Short Supply - Economics Students Society of Australia

Making America Great Again (at least for Trump’s friends)

Donald Trump won the presidential campaign off the back of the ‘forgotten man’. He promised to make America great again, courting the support of a resentful working class who had been promised the American Dream, yet have failed to accomplish it. He accused Hilary Clinton of “meeting in secret with

ben bernanke

Lessons learnt from the GFC and how to heed them

Boards’ inability to effectively self-regulate firms Prior to the GFC, poor regulation by boards left financial institutions vulnerable to economic downturns. Short-term profits and market share were the primary concern of banks, with Chuck Prince, former CEO of Citibank, declaring “while the music is playing, you have to dance”. [1]

developing

How did the GFC affect developing countries?

While the Global Financial Crisis originated in developed countries, developing countries were not immune to its effects. Reduced foreign investment, trade and remittances had a significant impact on the economies of the world’s poorest countries. The crisis manifested itself in growing budget and trade deficits, currency devaluations, higher rates

democracy

The Impact of the Global Financial Crisis on Liberal Democracy

In the wake of the Global Financial Crisis (GFC), concerns have been raised about the future of liberal democracy. This is not surprising, as it is usually during times of economic recession that the liberal democratic ideology is called into question, with the GFC being no exception. With its two

Deutsche

Deutsche Bank and the Global Financial Crisis

Deutsche Bank has been scrutinised and surrounded by controversy in relation to its conduct leading up to the Global Financial Crisis. However, when the facts are distilled from the myths and stigma, what is revealed is an admirable recovery by the institution, despite tumultuous economic times and the bad publicity.

australia

Australia and the GFC: a pair of star-crossed lovers

Australia, a few key themes tend to spring up: success, the theories of John Maynard Keynes, and increased production. A bit of context is in order. Firstly, Australia successfully avoided a recession during one of the most impactful global crises in decades. Secondly, John Maynard Keynes is the mind behind

Capital inflows

Capital inflows and the Global Financial Crisis

Australia has imported capital for most of its history, which has allowed investment to consistently exceed the volume of domestic savings. As a result, Australia has enjoyed the benefits of a larger capital stock which, through lifting the amount of capital per worker, has resulted in a more productive workforce,

behavioural economics

You get what you pay for: Behavioural economics and the GFC

Risk-taking behaviour of firms The failure of Lehman Brothers and Bear Stearns were at the hands of employees who took risks at the expense of the firm. It is true that every asset contains some amount of risk. However, the issue was that employees were never held accountable for the

developed

The Underlying Causes of the ‘Global Financial Crisis’

Common explanations put forth for the financial crisis of 2007-2008 have been rather simplistic, scratching the surface of issues caused by decades of structural changes in the global economic environment. One widely held understanding of the crisis nominates the vast sub-prime mortgage default in the USA as the primary catalyst.

Basel

Risky business: the free insurance provided to banks

Moral hazard (n): Where the actions of one party change to the detriment of the other party after a transaction has taken place. Imagine what life would be like if every time you got in trouble, whether it be for speeding, theft or even indecent exposure, your parents bailed you

global financial crisis

Uncertain Times, Bad Times

In January 2009, in the midst of the Global Financial Crisis, Olivier Blanchard, then Chief Economist of the International Monetary Fund, wrote “Crises feed uncertainty. And uncertainty affects behavior, which feeds the crisis. […] [Uncertainty] affects consumption and investment decisions, and is largely behind the dramatic collapse in demand we have

Akerlof

Why lemons don’t always make lemonade: The importance of information asymmetry

Think about the first major economic transaction that most people face: buying your first car. Being an attentive consumer, you had to carefully consider numerous details from safety features to fuel efficiency and so on. Yet, being limited to the second-hand market meant one factor was more important than any

beauty

The Economics of Beauty and Discrimination

Gary Becker (December 2, 1930 – May 3, 2014) was a professor of sociology and economics at the University of Chicago. A prominent figure in the social sciences, Becker was awarded a Nobel Prize in Economic sciences in 1992 for applying economic theory to analyse complex social issues such as racial

