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In 2020, the government changed university fees to encourage students to study courses where the government predicts there will be a future demand for jobs. This policy decision by the government
is considered beneficial for some while a burden for others. Especially students in humanities, arts, commerce, economics, and law will bear the burden of the fee hike. The government aims to navigate the students’ skills to meet the future demand for jobs. However, this carrot-and-stick approach might prove futile, as it creates a disparity amongst students. The Australian economy endured the Covid-19 downturn but the rising cost of living with a higher inflation rate has already crippled the purchasing power of an average Australian. An additional burden of fee rise in some courses is a double whammy. The students belonging to the disadvantaged groups are on the losing ends. This policy could be fraught with dangers of inequalities within Australia. Let’s not forget that women and youth employment trends are the most adversely affected by the Covid-19. Fee discrepancy can hurt women and young people more than ever. The facts and prevailing scenario require a holistic approach rather than desperately aiming for future growth.Hoping students will be compelled to choose cheaper courses is somewhat of a passive approach. Naively waiting for students to choose STEM courses instead of humanities and social sciences is just not the best move. The government has so much more to do to fill the gaps for increasing productivity. Rather than focusing on the supply side of skills why not focus on the demand side of skills? Why doesn’t the government focus on strengthening the existing jobs? The Australian workforce is currently in the dire need of workers of all skills and not just ‘high skilled’. Especially the low-skilled workers in hospitality, aged and disability care, and construction. The government should create additional jobs in these areas and upskill the existing workers. Focusing merely on the high-skilled jobs to boost productivity can also lead to job polarization, which occurs when middle-income jobs tend to vanish and labour market is divided into high-skilled jobs and low-skilled jobs, thereby increasing income inequalities. Changing the fee structure will add more confusion for Australians who need clarity in government decisions post-pandemic. Government having long-term plans and strategic solutions can give students time in directing their career trajectories. More time will also help the universities in planning their financial viability for any fee changes. Instead of having a rigid approach to changing fees and breeding inequality the government can be creative in resolving the skills enigma. Skills shortages can be tackled by improving the existing curriculum. Adding technically advanced knowledge to the existing courses can substantiate skills required for future jobs. Abrupt decisions can have lingering consequences, the government must take baby steps toward gradual improvements in tertiary education.
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What is the impetus for the study of economics ? It is a highly personal and sometimes irrational answer. Just like the existence and meaning of the agents within the economy, it is a deeply philosophical question - but one that just like those agents searching for the meaning of life, we economists should be searching, deliberating, conferring within ourselves and each other for the answer of what is it that we wish to achieve. A non-trivial working definition could be to advance practical policy to increase the standard of living and wealth on net and as fairly as possible for future generations as compared to their predecessors.
In 1917 John Dewey stated in regards to philosophy it should - “develop ideas relevant to the actual crisis of life, ideas influential in dealing with them and tested by the assistance they afford.” on the same page economics should aim to move towards this reality. Notwithstanding the answer, most outcomes benefit from greater knowledge of the economy: the how and why of its machinations. The title of this paper is derived from an early dispute within economics, the “Methodenstreit”. The outcome of which we live with today, however both Menger and Scholler weren't as dogmatic as history portrays as, whilst proselytising their method and approach to get to the “truth”/ “Economic Purity”, both recognized that the other's work was important. Whichever side of the divide you believe, the main goal of both authors was to get to some form of workable and practicable knowledge. This is what the true debate should be upon, after the resolution of what the goal of economics is, what is there to know and how do we know it within economics? Economics in any definition you choose involves some degree of human activity. Humans as can be observed are living contradictions: irrational and rational, emotional and robotic, self interested and community minded. Economic agents have the capacity to learn and to change habits, they also can have habits so ingrained into heuristics that nudges don't work. Practically, you cannot forecast decisions on such a creature with absolute certainty. Beyond that is the radical and terrosisng uncertainty of the future. We all know that we don't know the complete future and never will, that's why insurance is even a market that exists. For the knowledge of the future changes its course. This is not to assume chaos that economics is a Sisyphean endeavour, but a necessary point to start an agonising reappraisal of what we can know. So what can we know? Well nothing and more than can be imagined, simultaneously. Using the dualism of Menger and Scholler, both abstractions and deductions are of practical use in hand with the empirical positive and institutional statements. However as the economy becomes more complex and the limitations of humanity become more apparent alongside the radical uncertainty, getting concrete evidence is of more importance than the mathematisation or exploration for academic pleasure of the subject, to pivot from Neoclassical abstractions to one based in the here and now. By using neoclassical as a tool to teach but by no means that of being instructive of reality. For no meaningful doctrine coming from deduction or abstractions is mutually exclusive to be in reality from findings sought by empiricism. Thus the duality can aid and be the brushes with which we learn and interact with the evolving tapestry of the economy. However this view requires an abandonment of “a priori'' and “forecasts” certainties. For both the deductionists and inductionists. Creating a forecast on the future, by necessity changes the underlying original state for that forecast. The conditions that created the forecast were those where no forecast is present. The presence in either knowledge of, or even the existence of such a fact will alter evenly minutely the outcome. We are mapping a desert, not realising there are shifting sands all around and that the evolution of insights needs the profession of the artist, historian and philosopher. The nuance and intellectual integrity to negate and forsake ourselves, move back and diminish our aspersions and our vain attempt to project the future with absolute certainty. To provide insights but to do so cautiously and with the greatest emphasis on not knowing. This does leave us with a backward looking study, but the understanding of the past is the best tool to use as a tool to aid in the conversion to the goal that is decided upon for economics. This is also not to remove intervention as a tool or to say that we should not think of the future. The weight and certainty that is currently proclaimed by all schools of thought, needs to be abolished. Our pride is our hubris in achieving our goals. For if any one school of thought has or does proclaim intellectual dominance, a simple question is all that is needed to respond with - “where is the utopia?” Typically the epigone interjects to say that an outside influence halted them or that they never got full endorsement, is the response. A non trivial escalation is - “ Ha, so with your critical and penetrating thoughts, that would solve all economic problems, you could not convince smart well meaning people of your cause, does that not speak to the quality of the idea, if you could not convert even a simple majority to enact the necessary change?” - All such thoughts and schools of thought are made by man, who is feeble, prone to error and irrationality, no economist has undergone apotheosis and as such their words are not axioms but intriguing insights. Typically dedicated to solving the immediate problems or intellectual gaps created by previous generations, just like that generation before was focused on the pressing problem that the previous generation to them forewent - thus the study is iterative and not absolutist. But that can only ever be seen as progress if we realise why and how past generations operated and within ourselves of the value judgement on the work and ascribing if it brings us closer to the goal that we as a discipline want.
