Nigel Jump, Chief Economist at the South West RDA/SWO Economy Modules, takes us through a presentation of the fundamental principles of economics.

1. Economics Demystified: Principles
October 2010, Nigel F Jump, Chief Economist

2.  Scarcity, Choice & Resource Allocation
 Effectiveness & Efficiency, Benefit & Cost
 Uncertainty / Risk & Reward
 Macro & Micro
Economics Is

3.  Politics - value judgements/prescription
 Money
- unit of account, store of value, payments
mechanism
 Forecasting
Economics Is Not

4. Economics Is Micro
Demand & Supply
household & business behaviour
- price, income, tastes,
- utility & opportunity cost
- motives, aspiration & welfare
- externalities & market failure

5. Economics is Macro
• Growth
- wealth & productivity
• Inflation
- pull & push, always money
• Unemployment
• International Trade
• Structure & Cycles - trend & volatility

6. Economic Policy is
• Stabilisation - fiscal & monetary policy
• International relations
- trading & currency groups, & markets
- trans-national agencies
• Development
- regional & local policy
- intervention, technology & regulation

7. Economic Sectors are
Primary – resources
= agriculture, mining & minerals
Secondary – goods
= manufacturing, construction & utilities
Tertiary – services
= retail & distribution, hotels & catering,
= transport & communication
= banking & finance, & business services
= leisure, social & personal services
= public, education & health services

8. Economics Principles: Summary
Economics is choice & resource allocation
Economics is micro
– consumers, households, businesses & markets
Economics is macro
- growth & inflation, international trade

9. Economics Demystified: Growth & Productivity
October 2010, Nigel F Jump, Chief Economist

10. Increase in value created between times
a flow … not a stock
Issues: purchasing power
- nominal & real
- absolute & per capita
- measurement:
real GDP, wealth, happiness
Growth Is

11. zero sum game – winners & losers
invention, aspiration, population
Growth = productivity + employment
3 = 2 + 1, but boom & bust
= f ( R, K, L, T )
Accounting for growth
Incomes: Y = w + s + p + oy
Output: Q = m + e + g + s
Expenditure: S = C + I + G + nX + ^S
the “no” growth mirage

12. Ratio of outputs to inputs
- labour productivity
- total factor productivity
- resource productivity
Drivers
- investment in physical capital/infrastructure
- skills & innovation
- enterprise / entrepreneurship
- competitiveness
Productivity Is

13. Productivity in UK regions
GVA per Head £ ('000) Index Rank
UK 20.5 100.0
North East 15.9 77.4 11
North West 17.6 85.6 7
Yorks & Humber 17.1 83.3 9
East Midlands 18.0 87.9 6
West Midlands 17.5 85.1 8
East of England 19.5 94.9 4
London 34.8 169.5 1
South East 21.7 105.7 2
South West 18.8 91.5 5
England 21.0 102.4
Wales 15.2 74.3 12
Scotland 20.1 97.9 3
N Ireland 16.2 78.9 10
source: ONS, 2009

14. Productivity in SW England
GDP per Head (2007) £ ('000) Index
Cornwall & Isles of Scilly 12.7 64
Devon 15.2 76
Dorset & Somerset 16.8 84
Gloucs, Wilts & N
Somerset 21.8 109
GDY per Head (2008) £ ('000) Index
Cornwall & Isles of Scilly 13.0 87.5
Devon 13.6 91.4
Dorset & Somerset 15.4 103.5
Gloucs, Wilts & N
Somerset 15.2 102.4
source: ONS, 2009-10

15. Peripherality – cost, ICT & infrastructure, access
Population – demographics & choice
International Trade – FDI & competitiveness
Fiscal & regulatory framework
Urban hubs, local labour markets, agglomeration
Capital funding access/availability
Best v worst
Productivity : SW issues

16. Human Capital
- education (formal & informal)
- skills (accumulation & use)
Physical Capital
- technology, dissemination and use, innovation & R&D
Environmental Capital
- resource stock & flow
- waste management
Social/cultural Capital - risk takers, partnership
Productivity : investment base

17. Economics:
Growth &
Productivity
Summary
Growth is desirable
High & growing productivity is the means
Value adding productivity is what SW lacks/needs