EconomicsNotes

    Income inequality arises when different consumers have different incomes, and different people have different talents. It could also arise because of the source of income or the value of the talents. For instance, employees might have different incomes from each other because of different marginal labour products, different factor returns to their labour, or different elasticities of labour. People might have different skills for which there is a greater or lesser need and employers, or the purchasers of labour might have different demands. Equally, entrepreneurs often take greater risks than others, and thereby expect and receive greater rewards than those who do not take risks. There might be different factor returns to capital or land, which result in various levels of profit, dividend, or rent, for those who do not live by the return to their labour value. A functional market would bring all these diverse groups together as suppliers and consumers and would matc...

  The Economic Debate The 1970s in the West saw the emergence into policy of a debate which had been continuous but which was largely conducted amongst intellectuals and policymakers. This was the battle between the Keynesians who had defined the ‘post-war settlement’ and Monetarists who were focussed upon inflation. The consequences of this battle were to be quite serious, and pushed economics and political economy towards a kind of market-based, anti-inflation position which prevailed across the world with few exceptions by 1987-91. The basic disagreement was between those who believed that Aggregate Demand drove the economy, and that the worst problem in a real economy was unemployment, and those who believed that all policy eventually came down to how sound and trusted the money supply of a country was and could be. The former group argued that governments should spend against the economic cycle, that deficits were not a bad thing, and that the economy could be stimulated...

  The world since 1987 has become remarkably less unequal than it was. This is because of sustained growth in areas which had traditionally been rich in human history but which two hundred years of Imperial inequality had destabilised, such as South America, the Middle East, India, and East Asia. In those countries and areas, incomes have generally risen along with GDP/GNI, wages have increased, land value increases have provided one-off but huge benefits to many who were formerly peasants, and living standards have increased (at the temporary expense of the environment.) By contrast, Western countries have seen the opposite since 1973; their real wages and purchasing power have declined, their domination of world markets in a growing number of sectors and services has come under challenge, their national debts (since 2000) have generally grown, and their economies and supply chains have become globalised and financialised. This has not resulted in more unemployment, but has fo...

  The Trade Cycle In a note below,  I have tried to describe the broad outlines of the cycles you will come across in economics. However, in terms of the trade cycle, what the examiners are looking for is an understanding that  economic growth fluctuates over time.  This is a regular and normal process, often driven by a ‘boom and bust’ approach to spending, inventories, borrowing, or assets. What one hopes for is that the  long term trend of economic growth  is actually upwards. You will find references to fiscal policy being ‘balanced over the cycle,’ or to ‘corrections,’ and ‘cyclical adjustments.’ These all refer to the idea that a kind of upward sloping sine wave is a better aid in visualising the economy’s progress than a straight line could be. You might be interested in the following links:  https://www.economicshelp.org/blog/11437/economics/why-is-the-aggregate-demand-ad-curve-downward-sloping/ https://www.economicshelp.org/blog/643/unemployme...