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COVID Inflation, What Is Causing It and What Should We Expect In the Long Run by Mohamed Al-Bekaa26/9/2022 The COVID-19 pandemic has turned inflation on its head, where central banks before were at or below the zero-lower bound, today we see the world’s central banks raising rates for the first time in years. This raises two questions, is our current inflation a long-term phenomenon or “transitory” as was claimed by the Fed and if it is long-term, have the dynamics of inflation changed?
In discussing the dynamics of inflation, I mean to refer to the determinants of the rate of inflation, for which the story of economics provides several theories. In my opinion, inflation during COVID is transitory, but I do not mean the word in the same sense that the Federal Reserve had. The Fed’s meaning was that current short-term market forces were causing inflation, a view which very much skirted any onus in causing the current rate of inflation. Any economist who believes in the quantity theory of money (QTM) would have predicted the large inflation we are currently experiencing. For those who do not know what the QTM is, at its most basic, the theory states that the economy's general price level is proportional to the quantity of money. COVID saw central banks massively increase the quantity of money, with the Fed’s balance sheet doubling from March 2020 to May 2022 and the RBA tripling its balance sheet between March 2020 and June 2021. I do not mean to blame central banks across the globe for their monetary expansions, one could not fault them for facilitating government programs that were aimed at reducing financial distress. However, the current state of inflation is not one that should puzzle economists, the quantity of money was rapidly expanded, the quantity of goods shrunk due to supply-side issues and the lynch-pin, the velocity of money increased, meaning the speed at which money changed hands increased. In some ways, this holds parallels to the 70s and the oil crisis. Monetarists such as Milton Friedman argued for the need of stable growth of the money supply, that where there was a rapid increase in the quantity of money, you would see a rise in inflation. Such economists denied the claims made by others in the profession who ascribed the inflation to cost-push inflation, increases in the cost of production goods. Chairmen of the Federal Reserve have stated Friedman was right in his analysis of the Great Depression, but does that make the QTM a viable theory for explaining the 70s or predicting the inflation movements of this decade. If inflation is transitory in the sense I have defined it, caused by and responsive to changes in the quantity of money, then the actions of the central banks currently are logical. Transitory inflation indeed would reflect well on the QTM and in my estimation demonstrate that the underlying dynamics of inflation have not changed. That inflation is still “everywhere and always a monetary phenomenon”. If it is not transitory but the reflection of market conditions unrelated to monetary policy, then it is likely a recession may be deepened without necessity. One of course could rebut that the primary reason we are seeing inflation is the supply shocks the economy has been experiencing for nearly three years now, irrespective of the money supply. If firms and producers expect that it will be difficult to supply goods for the expected demand at current prices, then they will naturally raise prices as a rationing tool. Indeed, there are several factors which are driving pessimistic long run supply expectations, interest rate hikes, the invasion of Ukraine and tensions between the US and China. These events reflect current and long term shifts in the global economy, which we can predict have an effect but the depth and longevity of their effects remain elusive. As we see continuous destabilising shocks to supply chains, prices will continue to rise if demand remains stable or outstrips supply and the supply either becomes scarce or threatens to do so. In the most fundamental sense, could this not be a driver of the inflation we are experiencing? As we all know from our microeconomics courses when supply and demand are both inelastic, we should expect to see prices rise as a reflection of the behaviour of consumers and suppliers. If inflation can not be tamped down by rising interest rates but continues to rise in spite of tighter monetary policy which theoretically should slow down monetary velocity, serious questions must be asked as to how capable central banks will be at managing this episode of inflation.
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Welcome To Conflicting Ideas!13/9/2022 Welcome to MUES’s “Conflicting Ideas” blog, dedicated to providing economists with a space to explore and debate the different ideas and policies which arise from differing economic perspectives. Once a fortnight, you can read a blog post providing two views on issues regarding economics, either through a debate between two economists or a single economist exploring both sides of the argument. MUES aims to give our readers a more comprehensive understanding of everything concerning the field of economics, its practical application, the philosophy of economics, analysis of current events and more. We encourage those interested in sharing their views on economics to email us at [email protected]
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