Archive | April 2014

It starts here!

Thank you to Hayden Le for setting up this blog for the economics courses. There is a lot of material (syllabi, past exam papers, lists of resources, topic outlines, web pages and google documents created by last year’s seniors) on the G12 economics blog, which I will gradually transfer across to here. If you have any suggestions as to what you would find useful, let me know.

The most immediate pressing need, however, is to set up optional classes (to cover one topic that is not in the IB syllabus and to practice answering extended response questions) for those planning to do the AP microeconomics exam.  Based on past experience, about three hours are needed. But everybody is so involved in other activities that it is very hard to find a common time.

I propose the following: (all classes will be from 3:30 to 4:30)

Lesson One: Attend on EITHER Monday April 28th (for those not in the jazz band) OR on Thursday May 1st (for those not in Kapour….is this the right word?). I will teach the same material twice.

Lesson Two: Tuesday May 6th (both the boys’ and the girls’ soccer coaches have given permission for soccer players to attend this session).

Lesson Three: Monday May 12th (there will not be a jazz band practice on that day)

I hope that all those who want to attend will be able to do so.







Progressive income taxes: Equity vs Efficiency????

This article (written by Ezra Klein) is from a year ago. In an interesting way, it addresses many of the issues that we have discussed through the course.

Most agree that a progressive income tax is needed to narrow the market-determined distribution of income (which is often inequitable), reduce some of the externalities of poverty, and redress the regressiveness of sales taxes (the consumption tax in Japan). The main argument against high marginal rates of tax has been that they could reduce the incentive to work and to take risks and thus impede the rate of economic growth.

But look at these charts*
Taxes and Growth

Since the 1930s, the top marginal tax rate has swung from a high of 94 percent to a low of 28 percent. But, contrary to conventional wisdom, America has often grown faster during high-tax periods than low-tax periods.

In the article Mr Klein refers to the income and substitution effects of higher taxes. The implication is that the former is stronger. A “rich man” states that if he had had to pay higher taxes, he would have worked harder to reach his target income.

I recommend you read the whole article. It is very well written.

April 2014: Are we ready for May?

How should you spend Spring Break? From the point of view of preparation for the IB Economics exam, the only requirements are that you rest, “recharge your batteries”, and follow current economic issues, by reading newspapers and/or watching the TV news and/or engaging in discussions with your parents and friends.

The day for the rise in the consunption tax has already passed. But its effects cannot yet be measured. Consider its implications for both microeconomics theory and the Japanese macroeconomy.
1)Are prices rising? (does the incidence fall mainly on the consumers?) 1)Will firms’ profits fall (if they decide to absorb part of the cost)
1) Will aggregate demand fall (thus destroying Japan’s fragile recovery from recession)?
2) Will cost-push inflation help to pull Japan out of the deflationary spiral?
3) Will the government’s budget deficit be reduced? (It might rise if Japan falls back into recession leading to a fall in direct tax revenues and a rise in government expenditure on social security etc as unemployment rises).

We need to watch the effects over the next few months.