industrial Policy
• Roots of global imbalances:
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Finance (autonomization from real economy)
Migration (push and pull factors)
Accelerating technology
Climate change
• Are we entering prolonged slowdown?
• Is reshoring industry a solution?
• Is national industrial policy possible in the global
open economy?
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Current Issues in Economics
Overview
Austerity vs. Stimulus: policies in the time of recession
• Decade after the global crisis erupted, the world’s mature
economies – especially the Eurozone – find themselves
with shockingly fragile economies.
• Have the austerity programs adopted by several countries
since 2011 been cutting too much and too soon?
• Has austerity triggered a self-defeating ‘doom loop’
whereby budget cuts and tax rises widen deficits by
throwing economies into tailspins?
• Is spending more by increasing public debt a solution?
• Are we entering new rules of the game of post-economic
policies?
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Current Issues in Economics
Overview
Credit:
For „3” – at least 4 times present
For „4” or „5” PP presentation of 5 slides by
groups of 3 people, on one of the following topics:
1. Social media – benefits and risks
2. Who is gaining, who is loosing on globalization?
3. Can technology save the world?
4. Economic policy dilemas of XXI century
[email protected]
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Current Issues in Economics
Overview
Current Issues in Economics
Overview
„Elevator pitch test”
The term comes from a scenario of an accidental
meeting with someone important in the
elevator. If the conversation inside the elevator
in those few seconds is interesting and value
adding, the conversation will either continue
after the elevator ride, or a scheduled meeting.
Remember, every year some 30 milion
graduates enter the global labor market.
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Current Issues in Economics
Overview
Lecture presentations and useful links:
wz.uw.edu.pl > staff > Grzegorz Jedrzejczak >
study materials
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