Economics: issues and evaluation
Introduction: The three basic economic concepts of scarcity, choice and opportunity cost. Case
study: the government budget. The opportunity cost (the second best alternative) of choosing to
spend more money on e.g. the military may mean fewer funds available for education owing to a
scarcity of tax revenue.
Paul Krugman – (Nobel prize winner) How to Approach Economics
https://www.youtube.com/watch?v=kCQfqjhnC2E
TOK extension: Why do economists disagree (in spite of their use of the social scientific method).
Microeconomics: Free markets operating through the price system are a means to cure shortages
(by raising prices) and surpluses (by lowering prices). Prices act as a means of signaling to
producers what to produce and how. Prices also reflect how much households value various goods
and services.
Governments can set prices below the market clearing price to benefit low income households. Case
study: rent controls. This can lead to shortages if not supplemented with e.g. subsidies or transfer
payments. Governments can set prices above the market clearing price to benefit certain producers
like farmers. Case study I: agricultural support. This will lead to surpluses. What to do with these?
Case study II: The minimum wage.
The Economics of The Hudsucker Proxy
https://www.youtube.com/watch?v=wXnnAWkTb8w
Market failure occurs when either too much or little of a good is produced and/or consumed (at
market prices) from the point of view of society. This calls for government intervention in the form
of e.g. subsidies for goods / services deemed beneficial for all members of society (education and
health care), and taxes on goods deemed to be detrimental if consumed in large quantities
(cigarettes and alcohol). Case study: An evaluation of a sugar tax. Winners and losers; short and
long term implications. (Biology)
Pollution reducing policies are also meant to address a market failure. We look at the external costs
of e.g. mining (not borne by the producer) and how to address these. Such environmental issues can
be linked with biology and chemistry.
The real cost of a Big Mac
https://amomentsinsight.wordpress.com/2010/09/09/why-big-macs-should-cost-200/
Market structure: perfect competition, oligopoly and monopoly. Case studies are endless:
commodities (coffee beans, cocoa, and cotton producers); retail; beverage; airlines; Alko; Google;
Amazon; Finnkino; Caruna …). Issues like the illusion of competition on the part of oligopolies;
monopoly and the public interest?
The illusion of choice
http://preventdisease.com/images/orchestrators_choice3_large.jpg
TOK extension: How realistic is profit maximation as the firm’s main goal?
Macroeconomics: How to measure and deal with the economic and social costs of inflation,
unemployment, (low) levels of economic growth, (rising) levels of income inequality (The Gatsby
curve). The costs and benefits of economic growth. Keynesian vs the neo-classical school of
economic thought. For example should governments act to increase government spending or not in
the case of a recession (low or negative economic growth)? Case studies like Greece, Ireland, and
Finland, Venezuela.
Robert F. Kennedy challenges Gross Domestic Product
https://www.youtube.com/watch?v=77IdKFqXbUY
TOK extension: What is “natural” about the natural rate of unemployment?
International economics: Gains from trade. Free trade and protectionism. Imports and exports.
Exchange rates. Case study: the Canadian dollar (the Loonie). Winners and losers of a depreciating
Loonie. Evaluating the role of international institution: World Trade Organization (WTO),
International Monetary Fund (IMF). An evaluation of forms of economic integration (The European
Union, etc.). Free vs fair trade (coffee/ bananas/cotton/nuts….)
The luckiest nut in the world
https://www.youtube.com/watch?v=jtlYyuJjACw
TOK extension: Is there a moral aspect in the economic argument in favor of free trade?
Economic development: Low, middle and high income countries. What is meant by economic
development? The Human Development Index. The 8 millennium development goals (MDGs).
Economic sustainability. Case study: the fishing industry (Biology). International trade and
economic development (with many developing countries dependent on one or a few commodities
for export). An evaluation of the role of foreign direct investment (FDI) by multinational companies
(MNCs) in less developed countries (LDCs). Many case studies possible: Shell-Nigeria; Wal-Mart
& India; H&M- Bangladesh, etc. An evaluation of the role foreign aid plays in economic
development + case studies (Tanzania-Finland ….). Indebtedness. The World Bank (evaluation).
Hans Rosling: New insights on poverty
https://www.youtube.com/watch?v=YpKbO6O3O3M
TOK extension: The conflict between economic growth and sustainability
Evaluation in economics: CLASPP
http://www.timwoods.org/classes/ib-economics/evaluation-in-economics/
Assessment in economics: see pages 84-86 of the economics syllabus
http://www.lyska.net/src/tiedostot/IB/syllabukset/economic_syllabus.pdf
Yes that was confusing. Here’s an attempt to explain the assessment in layman terms:
Paper 1- The essay paper on the micro and macro section. HL 30%; SL 40%
Paper 2- The data response paper on international trade and economic development. HL 30%; SL
40%
Paper 3 – The quantitative / math paper. HL 20%
Internal assessment: HL 20%; SL 20%
Paper 1 should be straightforward. You know what an essay is.
Paper 2 requires the student to answer questions based on an article. It is basically a reading
comprehension paper where you have to analyze an economic problem.
Paper 3 is a math paper.
Note: Do not let anyone discourage you from taking economics because of paper 3. If they attempt
to do so, they have not bothered to look carefully at the syllabus. I have polled 2C students for three
years running and they are all of the opinion that the math in econ is basically middle school math,
and in no way should be an obstacle to taking the subject. In fact, it can be a student’s strongest
paper. In short, if I can handle the math, believe me, you can!
Please note that economics has a lot of weight if you may someday wish to study anything business
and/or economics related. I have sent 10s of students abroad to study over the years. My last count
is 68 UCAS references. And of course those wanting to study in Finland will benefit from having to
read one less book for the entrance exam to e.g. The Turku or Helsinki School of Economics. Even
if you are planning to study medicine, who knows, maybe one day you will be taking a course in
health economics!