Arthur Cecil Pigou

Arthur Cecil Pigou: externalities and the answer to climate change

Arthur Cecil Pigou remains an underappreciated contributor to the economics discipline. Deeply involved in Cambridge University economic thought throughout its most influential years from the late 1800s through to the work of John Maynard Keynes, his contribution to the field is even greater than his own research. Pigou pioneered the

History of Economic Thought

W Brian Arthur: the Complexity Economics vision

What is an ‘Economy’? For much of modern economic thought, the economy has been presented as a system which not only tends towards, but habitually, announces itself at ‘equilibrium’, for which the transient, inter-equilibrium, state is of little interest. Here, the economy is an efficient information processing and allocation mechanism,

adam smith

Ibn Khaldûn and Adam Smith—The Heroes of Modern Times

Ibn Khaldûn and Adam Smith cannot be further apart from each other. Ibn Khaldûn, who died in 1406 in Cairo, Egypt, was at the edge of the decline of the Arabic-Islamic civilization. Adam Smith, who died in 1790 in Edinburgh, Scotland, was at the edge of the rise of contemporary

History of Economic Thought

Rethinking the Rationality paradigm…

The neoclassical normative ideal, that humans are unboundedly rational, is – and has been for some time now – losing traction. At the same time, theories identifying significant practical limits on human decision-making in the real world have steadily gained momentum in the sphere of behavioural economics. Economics is no longer divorced

capitalism

The ‘Creative Destruction’ of Capitalism

For Joseph Schumpeter, the story of capitalism is of constant change; slowing or expanding, but never stagnating. The system itself is reliant on always creating new and better – new industries, new products, new demand, and new consumption are its staples. Once the ‘new’ has been introduced, the ‘old’ ceases to

bernie sanders

The Swedish Brains Behind the Welfare State

Welfare capitalist policies are often touted as a means of addressing inequality in developed nations. A prime example of this would be the presidential campaign of Bernie Sanders, which has energised many American voters with the prospect of universal health care and free college tuition. The term welfare capitalism loosely

Australia's economy: then and now

Tearing Down The White Picket Fence

The dream of owning the quarter acre block with a white picket fence for many young Australians appears to be just that—a dream. As property prices soar to unprecedented levels in Australia’s major cities, and affordability ratios leave hopeful Australian property owners as some of the worst off

alcohol

The More Things Change...

The federal Minister for Small Business, Bruce Billson, recently said that Australia is the ‘land of the great oligopoly’ with some of the most concentrated markets in the world. [1] It is over 50 years since Professors Karmel and Brunt completed their study of concentration in Australian industry—The Structure

Australia's economy: then and now

Where Will Our Economy be in 10 Years?

So far, 2015 has been a rollercoaster year for our economy. From making historic deals with China [1] to experiencing a slowdown in economic growth, [2] it seems that Australians will embark on their future with uncertainty. The question remains, should we be worried about our fate? The pillar for

Australia's economy: then and now

Why Free Trade?

“Every time one person freely trades with another, wealth increases”—that is, if you believe former Prime Minister Tony Abbott. [1] Somewhat surprisingly, Tony Abbott is correct—it is generally accepted that removing barriers to trade is beneficial. Given that free trade is hailed for its ability to improve living

Abbott

Abbott’s plan for North Australia: A brief overview

In June of this year the Federal government announced its White Paper on the vision for Northern Australia. It includes an ambitious plan to turn the north into an “economic powerhouse.” The vision it espouses is to transform northern cities, such as Darwin, into an investment gateway into Asia. The

airbnb

The Sharing Economy and the Rise of the Freelancer

The past five years have seen the global rise of the sharing economy and, particularly in Australia, the market is dominated by Airbnb and Uber. [1] Further abroad, the sharing economy encompasses nearly every aspect of the service industry; from dog walking (Pawshake) to home cooked meals (EatWith) and everything