EconomicsNotes

    The railways were nationalised in 1948, in a state of collapse. They were then built up as an integrated system until the 1960s, when the Beeching reforms attempted to transform them into an intercity service, and a freight service (aided by the questionable and possibly corrupt expansion of the motorways by a motorway construction executive who was also Minister of Transport, Ernest Marples, between 1959 and 1964.) This involved closing lots of small lines and network points. The service did prosper, and invested in advanced passenger trains, but was starved of funds by government during the stagflationary episode of 1973-1983. It was then privatised in 1992. A nationalised or integrated railway has positive externalities in terms of geographical mobility, though these have only recently become apparent. In the 1980s, consumers were still discovering the car, which became a more flexible and personal substitute, especially as the expansion of finance allowed more people...

    The main idea associated with Vilfredo Pareto is that, where price is equal to marginal cost, no one can be better off without someone else being worse off. This means that the Pareto point shows allocative efficiency, or an economy in which everyone has everything at its ‘true’ value. This is distinct from productive efficiency, in which everything is produced at the marginal efficient scale, or lowest long-run average cost.   Both forms of efficiency are predicated on the idea that the equilibrium price in a market reflects both social marginal costs and benefits, and private marginal costs and benefits. An additional assumption is that a situation in which firms essentially produce in perfect competition (the only market structure in which allocative and productive efficiency arise) is the best use of resources. A moment’s reflection, however, illustrates that this is not true. Negative and positive externalities of production and consumption exist, for insta...

  There are several challenges here. One is that a general consensus has arisen that a reduction in the carbon waste which enters the atmosphere from traditional forms of power generation is necessary to slow or reduce dangerous climate change. This means a move from an economy based around the generation of power from coal, oil, and to an extent gas, and towards one based upon renewable, abundant, and satisfactory replacements.   The challenge is that hydrocarbon power is a really efficient and effective form of power for electricity grids, cars, aeroplanes, heating, and factories. It is also globally used by competitor economies. Switching from it might therefore limit the capacity of economies, create advantages for competitors, lower living standards, and reduce the amount of investment capital available for the development of renewable resources. A second challenge is that the renewables sector is one covering a great many things. Some of these things, whilst improvin...

  A wealth tax is a tax on high value assets, high incomes, or luxury goods. The premise of the tax is that this can reduce the gap between the rich and the poor either by making the rich less rich, or by doing that and then redistributing money to the poor, thus narrowing the gap between the rich and poor.   The rich are poor and the few are many, however. An attempt to greatly reduce the wealth or incomes of the rich may simply encourage the rich to leave a country or to avoid the taxes with the help of accountants or lawyers. This would complicate efforts to collect the tax, and may actually mean that the tax was inefficient, because it collected less than it cost to operate. If a government were to take tax from a small number of individuals and then give a small portion to a large number of poorer people, the effect might be temporary and might not really affect incomes overall, as it could be spent on debt, inferior goods, or imported cheap goods. In addition, taxes ...

  There are a variety of policies which authorities could use to intervene when the market fails (that is, when the market price does not reflect the 'true' cost or benefit of a good or service, and where the price mechanism cannot therefore work.)  Different policies are suited to different failures. Below, I have set out the types of intervention, and then suggested which situations they fit. Type of Government Intervention Market Failures which the intervention is directed at Examples Indirect Taxation Indirect taxes function well to raise the price and lower the supply of a demerit good. They punish producers and discourage demand where demand is inelastic, and make the consumers pay for externalities when the consumer is inelastic. They are therefore widely used to cope with negative production and consumption externalities, though they may be subject to various forms of government failure. ...