Taxes and the Rich

There are few things more emotive than taxation and "the rich", and I have little doubt that as undergraduate students you have a few opinions on these issues.

It turns out Nick Clegg has made a public pronouncement (via the Guardian) that the rich should pay more tax - at least for a while...

The purpose of 217 is to encourage you to think about issues like this as an economist - to put your learning into practice.  So the think we should try our best to do is put politics out of the picture for as long as we possibly can, and try to think about things objectively - if that's possible!  Bernard Jenkins, a Tory MP, is very quickly political in the linked BBC article, trotting out the usual line that Clegg is indulging in the "politics of envy" (John Redwood does at least try and defend the Tory approach to taxation and the rich - something we are often quick to ridicule). Let's try and leave that behind.

One fairly commonly known theory, and one often cited when discussing matters of taxation is that of Ricardian equivalence, proposed by the famous economist himself.  It says that people are aware of the government's budget constraint, and hence realise that any cut in taxes now (or increase in spending) will have to be paid for, and hence they expect higher future taxes and so do not increase personal spending now but instead save up for when the tax bill will come in the future.

It's an intellectually appealing theory - we like to think people are rational and make sensible decisions like this. However, it does rely on a number of assumptions, as any economic theory does. For example it requires for its full effect that tax imposition is even across society, hence that all will feel the pain of increased future taxes to pay for current spending. In our progressive tax system, this is unlikely. It also does not reckon with our impatience - we want jam today not jam tomorrow and hence we'll spend today and face the consequences tomorrow.

We'll think a lot about policy in econ217 over the coming year, and one thing it's important to recognise is that nothing can be proven one way or the other using the tools of economics - neither data nor clever reasoning constitute proof in matters such as this, particularly when we are trying to predict the future. But this also does not render what we will discuss as meaningless - it will still pay for political parties to put in place economically sensible policies rather than trying to use economists for intellectual cover for ideologically driven policies (a common trait of all political parties).  It should be an interesting year!

Be Inspired!

Even if you're not a football fan or even a Man City fan, City have potentially given you a boon today - see http://www.youtube.com/watch?v=ikm52r7RlKc&feature=youtu.be.

City are making available incredibly detailed data on all football matches from last season - could make for an ideal extended essay when you reach your third year!

Sign up here: http://www.mcfc.co.uk/Home/The%20Club/MCFC%20Analytics

Moneyball UK

If you're a football fan and an economist, you may have come across Moneyball, the story of some data junkies who revolutionised how teams approach baseball in the US, and you may have seen the response of many cynics to Liverpool's attempt to adopt statistical techniques to augment their pursuit of success.

Sadly for those cynics, Manchester City provide the ultimate rebuttal of their sneering at the use of statistics in football, as this Guardian article shows. Vincent Kompany, a man whose stock never seems to stop rising, instigated weekly reviews of highly detailed OPTA data on City's defensive performances on arrival at the club, and it's hard to argue that they didn't help, since City were one of the best defensive sides in the league last season (and the one before that).

However, for those of you football fans and studiers of econ217ab, there's a huge opportunity coming your way.  City are setting up MCFCAnalytics from today, and at 5pm are releasing OPTA data from the 2011-12 season free of charge. This kind of data costs thousands of pounds usually, yet it's precisely the kind of data necessary to pursue theories about how football works - have you got a budding theory about why City kept winning? About why teams always win at home? You can start now to investigate it as the data will be available!

I'd like to specifically encourage you ahead of your third year, when you'll write your extended essay. Data like this could form the basis of a fascinating essay.  I've currently got students looking into how and why players trust each other, I've done research personally on whether Premiership referees discriminate, and have many plans for future research projects using this kind of data. Making use of this data to either look at footballing strategy or test economic theories will be one of the options you can choose at the end of the coming year when you start thinking about your extended essay...

Rail Fares

Yesterday saw the announcement that rail fares are going up by 6.2% in January, which has naturally caused plenty of consternation, with Guardian blogs fuming about the social exclusion going on.  The same sentiment is declared on Liberal Conspiracy too, with another sentiment being expressed: Controlling train fares protects the consumer.

However, is that true? Is it really true that controlling prices protects customers? In Contemporary Issues we'll spend quite a bit of time looking at reasons why governments might intervene in various markets to do things like control prices.

If you think you agree with the sentiment that controlling prices protects customers, hopefully you'll be challenged about the bases on which you hold that view, while if you think it is much more complicated, the course will help you to articulate that sentiment better.

A view that controlling prices protects customers ignores the possibility that customers are affected by the quality of a good being produced, and also its quantity. The upward sloping supply curve we are all used to now tells us that if the price is held low, then the quantity supplied will be low - it's not worth firms providing.

The supply curve is just one analytical tool we'll make use of in the course, but hopefully your appetite has been whetted already...

Perspectives on Football

One of the topics taught on econ217ab is the economics of sport. This coming year this section will be heavily influenced by the Olympics that just finished; in previous years the focus has been more towards football, and if you are interested in how economists think and approach football, you might be interested in the following new site: Football Perspectives.

The idea of this website is to provide blog-style posts which have slightly higher analytical content than might be standard in a blog post. It is similar in essence thus to Vox, a more general policy-orientated research blogging site.

Both are great resources and well worth a read if you're thinking of getting in some advanced reading ahead of the coming year's course!

Welcome to the econ217ab Blog!

This is the first post of a new blog to accompany econ217ab or Contemporary Issues in the UK Economy, the second-year (intermediate) undergraduate teaching course provided by the Department of Economics at the University of Birmingham.

It is intended that posts will appear on this blog related to items being lectured on int the course; as the name betrays, we lecture on issues that are relevant to the current day UK economy.

Watch this space!