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Cummings and Goings….

Published in COVID-19, May 27th, 2020
by Sarah Smith, Professor of Economics at the University of Bristol

This week, the press has been dominated by the Dominic Cummings’ trip to Durham in search of childcare, in breach of the spirit if not the strict letter, of the social distancing law that he himself had been partly responsible for.

Boris Johnson has stood by his man and gave a press conference at which he defended Dominic Cummings’ actions. But before he spoke, he might have benefitted from an understanding of some simple economic concepts.

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Price Gouging

Published in COVID-19, May 26th, 2020

Last week it was revealed that overall retail sales have slumped since the lockdown but demand for some products – such as surgical face masks – has soared and, at least in the early days of the pandemic, demand far outstripped supply.

One response to “excess demand” (i.e. demand greater than supply) is to let prices increase. Soon after the pandemic was declared, a pack of 100 blue disposable masks, was listed on Amazon for four times what it had cost only a few weeks before.

by Sarah Smith, Professor of Economics at the University of Bristol

Increasing price “solves” the problem of excess demand in two ways – it increases supply and it reduces demand. Prices are the natural mechanism that bring about market adjustment in the face of supply and demand shocks.

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Premier League salaries during the pandemic

Published in COVID-19, May 19th, 2020

by Pravin Steele, final year student at the University of Bristol

File:David Silva shaved Man City 2017 (36471171422) (cropped).jpg
Manchester City’s David Silva. Photo by Brad Tutterow, CC-BY

The initial response of Premier League clubs and players to the financial threat posed by the suspension of the football season met widespread criticism. Several clubs announced plans to use the government’s Coronavirus Job Retention Scheme (CJRS) to furlough non-playing staff, whilst around the same time the Professional Footballers’ Association (PFA), the union representing professional footballers, rejected the PL’s proposal of a 12-month 30% pay cut for all players. Critics argue is it is wrong for government money to be spent on non-playing staff salaries, when clubs could cover this cost simply by reducing players’ salaries, which seem exorbitant at the best of times.

Following this public outcry several clubs reversed their decision to use the government’s scheme. A league-wide agreement on player salaries has been abandoned, and each club is deciding wages individually. Two questions are worth exploring:

  1. Are demands for players to accept pay cuts fair?
  2. Are pay cuts desirable from a societal point of view?
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COVID19: The expert economist view

Published in COVID-19, May 14th, 2020

by Hans Sievertsen and Sarah Smith (University of Bristol)

“Give me a one-handed economist”, demanded Harry Truman, the former US President. “All my economists tell me, on the one hand… but on the other…” Economists get a lot of stick when it comes offering diverging views. In a similar vein, George Bernard Shaw joked that if you laid all the economists in the world end to end, you wouldn’t reach a conclusion. Why do people love to mock economists’ ability to give a clear answer? Is it really the case economists can’t agree on anything? This article looks at economists’ views on different issues, including the current COVID crisis, and asks whether there is such a thing as a one-handed economist.

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Keep your (social) distance!

Published in COVID-19, May 7th, 2020
by Sarah Smith, Professor of Economics at the University of Bristol

Life has changed immeasurably in recent weeks. Our society runs on social interactions, but social distancing is now promoted as a socially responsible behaviour that can help to slow the rate of infection and relieve pressure on health services. As a result, schools and universities have closed, along with most shops, restaurants and bars, only essential work is allowed and people are mostly required to stay indoors. In Spain this week, children celebrated after being let out into the fresh air for the first time in six weeks.

The way in which governments introduced social distancing varied across countries. Some imposed full lockdown very quickly. Others, such as the UK Government, seemed at first inclined towards a voluntary approach before moving towards legal restrictions. Sweden has banned gatherings of more than 50 people and stopped visits to retirement homes, but only advised Swedes to work from home and avoid bars and restaurants.

In this article we examine the phenomenon of social distancing. We compare voluntary and mandatory approaches and examine mechanisms that can help to promote socially responsible behaviour.

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Government versus the markets

Published in COVID-19, May 5th, 2020
by Sarah Smith, Professor of Economics at the University of Bristol

The coronavirus pandemic has seen a rapid and marked shift in the balance between markets and government.  

Governments around the world have responded to the crisis with massive spending commitments. In the UK, the Conservative Government’s initial reaction was to overturn a decade of austerity budgets and announce an estimated £60 billion of spending (including more generous income support and unemployment benefits, business support and increased NHS spending) an equivalent to 3 per cent of GDP, as well as a further £360 billion worth of guarantees for firms taking loans and deferrals of tax payments.

Governments have also seen a huge increase in their powers in recent weeks. Emergency legislation has given the UK government emergency powers for two years, including the power to restrict gatherings, close premises and to detain people on “public health grounds”. This marks a severe curtailment of important civil liberties, including the freedom to travel and the freedom to assemble. In the UK, the powers will be reviewed every six months. In Hungary, the parliament approved a bill to allow Prime Minister Viktor Orban to rule by decree. The bill includes harsh penalties of up to five years in prison for spreading anything the government deems “fake news”. No elections can take place while the measures are in effect and the bill does not include an end date. 

These responses to the pandemic measures highlight the unique role played by governments in a modern economy. This article asks what governments do and why are they so important in a time of crisis? 

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School is out, does it hurt us?

Published in COVID-19, April 30th, 2020

by Simon Burgess, University of Bristol, and Hans Sievertsen, University of Bristol & VIVE

1. Interrupted teaching

You are probably reading this at home and not at school or in a library, because schools and universities have been closed around the world because of COVID-19. Teaching has been interrupted, cancelled or moved online, but will this have long-term consequences for the affected students?

Can a few weeks (or maybe months) of teaching make a difference?

Is it really harmful if school is out for a short period of time? Does it really affect the skills of students? Many politicians, parents and students are asking themselves that question right now.

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Share prices allow us to see into the future

Published in COVID-19, April 28th, 2020

by Rachel Griffith, Peter Levell and Rebekah Stroud 

The spread of COVID-19, and the policy measures that were used to try to contain it worldwide, had a major impact on economic activity. One thing that people were interested in at the time is understanding how big this effect was, and having some idea of how this impact varied across firms and industries. One real-time measure that is useful is share prices of firms listed on the London Stock Exchange.

What are share prices and why are they informative? 

Buying a share (or stock) makes you a part owner of a company. Shareholders get a vote in certain corporate decisions (for example to select members of the company board), and perhaps more importantly, they are also paid a share of the company’s profits (a ‘dividend’).  

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